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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
BETWEEN
GE FINANCIAL
ASSURANCE HOLDINGS, INC.
AND
PACIFIC LIFE AND ACCIDENT INSURANCE COMPANY
Dated December 31, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS........................................................................... 1
SECTION 1.1. Definitions...................................................................... 1
SECTION 1.2. Other Definitions................................................................ 4
ARTICLE II THE ACQUISITION....................................................................... 6
SECTION 2.1. Purchase and Sale of Shares...................................................... 6
SECTION 2.2. Consideration for the Shares..................................................... 7
SECTION 2.3. Post-Closing Purchase Price Adjustment; Closing Balance Sheet.................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PLAC................................................ 9
SECTION 3.1. Organization and Qualification................................................... 9
SECTION 3.2. Authorization.................................................................... 10
SECTION 3.3. No Violation..................................................................... 10
SECTION 3.4. Capitalization of Professional................................................... 11
SECTION 3.5. Subsidiaries of Professional..................................................... 11
SECTION 3.6. Consents and Approvals........................................................... 11
SECTION 3.7. Financial Statements; Reserves................................................... 11
SECTION 3.8. Absence of Undisclosed Liabilities............................................... 13
SECTION 3.9. Absence of Certain Changes....................................................... 13
SECTION 3.10 Litigation....................................................................... 14
SECTION 3.11. Property; Liens and Encumbrances................................................. 14
SECTION 3.12. Investment Assets................................................................ 15
SECTION 3.13. Certain Agreements............................................................... 15
SECTION 3.14. Professional Employees........................................................... 17
SECTION 3.15. Taxes............................................................................ 19
SECTION 3.16. Compliance with Applicable Law; Permits; Policies................................ 21
SECTION 3.17. Powers of Attorney............................................................... 23
SECTION 3.18. Brokers' Fees and Commissions.................................................... 23
SECTION 3.19. Proprietary Rights............................................................... 23
SECTION 3.20. Insurance........................................................................ 24
SECTION 3.21. Environmental Matters............................................................ 24
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 3.22. Bank Accounts.................................................................... 25
SECTION 3.23. Insurance and Reinsurance........................................................ 25
SECTION 3.24. Labor Matters.................................................................... 25
SECTION 3.25. Threats of Cancellation.......................................................... 26
SECTION 3.26. Regulatory Qualifications........................................................ 26
SECTION 3.27. Year 2000 Compliance............................................................. 27
SECTION 3.28. Affiliate Security Ownership..................................................... 28
SECTION 3.29. Financial Condition.............................................................. 28
ARTICLE IV [RESERVED]............................................................................ 28
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER............................................... 28
SECTION 5.1. Organization; Qualifications and Operations...................................... 29
SECTION 5.2. Authorization.................................................................... 29
SECTION 5.3. No Violation..................................................................... 29
SECTION 5.4. Consents and Approvals........................................................... 29
SECTION 5.5. Brokers' Fees and Commissions.................................................... 29
SECTION 5.6. Purchase for Investment.......................................................... 30
SECTION 5.7. Financing........................................................................ 30
ARTICLE VI COVENANTS............................................................................. 30
SECTION 6.1. Conduct of Business Prior to the Closing......................................... 30
SECTION 6.2. Share Ownership.................................................................. 32
SECTION 6.3. Access to Information............................................................ 32
SECTION 6.4. Notice of Litigation and Requests................................................ 33
SECTION 6.5. HSR Act Filings; Consents........................................................ 33
SECTION 6.6. State Regulatory Approvals....................................................... 33
SECTION 6.7. Interim Financial Statements..................................................... 34
SECTION 6.8. Year End Financial Statements.................................................... 34
SECTION 6.9. Maintenance of Insurance: Post-Closing Claims.................................... 34
SECTION 6.10. Intercompany Accounts, Investments and Agreements................................ 35
SECTION 6.11. All Reasonable Efforts........................................................... 36
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 6.12. Public Announcements............................................................. 36
SECTION 6.13. Disclosure Supplements........................................................... 37
SECTION 6.14. No Implied Representations or Warranties......................................... 37
SECTION 6.15. Tax Matters...................................................................... 37
SECTION 6.16. Employment and Employee Benefits................................................. 33
SECTION 6.17. Nonsolicitation.................................................................. 46
SECTION 6.18. Noncompetition................................................................... 46
SECTION 6.19. Acquisition Proposals............................................................ 46
SECTION 6.20. Environmental Assessments........................................................ 47
SECTION 6.21. Policy Approvals................................................................. 47
SECTION 6.22. Distribution Agreements.......................................................... 48
SECTION 6.23. PESCO Joint Venture.............................................................. 48
ARTICLE VII CLOSING CONDITIONS.................................................................... 50
SECTION 7.1. Conditions to the Obligations of Buyer under this Agreement...................... 50
SECTION 7.2. Conditions to the Obligations of PLAC under this Agreement....................... 51
ARTICLE VIII CLOSING............................................................................... 52
SECTION 8.1. Closing.......................................................................... 52
ARTICLE IX SURVIVAL AND INDEMNIFICATION.......................................................... 52
SECTION 9.1. Survival of Representations, Warranties and Covenants............................ 52
SECTION 9.2. Limitations on Liability......................................................... 53
SECTION 9.3. Indemnification.................................................................. 53
SECTION 9.5. Defense of Claims................................................................ 54
SECTION 9.6. Adjustment to Purchase Price..................................................... 56
SECTION 9.7. Exclusive Remedy................................................................. 57
ARTICLE X TERMINATION AND ABANDONMENT........................................................... 57
SECTION 10.1. Termination...................................................................... 57
SECTION 10.2. Procedure and Effect of Termination.............................................. 58
SECTION 10.3. Certain Fees and Expenses....................................................... 59
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE XI MISCELLANEOUS PROVISIONS.............................................................. 60
SECTION 11.1. Amendment and Modification..................................................... 60
SECTION 11.2. Waiver of Compliance; Consents................................................. 60
SECTION 11.3. Validity 60
SECTION 11.4. Expenses and Obligations....................................................... 60
SECTION 11.5. Parties in Interest............................................................ 60
SECTION 11.6. Notices 60
SECTION 11.7. Governing Law.................................................................. 61
SECTION 11.8. Counterparts................................................................... 61
SECTION 11.9. Headings 61
SECTION 11.10 Entire Agreement............................................................... 61
SECTION 11.11. Assignment..................................................................... 62
SECTION 11.12. PLAC Covenants................................................................. 62
Annex A Disclosure Schedule
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated December 31, 1998, by
and between GE Financial Assurance Holdings, Inc., a Delaware corporation
("Buyer"), and Pacific Life and Accident Insurance Company, a Texas corporation
("PLAC").
RECITALS:
WHEREAS, PLAC is the record and beneficial owner of 49,996.5 (99.9%) of
the issued and outstanding shares of common stock, par value $50.00 per share,
of Professional Insurance Company, a Texas corporation ("Professional");
WHEREAS, PLAC intends to acquire all of the issued and outstanding shares
of common stock of Professional not currently owned by PLAC;
WHEREAS, Professional is engaged in the insurance business; and
WHEREAS, subject to the terms and conditions set forth herein, PLAC
desires to sell to Buyer, and Buyer desires to purchase from PLAC, all of the
shares of common stock of Professional issued and outstanding on the Closing
Date (the "Shares").
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means as to a specified Person any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the specified Person.
(b) "Annual Statement" means, with respect to a referenced Person, the
annual statement of such Person filed with or submitted to the insurance
regulatory authority in the jurisdiction in which such Person is domiciled on
forms prescribed or permitted by such authority.
(c) "AVR" means, with respect to any person, the Asset Valuation Reserve
set forth in the balance sheet of such person in accordance with SAP.
(d) "Business Day" means any day that is not a Saturday, Sunday or other
day on which banking institutions in the city of New York, New York are
authorized or required by law or executive order to be closed.
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(e) "Closing SAP Balance Sheet" means the balance sheet of Professional,
as of the Closing Date (immediately prior to consummation of the Closing),
prepared in accordance with SAP using Professional's customary standards of
practice used in preparing year-end financial statements.
(f) "Closing SAP Capital" means the sum of (i) Professional's capital and
surplus as reflected in the Closing SAP Balance Sheet plus (ii) the amount of
AVR as of the Closing Date for Professional, all determined in accordance with
SAP as in effect on the Closing Date.
(g) "Cobra" refers to the provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, relating to continuation of health
benefits in certain circumstances.
(h) "Code" means the Internal Revenue Code of 1986, as amended (including
any successor code), and the rules and regulations promulgated thereunder.
(i) "Competing Transaction" shall mean (i) any merger, consolidation,
share exchange, business combination, or other similar transaction involving
PLAC (but only if Professional is included in such transaction) or Professional;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 25% or more of the assets of PLAC (but only if Professional is included in
such transaction) or Professional, taken as a whole, in a single transaction or
series of transactions, or (iii) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(j) "Contracts and Other Agreements" means all contracts, agreements,
reinsurance treaties, undertakings, indentures, notes, bonds, loans,
instruments, leases, mortgages, commitments or other binding agreements, other
than (i) policies, endorsements, binders, riders, certificates and other
contracts of insurance issued, underwritten, assumed or renewed by Professional
or (ii) any of the foregoing included in the investment portfolio of
Professional.
(k) "Disclosure Schedule" means the Disclosure Schedule attached hereto
as Annex A.
(l) "Environmental Claim" means any investigation, notice, demand,
allegation, action, suit, injunction, judgment, order, consent decree, penalty,
fine, lien, proceeding or claim, whether administrative, judicial or private in
nature, arising: (A) pursuant to, or in connection with, any actual or alleged
violation of any Environmental Law; (B) in connection with any Hazardous
Material or actual or alleged activity associated with any Hazardous Material;
(C) from any abatement, removal, cleanup, corrective or other response action in
connection with any Hazardous Material, Environmental Law or other order or
directive of any federal, state or local governmental authority; or (D) from any
actual or alleged damage, loss, injury, threat or harm to the environment.
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(m) "Environmental Laws" means all applicable federal, state or local
laws (including but not limited to federal and state common law), statutes,
codes, rules or regulations relating to the environment, natural resources, and
pollution in effect as of the date of this Agreement, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., as amended from time to time ("CERCLA"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., as
amended from time to time ("HMTA"), the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., as amended from time to time ("RCRA"), the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., as amended
from time to time ("FWPCA"), the Clean Air Act, 42 U.S.C. Section 7401 et seq.,
as amended from time to time ("CAA"), and/or the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., as amended from time to time ("TSCA"), the Solid
Waste Disposal Act, 42 U.S.C. Section 6901, et seq., as amended from time to
time ("SWDA"), the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 1361 et seq., as amended from time to time ("FIFRA"), the Safe Drinking
Water Act, 41 U.S.C. Section 300f. et seq., as amended from time to time
("SDWA"), and the Occupational Safety and Health Act of 1970, 29 U.S.C. Section
600, et seq., as amended from time to time ("OSHA") to the extent it regulates
occupational exposure to Hazardous Materials.
(n) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
(o) "GAAP" means United States generally accepting accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
(p) "Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
(q) "Hazardous Materials" means (i) any wastes, substances, or materials
which are defined as "hazardous material," "hazardous waste," "hazardous
substance," "toxic material" or other similar designations in, or otherwise
subject to regulation under, any Environmental Laws; (ii) petroleum or petroleum
byproducts; (iii) friable asbestos and/or any material which contains friable
asbestos; and (iv) polychlorinated biphenyls ("PCBs").
(r) "Investment Assets" means all securities, mortgages and other
investment assets held by Professional that are listed on Section 3.12 of the
Disclosure Schedule, and all securities, mortgages and other investment assets
acquired on or after the date hereof 1998 by Professional, as all of the
foregoing may be sold, disposed of, invested or reinvested from time to time
prior to the Closing.
(s) "Material Adverse Effect" means an effect or series of related
effects that individually or in the aggregate is materially adverse to any of
(i) the business, results of operations or financial condition of Professional,
(ii) the ability of
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PLAC to consummate the transactions contemplated by this Agreement, or (iii) the
validity or enforceability of this Agreement.
(t) "Parent" means PennCorp Financial Group, Inc., the sole stockholder
of PLAC.
(u) "Person" means an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or,
as applicable, any other entity.
(v) "PLAC's knowledge," "to the knowledge of PLAC" and similar terms or
phrases shall be deemed to include the knowledge of Parent.
(w) "Quarterly Statement" means, with respect to a referenced Person, the
quarterly statement of such Person with or submitted to the insurance regulatory
authority in the state in which such Person is domiciled on forms prescribed or
permitted by such authority.
(x) "Release" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, pumping, pouring, emptying, dumping, disposal, release, or
threatened release of Hazardous Materials into the environment.
(y) "SAP" means the statutory accounting practices required or permitted
by the insurance regulatory authority in the jurisdiction of domicile of the
referenced Person, consistently applied throughout the specified period and in
the immediately prior comparable period.
(z) "Taxes" means any and all federal, state, local, foreign and other
taxes, levies, fees, imposts, duties, tariffs and similar governmental charges
(including any interest, penalties or additions to tax imposed in connection
therewith or with respect thereto or in relation to requirements to file tax
returns) including, without limitation, taxes imposed on, or with respect to, or
measured by, income, franchise, profits or gross receipts, ad valorem, value
added, sales, use, service, real or personal property, capital stock, license,
payroll, withholding, employment, social security, unemployment, compensation,
utility, severance, production, excise, stamp, estimated, alternative minimum,
environmental, disability, occupation, premium, windfall profits, transfer and
gains taxes, and customs duties.
(aa) "WARN" means the Worker Adjustment and Retraining Notification Act
of 1988 and any similar state or local "plant closing" statute.
SECTION 1.2. Other Definitions. When used in this Agreement, the
following terms shall have the meanings ascribed to them in the Sections noted
below:
Term Defined in
---- ----------
1997 Schedule T Section 3.1(b)
Acquisition Section 7.1
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Advance Notes Section 6.23(a)
Affected Employees Section 3.14(a)
Agent Advances Section 6.23(a)
Agreement Preamble
Auditor Section 6.15(j)
Benefit Arrangements Section 3.14(c)
Benefited Party Section 6.15(j)
Buyer Preamble
Buyer Material Adverse Effect Section 5.1
Buyer's Plans Section 3.14(c)
CERCLIS Section 3.21(e)
Certain Damages Section 9.3(b)
Closing Section 8.1
Closing Adjustment Calculations Section 2.3(c)
Closing Date Section 8.1
Closing Purchase Price Section 2.2
Company Plans Section 3.14(b)
Current Employees Section 3.14(a)
Direct Claim Section 9.5(d)
DOJ Section 3.6
Effective Tax Rate Section 6.15(j)
Employee Benefit Programs Section 3.14(b)
ERISA Affiliate Section 3.14(e)
Expenses Section 10.3(a)
Fee Section 10.3(b)
Final Purchase Price Section 2.2
Financial Statements Section 3.7(a)
First Advance Note Section 6.23(a)
Form 8023 Section 6.15(k)(ii)
GAAP Financial Statements Section 3.7(c)
HSR Act Section 3.6
Identified Agents Section 6.22
Identified Employees Section 3.14(a)
Inactive Employees Section 6.16(a)
Indemnifiable Tax Losses Section 6.15(a)
Indemnifying Party Section 9.2(a)
Indemnitee Section 9.2(a)
Indemnity Payment Section 9.2(a)
Intellectual Property Section 3.19
Intercompany Accounts Section 6.10(a)
Interim Quarterly GAAP Statements Section 6.7(b)
Interim SAP Statements Section 6.7(a)
Joint Venture Section 6.23(a)
Joint Venture Agreement Section 6.23(a)
Liens Section 3.11(b)
Litigation Section 3.10
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Loan Agreement Section 6.23(a)
Modified Form 8023 Section 6.15(k)(ii)
New Distribution Agreements Section 6.22
Occidental Section 6.17(b)
Other Returns Section 6.15(f)
Owned Properties Section 3.11(b)
Parent Agreement Section 7.1(l)
PBGC Section 3.14(c)
PESCO Section 6.23(a)
PLAC Preamble
PLAC Consolidated Returns Section 6.15(f)
PLAC Returns Section 6.15(f)
Pre-Closing Taxes Section 6.15(a)(ii)
Professional Recitals
Reduction Amount Section 2.3(b)
Reinsurance Agreements Section 3.23(a)
Retention Bonuses Section 6.16(i)
Second Advance Note Section 6.23(a)
Section 338 Elections Section 6.15(k)(i)
Section 338 Forms Section 6.15(k)(ii)
Section 338 Taxes Section 6.15(a)(iii)
Settlement Auditor Section 2.3(f)
Shares Recitals
Straddle Periods Section 6.15(b)
Superior Transaction Section 6.19(c)
Tax Benefit Section 6.15(j)
Tax Claim Section 6.15(b)
Tax Returns Section 3.15(d)
Tax Sharing Agreement Section 6.15(e)
Third Party Claim Section 9.2(a)
Transferred Employee Section 6.16(a)
Transition Services Agreement Section 6.10(d)
Year 2000 Complaint Section 3.27(a)
Year End GAAP Financial Statements Section 6.8
ARTICLE II
THE ACQUISITION
SECTION 2.1. Purchase and Sale of Shares. On the terms and subject to the
conditions hereof, and in reliance upon the respective representations,
warranties, covenants and agreements of each of the respective parties to this
Agreement, at the Closing PLAC will sell, assign, transfer and convey to Buyer,
and Buyer will purchase and acquire from PLAC, the Shares, free and clear of all
Liens, other than Liens created by Buyer.
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SECTION 2.2. Consideration for the Shares. The aggregate purchase price
payable by Buyer for the Shares shall be the sum of $47.5 million in cash (the
"Closing Purchase Price"), subject to adjustment following the Closing in
accordance with the provisions of Section 2.3 (as so adjusted, the "Final
Purchase Price"). On the Closing Date, Buyer will pay the Closing Purchase Price
by wire transfer of immediately available funds to such accounts as PLAC shall
have designated in writing at least two days prior to the Closing Date.
SECTION 2.3. Post-Closing Purchase Price Adjustment; Closing Balance
Sheet.
(a) Upon the earlier to occur of (i) the parties' agreement (or deemed
agreement pursuant to Section 2.3(e)) with respect to the calculation of the
Final Purchase Price and (ii) the delivery of any report of the Settlement
Auditor as provided in Section 2.3(g), the Closing Purchase Price shall be
decreased by the Reduction Amount, if any. Within five Business Days after the
earlier to occur of the events described in clauses (i) and (ii) above, (A) PLAC
shall, if the Reduction Amount is payable, pay to Buyer the difference between
the Reduction Amount less the amount to be paid by Buyer to PLAC as provided in
clause (B) below, plus simple interest thereon from and including the Closing
Date to but not including the date of payment at an annual interest rate equal
to 4.5%, and (B) Buyer shall pay to PLAC simple interest on the Closing Purchase
Price at an annual rate of 4.5% for the period from and including the date of
this Agreement to but excluding the Closing Date, except to the extent offset by
the payment required to be made by PLAC pursuant to clause (A) above. The
payments described in the foregoing sentence shall be made by wire transfer of
immediately available funds to such account or accounts of the party entitled to
receive such payment as such party specifies in writing to the party required to
make such payment in the manner specified herein for the delivery of notices.
The allocation of any such payments to particular Shares shall be determined by
mutual agreement of PLAC and Buyer.
(b) The "Reduction Amount" shall equal the greater of: (i) $0.00 or (ii)
the amount by which $7,897,000 exceeds the Closing SAP Capital.
(c) Within 30 Business Days after the Closing Date, PLAC shall prepare
and deliver to KPMG Peat Marwick LLP ("KPMG") for audit the Closing SAP Balance
Sheet. Buyer shall, and shall cause Professional and their officers and
employees to, afford to PLAC and its officers, employees and agents reasonable
access at reasonable times to the officers, employees, properties, books and
records of Professional and shall furnish to PLAC all financial and other data
and information relating to Professional as PLAC may reasonably request in
connection with PLAC's preparation of the Closing SAP Balance Sheet. As promptly
as practicable following such delivery (and, in any event, within 40 Business
Days), PLAC shall cause (at its expense) KPMG to complete an audit of the
Closing SAP Balance Sheet. Buyer shall, and shall cause Professional and its
officers and employees to, cooperate with KPMG in connection with such audit. As
promptly as practicable after such audit is completed, PLAC shall deliver to
Buyer (i) the audited Closing SAP Balance Sheet together with
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the report thereon of KPMG to the effect that such audit was conducted in
accordance with generally accepted auditing standards and that such firm
believes that such audit provides a reasonable basis for such firm's opinion
thereon and that the Closing SAP Balance Sheet presents fairly in all material
respects the statutory financial condition of Professional as of the Closing
Date in conformity with this Agreement, and (ii) a statement signed by PLAC
setting forth the calculation of the Reduction Amount, if any (the "Closing
Adjustment Calculations"), in sufficient detail to permit Buyer to verify such
calculation.
(d) As promptly as practicable after the conduct of the audit required
pursuant to Section 2.3(c), PLAC shall cause KPMG to (i) provide to Buyer's
independent auditors such work papers and other documents of KPMG relating to
such audits as Buyer's independent auditors may reasonably request and (ii)
cooperate with, and be reasonably available to, Buyer's independent auditors to
provide such other information reasonably requested by Buyer's independent
auditors concerning such audits and the accounting and auditing issues that
arise from or relate to such audits. Buyer shall pay the fees and expenses of
its independent auditors.
(e) Within 30 Business Days after Buyer's receipt of the audited Closing
SAP Balance Sheet (together with the Closing Adjustment Calculations of PLAC),
Buyer shall provide PLAC with written notice indicating whether Buyer agrees or
disagrees with such calculations, and, if Buyer disagrees with such calculations
of PLAC, setting forth Buyer's calculation of the Closing Adjustment
Calculations. If Buyer agrees with such calculations, or if Buyer fails to
deliver to PLAC such written notice within such 30 Business Day period, such
Closing SAP Balance Sheet and such calculations shall be deemed final. To the
extent Buyer, on the one hand, and PLAC, on the other hand, are in agreement as
to calculation of the Closing Adjustment Calculations, the Reduction Amount, if
any, shall be paid as contemplated in Section 2.3(a).
(f) Within ten Business Days after PLAC's timely receipt of any notice of
disagreement with the calculations of the Closing Adjustment Calculations, Buyer
and PLAC shall begin, and shall cause their independent auditors to participate
in, good faith negotiations to resolve such disagreement. If such parties and
their independent auditors are unable to resolve such disagreement within ten
Business Days after such negotiations begin, such disagreement shall be
submitted to an independent nationally recognized auditing firm selected by the
parties (the "Settlement Auditor") for resolution in a manner consistent with
the provisions of this Agreement. The parties shall, and shall cause their
independent auditors to, cooperate with the Settlement Auditor and shall proceed
in good faith to cause the Settlement Auditor to resolve such disagreement
within 40 Business Days after such disagreement is submitted to the Settlement
Auditor. The fees and expenses of the Settlement Auditor (i) shall be paid by
PLAC if the Buyer's
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calculation of the Closing Adjustment Calculations is closer to the Settlement
Auditor's calculation of the Closing Adjustment Calculations than PLAC's
calculation of the Closing Adjustment Calculations, (ii) shall be paid by Buyer
if PLAC's calculation of the Closing Adjustment Calculation is closer to the
Settlement Auditor's calculation of the Closing Adjustment Calculations than the
Buyer's calculation of the Closing Adjustment Calculations and (iii) shall be
paid on-half by PLAC and one-half by Buyer if neither PLAC's calculation of the
Closing Adjustment Calculations nor the Buyer's calculation of the Closing
Adjustment Calculations is closer to the Settlement Auditor's calculation of the
Closing Adjustment Calculations than the other.
(g) The Settlement Auditor, in its sole discretion, shall determine (i)
the nature and extent of the participation by Buyer, PLAC and their respective
independent auditors in connection with the resolution of any disagreement
submitted to the Settlement Auditor, (ii) the nature and extent of information
that Buyer and PLAC may submit to the Settlement Auditor for consideration in
connection with such resolution and (iii) the personnel of the Settlement
Auditor who shall review such information and resolve such disagreement;
provided, however, that the Settlement Auditor shall permit PLAC and Buyer to
submit any information relating to the audit by the auditors of PLAC or Buyer of
the Closing SAP Balance Sheet or the calculation of the Closing Adjustment
Calculations prepared by PLAC or Buyer in connection with the Settlement
Auditor's resolution of any such disagreement. The Settlement Auditor's
resolution of any such disagreement shall be reflected in a written report that
shall be delivered promptly to, and shall be final and binding upon, the parties
and the Closing Purchase Price shall be adjusted accordingly to reflect any such
resolution and, as adjusted, shall be deemed to be the Final Purchase Price and
any Reduction Amount resulting therefrom will be paid in accordance with Section
2.3(a). Notwithstanding anything in this Agreement to the contrary, in no event
shall the Settlement Auditors' calculation of the Closing SAP Capital be greater
than PLAC's auditors' calculation or less than Buyer's auditors' calculation of
the Closing SAP Capital.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PLAC
PLAC represents and warrants to Buyer as follows:
SECTION 3.1. Organization and Qualification.
(a) Each of PLAC and Professional is an insurance company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
domicile, which, as to each is set forth opposite its name in Section 3.1(a) of
the Disclosure Schedule, with all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as it is now
being conducted. PLAC has delivered to Buyer a true and complete copy of the
Articles of Incorporation and Bylaws of Professional, as currently in effect.
The minute books of Professional accurately reflect in all material respects the
actions taken at all meetings and all consents in lieu of meetings of the board
of directors of Professional and all committees thereof since the date
Professional was acquired by PLAC. True and complete copies of such minute books
previously have been made available to Buyer.
(b) Professional is qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction in which such
qualification or
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licensing is required by applicable law. Schedule T of Professional's Annual
Statement for the year ended December 31, 1997 (the "1997 Schedule T"), sets
forth a true and complete list of each jurisdiction in which Professional is
qualified or licensed to do business.
(c) Professional is not deemed to be commercially domiciled in any
jurisdiction other than its domiciliary state. Professional is licensed to write
the types of insurance shown on the 1997 Schedule T in the jurisdictions shown
on the 1997 Schedule T, which are all the types of insurance issued by
Professional and all the jurisdictions in which Professional writes such
insurance. Except as set forth in Section 3.1(c) of the Disclosure Schedule, no
such license or related document is the subject of a proceeding for suspension
or revocation or any similar proceedings and, to the knowledge of PLAC, there is
no pending threat of such suspension or revocation by any licensing or other
regulatory authority.
SECTION 3.2. Authorization. PLAC has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by PLAC, the
performance by PLAC of its obligations hereunder, and the consummation by PLAC
of the transactions contemplated hereby, have been duly authorized by its Boards
of Directors and by Parent as its sole stockholder. No other corporate action on
the part of PLAC is necessary to authorize the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by PLAC and
constitutes a valid and binding obligation of PLAC, enforceable against PLAC in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
SECTION 3.3. No Violation. Except as set forth in Section 3.3 of the
Disclosure Schedule, neither the execution and delivery of this Agreement by
PLAC, the performance by PLAC of its obligations hereunder nor the consummation
of the transactions contemplated hereby will (a) violate, conflict with or
result in any breach of any provision of the Articles of Incorporation or Bylaws
of PLAC or Professional, (b) violate or conflict with or result in a violation
or breach of, result in a material modification of the effect of, or constitute
a default or give rise to any right of termination or acceleration (with or
without due notice or lapse of time or both) or result in the acceleration of
any payments under the terms, conditions or provisions of any note, bond,
mortgage, indenture or deed of trust, license, lease or agreement to which PLAC
or Professional is a party or by which any of their assets are bound, (c)
violate any order, writ, judgment, injunction, decree, statute, rule or
regulation of any Governmental Authority applicable to PLAC or Professional or
any of their respective assets or (d) result in the creation of any Lien upon
any of the assets of PLAC or Professional, except in the cases of clauses (b)
and (d) above, for those violations, conflicts, breaches, defaults and Liens
which would not, individually or in the aggregate, reasonably be expected to
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have a Material Adverse Effect or materially impair PLAC's ability to consummate
the transactions contemplated hereby.
SECTION 3.4. Capitalization of Professional.
(a) As of the date hereof, the authorized capital stock of Professional
consists of 50,000 shares of common stock, par value $50.00 per share. As of the
date hereof, Professional has 50,000 shares of common stock issued and
outstanding, all of which have been validly issued, are fully paid and
non-assessable and were not issued in violation of any preemptive rights. Except
as set forth in Section 3.4(a) of the Disclosure Schedule, there are no (i)
options, warrants, calls, subscriptions, conversion or other rights, agreements
or commitments obligating (x) Professional to issue any additional shares of
capital stock or any other securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of capital stock of
Professional or (y) PLAC to sell or otherwise transfer all or any portion of the
Shares, (ii) agreements or commitments obligating Professional to repurchase,
redeem or otherwise acquire any shares of its capital stock, (iii) restrictions
on transfer of any shares of capital stock of Professional (other than pursuant
to this Agreement), (iv) voting or similar shareholder agreements relating to
any shares of capital stock of Professional, or (v) any bonds, debentures, notes
or other indentures of Professional granting the right to vote on any matters on
which stockholders of Professional vote issued and outstanding.
(b) As of the date hereof, PLAC owns 49,996.5 shares of common stock of
Professional and on the Closing Date PLAC will own all of the shares of common
stock of Professional issued and outstanding on the Closing Date, beneficially
and of record, free and clear of all Liens. At Closing, good title to the Shares
will be conveyed to Buyer, free and clear of all Liens other than those that may
be created by Buyer. SECTION 3.5. Subsidiaries of Professional. Except as set
forth in Section 3.5 of the Disclosure Schedule, Professional does not own
directly or indirectly, 5% or more of the outstanding voting securities of or
otherwise possesses, directly or indirectly, the power to direct or cause the
direction of the management or policies of any Person, other than securities
held for investment purposes only.
SECTION 3.6. Consents and Approvals. Except as set forth in Section 3.6
of the Disclosure Schedule, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any Governmental Authority is
necessary for the consummation by PLAC of the transactions contemplated by this
Agreement other than consents and approvals of or filings or registrations with
(a) the Antitrust Division of the United States Department of Justice (the
"DOJ") pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (b) the approval of the Texas Department of
Insurance.
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SECTION 3.7. Financial Statements; Reserves.
(a) PLAC has previously delivered to Buyer true and complete copies of
the following (the "Financial Statements"):
(i) the Annual Statements for Professional for each of the years ended
December 31, 1995, 1996 and 1997, together with any exhibits, schedules and
notes thereto and any affirmations or certifications filed therewith;
(ii) the Quarterly Statements for Professional for the quarters ended
March 31, June 30, and September 30, 1998, together with any exhibits,
schedules and notes thereto and any affirmations or certifications filed
therewith; and
(iii) the statutory annual statements of Professional that were filed for
1995, 1996, and 1997 and the quarterly statements with respect to the
quarters ended March 31, June 30 and September 30, 1998, together with any
exhibits, schedules and notes thereto and any affirmations or certifications
filed therewith, in any jurisdiction (other than such company's jurisdiction
of domicile) and that differ from the corresponding Annual Statements and
Quarterly Statements for such periods.
Each such statement was prepared in all material respects in accordance with SAP
and, except as set forth in Section 3.7(a) of the Disclosure Schedule, presents
fairly in all material respects the statutory financial condition of
Professional as of the respective dates thereof and the related summary of
operations and changes in capital and surplus and in cash flows of Professional
for and during the respective periods covered thereby. No deficiencies or
required adjustments with respect to such Annual Statements or Quarterly
Statements have been asserted by any regulatory authority that have not been
cured or otherwise resolved to the satisfaction of such insurance regulatory
authority and that have not been disclosed on Section 3.7(a) of the Disclosure
Schedule.
(b) Except as set forth in Section 3.7(b) of the Disclosure Schedule, all
statutory reserves and other similar amounts with respect to insurance as
established or reflected in the December 31, 1997 Annual Statement and the
September 30, 1998 Quarterly Statement of Professional were determined in all
material respects in accordance with SAP and meet the requirements of the
insurance laws of the State of Texas in all material respects. Except as set
forth in Section 3.7(b) of the Disclosure Schedule, all such reserves and other
similar amounts were adequate in all material respects as of the respective
dates of such statements, based upon then-current information and assumptions
concerning investment income, mortality and morbidity experience, persistency,
and expenses, to cover the total amount of all reasonably anticipated matured
and unmatured benefits, dividends, claims, and other liabilities of such company
under all insurance contracts under which such company had any liability
(including without limitation any liability arising under or as a result of any
reinsurance, coinsurance, or other similar contract) on the respective dates of
such financial statements. Except as set forth in Section 3.7(b) of the
Disclosure Schedule, Professional owns assets that qualify as legal reserve
assets under applicable insurance laws in an amount at least equal to all such
required reserves and other similar amounts of such company.
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(c) Section 3.7(c) of the Disclosure Schedule contains a true and correct
copy of the unaudited balance sheets and income statements of Professional for
the years ended December 31, 1997 and 1996, and the unaudited quarterly balance
sheets and income statements of Professional for the periods ended after January
1, 1998 and on or prior to September 30, 1998 (collectively, the "GAAP Financial
Statements"). The GAAP Financial Statements are based on the books and records
of Professional, and fairly present, in all material respects, the financial
condition and results of operations of Professional as of the dates and for the
periods indicated therein and have been prepared in conformity with GAAP (except
for the absence of notes thereto). All reserves and other similar amounts with
respect to insurance as established or reflected in the GAAP Financial
Statements were determined in all material respects in accordance with GAAP. All
such reserves and other similar amounts were adequate in all material respects
as of the respective dates of such statements, based upon then current
information and assumptions concerning investment income, mortality and
morbidity experience, persistency, and expenses, to cover the total amount of
all reasonably anticipated matured and unmatured benefits, dividends, claims,
and other liabilities of Professional under all insurance contracts under which
Professional had any liability (including, without limitation, any liability
arising under or as a result of any reinsurance, coinsurance or similar
contract) on the respective dates of such financial statements.
SECTION 3.8. Absence of Undisclosed Liabilities. As of the date hereof,
except for matters relating to the transactions contemplated by this Agreement,
there are no liabilities or financial obligations of Professional that are
required to be reflected on a balance sheet prepared in accordance with SAP,
other than (a) liabilities and obligations reserved against in the Financial
Statements, (b) benefits payable or other liabilities or obligations arising
under insurance policies issued by Professional, (c) liabilities and obligations
disclosed in Section 3.8 of the Disclosure Schedule, and (d) liabilities and
obligations arising in the ordinary course of business after September 30, 1998.
SECTION 3.9. Absence of Certain Changes. Except as disclosed in Section
3.9 of the Disclosure Schedule or as contemplated or otherwise permitted by this
Agreement, since September 30, 1998, there has not been any event, condition,
occurrence or change that has had or that reasonably could be expected to have,
a Material Adverse Effect, and Professional has not (a) conducted its business
in any material respect other than in the ordinary course, (b) except in the
ordinary course of business, incurred any indebtedness for borrowed money or
issued any debt securities or assumed, guaranteed or endorsed the obligations of
any other Person, (c) except in the ordinary course of business, (i) sold,
transferred or otherwise disposed of any of its property or assets or (ii)
mortgaged or encumbered any of its property or assets, (d) suffered any material
casualty losses not covered by insurance, (e) repurchased any of its capital
stock, (f) declared, set aside or paid any dividend or other distribution in
respect of its capital stock, other than ordinary dividends permitted under
applicable insurance laws, (g) amended its Articles of Incorporation or Bylaws
or merged with or into or consolidated with any other Person, (h) split,
combined or reclassified its capital stock, (i) issued or sold (or agreed to
issue or sell) any of its equity securities or any options, warrants, conversion
or other rights to purchase any such securities or any securities
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convertible into or exchangeable for such securities, or granted, or agreed to
grant any such rights, (j) increased the rates of compensation (including
bonuses) payable or to become payable to any of its officers, employees, agents,
independent contractors or consultants other than increases made in the ordinary
course of business, (k) entered into any new or amended any existing employment
contracts, severance agreements or consulting contracts or instituted or agreed
to institute any increase in benefits or altered its employment practices or the
terms and conditions of employment, in each case other than in the ordinary
course of business, (l) changed in any material respect its underwriting,
actuarial or tax accounting methods, principles or practices, (m) entered into
or amended or terminated any transaction or contract that has or could
reasonably be expected to have a Material Adverse Effect, (n) ceased its lead
generation activities or terminated any material reinsurance or coinsurance
contract (including without limitation, any surplus relief or financial
reinsurance contract), whether as reinsurer or reinsured in each case other than
in the ordinary course of business, (o) made any payments to Parent, PLAC or any
other affiliates, (p) entered into any joint ventures or partnerships or any
kind, or (q) entered into any contract or other written agreements to do any of
the foregoing.
SECTION 3.10. Litigation. Except as set forth in Section 3.10 of the
Disclosure Schedule, as of the date hereof, (a) there is no action, suit,
arbitration, investigation or proceeding ("Litigation") pending or, to the
knowledge of PLAC, threatened against PLAC or Professional before any
Governmental Authority or arbitrator, that if resolved adversely to PLAC or
Professional, would reasonably be expected to have a Material Adverse Effect and
(b) there are no judgments, orders or decrees of any Governmental Authority or
arbitrator binding on PLAC or Professional that (i) have been issued by any
insurance regulatory authority, (ii) would materially restrict the ability of
Professional to conduct its business as now being conducted or (iii) has had or
would reasonably be expected to have a Material Adverse Effect. Professional is
not in default under any judgment, decree, injunction or order of any
Governmental Authority or arbitrator outstanding against it, except for those
defaults that would not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.11. Property; Liens and Encumbrances.
(a) Section 3.11(a) of the Disclosure Schedule contains a complete and
accurate list of all real property owned or leased by Professional as of the
date hereof.
(b) Except as set forth in Section 3.11(b) of the Disclosure Schedule,
all properties and assets owned by Professional (the "Owned Properties") are
free and clear of all liens, pledges, claims, security interests, mortgages,
assessments, easements, rights of way, covenants, restrictions, rights of first
refusal, defects in title, encroachments and other burdens (collectively,
"Liens") except (i) statutory Liens not yet delinquent or the validity of which
are being contested in good faith by appropriate actions, (ii) purchase money
Liens arising in the ordinary course, (iii) Liens for taxes not yet delinquent,
(iv) Liens reflected in the Financial Statements (which have not been
discharged) and (v) Liens that in the aggregate do not materially detract from
the value or, in the case of personal property, materially impair the use by
Professional of the
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property subject thereto or, in the case of real property, materially impair the
present and continued use of such property in the usual and normal conduct of
the business of Professional. Professional has good and indefeasible title to
the Owned Properties and there are no pending or, to the knowledge of PLAC,
threatened condemnation proceedings affecting any of the Owned Properties.
SECTION 3.12. Investment Assets.
(a) Section 3.12(a) of the Disclosure Schedule contains (i) a list of all
Investment Assets owned by Professional as of September 30, 1998 together with
the carrying value on the balance sheet included in the Professional Financial
Statements for the quarter ended September 30, 1998 of each such Investment
Asset, and (ii) a list of all purchases, acquisitions, sales or dispositions of
Investment Assets by Professional since September 30, 1998 through the date
hereof (including the Investment Assets involved and the dates and prices of the
transactions). Professional has good title to the Investment Assets listed in
Section 3.12(a) of the Disclosure Schedule or purchased or acquired since
September 30, 1998, free and clear of any Liens or other encumbrances, other
than Investment Assets sold or disposed of in the ordinary course of business
since such date.
(b) From the date hereof until the Closing Date, Professional shall
purchase and sell its Investment Assets, and invest and reinvest income and
proceeds in respect thereof only in accordance with the investment policies set
forth in Section 3.12(b) of the Disclosure Schedule or as otherwise mutually
agreed upon by Buyer and PLAC. Within ten (10) Business Days after the end of
each month occurring between the date hereof and the Closing Date, Professional
shall provide Buyer with a written statement of all purchases, acquisitions,
sales and dispositions of Investment Assets, and all investments and
reinvestments of income and proceeds in respect thereof during the preceding
month.
SECTION 3.13. Certain Agreements. Section 3.13 of the Disclosure Schedule
lists all of the Contracts and Other Agreements to which Professional is a party
or by which any of its assets or properties are bound (other than the Employee
Benefit Programs set forth in Section 3.14(b) of the Disclosure Schedule):
(a) all employment, agency, consultation or representation contracts and
other agreements with any present officer, director, employee, agent,
consultant, or other similar representative of Professional (or former officer,
director, employee, agent, consultant or similar representative of Professional
if there exists any present or future liability with respect to such contract),
other than Contracts and Other Agreements with employees, agents, consultants
and similar representatives who do not receive compensation of $75,000 or more
per year and other than Contracts and Other Agreements with agents or producers
who did not receive commissions of at least $37,500 during the six months ended
June 30, 1998;
(b) all Contracts and Other Agreements with any person containing any
provision or covenant limiting the ability of Professional to (i) sell any
products or
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services of any person, (ii) engage in any line of business or (iii) compete
with or obtain products or services from any person or limit the ability of any
person to compete with or provide products or services to Professional;
(c) all Contracts and Other Agreements pursuant to which Professional has
agreed to indemnify or hold harmless any person (other than pursuant to
reinsurance and coinsurance agreements and other than indemnifications in the
ordinary course of business);
(d) all Contracts and Other Agreements (including without limitation
those relating to allocations of expenses, personnel, services or facilities)
between or among Professional on the one hand, and Parent or any direct or
indirect affiliate of Parent, on the other hand;
(e) all reinsurance and coinsurance contracts relating to Professional;
and
(f) all other Contracts and Other Agreements (other than any Contracts
and Other Agreements with agents or producers); provided, however, that Section
3.13 of the Disclosure Schedule need not include any Contracts or Other
Agreements not specified in clauses (a)-(e) above that do not involve one or
more payments or potential payments, pursuant to the terms of such Contracts and
Other Agreements, by or to Professional, in excess of $100,000 in any
twelve-month period or that provide for a remaining term in excess of twelve
months.
Each Contract or Other Agreement required to be disclosed in Section 3.13 of the
Disclosure Schedule is in full force and effect and constitutes a legal, valid
and binding obligation of Professional and, to the knowledge of each of PLAC and
Professional, each other party thereto, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, rehabilitation, liquidation, moratorium and other similar laws
relating to or affecting rights and remedies of creditors generally or rights
and remedies of creditors of insurance companies generally, by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) or by an implied covenant of good faith and
fair dealing. Except as set forth in Section 3.13 of the Disclosure Schedule,
neither PLAC nor Professional has received from any other party any notice of
termination with respect to any Contract or Other Agreement required to be
disclosed in Section 3.13 of the Disclosure Schedule. Except as set forth in
Section 3.13 of the Disclosure Schedule, neither Professional nor, to the
knowledge of each of PLAC or Professional, any other party to any contract or
other agreement required to be disclosed in Section 3.13 of the Disclosure
Schedule is in violation or breach of or default under any such Contract or
Other Agreement (or, with or without notice or lapse of time or both, would be
in violation or breach of or default under any such Contract or Other
Agreement), which violation, breach or default has or could reasonably be
expected to have, individually, or in the aggregate, a Material Adverse Effect.
There have been made available to Buyer true and complete copies of all
Contracts and Other Agreements required to be set forth
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in Section 3.13 of the Disclosure Schedule or in any other Section of the
Disclosure Schedule.
SECTION 3.14. Professional Employees.
(a) Section 3.14 (a)(i) of the Disclosure Schedule contains a true and
complete list of all persons employed by Professional (the "Current Employees")
as of November 30, 1998. Any Current Employee who remains employed by
Professional or its subsidiaries as of the Closing Date shall be referred to as
a "Transferred Employee".
(b) Section 3.14(b) of the Disclosure Schedule lists each "employee
benefit plan" (within the meaning of ERISA Section 3(3)) that, as of the date
hereof, is maintained or otherwise contributed to by Parent, PLAC or
Professional for the benefit of the Current Employees (including, without
limitation, pension, profit sharing, stock bonus, medical reimbursement, life
insurance, disability and severance pay plans) (collectively, the "Company
Plans") and all other material employee benefit plans and arrangements, payroll
practices, employment agreements, change-in-control or transition agreements, or
retention agreements, policies or other arrangements, not subject to ERISA, that
are maintained or otherwise contributed to by Parent, PLAC or Professional for
the benefit of the Current Employees and providing for deferred compensation,
bonuses, stock options, employee insurance coverage or any similar compensation
or welfare benefit plan (collectively, "Benefit Arrangements" and, together with
the Company Plans, the "Employee Benefit Programs"). Except as disclosed in
Section 3.14(b) of the Disclosure Schedule, all Employee Benefit Programs so
listed are sponsored by Parent.
(c) Except as set forth in Section 3.14(c) of the Disclosure Schedule,
(i) each Employee Benefit Program has been established and administered in all
material respects in compliance with the applicable provisions of ERISA, the
Code and the terms of all documents relating to such programs; (ii) each Company
Plan that is intended to be qualified under Code Section 401(a) has received a
favorable determination letter as to its qualification; (iii) as of the date of
this Agreement no "reportable event" (as such term is used in ERISA Section
4043, but other than any event for which notice to the Pension Benefit Guaranty
Corporation ("PBGC") has been waived), "prohibited transaction" (as such term is
used in Code Section 4975 or ERISA Section 406) or "accumulated funding
deficiency" (as such term is used in Code Section 412 or 4971) has heretofore
occurred with respect to any Company Plan where such occurrence has a reasonable
probability of resulting in a termination of a Company Plan subject to Title IV
of ERISA; and (iv) there are no pending or, to the knowledge of PLAC,
Professional or any of their subsidiaries, threatened actions, claims or
lawsuits that have been asserted or instituted against the Employee Benefit
Programs, the assets of any of the trusts under such plans or the plan sponsor
or the plan administrator, or against any fiduciary of the Employee Benefit
Programs with respect to the operation of such plans (other than routine benefit
claims).
(d) Current, accurate and complete copies of each Employee Benefit
Program (or to the extent no such copy exists, an accurate description), all
existing
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amendments and to the extent applicable, trust agreements, annuity contracts or
other funding arrangements, summary plan descriptions, Internal Revenue Service
determination letters, and the most recent annual reports on Form 5500, if any,
have been made available to Buyer.
(e) None of PLAC, Professional or any entity required to be aggregated
with them pursuant to Code Section 414 or ERISA Section 4001(b) ("ERISA
Affiliate") maintains or contributes, or has maintained or contributed within
the preceding six years, to any "multiemployer plan" (as such term is defined in
ERISA Section 3(37)), and none of PLAC, Professional or any of their
subsidiaries has incurred any material liability that remains unsatisfied under
ERISA Section 4062, 4063, 4064, 4069 or 4201. No ERISA Affiliate has incurred
any material liability to the PBGC that remains unsatisfied (other than PBGC
premiums), including as a result of the voluntary or involuntary termination of
any Company Plan that is subject to Title IV of ERISA. There is currently no
active filing by Professional with the PBGC (and no proceeding has been
commenced by the PBGC) to terminate any Company Plan that is subject to Title IV
of ERISA and that has been maintained or funded, in whole or in part, by
Professional.
(f) Except as disclosed in Section 3.14(f) of the Disclosure Schedule,
none of PLAC or Professional maintains or contributes to any Employee Benefit
Program that provides, or has any liability or obligation to provide, life
insurance or medical benefits to any employee (or his beneficiary) upon and/or
after such employee's retirement, except as may be required by federal, state or
local laws, rules or regulations.
(g) Except as disclosed in Section 3.14(g) of the Disclosure Schedule,
none of the Employee Benefit Programs contains any provision that would result
in any additional benefits, accelerated vesting and/or accelerated payments
solely as a result of the consummation of the transactions contemplated by this
Agreement or would, in the aggregate as to any one individual, constitute an
"excess parachute payment" under Code Section 280G solely as a result of the
consummation of the transactions contemplated by this Agreement.
(h) Except as disclosed in Section 3.14(h) of the Disclosure Schedule,
since January 1, 1998, there has not been any adoption or amendment by PLAC,
Professional or any subsidiary of Professional, of any collective bargaining
agreement or any Employee Benefit Program. Except as disclosed in Section
3.14(h) of the Disclosure Schedule, there exist no written employment,
consulting, severance, termination or indemnification agreements or arrangements
between Professional and any current or former employee, officer or director of
Professional.
(i) Any individual who performs services for Professional (other than
through a contract with an organization other than such individual) and who is
not treated as an employee for federal income tax purposes by PLAC, Professional
or any of their subsidiaries is not an employee for such purposes.
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SECTION 3.15. Taxes. Except as set forth in Section 3.15 of the
Disclosure Schedule:
(a) Professional has filed all Tax Returns (as hereinafter defined), or
in the case of consolidated, unitary or combined returns, Tax Returns have been
filed on its behalf (as used herein, references to Tax Returns of Professional
shall include any such returns), including those required under applicable
withholding laws and regulations, required to be filed by it on or prior to the
date hereof or requests for extensions to file such Tax Returns have been timely
filed or granted (if required) and have not expired. No claim has ever been made
in writing by an authority in a jurisdiction where Professional does not file
Tax Returns that it is or may be required to file Tax Returns in that
jurisdiction. All Tax Returns filed by Professional are complete and accurate in
all material respects. Professional has paid (or has had paid on its behalf), or
has established adequate reserves, in accordance with GAAP and SAP, for the
payment of, all Taxes shown due on such Tax Returns, and liabilities and
reserves for Taxes reflected on the Closing SAP Balance Sheet are adequate in
all material respects for Taxes payable by Professional for all taxable periods
and portions thereof through the Closing Date. Professional has timely paid (or
has had paid on its behalf) all required current estimated tax payments
sufficient to avoid material underpayment penalties. There are no Liens with
respect to Taxes on any of the assets of Professional.
(b) No deficiencies for any Taxes have been proposed, asserted or
assessed in writing against Professional that are not adequately reserved for in
accordance with SAP and GAAP, except for deficiencies that would not have a
Material Adverse Effect, and no agreements or arrangements for waivers of the
time to assess any such Taxes have been made or are pending. The Tax Returns of
Professional for all years prior to 1995 have been examined by and settled with
the applicable Governmental Authority or the statutes of limitations on
assessment or collection of any Taxes due in respect of such Tax Returns from
Professional have expired. No closing agreement pursuant to Section 7121 of the
Code or any similar provision of any state, local or foreign law has been
entered into by or with respect to Professional.
(c) No audit or other proceeding by any court, Governmental Authority, or
similar person is pending or threatened with respect to any Taxes due from or
with respect to Professional or any Tax Return filed by or with respect to
Professional. No assessment of Tax is proposed against Professional or any of
its assets.
(d) As used in this Agreement, "Tax Returns" shall include any return,
report, information return, or other document (including any related or
supporting information) filed or required to be filed with any Governmental
Authority in connection with the determination, assessment, collection, or
administration of any Taxes.
(e) PLAC is not a "foreign person" within the meaning of Section
1445(b)(2) of the Code. At or prior to Closing, PLAC will provide to Buyer a
certification of nonforeign status to the extent and in the form required under
Treas. Reg. Section 1.1445-2(b).
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(f) (i) Professional has not agreed or been requested to, does not have
an application pending and is not required to make any adjustment under Section
446(e) or Section 481(a) of the Code, (ii) Professional does not have any
accounting method changes pending, either initiated by the IRS or by it and
(iii) there are no elections in effect under Sections 108, 168, 441, 472, 1017,
1033, 4977 or 341(f)(2) of the Code that would result in conjunction with the
Section 338 Elections (as defined below), in recognition of income for federal
income tax purposes on the Closing Date. None of the assets of Professional is
tax exempt use property within the meaning of Section 168(h) of the Code.
(g) Professional has paid or has established adequate reserves in its
Financial Statements for the payment of all guarantee fund assessments in
respect of any period through the Closing Date.
(h) Professional is a member of the group of corporations filing a
consolidated federal income tax return having PLAC as its common parent, and
PLAC is a domestic corporation. Other than pursuant to this Agreement,
Professional has not issued, granted or transferred any outstanding call
options, warrants, convertible obligations, put options, redemption agreements
(including any rights to cause the redemption of stock), cash settlement
options, phantom stock, stock appreciation rights, or any similar interests
(except for stock), or any other instruments that provide for the right to
issue, redeem, or to transfer the stock (including any option on an option),
with respect to Professional.
(i) To the knowledge of PLAC, (i) for any taxable year in respect of
which the applicable statute of limitations on assessment or collection of Taxes
has not yet expired, Professional (or any predecessor) has not been a member of
any group of corporations filing a consolidated federal income tax return and
having as a common parent any corporation other than PLAC and (ii) PLAC has
disclosed to Buyer (or its representatives) each member of the group of
corporations filing a consolidated federal income tax return and having PLAC as
the common parent of such group.
(j) PLAC has properly prepared and filed information statements required
pursuant to Section 1.382-2T(a)(2)(ii) of the Treasury Regulations promulgated
under Section 382 of the Code.
(k) All life insurance contracts issued by Professional qualify as "life
insurance contracts" within the meaning of Section 7702(a) of the Code. None of
the life insurance contracts issued by Professional are Modified Endowment
Contracts within the meaning of Section 7702A(a) of the Code except as
adequately disclosed to the policyholder. All annuity contracts issued by
Professional that are subject to Section 72(s) of the Code contain the necessary
provisions of Section 72(s) of the Code.
(l) To the extent applicable, all contracts issued by Professional that
are subject to Section 817 of the Code have met the diversification requirements
applicable thereto since the issuance of such contracts.
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(m) PLAC and Professional are and for all prior taxable periods have been
taxable as life insurance companies as defined in Section 816 of the Code.
(n) Professional is not subject to any adjustment under Section 807(f) of
the Code.
(o) The insurance reserves and the unearned premiums with respect to
Professional set forth in all federal income tax returns of Professional were
determined substantially in accordance with Section 807 of the Code.
(p) Professional's policyholders' surplus account (as defined in Section
815 of the Code) balance is zero as of December 31, 1993 and for all subsequent
taxable periods through the Closing Date.
(q) The fair market value of Occidental Life Insurance Company as of the
date of its sale by Pennsylvania Life Insurance Company was not in excess of
$48.7 million.
(r) Professional has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii).
(s) Each of the surplus notes issued by any of the members of the
consolidated groups for which PLAC is or was the common parent constitutes, and
for all prior periods did constitute, valid indebtedness under the Code.
(t) The acquisition of United Life & Annuity Insurance Company, formerly
known as United Companies Life Insurance Company, and related Section 338(h)(10)
calculations as reflected on the federal income tax returns of PLAC filed as of
the Closing Date, have been made in accordance with the Code, the Regulations
and any other item that would constitute substantial authority under Treasury
Regulation Section 1.6662-4(d).
SECTION 3.16. Compliance with Applicable Law; Permits; Policies.
(a) Professional is in compliance with all applicable provisions of any
federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to Professional, its
business or its assets, except for such noncompliance as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) Professional owns or validly holds all licenses, franchises, permits,
approvals, authorizations, exemptions, classifications, certificates,
registrations, and similar documents or instruments that are required for its
business and operations. All such licenses, franchises, permits, approvals,
authorizations, exemptions, classifications, certificates, registrations, and
similar documents or instruments are valid and in full force and effect, except
as would not reasonably be expected to have, individually or in
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the aggregate, a Material Adverse Effect, and no proceeding is pending or, to
the knowledge of each of PLAC and Professional, threatened that could result in
the suspension, revocation or limitation of any material license, franchise,
permit, approval, authorization, exemption, classification, certificate,
registration, or similar document which are applicable to Professional.
(c) Except as disclosed in Section 3.16(c) of the Disclosure Schedule,
(i) all forms of insurance policies and all amendments, applications, brochures,
illustrations, certificates and riders thereto in force that were issued by
Professional are, to the extent required under applicable laws, on forms
approved by applicable insurance regulatory authorities of the jurisdictions in
which issued or have been filed with and not objected to by such insurance
regulatory authorities within the period provided for such objection, (ii) all
such forms have been administered in accordance with applicable law and (iii)
any premium rates with respect to such policies or riders required to be filed
with or approved by such applicable insurance regulatory authorities have been
so filed or approved and premiums charged conform thereto. Except as described
in Section 3.16(c) of the Disclosure Schedule, all contracts to which
Professional is a party that are required to be filed with or approved by a
Governmental Authority have been so filed or approved. Except as disclosed in
Section 3.16(c) of the Disclosure Schedule, Professional (exclusive of its
independent agents) and, to the knowledge of each of PLAC and Professional, its
independent agents, have marketed, sold, issued and enrolled products of
Professional in compliance with all laws applicable to the business of
Professional in the respective jurisdictions in which such products have been
marketed, sold, issued or enrolled.
(d) Except as set forth in Section 3.16(d) of the Disclosure Schedule,
Professional has filed or otherwise provided all material reports, data,
registrations and other information and applications required to be filed with
or otherwise provided to the office of the Texas Insurance Commissioner and all
other Federal, state or local Governmental Authorities having jurisdiction over
Professional, and all required regulatory approvals in respect thereof are in
force and effect on the date hereof. No material deficiencies have been asserted
by any such Governmental Authority with respect to any such regulatory filings
or submissions that have not been satisfied.
(e) Professional has previously made available to Buyer true and complete
copies of the reports (or the most recent draft thereof, to the extent any final
report is not available) reflecting the results of the most recent financial
examinations and market conduct examinations of Professional issued by any
insurance regulator.
(f) Professional has delivered or made available to Buyer true and
complete copies of all underwriting manuals (including each amendment thereto)
utilized by Professional since January 1, 1993. Except as set forth in Section
3.16(f) of the Disclosure Schedule, the underwriting standards and ratings
applied by Professional with respect to policies issued since the date on which
PLAC acquired Professional have conformed in all material respects to those
contained in the foregoing underwriting manuals as in effect at the times such
policies were underwritten.
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(g) To the knowledge of each of PLAC and Professional, all insurance or
annuity contract benefits payable by Professional have been paid, and all
insurance or annuity contract claims have been settled, in a timely manner in
accordance with the terms of the insurance, annuity and other contracts under
which they arose, except for such benefits or claims for which Professional
believes there is a reasonable basis to contest.
(h) Since the date on which PLAC acquired Professional, each insurance
agent of Professional, at the time Professional issued any policy wrote, sold,
or produced by such agent for Professional, was duly licensed and properly
appointed by Professional as an insurance agent (for the type of policy written,
sold, or produced by such insurance agent) in the particular jurisdiction in
which such agent wrote, sold, or produced such policy.
SECTION 3.17. Powers of Attorney. Except as set forth in Section 3.17 of
the Disclosure Schedule, there are no outstanding powers of attorney or proxies
granted by Professional to any other person.
SECTION 3.18. Brokers' Fees and Commissions. Except for Xxxxxxx Xxxxx
Xxxxxx Inc. and Xxx-Xxxx, Xxxxxx Inc., none of PLAC, Professional or their
respective affiliates, directors, officers, employees or agents has employed or
is in any way obliged to any investment banker, broker or finder in connection
with the transactions contemplated hereby. PLAC shall be responsible for the
fees and expenses of Xxxxxxx Xxxxx Xxxxxx Inc. and Xxx-Xxxx, Xxxxxx Inc. in
connection with the transactions contemplated by this Agreement. Neither Buyer
nor Professional shall be responsible for the fees or expenses of any investment
banker or finder retained by Parent, PLAC or Professional in connection with the
transactions contemplated by this Agreement.
SECTION 3.19. Proprietary Rights. Except as disclosed in Section 3.19 of
the Disclosure Schedule, Professional owns or possesses the right to use all
material trademarks, service marks, patents, patent rights, assumed names,
logos, trade secrets, copyrights, trade names, computer software, programs and
similar systems ("Intellectual Property") that are used or required by it in the
conduct of its business, operations or affairs and all such Intellectual
Property and computer software, programs and similar systems are in full force
and effect in accordance with their terms. Section 3.19 of the Disclosure
Schedule sets forth separately (v) all Intellectual Property licensed to
Professional by a third party, (w) all Intellectual Property licensed by
Professional to a third party, (x) all Intellectual property of which
Professional is the exclusive owner, (y) all Intellectual Property jointly owned
by Professional and a third party and (z) those items of Intellectual Property
for which any filings have been made with any Governmental Authority.
Professional is not in conflict with, or in violation or infringement of, nor
has it received any notice of any conflict with or violation or infringement of
or any claimed conflict with or violation or infringement of, any asserted
rights of any other Person with respect to any such Intellectual Property or
computer software, programs, or similar systems, except as would not reasonably
be expected to have a Material Adverse Effect.
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SECTION 3.20. Insurance. Section 3.20 of the Disclosure Schedule
summarizes the amount and scope of the insurance currently in force insuring
Professional and its operations and properties against loss or liability. All
such policies or contracts of insurance are sufficient for compliance in all
material respects with all requirements of law and of all agreements to which
Professional is a party. All insurance policies pursuant to which any such
insurance is provided are in full force and effect. No notice of cancellation or
termination of any such insurance policy or contract has been received by
Professional and neither the execution of this Agreement nor the consummation of
the transactions contemplated thereby will give rise to any right to terminate
or cancel such policies or contracts. All premiums required to be paid in
connection with such insurance policies and contracts have been paid in full.
SECTION 3.21. Environmental Matters. Except as disclosed on Section 3.21
of the Disclosure Schedule:
(a) the operations of Professional and the real property currently (or to
the knowledge of each of PLAC and Professional, formerly) owned, leased or
operated by Professional are in material compliance and, during the period of
the ownership or tenancy of Professional have been or were in material
compliance, with all applicable Environmental Laws;
(b) no judicial or administrative proceedings or investigations are
pending or, to the knowledge of PLAC, threatened against Professional pursuant
to any applicable Environmental Laws;
(c) Professional has obtained and will maintain through the Closing Date,
all material governmental approvals that are required with respect to its
operations under any Environmental Law;
(d) Professional (i) does not have any liability of which it is aware for
response costs or corrective action pursuant to any Environmental Law with
respect to any real property or facility currently or previously owned, leased
or operated by Professional or any other real property or facility where such
liability arises from or relates to the offsite transport, treatment, storage or
disposal of any Hazardous Material by or on behalf of Professional or the
offsite migration of any Hazardous Material from any of the foregoing types of
properties, (ii) has not received any notice of any Environmental Claim
involving Professional or any real property of facility owned, leased or
operated by Professional and which is outstanding, (iii) has no knowledge of any
Environmental Claim involving any real property or facility owned, leased or
operated by Professional, and (iv) has not received any written request for
information under Section 104 of the Comprehensive Environmental Response,
Compensation and Liability Act or any comparable state law;
(e) no real property currently (or to the knowledge of each of PLAC and
Professional, formerly) owned, operated or leased by Professional is listed or
has been proposed for listing on the National Priorities List, the Comprehensive
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Environmental Response Compensation and Liability and Information System
("CERCLIS") or any analogous state lists; and
(f) PLAC has made available to Buyer copies of all environmental
investigations, audits, assessments or other analyses conducted by or on behalf
of, or that are otherwise in the possession of, Parent, PLAC or Professional
relating to any real property currently or formerly owned, leased or operated by
Professional.
SECTION 3.22. Bank Accounts. Section 3.22 of the Disclosure Schedule
contains (a) a true and complete list of the names and locations of all banks,
trust companies, securities brokers, and other financial institutions at which
Professional has an account or safe deposit box or maintains a banking,
custodial, trading, trust, or other similar relationship and (b) a true and
complete list and description of each such account, box, and relationship,
including a list of all authorized signatories.
SECTION 3.23. Insurance and Reinsurance.
(a) Section 3.23(a) of the Disclosure Schedule is a true and complete
description of each material contract providing for reinsurance, coinsurance,
excess insurance, ceding of insurance, assumption of insurance or
indemnification of insurance liabilities to which Professional is a party that
is currently in effect or pursuant to which a party continues to or should
reserve against potential liability (the "Reinsurance Agreements").
(b) Except as required by law or as disclosed in Section 3.23(b) of the
Disclosure Schedule, all amounts payable by Professional under any Reinsurance
Agreement and all amounts payable by any other Person that is a party to any
Reinsurance Agreement have been paid in accordance with the terms of the
contracts under which they arose. Except as disclosed in Section 3.23(b) of the
Disclosure Schedule, to the knowledge of PLAC, no reinsurer (other than
Professional) that is a party to any of the Reinsurance Agreements has a valid
defense to payment of its material obligations under such Reinsurance
Agreements. Except as disclosed in Section 3.23(b) of the Disclosure Schedule,
since the date on which PLAC acquired Professional, Professional has not entered
into any series of transactions that are required to be recorded as financial
reinsurance pursuant to either GAAP or SAP. Neither the execution of this
Agreement nor the consummation of the transactions contemplated thereby will
give rise to any right to cancel or terminate any Reinsurance Agreement.
(c) No outstanding insurance or annuity contract issued, reinsured or
underwritten by Professional entitles the holder thereof or any other person to
receive any dividends, distributions, experience rating refunds or other
benefits based on the revenues or earnings of Professional or any other Person.
SECTION 3.24. Labor Matters.
(a) Professional is not a party to any labor or collective bargaining
agreement.
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(b) No employees of Professional are represented by any labor
organization that is certified to represent such employees under the National
Labor Relations Act. No labor organization or group of employees of Professional
has made a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or overtly threatened to be brought
before or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. To the knowledge of PLAC, there are no
organizing activities involving Professional pending with any labor organization
or group of employees of Professional.
(c) There are no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor disputes pending or
threatened against or involving Professional. There are no unfair labor practice
charges, grievances or complaints pending or threatened by or on behalf of any
employee or group of employees of Professional that, if individually or
collectively resolved against Professional, as the case may be, could reasonably
be expected to result in a Material Adverse Effect.
(d) Professional is in material compliance with all laws, regulations and
orders relating to the employment of labor, including all such laws, regulations
and orders relating to wages, hours, WARN, collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and any
similar tax.
(e) There are no complaints, charges or claims against Professional
pending or to the knowledge of each of PLAC and Professional threatened that
could be brought or filed with any Governmental Authority, arbitrator or court
based on, arising out of, in connection with or otherwise relating to the
employment or termination of employment by Professional of any individual prior
to the date hereof or the Closing Date, other than such complaints, charges or
claims that would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.25. Threats of Cancellation. Except as disclosed in Section
3.25 of the Disclosure Schedule, as of the date of this Agreement, no (i) holder
of any insurance policy issued by Professional, (ii) group of affiliated holders
of insurance policies issued by Professional or (iii) persons writing, selling
or producing insurance business that, individually or in the aggregate,
accounted for 5% or more of the premium or annuity income of Professional, for
the year ended December 31, 1997 or the nine months ended September 30, 1998,
has terminated or, to the knowledge of each of PLAC and Professional, threatened
to terminate its relationship with Professional and neither PLAC nor
Professional have knowledge of any fact which could reasonably be expected to
cause any such holders, groups of holders or other persons to terminate their
relationships with Professional.
SECTION 3.26. Regulatory Qualifications. To the knowledge of each of PLAC
and Professional, no event has occurred or condition exists or, to the extent it
is within the control of any of them, will occur or exist with respect to any of
them, that in
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connection with the transactions contemplated by this Agreement would cause any
of them to fail to satisfy any applicable law or regulation of any insurance
regulatory authority that prevents or would reasonably be likely to prevent them
from obtaining necessary approvals from any Governmental Authority to consummate
the transactions contemplated by this Agreement.
SECTION 3.27. Year 2000 Compliance.
(a) Professional has reviewed the areas within its business and
operations which Professional believes could be adversely affected if not Year
2000 Compliant on or before December 31, 1999 and is making related inquiries of
third parties with whom Professional exchanges data electronically (including,
without limitation, Regional Area Directors, insurance agents, customers,
clients, suppliers, service providers, subcontractors, processors, converters,
outsourcers, data processors, regulatory agencies and banks) whose lack of Year
2000 Compliance would be materially or significantly adverse to Professional.
The term "Year 2000 Compliant" as used herein means that Professional's computer
systems (i) are capable of recognizing, processing, managing, representing,
interpreting and manipulating correctly date related data for dates earlier and
later then January 1, 2000, including, but not limited to, calculating,
comparing, sorting, storing, tagging and sequencing, without resulting in or
causing logical or mathematical errors or inconsistencies in any user-interface
functionalities or otherwise, including data input and retrieval, data storage,
data fields, calculations, reports, processing or any other input or output,
(ii) have the ability to provide date recognition for any data element without
limitation (including, but not limited to, date-related data represented without
a century designation, date-related data represented by only two digits and date
fields assigned special values), (iii) have the ability to automatically
function into and beyond the year 2000 without human intervention and without
any change in operations associated with the advent of the year 2000, (iv) have
the ability to correctly interpret data, dates and time into and beyond the year
2000, (v) have the ability not to produce noncompliance in existing information,
nor otherwise corrupt such data into and beyond the year 2000, (vi) have the
ability to correctly process after January 1, 2000 data containing dates before
that date and (vii) have the ability to recognize all "leap years". Based on the
reviews of its own business and operations, Professional believes that it has
implemented an industry-standard compliance methodology that has taken all the
major systems related to Professional and its business (the "Professional
Systems") through a five-step process: (i) assessment, (ii) remediation or
upgrade, (iii) testing of individual systems and systemwide tests, (iv)
implementation into a Year 2000 Compliant environment, and (v) contingency
planning. Professional developed and implemented this five-step process in the
good faith belief that it will lead to a Year 2000 Compliant systems environment
for Professional, except where such noncompliance would not have a Material
Adverse Effect. Section 3.27 of the Disclosure Schedule indicates the progress
of the Professional Systems against the five steps outlined above. The
Professional Systems for which the five-step process is complete show completion
dates in the column entitled "Production Certified (Actual)". Each of the
Professional Systems are or will be Year 2000 Compliant no later than the Target
Date indicated on Section 3.27 of the Disclosure Schedule to the extent such
Target Date is before the Closing Date, and, with respect to
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each Target Date after the Closing Date, PLAC is not aware of any fact which
could reasonably be expected to cause the applicable Professional System not to
be Year 2000 Compliant on such Target Date.
(b) Notwithstanding anything in this Agreement to the contrary, PLAC (i)
shall not be deemed to have breached any representation or warranty contained in
this Section 3.27 with respect to any software purchased or licensed from
non-affiliated third parties to the extent that such representations and
warranties relating thereto were made in good faith in reliance upon written
statements of the vendors or licensors of such software to the effect that such
software is Year 2000 Compliant, (ii) are not making any representation and
warranty that Professional's computer systems will be Year 2000 Compliant if
combined with or integrated into any system or systems of Buyer, (iii) are not
making any representation or warranty that Professional's computer systems will
be Year 2000 Compliant if Professional's plans, methodologies, processes or
vendors are changed after the Closing, and (iv) are not making any
representation or warranty that Professional's computer systems will be Year
2000 Compliant in the event any change, noncompliance, failure, act of God or
other external event beyond the reasonable control of Professional shall occur
which directly or indirectly affects the operation of Professional's computer
systems.
SECTION 3.28. Affiliate Security Ownership. Professional does not own,
beneficially or of record, any debt or equity securities, or ownership interests
of any kind, of Parent or any of its Subsidiaries or affiliates.
SECTION 3.29. Financial Condition. The sale of the Shares is not being
made with the actual intent to hinder, delay or defraud any entity to which PLAC
is indebted as of the date hereof or any entity to which PLAC may become
indebted subsequent to the date hereof. PLAC has valid business reasons for
selling the Shares and has concluded that the Closing Purchase Price represents
reasonably equivalent value for the Shares. PLAC is not engaged in any business
or transaction, nor is PLAC about to engage in any business or transaction, for
which any property remaining with PLAC is or will be an unreasonably small
capital, and PLAC does not intend to incur, nor believes that is has incurred,
debts beyond its ability to pay as they mature or as PLAC expects to otherwise
become due and payable.
ARTICLE IV
[RESERVED]
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to PLAC as follows:
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SECTION 5.1. Organization; Qualifications and Operations. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, with all requisite corporate power and
authority to own the Shares. Buyer is qualified or licensed to do business and
is in good standing in each jurisdiction in which the ownership or leasing of
property by it or the conduct of its business requires such licensing or
qualification, except where the failure to be so qualified or licensed will not
affect Buyer's ability to consummate the transactions contemplated by this
Agreement (a "Buyer Material Adverse Effect").
SECTION 5.2. Authorization. Buyer has full corporate power and authority
to execute and deliver this Agreement and each other document to be delivered by
Buyer in connection herewith and to consummate the transactions contemplated
hereby and thereby. No other corporate proceeding on the part of Buyer is
necessary to authorize the execution and delivery of this Agreement and each
other document to be delivered by Buyer in connection herewith or to consummate
the transactions contemplated hereby and thereby. This Agreement has been duly
and validly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
SECTION 5.3. No Violation. Neither the execution and delivery of this
Agreement by Buyer, the performance by Buyer of its obligations hereunder nor
the consummation by Buyer of the transactions contemplated hereby will (a)
violate, conflict with or result in any breach of any provision of the
Certificate or Articles of Incorporation or Bylaws of Buyer (or similar
organizational documents), (b) violate or conflict with or result in a violation
or breach of, or constitute a default (with or without due notice or lapse of
time or both) under the terms, conditions or provisions of any note, bond,
mortgage, indenture or deed of trust, or any license, lease or agreement to
which Buyer or any of Buyer's subsidiaries is a party or by which any of their
assets is bound or (c) violate any order, writ, judgment, injunction, decree,
statute, rule or regulation of any Governmental Authority applicable to Buyer or
any of Buyer's subsidiaries or any of their assets, except in each case as would
not have a Buyer Material Adverse Effect.
SECTION 5.4. Consents and Approvals. Except as set forth in Section 5.4
of the Disclosure Schedule, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any third party or any
Governmental Authority is necessary for the consummation by Buyer of the
transactions contemplated by this Agreement other than consents and approvals of
or filings or registrations with (a) the DOJ pursuant to the HSR Act and (b) the
approval of the Texas Department of Insurance.
SECTION 5.5. Brokers' Fees and Commissions. Neither Buyer nor any of its
directors, officers, employees or agents has employed any investment banker,
broker or finder in connection with the transactions contemplated hereby.
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SECTION 5.6. Purchase for Investment. Buyer is acquiring the Shares for
its own account for investment purposes and not with a view to the distribution
of the Shares. Buyer has such knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares. Buyer is an "accredited investor" as defined in Rule 501 of the
Securities Act of 1933, as amended. Buyer is aware and understands that the
Shares have not been registered under the Securities Act of 1933 or under the
securities laws of any state, that any transfer of the Shares will be restricted
by such act and such state laws, and that the certificates representing the
Shares will bear legends to such effect. Buyer will not, directly or indirectly,
dispose of the Shares except in compliance with applicable federal and state
securities laws.
SECTION 5.7. Financing. Buyer has sufficient funds available necessary to
consummate the acquisition by Buyer of the Shares.
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business Prior to the Closing. Except as
expressly contemplated by this Agreement, as set forth in Section 6.1 of the
Disclosure Schedule or with the prior written consent of Buyer (not to be
unreasonably withheld or delayed), during the period from the date of this
Agreement to the Closing, PLAC will cause Professional to conduct its business
and operations according to its ordinary and usual course of business and will
use all reasonable efforts consistent therewith to preserve intact and, as
applicable, maintain in good repair its properties, assets and business
organizations, to maintain all licenses and permits currently in place, to keep
available the services of its officers and employees, to maintain at least its
current rating as assigned by A.M. Best & Co., to continue to pursue appropriate
rate filings and other profitability efforts, and to maintain satisfactory
relationships with policyholders, Regional Area Directors, agents and
regulators, in each case in the ordinary course of business. PLAC agrees that it
will cause Professional to notify Buyer promptly in writing should any (i)
holder of any insurance policies issued by Professional, (ii) group of
affiliated holders of insurance policies issued by Professional or (iii) persons
writing selling or producing insurance business that, individually or in the
aggregate, accounted for 5% or more of the premium or annuity income of
Professional for the year ended December 31, 1997 or the nine months ended
September 30, 1998 terminate or threaten to terminate their relationship with
Professional. Without limiting the generality of the foregoing, and except as
otherwise provided in this Agreement and as set forth in Section 6.1 of the
Disclosure Schedule, prior to the Closing, PLAC will not permit Professional to,
without the prior written consent of Buyer:
(a) issue, sell or pledge, or authorize or propose the issuance, sale or
pledge of additional shares of capital stock of any class, or securities
convertible into any such shares, or any rights, warrants or options to acquire
any such shares or other convertible securities;
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(b) redeem, purchase or otherwise acquire any outstanding shares of its
capital stock, except in connection with PLAC's acquisition of the shares of
common stock of Professional not owned by PLAC on the date of this Agreement;
(c) propose or adopt any amendment to its Articles of Incorporation or
Bylaws, except in connection with PLAC's acquisition of the shares of common
stock of Professional not owned by PLAC on the date of this Agreement;
(d) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse the obligations of any other Person;
(e) increase in any manner the rate or terms of compensation of any of
its directors, officers or other employees, except such increases as are granted
in the ordinary course of business consistent with past practice, or enter into
or materially modify any employment, severance or collective bargaining
agreement;
(f) except in the ordinary course of business, (i) sell, transfer or
otherwise dispose of any of its property or assets or (ii) mortgage or encumber
any of its property or assets;
(g) enter into any Contracts or Other Agreements (including, without
limitation, any Reinsurance Agreements, which shall not be deemed made in the
ordinary course of business), commitments or contracts, except agreements,
commitments or Contracts or Other Agreements made in the ordinary course of
business;
(h) declare, set aside or pay any dividend or other distribution in
respect of its capital stock, except in connection with PLAC's acquisition of
the shares of common stock of Professional not owned by PLAC on the date of this
Agreement;
(i) except in the ordinary course of business or with respect to capital
projects approved prior to the date hereof and described in Section 6.1(i) of
the Disclosure Schedule, enter into any agreement or commitment involving an
aggregate capital expenditure or commitment exceeding $100,000;
(j) amend, adopt or terminate any of the Employee Benefit Programs,
except as required by law;
(k) take any action that would result in a breach of the representations
and warranties contained in Article III of this Agreement;
(l) (i) acquire, form or commence the operations of any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof or (ii) acquire any assets (other than
Investment Assets) having an aggregate purchase price in excess of $50,000;
(m) Except with respect to Taxes, which shall be governed under Section
6.15 hereof, discharge, settle or satisfy any claims, liabilities or obligations
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(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Financial Statements
of Professional for the quarter ended September 30, 1998 or incurred since
September 30, 1998 in the ordinary course of business consistent with past
practice;
(n) invest Professional's future cash flow, any cash from matured and
maturing investments, any cash proceeds from the sale of Professional's assets
(including Investment Assets) and properties, and any cash funds currently held
by Professional, or dispose of any Investment Assets, unless in accordance with
the terms of the investment guidelines attached as Section 3.12(b) of the
Disclosure Schedule;
(o) make any change in accounting methods, principles or practices,
including but not limited to any change with respect to establishment of
reserves for unearned premiums, losses and loss adjustment expenses, except
insofar as may be required by a change in SAP or GAAP;
(p) except in the ordinary course of business consistent with past
practices, modify, amend or terminate any material Contract or Other Agreement
(including any confidentiality agreement), permit, concession, franchise,
license or similar instrument to which Professional is a party or waive, release
or assign any material rights or claims thereunder;
(q) settle or compromise, (i) any litigation or claim arising out of the
transactions contemplated hereby, or (ii) any other litigation or claim if the
settlement thereof involves payment of in excess of $50,000 (other than claims
for contractual benefits under any insurer or reinsurer in the ordinary course
of business and consistent with past practices); provided, that Buyer will not
unreasonably withhold its consent to any such settlement or compromise;
(r) move the operations of any business or division of Professional to
any location other than where it is located on the date hereof;
(s) change in any manner the rate or terms of compensation of any
insurance agent or Regional Area Director;
(t) make any payments to Parent, PLAC or any affiliates, except pursuant
to any Contract or Other Agreement set forth in Section 3.13 of the Disclosure
Schedule; or
(u) agree in writing to take any of the foregoing actions.
SECTION 6.2. Share Ownership. Prior to the Closing, PLAC will have
obtained record and beneficial ownership of all of the Shares, free and clear of
all Liens.
SECTION 6.3. Access to Information. Between the date hereof and the
Closing Date, PLAC shall cause Professional to give to Buyer and its counsel,
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accountants, and other authorized representatives and agents, reasonable access,
during regular business hours and upon reasonable advance notice, to any and all
of its premises, properties, contracts, books and records, and will cause its
officers and employees to furnish to Buyer and its representatives any and all
data and information pertaining, directly or indirectly, to Professional that
Buyer shall from time to time reasonably request, and shall permit Buyer and its
representatives to make extracts and copies thereof; provided, however, that
Buyer's rights pursuant to this Section 6.3 shall not be exercised in a manner
which would materially interfere with the day-to-day operations of Parent, PLAC
or Professional. If the acquisition contemplated herein is consummated, Buyer
covenants and agrees that it shall preserve and keep the records of Professional
delivered to it hereunder for a period of five years from the Closing Date, and
shall make such records available to PLAC and its affiliates, as reasonably
required by PLAC or its affiliates in connection with any legal proceedings by
or against, or governmental investigations of, PLAC or any of its affiliates, or
in connection with any tax examination of PLAC or any consolidated group of
which it was a part.
SECTION 6.4. Notice of Litigation and Requests. From the date hereof
through the Closing Date, PLAC agrees to notify Buyer promptly of any pending or
threatened Litigation that, if pending or threatened as of the date hereof,
would be required to be described in Section 3.10 of the Disclosure Schedule and
of any written requests for additional information or documentary materials by
any Governmental Authority in connection with the transactions contemplated by
this Agreement.
SECTION 6.5. HSR Act Filings; Consents. As soon as practicable, but in
any event not later than 10 Business Days after the date hereof, PLAC and Buyer
shall make appropriate filings with the DOJ under the HSR Act, with respect to
the transactions contemplated by this Agreement. In connection with such
filings, the parties hereto shall, in cooperation with each other, and as
promptly as reasonably practicable from time to time hereafter, make all such
further filings and submissions, and take such further action, as may be
required in connection therewith. Each party shall furnish the others all
information in its possession necessary for compliance by the others with the
provisions of this Section 6.5. No party shall withdraw any such filing or
submission prior to the termination of this Agreement without the written
consent of the other parties. Each party hereto shall and PLAC shall cause
Professional to use its reasonable best efforts to obtain all consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
SECTION 6.6. State Regulatory Approvals. As soon as practicable, but in
any event not later than 20 days after the date hereof, each party hereto shall
file all applications and other documents, and shall use its reasonable best
efforts to obtain all consents and approvals, as are required to be filed or
obtained by it under the applicable laws of the State of Texas, and of any other
applicable jurisdictions, including all requisite approvals of the insurance
regulatory authorities in such jurisdictions and all other governmental
approvals required for consummation of the transactions contemplated by this
Agreement, in each case as promptly as is practicable. PLAC shall cause
Professional to take all such actions (other than the payment of money not then
due and owing or the provision of other consideration) as are reasonably
requested by Buyer to assist Buyer in completing all such filings and obtaining
all such consents and approvals as are required to be made and obtained. Buyer
shall take all such actions (other than the payment of money not then due
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and owing or the provision of other consideration) as are reasonably requested
by PLAC to assist PLAC and Professional in completing all filings and obtaining
all consents and approvals as any of them may be required to make and obtain.
SECTION 6.7. Interim Financial Statements.
(a) As soon as reasonably practicable after they become available, PLAC
shall make available to Buyer true and complete copies of the statutory
Quarterly Statements of Professional filed with the appropriate Insurance
Commissioners, for all quarterly periods after December 31, 1998 and prior to
the Closing Date (collectively, the "Interim SAP Statements"). The Interim SAP
Statements will present fairly in all material respects the statutory financial
condition of Professional as of the respective dates thereof and the statutory
results of its operations and changes in its financial position and cash flow
for each of the periods then ended and will be prepared in conformity in all
material respects with SAP.
(b) As soon as practicable after they become available, PLAC shall make
available to Buyer true and complete copies of the quarterly balance sheets and
income statements of Professional (on a basis consistent with the GAAP Financial
Statements), for all quarterly periods on or after December 31, 1998 and prior
to the Closing Date (collectively, the "Interim Quarterly GAAP Statements"). The
Interim Quarterly GAAP Statements will present fairly in all material respects
the financial condition of Professional as of the respective dates thereof and
the results of Professional's operations for each of the periods then ended will
be prepared in conformity in all material respects with GAAP and with prior
periods.
SECTION 6.8. Year End Financial Statements. PLAC shall cause to be
prepared and delivered to Buyer at Professional's sole expense audited financial
statements of Professional for the year ending December 31, 1998 (the "Year End
GAAP Financial Statements"). The Year End GAAP Financial Statements shall be
accompanied by the unqualified report of a nationally recognized accounting firm
to the effect that such Year End GAAP Financial Statements present fairly in all
material respects the financial condition of Professional as of December 31,1998
and the results of its operations and changes in its financial condition and
cash flow for the year then ended, in conformity in all material respects with
GAAP. PLAC shall deliver the Year End GAAP Financial Statements as soon as
practicable, but in no event later than the earlier of the Closing Date or March
31, 1999.
SECTION 6.9. Maintenance of Insurance: Post-Closing Claims. From the date
hereof through the Closing Date, PLAC shall, and shall cause Professional to,
use reasonable efforts to maintain or cause to be maintained in force insurance
with respect to Professional as described in Section 3.20. Following the
Closing, Professional shall, and Buyer shall cause Professional to, pay or be
liable for the amount of any
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deductible or self-insured retention applicable to any claims incurred prior to
the Closing under the policies specified in Section 3.20 of the Disclosure
Schedule (or any replacement policy or other form of coverage substituted
therefor), to the extent reflected in the Closing Financial Statements. With
respect to the workers' compensation, general and automobile liability policies
specified in Section 3.20 of the Disclosure Schedule, PLAC will continue to
manage all claims incurred prior to the Closing and made or reported thereunder
(whether before or after the Closing), on behalf of Professional, and
Professional will promptly reimburse PLAC for the amount of any insurance
payments made in respect of such claims, all in accordance with past practice.
SECTION 6.10. Intercompany Accounts, Investments and Agreements.
(a) Except with respect to Taxes or matters related thereto, the parties
agree that all intercompany accounts and balances payable or receivable, whether
or not currently due, between Professional, on the one hand, and Parent or any
of its affiliates, on the other hand ("Intercompany Accounts"), shall be settled
as follows:
(i) At least five Business Days prior to the Closing Date, PLAC shall
cause to be prepared and delivered to Buyer a written statement setting forth
the estimated amount and a description of all Intercompany Accounts expected
to be outstanding on the Closing Date.
(ii) Buyer shall have the right, exercisable upon notice to PLAC not
later than two Business Days following delivery of the foregoing statements
of Intercompany Accounts, to object to any Intercompany Accounts set forth in
such statement; provided, however, that, notwithstanding anything herein to
the contrary, Buyer shall only be entitled to object to those Intercompany
Accounts that Buyer, in good faith reasonably believes (A) have been
calculated in manifest error; (B) are being charged for goods and services
not actually provided; (C) have not been determined reasonably in accordance
with past practice; or (D) are not payable or have not been determined in
accordance with the terms of the intercompany contracts or other agreements
under which such Intercompany Accounts arose. Without limiting the foregoing,
Buyer shall not be entitled to object to (I) whether any Intercompany Account
should or should not have been incurred or whether any transaction under
which any Intercompany Account arose should or should not have been
undertaken, (II) any particular past practice for determining intercompany
accounts or balances or (III) the particular terms of any intercompany
contract or other agreement under which an Intercompany Account arose.
(iii) If Buyer so objects to any Intercompany Account, Buyer and PLAC
will negotiate in good faith to resolve the objections set forth in Buyer's
notice of objection. If, as of the Closing Date, Buyer and PLAC are unable to
resolve all such objections, all Intercompany Accounts with respect to which
Buyer and PLAC are not in dispute or have resolved shall be settled in full
at or prior to the Closing, and any remaining objections as to Intercompany
Accounts that have not then been resolved by Buyer and PLAC shall be
submitted to the
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Settlement Auditor for resolution. Buyer and PLAC shall cooperate with the
Settlement Auditor and proceed in good faith to cause the Settlement Auditor
to resolve all such disputes within thirty days after the Closing. Buyer and
PLAC shall each pay one-half of the fees and expenses of the Settlement
Auditor. The Settlement Auditor's resolution of any such disagreement will be
reflected in a written report which will be delivered promptly to, and will
be final and binding upon, Buyer and PLAC.
(b) Except with respect to Taxes or matters related thereto, PLAC shall
cause Professional to modify, at or prior to the Closing, any Contracts or Other
Agreements between Professional, on the one hand, and Parent, PLAC or any of its
affiliates, on the other hand, to the extent necessary to exclude Professional
therefrom, except those Contracts or Other Agreements that are designated by
Buyer. For the purposes of this subsection, the termination of Contracts and
Other Agreements shall include recapture of reinsurance.
(c) On or prior to the Closing Date, Buyer, Professional and the
appropriate affiliates of Parent shall enter into an agreement (the "Transition
Services Agreement") with the terms set forth in Section 6.10(c) of the
Disclosure Schedule regarding the provision of certain services (including,
without limitation, information technology, operational support, customer
services and agent support) for a term of up to 18 months after the Closing
Date, subject to termination by Buyer on 30 days notice. Any costs or expenses,
not to exceed $20,000, required to be incurred to obtain any consents necessary
to effect the transactions contemplated by the Transition Services Agreement
shall be paid by Buyer with the advance approval of Buyer.
(d) On or prior to the Closing Date, Buyer and Security Life and Trust
Company shall enter into a lease agreement for a term not to exceed 18 months,
for the lease of the real property described on Section 6.10(d) of the
Disclosure Schedule on the terms set forth in Section 6.10(d) of the Disclosure
Schedule.
SECTION 6.11. All Reasonable Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done as
promptly as practicable, all things necessary, proper and advisable under
applicable laws and regulations to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. If at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, including, without limitation, the execution of
additional instruments, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
SECTION 6.12. Public Announcements. Buyer and PLAC will consult with each
other and will mutually agree (the agreement of each party not to be
unreasonably withheld or delayed) upon the content and timing of any press
release or other public statements with respect to the transactions contemplated
by this Agreement and shall not issue any such press release or make any such
public statement prior to such consultation and agreement, except as may be
required by applicable law or by
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obligations pursuant to any listing agreement with any securities exchange or
any stock exchange regulations; provided, however, that each party will give
prior written notice to the other parties of the content and timing of any such
press release or other public statement required by applicable law or by
obligations pursuant to any listing agreement with any securities exchange or
any stock exchange regulations.
SECTION 6.13. Disclosure Supplements. From time to time prior to the
Closing PLAC shall supplement or amend the Disclosure Schedule delivered in
connection herewith with respect to any matter that, if existing or occurring at
or prior to the date of this Agreement, would have been required to be set forth
or described in such Disclosure Schedule or that is necessary to correct any
information in such Disclosure Schedule that has been rendered inaccurate
thereby. Such supplements and amendments shall not be given effect for purposes
of Section 7.1(d) (except to the extent such supplements and amendments relate
to any matter with respect to which PLAC has obtained Buyer's consent pursuant
to Section 6.1 or with respect to which such consent is not required); however,
if the Closing occurs, Buyer shall be deemed to have waived any right or claim
it may otherwise have or have had on account of any matter so disclosed in such
supplement or amendment.
SECTION 6.14. No Implied Representations or Warranties. Buyer hereby
acknowledges and agrees that neither Parent nor PLAC is making any
representation or warranty whatsoever, express or implied, except those
representations and warranties of Parent or PLAC explicitly set forth in this
Agreement, the Disclosure Schedule, the Parent Agreement or in any certificate
contemplated hereby and delivered by Parent or PLAC in connection herewith.
Except as explicitly set forth herein, none of PLAC, its subsidiaries or any of
their respective officers, directors, shareholders, employees, affiliates or
representatives has made or is making any representation, express or implied, as
to the value of any asset or business being so acquired, or any warranty of
merchantability, suitability or fitness for a particular purpose.
SECTION 6.15. Tax Matters.
(a) PLAC will be responsible for, will pay or cause to be paid, and will
indemnify and hold harmless Buyer from and against, any and all monetary
damages, liabilities, loss suffered as a result of imposition by any taxing
authority of an offset right against an amount otherwise recoverable by the
indemnitee, fines, fees, penalties, interest and expenses (including, without
limitation, reasonable fees and disbursements of counsel incident to the
enforcement of rights to indemnification under this Section 6.15, but excluding
any expenses attributable to Buyer's pursuing (whether itself or through its
representatives) its right to consult, defend, consent or otherwise participate
in any Tax Claim (defined below) under this Section 6.15) ("Indemnifiable Tax
Losses") for or in respect of each of the following:
(i) any Taxes imposed or attributable to the income, assets or operations
of Professional to the extent such Tax is imposed with respect to any taxable
period or any portion thereof of Professional commencing prior to the Closing
Date; provided, however, that no claim by Buyer under this Section
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6.15(a)(i) for indemnification may be made in respect of any such Taxes by
virtue of the fact that such Taxes were paid by, or in respect of which a
payment was made by, Professional prior to the Closing Date; provided,
however, that in determining the amount of Taxes attributable to a taxable
period ending after the Closing Date, the amount shall be limited to the
Taxes determined as if the taxable year ended at the close of the Closing
Date;
(ii) any Taxes not described in clause (i) of this Section 6.15(a) and
imposed on Professional and attributable to the income, assets or operations
of any member of a consolidated or combined group of which Professional is or
was a member on or prior to the Closing Date and so imposed pursuant to
Treasury Regulation Section 1.1502-6(a) or any analogous or similar state,
local or foreign law ("Pre-Closing Taxes");
(iii) any Taxes attributable to the deemed sale of assets pursuant to the
Section 338 Elections ("Section 338 Taxes"); and
(iv) any breach of a representation or warranty contained in Section 3.15
or any obligation pursuant to this Section 6.15.
(b) Buyer will promptly notify PLAC of the commencement of any claim,
audit, examination, or other proposed change or adjustment by any taxing
authority, as well as any notice of assessment and any notice and demand for
payment issued under Section 6303 of the Code (or similar provision), concerning
any Taxes or other Indemnifiable Tax Losses covered by Section 6.15(a) ("Tax
Claim"). PLAC shall promptly notify Buyer of the commencement of any audit
concerning any pre-Closing taxable period of Professional. PLAC shall control
the strategy, defense and settlement of any Tax audit or administrative or court
proceeding relating to Taxes, including but not limited to extension of the
applicable statute(s) of limitations, of PLAC or Professional that may be
subject to indemnification under Section 6.15(a), provided, however, that Buyer
shall have the right to participate, at its own expense, in any such audit or
proceeding. Buyer agrees to fully cooperate with PLAC and to cause Professional
to fully cooperate with PLAC, including, but not limited to, providing powers of
attorney authorizing PLAC (or its designees) to control and take action in
connection with any such Taxes; provided, however, that PLAC may not, without
the prior written consent of Buyer, which consent shall not be unreasonably
withheld, execute final settlement agreements concerning any such Taxes if such
settlement would have a Material Adverse Effect on Professional or would result
in material Taxes for which Buyer is responsible under Section 6.15(c) hereof.
PLAC shall promptly notify Buyer if PLAC decides not to participate in the
defense of any such Tax audit or administrative or court proceeding and Buyer
thereupon shall be permitted (at its own expense) to defend such Tax audit or
proceeding, in which event PLAC agrees to fully cooperate with Buyer, including,
but not limited to, providing any necessary powers of attorney authorizing Buyer
(or its designee) to control and take action in connection with such defense;
provided, however, that no settlement shall be made without the prior written
consent of PLAC, which consent shall not be unreasonably withheld. In the event
of a failure of Buyer to provide notice to PLAC or to provide cooperation as
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required under this Section 6.15(b), PLAC's obligation to indemnify Buyer under
this Section 6.15 shall be reduced to the extent of the Indemnifiable Tax Losses
with respect to which PLAC's ability to defend against the claim underlying such
indemnity obligation has been prejudiced by such failure. Notwithstanding the
foregoing, Buyer shall control the strategy, defense and settlement of any Tax
audit or administrative or court proceeding relating to Taxes, including but not
limited to extension of the applicable statute of limitation(s), of PLAC or
Professional that may be subject to indemnification under Section 6.15, for Tax
periods beginning before and ending after the Closing Date ("Straddle Periods");
provided, that Buyer shall not execute any final settlement or agreements
concerning such Taxes without the prior written consent of PLAC which consent
shall not be unreasonably withheld.
(c) Buyer and Professional will be responsible for, will pay or cause to
be paid, and will indemnify and hold harmless PLAC from and against, any and all
Indemnifiable Tax Losses for or in respect of any Taxes (excluding any Taxes
described in clause (ii) or (iii) of Section 6.15(a) hereof) with respect to any
taxable period of Professional beginning after the Closing Date, or portion of
the Straddle Period beginning after the Closing Date. PLAC agrees to fully
cooperate with Buyer in preparing to defend against the imposition of such Taxes
by any taxing authority. In the event of a failure of PLAC to provide
cooperation as required under this Section 6.15(c), Buyer's obligation to
indemnify PLAC under this Section 6.15 shall be reduced to the extent of the
Indemnifiable Tax Losses with respect to which Buyer's ability to defend against
the claim underlying such indemnity obligation has been prejudiced by such
failure.
(d) Any claim for indemnity under this Section 6.15 may be made at any
time prior to the expiration of the applicable Tax statute of limitations with
respect to the relevant taxable period (including all periods of extension,
whether automatic or permissive), or, if later, within 30 days of receipt of
notice of assessment or notice and demand for payment issued under Section 6303
of the Code (or similar provision). Any such claim shall be made by the
indemnitee by providing to the indemnifying party written notice thereof,
provided, however, that such provision of notice shall not be a condition to
indemnification under this Section 6.15 except to the extent of actual and
material prejudice to the indemnifying party.
(e) Except as provided in the succeeding sentences, as of the Closing
Date, Professional shall not be a party to or have any further obligations or
rights under any tax sharing or tax allocation agreement with PLAC and its
affiliates. Professional currently is a party to a tax sharing agreement with
PLAC, copies of which have been made available to Buyer (the "Tax Sharing
Agreement"). Professional shall make a payment for Taxes through the Closing
Date equal to the accrual for Taxes as reflected in the Closing SAP Balance
Sheet; provided that if, but for this provision, the Closing SAP Balance Sheet
would have reflected a benefit for Taxes, such amount shall have been paid to
Professional by PLAC on or prior to the Closing Date. Such accrual shall be
calculated and recorded in accordance with principles consistent with prior
practice, provided, however, that the amount of the Taxes through the Closing
Date excludes the amount of the Section 338 Taxes as provided in Section
6.15(a)(iii) hereof. Such
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payment by Professional for Taxes through the Closing Date shall be made within
fifteen days of the timely filing (including extensions) of the Tax Return
pursuant to which the Tax liability arose.
(f) PLAC shall prepare and file or cause to be prepared and filed (i) all
Tax Returns required to reflect the income, assets or operations of Professional
and required to be filed (taking into account any extensions) on or prior to the
Closing Date and any Tax Returns of Professional required to be filed thereafter
in respect of any Taxes for which PLAC is responsible pursuant to Section
6.15(a), and (ii) PLAC Consolidated Returns (as hereinafter defined, together
with the Tax Returns referred to in clause (i) above, the "PLAC Returns"). PLAC
shall prepare or cause to be prepared all Tax Returns required to be filed after
the Closing Date relating to Tax periods ending on or before the Closing Date,
and shall submit them to Buyer not less than 20 days prior to their due date.
Buyer shall be responsible for preparing and filing, or causing
Professional to prepare and file, all other Tax Returns required to be filed by
Professional after the Closing Date ("Other Returns"). "PLAC Consolidated
Returns" shall mean all consolidated or combined Tax Returns that include the
taxable income or loss of Professional and PLAC.
(g) Neither Buyer nor Professional shall file any amended Tax Return that
may give rise to a claim for indemnification hereunder without the prior written
consent of PLAC, which may not be unreasonably withheld. PLAC shall have
exclusive authority to make all decisions with respect to matters relating to
any PLAC Return, including, but not limited to, decisions to amend a PLAC
Return, to extend the statutes of limitations with respect to any periods
covered by a PLAC Return, and to concede, settle, compromise or contest any
adjustment asserted by a taxing authority with respect to a PLAC Return;
provided, however, that PLAC may not voluntarily file any amended Tax Return
(except in connection with the resolution of any Tax Claim described in Section
6.15(b), provided that any such resolution is reached in a manner consistent
with Section 6.15(b)), that would materially increase any indemnifiable Tax Loss
described in Section 6.15(a), except with the prior written consent of Buyer,
which may not be unreasonably withheld.
(h) PLAC and Buyer will cooperate with one another in connection with the
preparation and filing of PLAC Returns and Other Returns and will provide to
each other access, at any reasonable time and from time to time, at the business
location at which the books and records are maintained, after the Closing Date,
to such Tax data relating to Professional as PLAC or Buyer, as the case may be,
may from time to time reasonably request (including the relevant portions of
PLAC Consolidated Returns). PLAC agrees that, prior to Closing, PLAC and
Professional will provide such information and documentation regarding Taxes as
Buyer shall reasonably request. PLAC and Buyer further agree upon request each
to provide the other party with all information that may be needed to report
pursuant to Section 6043 of the Code and the Treasury Regulations promulgated
thereunder.
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(i) PLAC shall be entitled to receive and to retain any and all refunds
of Taxes (i) relating to PLAC Returns (including any refunds of Taxes arising
from a carryback of losses by Professional) or (ii) in respect of Professional
for any taxable period or any portion thereof ending on or prior to the Closing
Date. Buyer shall be entitled to retain all other refunds relating to Taxes of
Professional. In the event Buyer (PLAC) or Professional receives any refund
(whether through payment, credit or reduction in Taxes) to which PLAC (Buyer) is
entitled hereunder, Buyer (PLAC) shall promptly pay, or cause the payment of,
such refund to PLAC (Buyer).
(j) Notwithstanding anything to the contrary contained herein, in
calculating the amount of any claim for indemnification pursuant to this
Agreement (including pursuant to this Section 6.15 and Article IX hereof),
Indemnifiable Tax Losses and Indemnifiable Losses (as defined in Section 9.2(a)
hereof) shall be reduced (but not below zero) by any Tax Benefit attributable
to, realized (or to be realized) in connection with or relating to such
indemnifiable claim. The term "Tax Benefit" means the amount by which any Taxes
of the indemnified party (Buyer or Professional on the one hand, or PLAC on the
other hand) or any affiliate thereto (the "Benefited Party") are or would be
reduced by any loss, deduction, refund, credit or other Tax Benefit and
includes, without limitation, the amount of any Tax Benefit realized or to be
realized by the Benefited Party in a subsequent taxable period (including,
without limitation, a taxable period ending after the Closing Date) attributable
to, realized (or to be realized) in connection with or relating to an adjustment
with respect to Taxes in a prior taxable period. For purposes of the
determination of the amount of any Tax Benefit that is not currently realized,
(i) the Benefited Party shall be assumed to have sufficient taxable income to
use any Tax Benefit in the taxable period or periods in which such Tax Benefit
will first arise; (ii) the Effective Tax Rate (as hereinafter defined) in the
most recent applicable taxable period shall be treated as applying to such Tax
Benefit to be realized in such future taxable period: (iii) the amount of Tax
Benefits shall be discounted to the present value of such Tax Benefits,
determined using a discount rate equal to the applicable federal rate under
Section 1274(d) of the Code for the period over which such Tax Benefits will be
realized under clause (i) above; (iv) appropriate adjustments shall be made
taking account of any income recognition (or other costs) resulting from such
Tax Benefit for Professional in any period covered by the Other Returns, using
the assumptions and discounting convention provided in this Section 6.15(j); (v)
no Tax Benefit shall be ascribed to additional tax basis in an asset or other
tax attribute of a Benefited Party if (X) the additional tax basis or other tax
attribute is neither depreciable nor amortizable (or otherwise recoverable by
its nature over a period of time), and (Y) the Benefited Party is not otherwise
likely to realize any Tax Benefit from such additional tax basis or other tax
attribute, provided, however, that in the case of any such additional tax basis
or other tax attribute describe in this clause (v), the amount of any Tax
Benefit (to the extent not in excess of the amount previously received by the
Benefitted Party in satisfaction of the underlying indemnity obligation)
actually realized by the Benefited Party in satisfaction of the underlying
indemnity obligation) actually realized by the Benefited Party at a subsequent
time shall be paid to the other (indemnifying) party; and (vi) any dispute
concerning the amount of a Tax Benefit for purposes of Section 6.15(j) shall be
resolved first by good faith negotiations among the parties and, if such dispute
is not resolved within 30 days, it shall be referred to a
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nationally recognized accounting firm (the "Auditor") that is mutually
acceptable to PLAC and Buyer for resolution, which Auditor shall issue a report
stating the amount of the Tax Benefit. Such report shall be final and binding on
the parties. The fees and expenses of the Auditor shall be shared equally by
PLAC, on the one hand, and Buyer on the other hand. For purposes of this Section
6.15(j), Tax Benefits shall not include the amount of any benefit realized by a
Benefited Party attributable to the tax basis of assets resulting from the
Section 338 Elections except in the case of an indemnification pursuant to this
Agreement arising from an allocation of tax basis inconsistent with the Section
338 Allocation Principles (defined below). The term "Effective Tax Rate" means
the sum of (i) the maximum federal income tax rate imposed on corporations for
the period in question plus (ii) the product of (A) the state and local income
tax rates imposed on the applicable corporation for the immediately preceding
taxable year times (B) one minus the maximum federal income tax rate referred to
in clause (i). For this purpose, the state and local income tax rates shall
equal the sum of the total amount of income tax imposed in each jurisdiction
divided by the sum of the total amount of taxable income in each such
jurisdiction.
(k) Section 338(h)(10) Election.
(i) Election. At the request of Buyer, Buyer and PLAC shall join in an
election pursuant to Section 338(h)(10) of the Code with respect to the
purchase and sale or the deemed purchased and sale of the Shares, and in all
comparable elections under state and local Tax law with respect to the
purchase and sale of such Shares (together with the election under Section
338(h)(10) of the Code, the "Section 338 Elections"). Consistent with the
following provisions of this Section 6.15(k), each of Buyer and PLAC shall
take all steps to properly and timely effect the Section 338 elections.
(ii) Forms. Buyer shall prepare drafts and execution copies of all forms
and schedules required to be filed to effect (and otherwise in connection
with) the Section 338 Elections ("Section 338 Forms"), including, without
limitation, IRS Form 8023 and all attachments required to be filed therewith
pursuant to applicable Treasury Regulations and the instructions to such
form, including without limitation the allocation of deemed purchase price
among the assets of Professional, which allocation shall be made pursuant to
the Code and related Treasury Regulations ("Form 8023"). PLAC shall provide
Buyer with such information and records, and shall make its employees
available for consultation under regular business hours, as Buyer reasonably
requires to prepare such Section 338 Forms. PLAC shall provide to Buyer the
necessary information to prepare Form 8023 and related attachments (except
that tax reserves shall be computed by Professional) no later than four
months after the Closing Date. Buyer shall prepare a draft version of Form
8023 and shall deliver such draft version to PLAC for its review no later
than five months after the Closing Date. PLAC may propose good faith
modifications no later than six months after the Closing Date. PLAC and Buyer
will use reasonable efforts to cooperate in arriving at agreed-upon
modifications no later than seven months after the Closing Date ("Modified
Form 8023"). If there is a dispute regarding the
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proposed modifications, any such dispute shall be resolved by a nationally
recognized accounting firm, to be mutually agreed upon. Buyer shall prepare
three copies of the Modified Form 8023, as determined according to such
procedures, and PLAC shall promptly execute, or cause the proper party to
execute and deliver such forms to Buyer within fifteen days of receipt of
Modified Form 8023, but not later than eight months after the Closing Date.
Buyer shall timely file such executed Modified Form 8023.
(iii) Modification; Revocation. Except as provided in this Section, Buyer
and PLAC shall not take, and shall not permit any of their affiliates to
take, any action to modify the Modified Form 8023 or any other Section 338
Forms, following the execution thereof by PLAC, or to modify or revoke the
Section 338 Elections following the filing of such Forms, without the written
consent of PLAC and Buyer.
(iv) Consistent Treatment: Reporting. Buyer and PLAC shall file, and
shall cause their respective affiliates to file, all Tax Returns in a manner
consistent with the information contained in the Section 338 Forms. Except as
otherwise required by law, Buyer and PLAC shall not take, and shall not
permit any of their affiliates to take, any position contrary to the
allocations reflected in such Section 338 Forms with any government agency of
taxing authority without the express written consent of the other party.
(v) Buyer Representation. Buyer represents that it is a domestic
corporation, and, other than pursuant to this Agreement, owns no stock or
rights to acquire stock, either directly or indirectly, in PLAC.
(vi) PLAC Representation. PLAC will convey, directly or indirectly, to
Buyer all of the shares of the outstanding stock of Professional as of the
Closing Date, which shares shall possess 100 percent of the total voting
power of all the shares of stock in Professional and have a value equal to
100 percent of the total value of all the shares of stock in Professional.
SECTION 6.16. Employment and Employee Benefits.
(a) Any Current Employee who is actively employed (including such
employees who are on vacation) immediately prior to the Closing shall remain an
employee of Professional immediately following the Closing at the same base
compensation and wage levels as in effect immediately preceding the Closing.
Each Current Employee who remains employed by Professional and each other
employee of Professional immediately prior to the Closing Date shall be a
"Transferred Employee"; provided, however, that the total number of Transferred
Employees shall not exceed 99. PLAC shall deliver the list of Transferred
Employees to Buyer no later than five days before the Closing Date for approval
by Buyer, which approval shall not be unreasonably withheld . Notwithstanding
anything herein to the contrary, nothing in this Agreement shall create any
obligation on the part of Professional or Buyer to continue
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the employment of any Transferred Employee for any definite period following the
Closing Date.
(b) Buyer shall, and shall cause its subsidiaries (including
Professional) to provide employee benefits to the Transferred Employees which
are substantially comparable in the aggregate to the employee benefits provided
to similarly situated employees of Buyer ("Buyer's Plans").
(c) If the Transferred Employees are included in any of Buyer's Plans,
such employees shall receive credit as employees thereunder for service prior to
the Closing Date with Professional under the terms of Buyer's Plans solely for
purposes of eligibility to participate, vesting and eligibility for retirement,
and solely with respect to vacation, disability and severance, for benefit
accrual purposes. If the Transferred Employees are included in any medical,
dental or health plan, any such plans shall not include pre-existing condition
exclusions, and such plans shall provide credit for any deductibles and
co-payments applied or made with respect to each such employee in the calendar
year of the change. PLAC shall deliver a list of amounts to be credited pursuant
to the foregoing sentence to Buyer at or prior to the Closing.
(d) On the Closing Date, PLAC shall cause Parent to fully vest each
Transferred Employee with respect to his account balance under the PennCorp
Financial Inc. Retirement and Savings Plan. Professional shall cease to be a
participating employer in the Employee Benefit Programs that are sponsored by
Parent (as set forth in Section 3.14(b) of the Disclosure Schedule) as of the
Closing Date. The Transferred Employees shall be entitled to receive
distributions pursuant to the terms of such programs and the provisions of
applicable law. With respect to any Transferred Employee who has an outstanding
loan balance under the terms of the PennCorp Financial Inc. Retirement and
Savings Plan (or similar plan in which the Transferred Employee is a
participant), PLAC shall cause Parent to permit, and Buyer shall permit, each
such Transferred Employee to repay the outstanding loan balance over the
remaining time period specified in the applicable promissory note in monthly or
quarterly payments by cash, check or through direct deduction from a checking or
savings account.
(e) PLAC and its affiliates shall retain liability for any and all of the
Employee Benefit Programs not expressly assumed by Buyer, including without
limitation, any retiree life or medical, bonus, severance, deferred
compensation, long-term disability or other program maintained by Professional
or Parent or its affiliates, and for any obligations under COBRA with respect to
any individual who terminated employment with Professional prior to the Closing.
(f) With respect to each Transferred Employee, PLAC shall retain the
obligation and liability for any workers' compensation or similar workers'
protection claims with respect to any such individual incurred prior to the
Closing Date.
(g) Buyer agrees to indemnify PLAC and its affiliates and to defend and
hold PLAC and its affiliates harmless from and against any and all Indemnifiable
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Losses (i) arising from obligations or liabilities that Buyer has agreed to
cause Professional to assume or (ii) for events occurring after the Closing
arising out of the employment or termination of employment of the Transferred
Employees, including but not limited to any claims by or in respect of any
Transferred Employee (or such Transferred Employee's successors or assigns)
arising out of, or in connection with, or otherwise relating to, any allegations
of unlawful discrimination or sexual harassment that occurred after the Closing.
(h) PLAC agrees to indemnify Buyer and its affiliates and to defend and
hold Buyer and its affiliates harmless from and against any and all
Indemnifiable Losses for events occurring prior to the Closing (i) arising out
of the employment or termination of employment of the Current Employees or (ii)
under any of the Employee Benefit Programs, including but not limited to (x) any
claims under any of the Employee Benefit Programs with respect to any of the
obligations or liabilities that Buyer has not agreed to cause Professional to
assume, (y) any "employee pension benefit plan" (within the meaning of Section
3(2) of ERISA) or any "group health plan" (within the meaning of Section 607 of
ERISA) in respect of which Professional has any liability solely as a result of
being a member of a "controlled group" (within the meaning of Section
4001(a)(14) of ERISA) prior to the Closing Date which includes PLAC or (z) any
claims by or in respect of any Transferred Employee (or such Transferred
Employee's successors or assigns) arising out of, or in connection with, or
otherwise relating to, any allegations of unlawful discrimination or sexual
harassment that occurred prior to the Closing; provided, however, that the
indemnities provided for in this sentence will not include any claims with
respect to cash compensation that is accrued prior to the Closing Date and
reflected on the Closing SAP Balance Sheet but that is payable after the Closing
Date. Notwithstanding any other provision of this Agreement to the contrary, the
indemnities provided for herein shall not be subject to the deductible and
maximum liability contained in Section 6.16, and all such indemnities shall
survive until 60 days after the expiration of the applicable statute of
limitations with respect thereto. Any claim for indemnification by Buyer or PLAC
pursuant to this Section 6.16 shall be subject to the procedures set forth in
Section 9.5.
(i) No provision of this Section 6.16 shall create any third-party
beneficiary rights in any employee or former employee (including any beneficiary
or dependent thereof) of PLAC any of its affiliates or Professional, in respect
of continued employment (or resumed employment) for any specified period of any
nature or kind whatsoever, and no provision of this Section 6.16 shall create
such third-party beneficiary rights in any such persons in respect of any
benefits that may be provided, directly or indirectly, under any employee
benefit plan or arrangement.
(j) Buyer affirms Professional's obligations and liabilities arising
after the Closing under each Employee Benefit Program that is sponsored by
Professional (as set forth in item 7 of Section 3.14(b) of the Disclosure
Schedule), including, but not limited to, each of the Retention Agreements set
forth in Section 6.16(j) of the Disclosure Schedule. Notwithstanding anything in
this Agreement to the contrary, PLAC shall pay, or shall cause Parent to pay,
all retention bonuses and transaction
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bonuses identified on Schedule 6.16(j) (the "Retention Bonuses") at such time as
such bonuses are payable pursuant to their terms.
SECTION 6.17. Nonsolicitation.
(a) PLAC hereby agrees that neither it nor any of the affiliates of
Parent will, for a period commencing on the Closing Date and ending on the
second anniversary of the Closing Date, without Buyer's prior written consent,
directly or indirectly, (i) solicit for employment or employ any employee of
Professional listed in Section 3.14(a)(i) of the Disclosure Schedule who
continues as an employee of Professional after the Closing Date; provided,
however that such agreement of non-solicitation shall not prohibit any general
advertisements or general solicitation that is not specifically directed to such
employees, (ii) solicit for appointment or appoint as agent any Regional Area
Directors ("RADs") of Professional on the Closing Date (except to the extent
PLAC or any of its affiliates (other than Professional) has a relationship with
any such RAD on the Closing Date), or (iii) solicit any policyholder of
Professional or twist or exchange (or seek to twist or exchange) any policy
issued by Professional.
(b) Buyer hereby agrees that neither it nor any of its affiliates
(including Professional) will, for a period commencing on the Closing Date and
ending on the second anniversary of the Closing Date, without Parent's prior
written consent, directly or indirectly, (i) solicit for employment or employ
any employee of Occidental Life Insurance Company of North Carolina
("Occidental"); provided, however that such agreement of non-solicitation shall
not prohibit any general advertisements or general solicitation that is not
specifically directed to such employees, (ii) solicit for appointment or appoint
as agent any general agents of Occidental on the Closing Date (except to the
extent Buyer or any of its affiliates (including Professional) has a
relationship with any such insurance agent or Regional Area Director on the
Closing Date), or (iii) solicit any policyholder or Occidental or twist or
exchange (or seek to twist or exchange) any policy issued by Occidental.
SECTION 6.18. Noncompetition. For a period commencing on the Closing Date
and ending on the fifth anniversary of the Closing Date, without Buyer's prior
written consent, directly or indirectly (i) PLAC will not permit Occidental or
any Subsidiaries or affiliates of Parent to market or encourage the sale of any
insurance product through Professional's RADs; provided, however, that if, after
the Closing Date, Professional enters into a contract with a new RAD which, at
the time of such retention, has a relationship with Occidental or any
Subsidiaries or affiliates of Parent, then Occidental, or such Subsidiary or
affiliate, shall be entitled to continue its relationship with such RAD and such
relationship shall not constitute a violation of this Section 6.18; and (ii)
PLAC will not nor will PLAC permit any of its affiliates to use the name
"Professional Insurance Company", or "Professional Insurance Corporation" or any
name that is confusingly similar to such name to market or sell any worksite
distributed insurance product or to otherwise engage in the worksite distributed
insurance business in the United States of America.
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SECTION 6.19. Acquisition Proposals.
(a) PLAC shall not, nor shall it authorize or permit any of its officers,
directors or employees, or any investment banker, attorney or other advisor or
representative acting on its behalf to, directly or indirectly, (a) solicit or
initiate the submission of any proposal regarding a Competing Transaction or (b)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Competing Transaction; provided, however, that if
PLAC shall receive a proposal regarding a Competing Transaction which (i) was
unsolicited or that did not otherwise result from a breach of this Section and
(ii) PLAC's Board of Directors determines is reasonably likely to lead to a
Superior Transaction, then PLAC may (x) furnish non-public information with
respect to Professional to the Person who made such proposal (pursuant to a
customary confidentiality agreement) and (y) participate in discussions and
negotiations regarding such Competing Transaction.
(b) PLAC shall not, and shall cause Professional not to, enter into any
letter of intent, agreement in principle, acquisition agreement or merger or
similar agreement with respect to any Competing Transaction unless: (i) PLAC's
Board of Directors shall have determined that such Competing Transaction is a
Superior Transaction and (ii) PLAC shall have terminated this Agreement pursuant
to Section 10.1(f). Notwithstanding the foregoing, PLAC shall not be entitled to
terminate this Agreement pursuant to Section 10.1(f) unless PLAC delivers notice
of its intent to terminate to Buyer at least five Business Days prior to the
date of termination. Such notice shall be accompanied by a description of the
terms of the Superior Transaction. PLAC agrees to consider any revised offer
communicated to PLAC by Buyer in response to such notice.
(c) The term "Superior Transaction" shall mean a Competing Transaction
that the Board of Directors of PLAC determines in good faith contains terms and
conditions, including likelihood of consummation, that are materially more
favorable to the PLAC than those set forth in this Agreement (as Buyer may have
proposed to amend it pursuant to the provisions of clause (b) above).
SECTION 6.20. Environmental Assessments. Buyer shall have the right,
within 30 days following the date of this Agreement, to retain an environmental
consultant to undertake and complete environmental assessments of the real
property listed on Section 6.20 of the Disclosure Schedule.
SECTION 6.21. Policy Approvals. Upon the request of Buyer prior to the
Closing, Professional shall, and PLAC shall cause Professional to, furnish to
Buyer copies of all policy forms (including riders and endorsements), rating
information, actuarial demonstrations and other documents relating to the
insurance products of Professional that have been filed with Professional with
insurance regulatory authorities or that Professional has determined are exempt
from filing and have been listed as such with any insurance regulatory
authorities, as are necessary to enable Buyer or an affiliate
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of Buyer to make all rate and policy form filings, and obtain all regulatory
approvals with respect thereto, required for buyer or an affiliate of Buyer to
issue directly, following the Closing, in all states in which Buyer or such
affiliate transacts insurance business, the insurance products currently being
offered for sale by Professional; provided, however, that (i) Buyer will not,
and will cause its affiliates not to, use any such rates or forms in any manner
whatsoever to market, sell, issue, underwrite, assume or otherwise transact
insurance at any time prior to the Closing and (ii) in the event that this
Agreement is terminated prior to the Closing, Buyer shall, and shall cause its
affiliates to, (A) promptly withdraw all such rate and policy form filings, and
promptly rescind any regulatory approvals, with respect thereto, and keep all
such filing, approvals, forms, actuarial demonstrations and information and
documents related thereto that are not publicly available confidential, and (B)
not resubmit such rate and policy form filings, or sell or apply for regulatory
approvals to sell the insurance products currently offered for sale by
Professional, in each case for a period of one year from the date this Agreement
is terminated. PLAC and Professional shall cooperate with Buyer and its
affiliates in any reasonable manner in connection with the preparation for
filing and filing of such rate and form filings of Buyer or its affiliates;
provided, however, that Buyer and such affiliates shall bear all out-of-pocket
expenses related to such cooperation and the performance by PLAC and
Professional of their obligations under this Section.
SECTION 6.22. Distribution Agreements. Buyer shall use its commercially
reasonable efforts and shall work in good faith to negotiate and enter into, as
soon as practicable after the date hereof, distribution agreements (the "New
Distribution Agreements") with the Persons listed in Section 6.22 of the
Disclosure Schedule (the "Identified Agents"); provided, however, that Buyer
shall ensure that Xxxxxxx Xxxx, as a representative of PLAC, shall be present or
otherwise included in all material discussions and negotiations between Buyer
and the Identified Agents. Buyer agrees that in no event shall the New
Distribution Agreements materially reduce the aggregate compensation of the
Identified Agents. Buyer further agrees that the effectiveness of the New
Distribution Agreements shall be conditioned upon the consummation of the
Closing and that, in the event the Closing does not occur, Buyer will promptly
terminate the New Distribution Agreements and will not solicit the Identified
Agents for a period of three years from the termination of this Agreement. PLAC
agrees that it will cause Professional to reasonably cooperate with and assist
Buyer in Buyer's efforts to enter into the New Distribution Agreements.
SECTION 6.23. PESCO Joint Venture.
(a) At or prior to Closing, subject to paragraph (c) below, PLAC shall
cause Professional to transfer and/or assign to PLAC or Parent all agreements,
contracts, notes, receivables, payables, investments and other assets,
liabilities, obligations of any kind, documents or securities held by
Professional or to which Professional is a party which relate to PESCO
Interstate, L.L.C. (the "Joint Venture"), the joint venture organized by
Professional and Public Employees Services Company, a Florida corporation
("PESCO"), or any other joint ventures to which either (x) both PESCO and
Professional are parties or (y) PESCO is a party and with which Professional has
a contractual relationship. Without limiting the generality of the foregoing, at
or prior to
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Closing, PLAC shall cause Professional to (i) assign to PLAC or Parent all of
Professional's rights and obligations under (A) the Joint Venture Agreement
(herein so called), dated as of March 30, 1998, between Professional and PESCO
and (B) all other Related Agreements (as defined in the Joint Venture Agreement)
to which Professional is a party, (ii) transfer to PLAC or Parent the 50%
membership interest in the Joint Venture held by Professional in exchange for a
payment by PLAC or Parent, as the case may be, in the amount of $200,000,
representing the amount contributed by Professional to the Joint Venture in
connection with the formation of the Joint Venture, (iii) assign to PLAC or
Parent that certain Loan Agreement (herein so called) dated July 24, 1998
between Professional and PESCO, as amended, (iv) transfer to PLAC or Parent (A)
that certain Promissory Note dated July 28, 1998 executed by PESCO in favor of
Professional pursuant to the Loan Agreement in the amount of $218,000 (the
"First Advance Note") and (B) that certain Future Advance Promissory Note dated
September 8, 1998 executed by PESCO in favor of Professional pursuant to the
Loan Agreement in the amount of $82,000 (the "Second Advance Note," and together
with the First Advance Note, the "Advance Notes"), in exchange for a payment by
PLAC or Parent, as the case may be, equal to the aggregate principal amounts,
together with accrued and unpaid interest, if any, outstanding under the Advance
Notes on the date of such transfer, and (v) transfer to PLAC or Parent all
balances due to Professional with respect to agent advances (the "Agent
Advances") made pursuant to, or otherwise payable to Professional under, that
certain General Agent Contract (herein so called) between Professional and PESCO
dated December 18, 1997, in exchange for a payment by PLAC or Parent, as the
case may be, in an amount equal to the aggregate balances of such Agent Advances
on the date of such transfer.
(b) In order to effect the assignments and transfers contemplated by
paragraph (a) above, PLAC shall, or shall cause Parent or Professional, as
applicable, to (i) deliver written notice to Buyer, at least two business days
prior to the date on which such assignments and transfers are to be made,
specifying the date on which such assignments and transfers are to be made and
accompanied by a certificate, executed by an executive officer of Professional
and PLAC, certifying (A) the principal amount, and the accrued and unpaid
interest, if any, outstanding under the Advance Notes as of the date specified
for the transfer of such Advance Notes, (B) the aggregate balances of the Agent
Advances as of the date specified for the transfer of such Agent Advances, and
(C) the aggregate amount to be paid to Professional in connection with the
transfers and assignments to be effected pursuant to paragraph (a) above, (ii)
make the payments to Professional described in paragraph (a) above in the
amounts specified in the notice delivered pursuant to clause (i) above on the
date the assignments and transfers are effected, and (iii) obtain such consents
and execute such documents as may be necessary to effect the assignments and
transfers described in paragraph (a) above. Buyer agrees that, from and after
the Closing, Buyer shall cause Professional to forward and pay over to PLAC or
Parent, as the case may be, any payments received by Professional with respect
to the Advance Notes or the Agent Advances pursuant to the terms of a payment
schedule to be agreed upon by the parties prior to Closing.
(c) Notwithstanding anything in this Section 6.23 to the contrary, Buyer
shall have the option, which option must be exercised on or prior to February
28, 1999,
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to allow Professional to continue the General Agent Contract after the
Closing. If such option is exercised, Professional shall retain, and Buyer and
Professional shall indemnify and hold PLAC and its affiliates harmless from, all
liabilities and obligations of Professional and its affiliates arising from and
after the Closing Date under the General Agent Contract. If Buyer shall not have
exercised such option on or prior to February 28, 1999, PLAC shall cause
Professional to terminate the General Agent Contract on or prior to Closing and
PLAC shall retain, and shall indemnify and hold Professional and Buyer harmless
from, all liabilities and obligations relating to the General Agent Contract
and/or the termination thereof.
SECTION 6.24. Professional Software. No later than the Closing Date, PLAC
will cause Parent to transfer, or cause to be transferred, to Professional at no
charge any and all interests of any kind that Parent or any of its Subsidiaries
or affiliates holds in the items of software listed in Section 6.24 of the
Disclosure Schedule. PLAC will be solely liable for all costs associated with
obtaining any third-party consents or assignments related to such transfers.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.1. Conditions to the Obligations of Buyer under this Agreement.
The obligation of Buyer under this Agreement to consummate the acquisition of
the Shares (the "Acquisition") shall be subject to the satisfaction, at or prior
to the Closing, of the following conditions:
(a) [reserved];
(b) Any waiting period applicable to the consummation of the Acquisition
under the HSR Act shall have expired or been terminated;
(c) No injunction, restraining order or other ruling or order issued by
any Governmental Authority or other legal restraint or prohibition preventing
the consummation of the Acquisition shall be in effect;
(d) Each of the obligations of PLAC or Professional required to be
performed by it at or prior to the Closing pursuant to this Agreement shall have
been duly performed and complied with in all material respects, and the
representations and warranties of PLAC contained in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing as though made at and as of the Closing (except as to any
representation or warranty that specifically relates to an earlier date), and
Buyer shall have received a certificate to that effect signed by a senior
officer of PLAC;
(e) Any and all permits, consents, waivers, clearances, approvals and
authorizations of all third parties and Governmental Authorities specified on
Section 7.1(e) of the Disclosure Schedule shall have been obtained; and
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(f) Buyer shall have received an opinion of Weil, Gotshal & Xxxxxx LLP or
Xxxxx X. Xxxxxxxxx, Esq., General Counsel of PennCorp Financial Group, Inc., in
form reasonably acceptable to Buyer.
(g) There shall not have occurred since September 30, 1998, any change in
the business condition (financial or otherwise) of Professional that has had or
would be reasonably likely to have a Material Adverse Effect.
(h) PLAC shall own all of the shares of Professional's common stock
issued and outstanding on the Closing Date free and clear of any Liens.
(i) PLAC shall have delivered the audited Year End GAAP Financial
Statements to Buyer and such financial statements shall conform in all material
respects to and shall reflect no material adjustments from the unaudited
financial statements provided to Buyer for the same period, except for
nonconformities or adjustments which have a positive effect on such financial
statements.
(j) Buyer shall have completed the environmental assessments referenced
in Section 6.20 and either (i) such environmental assessments shall be to
Buyer's reasonable satisfaction or (ii) PLAC shall have cured any objectionable
condition reflected in any such environmental assessments to Buyer's reasonable
satisfaction.
(k) Professional and the Identified Agents shall have entered into the
New Distribution Agreements on terms reasonably satisfactory to Buyer, subject
to the provisions of Section 6.22; provided, however, that Buyer shall not be
entitled to exercise this closing condition with respect to any New Distribution
Agreement based on the respective Identified Agent's refusal to agree to (i) an
alteration or modification of the territory currently granted to the Identified
Agent, (ii) a change in the current exclusive/ nonexclusive status of the
Identified Agent or (iii) a change in the current employee/ independent
contractor status of the Identified Agent.
(l) Each of the obligations of Parent required to be performed by it at
or prior to the Closing pursuant to the Agreement of even date herewith between
Parent and Buyer (the "Parent Agreement") shall have been performed or complied
with in all material respects and the representations and warranties of Parent
under the Parent Agreement shall be true and correct in all material respects as
of the date of the Parent Agreement and as of the Closing as though made at and
as of the Closing (except as to any representation or warranty that specifically
relates to an earlier date) and Buyer shall have received a certificate to that
effect signed by a senior officer of Parent.
(m) No later than January 15, 1999, PLAC shall have caused Professional
to deliver to Buyer current claims, premium and reserve experience and related
information with respect to the items listed in Section 3.16(f) of the
Disclosure Schedule and no later than January 31, 1999, Buyer shall have
determined that such experience and related information is satisfactory to Buyer
in its sole discretion.
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SECTION 7.2. Conditions to the Obligations of PLAC under this Agreement.
The obligation of PLAC under this Agreement to consummate the Acquisition shall
be subject to the satisfaction, at or prior to the Closing, of the following
conditions:
(a) Any and all permits, consents, waivers, clearances, approvals and
authorizations of all third parties and Governmental Authorities specified on
Section 7.1(e) of the Disclosure Schedule shall have been obtained;
(b) Any waiting period applicable to the consummation of the Acquisition
under the HSR Act shall have expired or been terminated;
(c) No injunction, restraining order or other ruling or order issued by
any Governmental Authority or other legal restraint or prohibition preventing
the consummation of the Acquisition shall be in effect;
(d) Each of the obligations of Buyer required to be performed by it at or
prior to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects, and the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made at and as of the Closing Date (except as
to any representation or warranty that specifically relates to an earlier date),
and PLAC shall have received a certificate to that effect signed by an officer
of Buyer; and
(e) PLAC shall have received an opinion of Buyer's legal counsel, in form
reasonably acceptable to PLAC.
ARTICLE VIII
CLOSING
SECTION 8.1. Closing. The closing of the Acquisition (the "Closing")
shall take place at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, subject to the satisfaction or waiver of the
conditions set forth in Sections 7.1 and 7.2, as soon as practicable after the
date hereof and in any event not later than March 31, 1999, or at such other
time and place and on such other date as Buyer and PLAC shall agree (the
"Closing Date"). As a further condition to Closing, at the Closing:
(a) PLAC shall deliver or cause to be delivered to Buyer the following:
(i) the certificate described in Section 7.1(d);
(ii) certificates representing all of the Shares in appropriate form for
transfer to Buyer duly endorsed in blank or accompanied by stock powers duly
executed in blank; and
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(iii) resignations of the directors of Professional who are not
Professional Employees; and
(iv) the opinion described in Section 7.1(f).
(b) Buyer shall deliver or cause to be delivered to PLAC (i) the
certificate described in Section 7.2(d) and (ii) the opinion described in
Section 7.2(e).
(c) Buyer shall pay the Closing Purchase Price to PLAC, by wire transfer
of immediately available funds.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.1. Survival of Representations, Warranties and Covenants.
(a) Except as to (i) the representations and warranties contained in
Sections 3.4 and 3.21 and the covenants contained in Section 9.3(c), which shall
survive the Closing indefinitely and (ii) the representations and warranties
contained in Sections 3.14 and 3.15, which shall survive the Closing until 60
days after the expiration of the applicable statute of limitations, the
representations, warranties and pre-Closing covenants of PLAC and Buyer
contained in this Agreement shall survive until the expiration of 24 months from
the Closing Date. Any claim for indemnification with respect to any of such
matters that is not asserted by notice given as herein provided within the
specified period of survival may not be pursued and is hereby irrevocably waived
after such time. Any claim for an Indemnifiable Loss asserted within such period
of survival as herein provided will be timely made for purposes hereof; provided
that any notice of claim relates to a particular item with respect to which an
Indemnifiable Loss is asserted and does not purport to assert a claim for
Indemnifiable Losses that might arise in the future with respect to matters not
known at the date of delivery of such notice.
(b) Unless a specified period is set forth in this Agreement (in which
event such specified period will control), the covenants in this Agreement to be
performed after the Closing will survive the Closing and remain in effect
indefinitely.
SECTION 9.2. Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnity Payment" means any
amount of Indemnifiable Losses required to be paid pursuant to this Agreement,
(ii) "Indemnitee" means any Person entitled to indemnification under this
Agreement, (iii) "Indemnifying Party" means any Person required to provide
indemnification under this Agreement, (iv) "Indemnifiable Losses" means any and
all damages, losses, liabilities, obligations, costs and expenses, and any and
all claims, demands or suits (by any Person, including without limitation any
Governmental Authority), including without limitation the costs and expenses of
any and all actions, suits, proceedings, demands, assessments, judgments,
settlements and compromises relating thereto and including reasonable attorneys'
fees and expenses in connection therewith incurred by an
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Indemnitee from and after the Closing Date, and (v) "Third Party Claim" means
any claim, action or proceeding made or brought by any Person who or which is
not a party to this Agreement or an affiliate of a party to this Agreement.
(b) No Indemnitee will be entitled to indemnification pursuant to Section
9.3 (except indemnification with respect to covenants to be performed after the
Closing) unless and until the aggregate amount of Indemnifiable Losses under
Section 9.3 exceeds $350,000, in which event the Indemnitee will be entitled to
indemnification only to the extent the amount of Indemnifiable Losses exceed
such amount; provided, however, in no event will an Indemnitee be entitled to
indemnification pursuant to Section 9.3 (except indemnification with respect to
covenants to be performed after the Closing) for aggregate Indemnifiable Losses
in excess of the aggregate Final Purchase Price.
SECTION 9.3. Indemnification.
(a) Subject to Sections 9.1 and 9.2, PLAC agrees to indemnify, defend and
hold harmless Buyer from and against any and all Indemnifiable Losses to the
extent relating to, resulting from or arising out of:
(i) any breach of representation or warranty of PLAC under the terms of
this Agreement; and
(ii) any breach or nonfulfillment of any agreement or covenant of PLAC
under the terms of this Agreement.
(b) In addition to the foregoing, subject to Section 9.5, PLAC shall
indemnify and hold harmless Buyer for any and all Indemnifiable Losses: (i)
arising out of a breach of the representations and warranties contained in
Section 3.21 hereof or arising out of or relating to any Environmental Claim
that arises out of or relates to (A) the conduct of the business of Professional
prior to the Closing Date; (B) the ownership or lease of real property or
facilities by Professional prior to the Closing Date; or (C) conditions that
existed at such real property and facilities prior to the Closing Date; (ii)
arising out or relating to any fiduciary or securities laws claims by any
shareholders of Parent; provided, that Buyer shall not be entitled to
indemnification hereunder for any losses, costs, expenses or other damages
incurred by Buyer in connection with such claims that result, directly or
indirectly, from any actions taken by Buyer, except for actions that are
required by, and that are not in breach or violation of, this Agreement or any
documents executed in connection herewith; (iii) arising out of relating to the
acquisition by PLAC of any Shares not owned by it beneficially and of record as
of the date of this Agreement and (iv) arising out of or related to PESCO, PESCO
Plus, L.C., PESCO, Inc. or the Joint Venture, except, in the event Buyer shall
have exercised the option set forth in Section 6.23(c), with respect to matters
arising from and after the Closing Date and relating to the General Agent
Contract. PLAC's liability under this Section 9.3(b) shall survive the Closing
indefinitely. Indemnifiable Losses that are indemnifiable under this Section
9.3(b) are referred to herein as "Certain Damages."
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(c) Subject to Sections 9.1 and 9.2, Buyer agrees to indemnify, defend
and hold harmless PLAC and its affiliates from and against any and all
Indemnifiable Losses to the extent relating to, resulting from or arising out
of:
(i) any breach of representation or warranty of Buyer under the terms of
this Agreement; and
(ii) any breach or nonfulfillment of any agreement or covenant of Buyer
under the terms of this Agreement.
(d) Notwithstanding the foregoing, indemnification for Taxes shall be
governed by Section 6.15 hereof and not by Article IX; indemnification in
connection with employee matters shall be governed by Section 6.16 hereof; and
indemnification for Certain Damages (as defined in Section 9.3(b) hereof) shall
be governed by Section 9.3(b) hereof and shall not be subject to Section 9.2(b)
hereof.
SECTION 9.4. [reserved]
SECTION 9.5. Defense of Claims.
(a) If any Indemnitee receives notice of assertion or commencement of any
Third Party Claim against such Indemnitee with respect to which an Indemnifying
Party may be obligated to provide indemnification under this Agreement, the
Indemnitee will give such Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 calendar days after receipt of such
notice of such Third Party Claim. Such notice will describe the Third Party
Claim in reasonable detail, will include copies of all material written evidence
thereof and will indicate the estimated amount, if reasonably practicable, of
the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The
Indemnifying Party will have the right to participate in or, by giving written
notice to the Indemnitee, to assume the defense of any Third Party Claim at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel
(reasonably satisfactory to the Indemnitee), and the Indemnitee will cooperate
in good faith in such defense.
(b) If, within 20 calendar days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 9.5(a), an Indemnitee
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 9.5(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if within twenty calendar days
after receiving written notice from the Indemnitee, (i) the Indemnifying Party
fails to take reasonable steps necessary to defend diligently such Third Party
Claim or (ii) the Indemnifying Party has not undertaken fully to indemnify the
Indemnitee in respect of all Indemnifiable Losses relating to the matter, the
Indemnitee may assume its own defense, and the Indemnifying Party will be liable
for all reasonable costs or expenses paid or incurred in connection therewith.
The Indemnifying Party will not enter into any settlement of any Third Party
Claim without
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the prior written consent of the Indemnitee, which consent shall not be
unreasonably withheld. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the Indemnitee
to that effect. If the Indemnitee fails to consent to such firm offer within ten
calendar days after its receipt of such notice, the Indemnitee may continue to
contest or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will not exceed
the amount of such settlement offer, plus costs and expenses paid or incurred by
the Indemnitee through the end of such ten calendar day period.
(c) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 9.5(a) or 9.5(b) will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party that was entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a result of such
failure.
(d) The Indemnifying Party will have a period of 30 calendar days within
which to respond in writing to any claim by an Indemnitee on account of an
Indemnifiable Loss that does not result from a Third Party Claim (a "Direct
Claim"). If the Indemnifying Party does not so respond within such 30 calendar
day period, the Indemnifying Party will be deemed to have rejected such claim,
in which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article IX.
(e) If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an Indemnity Payment, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other Person, the amount of
such reduction, less any costs, expenses, premiums or taxes incurred in
connection therewith will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnity Payment the Indemnifying Party
will, to the extent of such Indemnity Payment, be subrogated to all rights of
the Indemnitee against any third party that is not an affiliate of the
Indemnitee in respect of the Indemnifiable Loss to which the Indemnity Payment
related; provided, however, that (i) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party against any
such third party on account of said Indemnity Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision hereof,
each such Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights.
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(f) With respect to a Third Party Claim for which PLAC is the
Indemnifying Party, Buyer shall, and shall cause each of its affiliates and
their respective directors, officers, partners, employees, agents or
representatives to, make available to PLAC and its affiliates and their
representatives all books and records of Buyer and its affiliates and their
respective directors, officers, partners, employees, agents or representatives
relating to such Third Party Claim and shall render to PLAC and its affiliates
and their representatives such assistance and access to records and the
representatives of Buyer and of its affiliates and their respective directors,
officers, partners, employees, agents or representatives as may be reasonably
requested, except that Buyer shall not be required to make available any books,
records, documents or other information that Buyer reasonably determines to be
confidential or subject to attorney-client privilege unless and until PLAC shall
have entered into such agreements as Buyer reasonably deems to be necessary in
light of all surrounding circumstances (including, without limitation, PLAC's
need for information in connection with the investigation or defense of a Third
Party Claim) to protect such confidentiality or privilege.
SECTION 9.6. Adjustment to Purchase Price. The parties hereto agree that
any Indemnity Payment, including Tax and other Indemnity Payments, hereunder
shall be treated as an adjustment to the Purchase Price and subject to the
provisions of Section 6.15(j).
SECTION 9.7. Exclusive Remedy. The parties agree that, to the fullest
extent permitted by law, the sole and exclusive remedy of the parties after the
Closing with respect to any claim or cause of action asserted by any of them
relating to or arising from breaches of the representations, warranties or
covenants of the other parties hereto contained in this Agreement or any
document, list, schedule, exhibit, certificate or other instrument furnished or
to be furnished by or on behalf of such other parties or any of their
representatives in connection with the transactions contemplated by this
Agreement shall be limited to the rights of the parties under, and shall be
subject to the terms and conditions of, this Article IX and Sections 6.15 or
6.16, to the extent applicable.
ARTICLE X
TERMINATION AND ABANDONMENT
SECTION 10.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual consent of each of PLAC and Buyer;
(b) by PLAC or Buyer:
(i) if a Governmental Authority shall have issued an order, decree or
ruling or taken any other action (which order, decree or ruling the parties
hereto shall use their best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the Acquisition, and such
order, decree, ruling or other action shall have become final and
nonappealable;
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(ii) if any Governmental Authority whose consent or approval is required
to consummate the transactions contemplated hereby shall have informed PLAC
or Buyer that such consent or approval will not be granted; or (iii) if the
Closing shall not have occurred on or before March 31, 1999; provided,
however, that the right to terminate this Agreement shall not be available to
any party whose breach of this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; provided,
further, that the termination date contemplated by this clause
(iii) may be extended by either party for not more than three 30 day
periods if, as of the date of extension, the sole reason that the Closing
shall not have occurred previously is that one or more insurance regulatory
authorities shall not have approved the transaction and the party exercising
the right of extension provided above shall be using all reasonable efforts,
in good faith, to ensure such insurance regulatory authorities to promptly
approve the transaction contemplated hereby; or
(c) by Buyer if a material default or breach shall be made by PLAC with
respect to the due and timely performance of any of its covenants or agreements
contained herein, or (subject to the proviso set forth below) in any of its
representations or warranties contained in the Agreement, if such default or
breach has not been cured or waived within 30 days after written notice to PLAC
specifying, in reasonable detail, such claimed material default or breach and
demanding its cure or satisfaction; provided , however, in no event shall Buyer
be entitled to terminate this Agreement in the event of a breach by PLAC of a
representation or warranty unless the failure of such representation or warranty
to be true and complete would have a Material Adverse Effect;
(d) by PLAC if a material default or breach shall be made by Buyer with
respect to the due and timely performance of any of its covenants or agreements
contained herein, or in any of its representations or warranties contained in
the Agreement, if such default or breach has not been cured or waived within 30
days after written notice to Buyer specifying, in reasonable detail, such
claimed material default or breach and demanding its cure or satisfaction; or
(e) by Buyer upon the occurrence of either of the following:
(i) Parent, PLAC or Professional applies for, consents to or acquiesces
in the appointment of a trustee, receiver or other custodian for Parent, PLAC
or Professional or a substantial part of the property of Parent, PLAC or
Professional, or makes a general assignment of all its assets, rights and
properties for the benefit of creditors; or in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian
is appointed by Parent, PLAC or Professional, or for a substantial part of
the property of Parent, PLAC or Professional that is not discharged or
dismissed within 30 days; or
(ii) any bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy or insolvency law, or any dissolution or
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liquidation proceeding, is instituted by or against Parent and, if instituted
against Parent, is not dismissed within 30 days; or (f) by PLAC pursuant to
and in compliance with Section 6.19.
SECTION 10.2. Procedure and Effect of Termination. In the event of
termination and abandonment of the transactions contemplated hereby pursuant to
Section 10.1, written notice thereof shall forthwith be given to the other
parties to this Agreement and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided herein:
(a) upon request therefor, each party will redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same; and
(b) no party hereto shall have any liability or further obligation to any
other party to this Agreement resulting from such termination except (i) that
the provisions of this Section 10.2 and the provisions of Section 10.3 shall
remain in full force and effect and (ii) subject to Section 10.3, no party
waives any claim or right against a breaching party to the extent that such
termination results from the breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 10.3. Certain Fees and Expenses. PLAC acknowledges that Buyer has
spent, and will be required to spend, substantial time and effort in examining
the business, properties, affairs, financial condition and prospects of
Professional and has incurred, and will continue to incur, substantial fees and
expenses in connection with such examination, the preparation of this Agreement
and the accomplishment of the transactions contemplated hereby. Therefore, to
induce Buyer to enter this Agreement:
(a) EXPENSES. In the event that PLAC terminates this Agreement other than
pursuant to Sections 10.1(a), (b) or (d) or Buyer terminates this Agreement
pursuant to Section 10.1(c), then PLAC shall reimburse Buyer for the total
amount of the Expenses. The reimbursement of Buyer's Expenses pursuant to this
Section 10.3(a) shall be Buyer's sole and exclusive remedy for such termination,
subject to Section 10.3(b), if applicable. For purposes of this Section 10.3,
"Expenses" shall include all reasonable out-of-pocket expenses and fees
(including, without limitation, fees and expenses payable to all investment
banking firms and their respective agents and outside counsel, and all
reasonable fees of counsel, accountants, experts and consultants to Buyer)
actually incurred by Buyer on its behalf since October 15, 1998, in connection
with the transactions contemplated by this Agreement; provided, that such
Expenses shall not exceed $500,000. The Expenses, if due, shall be paid promptly
after such termination.
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(b) FEE. If this Agreement is terminated by PLAC pursuant to Section
10.1(f), then PLAC shall pay to Buyer, promptly after the consummation of the
Superior Transaction giving rise to such termination, a fee in the amount of
$2.0 million in addition to the amount of any Expenses paid or payable under
subsection (a) above (the "Fee"), not as a penalty but as full and complete
liquidated damages and a Buyer's sole and exclusive remedy.
The Expenses and the Fee shall be payable to Buyer notwithstanding that
any action taken by the Board of Directors of any of Parent, PLAC or
Professional that may give rise to the obligation to pay the Expenses and the
Fee may have been taken in accordance with the fiduciary duties of the Board of
Directors.
(c) PAYMENT. Any payment required pursuant to this Section 10.3 shall be
made promptly as practicable, but in no event later than three Business Days
after Buyer's delivery to PLAC of a statement setting forth the amount payable
and the facts causing such amount to be payable, including (if applicable) the
Expenses in reasonable detail, and shall be made by wire transfer of immediately
available funds to an account designated by Buyer. In the event that Buyer is
entitled to the Expenses or the Fee, PLAC shall also pay to Buyer interest at
the rate of 4.5% per year on any amounts that are not paid when due, plus all
costs and expenses in connection with or arising out of the enforcement of the
obligation of PLAC to pay the Expenses, the Fee or such interest.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Amendment and Modification. This Agreement may only be
amended, modified or supplemented by a written instrument signed by all the
parties hereto.
SECTION 11.2. Waiver of Compliance; Consents. Any failure of Buyer to
comply with any obligation, covenant, agreement or condition contained herein
may be waived in writing by PLAC, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any other failure. Any
failure of PLAC to comply with any obligation, covenant, agreement or condition
contained herein may be waived in writing by Buyer, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
other failure.
SECTION 11.3. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 11.4. Expenses and Obligations. Except as otherwise expressly set
forth herein, each party shall be responsible for paying all costs and
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expenses incurred by it in connection with the consummation of the transactions
contemplated by this Agreement.
SECTION 11.5. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement; provided, however, that affiliates of PLAC shall have the right to
assert and recover with respect to claims made in connection with Buyer's
obligations under Section 6.16 and Article IX.
SECTION 11.6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon the earlier of delivery
thereof if by hand or upon receipt if sent by mail (registered or certified,
postage prepaid, return receipt requested) or on the second next Business Day
after deposit if sent by a recognized overnight delivery service or upon
transmission if sent by telecopy or facsimile transmission (with electronic
acknowledgement of transmission confirmed) as follows:
(a) If to Buyer, to:
G.E. Financial Assurance Holdings, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
with a copy to:
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Heuhsen, Esq.
Facsimile No.: (000) 000-0000
(b) If to PLAC, to:
Pacific Life and Accident Insurance Company
c/o PennCorp Financial Group, Inc.
0 Xxxxxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
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with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
SECTION 11.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflicts-of-laws rules thereof.
SECTION 11.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
SECTION 11.9. Headings. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.10. Entire Agreement. This Agreement, the Disclosure Schedule
and the Annexes hereto, the Confidentiality Agreement between Buyer and Parent,
and the Letter Agreement dated of even date herewith between PLAC and Buyer
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein or therein. There are no agreements,
representations, warranties or covenants other than those expressly set forth
herein or therein. This Agreement, the Disclosure Schedule and the Annexes
hereto, and the Letter Agreement referenced above supersede all prior agreements
and understandings between the parties (other than the Confidentiality Agreement
referenced above) with respect to such subject matter.
SECTION 11.11. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 11.12. PLAC Covenants. No failure of any covenant of PLAC
contained herein shall be excused by virtue of the fact that PLAC does not
control any party, including Parent, which PLAC is obligated, pursuant to such
covenant, to cause to take any action or omit to take any action.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be signed on its behalf by its duly authorized officers, all as of the day
and year first above written.
GE FINANCIAL ASSURANCE HOLDINGS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
PACIFIC LIFE AND ACCIDENT INSURANCE COMPANY
By:
----------------------------------------
Name:
--------------------------------------
Title:
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