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EXHIBIT 10.45
STOCK PURCHASE AND EXCHANGE AGREEMENT
BY AND AMONG
GE FINANCIAL ASSURANCE HOLDINGS, INC.,
GE LIFE AND ANNUITY ASSURANCE COMPANY,
PM HOLDINGS, INC.
AND
PHOENIX GROUP HOLDINGS, INC.
Dated as of December 9, 1999
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS...................................................................................................4
1.1. Definition of Terms.....................................................................................4
ARTICLE II SALE, PURCHASE AND EXCHANGE.................................................................................25
2.1. Sale, Purchase and Exchange of Shares..................................................................25
2.2. First Closing..........................................................................................26
2.3. Second Closing.........................................................................................26
2.4. Third Closing and CDM Matters..........................................................................27
2.5. Alternate Payment for the Purchased GELAAC Shares......................................................28
2.6. Purchase Price Adjustment..............................................................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PMH AND PGH..............................................................33
3.1. Corporate Status and Authority of PMH..................................................................33
3.2. Corporate Status and Authority of PGH..................................................................34
3.3. Corporate Status and Authority of the PGH Subsidiaries.................................................34
3.4. No Conflicts; Consents and Approvals, etc..............................................................36
3.5. Capital Stock of PGH Subsidiaries......................................................................38
3.6. Financial Statements...................................................................................38
3.7. Reserves...............................................................................................40
3.8. Absence of Undisclosed Liabilities.....................................................................41
3.9. Absence of Changes.....................................................................................42
3.10. Property; Assets......................................................................................44
3.11. Contracts.............................................................................................45
3.12. Employment Agreement and Benefits, etc................................................................49
3.13. Intellectual Property.................................................................................52
3.14. Governmental Authorizations; Compliance with Law; Forms and Policies..................................52
3.15. Litigation............................................................................................56
3.16. Brokers...............................................................................................57
3.17. Insurance.............................................................................................57
3.18. Environmental Matters.................................................................................58
3.19. Bank Accounts.........................................................................................59
3.20. Labor Matters.........................................................................................60
3.21. Regulatory Qualifications.............................................................................61
3.22. Year 2000 Compliance..................................................................................62
3.23. Investment Assets.....................................................................................64
3.24. Investment Company....................................................................................65
3.25. Purchase for Investment; Restricted Shares............................................................65
3.26. Schedules.............................................................................................65
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GEFA......................................................................66
4.1. Corporate Status and Authority of GEFA.................................................................66
4.2. Corporate Status and Authority of GELAAC...............................................................66
4.3. Subsidiaries of GELAAC.................................................................................67
4.4. Capitalization of GELAAC...............................................................................67
(i)
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4.5. Title..................................................................................................67
4.6. No Conflicts; Consents and Approvals, etc..............................................................68
4.7. No Violation, Default, etc.............................................................................68
4.8. Licenses and Permits...................................................................................69
4.9. Environmental Matters..................................................................................69
4.10. Taxes.................................................................................................70
4.11. Litigation............................................................................................72
4.12. Labor Matters.........................................................................................73
4.13. Financial Statements..................................................................................73
4.14. ERISA.................................................................................................74
4.15. Absence of Undisclosed Liabilities....................................................................75
4.16. Insurance.............................................................................................76
4.17. No Adverse Changes....................................................................................76
4.18. Investment Company....................................................................................76
4.19. Year 2000.............................................................................................76
4.20. Books and Records.....................................................................................77
4.21. Purchase for Investment; Restricted Shares............................................................77
4.22. Brokers...............................................................................................78
ARTICLE V COVENANTS OF GEFA, PGH AND PMH...............................................................................78
5.1. Satisfaction of Closing Conditions.....................................................................78
5.2. Publicity..............................................................................................78
5.3. Policyholder Confidentiality...........................................................................79
5.4. Cooperation; Regulatory Filings; Other Consents........................................................79
5.5. Confidentiality and Non-Solicitation...................................................................80
5.6. Compliance with Laws...................................................................................83
5.7. PGH's Option to Require GEFA to Repurchase the Purchased GELAAC Shares.................................83
5.8. PGH's Option to Require GEFA to Purchase the Retained PAL Shares.......................................88
5.9. Reinsurance Agreements.................................................................................93
5.10. Rating Agencies.......................................................................................94
5.11. Negotiation of Reference Amount, Index Rate and Certain Ancillary Agreements..........................94
5.12. Conversion Policies...................................................................................94
5.13. Nonrecourse Financing.................................................................................95
5.14. Financial Information at Closings.....................................................................95
5.15. Leases................................................................................................96
5.16. Investment Asset Transaction Reports..................................................................96
5.17. Contact with Employees, Customers and Policyholders...................................................96
ARTICLE VI COVENANTS OF PMH AND PGH....................................................................................97
6.1. Conduct of Business, etc...............................................................................97
6.2. Access and Information.................................................................................97
6.3. Supplements to Disclosures.............................................................................98
6.4. Maintenance of Insurance; Post-Closing Claims..........................................................98
6.5. Preferred Client Accounts..............................................................................99
(ii)
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6.6. Intercompany Accounts, Investments and Agreements.....................................................100
6.7. Exclusivity...........................................................................................104
6.8. Notice of Litigation and Requests.....................................................................104
6.9. Actuarial Opinion.....................................................................................104
6.10. Maintenance of Certain Plans.........................................................................105
ARTICLE VII TAX MATTERS...............................................................................................105
7.1. Tax Representations...................................................................................105
7.2. Tax Returns...........................................................................................112
7.3. Refunds...............................................................................................115
7.4. Tax Payments..........................................................................................116
7.5. Cooperation on Tax Matters............................................................................117
7.6. Tax Indemnification...................................................................................119
7.7. Section 338(h)(10) Elections..........................................................................124
7.8. Asset Allocation......................................................................................127
7.9. Termination of Existing Tax Sharing Agreements........................................................127
7.10. Survival.............................................................................................128
7.11. Guarantee Fund Assessments...........................................................................128
ARTICLE VIII EMPLOYEE MATTERS.........................................................................................128
8.1. Employees and Employee Benefit Plans..................................................................128
ARTICLE IX CONDITIONS PRECEDENT.......................................................................................136
9.1. General...............................................................................................136
9.2. Conditions to Obligations of All Parties at the First Closing.........................................136
9.3. Conditions to Obligations of PGH at the First Closing.................................................137
9.4. Conditions to Obligations of GEFA at the First Closing................................................138
9.5. Conditions to Obligations of All Parties at the Second Closing........................................139
9.6. Conditions to Obligation of PMH and PGH at the Second Closing.........................................140
9.7. Conditions to Obligations of GEFA at the Second Closing...............................................140
ARTICLE X INDEMNIFICATION.............................................................................................143
10.1. Survival of Representations and Warranties...........................................................143
10.2. Indemnification......................................................................................143
ARTICLE XI GENERAL PROVISIONS.........................................................................................151
11.1. Modification; Waiver.................................................................................151
11.2. Entire Agreement.....................................................................................151
11.3. Certain Limitations..................................................................................151
11.4. Termination..........................................................................................152
11.5. Expenses.............................................................................................154
11.6. Further Actions......................................................................................154
11.7. Post-Closing Access..................................................................................154
11.8. Notices..............................................................................................155
11.9. Assignment...........................................................................................156
11.10. No Third-Party Beneficiaries........................................................................157
(iii)
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11.11. Counterparts........................................................................................157
11.12. Interpretation......................................................................................157
11.13. Governing Law.......................................................................................157
11.14. Mediation and Arbitration...........................................................................158
11.15. Consent to Jurisdiction, etc........................................................................159
11.16. Legal Counsel.......................................................................................160
11.17. Waiver of Punitive and Other Damages and Jury Trial.................................................160
(iv)
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SCHEDULES
Schedule A PGH Business Assets
Schedule B Knowledge of GEFA
Schedule C Knowledge of PGH
Schedule 3.3(a) PAL: Corporate Status
Schedule 3.3(b) Group Services: Corporate Status
Schedule 3.3(c) CA Benefits: Corporate Status
Schedule 3.3(d) PDS: Corporate Status
Schedule 3.3(e) CDM: Corporate Status
Schedule 3.4(a) Conflicts
Schedule 3.4(b) Consents and Approvals; PGH Required Jurisdictions
Schedule 3.5 PGH Subsidiaries Capitalization; Options
Schedule 3.6(c) Adjustments to Financial Statements
Schedule 3.8 Undisclosed Liabilities
Schedule 3.9 PGH Subsidiaries: Material Changes
Schedule 3.10 PGH Subsidiaries: Property; Assets; Leases
Schedule 3.11(a) Contracts
Schedule 3.11(b) Reinsurance Agreements
Schedule 3.12(a) Phoenix Plans
Schedule 3.12(b) Proceeding regarding Phoenix Plans
Schedule 3.12(c) Tax Qualification
Schedule 3.12(e) Retiree Benefits
Schedule 3.12(f) Additional Benefits
Schedule 3.12(g) Additional or Amended Plans
Schedule 3.13 Intellectual Property
Schedule 3.14(a) Necessary Permits
Schedule 3.14(b) Insurance Policies
Schedule 3.14(d) Reports
Schedule 3.14(f) Contract Benefits
Schedule 3.14(g) Dividend and Refund Entitlement
Schedule 3.15 PGH Litigation
Schedule 3.17 Insurance
Schedule 3.18 Environmental Matters
Schedule 3.19 Bank Accounts
Schedule 3.20(d) Labor Matters
Schedule 3.22(a)(i) Tagging and Sequencing
Schedule 3.23 Investment Assets
Schedule 4.3 GELAAC Subsidiaries
Schedule 4.6(a) Conflicts
Schedule 4.6(b) Consents and Approvals; GEFA Required Jurisdictions
Schedule 4.10 GELAAC Tax Matters
Schedule 4.11 GELAAC Litigation
Schedule 4.15 GELAAC Liabilities
Schedule 4.17 GELAAC Material Changes
(v)
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Schedule 5.5 Persons Subject to Hiring Restrictions
Schedule 5.12 Special Contracts
Schedule 5.15 Assigned Leases
Schedule 7.1(a) Tax Disclosure
Schedule 7.1(b) Tax Jurisdictions
Schedule 7.1(c) Tax Periods
Schedule 8.1 PGH Business Employees
Schedule 9.7(i) Investment Assets
(vi)
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STOCK PURCHASE AND EXCHANGE AGREEMENT
STOCK PURCHASE AND EXCHANGE AGREEMENT (this "AGREEMENT"), dated as of
December 9, 1999, by and among PHOENIX GROUP HOLDINGS, INC., a Connecticut
corporation ("PGH"), PM HOLDINGS, INC., a Connecticut corporation, ("PMH"), GE
FINANCIAL ASSURANCE HOLDINGS, INC., a Delaware corporation ("GEFA") and GE LIFE
AND ANNUITY ASSURANCE COMPANY, a Virginia corporation ("GELAAC").
WHEREAS, GEFA and PMH wish to realize opportunities to consolidate their
respective group insurance operations and to offer greater breadth of products
to their respective customer bases;
WHEREAS, GEFA and PMH are committed to working together to identify
further opportunities for cooperation and mutual advancement;
WHEREAS, PGH owns: (i) all of the outstanding capital stock (the "PAL
STOCK") of Phoenix American Life Insurance Company, a stock life insurance
company organized under the Laws of the State of Connecticut ("PAL"); (ii) all
of the outstanding Capital Stock (the "GROUP SERVICES STOCK") of Phoenix Group
Services, Inc., a Delaware corporation ("GROUP SERVICES"); (iii) all of the
outstanding Capital Stock (the "PDS STOCK") of Phoenix Dental Services, Inc., a
Connecticut corporation ("PDS"), which owns all of the outstanding Capital Stock
(the "CA BENEFITS STOCK") of California Benefits Dental Plan, Inc., a California
corporation ("CA BENEFITS"); and (iv) all of the outstanding Capital Stock (the
"CDM STOCK" and, collectively, together with the PAL Stock, the Group Services
Stock, and the PDS Stock, the "PGH SUBSIDIARY STOCK") of Clinical Disability
Management, Inc., a Connecticut corporation ("CDM"
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and, collectively, together with PAL, Group Services, PDS and CA Benefits the
"PGH SUBSIDIARIES");
WHEREAS, the PGH Subsidiaries are currently engaged primarily in the
businesses of group life, health and dental insurance, clinical disability
management services and claims administration for employee benefit plans (such
businesses as presently conducted by the PGH Subsidiaries are referred to
collectively as the "PGH BUSINESS");
WHEREAS, PGH wishes to sell to GEFA and GEFA wishes to purchase: (i)
1,455 shares of the PAL Stock (the "PURCHASED PAL SHARES"), representing
approximately 97% of the issued and outstanding Capital Stock of PAL; (ii) 100
shares of the Group Services Stock (the "PURCHASED GROUP SERVICES SHARES"),
representing 100% of the Capital Stock of Group Services; (iii) one share of the
PDS Stock (the "PURCHASED PDS SHARES"), representing 100% of the Capital Stock
of PDS; and (iv) 100 shares of the CDM Stock (the "PURCHASED CDM SHARES" and,
collectively, together with the Purchased PAL Shares, the Purchased Group
Services Shares, and the Purchased PDS Shares, the "PURCHASED PGH SUBSIDIARY
SHARES"), representing 100% of the Capital Stock of CDM;
WHEREAS, the remaining 45 shares of Capital Stock of PAL, representing
approximately 3% of the Capital Stock of PAL, as such number may be adjusted
from time to time to reflect stock splits, stock dividends, recapitalizations
and the like (the "RETAINED PAL SHARES");
WHEREAS, PMH or its Affiliates own certain assets used by the PGH
Subsidiaries in the conduct of the PGH Business and listed on Schedule A hereto
(collectively the "PGH BUSINESS ASSETS");
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WHEREAS, PMH wishes to sell or cause to be sold the PGH Business Assets
to GEFA and GEFA wishes to purchase the PGH Business Assets from PMH or its
Affiliates;
WHEREAS, as partial consideration for the Purchased PGH Subsidiary
Shares, GEFA desires to transfer to PGH, and PGH desires to acquire from GEFA,
eight hundred (800) outstanding common shares of GELAAC, as such number may be
adjusted from time to time to reflect stock splits, stock dividends,
recapitalizations and the like (the "PURCHASED GELAAC SHARES"), par value $1,000
per share (the "GELAAC COMMON STOCK"), representing approximately 3.119% of the
issued and outstanding common stock of GELAAC;
WHEREAS, the remaining approximately 96.881% of the issued and
outstanding common stock of GELAAC is held by General Electric Capital Assurance
Company, a Delaware corporation ("GECA"), and Federal Home Life Insurance
Company, an Indiana corporation ("FEDERAL HOME"), each of which is an Affiliate
of GEFA; and
WHEREAS, in connection with the purchase and sale of the Purchased PGH
Subsidiary Shares, the PGH Business Assets and the Purchased GELAAC Shares, PGH
and GEFA wish to enter into, or to cause appropriate Affiliates to enter into:
(i) a transition services agreement (the "TRANSITION SERVICES AGREEMENT"); (ii)
a computer services agreement (the "COMPUTER SERVICES AGREEMENT"); (iii) a
trademark licensing agreement, including the use of the name "Phoenix" (the
"LICENSE AGREEMENT"); (iv) a lease agreement with respect to the Enfield
Property and the Greenfield Property (the "FACILITIES AGREEMENT"); (v) a
shareholders agreement with respect to the GELAAC Common Stock to be dated as of
the First Closing Date, by and among GECA, PGH, Federal Home, GEFA and GELAAC
(the "GELAAC SHAREHOLDERS AGREEMENT"); (vi) reinsurance agreements (the
"REPLACEMENT REINSURANCE AGREEMENTS") to
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replace: (A) the Group Coinsurance Reinsurance Agreement, dated January, 1991
(the "1991 REINSURANCE AGREEMENT"), between PAL and PHLMIC; and (B) the
Reinsurance Agreement, dated January 1, 1992 (the "1992 REINSURANCE AGREEMENT"),
between PAL and PHLMIC; and (vii) a shareholders agreement with respect to the
PAL Stock to be dated as of the Second Closing Date by and among GEFA, PGH and
PAL (the "PAL SHAREHOLDERS AGREEMENT" and, together with the Transition Services
Agreement, the Computer Services Agreement, the License Agreement, the
Facilities Agreement, the GELAAC Shareholders Agreement and the Replacement
Reinsurance Agreements, the "ANCILLARY AGREEMENTS").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definition of Terms.
The terms defined in this Section 1.1, whenever used in this
Agreement (including in the Schedules), shall have the respective meanings
indicated below for all purposes of this Agreement. Such definitions shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine or neuter forms. All references herein to a Section, Article or
Schedule are to a Section, Article or Schedule of or to this Agreement, unless
otherwise indicated.
"1940 ACT" shall have the meaning specified in Section 3.24
"1991 REINSURANCE AGREEMENT" shall have the meaning specified in
the Recitals to this Agreement.
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"1992 REINSURANCE AGREEMENT" shall have the meaning specified in
the Recitals to this Agreement.
"AFFILIATE" of a Person shall mean a Person that directly or
indirectly controls, is controlled by, or is under common control with, the
first Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGREED ALLOCATION" shall have the meaning specified in Section
7.7(b)(ii).
"AGREEMENT" shall have the meaning specified in the first
paragraph of this Agreement.
"AMENDED SCHEDULES" shall have the meaning specified in Section
9.2(f).
"ANCILLARY AGREEMENTS" shall have the meaning specified in the
Recitals to this Agreement.
"APPLICABLE INSURANCE LAWS" shall have the meaning specified in
Section 3.14(b)(i).
"APPROVALS" shall have the meaning specified in Section 3.4(b).
"ASSIGNED LEASES" shall have the meaning specified in Section
5.15.
"AUDITED PAL SAP STATEMENTS" shall have the meaning specified in
Section 3.6(a)(iii).
"BASKET" shall have the meaning specified in Section 10.2(b)(i).
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"BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or day on which banking institutions or insurance companies in the city of
Hartford, Connecticut are authorized or obligated by Law or executive order to
close.
"CA BENEFITS" shall have the meaning specified in the Recitals
to this Agreement.
"CA BENEFITS STOCK" shall have the meaning specified in the
Recitals to this Agreement.
"CAP" shall have the meaning specified in Section 10.2(b)(i).
"CAPITAL STOCK" of any Person means any and all shares, equity
interests, membership interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
equity of such Person.
"CDM" shall have the meaning specified in the Recitals to this
Agreement.
"CDM PURCHASE PRICE" shall mean $1,000.00.
"CDM STOCK" shall have the meaning specified in the Recitals to
this Agreement.
"CERCLA" shall have the meaning specified in the defined term
"Environmental Laws."
"CHANGE OF CONTROL" shall mean, with respect to any Person, the
occurrence of (a) the sale, lease, transfer or other disposition of all or
substantially all of the assets of such Person to any other Person or group of
Persons other than an Affiliate of such Person; (b) the merger or consolidation
of such Person or a Parent of such Person with or into another corporation, or
the merger of another corporation with and into such Person or a Parent of such
Person, with the effect that another Person or group of Persons (as such term is
defined in
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Section 13(d) of the Exchange Act) other than Affiliates of such Person hold,
directly or indirectly, in the aggregate more than fifty percent (50%) of the
total voting power on a fully diluted basis entitled to vote in the election of
directors of the surviving corporation of such merger or the corporation
resulting from such consolidation; and (c) any other event that results in
another Person or group of Persons (as such term is defined in Section 13(d) of
the Exchange Act) other than Affiliates of such Person holding, directly or
indirectly, in the aggregate more than thirty-three percent (33%) of the total
voting power on a fully-diluted basis entitled to vote in the election of
directors of such Person or a Parent of such Person. Notwithstanding the
foregoing, a demutualization of PHLMIC that does not result in any effect
described in (a), (b) or (c) above shall not constitute a Change of Control.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and in effect from time to time.
"COMPETING TRANSACTION" shall mean (i) any merger,
consolidation, share exchange, business combination or other similar transaction
involving PGH or any PGH Subsidiary; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 25% or more of the assets of PGH or any
PGH Subsidiary, taken as a whole, in a single transaction or series of
transactions; (iii) any tender or exchange offer for 25% or more of the
outstanding shares of PGH or any PGH Subsidiary or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) 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.
"COMPUTER SERVICES AGREEMENT" shall have the meaning specified
in the Recitals to this Agreement.
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"COMPUTER SYSTEMS" shall have the meaning specified in Section
3.22(a).
"CONFIDENTIAL INFORMATION" shall mean the following items,
whether existing now or created in the future: (a) all knowledge or information
concerning the business, operations and assets of Phoenix, GEFA or GELAAC which
is not readily available to the public such as: internal operating procedures;
investment strategies; sales data and customer lists; financial plans,
projections and reports; and insurance and investment company programs, plans
and products (including all data, descriptions and documents); (b) all property
owned, licensed and/or developed by or for Phoenix, GEFA or GELAAC or of each of
their respective clients and not readily available to the public, such as
computer systems, programs, software and devices, plus information about the
design, methodology and documentation therefor; (c) information about or
personal to Phoenix's, GEFA's or GELAAC's insureds, employees, agents or
applicants for any of such statuses; (d) information, materials, products or any
other tangible or intangible assets in Phoenix's, GEFA's or GELAAC's possession
or under their respective control which is proprietary to, or confidential to or
about any other person; (e) proprietary or confidential information obtained
from persons conducting business with Phoenix, GEFA or GELAAC in any capacity;
(f) records and repositories of all of the foregoing, in whatever form
maintained; (g) analyses, compilations, forecasts, studies and other documents
incorporating any of the foregoing, irrespective of who has prepared such; (h)
the fact that this Agreement exists, that Confidential Information is being or
has been provided to GEFA or its Affiliates and Phoenix, that discussions or
negotiations are taking or have taken place concerning the transactions
contemplated by this Agreement, or any of the terms, conditions or other facts
with respect thereto, including the status thereof; and (i) any information
provided pursuant to or subject to any prior written agreements
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entered into with respect to the transactions contemplated by this Agreement
concerning confidentiality between Phoenix and GEFA or any of their respective
Affiliates.
Notwithstanding the foregoing, the following shall not be
considered Confidential Information: (a) information publicly available or
generally known within the insurance or data processing industries; (b)
information known to Phoenix or GEFA prior to disclosure hereunder, provided
that such information is not known by Phoenix or GEFA, as appropriate, to be
subject to another confidentiality agreement with or other obligation of secrecy
to another party; (c) information independently developed by Phoenix or GEFA; or
(d) information that becomes available to Phoenix or GEFA on a non-confidential
basis from sources other than GEFA or Phoenix or their respective Affiliates;
provided that such sources are not prohibited by contractual, legal or fiduciary
obligation from transmitting the information. Failure to xxxx any material or
information "confidential" shall not affect the confidential nature thereof.
"CONNECTICUT SAP" shall have the meaning specified in Section
3.6(c).
"CONTRACTS" shall have the meaning specified in Section 3.4(a).
"COSTS" shall have the meaning specified in Section 10.2(a).
"DISCLOSING PARTY" shall have the meaning specified in Section
5.5(a).
"DOJ" shall have the meaning specified in Section 5.4(a).
"ENFIELD PROPERTY" shall mean building No. 1 within PHLMIC's
operations campus located at 000 Xxxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxxx,
and such other locations at such addresses as are more particularly described in
the Facilities Agreement.
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"ENVIRONMENTAL CLAIM" shall mean 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.
"ENVIRONMENTAL LAWS" shall mean all applicable Laws (including,
but not limited to, federal and state common Law), relating to the environment,
natural resources and pollution 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, the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., as amended from time to time, the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq., as amended from time to time, the Clean Air Act, 42
U.S.C. Section 7401 et seq., as amended from time to time, and/or the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., as amended from time to
time, the Solid Waste Disposal Act, 42 U.S.C. Section 6901, et seq., as amended
from time to time, the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Section 1361 et seq., as amended from time to time, the Safe Drinking
Water Act, 42 U.S.C. Section 300f, et seq., as amended from time to time, and
the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 600, et seq.,
as amended from time to time.
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"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
"FACILITIES AGREEMENT" shall have the meaning specified in the
Recitals to this Agreement.
"FEDERAL HOME" shall have the meaning specified in the Recitals
to this Agreement.
"FEDERAL TAX" shall mean any Tax imposed under Subtitle A of the
Code.
"FIRST CLOSING" shall have the meaning specified in Section 2.2.
"FIRST CLOSING DATE" shall have the meaning specified in Section
2.2.
"FIRST GELAAC INSTALLMENT PURCHASE" shall have the meaning
specified in Section 5.7(g).
"FIRST PAL INSTALLMENT PURCHASE" shall have the meaning
specified in Section 5.8(g).
"FTC" shall have the meaning specified in Section 5.4(a).
"GAAP" shall mean United States generally accepted accounting
principles, as in effect on the date any calculation thereunder is made, applied
on a basis consistent with prior periods.
"GECA" shall have the meaning specified in the Recitals to this
Agreement.
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"GECC" shall have the meaning specified in Section 4.10(b).
"GEFA" shall have the meaning specified in the first paragraph
of this Agreement.
"GEFA ACCOUNTANTS" shall mean KPMG Peat Marwick LLP, or such
other nationally recognized accounting firm as may be selected from time to time
by GEFA.
"GEFA'S ALLOCATION" shall have the meaning specified in Section
7.7(b)(ii).
"GEFA INDEMNITEE" shall have the meaning specified in Section
7.6(a).
"GEFA'S NOTICE" shall have the meaning specified in Section
2.6(c).
"GEFA REQUIRED JURISDICTIONS" shall have the meaning specified
in Section 4.6(b).
"GELAAC" shall have the meaning specified in the first paragraph
of this Agreement.
"GELAAC ANNUAL CALCULATIONS" shall have the meaning specified in
Section 5.7(h).
"GELAAC CALCULATIONS" shall have the meaning specified in
Section 5.7(h).
"GELAAC CERTIFICATES" shall have the meaning specified in
Section 2.2.
"GELAAC CHANGE OF CONTROL CALCULATIONS" shall have the meaning
specified in Section 5.7(e).
"GELAAC CHANGE OF CONTROL NOTICE DATE" shall have the meaning
specified in Section 5.7(a).
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"GELAAC COMMON STOCK" shall have the meaning specified in the
Recitals to this Agreement.
"GELAAC GAAP FINANCIAL STATEMENTS" shall have the meaning
specified in Section 4.13(a).
"GELAAC INSURANCE LICENSES" shall mean the insurance Licenses
from the insurance regulatory agencies of the various states and foreign
jurisdictions where GELAAC conducts business.
"GELAAC MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on GELAAC, taken as a whole, except for any effect resulting from (i)
general conditions (including Laws) applicable to the industries in which GELAAC
operates or (ii) general economic, financial or market conditions.
"GELAAC PLANS" shall have the meaning specified in Section 4.14.
"GELAAC PUT CLOSING DATE" shall have the meaning specified in
Section 5.7(i).
"GELAAC PUT NOTICE DATE" shall have the meaning specified in
Section 5.7(i).
"GELAAC PUT OBJECTION NOTICE" shall have the meaning specified
in Section 5.7(j).
"GELAAC REPURCHASE PRICE" shall have the meaning specified in
Section 5.7(c).
"GELAAC SHARE PRICE" shall have the meaning specified in Section
2.1.
"GELAAC SHAREHOLDERS AGREEMENT" shall have the meaning specified
in the Recitals to this Agreement.
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"GELAAC TAXPAYER" shall have the meaning specified in Section
4.10(a)(i).
"GELAAC YEAR 2000 PLAN" shall have the meaning specified in
Section 4.19.
"GOVERNMENTAL AUTHORITY" shall mean any national government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any government
authority, agency, department, board, commission or instrumentality of the
United States or any territory thereof, the District of Columbia, any State of
the United States or any political subdivision of a State or territory of the
United States or any public instrumentality of any of the foregoing.
"GREENFIELD PROPERTY" shall mean such portion of PHLMIC's
premises located at 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx, and such other
locations at such addresses as are more particularly described in the Facilities
Agreement.
"GROUP SERVICES" shall have the meaning specified in the
Recitals to this Agreement.
"GROUP SERVICES STOCK" shall have the meaning specified in the
Recitals to this Agreement.
"HSR ACT" shall have the meaning specified in Section 3.4(b).
"HAZARDOUS MATERIAL" shall mean (a) 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
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Laws; (b) petroleum or petroleum byproducts; (c) friable asbestos and/or any
materials that contain friable asbestos; and (d) polychlorinated biphenyls in
excess of 30 parts per million.
"INDEMNITEE" shall have the meaning specified in Section
10.2(d).
"INDEMNITOR" shall have the meaning specified in Section
10.2(d).
"IN-FORCE REVIEW" shall have the meaning specified in Section
6.2.
"INTELLECTUAL PROPERTY" shall have the meaning specified in
Section 3.13.
"INTERCOMPANY ACCOUNTS" shall have the meaning specified in
Section 6.6(a).
"INVESTMENT ASSETS" shall mean all securities, mortgages and
other investment assets held by PAL on the date hereof or acquired hereafter by
PAL, prior to the Second Closing, as all of the foregoing may be sold, disposed
of, invested or reinvested from time to time prior to the Second Closing.
"KNOWLEDGE OF GEFA" shall mean the knowledge, after due and
diligent inquiry, of the Persons listed on Schedule B hereto.
"KNOWLEDGE OF PGH" shall mean the knowledge, after due and
diligent inquiry, of the Persons listed on Schedule C hereto.
"LAWS" shall have the meaning specified in Section 3.4(a).
"LEASED PERSONAL PROPERTY" shall have the meaning specified in
Section 3.10(a).
"LEASED REAL PROPERTY" shall have the meaning specified in
Section 3.10(a).
"LEASES" shall have the meaning specified in Section 3.10(b).
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"LICENSES" shall mean any certificates, permits, licenses,
franchises, consents, approvals, orders, authorizations and clearances from
appropriate Governmental Authorities.
"LICENSE AGREEMENT" shall have the meaning specified in the
Recitals.
"LIENS" shall have the meaning specified in Section 3.4(a).
"MODIFIED AGGREGATE DEEMED SALES PRICE" shall have the meaning
specified in Section 7.7(b)(ii).
"MODIFIED YEAR 2000 COMPLIANT" shall have the meaning specified
in Section 3.22(c).
"OWNED PERSONAL PROPERTY" shall have the meaning specified in
Section 3.10(a).
"PAL" shall have the meaning specified in the Recitals to this
Agreement.
"PAL ANNUAL CALCULATIONS" shall have the meaning specified in
Section 5.8(h).
"PAL CALCULATIONS" shall have the meaning specified in Section
5.8(h) hereto.
"PAL CHANGE OF CONTROL CALCULATIONS" shall have the meaning
specified in Section 5.8(f) hereto.
"PAL CHANGE OF CONTROL NOTICE DATE" shall have the meaning
specified in Section 5.8(a).
"PAL PURCHASE PRICE" shall have the meaning specified in Section
5.8(c).
"PAL PUT CLOSING DATE" shall have the meaning specified in
Section 5.8(i).
"PAL PUT NOTICE DATE" shall have the meaning specified in
Section 5.8(i).
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"PAL SHAREHOLDERS AGREEMENT" shall have the meaning specified in
the Recitals to this Agreement.
"PAL STATUTORY STATEMENTS" shall have the meaning specified in
Section 3.6(a)(ii).
"PAL STATUTORY YEAR-END BALANCE SHEET" shall have the meaning
specified in Section 2.6(a).
"PAL STOCK" shall have the meaning specified in the Recitals to
this Agreement.
"PARENT" shall mean, with respect to any Person, the Person who
holds, directly or indirectly in the aggregate, more than fifty percent (50%) of
the total voting power on a fully diluted basis entitled to vote in the election
of directors of that Person.
"PBGC" shall have the meaning specified in Section 3.12(b).
"PDS" shall have the meaning specified in the Recitals to this
Agreement.
"PDS PURCHASE PRICE" shall mean $2,000,000.
"PDS STOCK" shall have the meaning specified in the Recitals to
this Agreement.
"PERMITS" shall have the meaning specified in Section 3.4(a).
"PERMITTED LIENS" shall mean (i) Liens reflected in the
Schedules to this Agreement, (ii) Liens for Taxes and other governmental charges
and assessments that are not yet due and payable, that are due and will be paid
in the ordinary course before becoming delinquent, or that are being contested
in good faith by appropriate Proceedings, (iii) Liens of carriers, warehousemen,
mechanics and materialmen and other like Liens arising in the ordinary course of
business, (iv) statutory and common law Liens in favor of lessors arising in
connection with any
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leased property, (v) Liens reflected in the applicable party's financial
statements and (vi) easements, rights of way, title imperfections and
restrictions, zoning ordinances and other similar encumbrances affecting real
property.
"PERSON" shall mean any natural person, firm, limited liability
company, association, corporation, trust, Governmental Authority or other
entity.
"PGH" shall have the meaning specified in the first paragraph of
this Agreement.
"PGH ADJUSTED YEAR-END EQUITY" shall have the meaning specified
in Section 2.6(a).
"PGH BUSINESS" shall have the meaning specified in the Recitals
to this Agreement.
"PGH BUSINESS ASSETS" shall have the meaning specified in the
Recitals to this Agreement.
"PGH BUSINESS EMPLOYEES" shall have the meaning specified in
Section 8.1(a).
"PGH CHANGE OF CONTROL NOTICE DATE" shall have the meaning
specified in Section 5.8(b).
"PGH COMPUTER SYSTEMS" shall have the meaning specified in
Section 3.22(a).
"PGH GAAP FINANCIAL STATEMENTS" shall have the meaning specified
in Section 3.6(a)(i).
"PGH GAAP YEAR-END BALANCE SHEETS" shall have the meaning
specified in Section 2.6(a).
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"PGH GELAAC PUT OBJECTION NOTICE" shall have the meaning
specified in Section 5.7(j).
"PGH GROUP" shall mean, with respect to federal Taxes, the
affiliated group of corporations (as defined in Section 1504(a) of the Code) of
which PGH is a member, and with respect to Taxes other than federal Taxes, any
affiliated, consolidated, combined, unitary or similar group of which PGH or any
of its Affiliates (other than solely the PGH Subsidiaries) is a member.
"PGH INACTIVE EMPLOYEES" shall have the meaning specified in
Section 8.1(a).
"PGH MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the PGH Subsidiaries taken as a whole, except for any effect resulting
from (i) general conditions (including Laws) applicable to the industries in
which the PGH Subsidiaries operate or (ii) general economic, financial or market
conditions; provided, however, that a material adverse effect on PAL
individually shall constitute a PGH Material Adverse Effect.
"PGH PAL PUT OBJECTION NOTICE" shall have the meaning specified
in Section 5.8(j).
"PGH REQUIRED JURISDICTIONS" shall have the meaning specified in
Section 3.4(b).
"PGH SUBSIDIARY STOCK" shall have the meaning specified in the
Recitals to this Agreement.
"PGH SUBSIDIARIES" shall have the meaning specified in the
Recitals to this Agreement.
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"PGH SUBSIDIARY EMPLOYEES" shall have the meaning specified in
Section 8.1(a).
"PGH YEAR 2000 PLAN" shall have the meaning specified in Section
3.22(c).
"PHLMIC" shall mean Phoenix Home Life Mutual Insurance Company,
a mutual life insurance company organized under the Laws of the State of New
York.
"PHOENIX" shall mean, collectively, PHLMIC, PMH and each of
their respective Subsidiaries, including, without limitation, PGH and, until the
Second Closing, each of the PGH Subsidiaries.
"PHOENIX AUDITORS" shall have the meaning specified in Section
2.6(a).
"PHOENIX PLANS" shall have the meaning specified in Section
3.12(a).
"PLANS" shall mean all Contracts of the following types: (i)
employment and consulting agreements (including severance, retention,
change-in-control, transition or similar agreements), (ii) collective bargaining
agreements and (iii) profit sharing, pension, retirement, bonus, incentive
compensation, stock option, deferred compensation or other written employee
benefit plans, agreements, contracts or commitments, and all employee benefit
plans, written or unwritten, subject to ERISA.
"PMH" shall have the meaning specified in the first paragraph of
this Agreement.
"POLICIES" shall have the meaning specified in Section
3.14(b)(i).
"POST-CLOSING TAX PERIOD" shall mean any Tax period beginning on
the day after the Second Closing Date; and, with respect to a Tax period that
begins on or before the Second Closing Date and ends thereafter, the portion of
such Tax period beginning on the day after the Second Closing Date.
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"PRE-CLOSING TAX PERIOD" shall mean any Tax period ending on or
before the Second Closing Date; and, with respect to a Tax period that begins on
or before the Second Closing Date and ends thereafter, the portion of such Tax
period ending on the Second Closing Date.
"PREFERRED ACCOUNTS PROGRAM" shall have the meaning specified in
Section 6.5(a).
"PRIME RATE" shall mean the prime lending rate as reported from
time to time in the Wall Street Journal, Eastern Edition.
"PROCEEDING" shall have the meaning specified in Section 3.15.
"PURCHASE PRICE" shall have the meaning specified in Section
2.1.
"PURCHASED CDM SHARES" shall have the meaning specified in the
Recitals to this Agreement.
"PURCHASED GELAAC SHARES" shall have the meaning specified in
the Recitals to this Agreement.
"PURCHASED GROUP SERVICES SHARES" shall have the meaning
specified in the Recitals to this Agreement.
"PURCHASED PAL SHARES" shall have the meaning specified in the
Recitals to this Agreement.
"PURCHASED PDS SHARES" shall have the meaning set specified in
the Recitals to this Agreement.
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"PURCHASED PGH SUBSIDIARY SHARES" shall have the meaning
specified in the Recitals to this Agreement.
"REALIZED LOSS ADJUSTMENT" shall have the meaning specified in
Section 2.6(g).
"RECEIVING PARTY" shall have the meaning specified in Section
5.5(a).
"REDUCTION AMOUNT" shall have the meaning specified in Section
2.6(f).
"REINSURANCE AGREEMENTS" shall have the meaning specified in
Section 3.11(b).
"REPLACEMENT REINSURANCE AGREEMENTS" shall have the meaning
specified in the Recitals to this Agreement.
"REQUIRED JURISDICTIONS" shall have the meaning specified in
Section 4.6(b).
"RETAINED PAL SHARES" shall have the meaning specified in the
Recitals to this Agreement.
"RETURN" shall mean all Tax returns, statements, reports and
forms required to be filed with any Taxing Authority.
"SECOND CLOSING" shall have the meaning specified in Section
2.3.
"SECOND CLOSING DATE" shall have the meaning specified in
Section 2.3.
"SECOND GELAAC INSTALLMENT PURCHASE" shall have the meaning
specified in Section 5.7(g).
"SECTION PAL INSTALLMENT PURCHASE" shall have the meaning
specified in Section 5.8(g).
"SECTION 338 ELECTIONS" shall have the meaning specified in
Section 7.7(a).
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"SECTION 338 FORMS" shall have the meaning specified in Section
7.7(b)(i).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder.
"SITE ASSESSORS" shall have the meaning specified in Section
9.7(g).
"SPECIAL CONTRACTS" shall have the meaning specified in Section
5.12.
"STATUTORY NET PENSION LIABILITY" shall mean any identified Post
Retirement Liability and Post Retirement Life Fund ($7,508,000 and $8,207,000,
respectively at June 30, 1999), or any other related pension or post retirement
liabilities for employees of PHLMIC or its Affiliates recorded in the PAL
Statutory Statements.
"SUBSIDIARY" shall mean with respect to any Person, any other
Person of which more than 50% of the securities or other ownership interests
having by their terms ordinary voting power to elect a majority of the board of
directors, or other Persons performing similar functions, of such other Person,
is directly or indirectly owned or controlled by such Person, by one or more of
such Person's Subsidiaries or by such Person and any one or more of such
Person's Subsidiaries.
"TAX" shall mean: (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever (including, but not limited to,
guarantee fund assessments and withholding on amounts paid to or by any Person),
together with any interest, penalty, addition to tax or additional amount
imposed by any Governmental Authority (a "TAXING AUTHORITY") responsible for the
imposition of any such tax (domestic or foreign); (ii) all transferee,
successor, joint and several or contractual liability (including, without
limitation, liability pursuant to Treasury Regulation Section 1.1502-6 (or any
similar state, local or foreign provision)) in respect to any item
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described in clause (i) above; and (iii) any liability with respect to the
payment of any amount described in clause (i) or (ii) above as a result of any
express or implied agreement or arrangement (including, but not limited to, any
indemnification agreement or arrangement or a Tax Sharing Agreement).
"TAX ASSET" shall mean any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute that could be carried forward or back to reduce Taxes
(including without limitation deductions and credits related to alternative
minimum Taxes).
"TAXING AUTHORITY" shall have the meaning specified in the
defined term "Tax."
"TAX PRE-FILING REVIEW PROCEDURE" shall have the meaning
specified in Section 7.5(b).
"TAX PROCEEDING" shall mean any audit, assessment of Taxes,
other examination by any Taxing Authority, claim for refund or credit, and any
administrative or judicial Proceeding or appeal of such Proceeding relating to
Taxes.
"TAX SHARING AGREEMENT" shall mean all existing agreements or
arrangements (whether or not written) binding PGH or any PGH Subsidiary that
provide for the indemnification of any Person for its Tax liability, the
allocation, apportionment, sharing or assignment of any Tax liability or
benefit, or the transfer or assignment of income, revenues, receipts or gains
for the purpose of determining any Person's Tax liability.
"THIRD PARTY ACCOUNTANTS" shall have the meaning specified in
Section 2.6(d).
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"TRANSITION COMPUTER SYSTEMS" shall have the meaning specified
in Section 3.22(c).
"TRANSITION SERVICES AGREEMENT" shall have the meaning specified
in the Recitals to this Agreement.
"WARN" shall mean the Worker Adjustment and Retraining
Notification Act of 1988, as amended, and any similar state or local "plant
closing" statute.
"YEAR 2000 COMPLIANT" shall have the meaning specified in
Section 3.22(a).
ARTICLE II
SALE, PURCHASE AND EXCHANGE
2.1. Sale, Purchase and Exchange of Shares.
Subject to the terms and conditions of this Agreement, PGH will
sell and GEFA will purchase the Purchased PGH Subsidiary Shares, and PGH or its
Affiliates will sell and GEFA will purchase the PGH Business Assets, for an
aggregate purchase price of $280,000,000 (the "PURCHASE PRICE"). An initial
installment on the Purchase Price equal to $45,000,000, which the parties hereby
agree is the fair market value of the Purchased GELAAC Shares (the "GELAAC SHARE
PRICE "), shall be payable through the transfer by GEFA to PGH of the Purchased
GELAAC Shares at the First Closing, as set forth below in Section 2.2. Subject
to Section 2.6 hereof, the remaining balance of the Purchase Price shall be
payable by GEFA to PGH in cash at the Second Closing as set forth below in
Section 2.3; provided, that if the sale of the Purchased PDS Shares is not
consummated at the Second Closing, the remaining balance of the Purchase Price
shall be reduced by the PDS Purchase Price. The cash portion of the Purchase
Price shall be subject to adjustment as provided in Section 2.6.
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2.2. First Closing.
The closing of the transfer by GEFA to PGH of the Purchased
GELAAC Shares (the "FIRST CLOSING") will take place at the offices of Xxxxxx
Xxxxxx & Xxxxxxx, on the third (3rd) Business Day after the fulfillment or
waiver of the conditions set forth in Sections 9.2, 9.3 and 9.4, or at such
other place, date or time as the parties may agree. The date upon which the
First Closing occurs is herein referred to as the "FIRST CLOSING DATE." At the
First Closing, GEFA will deliver to PGH stock certificates representing the
Purchased GELAAC Shares (the "GELAAC CERTIFICATES") accompanied by stock powers
in favor of PGH. Effective as of the First Closing, PGH will be the sole holder
of the Purchased GELAAC Shares, entitled to vote the Purchased GELAAC Shares at
all meetings of the holders of the GELAAC Common Stock and to receive all
distributions made with respect to the Purchased GELAAC Shares.
2.3. Second Closing.
The closing of the sale and purchase of the Purchased PGH
Subsidiary Shares and the PGH Business Assets (the "SECOND CLOSING") will take
place at the offices of PGH or Stroock & Stroock & Xxxxx on the last calendar
day of the calendar month during which the conditions set forth in Sections 9.5,
9.6 and 9.7 are fulfilled or waived (or if such last calendar day is not a
Business Day, then on the next succeeding day that is a Business Day; provided
that the Second Closing shall be effective as of the last calendar day), or such
other place, date or time as the parties may agree. The date upon which the
Second Closing occurs is herein referred to as the "SECOND CLOSING DATE." At the
Second Closing:
(a) PGH will deliver to GEFA stock certificates representing
the Purchased PGH Subsidiary Shares, endorsed or accompanied by stock powers in
favor of GEFA;
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(b) GEFA will pay to PGH by wire transfer of immediately
available funds to such accounts as are designated by PGH an amount equal to the
Purchase Price less the GELAAC Share Price; and
(c) PMH will deliver to GEFA such bills of sale,
assignments, certificates of title, documents or other instruments of transfer
and conveyance as may be reasonably requested by GEFA, each in form and
substance satisfactory to GEFA, to transfer title to GEFA to the PGH Business
Assets, free and clear of all Liens except Permitted Liens.
2.4. Third Closing and CDM Matters.
(a) If, on the Second Closing Date, the Approvals required
for the sale of PDS set forth on Schedule 3.4(b) have not been received, but all
other conditions set forth in Article IX have been satisfied or waived, the
parties agree to proceed with the Second Closing, but only with respect to the
other PGH Subsidiaries. In such event, (a) the Purchase Price shall be reduced
by the PDS Purchase Price; (b) the parties agree to negotiate in good faith an
amendment to this Agreement providing for the sale of PDS by PGH to GEFA for the
PDS Purchase Price on the same terms and conditions as this Agreement subject to
the receipt of the applicable Approvals set forth in Schedule 3.4(b); and (c)
any and all agreements that were to be executed and delivered on the Second
Closing shall be amended to the extent applicable in order to reflect the
subsequent transfer of PDS. The closing of the sale and purchase of the
Purchased PDS Shares shall take place at the offices of PGH or Stroock & Stroock
& Xxxxx on the last calendar day of the calendar month during which the
Approvals required pursuant to Schedule 3.4(b) with respect to the sale of PDS
are received (or if such last calendar day is not a Business Day, then on the
next succeeding day that is a Business Day; provided that the Third Closing
shall be effective as of the last calendar day), or such other place, date or
time as the parties may agree. In the event that the
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Third Closing has not occurred on or prior to December 31, 2000, GEFA will not
purchase from PGH, and PGH will not sell to GEFA, the PDS Shares.
(b) If, on the Second Closing Date, CDM shall not have
entered into an agreement with the persons listed on Schedule 9.7(h) to
terminate any obligations of CDM under the employment, voting or other Contracts
listed on Schedule 9.7(h), on terms and conditions reasonably satisfactory to
GEFA, GEFA will not purchase from PGH and PGH will not sell to GEFA the CDM
Shares and the Purchase Price shall be reduced by the CDM Purchase Price.
2.5. Alternate Payment for the Purchased GELAAC Shares.
In the event that this Agreement is terminated after the First
Closing and prior to the Second Closing for any reason, on the date of such
termination PGH will pay to GEFA, by wire transfer of immediately available
funds to a previously designated account of GEFA, an amount equal to the sum of:
(i) the GELAAC Share Price; plus (ii) simple interest on the GELAAC Share Price
for the period from and including the First Closing Date to, but not including,
the date of payment at an annual interest rate equal to 7.5%.
2.6. Purchase Price Adjustment.
(a) No later than February 25, 2000, PGH will prepare and
deliver to GEFA and PricewaterhouseCoopers LLP (the "PHOENIX AUDITORS"): (i) the
unaudited balance sheet of PAL as of the close of business on December 31, 1999
(the "PAL STATUTORY YEAR-END BALANCE SHEET"); (ii) the unaudited balance sheets
of CDM, Group Services and PDS as of the close of business on December 31, 1999
(collectively, the "PGH GAAP YEAR-END BALANCE SHEETS"); and (iii) a preliminary
calculation of the PGH Total Equity based on such unaudited balance sheets and
computed in accordance with Section 2.6(g) as of the December 31, 1999 (the "PGH
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ADJUSTED YEAR-END EQUITY"). Such unaudited balance sheets and the PGH Adjusted
Year-End Equity shall be subject to completion of the audit by the Phoenix
Auditors as provided in Section 2.6(b). After the Second Closing, GEFA shall
cause the PGH Subsidiaries and their respective employees (i) to assist Phoenix
and the Phoenix Auditors in the audit of the PAL Statutory Year-End Balance
Sheet and the PGH GAAP Year-End Balance Sheets and (ii) to provide Phoenix and
the Phoenix Auditors on-site access at all reasonable times to the personnel,
properties, books and records of the PGH Subsidiaries until final resolution of
all matters in dispute under this Section 2.6.
(b) As promptly as practicable following such delivery (and,
in any event, by May 30, 2000), PGH shall cause the Phoenix Auditors to complete
an audit of the PAL Statutory Year-End Balance Sheet and the PGH GAAP Year-End
Balance Sheets. PGH will pay any fees of the Phoenix Auditors in excess of
amounts accrued by or paid by or on behalf of the PGH Subsidiaries on or before
December 31, 1999. After the Second Closing, GEFA shall cause the PGH
Subsidiaries and their respective employees (i) to assist Phoenix and the
Phoenix Auditors in the audit of the PAL Statutory Year-End Balance Sheet and
the PGH GAAP Year-End Balance Sheets and (ii) to provide Phoenix and the Phoenix
Auditors on-site access at all reasonable times to the personnel, properties,
books and records of the PGH Subsidiaries until final resolution of all matters
in dispute under this Section 2.6. No later than May 30, 2000, PGH shall deliver
to GEFA: (i) the audited PAL Statutory Year-End Balance Sheet and the audited
PGH GAAP Year-End Balance Sheets, together with the report thereon of the
Phoenix Auditors to the effect that such audit was conducted in accordance with
Connecticut SAP or GAAP, as appropriate, and that such firm believes: (A) that
such audit provides a reasonable basis for such firm's opinion thereon, (B) that
the PAL Statutory Year-End Balance Sheet represents fairly in all material
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37
respects the statutory financial condition of PAL as of December 31, 1999, and
(C) that the PGH GAAP Year-End Balance Sheets represent fairly in all material
respects the financial condition of CDM, Group Services and PDS as of December
31, 1999; and (ii) a statement signed by PGH setting forth the calculation of
the PGH Adjusted Year-End Equity in sufficient detail to permit GEFA to verify
such calculation.
(c) During the thirty (30) day period following GEFA's
receipt of the audited PAL Statutory Year-End Balance Sheet, the audited PGH
GAAP Year-End Balance Sheets and the calculation of the PGH Adjusted Year-End
Equity, PGH (i) will permit GEFA and its independent auditors to review the
working papers of PGH as well as such other documents as GEFA may reasonably
request and (ii) will cooperate with, and be reasonably available to, GEFA and
its independent auditors to provide such other information reasonably requested
relating to the PAL Statutory Year-End Balance Sheet, the PGH GAAP Year-End
Balance Sheets and the calculation of the PGH Adjusted Year-End Equity; provided
that GEFA's independent auditors execute and deliver a confidentiality
agreement, reasonably satisfactory to PGH, and adhere to whatever procedures PGH
reasonably requests to safeguard confidential, non-public or privileged
information relating to Phoenix. The PAL Statutory Year-End Balance Sheet, the
PGH GAAP Year-End Balance Sheets and the calculation of the PGH Adjusted
Year-End Equity will become final and binding upon the parties on the thirtieth
(30th) day following delivery thereof to GEFA, unless GEFA delivers a written
notice ("GEFA'S NOTICE") to PGH prior to such date that specifies in reasonable
detail the amount by which and the reasons why it thinks particular line items
in the PAL Statutory Year-End Balance Sheet, the PGH GAAP Year-End Balance
Sheets or the calculation of the PGH Adjusted Year-End Equity were not prepared
in accordance with Connecticut SAP, GAAP or Section 2.6(g), as appropriate.
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(d) Within ten Business Days after PGH's timely receipt of
GEFA's Notice, GEFA and PGH 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, then either of GEFA or PGH may submit such disagreement to an independent
nationally recognized accounting firm selected promptly by the parties (the
"THIRD PARTY ACCOUNTANTS"), 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 Third Party Accountants and shall
proceed in good faith to cause the Third Party Accountants to resolve such
disagreement within thirty (30) Business Days after such disagreement is
submitted to the Third Party Accountants. The fees and expenses of the Third
Party Accountants shall be paid one-half by PGH and one-half by GEFA.
(e) Each party shall provide the Third Party Accountants
with such information as the Third Party Accountants reasonably may request in
resolving any disagreement submitted to them, together with such other
information as the party reasonably believes relevant to the resolution of such
disagreement. The Third Party Accountants' 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.
(f) Upon the earliest to occur of (i) the PAL Statutory
Year-End Balance Sheet, the PGH GAAP Year-End Balance Sheets and the calculation
of the PGH Adjusted Year-End Equity becoming final pursuant to Section 2.6(c),
(ii) the parties reaching an agreement pursuant to Section 2.6(d) or (iii) the
Third Party Accountants delivering their report pursuant to Section 2.6(e), the
cash portion of the Purchase Price shall be decreased by the Reduction
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Amount (as defined below), if any. Within five Business Days after the earliest
to occur of the events described in clauses (i), (ii) and (iii) above, (A) PGH
shall, if the Reduction Amount is payable, pay to GEFA the Reduction Amount plus
simple interest thereon from and including the Second Closing Date to, but not
including, the date of payment at an annual interest rate equal to 7.5%, and (B)
GEFA shall compensate PGH for foregone income of the PGH Subsidiaries in an
amount equal to the sum of (I) $55,890.00 per day for the period from and
including the date of this Agreement to, but not including, the First Closing
Date, (II) $46,644.00 per day for the period from and including the First
Closing Date to, but not including, the Second Closing Date and (III) simple
interest on the sum of the amounts calculated pursuant to clauses (I) and (II)
from and including the Second Closing Date to, but not including, the date of
payment at an annual interest rate equal to the 3 month Treasury Xxxx rate as of
the Second Closing Date. The payment 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 delivery of notices. The "REDUCTION AMOUNT" shall equal the greater
of: (i) $0.00 or (ii) the amount by which $153,000,000 exceeds the PGH Adjusted
Year-End Equity.
(g) For purposes of this Section 2.6, "PGH ADJUSTED YEAR-END
EQUITY" shall mean the sum of (i) 97% times the sum of the "capital and surplus"
and "asset valuation reserve" in the PAL Statutory Year-End Balance Sheet and
less the Realized Loss Adjustment for net realized losses related to any assets
listed in Schedule 9.7(i) that are disposed of after December 31, 1999, all
calculated in accordance with Connecticut SAP, (ii) 100% times the sum of the
line items in each of the PGH GAAP Year-End Balance Sheets titled "stockholders
equity," (iii) 65% times 97% of the reduction in the Statutory Net Pension
Liability from December 31,
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1999, to the Second Closing and (iv) an amount equal to the Tax benefit arising
from any deferred intercompany loss attributable to the disposition of the
assets listed in Schedule 9.7(i) to the extent such Tax benefit has not
otherwise been reflected in the PAL Statutory Year-End Balance Sheet. For
purposes of this Section 2.6(g), "REALIZED LOSS ADJUSTMENT" shall mean the sum
of: (i) any net debit adjustment to the PAL Asset Valuation Reserve between
December 31, 1999, and the Second Closing relating to such realized losses and
(ii) any net debit adjustment to the PAL Interest Maintenance Reserve between
December 31, 1999, and the Second Closing relating to such realized losses in
excess of the credit balance of the PAL Interest Maintenance Reserve as of
December 31, 1999.
(h) Notwithstanding anything in this Agreement to the
contrary, any matter that is the subject of an adjustment, or claimed
adjustment, to the Purchase Price pursuant to this Section 2.6, may not be
asserted by GEFA as an alleged misrepresentation or breach of any
representation, warranty or covenant in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PMH AND PGH
Each of PGH and PMH, jointly and severally represents and
warrants to GEFA as of the date hereof that:
3.1. Corporate Status and Authority of PMH.
PMH is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Connecticut and has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of the obligations of PMH under
this Agreement have been duly authorized by the board of directors of PMH, which
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constitutes all necessary corporate action on the part of PMH for such
authorization. This Agreement has been duly executed and delivered by PMH and
constitutes the valid and binding obligation of PMH, enforceable against PMH in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or similar Laws affecting creditors' rights generally
and by general principles of equity (whether considered at law or in equity).
3.2. Corporate Status and Authority of PGH.
PGH is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Connecticut and has all requisite
corporate power and authority to conduct its business and to own or lease its
properties, as now conducted, owned or leased. PGH is duly qualified to do
business in each jurisdiction in which the failure to be so qualified would
reasonably be expected to have a PGH Material Adverse Effect. The execution,
delivery and performance of the obligations of PGH under this Agreement have
been duly authorized by the board of directors of PGH, which constitutes all
necessary corporate action on the part of PGH for such authorization. This
Agreement has been duly executed and delivered by PGH and constitutes the valid
and binding obligation of PGH, enforceable against PGH in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium, receivership or
similar Laws affecting creditors' rights generally and by general principles of
equity (whether considered at law or in equity).
3.3. Corporate Status and Authority of the PGH Subsidiaries.
(a) PAL is a stock life insurance company duly organized,
validly existing and in good standing under the Laws of the State of Connecticut
and has all requisite power and authority to conduct its business and to own or
lease its properties, as now conducted, owned or
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leased. PAL is duly licensed or authorized to conduct insurance business under
the Laws of each jurisdiction in which such licensing or authorization is
required by Law. Each such jurisdiction is listed on Schedule 3.3(a), with the
lines of business that PAL is so licensed or authorized to conduct set forth
opposite each jurisdiction. PAL is licensed to write the types of insurance
shown on Schedule 3.3(a) in the jurisdictions shown, which are all the types of
insurance issued by PAL and all the jurisdictions in which PAL writes any such
insurance. Except as set forth on Schedule 3.3(a), 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 PMH, there is no pending threat of
such suspension or revocation by any licensing or other regulatory authority.
PAL is not a "life insurance company" within the meaning of Section 816 of the
Code.
(b) Group Services is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware, and has
all requisite power and authority to conduct its business and to own or lease
its properties, as now conducted, owned or leased. Group Services is duly
licensed to operate the business presently conducted by it in each jurisdiction
in which such licensing is required by Law. Each such jurisdiction is set forth
on Schedule 3.3(b), with the capacity in which Group Services is so licensed set
forth opposite each jurisdiction.
(c) CA Benefits is a corporation duly organized, validly
existing and in good standing under the Laws of the State of California. CA
Benefits has all requisite power and authority to conduct its business and to
own or lease its properties, as now conducted, owned or leased. CA Benefits
possesses a valid license pursuant to the Xxxx-Xxxxx Health Care Service Plan
Act of 1975, as amended, and is duly licensed or authorized as a health
maintenance
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organization or a prepaid dental plan, a limited health service organization or
a hospital, medical, dental services or indemnity corporation in each
jurisdiction in which such licensing or authorization is required by Law. Each
such jurisdiction is set forth on Schedule 3.3(c), with the capacity in which CA
Benefits is so licensed or authorized to do business set forth opposite each
jurisdiction.
(d) PDS is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Connecticut, and has all
requisite power and authority to conduct its business and to own or lease its
properties, as now conducted, owned or leased. PDS is duly licensed to operate
the business presently conducted by it in each jurisdiction in which such
licensing is required by law. Each such jurisdiction is set forth on Schedule
3.3(d), with the capacity in which PDS is so licensed set forth opposite each
jurisdiction.
(e) CDM is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Connecticut, and has all
requisite power and authority to conduct its business and to own or lease its
properties, as now conducted, owned or leased. CDM is duly licensed to operate
the business presently conducted by it in each jurisdiction in which such
licensing is required by Law. Each such jurisdiction is set forth on Schedule
3.3(e), with the capacity in which CDM is so licensed set forth opposite each
jurisdiction.
3.4. No Conflicts; Consents and Approvals, etc.
(a) Except as set forth in Schedule 3.4(a), the execution,
delivery and performance of this Agreement by PMH or PGH and the consummation of
the transactions contemplated hereby will not result in (i) a conflict with, or
breach or violation of, any provision of the certificate or articles of
incorporation or by-laws of PMH, PGH or any PGH Subsidiary,
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(ii) subject to obtaining the consents referred to in Section 3.4(b), any breach
or violation of, default under, or give rise to any right of termination or
acceleration (with or without due notice or lapse of time or both) under, any
law, statute, regulation, rule, judgment, order, writ, injunction or decree of
any jurisdiction within the United States (collectively, "LAWS"), any license,
franchise, permit, approval, exemption, classification, certificate,
registration or other authorization issued by a Governmental Authority
(collectively, "PERMITS") or any mortgage, note, lease, agreement, loan
agreement, other agreement or instrument for borrowed money, guarantee,
reinsurance treaty, deed of trust, indenture or any other written or oral
instrument (collectively, "CONTRACTS") to which PMH, PGH or any PGH Subsidiary
is a party or by which any of them or their respective properties or assets are
bound or (iii) the creation or imposition of any liens, security interests,
adverse claims, charges or encumbrances (collectively, "LIENS") upon the
Business Assets or any other assets or properties of PMH, PGH or any PGH
Subsidiary other than Liens resulting from the actions of GEFA or any of its
Affiliates.
(b) Except as set forth in Schedule 3.4(b), no consent,
approval or authorization of or filing with any third party or any Governmental
Authority ("APPROVALS") is required on the part of PMH, PGH or any PGH
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except (i) filings
required with respect to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), and (ii) approvals or non-disapprovals of the
insurance regulatory authorities and other Governmental Authorities of the
jurisdictions listed on Schedule 3.4(b) (the "PGH REQUIRED JURISDICTIONS").
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3.5. Capital Stock of PGH Subsidiaries.
The authorized Capital Stock of each of the PGH Subsidiaries is
set forth on Schedule 3.5. All issued and outstanding shares of Capital Stock of
each of the PGH Subsidiaries are owned solely, both of record and beneficially,
directly or indirectly by PGH, free and clear of all Liens, and have been duly
authorized and validly issued, are fully paid and non-assessable and were not
issued in violation of any preemptive rights. Except as set forth in Schedule
3.5, there are not outstanding any (i) securities or obligations of PGH
convertible into or exchangeable for Capital Stock of any PGH Subsidiary, (ii)
warrants, rights or options to subscribe for or purchase from any PGH Subsidiary
any Capital Stock of any PGH Subsidiary or any securities or obligations
convertible into or exchangeable for Capital Stock of any PGH Subsidiary or
(iii) obligations of any PGH Subsidiary to issue Capital Stock of any PGH
Subsidiary or securities or obligations convertible into or exchangeable for
Capital Stock of any PGH Subsidiary, and no authorization therefor has been
given. None of the PGH Subsidiaries has any direct or indirect equity interest
or investment in any corporation, partnership, joint venture, association or
other business organization other than (i) as set forth on Schedule 3.5, (ii) in
the case of PDS, CA Benefits or (iii) in the case of PAL, the Investment Assets.
3.6. Financial Statements.
(a) PGH has delivered to GEFA:
(i) the consolidated balance sheets of PGH and the
PGH Subsidiaries as at December 31, 1997 and
1998, and the related consolidated statements of
income, changes in shareholders' equity, and
cash flows for the years ended December 31, 1997
and 1998, together with any exhibits, schedules
or notes thereto and the unqualified
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report of PricewaterhouseCoopers LLP thereon and
the consolidated balance sheets of PGH and the
PGH Subsidiaries as of September 30, 1999, and
the related consolidated statements of income
and changes in shareholders' equity for the nine
months ended September 30, 1999 (the "PGH GAAP
FINANCIAL STATEMENTS");
(ii) the annual and quarterly statements of PAL,
including all exhibits, schedules or notes
thereto and any affirmations or certifications
filed therewith (the "PAL STATUTORY
STATEMENTS"), as filed with the Connecticut
Insurance Department for the years ended
December 31, 1996, 1997 and 1998 and the quarter
ended June 30, 1999; and
(iii) the audited statutory-basis balance sheets of
PAL as at December 31, 1996, 1997 and 1998, and
the related statutory-basis statements of
income, capital and surplus, and cash flow for
each of the years ended December 31, 1996, 1997
and 1998, together with any exhibits, schedules
or notes thereto and the unqualified report of
PricewaterhouseCoopers LLP thereon (the "AUDITED
PAL SAP STATEMENTS").
(b) The PGH GAAP Financial Statements present fairly, in all
material respects, the consolidated financial position of PGH and the PGH
Subsidiaries on a consolidated basis as at the respective dates and for the
respective periods indicated therein and the results of
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their consolidated income, changes in shareholders' equity and cash flows for
the respective periods then ended, in each case, in accordance with GAAP applied
on a consistent basis throughout the periods indicated, except for the
deviations from GAAP disclosed thereon or in any exhibits, schedules or notes
thereto and except with respect to accounting transactions relating to Statutory
Net Pension Liability.
(c) The PAL Statutory Statements and the Audited PAL SAP
Statements have been prepared in accordance with the statutory accounting
practices prescribed or permitted by the Connecticut Insurance Department
("CONNECTICUT SAP") and such accounting practices have been applied on a
consistent basis throughout the periods indicated, subject to customary year-end
adjustments in the case of the quarterly PAL Statutory Statements, except as
expressly set forth or disclosed in the respective exhibits, schedules and notes
thereto. The Audited PAL SAP Statements present fairly, in all material
respects, the admitted assets, reserves, liabilities, capital and surplus of PAL
as at the respective dates thereof and the results of its operations and its
cash flow for the respective periods then ended. The PAL Statutory Statements
and the Audited PAL SAP Statements complied with all Applicable Insurance Laws
of the State of Connecticut when filed. No deficiencies or required adjustments
with respect to the Statutory Statements or the Audited SAP Statements have been
asserted by any Governmental Authority that have not been cured or otherwise
resolved to the satisfaction of such Governmental Authority and that have not
been disclosed on Schedule 3.6(c).
3.7. Reserves.
(a) The aggregate reserves as recorded in the PAL Statutory
Statements have been determined in accordance with Connecticut SAP (except as
set forth therein). The insurance reserving practices and policies of PAL have
not changed, in any material respect, since June 30,
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1999 and the results of the application of such practices and policies are
reflected in the PAL Statutory Statements. All reserves set forth in the PAL
Statutory Statements are fairly stated in accordance with sound actuarial
principles and meet the requirements of the Applicable Insurance Laws of the
State of Connecticut.
(b) All reserves and other similar amounts with respect to
insurance as established or reflected in the PGH GAAP Financial Statements were
determined 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 PAL under all insurance
contracts under which PAL 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. The GAAP
insurance and reserve practices and policies of PAL have not changed, in any
material respect, since June 30, 1999. The foregoing clauses (a) and (b) shall
not be construed as a guarantee of the adequacy of the reserves.
3.8. Absence of Undisclosed Liabilities.
Except as set forth in Schedule 3.8, none of the PGH
Subsidiaries has any liabilities of any nature (including, without limitation,
obligations or liabilities arising from policyholder claims or guaranty fund
assessments), whether absolute, accrued, contingent or otherwise, of a nature
required by GAAP to be reflected in a consolidated balance sheet (or reflected
in the notes thereto), except for (i) liabilities fully and adequately reflected
or reserved against in the PGH GAAP Financial Statements, the PAL Statutory
Statements or the Audited PAL SAP Statements
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or in the notes, exhibits, schedules, and interrogatories thereto in accordance
with the standards of disclosure applicable thereto, (ii) liabilities incurred
since the date of the most recent quarterly balance sheet included in the PGH
GAAP Financial Statements in the ordinary course of business and (iii)
liabilities reflected in the Schedules hereto.
3.9. Absence of Changes.
Except as set forth in Schedule 3.9, since June 30, 1999, other
than in connection with the transactions contemplated by this Agreement or
reflected in the Schedules hereto, the PGH Subsidiaries have conducted the PGH
Business in the ordinary course, in substantially the same manner in which it
has been previously conducted, there has been no PGH Material Adverse Effect,
and none of the PGH Subsidiaries has:
(a) purchased or redeemed any shares of its equity
securities, or issued or sold (or agreed to issue or sell) any of its equity
securities or any option, warrant, conversion or other right to purchase or
acquire any of its equity securities or granted or agreed to grant such rights;
(b) incurred any indebtedness for borrowed money or issued
any debt securities other than indebtedness on commercially reasonable terms not
in excess of $500,000 in principal amount for all PGH Subsidiaries, entered into
any guaranty or declared, set aside or paid any dividends or other distribution
in respect of its equity securities;
(c) mortgaged, pledged or subjected to any Lien any of their
respective properties or assets, except for Liens incurred in the ordinary
course of business or Permitted Liens;
(d) except as required by GAAP or Connecticut SAP, made any
change in its accounting principles or the methods by which such principles are
applied for financial reporting
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purposes or changed in any material respect its underwriting, actuarial or Tax
accounting methods or made, modified or revoked any material Tax elections;
(e) increased the compensation of any officer or employee,
other than (i) in the ordinary course of business or (ii) to comply with
applicable Law; or 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;
(f) disposed or agreed to dispose of any properties or
assets necessary for the conduct of the PGH Business as currently conducted,
other than in the ordinary course of business;
(g) canceled or forgiven any debts or claims in excess of
$50,000, individually or in the aggregate;
(h) taken any action to forfeit, abandon, modify, waive,
terminate or otherwise change any of its Permits, except (i) as may be required
in order to comply with applicable Law or (ii) as may be contemplated by this
Agreement;
(i) issued, reinsured or sold new kinds of Policies, or
amended existing kinds of Policies except to the extent required to comply with
applicable Law;
(j) suffered any material casualty losses not covered by
insurance;
(k) amended its charter or by-laws or merged with or into
any other Person;
(l) split, combined or reclassified its Capital Stock;
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(m) entered into or amended or terminated any transaction or
contract that has or could reasonably be expected to have a PGH Material Adverse
Effect;
(n) ceased its lead generation or marketing activities or
terminated or amended 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 any Affiliates except in
satisfaction of previous contractual obligations;
(p) entered into any joint ventures or partnerships of any
kind;
(q) settled or received a judgment in any Proceeding in
which a PGH Subsidiary was a party;
(r) become or committed to become a plaintiff in any
Proceeding, excluding counterclaims with respect to claims made under any
Policy;
(s) assumed, guaranteed or endorsed the obligations of any
Person; or
(t) entered into any contract or other agreement to do any
of the foregoing.
3.10. Property; Assets.
(a) None of the PGH Subsidiaries owns any real property.
Schedule 3.10 lists all items of personal property owned by the PGH Subsidiaries
that individually have a value in excess of $10,000, and all items of computer
software owned by the PGH Subsidiaries (collectively, the "OWNED PERSONAL
PROPERTY") and all items of real property and personal property leased by the
PGH Subsidiaries subject to a lease with a term in excess of one year or
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annual payments in excess of $1,000, and all items of computer software licensed
by or for the PGH Subsidiaries (the "LEASED REAL PROPERTY" and, collectively,
the "LEASED PERSONAL PROPERTY," respectively). Except as set forth in Schedule
3.10, the PGH Subsidiaries have legal and beneficial ownership of all the Owned
Personal Property listed on Schedule 3.10 and valid leasehold interests in the
Leased Real Property and the Leased Personal Property listed on Schedule 3.10,
in each case, free and clear of all Liens, except as set forth on Schedule 3.10
and except for Permitted Liens. Except as set forth on Schedule 3.10, the Owned
Personal Property, the Leased Real Property and the Leased Personal Property,
together with the PGH Business Assets and the property to be provided for use by
the PGH Subsidiaries pursuant to the Transition Services Agreement, constitute
all of the property necessary (other than Permits) to conduct the PGH Business
as currently conducted, that individually have a value in excess of $10,000
(except items of computer software).
(b) Each lease (including any option to purchase contained
therein) pursuant to which any of the PGH Subsidiaries lease any Leased Real
Property or Leased Personal Property is listed on Schedule 3.10 (the "LEASES")
and is in full force and effect. There exists no material default or event of
default (or any event that with notice or lapse of time or both would become a
material default) on the part of any of the PGH Subsidiaries under any of the
Leases or, to the Knowledge of PGH, any other party to the Leases.
3.11. Contracts.
(a) Schedule 3.11(a) lists all Contracts of the following
types to which any of the PGH Subsidiaries is a party or by which any of the PGH
Subsidiaries or any of their respective properties is bound as of the date
hereof and will be bound following the Second Closing or pursuant to which goods
or services are provided to the PGH Subsidiaries (other than real
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property Leases, Reinsurance Agreements or labor or employment-related
Contracts, which are provided for in Schedules 3.10, 3.11(b) or 3.12,
respectively):
(i) Contracts with health care providers or networks
that are material to the PGH Business;
(ii) Contracts that involve one or more payments or
potential payments by or to the PGH Subsidiaries
of amounts in excess of $100,000 per year;
(iii) Contracts (or portions thereof) issued by PMH
pursuant to which PMH provides only
administrative services to customers of any PGH
Subsidiary;
(iv) distributing, marketing, agency, dealer, sales
representative or other similar Contracts
involving in excess of $100,000 per year;
(v) Contracts or arrangements with PGH or any of its
Affiliates;
(vi) partnership, joint venture or other similar
Contracts or arrangements;
(vii) Contracts relating to the borrowing of money or
extension of credit in any case in excess of
$100,000;
(viii) all Contracts with any Person containing any
provision or covenant limiting the ability of
any PGH Subsidiary after it ceases to be a
Subsidiary of PHLMIC to (A) sell any products or
services of any other Person, (B) engage in any
line of business or (C) compete
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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
any PGH Subsidiary;
(ix) all Contracts pursuant to which any PGH
Subsidiary has agreed to indemnify or hold
harmless any Person (other than pursuant to
Policies and reinsurance and coinsurance
agreements and charter and by-law provisions,
indemnifications in the ordinary course of
business and indemnification clauses contained
in any of the Contracts identified in Schedule
3.11 (or not required to be identified thereon)
pursuant to any of the preceding clauses of
Section 3.11); or
(x) other Contracts that are not cancelable by any
of the PGH Subsidiaries on notice of sixty days
or less and that require payment by any of the
PGH Subsidiaries after the date hereof of more
than $100,000.
Each such Contract is a legal, valid and binding obligation of the PGH
Subsidiaries and is in full force and effect except as to enforceability
which may be limited by applicable bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium, receivership or similar
laws affecting creditors' rights generally and by general principles of
equity (whether considered at law or in equity). No PGH Subsidiary, nor
to the Knowledge of PGH, any other party thereto, is in default under
or, with or without notice of lapse of time or both, would be in default
under any of the Contracts listed on Schedule 3.11(a),
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except for such defaults which would not, individually or in the
aggregate, reasonably be expected to have a PGH Material Adverse Effect.
No PGH Subsidiary has received any notice of termination with respect to
any Contract required to be disclosed on Schedule 3.11(a) or Schedule
3.11(b), except as provided on the latter Schedule.
(b) Schedule 3.11(b) lists all Contracts providing
reinsurance, coinsurance, excess insurance, ceding of insurance, assumption of
insurance or indemnification of insurance liabilities to which any PGH
Subsidiary 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") on the date of this Agreement. All such Reinsurance Agreements are
legal, valid, binding and in full force and effect in accordance with their
terms. No PGH Subsidiary is, and, to the Knowledge of PGH, no other party
thereto is, in default of or, with or without notice or lapse of time or both,
would be in default of any provision thereof, which default has or could have,
individually or in the aggregate, a PGH Material Adverse Effect and, except as
set forth on Schedule 3.11(b), no such Reinsurance Agreement contains any
provision providing that the other party thereto may terminate the same by
reason of the transactions contemplated by this Agreement or any other provision
that would be altered or otherwise become applicable by reason of such
transactions. Except as required by Law or as disclosed on Schedule 3.11(b), all
amounts payable under any Reinsurance Agreement and all amounts payable by any
Person that is a party to any Reinsurance Agreement have been paid in accordance
with the terms of the Reinsurance Agreements under which they arose, except for
such amounts for which PGH reasonably believes there is a reasonable basis to
contest payment. Except as disclosed on Schedule 3.11(b), to the Knowledge of
PGH, no reinsurer that is a party to any of such Reinsurance Agreements has a
valid defense to payment of its material obligations under such Reinsurance
Agreements. No
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PGH Subsidiary has entered into any series of transactions that are required to
be recorded as financial reinsurance pursuant to either GAAP or Connecticut SAP.
(c) There have been, or will be, made available to GEFA true
and complete copies of all Contracts required to be set forth in Schedule
3.11(a) or Schedule 3.11(b) or in any other Schedule hereto.
3.12. Employment Agreement and Benefits, etc..
(a) Employment Agreements and Plans. Schedule 3.12(a) lists
all Plans to which any of the PGH Subsidiaries is a party or that are maintained
by or otherwise contributed to by PMH, PGH or their Affiliates for the benefit
of PGH Business Employees (as defined in Section 8.1(a)) or PGH Subsidiary
Employees (as defined in Section 8.1(a)) (the "PHOENIX PLANS").
(b) ERISA. Each Phoenix Plan subject to ERISA and/or the
Code complies with and has been administered in all material respects in
compliance with the requirements of ERISA and the Code, and in accordance with
the documents related to such Plan. No Plan (other than a multiemployer plan as
defined in Section 3(37) of ERISA) to which PMH or PGH or any member of the same
controlled group of corporations as PMH or PGH within the meaning of section
4001(a)(3) of ERISA contributes and which is subject to Part 3 of Subtitle B of
Title I of ERISA has incurred any "accumulated funding deficiency" within the
meaning of section 302 of ERISA or section 412 of the Code. No material
liability (other than for annual premiums) to the Pension Benefit Guaranty
Corporation ("PBGC") has been incurred by PMH or PGH, with respect to any Plan
and no "reportable event" (as such term is used in ERISA section 4043) has
occurred, other than any event for which notice to the PBGC is waived. None of
PMH, PGH or
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any of their Affiliates has incurred any liability for any Tax or penalty
imposed by section 4975 of the Code or section 502(i) of ERISA with respect to
the Phoenix Plan. None of PMH, PGH or any of their Affiliates maintains or has
ever maintained, has contributed to or has withdrawn at any time within the
preceding six years, from any multiemployer plan, as defined in section 3(37) of
ERISA. Except as disclosed in Schedule 3.12(b), there are no pending or, to the
Knowledge of PGH, threatened Proceedings or claims by or on behalf of any of the
Phoenix Plans or by any employee involving any Phoenix Plan (other than routine
claims for benefits). All contributions required to have been made by PMH, PGH
or any of their Affiliates to any Phoenix Plan or to any other employee benefit
plan (within the meaning of section 3(3) of ERISA) under the terms of any such
Plan or pursuant to any applicable collective bargaining agreement or applicable
Law (including, without limitation, ERISA and the Code) have been made on or
before the due date.
(c) Tax Qualification. Except as disclosed in Schedule
3.12(c), each Phoenix Plan intended to be qualified under section 401(a) of the
Code, and the trust (if any) forming a part thereof, has received a favorable
determination letter from the Internal Revenue Service as to its qualification
under the Code and to the effect that each such trust is exempt from taxation
under section 501(a) of the Code, and, to the Knowledge of PGH, nothing has
occurred since the date of such determination letter that would reasonably be
expected to adversely affect such qualification or tax-exempt status.
(d) Documents. Current, accurate and complete copies of each
Phoenix Plan (or to the extent that no such copy exists, an accurate
description), all existing amendments, and to the extent applicable, all
existing annuity contracts, insurance contracts or other funding
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arrangements, all summary plan descriptions, Internal Revenue Service
determination letters, and the most recent annual reports on Form 5500, if any,
have been provided to GEFA.
(e) Retiree Benefits. Except as disclosed in Schedule
3.12(e), none of PMH, PGH or any of their Affiliates maintains or contributes to
any Plan that provides, or has any liability or obligation to provide, life
insurance, medical or other employee welfare benefits to any employee (or his or
her beneficiary) upon and/or after such employee's retirement or termination of
employment, except as may be required by Law, none of PMH, PGH or any PGH
Subsidiary has ever represented, promised or contracted to or with any employee
(or former employee) that such employee (or former employee) would be provided
life insurance, medical or other employee welfare benefits upon his or her
retirement or termination of employment except to the extent required by Law.
(f) Except as disclosed on Schedule 3.12(f), none of the
Phoenix Plans 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 section 280G of the Code.
(g) Except as disclosed in Schedule 3.12(g), Part I, since
May 1, 1999, there has not been any adoption or amendment by PMH, PGH or any PGH
Subsidiary, of any Plan. Except as disclosed in Schedule 3.12(g), Part II, there
exist no written executory employment, consulting, severance, termination or
indemnification Contracts between PGH or any PGH Subsidiary and any current or
former employee, officer or director of such entities.
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(h) Any individual who performs services for PGH or any PGH
Subsidiary (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 PMH, PGH or any PGH Affiliate would not reasonably be expected to be
classified as an employee for such purposes.
3.13. Intellectual Property.
Schedule 3.13 lists all trademarks, copyrights, trade names,
service marks, patents, assumed names, computer software programs and all
applications therefor, used or required by any of the PGH Subsidiaries in the
conduct of their respective businesses (the "INTELLECTUAL PROPERTY"), together
with the owner of each item of Intellectual Property and the terms of any
Contract (except with respect to computer software programs) pursuant to which
one of the PGH Subsidiaries uses such items of Intellectual Property. Except as
set forth in Schedule 3.13 and except for items of Intellectual Property covered
by the Transition Services Agreement or the Computer Services Agreement, PHLMIC
owns the Intellectual Property free and clear of all Liens. Except as set forth
in Schedule 3.13, none of PMH, PGH or any PGH Subsidiary has received any notice
or claim that a PGH Subsidiary is infringing on or otherwise acting adversely to
the Intellectual Property rights of any Person and, to the Knowledge of PGH, no
Person is infringing on the Intellectual Property. Except as set forth in
Schedule 3.13, no PGH Subsidiary has licensed or agreed to license for use by
any other Person any of the Intellectual Property. Any Intellectual Property
currently used in the PGH Business is subject to a currently valid license in
full force to which PHLMIC or any of its Affiliates is a party.
3.14. Governmental Authorizations; Compliance with Law; Forms and
Policies.
(a) Each of the PGH Subsidiaries is in compliance with the
Laws or Permits applicable to it, the PGH Business and the PGH Business Assets.
Each of the PGH Subsidiaries
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and, to the Knowledge of PGH, their independent agents, have marketed, sold and
issued products of such company in compliance with the Laws applicable to the
PGH Business in the respective jurisdiction in which such products have been
marketed or sold. Except as otherwise set forth in Schedule 3.14(a), the PGH
Subsidiaries hold all Permits necessary for the conduct of the PGH Business as
presently conducted. All of such Permits are valid and in full force and effect,
and no Proceeding is pending or, to the Knowledge of PGH, threatened that could
result in the suspension, revocation or limitation of any such Permits. Except
as disclosed in Schedule 3.14(a), none of the PGH Subsidiaries has received any
notice of any violation of any Law or Permit, applicable to it or to any of its
properties. Notwithstanding the foregoing, the representations contained in this
Section 3.14 do not relate to the Permits identified on Schedule 3.4, which are
instead the subject of Section 3.4(a); employee benefits matters, which are
instead the subject of Section 3.12 and Article VIII; or any Tax Matters, which
are instead the subject of Article VII.
(b) Except as set forth in Schedule 3.14(b):
(i) all forms of insurance policies, and guaranteed
interest contracts and amendments and riders
thereto (collectively, "POLICIES") in force that
were issued by PAL, that PAL has a current
contractual obligation to issue or for which PAL
has any reinsurance obligation, are, to the
extent required under the insurance Laws of any
applicable jurisdictions (collectively,
"APPLICABLE INSURANCE LAWS"), and in all
material respects, on forms approved by
applicable Governmental Authorities of the
jurisdictions where
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issued or have been filed with and not objected
to by such Governmental Authorities within the
period provided for objection;
(ii) all Policy applications in respect of Policy
forms in force that were issued by PAL or for
which PAL has any reinsurance obligations and
required to be filed with or approved by
applicable Governmental Authorities under
Applicable Insurance Laws have been so filed or
approved;
(iii) all such forms and applications have been
administered in accordance with Applicable
Insurance Laws and the then current industry
practices;
(iv) any premium rates with respect to Policies that
were issued by PAL or for which PAL has any
reinsurance obligations, which rates are, or
were at the time such policies were issued,
required to be filed with or approved by
applicable Governmental Authorities under
Applicable Insurance Laws have been so filed or
approved and premiums charged conforming to the
rates so filed;
(v) all Contracts to which any PGH Subsidiary is a
party that are required to be filed with or
approved by a Governmental Authority have been
so filed or approved; and
(vi) no material deficiencies have been asserted by
any Governmental Authority with respect to any
such filings that have not been cured
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or otherwise resolved to the satisfaction of
such Governmental Authority.
(c) PGH has previously made available to GEFA true and
complete copies of (i) 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 PAL issued by
any insurance regulatory authority and (ii) any and all actuarial opinion
memoranda issued in connection with PAL's year end financial statements during
the preceding two years.
(d) Except as set forth in Schedule 3.14(d), each of the PGH
Subsidiaries has filed or otherwise provided all reports, data, registrations
and other information and applications required to be filed with or otherwise
provided to any federal, state or local Governmental Authorities having
jurisdiction over such company, and all required regulatory approvals in respect
thereof are in full force and effect. No material deficiencies have been
asserted by any such Governmental Authority with respect to any such regulatory
filings or submissions that have either not been or will not be, in the ordinary
course, satisfied.
(e) PAL has delivered or made available to GEFA true and
complete copies of all underwriting manuals (including each amendment thereto)
utilized by PAL since January 1, 1996. The underwriting standards and ratings
applied by PAL since such date with respect to Policies issued by PAL or for
which PAL has any reinsurance obligations 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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(f) To the Knowledge of PGH, except as disclosed in Schedule
3.14(f), all Contract benefits payable by any of the PGH Subsidiaries have been
or will be paid, and all Contract claims have been or will be settled, all in a
timely manner in accordance with the terms of the Contracts under which they
arose, except for such benefits or claims that the appropriate PGH Subsidiary
reasonably believes there is a reasonable basis to contest.
(g) Except as set forth in Schedule 3.14(g), no outstanding
Policy or other insurance or annuity Contract issued, reinsured or underwritten
by PAL 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 any other Person.
(h) Each independent agent of any PGH Subsidiary, at the
time such agent wrote, sold or produced business for such company, was duly
licensed and properly appointed by such company as an independent agent (for the
type of business written, sold or produced by such agent) in the particular
jurisdiction in which such agent wrote, sold or produced such business.
3.15. Litigation.
Except as otherwise set forth in Schedule 3.15, (a) there are no
claims, audits, actions, suits, arbitrations, investigations or proceedings,
whether civil, criminal, administrative or investigative (each, a "PROCEEDING")
pending or, to the Knowledge of PGH, threatened against PMH, PGH or any of the
PGH Subsidiaries before any Governmental Authority or arbitrator, that if
resolved adversely to PMH, PGH or any of the PGH Subsidiaries, individually or
in the aggregate, would reasonably be expected to have a PGH Material Adverse
Effect and (b) there are no judgments, orders or decrees of any Governmental
Authority or arbitrator binding on any of the PGH Subsidiaries that (i) have
been issued by any insurance regulatory authority, (ii) would
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materially restrict the ability of any of the PGH Subsidiaries to conduct its
PGH Business as now being conducted or (iii) has had or would reasonably be
expected to have a PGH Material Adverse Effect. None of the PGH Subsidiaries is
in default under any judgment, decree, injunction or order of any Governmental
Authority or arbitrator outstanding against it. No Proceeding relating to the
transactions contemplated by this Agreement is (i) pending, (ii) dismissed with
rights of appeal not fully lapsed or (iii) to the Knowledge of PGH, threatened,
in each case before any Governmental Authority, that questions the validity of
this Agreement or either Shareholders Agreement or any of the transactions
contemplated hereby or thereby or that presents a risk of the restraint or
prohibition of the transactions contemplated hereby or thereby or the obtaining
of material damages or other material relief in connection herewith or therewith
or deprives, or would reasonably be expected to deprive, GEFA of any of the
material benefits hereunder or thereunder or that could reasonably be expected
to have a PGH Material Adverse Effect.
3.16. Brokers.
All discussions and negotiations relating to this Agreement and
the transactions contemplated hereby have been carried out without the
intervention of any Person acting on behalf of PMH or PGH in such manner as to
give rise to any valid claim against GEFA, PMH, PGH or any of their Affiliates
for any brokerage or finder's commission, fee or similar compensation, except
for Bear, Xxxxxxx & Co. Inc., whose fees in respect hereof shall be paid by PMH.
3.17. Insurance.
Schedule 3.17 summarizes the amount and type of the insurance
currently in force insuring the PGH Subsidiaries and their operations and
properties against loss or liability. All
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such policies or Contracts of insurance are sufficient for compliance with all
requirements of Law and of all Contracts to which any of the PGH Subsidiaries 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 given to the PGH Subsidiaries and
neither the execution of this Agreement nor the consummation of the transactions
contemplated thereby will give rise, whether with the giving of notice, the
lapse of time, or both, to any right to terminate or cancel such policies or
Contracts prior to the Second Closing.
3.18. Environmental Matters.
Except as disclosed on Schedule 3.18:
(a) the operations of each of the PGH Subsidiaries and the
real property currently (or, to the Knowledge of PGH, formerly) owned, leased,
occupied or operated by the PGH Subsidiaries are in compliance and, during the
period of the ownership or tenancy of each of the PGH Subsidiaries have been or
were in compliance, with all applicable Environmental Laws;
(b) no Proceedings are pending or, to the Knowledge of PGH,
threatened against any PGH Subsidiary pursuant to any applicable Environmental
Laws;
(c) each of the PGH Subsidiaries has obtained and will
maintain through the Second Closing Date, all governmental approvals that are
required with respect to its operations under any Environmental Law;
(d) no PGH Subsidiary: (i) has any liability for response
costs or corrective action pursuant to any Environmental Law with respect to any
real property or facility formerly owned, or currently or formerly leased or
operated by any PGH Subsidiary or any other real
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property or facility where such liability arises from or relates to the off-site
transport, generation, treatment, storage or disposal of any Hazardous Material
by or on behalf of any PGH Subsidiary or the off-site migration of any Hazardous
Material from any of the foregoing types of properties, (ii) has received any
notice of any Environmental Claim involving any PGH Subsidiary or any real
property or facility formerly owned, or currently or formerly leased or operated
by any PGH Subsidiary, (iii) has any Knowledge of any Environmental Claim at any
real property or facility formerly owned, or currently or formerly leased or
operated by any PGH Subsidiary or (iv) has received any written request for
information under Section 104 of CERCLA or any comparable state Law;
(e) no real property currently (or to the Knowledge of PGH,
formerly) owned, operated or leased by any PGH Subsidiary is listed or has been
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response Compensation and Liability and Information Systems
("CERCLIS") or any analogous state lists; and
(f) PGH has made available to GEFA copies of all
environmental investigations, audits, assessments or other analyses conducted by
or on behalf of, or that are otherwise in possession of PMH, PGH or any PGH
Subsidiary relating to any real property formerly owned, or currently or
formerly leased or operated by any PGH Subsidiary.
3.19. Bank Accounts.
Schedule 3.19 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 any PGH Subsidiary has an
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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.
3.20. Labor Matters.
(a) No PGH Subsidiary is a party to any labor or collective
bargaining agreement.
(b) No employees of any PGH Subsidiary 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 any
PGH Subsidiary has made pending demand for recognition or certification and
there are no representation or certification Proceedings or petitions seeking a
representation Proceeding presently pending or, to the Knowledge of PGH,
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 PGH,
there are no organizing activities involving any PGH Subsidiary pending with any
labor organization or group of employees of any PGH Subsidiary.
(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 any PGH Subsidiary. There
are no unfair labor practice charges, grievances or complaints pending or, to
the Knowledge of PGH, threatened by or on behalf of any employee or group of
employees of the PGH Subsidiaries that, if individually or collectively resolved
against
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the PGH Subsidiaries, as the case may be, could reasonably be expected to have a
PGH Material Adverse Effect.
(d) Except as set forth in Schedule 3.20(d), each of the PGH
Subsidiaries is in compliance with all Laws 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 has not been and, except as may result from the
termination of employees of PGH, Group Services, PDS, CDM or CA Benefits as
contemplated by Section 8.1(a) of this Agreement, there will be no "mass layoff"
or "plant closing" as defined by WARN with respect to any PGH Subsidiary prior
to the Second Closing.
(f) There are no complaints, charges or claims against any
PGH Subsidiary pending or, to the Knowledge of PGH, threatened that could be
brought or filed with any Governmental Authority or arbitrator based on, arising
out of, in connection with or otherwise relating to the employment or
termination of employment by any PGH Subsidiary of any individual, other than
such complaints, charges or claims that, individually or in the aggregate, would
not reasonably be expected to have a PGH Material Adverse Effect.
3.21. Regulatory Qualifications.
To the Knowledge of PGH, no event has occurred or condition
exists or, to the extent it is within the control of PMH, PGH or any PGH
Subsidiary, is likely to occur or exist with respect to PMH, PGH or any PGH
Subsidiary, that in connection with the transactions contemplated by this
Agreement would cause PMH, PGH or any PGH Subsidiary to fail to satisfy any
applicable Law or that prevents or would reasonably be likely to prevent PMH,
PGH or any
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PGH Subsidiary from obtaining necessary approvals from any Governmental
Authority to consummate the transactions contemplated by this Agreement.
3.22. Year 2000 Compliance.
(a) The computer systems (the "PGH COMPUTER SYSTEMS") (i) of
the PGH Subsidiaries or (ii) included in the PGH Business Assets (including
without limitation all software, hardware, workstations and related components
and automated devices) ("COMPUTER SYSTEMS") are Year 2000 Compliant or will be
Year 2000 Compliant by December 31, 1999. The term "YEAR 2000 COMPLIANT" as used
in this Section 3.22 means that the PGH Computer Systems (i) are capable of
recognizing, processing, managing, representing, interpreting and manipulating
correctly date-related data for dates earlier and later than January 1, 2000,
including, but not limited to, calculating, comparing, sorting, storing, tagging
and sequencing (except as provided in Schedule 3.22(a)(i) with respect to
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 on and
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after January 1, 2000 data containing dates before that date and (vii) have the
ability to recognize all "leap years."
(b) The PGH Computer Systems have (or no later than the date
of the Second Closing will have) the ability to properly interface and will
continue to properly interface with internal and external applications and
systems of third parties with whom any PGH Subsidiary exchanges data
electronically (including, without limitation, insurance agents, customers,
clients, suppliers, service providers, subcontractors, processors, converters,
shippers, warehousemen, outsourcers, data processors, regulatory agencies and
banks) whether or not they have achieved Year 2000 Compliance. The PGH
Subsidiaries have inquired of all such third parties whose lack of Year 2000
Compliance would be materially or significantly adverse to the PGH Subsidiaries
and all such third parties have represented that they are Year 2000 Compliant or
will be Year 2000 Compliant by December 31, 1999.
(c) PMH and PGH have a detailed and comprehensive plan (the
"PGH YEAR 2000 PLAN") regarding Modified Year 2000 Compliance of the Computer
Systems provided or used in providing services under the Transition Services
Agreement or the Computer Services Agreement (the "TRANSITION COMPUTER SYSTEMS")
(including, without limitation, the costs of reprogramming, reprogramming errors
and failures of information technology that is not Modified Year 2000 Compliant)
will not, in the aggregate, have a PGH Material Adverse Effect. "MODIFIED YEAR
2000 COMPLIANT" means that such information technology (a) accurately processes
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries and
the years 1999 and 2000 and (b) accurately performs leap year calculations. PGH
has undertaken a review and assessment of the
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Modified Year 2000 Compliance of its material suppliers, customers and service
providers and, based upon information provided by such persons, has determined
that no failure of any information technology of these persons to be Modified
Year 2000 Compliant will have a PGH Material Adverse Effect. This representation
shall be used by GEFA solely for the purpose of triggering the indemnity
provisions of Section 10.2(b) of this Agreement and may not be used and shall
have no force or effect with respect to any other person, including any third
party beneficiary of this Agreement.
3.23. Investment Assets.
(a) Schedule 3.23 contains (i) a list of all Investment
Assets owned by PAL as of September 30, 1999, together with the carrying value
on the balance sheet included in the PGH GAAP Financial Statements as of
September 30, 1999, of each such Investment Asset, and (ii) a list of all
purchases, acquisitions, sales or dispositions of Investment Assets by PAL for
October, 1999 (including the Investment Assets involved and the dates and prices
of the transactions). PAL has good and valid title to the Investment Assets
listed in Schedule 3.23 or purchased or acquired since September 30, 1999, 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 Second Closing Date, PAL
shall purchase and sell its Investment Assets, and invest and reinvest income
and proceeds in respect thereof only in accordance with investment policies
mutually agreed upon by GEFA and PGH.
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3.24. Investment Company.
None of the PGH Subsidiaries is an "investment company" or a
company "controlled" by an investment company, within the meaning of the
Investment Company Act of 1940, as amended (the "1940 ACT").
3.25. Purchase for Investment; Restricted Shares.
PGH acknowledges that it is acquiring the Purchased GELAAC
Shares for investment only and not with a view toward any resale or distribution
except in compliance with the Securities Act. PGH has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the risks and merits of its investment in the Purchased GELAAC Shares and is
capable of bearing the economic risks of such investment. PGH understands that
the Purchased GELAAC Shares have not been and will not be registered under the
Securities Act and that the Purchased GELAAC Shares may not be sold or otherwise
transferred by it, unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration and unless such
disposition is made in accordance with the terms of the GELAAC Shareholders
Agreement, and that a legend to such effect will be placed on the certificates
representing the Purchased GELAAC Shares.
3.26. Schedules.
As of the date hereof, all Schedules related to Article III are
substantially complete and accurate.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GEFA
GEFA represents and warrants to PMH and PGH as follows:
4.1. Corporate Status and Authority of GEFA.
GEFA is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware and has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of the obligations of GEFA under
this Agreement have been duly authorized by all necessary corporate action on
the part of GEFA and no consent or authorization of any shareholder of GEFA or
GELAAC is required. This Agreement has been duly executed and delivered by GEFA
and constitutes the valid and binding obligation of GEFA, enforceable against
GEFA in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or similar Laws affecting creditors' rights generally
and by general principles of equity (whether considered at law or in equity).
4.2. Corporate Status and Authority of GELAAC.
GELAAC is a corporation duly organized, validly existing and in
good standing under the Laws of the Commonwealth of Virginia. GELAAC is duly
authorized to conduct business and is in good standing under the Laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not have a GELAAC Material Adverse Effect. GELAAC has full
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it.
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4.3. Subsidiaries of GELAAC.
A true and complete list of all Subsidiaries of GELAAC as of the
date of this Agreement is set forth on Schedule 4.3 hereto. The assets,
properties and results of operations of all Subsidiaries of GELAAC and all
limited liability companies in which GELAAC owns a majority of the outstanding
membership interests, in the aggregate, are not material to GELAAC.
4.4. Capitalization of GELAAC.
The authorized Capital Stock of GELAAC consists of 50,000 common
shares, par value $1,000 per share, of which 25,651 shares are issued and
outstanding, and 200,000 preferred shares, stated value $1,000 per share, of
which 120,000 shares are issued and outstanding. The Purchased GELAAC Shares are
owned solely, both of record and beneficially, by GEFA, free and clear of all
Liens, and are duly authorized, validly issued, fully paid and nonassessable and
were not issued in violation of any preemptive rights. There are not outstanding
any (i) securities or obligations of GELAAC convertible into or exchangeable for
Capital Stock of GELAAC, (ii) warrants, rights or options to subscribe for or
purchase from GELAAC any Capital Stock of GELAAC or any securities or
obligations convertible into or exchangeable for Capital Stock of GELAAC or
(iii) obligations of GELAAC to issue Capital Stock of GELAAC or securities or
obligations convertible into or exchangeable for Capital Stock of GELAAC and no
authorization for any of the foregoing has been given.
4.5. Title.
Upon delivery to PGH of the Purchased GELAAC Shares pursuant to
this Agreement, PGH will have good and valid tile to the Purchased GELAAC Shares
free and clear of all Liens, and the Purchased GELAAC Shares will be fully paid
and non-assessable.
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4.6. No Conflicts; Consents and Approvals, etc.
(a) Except as set forth in Schedule 4.6(a), the execution,
delivery and performance by GEFA of this Agreement and the consummation of the
transactions contemplated hereby will not result in (i) a conflict with, or
breach or violation of, any provisions of the certificate or articles of
incorporation or by-laws of GEFA or GELAAC, (ii) subject to obtaining the
consents referred to in Section 4.6(b), any breach or violation of, default
under or give rise to any right of termination or acceleration (with or without
due notice or lapse of time or both) under any Law, Permit or Contract to which
GEFA or GELAAC is a party or subject or by which GEFA or GELAAC or their
respective properties or assets are bound, or (iii) the creation or imposition
of any Lien upon any assets or properties of GEFA or GELAAC, except for such
breaches, violations or defaults and such Liens which would not, individually or
in the aggregate, impair the ability of GEFA to fulfill its obligations
hereunder or reasonably be expected to result in a GELAAC Material Adverse
Effect.
(b) Except as set forth on Schedule 4.6(b), no Approvals are
required on the part of GEFA or GELAAC in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except filings required with respect to (i) the HSR Act and (ii)
approvals or non-disapprovals of the insurance regulatory authorities and other
Governmental Authority of the jurisdictions listed on Schedule 4.6(b) (the "GEFA
REQUIRED JURISDICTIONS," and together with the PGH Required Jurisdictions, the
"REQUIRED JURISDICTIONS").
4.7. No Violation, Default, etc.
GELAAC is not in violation of (i) any of its articles of
incorporation or bylaws (ii) any applicable Law, other than such violations as
would not, individually or in the aggregate,
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reasonably be expected to have a GELAAC Material Adverse Effect. No event of
default on the part of GELAAC or event that, but for the giving of notice or the
lapse of time or both, would constitute an event of default on the part of
GELAAC exists under any Contract or Permit to which GELAAC is a party or by
which GELAAC is bound or to which any of the properties, assets or operations of
GELAAC is subject or of which it is a beneficiary, other than any such event of
default as would not, individually or in the aggregate, reasonably be expected
to have a GELAAC Material Adverse Effect.
4.8. Licenses and Permits.
GELAAC has such Permits, including those required under
Applicable Insurance Laws, as are necessary to own, lease or operate its
properties as currently owned, leased or operated and to conduct its business as
currently conducted and all such Permits are valid and in full force and effect,
other than such Permits the failure to have as would not, individually or in the
aggregate, reasonably be expected to have a GELAAC Material Adverse Effect.
GELAAC is in compliance in all material respects with its obligations under such
Permits, and no event has occurred that allows, or after notice or lapse of time
would allow, revocation or termination of such Permits.
4.9. Environmental Matters.
The properties, assets and operations of GELAAC are in
compliance in all material respects with all applicable Environmental Laws,
other than any such failure to be in compliance as would not, individually or in
the aggregate, reasonably be expected to have a GELAAC Material Adverse Effect.
GELAAC has not received any notice or claim (and is not aware of any facts that
would form a reasonable basis for any claim), nor entered into any negotiations
or agreements with any third party, in each case relating to any material
liability or remedial action
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under Environmental Laws, other than any such liability or remedial action as
would not, individually or in the aggregate, reasonably be expected to have a
GELAAC Material Adverse Effect. There are no pending or, to the Knowledge of
GEFA, threatened Proceedings against or affecting GELAAC or its properties,
assets or operations in connection with any applicable Environmental Laws, other
than any such Proceedings as would not, individually or in the aggregate,
reasonably be expected to have a GELAAC Material Adverse Effect.
4.10. Taxes.
(a) Except as set forth on Schedule 4.10, with respect to
all taxable periods or portions thereof during which GELAAC was owned by GEFA or
its Affiliates:
(i) all material Returns required to be filed by or
on behalf of GELAAC or any of its Subsidiaries
(collectively, the "GELAAC TAXPAYER"), have been
duly filed on a timely basis;
(ii) such Returns are true, complete and correct in
all material respects;
(iii) all material Taxes due and payable by the GELAAC
Taxpayer (including Taxes due and payable by
reason of being included in a consolidated,
combined, unitary or similar Return) have been
paid, withheld or fully reserved on the GELAAC
GAAP Financial Statements;
(iv) all material Taxes owed by the GELAAC Taxpayer
for or with respect to any partial taxable
period that includes or ends on the First
Closing Date have been or will be fully reserved
for on the financial statements or books of the
GELAAC Taxpayer;
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(v) the GELAAC Taxpayer, individually or as part of
an affiliated group of corporations filing a
consolidated, combined, unitary or similar
Return, (A) has never been audited or received
written notice of initiation thereof by any
Governmental Authority for which the statute of
limitations for assessment of Taxes remains
open, (B) has never extended any applicable
statute of limitations regarding Taxes for which
the statute of limitations for assessment of
Taxes remains open, (C) has not filed a consent
pursuant to Section 341(f) of the Code, (D) has
not agreed to and is not required to make any
adjustment under Section 481(a) or Section 263A
of the Code (as a result of any examination by a
Taxing Authority), (E) has never made any
payments, is not obligated to make any payments
and is not a party to any agreement or
arrangement that under certain circumstances
could obligate it to make any payments that may
not be deductible under Section 280G of the
Code, (F) is not a party to any allocation or
sharing agreement with respect to Taxes and (G)
has never participated in the filing of any
consolidated, combined, unitary or similar
Return (other than with a group for which
General Electric Capital Assurance Company is
the common parent); and
(vi) the GELAAC Taxpayer has never been a United
States real property holding corporation within
the meaning of Section 897(c)(2) of the Code.
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(b) With respect to all taxable periods or portions thereof
prior to the acquisition of GELAAC by General Electric Capital Company ("GECC"),
Aon Corporation and its subsidiary, Combined Insurance Company of America, made
certain representations to GECC and provided certain indemnifications to GECC,
as provided in a stock purchase agreement, dated as of December 22, 1995, a copy
of which has been provided to PMH.
(c) None of the other representations of GEFA in this
Article IV, except for Section 4.7, relate to Tax matters, which are dealt with
exclusively in this Section 4.10.
4.11. Litigation.
Except as set forth on Schedule 4.11, there are no pending or,
to the Knowledge of GEFA, threatened Proceedings against or affecting GELAAC or
any of its properties, assets or operations, or with respect to which GELAAC is
responsible by way of indemnity or otherwise, other than any action as would
not, individually or in the aggregate, reasonably be expected to have a GELAAC
Material Adverse Effect. No Proceeding relating to the transactions contemplated
by this Agreement or the GELAAC Shareholders Agreement is (i) pending, (ii)
dismissed with rights of appeal not fully lapsed or (iii) to the Knowledge of
GEFA, threatened, in each case before any court or by any Governmental
Authority, that questions the validity of this Agreement or the GELAAC
Shareholders Agreement or any of the transactions contemplated hereby or thereby
or that presents a risk of the restraint or prohibition of the transactions
contemplated hereby or thereby or the obtaining of material damages or other
material relief in connection herewith or therewith or deprives, or would
reasonably be expected to deprive, PGH of any of the material benefits hereunder
or thereunder or that would reasonably be expected to have a GELAAC Material
Adverse Effect.
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4.12. Labor Matters.
There are no labor strikes, disputes, slow downs, work stoppages
or other labor troubles or grievances pending or, to the Knowledge of GEFA,
threatened against or involving GELAAC nor are any petitions pending or, to the
Knowledge of GEFA, threatened by any labor union representing or purporting to
represent GELAAC's employees. There are no unfair labor practice complaints or
charges before the National Labor Relations Board, no complaints, charges or
grievances of any nature before any similar or comparable state, local or
foreign agency relating to GELAAC. GELAAC has not received notice of, nor has
Knowledge of, the intent of any Governmental Authority responsible for the
enforcement of labor or employment laws to conduct any investigation of or
relating to GELAAC.
4.13. Financial Statements.
(a) GEFA has delivered or made available to PGH true and
complete copies of the balance sheet, income statement and cash flow statement
for GELAAC's two most recent fiscal years and the balance sheet, income
statement and cash flow statement for the fiscal quarters ended September 30,
1998 and September 30, 1999 (the "GELAAC GAAP FINANCIAL STATEMENTS"). The GELAAC
GAAP Financial Statements were prepared in accordance with GAAP consistently
applied throughout the periods involved and fairly present the financial
condition, results of operations, cash flows and changes in shareholders' equity
of GELAAC at the dates and for the periods to which they relate.
(b) GEFA has delivered or made available to PGH true and
complete copies of the annual and quarterly statements of GELAAC as filed with
the Commonwealth of Virginia, State Corporation Commission, Bureau of Insurance,
for GELAAC's two most recent fiscal years and the fiscal quarters ended
September 30, 1998 and September 30, 1999, including all exhibits,
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interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents filed in connection therewith (the
"GELAAC STATUTORY STATEMENTS"). The GELAAC Statutory Statements were prepared in
accordance with statutory accounting practices prescribed or permitted by the
Commonwealth of Virginia, State Corporation Commission, Bureau of Insurance
("VIRGINIA SAP"), consistently applied throughout the periods involved and
fairly present the statutory financial condition, results of operations, cash
flows and changes in shareholders' equity of GELAAC at the dates and for the
periods to which they relate. Such statements complied in all material respects
with all applicable laws when filed and no material deficiency has been asserted
with respect to any such statement by the applicable regulatory body or any
other Governmental Authority.
4.14. ERISA.
Except for noncompliance that would not reasonably be expected
to have a GELAAC Material Adverse Effect, GELAAC is in compliance with the terms
of the Plans to which GELAAC is a party or that are maintained by or otherwise
contributed to by GELAAC or its Affiliates for the benefit of present and former
employees of GELAAC (the "GELAAC PLANS") and the applicable provisions of ERISA,
the Code and all other applicable laws in respect of the GELAAC Plans. There are
no investigations by any Governmental Authority or Proceedings (except routine
claims for benefits) against or involving any GELAAC Plan or asserting any
rights to or claims for benefits under any GELAAC Plan, other than such
Proceedings as would not, individually or in the aggregate, reasonably be
expected to have a GELAAC Material Adverse Effect. Each GELAAC Plan that is
intended to be a tax-qualified Plan has been the subject of a determination
letter from the Internal Revenue Service to the effect that such GELAAC Plan and
each related trust is qualified and exempt from federal income Taxes
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under Sections 401(a) and 501(a), respectively, of the Code; no such
determination letter has been revoked, and revocation has not been threatened;
and, to the Knowledge of GEFA, no event has occurred and no circumstances exist
that could reasonably be expected to adversely affect the tax-qualification of
such GELAAC Plan. GELAAC has not incurred, and is not reasonably expected to
incur, liability (including any joint and several liability) under Title IV of
ERISA or under Section 412 of the Code that would reasonably be expected to have
a GELAAC Material Adverse Effect or would result in the imposition of a Lien on
any of the assets of GELAAC. GELAAC has not been required to and GELAAC is not
reasonably expected to be required to provide security under Section 401(a)(29)
to any GELAAC Plan or to any other defined benefit Plan.
4.15. Absence of Undisclosed Liabilities.
Except as set forth in Schedule 4.15, GELAAC has no liabilities
of any nature (including, without limitation, obligations or liabilities arising
from policyholder claims or guaranty fund assessments), whether absolute,
accrued, contingent or otherwise, of a nature required by GAAP to be reflected
in a consolidated balance sheet (or reflected in the notes thereto), except for
(i) liabilities fully and adequately reflected or reserved against in the GELAAC
GAAP Financial Statements or in the notes, exhibits, schedules and
interrogatories thereto in accordance with the standards of disclosure
applicable thereto, (ii) liabilities incurred since the date of the most recent
quarterly balance sheet included in the GELAAC GAAP Financial Statements in the
ordinary course of business and (iii) liabilities that in the aggregate are not
material to the financial condition of XXXXXX.
00
00
4.16. Insurance.
GELAAC carries insurance in such amounts and covering such risks
as is adequate for the conduct of its business and the value of its properties.
4.17. No Adverse Changes.
Except as set forth on Schedule 4.17, since the date of the most
recent quarterly balance sheet included in the GELAAC GAAP Financial Statements,
(a) GELAAC has not incurred any liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement (other than
this Agreement) or other transaction, (i) that is not in the ordinary course of
business or (ii) that would, individually or in the aggregate, reasonably be
expected to have a GELAAC Material Adverse Effect; (b) GELAAC has not sustained
any loss or interference with its business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance); (c)
there has been no change in the outstanding Capital Stock of GELAAC and no
dividend or distribution of any kind has been declared, paid or made by GELAAC
on any class of its Capital Stock, except for regular distributions on its
preferred shares; and (d) there has been no event or circumstance causing a
GELAAC Material Adverse Effect, or any development that would, individually or
in the aggregate, reasonably be expected to result in a GELAAC Material Adverse
Effect.
4.18. Investment Company.
GELAAC is not an "investment company" or a company "controlled"
by an investment company, within the meaning of the 0000 Xxx.
4.19. Year 2000.
GELAAC has a detailed and comprehensive plan (the "GELAAC YEAR
2000 PLAN") regarding Modified Year 2000 Compliance (including, without
limitation, the costs of
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reprogramming, reprogramming errors and failures of information technology that
is not Modified Year 2000 Compliant) will not, in the aggregate, have a GELAAC
Material Adverse Effect. GELAAC has undertaken a review and assessment of the
Modified Year 2000 Compliance of its material suppliers, customers and service
providers and, based upon information provided by such persons, has determined
that no failure of any information technology of these persons to be Modified
Year 2000 Compliant will have a GELAAC Material Adverse Effect. This
representation shall be used by PMH and PGH solely for the purpose of triggering
the indemnity provisions of Section 10.2(c) of this Agreement and may not be
used and shall have no force or effect with respect to any other person,
including any third party beneficiary of this Agreement.
4.20. Books and Records.
All the books, records and accounts of GELAAC are in all
material respects true and complete, are maintained in accordance with good
business practice and all Laws applicable to its businesses and accurately
present and reflect in all material respects all of the transactions therein
described.
4.21. Purchase for Investment; Restricted Shares.
GEFA acknowledges that it is acquiring the Purchased PGH
Subsidiary Shares for investment only and not with a view toward any resale or
distribution thereof except in compliance with the Securities Act. GEFA has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the risks and merits of its investment in the Purchased
PGH Subsidiary Shares and is capable of bearing the economic risks of such
investment. GEFA understands that the Purchased PGH Subsidiary Shares have not
been and will not be registered under the Securities Act and that the Purchased
PGH Subsidiary Shares may not
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be sold or otherwise transferred by it, unless a subsequent disposition thereof
is registered under the Securities Act or is exempt from such registration.
4.22. Brokers.
All discussions and negotiations relating to this Agreement and
the transactions contemplated hereby have been carried out without the
intervention of any Person acting on behalf of GEFA, GELAAC or any of their
respective Affiliates in such manner as to give rise to any valid claim against
GEFA, GELAAC or any of their respective Affiliates, PMH or PGH or any PGH
Subsidiary for any brokerage or finder's commission, fee or similar
compensation.
ARTICLE V
COVENANTS OF GEFA, PGH AND PMH
5.1. Satisfaction of Closing Conditions.
The parties shall use their commercially reasonable efforts to
bring about the satisfaction as soon as possible of all the conditions contained
in Article IX. Without limiting the generality of the foregoing, the parties
shall apply for and diligently prosecute all applications for, and shall use
their commercially reasonable efforts promptly to obtain, such Approvals as
shall be necessary to permit the consummation of the transactions contemplated
by this Agreement.
5.2. Publicity.
No press release or public announcement related to this
Agreement, the Ancillary Agreements, or the transactions contemplated hereby or
thereby, shall be issued or made without the joint approval of PMH, PGH and
GEFA, unless required by Law in which case PMH, PGH and GEFA shall have the
right to review such press release or announcement prior to publication.
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5.3. Policyholder Confidentiality.
PMH, PGH and GEFA agree to maintain the confidentiality of all
records and other information relating to customers of the PGH Subsidiaries in
accordance with applicable Law and Section 5.5 hereof.
5.4. Cooperation; Regulatory Filings; Other Consents.
(a) GEFA shall, and PMH and PGH shall cause PHLMIC to, as
promptly as practicable, but in no event later than fifteen (15) Business Days
following the execution and delivery of this Agreement, file with the United
States Federal Trade Commission (the "FTC") and the United States Department of
Justice (the "DOJ") the notification and report form, if any, required for the
transactions contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act. Any such notification and report
form and supplemental information shall be in substantial compliance with the
requirements of the HSR Act. PMH, PGH and GEFA shall keep each other apprised of
the status of any communications with, and any inquiries or requests for
additional information from, the FTC and the DOJ and any other Governmental
Authority and shall comply promptly with any such inquiry or request. Each of
PMH, PGH and GEFA shall use commercially reasonable efforts to obtain any
clearance required under the HSR Act or any other consent, approval or
authorization of any Governmental Authority necessary for the consummation of
the transactions contemplated hereby.
(b) GEFA shall file a Form A or other appropriate
application, if any, relating to the change of control of PAL and the other PGH
Subsidiaries with the insurance regulatory authority or other appropriate
regulatory authority in each of GEFA's Required Jurisdictions as promptly as
practicable, but in no event later than twenty Business Days following the
execution and delivery of this Agreement. GEFA shall consult in good faith with
PGH as to the form and
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substance of each such Form A or other appropriate application. Each of PMH, PGH
and GEFA shall furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation of any
filing that is necessary under any applicable Law or in connection with filings
to be specified. GEFA shall keep PGH apprised of the status of such filings.
(c) PMH, PGH and GEFA shall as promptly as practicable
comply with any other Laws of any jurisdiction that are applicable to any of the
transactions contemplated hereby and pursuant to which any Approvals or filing
with, any Governmental Authority or any other Person in connection with such
transactions is necessary.
5.5. Confidentiality and Non-Solicitation.
(a) Except as otherwise agreed by the parties hereto in
writing, a party hereto and its Affiliates receiving Confidential Information
(the "RECEIVING PARTY") shall hold all such Confidential Information in the
strictest confidence at all times, making no use thereof other than in
connection with the consummation of the transactions contemplated by this
Agreement. The Receiving Party shall not without the prior written approval of
an appropriate officer of any other party or its Affiliates who furnishes
Confidential Information (the "DISCLOSING PARTY"): (i) release any Confidential
Information to any Person other than Persons directly involved in the
transactions contemplated by this Agreement; (ii) duplicate or otherwise
reproduce any Confidential Information except as required in connection with the
transactions contemplated by this Agreement; (iii) reverse engineer, reverse
compile, or otherwise subject any software used by Phoenix or GEFA to any
process, a goal of which is to obtain the source code therefor; or (iv) remove
or obscure any copyright or other proprietary notice on any software or other
object owned, leased or licensed by Phoenix or GEFA. At any time upon written
request by the
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Disclosing Party, the Receiving Party shall return all records and copies of
Confidential Information, in whatever form then existing, to an appropriate
officer of the Disclosing Party or destroy all copies thereof, including copies
resident on any computer, and certify to the Disclosing Party in a writing
signed by an authorized officer of the Receiving Party as to such destruction;
provided that after the Second Closing, GEFA need not comply with any request
pursuant to the prior sentence to the extent it relates solely to Confidential
Information concerning the PGH Subsidiaries.
(b) In the event that the Receiving Party is requested or
required (by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or process) to disclose any
Confidential Information, the Receiving Party agrees that it will provide the
Disclosing Party with prompt written notice of any such request or requirement
(written, if practicable) so that the Disclosing Party may seek an appropriate
protective order or waive compliance with the provisions of this Section 5.5.
If, failing the entry of a protective order or the receipt of a waiver
hereunder, the Receiving Party is, in the opinion of its counsel, compelled to
disclose Confidential Information, the Receiving Party may disclose that portion
of the Confidential Information which its counsel advises that it is compelled
to disclose and will exercise reasonable efforts to obtain assurance that
confidential treatment will be accorded to that portion of the Confidential
Information which is being disclosed. In any event, the Receiving Party will not
oppose any action by the Disclosing Party to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
the Confidential Information.
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(c) The Receiving Party shall be liable hereunder for the
actions and inactions of itself, its Affiliates and its Affiliates' officers,
directors, employees, advisers and representatives, all of whom shall be
required by the Receiving Party to abide by the provisions of this Agreement as
though made parties hereto.
(d) The Receiving Party shall not, and shall not permit any
of its representatives to, communicate with any Person concerning any other
aspect of the transactions contemplated hereby, other than Persons reasonably
required to assist the Receiving Party in its analysis of the Confidential
Information in order to effect the transactions contemplated hereby.
(e) Each Receiving Party stipulates that breach of the
provisions of this Section 5.5 concerning Confidential Information could cause
the Disclosing Party, or the rightful owner of subject of such matters,
irreparable injury inadequately compensable through monetary damages, and
accordingly, agrees that the Disclosing Party shall be entitled to injunctive
relief against such breach or threatened breach, in addition to any other
available remedies.
(f) Until two years after the Second Closing Date, or if
there is none, then until thirty months after the date hereof, GEFA shall not
directly or indirectly solicit for employment or hire or employ any officer,
director or employee of Phoenix who is or was actively involved in the
negotiations concerning the transactions contemplated hereby or who was, during
the negotiation of the transactions contemplated hereby, an officer with the
title of Vice President or higher or the equivalent who had responsibilities
involving any line of business of any of the PGH Subsidiaries. Notwithstanding
the foregoing, GEFA shall not be prevented from hiring any such Person who
contacts it on his or her own initiative without any direct or indirect
solicitation by GEFA or its agents (other than through general solicitations in
industry journals, newspapers
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or similar publications or through use of a search firm or similar agency that
has not been directed by GEFA to contact such Person, except the Persons listed
on Schedule 5.5).
5.6. Compliance with Laws.
(a) GEFA agrees that, after the First Closing and so long as
PGH or an Affiliate owns the Purchased GELAAC Shares, it will cause GELAAC to,
and GELAAC will, comply with all Laws governing transactions between GELAAC and
its Affiliates.
(b) GEFA agrees that after the Second Closing and so long as
PGH or an Affiliate owns the Purchased PAL Shares, it will cause the PGH
Subsidiaries to comply with all Laws governing transactions between the PGH
Subsidiaries and their Affiliates.
(c) GEFA further agrees: (i) that so long as PGH or any of
its Affiliates continues to own any Purchased GELAAC Shares, all intercompany
and Affiliate transactions shall be allocated on the GELAAC GAAP Financial
Statements and GELAAC Statutory Statements pursuant to GAAP or Virginia SAP, as
the case may be, and in accordance with GELAAC's accounting practices,
consistently applied, for all prior fiscal years; and (ii) so long as PGH or any
of its Affiliates continues to own any Purchased PAL Shares, all intercompany
and Affiliate transactions shall be allocated on PAL's financial statements
pursuant to GAAP or Connecticut SAP, as the case may be, and in accordance with
PAL's accounting practices, consistently applied for all prior fiscal years.
5.7. PGH's Option to Require GEFA to Repurchase the Purchased GELAAC
Shares.
(a) GELAAC shall deliver to PGH and GEFA a notice that a
Change of Control of GELAAC has occurred either prior to or no more than thirty
(30) days following the
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occurrence of a Change of Control of GELAAC. The date such notice is given is
hereinafter referred to as the "GELAAC CHANGE OF CONTROL NOTICE DATE."
(b) PGH shall deliver to GEFA a notice that a Change of
Control of PGH has occurred either prior to or no more than thirty (30) days
following the occurrence of a Change of Control of PGH. The date such notice is
given is hereafter referred to as the "PGH CHANGE OF CONTROL NOTICE DATE."
(c) PGH shall have the right to require GEFA, but only GEFA,
to repurchase the Purchased GELAAC Shares in full, but not in part, for the then
applicable per share purchase price (the "GELAAC REPURCHASE PRICE") (which the
parties agree shall constitute the fair market value of the Purchased GELAAC
Shares) times the number of Purchased GELAAC Shares outstanding following a
Change of Control of GELAAC.
(d) In addition, the date forty-five (45) days after any PGH
Change of Control Notice Date shall be a GELAAC Put Notice Date, within the
meaning of Section 5.7(i), and GEFA shall repurchase the Purchased GELAAC Shares
in full for the then applicable GELAAC Repurchase Price times the number of
Purchased GELAAC Shares outstanding following the Change of Control of PGH;
provided, however, that GEFA may waive the application of this Section 5.7(d) by
written notice delivered to PGH at any time within such forty-five (45) days.
(e) The GELAAC Repurchase Price shall be equal to the GELAAC
Reference Amount times the Index Rate. The calculation of the GELAAC Index Rate
and the GELAAC Reference Amount shall be agreed upon among the parties prior to
the First Closing Date.
(f) The determination of the GELAAC Reference Amount for the
purpose of determining the applicable GELAAC Repurchase Price in accordance with
Section 5.7(c) shall be
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made by GEFA as of and based upon the financial statements of GELAAC for the
most recent six calendar quarters ending prior to the date of the Change of
Control of GELAAC or PGH, as the case may be; provided that in the event that
fewer than six (6) calendar quarters have elapsed between the date of the GELAAC
Change of Control or the PGH Change of Control and the date of this Agreement,
then the calculation of the GELAAC Reference Amount shall be based on the
calendar quarters commencing as of January 1, 2000. Promptly upon determination
of the applicable GELAAC Reference Amount and the Index Rate, GEFA shall deliver
to PGH its calculations and the relevant financial statements (the "GELAAC
CHANGE OF CONTROL CALCULATIONS").
(g) In addition, PGH shall have the right to require GEFA,
but only GEFA, to repurchase the Purchased GELAAC Shares for an amount equal to
the then applicable GELAAC Repurchase Price times the number of Purchased GELAAC
Shares sold, in the following amounts and in accordance with the following
schedule:
(i) as of April 1 through June 30, 2005: 265 of the
Purchased GELAAC Shares, in full but not in part
(the "FIRST GELAAC INSTALLMENT PURCHASE");
(ii) as of April 1 through June 30, 2006:
(A) 265 of the Purchased GELAAC Shares, in
full but not in part, if the First
GELAAC Installment Purchase has
occurred; and
(B) 530 of the Purchased GELAAC Shares, in
full but not in part, if the First
GELAAC Installment Purchase has not
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occurred (the "SECOND GELAAC INSTALLMENT
PURCHASE"); and
(iii) as of April 1 through June 30, 2007, and every
April 1 through June 30 thereafter:
(A) 265 of the Purchased GELAAC Shares, in
full but not in part, if both the First
and Second GELAAC Installment Purchases
have occurred;
(B) 530 of the Purchased GELAAC Shares, in
full but not in part, if only one of the
First or Second GELAAC Installment
Purchases has occurred; or
(C) 800 of the Purchased GELAAC Shares, in
full but not in part, if neither the
First nor Second GELAAC Installment
Purchases has occurred.
The number of Purchased GELAAC Shares that may be repurchased pursuant to this
Section 5.7(g) shall continue to be readjusted from time to time to reflect
stock splits, stock dividends, recapitalizations and the like.
(h) On March 31, 2005 and each March 31 thereafter on which
PGH owns the Purchased GELAAC shares, GEFA will deliver to PGH its calculations
of the then applicable GELAAC Reference Amount as of the prior December 31 based
on the six calendar quarters ending on such December 31 and the relevant
financial statements (the "GELAAC ANNUAL CALCULATIONS" and, together with the
GELAAC Change of Control Calculations, the "GELAAC
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CALCULATIONS"). GEFA shall concurrently deliver to PGH its calculations of the
Index Rate and the GELAAC Repurchase Price based on the GELAAC Calculations.
(i) In the event that PGH desires to sell the Purchased
GELAAC Shares pursuant to its rights under this Section 5.7, PGH shall deliver
to GEFA and GELAAC notice of its intention to sell the Purchased GELAAC Shares
pursuant to this Section 5.7 within thirty (30) days after receipt of the
applicable GELAAC Calculations and GELAAC's calculation of the Index Rate and
the GELAAC Repurchase Price. The date such notice is given is hereinafter
referred to as the "GELAAC PUT NOTICE DATE." Following a GELAAC Put Notice Date,
the closing date for the repurchase of the Purchased GELAAC Shares pursuant to
this Section 5.7 (the "GELAAC PUT CLOSING DATE") shall be on the tenth (10th)
Business Day following the agreement of the parties on the GELAAC Repurchase
Price.
(j) PGH shall be afforded a period of thirty (30) days to
review the applicable GELAAC Calculations, Index Rate and the GELAAC Repurchase
Price following the GELAAC Put Notice Date. During such thirty (30) day period,
PGH and its representatives shall be given an adequate opportunity to review the
financial statements and books and records of GELAAC used in the preparation of
the GELAAC Calculations. At or before the end of such thirty (30) day period,
PGH shall either (i) accept the GELAAC Repurchase Price in its entirety or (ii)
deliver to GEFA and GELAAC a reasonably detailed written notice of its objection
to the calculation of the GELAAC Reference Amount and/or the GELAAC Repurchase
Price (the "PGH GELAAC PUT OBJECTION NOTICE"). The failure by PGH to deliver the
PGH Put Objection Notice in a timely manner shall constitute PGH's agreement
with the GELAAC Repurchase Price. If PGH delivers the PGH Put Objection Notice
in a timely manner, then, within a period of thirty (30) days from
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the date of such delivery, the parties and, if desired, their accountants will
attempt to resolve in good faith any disputed items and reach an agreement with
respect thereto. Failing such resolution, the unresolved disputed items will be
referred for final binding resolution to the Third Party Accountants. The fees
and expenses of the Third Party Accountants shall be borne equally between GEFA
and GELAAC, on the one hand, and PGH on the other hand. The Third Party
Accountants' determination of the GELAAC Repurchase Price shall be conclusive.
(k) The Purchased GELAAC Shares shall be purchased by GEFA
on the GELAAC Put Closing Date (or the earliest date thereafter upon which all
governmental consents or approvals necessary to consummate such purchase are
received) by delivery of the amount required by Section 5.7(c), (d) or (e), as
appropriate, by wire transfer of immediately available funds to an account of
PGH designated in writing to GEFA by PGH at least two (2) Business Days prior to
the GELAAC Put Closing Date, upon surrender of the certificates representing the
Purchased GELAAC Shares duly endorsed for transfer or accompanied by stock
powers duly endorsed in blank.
5.8. PGH's Option to Require GEFA to Purchase the Retained PAL
Shares.
(a) PAL shall deliver to PGH and GEFA a notice that a Change
of Control of PAL has occurred either prior to or no more than thirty (30) days
following the occurrence of a Change of Control of PAL. The date such notice is
given is hereinafter referred to as the "PAL CHANGE OF CONTROL NOTICE DATE."
(b) PGH shall deliver to GEFA a notice that a Change of
Control of PGH has occurred either prior to or no more than thirty (30) days
following the occurrence of a Change of
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Control of PGH. The date such notice is given is hereafter referred to as the
"PGH CHANGE OF CONTROL NOTICE DATE."
(c) PGH shall have the right to require GEFA, but only GEFA,
to purchase the Retained PAL Shares in full, but not in part, for the then
applicable per share purchase price (the "PAL PURCHASE PRICE") (which the
parties agree shall constitute the fair market value of the Retained PAL Shares)
times the number of Retained PAL Shares outstanding following a Change of
Control of PAL.
(d) In addition, the date forty-five (45) days after any PGH
Change of Control Notice Date shall be a PAL Put Notice Date, within the meaning
of Section 5.8 (i), and GEFA shall purchase the Retained PAL Shares in full for
the then applicable PAL Purchase Price times the number of Retained PAL Shares
outstanding following the Change of Control of PGH; provided, however, that GEFA
may waive the application of this Section 5.8(d) by written notice delivered to
PGH at any time within such forty-five (45) days.
(e) The PAL Purchase Price shall be equal to the PAL
Reference Amount times the Index Rate. The calculation of the Index Rate and the
PAL Reference Amount shall be agreed upon among the parties prior to the First
Closing Date.
(f) The determination of the PAL Reference Amount for the
purpose of determining the applicable PAL Purchase Price in accordance with
Section 5.8(c) shall be made by GEFA as of and based upon the financial
statements of PAL for the most recent six calendar quarters ending prior to the
date of the Change of Control of PAL or PGH, as the case may be; provided that
in the event that fewer than six (6) calendar quarters have elapsed between the
date of the PAL Change of Control or the PGH Change of Control and the date of
this Agreement,
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then the calculation of the PAL Reference Amount shall be based on the calendar
quarters commencing as of January 1, 2000. Promptly upon determination of the
applicable PAL Reference Amount and the Index Rate, GEFA shall deliver to PGH
its calculations and the relevant financial statements (the "PAL CHANGE OF
CONTROL CALCULATIONS").
(g) In addition, PGH shall have the right to require GEFA,
but only GEFA, to purchase the Retained PAL Shares for an amount equal to the
then applicable PAL Purchase Price times the number of Retained PAL Shares sold,
in the following amounts and in accordance with the following schedule:
(i) as of April 1 through June 30, 2005: 15 of the
Retained PAL Shares, in full but not in part
(the "FIRST PAL INSTALLMENT PURCHASE");
(ii) as of April 1 through June 30, 2006:
(A) 15 of the Retained PAL Shares, in full
but not in part, if the First PAL
Installment Purchase has occurred; and
(B) 30 of the Retained PAL Shares, in full
but not in part, if the First PAL
Installment Purchase has not occurred
(the "SECOND PAL INSTALLMENT PURCHASE");
and
(iii) as of April 1 through June 30, 2007, and every
December 31 thereafter:
(A) 15 of the Retained PAL Shares, in full
but not in part, if both the First and
Second PAL Installment Purchases have
occurred;
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(B) 30 of the Retained PAL Shares, in full
but not in part, if only one of the
First or Second PAL Installment
Purchases has occurred; or
(C) 45 of the Retained PAL Shares, in full
but not in part, if neither the First
nor Second PAL Installment Purchases has
occurred.
The number of Retained PAL Shares that may be purchased pursuant to this Section
5.8(g) shall continue to be adjusted from time to time to reflect stock splits,
stock dividends, recapitalizations and the like.
(h) On March 31, 2005 and each March 31 thereafter on which
PGH owns the Retained PAL shares, GEFA will deliver to PGH its calculations of
the then applicable PAL Reference Amount as of the prior December 31 based on
the six calendar quarters ending on such December 31 and the relevant financial
statements (the "PAL ANNUAL CALCULATIONS" and, together with the PAL Change of
Control Calculations, the "PAL CALCULATIONS"). GEFA shall concurrently deliver
to PGH its calculations of the Index Rate and the PAL Purchase Price based on
the PAL Calculations.
(i) In the event that PGH desires to sell the Purchased PAL
Shares pursuant to its rights under this Section 5.8, PGH shall deliver
to GEFA and PAL notice of its intention to sell the Retained PAL Shares
pursuant to this Section 5.8 within thirty (30) days after receipt of
the applicable PAL Calculations and GEFA's calculation of the Index Rate
and the PAL Purchase Price. The date such notice is given is hereinafter
referred to as the "PAL PUT NOTICE DATE." Following a PAL Put Notice
Date, the closing date for
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the purchase of the Retained PAL Shares pursuant to this Section 5.8
(the "PAL PUT CLOSING DATE") shall be on the tenth (10th) Business Day
following the agreement of the parties on the PAL Purchase Price.
(j) PGH shall be afforded a period of thirty (30) days to
review the applicable PAL Calculations, Index Rate and PAL Purchase Price
following the PAL Put Notice Date. During such thirty (30) day period, PGH and
its representatives shall be given an adequate opportunity to review the
financial statements and books and records of PAL used in the preparation of the
PAL Calculations. At or before the end of such thirty (30) day period, PGH shall
either (i) accept the PAL Purchase Price in its entirety or (ii) deliver to GEFA
and PAL a reasonably detailed written notice of its objection to the calculation
of the PAL Reference Amount (the "PGH PAL PUT OBJECTION NOTICE"). The failure by
PGH to deliver the PGH Put Objection Notice in a timely manner shall constitute
PGH's agreement with the PAL Purchase Price. If PGH delivers the PGH Put
Objection Notice in a timely manner, then, within a period of thirty (30) days
from the date of such delivery, the parties and, if desired, their accountants
will attempt to resolve in good faith any disputed items and reach an agreement
with respect thereto. Failing such resolution, the unresolved disputed items
will be referred for final binding resolution to the Third Party Accountants.
The fees and expenses of the Third Party Accountants shall be borne equally
between GEFA and PAL, on the one hand, and PGH on the other hand. The Third
Party Accountants' determination of the PAL Purchase Price shall be conclusive.
(k) The Retained PAL Shares shall be purchased by GEFA on
the PAL Put Closing Date (or the earliest date thereafter upon which all
governmental consents or approvals necessary to consummate such purchase are
received) by delivery of the amount required by
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Section 5.8(c), (d) or (e), as appropriate, by wire transfer of immediately
available funds to an account of PGH designated in writing to GEFA by PGH at
least two (2) Business Days prior to the PAL Put Closing Date, upon surrender of
the certificates representing the Purchased PAL Shares duly endorsed for
transfer or accompanied by stock powers duly endorsed in blank.
5.9. Reinsurance Agreements.
As promptly as practicable following the execution and delivery
of this Agreement, GEFA will, and PMH and PGH will cause PHLMIC to, enter into
negotiations with respect to the Replacement Reinsurance Agreements. When GEFA
and PHLMIC have agreed upon the terms of the Replacement Reinsurance Agreements,
PMH and PGH will cause PHLMIC and PAL to file such Agreements with the insurance
regulatory authorities or other Governmental Authorities of the PGH Required
Jurisdictions and any other jurisdiction in which such filing is required. Until
the approval (or non-disapproval after the expiration of the then applicable
disapproval period) of the Replacement Reinsurance Agreements by such insurance
regulatory authorities or other Governmental Authorities is granted:
(a) PMH and PGH agree that: (i) they will cause PHLMIC to
refrain from exercising (A) any rights PHLMIC may have pursuant to Section 10 of
the 1991 Reinsurance Agreement and (B) any rights PHLMIC may have pursuant to
Appendix B of the 1992 Reinsurance Agreement to receive any reinsurance
allowances other than premium and excise taxes and commissions; and (ii) prior
to the Second Closing, they will cause PAL to refrain from exercising (A) any
rights PAL may have pursuant to Section 10 of the 1992 Reinsurance Agreement and
(B) any rights PAL may have pursuant to Appendix B to the 1991 Reinsurance
Agreement to receive any reinsurance allowances other than premium and excise
taxes and commissions; and
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(b) GEFA agrees that, following the Second Closing, it will
cause PAL to refrain from exercising (i) any rights PAL may have pursuant to
Section 10 of the 1992 Reinsurance Agreement and (ii) any rights PAL may have
pursuant to Appendix B to the 1991 Reinsurance Agreement to receive any
reinsurance allowances other than premium and excise taxes and commissions.
5.10. Rating Agencies.
GEFA, PMH and PGH will coordinate, and cooperate with respect
to, all discussions with rating agencies regarding the transactions contemplated
by this Agreement. By way of example and without limiting the foregoing, PMH and
PGH will cause PHLMIC to comply with all of its notice and other obligations to
Standard & Poor's in connection with the transactions contemplated by this
Agreement.
5.11. Negotiation of Reference Amount, Index Rate and Certain
Ancillary Agreements.
The parties agree that they shall or shall cause their
appropriate Affiliates to, negotiate in good faith (i) the definitions of
"GELAAC Reference Amount," "PAL Reference Amount" and "Index Rate" and (ii) the
Ancillary Agreements (other than the GELAAC Shareholders Agreement and the PAL
Shareholders Agreement), which shall be in form and substance reasonably
acceptable to the parties and shall be executed and delivered at the Second
Closing to fulfill the conditions set forth in Section 9.5(d).
5.12. Conversion Policies.
The parties agree to use commercially reasonable efforts to
obtain within twenty-four (24) months after the Second Closing all approvals
from Governmental Authorities necessary to permit PAL to amend, if necessary,
the Contracts identified on Schedule 5.12 (the "SPECIAL
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CONTRACTS") in such a manner that neither PHLMIC nor any of its Affiliates
(other than PAL) is required to issue any conversion policies to any Person
whose group coverage is terminating. Promptly upon the receipt of any such
approvals relating to a Special Contract, GEFA shall cause PAL to so amend such
Special Contract, if necessary. PMH and PGH shall cause PHLMIC and its
Affiliates to issue conversion policies to any Person who is covered by a
Special Contract and whose group coverage is terminating, which conversion
policy shall be issued in accordance with the terms and conditions of such
Special Contract on the same economic basis as current practice, until such time
as such Special Contract is amended as contemplated by this Section 5.12.
5.13. Nonrecourse Financing.
GEFA shall use its best efforts to assist Phoenix or any of its
Affiliates in obtaining, not later than the Second Closing, a nonrecourse loan
in the principal amount of forty percent (40%) of the GELAAC Share Price, on
terms and conditions reasonably acceptable to Phoenix. GEFA agrees to provide
all information requested by potential lenders in a timely manner and to provide
assistance in the negotiations and documentation of such financing including the
delivery of all required certifications and the affirmation of the accuracy of
any information provided by GEFA. In the event that such nonrecourse financing
is not secured by the Second Closing, GEFA shall provide such financing on terms
and conditions reasonably acceptable to Phoenix and GEFA.
5.14. Financial Information at Closings.
PMH and PGH agree to provide, on a timely basis, financial
statements for each of the PGH Subsidiaries as of the Second Closing (or Third
Closing, as appropriate) prepared under GAAP and Connecticut SAP, as
appropriate, including all supporting detail information necessary to prepare
such financial statements as well as all information necessary to prepare any
Tax filings
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required to be made by GEFA with respect to each legal entity. Such information
shall include, but not be limited to (a) detail reserve calculations by block of
business, (b) investment information by CUSIP, (c) detail of other assets and
other liabilities totals included in the above financial statements and Tax
filings, (d) detail of other revenues and other expenses totals included in the
above financial statements and Tax filings, (e) state apportionment information
and (f) any other detail information reasonably required to prepare, explain or
analyze such financial statements and Tax filings.
5.15. Leases.
GEFA and PMH will, and PMH will cause Phoenix to, negotiate in
good faith to agree upon assignments or subleases of the leases listed on
Schedule 5.15 to the appropriate PGH Subsidiary as of the Second Closing (the
"ASSIGNED LEASES").
5.16. Investment Asset Transaction Reports.
Within ten Business Days after the end of each month occurring
between the date hereof and the Second Closing Date, PAL shall provide GEFA 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.
5.17. Contact with Employees, Customers and Policyholders.
GEFA (and all of its agents and Affiliates and any employees,
directors or officers of any of the foregoing) shall contact and communicate
with the employees, customers, policyholders and brokers of the PGH Subsidiaries
in connection with the transactions contemplated hereby only with the prior
written consent of PMH or PGH, which consent may be
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conditioned upon an officer of PMH, PGH or the PGH Subsidiaries being present at
any such meeting or conference.
ARTICLE VI
COVENANTS OF PMH AND PGH
6.1. Conduct of Business, etc.
From the date hereof until the Second Closing, except for
entering into and performing under this Agreement, the effect of the
consummation of the transactions contemplated hereby, or as consented to by GEFA
in writing, such consent not to be unreasonably withheld or delayed, PMH and PGH
shall cause each of the PGH Subsidiaries to conduct the PGH Business in the
ordinary course in substantially the same manner in which it previously has been
conducted and not to take any action that would cause a breach of Section 3.9 or
require any amendment or addition to Schedule 3.9.
6.2. Access and Information.
Subject to the limitations set forth in Section 5.17, upon
twenty-four (24) hours' prior notice PMH and PGH shall cause each of the PGH
Subsidiaries to give to GEFA and its representatives reasonable access at all
reasonable times during the PGH Subsidiaries' customary business hours to the
properties, books and records of the PGH Subsidiaries and to furnish such
information and documents in its possession relating to the PGH Subsidiaries:
(i) as GEFA reasonably may request generally; and (ii) as GEFA reasonably may
request to complete an in-force review of PAL's stop-loss line of business (the
"IN-FORCE REVIEW"); provided that GEFA shall not be entitled to any such access,
information or documents (i) as to which the attorney-client privilege may be
available, or (ii) the disclosure of which is restricted by Contract or
applicable Law except in strict compliance with such Contract or Law, or (iii)
relating to
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evaluation records, medical histories or other information that in PMH's and
PGH's good faith opinion is sensitive or the disclosure of which could subject
PMH, PGH or their Affiliates to risk of liability, or (iv) that unreasonably
interferes with any aspect of the conduct of the PGH Business. GEFA shall not be
entitled to exercise its rights under Section 9.7 based on the results of the
In-Force Review.
6.3. Supplements to Disclosures.
Until the Second Closing any amendments to the Schedules with
respect to any matter that, if existing or occurring at or prior to the Second
Closing Date, would have been required to be set forth or described in such a
Schedule or that is necessary to complete or correct any information in any
representation or warranty contained in Article III will not be taken into
account for purposes of determining the fulfillment of the condition precedent
set forth in Section 9.7(a). For all other purposes, including, without
limitation, Section 10.2(b), each such additional amendment and supplement shall
be given effect.
6.4. Maintenance of Insurance; Post-Closing Claims.
From the date hereof through the Second Closing Date, PMH and
PGH shall, and shall cause the PGH Subsidiaries to, use reasonable efforts to
maintain or cause to be maintained in force insurance with respect to the PGH
Subsidiaries as described in Section 3.17. Following the Second Closing, the PGH
Subsidiaries shall, and GEFA shall cause the PGH Subsidiaries to, pay or be
liable for the amount of any deductible or self-insured retention applicable to
any claims incurred prior to the Second Closing under the policies specified in
Section 3.17 (or any replacement policy or other form of coverage substituted
therefor), to the extent reflected in the PGH GAAP Year-End Balance Sheets. With
respect to the workers' compensation, general liability and automobile liability
policies specified in Schedule 3.17, the PGH Subsidiaries will
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continue to manage all claims incurred prior to the Second Closing and made or
reported thereunder (whether made or reported before or after the Second
Closing), on behalf of the PGH Subsidiaries and the PGH Subsidiaries will
promptly reimburse PHLMIC for the amount of any insurance payments made in
respect of such claims, all in accordance with past practice.
6.5. Preferred Client Accounts.
(a) Unless GEFA gives PGH written notice to the contrary no
later than thirty (30) days after the date hereof, effective as of the Second
Closing Date, PAL's participation in the Phoenix Preferred Client Accounts
program (the "PREFERRED ACCOUNTS PROGRAM") shall be terminated and, no later
than three Business Days prior to the Second Closing, PGH shall provide evidence
of such termination reasonably satisfactory to GEFA and PGH and its Affiliates
shall not be required to continue such programs unless and except to the extent
the parties enter into a Contract governing the terms thereof.
(b) GEFA may elect to cause PAL to initiate a program
similar to the Preferred Accounts Program.
(c) Regardless of whether PAL initiates a program similar to
the Preferred Accounts Program following the Second Closing, PGH shall
administer, or cause to be administered, at no cost to any of the PGH
Subsidiaries, in accordance with all applicable Laws and the policies relating
to the Preferred Accounts Program, all amounts on deposit in the Preferred
Accounts Program on behalf of present or former holders of PAL Policies or their
beneficiaries as of the Second Closing Date, and no PGH Subsidiary shall have
any obligation in connection therewith or liability therefor.
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6.6. Intercompany Accounts, Investments and Agreements.
(a) Except with respect to Taxes or matters related thereto
(which are addressed in Article VII) and the Contracts listed in Schedule
3.11(b), the parties agree that all intercompany accounts and balances payable
or receivable, whether or not currently due, between any PGH Subsidiary, on the
one hand, and PMH, PGH or any of their other Affiliates, on the other hand
("INTERCOMPANY ACCOUNTS"), shall be settled as follows:
(i) At least fifteen (15) Business Days prior to the
Second Closing Date, PGH shall cause to be
prepared and delivered to GEFA a written
estimate setting forth the amount and a detailed
description, reasonably satisfactory to GEFA, of
all Intercompany Accounts expected to be
outstanding on the Second Closing Date.
(ii) GEFA shall have the right, exercisable upon
notice to PGH not later than fifteen (15)
Business Days following delivery of the
foregoing statement of Intercompany Accounts, to
object to any Intercompany Accounts set forth in
such statement; provided, however, that,
notwithstanding anything herein to the contrary,
GEFA shall only be entitled to object to those
Intercompany Accounts that GEFA, in good faith,
reasonably believes (A) have been calculated in
manifest error, (B) are being charged for goods
or 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
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Intercompany Accounts arose. Without limiting
the foregoing, GEFA 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 GEFA so objects to any Intercompany Account,
GEFA and PGH will negotiate in good faith to
resolve the objections set forth in GEFA's
notice of objection. If, as of the Second
Closing Date, GEFA and PGH are unable to resolve
all such objections, all Intercompany Accounts
with respect to which GEFA and PGH are not in
dispute or have resolved shall be settled in
full at or prior to the Second Closing, and any
remaining objections as to Intercompany Accounts
that have not then been resolved by GEFA and PGH
shall be submitted to the Third Party
Accountants for resolution. GEFA and PGH shall
cooperate with the Third Party Accountants and
proceed in good faith to cause the Third Party
Accountants to resolve all such disputes by that
date that is ten (10) Business Days after
delivery of the statement pursuant to clause
(iv) below, but if GEFA raises any objections
pursuant to clause (iv), then within thirty days
after the later of such date as (x) GEFA and
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PGH resolve their dispute pursuant to such
clause or (y) the dispute is referred to the
Third Party Accountants pursuant to clause (v).
(iv) Within sixty (60) days after the Second Closing
Date, PGH shall cause to be prepared and
delivered to GEFA a written statement of the
actual Intercompany Accounts outstanding on the
Second Closing Date. GEFA shall have the right,
exercisable upon notice to PGH not later than
fifteen (15) Business Days following delivery of
the foregoing statement to object to any
Intercompany Accounts set forth in such
statement but only if, and to the extent, not
reflected in the statement provided pursuant to
clause (i) and subject to the standards set
forth in subclauses A, B or C of clause (ii).
(v) If GEFA objects to any Intercompany Accounts as
permitted pursuant to clause (iv), GEFA and PGH
will negotiate in good faith to resolve the
objections set forth in GEFA's notice of
objections. If within ten (10) Business Days of
delivery of GEFA's objection pursuant to clause
(iv), GEFA and PGH are unable to resolve all
such objections, all those Intercompany Accounts
that are not in dispute or have been resolved
shall be settled in full within two Business
Days. Any remaining objections pursuant to
clause (iv) shall be submitted to the Third
Party Accountants for resolution, together with
unresolved objections, if any, pursuant to
clause (ii),
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and the procedures set forth in clause (ii)
shall apply equally to the objections under
clause (iv). All sums ultimately payable under
clause (ii) or (iv) shall bear simple interest
from the Second Closing until payment at the
annual rate of 7.5%. GEFA and PGH shall each pay
one-half of the fees and expenses of the Third
Party Accountants. The Third Party Accountants'
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, GEFA, PMH and PGH.
(b) Except for reinsurance agreements subject to Sections
5.9 and 6.10 and for agreements among the PGH Subsidiaries to which no other
Person is a party, and except as otherwise agreed in writing by PMH and GEFA
within thirty (30) days after the date hereof, PMH and PGH shall cause the PGH
Subsidiaries to terminate, at or prior to the Second Closing, any Contracts
between one or more of the PGH Subsidiaries, on the one hand, and PMH, PGH or
any of their Affiliates, on the other hand.
(c) On or prior to the Second Closing Date, PMH and PGH
shall cause the PGH Subsidiaries to dispose of all equity and debt securities of
any Affiliate of PHLMIC owned by the PGH Subsidiaries upon terms and conditions
satisfactory to GEFA in its sole discretion and shall deliver to GEFA evidence
of the consummation of such disposition satisfactory to GEFA in its sole
discretion.
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6.7. Exclusivity.
PMH and PGH shall not, nor shall they authorize or permit any of
their respective officers, directors or employees, or any investment banker,
attorney or other advisor or representative acting on their 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. PMH and PGH shall notify GEFA in writing of the receipt of, and
describe the material terms of, any such inquiries or proposals within 24 hours
of receipt of any such inquiry or proposal.
6.8. Notice of Litigation and Requests.
From the date hereof through the Third Closing Date, PMH and PGH
agree to notify GEFA and GELAAC agrees to notify PGH promptly of any pending or
threatened Proceeding that, if pending or threatened as of the date hereof,
would be required to be described, in the case of PMH or PGH, in Schedule 3.15
hereto or, in the case of GELAAC, in Schedule 4.11 hereto and of any written
requests for additional information or documentary materials by any Governmental
Authority in connection with the transactions contemplated by this Agreement.
6.9. Actuarial Opinion.
No later than April 1, 2000, if the Second Closing shall not
have occurred before such date, PMH and PGH shall deliver to GEFA the actuarial
opinion memorandum as of December 31, 1999 required by Law to be prepared on
behalf of PAL by its appointed actuary.
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6.10. Maintenance of Certain Plans.
Prior to the Second Closing, GEFA, PMH and PGH will agree upon
the maintenance in effect by GEFA or a third-party provider satisfactory to GEFA
and PHLMIC: (i) through December 31, 2000, of those administrative service
arrangements in effect as of the date hereof with a PGH Subsidiary respecting
the PHLMIC Comprehensive and Preferred Provider Medical Expense Benefit Plans
and Prescription Drug Expense Benefit Plans for its employees and agents and, as
applicable, retirees; (ii) through December 31, 2004 (or for such lesser number
of 12-month periods as GEFA may determine), those administrative service
arrangements in effect as of the date hereof with any PGH Subsidiaries
respecting the PHLMIC Dental Expense Benefit Plans and Long Term Disability
Coverage Plans for its employees, agents, and, as applicable, retirees, and the
Weekly Indemnity Benefit Plan for its agents; (iii) through December 31, 2004
(or for such lesser number of 12-month periods as GEFA may determine), those
administrative service arrangements in effect as of the date hereof with respect
to the PHLMIC Group Term Life and Accidental Death and Dismemberment Insurance
Plan; and (iv) those administrative service arrangements in effect with respect
to those plans of Phoenix Investment Partners, Ltd. ("PXP") comparable to the
above-referenced plans to the extent also acceptable to PXP. Such agreement
shall include provisions providing for a true-up of costs incurred by the
service provider and a mutually acceptable profit for GEFA based on industry
expectations.
ARTICLE VII
TAX MATTERS
7.1. Tax Representations.
PMH and PGH represent and warrant to GEFA as of the date hereof
and as of the Second Closing Date that:
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(a) Except as set forth on Schedule 7.1(a):
(i) (A) Each owner of any of the PGH Business Assets
has timely filed or caused to be timely filed
all required Returns relating to its business
and its PGH Business Assets, and all such
Returns are complete and accurate in all
material respects, (B) there are no unpaid Taxes
payable by any Person that are or could become a
Lien on any PGH Business Asset, or otherwise
could have an adverse effect on any of the PGH
Business Assets or the use thereof or could
cause GEFA to incur any liability, (C) there is
no current or pending audit of any Return filed
by any owner of the PGH Business Assets with
respect to its business or any of its PGH
Business Assets nor has any Taxing Authority
asserted any claims for the assessment or
collection of any Tax relating to its business
or its PGH Business Assets, and (D) none of the
PGH Business Assets is or is subject to a
"safe-harbor lease" under former Section
168(f)(8) of the Internal Revenue Code of 1954,
as amended before the Tax Reform Act of 1984,
and the regulations thereunder;
(ii) all material Returns with respect to any Tax
period required to be filed by or with respect
to any PGH Subsidiary (including, without
limitation, material Returns required under
applicable withholding laws and regulations, and
any affiliated, consolidated, unitary, combined
or similar Returns that include any PGH
Subsidiary),
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have been filed when due, including any valid
extensions, and any requests for extensions to
file such Returns have been timely filed,
granted (if required) and have not expired;
(iii) all Returns described in clause (ii) are
complete and correct in all material respects,
and all Taxes due and payable by any PGH
Subsidiary have been timely paid, or timely
withheld and remitted to the appropriate Taxing
Authority;
(iv) neither any PGH Subsidiary nor any affiliated,
consolidated, combined, unitary or similar group
of which any PGH Subsidiary is or has been a
member has granted any extension or waiver of
the statute of limitations period applicable to
any Return or the assessment or collection of
any Tax, which period (after giving effect to
such extension or waiver) has not yet expired;
(v) there is not currently pending any Tax
Proceeding nor has any Tax Proceeding been
threatened in writing, against or with respect
to any PGH Subsidiary or (with respect to the
assets or activities of any PGH Subsidiary) any
PGH Group in respect of any Tax or Tax Asset;
(vi) there are no Liens for Taxes upon the assets of
any PGH Subsidiary except Liens for current
Taxes not yet due;
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(vii) neither any PGH Subsidiary nor any predecessor
thereto has been a member of an affiliated,
consolidated, combined, unitary or similar group
other than one of which PHLMIC was the common
parent;
(viii) with respect to each PGH Subsidiary, no written
claim has ever been received from a Tax
Authority in a jurisdiction where it does not
file Returns that it is or may be subject to
taxation by that jurisdiction;
(ix) as of their respective dates, the accrual and
reserve for liabilities for Taxes reflected on
the PAL Statutory Year-End Balance Sheet and the
PGH GAAP Year-End Balance Sheets are adequate in
all material respects for all Taxes of the PGH
Subsidiaries for all periods and portions
thereof through the date thereof;
(x) no material deficiencies for any Taxes have been
proposed, asserted or assessed in writing
against any PGH Subsidiary, any assets of a PGH
Subsidiary or any of the PGH Business Assets;
(xi) 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 any PGH Subsidiary;
(xii) no PGH Subsidiary is a party to any agreement or
arrangement that provides for the payment of any
amount, or the provision of any other benefit,
that could constitute a "parachute payment"
within
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the meaning of Section 280G of the Code (or any
similar provision of state, local or foreign
Law);
(xiii) neither PGH nor any owner of the PGH Business
Assets is a "foreign person" within the meaning
of Section 1445(b)(2) of the Code;
(xiv) no PGH Subsidiary: (A) has agreed to, been
requested to, has an application pending to, or
is required to, make any adjustment under
Section 446(e) or Section 481(a) of the Code;
(B) has any accounting method changes pending,
either initiated by the IRS or by it; or (C) has
in effect any election under Sections 108, 168,
441, 472, 1017, 1033, 4977 or 341(f)(2) of the
Code;
(xv) none of the assets of any PGH Subsidiary is
"tax-exempt use property" within the meaning of
Section 168(h) of the Code;
(xvi) no PGH Subsidiary has made or entered into, or
holds any asset that is or is subject to, a
"safe harbor lease" under former Section
168(f)(8) of the Internal Revenue Code of 1954,
as amended before the Tax Reform Act of 1984,
and the regulations thereunder;
(xvii) other than pursuant to this Agreement, no PGH
Subsidiary has issued, granted or transferred
any outstanding cash settlement options, phantom
stock, stock appreciation rights, or any similar
interests (except for stock), or any other
instruments that provide
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for the right to issue, redeem, or to transfer
stock (including any option on an option), with
respect to any PGH Subsidiary;
(xviii) (A) all life insurance contracts issued by PAL
have at all times satisfied the applicable
provisions in Sections 101(f) or 7702 of the
Code; (B) none of the life insurance contracts
issued by PAL are modified endowment contracts
within the meaning of Section 7702A(a) of the
Code except as adequately disclosed to the
policyholder and (C) all annuity contracts
issued by PAL that are subject to Section 72(s)
of the Code contain the necessary provisions of
Section 72(s) of the Code and are administered
accordingly;
(xix) to the extent applicable, all Contracts issued
by PAL that are subject to Section 817 of the
Code have met the diversification requirements
applicable thereto since the issuance of such
Contracts;
(xx) for all taxable years in respect of which the
applicable statute of limitations on assessments
or collection of Taxes has not yet expired, PAL
has been subject to Tax under section 831 of the
Code, and has calculated its insurance and
unearned premium reserves in accordance with
Sections 807 and 846 of the Code, and has
computed its unpaid losses based upon reasonable
estimates;
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(xxi) PAL is not subject to any adjustment under
Section 807(f) of the Code;
(xxii) PAL's policyholders' surplus account (as defined
in Section 815 of the Code) balance is zero;
(xxiii) no PGH Subsidiary has 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);
(xxiv) no surplus notes have been issued by any PGH
Subsidiary;
(xxv) since April 16, 1997, no PGH Subsidiary has
distributed to its stockholders or security
holders any stock or securities of a controlled
corporation to which Section 355(a) of the Code
applies; and
(xxvi) (A) for each of PAL and the other PGH
Subsidiaries whose stock is to be purchased by
GEFA hereunder (1) the shares of stock of such
corporation to be purchased by GEFA hereunder
meet the requirements of Section 1504(a)(2) of
the Code and (2) the PGH Group is a "selling
consolidated group" within the meaning of
Treasury Regulation Section 1.338(h)(10)-1(c)(3)
and any successor regulation thereto (any
reference hereinafter to a Treasury Regulation
shall also refer to any successor regulation
thereto) and Proposed Treasury Regulation
Section 1.338(h)(10)-1(b)(2); and (B) the
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shares of stock of CA Benefits owned by PDS meet
the requirements of Section 1504(a)(2) of the
Code.
(b) With respect to each PGH Subsidiary, Schedule 7.1(b)
contains a list of all jurisdictions (whether foreign or domestic) to which PMH
or PGH in good faith reasonably believes that any Tax is properly payable.
(c) All Returns filed with respect to the PGH Subsidiaries
have been examined and closed or are Returns with respect to which the
applicable period for assessment under applicable Law, after giving effect to
extensions or waivers, has expired for all years, through the dates listed, with
respect thereto, on Schedule 7.1(c);
7.2. Tax Returns.
(a) PGH shall file, or cause to be filed by PHLMIC or such
other Person as is appropriate, all Returns required to be filed by or with
respect to any PGH Subsidiary on or after the date hereof and on or before the
Second Closing Date. All such Returns will be filed when due (taking into
account any extensions) in accordance with all applicable Laws. Such Returns
shall be prepared in a manner consistent in all material respects with the
positions taken and accounting methods used on the Returns filed by or with
respect to any PGH Subsidiary prior to the Second Closing Date, unless otherwise
required by Law or agreed by PGH and GEFA.
(b) PGH shall, to the extent permitted by applicable Law,
cause all Tax periods of each PGH Subsidiary to close on the Second Closing
Date, and file or cause the PGH Subsidiaries to file, all Returns required to be
filed with respect to any PGH Subsidiary relating to any tax period ending on or
before the Second Closing Date, and provided that if PGH determines that it is
unable to file any such Return for income taxes under applicable Law, GEFA
shall, upon
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PGH's request but subject to the balance of this Section 7.2(b), cause such
Returns (as prepared by PGH) to be duly and timely filed by the appropriate PGH
Subsidiary. In such case, PGH shall submit income tax Returns to GEFA not less
than forty-five (45) days prior to their due date (including all valid
extensions). GEFA shall promptly provide PGH with proof of such filing and a
copy of the Return as filed. If GEFA does not file such Return on or before the
due date (taking into account any extensions and excluding cases where GEFA
reasonably withheld consent for filing), GEFA shall indemnify and hold PGH
harmless from any penalties or interest arising from such late filing. With
respect to Returns other than for income taxes, GEFA shall provide to PGH
appropriate powers of attorney authorizing the preparation and filing of such
Returns, and PGH shall promptly provide GEFA with proof of the filing thereof
and payment of Taxes shown to be due thereon. All Returns described in this
Section 7.2(b) shall be prepared in a manner consistent in all material respects
with the positions taken and accounting methods used on the Returns filed by or
with respect to the appropriate PGH Subsidiary prior to the Second Closing Date,
unless otherwise required by Law or agreed by PGH and GEFA; provided that no
income tax Return to be filed by any PGH Subsidiary shall be based on or use any
position or accounting method for which, in GEFA's reasonable judgment, there is
not a reasonable basis under applicable Law. If GEFA believes that no such
reasonable basis exists for a position or accounting method taken in an income
tax Return prepared by PGH, GEFA shall notify PGH within thirty (30) days of its
receipt of such Return. If PGH disagrees with GEFA, the parties shall negotiate
in good faith to resolve any such dispute. If the parties are unable to resolve
such dispute, GEFA shall cause the Return to be filed on or before the due date
(taking into account any extensions) using the position or accounting method
that it believes is appropriate. If PGH disagrees with such position or
accounting method, the disagreement shall be referred to the Third Party
Accountants for
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resolution. The Third Party Accountants' determination shall be final and
binding on the parties. The fees and expenses of the Third Party Accountants
shall be borne equally by PGH and GEFA. If the Third Party Accountants determine
that the position or accounting method used by PGH in the Return was reasonable
under applicable Law and the position or accounting method used by GEFA results
in any increase in Taxes, GEFA shall be responsible for such increase.
(c) GEFA shall prepare and, subject to the Tax Pre-Filing
Review Procedure, timely file all Returns of each PGH Subsidiary required to be
filed after the Second Closing Date for all Tax periods that include, but do not
end on, the Second Closing Date. Such Returns shall be prepared, in all material
respects, in a manner consistent with the positions taken and accounting methods
used on the Returns filed by or with respect to the appropriate PGH Subsidiary
prior to the Second Closing Date, unless otherwise required by Law or agreed by
PGH and GEFA; provided that no Return shall be based on or use any position or
accounting method for which, in GEFA's reasonable judgment, there is not a
reasonable basis under applicable Law.
(d) GEFA shall prepare and file, or cause the PGH
Subsidiaries to prepare and file, all Returns required to be filed by or with
respect to any PGH Subsidiary for any Tax period beginning after the Second
Closing Date.
(e) Neither GEFA nor any PGH Subsidiary shall file any
amended Return for any Pre-Closing Period that may give rise to a claim for
indemnification by PGH under this Article VII without the prior written consent
of PGH, which may not be unreasonably withheld or delayed. PGH may not file any
amended Return (except as required in connection with the resolution of any Tax
Proceeding described in Section 7.6(d), provided that any such resolution is
reached in a manner consistent with Section 7.6(d)) that would materially
increase any
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indemnifiable Tax loss described in Section 7.6(a), except with the prior
written consent of GEFA, which may not be unreasonably withheld or delayed under
the circumstances (including taking into account the permitted time for filing
such amended Return); and provided further that PGH shall not take or cause to
be taken any position or action for which, in GEFA's reasonable judgment, there
is not a reasonable basis under applicable Law. To the extent such amended
Returns are required to be filed by GEFA, GEFA shall promptly provide PGH with
proof of such filing and a copy of the Return as filed. If GEFA does not file
such Return on or before the last date permitted for filing such Return
(excluding cases where GEFA reasonably withheld consent for filing), GEFA shall
indemnify and hold PGH harmless from any Taxes (including the failure to receive
a refund of Taxes) resulting from such late filing; if the parties disagree
about the amount for which GEFA is liable pursuant to this sentence, the dispute
resolution provisions of Section 7.2(b) shall apply. To the extent such amended
Returns are filed by PGH, PGH shall promptly provide GEFA with a copy of the
Return as filed.
7.3. Refunds.
PGH shall be entitled to receive and to retain any and all
refunds of Taxes in respect of any PGH Subsidiary for any Pre-Closing Tax Period
(excluding any refunds of Taxes arising from a carryback of any Tax Asset from a
Post-Closing Tax Period by any PGH Subsidiary). GEFA shall be entitled to retain
all other refunds relating to Taxes of the PGH Subsidiaries. In the event GEFA,
any member of the PGH Group or any PGH Subsidiary receives any refund (whether
through payment, credit or reduction in Taxes) to which it is not entitled
hereunder, the recipient shall promptly pay, or cause the payment of, such
refund to the proper party; provided, however, that any amount payable in
respect of any such refund shall be reduced by the amount of any Taxes incurred,
and the present value (based on a discount rate of six
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percent (6%)) of any Taxes to be incurred, by the recipient as a result of the
accrual or receipt of the refund.
7.4. Tax Payments.
(a) PGH shall pay or cause to be paid (without duplication
of amounts otherwise payable): (i) all Taxes required to be reported on any
Return required to be prepared by PGH pursuant to Sections 7.2(a) or Section
7.2(b); (ii) any Taxes reportable on Returns required to be prepared by GEFA
pursuant to Section 7.2(c), to the extent such Taxes are allocable to the
Pre-Closing Tax Period; and (iii) all other Taxes required to be paid by or with
respect to any PGH Subsidiary with respect to any Pre-Closing Tax Period. For
purposes of Section 7.2(c), Taxes reportable on Returns described therein shall
be allocated as provided in Section 7.6(e).
(b) GEFA shall pay (i) all Taxes reportable on Returns
required to be prepared by GEFA pursuant to Section 7.2(c), to the extent such
Taxes are allocable to the Post-Closing Tax Period, (ii) any Taxes required to
be reported on any Return required to be filed by GEFA pursuant to Section
7.2(d) and (iii) all other Taxes required to be paid by or with respect to any
PGH Subsidiary with respect to any Post-Closing Tax Period. For the purposes of
Section 7.2(c), Taxes reportable on Returns described therein shall be allocated
as provided in Section 7.6(e).
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in connection
with the sale of the PGH Subsidiaries or the PGH Business Assets pursuant to
this Agreement shall be paid by PGH when due, and PGH will, at its own expense,
file all necessary Returns and other documentation with respect to all such
Taxes and fees, and, if required by applicable Law, GEFA will, and will cause
its Affiliates to, join in the execution of any such Returns and other
documentation.
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7.5. Cooperation on Tax Matters.
(a) GEFA and PGH shall, and shall cause their respective
Affiliates to, cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the preparation and filing of any Return, and
with any Tax Proceeding with respect to Taxes, of the PGH Subsidiaries. Such
cooperation shall include (upon the other party's request) the provision of
records and information relating to any PGH Subsidiary (including the relevant
portions of any affiliated, consolidated, combined, unitary or similar Return
including any PGH Subsidiary) that are in either party's possession (or are held
by any Affiliate of a party) at the time of such request that are reasonably
relevant to any such Return or Proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Upon request of the other party, GEFA and PGH
shall use all reasonable efforts to obtain any certificate or other document
from any Governmental or Taxing Authority, customer of any PGH Subsidiary or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to this
transaction).
(b) After the Second Closing Date, each Return prepared or
caused to be prepared by GEFA with respect to any PGH Subsidiary that relates to
any Pre-Closing Tax Period shall be subject to pre-filing review by PGH and, in
the event of any disagreement between PGH, on the one hand, and GEFA or any PGH
Subsidiary, on the other hand, PGH and GEFA shall negotiate in good faith to
resolve any such disagreement. If PGH and GEFA do not reach agreement in a
reasonable period of time, such disagreement shall be resolved by the Third
Party Accountants, and any such determination by the Third Party Accountants
shall be final. The fees and expenses of the Third Party Accountants shall be
borne equally by PGH and GEFA. Unless
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otherwise agreed to by the parties, the Returns subject to such pre-filing
review shall be submitted by GEFA to PGH at least forty-five (45) days, ten (10)
days in the case of premium Returns, prior to the due date (including
extensions) of such Return, and PGH shall either complete its review or provide
written comments on such Return within fifteen days (15), five (5) days in the
case of premium Returns, of receipt of such Return. The procedure described in
this Section 7.5(b) shall be referred to herein as the "TAX PRE-FILING REVIEW
PROCEDURE."
(c) PGH acknowledges that GEFA and the PGH Subsidiaries
shall be entitled to the income Tax benefit of any Tax Asset of any of the PGH
Subsidiaries that (i) has arisen or arises before the Second Closing Date but is
reportable in or carried forward to a Tax period ending after the Second Closing
Date or (ii) arises after the Second Closing Date, although such Tax Asset may
be carried back to a Tax period ending on or before the Second Closing Date,
provided however that any such carryback shall be subject to the following
conditions: (x) if under applicable Law, a Tax Asset of a PGH Subsidiary must be
carried back to a Tax period ending on or before the Second Closing Date, such
Tax Asset may be carried back by any PGH Subsidiary and (y) if under applicable
Law, a Tax Asset may (at the taxpayer's option) be carried forward instead of
being carried back, such Tax Asset may not be carried back without PGH's written
consent, which consent shall not be unreasonably withheld or delayed. PGH agrees
to cooperate with GEFA and the PGH Subsidiaries in taking such action as may be
necessary (including, without limitation, amending any Return and filing any
claim for refund) for GEFA or any of the PGH Subsidiaries to realize the Tax
benefit of carrying such a Tax Asset back (if permitted pursuant to the
preceding sentence) to a Tax period ending on or before the Second Closing Date.
PGH promptly shall pay or cause to be paid to GEFA (i) any amount received as a
refund and (ii) if not realized as a refund, the amount of any reduction in Tax
liability (of any of
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the PGH Subsidiaries, PGH, or any other member of the PGH Group) resulting from
the use of such a Tax Asset; provided however that the amount so payable by PGH
shall be reduced by the amount of any Taxes incurred, and the present value
(based on a discount rate of six percent (6%)) of any Taxes to be incurred, by
PGH or any such other member of PGH Group as a result of the accrual or receipt
of any such refund.
7.6. Tax Indemnification.
(a) Except as otherwise provided in this Article VII, PGH
and PMH shall indemnify GEFA, its Affiliates, and the PGH Subsidiaries (each a
"GEFA INDEMNITEE") against and agrees to hold each GEFA Indemnitee harmless
from: (i) any Tax of any PGH Subsidiary related to a Pre-Closing Tax Period;
(ii) any Tax imposed on any PGH Subsidiary as a result of being or having been
before the Second Closing Date a member of an affiliated, consolidated,
combined, unitary or similar group, or a party to any agreement or arrangement;
(iii) any amount payable as a result of being party to any Tax Sharing Agreement
or with respect to the payment of any amount of the type described in clause (i)
or (ii) above as a result of any existing express or implied obligation
(including, but not limited to, an indemnification obligation); (iv) if any of
the Section 338 Elections provided for in Section 7.7 are made, any Taxes
attributable to the deemed sale of assets or other deemed transactions pursuant
to any such elections; (v) any increase in Taxes (for any taxable period,
including a Post-Closing Tax Period) resulting from adjustments to or changes in
Tax items relating to any of the PGH Subsidiaries for any taxable period ending
on or before the Second Closing Date, whether such adjustments or changes are
voluntarily made or are required by a Taxing Authority; (vi) the breach of any
representation, warranty or covenant in this Article VII (for this purpose, the
breach of any representation or warranty shall be determined without regard to
any qualification as to materiality); (vii) any liability (including any Costs,
within
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the meaning of Section 10.2(a), associated therewith) resulting from any
representation made by any member of the PGH Group or any of its agents to any
purchaser of group increasing whole life insurance policies guaranteeing or
warranting the anticipated Tax benefits of owning such insurance contracts,
including, but not limited to, the availability of any interest deduction under
Sections 163 and 264(a)(3) of the Code for any policy indebtedness; and (viii)
any Costs (within the meaning of Section 10.2(a)) arising out of or incident to
the imposition, assessment or assertion of any Tax or increase in Tax or breach
described in this Section 7.6(a); provided, however, that there shall be no
duplicative recovery hereunder. GEFA agrees to cooperate as reasonably requested
with PGH and PMH in preparing to defend against the imposition of such Taxes by
any Taxing Authority.
(b) GEFA shall indemnify PGH and its Affiliates (other than
the PGH Subsidiaries) from and against and hold them harmless from any Tax of
any PGH Subsidiary relating to a Post-Closing Tax Period, except as otherwise
provided in Section 7.6(a). PGH agrees to cooperate as reasonably requested with
GEFA in preparing to defend against the imposition of such Taxes by any Taxing
Authority.
(c) Any payment required to be made under the terms of this
Section 7.6 shall be made not later than ten (10) days after receipt by the
indemnifying party of written notice from the party to be indemnified stating
that any loss has been incurred by the party to be indemnified and the amount
thereof and of the indemnity payment requested.
(d) Following the Second Closing Date, PGH shall control the
conduct of all stages of any Tax Proceeding with respect to Taxes for which PGH
could be held liable pursuant to Section 7.4(a) or Section 7.6(a); provided,
however, that (i) GEFA shall have the right to
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participate, at its own expense, in any such Tax Proceeding and (ii) GEFA shall
control the conduct of all stages of any Tax Proceeding relating to Taxes of any
PGH Subsidiary that may be subject to indemnification under this Article VII for
Tax periods beginning before and ending after the Second Closing Date. GEFA
shall furnish, or shall cause a PGH Subsidiary to furnish, as the case may be,
PGH with powers of attorney, or any other document or authorization necessary or
appropriate to enable PGH to exercise the control provided PGH in this Section
7.6(d). GEFA shall control the conduct of all other Tax Proceedings with respect
to the Tax liability of the PGH Subsidiaries. Subject to such control:
(i) With respect to any Tax Proceeding that PGH
controls, PGH (X) shall give prompt written
notice to GEFA of any Tax adjustment proposed in
writing with respect to the assets or activities
of any PGH Subsidiary, (Y) upon GEFA's
reasonable request shall discuss with GEFA and
GEFA's Tax advisors the position that it intends
to take regarding any issue concerning such
assets or activities, and (Z) shall not, and
shall not permit any of its Affiliates to,
accept any proposed adjustment or enter into any
settlement or agreement in compromise of any
proposed adjustment that would have a PGH
Material Adverse Effect or that would result in
material Taxes for which GEFA is responsible
under Section 7.6(b) hereof or that purports to
bind GEFA or any PGH Subsidiary with respect to
any Tax period ending after the Second Closing
Date without the express written consent of
GEFA, which consent shall not be unreasonably
withheld or delayed, and
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(ii) GEFA (X) shall, within ten (10) Business Days
from its receipt of any written notice of any
pending or threatened Tax Proceeding with
respect to which indemnification may be sought
against PGH under this Article VII, provide
written notice to PGH thereof, (Y) with respect
to any Tax Proceeding controlled by GEFA, shall
afford PGH and its Tax advisors a reasonable
opportunity to participate (at PGH's expense) in
the conduct of any Tax Proceeding regarding a
proposed adjustment described in clause (X)
above including, without limitation, the right
to participate in conferences with Taxing
Authorities and submit pertinent material in
support of PGH's position, and (Z) shall not,
and shall not permit any of its Affiliates to,
accept any proposed adjustment or enter into any
settlement or agreement in compromise that would
result in a claim for indemnification against
PGH pursuant to this Article VII without PGH's
express written consent, which shall not be
unreasonably withheld or delayed.
PGH may elect to forego control of any Tax Proceeding that it is
entitled to control pursuant to this Section 7.6(d), and shall promptly
notify GEFA if PGH elects to forego such control. In that event, GEFA
shall control the conduct of such Tax Proceeding, subject to the
requirements of clause (ii) above, and PGH shall fully cooperate with
GEFA, including, but not limited to providing any necessary powers of
attorney authorizing GEFA (or its designee) to control and take action
in connection with such defense.
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(e) For purposes of this Article VII, in the case of any
Taxes that are payable for a Tax period that includes (but does not end on) the
Second Closing Date, the portion of such Tax related to the portion of such Tax
period ending on and including the Second Closing Date shall (i) in the case of
any Taxes that are periodic and fixed in amount (for example, real or personal
property taxes), be deemed to be the amount of such Tax for the entire Tax
period multiplied by a fraction, the numerator of which is the number of days in
the Tax period ending on and including the Second Closing Date and the
denominator of which is the number of days in the entire Tax period, and (ii) in
the case of all other Taxes, be deemed equal to the amount which would be
payable if the relevant Tax period ended on and included the Second Closing
Date. The allocations of Taxes pursuant to the preceding sentence shall be made
first without taking into account any Tax credits, and credits with respect to
any such Tax shall then be allocated in the same proportion as such Tax between
the portion of the Tax period ending on and including the Second Closing Date
and the remainder of the entire Tax period. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the PGH Subsidiaries, unless otherwise required by Law or
agreed by PGH and GEFA. In the case of an interest in an entity that is a
pass-through entity for Tax purposes, items shall be deemed to flow through on a
daily basis rather than at the close of the entity's Tax year.
(f) Any payment required to be made by GEFA or PGH under
this Article VII that is not made when due as provided herein shall bear
interest at the Prime Rate for each day following the due date until the date on
which payment thereof is duly mailed or electronically transmitted to the party
entitled to the receipt thereof.
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7.7. Section 338(h)(10) Elections.
(a) At GEFA's option, GEFA and PGH shall join in an election
pursuant to Section 338(h)(10) of the Code with respect to the purchase and sale
or the deemed purchase and sale of any of the PGH Subsidiaries designated by
GEFA, and in all comparable elections under state and local Tax law (together
with the election under Section 338(h)(10) of the Code, the "SECTION 338
ELECTIONS"). If GEFA decides to make such elections, consistent with the
following provisions of this Section 7.7, each of GEFA and PGH shall take all
steps reasonably required to properly and timely effect the Section 338
Elections. If any Section 338 Elections are made, PGH will not take, and will
not permit any Affiliate to take, any action or position that could invalidate
such elections or that is inconsistent with such elections.
(b) If GEFA decides to make any Section 338 Elections:
(i) To the extent feasible, GEFA and PGH agree to
execute at the Second Closing any and all forms
necessary to effectuate the Section 338
Elections (including, without limitation,
Internal Revenue Service Form 8023 and any
similar forms under applicable state and local
income tax laws (the "SECTION 338 FORMS"). In
the event, however, any Section 338 Forms are
not executed at the Second Closing, GEFA and PGH
agree to prepare and complete each such Section
338 Form no later than thirty Business Days
prior to the date such Section 338 Form is
required to be filed. GEFA and PGH shall each
cause the Section 338 Forms to be duly executed
by an authorized person for GEFA and PGH in each
case,
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and shall duly and timely file the Section 338
Forms in accordance with applicable Tax Laws and
the terms of this Agreement.
(ii) As soon as practicable after the Second Closing
Date, GEFA shall deliver to PGH a written notice
setting forth (with reasonable specificity)
GEFA's good faith calculation of the Modified
Aggregate Deemed Sales Price (as defined below)
and the allocation thereof among the assets of
the affected companies in accordance with the
principles of Treasury Regulation Section
1.338(h)(10)-1(f)(1)(ii) ("GEFA'S ALLOCATION").
GEFA's Allocation shall be conclusive and
binding on the parties, provided such allocation
is based on a reasonable position. Within twenty
Business Days after receipt thereof, PGH shall
deliver to GEFA written notice indicating
whether PGH disagrees with the reasonableness of
GEFA's Allocation. If PGH agrees with GEFA's
allocation or if PGH fails to deliver such
written notice within such twenty Business Days,
GEFA's Allocation shall constitute the "AGREED
ALLOCATION." If PGH provides timely written
notice to GEFA of any disagreement with the
reasonableness of GEFA's Allocation, GEFA and
PGH shall negotiate in good faith to determine
the Agreed Allocation. If they do not reach
agreement within thirty days after commencing
negotiations, the Third Party Accountants shall
determine whether GEFA's Allocation has a
reasonable basis, and if the Third Party
Accountants determine that
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such reasonable basis is lacking, the Third
Party Accountants shall modify GEFA's Allocation
to the extent necessary to make it reasonable.
The fees and expenses of the Third Party
Accountants shall be borne equally by PGH and
GEFA. Except as determined to the contrary by
the appropriate Taxing Authority upon an audit
of its (or its Affiliates) Returns, each of GEFA
and PGH shall file (or cause to be filed) all
relevant Returns consistent with the Agreed
Allocation and shall not take (or permit any
Affiliate to take) any position inconsistent
with the Agreed Allocation in any Tax Proceeding
unless required by Law to do so. For purposes of
this Section 7.7, the term "MODIFIED AGGREGATE
DEEMED SALES PRICE" shall mean the amount
resulting from the Section 338 Elections,
determined pursuant to Treasury Regulation
Section 1.338(h)(10)-1(f) without regard to
items described in Treasury Regulation Section
1.338(h)(10)-1(f)(4) (it being understood that
such items may be taken into account by PGH or
GEFA, as appropriate, in filing Tax Returns).
(c) To the extent any Section 338 Forms are required by
applicable Law to be signed by or on behalf of any Affiliate of GEFA or PGH, or
any other action necessary to effect any Section 338 Election must be taken by
or on behalf of any such Affiliate, references in this Section 7.7 to GEFA and
PGH shall also refer to any such Affiliate, and GEFA or PGH (as appropriate)
shall obtain such signature of or other action by an Affiliate as may be
necessary.
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7.8. Asset Allocation.
The portion of the Purchase Price allocable to the PGH Business
Assets shall be allocated among the PGH Business Assets in accordance with a
schedule to be prepared by GEFA as soon as practicable following the Second
Closing. This allocation is intended to comply with the allocation method
required by Section 1060 of the Code. The parties shall cooperate to comply with
all substantive and procedural requirements of Section 1060 and the regulations
thereunder, and except for any adjustment necessary to reflect the portion of
the Purchase Price allocable to the PGH Business Assets, the allocation shall be
adjusted only if and to the extent necessary to comply with such requirements.
GEFA and PMH agree that they will not take nor will they permit any affiliated
person to take, for income Tax purposes, any position inconsistent with such
allocation; provided, however, that GEFA's cost for the PGH Business Assets may
differ from the total amount allocated hereunder to reflect the inclusion in the
total cost of items (for example, capitalized acquisition costs) not included in
the total amount so allocated.
7.9. Termination of Existing Tax Sharing Agreements.
Any and all existing Tax Sharing Agreements shall be terminated
with respect to PGH and each PGH Subsidiary as of the Second Closing Date, and
no PGH Subsidiary shall have any continuing liability under any such agreements.
PMH or PGH will reimburse promptly the appropriate PGH Subsidiary for any
amounts paid by such PGH Subsidiary pursuant to a Tax Sharing Agreement in
excess of the actual Tax liability of such PGH Subsidiary shown on an originally
filed Return for any period after December 31, 1999 up to and including the
Second Closing. GEFA will cause the appropriate PGH Subsidiary to reimburse
promptly PGH for any Tax liability of such PGH Subsidiary shown on an originally
filed Return for any period after
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December 31, 1999 up to and including the Second Closing in excess of any
amounts paid by such PGH Subsidiary pursuant to a Tax Sharing Agreement.
7.10. Survival.
Notwithstanding anything in this Agreement to the contrary, the
provisions of this Article VII shall survive for the full period of all
applicable statutes of limitations (giving effect to any waiver, mitigation or
extension thereof), and any claim for indemnity under this Article VII may be
made at any time prior to thirty days after the expiration of such statutes of
limitations. 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
Article VII except to the extent of actual and material prejudice to the
indemnifying party.
7.11. Guarantee Fund Assessments.
For purposes of this Article VII, guarantee fund assessments
shall be treated as accruing on the date of the assessment, and shall not be
attributable to any prior period.
ARTICLE VIII
EMPLOYEE MATTERS
8.1. Employees and Employee Benefit Plans.
(a) Schedule 8.1 lists the names of those employees who are
assigned to and have performed all or substantially all of their services for
the PGH Business (other than employees of Group Services, PDS, CDM and CA
Benefits) (the "PGH BUSINESS EMPLOYEES"); provided, however, that PMH and PGH
agree that such list shall be subject to approval in writing by GEFA by January
31, 2000. As of January 1, 2000, PMH or PGH, as appropriate, will transfer
employment of the PGH Business Employees, other than in-house counsel, to the
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appropriate PGH Subsidiary. PMH, PGH and their Affiliates agree that none of
PMH, PGH or their Affiliates will make any representations to the PGH Business
Employees regarding continued employment with PMH, PGH or their Affiliates after
January 31, 2000. No later than January 31, 2000, GEFA shall identify and select
in writing those employees of PGH Group Services, PDS, CDM and CA Benefits who
will remain employed with such entities after the Second Closing Date (the "PGH
SUBSIDIARY EMPLOYEES") and PMH and PGH agree to cause the termination, prior to
the Second Closing Date, of the employment of those employees of PGH Group
Services, PDS, CDM and CA Benefits who are not PGH Subsidiary Employees;
provided, however, that GEFA and PGH agree to cooperate to their respective
mutual satisfaction with respect to the future employment of such employees.
GEFA agrees to offer employment to each PGH Business Employee and each PGH
Subsidiary Employee who is receiving sick-leave or short-term disability program
benefits or who is on an approved leave of absence on the Second Closing Date
("PGH INACTIVE EMPLOYEES") as of the date such PGH Inactive Employee is eligible
to return to work; provided, however, that no individual who is on long-term
disability on the Second Closing Date or who, after being on short-term
disability on such date, becomes eligible for long-term disability during the
six-month period commencing on such date, shall be offered employment under this
provision nor shall any individual be offered employment under this provision
after six months following the Second Closing Date or any applicable period
required by Law, if longer. Each PGH Inactive Employee shall become or remain an
employee of PMH or PGH as of the Second Closing Date until such Inactive
Employee is offered employment by GEFA. The PGH Business Employees, the PGH
Subsidiary Employees and those PGH Inactive Employee who are eligible hereunder
for an offer of employment by GEFA shall be referred to herein as "PGH
TRANSFERRED EMPLOYEES." GEFA agrees to continue to employ on the Second Closing
Date the PGH
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Transferred Employees at substantially the same salaries and wages as in effect
for such employees immediately prior to the Second Closing Date; provided,
however, that nothing in this Agreement shall create any obligation on the part
of GEFA or any of its Affiliates to continue the employment of any PGH
Transferred Employee following the Second Closing Date or limit in any way the
right of GEFA after the Second Closing Date to terminate the employment of any
PGH Transferred Employee, to change the salary or wages or to modify benefits or
other terms of employment of the PGH Transferred Employees.
(b) The parties agree that, subject to GEFA supplying PMH by
January 31, 2000 with a list identifying the employees of PGH Group Services,
PDS, CDM and CA Benefits who shall be offered employment on or after the Second
Closing, PMH will timely give all notices as may be required under WARN or any
similar state or local law (collectively, the "WARN OBLIGATIONS"). GEFA agrees
to maintain, for a period of one year from the date of the Second Closing, the
employment of at least 760 PGH Transferred Employees; provided that solely for
the purposes of determining GEFA's compliance with its obligations under this
sentence, GEFA shall be deemed to have maintained the employment of any PGH
Transferred Employee who after the date of this Agreement (i) terminates his or
her employment at his or her own option (including pursuant to an
early-retirement package), (ii) is terminated for cause or (iii) is terminated
in connection with the disposition of the fully-insured medical line of business
of PAL. In addition, whether through retention of existing employees of the PGH
Subsidiaries or the hiring of additional individuals, GEFA shall maintain, for a
period of not more than one year from the date of the Second Closing, the total
number of employees working in Connecticut for the group insurance operations of
GEFA at not less than the total number of such existing employees of the PGH
Subsidiaries on the date of this Agreement; provided that such number may be
reduced by
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the number of employees of the PGH Subsidiaries who were engaged primarily in
the fully-insured medical line of business of PAL in the event of the
disposition of such business.
(c) With respect to the PGH Transferred Employees, the PGH
Subsidiaries shall be responsible for all properly accrued but unused vacation
and all properly accrued but unpaid salary, wages and bonuses (including
incentives) as of the Second Closing Date. GEFA agrees to grandfather the
vacation entitlements (i.e. the number of weeks' vacation per year for which an
employee is eligible based on his length of service) attained as of the Second
Closing Date by any PGH Transferred Employee under the PMH vacation policy while
such entitlement is greater than such employee's vacation entitlement would be
under the GEFA vacation policy in effect as of the Second Closing Date.
(d) Effective as of the Second Closing Date, GEFA agrees to
provide employee benefits to the PGH Transferred Employees that are
substantially equivalent to the employee benefits currently available to the PGH
Transferred Employees by PMH or PGH; provided, however, that with respect to
benefits under any non-qualified deferred compensation plan or program currently
available to any of the PGH Transferred Employees, such benefits shall be
substantially equivalent to those benefits currently available to similarly
situated employees of GEFA. Such benefits shall be provided under the terms of
employee benefit plans sponsored or maintained by GEFA or its Affiliates
("GEFA'S PLANS"). If the PGH Transferred Employees are included in GEFA's Plans,
such employees shall be given credit by GEFA for their years of service with
PMH, PGH or any of their Affiliates for purposes of (i) eligibility, vesting and
service requirements for early retirement and otherwise (but not benefit
accruals) in all of GEFA's Plans that are made available to such employees
following the Second Closing and (ii) calculating
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the benefits to which they are entitled under the applicable severance and
vacation policies of GEFA that are made available to such employees following
the Second Closing. In addition, GEFA shall cause GEFA's Plans which are welfare
benefit plans (within the meaning of Section 3(1) of ERISA) and which are made
available to the PGH Transferred Employees following the Second Closing to waive
any pre-existing condition limitations and give credit for any amounts paid
under PMH's corresponding welfare benefit plans in the calendar year that
contains the Second Closing Date for purposes of satisfying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms of GEFA's welfare benefit plans.
(e) PMH and PGH shall retain all liabilities,
responsibilities and obligations (i) with respect to any PGH Business Employee
or PGH Subsidiary Employee who does not become a PGH Transferred Employee, (ii)
with respect to any PGH Business Employee or any PGH Subsidiary Employee for the
period on or prior to the Second Closing, and (iii) except for the CDM 401(k)
Plan, with respect to any employee benefit plan (as defined in Section 3(3) of
ERISA), any compensation policy or arrangement, any plan or, arrangement or
obligation to provide medical or life insurance benefits upon retirement or
following termination of employment, including section 4980B of the Code
("COBRA"), and any severance Plan of PMH, PGH or any of their Affiliates,
including any plans covering the PGH Business Employees and the PGH Subsidiary
Employees, and, except with respect to the CDM 401(k) Plan, GEFA shall not
assume or adopt or become liable with respect to such employee plans, policies
or arrangements, or assume any obligations under such plans, policies or
arrangements.
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(f) PMH and PGH shall be responsible for all deferred
compensation due to the PGH Transferred Employees under PMH's or PGH's deferred
compensation plans with respect to services rendered prior to the Second Closing
Date by any PGH Transferred Employee.
(g) On the Second Closing Date, PMH or PGH, as appropriate,
shall fully vest each PGH Transferred Employee under the Phoenix Plans, other
than the CDM 401(k) Plan, with respect to his accrued benefit or account balance
under the applicable plan. The PGH Subsidiaries shall cease to be participating
employers in the Phoenix Plans, other than the CDM 401(k) Plan, as of the Second
Closing Date. The PGH Transferred Employees shall be entitled to receive
distributions pursuant to the terms of such Phoenix Plans, other than the CDM
401(k) Plan, and the provisions of applicable Law except with respect to those
PGH Transferred Employees with an account balance under the CDM 401(k) Plan, and
shall further be entitled to rollover or directly transfer distributions to one
or more GELAAC Plans in which such PGH Transferred Employees are entitled to
participate in accordance with Section 402(c) or 401(a)(31) within the meaning
of Section 402(c)(4) of the Code to the extent such distributions qualify as
eligible rollover distributions in any Phoenix Plan and as permitted under the
terms of the applicable GELAAC Plan. With respect to any PGH Transferred
Employee who has an outstanding loan balance under the terms of the PHLMIC
Savings and Investment Plan as of the Second Closing Date, PMH and PGH shall
permit each such PGH Transferred Employee to repay the outstanding loan balance
over the remaining time period specified in the applicable promissory note and
GEFA agrees that, to the extent practicable, it will collect such loan
repayments from the wages of each affected PGH Transferred Employee as of each
payroll period and remit the loan repayments to PMH or PGH or such other person
assigned by PMH or PGH; provided, however,
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that neither GEFA nor any of its Affiliates shall be responsible or liable for
the collection or payment of such loan amounts.
(h) With respect to each PGH Business Employee and each PGH
Subsidiary Employee, PMH or PGH, as appropriate, shall retain the obligation and
liability for any workers' compensation or similar workers protection claims
incurred on or prior to the Second Closing Date.
(i) GEFA agrees to indemnify PMH, PGH and their Affiliates
and to defend and hold harmless PMH, PGH and their Affiliates from and against
any and all Costs arising out of any claims by or in respect of any PGH
Transferred Employee with respect to acts or omissions of GEFA after the Second
Closing Date. PMH and PGH agree to indemnify GEFA and its Affiliates and to
defend and hold GEFA and its Affiliates harmless from and against any and all
Costs for events occurring prior to the Second Closing Date arising out of the
employment or termination of employment of the PGH Business Employees and the
PGH Subsidiary Employees or under any of the Phoenix Plans, including but not
limited to (i) any claims under any of the Phoenix Plans, including the CDM
401(k) Plan for periods prior to the Second Closing Date, with respect to any of
the obligations or liabilities that GEFA has not assumed, (ii) any "employee
pension 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 the PGH
Subsidiaries have 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 Second Closing Date which includes PMH and PGH or, (iii) any claims by or in
respect of any PGH Business Employee or PGH Subsidiary Employee, including a PGH
Transferred Employee (or such PGH Transferred Employee's successors or
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assigns), arising out of, or in connection with, or otherwise relating to, any
allegations of unlawful discrimination or sexual harassment that occurred on or
prior to the Second 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 10.2(b)(i),
and all such indemnities shall survive until sixty days after the expiration of
the applicable statute of limitations with respect thereto. Any claim for
indemnification by GEFA, PMH or PGH pursuant to this Section 8.1 shall be
subject to the procedures set forth in Section 10.2(d).
(j) No provision of this Section 8.1 shall create any
third-party beneficiary rights in any employee or former employee (including any
beneficiary or dependent thereof) of any PGH Subsidiary, in respect of continued
employment (or resumed employment) for any specified period of any nature or
kind whatsoever, and no provision of this Section 8.1 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.
(k) PMH and PGH hereby agree that, for a period commencing
on the Second Closing Date and ending on the fifth anniversary of the Second
Closing Date, they will not, without GEFA's prior written consent, directly or
indirectly, appoint as an agent or hire (i) any PGH Transferred Employees or
other employees of GEFA or its Affiliates who work for any PGH Subsidiary or
(ii) any Person who, on the Second Closing Date, served as an insurance agent
exclusively for PAL. The foregoing notwithstanding, PMH and PGH and their
Affiliates may hire any PGH Transferred Employees or other employees of GEFA or
its Affiliates who have been terminated after the Second Closing by GEFA or its
Affiliates, provided that the hiring party does
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not utilize such employees in a group insurance or worksite (i.e., the sale of
insurance through employers) capacity during the foregoing five-year period.
(l) PMH and PGH shall be responsible for any and all
payments under any retention bonus agreement due or payable to the PGH
Transferred Employees.
ARTICLE IX
CONDITIONS PRECEDENT
9.1. General.
The respective obligations set forth herein to be performed by
PMH, PGH or GEFA at the First Closing shall be subject to the fulfillment, on or
before the First Closing Date, in the case of PMH and PGH, of the conditions set
forth in Sections 9.2 and 9.3, and in the case of GEFA, of the conditions set
forth in Sections 9.2 and 9.4. The respective obligations set forth herein to be
performed by PMH, PGH or GEFA at the Second Closing shall be subject to the
fulfillment, on or before the Second Closing Date, in the case of PMH and PGH,
of the conditions set forth in Sections 9.3 and 9.6, and in the case of GEFA, of
the conditions set forth in Sections 9.6 and 9.7. Notwithstanding the foregoing,
neither party may invoke the failure of any of the conditions under this
Agreement, as set forth this Article IX, to be fulfilled if such failure was
caused by any action or inaction by or on behalf of the party seeking to invoke
such condition.
9.2. Conditions to Obligations of All Parties at the First Closing.
(a) HSR Act. Any applicable waiting period under the HSR Act
shall have expired or been terminated.
(b) Consents. All third party consents (other than approvals
or non-disapprovals of the appropriate insurance regulatory authorities and
other similar or equivalent regulatory authorities) listed on Schedules 3.4(b)
and 4.6(b) shall have been obtained.
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(c) No Injunction. There shall not be in effect any
injunction or other order issued by a court of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement.
(d) GELAAC Shareholders Agreement. GEFA, GELAAC and PGH (or
an Affiliate of PGH reasonably acceptable to GEFA), as appropriate, shall have
entered into the GELAAC Shareholders Agreement.
(e) Agreement on Reference Amounts and Index. The parties
shall have agreed upon definitions of "GELAAC Reference Amount," "PAL Reference
Amount" and "Index Rate" to be included in Sections 5.7 and 5.8.
(f) Supplements to Disclosures. Either (i) GEFA shall have
approved of (or failed to respond to) any amendment or supplement to the
Schedules to this Agreement which are delivered pursuant to the first sentence
of Section 6.3 (the "Amended Schedules") or (ii) all disputed matters on the
Amended Schedules shall have been conclusively resolved to the reasonable
satisfaction of PMH, PGH and GEFA.
9.3. Conditions to Obligations of PGH at the First Closing.
(a) Representations, Warranties and Actions of GEFA. The
representations and warranties set forth in Article IV, to the extent they are
qualified by a GELAAC Material Adverse Effect or otherwise qualified as to
materiality, shall be true and correct in all respects at and as of the First
Closing Date and all other representations and warranties set forth in Article
IV shall be true and correct in all material respects at and as of the First
Closing Date. GEFA and its Affiliates shall have duly performed and complied in
all material respects with all obligations herein required to be performed or
complied with by them at or before the First Closing. All
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actions to be taken by GEFA in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to PGH.
(b) Officer's Certificate. GEFA shall have delivered to PGH
a certificate, dated the First Closing Date and signed by its President or a
Vice President, as to the fulfillment of the conditions set forth in Section
9.3(a).
(c) Opinion of Counsel. PGH shall have received from Hunton
& Xxxxxxxx, counsel for GEFA, an opinion in the form reasonably satisfactory to
PGH.
9.4. Conditions to Obligations of GEFA at the First Closing.
(a) Representations, Warranties and Actions of PMH and PGH.
The representations and warranties set forth in Article III, to the extent they
are qualified by a PGH Material Adverse Effect or otherwise qualified as to
materiality, shall be true and correct in all respects at and as of the First
Closing Date and all other representations and warranties set forth in Article
III shall be true and correct in all material respects at and as of the First
Closing Date. PMH and PGH shall have duly performed and complied in all material
respects with all agreements contained herein required to be performed or
complied with by either of them at or before the First Closing. All actions to
be taken by PMH and PGH prior to such Closing in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
GEFA.
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(b) Officer's Certificate. Each of PMH and PGH shall have
delivered to GEFA a certificate, dated the First Closing Date and signed by its
President or a Vice President, as to the fulfillment of the conditions set forth
in Section 9.4(a).
(c) Opinion of Counsel. GEFA shall have received from Xxxxxx
Xxxxxxx, Esq., counsel to PMH and PGH, an opinion in the form reasonably
satisfactory to GEFA.
9.5. Conditions to Obligations of All Parties at the Second Closing.
(a) HSR Act. Any applicable waiting period under the HSR Act
shall have expired or been terminated.
(b) Consents. All third party consents listed on Schedules
3.4(b) and 4.6(b) shall have been obtained and this Agreement and the
consummation of the transactions contemplated hereby shall have been approved by
the insurance regulatory authorities or Government Authorities of the Required
Jurisdictions (or shall not have been disapproved by such authorities and the
time period during which such authorities may, under applicable Law, disapprove
this Agreement and the consummation of such transactions shall have lapsed), the
parties shall have received reasonably satisfactory evidence of such Approvals
(or non-disapprovals) and such Approvals (or non-disapprovals) shall not be
subject to conditions that are unreasonably burdensome.
(c) No Injunction. There shall not be in effect any
injunction or other order issued by a court of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement.
(d) Ancillary Agreements. GEFA (or an Affiliate of GEFA
reasonably acceptable to PGH) and PGH (or an Affiliate of PGH reasonably
acceptable to GEFA) shall have
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entered (i) into the Ancillary Agreements (other than the GELAAC Shareholders
Agreement) and all the conditions precedent to the effectiveness of each of such
Ancillary Agreements shall have been satisfied and (ii) all other agreements,
documents and instruments reasonably required to effectuate the transactions
contemplated hereby.
9.6. Conditions to Obligation of PMH and PGH at the Second Closing.
(a) Representations, Warranties and Actions of GEFA. The
representations and warranties set forth in Sections 4.1, 4.6 (solely with
respect to GEFA), 4.7 (solely with respect to GEFA), 4.11 (solely with respect
to GEFA), 4.21, and 4.22 shall be true and correct in all material respects at
and as of the Second Closing Date. GEFA and its Affiliates shall have duly
performed and complied in all material respects with all obligations herein
required to be performed or complied with by them at or before the Second
Closing. All actions to be taken by GEFA in connection with the consummation of
the transactions contemplated hereby and all certificates, opinions, instruments
and other documents required to effect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to PMH and PGH.
(b) Officer's Certificate. GEFA shall have delivered to PMH
and PGH a certificate, dated the Second Closing Date and signed by its President
or a Vice President, as to the fulfillment of the conditions set forth in
Section 9.3(a).
(c) Opinion of Counsel. PMH and PGH shall have received from
Hunton & Xxxxxxxx, counsel to GEFA, an opinion in form reasonably satisfactory
to PMH and PGH.
9.7. Conditions to Obligations of GEFA at the Second Closing.
(a) Representations, Warranties and Actions of PMH and PGH.
The representations and warranties set forth in Article III and Article VII, to
the extent they are
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qualified by a PGH Material Adverse Effect or otherwise qualified as to
materiality, shall be true and correct in all respects at and as of the Second
Closing Date and all other representations and warranties set forth in Article
III and Article VII shall be true and correct in all material respects at and as
of the Second Closing Date. PMH and PGH shall have duly performed and complied
in all material respects with all agreements contained herein required to be
performed or complied with by either of them at or before the Second Closing.
All actions to be taken by PMH or PGH in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to GEFA.
(b) Officer's Certificate. Each of PMH and PGH shall have
delivered to GEFA a certificate, dated the Second Closing Date and signed by its
President or a Vice President, as to the fulfillment of the conditions set forth
in Section 9.7(a).
(c) Opinion of Counsel. GEFA shall have received from Xxxxxx
X. Xxxxxxx, Esq., counsel to PMH and PGH, an opinion in form reasonably
satisfactory to GEFA.
(d) Resignations. Those directors and officers of each of
the PGH Subsidiaries specified in a written notice delivered by GEFA to PGH at
least twenty days prior to the Second Closing shall have submitted their
resignations from the Boards of Directors of each of the PGH Subsidiaries, as
the case may be, effective as of the Second Closing Date.
(e) PGH Material Adverse Effect. Since June 30, 1999, there
shall have been no PGH Material Adverse Effect.
(f) FIRPTA Certificate. Each of PMH and PGH shall have
delivered on the Second Closing Date to GEFA a certificate, as contemplated
under and meeting the requirements
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of section 1.1445-2(b)(2)(i) of the Treasury Regulations, to the effect that it
is not a foreign Person within the meaning of the Code and applicable Treasury
Regulations.
(g) Environmental Matters. GEFA shall have completed to its
satisfaction such environmental assessments of the real properties described in
Schedule 3.10 as GEFA deems appropriate within forty-five (45) days after the
signing of this Agreement. Notwithstanding the foregoing, GEFA, on behalf of
itself and its contractors, employees and designees (collectively, the "SITE
ASSESSORS"), agrees that: (i) with respect to any leased property described in
Schedule 3.10 hereto, any and all physical investigations, testing and inquiries
are subject to such limitations, if any, as may be provided in the applicable
leases therefor and the unfettered right of such landlords to grant or withhold
permission to undertake any and all such investigations; (ii) with respect to
such leased properties, the Enfield Property and the Greenfield Property (A) the
Site Assessors shall restore all portions of the properties affected thereby to
the same general condition existing immediately prior to any such investigation
and (B) the Site Assessors shall provide evidence of insurance reasonably
acceptable to PHLMIC. PMH and PGH shall provide GEFA with such assistance as it
may reasonably request in connection with the obtaining of such access to the
real properties described in Schedule 3.10 as GEFA reasonably deems necessary in
order to complete the environmental assessments described in this Section
9.7(g).
(h) Investment Assets. PAL shall have delivered to GEFA
documentary evidence reasonably satisfactory to GEFA that PAL has disposed of
the Investment Assets listed on Schedule 9.7(i).
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(i) Replacement Reinsurance Agreements. GEFA and PHLMIC
shall have agreed upon, and PHLMIC and PAL shall have made all necessary
insurance regulatory filings with respect to, the Replacement Reinsurance
Agreements.
ARTICLE X
INDEMNIFICATION
10.1. Survival of Representations and Warranties.
Except as to (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.3, 3.5, 3.15, 3.18, 4.1, 4.2 4.3, 4.4, 4.5, 4.9 and 4.11
and the covenants contained in Section 10.2(c), which shall survive both
Closings indefinitely, provided that the representations and warranties
contained in Section 3.3 with respect to licensure shall be subject to the
general limitation period below; and (ii) the representations and warranties
contained in Sections 3.12, 4.10 and 4.14, which shall survive the Second
Closing until sixty days after the expiration of the applicable statute of
limitations, the representations, warranties, covenants and agreements made by
each party in this Agreement or in any certificate or instrument delivered by
any such party pursuant hereto shall, except as provided in Article VII and
Article VIII, survive the Second Closing until twenty-four months after the
Closing Date. Except with respect to the representations and warranties in
clauses (i) and (ii) of the preceding sentence, any claim for indemnification
under Article X with respect to the representations and warranties contained in
Article III or Article IV of this Agreement must be brought prior to the
twenty-four month anniversary of the Second Closing Date in accordance with
Section 10.2(d).
10.2. Indemnification.
(a) General. In addition to the limitations contained in
Section 11.17(a), the rights of the Indemnitee to indemnification under this
Article X shall be limited as follows: the
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amount of any and all damages, losses, liabilities, obligations, costs and
expenses, and any and all claims, damages, demands or suits by any Person
(including, without limitation, any Governmental Authority), including, without
limitation, the costs and expenses of any and all Proceedings, demands,
assessments, judgments, settlements and compromises relating thereto and
including reasonable attorneys' fees and expenses reasonably incurred in
connection therewith incurred by the Indemnitee (the "COSTS") shall be reduced
by the net amount the Indemnitee or any of its Affiliates recovers (after
deducting all reasonable attorneys' fees, expenses and other costs of recovery)
from any insurer or other party liable for such Costs, and the Indemnitee shall
use reasonable efforts to effect any such recovery.
(b) By PMH and PGH.
(i) From and after the Second Closing, PMH and PGH
agree to indemnify and hold harmless GEFA and
its Affiliates from Costs incurred or sustained
by GEFA or any of its Affiliates as a result of
the breach by PMH or PGH of any covenant,
representation or warranty set forth in this
Agreement other than any such covenant,
representation or warranty contained in Article
VII or Article VIII of this Agreement (which is
subject to the indemnification provisions
thereof); provided that (i) there shall not be
any duplicative payments or indemnities by PMH
and PGH and (ii) GEFA and its Affiliates shall
be entitled to indemnification under this
Section 10.2(b)(i) only after the aggregate
amount of such Costs exceeds 2.25% of the
Purchase Price (the "BASKET"), in
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which case GEFA and its Affiliates will be
entitled to indemnification for all Costs in
excess of the Basket, and in no event will GEFA
or its Affiliates be entitled to indemnification
in excess of 50% of the Purchase Price (the
"CAP").
(ii) In addition to and notwithstanding the
foregoing, subject to the provisions of Sections
10.2(d), 10.2(e) and 10.2(f) hereof, PMH and PGH
shall indemnify and hold harmless GEFA and its
Affiliates for any and all Costs: (A) arising in
connection with the matters described in Section
9.7(i) hereof or otherwise in connection with
the dissolution, liquidation or other
disposition of CDM at any time by PGH or GEFA or
their respective Affiliates; (B) arising
directly or indirectly in connection with, or as
a result of, liability(ies) incurred by PMH, PGH
or any of their Affiliates, under reinsurance
placed with, by, or from Unicover Managers, Inc.
on behalf of the Unicover Occupational Accident
Reinsurance Pool or on behalf of any other
Unicover facility; (C) arising out of a breach
of the representations and warranties contained
in Section 3.18 hereof or arising out of or
relating to any Environmental Claim that arises
out of or relates to (x) the conduct of the
business of the PGH Subsidiaries prior to the
Second Closing Date; (y) the ownership, lease or
occupancy of real property or facilities by the
PGH Subsidiaries prior to the Second Closing
Date; or (z) conditions that existed at such
real property and facilities prior to the Second
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Closing Date; (D) arising directly or indirectly
out of policy holder litigation in connection
with group increasing whole life insurance
Policies issued by PAL; and (E) arising directly
or indirectly out of PAL's participation in the
Preferred Accounts Program on or prior to the
Second Closing Date. PMH's and PGH's liability
under this Section 10.2(b)(ii) shall survive the
Closing indefinitely and shall not be subject to
the Basket or the Cap.
(c) By GEFA. From and after the First Closing, GEFA agrees
to indemnify and hold harmless PMH, PGH and their Affiliates from and against
any Costs incurred or sustained by PMH, PGH or any of their Affiliates as a
result of the breach by GEFA of any covenant, representation or warranty set
forth in this Agreement other than any such covenant, representation or warranty
contained in Article VII and Article VIII of this Agreement (which is subject to
the indemnification provisions thereof); provided that (i) there shall not be
any duplicative payments or indemnities by GEFA and (ii) PMH, PGH and their
Affiliates shall be entitled to indemnification under this Section 10.2(c) only
after the aggregate amount of such Costs exceeds 2.25% of the GELAAC Share
Price, in which case PMH, PGH and their Affiliates shall be entitled to
indemnification for all Costs in excess of such amount, and in no event will
PMH, PGH or their Affiliates be entitled to indemnification in excess of 50% of
the GELAAC Share Price.
(d) Indemnification Procedures. A party entitled to
indemnification hereunder shall herein be referred to as an "INDEMNITEE." A
party obligated to indemnify an Indemnitee hereunder shall herein be referred to
as an "INDEMNITOR."
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(i) Third Party Claims. Within ten Business Days
after an Indemnitee receives written notice of
the commencement of any Proceeding by any third
party which such Indemnitee reasonably believes
may give rise to a claim for indemnification
from an Indemnitor hereunder, such Indemnitee
shall, if a claim in respect thereof is to be
made against an Indemnitor under this Article X,
notify such Indemnitor in writing in reasonable
detail of such Proceeding and include with such
notice copies of all notices and documents
(including court papers) served on or received
by the Indemnitee from or on behalf of such
third party. Upon receipt of such notice, the
Indemnitor shall be entitled to participate in
such Proceeding, or, by giving written notice to
the Indemnitee to assume the defense thereof at
the Indemnitor's sole expense, with counsel
reasonably satisfactory to the Indemnitee. After
notice to the Indemnitee of the Indemnitor's
election to assume the defense of such
Proceeding, the Indemnitor shall not be liable
to the Indemnitee under this Article X for any
legal or other expenses subsequently incurred by
the Indemnitee in connection with the defense
thereof other than reasonable costs of
investigation, provided that if within twenty
days after receiving written notice from the
Indemnitee (i) the Indemnitor fails to take
reasonable steps necessary to defend diligently
such Proceeding or (ii) the Indemnitor has not
undertaken fully to indemnify the Indemnitee in
respect of all Costs relating to
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the matter, the Indemnitee may assume its own
defense, and the Indemnitor will be liable for
all reasonable costs or expenses paid or
incurred in connection therewith. The Indemnitor
will not enter into any settlement of any
Proceeding without the prior written consent of
the Indemnitee, which consent shall not be
unreasonably withheld. If a firm offer is made
to settle a Proceeding 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 Indemnitor
desires to accept and agree to such offer, the
Indemnitor will give written notice to the
Indemnitee to that effect. If the Indemnitee
fails to consent to such firm offer within ten
Business Days after receipt of such notice, the
Indemnitee may continue to contest or defend
such Proceeding and, in such event, the maximum
liability to the Indemnitor as to such
Proceeding 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 Business Day period. Unless it has been
conclusively determined through a final judicial
determination (or settlement tantamount thereto)
that the Indemnitor is not liable to the
Indemnitee under this Section 10.2(d), the
Indemnitee shall act reasonably and in
accordance with its good faith business judgment
with respect to such defense, and shall not
settle or compromise any such Proceeding (i)
unless such
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settlement or compromise includes an
unconditional release of the Indemnitor and the
Indemnitee from all liability arising out of
such Proceeding, and (ii) without the consent of
the Indemnitor, which consent shall not be
unreasonably withheld or delayed. The parties
hereto agree to render to the others such
assistance as may reasonably be requested in
order to ensure the proper and adequate defense
of any such Proceeding, including providing
relevant documentation to the other parties and
making employees available on a mutually
convenient basis to provide additional
information and explanation of any relevant
materials or to testify in or with respect to
such Proceeding.
(ii) Other Claims. Within twenty (20) Business Days
after an Indemnitee sustains any Costs not
involving a third party Proceeding which such
Indemnitee reasonably believes may give rise to
a claim for indemnification from an Indemnitor
hereunder, such Indemnitee shall deliver written
notice of such claim to the Indemnitor,
specifying with reasonable detail the basis on
which indemnification is being asserted, the
amount of such Costs and evidence reasonably
satisfactory to the Indemnitor of such Costs. If
the Indemnitor does not notify the Indemnitee
within thirty calendar days following its
receipt of such notice that the Indemnitor
disputes its liability to the Indemnitee under
this Article X, such claim specified by the
Indemnitee in such notice shall be
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conclusively deemed a liability of the
Indemnitor under this Article X and the
Indemnitor shall pay the amount of such Costs to
the Indemnitee on demand or, in the case of any
notice in which the amount of the Costs (or any
portion thereof) is estimated, then thirty days
after the Indemnitor has provided evidence
reasonably satisfactory to the Indemnitor of the
amount of such Costs (or such portion thereof)
as finally determined. If the Indemnitor has
timely disputed its liability with respect to
such Costs, as provided above, the Indemnitor
and the Indemnitee shall proceed in good faith
to negotiate a resolution of such dispute and,
if not resolved through negotiations, the
Indemnitee shall be entitled to pursue such
remedies as may be available to Indemnitee.
(e) Tax Treatment of Indemnity Payment. Each of PMH and GEFA
agrees to treat any indemnity payment made pursuant to Section 10.2 and Article
VII as an adjustment to the Purchase Price for all Tax purposes unless otherwise
required by Law.
(f) Exclusivity of Indemnification Provision. Except for
remedies specifically provided for in Section 5.5(e), Article VII and Article
VIII, the indemnity provided for in this Article X shall be the sole and
exclusive remedy of the parties and their Affiliates after the Closings for any
inaccuracy of any representation or warranty of PMH or GEFA, as applicable or
any failure or breach of any covenant, obligation, condition or agreement to be
performed or fulfilled, regardless of the legal theory upon which a Proceeding
is brought.
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ARTICLE XI
GENERAL PROVISIONS
11.1. Modification; Waiver.
This Agreement may be modified only by a written instrument
executed by the parties hereto. Any of the terms and conditions of this
Agreement may be waived in writing at any time on or prior to the Second Closing
Date by the party entitled to the benefits thereof.
11.2. Entire Agreement.
This Agreement including the schedules hereto (which are hereby
incorporated by reference and made a part hereof or thereof, as appropriate)
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all other prior agreements, understandings,
documents, projections, financial data, statements, representations and
warranties, oral or written, express or implied, between the parties hereto and
their respective Affiliates, representatives and agents in respect of the
subject matter hereof.
11.3. Certain Limitations.
It is the explicit intent and understanding of each of the
parties hereto that none of the parties nor any of their Affiliates,
representatives or agents is making any representation or warranty whatsoever,
oral or written, express or implied, other than those set forth in Articles III
and IV, including the Schedules thereto, and neither party is relying on any
statement, representation or warranty, oral or written, express or implied, made
by the other party or such other party's Affiliates, representatives or agents,
except for the representations and warranties set forth in such provisions.
EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE PARTIES
EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION,
MERCHANTABILITY OR
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SUITABILITY AS TO ANY PGH BUSINESS ASSETS AND OWNED PERSONAL PROPERTY, EXCEPT AS
OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, IT IS UNDERSTOOD THAT THE
BUYER TAKES SUCH ASSETS "AS IS" AND "WHERE IS." The parties agree that this is
an arm's length transaction in which the parties' undertakings and obligations
are limited to the performance of their obligations under this Agreement. GEFA
acknowledges that it is a sophisticated investor, that it has undertaken a full
investigation of the PGH Business, PGH, the PGH Subsidiaries and the employees
and that it has only a contractual relationship with PMH and PGH, based solely
on the terms of this Agreement, and that there is no special relationship of
trust or reliance between GEFA, PMH and PGH. PGH acknowledges that it is a
sophisticated investor, that it has undertaken a full investigation of GELAAC,
its business, Subsidiaries and employees and that it has only a contractual
relationship with GEFA, based solely on the terms of this Agreement, and that
there is no special relationship of trust or reliance between PGH and GEFA.
11.4. Termination.
(a) This Agreement may be terminated: (i) at any time prior
to either Closing Date by mutual written consent of GEFA, PMH or PGH, or (ii) by
either GEFA or PMH and PGH, if the Second Closing shall not have taken place on
or before June 30, 2000 or such later date as the parties may have agreed to in
writing, or (iii) by either GEFA or PMH and PGH if there shall be any Law that
makes consummation of the transactions contemplated hereby illegal or otherwise
prohibited or if consummation of the transactions contemplated hereby would
violate any nonappealable final order, decree or judgment of any court or other
Governmental Authority having competent jurisdiction; (iv) at any time prior to
the First Closing, (A) by PMH and PGH if any of the conditions set forth in
Sections 9.2 and 9.3 shall have become incapable of fulfillment
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and shall not have been waived in writing by PMH or PGH; or (B) by GEFA if any
of the conditions set forth in Sections 9.2 and 9.4 shall have become incapable
of fulfillment and shall not have been waived in writing by GEFA, or (v) at any
time prior to the Second Closing, (A) by PMH and PGH if any of the conditions
set forth in Sections 9.5 and 9.6 shall have become incapable of fulfillment and
shall not have been waived in writing by PMH or PGH; or (B) by GEFA if any of
the conditions set forth in Sections 9.5 and 9.7 shall have become incapable of
fulfillment and shall not have been waived in writing by GEFA.
(b) In the event of termination by PMH and PGH or GEFA
pursuant to this Section 11.4, prompt written notice thereof shall forthwith be
given to the other party and the transactions contemplated by this Agreement
shall be terminated without further action by either party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(i) Each party shall return to the other parties all
documents and other materials received from such
other parties or such other parties' Affiliates
or agents (including all copies of or materials
developed from any such documents or other
materials) relating to the transactions
contemplated hereby or by the Ancillary
Agreements, whether obtained before or after the
execution hereof; and
(ii) All Confidential Information received by any
party with respect to the other parties and
their Affiliates shall be treated in accordance
with Section 5.5 which shall remain in full
force and effect notwithstanding the termination
of this Agreement.
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(c) If this Agreement is terminated as provided in this
Section 11.4 it shall become null and void and of no further force or effect,
without any liability of any party (or of any stockholder, director, officer,
employee, representative or agent of such party) to the other party to this
Agreement or its Affiliates, except for Section 2.5 relating to the payment for
the Purchased GELAAC Shares (if this Agreement if terminated after the First
Closing and before the Second Closing), Section 5.5 (including Section 5.5(d)),
relating to Confidential Information, Section 5.2 relating to publicity, Section
11.5 relating to expenses, and except for any liability resulting from such
party's or its Affiliates' or representatives' breach of this Agreement.
11.5. Expenses.
Except as expressly provided herein, whether or not the
transactions contemplated herein shall be consummated, each party shall pay its
own and its Affiliates' expenses incident to the preparation and performance of
this Agreement and the Ancillary Agreements.
11.6. Further Actions.
Each party shall execute and deliver such certificates and other
documents and take such other actions as may reasonably be requested by the
other parties in order to consummate or implement the transactions contemplated
hereby or by the Ancillary Agreements.
11.7. Post-Closing Access.
In connection with any matter relating to any period prior to,
or any period ending on, the Second Closing, GEFA shall, upon the request and at
the expense of PMH and PGH, permit PMH or PGH and their representatives full
access at all reasonable times to the books and records of the PGH Subsidiaries
that shall have been transferred to GEFA, and GEFA shall execute (and shall
cause the PGH Subsidiaries to execute) such documents as PMH or PGH may
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reasonably request to enable PMH or PGH to file any required Returns relating to
any of the PGH Subsidiaries. GEFA shall not dispose of such books and records
during the seven-year period beginning with the Second Closing Date without
PMH's or PGH's written consent, which shall not be unreasonably withheld or
delayed. Following the expiration of such seven-year period, GEFA may dispose of
such books and records at any time upon giving sixty days' prior written notice
to PMH or PGH, unless PMH or PGH agrees to take possession of such books and
records within sixty days at no expense to GEFA.
11.8. Notices.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as follows:
(a) if sent by registered or certified mail in the United
States return receipt requested, upon receipt;
(b) if sent by reputable overnight air courier (such as DHL
or Federal Express), two Business Days after mailing;
(c) if sent by facsimile transmission, with a copy mailed on
the same day in the manner provided in (a) or (b) above, when transmitted and
receipt is confirmed by telephone; or
(d) if otherwise actually personally delivered, when
delivered and shall be delivered as follows:
if to PMH or PGH:
PM Holdings, Inc.
Xxx Xxxxxxxx Xxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Fax Number: (000) 000-0000
Attention: General Counsel
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with a copy to:
Stroock, & Stroock & Xxxxx LLP
00 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax Number: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
if to GEFA or GELAAC:
GE Financial Assurance Holdings, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax Number: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
and
Hunton & Xxxxxxxx
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax Number: (000) 000-0000
Attention: Xxxxxxx X. Heuhsen, Esq.
or to such other address or to such other Person as either party hereto
shall have last designated by notice to the other party.
11.9. Assignment.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided that,
except for any assignment by either party to one of its Affiliates, which shall
not require the other party's consent, but which also will
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not relieve the assignor of its obligations hereunder, any assignment, by
operation of Law or otherwise, by either party hereto shall require the prior
written consent of the other party which consent shall not be unreasonably
withheld and any purported assignment or other transfer without such consent
shall be void and unenforceable.
11.10. No Third-Party Beneficiaries.
Except as provided in Article X, nothing in this Agreement shall
confer any rights upon any Person which is not a party or a successor or
permitted assignee of a party to this Agreement.
11.11. Counterparts.
This Agreement may be executed in one or more counterparts,
which, when taken together, shall constitute one and the same instrument.
11.12. Interpretation.
The section headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provision hereof. The disclosure of any matter in the
schedules hereto shall be deemed to be a disclosure for all purposes of this
Agreement to which such matter could reasonably be likely to be pertinent, but
shall expressly not be deemed to constitute an admission by PMH, PGH or GEFA, or
to otherwise imply, that any such matter is material for the purposes of this
Agreement.
11.13. Governing Law.
This Agreement shall be construed, performed and enforced in
accordance with the Laws of the State of Connecticut, without regard to the
conflicts of law principles of such state.
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11.14. Mediation and Arbitration.
The parties acknowledge that the expeditious and equitable
settlement of disputes arising under this Agreement is to their mutual
advantage. To that end, the parties agree to use their best efforts to resolve
all differences of opinion and to settle all disputes, through joint cooperation
and consultation between a senior executive officer of each party to such
dispute. (a) Any dispute, alleged breach, interpretation, challenge or
disagreement whatsoever arising out of this Agreement (other than those that are
to be resolved by the Third Party Accountants in accordance with provisions of
this Agreement) that the parties are unable to settle within sixty (60) days, as
set forth in the preceding sentence, shall be referred to mediation as follows:
(i) either of the parties may notify the other of its desire to have a dispute
mediated by sending notice of such intention to the other party, including in
such notice its proposed resolution and the identity of a nominee mediator who
shall have knowledge and experience in the insurance industry; (ii) the other
party, within twenty (20) days of its receipt of notice as described above,
shall send its notice to the initiating party, including its own nomination of a
mediator of comparable qualifications or its agreement to accept the decision of
the nominated mediator indicated in the notice of the initiating party; (iii)
promptly upon the receipt of the notice described in (i) above, the parties
shall provide to the mediator(s) copies of the parties' notices and shall
request the mediator(s) to meet within twenty (20) days to consider and propose
a resolution or a procedure for reaching a resolution; (iv) the mediator(s)
shall devise a resolution on the basis of fairness and practicality with
reference to this Agreement and the fact situation leading to and consequent
upon the dispute, and shall propose a resolution to the parties within ten (10)
days of the date of their first meeting; (v) each of the parties shall, within
ten (10) days after receiving the mediator's proposed resolution, notify the
other of its acceptance or
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non-acceptance of the proposed resolution; and (vi) the mediation shall be held
in Hartford, Connecticut and (b) If any dispute cannot be resolved by the
procedures set forth in this section (including if the parties fail to agree
upon a mediator), either of the parties may demand arbitration thereof and the
dispute shall be resolved by final and binding arbitration before a panel of
three arbitrators serving under the Commercial Arbitration Rules of the American
Arbitration Association. Each party to the dispute shall select one arbitrator
and such arbitrators shall jointly select a third arbitrator. The arbitration
shall be held in Hartford, Connecticut, unless another location is mutually
agreed upon by the parties to such arbitration. The majority decision of
arbitrators may, but need not, be entered as judgment in accordance with the
provisions of applicable law. With respect to any such arbitration, the parties
hereto each hereby irrevocably submits to the jurisdiction of any federal or
state court located in Hartford, Connecticut solely for purposes of compelling
arbitration pursuant to this Section 11.14 or to enforce any interim or final
award entered by the arbitrators. If this arbitration provision is for any
reason held to be invalid or otherwise inapplicable to any dispute, the parties
hereto agree that any action or proceeding brought with respect to any dispute
arising under this Agreement, or to interpret or clarify any rights or
obligations arising hereunder, shall be maintained solely and exclusively in any
federal or state court located in Hartford, Connecticut.
11.15. Consent to Jurisdiction, etc.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Connecticut court or federal court of the United States of
America sitting in Hartford, and any appellate court from any thereof, in any
Proceeding arising out of or relating to this Agreement or the Ancillary
Agreements or the transactions contemplated hereby or thereby or for recognition
or enforcement of any judgment
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relating thereto, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such Proceeding may be
heard and determined in such Connecticut court or, to the extent permitted by
law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such Proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.
(b) Each of the parties hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any Proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby in any Connecticut or federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by Law, the
defense of an inconvenient forum to the maintenance of such Proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 11.8. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by Law.
11.16. Legal Counsel.
The parties hereto acknowledge that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to consult
with legal counsel of their choice in connection with the drafting, negotiation
and execution of this Agreement.
11.17. Waiver of Punitive and Other Damages and Jury Trial.
(a) THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO
ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY, LOST PROFITS, INDIRECT, CONSEQUENTIAL
OR SIMILAR DAMAGES IN ANY PROCEEDING
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ARISING OUT OF OR RESULTING FROM ANY CONTROVERSY OR CLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
(c) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF A PROCEEDING,
SEEK TO ENFORCE EITHER OF THE FOREGOING WAIVERS, (ii) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.17.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
PM HOLDINGS, INC.
By /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
PHOENIX GROUP HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
GE FINANCIAL ASSURANCE
HOLDINGS, INC.
By /s/ Xxxx X. Xxxxx
--------------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President,
Secretary & General Counsel
The undersigned hereby executes this Agreement solely for the purpose of
being bound by the provisions of Section 5.6 and Section 5.7.
GE LIFE AND ANNUITY
ASSURANCE COMPANY
By /s/ Xxxx X. Xxxxx
--------------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President
