EXHIBIT 2.2
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
DATED AS OF
OCTOBER 14, 2004
BY AND AMONG
UNITED NATIONAL GROUP, LTD.,
UNITED NATIONAL INSURANCE COMPANY,
PENN INDEPENDENT CORPORATION,
THE SHAREHOLDERS NAMED HEREIN,
AND
THE SHAREHOLDERS' REPRESENTATIVE
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS......................................................................................... 2
Section 1.1 Definitions............................................................................. 2
ARTICLE II PURCHASE AND SALE OF SHARES........................................................................ 6
Section 2.1 Sale and Transfer of the PIC Shares..................................................... 6
Section 2.2 The Purchase Price...................................................................... 6
Section 2.3 Purchase Price Adjustment............................................................... 7
Section 2.4 EBITDA Payment.......................................................................... 8
Section 2.5 Further Assurances...................................................................... 9
ARTICLE III THE CLOSING....................................................................................... 10
Section 3.1 The Closing............................................................................. 10
Section 3.2 Deliveries by PIC, the Shareholders and the Shareholders' Representative................ 10
Section 3.3 Deliveries by Parent.................................................................... 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING PIC....................................................... 11
Section 4.1 Organization and Qualification.......................................................... 12
Section 4.2 Capitalization.......................................................................... 12
Section 4.3 Corporate Authorization; Enforceability; Board Action................................... 13
Section 4.4 Consents and Approvals; No Violations................................................... 14
Section 4.5 Financial Statements.................................................................... 14
Section 4.6 Absence of Certain Changes.............................................................. 15
Section 4.7 Undisclosed Liabilities................................................................. 15
Section 4.8 Litigation.............................................................................. 16
Section 4.9 Compliance with Laws.................................................................... 16
Section 4.10 Accounts................................................................................ 18
Section 4.11 Books and Records....................................................................... 18
Section 4.12 Producer Relationships.................................................................. 18
Section 4.13 Insurance Markets....................................................................... 19
Section 4.14 Employee Benefit Plans.................................................................. 19
Section 4.15 Employee Matters........................................................................ 21
Section 4.16 Taxes................................................................................... 21
Section 4.17 Certain Contracts....................................................................... 23
Section 4.18 Intellectual Property; Software......................................................... 24
Section 4.19 Properties and Assets................................................................... 26
Section 4.20 Environmental Matters................................................................... 26
Section 4.21 Transactions with Affiliates............................................................ 27
Section 4.22 Insurance............................................................................... 27
Section 4.23 Finders' or Advisors' Fees.............................................................. 27
Section 4.24 Ownership of PNG Shares................................................................. 28
Section 4.25 Disclosure Documents.................................................................... 28
Section 4.26 Risk Management......................................................................... 28
Section 4.27 Derivatives............................................................................. 28
Section 4.28 Disclosure.............................................................................. 28
Section 4.29 Merger Agreement Representations and Warranties......................................... 29
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Section 4.30 No Other Representations................................................................ 29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.................................................. 29
Section 5.1 Ownership of Stock; Title............................................................... 29
Section 5.2 Authority............................................................................... 30
Section 5.3 No Violation; Consents and Approvals.................................................... 30
Section 5.4 Outstanding Obligations................................................................. 31
Section 5.5 Disclosure Documents.................................................................... 31
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER................................................. 31
Section 6.1 Organization and Qualification.......................................................... 31
Section 6.2 Corporate Authorization; Board Action................................................... 32
Section 6.3 Consents and Approvals; No Violations................................................... 32
Section 6.4 Investment Representation............................................................... 33
ARTICLE VII COVENANTS......................................................................................... 33
Section 7.1 Conduct of PIC.......................................................................... 33
Section 7.2 Conduct of the Shareholders............................................................. 36
Section 7.3 Access to Information; Confidentiality.................................................. 36
Section 7.4 Regulatory Filings; Commercially Reasonable Best Efforts................................ 37
Section 7.5 Notification of Certain Matters......................................................... 38
Section 7.6 No Solicitation; Unsolicited Proposals.................................................. 39
Section 7.7 Subsequent Actions...................................................................... 40
Section 7.8 Employee Benefits....................................................................... 40
Section 7.9 PNG..................................................................................... 41
Section 7.10 Non-Solicitation and Non-Competition.................................................... 41
Section 7.11 Shareholder Releases.................................................................... 43
Section 7.12 Hatboro Headquarters.................................................................... 44
Section 7.13 Disclosure Documents.................................................................... 44
ARTICLE VIII CONDITIONS....................................................................................... 45
Section 8.1 Conditions to the Obligations of Each Party............................................. 45
Section 8.2 Conditions to the Obligations of Parent and Buyer....................................... 45
Section 8.3 Conditions to the Obligations of PIC and the Shareholders............................... 48
Section 8.4 Frustration of Closing Conditions....................................................... 48
ARTICLE IX VOTING AGREEMENT................................................................................... 48
Section 9.1 Voting of the PNG Shares................................................................ 48
ARTICLE X TERMINATION......................................................................................... 49
Section 10.1 Termination............................................................................. 49
Section 10.2 Effect of Termination................................................................... 50
Section 10.3 Fees and Expenses....................................................................... 50
ARTICLE XI INDEMNIFICATION.................................................................................... 51
Section 11.1 Indemnification by the Principal Shareholder............................................ 51
Section 11.2 Indemnification by Parent and Buyer..................................................... 52
Section 11.3 Notice of Claim; Defense................................................................ 53
Section 11.4 Survival of Indemnification Claims; Offset.............................................. 54
Section 11.5 Characterization of Indemnification Payments............................................ 54
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Section 11.6 Effect of Investigation................................................................. 54
Section 11.7 Limitations on Indemnification.......................................................... 54
Section 11.8 Exclusive Remedy........................................................................ 55
ARTICLE XII TAX MATTERS....................................................................................... 56
Section 12.1 Apportionment of Taxes.................................................................. 56
Section 12.2 Contest Provisions...................................................................... 57
Section 12.3 Tax Returns............................................................................. 58
Section 12.4 Refunds, Credits and Net Operating Losses............................................... 58
Section 12.5 Survival of Tax Provisions.............................................................. 59
Section 12.6 Transfer Taxes.......................................................................... 59
Section 12.7 Exclusivity............................................................................. 59
Section 12.8 Certain Post-Closing Actions which Affect Shareholders'
Liability for Taxes.................................................................... 59
Section 12.9 Termination of Existing Tax Sharing Agreements.......................................... 59
Section 12.10 Characterization of Indemnification Payments............................................ 60
Section 12.11 Assistance and Cooperation.............................................................. 60
Section 12.12 FIRPTA.................................................................................. 60
ARTICLE XIII THE SHAREHOLDER REPRESENTATIVE................................................................... 60
Section 13.1 The Shareholders' Representative........................................................ 60
ARTICLE XIV MISCELLANEOUS..................................................................................... 62
Section 14.1 Survival of Covenants, Representations and Warranties................................... 62
Section 14.2 Amendments; No Waivers.................................................................. 63
Section 14.3 Notices................................................................................. 63
Section 14.4 Successors and Assigns.................................................................. 65
Section 14.5 Governing Law........................................................................... 65
Section 14.6 Jurisdiction............................................................................ 65
Section 14.7 Waiver of Jury Trial.................................................................... 65
Section 14.8 Counterparts; Effectiveness............................................................. 65
Section 14.9 Entire Agreement........................................................................ 65
Section 14.10 Third Party Beneficiaries............................................................... 66
Section 14.11 Severability............................................................................ 66
Section 14.12 Specific Performance.................................................................... 66
Section 14.13 Construction; Interpretation............................................................ 66
Section 14.14 Changes in PNG Common Stock............................................................. 67
Section 14.15 Obligations of Each of the Shareholders and PIC......................................... 67
EXHIBIT A...................................................................................... SHAREHOLDER DATA
EXHIBIT B.............................................................................. FORM OF ESCROW AGREEMENT
EXHIBIT C...................................................................................... KNOWLEDGE OF PIC
EXHIBIT D............................................................................... FORM OF GENERAL RELEASE
EXHIBIT E............................................................................... FORM OF SPOUSAL CONSENT
EXHIBIT F................................................................................... FORM OF MLB OPINION
EXHIBIT G................................................................. FORM OF SHAREHOLDERS' COUNSEL OPINION
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INDEX OF DEFINED TERMS
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Accounting Referee............................................................................................ 7
Action........................................................................................................ 16
Actual EBITDA................................................................................................. 9
Additional PNG Equity......................................................................................... 1
Additional PNG Equity Holders................................................................................. 1
Adjusted EBITDA............................................................................................... 9
Affected Employees............................................................................................ 41
affiliate..................................................................................................... 66
Agreement..................................................................................................... 1
Alternative Transaction....................................................................................... 39
Approving Holders............................................................................................. 61
Audited Financial Statements.................................................................................. 14
Books and Records............................................................................................. 2
Business Day.................................................................................................. 2
Buyer......................................................................................................... 1
Closing....................................................................................................... 10
Closing Date.................................................................................................. 10
Closing Date Balance Sheet.................................................................................... 7
Closing Net Working Capital................................................................................... 7
Code.......................................................................................................... 2
Confidentiality Agreement..................................................................................... 37
Contract...................................................................................................... 2
Copyrights.................................................................................................... 24
Current Leases................................................................................................ 44
Designated Employees.......................................................................................... 42
EBITDA Statement.............................................................................................. 8
End Date...................................................................................................... 49
ERISA......................................................................................................... 19
ERISA Affiliate............................................................................................... 19
Escrow Agreement.............................................................................................. 2
Escrowed Amount............................................................................................... 6
Excess Bonus.................................................................................................. 6
Exchange Act.................................................................................................. 2
Fee Cap....................................................................................................... 51
Final EBITDA Statement........................................................................................ 9
Financial Statements.......................................................................................... 14
FIRPTA Certificate............................................................................................ 60
Form S-4...................................................................................................... 28
GAAP.......................................................................................................... 7
General Releases.............................................................................................. 10
Governmental Authority........................................................................................ 2
Hazardous Material............................................................................................ 2
Headquarters.................................................................................................. 44
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Headquarters Lease............................................................................................ 44
Headquarters Purchase Agreement............................................................................... 44
HSR Act....................................................................................................... 14
including..................................................................................................... 66
Indemnified Person............................................................................................ 53
Indemnitor.................................................................................................... 53
Indemnity Reduction Amounts................................................................................... 55
Insurance Permit.............................................................................................. 3
Intellectual Property......................................................................................... 24
IP Licenses................................................................................................... 25
Joint Proxy Statement/Prospectus.............................................................................. 28
Key Employees................................................................................................. 47
knowledge of the PIC.......................................................................................... 3
Law........................................................................................................... 3
Lazard........................................................................................................ 27
Leased Real Property.......................................................................................... 26
Leases........................................................................................................ 23
Liability..................................................................................................... 3
Lien.......................................................................................................... 3
Major Producers............................................................................................... 18
Margin Error.................................................................................................. 8
Material Adverse Effect....................................................................................... 3
Material Contracts............................................................................................ 24
Merger........................................................................................................ 3
Merger Agreement.............................................................................................. 3
Net Working Capital........................................................................................... 3
Paid Amount................................................................................................... 6
Parent........................................................................................................ 1
Parent Disclosure Letter...................................................................................... 32
Parent Indemnified Persons.................................................................................... 51
Parent Losses................................................................................................. 3
Patents....................................................................................................... 24
PBCL.......................................................................................................... 13
Permitted Liens............................................................................................... 4
Person........................................................................................................ 4
PIC........................................................................................................... 1
PIC Balance Sheet............................................................................................. 4
PIC Business Documents........................................................................................ 17
PIC Contracts................................................................................................. 24
PIC Disclosure Letter......................................................................................... 12
PIC Employee Plans............................................................................................ 19
PIC Holdings.................................................................................................. 28
PIC Intellectual Property..................................................................................... 25
PIC Permits................................................................................................... 4
PIC Shares.................................................................................................... 6
PIC Subsidiary Convertible Security........................................................................... 13
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PIC-Produced Insurance Contracts.............................................................................. 4
PNG........................................................................................................... 1
PNG Common Stock.............................................................................................. 1
PNG Shares.................................................................................................... 28
PNG Stock Purchase Agreements................................................................................. 1
Pre-Closing Tax Period........................................................................................ 56
Principal Shareholder......................................................................................... 4
Producer...................................................................................................... 18
Producer Agreement............................................................................................ 18
Proxy......................................................................................................... 49
Purchase Price................................................................................................ 6
Release....................................................................................................... 5
Releasee...................................................................................................... 43
Representative................................................................................................ 5
Requisite Regulatory Approvals................................................................................ 46
Restricted Business........................................................................................... 42
Restricted Shareholder........................................................................................ 43
Securities Act................................................................................................ 5
Shareholder................................................................................................... 1
Shareholder Indemnified Persons............................................................................... 53
Shareholder Losses............................................................................................ 53
Shareholders.................................................................................................. 1
Shareholders' Representative.................................................................................. 1
Software...................................................................................................... 25
Straddle Period............................................................................................... 56
Subsidiary.................................................................................................... 5
Target Net Working Capital.................................................................................... 5
Tax........................................................................................................... 5
Tax Authority................................................................................................. 5
Tax Claim..................................................................................................... 59
Tax Gross-Up Payment.......................................................................................... 5
Tax Return.................................................................................................... 5
Taxes......................................................................................................... 5
Third Party................................................................................................... 6
Total Current Assets.......................................................................................... 6
Total Current Liabilities..................................................................................... 6
Trade Secrets................................................................................................. 25
Trademarks.................................................................................................... 24
Transfer Taxes................................................................................................ 59
Unaudited Financial Statements................................................................................ 14
Voting Debt................................................................................................... 12
WARN Act...................................................................................................... 21
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of October
14, 2004, is entered into by and among United National Group, Ltd., an exempted
company formed with limited liability under the laws of the Cayman Islands
("Parent"), United National Insurance Company, a Pennsylvania corporation and an
indirect, wholly-owned subsidiary of Parent ("Buyer"), Penn Independent
Corporation, a Pennsylvania corporation ("PIC"), each of the shareholders of PIC
whose names are set forth on Exhibit A hereto (each, a "Shareholder," and,
collectively, the "Shareholders") and Xxxxx Xxxxxxxx (the "Shareholders'
Representative") in his capacity as the Shareholders' Representative.
W I T N E S S E T H:
WHEREAS, PIC, through a wholly-owned subsidiary, owns approximately
thirty-one percent (31%) of the outstanding common stock (the "PNG Common
Stock"), par value $0.01 per share, of Penn-America Group, Inc., a Pennsylvania
corporation ("PNG ");
WHEREAS, the Shareholders own all of the issued and outstanding
shares of PIC, and each of the Shareholders deems it advisable and in their best
interests to consummate the acquisition of PIC by Parent and Buyer;
WHEREAS, each of the Boards of Directors of Parent and PIC has
approved, and deems it advisable and in the best interests of its respective
shareholders to consummate the acquisition of PIC by Parent and Buyer, which
acquisition is to be effected by the purchase of all the outstanding capital
stock of PIC by Buyer upon the terms and subject to the conditions set forth
herein;
WHEREAS, each of the Principal Shareholder (as defined below) and
Xxx X. Xxxxxxxx (together, the "Additional PNG Equity Holders") desires to sell
to Buyer simultaneously with the Closing (as defined below), and Buyer desires
to acquire, shares of PNG Common Stock issued upon the exercise of the options
to purchase shares of PNG Common Stock owned by them (such shares of PNG Common
Stock, collectively, the "Additional PNG Equity"); and
WHEREAS, the Additional PNG Equity Holders are entering into
separate stock purchase agreements with Buyer simultaneously with the execution
of this Agreement to effect the sale and transfer of the Additional PNG Equity
to Buyer (collectively, the "PNG Stock Purchase Agreements"), subject to the
terms and conditions contained in the PNG Stock Purchase Agreements.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the following
terms shall have the respective meanings specified therefor below:
"Books and Records" means the originals or copies of all customer
lists, policy information, insurance contract forms, administrative and pricing
manuals, claim records, sales records, underwriting records, financial records,
compliance records, data files prepared for or filed with regulators of the
businesses of PIC and its Subsidiaries and premium Tax records, each in the
possession or control of PIC, its Subsidiaries or any of their affiliates,
whether or not stored in hardcopy form or on magnetic or optical media (to the
extent not subject to licensing restrictions), but excluding prior to the
Closing any such lists, information and records that are prohibited from being
disclosed or transferred by applicable Law or regulatory requirements.
"Business Day" means any day other than Saturday, Sunday and any day
on which banking institutions in the Commonwealth of Pennsylvania are authorized
by Law or other governmental action to close.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Contract" means, with respect to any Person, any agreement,
arrangement, undertaking, contract, commitment, obligation, promise, indenture,
deed of trust or other instrument, document or agreement (whether written or
oral and whether express or implied) by which that Person, or any amount of its
properties or assets, is bound or subject.
"Escrow Agreement" means the Escrow Agreement among Buyer, the
Principal Shareholder and the escrow agent named therein substantially in the
form of Exhibit B hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any domestic (federal, state or local),
foreign or supranational governmental or regulatory authority, agency,
department, board, commission, administration or instrumentality, any court,
tribunal or arbitrative body or any self-regulatory organization (including but
not limited to state departments or divisions of insurance).
"Hazardous Material" means all substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law including (i) petroleum, asbestos or polychlorinated biphenyls
and (ii) in the United States, all substances defined as Hazardous Substances,
Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. Section 300.5.
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"Insurance Permit" means any PIC Permit in any jurisdiction to
issue, underwrite, assume, place or otherwise transact the business of
insurance.
"knowledge of PIC" means the actual knowledge that was or would
reasonably be expected to be obtained after due inquiry of the individuals
listed on Exhibit C hereto; provided, that in any case where PIC makes any
representations or warranties as to the action, inaction, status or position of
any Person other than PIC, its Subsidiaries, their respective officers and
directors and any Shareholder, it is specifically understood that PIC has not
made and shall not be required to make, any specific inquiry or investigation of
or with respect to such Person.
"Law" means any law (including common law), ordinance, writ,
directive, judgment, order, decree, injunction, statute, treaty, rule,
regulation, regulatory requirement or determination of (or an agreement with) a
Governmental Authority.
"Liability" means any debt, liability, commitment, obligation, claim
or cause of action of any kind whatsoever, whether due or to become due, known
or unknown, accrued or fixed, absolute or contingent, or otherwise.
"Lien" means any and all liens, charges, security interests,
options, claims, mortgages, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer of any nature whatsoever.
"Material Adverse Effect" means, with respect to any Person, any
fact, event, circumstance, change, condition or effect that, individually or
together with other facts, events, circumstances, changes, conditions or
effects, (a) has been, or would reasonably be expected to be, material and
adverse to the business, assets, properties, liabilities, financial condition or
results of operations of such Person and its Subsidiaries, taken as a whole, or
(b) has materially delayed, or would reasonably be expected to materially delay,
the consummation of the transactions contemplated hereby or has materially and
adversely affected, or would reasonably be expected to materially and adversely
affect, the ability of such Person and its Subsidiaries, taken as a whole, to
perform timely its obligations hereunder or to consummate timely the
transactions contemplated hereby; provided, however, that a change or effect
resulting from changes or effects to the U.S. economy in general shall be deemed
not to be a Material Adverse Effect.
"Merger Agreement" means that certain Agreement and Plan of Merger,
dated as of October 14, 2004, by and among Parent, U.N. Holdings II, Inc.,
Cheltenham Acquisition Corp. and PNG.
"Merger" means the business combination of PNG with Buyer pursuant
to, and upon the terms and conditions set forth in, the Merger Agreement.
"Net Working Capital" means the Total Current Assets minus the Total
Current Liabilities of PIC and its Subsidiaries.
"Parent Losses" means any and all actual losses, liabilities,
damages, judgments, settlements and expenses (including interest and penalties
recovered by a Third Party with respect thereto and reasonable attorneys' fees
and expenses and reasonable accountants' fees and expenses incurred in the
defense of any of the same or in asserting, preserving or enforcing any
3
of the rights of the Parent Indemnified Persons arising under Article XI)
incurred by any of the Parent Indemnified Persons, whether or not involving a
third-party claim, which are caused by, arise from or are related to:
(i) any breach by PIC of any of PIC's representations
and warranties contained in or made by or pursuant to Article IV
(other than Sections 4.16 and 4.29); provided, however, that, in the
case of any representation or warranty that is limited by
"material," "Material Adverse Effect" or by any similar term or
limitation, the occurrence of a breach or inaccuracy of such
representation or warranty, as the case may be, and the amount of
Parent Losses shall be determined as if "material," "Material
Adverse Effect" or by any similar term or limitation were not
included therein;
(ii) any breach by any of the Shareholders of any of
such parties' covenants in Article VII that survive the Closing; or
(iii) any breach prior to the Closing by PIC or any of
the Shareholders of any covenants contained in Article VII.
All statements contained in any exhibit, certificate or schedule hereto
delivered by PIC, the Shareholders' Representative or any Shareholder shall be
deemed representations and warranties.
"Permitted Liens" means (a) Liens for Taxes not yet due and payable
or which are being contested in good faith and for which adequate reserves are
reflected on the Financial Statements, (b) original purchase price conditional
sales contracts and equipment leases with Third Parties entered into in the
ordinary course of business and consistent with past practice, (c) Liens that do
not materially interfere with or materially affect the value or use in any
material respect of the respective underlying asset to which such Liens relate,
and (d) any Liens disclosed on Section 1.1 of the PIC Disclosure Letter.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity or
group (as defined in the Exchange Act).
"PIC Balance Sheet" means the unaudited consolidated balance sheet
of PIC as of June 30, 2004.
"PIC Permits" means all licenses, franchises, permits, certificates,
approvals, accreditations or other similar authorizations from any Governmental
Authority required for, affecting, or relating in any way to, any business
operated or services furnished by PIC or its Subsidiaries, including Insurance
Permits.
"PIC-Produced Insurance Contracts" means all policies, binders and
Contracts of insurance procured by PIC or any of its Subsidiaries.
"Principal Shareholder" means Xxxxx Xxxxxxxx.
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"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
"Representative" means, with respect to any Person, (a) such Person,
(b) its respective Subsidiaries and affiliates and (c) such Person's, and such
Person's respective Subsidiaries' and affiliates', respective officers,
directors, employees, shareholders, partners, controlling persons, auditors,
financial advisors, attorneys, accountants, consultants, agents, advisors or
representatives.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" of a Person means: (a) any corporation, association or
other business entity of which more than fifty percent (50%) of the total voting
power of shares or other voting securities outstanding thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person (or a combination thereof); and (b) any
partnership or limited liability company (i) the sole general partner or the
managing general partner or managing member of which is such Person or one or
more of the other Subsidiaries of such Person (or any combination thereof) or
(ii) the only general partners or members of which are such Person or one or
more of the other Subsidiaries of such Person (or any combination thereof).
Without limiting the generality of the foregoing and for avoidance of ambiguity,
PNG shall not be deemed to be a Subsidiary of PIC.
"Target Net Working Capital" means three million dollars
($3,000,000).
"Tax Authority" means any competent Governmental Authority
exercising any regulatory or Taxing authority responsible for the determination,
assessment or collection of Taxes.
"Tax Return" means any return, report or similar statement
(including any attachment or supplements thereto) supplied to or required to be
supplied to any Tax Authority, including any information return, claim for
refund, amended return or declaration of estimated Tax.
"Tax" or "Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Tax Authority, including taxes, fees, duties, levies, customs, tariffs,
imposts, assessments, obligations or other similar charges of any kind on or
with respect to income, franchises, premiums, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation or net worth,
and taxes or other similar charges of any kind in the nature of excise,
withholding, ad valorem or value added.
"Tax Gross-Up Payment" means a payment made such that (i) the sum of
the amount of such gross-up payment plus the amount of the payment with respect
to which such
5
gross-up payment was made less (ii) all Taxes imposed on such sum equals (iii)
the amount of payment with respect to which such gross-up payment was made.
"Third Party" means any Person (or group of Persons) other than
Parent and its Subsidiaries.
"Total Current Assets" means the current assets of PIC and its
Subsidiaries relating to the line items set forth in Section 1.1 of the PIC
Disclosure Letter and set forth on the Closing Date Balance Sheet.
"Total Current Liabilities" means the current liabilities of PIC and
its Subsidiaries relating to the line items set forth in Section 1.1 of the PIC
Disclosure Letter and set forth on the Closing Date Balance Sheet.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Sale and Transfer of the PIC Shares. Subject to the
terms and conditions of this Agreement, at the Closing, the Shareholders shall
sell, convey, assign, transfer and deliver to Buyer all of the issued and
outstanding shares of common stock, par value $1.00 per share, of PIC (the "PIC
Shares") free and clear of all Liens.
Section 2.2 The Purchase Price. Subject to the terms and conditions
of this Agreement, in consideration of the aforesaid sale, conveyance,
assignment, transfer and delivery to Buyer of the PIC Shares, Buyer shall pay to
the Shareholders total consideration of ninety-five million dollars
($95,000,000), as adjusted in accordance with the terms of this Agreement. Such
amount shall be paid as follows, Buyer shall (i) pay to the Shareholders by wire
transfer of immediately available funds to an account or accounts designated in
writing by the Shareholders' Representative the sum of (A) eighty-nine million
dollars ($89,000,000) minus (B) the amount, if any, equal to (1) the aggregate
amount of change of control bonuses or other payments (including the amounts
payable pursuant to Section 8.2(k)), including associated Tax Gross-Up Payments,
and any additional accruals (as compared to the relevant accrual set forth on
PIC's March 31, 2004 balance sheet) (with each accrual compared on an
item-by-item basis, rather than on an aggregate basis for all such accruals)
required in connection with or as a result of (with or without lapse of time and
whether alone or in combination with another event) the transactions
contemplated by this Agreement, with respect to amounts paid or payable to any
officers or employees of PIC or its Subsidiaries pursuant to Contracts in effect
as of the date hereof, minus (2) five million dollars ($5,000,000) (the excess
of (1) over (2), the "Excess Bonus") minus (3) any Tax benefit (including the
reduction of Taxes) when and if actually realized by PIC in any taxable period
or portion thereof beginning following the Closing solely as a result of the
payment of the Excess Bonus (assuming that all other available losses,
deductions, loss carry forwards and other tax attributes are utilized prior to
the Excess Bonus) (such sum, the "Paid Amount") to be distributed among the
Shareholders according to each Shareholders' percentage ownership as set forth
in Section 2.2 of the PIC Disclosure Letter and (ii) deposit into escrow the sum
of six million dollars ($6,000,000) (the "Escrowed Amount" and together with the
Paid Amount, the "Purchase Price"). The Purchase Price shall be subject to
adjustment pursuant to Sections 2.3, 2.4
6
and 10.3(b). The Escrowed Amount shall be subject to the terms of the Escrow
Agreement and this Agreement and shall remain in escrow until eighteen (18)
months after the Closing Date or until it is paid to the Principal Shareholder
or Buyer pursuant to the Escrow Agreement and this Agreement; provided that,
subject in all respects to the terms of the Escrow Agreement, two million
dollars ($2,000,000) of the Escrowed Amount shall be paid to the Principal
Shareholder on each of the sixth (6) month anniversary of the Closing Date and
the one (1) year anniversary of the Closing Date. All interest earned on the
Escrowed Amount shall be paid to Buyer. Buyer shall pay the costs in connection
with establishing and maintaining the escrow account pursuant to the Escrow
Agreement.
Section 2.3 Purchase Price Adjustment.
(a) Within ninety (90) calendar days following the Closing Date,
Parent shall cause its independent public accountants to prepare and deliver to
the Shareholders' Representative a statement containing the balance sheet of PIC
as of the Closing Date (the "Closing Date Balance Sheet") and a calculation of
the Net Working Capital as of the Closing Date (such amount, the "Closing Net
Working Capital"); provided, that the Excess Bonus shall not be deducted in
calculating the Closing Net Working Capital. The Closing Date Balance Sheet
shall be prepared, and the Closing Net Working Capital shall be calculated, in
accordance with United States generally accepted accounting principles ("GAAP")
(as in effect on the Closing Date).
(b) If the Shareholders' Representative in good faith disagrees with
Parent's calculation of the Closing Net Working Capital as set forth on the
Closing Date Balance Sheet, he may within twenty (20) Business Days after
receipt thereof deliver a written notice to Parent disagreeing with such
calculation of the Closing Net Working Capital. Any such notice of disagreement
shall specify in reasonable detail those items or amounts comprising the Closing
Net Working Capital as to which the Shareholders' Representative disagrees and
the basis of such disagreement. If no such notice of disagreement is timely
delivered pursuant to this Section 2.3(b), the Closing Net Working Capital set
forth on the Closing Date Balance Sheet shall be final and binding on the
parties hereto.
(c) If a notice of disagreement shall be timely delivered pursuant
to Section 2.3(b), the parties shall, during the twenty (20) Business Days
following such delivery, use their reasonable efforts to reach an agreement on
the disputed items. If such an agreement is reached, the Closing Net Working
Capital as so agreed shall be final and binding on the parties hereto. If the
parties are unable to reach such an agreement, a nationally-recognized
accounting firm jointly selected by Parent and the Shareholders' Representative
not then performing, or that has not performed in the past two (2) years,
material services for any of the Shareholders or Parent (the "Accounting
Referee") shall be retained to review promptly this Agreement and the disputed
items or amounts. The Accounting Referee shall deliver to the parties, as
promptly as practicable, and within forty-five (45) calendar days of being
referred the matter, a report setting forth its adjustments, if any, to the
Closing Date Balance Sheet and the calculations supporting such adjustments. The
Accounting Referee shall act as an arbitrator to determine, based solely on the
provisions of this Section 2.3 and the presentations by Parent and the
Shareholders' Representative, and not by independent review, only those issues
still in dispute. Such report shall be final and binding upon the parties hereto
and the Closing Net Working Capital as adjusted pursuant to such report shall be
final and binding on the parties hereto. The cost of the Accounting
7
Referee's review and report shall be borne by each of the Shareholder's
Representative and Parent in proportion to their respective Margin Errors. For
purposes of this section, "Margin Error" shall mean the difference between such
Person's disputed estimated amount of the Closing Net Working Capital and the
final amount of the binding Closing Net Working Capital as determined by the
Accounting Referee (in all cases multiplying any negative result by - 1).
(d) If the Target Net Working Capital exceeds the Closing Net
Working Capital reflected on the Closing Date Balance Sheet, then the Principal
Shareholder shall promptly pay to Buyer, as an adjustment to the Purchase Price,
without interest, an amount equal to such excess.
(e) Any payments pursuant to Section 2.3(d) shall be made by wire
transfer of immediately available funds to an account at a United States bank
designated in writing by Parent.
Section 2.4 EBITDA Payment.
(a) If the Closing occurs:
(i) prior to December 31, 2004, then as promptly as
practicable after December 31, 2004 (but in no event later than
ninety (90) days thereafter), Parent shall cause its independent
public accountants to prepare and deliver to the Shareholders'
Representative a statement containing a calculation of the Adjusted
EBITDA (as defined in Section 2.4(e)) (the "EBITDA Statement"); or
(ii) after December 31, 2004, then as promptly as
practicable after December 31, 2004 (but in no event later than
ninety (90) days thereafter), PIC shall prepare and deliver to
Parent and the Shareholders' Representative the EBITDA Statement.
(b) In the case of Section 2.4(a)(i) above, if the Shareholders'
Representative in good faith disagrees with Parent's calculation of the EBITDA
Statement, he may within twenty (20) Business Days after receipt thereof deliver
a written notice to Parent disagreeing with such calculation of the EBITDA
Statement. In the case of Section 2.4(a)(ii) above, if Parent or the
Shareholders' Representative in good faith disagrees with PIC's calculation of
the EBITDA Statement, it may within twenty (20) Business Days after receipt
thereof deliver a written notice to PIC disagreeing with such calculation of the
EBITDA Statement. Any such notice of disagreement shall specify in reasonable
detail those items or amounts comprising the EBITDA Statement as to which the
Shareholders' Representative or Parent, as applicable, disagrees and the basis
of such disagreement. If no such notice of disagreement is timely delivered
pursuant to this Section 2.4(b), the EBITDA Statement shall be final and binding
on the parties hereto.
(c) If a notice of disagreement shall be timely delivered pursuant
to Section 2.4(b), the parties shall, during the twenty (20) Business Days
following such delivery, use their reasonable efforts to reach an agreement on
the disputed items. If such an agreement is reached, the EBITDA Statement as so
agreed shall be final and binding on the parties hereto. If the parties are
unable to reach such an agreement, an Accounting Referee shall be retained to
review promptly this Agreement and the disputed items or amounts. The Accounting
Referee shall
8
deliver to the parties, as promptly as practicable, and within forty-five (45)
calendar days of being referred the matter, a report setting forth its
adjustments, if any, to the EBITDA Statement and the calculations supporting
such adjustments. The Accounting Referee shall act as an arbitrator to
determine, based solely on the provisions of this Section 2.4 and the
presentations by Parent and the Shareholders' Representative, and not by
independent review, only those issues still in dispute. Such report shall be
final and binding upon the parties hereto and the EBITDA Statement as adjusted
pursuant to such report shall be final and binding on the parties hereto. The
EBITDA Statement, as agreed to by the Parent and the Shareholders'
Representative, or as adjusted by the Accountant pursuant to the preceding
sentence, will be final and binding and will be referred to as the "Final EBITDA
Statement". The cost of the Accounting Referee's review and report shall be
borne by each of the Shareholder's Representative and Parent in proportion to
their respective Margin Errors.
(d) If the Actual EBITDA (as defined below) exceeds six million nine
hundred thirty-one thousand dollars ($6,931,000), Buyer shall, without interest,
pay to the Principal Shareholder an amount equal to 5.126 times the amount by
which the Actual EBITDA is in excess of six million nine hundred thirty-one
thousand dollars ($6,931,000) as an adjustment to the Purchase Price. If the
Actual EBITDA is less than five million six hundred seventy-one thousand dollars
($5,671,000), the Principal Shareholder shall pay, without interest, to Buyer
the absolute value of the amount equal to 5.126 times the amount by which the
Actual EBITDA is less than five million six hundred seventy-one thousand dollars
($5,671,000) as an adjustment to the Purchase Price. In no event shall any
payment by Buyer pursuant to this Section 2.4 exceed three million dollars
($3,000,000).
(e) For purposes of this Agreement:
(i) "Actual EBITDA" means the Adjusted EBITDA as shown
on the Final EBITDA Statement.
(ii) "Adjusted EBITDA" means consolidated pre-Tax net
operating income of PIC and its Subsidiaries for the fiscal year
ended December 31, 2004 (calculated in accordance with GAAP (as in
effect on the Closing Date) applied on a consistent basis with the
Audited Financial Statements) and as adjusted in accordance with
Section 2.4(e) of the Parent Disclosure Letter. In all cases,
Adjusted EBITDA will exclude the cumulative effect of any change in
accounting principles.
(f) Any payments or transfers made pursuant to Section 2.4(d) shall
be made within two (2) Business Days after the completion of the Final EBITDA
Statement in accordance with Section 2.4(c) above. Any payments pursuant to
Section 2.4(d) shall be made by wire transfer of immediately available funds to
an account at a United States bank designated in writing by Parent or the
Shareholders' Representative, as applicable.
Section 2.5 Further Assurances. After the Closing, the Shareholders
and the Shareholders' Representative shall from time to time, at the reasonable
request of Parent, Buyer or PIC, execute and deliver such other instruments of
conveyance and transfer and take such other actions as Parent, Buyer or PIC may
reasonably request, in order to consummate the transactions
9
contemplated hereby and to vest in Buyer the right, title and interest in and to
the PIC Shares.
ARTICLE III
THE CLOSING
Section 3.1 The Closing. The sale and transfer (the "Closing") of
the PIC Shares by the Shareholders to Buyer shall take place at the offices of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Four Times Square, Xxx Xxxx, XX 00000,
at 10:00 am local time, as soon as reasonably practicable, but in any event
within two (2) Business Days after the satisfaction or waiver of the conditions
set forth in Article VIII (other than those conditions that by their nature are
to be satisfied at the Closing) (the actual time and date of the Closing being
referred to herein as the "Closing Date").
Section 3.2 Deliveries by PIC, the Shareholders and the
Shareholders' Representative. Subject to the conditions set forth in this
Agreement, at the Closing, and simultaneously with Parent's deliveries
hereunder, PIC, the Shareholders and the Shareholders' Representative shall
deliver, or cause to be delivered, to Parent or Buyer, as applicable, the
following:
(a) stock certificates representing all of the PIC Shares sufficient
to vest in Buyer good and marketable title to such PIC Shares accompanied by
stock powers duly endorsed in blank or accompanied by duly executed documents of
transfer;
(b) a document, duly executed by each Person who is an executive
officer and/or director of PIC, reciting that such document shall become
effective simultaneously with the Closing, that effects the resignation of such
Person as an executive officer (unless such executive officer is a party to an
employment agreement or is otherwise continuing employment pursuant to Section
8.2(g)) and/or director of PIC;
(c) executed general releases from each of the directors and
executive officers of PIC, as well as the Key Employees, in each case, in the
form attached hereto as Exhibit D (the "General Releases");
(d) executed copies of the consents referred to in Sections 4.4(a)
and 7.4(d);
(e) all of the Books and Records of PIC and its Subsidiaries;
(f) the officer's certificate referred to in Section 8.2(a);
(g) the Shareholders' Representative's certificate referred to in
Section 8.2(b);
(h) a certificate of the secretary or an assistant secretary of PIC
setting forth resolutions of its Board of Directors with respect to the
authorization of PIC to execute and deliver this Agreement and to enter into the
transactions contemplated herein;
10
(i) the Escrow Agreement duly executed by the Principal Shareholder;
(j) the FIRPTA Certificate (as defined below);
(k) the opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP referred to in
Section 8.2(i);
(l) the opinions of counsel to the Shareholders referred to in
Section 8.2(i);
(m) an executed spousal consent for each of the Shareholders set
forth in Section 5.2(b) of the PIC Disclosure Letter, in form and substance as
set forth in Exhibit E; and
(n) all other previously undelivered documents reasonably required
to be delivered by PIC, the Shareholders or the Shareholders' Representative to
Parent or Buyer at or prior to the Closing in connection with the consummation
of the transactions contemplated hereby.
Section 3.3 Deliveries by Parent. Subject to the conditions set
forth in this Agreement, at the Closing, and simultaneously with PIC's, the
Shareholders' and the Shareholders' Representative's deliveries hereunder,
Parent shall deliver or cause to be delivered to PIC or the Shareholders'
Representative, as applicable, the following:
(a) the Paid Amount;
(b) either the Headquarters Lease or the Headquarters Purchase
Agreement duly executed by Parent or affiliate of Parent;
(c) the Escrow Agreement duly executed by Buyer;
(d) the Escrowed Amount to the escrow agent identified in the Escrow
Agreement;
(e) the officer's certificate referred to in Section 8.3; and
(f) all other previously undelivered documents required to be
delivered by Parent to PIC and the Shareholders' Representative at or prior to
the Closing in connection with the consummation of the transactions contemplated
hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING PIC
Each of PIC and the Shareholders, jointly and severally, represents
and warrants to Parent and Buyer as follows:
11
Section 4.1 Organization and Qualification. Each of PIC and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of incorporation or organization.
Each of PIC and its Subsidiaries has the requisite corporate power and authority
and any necessary PIC Permit to own, operate and lease the properties that it
purports to own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign corporation to do business,
and is in good standing in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect on PIC. Section 4.1 of
the disclosure letter delivered by PIC and the Shareholders' Representative to
Parent simultaneously with the execution of this Agreement (the "PIC Disclosure
Letter") sets forth a complete list of PIC's Subsidiaries and for each such
Subsidiary indicates its ownership and the jurisdictions in which it is
organized and qualified to do business as a foreign corporation. Other than as
set forth in Section 4.1 of the PIC Disclosure Letter and its ownership of PNG
Common Stock, neither PIC nor any of its Subsidiaries is the record or
beneficial owner, directly or indirectly, of any capital stock or other
ownership interest of any kind whatsoever in any other Person.
Section 4.2 Capitalization.
(a) The authorized capital stock of PIC consists of 1,000,000 PIC
Shares, of which, as of the date hereof, 534,333 shares are issued and
outstanding. As of the date hereof, there are no PIC Shares held in treasury.
All the outstanding shares of PIC's capital stock are duly authorized, validly
issued, fully paid and non-assessable. There are no bonds, debentures, notes or
other indebtedness having voting rights (or convertible into securities having
such rights) ("Voting Debt") of PIC or any of its Subsidiaries issued and
outstanding. Except as set forth above or in Section 4.2(a) of the PIC
Disclosure Letter and except for the transactions provided for in this
Agreement, as of the date hereof, (i) there are no shares of capital stock of
PIC authorized, issued or outstanding and (ii) there are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the issued or unissued capital stock of PIC or any of its Subsidiaries,
obligating PIC or any of its Subsidiaries to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interest in, PIC or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of PIC or any of its Subsidiaries to grant, extend or enter into any
such option, warrant, call, subscription or other right, convertible security,
agreement, arrangement or commitment. There are no outstanding contractual
obligations of PIC or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any PIC Shares or other capital stock of PIC or any of its Subsidiaries
or affiliates of PIC or to provide funds to make any investment (in the form of
a loan, capital contribution or otherwise) in any of its Subsidiaries or any
other entity nor has PIC or any of its Subsidiaries granted or agreed to grant
to any Person any stock appreciation rights or similar equity-based rights.
(b) Except as set forth in Section 4.2(b) of the PIC Disclosure
Letter, all of the outstanding capital stock of, or other ownership interests
in, each Subsidiary of PIC is, directly or indirectly, owned by PIC, and all
such capital stock has been validly issued and is fully paid and nonassessable
and owned by either PIC or one of its Subsidiaries free and clear of all Liens
and free of any other limitation or restriction (including any restriction on
the right to
12
vote, sell or otherwise dispose of such capital stock or other ownership
interests). Except as set forth in Section 4.2(b) of the PIC Disclosure Letter,
there are no outstanding options, warrants or other rights to acquire from PIC
or any of its Subsidiaries, and no preemptive or similar rights, subscriptions
or other rights, or convertible or exchangeable securities, agreements,
arrangements or commitments of any character, relating to the capital stock of
any Subsidiary of PIC, obligating PIC or any of its Subsidiaries to issue,
transfer or sell, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable for any capital
stock, voting securities or ownership interests in, any Subsidiary of PIC or
obligating PIC or any Subsidiary of PIC to grant, extend or enter into any such
option, warrant, subscription or other right, convertible or exchangeable
security, agreement, arrangement or commitment (each of the foregoing, a "PIC
Subsidiary Convertible Security"). There are no outstanding obligations of the
PIC or any of its Subsidiaries to repurchase, redeem or otherwise acquire from
any Person (other than PIC or a wholly-owned Subsidiary of PIC) any outstanding
shares of capital stock of any Subsidiary of PIC or any PIC Subsidiary
Convertible Securities. No Subsidiary of PIC owns, either directly or
indirectly, any shares of capital stock of PIC.
(c) Except as set forth in Section 4.2(c) of the PIC Disclosure
Letter, there are no voting trusts or other agreements or understandings to
which PIC or any of its Subsidiaries is a party with respect to the voting of
the capital stock of PIC or any of its Subsidiaries. None of PIC or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of PIC or any of its Subsidiaries, respectively, as a result of
the transactions contemplated by this Agreement.
Section 4.3 Corporate Authorization; Enforceability; Board Action.
(a) PIC has the requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of PIC and no other corporate proceedings on the
part of PIC are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by PIC and, assuming due authorization,
execution and delivery of this Agreement by the other parties hereto,
constitutes a valid and binding agreement of PIC enforceable against PIC in
accordance with its terms, except to the extent that such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws, now or hereafter in effect, affecting creditors' rights
generally, and to general equity principles.
(b) The Board of Directors of PIC, at a meeting duly called and held
or by written consent, unanimously has (i) determined that this Agreement and
the transactions contemplated hereby are advisable and in the best interests of
PIC and the Shareholders, and (ii) approved and adopted this Agreement and the
transactions contemplated hereby.
(c) No "fair price," "merger moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (including the
provisions of Subchapters E, F, G and H of Chapter 25 of the Pennsylvania
Business Corporation Law (the "PBCL")) applies, will apply or purports to apply
to this Agreement or the transactions contemplated hereby.
13
Pursuant to the PBCL, the articles of incorporation of PNG explicitly provide
that the provisions of Subchapters E, F, G and H of Chapter 25 of the PBCL shall
not be applicable to PNG; and therefore, no "fair price," "merger moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
(including the provisions of Subchapters E, F, G and H of Chapter 25 of the
PBCL) applies, will apply or purports to apply to the Merger Agreement or the
transactions contemplated thereby.
Section 4.4 Consents and Approvals; No Violations.
(a) The execution, delivery and performance by PIC of this Agreement
and the consummation by PIC and its Subsidiaries of the transactions
contemplated hereby require no action by or in respect of, or notice to or
filing with, any Governmental Authority (including with respect to any
Subsidiary of PIC) other than (i) compliance with any applicable requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and (ii) those set forth in Section 4.4(a) of the PIC Disclosure Letter
that are required under federal and state Laws governing insurance and companies
that underwrite, place or otherwise transact the business of insurance. Section
4.4(a) of the PIC Disclosure Letter sets forth each such approval and identifies
the applicable Subsidiary (including the applicable state in which it operates)
and applicable Governmental Authority.
(b) Except as set forth in Section 4.4(b) of the PIC Disclosure
Letter, neither the execution, delivery or performance by PIC of this Agreement
nor the consummation by PIC and its Subsidiaries of the transactions
contemplated hereby nor compliance by PIC with any of the provisions hereof will
(i) conflict with or result in any breach of any provisions of the articles of
incorporation or bylaws of PIC or the similar organizational and governing
documents of any of its Subsidiaries, (ii) assuming compliance with the matters
referred to in Section 4.4(a), conflict with or result in any violation of any
provision of any Law binding upon or applicable to PIC or any of its
Subsidiaries, (iii) require the consent, approval or authorization of, or notice
to or filing with, any Third Party with respect to, result in any violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation, amendment, or
acceleration of any right or obligation of PIC or any of its Subsidiaries or to
a loss of any benefit to which PIC or any of its Subsidiaries is entitled)
under, any provision of any PIC Contract or any PIC Permit or (iv) result in the
creation or imposition of any Lien (other than a Permitted Lien) on any asset of
PIC or any of its Subsidiaries.
Section 4.5 Financial Statements.
(a) Section 4.5(a) of the PIC Disclosure Letter sets forth a true
and complete copy of PIC's consolidated financial statements, which include a
combined balance sheet of PIC and its subsidiaries as of December 31 for each of
the years 2001 to 2003, together with combined statements of income,
shareholders' equity and cash flows for each of the years then ended, all of
which have been reviewed by PIC's independent public accountants, whose reports
thereon are included (the "Audited Financial Statements"). Section 4.5(a) of the
PIC Disclosure Letter sets forth a true and complete copy of PIC's unaudited
interim balance sheet as of June 30, 2004 and the related unaudited interim
statements of income for the six (6) months ended June 30, 2004 (the "Unaudited
Financial Statements" and, together with the Audited Financial Statements, the
"Financial Statements"). The Financial Statements have been prepared
14
from, and are in accordance with, the Books and Records of PIC and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of PIC and its consolidated
Subsidiaries as at the dates thereof or for the periods presented therein
(subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments and the absence of footnotes), in each case in conformity
with GAAP applied on a consistent basis (except as may be indicated in the notes
thereto).
(b) PIC and its Subsidiaries maintain accurate Books and Records
reflecting their assets and liabilities and maintain proper and adequate
internal accounting controls that provide assurance that (i) transactions are
executed with management's authorization, (ii) transactions are recorded as
necessary to permit preparation of their financial statements and to maintain
accountability for their assets, (iii) access to their assets is permitted only
in accordance with management's authorization, and (iv) accounts, notes and
other receivable and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and
timely basis.
(c) Neither PIC nor any of its Subsidiaries nor, to the knowledge of
PIC, any Representative of PIC or any of its Subsidiaries has received or
otherwise had or obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of PIC or any of its
Subsidiaries or their respective internal accounting controls, including any
material complaint, allegation, assertion or claim that PIC or any of its
Subsidiaries has engaged in questionable accounting or auditing practices.
Section 4.6 Absence of Certain Changes. Except as set forth in
Section 4.6 of the PIC Disclosure Letter, since December 31, 2003 (a) PIC and
its Subsidiaries have conducted their respective businesses and operations in
all material respects consistent with past practice only in the ordinary and
usual course thereof and there has not occurred (i) any fact, event,
circumstance, change, condition or effect (including the incurrence of any
Liabilities of any nature, whether or not accrued, contingent or otherwise) that
has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on PIC; (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of PIC or of any of its
wholly-owned Subsidiaries other than dividends paid to PIC or any of its
wholly-owned Subsidiaries by a wholly-owned Subsidiary; or (iii) any change by
PIC or any of its Subsidiaries in accounting principles or methods, and (b)
neither PIC nor any of its Subsidiaries has taken any action or made any
omission which, if taken or made after the date of this Agreement, would be
prohibited by Section 7.1.
Section 4.7 Undisclosed Liabilities. Except for Liabilities (a) set
forth in Section 4.7 of the PIC Disclosure Letter or on the face of the
Financial Statements, (b) incurred in the ordinary course of business and
consistent with past practice, and (c) that are not, individually or in the
aggregate, material to PIC, neither PIC nor any of its Subsidiaries has incurred
any Liabilities of any nature that would be required to be reflected or reserved
against on a
15
consolidated balance sheet of PIC and its Subsidiaries (including the notes
thereto) prepared in accordance with GAAP as applied in preparing the PIC
Balance Sheet. Section 4.7 of the PIC Disclosure Letter sets forth the amount of
principal and unpaid interest outstanding under each instrument evidencing
indebtedness of PIC and its Subsidiaries that will accelerate or become due or
result in a right of redemption or repurchase on the part of the holder of such
indebtedness (with or without due notice or lapse of time) as a result of this
Agreement or the transactions contemplated hereby.
Section 4.8 Litigation.
(a) PIC has furnished to Parent and its Representatives a complete
list of each litigation, suit, action, claim, charge or other proceeding (each,
an "Action") that has been instituted or, to the knowledge of PIC, threatened
against, by or affecting PIC or any of its Subsidiaries, the outcome of which,
if determined adversely to PIC, would be reasonably expected to have a Material
Adverse Effect on PIC. Except as set forth in Section 4.8(a) of the PIC
Disclosure Letter, (i) there is no Action by or before any Governmental
Authority pending or, to the knowledge of PIC, threatened, against, by or
affecting PIC or any of its Subsidiaries, except for such Actions as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on PIC and (ii) no investigation or inquiry by or before any
Governmental Authority is pending or, to the knowledge of PIC, threatened
against PIC or any of its Subsidiaries.
(b)Except as set forth in Section 4.8(b) of the PIC Disclosure
Letter, there are no judgments, injunctions, writs, orders or decrees binding on
PIC or any of its Subsidiaries that (i) have had, or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
PIC or any of its Subsidiaries or (ii) would be binding upon Parent or any of
its Subsidiaries following consummation of the transactions contemplated hereby.
Section 4.9 Compliance with Laws.
(a) Except as set forth in Section 4.9(a) of the PIC Disclosure
Letter, PIC and each of its Subsidiaries and, to the knowledge of PIC, each
Third Party service provider acting on behalf of PIC or any of its Subsidiaries,
are, and since January 1, 2001 have been, in compliance in all material respects
with all applicable Laws. All Books and Records, including personnel files of
any employee or agent, of PIC and its Subsidiaries have been maintained, in all
material respects, accurately and in accordance with applicable Law.
(b) Except as set forth in Section 4.9(b) of the PIC Disclosure
Letter, (i) all PIC Permits are valid and in full force and effect, (ii) neither
PIC nor any of its Subsidiaries is in default under, or in violation of, any PIC
Permit, and no event has occurred or condition exists which constitutes or, that
with notice or lapse of time or both, could constitute, a default under, or
violation of, any PIC Permit, (iii) none of the PIC Permits shall be terminated
or impaired or become terminable, in whole or in part, as a result of the
transactions contemplated hereby, and (iv) all applications required to have
been filed for the renewal of any PIC Permits have been duly filed on a timely
basis with the appropriate Governmental Authorities. All such PIC Permits are
set forth in Section 4.9(b) of the PIC Disclosure Letter. Neither PIC nor any of
its Subsidiaries is operating under any Contract with any Governmental Authority
that requires it to take, or refrain from taking, any action relating to the
conduct of its business or the performance
16
of its obligations under this Agreement or the Merger Agreement otherwise
permitted by applicable Law.
(c) Except as set forth in Section 4.9(c) of the PIC Disclosure
Letter or as would not reasonably be expected to have a Material Adverse Effect
on PIC, since January 1, 2001, (i) neither PIC nor any of its Subsidiaries nor,
to the knowledge of PIC, any Third Party service provider acting on behalf of
PIC, has received, or otherwise has any knowledge of, any written or oral notice
from any Governmental Authority that (x) alleges any material noncompliance (or
that PIC or any of its Subsidiaries or any such Third Party service provider is
under investigation or the subject of an inquiry by any such Governmental
Authority for such alleged noncompliance) with any applicable Law or (y) could
reasonably be expected to result in a fine, assessment or cease and desist
order, or the suspension, revocation or material limitation or restriction of
any PIC Permit, (ii) to the knowledge of PIC, there is no reasonable basis for
the assertion of any such violation or the institution of any such proceeding of
the type described in clause (i) and (iii) neither PIC nor any of its
Subsidiaries has entered into any agreement or settlement with any Governmental
Authority with respect to its non-compliance with, or violation of, any
applicable Law.
(d) Except as set forth in Section 4.9(d) of the PIC Disclosure
Letter, since January 1, 2001, PIC and each of its Subsidiaries has timely filed
all regulatory reports, schedules, statements, documents, filings, submissions,
forms, registrations and other documents, together with any amendments required
to be made with respect thereto, that each was required to file with any
Governmental Authority (the "PIC Business Documents"), including state insurance
regulatory authorities and any applicable federal regulatory authorities, and
have timely paid all Taxes, fees and assessments due and payable in connection
therewith, except where the failure to make such payments and filings would not
be material to PIC and its Subsidiaries. All PIC Business Documents were true,
correct and complete in all material respects when filed, complied in all
material respects with applicable Law in effect when filed, and no material
deficiencies have been asserted by any such Governmental Authority with respect
to PIC Business Documents that have not been satisfied. There is no material
unresolved violation or exception by any such Governmental Authority with
respect to any of the PIC Business Documents. As of their respective dates, the
PIC Business Documents complied in all material respects with applicable Law and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. PIC has delivered or made available to Parent a true and
complete copy of each material PIC Business Document.
(e) Except as set forth in Section 4.9(e) of the PIC Disclosure
Letter, PIC and its Subsidiaries have properly administered, in compliance in
all material respects with applicable Law, all accounts for which it acts as a
fiduciary, if any, including, but not limited to, accounts for which it serves
as a trustee, agent, custodian, personal representative, guardian, conservator
or investment advisor, in accordance with the terms of the governing document.
Neither PIC nor its Subsidiaries nor any of its directors, officers or employees
has committed any breach of trust with respect to any such fiduciary account,
and the accounting for each such fiduciary account is true and correct in all
material respects and accurately reflects the assets of such fiduciary account.
17
(f) PIC and its Subsidiaries have implemented procedures and
programs to provide assurance that its agents and employees are in compliance in
all material respects with all applicable Laws, including Laws, regulations,
directives and opinions of Governmental Authorities relating to advertising,
licensing and sales practices.
(g) Each of PIC and its Subsidiaries has been and is in material
compliance with (i) all applicable Laws concerning privacy or security, and (ii)
all of its internal policies and/or agreements with other Persons concerning
privacy or security.
Section 4.10 Accounts. Section 4.10 of the PIC Disclosure Letter
sets forth the names of all financial and other similar institutions at which
PIC and/or its Subsidiaries maintain accounts, deposits or safe deposit boxes of
any nature, and the account numbers and the names of all Persons authorized to
draw thereon or make withdrawals therefrom.
Section 4.11 Books and Records. The Books and Records of PIC and its
Subsidiaries (i) are complete and accurate in all material respects and (ii)
have been maintained in all material respects in accordance with PIC's and its
Subsidiaries' customary business practices, as applicable, and with applicable
Law. PIC has heretofore made available to Parent the minute books of PIC and
PIC's Subsidiaries for its inspection. These minutes are complete and correct
through December 31, 2003. Minute books that are complete and correct through
the date hereof will be provided prior to Closing.
Section 4.12 Producer Relationships.
(a) Section 4.12(a)(i) of the PIC Disclosure Letter sets forth the
standard form of agreement currently being utilized by PIC and its Subsidiaries
with respect to the insurance producers of the PIC-Produced Insurance Contracts
(the "Producer Agreement"). Except as set forth in Section 4.12(a)(ii) of the
PIC Disclosure Letter, all of the Contracts currently in effect between PIC or
one of its Subsidiaries and a producer of PIC-Produced Insurance Contracts are
in all material respects in the form of the Producer Agreement.
(b) Section 4.12(b) of the PIC Disclosure Letter sets forth a list
of the top twenty (20) producers of PIC-Produced Insurance Contracts during the
year ended December 31, 2003 (the "Major Producers"). Since January 1, 2003, no
Major Producer has cancelled, substantially modified (including the amount
thereof) or otherwise terminated its Producer Agreement with PIC or any of its
Subsidiaries with PIC and its Subsidiaries, and, to the knowledge of PIC, no
such party has indicated an intent to do so. To the knowledge of PIC, each
producer of PIC-Produced Insurance Contracts with which PIC or any of its
Subsidiaries has a written Contract (a "Producer") is duly licensed (to the
extent that such licenses are required) in each jurisdiction in which the
Producer places or sells insurance on behalf of PIC or any of its Subsidiaries.
Except as set forth in Section 4.12(b) of the PIC Disclosure Letter, PIC and its
Subsidiaries are not in breach or violation of, or default under, in any
material respect, any of its Contracts with Producers. To the knowledge of PIC,
no Producer is the subject of, or party to, any disciplinary action or
proceeding under any applicable Law. Except as set forth in Section 4.12(b) of
the PIC Disclosure Letter, there is no dispute pending or, to the knowledge of
PIC, threatened against PIC or any of its Subsidiaries by any Producer.
18
(c) Except as set forth in Section 4.12(c) of the PIC Disclosure
Letter, PIC has no agency contracts, Third Party administration Contracts or
other similar arrangements or commitments, or amendments, supplements or
modifications thereto, under which an independent party has authority to perform
underwriting analysis and issue insurance policies on behalf of PIC or any of
its Subsidiaries or otherwise bind PIC or any of its Subsidiaries without prior
approval by PIC or any of its Subsidiaries.
Section 4.13 Insurance Markets. Except as set forth in Section 4.13
of the PIC Disclosure Letter, PIC and its Subsidiaries have all requisite
authorizations to place business in the insurance markets in which they operate.
Except as set forth in Section 4.13 of the PIC Disclosure Letter, since January
1, 2003, neither PIC nor any of its Subsidiaries has had its authority
cancelled, nonrenewed, suspended, substantially restricted or otherwise impaired
in any such insurance market in which it places business. Except as set forth in
Section 4.13 of the PIC Disclosure Letter, neither PIC nor any of its
Subsidiaries is in violation of, or default under, any requirements necessary to
place business in the insurance markets in which it operates. Except as set
forth in Section 4.13 of the PIC Disclosure Letter, neither PIC nor any of its
Subsidiaries is the subject of, or party to, any actual or, to the knowledge of
PIC, threatened disciplinary action or proceeding under any applicable Law in
respect of its placement of business in any of the insurance markets in which it
operates. Neither PIC nor any of its Subsidiaries places business directly or
indirectly in any insurance market, other than those in which it has full
authorization to do so. At and following the Closing, except as set forth in
Section 4.13 of the PIC Disclosure Letter, each of PIC and its Subsidiaries will
hold valid authorizations to place business in the insurance markets in which it
operates as of the date hereof.
Section 4.14 Employee Benefit Plans.
(a) Section 4.14(a) of the PIC Disclosure Letter sets forth a true
and complete list of each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option, phantom stock, phantom
equity or other equity compensation plan, program, agreement or arrangement,
each severance or termination pay, medical, surgical, hospitalization, life
insurance or other "welfare" plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by PIC or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together with
PIC would be deemed a "single employer" within the meaning of Section 4001(b) of
ERISA, or to which PIC or an ERISA Affiliate is party, whether written or oral,
for the benefit of any current or former employee, consultant or director of PIC
or any Subsidiary (the "PIC Employee Plans").
(b) With respect to each PIC Employee Plan, PIC has heretofore made
available to Parent true and complete copies of the PIC Employee Plan and any
amendments thereto (or if the PIC Employee Plan is not a written plan, a
description thereof), any related trust or other funding vehicle, any reports or
summaries required under ERISA or the Code and the most recent determination
letter received from the Internal Revenue Service with respect to each PIC
Employee Plan intended to qualify under Section 401 of the Code. Except as set
forth in
19
Section 4.14(b) of the PIC Disclosure Letter, there have not been any
amendments, modifications, terminations or any other changes to any PIC Employee
Plans as in effect on such date.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by PIC or any ERISA Affiliate that has not been satisfied in full, no
condition exists that presents a material risk to PIC or any ERISA Affiliate of
incurring such liability, and neither PIC nor any ERISA Affiliates made, or was
required to make, contributions to any plan subject to Title IV of ERISA during
the six (6) year period ending on the last day of the most recent fiscal year
ended prior to the Closing Date for any such plan.
(d) Each PIC Employee Plan has been operated and administered in all
material respects in accordance with its terms and applicable Law, including
ERISA and the Code.
(e) Each PIC Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service to the effect that such PIC Employee Plans is qualified and the
trust related thereto is exempt from federal income taxes under Sections 401(a)
and 501(a), respectively, of the Code, no such determination letter has been
revoked and revocation has not been threatened.
(f) No PIC Employee Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for periods
extending beyond retirement or other termination of service, other than (i)
coverage mandated by applicable Law, (ii) death benefits under any "pension
plan," or (iii) benefits the full cost of which is borne by the current or
former participant (or his beneficiary).
Except as set forth in Section 4.14(g) of the PIC Disclosure Letter,
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee, officer, director or consultant of PIC or any ERISA Affiliate
to severance pay, unemployment compensation or any other payment or benefit or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation or benefits due any such employee or officer. No amounts payable
under the PIC Employee Plans will fail to be deductible for federal income Tax
purposes by virtue of Section 280G of the Code. Section 4.14(g) of the PIC
Disclosure Letter sets forth each outstanding grant under any existing phantom
stock plan of PIC and its Subsidiaries, and all liabilities accrued under such
phantom stock plans have been paid, accrued, or otherwise adequately reserved in
accordance with GAAP.
(g) There are no pending or threatened material claims by or on
behalf of any PIC Employee Plan, by any Person or beneficiary covered under any
such PIC Employee Plan, or otherwise involving any such PIC Employee Plan (other
than routine claims for benefits).
(h) None of PIC, any PIC Employee Plan, any trust created thereunder
or, to the knowledge of PIC, any trustee or administrator thereof has engaged in
a transaction in connection with which PIC, any PIC Employee Plan, any such
trust or any trustee or administrator thereof, or any party dealing with any PIC
Employee Plan or any such trust, would be subject
20
to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or
a Tax imposed pursuant to Section 4975 or 4976 of the Code.
Section 4.15 Employee Matters. Except as set forth in Section 4.15
of the PIC Disclosure Letter:
(a) Neither PIC nor any of its Subsidiaries is a party to or bound
by any (i) collective bargaining or similar agreement with any labor
organization or (ii) work rules or practices agreed to with any labor
organization or employee association applicable to employees of PIC or any of
its Subsidiaries.
(b) None of the employees of PIC or any of its Subsidiaries is
represented by any labor organization, and PIC has no knowledge of any current
union organizing activities among the employees of PIC or any of its
Subsidiaries, nor does any question concerning representation exist concerning
such employees.
(c) There are no labor strikes, labor disputes, work stoppages,
lockouts or material grievances pending or, to the knowledge of PIC, threatened
involving the employees of PIC or any of its Subsidiaries, and during the past
five (5) years there has not been any such actions.
(d) There are no complaints, charges or claims against PIC or any of
its Subsidiaries pending or, to the knowledge of PIC, threatened to be brought
or filed with any Governmental Authority in connection with the employment by
PIC or any of its Subsidiaries of any individual, including, without limitation,
any claim relating to employment discrimination, equal pay, sexual harassment,
employee safety and health, wages and hours or workers' compensation.
(e) To the knowledge of PIC, neither PIC nor any of its Subsidiaries
has received notice of the intent of any Governmental Authority responsible for
the enforcement of labor or employment Laws to conduct an investigation with
respect to or relating to PIC or any of its Subsidiaries, and no such
investigation is in progress.
(f) During the last five (5) years, neither PIC nor any of its
Subsidiaries has effectuated a "plant closing" or a "mass layoff" (as such terms
are defined in the Worker Adjustment and Retraining Notification Act (the "WARN
Act")), and neither PIC nor any of its Subsidiaries has been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any Law that is similar to the WARN Act.
(g) None of the employees of PIC or any of its Subsidiaries has
suffered an "employment loss" (as defined in the WARN Act) during the ninety
(90) day period prior to the date of this Agreement.
Section 4.16 Taxes. Except as set forth in Section 4.16 of the PIC
Disclosure Letter:
(a) Each of PIC, its Subsidiaries and any consolidated, affiliated,
combined or unitary group of which PIC or any of its Subsidiaries is a member
has (i) timely filed (or
21
there have been timely filed on its behalf) with the appropriate Tax Authorities
all income and other Tax Returns required to be filed by it or them (giving
effect to all extensions) (except for delays or latenesses in filing of short
duration the occurrence of which has not had and will not have, individually or
in the aggregate, a Material Adverse Effect on PIC or any of its Subsidiaries)
and such Tax Returns are true, correct and complete in all material respects,
(ii) timely (giving effect to all extensions) paid in full (or there has been
timely (giving effect to all extensions) paid in full on its behalf) all
material income and other Taxes required to have been paid by it or them, and
(iii) made adequate provision (or adequate provision has been made on its
behalf) for all accrued Taxes not yet due.
(b) There are no Liens for Taxes upon any property or assets of PIC
or any Subsidiary of PIC, except for Liens for Taxes not yet due and payable.
(c) Each of PIC and its Subsidiaries has complied in all material
respects with all applicable Laws relating to the withholding of Taxes and
payment thereof.
(d) As of the date of this Agreement, no federal, state, local or
foreign audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of PIC or any of its
Subsidiaries, and neither PIC nor any Subsidiary of PIC has received a written
notice of any pending or proposed claims, audits or proceedings with respect to
Taxes.
(e) Neither PIC nor any of its Subsidiaries has granted in writing
any power of attorney which is currently in force with respect to any Taxes or
Tax Returns.
(f) Neither PIC nor any of its Subsidiaries has requested an
extension of time within which to file any Tax Return which has not since been
filed and no currently effective waivers, extensions, or comparable consents
regarding the application of the statute of limitations with respect to Taxes or
Tax Returns has been given by or on behalf of PIC or any of its Subsidiaries.
(g) Neither PIC nor any of its Subsidiaries is a party to any
Contract providing for the allocation, sharing or indemnification of Taxes.
(h) The federal income Tax Returns of PIC and each of its
Subsidiaries have been examined and any disputes relating thereto have been
settled with the Internal Revenue Service (or the applicable statutes of
limitation for the assessment of Taxes for such periods have expired) for all
periods ending on or before December 31, 2000.
(i) Neither PIC nor any of its Subsidiaries has been included in any
"consolidated," "unitary" or "combined" Tax Return (other than Tax Returns which
include only PIC and any of its Subsidiaries) provided for under the laws of the
United States, any foreign jurisdiction or any state or locality with respect to
Taxes for any taxable year.
(j) Neither PIC nor any of its Subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock to which Section
355 of the Code (or so
22
much of Section 356 of the Code as relates to Section 355 of the Code) applies
and which occurred within two years of the date of this Agreement.
(k) Neither PIC nor any of its Subsidiaries have agreed, or is
required, to make any material adjustment under Section 481 of the Code
affecting any taxable year ending after December 31, 1999.
(l) No claim has been made in writing by any Tax Authority in a
jurisdiction where PIC or any of its Subsidiaries does not file Tax Returns that
any such entity is, or may be, subject to taxation by that jurisdiction.
(m) Neither PIC nor any of its Subsidiaries has received any written
notice of deficiency or assessment from any Tax Authority for any amount of Tax
that has not been fully settled or satisfied, and to the knowledge of PIC, no
such deficiency or assessment is proposed.
Section 4.17 Certain Contracts.
(a) PIC Contracts. Section 4.17(a) of the PIC Disclosure Letter sets
forth, with respect to or otherwise affecting PIC or any of its Subsidiaries:
(i) any Contract relating to the incurrence of indebtedness (including sale and
leaseback transactions, capitalized lease transactions and other similar
financing transactions), including any such Contract that contains provisions
that in any non-de-minimis manner restrict, or may restrict, the conduct of
business of the issuer thereof as currently conducted that will be acquired,
directly or indirectly, by Parent, (ii) any non-competition Contract or any
other Contract or obligation that purports to limit in any respect the manner or
the localities in which the business of PIC or any of its Subsidiaries, or
following consummation of the transactions contemplated by this Agreement,
Parent's businesses, is or would be conducted, (iii) any Contract providing for
the indemnification by PIC or any of its Subsidiaries of any Person, (iv) any
joint venture or partnership Contract, (v) any Contract that grants any right of
first refusal or right of first offer or similar right or that limits or
purports to limit the ability of PIC or any of its Subsidiaries to own, operate,
sell, transfer, pledge or otherwise dispose of any material amount of assets or
business (other than in connection with financing transactions or Contracts
entered into in the ordinary course of business and consistent with past
practice that require that the particular transactions that are the subject
thereof to be conducted with the counterparty or counterparties to the
contract), (vi) any Contract providing for any future payments that are
conditioned, in whole or in part, on a change of control or similar event, (vii)
any Contract that contains a "most favored nation" clause or requires any type
of exclusive dealing or similar arrangement involving PIC or any of its
Subsidiaries, (viii) any agency, broker, sales representative, marketing or
similar Contract involving annual payments in excess of seventy-five thousand
dollars ($75,000), (ix) any agreement or understanding with, or restriction
imposed by, a Governmental Authority or other Third Party relating to the
payment of dividends or maintenance of capital by PIC or any of its
Subsidiaries, (x) any agreement or commitment to make any loan, advance or
capital contribution to, or investment in, any Person other than a direct or
indirect wholly-owned Subsidiary of PIC, (xi) all leases, subleases, licenses or
other Contracts, including all amendments, extensions, renewals, guaranties or
other Contracts with respect thereto, pursuant to which PIC or any of its
Subsidiaries use or hold any material Leased Real Property ("Leases"), (xii) any
agreement granting or obtaining any right to use or
23
practice any rights under any material Intellectual Property (other than
licenses for readily available commercial software having an acquisition price
of less than twenty-five thousand dollars ($25,000)), (xiii) any material
outsourcing agreements (including those pursuant to which call center or
customer service functions are performed), (xiv) any other Contracts not listed
above that involve annual revenues or annual expenditures in excess of one
hundred thousand dollars ($100,000), and (xv) any other Contracts not listed
above that are material to PIC and its Subsidiaries taken as a whole (the
Contracts of a type covered by clauses (i) to (xv) being referred to as the
"Material Contracts"). Prior to the date of this Agreement, PIC has made
available to Parent true and correct copies of each Material Contract (including
any amendments or supplements thereto).
(b) Except as would not reasonably be expected to have a Material
Adverse Effect on PIC: (i) each PIC Contract (as defined below) is a legal,
valid and binding obligation of PIC or the applicable Subsidiary of PIC (as the
case may be) and, to the knowledge of PIC, of each other party thereto,
enforceable against each such party in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer and other similar laws affecting the
rights and remedies of creditors generally and general principles of equity,
(ii) neither PIC nor any Subsidiary of PIC (as the case may be) nor, to the
knowledge of PIC, any other party to a PIC Contract, is in material violation or
default of any term of any PIC Contract, and (iii) to the knowledge of PIC, no
condition or event exists that, (with the giving of notice or the passage of
time, or both), would be reasonably expected to constitute a material violation
or default by PIC or any of its Subsidiaries, as the case may be, or any other
party to a PIC Contract, or permit the termination, modification, cancellation
or acceleration of performance of the obligations of PIC or any of its
Subsidiaries, as the case may be, or any other party to the PIC Contract. For
purposes of this Agreement, the term "PIC Contracts" means, collectively, each
Material Contract and PIC-Produced Insurance Contract, and each other Contract
to which PIC or any of its Subsidiaries is a party (without regard to any dollar
or materiality thresholds) or to which PIC or any of its Subsidiaries, or any of
their respective businesses or assets, is bound.
(c) Except as set forth in Section 4.17(c) of the PIC Disclosure
Letter or as would not reasonably be expected to have a Material Adverse Effect
on PIC, since December 31, 2003: (i) no Third Party to any PIC Contract has
canceled or otherwise terminated any PIC Contract or has provided written or
oral notice to PIC or any of its Subsidiaries of its intent to do so and (ii) to
the knowledge of PIC, no Third Party to any PIC Contract is unable to continue
to perform its obligations thereunder.
Section 4.18 Intellectual Property; Software.
(a) As used herein: (i) "Intellectual Property" means all United
States and foreign (A) trademarks, service marks, trade names, Internet domain
names, designs, logos, and slogans, together with goodwill, registrations and
applications relating to the foregoing ("Trademarks"), (B) patents and pending
patent applications, patent disclosures, and any and all divisions,
continuations, continuations-in-part, reissues, reexaminations, and any
extensions thereof, any counterparts claiming priority therefrom, utility
models, patents of importation/confirmation, certificates of invention and like
statutory rights ("Patents"), (C) registered and unregistered copyrights
(including those in Software) and all registrations and applications to register
the same ("Copyrights"), and (D) confidential information, know-how, inventions,
24
processes, formulae, algorithms, models and methodologies ("Trade Secrets"),
(ii) "IP Licenses" means all licenses and agreements (excluding "click-wrap" or
"shrink-wrap" agreements or agreements contained in "off-the-shelf" Software or
the terms of use or service for any Web site) pursuant to which PIC and its
Subsidiaries have acquired rights in (including usage rights) to any
Intellectual Property, or licenses and agreements pursuant to which PIC and its
Subsidiaries have licensed or transferred the right to use any Intellectual
Property, including license agreements, settlement agreements and covenants not
to xxx, (iii) "Software" means all computer programs, including any and all
software implementations of algorithms, models and methodologies whether in
source code or object code form, databases and compilations, including any and
all data and collections of data, all documentation, including user manuals and
training materials, related to any of the foregoing, and (iv) "PIC Intellectual
Property" means the Intellectual Property and Software owned by PIC or its
Subsidiaries and used in its business.
(b) Section 4.18(b) of the PIC Disclosure Letter sets forth, for the
following Intellectual Property owned by PIC and its Subsidiaries, a complete
and accurate list of all U.S., state and foreign: (i) Patents; (ii) registered
Trademarks (including Internet domain name registrations) and material
unregistered Trademarks and service marks; and (iii) registered Copyrights.
(c) Section 4.18(c) of the PIC Disclosure Letter sets forth all
material Software that is owned by PIC or its Subsidiaries and used in its
business and all material IP Licenses.
(d) PIC, or one of its Subsidiaries, owns all PIC Intellectual
Property, free and clear of all Liens, except Permitted Liens.
(e) All registered Trademarks and registered Copyrights owned by PIC
and its Subsidiaries are valid and subsisting, in full force and effect and have
not lapsed, expired or been abandoned, and are not the subject of any opposition
filed with the United States Patent and Trademark Office or any other
intellectual property registry.
(f) PIC Intellectual Property and the IP Licenses constitute all the
Intellectual Property, Software and IP Licenses that are necessary for the
continuing conduct and operation of PIC's business in all respects as conducted
and operated by the immediately prior to the date of this Agreement.
(g) Except as set forth in Section 4.18(g) of the PIC Disclosure
Letter:
(i) no infringement claims, or to the knowledge of PIC,
threat of infringement claims, have been asserted by any Third Party
in writing against PIC or any of its Subsidiaries related to the use
in the conduct of the businesses of PIC and its Subsidiaries of any
Intellectual Property or Software, or challenging or questioning the
validity or effectiveness of any IP License;
(ii) no settlement agreements, consents, judgments,
orders, forbearances to xxx or similar obligations limit or restrict
PIC's or any Subsidiary's rights and to any PIC Intellectual
Property;
25
(iii) to the knowledge of PIC, the conduct of the
businesses of PIC and its Subsidiaries does not infringe,
misappropriate, dilute or otherwise violate any Intellectual
Property rights of any Third Party;
(iv) PIC and its Subsidiaries have not licensed or
sublicensed their rights in any PIC Intellectual Property, other
than pursuant to the IP Licenses;
(v) to the knowledge of PIC, no Third Party is
misappropriating, infringing, diluting or violating any Intellectual
Property owned by PIC or its Subsidiaries; and
(vi) the consummation of the transactions contemplated
hereby will not result in the termination of PIC's and its
Subsidiaries' rights to own or use any of the PIC Intellectual
Property, nor will such consummation require the consent of any
Third Party in respect of any IP Licenses.
Section 4.19 Properties and Assets.
(a) Neither PIC nor any of its Subsidiaries owns any real property.
Section 4.19(a) of the PIC Disclosure Letter sets forth the address or other
description of all leasehold or subleasehold estates and other rights to use or
occupy any land or buildings held by or for PIC or its Subsidiaries (the "Leased
Real Property"). PIC has delivered or made available to Parent a true and
complete copy of each of the Leases. Except as set forth in Section 4.19(a) of
the PIC Disclosure Letter, with respect to each of the Leases: (i) there are no
material disputes with respect to such Lease; (ii) no security deposit or
portion thereof deposited with respect to such Lease has been applied in respect
of a breach or default under such Lease that has not been redeposited in full;
(iii) neither PIC or any of its Subsidiaries owes, nor will they owe in the
future, any brokerage commissions or finder's fees with respect to such Lease;
(iv) the other party to such Lease is not an affiliate of, and otherwise does
not have any economic interest in, PIC or any of its Subsidiaries; (v) PIC and
its Subsidiaries have not subleased, licensed or otherwise granted any Person
the right to use or occupy such Leased Real Property or any portion thereof;
(vi) PIC and its Subsidiaries have not collaterally assigned or granted any
other security interest in such Lease or any interest therein; and (vii) there
are no Liens granted by PIC and its Subsidiaries, except for Permitted Liens, on
the estate or interest created by such Lease.
(b) PIC and its Subsidiaries have, and following the Closing will
continue to have, good and valid title to their owned assets (except for
Permitted Liens), or in the case of assets and properties that they lease,
license or have other rights in, valid rights by lease, license or other
agreement to use, all assets and properties (in each case, tangible and
intangible) necessary and desirable to permit PIC and its Subsidiaries to
conduct their business as currently conducted. The assets and properties (in
each case, tangible and intangible) owned or used by PIC are adequate in all
material respects for their current use.
Section 4.20 Environmental Matters. Except for matters that are not
material to PIC, (a) no written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, and no
action, claim, suit, proceeding or review or, to
26
the knowledge of PIC, investigation is pending or, to the knowledge of PIC or
any of its Subsidiaries, threatened by any Person against, PIC or any of its
Subsidiaries with respect to any matters relating to or arising out of any
Environmental Law, (b) PIC and its Subsidiaries have been and are in compliance
in all material respects with all applicable Environmental Laws, including
possessing all material permits, authorizations, licenses, exemptions and other
governmental authorizations required for its operations under applicable
Environmental Laws, and (c) with respect to any Leased Real Property leased by
PIC or its Subsidiaries, there have been, to the knowledge of PIC, no Releases
of Hazardous Materials that have or could reasonably be expected to result in a
claim against PIC or its Subsidiaries. Neither PIC nor any of its Subsidiaries
has entered into any agreement that may require them to pay to, reimburse,
guarantee, pledge, defend, indemnify or hold harmless any Person from or against
any liabilities or costs arising out of or related to the generation,
manufacture, use, transportation or disposal of Hazardous Materials, or
otherwise arising in connection with or under Environmental Laws.
Section 4.21 Transactions with Affiliates. Except as set forth in
Section 4.21 of the PIC Disclosure Letter, there are no outstanding amounts
payable to or receivable from, or advances by PIC or any of its Subsidiaries to,
and neither PIC nor any of its Subsidiaries is otherwise a creditor or debtor
to, or party to any Contract with, any shareholder, director, officer, employee,
affiliate or associate of PIC or any of its Subsidiaries, or any relative of any
of the foregoing.
Section 4.22 Insurance. Section 4.22 of the PIC Disclosure Letter
sets forth a list of all insurance policies and fidelity bonds relating to the
assets, business, operations, employees, officers or directors of PIC and its
Subsidiaries and PIC has provided or made available to Parent true and complete
copies of all such insurance policies and fidelity bonds. There is no claim by
PIC or any of its Subsidiaries pending under any of such policies or bonds as to
which coverage has been, to the knowledge of PIC, questioned, denied or disputed
by the underwriters of such policies or bonds or in respect of which such
underwriters have reserved their rights. All premiums payable under all such
policies and bonds have been timely paid and PIC and its Subsidiaries have
otherwise complied fully with the terms and conditions of all such policies and
bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been in effect since
December 31, 2003 and remain in full force and effect. PIC and each of its
Subsidiaries maintain insurance policies and fidelity bonds (including financial
institutions bond, property and casualty insurance, professional liability
insurance and workers' compensation insurance) of the type and in amounts
customarily carried by Persons conducting businesses similar to PIC's business.
PIC has no knowledge of any threatened termination of, premium increase with
respect to, or material alteration of coverage under, any of such policies or
bonds.
Section 4.23 Finders' or Advisors' Fees. Except for Lazard Freres &
Co. LLC ("Lazard"), there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of PIC
or any of its Subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement. PIC has made
available to Parent a complete and correct copy of the agreement between PIC and
Lazard pursuant to which such firm would be entitled to any payment relating to
this Agreement or the transactions contemplated hereby and such agreement is the
only agreement providing for
27
the payment of any consideration to Lazard with respect to this Agreement or the
transactions contemplated by this Agreement.
Section 4.24 Ownership of PNG Shares. As of the date of this
Agreement, PIC Holdings, Inc. ("PIC Holdings") is the sole record and beneficial
owner of four million six hundred thirty-one thousand two hundred fifty
(4,631,250) shares of PNG Common Stock (the "PNG Shares") free and clear of all
Liens, except as set forth in Section 4.24 of the PIC Disclosure Letter. Neither
PIC nor any of its Subsidiaries owns, of record or beneficially, any shares of
capital stock or other voting securities of PNG other than the PNG Shares. PIC
Holdings has the sole right to vote the PNG Shares at any PNG shareholders'
meeting. For avoidance of doubt, none of the representations and warranties
contained in Article IV of this Agreement are made with respect to PNG or the
PNG Common Stock other than as set forth in this Section 4.24 and Section 4.29
below.
Section 4.25 Disclosure Documents. None of the information supplied
or to be supplied by or on behalf of PIC for inclusion or incorporation by
reference in the joint proxy statement/prospectus relating to the matters to be
submitted to PNG's shareholders at the PNG shareholder meeting related to the
Merger and to the Parent shareholders at the Parent shareholder meeting related
to the Merger (such joint proxy statement/prospectus, and any amendments or
supplements thereto, the "Joint Proxy Statement/Prospectus") or any amendment or
supplement thereto shall, at the date the Joint Proxy Statement/Prospectus or
any such amendment or supplement is first mailed to the shareholders of PNG and
Parent, contain any untrue statement of a material fact or omit any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of PIC for inclusion or
incorporation by reference in the Registration Statement on Form S-4 with
respect to the issuance of Parent Class A common shares issuable in the Merger
(such Form S-4, and any amendments or supplements thereto, the "Form S-4") or
any amendment or supplement thereto will, at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, not misleading. No representation or warranty is made by PIC
in this Section 4.25 with respect to statements made or incorporated by
reference therein based on information that was not supplied by or on behalf of
PIC for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus or the Form S-4.
Section 4.26 Risk Management. PIC and each of its Subsidiaries have
in place risk management policies and procedures sufficient in scope and
operation to protect against risks of the type and in amounts reasonably
expected to be incurred by Persons of similar size and in similar lines of
business as PIC and each such Subsidiary.
Section 4.27 Derivatives. Except as set forth in Section 4.27 of the
PIC Disclosures Letter, neither PIC nor any of its Subsidiaries holds any
derivative instruments, including swaps, caps, floors and option agreements,
whether entered into for PIC's account, or for the account of any of its
Subsidiaries or their customers.
Section 4.28 Disclosure. The representations and warranties
contained in this Article IV do not contain any untrue statement of material
fact or omit to state any material fact
28
necessary to make any statement contained in this Article IV not misleading, in
light of the circumstances under which they are made.
Section 4.29 Merger Agreement Representations and Warranties. The
representations and warranties made by PNG in Article IV of the Merger Agreement
are true and correct.
Section 4.30 No Other Representations. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, THE PIC SHARES ARE
BEING SOLD AND TRANSFERRED PURSUANT TO THIS AGREEMENT "AS IS, WHERE IS," AND
NEITHER PIC NOR THE SHAREHOLDERS ARE MAKING ANY OTHER REPRESENTATIONS OR
WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING THE PIC
SHARES OR THE BUSINESS, ASSETS, OR LIABILITIES OF PIC OR ANY SUBSIDIARY OF PIC,
INCLUDING, IN PARTICULAR, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
PARENT AND BUYER HEREBY WAIVE AND RELINQUISH ALL RIGHTS AND PRIVILEGES ARISING
OUT OF, OR WITH RESPECT OR IN RELATION TO, ANY REPRESENTATIONS, WARRANTIES, AND
COVENANTS, WHETHER EXPRESS OR IMPLIED, WHICH MAY HAVE BEEN MADE OR GIVEN, OR
WHICH MAY BE DEEMED TO HAVE BEEN MADE OR GIVEN BY PIC OR THE SHAREHOLDERS, OTHER
THAN OTHERWISE SET FORTH HEREIN.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders, severally, and not jointly, represents and
warrants to Parent as follows:
Section 5.1 Ownership of Stock; Title.
(a) Such Shareholder is the sole lawful record and beneficial owner
of the PIC Shares set forth opposite such Shareholder's name on Exhibit A, which
ownership is free and clear of all Liens. Such Shareholder is not a party to any
Contract creating rights with respect to such PIC Shares in any Person and such
Shareholder has the full power and legal right to sell, assign, transfer and
deliver such PIC Shares. There are no existing warrants, options, stock purchase
agreements, redemption agreements, restrictions of any nature, voting trust
agreements, proxies, calls or rights to subscribe of any character relating to
the PIC Shares owned by such Shareholder. Such Shareholder has not received any
notice of any adverse claim to the ownership of any of the PIC Shares (or any
capital stock or other ownership interest of PIC or its predecessors) owned by
such Shareholder, and is not aware of existing facts that would give rise to any
adverse claim to the ownership of the PIC Shares (or any capital stock or other
ownership interest of PIC or its predecessors) owned by such Shareholder. On the
Closing Date, such Shareholder shall have good and marketable title to the PIC
Shares owned by such Shareholder, free and clear of all Liens. The delivery of
certificates for the PIC Shares owned by such
29
Shareholder to Buyer pursuant to the provisions of this Agreement, subject to
consummation of the transactions contemplated hereby, will transfer to Parent
good and marketable title to the PIC Shares owned by such Shareholder, free and
clear of all Liens, except for those created by Parent or Buyer.
(b) The Shareholders are, collectively, the sole record and
beneficial owners of all of the issued and outstanding PIC Shares, free and
clear of all Liens.
Section 5.2 Authority.
(a) Such Shareholder has the requisite power and authority and has
full legal capacity necessary to execute, deliver and perform his, her or its
obligations under this Agreement and all other agreements and instruments to be
executed and delivered by such Shareholder hereunder or in connection herewith
and to carry out such Shareholder's obligations hereunder and thereunder and the
transactions contemplated hereby. No other proceedings on the part of such
Shareholder are necessary to authorize such execution, delivery and performance.
This Agreement has been duly and validly executed and delivered by such
Shareholder and, assuming due authorization, execution and delivery of this
Agreement by the other parties hereto, constitutes a valid and binding agreement
of such Shareholder enforceable against it in accordance with its terms, except
to the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws, now or hereafter
in effect, affecting creditors' rights generally, and to general equity
principles.
(b) Except as set forth in Section 5.2(b) of the PIC Disclosure
Letter, no Person has any community property rights by virtue of marriage or
otherwise in any of the PIC Shares.
Section 5.3 No Violation; Consents and Approvals.
(a) The execution and delivery of this Agreement by such Shareholder
and the consummation of the transactions contemplated hereby require no action
by or in respect of, or filing with, any Governmental Authority other than (i)
compliance with any applicable requirements of the HSR Act and (ii) those set
forth in Section 4.4(a) of the PIC Disclosure Letter which are required under
federal and state Laws, rules and regulations governing insurance and insurance
companies.
(b) Except as set forth in Section 5.3(b) of the PIC Disclosure
Letter, neither the execution, delivery or performance by such Shareholder of
this Agreement nor the consummation by such Shareholder of the transactions
contemplated hereby nor compliance by such Shareholder with any of the
provisions hereof will (i) conflict with or result in any breach of any
organizational and governing documents of such Shareholder that is a trust, (ii)
assuming compliance with the matters referred to in Section 5.3(a), conflict
with or result in any violation of any provision of any Law binding upon or
applicable to such Shareholder, (iii) require the consent, approval or
authorization of, or notice to or filing with, any Third Party with respect to,
result in any violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation, amendment, or acceleration of any right or obligation of such
Shareholder or to a loss of any benefit to which such
30
Shareholder is entitled) under, any provision of any Contract or (iv) result in
the creation or imposition of any Lien (other than a Permitted Lien) on any PIC
Shares held by such Shareholder.
Section 5.4 Outstanding Obligations. Except as set forth in Section
5.4 of the PIC Disclosure Letter, PIC and its Subsidiaries have no outstanding
liabilities or obligations to, and there are no amounts due from PIC or any of
its Subsidiaries to, any Shareholder (or any of his, her or its relatives,
spouse (and relatives of such spouse), shareholders, partners, directors,
officers or affiliates) and such Shareholder (and any of his, her or its
relatives, spouse (and relatives of such spouse), shareholders, partners,
directors, officers and affiliates) has no Liability to or from PIC.
Section 5.5 Disclosure Documents. None of the information supplied
or to be supplied by or on behalf of such Shareholder for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus or any
amendment or supplement thereto shall, at the date the Joint Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to the
shareholders of PNG and Parent, contain any untrue statement of a material fact
or omit any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied or to be supplied by or on behalf of such Shareholder
for inclusion or incorporation by reference in the Form S-4 or any amendment or
supplement thereto will, at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
not misleading. No representation or warranty is made by such Shareholder in
this Section 5.5 with respect to statements made or incorporated by reference
therein based on information that was not supplied by or on behalf of such
Shareholder for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus or the Form S-4.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer, jointly and severally, represent and warrant to
PIC and the Shareholders that:
Section 6.1 Organization and Qualification. Parent was duly
organized as an exempted company formed with limited liability under the laws of
the Cayman Islands and is validly existing and in good standing under the Laws
of the Cayman Islands. Buyer is a corporation duly organized, validly existing
and in good standing under the Commonwealth of Pennsylvania. Each of Parent and
Buyer has the requisite corporate power and corporate authority and any
necessary Governmental Authority, franchise, license, certificate, or permit to
own, operate and lease the properties that it purports to own, operate or lease
and to carry on its business as it is now being conducted, and is duly qualified
as a foreign corporation to do business, and is in good standing in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except for such
failures to be so qualified and in good standing that do not, or would not be
reasonably expected to, result in a Material Adverse Effect on Parent.
31
Section 6.2 Corporate Authorization; Board Action. Each of Parent
and Buyer has the requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of each of Parent and Buyer and no other corporate proceedings on
the part of either Parent or Buyer are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Buyer and, assuming due authorization, execution and delivery of this
Agreement by the other parties hereto, constitutes a valid and binding agreement
of each of Parent and Buyer enforceable against each such party in accordance
with its terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws, now or hereafter in effect, affecting creditors' rights generally, and to
general equity principles.
Section 6.3 Consents and Approvals; No Violations.
(a) The execution, delivery and performance by Parent and Buyer of
this Agreement and the consummation by Parent, its Subsidiaries and Buyer of the
transactions contemplated hereby require no action by or in respect of, or
notice to or filing with, any Governmental Authority (including with respect to
any Subsidiary of Parent) other than (i) compliance with any applicable
requirements of the HSR Act, (ii) compliance with any applicable requirements of
the Exchange Act and the rules and regulations promulgated thereunder, (iii)
compliance with any applicable requirements of the Securities Act and the rules
and regulations promulgated thereunder, and (iv) those set forth in Section
6.3(a) of the disclosure letter delivered by Parent to PIC simultaneously with
the execution of this Agreement (the "Parent Disclosure Letter") that are
required under federal and state Laws governing insurance and insurance
companies. Section 6.3(a) of the Parent Disclosure Letter sets forth each such
approval and identifies the applicable Governmental Authority.
(b) Except as set forth in Section 6.3(b) of the Parent Disclosure
Letter, neither the execution, delivery or performance by Parent and Buyer of
this Agreement nor the consummation by Parent and Buyer of the transactions
contemplated hereby nor compliance by Parent or Buyer with any of the provisions
hereof or thereof will (i) conflict with or result in any breach of any
provisions of the memorandum and articles of association of Parent or the
similar organizational and governing documents of its Subsidiaries, (ii)
conflict with or result in any violation of any provision of any Law binding
upon or applicable to Parent or any of Subsidiaries, (iii) require the consent,
approval or authorization of, or notice to or filing with, any Third Party with
respect to, result in any violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation, amendment, or acceleration of any right or obligation
of Parent or its Subsidiaries or to a loss of any benefit to which Parent or any
of its Subsidiaries is entitled) under any provision of any Contract binding
upon Parent or its Subsidiaries or (iv) result in the creation or imposition of
any Lien (other than Permitted Liens) on any asset of Parent or any of its
Subsidiaries, except in the case of (ii), (iii) and (iv) for such conflicts,
violations, breaches, defaults, rights or losses, or the failure to obtain any
such consents or approvals or to provide such notices or make such filings, that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
32
Section 6.4 Investment Representation. Buyer is acquiring the PIC
Shares for investment for its own account, not as a nominee or agent, and not
with a view to, or for resale in connection with, any distribution thereof in
violation of the Securities Act.
ARTICLE VII
COVENANTS
Section 7.1 Conduct of PIC.
(a) PIC covenants and agrees that the business of PIC and its
Subsidiaries shall be conducted in all material respects only in the ordinary
course of business and consistent with past practice and, to the extent
consistent therewith, PIC shall use (and PIC shall cause its Subsidiaries to
use) commercially reasonable best efforts to preserve its business organization
intact and maintain its existing relations with customers, agents, underwriters,
brokers, suppliers, employees, creditors and business partners.
(b) Without limiting the provisions of Section 7.1(a), except as set
forth in Section 7.1(b) of the PIC Disclosure Letter, PIC covenants and agrees
that, except as expressly provided in this Agreement or as required to comply
with applicable Law, or with the prior written consent of Parent, from and after
the date of this Agreement and prior to the Closing, PIC shall not, and shall
not permit any of its Subsidiaries to:
(i) amend or propose to amend its articles of
incorporation or bylaws or similar organizational documents;
(ii) issue, sell, transfer, pledge, dispose of or
encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights
of any kind to acquire, any shares of capital stock of any class of
PIC or its Subsidiaries;
(iii) (A) directly or indirectly, split, combine or
reclassify the outstanding shares of capital stock of PIC, or any
outstanding capital stock of any of the Subsidiaries of PIC; or (B)
redeem, purchase or otherwise acquire directly or indirectly any of
its capital stock;
(iv) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its
capital stock;
(v) adopt a plan of complete or partial liquidation or
dissolution;
(vi) (A) increase the compensation or benefits payable
to any director, officer, employee or consultant of PIC or any of
its Subsidiaries; (B) grant any severance or termination pay to (or
amend any such existing arrangement with) any director, officer,
employee or consultant of PIC or any of its Subsidiaries; (C) enter
into any employment, deferred compensation or other similar
agreement (or amend any such existing agreement) with any director,
officer, employee or consultant of PIC or any of its Subsidiaries;
(D) increase any benefits
33
payable under any existing severance or termination pay policies or
agreements or employment agreements; or (E) permit any director,
officer, employee or consultant of PIC or any of its Subsidiaries
who is not already a party to an agreement or a participant in a
plan providing benefits upon or following a "change in control" to
become a party to any such agreement or a participant in any such
plan, other than pursuant to a pre-existing contractual commitment
or as required by applicable Law;
(vii) (A) adopt any new benefit plan, terminate any PIC
Employee Plan or modify any PIC Employee Plan in a way that could
result in additional cost to Parent, PIC or any of their respective
Subsidiaries, except for any amendments to a PIC Employee Plan
required to maintain its qualified plan status under Section 401(a)
of the Code; (B) modify any actuarial cost method, assumption or
practice used in determining benefit obligations, annual expense and
funding for any PIC Employee Plan, except to the extent required by
GAAP; (C) subject to any ERISA fiduciary obligation, modify the
investment philosophy of the PIC Employee Plan trusts or maintain an
asset allocation that is not consistent with such philosophy; (D)
subject to any ERISA fiduciary obligation, enter into any
outsourcing agreement, or any other material contract relating to
the PIC Employee Plans or management of any benefit plan trusts; (E)
grant any ad hoc pension increase; or (F) establish any new or fund
any existing "rabbi" or similar trust (except in accordance with the
current terms of any PIC Employee Plan), or enter into any other
arrangement for the purpose of securing non-qualified retirement
benefits, termination benefits or deferred compensation;
(viii) modify, amend or terminate any Material Contracts
or PIC-Produced Insurance Contracts or waive, release or assign any
material rights or claims, except in the ordinary course of business
and consistent with past practice;
(ix) enter into any Contract that provides for
risk-sharing or risk-retention by PIC or any of its Subsidiaries;
(x) enter into any material insurance transaction other
than in the ordinary course of business and consistent with past
practice;
(xi) permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be cancelled or terminated
without notice to Parent or fail to renew coverage under any such
policy;
(xii) (A) incur any indebtedness for borrowed money or
issue debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any
Person (other than a wholly-owned Subsidiary of PIC) for borrowed
money, except for indebtedness incurred under PIC's existing credit
facilities in the ordinary course of business and consistent with
past practice and in an aggregate amount not to exceed one hundred
seventy-five thousand dollars ($175,000); (B) make any loans,
advances or capital contributions to, or investments in, any other
Person (other than to wholly-owned
34
Subsidiaries of PIC); or (C) enter into any material commitment or
transaction (including any borrowing, capital expenditure or
purchase, sale or lease of assets) requiring a capital expenditure
by PIC or its Subsidiaries, other than capital expenditures pursuant
to PIC's capital expenditures budget previously furnished to Parent
and other capital expenditures that do not exceed one hundred
thousand dollars ($100,000) in the aggregate;
(xiii) (A) make, revoke or change a material Tax
election with respect to PIC or any of its Subsidiaries; (B) change
a material method of reporting income or deductions for Tax purposes
with respect to PIC or any of its Subsidiaries; (C) consent to
extend the period of limitations for the payment or assessment of
any material Tax with respect to PIC or any of its Subsidiaries; or
(D) settle or compromise any material Tax liability of PIC or any of
its Subsidiaries;
(xiv) change any of the accounting principles used by it
unless required by GAAP;
(xv) pay, discharge or satisfy any Liabilities other
than (A) the payment, discharge or satisfaction of any such
Liabilities in the ordinary course of business and consistent with
past practice and in accordance with their terms as in effect on the
date of this Agreement (as previously disclosed to Parent) and (B)
settlements or compromises of any litigation (whether or not
commenced prior to the date of this Agreement) where the amount paid
(after giving effect to insurance proceeds actually received) does
not exceed one hundred thousand dollars ($100,000) in the aggregate
for all such settlements or compromises;
(xvi) (A) acquire (by merger, consolidation, or
acquisition of stock or assets) any Person or division thereof or
make any investment in another Person (other than an entity that is
a wholly-owned subsidiary of PIC as of the date of this Agreement
and other than incorporation of a wholly-owned subsidiary of PIC)
or, except in the ordinary course of business and consistent with
past practice, acquire assets, or (B) sell, transfer, lease,
license, pledge, dispose of, or encumber or authorize or propose the
sale, pledge, disposition or Lien of any assets of PIC or any of its
Subsidiaries, except in the case of clause (B) above, for sales,
transfers, leases, licenses, pledges, dispositions or Liens (I)
pursuant to existing Contracts (the terms of which have been
previously disclosed to Parent) or (II) in the ordinary course of
business and consistent with past practice; provided, that the fair
market value of all assets sold, transferred, leased, licensed,
pledged, disposed of or encumbered pursuant to this clause (II) does
not exceed fifty thousand dollars ($50,000) in the aggregate;
(xvii) take any action, or fail to take any action, that
would reasonably be expected to adversely affect or delay in any
material respect the ability of any of the parties hereto to obtain
any approval of any Governmental Authority required to consummate
the transactions contemplated hereby;
35
(xviii) take, or agree to commit to take, or omit to
take, any action that would make any representation or warranty of
PIC contained herein inaccurate in any respect at, or as of any time
prior to, the Closing;
(xix) sell, transfer, pledge, dispose of, permit to
exist any Lien on, any of the PNG Shares or any interest therein or
relating thereto;
(xx) take any action, or fail to take any action, that
could impose a material delay in consummating the transactions
contemplated hereby; or
(xxi) enter into a Contract to do any of the foregoing,
or authorize, recommend, propose or announce an intention to do any
of the foregoing.
Section 7.2 Conduct of the Shareholders. Each Shareholder covenants
and agrees that, except as expressly provided in this Agreement or as required
to comply with applicable Law, or with the prior written consent of Parent, from
and after the date of this Agreement and prior to the Closing, such Shareholder
shall not:
(i) sell, transfer, pledge, dispose of, or permit to
exist any Lien on, any of such Person's PIC Shares or any interest
therein or relating thereto;
(ii) take any action, or fail to take any action, that
could reasonably be expected to adversely affect or delay in any
material respect the ability of any of the parties hereto to obtain
any approval of any Governmental Authority required to consummate
the transactions contemplated hereby;
(iii) take, or agree to commit to take, or omit to take,
any action that could make any representation or warranty of such
Person contained herein inaccurate in any respect at, or as of any
time prior to, the Closing;
(iv) take any action, or fail to take any action, that
could impose a material delay in consummating the transactions
contemplated hereby; or
(v) enter into a Contract to do any of the foregoing, or
authorize, recommend, propose or announce an intention to do any of
the foregoing.
Section 7.3 Access to Information; Confidentiality.
(a) PIC shall, and shall cause its Subsidiaries to, give Parent and
its Representatives reasonable access to the offices, Representatives,
properties, Books and Records of PIC and its Subsidiaries during normal business
hours, furnish to Parent and its Representatives such financial and operating
data and all other information as such Persons may reasonably request and shall
instruct its own Representatives to cooperate in all reasonable respects with
Parent in its investigation of the business of PIC and its Subsidiaries;
provided, however, that no investigation of PIC's business shall affect any
representation or warranty given by PIC or any Shareholder hereunder.
36
(b) All information provided or obtained in connection with the
transactions contemplated by this Agreement shall be held by Parent in
accordance with the Confidentiality Agreement, dated June 1, 2004, between
Parent and PIC (as amended to date, the "Confidentiality Agreement"). In the
event of a conflict or inconsistency between the terms of this Agreement and the
Confidentiality Agreement, the terms of this Agreement shall govern.
(c) From and after the Closing Date, the Shareholders shall, and
shall cause their respective Representatives to, keep confidential any and all
information concerning PIC and its Subsidiaries, including the PIC Intellectual
Property, prior to the Closing Date.
Section 7.4 Regulatory Filings; Commercially Reasonable Best
Efforts.
(a) Each of Parent, Buyer, PIC, the Shareholders and the
Shareholders' Representative shall (i) promptly make or cause to be made the
filings required of such party or any of its Subsidiaries under the HSR Act and
any other antitrust Laws with respect to the Merger, the sale of the PIC Shares
and the Additional PNG Equity and the other transactions contemplated by this
Agreement, (ii) comply with any request under the HSR Act or such other
antitrust Laws for additional information, documents, or other material received
by such party or any of its Subsidiaries from the Federal Trade Commission or
the Department of Justice or any other Governmental Authority in respect of such
filings, the Merger, the sale of the PIC Shares and the Additional PNG Equity or
any other transactions contemplated by this Agreement, (iii) cooperate with the
other parties in connection with any such filing and in connection with
resolving any investigation or other inquiry of any such agency or other
Governmental Authority under any antitrust Laws with respect to any such filing,
the Merger, the sale of the PIC Shares and the Additional PNG Equity or any
other transactions contemplated by this Agreement, and (iv) use commercially
reasonable best efforts to resolve such objections, if any, as may be asserted
by any Governmental Authority with respect to the Merger, the sale of the PIC
Shares and the Additional PNG Equity or any other transactions contemplated
hereby under the antitrust Laws. PIC, the Shareholders and the Shareholders'
Representative shall not propose to enter into, or enter into, any agreement,
arrangement or understanding with any Governmental Authority with respect to any
Governmental Authority's review of the Merger, the sale of the PIC Shares and
the Additional PNG Equity or any other transactions contemplated by this
Agreement without the prior written consent of Parent.
(b) Each of the parties agrees to use commercially reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the sale of the PIC Shares and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
other necessary actions or non-actions, waivers, consents and approvals from
Governmental Authorities and the making of all other necessary registrations and
filings (including other filings with Governmental Authorities, if any), (ii)
the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the preparation of the Registration Statement on Form S-4 and the
Joint Proxy Statement/Prospectus concerning the Merger, and (iv) the execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
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(c) Notwithstanding anything to the contrary in this Section 7.4 or
otherwise, (i) neither Parent nor any of its Subsidiaries shall be required to
divest or hold separate any of their or PIC's or any of its Subsidiaries'
respective businesses, product lines or assets, (ii) neither Parent nor any of
its Subsidiaries shall be required to sell, hold separate, otherwise dispose of
or license or conduct their business in a specified manner, or agree to sell,
hold separate, otherwise dispose of or license or conduct their business in a
specified manner, or take or agree to take any other action or agree to any
limitation that could reasonably be expected to have an adverse effect, in
either the short-term or the long-term, on the business, assets, properties,
liabilities, financial condition or results of operations of Parent or its
Subsidiaries or on the expected benefits of the transactions contemplated by
this Agreement and the Merger Agreement, including the Merger, (iii) neither
Parent nor Buyer shall be required to waive any of the conditions set forth in
Article VIII, and (iv) no party shall be required to pursue or defend any
administrative or judicial action or proceeding that may be instituted or
threatened.
(d) PIC shall use its commercially reasonable best efforts to
obtain, prior to the Closing (i) the unconditional consent to the Closing and
the other transactions contemplated hereby of each lender to whom PIC or any of
its Subsidiaries owes in excess of ten thousand dollars ($10,000) as of the
Closing Date, (ii) the unconditional consent to the Closing and the other
transactions contemplated hereby of each Person holding a mortgage or Lien on
real property or material personal property owned or leased by PIC or any of its
Subsidiaries to the extent required by such mortgage or lien, (iii) the
unconditional consent to the Closing and the other transactions contemplated
hereby of the lessor of each of the Leases to the extent required by such Lease,
(iv) the unconditional consent to the Closing and the other transactions
contemplated hereby of each other party to each Material Contract with PIC or
any Subsidiary of PIC, but only if and to the extent that the failure to obtain
such consent could adversely affect PIC or any Subsidiary of PIC or the ability
of any Person to consummate the transactions contemplated hereby. Section 7.4(d)
of the PIC Disclosure Letter sets forth each such consent.
Section 7.5 Notification of Certain Matters.
(a) PIC and the Shareholders shall notify Parent, and Parent shall
notify PIC and the Shareholders' Representative, of (i) any fact, event,
circumstance, change, condition, or effect that has had, or would reasonably be
expected to have had, individually or in the aggregate, a Material Adverse
Effect on PIC or Parent, as applicable, (ii) any representation or warranty made
by it contained in this Agreement becoming untrue or inaccurate in any material
respect, and (iii) the failure by it to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, in each case within three (3) Business Days of such
Person becoming aware of the occurrence of such development.
(b) PIC and the Shareholders shall give prompt notice to Parent, and
Parent or Buyer shall give prompt notice to PIC and the Shareholders'
Representative, of: (i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement and (ii) any notice or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement.
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(c) If any event or matter arises after the date of this Agreement
that, if existing or occurring at the date of this Agreement, (i) would have
been required to be set forth or described by PIC or any Shareholder in the PIC
Disclosure Letter or by Parent in the Parent Disclosure Letter or (ii) would
have caused a representation or warranty or covenant in Articles IV, V, VI or
Article VII, as applicable, to be violated in any material respect as of such
date, then PIC, the Shareholders or Parent, as applicable, shall, for
informational purposes only, deliver to Parent or PIC and the Shareholders'
Representative, as applicable, the PIC Disclosure Letter or the Parent
Disclosure Letter, as applicable, updated to reflect such event or matter two
(2) Business Days prior to the Closing Date; provided, however, that such
supplemental disclosure shall not be required to disclose any such event or
matter, and the PIC Disclosure Letter or the Parent Disclosure Letter, as
applicable, shall not be required to be updated, in either case, with respect to
representations or warranties that are expressly made as of a specific date.
(d) The parties' obligations under this Section 7.5 and the
disclosure of any matter in accordance with the provisions of this Section 7.5
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such disclosure (including the remedies described in Article XI)
and shall not be deemed to cure any breach or inaccuracy of any representation
or warranty made in this Agreement.
Section 7.6 No Solicitation; Unsolicited Proposals.
(a) From the date of this Agreement until the Closing or, if
earlier, the termination of this Agreement in accordance with its terms, the
Shareholders and PIC shall not, and PIC shall cause its Subsidiaries and PIC's
and such Subsidiaries' respective Representatives not to, and the Shareholders
shall cause their Representatives not to, directly or indirectly, (i) encourage,
engage in, solicit or initiate any discussions or negotiate with, or provide any
information to, or negotiate or enter into any agreement or agreement in
principle with, or vote in favor of or in any other way support (including by
tendering or agreeing to tender shares) or agree to so vote or support, any
Person with respect to a sale, merger or business combination of PIC or PNG or
any division of PIC or PNG, the sale or encumbrance of any of their respective
material assets (including all or any portion of the PIC Shares or the PNG
Shares, as applicable) or any similar transaction (each, an "Alternative
Transaction") or (ii) enter into any Contract (including any agreement in
principle, letter of intent, or understanding) with respect to or contemplating
any Alternative Transaction or enter into any agreement, arrangement or
understanding requiring PIC or any of the Shareholders to abandon, terminate or
fail to consummate the transactions contemplated by this Agreement. The
Shareholders and PIC shall, and PIC shall cause its Subsidiaries and PIC's and
such Subsidiaries' respective Representatives to, immediately cease and
terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any Third Party conducted heretofore by PIC, the
Shareholders, PIC's Subsidiaries or any of their respective Representatives with
respect to any Alternative Transaction. PIC and its Subsidiaries also agree that
they shall promptly request that each Third Party that has heretofore executed a
confidentiality or similar agreement within the twelve (12) months prior to the
date of this Agreement in connection with any Third Party's consideration of any
Alternative Transaction return or destroy all confidential information
heretofore furnished to any Third Party by or on behalf of PIC or any of its
Subsidiaries.
39
(b) PIC and the Shareholders, as applicable, shall as soon as
practicable (and in any event within twenty-four (24) hours) notify and advise
Parent orally and in writing of any Alternative Transaction or of any request
for information or inquiry that may lead to an Alternative Transaction, the
terms and conditions of such Alternative Transaction, request or inquiry, and
the identity of the Person making such Alternative Transaction, request or
inquiry. PIC and the Shareholders, as applicable, shall inform Parent on a
prompt and current basis of the status, content and details of any discussions
regarding, or relating to, any Alternative Transaction with a Third Party
(including amendments and proposed amendments) and, as promptly as practicable,
of any change in the price, structure or form of the consideration or material
terms of and conditions regarding the Alternative Transaction. In fulfilling
their obligations under this Section 7.6(b), PIC and the Shareholders, as
applicable, shall provide promptly to Parent copies of all written
correspondence or other written material, including material in electronic form,
between PIC and the Shareholders, as applicable, and such Third Party.
(c) PIC and the Shareholders agree that any breach of this Section
7.6 by any of their respective Subsidiaries or any of their respective
Representatives shall be deemed a breach by PIC and the Shareholders, as
applicable, of this Section 7.6.
(d) PIC and the Shareholders agree not to release or permit the
release of any Person from, or to waive or permit the waiver of any provision
of, any confidentiality, "standstill" or similar agreement to which any of PIC,
its Subsidiaries or the Shareholders is a party and shall promptly provide
Parent with a copy of such agreements. Each of PIC and the Shareholders shall
use its commercially reasonable best efforts to enforce or cause to be enforced
each such agreement at the request of Parent.
(e) Nothing in this Section 7.6, or elsewhere in this Agreement,
shall limit, prohibit or otherwise affect in any way the manner in which any
member of the Board of Directors of PNG performs his duties solely in his
capacity as such a director, with respect to his fiduciary duties to the
shareholders of PNG or otherwise.
Section 7.7 Subsequent Actions. If at any time after the Closing
Parent or Buyer shall consider or be advised that any deeds, bills of sale,
instruments of conveyance, assignments, assurances or any other actions or
things are necessary or desirable (i) to vest, perfect or confirm ownership (of
record or otherwise) in Buyer, its right, title or interest in, to or under any
or all of the PIC Shares, (ii) to vest, perfect or confirm ownership (of record
or otherwise) in PIC and each Subsidiary of PIC, any of its rights, properties
or assets or (iii) otherwise to carry out this Agreement, the Shareholders and
the Shareholders' Representative shall execute and deliver all deeds, bills of
sale, instruments of conveyance, powers of attorney, assignments and assurances
and take and do all such other actions and things as may be requested by Parent
in order to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in Buyer or PIC or any Subsidiary
of PIC or otherwise to carry out this Agreement.
Section 7.8 Employee Benefits.
(a) For a period of one (1) year immediately following the Closing
Date, except as otherwise required by applicable Law, Parent shall, or shall
cause PIC to, provide to individuals who are employed by PIC and its
Subsidiaries immediately prior to the Closing
40
who remain employed with PIC or any Subsidiary of PIC after the Closing
("Affected Employees"), employee benefits (including pension and welfare
benefits, but excluding any equity-based or incentive compensation) which are,
in the aggregate, substantially comparable to and no less favorable in any
material respect than the employee benefits provided to Affected Employees
immediately prior to the Closing.
(b) Parent shall, or shall cause PIC to, provide to Affected
Employees full credit (consistent with current policies), solely for purposes of
eligibility and vesting, under severance benefit, vacation and other employee
benefit plans or arrangements maintained by Parent or any Subsidiary of Parent
(to the extent such Affected Employees participate in any such employee welfare
benefit plan or arrangement) for such Affected Employees' service with PIC or
any Subsidiary of PIC to the same extent recognized by PIC immediately prior to
the Closing; provided, however, that the crediting shall not operate to
duplicate any benefit.
(c) Parent shall, or shall cause PIC to, (i) waive all limitations
as to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Affected Employees
under any welfare benefit plans of Parent that such employees may be eligible to
participate in after the Closing, other than limitations or waiting periods that
were in effect with respect to such employees as of the Closing under any
welfare plan maintained by PIC for the Affected Employees immediately prior to
the Closing, and (ii) provide each Affected Employee with credit for any
co-payments and deductibles paid prior to the Closing in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans that
such employees are eligible to participate in after the Closing during the same
plan year in which such co-payments and deductibles were paid.
Section 7.9 PNG. PIC, the Shareholders shall use their commercially
reasonable best efforts to (i) cause PNG, upon the consummation of the
transactions contemplated hereby (if the Merger is not consummated
simultaneously therewith or immediately thereafter), to allow Parent to obtain
representation on the PNG Board of Directors proportional to Parent's aggregate
equity ownership of PNG (after giving effect to the Closing) (which, as of the
date hereof, shall be no less than two (2) of the seven (7) director positions
on the PNG Board of Directors) and (ii) prevent PNG from taking any action or
omitting to take any action under or with respect to Pennsylvania law, PNG's
articles of incorporation, bylaws, other governing documents or Contracts
(including, without limitation, by adopting a shareholder rights or similar
plan, by issuing additional securities, by effect of any state takeover law or
state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares of PNG Common Stock, or by amending any of
PNG's articles of incorporation, bylaws or other governing documents or
adopting, amending or terminating any Contracts) that has the effect of
preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand.
Section 7.10 Non-Solicitation and Non-Competition.
(a) Except in connection with the Restricted Shareholder's
employment by Parent or any of its Subsidiaries, each of the Restricted
Shareholder and the Principal Shareholder agrees that he shall not (and shall
cause each of his respective Representatives not to), without the prior written
consent of Parent, directly or indirectly, individually or on behalf of
41
any other Person, prior to the third anniversary of the Closing Date with
respect to the Principal Shareholder and prior to the first anniversary of the
Closing Date with respect to the Restricted Shareholder (i) solicit, aid, induce
or encourage any individual, who is an employee of any of Parent, PIC or any of
their respective Subsidiaries or affiliates as of the date of this Agreement or
immediately prior to the Closing Date (the "Designated Employees") to leave his
or her employment relationship with Parent, PIC or any of their respective
Subsidiaries or affiliates before or after the Closing; provided, however, that
it is understood that this Section 7.10 shall not prohibit: (A) any solicitation
by a professional search firm where none of the Principal Shareholder, the
Restricted Shareholder or any of their respective Representatives has, directly
or indirectly, directed such firm to solicit that Person; or (B) generalized
solicitations by advertising and the like which are not specifically directed to
the Designated Employees; or (ii) hire or otherwise engage, or assist any Person
in hiring or otherwise engaging, any such Designated Employee who has been
employed by Parent, PIC or any of their Subsidiaries or affiliates within the
immediately preceding twenty-four (24) months.
(b) Except in connection with the Restricted Shareholder's
employment by Parent or any of its Subsidiaries, each of the Restricted
Shareholder and the Principal Shareholder agrees that he shall not (and shall
cause each of his respective Representatives not to), without the prior written
consent of Parent, directly or indirectly, prior to the third anniversary of the
Closing Date with respect to the Principal Shareholder and prior to the first
anniversary of the Closing Date with respect to the Restricted Shareholder,
solicit any Person who is a client or customer of a Restricted Business (as
defined below) as of the Closing Date for the purposes of providing any products
or services of a type substantially similar to any of those provided by a
Restricted Business.
(c) Except in connection with the Restricted Shareholder's
employment by Parent or any of its Subsidiaries, each of the Restricted
Shareholder and the Principal Shareholder agrees that he shall not (and shall
cause each of his respective Representatives not to), without the prior written
consent of Parent, directly or indirectly, prior to the third anniversary of the
Closing Date with respect to the Principal Shareholder and prior to the first
anniversary of the Closing Date with respect to the Restricted Shareholder,
engage in or carry on in any capacity, directly or indirectly (including as
shareholder, investor, member, partner, principal, proprietor, independent
contractor, agent or creditor), any business, trade or venture substantially
similar to a Restricted Business in the United States; provided, however, that
the ownership of less than two percent (2%) of any class of the issued and
outstanding securities of a Person engaged in a Restricted Business shall not
constitute a violation of Sections 7.10(b) and (c) if such class of securities
of such Person is traded on a national securities exchange or in the
over-the-counter market.
(d) For purposes of this Agreement:
(i) "Restricted Businesses" means the business conducted by
PIC, PNG and their respective Subsidiaries including the activities
of (i) acting as a wholesale broker of general liability, commercial
property and multi-peril insurance, (ii) marketing and underwriting
general liability, commercial property and multi-peril insurance,
and (iii) handling or administering Third-Party claims relating to
general liability, commercial property and multi-peril insurance;
and
42
(ii) "Restricted Shareholder" means the following Shareholder:
E. Xxxxxxx Xxxxxxxx.
(e) The parties agree that the remedy at law for any breach of the
foregoing will be inadequate and that Parent, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive relief
without proof of actual damages and without any requirement for the securing or
posting of any bond.
(f) Each of the Restricted Shareholder and the Principal Shareholder
acknowledges that the covenants in this Section 7.10 are an essential element of
the transactions contemplated by this Agreement and a fundamental inducement to
Parent and Buyer to enter into this Agreement. Moreover, each of the Restricted
Shareholder and the Principal Shareholder acknowledges that the business of PIC,
Parent and their respective Subsidiaries can be conducted in any location
throughout the United States. Parent, Buyer, the Restricted Shareholder, and the
Principal Shareholder intend to and hereby confer jurisdiction to enforce the
covenants in this Section 7.10 upon the courts of any jurisdiction within the
geographical scope of the covenants in this Section 7.10. Each of the Restricted
Shareholder and the Principal Shareholder agrees that this Section 7.10 shall be
deemed to be a series of separate covenants, one for each state, territory and
jurisdiction of the United States in which the Restricted Businesses purport to
conduct business. With respect to any proceeding of or before a Governmental
Authority, each of the Restricted Shareholder and the Principal Shareholder
further agrees that (i) if a Governmental Authority shall refuse to enforce any
of these separate covenants, such unenforceable covenants shall be deemed
eliminated from the provisions hereof for the purposes of such proceeding to the
extent necessary for the remaining separate covenants to be enforced in such
proceeding and (ii) if a Governmental Authority shall refuse to enforce one or
more of the separate covenants because the total time thereof is deemed to be
excessive or unreasonable, then such covenants which would otherwise be
unenforceable due to such excessive or unreasonable period of time shall be
enforced for such lesser period of time as shall be deemed reasonable and not
excessive by such Governmental Authority.
(g) All memoranda, notes, lists, records and other documents (and
all copies thereof), including, but not limited to, such items stored in
computer memories, on microfiche or made available to the Restricted Shareholder
or the Principal Shareholder concerning the Restricted Businesses or the
business of Parent or any of its affiliates, are and shall be Parent's property
and shall be delivered to Parent or any of its affiliates, promptly upon
termination of the Restricted Shareholder's or the Principal Shareholder's
employment with Parent or any of its affiliates, as the case may be, or at any
other time on request.
Section 7.11 Shareholder Releases. Except as set forth in this
Section 7.11, each Shareholder, on behalf of itself and its affiliates, and
their respective heirs, executors, successors and assigns, hereby remises,
releases and forever discharges, and by these presents does release and forever
discharge, Parent, PIC, and their respective Subsidiaries and Parent's, PIC's
and their Subsidiaries' respective Representatives (each, a "Releasee"), jointly
and severally, of and from any and all actions, causes of action, suits, debts,
accounts, bonds, bills, covenants, contracts, controversies, agreements,
liabilities, damages, costs, expenses, demands, judgments, executions,
variances, claims and other obligations of whatever kind or nature, in law or in
equity, known or unknown, arising from, connected or related to, or caused by
any event, occurrence,
43
cause or thing, of any type, whatsoever, arising or existing, or occurring, in
whole or in part, at any time from the beginning of the world through the date
hereof; provided, however, that this release shall not extend to (a) any
obligation of the Releasee or any of them provided for in or incurred under this
Agreement or in any written agreement (whenever any such obligation or the cause
thereof shall have arisen) between a Shareholder and the Releasee, or any of
them, to be executed at or in connection with the consummation of the
transactions contemplated by this Agreement, or (b) the entitlement of a Person
to COBRA continuation coverage benefits or any other similar benefits required
to be provided by Law. This release is for any relief, no matter how
denominated, including, but not limited to, injunctive relief, wages, front pay,
compensatory damages, or punitive damages. Notwithstanding any other provision
of this Section 7.11 to the contrary, this release is not intended to interfere
with, and shall not apply to, a Shareholder's right to file a charge with the
Equal Employment Opportunity Commission in connection with any claim such Person
believes it may have against the Releasees. However, by executing this
Agreement, the Shareholders hereby waive the right to recover in any proceeding
they may bring before the Equal Employment Opportunity Commission or any State
human rights commission or in any proceeding brought by the Equal Employment
Opportunity Commission or any State human rights commission on their behalf.
This release is for any relief, no matter how denominated, including, but not
limited to, injunctive relief, wages, front pay, compensatory damages, or
punitive damages. This release shall be irrevocable and may not be changed
orally.
Section 7.12 Hatboro Headquarters. At or prior to Closing, Parent
shall enter into, or cause an affiliate of Parent to enter into, (a) a lease
(the "Headquarters Lease") with the Principal Shareholder for a term of at least
ten (10) years for the whole of the building located at 000 X. Xxxx Xxxx,
Xxxxxxx, Xxxxxxxxxxxx (the "Headquarters") on terms mutually acceptable to
Parent and the Principal Shareholder; provided, that such terms shall be no less
favorable than the terms in effect as of the date of this Agreement under any
lease between PIC, PNG or their affiliates and the Principal Shareholder (the
"Current Leases"), which include, among other things, an annual rental rate of
approximately $17.00 per square foot and annual expense adjustments as set forth
in the Current Leases, or (b) an agreement with the Principal Shareholder to
purchase the Headquarters and the related land on terms mutually acceptable to
Parent or an affiliate of Parent and the Principal Shareholder (the
"Headquarters Purchase Agreement").
Section 7.13 Disclosure Documents. PIC shall instruct and shall use
its commercially reasonable best efforts to cause its independent public
accountants to provide for the purposes of filing, and to consent to such
filing, the Audited Financial Statements, the Unaudited Financial Statements,
any financial statements of PIC and its Subsidiaries prepared after the date of
this Agreement, and such consents and other documentation, in form and substance
as required by applicable Law, in any public or private financing documents or
other documents filed with the U.S. Securities and Exchange Commission or any
other Governmental Authority. Buyer and PIC shall each pay fifty percent (50%)
of the costs of PIC's independent public accountants incurred by PIC in
connection with this Section 7.13.
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ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to the Obligations of Each Party. The
obligations of PIC, the Shareholders, Parent and Buyer to effect the Closing are
subject to the satisfaction (or, to the extent legally permissible, waiver) of
the following conditions:
(a) HSR Act. Any applicable waiting period (including any extension
thereof) under the HSR Act relating to transactions contemplated by this
Agreement shall have expired or been terminated; and
(b) No Injunctions or Restraints. No provision of any applicable Law
and no judgment, injunction, order or decree that makes illegal or otherwise
prohibit the Closing or any of the other transactions contemplated by this
Agreement shall be in effect.
Section 8.2 Conditions to the Obligations of Parent and Buyer. The
obligations of Parent and Buyer to effect the Closing are subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:
(a) Performances of Obligations; Representations and Warranties of
PIC. (i) The representations and warranties of PIC contained in this Agreement
and in any certificate or other writing delivered by PIC pursuant hereto (A) if
subject to any limitations as to "materiality" or "Material Adverse Effect,"
shall be true and correct in all respects on the date of this Agreement and at
and as of the Closing as if made at and as of such time (except to the extent
expressly by its terms made as of an earlier date, in which case as of such
earlier date), and (B) if not subject to any limitations as to "materiality" or
"Material Adverse Effect," shall be true and correct in all material respects on
the date of this Agreement and at and as of the Closing as if made at and as of
such time (except to the extent expressly by its terms made as of an earlier
date, in which case as of such earlier date), (ii) PIC shall have performed in
all material respects all of its covenants, agreements and obligations hereunder
required to be performed by it at or prior to the Closing, and (iii) Parent
shall have received a certificate signed by the chief executive officer of PIC
to the foregoing effect;
(b) Performances of Obligations; Representations and Warranties of
the Shareholders. (i) The representations and warranties of the Shareholders
contained in this Agreement and in any certificate or other writing delivered by
the Shareholders pursuant hereto (A) if subject to any limitations as to
"materiality" or "Material Adverse Effect," shall be true and correct in all
respects on the date of this Agreement and at and as of the Closing as if made
at and as of such time (except to the extent expressly by its terms made as of
an earlier date, in which case as of such earlier date), and (B) if not subject
to any limitations as to "materiality" or "Material Adverse Effect," shall be
true and correct in all material respects on the date of this Agreement and at
and as of the Closing as if made at and as of such time (except to the extent
expressly by its terms made as of an earlier date, in which case as of such
earlier date), (ii) the Shareholders shall have performed in all material
respects all of their covenants, agreements and obligations hereunder required
to be performed by them at or prior to the Closing, and (iii) Par-
45
ent shall have received a certificate signed by the Shareholders' Representative
to the foregoing effect;
(c) No Litigation. No proceeding or litigation shall have been
threatened or shall have been commenced by or before any Governmental Authority
(i) seeking to restrain or prohibit the consummation of the transaction
contemplated by this Agreement or the Merger Agreement or seeking to obtain from
Parent, PIC or any of their respective Subsidiaries any damages that are
material in relation to Parent and Parent's Subsidiaries taken as a whole or PIC
and PIC's Subsidiaries taken as a whole, as applicable, (ii) seeking to prohibit
or limit the ownership or operation by Parent, PIC or any of their respective
Subsidiaries of any material portion of the business or assets of PIC and its
Subsidiaries, or to compel Parent, PIC or any of their respective Subsidiaries
to dispose of or hold separate any material portion of their business or assets,
as applicable, as a result of the transactions contemplated by this Agreement or
the Merger Agreement, (iii) seeking to impose limitations on the ability of
Parent to, directly or indirectly, acquire or hold, or exercise full rights of
ownership of, any shares of capital stock of PIC or PNG, (iv) seeking to
prohibit Parent or Parent's Subsidiaries from, after the Closing Date,
effectively controlling in any material respect the business or operations of
PIC and PIC's Subsidiaries, taken as a whole, or (v) that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
PIC or Parent;
(d) Regulatory Matters. The authorizations, consents, orders,
permits or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Authority (other than the
expiration of the applicable waiting period under the HSR Act that is addressed
in Section 8.1(a)) that are necessary for the consummation of the transactions
contemplated hereby shall have been filed, have occurred or have been obtained
(all of the foregoing, the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Approvals shall be in full force and effect; provided,
however, that a Requisite Regulatory Approval shall not be deemed to have been
obtained if in connection with the grant thereof there shall have been an
imposition by any Governmental Authority of any condition, requirement,
restriction or change of regulation, or any other action directly or indirectly
related to such grant taken by such Governmental Authority, which could (or if
implemented could) have more than an immaterial effect on Parent or PIC;
(e) Third Party Consents. All material Third Party consents and
approvals required in connection with the consummation of the transactions
contemplated by this Agreement, which shall consist solely of those set forth in
Section 8.2(e) of the PIC Disclosure Letter, shall have been obtained;
(f) PNG. If the Merger is not consummated simultaneously with the
Closing hereunder or immediately thereafter, PNG shall have taken all necessary
action to allow Parent to obtain representation on the PNG Board of Directors
proportional to Parent's aggregate equity ownership of PNG (after giving effect
to the Closing) (which, as of the date hereof, shall be no less than two (2) of
the seven (7) director positions on the PNG Board of Directors) and PNG shall
not have taken any action or omitted to take any action under or with respect to
Pennsylvania law, PNG's articles of incorporation, bylaws, other governing
documents or Contracts (including, without limitation, by adopting a shareholder
rights or similar plan, by issuing additional securities, by effect of any state
takeover law or state law that purports to limit or restrict
46
business combinations or the ability to acquire or vote shares of PNG Common
Stock, or by amending any of PNG's articles of incorporation, bylaws or other
governing documents or adopting, amending or terminating any Contracts) that has
the effect of preventing or making more difficult any business combination or
other transaction involving Parent and its affiliates, on the one hand, and PNG
and its shareholders, on the other hand;
(g) Employment Arrangements. (i) Each of Xxxxxx X. Xxxx, Xxxxx X.
Xxxxxxx, Xxxxxx X. Xxxx, and E. Xxxxxxx Xxxxxxxx shall have entered into
employment agreements with PIC, each effective as of the Closing Date; (ii) Xxxx
X. Xxx Xxxxxxx and Xxxx X. Xxxxxxx shall be employed by PIC or its Subsidiaries
as of the Closing Date under the terms of the employment arrangement currently
in effect with respect to them, as may be modified after the date of this
Agreement; and (iii) Xxxxx X. Xxxx shall have executed an amendment to his
current employment arrangements, which amendment shall be in form and substance
reasonably satisfactory to Parent and which shall terminate any existing phantom
stock plan and any outstanding phantom equity of any Subsidiary of PIC to which
he is entitled (collectively, the "Key Employees");
(h) General Releases. Each of the directors and officers of PIC and
PIC's Subsidiaries shall have executed and delivered to Parent a General
Release;
(i) Legal Opinion. Parent and Buyer shall have received (i) an
opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to PIC (or other counsel
reasonably acceptable to Parent), dated as of the Closing Date, in form and
substance satisfactory to Parent, to the effect set forth in Exhibit F; and (ii)
opinions of counsel to the Shareholders dated as of the Closing Date, in form
and substance satisfactory to Parent, to the effect set forth in Exhibit G;
(j) PNG Stock Purchase Agreements. The closing of the sale of the
Additional PNG Equity shall have been consummated prior to or simultaneously
with the Closing in accordance with the terms of the PNG Stock Purchase
Agreements; and
(k) Satisfaction of Payments. All obligations to the Principal
Shareholder (approximately $2,750,000) and Xxxxxx X. Xxxx (approximately
$2,900,000) pursuant to the Deferred Compensation Agreement between the
Principal Shareholder and PIC, dated as of November 18, 2002, and the Executive
Employment Agreement between Xxxxxx X. Xxxx and PIC, dated as of November 11,
1997, as amended, respectively, shall have been satisfied in full at or prior to
the Closing and such agreements shall have been terminated.
47
Section 8.3 Conditions to the Obligations of PIC and the
Shareholders. The obligation of PIC and the Shareholders to effect the Closing
is subject to the satisfaction (or, to the extent legally permissible, waiver)
of the following further conditions: (i) the representations and warranties of
Parent and Buyer contained in this Agreement and in any certificate or other
writing delivered by Parent pursuant hereto (A) if subject to any limitations as
to "materiality" or "Material Adverse Effect," shall be true and correct in all
respects on the date of this Agreement and at and as of the Closing as if made
at and as of such time (except to the extent expressly by its terms made as of
an earlier date, in which case as of such earlier date), and (B) if not subject
to any limitations as to "materiality" or "Material Adverse Effect," shall be
true and correct in all material respects on the date of this Agreement and at
and as of the Closing as if made at and as of such time (except to the extent
expressly by its terms made as of an earlier date, in which case as of such
earlier date), (ii) Parent shall have performed in all material respects all of
its covenants, agreements and obligations hereunder required to be performed by
it at or prior to the Closing, and (iii) PIC and the Shareholders'
Representative shall have received a certificate signed by the chief executive
officer of Parent to the foregoing effect.
Section 8.4 Frustration of Closing Conditions. None of Parent,
Buyer, PIC, the Shareholders or the Shareholders' Representative may rely,
either as a basis for not consummating the transactions contemplated hereby or
terminating this Agreement and transactions contemplated hereby, on the failure
of any condition set forth in Sections 8.1, 8.2 or 8.3, as the case may be, to
be satisfied if such failure was caused by such party's breach of any provision
of this Agreement or failure to use its reasonable best efforts to consummate
the transactions contemplated hereby, as required by and subject to Section 7.4.
ARTICLE IX
VOTING AGREEMENT
Section 9.1 Voting of the PNG Shares.
(a) Until the Closing or the termination of this Agreement in
accordance with the terms hereof, PIC hereby agrees that it shall cause PIC
Holdings at any annual, special or other meeting of the shareholders of PNG, and
at any adjournment or adjournments thereof, or by written consent without a
meeting, to vote the PNG Shares (i) in favor of any business combination or
other transaction, or other resolution or matter submitted to the PNG
shareholders involving or related to any business combination or other
transaction, with Parent and its affiliates, on the one hand, and PNG and its
shareholders, on the other hand, including the adoption of the Merger Agreement
and the consummation of the transactions contemplated thereby and (ii) against
approval or adoption of any business combination or other transaction involving
a Third Party and PNG, or any other action or agreement that could have the
effect of preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand, or that could impede, interfere with,
frustrate, delay, postpone or attempt to discourage the transactions
contemplated by the Merger Agreement. PIC shall cause PIC Holdings, as the
holder of the PNG Shares, to be present, in person or by proxy, at all annual,
special or other meetings of the share-
48
holders of PNG, and at any adjournment or adjournments thereof, so that all of
the PNG Shares are counted for the purpose of determining the presence of a
quorum at such meetings.
(b) PIC shall cause PIC Holdings, with respect to the PNG Shares, to
constitute and appoint Parent, or any nominee of Parent, with full power of
substitution, from the date of this Agreement until the earlier of the
termination of this Agreement and the Closing, as PIC Holdings' true and lawful
attorney and proxy (its "Proxy"), for and in its name, place and stead, to vote
the PNG Shares, as its Proxy, at any annual, special or other meeting of the
shareholders of PNG, and at any adjournment or adjournments thereof, or by
written consent without a meeting, (i) in favor of any business combination or
other transaction, or other resolution or matter submitted to the PNG
shareholders involving or related to any business combination or other
transaction, with Parent and its affiliates, on the one hand, and PNG and its
shareholders, on the other hand, including the adoption of the Merger Agreement
and the consummation of the transactions contemplated thereby and (ii) against
approval or adoption of any business combination or other transaction involving
a Third Party and PNG, or any other action or agreement that could have the
effect of preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand, or that could impede, interfere with,
frustrate, delay, postpone or attempt to discourage the transactions
contemplated by the Merger Agreement. THIS POWER OF ATTORNEY AND PROXY IS
IRREVOCABLE, IS GRANTED IN CONSIDERATION OF PARENT AND BUYER ENTERING INTO THIS
AGREEMENT, IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN
IRREVOCABLE POWER AND SHALL TERMINATE UPON THE EARLIER OF THE TERMINATION OF
THIS AGREEMENT AND THE CLOSING. This appointment shall revoke all prior
attorneys and proxies appointed by PIC Holdings at any time with respect to the
PNG Shares and no subsequent attorneys or proxies shall be appointed by PIC
Holdings or be effective with respect thereto while this Agreement is in effect.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual written consent of PIC and Parent;
(b) by either PIC or Parent, if the Closing not been consummated as
of March 31, 2005 (the "End Date"); provided, however, that if (x) the Closing
has not occurred by such date by reason of non-satisfaction of the condition set
forth in Section 8.1(a) or 8.2(d) and (y) all other conditions set forth in
Article VIII have heretofore been satisfied or waived or are capable of being
satisfied, then such date shall automatically be extended to June 30, 2005
(which shall then be the End Date); provided, further, that at the End Date the
right to terminate this Agreement under this Section 10.1(b) shall not be
available to any party whose failure to fulfill in any material respect any
obligation under this Agreement has caused or resulted in the failure of the
Closing to occur on or before the End Date;
49
(c) by either PIC or Parent, if there shall be any Law that makes
effecting the Closing illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Parent, Buyer, PIC or any Shareholder from
effecting the Closing is entered and such judgment, injunction, order or decree
shall become final and nonappealable; provided, however, that the right to
terminate this Agreement under this Section 10.1(c) is not available to a party
that has not fulfilled its obligations under Section 7.3;
(d) by either PIC or Parent, if there shall have been a breach by
the other of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 8.2(a) (in the case of a
breach by PIC) or Section 8.3 (in the case of a breach by Parent or Buyer), and
in any such case such breach shall be incapable of being cured or, if capable of
being cured, shall not have been cured within thirty (30) days after written
notice thereof shall have been received by the party alleged to be in breach; or
(e) by Parent, if there shall have been a breach by any of the
Shareholders of any of their representations, warranties, covenants or
obligations contained in this Agreement, which breach would result in the
failure to satisfy one or more of the conditions set forth in Section 8.2(b),
and such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within thirty (30) days after written notice thereof
shall have been received by the party alleged to be in breach.
The party desiring to terminate this Agreement pursuant to clause (b), (c), (d)
or (e) of this Section 10.1 shall give written notice of such termination to the
other party in accordance with Section 14.3, specifying the provision hereof
pursuant to which such termination is effected.
Section 10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (i) that the provisions of
this Agreement set forth in this Section 10.2 and Article XIV and the agreements
contained in the Confidentiality Agreement (to the extent set forth therein),
shall survive the termination hereof and (ii) that no such termination shall
relieve any party of any liability or damages resulting from any breach by that
party of this Agreement prior to such termination.
Section 10.3 Fees and Expenses.
(a) If the transactions contemplated by this Agreement are not
consummated, all costs and expenses incurred by any party to this Agreement in
connection with this Agreement or the transactions contemplated hereby shall be
paid by the party incurring such cost or expense. If the transactions
contemplated by this Agreement are consummated, except as otherwise provided
herein, (i) the Shareholders shall pay or reimburse all of the costs, fees and
related expenses incurred by PIC, its Subsidiaries and the Shareholders (A) in
connection with this Agreement, the transactions contemplated hereby, and the
other strategic alternatives considered by PIC and the Shareholders and (B)
pursuant to that certain Agreement, dated August 20, 1993, as in effect as of
the Closing, between PIC and PNG; except that PIC shall pay or reimburse the
reasonable and documented fees and expenses of the Shareholders and the Key
Employees incurred in connection with this Agreement and the transactions
contemplated hereby
50
(whether relating to legal, accounting, actuarial, financial advisory or other
fees and expenses) in an amount not to exceed one hundred fifty thousand dollars
($150,000) (the "Fee Cap") and (ii) filing fees payable under or pursuant to the
HSR Act shall be paid by Buyer.
(b) Without limitation on the generality of the foregoing, the
Shareholders will be responsible for all expenses in excess of the Fee Cap
incurred by or on behalf of PIC and the Shareholders, including but not limited
to the fees, expenses, and disbursements of its investment bankers, accountants,
actuaries and counsel. To the extent any fees or expenses have been paid by PIC
or its Subsidiaries to any Person whose fees, expenses and disbursements are the
responsibility of the Shareholders pursuant to the foregoing, such amount shall
be deductible, at the option of Buyer, from the Purchase Price payable to the
Shareholders at the Closing. The Shareholders jointly and severally agree to
indemnify Buyer against all claims for fees, expenses and disbursements by any
Person which the Shareholders are responsible for pursuant to the foregoing.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Indemnification by the Principal Shareholder.
(a) Subject to Sections 11.1(c) and (d), the Principal Shareholder
shall indemnify, defend and hold harmless Parent, each of its Subsidiaries
(including PIC and its Subsidiaries), and each of their respective
Representatives (and the respective heirs, successors and assigns of each of the
foregoing) (the "Parent Indemnified Persons") from and against and in respect of
one hundred percent (100%) of all Parent Losses.
(b) Subject to Section 11.1(e), the Principal Shareholder shall
indemnify, defend and hold harmless the Parent Indemnified Persons from and
against and in respect of one hundred percent (100%) of all actual losses,
liabilities, damages, judgments, settlements and expenses (including interest
and penalties recovered by a Third Party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the defense of any of the same or in asserting, preserving or
enforcing any of the rights of the Parent Indemnified Persons arising under
Article XI) incurred by any of the Parent Indemnified Persons, whether or not
involving a Third-Party claim, which are caused by, arise from or are related to
any breach of any representation or warranty made by any Shareholder pursuant to
Article V or any covenant of any Shareholder contained in this Agreement;
provided, however, that, in the case of any representation or warranty that is
limited by "material," "Material Adverse Effect" or by any similar term or
limitation, the occurrence of a breach or inaccuracy of such representation or
warranty, as the case may be, and the amount of losses subject to
indemnification hereunder shall be determined as if "material," "Material
Adverse Effect" or by any similar term or limitation were not included therein.
All statements contained in any schedule hereto delivered by PIC or any
Shareholder pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed representations and warranties of the Principal
Shareholder.
(c) The Principal Shareholder's indemnification obligations arising
from Section 11.1(a) (to the extent relating to clause (i) of the definition of
Parent Losses) shall
51
survive only until eighteen (18) months after the Closing Date; provided,
however, that the indemnification obligations related to the representations and
warranties contained in (i) Sections 4.2, 4.14(g), 4.23 and 4.24 shall survive
without limitation and (ii) Sections 4.14 (except for subsection (g)) and 4.20
shall survive until the expiration of the applicable statute of limitations plus
a period of ten (10) Business Days. No claim for the recovery of any Parent
Losses may be asserted by any Parent Indemnified Person after the termination of
the applicable period as set forth in this Section 11.1(c); provided, however,
that claims asserted in writing by any Parent Indemnified Person prior to the
termination of the applicable period as set forth in this Section 11.1(c) shall
not thereafter be barred; provided, further, however, that the limitations set
forth in this Section 11.1(c) shall not apply to any representation and warranty
of any Shareholder contained in Article V or any covenant or agreement to be
performed by any party hereto.
(d) The Principal Shareholder's obligation to indemnify the Parent
Indemnified Persons for Parent Losses resulting from or arising out of a breach
of a representation or warranty contained in or made pursuant to Article IV
(except for Sections 4.2, 4.14, 4.20, 4.23 and 4.24) pursuant to Section 11.1(a)
is subject to the limitation that no indemnification shall be made by the
Principal Shareholder with respect to any claim unless the aggregate amount of
Parent Losses exceeds two hundred eighty-seven thousand five hundred dollars
($287,500); however, if such aggregate amount exceeds two hundred eighty-seven
thousand five hundred dollars ($287,500), then in such event, indemnification
shall be made by the Principal Shareholder for the full amount of Parent Losses
(including the first $287,500). In no event shall the Principal Shareholder's
aggregate obligations to indemnify the Parent Indemnified Persons for Parent
Losses resulting from or arising out of a breach of a representation or warranty
contained in or made pursuant to: (i) Article IV (except for Sections 4.2, 4.7,
4.9, 4.13, 4.14, 4.15, 4.20, 4.23 and 4.24) pursuant to Section 11.1(a) exceed
six million dollars ($6,000,000); and (ii) Sections 4.7 (but only to the extent
such breach is not also a breach of another representation or warranty contained
in this Agreement), 4.9, 4.13, 4.14 and 4.15 pursuant to Section 11.1(a) exceed
ten million dollars ($10,000,000); provided that the $10,000,000 limitation
described in clause (ii) of this sentence shall not be in addition to the
$6,000,000 limitation described in clause (i) of this sentence, but shall only
constitute and extension of such $6,000,000 limitation, such that the Principal
Shareholder's obligations to indemnify the Parent Indemnified Persons for Parent
Losses resulting from or arising out of a breaches of representations or
warranties described in this sentence shall not exceed $10,000,000 in the
aggregate. The Principal Shareholder's obligation to indemnify the Parent
Indemnified Persons for Parent Losses resulting from or arising out of a breach
of a representation or warranty contained in or made pursuant to Sections 4.2,
4.20, 4.23 and 4.24 pursuant to Section 11.1(a) shall not be subject to any
limitations contained in this Section 11.1(d).
(e) The Principal Shareholder's indemnification obligation arising
from Section 11.1(b) shall survive indefinitely. In no event shall the Principal
Shareholder's obligation to indemnify the Parent Indemnified Persons pursuant to
Section 11.1(b) exceed the Purchase Price.
Section 11.2 Indemnification by Parent and Buyer.
(a) Subject to Sections 11.2(b) and (c), Parent and Buyer shall,
jointly and severally, indemnify, defend and hold harmless the Shareholders and
each of their respective
52
Representatives (and the respective heirs, successors and assigns of each of the
foregoing) (the "Shareholder Indemnified Persons") from and against and in
respect of one hundred percent (100%) of all actual losses, liabilities,
damages, judgments, settlements and expenses (including interest and penalties
recovered by a Third Party with respect thereto and reasonable attorneys' fees
and expenses and reasonable accountants' fees and expenses incurred in the
defense of any of the same or in asserting, preserving or enforcing any of the
rights of the Shareholder Indemnified Persons arising under Article XI) incurred
by any of the Shareholder Indemnified Persons, whether or not involving a
Third-Party claim, which are caused by, arise from or are related to (i) any
breach of any representation or warranty made by Parent or Buyer pursuant to
Article VI, (ii) any covenant of Parent or Buyer contained in this Agreement, or
(iii) the operation by Buyer of the business of PIC and its Subsidiaries
following the Closing (except to the extent any such Shareholder Losses are
related to any action or inaction by any Shareholder Indemnified Persons or the
operation of the business of PIC and its Subsidiaries prior to the Closing)
("Shareholder Losses").
(b) Parent's and Buyer's indemnification obligations arising from
Section 11.2(a) shall survive only until the eighteen (18) month anniversary of
the Closing Date. No indemnification claim may be asserted by any Shareholder
Indemnified Person after the termination of the applicable period as set forth
in this Section 11.2(b); provided, however, that claims asserted in writing by
any Shareholder Indemnified Person prior to the termination of the applicable
period as set forth in this Section 11.2(b) shall not thereafter be barred;
provided, further, however, that the limitations set forth in this Section
11.2(b) shall not apply to any covenant or agreement to be performed by any
party hereto.
(c) Parent's and Buyer's obligations to indemnify the Shareholder
Indemnified Persons for Shareholder Losses resulting from or arising out of a
breach of a representation or warranty contained in or made pursuant to Article
VI pursuant to Section 11.2(a) is subject to the limitation that no
indemnification shall be made by Parent or Buyer with respect to any claim
unless the aggregate amount of Shareholder Losses exceeds two hundred
eighty-seven thousand five hundred dollars ($287,500); however, if such
aggregate amount exceeds two hundred eighty-seven thousand five hundred dollars
($287,500), then in such event, indemnification shall be made by Parent or Buyer
for the full amount of Shareholder Losses (including the first $287,500). In no
event shall Parent's or Buyer's aggregate obligations to indemnify the
Shareholder Indemnified Persons for Shareholder Losses pursuant to clause (i) of
Section 11.2(a) and clause (iii) of Section 11.2(a) exceed six million dollars
($6,000,000). Nothing in the foregoing sentence shall imply that, solely as a
result of the terms of such sentence, the Shareholder Indemnified Persons assume
any liability (including in excess of the cap referred to in such sentence) for
matters referred to in clause (iii) of Section 11.2(a).
Section 11.3 Notice of Claim; Defense. A Parent Indemnified Person
or a Shareholder Indemnified Person that desires to seek indemnification under
any part of this Article XI (each, an "Indemnified Person") shall give to each
party responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor") prompt notice of any third-party claim that may give rise to any
indemnification obligation under this Article XI, together with the estimated
amount of such claim (if then estimable), and the Indemnitor shall have the
right to assume the defense (at its expense) of any such claim through counsel
of such Indemnitor's own choosing by so notifying the Indemnified Persons within
fifteen (15) Business Days of the first
53
receipt by such Indemnitor of such notice from the Indemnified Persons;
provided, however, that any such counsel shall be reasonably satisfactory to the
Indemnified Persons. Failure to give such notice shall not affect the
indemnification obligations hereunder in the absence of actual and material
prejudice and in such case, only to the extent of such prejudice. If, under
applicable standards of professional conduct, a conflict between any Indemnified
Persons and any Indemnitor exists in respect of such third-party claim, the
Indemnitor shall pay the reasonable fees and expenses of such additional counsel
as may be required to be retained in order to resolve such conflict (but not
more than one firm of counsel). The Indemnitor shall be liable for the fees and
expenses of counsel employed by the Indemnified Persons for any period during
which the Indemnitor has not assumed the defense of any such third-party claim.
If the Indemnitor assumes such defense, the Indemnified Persons shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnitor. If the Indemnitor
chooses to defend or prosecute any third-party claim, the Indemnified Persons
shall agree to any settlement, compromise or discharge of such third-party claim
that the Indemnitor may recommend and that, by its terms, discharges the
Indemnified Persons from any Liability in connection with such third-party
claim; provided, however, that, without the consent of the Indemnified Persons,
the Indemnitor shall not consent to, and the Indemnified Persons shall not be
required to agree to, the entry of any judgment or enter into any settlement
that (i) provides for injunctive or other non-monetary relief affecting the
Indemnified Persons or any affiliate of the Indemnified Persons or (ii) does not
include as an unconditional term thereof the giving of a release from all
liability with respect to such claim by each claimant or plaintiff for the
benefit of each Indemnified Person.
Section 11.4 Survival of Indemnification Claims; Offset. The
indemnification obligations set forth in this Article XI shall survive the
Closing as set forth in Sections 11.1(c) and 11.1(e) and may be satisfied, in
whole or in part, by offset against the Escrowed Amount.
Section 11.5 Characterization of Indemnification Payments. Any
payments made pursuant to this Article XI shall be treated for all Tax purposes
as adjustments to the Purchase Price.
Section 11.6 Effect of Investigation. The right to indemnification
and all other remedies based on any representation, warranty, covenant or
obligation contained in or made pursuant to this Agreement shall not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the date the Closing occurs, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition to the obligation
of any party hereto to consummate the transactions contemplated hereby, where
such condition is based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, shall not
affect the right to indemnification or other remedy based on such
representation, warranty, covenant or obligation.
Section 11.7 Limitations on Indemnification.
(a) Notwithstanding the other provisions of this Article XI, the
amount by which an Indemnitor is or may be required to pay to an Indemnified
Person in respect of
54
losses for which indemnification is provided under this Article XI shall be
reduced by (i) any amounts actually received (including amounts actually
received under insurance policies) by the Indemnified Person from Third Parties
in respect of such loss or (ii) any actual reduction in income Taxes payable by
the Indemnified Person, solely as a result of the deductibility for income Tax
purposes of such losses for which indemnification is provided under this Article
XI, for the taxable year in which such deduction is claimed (assuming that all
other available losses, deductions, loss carry forwards and other Tax attributes
are utilized prior to such losses for which indemnification is provided under
this Article XI) (such amounts are collectively referred to herein as "Indemnity
Reduction Amounts"). If any Indemnified Person receives any Indemnity Reduction
Amounts in respect of a claim for which indemnification is provided under this
Agreement after the full or partial amount of such claim has been paid by an
Indemnitor, then the Indemnified Person shall promptly remit to the Indemnitor
an amount equal to the excess, if any, of (i) the amount theretofore paid by the
Indemnitor in respect of such claim, less (ii) the amount of the indemnity
payment that would have been due if such Indemnity Reduction Amounts in respect
thereof had been received before the indemnity payment was made.
(b) Notwithstanding anything to the contrary in the organizational
documents or other instruments of PIC or any of its Subsidiaries, no Shareholder
shall have any right to indemnification or other recovery thereunder or
otherwise (whether as an officer, director, shareholder or in any other
capacity) from PIC or any of its Subsidiaries with respect to any matter to the
extent that such the Principal Shareholder is liable, or would be liable but for
the limitations on indemnification contained herein, to any of the Parent
Indemnified Persons for indemnification under this Article XI with respect to
such matter.
(c) EXCEPT WITH RESPECT TO AMOUNTS PAID OR PAYABLE BY AN INDEMNIFIED
PERSON IN CONNECTION WITH THIRD-PARTY CLAIMS AND EXCEPT IN THE CASE OF FRAUD OR
WILLFUL MISREPRESENTATION, AN INDEMNITOR SHALL NOT HAVE ANY LIABILITY TO ANY
INDEMNIFIED PERSON FOR ANY LOSS OF PROFITS, SPECIAL, INDIRECT, CONSEQUENTIAL,
EXEMPLARY, PUNITIVE OR INCIDENTAL DAMAGES ARISING OUT OF OR RELATED TO THIS
AGREEMENT HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE),
WHETHER OR NOT THE INDEMNITOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the case of fraud or willful misrepresentation, the limitations on
indemnification (including as to duration and amount) contained in Sections
11.1(c), 11.1(d), 11.2(b), and 11.2(c) shall not apply to any claim for
indemnification under this Article XI by an Indemnified Person.
Section 11.8 Exclusive Remedy. Except in the case of fraud or
willful misrepresentation, Parent, Buyer and the Shareholders agree that the
indemnification provisions of this Article XI and Article XII shall be the
exclusive monetary remedy of the Indemnified Persons with respect to breaches of
representations, warranties, covenants, obligations or other provisions of this
Agreement.
55
ARTICLE XII
TAX MATTERS
Section 12.1 Apportionment of Taxes.
(a) Principal Shareholder Indemnification. The Principal Shareholder
shall indemnify, defend and hold harmless the Parent Indemnified Persons from
and against and in respect of one hundred percent (100%) of all Taxes (and
reasonable attorneys' fees and expenses and reasonable accountants' fees and
expenses incurred asserting, preserving or enforcing any of the rights arising
under Article XII), other than any such Taxes that were included in Total
Current Liabilities for purposes of calculating the Closing Net Working Capital
pursuant to Section 2.3(a), incurred in connection with (i) any Taxes imposed on
PIC or any of its Subsidiaries for any taxable period ending on or before the
Closing Date, and for the portion of any Straddle Period (as defined below)
ending on the Closing Date (a "Pre-Closing Tax Period"), (ii) any Taxes imposed
on any member of any consolidated, combined, affiliated or unitary group
(including, without limitation any Taxes imposed pursuant to Treasury Regulation
Section 1.1502-6 or a similar provision of any state, local or foreign income
Tax Law imposing joint and/or several liability upon the members of a
consolidated, combined, affiliated or unitary group) with which PIC or any of
its Subsidiaries files or has filed a Tax Return on a consolidated, combined,
unitary or affiliated basis for any Pre-Closing Tax Period, (iii) any Transfer
Taxes for which the Principal Shareholder is liable pursuant to Section 12.6,
and (iv) any Taxes imposed on PIC or any of its Subsidiaries as a result of any
breach of any warranty or representation under Section 4.16.
(b) Buyer's Indemnification of Shareholders. Parent and Buyer,
jointly and severally, shall indemnify, defend and hold harmless the
Shareholders from and against and in respect of one hundred percent (100%) of
all Taxes (and reasonable attorneys' fees and expenses and reasonable
accountants' fees and expenses incurred in asserting, pursuing or enforcing any
of the rights arising under Article XII) incurred in connection with any Tax
imposed on PIC or any of its Subsidiaries for any taxable period beginning after
the Closing Date and the portion of any Straddle Period beginning after the
Closing Date.
(c) Proration of Taxes and Earnings and Profits. To the extent
permitted by Law or administrative practice, the taxable years of PIC and each
of its Subsidiaries shall end on and include the Closing Date. Whenever it is
necessary to determine the liability for Taxes, or the earnings and profits, of
PIC or any of its Subsidiaries for a portion of a taxable year or period that
begins before and ends after the Closing Date (a "Straddle Period"), the
determination of the Taxes or the earnings and profits for the portion of the
year or period ending on, and the portion of the year or period beginning after,
the Closing Date shall be determined by using an interim-closing-of-the-books
method assuming that such taxable period ended at the close of the Closing Date,
except that (A) exemptions, allowances or deductions that are allowed on an
annual basis shall be apportioned on a per-diem basis and (B) Taxes other than
Taxes based upon income or receipts or ad valorem Taxes, such as real property,
personal property, intangibles and other similar Taxes (including, but not
limited to, franchise Taxes not based upon income or receipts) shall be
allocated as follows: the portion of the Tax that relates to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax from the entire taxable year
or period multiplied by a fraction the numerator of which is the number of days
in the Pre-Closing Tax Period
56
and the denominator of which is the number of days in the entire year or period,
and the remainder of such Tax shall be allocated to the portion of the year or
period beginning on the day after the Closing Date.
(d) To the extent that an indemnification obligation of one party
pursuant to this Section 12.1 may overlap with another indemnification
obligation of such party pursuant to this Section 12.1, the party entitled to
such indemnification shall be limited to only one of such indemnification
payments.
(e) Whenever in accordance with this Section 12.1 Parent or Buyer
shall be required to pay the Shareholders an amount or the Principal Shareholder
shall be required to pay Buyer an amount, such payments shall be made as of the
later of (x) ten (10) days after the date such payment is requested or (y) ten
(10) days before the requesting party is required to pay the related Tax
liability.
Section 12.2 Contest Provisions.
(a) Notification of Contests. Buyer shall notify the Shareholders'
Representative in writing within fifteen (15) days of receipt by Parent, Buyer,
PIC or any of their Subsidiaries of written notice of any pending or threatened
audits, assessments, inquiries or claims, which may affect the liability for
Taxes (including, without limitation, under this Section 12) of the Principal
Shareholder. The Shareholders' Representative shall notify Buyer in writing
within fifteen (15) days of receipt by any Shareholder of written notice of any
pending or threatened audits, assessments, inquiries or claims, which may affect
the liability for Taxes (including, without limitation, under this Section 12)
of Parent or Buyer. If the Shareholders' Representative or Buyer fails to give
such prompt notice to the other party, it shall not be entitled to
indemnification for any related Taxes only if (and only to the extent that) such
failure to give notice materially prejudices the other party's ability to
contest liability for such Taxes.
(b) Which Party Controls.
(i) Principal Shareholder's Items. The Shareholders'
Representative shall at his expense have the sole right to control,
defend, prosecute, settle and compromise any audit, assessment,
inquiry or claim for Taxes with respect to Taxes set forth in
Section 12.1(a), other than Taxes for any Straddle Period which
shall be controlled by Buyer pursuant to Section 12.2(b)(ii) hereof.
(ii) Buyer's Items. Buyer shall at its expense have the sole
right to control defend, prosecute, settle and compromise any audit,
assessment, inquiry or claim for Taxes related to PIC or any
Subsidiary of PIC (including, without limitation, those relating to
any Taxes for any Straddle Period) other than those controlled by
the Shareholders' Representative pursuant to Section 12.2(b)(i);
provided, that, for a Straddle Period in which the Principal
Shareholder may have a Tax liability, no settlement with respect to
such Tax liability shall be made without the Shareholders'
Representative consent, which consent shall not be unreasonably
withheld or delayed.
57
(iii) Participation Rights. Notwithstanding Section 12.2(b)(i)
and (ii), any party whose liability for Taxes may be affected by an
audit, assessment, inquiry or claim shall be entitled to participate
at its expense in such defense and to employ counsel of its choice
at its expense.
Section 12.3 Tax Returns.
(a) The Shareholders. The Shareholders' Representative shall prepare
or cause to be prepared and timely file or cause to be timely filed (taking into
account any extensions) all required Tax Returns relating to PIC and any
Subsidiary of PIC for any taxable period that ends on or before the Closing
Date.
(b) Buyer. Buyer shall prepare or cause to be prepared and timely
file or cause to be timely filed (taking into account any extensions) all other
Tax Returns (including for any Straddle Periods) relating to PIC and any of its
Subsidiaries. Buyer shall provide the Shareholders' Representative with a copy
of any Tax Return with respect to a Straddle Period at least thirty (30) days
prior to the date it is filed, accompanied by a statement calculating in
reasonable detail the Principal Shareholders' indemnification obligation with
respect thereto pursuant to Section 12.1. Such Straddle Period Tax Returns shall
be prepared in a manner consistent with prior practice to the extent supported
by applicable Law. Buyer shall not file or cause to be filed any Straddle Period
Tax Return without the Shareholder Representatives' prior consent, which shall
not be unreasonably withheld.
Section 12.4 Refunds, Credits and Net Operating Losses.
(a) Any refunds or credits of Taxes of PIC or any of its
Subsidiaries plus any interest received with respect thereto for any Pre-Closing
Tax Period (including, without limitation, refunds or credits arising by reason
of amended Tax Returns filed after the Closing Date or refunds of estimated
Taxes or "quick refunds" pursuant to Code Section 6411 or any corresponding
provision of applicable Tax Law) shall be for the account of the Shareholders
and shall be paid or caused to be paid by Buyer to the Shareholders'
Representative within ten (10) Business Days after receipt of such refund or
after the relevant Tax Return is filed which causes the credit to become
available to Buyer, PIC or any of their Subsidiaries. Any refunds or credits of
Taxes of PIC or any of its Subsidiaries plus any interest received with respect
thereto from the applicable Tax Authority for any taxable period beginning after
the Closing Date shall be for the account of Buyer. Any refunds or credits of
Taxes of PIC or any of its Subsidiaries plus interest received with respect
thereto for any Straddle Period shall be apportioned between the Shareholders
and Buyer in the same manner as the liability for such Taxes is apportioned
pursuant to Section 12.1. Notwithstanding anything to the contrary in this
Agreement, the parties acknowledge, agree and shall report for all income Tax
purposes that, pursuant to applicable Law, any income Tax deductions arising
from the payment of change of control bonuses or other similar payments
referenced in Sections 2.2 and 8.2(k) shall be attributable to the taxable
period (or portion thereof) ending on the Closing Date and any refund or credit
attributable thereto (plus any interest received with respect thereto) with
respect to any Pre-Closing Tax Period shall be for the account of the
Shareholders and shall be paid in accordance with the first sentence of this
Section 12.4(a).
58
(b) Neither Buyer nor any of its affiliates shall be under any
obligation to make any payment to the Shareholders for the use in a Tax Return
for a period beginning after the Closing Date, of any excess Tax credit
(including any excess foreign tax credits), net operating loss, or other Tax
attribute of PIC or any Subsidiary of PIC, and the Shareholders shall not be
liable to Buyer for any change in the amount of such credits or net operating
loss after the Closing Date which results from any adjustments made to any Tax
Return which affects the amount of such credits or net operating loss.
Section 12.5 Survival of Tax Provisions. Any claim to be made
pursuant to this Article XII (a "Tax Claim") must be made within thirty (30)
days following the expiration (giving effect to any valid extensions, waivers
and tolling periods) of the applicable statutes of limitations relating to the
Taxes at issue.
Section 12.6 Transfer Taxes. Notwithstanding any other provision of
this Agreement to the contrary, all excise, sales, use, transfer (including real
property transfer or gains), documentary, value added, stamp, filing,
recordation and other similar Taxes together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties, incurred in connection with the transactions contemplated by this
Agreement (collectively, "Transfer Taxes") and all expenses relating thereto
shall be borne by the Principal Shareholder. Notwithstanding Section 12.3, which
shall not apply to Tax Returns relating to Transfer Taxes, any Tax Returns that
must be filed in connection with Transfer Taxes shall be prepared and filed when
due by the Buyer. To the extent required by applicable law, the Shareholders
shall cause their respective affiliates to cooperate in the execution of any
such Tax Returns.
Section 12.7 Exclusivity. Notwithstanding any other provision in
this Agreement, this Article XII shall exclusively govern all matters related to
indemnification for Taxes under this Agreement and Article XI shall not apply to
such matters.
Section 12.8 Certain Post-Closing Actions which Affect Shareholders'
Liability for Taxes.
(a) None of Buyer or any affiliate of Buyer shall (or shall cause or
permit PIC or any Subsidiary of PIC to) amend, refile or otherwise modify any
Tax Return relating in whole or in part to PIC or any Subsidiary of PIC with
respect to any taxable year or period ending on or before the Closing Date
without the prior written consent of the Shareholders' Representative, which
consent may be withheld in the sole discretion of the Shareholders'
Representative.
(b) Buyer shall make all elections and waivers under applicable Law
(including Section 172 of the Code) to waive the carryback of any operating
losses, net operating losses, capital losses, tax credits or similar items to a
Pre-Closing Tax Period and/or a Straddle Period.
Section 12.9 Termination of Existing Tax Sharing Agreements. Any and
all existing Tax sharing agreements or arrangements, written or oral, between
the Shareholders and PIC shall terminate as of the Closing. After the Closing
Date, neither PIC nor any of its Subsidiaries shall have any further rights or
obligations under any such Tax sharing agreements.
59
Section 12.10 Characterization of Indemnification Payments. Any
payments made pursuant to this Article XII shall be treated for all Tax purposes
as adjustments to the Purchase Price.
Section 12.11 Assistance and Cooperation. The parties agree that
after the Closing Date:
(a) Each party shall assist (and cause their respective
Representatives to assist) the other party in preparing and filing any Tax
Returns which such other party is responsible for preparing and filing,
including maintaining and making available to the other party all records
(including audit records and work-papers) necessary in connection with Taxes and
in resolving disputes and audits with respect to all taxable periods relating to
Taxes;
(b) The parties shall cooperate fully in preparing for any audits
of, or disputes with, Tax Authorities regarding any Tax Returns and payments in
respect thereof;
(c) The parties shall make available to each other and to any Tax
Authority as reasonably requested all relevant books and records relating to
Taxes, Tax Returns, schedules, work-papers and other relevant documents related
to Taxes;
(d) The parties shall furnish the other with copies of all relevant
correspondence received from any Tax Authority; and
(e) The Shareholders shall provide Buyer with copies of all Tax
Returns (including all supporting documentation) related to PIC and its
Subsidiaries filed for Pre-Closing Tax Periods.
Section 12.12 FIRPTA. Immediately prior to the Closing, the
Shareholders shall furnish to Buyer a certification in accordance with Treasury
Regulation Section 1.1445-2(c), and otherwise in form and substance reasonably
satisfactory to Buyer, certifying that an interest in PIC is not a United States
real property interest because PIC is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code
(the "FIRPTA Certificate").
ARTICLE XIII
THE SHAREHOLDER REPRESENTATIVE
Section 13.1 The Shareholders' Representative.
(a) The Shareholders hereby authorize, direct and appoint Xxxxx
Xxxxxxxx to act as sole and exclusive agent, attorney-in-fact and representative
of the Shareholders, with full power of substitution with respect to all matters
under this Agreement, including, without limitation, determining, giving and
receiving notices and processes hereunder, receiving distributions of the Paid
Amount to or for the benefit of the Shareholders, contesting and settling any
and all claims for indemnification pursuant to Articles XI and XII, resolving
any other disputes hereunder, performing the duties expressly assigned to the
Shareholders' Representative
60
hereunder and to engage and employ agents and representatives and to incur such
other expenses as the Shareholders' Representative shall reasonably deem
necessary or prudent in connection with the foregoing. The Shareholders'
Representative shall have the sole and exclusive right on behalf of any
Shareholder to take any action or provide any waiver, or receive any notice with
respect to any claims for indemnification under Articles XI and XII and to
settle any claim or controversy arising with respect thereto. Any such actions
taken, exercises of rights, power or authority, and any decision or
determination made by the Shareholders' Representative consistent herewith,
shall be absolutely and irrevocably binding on each Shareholder as if such
Shareholder personally had taken such action, exercised such rights, power or
authority or made such decision or determination in such Shareholder's
individual capacity, and no Shareholder shall have the right to object, dissent,
protest or otherwise contest the same. Any action required to be taken by the
Shareholders hereunder or any action which the Shareholders, at their election,
have the right to take hereunder, shall be taken only by the Shareholders'
Representative and no Shareholder acting on its own shall be entitled to take
any such action. All deliveries and payments to be made by Parent or Buyer to
any Shareholder hereunder shall be made exclusively to the Shareholders'
Representative on behalf of the Shareholders and any delivery or payment so made
to the Shareholders' Representative shall constitute full performance of the
obligations hereunder of Parent or Buyer to the Shareholders. Parent and Buyer
shall not be liable for allocation of particular deliveries and payments among
the Shareholders.
(b) The appointment of the Shareholders' Representative as each
Shareholder's attorney-in-fact revokes any power of attorney heretofore granted
that authorized any other Person or Persons to represent such Shareholder with
regard to this Agreement, the PIC Shares and the transactions contemplated
hereby. The appointment of the Shareholders' Representative as attorney-in-fact
pursuant hereto is coupled with an interest and is irrevocable. The obligations
of each Shareholder pursuant to this Agreement (i) will not be terminated by
operation of law, death, mental or physical incapacity, liquidation,
dissolution, bankruptcy, insolvency or similar event with respect to such
Shareholder or any proceeding in connection therewith, or in the case of a
trust, by the death of any trustee or trustees or the termination of such trust,
or any other event, and (ii) shall survive the delivery of an assignment by any
Shareholder of the whole or any fraction of its interest in any payment due to
it under this Agreement.
(c) Xxxxx Xxxxxxxx hereby accepts the foregoing appointment and
agrees to serve as the Shareholders' Representative, subject to the provisions
hereof, for the period of time from and after the date hereof without
compensation except for the reimbursement from the Shareholders of reasonable
out of pocket expenses incurred by the Shareholders' Representative in his
capacity as such.
(d) Each Shareholder hereby waives all potential conflicts of
interest arising out of the Shareholders' Representative's activities or
authority as the Shareholders' Representative and his relationships with PIC or
any of its Subsidiaries or affiliates (whether before or after the Closing),
whether as an employee, consultant, agent, director, officer, shareholder or
other representative of PIC or any of its affiliates.
(e) The Shareholders' Representative may resign at any time by
giving written notice of resignation, at least sixty (60) days prior to the
effectiveness of such resignation, to Parent, the Shareholders, the
Shareholders' Representative may be removed at any time
61
with or without cause by the approval of the holders of seventy five percent
(75%) of the PIC Shares held by the Shareholders on the Closing Date (the
"Approving Holders"). Upon any such resignation or removal, such Approving
Holders shall select a successor Shareholders' Representative, which successor
shall be approved by the Approving Holders. In the case of a resigning
Shareholders' Representative, if no successor Shareholders' Representative shall
have been so appointed by the Approving Holders and shall have accepted such
appointment (effective upon the date of resignation of the resigning
Shareholders' Representative), within fifteen (15) days after the resigning
Shareholders' Representative's giving of notice of resignation, the resigning
Shareholders' Representative (or Parent if the resigning Shareholders'
Representative does not act) may, on behalf of the Approving Holders, appoint a
successor Shareholders' Representative. Upon the acceptance of any appointment
as the Shareholders' Representative thereunder by a successor Shareholders'
Representative, such successor Shareholders' Representative shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Shareholders' Representative, and the resigning Shareholders'
Representative shall be discharged from its duties and obligations as the
Shareholders' Representative under this Agreement. After any resigning
Shareholders' Representative's resignation or removal hereunder as the
Shareholders' Representative, the provisions of this Article XIII shall inure to
his benefit as to any actions taken or omitted to be taken by it while it was
the Shareholders' Representative. Any successor Shareholders' Representative
shall by means of execution of a counterpart hereof be bound by the terms of
this Agreement applicable to the Shareholders' Representative. Notwithstanding
the foregoing, upon the death or disability of Xxxxx Xxxxxxxx, Xxxx
Xxxxxxxx-Xxxx shall automatically succeed as Shareholders' Representative
without any further action on the part of any Person.
(f) The provisions of this Article XIII shall in no way impose any
obligations on Parent or Buyer. In particular, notwithstanding any notice
received by Parent or Buyer to the contrary (except any notice of the
appointment of a successor Shareholders' Representative approved by Parent) and
absent bad faith or willful misconduct, Parent and Buyer (i) shall be fully
protected in relying upon and shall be entitled to rely upon, shall have no
liability to the Shareholders with respect to, actions, decisions and
determinations of the Shareholders' Representative and (ii) shall be entitled to
assume that all actions, decisions and determinations of the Shareholders'
Representative are fully authorized by all of the Shareholders.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Survival of Covenants, Representations and Warranties.
Each of the covenants, representations and warranties of Parent, Buyer, PIC and
the Shareholders in this Agreement or in any schedule, instrument or other
document delivered pursuant to this Agreement shall survive the Closing Date and
shall continue in force thereafter, except as limited by Section 11.1(c),
Section 11.2(b) and Section 12.5; provided, that nothing in Articles XI or XII
or this Section 14.1 shall relieve the parties or their respective
Representatives of any liability following the Closing Date for any willful or
fraudulent misrepresentations contained herein or in any other certificate or
writing delivered pursuant hereto.
62
Section 14.2 Amendments; No Waivers.
(a) Any provision of this Agreement (including the PIC Disclosure
Letter, the Parent Disclosure Letter and the Exhibits hereto) may be amended or
waived at any time prior to the Closing if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by PIC, the
Shareholders' Representative, Parent and Buyer, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.
Section 14.3 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given upon receipt when delivered
in person, by facsimile (receipt confirmed) or by overnight courier or
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
if to Parent or Buyer, to:
United National Group, Ltd.
Xxxxxx Xxxxx, 00 Xxxx Xxxxxx
P.O. Box 908GT
Xxxxxx Town, Grand Cayman
Cayman Islands
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
United National Group, Ltd.
c/o United National Insurance Company
Three Xxxx Xxxxx, Xxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Facsimile No.: (000) 000-0000
63
and:
United National Insurance Company
Three Xxxx Xxxxx, Xxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
United National Insurance Company
Three Xxxx Xxxxx, Xxxx
Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. March
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx
Facsimile No.: (000) 000-0000
if to PIC, to:
Penn Independent Corporation
000 Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Facsimile No.: (000) 000-0000 ((000) 000-0000 must be
called prior to any facsimile
transmissions)
with a copy (which shall not constitute notice) to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
64
if to the Shareholders or the Shareholders' Representative:
Xxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
Section 14.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto, except that Parent or Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, its rights or obligations under this Agreement, but any such
transfer or assignment shall not relieve Parent or Buyer of its obligations
hereunder.
Section 14.5 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be construed in accordance with
and governed by the law of the Commonwealth of Pennsylvania (without regard to
principles of conflicts or choice of laws) as to all matters, including but not
limited to, matters of validity, construction, effect, performance and remedies.
Section 14.6 Jurisdiction. Except as set forth in Section 7.10, any
suit, action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby may be brought in any federal or state court located in the
Commonwealth of Pennsylvania, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by Law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 14.3
shall be deemed effective service of process on such party.
Section 14.7 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
Section 14.8 Counterparts; Effectiveness. This Agreement may be
executed in one or more counterparts, each of which together shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 14.9 Entire Agreement. This Agreement (including the PIC
Disclosure Letter, the Parent Disclosure Letter and the Exhibits hereto)
constitutes the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede and can-
65
cel all prior agreements, negotiations, correspondence, undertakings,
understandings and communications of the parties, oral and written, with respect
to the subject matter hereof and thereof.
Section 14.10 Third Party Beneficiaries. Nothing contained in this
Agreement or in any instrument or document executed by any party in connection
with the transactions contemplated hereby shall create any rights in, or be
deemed to have been executed for the benefit of, any Person that is not a party
hereto or thereto or a permitted successor or assign of such a party.
Section 14.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
Section 14.12 Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the transactions contemplated hereby, will cause
irreparable injury to the other parties, for which damages, even if available,
will not be an adequate remedy. Accordingly, each party hereby consents to the
issuance of injunctive relief by any court of competent jurisdiction to compel
performance of such party's obligations and to the granting by any court of the
remedy of specific performance of its obligations hereunder without proof of
actual damages and without any requirement for the securing or posting of any
bond. Such remedy shall not be deemed to be the exclusive remedy for a party's
breach of its obligations but shall be in addition to all other remedies
available at law or equity.
Section 14.13 Construction; Interpretation.
(a) The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, (i) unless otherwise specified herein, the
term "affiliate," with respect to any Person, shall mean and include any Person
controlling, controlled by or under common control with such Person, (ii) the
term "including" shall mean "including, without limitation," (iii) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires, (iv)
the words "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including the PIC Disclosure Letter, the Parent Disclosure Letter and the
Exhibits hereto) and not to any particular provision of this Agreement, and
article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement, unless
otherwise specified, (v) the word "or" shall not be exclusive, and (vi) Parent,
Buyer, PIC and the Shareholders and will be referred to herein individually as a
"party"
66
and collectively as "parties" (except where the context otherwise requires).
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning. A reference to any party to this Agreement
or any other agreement or document shall include such party's successors and
permitted assigns.
(b) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(c) Any reference to any federal, state, local or non-United States
statute or Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context otherwise requires.
Section 14.14 Changes in PNG Common Stock. For all purposes of this
Agreement, the PNG Shares shall include any securities issued or exchanged with
respect to such PNG Shares upon any recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend,
split-up or combination of the securities of PNG or any other change in PNG's
capital structure.
Section 14.15 Obligations of Each of the Shareholders and PIC.
Whenever this Agreement requires PIC to take any action or to fail to take any
action at or prior to the Closing, that requirement shall be deemed to include
an agreement and undertaking on the part of each of the Shareholders to cause
PIC to take that action or to fail to take that action, as applicable.
[Signature page follows]
67
IN WITNESS WHEREOF, Parent, Buyer, PIC, each of the Shareholders and
the Shareholders' Representative, in his capacity as the Shareholders'
Representative, have executed this Agreement or caused this Agreement to be
executed by their respective duly authorized officers as of the date first
written above.
UNITED NATIONAL GROUP, LTD. UNITED NATIONAL INSURANCE
COMPANY
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------- ---------------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer Title: President & CEO
PENN INDEPENDENT CORPORATION XXXXX XXXXXXXX TRUST
DATED FEBRUARY 18, 1989
By: /s/ Xxxxxx X. Xxxx /s/ Xxxxx Xxxxxxxx
---------------------------------- -------------------------------------
Name: Xxxxxx X. Xxxx Xxxxx Xxxxxxxx, Trustee
Title: Chief Executive Officer
XXX X. XXXXXXXX IRREVOCABLE TRUST, XXXX XXXX XXXXXXXX IRREVOCABLE TRUST,
DATED MAY 20, 1985 DATED MAY 20, 1985
By: /s/ Xxx X. Xxxxxxxx By: /s/ Xxx X. Xxxxxxxx
---------------------------------- ---------------------------------
Xxx X. Xxxxxxxx, Trustee Xxx X. Xxxxxxxx, Trustee
By: /s/ E. Xxxxxxx Xxxxxxxx By: /s/ E. Xxxxxxx Xxxxxxxx
---------------------------------- ---------------------------------
E. Xxxxxxx Xxxxxxxx, Trustee E. Xxxxxxx Xxxxxxxx, Trustee
By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
---------------------------------- ---------------------------------
Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
E. XXXXXXX XXXXXXXX JAN-XXXXX XXXXX IRREVOCABLE
IRREVOCABLE TRUST, TRUST, DATED MAY 20, 1985
DATED MAY 20, 1985
By: /s/ Xxx X. Xxxxxxxx By: /s/ Xxx X. Xxxxxxxx
---------------------------------- ---------------------------------
Xxx X. Xxxxxxxx, Trustee Xxx X. Xxxxxxxx, Trustee
By: /s/ E. Xxxxxxx Xxxxxxxx By: /s/ E. Xxxxxxx Xxxxxxxx
---------------------------------- ---------------------------------
E. Xxxxxxx Xxxxxxxx, Trustee E. Xxxxxxx Xxxxxxxx, Trustee
By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
---------------------------------- --------------------------------
Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
XXXXX X. XXXXXXXX IRREVOCABLE TRUST, XXXX XXXXX XXXXXXXX 1996
DATED MAY 20, 1985 IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996
By: /s/ Xxx X. Xxxxxxxx
----------------------------------
Xxx X. Xxxxxxxx, Trustee
By: /s/ E. Xxxxxxx Xxxxxxxx By: /s/ Xxx X. Xxxxxxxx
---------------------------------- -----------------------------------
E. Xxxxxxx Xxxxxxxx, Trustee Xxx X. Xxxxxxxx, Trustee
By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
----------------------------------
Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
XXXXXXX XXXXXXX XXXXXXXX 1996 XXX XXXXX XXXXXXXX 1996
IRREVOCABLE TRUST, IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996 DATED DECEMBER 18, 1996
By: /s/ Xxx X. Xxxxxxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
---------------------------------- -----------------------------------
Xxx X. Xxxxxxxx, Trustee Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
XXX XXXXXX XXXXXXXX 1996 XXXXXX XXX XXXXXXXX 1996
IRREVOCABLE TRUST, IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996 DATED DECEMBER 18, 1996
By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
---------------------------------- -----------------------------------
Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
XXXXXXXX XXX XXXXXXXX 1996 XXXX XXXX XXXXXXXX 1996
IRREVOCABLE TRUST, IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996 DATED DECEMBER 18, 1996
By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
---------------------------------- -----------------------------------
Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
XXXX XXXXXXX XXXXXXXX 1996 MADISON XXXXXX XXXXXXXX 1998
IRREVOCABLE TRUST, IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996 DATED SEPTEMBER 23, 1998
By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
---------------------------------- -----------------------------------
Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
2
XXXXXXXX XXXXXX XXXXXXXX XXXXX XXXXX XXXXXXXX TRUST,
TRUST, DATED SEPTEMBER 23, 1998 DATED FEBRUARY 17, 1999
By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
---------------------------------- ----------------------------------
Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee Xxxx Xxxx Xxxxxxxx-Xxxx, Trustee
XXX X. XXXXXXXX E. XXXXXXX XXXXXXXX
/s/ Xxx X. Xxxxxxxx /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
-------------------------------------- --------------------------------------
XXXX XXXX XXXXXXXX-XXXX XXXXX X. XXXXXXXX
/s/ Xxxx Xxxx Xxxxxxxx-Xxxx /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
-------------------------------------- --------------------------------------
JAN-XXXXX XXXXXXXX SHAREHOLDERS' REPRESENTATIVE
/s/ Jan-Xxxxx Xxxxxxxx By: /s/ Xxxx Xxxx Xxxxxxxx-Xxxx
-------------------------------------- ----------------------------------
Name: Xxxxx Xxxxxxxx
Title: Shareholders' Representative
3
