Exhibit 2
STOCK PURCHASE AGREEMENT
By and Among
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
a Virginia corporation
and
PM Holdings, Inc.
a Connecticut corporation
and
Phoenix Home Life Mutual Insurance Company
a New York life insurance company
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Dated as of March 29, 1999
TABLE OF CONTENTS
Page
I. DEFINITIONS..............................................................................................1
1.1. Certain Matters of Construction.................................................................1
1.2. Cross Reference Table...........................................................................2
1.3. Certain Definitions.............................................................................3
II. THE ACQUISITION..........................................................................................9
2.1. Acquisition.....................................................................................9
2.2. Consideration and Closing.......................................................................9
III. REPRESENTATIONS AND WARRANTIES OF SELLERS...............................................................12
3.1. Corporate Matters..............................................................................12
3.2. Financial Statements...........................................................................13
3.3. Change in Condition............................................................................14
3.4. Liabilities....................................................................................15
3.5. Assets.........................................................................................16
3.6. Intellectual Property..........................................................................17
3.7. Year 2000 Compliance...........................................................................18
3.8. Accounts.......................................................................................19
3.9. Certain Contractual Obligations................................................................19
3.10. Insurance......................................................................................21
3.11. Transactions with Affiliates...................................................................21
3.12. Compliance with Laws...........................................................................22
3.13. Tax Matters....................................................................................22
3.14. Employee Relations and Employee Benefit Plans..................................................23
3.15. Environmental Matters..........................................................................28
3.16. Accounts Receivable............................................................................29
3.17. Litigation.....................................................................................29
3.18. Agents and Broker Relationships................................................................29
3.19. Brokers........................................................................................29
3.20. Full Disclosure................................................................................29
IIIA. REPRESENTATIONS AND WARRANTIES OF PHL...................................................................29
3A.1. Corporate Matters..............................................................................30
3A.2. Financial Information of Holdings..............................................................31
IIIB. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇...............................................................31
3B.1. Matters Relating to ▇▇▇▇▇▇▇....................................................................31
IV. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................31
4.1. Corporate Matters..............................................................................31
4.2. Financial Statements...........................................................................32
4.3. Change in Condition............................................................................33
4.4. Compliance with Laws...........................................................................33
4.5. Litigation.....................................................................................33
4.6. Financing......................................................................................34
4.7. Buyer SEC Documents............................................................................34
4.8. Brokers........................................................................................34
V. CERTAIN COVENANTS OF THE PARTIES........................................................................34
5.1. Access to Information of Buyer.................................................................34
5.2. Access to Premises and Information of APC......................................................34
5.3. Confidentiality Letter.........................................................................35
5.4. Operation of APC Business Prior to the Closing Date............................................35
5.5. Certain Notices................................................................................37
5.6. Preparation for Closing........................................................................37
5.7. Tax Matters....................................................................................37
5.8. Expenses of Transaction; Accounts..............................................................41
5.9. Books and Records; Personnel...................................................................41
5.10. Use of Certain Names and Marks.................................................................42
5.11. Further Assurances.............................................................................42
5.12. Reimbursement by the Parties...................................................................42
5.13. Financial Statement Deliveries.................................................................43
5.14. Errors and Omissions Insurance.................................................................44
5.15. No Solicitation or Employment; Interference in Relationships...................................44
5.16. No Solicitation of Proposals or Offers.........................................................44
5.17. Noncompetition Covenant........................................................................44
5.18. Payment of Certain Outstanding Debt; Capital Contribution......................................49
5.19. Assumption of Excluded Liabilities by Holdings or
PHL; Purchase of Owned Real Property.......................................................49
5.20. Financing......................................................................................50
5.21. Assumption of Certain Liabilities by Buyer.....................................................50
5.22. Collection of Accounts Receivable..............................................................50
5.23. Audit of Accounts Payable......................................................................51
5.24. Certain Leases.................................................................................51
5.25. Acquisition of Atlanta Subsidiary..............................................................51
5.26. Financial Position of Holdings.................................................................52
5.27. Cooperation....................................................................................52
5.28. Guarantees.....................................................................................52
5.29. Record Retention...............................................................................52
5.30. Minority Interests.............................................................................52
VI. CONDITIONS TO THE OBLIGATION OF BUYER TO CLOSE..........................................................53
6.1. Representations, Warranties and Covenants......................................................53
6.2. Closing Agreements.............................................................................53
6.3. Legality; Governmental Authorization; Litigation...............................................54
6.4. Affiliate Debt.................................................................................54
6.5. Financing......................................................................................54
6.6. Opinions of Counsel............................................................................54
6.7. ▇▇▇▇▇▇▇ Employment Agreement...................................................................54
6.8. ▇▇▇▇▇▇▇ Resignation Letter.....................................................................54
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6.9. Update.........................................................................................54
6.10. General........................................................................................54
VII. CONDITIONS TO THE OBLIGATION OF SELLERS TO CLOSE........................................................55
7.1. Representations, Warranties and Covenants......................................................55
7.2. Closing Agreements.............................................................................55
7.3. Legality; Government Authorization; Litigation.................................................55
7.4. Opinion of Counsel.............................................................................56
7.5. General........................................................................................56
7.6. Update.........................................................................................56
7.7. Listing of Shares Issuable Upon Conversion of Subordinated Debentures..........................56
7.8. Board of Directors.............................................................................56
7.9. Payment........................................................................................56
7.10. Registration of the Buyer Common Shares........................................................56
VIII. INDEMNIFICATION.........................................................................................56
8.1. Indemnification by Sellers.....................................................................56
8.2. Indemnification by Buyer.......................................................................57
8.3. Time Limitation on Indemnification.............................................................58
8.4. Monetary Limitations on Indemnification........................................................58
8.5. Reporting......................................................................................59
8.6. Third Party Claims.............................................................................59
8.7. No Circular Recovery...........................................................................59
8.8. Nature of Certain Payments.....................................................................60
8.9. Other Remedies.................................................................................60
IX. CONSENT TO JURISDICTION; GOVERNING LAW..................................................................60
9.1. Consent to Jurisdiction........................................................................60
9.2. Governing Law..................................................................................60
X. TERMINATION.............................................................................................61
10.1. Termination of Agreement.......................................................................61
10.2. Effect of Termination..........................................................................62
XI. MISCELLANEOUS...........................................................................................62
11.1. Entire Agreement; Waivers......................................................................62
11.2. Amendment or Modification......................................................................62
11.3. Survival, etc..................................................................................62
11.4. Independence of Representations and Warranties.................................................62
11.5. Severability...................................................................................63
11.6. Successors and Assigns.........................................................................63
11.7. Notices........................................................................................63
11.8. Public Announcements...........................................................................64
11.9. Headings, etc..................................................................................64
11.10. Third Party Beneficiaries......................................................................64
11.11. Counterparts...................................................................................64
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EXHIBITS
Exhibit A - Baltimore Lease
Exhibit B - Indenture
Exhibit C - Jamestown Lease
Exhibit D - Miami Lease
Exhibit E - Registration Rights Agreement
Exhibit F - Risk Management Agreement
Exhibit G - Rule 145 Representation Letter
Exhibit H - ▇▇▇▇▇▇▇ Employment Agreement
Exhibit I - Voting and Standstill Agreement
Exhibit J - Trademark License Agreement
Exhibit K - Form of Legal Opinion of Stroock & Stroock & ▇▇▇▇▇ LLP
Exhibit L - Form of Legal Opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Exhibit M - Form of Legal Opinion of Sorokin, Gross & Hyde, P.C.
Exhibit N - Form of Legal Opinion of Williams, Mullen, Christian & ▇▇▇▇▇▇▇, P.C.
SCHEDULES
Schedule 5.7.1 - APC Electing Subsidiaries
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 29th day of March, 1999, by and among HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇
COMPANY, a Virginia corporation (the "Buyer"), PM HOLDINGS, INC., a Connecticut
corporation ("Holdings"), PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY, a New York
life insurance company ("PHL"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III (individually
"▇▇▇▇▇▇▇," and collectively with Holdings, the "Sellers").
RECITALS
1. Holdings owns 5,000 Class A common shares, which is eighty-five
percent (85%) of the issued and outstanding shares, of the capital stock of
American Phoenix Corporation, a Connecticut corporation ("APC"), and ▇▇▇▇▇▇▇
owns 882 Class B common shares, which is fifteen percent (15%) of the issued and
outstanding shares, of the capital stock of APC. The issued and outstanding
shares of capital stock of APC are collectively referred to herein as the "APC
Shares."
2. The Sellers desire to sell and transfer the APC Shares to Buyer,
and Buyer desires to purchase and accept transfer of (the "Purchase") the APC
Shares from Sellers, upon the terms and subject to all of the conditions set
forth in this Agreement.
3. PHL is the ultimate corporate parent of Holdings and, in
connection with, and to induce Buyer to consummate, the Purchase, PHL desires to
make certain representations and warranties and perform and satisfy certain
covenants and obligations upon the terms and subject to all of the conditions
set forth in this Agreement.
AGREEMENT
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below, which are acknowledged by each party to be fair
and adequate consideration for its obligations and commitments hereunder, the
parties hereby agree as follows:
ARTICLE I
Definitions
For the purposes of this Agreement:
Section 1.1. Certain Matters of Construction. In addition to the
definitions set forth below in this Article I:
(a) The words "hereof", "herein", "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of
this Agreement, and any reference to a particular Section of this Agreement
shall include all subsections thereof.
(b) The word "party" shall refer to Buyer, Holdings, PHL or
▇▇▇▇▇▇▇, as the case may be, and the word "parties" shall refer to Buyer,
Holdings, PHL and ▇▇▇▇▇▇▇, collectively.
(c) Definitions shall be equally applicable to both the
singular and plural forms of the terms defined, and references to the masculine,
feminine or neuter gender shall include each other gender.
(d) Accounting terms used herein and not otherwise defined
herein are used herein as defined by GAAP.
Section 1.2. Cross Reference Table. The following terms are defined in
the Preamble, Recitals or Sections set forth opposite the term and shall have
the respective meaning therein set forth:
Term Definition
---- ----------
"Affiliated Group" Section 3.13(b)
"Agreement" Preamble
"AGUB" Section 5.7.6
"Allocations" Section 5.7.6
"APC" Recitals
"APC Annual Balance Sheets" Section 3.2.1
"APC Assets" Section 3.5.1
"APC Benefit Arrangements" Section 3.14.2(a)
"APC Electing Subsidiaries" Section 5.7.1
"APC Financial Statements" Section 3.2.1
"APC Headquarters" Section 1.3.7
"APC Marks" Section 5.10
"APC Plans" Section 3.14.2(a)
"APC Shares" Recitals
"APIA Georgia" Section 5.2.5
"Books and Records" Section 5.9(b)(i)
"Buyer" Preamble
"Buyer Disclosure Letter" Article IV
"Buyer Financial Statements" Section 4.2.1
"Buyer's Deemed Sales Price Notice" Section 5.7.6
"Buyer SEC Documents" Section 4.7
"Cash Consideration" Section 2.2.1
"Closing" Section 2.2.4
"Closing Agreements" Section 6.2
"Closing Date" Section 2.2.4
"Closing Date Accounts Receivable" Section 5.22
2
"Closing Date Balance Sheet" Section 2.2.2
"Commitment Letter" Section 4.6
"Confidentiality Agreement" Section 5.3
"Contracts" Section 3.9
"Copyright Properties" Section 3.6.1
"Exchange Act" Section 4.7
"Excluded Liabilities" Section 2.2.3
"February 1999 APC Balance Sheet" Section 3.2.1
"February 1999 APC Financial Statements" Section 3.2.1
"General Survival Period" Section 8.3
"Holdings" Preamble
"Holdings Balance Sheet" Section ▇▇.▇
"▇▇▇ ▇▇▇" Section 3.1.3
"IJB" Section 5.4
"Indemnifying Party" Section 8.1, 8.2
"Indemnitee" Section 8.1, 8.2
"Insurance Policies" Section 3.10
"Intellectual Property" Section 3.6.1
"Lead Lender" Section 4.6
"Leases" Section 3.5.2
"Leases-Out" Section 3.5.2
"Net Adjustment to Buyer" Section 2.2.2
"Net Adjustment to Sellers" Section 2.2.2
"1998 APC Balance Sheet" Section 3.2.1
"1998 APC Financial Statements" Section 3.2.1
"Offeror" Section 5.17.3(iv)
"Owned Real Property" Section 3.5.1
"Patent Properties" Section 3.6.1
"Permits" Section 3.12
"PHL" Preamble
"Post-Closing Tax Period" Section 5.7.2
"Pre-Closing Tax Period" Section 5.7.2
"Purchase" Recitals
"Purchase Consideration" Section 2.2.1
"Required Filings" Section 3.1.3
"Reserved Claims" Section 8.3
"Restricted Period" Section 5.17
"Section 338(h)(10) Elections" Section 5.7.1
"Securities Act" Section 4.7
"Sellers" Preamble
"Software Properties" Section 3.6.1
"Tax Loss" Section 5.7.2
"Threshold" Section 8.5
"Trade Secrets" Section 3.6.1
"Trademark License Agreement" Section 5.10
"Trademark Properties" Section 3.6.1
3
"Transaction Costs" Section 5.7.6
"▇▇▇▇▇▇▇" Preamble
"WARN" Section 3.14.1
"Year 2000 Compliant" Section 3.7
Section 1.3. Certain Definitions. The following terms shall have the
following meanings:
1.3.1. "Action" shall mean any claim, action, cause of action or suit
(in contract or tort or otherwise), arbitration, proceeding or investigation by
or before any Governmental Authority (and whether brought by any Governmental
Authority or any other Person).
1.3.2. "Adjusted Tangible Net Worth" shall mean, with respect to APC
and its Subsidiaries, $(negative) 48,328,012.
1.3.3. "Affiliate" shall mean, as to any specified Person, each other
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with that specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, or by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, any investment
company registered under the Investment Company Act of 1940, as amended, shall
not be deemed an Affiliate of any specified Person.
1.3.4. "Affiliate Debt" shall mean all Debt between APC or any
Subsidiary of APC, on the one hand, and PHL, either of the Sellers or any of
their Affiliates (other than APC or its Subsidiaries), on the other hand, and
all intercompany advances of funds between PHL, either of the Sellers or any of
their Affiliates (other than APC or its Subsidiaries), on the one hand, and APC
or any Subsidiary of APC, on the other hand.
1.3.5. "Alternative Accountants" shall mean one of the top five (5)
national accounting firms in the United States other than the accounting firms
that regularly audit the annual financial statements of any of the parties,
which firm is mutually acceptable to the parties or, if the parties do not agree
upon such a firm within three (3) Business Days of the date any dispute under
this Agreement is required to be submitted to such firm, then such a top five
firm as is chosen by lot.
1.3.6. "APC Business" shall mean, taken as a whole, the businesses
conducted by APC and its Subsidiaries as such businesses are currently being
conducted by them.
1.3.7. "APC Headquarters Employees" shall mean any Person employed by
APC prior to the Closing whose place of employment is at the corporate
headquarters of APC in Hartford, Connecticut (the "APC Headquarters") other
than: (a) employees of APC Subsidiaries, (b) Persons listed on the Buyer
Disclosure Letter, or (c) Persons whom the parties, within thirty (30) days
after the date hereof mutually agree in writing shall be retained by APC or its
Affiliates.
4
1.3.8. "Baltimore Lease" shall mean the Lease Agreement to be entered
into by APC or its Affiliate and Holdings or its Affiliate at the Closing, which
shall be in substantially the form attached hereto as Exhibit A.
1.3.9. "Business Day" shall mean any day on which banking institutions
in New York, New York are customarily open for the purpose of transacting
business.
1.3.10. "Buyer Common Shares" shall mean, in the aggregate, the
1,000,000 shares of the Buyer Common Stock to be issued by Buyer to Sellers at
Closing pursuant and subject to the terms and conditions set forth herein and,
with respect to the Buyer Common Stock to be issued to Holdings, in the Voting
and Standstill Agreement.
1.3.11. "Buyer Common Stock" shall mean the shares of Common Stock, no
par value, issued by the Buyer.
1.3.12. "Bylaws" shall mean all written rules, regulations and bylaws,
and all other documents (other than the Charter), relating to the management,
governance or internal regulation of a Person (other than an individual) or
interpretative of the Charter of such Person, each as from time to time in
effect.
1.3.13. "Charter" shall mean the certificate or articles of
incorporation or organization, statute, constitution, joint venture or
partnership agreement or other charter documents of any Person (other than an
individual), each as from time to time in effect.
1.3.14. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and in effect from time to time.
1.3.15. "Compensation", as applied to any Person, shall mean all
salaries, compensation, remuneration, commissions or bonuses of any character,
and medical, surgical, dental, hospital, disability, unemployment, retirement,
pension, vacation, insurance or fringe benefits of any kind, or other payments
or benefits of any kind whatsoever made or provided directly or indirectly by or
on behalf of APC or its Subsidiaries to such Person or members of the immediate
family of such Person.
1.3.16. "Contractual Obligation" shall mean, with respect to any
Person, any contract, agreement, deed, mortgage, lease, sublease, license,
indenture, Guarantee, commitment, undertaking or arrangement, written or oral,
or other consensual document or instrument, including, without limitation, any
document or instrument evidencing or otherwise relating to any indebtedness, but
excluding the Charter and Bylaws of such Person, to which or by which such
Person is a party or otherwise subject or bound or to which or by which any
property or right of such Person is subject or bound.
1.3.17. "Debt" of any Person shall mean all obligations of such Person
(i) in respect of indebtedness for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) for the deferred purchase price
of property, tangible or real, goods or services (other than trade payables or
accruals incurred in the Ordinary Course of Business or, with
5
respect to a Person other than APC or its Subsidiaries, in the Ordinary Course
of the Business of such Person), (iv) under capital leases and (v) in the nature
of Guarantees of the obligations described in clauses (i) through (iv) above of
any other Person.
1.3.18. "Distribution" shall mean, with respect to the capital stock of
or other Equity Securities issued by any Person, (i) the declaration or payment
of any dividend on or in respect of any shares of any class of such capital
stock or in respect of any such Equity Security; (ii) the purchase, redemption
or other retirement of any shares of any class of such capital stock or of any
such Equity Security, directly, or indirectly through a Subsidiary of such
Person or otherwise; and (iii) any other distribution on or in respect of any
shares of any class of such capital stock or on or in respect of any such Equity
Security.
1.3.19. "Enforceable" shall mean, with respect to any Contractual
Obligation, that such Contractual Obligation is the legal, valid and binding
obligation of the Person in question, enforceable against such Person in
accordance with its terms, subject to bankruptcy, reorganization, insolvency and
other similar laws affecting the enforcement of creditors' rights in general and
to general principles of equity (regardless of whether considered in a
proceeding in equity or an Action at law).
1.3.20. "Environmental Laws" shall mean any Legal Requirement in effect
on or prior to the Closing Date relating to (i) releases or threatened releases
of Hazardous Substances, (ii) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Substances or materials containing
Hazardous Substances or (iii) otherwise relating to pollution of the environment
or the protection of human health or the environment.
1.3.21. "Equity Securities" shall mean, with respect to any Person that
is not a natural Person, all shares of capital stock or other equity or
beneficial interests issued by or created in or by such Person, all stock
appreciation or similar rights or grants of, or any other Contractual Obligation
for, any right to share in the equity, income, revenues or cash flow of such
Person, and all securities or other rights, warrants or other Contractual
Obligations to acquire any of the foregoing, whether by conversion, exchange,
exercise or otherwise.
1.3.22. "ERISA" shall mean the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and regulations
thereunder, and in the case of any referenced section of any such statute, rule
or regulation, any successor section thereto, collectively and as from time to
time amended and in effect.
1.3.23. "GAAP" shall mean generally accepted United States accounting
principles as in effect on the date hereof, consistently applied in accordance
with past practices.
1.3.24. "Governmental Authority" shall mean any United States federal,
state or local or any foreign government, governmental authority, regulatory or
administrative agency, governmental commission, court or tribunal (or any
department, bureau or division of any of the foregoing).
6
1.3.25. "Governmental Order" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
1.3.26. "Guarantee", with respect to any Person, shall mean (i) any
guarantee of the payment or performance of, or any contingent obligation in
respect of, any Debt or other obligation of any other Person, (ii) any other
arrangement whereby credit is extended to any other Person on the basis of any
promise or undertaking of such Person (a) to pay the Debt of such other Person,
(b) to purchase any obligation owed by such other Person, (c) to purchase or
lease assets under circumstances that would enable such other Person to
discharge one or more of its obligations, or (d) to maintain the capital,
working capital, solvency or general financial condition of such other Person
and (iii) any liability of such Person as a general partner of a partnership or
as a venturer in a joint venture in respect of Debt or other obligations of such
partnership or venture.
1.3.27. "Hazardous Substances" shall mean (i) substances which contain
substances defined in or regulated under the following federal statutes, and
their state counterparts, each as amended, as well as these statutes'
implementing regulations as amended from time to time and as interpreted by
administering Governmental Authorities: the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Asbestos Hazard Emergency Response Act, the Atomic Energy Act,
the Toxic Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas, synthetic gas
and any mixtures thereof; (iv) radon; (v) PCBs; (vi) asbestos; (vii) any
substance with respect to which a Governmental Authority requires environmental
investigation, monitoring, reporting or remediation; and (viii) any other
radioactive or toxic materials or substances.
1.3.28. "Income Tax" means any Tax which is, in whole or in part, based
on or measured by income or gains.
1.3.29. "Indenture" shall mean the Indenture, dated the Closing Date,
which shall be in the form attached hereto as Exhibit B.
1.3.30. "Jamestown Lease" shall mean the Lease Agreement to be entered
into by Holdings or its Affiliate and APC or its Affiliate at the Closing, which
shall be in substantially the form attached hereto as Exhibit C.
1.3.31. "Knowledge" shall mean the actual knowledge of ▇▇▇▇▇▇▇ or of
the executive officers of PHL, Holdings or Buyer, as the case may be, following
due inquiry of ▇▇▇▇▇▇▇ or the executive officers of each Subsidiary of PHL,
Holdings or Buyer, as the case may be. For purposes of this definition,
"executive officer" shall mean the two (2) highest ranking officers of the
Person in question but, in the event several individuals have the same rank or
title, then that individual with the longest term of service with his or her
current employer shall be deemed the highest ranking among such similarly titled
or ranked individuals.
7
1.3.32. "Legal Requirement" shall mean any United States federal, state
or local or any foreign law, statute, standard, ordinance, code, order, rule,
regulation, resolution or promulgation, or any Governmental Order, or any
license, franchise, consent, approval, permit or similar right granted by any
Governmental Authority under any of the foregoing.
1.3.33. "Liabilities" shall mean any and all liabilities and
obligations, whether accrued, fixed, absolute or contingent, matured or
unmatured or determined or determinable.
1.3.34. "Lien" shall mean any mortgage, pledge, lien, security
interest, charge, attachment, equity or other encumbrance, or restriction on the
creation of any of the foregoing, whether relating to any property or right or
the income or profits therefrom; provided, however, that the term "Lien" shall
not include statutory liens for Taxes to the extent that the payment thereof is
not in arrears or otherwise due.
1.3.35. "Limited Knowledge" shall mean the actual knowledge of the
executive officers of PHL, Holdings, ▇▇▇▇▇▇▇ or Buyer, as the case may be,
without any obligation to investigate. For purposes of this definition,
"executive officer" shall mean the two (2) highest ranking officers of the
Person in question but, in the event several individuals have the same rank or
title, then that individual with the longest term of service with his or her
current employer shall be deemed the highest ranking among such similarly titled
or ranked individuals.
1.3.36. "Losses" shall mean any and all losses, damages, obligations,
Liabilities, claims, awards (including, without limitation, interest),
assessments, amounts paid in settlement, judgments, orders, decrees, fines and
penalties, plus reasonable costs and expenses reasonably incurred (including,
without limitation, reasonable legal costs and expenses and reasonable costs and
expenses of collection).
1.3.37. "Material Adverse Effect" shall mean any adverse change in or
effect on the business, condition (financial or otherwise), operations,
performance or properties of any Person that is material to such Person and its
Subsidiaries, taken as a whole; provided, however, that when such term is used
in reference to Buyer, such term shall not include any change or effect
attributable to the acquisition of APC or any Subsidiary of APC; provided
further, however, that such term when used in reference to APC and its
Subsidiaries shall not include (i) changes in general economic conditions,
changes in legal or regulatory conditions that affect, in general, businesses in
which APC or any of its Subsidiaries are engaged or the insurance industry in
general and not specifically relating to APC or its Subsidiaries, or (ii) the
loss of accounts which represented less than $3,250,000 of the consolidated
revenues of APC and its Subsidiaries for 1998.
1.3.38. "Miami Lease" shall mean the Lease Agreement to be entered into
by Holdings or its Affiliate and APC or its Affiliate at the Closing, in
substantially the form attached hereto as Exhibit D.
1.3.39. "Ordinary Course of Business" shall mean the ordinary course of
the business of a Person consistent with such Person's regular custom and
practice.
8
1.3.40. "Person" shall mean any individual, partnership, corporation,
limited liability company, association, trust, joint venture, unincorporated
organization or other entity, and any Governmental Authority.
1.3.41. "Registration Rights Agreement" shall mean the Registration
Rights Agreement to be entered into by PHL, Holdings and Buyer at the Closing in
the form attached hereto as Exhibit E.
1.3.42. "Risk Management Agreement" shall mean the Risk Management
Agreement to be entered into by PHL and Buyer at the Closing in the form
attached hereto as Exhibit F.
1.3.43. "Rule 145 Representation Letter" shall mean the Rule 145
Representation Letter to be executed by PHL, Holdings and ▇▇▇▇▇▇▇ in the form
attached hereto as Exhibit G.
1.3.44. "Subordinated Debentures" shall mean Buyer's 5.25% Convertible
Subordinated Debentures (Due 2014), in the aggregate principal amount of
$32,000,000.
1.3.45. "Subsidiary" shall mean, as the case may be, any Person of
which Buyer, PHL, Holdings or APC (or other specified Person) shall own directly
or indirectly at least a majority of the outstanding capital stock (or other
shares of Equity Securities) entitled to vote generally in the election of
directors or in which Buyer, PHL, Holdings or APC (or other Specified Person) is
a general partner or joint venturer without limited liability; provided,
however, all references in Sections 3.6, 3.8, 3.10, 3.14 and 3.15 of this
Agreement to the Subsidiaries of APC shall not include ▇▇▇▇ ▇▇▇▇▇▇▇ Ferry
(Holdings) Ltd., a company incorporated with limited liability under the laws of
the United Kingdom, or its direct and indirect subsidiaries.
1.3.46. "Tangible Net Worth" shall mean, with respect to APC and its
Subsidiaries on a consolidated basis, the aggregate of (a) the capital stock and
surplus of APC and its Subsidiaries, and (b) APC's and its Subsidiaries'
consolidated retained earnings or deficit, each determined on a basis in
accordance with GAAP after eliminating (i) that portion of the book amount of
all assets which would be treated as intangible under GAAP, including, without
limitation, goodwill, trademarks, tradenames, copyrights, patents, licenses and
rights with respect to the foregoing and unamortized debt, discount and expense,
(ii) deferred Taxes and (iii) property, real and personal, and equipment.
1.3.47. "Taxes" shall mean all United States federal, state or local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax, fee, levy, duty, impost or charge of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not;
and the term "Tax" means one of the foregoing Taxes.
1.3.48. "Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto,
9
and including any amendment thereof, required to be filed with any tax
authority, domestic or foreign.
1.3.49. "▇▇▇▇▇▇▇ Employment Agreement" shall mean the Employment
Agreement entered into by Buyer and ▇▇▇▇▇▇▇ as of the date hereof in the form
attached hereto as Exhibit H.
1.3.50. "Voting and Standstill Agreement" shall mean the Voting and
Standstill Agreement to be entered into by the Buyer, Holdings and PHL at the
Closing in the form attached hereto as Exhibit I.
ARTICLE II
The Acquisition
Section 2.1. Acquisition. Upon the terms, subject to the conditions,
and in reliance on the representations, warranties and covenants set forth
herein, Sellers agree to sell and transfer to Buyer, and Buyer agrees to
purchase and accept from Sellers, on the Closing Date, all of the APC Shares.
Section 2.2. Consideration and Closing.
2.2.1. Purchase Consideration.
2.2.1A. Consideration to PHL. At the Closing, in consideration of the
non-competition covenants and obligations to be complied with by PHL pursuant to
Section 5.17 of this Agreement, Buyer shall issue to PHL the aggregate principal
amount of $10,000,000 of the Subordinated Debentures and $150,000 in cash.
2.2.1B. Consideration to Sellers. At the Closing, in consideration of
the sale and transfer of the APC Shares by Sellers to Buyer and of the
agreements by PHL and Sellers to perform those obligations and covenants to be
fulfilled or complied with by them hereunder, Buyer shall:
(a) pay to ▇▇▇▇▇▇▇ at the Closing (by wire transfer of
immediately available funds to an account designated in writing by ▇▇▇▇▇▇▇ to
Buyer) not fewer than three (3) Business Days prior to the Closing Date, the
cash sum of $671,988 (the "Cash Consideration");
(b) issue to Holdings, and deliver certificates
representing, 865,042 shares of Buyer Common Stock at the Closing;
(c) issue to ▇▇▇▇▇▇▇, and deliver certificates representing,
134,958 shares of Buyer Common Stock at the Closing; and
(d) issue to Holdings the aggregate principal amount of
$22,000,000 of the Subordinated Debentures.
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The items of consideration provided for in subsections (a) - (d) above
shall collectively be referred to as the "Purchase Consideration."
2.2.2. Tangible Net Worth Adjustment. After the Closing, the Purchase
Consideration shall be decreased dollar-for-dollar by the amount, if any, by
which the Tangible Net Worth of APC and its Subsidiaries, on a consolidated
basis as of the date of the Closing Date Balance Sheet, is less than the
Adjusted Tangible Net Worth (in such case, the "Net Adjustment to Buyer"), and
increased dollar-for-dollar by the amount, if any, by which the Tangible Net
Worth of APC and its Subsidiaries as of the date of the Closing Date Balance
Sheet, is greater than the Adjusted Tangible Net Worth (in such case, the "Net
Adjustment to Sellers"). Such adjustment shall be determined on the basis of a
balance sheet of APC and its Subsidiaries as of the Closing Date if the Closing
occurs on the last calendar day of any month, but if the Closing occurs on any
other day, then as of the last calendar day of the month immediately preceding
the Closing Date, prepared by APC in accordance with GAAP, which balance sheet
may be reviewed or audited, at Buyer's expense and sole election, by Ernst &
Young LLP, or at Holdings' expense and sole election, by PricewaterhouseCoopers
(the "Closing Date Balance Sheet"). For the purpose of the preparation of the
Closing Date Balance Sheet, (a) the value of the minority shareholders' Equity
Securities of the Subsidiaries of APC outstanding as of the Closing Date shall
be determined in accordance with the formula set forth in the respective
buy-sell agreements with respect to the respective APC Subsidiaries, using for
purposes of such formulae the respective Subsidiaries' financial statements as
of the Closing Date if the Closing occurs on the last calendar day of any month,
but if the Closing occurs on any other day, then their respective financial
statements as of the last calendar day of the month immediately preceding, and
no discounts for lack of marketability, minority interest or other discounts
shall be taken into effect, (b) the APC Assets on the Closing Date Balance Sheet
shall not include any commissions earned but not received on insurance policies
which are direct billed by the insurance carriers to the commercial customers of
APC and its Subsidiaries to the extent that such commissions exceed $1,500,000,
(c) the capital contribution of PHL or Holdings, as the case may be (as provided
in Section 5.18(b)), shall be included, (d) the purchase price paid by Holdings
or PHL, as the case may be, for the Owned Real Property shall be included and
(e) accruals as of the date of the Closing Date Balance Sheet for the applicable
pro rata portions of bonuses earned by employees of APC and its Subsidiaries and
any other accruals for expenses incurred but not yet paid shall be included.
Buyer and its accountants, Ernst & Young LLP, and Holdings and its accountants,
PricewaterhouseCoopers, shall be permitted to review the Closing Date Balance
Sheet and the work papers related to the preparation and review of the Closing
Date Balance Sheet, and, in the event of any dispute concerning the correctness
of such Closing Date Balance Sheet, such dispute shall be submitted to the
Alternative Accountants for resolution. If issues in dispute are submitted to
such accounting firm for resolution, (i) each party will furnish to such
accounting firm such work papers and other documents and information relating to
the disputed issues as such accounting firm may request and are available to
that party (or its independent public accountants), and will be afforded an
opportunity to present to such accounting firm any material relating to the
determination and to discuss the determination with such accounting firm, (ii) a
determination by such accounting firm, as set forth in a notice delivered to
both parties by such accounting firm no later than thirty (30) days after the
issues in dispute are submitted to such accounting firm, will be binding and
conclusive on the parties, and (iii) Buyer, on the one hand, and Sellers, on the
other, will each bear fifty percent (50%) of the fees of such accounting firm
for such determination. The Closing
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Date Balance Sheet shall be prepared within thirty (30) days following Closing.
Buyer or Sellers, jointly and severally, whichever is the case, shall pay the
Net Adjustment to Sellers or the Net Adjustment to Buyer, whichever is the case,
to Sellers or Buyer, as the case may be, by wire transfer or delivery of other
immediately available funds within three (3) Business Days after the date on
which the Closing Date Balance Sheet is finally determined. Any Net Adjustment
to Sellers or any Net Adjustment to Buyer, as the case may be, shall bear
interest at a rate of seven percent (7%) per annum from the Closing Date, and
all accrued interest shall be paid at the same time as any Net Adjustment to
Sellers or any Net Adjustment to Buyer. Any Net Adjustment to Sellers payable
to, or any Net Adjustment to Buyer payable by, Sellers, as the case may be,
shall be payable in proportion to Holdings' and ▇▇▇▇▇▇▇'▇ respective percentage
ownership in APC as of the Closing Date.
2.2.3. Excluded Liabilities. The parties agree that, except as
otherwise provided herein or in any of the Closing Agreements, Buyer (and after
the Closing, APC and its Subsidiaries) shall not have any responsibility or
incur or assume any Liabilities with respect to the following matters
(collectively, the "Excluded Liabilities") (it being understood, subject to
Section 5.21 of this Agreement, that such assets shall be transferred to, or
such obligations will be assumed by, PHL or Holdings prior to Closing):
(a) any Owned Real Property; and
(b) any APC Headquarters Employees.
Notwithstanding the foregoing to the contrary, with respect to any APC
Headquarters Employees, Buyer (and after the Closing, APC and its Subsidiaries)
shall, except as provided hereinafter, assume Liabilities accrued, arising or
incurred under, or otherwise relating to, any APC Plan or APC Benefit
Arrangement, and such Liabilities shall not be deemed Excluded Liabilities for
purposes of this Agreement. The foregoing notwithstanding, Holdings shall be
responsible for any severance benefits payable as a result of the termination
within eight (8) weeks after the Closing of the employment of any APC
Headquarters' Employee other than any severance benefits or penalties as are
attributable to the wrongful acts or inactions of Buyer or its Affiliates
(including APC or its Subsidiaries after the Closing).
All of the above notwithstanding, the parties have agreed that in the
interests of facilitating a transition following the Closing, APC shall be
entitled to continue, for a period of up to eight (8) weeks following the
Closing, the employment of any of the APC Headquarters Employees, provided APC
shall be liable for such employees' salary and benefits earned or accrued during
such period. Such continuation of employment for such period of time shall not
affect Holdings' obligation hereunder for severance benefits (as more fully
described above). If, however, APC, without Holdings' prior express written
permission, continues, after that date which is eight (8) weeks after the
Closing, the employment of any APC Headquarters Employee, such circumstance,
without more, shall immediately and automatically result in the termination of
all obligations of Holdings under this Agreement for severance benefits of any
kind with respect to such employee.
2.2.4. Time and Place of Closing. The closing of the purchase and sale
of the APC Shares and the other transactions contemplated by this Agreement (the
"Closing") shall take place at the
12
offices of Williams, Mullen, Christian & ▇▇▇▇▇▇▇ in Richmond, Virginia on such
date as is mutually agreed by the parties hereto (the "Closing Date") at 10:00
a.m. (local time); provided that: (i) all conditions to Closing have been
satisfied or waived as provided in Articles VI and VII hereof, and (ii) the
Closing Date shall in no event be later than June 30, 1999.
2.2.5. Delivery. At the Closing, Sellers will convey, transfer and
assign the APC Shares to Buyer free and clear of any Liens (including, without
limitation, restrictions on transfer or voting), and will deliver to Buyer
certificates evidencing all of the APC Shares duly endorsed or accompanied by
separate stock power(s) duly endorsed, with all required stock transfer Tax
stamps affixed and in form proper for transfer, against delivery by Buyer of the
Subordinated Debentures, the Cash Consideration and issuance by Buyer of the
Buyer Common Shares as set forth in Section 2.2.1 above.
ARTICLE III
Representations and Warranties of Sellers
Except as disclosed, or as qualified by information set forth in the
Sellers' disclosure letter dated of even date herewith and delivered to Buyer
concurrently herewith (the "Sellers' Disclosure Letter"), Sellers, jointly and
severally, represent and warrant to Buyer and to Buyer's successors and
permitted assigns as of the date hereof and as of the Closing Date (except to
the extent that Sellers' representations and warranties expressly speak as of a
specified earlier date) as follows:
Section 3.1. Corporate Matters.
3.1.1. Organization and Standing; Power and Authority. APC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut. Each of the Subsidiaries of APC is a corporation
duly organized, validly existing and in good standing (to the extent its
jurisdiction of incorporation or organization recognizes such concept) under the
jurisdiction of its incorporation or organization. Each of APC and its
Subsidiaries has all requisite power and authority, corporate and otherwise, to
carry on its respective portion of the APC Business as currently conducted. Each
of APC and its Subsidiaries is duly qualified or licensed to do business as a
foreign corporation or otherwise, and is in good standing as such (to the extent
their respective jurisdictions of incorporation or qualification recognize such
concept), in each jurisdiction where the nature of APC's or such Subsidiary's
activities or its ownership or leasing of property requires such qualification
or license, except to the extent that the failure to be so qualified or licensed
would not have a Material Adverse Effect on APC.
3.1.2. Non-Contravention. No approval, consent, waiver, authorization
or other order of, and no filing, registration, qualification or recording with,
any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of Sellers, APC or any of their Subsidiaries in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby, except for (a)
satisfaction of the requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (b) the items listed in Section
3.1.2 of the Sellers' Disclosure Letter. Specifically, and not by way of
limitation, all filings with and approvals of State Departments of Insurance and
similar Governmental Authorities, which filings and approvals must be made or
obtained prior to
13
the Closing (collectively, the "Required Filings") are set forth in the Sellers'
Disclosure Letter. Neither the execution, delivery and performance of this
Agreement nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the execution, delivery and performance of the
Closing Agreements) does or will constitute, result in or give rise to (i) a
breach or violation or default under any Legal Requirement applicable to
Sellers, APC, or any of their Subsidiaries (assuming the accuracy of the
representations and warranties of Buyer in Article IV hereof), (ii) a breach of
or a default under any Charter or Bylaws provision of Holdings, APC or any of
their Subsidiaries, (iii) the acceleration of the time for performance of any
obligation under any Contractual Obligation of Holdings, APC or any of their
Subsidiaries, (iv) the imposition of any Lien upon or the forfeiture of any APC
Asset, (v) a breach of or a default under any Contractual Obligation of
Holdings, APC or any of their Subsidiaries, or (vi) the right to any severance
payments other than by operation of law (including, without limitation, if such
payments become due only if employment is terminated following the Closing),
termination, right of termination, modification of terms or change in benefits
or burdens under any Contractual Obligation, other than in the case of clauses
(i), (iii), (iv), (v) and (vi) such as, individually or in the aggregate, have
and could reasonably be expected to have neither a Material Adverse Effect on
APC nor on the ability of Holdings to consummate the transactions contemplated
hereby.
3.1.3. Title to APC Shares.
(a) Holdings is the beneficial and record holder of, and has
good and valid title to, 5,000 Class A shares of the APC Shares, which is
eighty-five percent (85%) of the issued and outstanding shares of the capital
stock of APC.
(b) Sellers, collectively, own all of the APC Shares.
(c) Except for this Agreement, there is no Contractual
Obligation pursuant to which Sellers or its Affiliates have, directly or
indirectly, granted any Equity Security in APC or any of its Subsidiaries to any
Person or any right to acquire any of, or any interest in, any APC Asset. Upon
delivery of certificates representing the APC Shares, and delivery of the
Purchase Consideration, Buyer will receive good and valid title to all of the
APC Shares, free and clear of any Liens (including, without limitation,
restrictions on transfer or voting) and subject to no rescission rights or
similar rights or equities of any kind, other than such Liens or rights as arise
out of actions or inactions of Buyer.
3.1.4. Capitalization. The only issued and outstanding shares of
capital stock of APC are the APC Shares, all of which are duly authorized,
validly issued, fully paid and non-assessable. There is no Contractual
Obligation or Charter or Bylaw provision that obligates APC or any of its
Subsidiaries to issue, purchase or redeem, or make any payment in respect of,
any Equity Security.
3.1.5. Subsidiaries. APC's only Subsidiaries are listed in the Sellers'
Disclosure Letter, which sets forth the name and jurisdiction of incorporation
or organization, the date of incorporation or organization, the issued and
outstanding shares of capital stock and number of shares owned of record and
beneficially by each minority shareholder of such Subsidiaries and the federal
or foreign taxpayer identification number of each such Subsidiary. APC is the
direct
14
record and beneficial owner of all of the issued and outstanding shares of
capital stock of each of its respective Subsidiaries, such shares of capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable, and APC has good and valid title to such shares free and clear of
any Liens (including, without limitation, restrictions on transfer or voting).
There is no outstanding Equity Security of any Subsidiary of APC other than its
issued and outstanding shares of capital stock. APC has no equity investment in
any Person other than its Subsidiaries.
3.1.6. Charter and Bylaws. Sellers have heretofore made available to
Buyer true and complete copies of the Charter and Bylaws of APC and each of its
Subsidiaries, in each case in the form currently in effect and as will be in
effect immediately prior to the Closing.
Section 3.2. Financial Statements.
3.2.1. Financial Information. Sellers have previously provided Buyer
with (i) a true and complete copy of the unaudited consolidated balance sheet of
APC and its Subsidiaries as of February 28, 1999 (the "February 1999 APC Balance
Sheet"), and the related unaudited statements of income, stockholders' equity
and cash flows of such entities for the two (2) months ending February 28, 1999
(collectively, with the February 1999 APC Balance Sheet, the "February 1999 APC
Financial Statements"), and (ii) true and complete copies of the audited
consolidated balance sheets of APC and its Subsidiaries as of December 31, 1998,
1997 and 1996 (collectively, the "APC Annual Balance Sheets") and the related
audited statements of income, stockholders' equity and cash flows of such
entities for such fiscal years ended December 31, 1998, 1997 and 1996
(collectively with the APC Annual Balance Sheets and the February 1999 APC
Financial Statements, the "APC Financial Statements").
3.2.2. Character of Financial Information. The APC Financial
Statements, including (except with respect to the February 1999 APC Financial
Statements) the notes thereto, were prepared in accordance with GAAP throughout
the periods specified therein and present fairly, in all material respects, the
consolidated financial position and results of operations of APC and its
Subsidiaries at the respective dates and for the periods specified therein,
subject in the case of the February 1999 APC Financial Statements to year-end
audit adjustments.
Section 3.3. Change in Condition.
Since February 28, 1999:
(a) The APC Business has been conducted in all material
respects only in the Ordinary Course of Business (except as may be otherwise
required by the terms of this Agreement), and without limiting the generality of
the foregoing, APC and its Subsidiaries have made capital expenditures only in
the Ordinary Course of Business;
(b) Neither APC nor any of its Subsidiaries has:
(i) made any capital expenditure greater than
$50,000 except for expenditures for repairs and maintenance in the Ordinary
Course of Business;
15
(ii) incurred or otherwise become liable in respect
of any Debt or become liable in respect of any Guarantee, other than any Debt or
any Guarantee between APC and its respective wholly-owned Subsidiaries;
(iii) mortgaged or pledged an APC Asset or subjected
any APC Asset to any Lien;
(iv) made any change in its authorized or issued
capital stock or granted or issued any option, purchase right, convertible
stock, other sort of security or registration right, or purchased, redeemed or
retired any shares or other securities, or declared or made any Distribution
(other than distributions or contributions in connection with an increase in or
the repayment or cancellation (in whole or in part) of Debt or intercompany
advances between APC and its respective wholly-owned Subsidiaries);
(v) sold, leased to others or otherwise disposed of
any of the APC Assets except in the Ordinary Course of Business and except for
such assets as were not, individually or in the aggregate, material to APC;
(vi) purchased any Equity Security issued by any
Person other than ones issued by a Subsidiary of APC, or any assets material in
amount or constituting a business or line of business, or been party to any
merger, consolidation or other business combination or entered into any
Contractual Obligation relating to any such purchase, merger, consolidation or
business combination;
(vii) made any loan, advance or capital contribution
to or investment in any Person other than loans, advances or capital
contributions to or investments in or to APC or any of APC's wholly-owned
Subsidiaries and other than loans or advances made in the Ordinary Course of
Business which are not material either singly or in the aggregate;
(viii) canceled or compromised any Debt or claim other
than in the Ordinary Course of Business and other than any Debt, intercompany
advances or claim between APC and its respective wholly-owned Subsidiaries;
(ix) sold, transferred, licensed or otherwise
disposed of any Intellectual Property other than in the Ordinary Course of
Business;
(x) made or agreed to make any material change in
its customary methods of accounting or accounting practices;
(xi) engaged in or become obligated in respect of any
transaction with PHL, Holdings or any of their Affiliates;
(xii) waived or released or permitted to lapse any
right of material value except in the Ordinary Course of Business or suffered
any material damage to or material destruction or loss of any material asset or
property, whether or not covered by insurance;
16
(xiii) instituted, settled or agreed to settle any
material Action; or
(xiv) consented or agreed to do any of the foregoing.
(c) Neither APC nor any of its Subsidiaries has (i) had any
material change in its relationships with its employees, producers, agents,
independent contractors, insurance carriers, customers, referral sources or
suppliers, or (ii) made any changes in the rate of Compensation payable (or paid
or agreed in writing or orally promised to pay, conditionally or otherwise, any
extra Compensation) to any director, officer, manager, employee, producer,
consultant or agent (other than changes granted in the Ordinary Course of
Business and consistent with past practice, which changes will not have a
Material Adverse Effect);
(d) There has been no amendment of any material provision of
any Equity Security issued by APC or any of its Subsidiaries;
(e) Neither APC nor any of its Subsidiaries has entered into
any Contractual Obligation (and PHL, Sellers and their Affiliates have not
entered into any Contractual Obligation obligating APC or any of its
Subsidiaries) to do any of the things referred to in clauses (a) through (d)
above with respect to APC, any of the Subsidiaries of APC or the APC Business;
and
(f) No Material Adverse Effect has occurred with respect to
APC and its Subsidiaries.
Section 3.4. Liabilities. Except as otherwise provided in this
Agreement, neither APC nor any of its Subsidiaries has any Liabilities, other
than, to the extent the existence thereof is consistent with all other
representations and warranties of PHL and Sellers, as:
(a) set forth on the February 1999 APC Balance Sheet;
(b) incurred since the date of the February 1999 APC Balance
Sheet in the Ordinary Course of Business;
(c) incurred in respect of the Leases and Contracts; or
(d) between APC and its respective wholly-owned Subsidiaries
or between wholly-owned Subsidiaries of APC.
Section 3.5. Assets.
3.5.1. Title to Assets; Owned Real Estate. APC and its Subsidiaries
have good and valid title to, or, in the case of property held under lease or
other Contractual Obligation, a valid and enforceable right to use under an
Enforceable Lease or license, all of their properties, rights and assets,
whether real or personal property or intellectual property and whether tangible
or intangible (collectively, the "APC Assets"), including, without limitation,
all properties, rights and assets reflected in the February 1999 APC Balance
Sheet or acquired after the date of the February 1999 APC Balance Sheet (except
as sold or otherwise disposed of since the date of the February 1999 APC Balance
Sheet in the Ordinary Course of Business or as otherwise permitted or required
by this Agreement to be disposed of since the date of the
17
February 1999 APC Balance Sheet). The Sellers' Disclosure Letter contains a
true, correct and complete list of all real property and buildings owned by APC
or any of its Subsidiaries (collectively, the "Owned Real Property") and
identifies the respective owner of each such parcel or building. No APC Asset is
subject to any Lien except as described in the Sellers' Disclosure Letter. The
APC Assets (including, without limitation, the Owned Real Property, the
Intellectual Property, the Leases and the Contracts), constitute all material
properties, rights and assets held for or used in the APC Business as currently
conducted.
3.5.2. Real Property Leases. The Sellers' Disclosure Letter sets forth
a true, correct and complete list of (a) each facility, location or parcel which
is leased or subleased, or which has been agreed to be leased or subleased, as
lessee or sublessee by APC or any of its Subsidiaries (all of the leases,
subleases or other Contractual Obligations pursuant to which such facilities,
locations or parcels are held or are to be held being referred to herein
collectively as the "Leases"), and (b) each lease, sublease or other Contractual
Obligation (collectively, the "Leases-Out") under which APC or any of its
Subsidiaries is a lessor or sublessor of any facility, location or parcel. True,
correct and complete copies of the Leases and the Leases-Out, and all material
amendments, modifications and supplemental agreements thereto, have been
previously made available to the Buyer.
Except as set forth on the Sellers' Disclosure Letter, to
Sellers' Knowledge:
(a) each Lease and each Lease-Out is an Enforceable
agreement of APC or the Subsidiary of APC which is party thereto, and each Lease
or Lease-Out is an Enforceable agreement of the other parties thereto;
(b) APC or the Subsidiary of APC which is a party thereto
has fulfilled all material obligations required pursuant to the Leases and the
Leases-Out to have been performed by APC or the Subsidiary of APC party thereto
on its part;
(c) neither APC nor any Subsidiary of APC is in material
breach of or default under any Lease or Lease-Out, and no event has occurred
which with the passage of time or giving of notice or both would constitute such
a breach or default, result in a loss of rights or result in the creation of any
Lien thereunder or pursuant thereto;
(d) (i) there is no existing material breach or default by
any other party to any Lease or Lease-Out, and (ii) no event has occurred which
with the passage of time or giving of notice or both would constitute a material
default by such other party, result in a loss of rights or result in the
creation of any Lien thereunder or pursuant thereto;
(e) neither APC nor any Subsidiary of APC is obligated to
pay any material leasing or lease brokerage commission as a result of the
transactions contemplated hereby; and
(f) there is no pending or threatened eminent domain taking
affecting any of the properties which are the subject of the Leases or the
Leases-Out.
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Section 3.6. Intellectual Property.
3.6.1. Definition of Intellectual Property. "Intellectual Property"
shall mean, collectively, all (i) United States or foreign patents, patent
applications, patent disclosures, and all renewals, reissues, divisions,
continuations, extensions or continuations-in-part thereof, and all discoveries
which may be patentable (collectively, "Patent Properties"), (ii) trademarks,
service marks, trade dress, trade names and corporate names and registrations
and applications for registration thereof (collectively, "Trademark
Properties"), (iii) copyrights (registered or unregistered), registrations and
applications for registration thereof, including all renewals, derivative works,
enhancements, modifications, updates, new releases or other revisions thereof,
and all works of authorship (collectively, "Copyright Properties"), (iv)
computer software (including source code and object code), data, databases, code
segments, algorithms, objects, routines, templates and documentation
(collectively, "Software Properties"), (v) trade secrets and other confidential
information, including, but not limited to, ideas, processes, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, blue prints,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans, schematics, and customer and supplier lists and
information ("Trade Secrets"), (vi) rights to third party warranties relating to
the foregoing, including, without limitation, rights to millennium compliance
warranties, (vii) copies and tangible embodiments of all of the foregoing (in
whatever form or medium), (viii) the internet domain names used by APC's
Subsidiaries, (ix) the telephone numbers used by APC and its Subsidiaries, (x)
all licenses and rights to royalties, and (xi) all damages and payments under
and the right to ▇▇▇ for infringement with respect to all of the foregoing, and
the goodwill symbolized by all of the foregoing and connected therewith
throughout the world.
3.6.2. Ownership of Intellectual Property. APC and its Subsidiaries own
or are authorized by license to use the "American Phoenix" name and all Software
Properties developed or currently used by each which are material to the conduct
of the APC Business, and each has the right to use the "American Phoenix" name
and such Software Properties, and in each case, such usage without more, will
not infringe upon the Intellectual Property rights of another Person, and such
Software Properties are listed in the Sellers' Disclosure Letter.
3.6.3. Compliance with License Agreements. All license agreements
relating in any manner to the Intellectual Property used by APC and its
Subsidiaries that are material to the conduct of the APC Business are listed in
the Sellers' Disclosure Letter. APC and its Subsidiaries are in full compliance
in all material respects with and are not in default under any such license
agreements, and to the Knowledge of Sellers, all other parties to any of such
license agreements are in full compliance in all material respects with and are
not in default under any of such license agreements.
3.6.4. Registrations. There are no registered (with the U.S. Copyright
Office, U.S. Patent and Trademark Office or the trademark registration offices
of any of the fifty states) Patent Properties, Trademark Properties or Copyright
Properties owned and used by APC and its Subsidiaries (except as used pursuant
to a license agreement listed in the Sellers' Disclosure
19
Letter) in the conduct of the APC Business.
3.6.5. Custom Software. There are no Software Properties that APC and
its Subsidiaries have had written or developed by any Person not an employee of
APC or its Subsidiaries.
3.6.6. Noninfringement. APC and its Subsidiaries have not infringed,
misappropriated, or otherwise used in an unauthorized manner the proprietary
rights (including, but not limited to, the patent, trade secret, trademark,
service ▇▇▇▇, trade dress, or copyright rights) of any third party.
3.6.7. Rights Granted to Others. APC and its Subsidiaries have not
granted or committed to grant any rights in their Intellectual Property of any
nature whatsoever to any third party.
3.6.8. No Claims. No claim has been asserted in writing by any Person
to Sellers (i) to the effect that any Action by APC or any of its Subsidiaries,
infringes on the Intellectual Property rights of any other Person; or (ii) that
challenges or questions the right of APC or any of its Subsidiaries to use any
of the Intellectual Property being used by it; or (iii) except for license
agreements disclosed in the Sellers' Disclosure Letter, which asserts the right
of any third party to use such Intellectual Property.
3.6.9. Unauthorized Use. To the Knowledge of Sellers, there has been no
unauthorized use, infringement or misappropriation of any of the Intellectual
Property of APC or its Subsidiaries by any third party, including, but not
limited to, any employee, former employee, producer, agent or independent
contractor of APC or its Subsidiaries.
Section 3.7. Year 2000 Compliance. "Year 2000 Compliant" or "Year 2000
Compliance" means, with respect to computer systems (including, but not limited
to, all hardware, software, embedded systems, databases and tools) that the
computer systems (i) accurately process date/time data (including, but not
limited to, calculating, comparing and sequencing) from, into, and between the
twentieth and twenty-first centuries, and the years 1999 and 2000 and leap year
calculations, (ii) will operate prior to, during, and after the calendar year
2000 AD without error relating to date data, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century, (iii) will respond to two-digit
date input in a manner which resolves any ambiguity as to century in a
disclosed, defined and predetermined manner and (iv) will store and provide
output of date information in manners that are unambiguous as to century.
APC and its Subsidiaries are implementing a program to identify on a
timely basis the Year 2000 Compliance of mission critical: (i) products and
services supplied by third parties and used in the APC Business, and (ii)
computer systems or components therein used in the APC Business, whether owned
or leased by APC or any of its Subsidiaries, and to remediate (or replace or
abandon as appropriate) any such non-Year 2000 Compliant systems, test any such
renovated or updated products or services, and implement contingency plans in
the event of internal computer system or third party failure that is mission
critical to its business. This program is outlined in the Sellers' Disclosure
Letter, and included therein, is an identification of those tasks and or/tests
that
20
have not been completed as of the date of this Agreement, as well as a list of
all vendors where APC and its Subsidiaries have determined the vendor's product
or service are not Year 2000 Compliant. With respect to third party developed
software, Sellers shall be entitled to rely upon vendor certifications received
by either of them or their Affiliates, provided that APC and its Subsidiaries
have adequate contingency plans in place in the event of failure. Sellers
reasonably believe, consistent with industry standards, that APC and its
Subsidiaries will complete all aspects of such program prior to the time when
any damages are likely to result from the failure of such products and services
to be Year 2000 Compliant.
Section 3.8. Accounts. Each bank account or similar account for the
deposit of cash or securities currently maintained by or on behalf of, or
utilized by, APC or any Subsidiary of APC (i) is wholly owned by APC or one of
its Subsidiaries; (ii) periodically reconciled to its bank statements; and (iii)
to the extent such accounts of APC and its Subsidiaries in the aggregate hold
monies in an escrow or trust capacity, contains in the aggregate all escrow and
trust monies of APC and its Subsidiaries required to be so maintained by it.
Section 3.9. Certain Contractual Obligations. Set forth in the Sellers'
Disclosure Letter is a true and complete list of all of the material Contractual
Obligations of APC or any of its Subsidiaries (except for or with respect to the
APC Plans and the APC Benefit Arrangements), including, without limitation, each
of the following:
(a) All collective bargaining agreements and other labor
agreements; all material employment, producer or consulting agreements; and all
other material plans, agreements, arrangements or practices which constitute
Compensation or benefits to any of the directors, officers or employees of APC
or any of its Subsidiaries;
(b) All Contractual Obligations under which APC or any of
its Subsidiaries is or may become obligated to pay any legal, accounting,
brokerage, finder's or similar fees or expenses in connection with, or incur any
severance pay or special Compensation obligations which would become payable by
reason of, this Agreement or the consummation of the transactions contemplated
hereby;
(c) All Contractual Obligations under which APC or any of
its Subsidiaries is or will after the Closing be restricted from carrying on any
business or other activities anywhere in the world;
(d) All Contractual Obligations (including, without
limitation, options) to: (i) sell or otherwise dispose of any APC Assets except
in the Ordinary Course of Business or (ii) purchase or otherwise acquire any
individual property or other assets for a price of $50,000 or more;
(e) All Contractual Obligations which, individually, are in
excess of $50,000 under which APC or any of its Subsidiaries has any liability
for Debt or obligation for Debt or constituting or giving rise to a Guarantee of
any liability or obligation of any Person (other than any Lease, any Debt or
intercompany advances between APC and its wholly-owned Subsidiaries), or under
which any Person has any liability or obligation constituting or giving rise to
a Guarantee
21
of any liability or obligation of APC or any of its Subsidiaries (including,
without limitation, partnership and joint venture agreements) other than any
Guarantee by APC of any Lease;
(f) Any lease or other Contractual Obligation under which
any tangible personal property having a cost or capital lease obligation in
excess of $50,000 is held or used by APC or any of its Subsidiaries;
(g) Any Contractual Obligation under which APC or any of its
Subsidiaries would reasonably be expected to become obligated to pay any amount
in excess of $50,000 in respect of indemnification obligations or purchase price
adjustment provisions in connection with any (i) acquisition or disposition of
assets, securities or real property, (ii) other acquisition or disposition of
assets other than in the Ordinary Course of Business, (iii) assumption of
liabilities or warranty, (iv) settlement of claims, (v) merger, consolidation or
other business combination, or (vi) series or group of related transactions or
events of a type specified in subclauses (i) through (v); and if with respect to
any Contractual Obligation there exists any pending or, to the Knowledge of
Sellers, threatened Action that could reasonably be expected to result in APC,
its Subsidiaries or any of them being liable to pay an amount in excess of
$50,000 or there currently exist circumstances that would reasonably be expected
to give rise to such an Action;
(h) All written contracts or commitments relating to
commission arrangements with others (other than those listed under subsection
(i) below), pursuant to which $50,000 or more is expected to be paid by APC or
any of its Subsidiaries in 1999;
(i) All written agreements with agents or independent
contractors, which are the exclusive representative of APC or any of its
Subsidiaries in a specified market, relating to the APC Business;
(j) All written agreements containing covenants limiting
competition by APC or its Subsidiaries in any kind of business or in any
jurisdiction or limiting the ability of APC or its Subsidiaries to retain the
services of any Person or classes of Persons or to sell any product or the
ability of APC or its Subsidiaries to acquire Equity Securities issued by any
Persons; and
(k) Any other Contractual Obligation of a type not
specifically covered in clauses (a) through (j) above entered into other than in
the Ordinary Course of Business, involving payments by or on behalf of, or to,
APC or any of its Subsidiaries in excess of $50,000 during the calendar year
ended December 31, 1998 or $100,000 over the remaining term of such Contractual
Obligation or the termination of which may reasonably be expected to require
payments by APC or any of its Subsidiaries exceeding $50,000 (other than
purchase orders entered into in the Ordinary Course of Business).
Sellers have heretofore made available to Buyer a true and
complete copy (or, in the case of oral contracts or arrangements, a full and
accurate written summary) of each of the Contractual Obligations listed in the
Sellers' Disclosure Letter, each as in effect on the date hereof, including,
without limitation, all amendments (such Contractual Obligations required to be
listed in the Sellers' Disclosure Letter, together with all licenses identified
in Section 3.6.3 of Sellers' Disclosure Letter and the Insurance Policies, but
excluding the APC Plans and APC
22
Benefit Arrangements, being referred to herein collectively as the "Contracts").
Each Contract is Enforceable by APC or the Subsidiary of APC which is party
thereto, against each Person (other than APC or such Subsidiary of APC) party
thereto. No material breach or default by APC or any of its Subsidiaries under
any of the Contracts has occurred and is continuing, and no event has occurred
or circumstance exists which with notice or lapse of time would constitute such
a breach or default or permit termination, modification or acceleration by any
other Person under any of the Contracts or would result in a loss of rights or
creation of any Lien thereunder or pursuant thereto except as would arise from
execution, delivery and performance of this Agreement and the Closing
Agreements. To the Knowledge of Sellers, no material breach or default by any
other Person under any of the Contracts has occurred and is continuing, and no
event has occurred or circumstance exists that with notice or lapse of time
would constitute such a breach or default or permit termination, modification or
acceleration by APC or any of its Subsidiaries under any of the Contracts or
would result in a loss of rights or creation of any Lien thereunder or pursuant
thereto except as would arise from the execution, delivery and performance of
this Agreement and the Closing Agreements.
Section 3.10. Insurance. The Sellers' Disclosure Letter sets forth a
list of all (i) fire, theft, casualty, general liability, workers compensation,
fidelity, errors and omissions, business interruption, environmental, product
liability, automobile and other insurance policies maintained by APC or any of
its Subsidiaries, or by Holdings relating to APC or the APC Business, (ii) life
insurance policies maintained by PHL or APC or any Subsidiary of APC on the life
of any of its employees, officers or directors, other than the group term
insurance provided for all employees (collectively, items (i) and (ii) shall be
referred to as the "Insurance Policies"), specifying the type of coverage, the
amount of coverage, the premium, the insurer, the policyholder, each covered
insured, the policy owner, the expiration date of each such policy and a
description of any retroactive premium adjustments or other loss-sharing
arrangements, (iii) any self-insurance arrangements by or affecting APC or its
Subsidiaries, any sharing of risk contracts or arrangements affecting APC and
any obligations of APC or its Subsidiaries to any third party with respect to
insurance, and (iv) excess of loss or catastrophic loss reinsurance arrangements
maintained by APC or any of its Subsidiaries or to which any of them is a party.
True, correct and complete copies of all Insurance Policies have been previously
made available by the Sellers to the Buyer. To the Knowledge of the Sellers, the
Insurance Policies are Enforceable and will continue to be Enforceable
immediately after the Closing in accordance with their terms as in effect
immediately before the Closing. All premiums due and payable on any of the
Insurance Policies or renewals thereof have been paid or will be paid timely
through the Closing Date, and Sellers have no Knowledge that there is any
default (including with respect to the payment of premiums or the giving of
notices) by APC or any its Subsidiaries under the Insurance Policies nor any
default by any other party to the Insurance Policies and Sellers have no
Knowledge that any event has occurred which, with notice or the lapse of time,
would constitute such a breach or default or permit termination, modification or
acceleration, under any Insurance Policy. Neither PHL, Holdings, APC nor any of
their Subsidiaries has received any notice from the issuer of any of the
Insurance Policies denying coverage or reserving rights with respect to a
particular claim currently pending under any Insurance Policy or with respect to
any Insurance Policy in general. Since February 28, 1999, neither APC nor any
Subsidiary of APC has incurred any loss, damage, expense or liability that has
had or would reasonably be expected to have a Material Adverse Effect and that
was or would be covered by any Insurance Policy for which it has not properly
23
asserted a claim under any Insurance Policy. Each of APC and its Subsidiaries is
covered by types of insurance customary for the industry in which it is engaged
and in coverage amounts reasonable for a company of its size. There is no
outstanding recommendation or requirement by the issuer of any Insurance Policy
of any material changes in the conduct of the APC Business or of any material
repairs or other work to be done on or with respect to any APC Asset.
Section 3.11. Transactions with Affiliates. None of (i) the officers,
directors or employees of Holdings, PHL or their Affiliates is an officer,
director, employee, consultant, distributor, supplier or vendor of, or is party
to any Contractual Obligation with, and (ii) Sellers, PHL or their Affiliates is
a consultant, distributor, supplier or vendor of, APC or any Subsidiary of APC.
Except with respect to obligations arising or circumstances existing prior to
the Closing (including, without limitation, services provided prior to Closing
and existing guaranties of certain Liabilities of APC and its Subsidiaries),
neither APC nor any Subsidiary of APC will have any Liability or obligation to
or for the benefit of PHL, the Sellers or any of their Subsidiaries (other than
APC or any Subsidiary of APC) as a result of any agreement among such Persons
which is in effect on the date hereof. There are no APC Assets (including,
without limitation, Intellectual Property) that PHL, Sellers or any of their
Affiliates (other than APC or its Subsidiaries) own or are licensed or otherwise
have the right to use which are used in or necessary to the conduct of the APC
Business nor are there any services or staffing being provided to the APC
Business by PHL, Sellers or any of their Affiliates other than pursuant to
written Contractual Obligations.
Section 3.12. Compliance with Laws. Without regard to environmental
matters which are covered in Section 3.15 of this Agreement, (i) the APC
Business as heretofore, and currently being, operated has not been, and is not,
in violation of, nor is APC or any Subsidiary of APC in default under, any Legal
Requirement, except for such violations or defaults as have not had and will not
have individually or in the aggregate a Material Adverse Effect, and (ii) APC
and the Subsidiaries of APC have been duly granted and continue to hold, and at
the Closing will hold, all licenses, permits, consents, approvals, franchises
and other authorizations under any Legal Requirement or trade practice necessary
for them to hold for the conduct of the APC Business as currently conducted
(collectively, the "Permits"), except such as have not had and will not have
individually or in the aggregate a Material Adverse Effect. All of the Permits
are now and after giving effect to the Closing will be in full force and effect,
except for those whose failure to be in full force and effect would not have a
Material Adverse Effect. Within twenty-one (21) days following the execution of
this Agreement, Sellers will provide Buyer with an update to the Sellers'
Disclosure Letter which will set forth all Permits and applications therefor
that are material to the APC Business. Neither PHL, Sellers, APC nor any
Subsidiary of APC has received any notice from any Governmental Authority or
other licensing authority or association that such entity will revoke, cancel,
rescind, materially modify or refuse to renew in the ordinary course any of the
Permits, which actions individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
Section 3.13. Tax Matters. Except as set forth in the APC Financial
Statements:
(a) The following is correct with respect to APC and its
Subsidiaries for so long as each Subsidiary has been owned by APC (i) all Tax
Returns required to be filed on or before the Closing Date by, or with respect
to APC or any of its Subsidiaries have been or will be
24
timely filed (taking into account permitted extensions) with the appropriate
taxing authorities; (ii) all Tax Returns required to be filed on or before the
Closing Date by, or with respect to APC or any of its Subsidiaries have
accurately reflected and will accurately reflect all material liability for
Taxes of APC and its Subsidiaries for the periods covered thereby; (iii) APC and
its Subsidiaries have timely paid, withheld or made provision in the APC
Financial Statements for all Taxes shown as due and payable on any Tax Return
and have timely paid, withheld, or made provision in the APC Financial
Statements for all material Taxes, whether or not shown on any Tax Return; (iv)
no Liens for Taxes upon the APC Assets exist; (v) neither APC nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return; and (vi) no claim has ever been made by an authority in
a jurisdiction where any of APC or its Subsidiaries does not file Tax Returns
that any of them is or may be subject to taxation by that jurisdiction. The
amounts recorded as liabilities for Taxes on the February 1999 APC Financial
Statements are sufficient for the payment of all material unpaid Taxes for which
APC or its Subsidiaries are or shall become liable as of February 28, 1999 with
respect to all periods through February 28, 1999.
(b) APC and each of its Subsidiaries is a member of the
affiliated group of which PHL is the common parent, within the meaning of
Section 1504(a) of the Code (the "Affiliated Group"), and such Affiliated Group
files a consolidated federal Income Tax Return. Neither APC nor any of its
Subsidiaries has at any time been a member of an affiliated group filing a
consolidated federal Income Tax Return other than the Affiliated Group. All
Income Taxes shown on any consolidated federal income Tax Return of the
Affiliated Group have been paid for each taxable period during which APC and its
Subsidiaries were a member of the Affiliated Group.
(c) Each of APC and its Subsidiaries has withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, producer, independent contractor,
creditor, stockholder, foreign Person, or other third party.
(d) There is no dispute or claim concerning any material Tax
Liability of any of APC and its Subsidiaries as to which Sellers have Limited
Knowledge. The Sellers' Disclosure Letter lists all Income Tax Returns filed
with respect to APC or any of its Subsidiaries (with respect to each Subsidiary
only since its acquisition or creation by APC or an APC Subsidiary) for taxable
periods ended on or after December 31, 1994, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit. Sellers have delivered to Buyer correct and complete copies of
all portions of federal Income Tax Returns and examination reports and
statements of deficiencies assessed against or agreed to by PHL, Sellers, APC or
any of their Subsidiaries since December 31, 1994 which pertain to APC and its
Subsidiaries. Any representation with respect to Subsidiaries under this Section
3.13(d) shall relate to a Subsidiary only for periods following its acquisition
or creation by APC or an APC Subsidiary.
(e) Neither APC nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
25
(f) Neither APC nor any of its Subsidiaries has (i) made any
payments, (ii) is obligated to make any payments, or (iii) is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G.
(g) There are no tax sharing, allocation, indemnification or
similar agreements or arrangements in effect between APC or any of its
Subsidiaries, or any predecessor or affiliate thereof, and any other party under
which APC or any of its Subsidiaries could be liable for any Taxes or other
claims of any Person.
(h) Neither APC nor any of its Subsidiaries has applied for,
been granted, or agreed to any accounting method change for which it will be
required to take into account any adjustment under Section 481 of the Code or
any similar provision of the Code or the corresponding tax laws of any nation,
state or locality.
(i) No indebtedness of APC or any of its Subsidiaries
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code.
Section 3.14. Employee Relations and Employee Benefit Plans.
3.14.1. Employee Relations.
(a) To the Knowledge of Sellers, APC and each of its
Subsidiaries are in material compliance with all federal, state or other
applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and hours of employment;
(b) No legal claim in respect of application for employment,
employment or termination of employment of any Person has been asserted or, to
the Knowledge of Sellers, threatened, against APC or any of its Subsidiaries;
(c) To the Knowledge of Sellers, APC and each of its
Subsidiaries have not, and are not, engaged in any unfair labor practice;
(d) No unfair labor practice complaint against APC or any of
its Subsidiaries is pending before the National Labor Relations Board;
(e) No labor strike, dispute, slowdown or stoppage is
actually pending or, to the Knowledge of Sellers, threatened against or
involving APC or any of its Subsidiaries;
(f) Neither APC nor any of its Subsidiaries is a party to
any collective bargaining agreement and no collective bargaining agreement is
currently being negotiated by any of them;
(g) None of the employees of APC or any of its Subsidiaries
is represented by a labor union;
26
(h) No petition has been filed or Action instituted by any
employee or group of employees of APC or any of its Subsidiaries with any labor
relations board seeking recognition of a bargaining representative;
(i) To the Knowledge of Sellers, there is no organizational
effort currently being made or threatened by or on behalf of any labor union to
organize any employees of APC or any of its Subsidiaries;
(j) There are no other controversies or disputes pending
between APC or any of its Subsidiaries on the one hand, and any of their
respective employees on the other hand, except for such other controversies and
disputes with individual employees arising in the Ordinary Course of Business
that have not had and may not reasonably be expected to have a Material Adverse
Effect; and
(k) Sellers, PHL, APC and the Subsidiaries of APC have taken
any and all actions necessary to comply with the Worker Adjustment and
Retraining Notification Act ("WARN"), with respect to any event or occurrence
affecting APC or its Subsidiaries since the effective date of WARN, or, if
later, the date of acquisition by APC of such Subsidiaries.
3.14.2. Employee Benefit Plans and Programs.
(a) List of Plans. Set forth in the Sellers' Disclosure
Letter is an accurate and complete list, by name and benefit type, of all plans
and benefit arrangements in which employees of APC or any Subsidiary of APC
participate (the "APC Plans" and "APC Benefit Arrangements"), which list further
specifies which of said plans and arrangements are sponsored by any Affiliate of
Sellers other than APC or a Subsidiary of APC.
(b) Status of Plans.
(i) Each APC Plan and APC Benefit Arrangement has,
at all times, been maintained and operated in compliance, in all material
respects, with its terms and the requirements of all applicable laws, including,
without limitation, ERISA and the Code;
(ii) No complete or partial termination of any APC
Plan or APC Benefit Arrangement has occurred or is expected to occur solely as a
result of this Agreement and the consummation of the transactions contemplated
hereby;
(iii) Neither APC nor any of its Subsidiaries has any
current commitment or understanding to create, modify or terminate any APC Plan
or APC Benefit Arrangement, except solely as required by current applicable law;
(iv) Except as required by applicable law or the
terms of a current collective bargaining agreement, no condition or circumstance
exists that would prevent the subsequent unrestricted amendment or termination
of any APC Plan or APC Benefit Arrangement; and
27
(v) Apart from the transactions contemplated by this
Agreement or change in applicable law, no event has occurred and no condition or
circumstance has existed that will, or could, result in a material increase in
the benefits under, or the expense of maintaining, any APC Plan or APC Benefit
Arrangement from the level of benefits or expense incurred for the most recently
concluded fiscal year thereof.
(c) Liabilities.
(i) Neither Sellers, PHL, APC nor any of its
Subsidiaries maintain or contribute to an APC Plan subject to Section 412 or
418B of the Code, or Section 302 of ERISA or which otherwise is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA);
(ii) Neither APC nor any of its Subsidiaries
maintains any APC Plan or APC Benefit Arrangement which is a "group health plan"
(as such term is defined in Section 5000(b)(1) of the Code) that has not been
administered and operated, in all material respects, in compliance with the
applicable requirements of Sections 601, 701 and 702 of ERISA and Sections
4980B(f), 9801 and 9802 of the Code; and, neither APC nor any of its
Subsidiaries is subject to any liability for fines, penalties or loss of Tax
deduction as a result of such administration and operation;
(iii) Neither APC nor any of its Subsidiaries
maintains any APC Plan or APC Benefit Arrangement (whether qualified or
nonqualified within the meaning of Section 401(a) of the Code) providing for
retiree health and/or life benefits or having unfunded liabilities;
(iv) Neither APC nor any of its Subsidiaries
maintains any APC Plan which is an "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which any excise tax could be imposed;
(v) No Person is entitled to, with respect to
employment with APC or any of its Subsidiaries, any benefit to be paid after
termination of employment (other than pursuant to an APC Plan that is
tax-qualified under Section 401(a) of the Code or pursuant to the group health
plan continuation coverage requirements under Section 4980B of the Code and Part
6 of Title I of ERISA);
(vi) Neither APC nor any of its Subsidiaries has
incurred any liability for any tax or excise tax arising under Section 4971,
4977, 4978, 4979, 4980, 4980B or 4980D of the Code; and, no event has occurred
and no condition or circumstance has existed that could give rise to any such
liability;
(vii) No Actions are pending, or, to the Knowledge of
Sellers, threatened, anticipated or expected to be asserted against any APC Plan
or APC Benefit Arrangement or the assets of any such APC Plan or APC Benefit
Arrangement (other than routine claims for benefits and appeals of denied
routine claims);
28
(viii) No civil or criminal Action brought pursuant to
the provisions of Title I, Subtitle B, Part 5 of ERISA is pending, or, to the
Knowledge of Sellers, threatened, anticipated or expected to be asserted against
APC or any of its Subsidiaries or to the Knowledge of Sellers, any fiduciary of
any APC Plan or APC Benefit Arrangement, with respect to any APC Plan or APC
Benefit Arrangement; and
(ix) On or after January 1, 1993, no APC Plan or APC
Benefit Arrangement or, with respect to any APC Plan or APC Benefit Arrangement,
and to the Knowledge of Sellers, any fiduciary thereof, is or has been the
direct or indirect subject of an audit, investigation or examination by any
governmental or quasi-governmental agency; or, has entered into a settlement
with such agency.
(d) Contributions.
(i) Full payment has been made, or by the Closing
Date will have been made, of all material amounts which APC or any of its
Subsidiaries is required, under applicable law, under any APC Plan or APC
Benefit Arrangement or under any agreement relating to any APC Plan or APC
Benefit Arrangement to which APC or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such APC Plan or APC Benefit Arrangement ended prior to Closing;
(ii) All contributions by APC or any of its
Subsidiaries to an APC Plan or an APC Benefit Arrangement have been deducted, or
can be deducted, in the taxable year for which such contributions are made; and,
no such contribution deduction has been challenged or disallowed;
(iii) APC has made adequate provision for reserves to
make APC Plan or APC Benefit Arrangement contributions that have accrued or will
have accrued through Closing, but that have not been made because they are not
yet due under the terms of any APC Plan or APC Benefit Arrangement or related
agreements; and
(iv) Benefits under all APC Plans or APC Benefit
Arrangements are materially as represented in this Agreement and have not been
increased subsequent to the date as of which plan documents were provided or
made available to Buyer except as may be required by applicable law.
(e) Tax Qualification.
(i) Each APC Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified, as to design,
by the Internal Revenue Service. Each APC Plan intended to be tax-qualified is
qualified under Section 401(a) of the Code (and with respect to the APC's 401(k)
plan, Section 401(k) of the Code);
(ii) Each trust established in connection with any
APC Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code continues
29
to be exempt; and
(iii) Since the date of each most recent determination
referred to in this paragraph (e), to the Knowledge of Sellers, no event has
occurred and no condition or circumstance has existed that resulted or is likely
to result in the revocation of any such determination or that could adversely
affect the qualified status of any APC Plan or the exempt status of any such
related trust.
(f) Transactions. Neither APC nor any of its Subsidiaries
nor, to the Knowledge of Sellers, any of their respective directors, officers,
employees or other Persons who participate in the operation of any APC Plan or
APC Benefit Arrangement or related trust or funding vehicle, has engaged in any
transaction with respect to any APC Plan or APC Benefit Arrangement or breached
any applicable fiduciary responsibilities or obligations under Title I of ERISA
with respect to any APC Plan or APC Benefit Arrangement that would subject any
of them to a Tax, penalty or liability for prohibited transactions under ERISA
or the Code or would result in any claim being made under, by or on behalf of
any such APC Plan or APC Benefit Arrangement, by any Person with standing to
make such claim for which APC or its Subsidiaries would have a liability.
(g) Triggering Events.
(i) The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any APC Plan or APC Benefit Arrangement, policy,
arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits to any employee or
former employee or director of APC or any of its Subsidiaries; and
(ii) No APC Plan or APC Benefit Arrangement provides
for the payment of severance benefits upon the termination of employment of an
employee of APC or any of its Subsidiaries.
(h) Documents. Sellers have delivered or caused to be
delivered to Buyer or its counsel true and complete copies of all of the
following documents in connection with each APC Plan and APC Benefit
Arrangement, as applicable: (i) all APC Plans and APC Benefit Arrangements as in
effect on the date hereof, together with all amendments thereto, including, in
the case of any APC Plan or APC Benefit Arrangement not set forth in writing, a
written description thereof; (ii) all current summary plan descriptions and
summaries of material modifications; (iii) all current trust agreements,
declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (iv) the most recent Internal Revenue Service determination letter
obtained with respect to each APC Plan or APC Benefit Arrangement intended to be
qualified under Section 401(a) of the Code or exempt under Section 501(a) of the
Code; (v) the annual report on Internal Revenue Service Form 5500-series for
each of the last three (3) years for each APC Plan or APC Benefit Arrangement
required to file such form; (vi) the most recently prepared financial
30
statements for each APC Plan or APC Benefit Arrangement; and (vii) all
Contractual Obligations relating to each APC Plan or APC Benefit Arrangement,
including, without limitation, service provider agreements, insurance contracts,
annuity contracts, investment management agreements, subscription agreements,
participation agreements and record-keeping agreements.
3.14.3 Compensation of Employees. Set forth in the Sellers' Disclosure
Letter is an accurate and complete list for APC, showing the names of all
Persons employed by APC and its Subsidiaries who received more than $80,000 in
1998 cash compensation (including, without limitation, salary, commission and
bonus) and who are expected to be employed by APC or its Subsidiaries on the
Closing Date. Such list sets forth the present (1999) salary or hourly wage and
the total cash compensation in 1998.
3.14.4 Employment Agreements. Neither APC nor any of its Subsidiaries
is a party to or bound by (i) any written employment agreement, producer
agreement or similar arrangement providing annual cash compensation to an
individual in excess of $80,000, other than written agreements or arrangements
that may be terminated at any time by APC or its Subsidiaries, as the case may
be, upon no more than ninety (90) days' notice without penalty or other payment,
or any extension of any benefit or other coverage, or (ii) any employment
agreement or producer agreement that causes an employee to be other than an "at
will" employee.
Section 3.15. Environmental Matters.
(a) Neither APC nor any of its Subsidiaries is or has in the
past been in violation of Environmental Laws. Neither APC nor the Subsidiaries
of APC has received notice of any Action pending against it or such Subsidiaries
nor, to the Knowledge of Sellers, is there any basis for any Action or is any
Action threatened against APC or its Subsidiaries, in each case in respect of
(i) a violation by APC or any Subsidiary of APC of any Environmental Laws, or
(ii) the presence or release or threatened release into the environment of any
Hazardous Substance whether or not generated by APC or any Subsidiary of APC or
located at or about or emanating from or to a site included in the Owned Real
Property or any other facility, location, building or site currently or
heretofore owned, leased or otherwise used by APC or any Subsidiary of APC or
any predecessor entity of any of them.
(b) Except for matters that would not result in any material
Liability to APC and its Subsidiaries taken as a whole, no event has occurred or
condition exists or operating practice is being engaged in that is currently
contrary to any environmental law and that gives rise to any Liability or Losses
on the part of APC or any of its Subsidiaries (or, after the Closing, Buyer)
either at the present or at any future time (including, without limitation, any
obligation to conduct any remedial or monitoring work) under any Environmental
Laws or otherwise resulting from or relating to the handling, storage, use,
transportation or disposal of any Hazardous Substance by or on behalf of APC or
any Subsidiary of APC or any of their respective predecessors or otherwise.
(c) The Sellers have previously made available to Buyer true
and correct copies of all written reports and all other documents arising out of
environmental inspections, investigations, studies, audits, tests, reviews or
other analyses conducted by Sellers with respect
31
to any Owned Real Property listed in the Sellers' Disclosure Letter or any real
property leased or otherwise used by APC or any of its Subsidiaries.
Section 3.16. Accounts Receivable. All accounts receivable of APC and
its Subsidiaries that are reflected on the APC Financial Statements (i) are
accurate and complete in all material respects, and (ii) represent or will
represent valid obligations arising from services actually performed in the
Ordinary Course of Business. None of such accounts receivable are subject to any
counterclaim or set-off except to the extent set forth on the Sellers'
Disclosure Letter.
Section 3.17. Litigation. Without regard to environmental matters which
are covered in Section 3.15 of this Agreement, there is no Action against APC or
any Subsidiary of APC, pending or, to the Knowledge of Sellers, threatened, with
respect to which APC or any of its Subsidiaries are or would reasonably be
expected to be parties. There is no Action pending or, to the Limited Knowledge
of Sellers, threatened, that seeks rescission of, seeks to enjoin the
consummation of, or otherwise relates to, this Agreement or any of the
transactions contemplated hereby. No Governmental Order specifically directed at
APC or any of its Subsidiaries has been issued which has had or could reasonably
be expected to have a Material Adverse Effect.
Section 3.18. Agents and Broker Relationships. Since February 28, 1999,
neither APC nor any of its Subsidiaries has had any agent, broker or insurance
carrier terminate its relationship with it so as to adversely affect its
business, reputation, income, property or financial condition, nor has any such
terminated Person taken or successfully solicited any accounts or customers of
APC or its Subsidiaries, and, to the Knowledge of Sellers, no broker, agent or
insurer with whom APC or any of its Subsidiaries currently does business intends
to terminate its relationship with APC or any Subsidiary of APC as of any date
or upon the happening of any event.
Section 3.19. Brokers. Except for Bear ▇▇▇▇▇▇▇ & Co., no broker,
finder, investment bank or banker or similar agent is entitled to any brokerage,
finder's or other fee, Compensation or reimbursement of expenses in connection
with the transactions contemplated by this Agreement based upon agreements or
arrangements made by or on behalf of (or the conduct of) Sellers, PHL, APC, any
Subsidiary of APC or any of their respective Affiliates. Sellers shall be solely
responsible for the payment of the fees and expenses of Bear ▇▇▇▇▇▇▇ & Co.
Section 3.20. Full Disclosure. No statement contained in any document,
certificate, or other writing furnished or to be furnished by PHL, Sellers, APC
or any of their Subsidiaries to Buyer pursuant to the provisions of this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to avoid statements herein or
therein being misleading.
ARTICLE IIIA
Representations and Warranties of PHL
32
PHL represents and warrants to Buyer and to Buyer's successors and
assigns as of the date hereof and as of the Closing Date (except to the extent
that PHL's representations and warranties expressly speak as of a specified
earlier date) as follows:
Section 3A.1. Corporate Matters.
3A.1.1. Organization and Standing; Power and Authority.
(a) PHL is a life insurance company duly organized, validly
existing and in good standing under the laws of the State of New York and has
all requisite power and authority, corporate and otherwise, to enter into this
Agreement and the Closing Agreements to which it is intended to be a party as
reflected on the signature page thereof, to carry out and perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
(b) Holdings is a corporation duly organized, validly
existing and in good standing under the laws of the State of Connecticut and has
all requisite power and authority, corporate and otherwise, to enter into this
Agreement and each of the Closing Agreements to which it is intended to be a
party as reflected on the signature page thereof, to carry out and perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
3A.1.2. Authorization and Enforceability.
(a) This Agreement has been duly authorized, executed and
delivered by PHL and is Enforceable against PHL. Each of the Closing Agreements
to which PHL or any of its Affiliates is a party as reflected on the signature
page thereof has been duly authorized, and, on or before the Closing Date, will
be duly executed and delivered by PHL or its applicable Affiliate and be
Enforceable against PHL or such Affiliate, as the case may be.
(b) This Agreement has been duly authorized, executed and
delivered by Holdings and is Enforceable against Holdings. Each of the Closing
Agreements to which Holdings or any of its Affiliates, including APC, is a party
as reflected on the signature page thereof has been duly authorized, and, on or
before the Closing Date, will be duly executed and delivered by Holdings or its
applicable Affiliate and be Enforceable against Holdings or such Affiliate, as
the case may be.
3A.1.3. Non-Contravention. No approval, consent, waiver, authorization
or other order of, and no filing, registration, qualification or recording with,
any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of PHL in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated hereby, except for (a) satisfaction of the requirements of the HSR
Act, and (b) the items listed in Section 3A.1.3 of the Sellers' Disclosure
Letter. Specifically, and not by way of limitation, all Required Filings are set
forth in the Sellers' Disclosure Letter. Neither the execution, delivery and
performance of this Agreement nor the consummation of any of the transactions
33
contemplated hereby (including, without limitation, the execution, delivery and
performance of the Closing Agreements) does or will constitute, result in or
give rise to (i) a breach or violation or default under any Legal Requirement
applicable to PHL (assuming the accuracy of the representations and warranties
of Buyer in Article IV hereof), or (ii) a breach of or a default under any
Charter or Bylaws provision of PHL.
3A.1.4. Title to APC Shares. All of the APC Shares owned by Holdings
are held free and clear of any Liens (including, without limitation,
restrictions on transfer or voting).
Section 3A.2. Financial Information of Holdings. Holdings has
previously provided Buyer with a true and complete copy of the unaudited
consolidated balance sheet of Holdings and its Subsidiaries as of December 31,
1998 (the "Holdings Balance Sheet"). The Holdings Balance Sheet presents fairly,
in all material respects, the consolidated financial position of Holdings and
its Subsidiaries as of December 31, 1998.
ARTICLE IIIB
Representations and Warranties of ▇▇▇▇▇▇▇
Except as disclosed, or as qualified by information set forth in the
Sellers' Disclosure Letter, ▇▇▇▇▇▇▇ represents and warrants to Buyer as of the
date hereof and as of the Closing Date (except to the extent that ▇▇▇▇▇▇▇'▇
representations and warranties expressly speak as of a specified earlier date)
as follows:
Section 3B.1. Matters Relating to ▇▇▇▇▇▇▇.
3B.1.1. Enforceability. This Agreement is, and each of the Closing
Agreements to which ▇▇▇▇▇▇▇ is a party as reflected on the signature page
thereof, will be when it is executed and delivered by ▇▇▇▇▇▇▇, Enforceable
against ▇▇▇▇▇▇▇.
3B.1.2. Title to APC Shares. ▇▇▇▇▇▇▇ is the beneficial and record
holder of, and has good and valid title to, 882 Class B shares of the APC
Shares, which is fifteen percent (15%) of the issued and outstanding shares of
the capital stock of APC, free and clear of any Liens (including, without
limitation, restrictions on transfer, except as provided in the Shareholders'
Agreement with APC dated April 13, 1993, which shall be terminated effective as
of the Closing Date).
ARTICLE IV
Representations and Warranties of Buyer
Except as disclosed, or as qualified by information set forth in the
Buyer's disclosure letter dated of even date herewith and delivered to Sellers
concurrently herewith (the "Buyer Disclosure Letter"), Buyer represents and
warrants to Sellers as of the date hereof and as of the Closing Date
34
(except to the extent that Buyer's representations and warranties expressly
speak as of a specified earlier date) as follows:
Section 4.1. Corporate Matters.
4.1.1. Incorporation and Authority of Buyer. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has all requisite power and authority, corporate
and otherwise, to enter into this Agreement and each of the Closing Agreements
to which it is intended to be a party as reflected on the signature page
thereof, to carry out and perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby.
4.1.2. Organization, Power and Standing. Each of the Subsidiaries of
Buyer is a corporation duly incorporated, validly existing and in good standing
under the jurisdiction of its incorporation or organization (to the extent
recognized in such jurisdiction of incorporation or organization). Each of Buyer
and its Subsidiaries has all requisite power and authority, corporate and
otherwise, to carry on its business as currently conducted, and, in the case of
the Buyer, to consummate the transactions contemplated hereby. Each of Buyer and
its Subsidiaries is duly qualified or licensed to do business as a foreign
corporation or otherwise, and is in good standing as such (to the extent such
concept is recognized in such jurisdiction), in each jurisdiction where the
nature of Buyer's or such Subsidiaries' activities or their ownership or leasing
of property requires such qualification or license, except to the extent that
the failure to be so qualified or licensed would not have a Material Adverse
Effect on Buyer.
4.1.3. Authorization and Enforceability. This Agreement has been duly
authorized, executed and delivered by Buyer, and is Enforceable against Buyer.
Each of the Closing Agreements to which Buyer is a party as reflected on the
signature page thereof has been duly authorized, and, on or before the Closing
Date, will be duly executed and delivered by Buyer and will be Enforceable
against Buyer.
4.1.4. Non-Contravention. No approval, consent, waiver, authorization
or other order of, and no filing, registration, qualification or recording with,
any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of Buyer in connection with the execution, delivery or
performance of this Agreement or any of the Closing Agreements and the
consummation of the transactions contemplated hereby and thereby, except for (i)
satisfaction of the requirements of the HSR Act and (ii) the items listed in the
Buyer Disclosure Letter. Except as set forth in the Buyer Disclosure Letter,
neither the execution, delivery and performance of this Agreement nor the
consummation of any of the transactions contemplated hereby (including, without
limitation, the execution, delivery and performance of the Closing Agreements
and performance by Buyer of Buyer's obligations in respect of the Buyer Common
Stock and Subordinated Debentures in accordance with its terms) does or will
constitute, result in or give rise to (i) a breach or violation or default under
any Legal Requirement applicable to Buyer or any of Buyer's Subsidiaries
(assuming the accuracy of the representations and warranties of PHL and Sellers
in Articles III, IIIA and IIIB hereof), (ii) a breach of or a default under any
Charter or Bylaws provision of Buyer or any of Buyer's Subsidiaries, (iii) the
acceleration of the time for performance of any obligation under any Contractual
Obligation of Buyer or any of Buyer's
35
Subsidiaries, (iv) the imposition of any Lien upon or the forfeiture of any
asset of Buyer or any of Buyer's Subsidiaries, or (v) a breach of or a default
under any material Contractual Obligation of Buyer or any of Buyer's
Subsidiaries.
4.1.5. Capitalization. As of March 26, 1999, 12,157,975 shares of Buyer
Common Stock were issued and outstanding. Each outstanding share of the Buyer
Common Stock is duly authorized, validly issued, fully paid and non-assessable.
There is no Contractual Obligation or Charter or Bylaw provision that obligates
Buyer to issue, purchase or redeem, or make any payment in respect of any Equity
Security.
4.1.6. Charter and Bylaws. Buyer has heretofore made available to
Sellers true and complete copies of the Charter and Bylaws of Buyer, in the form
currently in effect and as will be in effect immediately prior to Closing.
Section 4.2. Financial Statements.
4.2.1. Financial Information. Buyer has previously made available to
Sellers true and complete copies of the audited consolidated balance sheets of
Buyer as of December 31, 1998, 1997 and 1996 and the related audited
consolidated statements of income, stockholders' equity and cash flows of Buyer
for such fiscal years ended December 31, 1998, 1997 and 1996 (collectively, the
"Buyer Financial Statements").
4.2.2. Character of Financial Information. The Buyer Financial
Statements, including the notes thereto, were prepared in accordance with GAAP
consistently applied throughout the periods specified therein and present
fairly, in all material respects, the consolidated financial position and
results of operations of the Buyer and its Subsidiaries for the periods
specified therein.
Section 4.3. Change in Condition.
Except for the matters set forth in the Buyer Disclosure Letter, since
December 31, 1998:
(a) The business of the Buyer has been conducted only in the
Ordinary Course of Business (except as may be otherwise required by the terms of
this Agreement);
(b) Neither the Buyer nor any of its Subsidiaries has
(except as required or otherwise contemplated by this Agreement):
(i) made any change in its authorized or issued
capital stock or granted or issued any option, purchase right, convertible
stock, other sort of security or registration right, purchased, redeemed or
retired any shares or other securities, or declared or made any Distribution;
(ii) amended its Charter or Bylaws;
36
(iii) made or agreed to make any material change in
its customary methods of accounting practices; or
(iv) instituted, settled or agreed to settle any
material Action.
(c) There has been no amendment of any material provision of
any Equity Security of the Buyer other than as contemplated by this Agreement
and the Closing Agreements; and
(d) No Material Adverse Effect has occurred with respect to
Buyer and its Subsidiaries.
Section 4.4. Compliance with Laws. Except as set forth in the Buyer
Disclosure Letter, the Buyer's business as heretofore, and currently being,
operated has not been, and is not, in violation of, nor is Buyer or any
Subsidiary of Buyer in default under, any Legal Requirement, except for such
violations or defaults as have not had and will not have individually or in the
aggregate a Material Adverse Effect on Buyer.
Section 4.5. Litigation. Except as set forth in the Buyer Disclosure
Letter, there is no Action pending or, to the Knowledge of Buyer, threatened
with respect to Buyer or any of its Subsidiaries, which could reasonably be
expected to have a Material Adverse Effect on Buyer. There is no Action pending
or, to the Knowledge of Buyer, threatened, that seeks rescission of, seeks to
enjoin the consummation of, or otherwise relates to, this Agreement or any of
the transactions contemplated hereby and that could reasonably be expected to
have a Material Adverse Effect on Buyer or a material adverse effect on Buyer's
ability to consummate the transactions contemplated hereby. No Governmental
Order specifically directed at Buyer or any of Buyer's Subsidiaries has been
issued which has had or could reasonably be expected to have a Material Adverse
Effect on Buyer.
Section 4.6. Financing. Buyer has received and delivered to Sellers a
commitment letter with respect to fully underwritten debt financing from First
Union National Bank and First Union Capital Markets Corp. ("Lead Lender") dated
as of March 15, 1999 (the "Commitment Letter"), which is in an amount sufficient
to enable Buyer to pay the Cash Consideration. The terms of such letter have not
been altered or amended by Buyer or Lead Lender in a manner that would have a
Material Adverse Effect upon Buyer's ability to perform its obligations under
this Agreement and such letter remains in full force and effect (unless
superseded by definitive credit documentation that would not have a Material
Adverse Effect upon Buyer's ability to perform its obligations under this
Agreement).
Section 4.7. Buyer SEC Documents. Buyer has filed all required reports,
schedules, forms, statements and other documents with the Securities and
Exchange Commission since January 1, 1998 (collectively, the "Buyer SEC
Documents"). As of their respective dates, the Buyer SEC Documents complied as
to form, in all material respects, with the requirements of the Securities Act
of 1933, as amended (the "Securities Act") and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder applicable to the Buyer SEC Documents, and none of the Buyer SEC
Documents, as of their
37
respective filing dates, contained any untrue statements of a material fact or
omitted 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.
Section 4.8. Brokers. Except for ▇▇▇▇▇▇▇▇▇ & Company, LLC, no broker,
finder, investment bank or similar agent is entitled to any brokerage, finder's
or other fee, Compensation or reimbursement of expenses in connection with the
transactions contemplated by this Agreement based upon agreements or
arrangements by or on behalf of (or the conduct of) Buyer or its Affiliates.
Buyer shall be solely responsible for the payment of the fees and expenses of
▇▇▇▇▇▇▇▇▇ & Company, LLC.
ARTICLE V
Certain Covenants of the Parties
Section 5.1. Access to Information of Buyer. Prior to the Closing,
Buyer shall cause its management to be available to Sellers and their
representatives and advisors at such times, and from time to time, as Sellers
may reasonably request in connection with the transactions contemplated hereby.
Buyer will cause to be delivered to Sellers as soon as is practicable such
additional information and copies of documents, books and records relating to
Buyer as may be reasonably requested by Sellers or their respective
representatives and advisors, and all financial statements (audited and
unaudited) of Buyer and its Subsidiaries that are prepared prior to the Closing
Date. All financial statements prepared by or on behalf of Buyer after the date
hereof shall be included within the meaning of the term Buyer Financial
Statements for all purposes of this Agreement from and after their respective
dates.
Section 5.2. Access to Premises and Information of APC. Prior to the
Closing, Sellers will, and will cause APC and its Subsidiaries to, permit Buyer
and its prospective lenders listed in the Buyer Disclosure Letter (which shall
execute appropriate confidentiality agreements reasonably acceptable to PHL),
and their respective representatives and advisors, to have full access to their
premises and documents, books and records and to make copies at their expense
during APC's normal business hours of such financial and operating data and
other information with respect to APC and its Subsidiaries as Buyer, such
lenders, or any of their representatives and advisors shall reasonably request;
provided, however, that Sellers shall not be required to provide access to, or
copies of, the portions of any documents, books and records or other data that
contain information relating solely to entities other than APC and its
Subsidiaries. In addition, Sellers shall cause the management of APC and its
Subsidiaries to be available to Buyer and its prospective lenders at such times
during APC's normal business hours, and from time to time, as Buyer and its
prospective lenders may reasonably request in connection with the transactions
contemplated hereby and their review of the APC Business. Sellers will cause to
be delivered as soon as is practicable such additional information and copies of
documents, books and records relating to APC and its Subsidiaries or the APC
Business as may be reasonably requested by Buyer, such lenders, or any of their
representatives and advisors, and all financial statements, audited and
unaudited, of APC or its Subsidiaries that are prepared prior to the Closing
Date. All financial statements so provided to the Buyer after the date hereof
shall be included
38
within the meaning of the term APC Financial Statements for all purposes of this
Agreement from and after their respective dates.
Section 5.3. Confidentiality Letter. The provisions of that certain
letter agreement between Buyer and Holdings dated October 27, 1998 (the
"Confidentiality Agreement") are hereby confirmed and remain in effect and are
acknowledged to be Enforceable with respect to Buyer, PHL, Sellers, APC and each
of their Subsidiaries as fully as if each of them had been an original signatory
and to apply to all documents and materials disclosed hereunder or in the due
diligence review of any party in connection with the transactions contemplated
hereunder; provided, however, that the Confidentiality Agreement is hereby
amended so that (i) it shall terminate with respect to the obligations of Buyer
thereunder upon the consummation of the Closing and (ii) it shall not prohibit
any retention of records or disclosure made in connection with the enforcement
of any right or remedy relating to this Agreement or the transactions
contemplated hereby.
Section 5.4. Operation of APC Business Prior to the Closing Date.
(a) On and prior to the Closing Date, except as otherwise
required by this Agreement, Sellers will cause APC to conduct the APC Business
only in the Ordinary Course of Business, and Sellers will use their reasonable
commercial efforts to maintain the value of the APC Business as a going concern
and the relationships of APC and its Subsidiaries with insurance carriers,
customers, suppliers, vendors, employees, producers, agents, referral sources
and Governmental Authorities. Sellers agree to cause APC and its Subsidiaries to
make capital expenditures only in the Ordinary Course of Business up to the
Closing Date and prior to the Closing Date and to obtain the written consent of
the Buyer prior to any capital expenditure which is individually equal to or
greater than $50,000 or any capital expenditures in the aggregate of more than
$100,000, whether or not in the Ordinary Course of Business. Without in any way
limiting the generality of the foregoing, on and prior to the Closing Date,
Sellers will cause APC and its Subsidiaries to refrain from doing any of the
following without the prior written consent of Buyer:
(i) enter into any transaction with PHL, Sellers or
any of their Affiliates (other than APC or its Subsidiaries) except in the
Ordinary Course of Business or with respect to Affiliate Debt as set forth in
the Sellers' Disclosure Letter;
(ii) pay or accrue any Compensation other than in the
Ordinary Course of Business or increase any Compensation of any officer or
employee other than such increases in Compensation for individual employees as
may be made in the Ordinary Course of Business;
(iii) make any Distribution other than (w) those
required in connection with the dissolution of Poor, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
of PA, Inc., (x) the distributions set forth in the Sellers' Disclosure Letter
pursuant to Section 3.3(b); (y) distributions of cash or of any receivable
constituting Affiliate Debt in connection with the repayment or cancellation of
Affiliate Debt; and (z) distributions or contributions in connection with an
increase in or the repayment or cancellation (in whole or in part) of Debt or
intercompany advances between APC and any of its respective wholly-owned
Subsidiaries;
39
(iv) incur any Debt except in the Ordinary Course of
Business or intercompany advances between APC and any of its respective
wholly-owned Subsidiaries, except in the Ordinary Course of Business or, in the
case of ▇▇▇▇ ▇▇▇▇▇▇▇ Fairy (Holdings), Ltd., such Subsidiary may borrow, or
enter into an agreement to borrow, from APC an amount not to exceed Five Hundred
Thousand Dollars ($500,000) in order to facilitate the execution and
consummation of a Profit-Sharing Agreement with International Jewelers Fine Art
& Insurance Services Inc. ("IJB"), or incur any Lien except in the Ordinary
Course of Business;
(v) amend the Charter or Bylaws of APC or any
Subsidiary of APC other than the Articles of Association of ▇▇▇▇ ▇▇▇▇▇▇▇ Fairy
(Holdings), Ltd.;
(vi) allow any material permit or license to lapse or
terminate or fail to renew any material permit or license in accordance with
reasonably prudent business practice;
(vii) fail to operate the APC Business and maintain
APC's and its Subsidiaries' books, accounts and records in the Ordinary Course
of Business and maintain in good repair, ordinary wear and tear excepted, APC's
and its Subsidiaries' business premises, fixtures, machinery, furniture and
equipment in a manner consistent with past practice;
(viii) engage any new employee of APC or any of its
Subsidiaries for a salary in excess of $100,000 per annum;
(ix) enter into, amend in any material respect,
extend, terminate or permit any renewal notice period or option to lapse with
respect to any Lease, Lease-Out or any other Contractual Obligation that
contains either consideration to be given or performed by APC or any of its
Subsidiaries of a value exceeding $50,000 per year or a term exceeding one year
(except for the making of capital expenditures consistent with the opening
paragraph of this Section 5.4);
(x) purchase, or otherwise acquire, or enter into a
lease of any real property except for Lease renewals in the Ordinary Course of
Business;
(xi) issue any capital stock or other securities or
enter into any amendment of any material term of any outstanding security of APC
or any of its Subsidiaries, except that ▇▇▇▇ ▇▇▇▇▇▇▇ Fairy (Holdings), Ltd. may
issue or commit to issue securities if and to the extent required in order to
consummate its current merger discussions and may grant the option contemplated
under the proposed Profit-Sharing Agreement with IJB;
(xii) take any of the actions specified in any of
subsections (a) through (d) of Section 3.3; or
(xiii) consent or agree to do any of the foregoing.
Section 5.5. Certain Notices.
40
(a) On and prior to the Closing Date, Sellers will promptly
upon becoming aware thereof give Buyer written notice of any material
development that results in or constitutes a Material Adverse Effect with
respect to the APC Business, and any material breach of or inaccuracy in any
representation or warranty of PHL or Sellers contained in this Agreement.
(b) On and prior to the Closing Date, Buyer will promptly
upon becoming aware thereof give Sellers written notice of any material
development affecting Buyer, or the financial condition of Buyer and any
material breach of or inaccuracy in any representation or warranty of Buyer
contained in this Agreement.
Section 5.6. Preparation for Closing. Each party will use its best
efforts to bring about the timely fulfillment of each of the conditions
precedent to the obligations of the other parties hereto set forth in this
Agreement. Without limiting the generality of the foregoing, the parties shall
take the actions set forth below in this Section 5.6.
5.6.1. HSR Filing. Promptly upon execution and delivery of this
Agreement, each of PHL and Buyer will prepare and file, or cause to be prepared
and filed, with the appropriate Governmental Authorities, a notification with
respect to the transactions contemplated by this Agreement pursuant to the HSR
Act. Each of PHL and Buyer will promptly provide all additional information
requested, and take all other actions necessary or appropriate, to comply with
notification requirements under the HSR Act and to cause the expiration of all
waiting periods under the HSR Act.
5.6.2. Closing Agreements. Each of PHL and Sellers will enter into each
of the Closing Agreements to which it is intended to be a party, and PHL will
cause each of its Subsidiaries and Affiliates which is intended to be a party to
any Closing Agreement to enter into each Closing Agreement to which such Person
is intended to be a party. Buyer will enter into each of the Closing Agreements
to which it is intended to be a party.
Section 5.7. Tax Matters.
5.7.1. Section 338(h)(10) Election. Sellers and Buyer (i) shall join in
making timely, effective and irrevocable elections under Section 338(h)(10) of
the Code and any corresponding elections under state, local, or foreign tax law
that have substantially the same effect as an election under Section 338(h)(10)
of the Code (collectively, the "Section 338(h)(10) Elections") with respect to
APC and each of the Subsidiaries listed on attached Schedule 5.7.1 (the "APC
Electing Subsidiaries"), and (ii) shall file such elections in accordance with
applicable regulations. Sellers and Buyer agree to cooperate in all respects for
the purpose of effectuating timely and effective Section 338(h)(10) Elections,
including, without limitation, the execution and filing of any forms or returns.
41
5.7.2. Tax Indemnification.
(i) Sellers, jointly and severally, shall be liable for and
shall pay (and shall indemnify and hold Buyer harmless from and against) (x) all
Taxes with respect to APC and its Subsidiaries for any Pre-Closing Tax Period
(including, without limitation, any Taxes attributable to the Section 338(h)(10)
Election) but only to the extent the amount payable exceeds the amount accrued
therefor in the Closing Date Balance Sheet adjusted as provided in Section
5.7.2(ii) below and (y) any and all federal Income Taxes of the Affiliated Group
of which Holdings is a member imposed on APC or any of its Subsidiaries pursuant
to Section 1.1502-6 of the Treasury Regulations, in each case incurred or
suffered by Buyer, any of its Affiliates or, effective upon the Closing, APC or
any of its Subsidiaries (the sum of (x) and (y) being referred to as a "Tax
Loss"). For purposes of this Section 5.7, (A) the term "Pre-Closing Tax Period"
shall mean all taxable periods ending on or before the close of the Closing Date
and the portion ending at the close of the Closing Date of any taxable period
that includes (but does not end on) the Closing Date, and (B) the term
"Post-Closing Tax Period" shall mean all taxable periods that begin on or after
the day following the Closing Date and the portion beginning after the Closing
Date of any taxable period that includes (but does not end on) the Closing Date.
In the case of a taxable period that includes (but does not end on) the Closing
Date, the Tax attributable to the Pre-Closing Tax Period shall be the
responsibility of Sellers (and not APC and its Subsidiaries) and the Taxes
attributable to the Post-Closing Tax Period shall be the responsibility of Buyer
and APC and its Subsidiaries. Buyer shall be liable (and shall indemnify and
hold Sellers harmless from and against) any Taxes attributable to the
Post-Closing Tax Period.
(ii) For purposes of this Section 5.7.2, in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax related
to the portion of such Tax period ending on the Closing Date shall (x) in the
case of any Taxes other than Taxes based upon or related to income, sales, gross
receipts, wages, capital expenditures or expenses, be deemed to be the amount of
such Tax for the entire Tax period multiplied by a fraction, the numerator of
which is the number of days in the Tax period ending on the Closing Date and the
denominator of which is the number of days in the entire Tax period, and (y) in
the case of any Tax based upon or related to income, sales, gross receipts,
wages, capital expenditures or expenses, be deemed equal to the amount which
would be payable if the relevant Tax period ended on the Closing Date. In the
case of Income Taxes described in the preceding sentence, if either Buyer or
Sellers are adversely affected (as a consequence of an increase in liability or
a reduction of refund or other Tax attribute) that would have been available to
it if the relevant tax period had ended on the Closing Date, and the other party
is benefited from such circumstance, the party benefited shall reimburse the
party adversely affected to the extent of the benefit realized. In the event the
Closing occurs on a date other than the date of the Closing Date Balance Sheet,
for purposes of this Section 5.7.2 only, the amount accrued for Taxes in the
Closing Date Balance Sheet shall be adjusted to reflect any increase or decrease
in Taxes with respect to APC and its Subsidiaries attributable to the operation
of APC and it Subsidiaries in the Ordinary Course of Business from the date of
the Closing Date Balance Sheet through the Closing Date determined in a manner
consistent with prior practices without any change in an election or accounting
method. Such adjustment shall not include any Taxes attributable to an
"extraordinary transaction" as such term is defined in Section
1.1502(b)(2)(ii)(C) of the Treasury Regulations.
42
(iii) Any payment pursuant to this Section 5.7.2 shall be made
(x) if reflected on a Tax Return, contemporaneously with the filing of such Tax
Return and (y) in all other cases, not later than thirty (30) days after receipt
by Sellers or Buyer, as the case may be, of written notice from Buyer or Sellers
stating that any Tax Loss has been paid by Buyer or Sellers, any of its
Affiliates or, effective upon the Closing, APC or any Subsidiary of APC, and the
amount thereof and of the indemnity payment requested; provided, however, no
payment shall be made until the procedures set forth in Section 5.7.2(ii) and
5.7.5(iii) have been complied with.
(iv) If any claim or demand for Taxes in respect of which
indemnity may be sought pursuant to this Section 5.7.2 is asserted in writing
against Buyer, any of its Affiliates or, effective upon the Closing, APC or any
Subsidiary of APC, Buyer shall promptly notify PHL and Sellers of such claim or
demand within sufficient time that would allow Sellers to timely respond to such
claim or demand, and shall give PHL and Sellers such information with respect
thereto as they may reasonably request. PHL and Sellers may discharge, at any
time, their indemnification obligations under this Section 5.7.2 by paying to
Buyer the amount of the applicable Tax Loss, calculated on the date of such
payment. PHL and Sellers may, at their own expense, participate in and, upon
notice to Buyer, assume the defense of any such Action (including any Tax
audit). If PHL or Sellers assume such defense and if the relevant Action relates
to a taxable period that includes (but does not end on) the Closing Date, Buyer
shall have the right (but not the duty) to participate in the defense thereof to
the extent it relates to Taxes for which Buyer is not entitled to
indemnification hereunder and to employ counsel, at its own expense, separate
from the counsel employed by PHL or Sellers. Whether or not PHL or Sellers
choose to defend or prosecute any Action, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
(v) Except with respect to Taxes described in clause (y) of
Section 5.7.2(i), Buyer shall be liable for any Taxes pertaining to any
Post-Closing Tax Period.
5.7.3. Tax Sharing Agreements. Except as provided below in this Section
5.7.3, all Tax sharing agreements or similar agreements with respect to or
involving APC and its Subsidiaries shall be terminated as of the Closing Date
and, after the Closing Date, APC and its Subsidiaries shall not be bound thereby
or have any liability thereunder. Notwithstanding the foregoing, The Tax
Allocation Agreement between PHL and its Subsidiaries, dated November 10, 1994,
and the Connecticut Tax Allocation Agreement between Holdings and its
Subsidiaries, dated August 25, 1993, shall survive with respect to the liability
of APC and its Subsidiaries to Holdings or PHL, or the liability of Holdings or
PHL to APC and its Subsidiaries, as the case may be, in connection with any
consolidated federal income Tax Returns of the PHL Affiliated Group or any
combined Connecticut income Tax Return of the Holdings Affiliated Group for any
Pre-Closing Tax Period.
5.7.4. Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be borne equally by
Sellers and Buyer.
5.7.5. Return Filings, Refunds and Credits.
43
(i) PHL shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns of APC and its Subsidiaries for all Tax
periods ending on or before the Closing Date and shall be responsible for
remitting all Taxes reflected on such Tax Returns. Copies of all such Tax
Returns (or the relevant portion thereof relating to APC and its Subsidiaries)
shall be furnished to Buyer.
(ii) Buyer shall prepare or cause to be prepared and file or
cause to be filed on a timely basis all Tax Returns with respect to APC and its
Subsidiaries for taxable periods including (but not ending on) the Closing Date
(taking into account extensions) and shall be responsible for remitting all
Taxes reflected on such Tax Returns. If requested by PHL or Sellers, Buyer shall
furnish copies of all such Tax Returns prepared by Buyer that are prepared for a
Pre-Closing Tax Period.
(iii) Sellers and Buyer shall reasonably cooperate, and shall
cause their respective Affiliates, agents, auditors, representatives, officers
and employees reasonably to cooperate, in preparing and filing all Tax Returns
(including amended returns and claims for refund), including maintaining and
making available to each other all records reasonably required in connection
with Taxes and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes. Buyer, PHL and Sellers agree to retain or cause to be
retained all books and records pertinent to APC and its Subsidiaries until the
applicable period for assessment under applicable law (giving effect to any and
all extensions or waivers) has expired, and to abide by or cause the abidance
with all record retention agreements entered into with any taxing authority.
Buyer, PHL and Sellers shall cooperate with each other in the conduct of any
audit or other proceedings involving APC or any Subsidiary of APC for any Tax
purposes and each shall execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this subsection. Any Tax
Return prepared by PHL pursuant to Section 5.7.5(i) for which PHL intends to
seek reimbursement from Buyer or, effective after Closing, APC or any of its
Subsidiaries, for any portion of the Taxes reflected on such Tax Return or any
Tax Return prepared by, or at the direction of, Buyer pursuant to Section
5.7.5(ii) for which Buyer intends to seek indemnification from Sellers for any
portion of the Taxes reflected on such Tax Return shall be prepared in a manner
consistent with past practice and without a change of any election or any
accounting method and shall be submitted to PHL or Buyer, as the case may be, in
sufficient time to permit a reasonable review prior to the due date (including
extensions) of such Tax Return. Buyer or PHL, as the case may be, shall have the
right to review all work papers and procedures used to prepare any such Tax
Return. If Buyer or PHL, as the case may be, within twenty (20) Business Days
after delivery of any such Tax Return, notifies the other party in writing that
it objects to any items in such Tax Return, the parties shall proceed in good
faith to resolve the disputed items and, if they are unable to do so within ten
(10) Business Days, the disputed items shall be resolved (within a reasonable
time, taking into account the deadline for filing such Tax Return) with respect
to (i) items for which PHL or Buyer is solely liable by reference to such
party's treatment and (ii) all other items by the Alternative Accountants. Upon
resolution of all disputed items, the relevant Tax Return shall be adjusted to
reflect such resolution and shall be binding upon the parties without further
adjustment. The costs, fees and expense of such Alternative Accountants shall be
borne equally by PHL and Buyer.
(iv) With respect to Tax refunds pertaining to APC or its
Subsidiaries for any
44
tax period or portion thereof ending on or before the Closing Date: (a) if and
to the extent such refund is less than or equal to the corresponding asset
reflected on the Closing Date Balance Sheet, APC shall be entitled to retain the
entire amount; and (b) if and to the extent such refund exceeds the asset so
reflected, Holdings shall be entitled to such excess amount.
(v) If and to the extent any Liability reflected on the
Closing Date Balance Sheet for Taxes proves to have been overstated, Buyer shall
pay Holdings cash in the amount of such overstatement.
5.7.6. Allocation of Consideration. In connection with the Section
338(h)(10) Elections, Holdings and Buyer shall act together in good faith to
determine and agree upon: (i) the amount of the "adjusted grossed-up basis" (the
"AGUB") of the APC Shares and the shares of each of the Electing Subsidiaries
(within the meaning of Treasury Regulations Section 1.338(b)-1(c)) and (ii) the
proper allocations (the "Allocations") of the AGUB of the APC Shares among the
assets of APC, and the AGUB of the shares of the APC Electing Subsidiaries among
the assets of the APC Electing Subsidiaries, including, without limitation,
intangibles, in accordance with the IRC and the Treasury Regulations promulgated
thereunder. Unless otherwise agreed by the parties, the AGUB of the APC Shares,
allocated to the APC Electing Subsidiaries shall be allocated among the APC
Electing Subsidiaries based on their 1998 operating revenue. For this purpose,
the operating revenues shall be the sum of commissions, fees and contingent
payments less outside brokers' expenses, as reflected on the unaudited
consolidated income statements of APC and its Subsidiaries included in the
Seller Disclosure Letter. Notwithstanding the foregoing, the calculations of the
AGUB and the Allocations which the parties shall agree upon pursuant to this
Section shall not include the respective investment banking, legal, accounting
and other fees or costs incurred by each of Buyer and Sellers as a result of the
transactions contemplated by this Agreement ("Transaction Costs"). Holdings and
each APC Electing Subsidiary will calculate the gain or loss, if any, resulting
from the Section 338(h)(10) Elections in a manner consistent with the
Allocations and the amount of the APC Electing Subsidiary AGUB and will not take
any position inconsistent with the Section 338(h)(10) Elections, the Allocations
or the amount of the AGUB in any Tax Return or otherwise, except as otherwise
required by any final determination of a proposed adjustment by a taxing
authority; provided, however, that Holdings will be entitled to take into
account its Transaction Costs when calculating such gain or loss. Buyer will
allocate the AGUB of the APC Shares among the assets of APC and the AGUB of the
APC Electing Subsidiaries among the assets of the APC Electing Subsidiaries in a
manner consistent with the Allocations and will not take any position
inconsistent with the Section 338(h)(10) Elections, the Allocations or the
amount of the AGUB in any Tax Return or otherwise, except as otherwise required
by any final determination of a proposed adjustment by a taxing authority;
provided, however, that Buyer will be entitled to add its Transaction Costs to
the AGUB of the APC Shares for purposes of allocating such AGUB among the APC
Assets.
Section 5.8. Expenses of Transaction; Accounts.
5.8.1. Transaction Costs of Sellers. Except to the extent specifically
otherwise provided herein, Holdings shall pay all financial advisory, legal,
accounting and other fees and expenses incurred by Holdings, APC or any of their
Subsidiaries in connection with the transactions contemplated by this Agreement
other than normal salaries, benefits and expenses of APC
45
personnel, and ▇▇▇▇▇▇▇ shall pay all such fees and expenses incurred by him in
connection with the transactions contemplated by this Agreement; provided,
however, that with respect to APC and its Subsidiaries, Holdings shall pay only
fees and expenses incurred prior to and on the Closing Date.
5.8.2. Transaction Costs of Buyer. Except to the extent specifically
otherwise provided herein, Buyer shall bear all financial advisory, legal,
accounting and other fees and expenses incurred by Buyer in connection with the
transactions contemplated by this Agreement and all such fees and expenses
incurred by APC or its Subsidiaries from and after the Closing Date.
5.8.3. Accounts. Subject to the provisions of Section 3.8, after the
Closing Date, all monies and bank or other depository accounts arising out of,
relating to or established for the APC Business, APC or any Subsidiary of APC
shall be held by, and accessible only to, Buyer, APC or such Subsidiary of APC.
Section 5.9. Books and Records; Personnel.
(a) Sellers acknowledge and agree that from and after the
Closing Date, APC will be entitled to own and possess, subject to the next
succeeding sentence, all documents, books, records, agreements and financial
data of any sort relating to APC, as the case may be, its Subsidiaries or the
APC Business. Sellers agree to deliver and cause their Affiliates to deliver,
not later than immediately following the Closing, all such books and records in
their possession to APC, as appropriate, or, to the extent such books and
records are not readily separable from the books and records of Holdings or any
of its Affiliates relating to their businesses other than the APC Business, true
and complete copies of such books and records.
(b) From and after the Closing Date:
(i) Buyer shall, and shall cause APC to, allow PHL,
Sellers and their agents reasonable access to all books and records (other than
books and records which are subject to the attorney/client privilege or which
constitute an attorney's work product) of APC or relating to the APC Business
arising from or relating to periods prior to the Closing Date (the "Books and
Records") during normal working hours at Buyer's principal place of business or
at any location where the Books and Records are stored, and PHL and Holdings
shall have the right, at their own expense, to make copies of any Books and
Records; provided, however, that any such access or copying shall be had or done
(A) in such a manner so as not to interfere with the normal conduct of Buyer's
business or the APC Business and (B) for a legitimate business purpose (such as
tax preparation) that does not involve direct or indirect competition with the
APC Business.
(ii) Holdings shall reimburse Buyer, APC and its
Subsidiaries for the reasonable out-of-pocket expenses reasonably incurred by
any of them in performing the covenants contained in this Section 5.9. The
parties agree that the confidentiality provisions of the Confidentiality
Agreement shall apply to the information disclosed pursuant to this Section 5.9.
46
Section 5.10. Use of Certain Names and Marks. PHL and Sellers
acknowledge and confirm that: (i) from and after the Closing Date, neither PHL,
Sellers nor their Affiliates has or shall have any rights in the current legal
names and current assumed names of the Subsidiaries of APC (except as otherwise
provided in this Section 5.10) and those trademarks to be listed in the Sellers'
Disclosure Letter, and all confusingly similar variations of the foregoing
(collectively, the "APC Marks"), and (ii) neither PHL, Sellers nor any of their
Affiliates will contest the ownership or validity of any rights of Buyer or APC
and its Subsidiaries in or to any of the APC Marks, or registrations (or
applications for registration) thereof; provided, however, neither Buyer, APC or
its Subsidiaries shall have any rights whatsoever in and to the service ▇▇▇▇ and
trade name "PHOENIX" and the service ▇▇▇▇ and trade name "AMERICAN PHOENIX,"
except as otherwise expressly provided in the Trademark License Agreement (the
"Trademark License Agreement") to be entered into at the Closing between PHL and
APC, in substantially the form attached hereto as Exhibit J.
Section 5.11. Further Assurances. Each party, upon the request from
time to time of any other party hereto after the Closing, and without further
consideration, will do each and every act and thing as may be necessary or
reasonably requested to consummate the transactions contemplated hereby in an
orderly fashion.
Section 5.12. Reimbursement by the Parties. To the extent that any
party to this Agreement or its Subsidiaries receives any payment after the
Closing which belongs in whole or in part to another Person or any of its
Subsidiaries, it shall promptly pay over such payment to such other Person. In
the case of errors and omissions claims made prior to Closing, if and to the
extent any payment received (i) was reflected as an asset in determining APC's
Tangible Net Worth at Closing, then to that extent such payment shall be
retained by or paid to APC, (ii) was reflected as a Liability in determining
APC's Tangible Net Worth at Closing, then to that extent such payment shall be
retained by or paid to Holdings or PHL, or (iii) was not reflected as an asset
or a Liability in determining APC's Tangible Net Worth at Closing, then to the
extent any Person has paid or is liable to pay all or any part of the sums
received to another Person, the payment under such errors and omissions coverage
shall be paid to the Person who made, or has an obligation to make, such
payment.
Section 5.13. Financial Statement Deliveries.
5.13.1. Financial Statements of APC. As soon as is reasonably
practicable following the date hereof and in any event not later than three (3)
Business Days after their preparation in final form, and in the case of clause
(a) below, no later than April 23, 1999, Sellers shall cause to be delivered to
Buyer, at the cost and expense of Sellers, each of the following:
(a) The unaudited consolidated balance sheet of APC and its
Subsidiaries as of March 31, 1999 and the related statements of earnings,
stockholders' equity and cash flows for the quarter then ended; and
(b) Such additional unaudited financial statements of APC
and its Subsidiaries as are prepared prior to the Closing Date and, after the
Closing Date, such additional financial statements of APC and its Subsidiaries
for periods prior to the Closing Date as are in Holdings'
47
possession. Nothing in this paragraph (b) shall obligate Holdings to prepare any
financial statement that would not have been prepared absent Buyer's request.
Sellers shall cause all financial statements (including the notes
thereto) referred to in this Section 5.13.1 to be prepared in accordance with
GAAP consistently applied throughout the periods specified therein, and to
present fairly in all material respects, the consolidated financial position and
results of operations of APC and its Subsidiaries for the periods specified
therein, subject in the case of financial statements for interim periods to an
absence of footnotes and to normal year-end audit adjustments which will not in
the aggregate be material. Sellers shall use their best efforts to cause
PricewaterhouseCoopers to consent in writing (and to deliver such consent to
Buyer) to the inclusion of its report on the historical audited financial
statements in any filings made by Buyer under the Securities Act or the Exchange
Act.
5.13.2. Financial Statements of Buyer. As soon as is reasonably
practicable following the date hereof and in any event not later than three (3)
Business Days after their preparation in final form and, in the case of clause
(a) below, no later than April 23, 1999, Buyer shall cause to be delivered to
Sellers, at the cost and expense of Buyer, each of the following:
(a) The unaudited consolidated balance sheet of the Buyer as
of March 31, 1999 and the related statements of earnings, stockholders' equity
and cash flows for the quarter then ended; and
(b) Such additional unaudited financial statements of the
Buyer as are prepared prior to the Closing Date.
Buyer shall cause all financial statements (including the notes
thereto) referred to in this Section 5.13.2 to be prepared in accordance with
GAAP consistently applied throughout the periods specified therein, and to
present fairly in all material respects, the consolidated financial position and
results of operations of Buyer for the periods specified therein, subject in the
case of financial statements for interim periods to an absence of footnotes and
to normal year-end audit adjustments which will not in the aggregate be
material.
Section 5.14. Errors and Omissions Insurance. Buyer will use its best
efforts to include APC in its errors and omissions coverage, including full
prior acts coverage, for all periods arising on or after the Closing, provided
such terms are acceptable to Buyer. Alternatively, Buyer may request APC to
continue its existing coverage, including full prior acts coverage, or procure a
limited term tail policy. In either circumstance, Holdings shall pay the
appropriate carrier one (1) year's premiums for that portion of the coverage
attributable to APC. All premiums attributable to such insurance coverage for
periods commencing on or after that date which is one (1) year after the Closing
shall be payable by Buyer. The foregoing assumes that the errors and omissions
coverages for APC will be upon substantially the same terms as APC currently
maintains, including, without limitation, APC's current limits and deductibles.
Section 5.15. No Solicitation or Employment; Interference in
Relationships. Except as provided by law, or as otherwise contemplated by this
Agreement with respect to certain employees of APC, for a period beginning on
the date hereof and ending on the second
48
anniversary of the Closing Date, neither PHL, Holdings nor any of their
Affiliates shall solicit to employ or employ any individual who is an employee
(other than secretarial or clerical employee) of APC or any of its Subsidiaries
on the date hereof. PHL, Holdings and their Affiliates, from and after the
Closing Date, will take no action and make no statement to discourage the
continuation of any of the existing business relationships of APC or any of its
Subsidiaries.
Section 5.16. No Solicitation of Proposals or Offers. The parties
hereto shall not, after the date hereof and before the Closing Date, directly or
indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate or encourage submission of proposals or offers from any Person
relating to any acquisition or purchase of all or (other than in the Ordinary
Course of Business) a substantial portion of the assets of, or any equity
interest in, Buyer, on the one hand, or APC or any of its Subsidiaries, on the
other hand, or any business combination involving any of them or, except to the
extent required by fiduciary obligations under Legal Requirements or case law as
advised by counsel, participate in any negotiations regarding, or furnish to any
other Person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to do or seek any of the foregoing. The parties
shall, to the extent permitted by the terms of each such party's confidentiality
agreements with other Persons existing on the date hereof, promptly advise one
another if any such proposal or offer, or any inquiry or contact with any Person
with respect thereto, is made, shall promptly inform one another of all the
terms and conditions thereof, and shall furnish to one another copies of any
such written proposal or offer and the contents of any communications in
response thereto. Neither party shall waive any provisions of any "standstill"
agreements between such party and any other Person, except to the extent that
such waiver is, as advised by counsel, required by fiduciary obligations under
Legal Requirements.
Section 5.17. Noncompetition Covenant.
5.17.1. Definitions. For purposes of this Section 5.17 only, the
following terms shall have the following meanings:
"Acquire" shall mean and include the act of acquiring the stock or
assets of another Person, or merging or otherwise combining through a business
combination with another Person.
"Controlling" shall mean the power to direct the management and
policies of a Person, directly or indirectly, whether through the ownership of
voting securities, or by contract or otherwise.
"Incidental Business" shall mean an insurance agency or broker that, in
the twelve (12) months preceding its acquisition (i) derived less than fifty
percent (50%) of its revenues from the sale of Property-Casualty Insurance in
the United States, and (ii) had consolidated revenues arising from the sale of
Property-Casualty Insurance in the United States equal to or less than Five
Million Dollars ($5,000,000).
"Person" shall mean a natural person or a corporation, partnership,
limited liability company or any other business entity, domestic or foreign.
49
"Property-Casualty Business" shall mean an insurance agency or broker
(but not an insurance or reinsurance company) organized in the United States
that derived during the preceding calendar year fifty percent (50%) or more of
its revenues from the sale of Property-Casualty Insurance in the United States.
"Property-Casualty Insurance" shall mean those forms of insurance
denominated as such under applicable state insurance laws, but shall not include
any type of insurance which may be underwritten by a duly licensed life
insurance company, such as, for example and not in limitation, stop-loss
insurance.
"Restricted Period" shall mean the period from the Closing Date until
the later of: (i) the third anniversary of the Closing Date, or (ii) that date
upon which PHL, Holdings and its Affiliates (other than, as provided in the
Voting and Standstill Agreement, Phoenix Investment Partners, Ltd. and its
Subsidiaries) no longer hold that number of Adjusted Outstanding Shares (as
defined in the Voting and Standstill Agreement) equal to at least ten percent
(10%) of the issued and outstanding Buyer Common Stock.
5.17.2. Non-Compete Covenant. PHL and Holdings agree that, during the
Restricted Period, without the prior written consent of Buyer, PHL, Holdings and
their Affiliates (except as otherwise provided in the Voting and Standstill
Agreement with respect to Phoenix Investment Partners, Ltd. and its
Subsidiaries) shall not, directly or indirectly, through ownership of an
interest in any Person in any country, state, locality or territory, domestic or
foreign, acquire an ownership interest in a Property-Casualty Business or an
Incidental Business except as otherwise provided hereafter.
5.17.3. Exceptions to Covenant. Section 5.17.2 notwithstanding, during
the Restricted Period, PHL, Holdings and their Affiliates may, without the prior
consent of Buyer:
(i) Acquire an interest of less than five percent (5%) of the
outstanding capital stock of a publicly-traded company that owns or constitutes
a Property-Casualty Business or an Incidental Business;
(ii) Acquire less than a Controlling interest in an Incidental
Business;
(iii) Acquire a Controlling interest in an Incidental Business,
subject to the limitations in clause (i) of Section 5.17.4;
(iv) organize or form a new, start-up Property-Casualty Business,
subject to the limitations in clause (i) of Section 5.17.4 and, provided that,
if such start-up Property-Casualty Business during any calendar year derives
revenues arising from the sale of Property-Casualty Insurance in the United
States that exceed Five Million Dollars ($5,000,000), then, at such time, PHL,
Holdings or their Affiliates, as the case may be, shall provide Buyer with a
right of first refusal with respect to such portion (designated by the selling
party) of such Property-Casualty Business as is necessary in order to reduce
such revenues below an amount equal to Five Million Dollars ($5,000,000). In
such case, PHL, Holdings or their Affiliates, as the case may be (the
"Offeror"), shall send a notice to Buyer which (a) identifies the start-up
Property-Casualty
50
Business or portion thereof for which the right of first refusal exists, (b)
provides relevant summary financial information pertaining to the business of
such Property-Casualty Business, and (c) states the offering price and any other
material terms for such business. Buyer shall have sixty (60) days from receipt
of the notice hereunder in which to elect whether to acquire the business
identified in clause (a), which election shall be evidenced by a writing
delivered to the Offeror by the close of business. In the event Buyer does not
timely exercise its rights hereunder, or, having exercised its rights, fails to
close the sale in a timely manner, the Offeror shall be entitled to sell the
business identified in clause (a) upon the terms such business was offered to
Buyer pursuant to this paragraph, but may not materially modify such terms
without reoffering such business to Buyer hereunder upon the proposed new terms.
(v) Acquire less than a Controlling Interest in any
Property-Casualty Business, subject to the limitations in clause (i) of Section
5.17.4; and, provided that, in the twelve (12) calendar months preceding its
acquisition, such Property-Casualty Business did not have revenues arising from
the sale in the United States of Property-Casualty Insurance in an amount
exceeding Five Million Dollars ($5,000,000); and
(vi) Acquire a Controlling Interest in any Property-Casualty
Business, subject to the limitations in clause (i) of Section 5.17.4 and to
Buyer's rights, if any, pursuant to Sections 5.17.5 and 5.17.6 and provided that
such Property-Casualty Business did not, during the twelve (12) calendar months
preceding such acquisition, have revenues from the sale in the United States of
Property-Casualty Insurance in an amount exceeding Five Million Dollars
($5,000,000).
5.17.4. Limitations.
(i) Restrictions on Aggregate Revenues. PHL, Holdings and their
Subsidiaries shall not acquire any Person pursuant to clauses (iii), (iv), (v)
or (vi) of Section 5.17.3 if such acquisition would cause the aggregate
commission and fee revenue obtained by PHL, Holdings and their Affiliates from
all Property-Casualty Businesses and Incidental Businesses Acquired during the
Restricted Period pursuant to clauses (iii) through (vi) of Section 5.17.3, and
from all Property-Casualty Businesses organized by PHL, Holdings and their
Affiliates during the Restricted Period, which revenue is attributable to the
sale of Property-Casualty Insurance in the United States, to exceed Twenty
Million Dollars ($20,000,000) for calendar year 1999 and, for subsequent years,
such number increased by three percent (3%) for each year after 1999 to and
including the calendar year of measurement.
(ii) Restriction on Combinations. During the Restricted Period,
neither PHL, Holdings nor their Affiliates shall merge or otherwise combine the
management and operations of any Property-Casualty Businesses or any Incidental
Businesses with those of any other Property-Casualty Business or any Incidental
Business Acquired during the Restricted Period, unless the resulting Person
qualifies, at the time of such combination, as an Incidental Business.
5.17.5. Option. If during the Restricted Period, PHL, Holdings or any
of their Affiliates wishes to Acquire, directly or indirectly, a Controlling
interest in a Property-Casualty Business pursuant to clause (vi) of Section
5.17.3 above, it may do so provided: (i) it offers an option to Buyer to
acquire, in the optionor's discretion, the whole Property-Casualty Business
being
51
acquired or only that portion thereof that causes such business to fail to
qualify as an Incidental Business; and (ii) the limitation contained in clause
(i) of Section 5.17.4 shall continue to be satisfied. The offer pursuant to this
Section 5.17.5 to Buyer shall be in the form of a notice providing (a)
identifying information as to the Property-Casualty Business or portion thereof
that the offeror is proposing to sell to Buyer, (b) relevant summary financial
information pertaining to the business identified in clause (a), and (c) the
purchase price for such business, determined as provided hereinafter. Buyer
shall have sixty (60) days from receipt of the notice hereunder in which to
elect whether to exercise its option, which exercise shall be evidenced by a
writing delivered to the Offeror by the close of business on the sixtieth day
following receipt of the notice of option, but if such date is not a day on
which Buyer is open for business, then by the close of business on its first
business day thereafter. The purchase price under this Section 5.17.5 shall be
the price Offeror would be paying for the Property-Casualty Business or, if only
a portion thereof is subject to the option hereunder, then the purchase price
shall be calculated on a pro rata basis. If Buyer does not accept the offer, or,
having accepted the offer, fails to settle in a timely manner, then the Offeror
may Acquire such business on the terms and conditions of the offer presented to
Buyer; provided that, PHL, Holdings or any of their Affiliates, as the case may
be, shall dispose of the whole Property-Casualty Business being Acquired or only
that portion thereof that causes such business to fail to qualify as an
Incidental Business within twenty-four (24) calendar months following its
acquisition. During any period pending the disposition of such business to a
third party pursuant to the terms of this Section 5.17.5, PHL, Holdings or their
Affiliates, as the case may be, shall pay to Buyer, on a net basis, the revenue
generated by such Property-Casualty Business during the period from the date
that Buyer elects not to purchase such business through the date on which such
Property-Casualty Business or portion thereof is sold by PHL, Holdings or their
Affiliates, as the case may be.
5.17.6. Right of First Refusal. If during the Restricted Period, PHL,
Holdings or any of their Affiliates wishes to acquire, directly or indirectly, a
Controlling interest in a Property-Casualty Business where such acquisition
would cause them to fail to comply with the limitation contained in clause (i)
of Section 5.17.4, they may do so, provided they sell, subject to providing
Buyer with a right of first refusal with respect to, such portion (designated by
the selling party) of the aggregate Property-Casualty Businesses acquired during
the Restricted Period as necessary in order to comply with such limitation once
the sale that is subject to such right is consummated. PHL, Holdings or their
Affiliates, whichever of them wishes to acquire a Property-Casualty Business
subject to a right of first refusal hereunder, shall send a notice to Buyer
which (i) identifies the Property-Casualty Business or portion thereof it wishes
to sell, (ii) provides relevant summary financial information pertaining to the
business identified in clause (i), and (iii) states the offering price and any
other material terms for such business. Buyer shall have sixty (60) days from
receipt of the notice hereunder in which to elect whether to acquire the
business identified in clause (i), which election shall be evidenced by a
writing delivered to the Offeror by the close of business. In the event Buyer
does not timely exercise its rights hereunder, or, having exercised its rights,
fails to close the sale in a timely manner, the Offeror shall be entitled to
sell the business identified in clause (i) upon the terms such business was
offered to Buyer pursuant to this paragraph, but may not materially modify such
terms without re-offering such business to Buyer hereunder upon the proposed new
terms.
52
5.17.7. Non-Circumvention. PHL and Holdings hereby agree that they and
their Affiliates will not attempt to circumvent the intent of the foregoing
provisions of this Section 5.17 through any joint venture agreement or other
business arrangement. The foregoing notwithstanding, PHL, Holdings and their
Affiliates shall be permitted to do the following, without being deemed to be in
violation of this paragraph 5.17.7:
(i) Acquire, start-up or continue to own an interest in an insurance
or reinsurance company engaged in underwriting any type of insurance or
reinsurance, including, without limitation, Property-Casualty Insurance, and
except as expressly prohibited by this Section 5.17, without regard to what
method such company utilizes to distribute its products, subject to the
limitations below;
(ii) Acquire a block of insurance or reinsurance of any kind or
underwrite any type of insurance;
(iii) hire or otherwise retain or continue to employ or contract with
any Person who sells Property-Casualty Insurance;
(iv) enter into or continue any kind of arrangement with any Person,
including a Property-Casualty Business, relating to the marketing or sale of any
products or services, subject to any applicable limitations in the case of
Persons organized, Acquired or owned pursuant to clause (i) above, issued or
underwritten by PHL, Holdings or their Affiliates; and
(v) lease or otherwise make available on an Affiliate's premises
space for an insurance agent to sell insurance, including Property-Casualty
Insurance.
In the event PHL, Holdings or their Affiliates Acquire or own any
insurance or reinsurance company engaged in the sale of Property-Casualty
Insurance which distributes such insurance through Property-Casualty Businesses
and Incidental Businesses it owns, the aggregate revenues received on a
consolidated basis by such insurer or reinsurer in any calendar year which are
attributable to the sale by such businesses of Property-Casualty Insurance in
the United States shall not, when aggregated with the revenues counted for
purposes of clause (i) of Section 5.17.4 above, exceed Thirty Million Dollars
($30,000,000) nor shall the aggregate of such revenues received by such insurer
or reinsurer from any single Property-Casualty Business or Incidental Business
they own exceed Ten Million Dollars ($10,000,000).
5.17.8. Remedies.
(i) Liquidated Damages. If PHL, Holdings or their Affiliates breach
the limitations contained in clause (i) of Section 5.17.4, and Buyer, in its
sole discretion, deems such breach to be an isolated and incidental violation,
then in lieu of seeking any other remedies available to Buyer under this
Agreement and applicable law, Buyer may elect to cause PHL, Holdings or their
Affiliates, as the case may be, to pay to Buyer as liquidated damages an amount
equal to the net commission revenue (after taxes and expenses) generated in the
United States for the period from the date of default until the date of payment,
which revenue is attributable to the Incidental Business, Property-Casualty
Business or portion thereof that exceeds such limitations. The
53
foregoing sum is agreed by the parties to be in the nature of liquidated damages
for the breach of this Section 5.17 and is acknowledged to be reasonable in
light of the nature of this Agreement and the difficulty in determining the
actual damages which Buyer would suffer in connection with a breach of this
Section 5.17.
(ii) Specific Performance. PHL and Holdings acknowledge that Buyer
and its Affiliates will be irrevocably damaged if all of the provisions of this
Section 5.17 are not specifically enforced and accordingly, PHL and Holdings
each agree that, in addition to any other relief to which Buyer and its
Affiliates may be entitled, Buyer and its Affiliates will be entitled to seek
and obtain injunctive relief from a court of competent jurisdiction for the
purpose of restraining PHL and Holdings from any actual or threatened breach of
this Section 5.17, except as provided in clause (iii) below.
(iii) Other. In the event PHL, Holdings or their Affiliate would be in
violation of this Section 5.17 as a consequence of a merger or other business
combination whose primary purpose is not the acquisition of one or more
Property-Casualty Businesses, then the acquiring party or its relevant Affiliate
shall, at its option, either: (a) within six (6) months after consummation of
such transaction sell such number of Buyer Common Shares as to trigger the
termination of the Restricted Period, as provided in Section 5.17.1 above; or
(b) have twenty-four (24) months after consummation of such transaction in which
to either divest itself of a sufficient amount of Incidental Businesses,
Property-Casualty Businesses or portions thereof or to otherwise reduce the
revenues from the sale of Property-Casualty Insurance in the United States it
derives therefrom in order to come into compliance with the covenants contained
in this Section 5.17. If and to the extent PHL, Holdings and their Affiliates
fail to meet the requirements set forth above in this clause (iii), Buyer shall
be entitled to liquidated damages pursuant to clause (i) of Section 5.17.8, but
shall not be entitled to injunctive relief preventing or reversing the merger or
other business combination.
5.17.9. Validity of Covenant. PHL and Holdings agree that all of the
covenants contained in this Section 5.17 are reasonably necessary to protect the
legitimate interests of Buyer, are reasonable with respect to time and territory
and do not interfere with the interests of the public and that the descriptions
of the covenants contained in this Section 5.17 are sufficiently accurate and
definite to inform each of them of the scope of the covenants. PHL and Holdings
agree that the consideration to be received by Sellers hereunder, upon receipt
of such consideration at the Closing, will be full, fair and adequate to support
the obligations of PHL and Holdings hereunder.
5.17.10. Amendment of Section 5.17. PHL, Holdings and ▇▇▇▇▇▇▇
acknowledge the difficulty of agreeing upon a non-competition covenant of the
kind contemplated herein which will have a long duration and yet should remain
relevant in the ever-evolving financial services marketplace. For this reason,
without the intent of detracting in any way from the validity of this Section
5.17, the parties agree that the provisions of this Section 5.17 may be amended
through a writing signed by all of Buyer, PHL and Holdings, without any consent
thereto by ▇▇▇▇▇▇▇.
Section 5.18. Payment of Certain Outstanding Debt; Capital
Contribution.
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(a) At the Closing, Buyer shall make a payment to The First
National Bank of Boston, in an amount sufficient to satisfy all existing
indebtedness owed by APC and its Subsidiaries, provided that, such payment shall
not exceed $48,328,012. Following such payment, Holdings shall cooperate with
the Buyer to (a) obtain from The First National Bank of Boston the release of
all collateral securing the indebtedness of APC and its Subsidiaries to such
bank, including assets pledged and mortgaged by APC and its Subsidiaries, and
(b) obtain originals of all credit agreements and related loan documents
necessary to effectuate the preceding items.
(b) At or prior to Closing, PHL or Holdings shall contribute
capital to APC in an amount equal to the greater of (i) $19,805,898 or (ii) an
amount sufficient to satisfy all indebtedness of APC and its Subsidiaries
outstanding as of the Closing Date to The First National Bank of Boston and
Deutsche Bank after effect is given to the payment of Buyer under Section
5.18(a).
Section 5.19. Assumption of Excluded Liabilities by Holdings or PHL;
Purchase of Owned Real Property. Prior to the Closing Date, Holdings or PHL
shall assume all of the Excluded Liabilities. In connection therewith, Holdings
or PHL shall purchase from APC or its Subsidiary, as applicable, each parcel of
Owned Real Property. In addition, to the extent provided in Section 2.2.3, PHL
and Holdings shall indemnify Buyer (and after Closing, APC and its Subsidiaries)
for any Losses incurred by Buyer (and after Closing, APC and its Subsidiaries)
with respect to any severance payment obligations required to be made by Buyer,
APC or their Subsidiaries after the Closing to any employees employed by APC at
the APC Headquarters whose employment is terminated after the Closing.
Section 5.20. Financing. Prior to the Closing, Buyer shall use its best
efforts to satisfy all of the terms and conditions set forth in the Commitment
Letter. If the lenders shall have terminated the Commitment Letter or definitive
loan documentation contemplated thereby for any reason other than the occurence
of an event or change constituting a Material Adverse Effect with respect to
APC, Buyer shall use its best efforts to obtain substitute financing by not
later than June 30, 1999.
Section 5.21. Assumption of Certain Liabilities by Buyer. Buyer and APC
shall indemnify Holdings, PHL and their Subsidiaries for all Losses suffered by
any of Holdings, PHL and their Subsidiaries as a result of the use by APC or its
Subsidiaries after the Closing of any name pursuant to the Trademark License
Agreement and use after the Closing of any forms, booklets and other written
materials used by APC or its Subsidiaries prior to the Closing in the conduct of
the APC Business. From and after the Closing Date, Buyer shall also be liable
for all Losses incurred by Buyer, APC and their Subsidiaries arising out of or
relating to the termination after the Closing of any employee of APC (except as
provided in Section 2.2.3) or of any Subsidiaries of APC and shall indemnify
PHL, Holdings and their Affiliates for any Losses reasonably incurred by them in
connection with or as a result of any such termination, including, without
limitation, any payments in the nature of severance ultimately required to be
paid to any such terminating employees (except as provided in Section 2.2.3).
From and after the Closing Date, Buyer shall take any and all actions necessary
to comply with WARN and shall indemnify PHL, Holdings and their Affiliates
against all Losses they incur as a result of any actual or alleged failure of
Buyer or APC to take such actions.
Section 5.22. Collection of Accounts Receivable. Following the Closing
Date, Buyer
55
shall, consistent with its customary business practices and in the Ordinary
Course of Business, use its best efforts to collect the accounts receivable of
APC and its Subsidiaries that are outstanding as of the Closing Date
(collectively, the "Closing Date Accounts Receivable"). On a monthly basis for a
period of one year from the Closing Date, Buyer shall deliver to Holdings a
computer generated accounts receivable aging report with respect to the Closing
Date Accounts Receivable, which shall include the identity of delinquent
accounts by agency office. One year from the Closing Date, Buyer shall notify
Sellers of any uncollected Closing Date Accounts Receivable and shall provide
Sellers with reasonable evidence of such determination. Within fifteen (15) days
from Buyer's notification of the uncollected Closing Date Accounts Receivable,
if any, Sellers, jointly and severally, shall pay to Buyer, on a
dollar-for-dollar basis, the amount by which the uncollected Closing Date
Accounts Receivable exceed the sum of (a) the accounts receivable reserve set
forth on the Closing Date Balance Sheet, plus (b) $125,000. Any dispute
regarding the calculation of uncollected Closing Date Accounts Receivable shall
be submitted to the Alternative Accountants for resolution, in which case, (i)
Sellers and Buyer will furnish to such accounting firm such work papers and
other documents and information relating to the disputed issues as such
accounting firm may request and are available to Sellers and Buyer, and will be
afforded an opportunity to present to such accounting firm any material relating
to the determination and to discuss the determination with such accounting firm,
(ii) a determination by such accounting firm, as set forth in a notice delivered
to both parties by such accounting firm no later than thirty (30) days after the
issues in dispute are submitted to such accounting firm, will be binding and
conclusive on the parties, and (iii) Buyer, on the one hand, and Sellers, on the
other, will each bear fifty percent (50%) of the fees of such accounting firm
for such determination. Upon Buyer's receipt of any reimbursement pursuant to
this Section 5.22, Buyer shall promptly assign to Holdings all of the
uncollected Closing Date Accounts Receivable.
Section 5.23. Audit of Accounts Payable. Buyer shall, as of one hundred
twenty (120) days following the Closing Date, audit the accuracy and
completeness of the accounts payable of APC and its Subsidiaries as reflected on
the Closing Date Balance Sheet and shall notify Sellers of any errors, positive
or negative, in the statement of accounts payable in the Closing Date Balance
Sheet. If the actual accounts payable were less than the amount reflected on the
Closing Date Balance Sheet, then Buyer shall reimburse Holdings in the amount of
such overstatement. If the actual accounts payable exceeded the amount reflected
on the Closing Date Balance Sheet, then Sellers, jointly and severally, shall
reimburse Buyer in the amount of such understatement. Any amount due hereunder,
whether due from Sellers or Buyer, shall be paid within thirty (30) days from
Buyer's notification to Sellers of the results of such audit, unless Sellers, in
good faith, dispute such results. Any dispute regarding the audit of accounts
payable shall be submitted to the Alternative Accountants for resolution, in
which case, (i) Sellers and Buyer will furnish to such accounting firm such work
papers and other documents and information relating to the disputed issues as
such accounting firm may request and are available to Buyer or Sellers, and will
be afforded an opportunity to present to such accounting firm any material
relating to the determination and to discuss the determination with such
accounting firm, (ii) a determination by such accounting firm, as set forth in a
notice delivered to both parties by such accounting firm no later than thirty
(30) days after the issues in dispute are submitted to such accounting firm,
will be binding and conclusive on the parties, and (iii) Buyer, on the one hand,
and Sellers, on the other, will each bear fifty percent (50%) of the fees of
such accounting firm for such determination.
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Section 5.24. Certain Leases. Buyer shall indemnify Holdings and PHL
for and hold them harmless from any Losses incurred by APC, Holdings or PHL
after the Closing as a result of the failure to obtain prior to the Closing any
required consent to assign the following leases: St. Davids Center Indenture of
Lease between Wyeth Laboratories Inc. and American Brokerage Corporation of
Philadelphia, dated November 15, 1990; and Office Lease between Magnolia
Associates, Ltd. and American Phoenix Corporation, dated August 2, 1995.
Section 5.25. Acquisition of Atlanta Subsidiary. In the event that the
Closing has not occurred on or before April 30, 1999, Buyer and Sellers will
enter into a stock purchase agreement effective as of such date, in a form that
is mutually acceptable to Sellers and Buyer, pursuant to which all of the issued
and outstanding capital stock of American Phoenix Insurance Agency of Georgia, a
Georgia corporation ("APIA Georgia") will be acquired by Buyer. Such agreement
shall provide for a purchase price equal to APIA Georgia's revenue from the
period of May 1, 1998 through May 1, 1999. Such purchase price, together with
interest from May 1, 1999 to the date of closing at a rate of seven percent (7%)
per annum shall be payable on the date this Agreement is validly terminated
pursuant to Article X hereof; provided that, the purchase price shall be deemed
paid in full upon the Closing hereunder. The purchase price agreement will
provide that, subject to the terms thereof, the purchase price shall be payable
by Buyer as follows: fifty percent (50%) by wire transfer or certified check at
closing, and fifty percent (50%) payable on May 1, 2000 by wire transfer or
certified check. The purchase agreement shall contain representations,
warranties and indemnities similar in substance and scope to those set forth in
this Agreement, but the parties acknowledge and agree that such provisions shall
be modified where necessary to reflect the smaller size of such transaction. The
purchase agreement shall provide that, from May 1, 1999 and thereafter, Buyer
shall be responsible for all salaries and benefits of, and all severance
obligations with respect to, all APIA Georgia employees.
Section 5.26. Financial Position of Holdings. Holdings shall deliver a
copy of its annual consolidated balance sheet to Buyer for each calendar year
through 2003. PHL and Holdings shall notify Buyer immediately of any event that
has, or reasonably could be expected to have, a Material Adverse Effect on
Holdings, and in the event of such a Material Adverse Effect, PHL shall, upon
the request of Buyer, guarantee the payment and performance of the indemnity
obligations of Sellers hereunder, and shall execute and deliver to Buyer an
instrument in form reasonably satisfactory to Buyer to evidence such guarantee.
Section 5.27. Cooperation. From and after the Closing, the parties will
cooperate and cause their respective Subsidiaries to cooperate to the extent
reasonably required for each party to appropriately defend against any Action
brought or threatened to be brought against another party hereto or its
Subsidiaries. Such cooperation shall include, without limitation, making records
and personnel available during normal business hours. The party seeking such
cooperation shall bear all reasonable costs of travel and lodging reasonably
incurred by the Person whose cooperation is requested.
Section 5.28. Guarantees. The parties acknowledge and agree that
Holdings and PHL are each, individually, the guarantor of certain obligations of
APC and its Subsidiaries to certain non-bank Persons identified in Item 5.28 of
Sellers' Disclosure Letter. In consideration for Holdings and PHL agreeing to
allow such guarantees to remain in full force and effect after the Closing,
Buyer agrees to defend, indemnify and hold Holdings, PHL and their Affiliates
harmless
57
from and against all Actions arising after Closing as a result of or in
connection with such guarantees and the underlying obligations of APC and its
Subsidiaries.
Section 5.29. Record Retention. Buyer, PHL and Sellers agree, in
addition to abiding by the covenants contained in Section 5.9 with respect to
books and records, to retain or cause to be retained all books and records
pertaining to Actions currently pending against APC or any APC Subsidiary and
not to destroy such until the later of: (a) the running of the applicable
statutes of limitation; or (b) termination of the Action by verdict, settlement
or otherwise and the completion of all appeals therefrom or the termination of
all periods for appeal. Buyer, PHL and Sellers also agree to retain or cause to
be retained all books and records pertaining to APC or its Subsidiaries until
the later of: (i) passage of the relevant survival period under Section 8.3 of
this Agreement for bringing an Action; or (ii) ten (10) years from the date
hereof. The foregoing notwithstanding, nothing herein shall be deemed to condone
or require: (x) the destruction of books or records in contravention of
applicable Legal Requirements; or (y) the destruction of any records commonly
held for permanent retention such as, without limitation, minute books and stock
ledgers.
Section 5.30. Minority Interests. Within sixty (60) days after the
Closing, Buyer will offer to purchase the outstanding shares of minority
interests in the APC Subsidiaries outstanding as of the Closing Date at a price
calculated in accordance with the applicable formula in the respective buy-sell
agreements entered into by such minority shareholders; provided that, Buyer,
may, in its sole discretion, determine whether to make such an offer to the
minority shareholder(s), if any, of ▇▇▇▇ ▇▇▇▇▇▇▇ Fairy (Holdings), Ltd. In the
event that any holder of minority interests in the APC Subsidiaries elects not
to sell its minority shares to Buyer, Buyer shall have no further obligation
with respect to such minority shareholders under this Agreement, except as
otherwise provided.
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ARTICLE VI
Conditions to the Obligation of Buyer to Close
The obligations of Buyer at the Closing to purchase the APC Shares, to
issue the Buyer Common Shares and the Subordinated Debentures, to pay the Cash
Consideration and to execute and deliver the Closing Agreements to which it is
party are subject to the satisfaction, at or prior to the Closing, of each of
the following conditions, compliance with which, or the occurrence of which, may
be waived prior to the Closing in writing by Buyer in its sole discretion:
Section 6.1. Representations, Warranties and Covenants.
6.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of PHL and Sellers contained in this Agreement or
any Closing Agreement that include qualifications as to materiality or Material
Adverse Effect shall be true and correct as of the Closing Date and all other
representations and warranties of PHL and Sellers contained in this Agreement or
any Closing Agreement shall be true and correct in all material respects as of
the Closing Date, in each case with the same force and effect as if such
representations and warranties were made at and as of the Closing, except to the
extent such representations and warranties expressly speak as of a specified
earlier date.
6.1.2. Performance of Agreements. PHL and Sellers shall have performed
and satisfied in all material respects all covenants and agreements required by
this Agreement or any Closing Agreement to be performed or satisfied by them at
or prior to the Closing, and Sellers shall have delivered the APC Shares and all
required instruments of transfer.
6.1.3. Closing Certificate. At the Closing, Holdings shall furnish to
Buyer an unqualified certificate, signed by the President of Holdings and the
President of APC, dated the Closing Date, to the effect that the conditions
specified in Sections 6.1.1 and 6.1.2 hereof have been satisfied.
Section 6.2. Closing Agreements. At or prior to the Closing, the
parties thereto other than Buyer shall have entered into each of the following
documents or agreements (collectively, the "Closing Agreements," it being
understood by the parties that the ▇▇▇▇▇▇▇ Employment Agreement shall be deemed
to be one of the Closing Agreements for all purposes other than Sections 6.2 and
7.2), in substantially the form thereof attached hereto without change other
than such changes as may be acceptable to Buyer:
(i) the Voting and Standstill Agreement,
(ii) the Indenture,
(iii) the Registration Rights Agreement,
(iv) the Risk Management Agreement,
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(v) the Baltimore Lease (unless the current holder of a
right of first refusal with respect to the premises
leased under the Baltimore Lease validly exercises its
right to acquire such premises), the Miami Lease and the
Jamestown Lease,
(vi) the Trademark License Agreement, and
(vii) the Rule 145 Representation Letter.
Section 6.3. Legality; Governmental Authorization; Litigation. Buyer's
purchase of and payment for the APC Shares, and the consummation of the other
transactions contemplated hereby, shall not be prohibited by any Legal
Requirement. All Required Filings and HSR Act filings shall have been made and
all requisite approvals obtained and related waiting periods expired or
terminated. No Action shall have been instituted at or prior to the Closing by
any Governmental Authority that seeks to delay, enjoin or otherwise make illegal
the consummation of the transactions contemplated hereby; but if such Action
shall have been instituted by a non-federal Governmental Authority, then there
must be no reasonable likelihood that the result of such Action could be to
delay, enjoin or otherwise make illegal Buyer's purchase of the APC Shares or
the consummation of any other transaction contemplated hereby.
Section 6.4. Affiliate Debt. Except to the extent not finally
determined prior to the availability of the Closing Date Balance Sheet: (a)
there shall not be any outstanding Affiliate Debt, and (b) there shall not be
outstanding any Debt or other advances owed to APC or any Subsidiary of APC by
PHL, Holdings or any of their Affiliates or by any present or former employee,
officer, stockholder or director of PHL, Holdings or their Affiliates other than
APC and its Subsidiaries.
Section 6.5. Financing. Buyer shall have obtained the funds to be
provided pursuant to the Commitment Letter, unless Buyer shall have failed to
have obtained such funds (i) exclusively as a result of Buyer's failure to pay
any fees or expenses required to be paid by Buyer under the Commitment Letter or
(ii) due to the lenders terminating the Commitment Letter or definitive loan
documentation contemplated thereby other than by reason of the occurrence of any
event or change constituting a Material Adverse Effect with respect to APC.
Section 6.6. Opinions of Counsel. Sellers shall have furnished Buyer
with the favorable opinion of (i) Stroock & Stroock & ▇▇▇▇▇ LLP, dated the
Closing Date, in substantially the form of Exhibit K hereto, (ii) ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esquire, in substantially the form of Exhibit L hereto, and Sorokin,
Gross & Hyde, P.C., in substantially the form of Exhibit M hereto.
Section 6.7. ▇▇▇▇▇▇▇ Employment Agreement. The ▇▇▇▇▇▇▇ Employment
Agreement shall be in full force and effect, subject to the Closing.
Section 6.8. ▇▇▇▇▇▇▇ Resignation Letter. ▇▇▇▇▇▇▇ shall have executed
and delivered to Buyer a resignation letter with respect to his position on the
Board of Directors of Buyer, in form reasonably satisfactory to Buyer.
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Section 6.9. Update. PHL and Sellers shall have provided the Buyer with
a written update of all of the information provided in, and consistent with the
form of, all parts of the Sellers' Disclosure Letter as of a date which is no
more than five (5) Business Days prior to the Closing Date. The information
provided in such updates shall not constitute a Material Adverse Effect with
respect to APC and its Subsidiaries, taken as a whole. No written update
provided by PHL and Sellers of the Sellers' Disclosure Letter prior to the
Closing Date shall cure any breach of any representation and warranty of PHL and
Sellers.
Section 6.10. General. Sellers shall have furnished Buyer with such
officers' certificates, good standing certificates, incumbency certificates and
other customary closing documents as Buyer may reasonably request in connection
with the transactions contemplated hereby, including, without limitation (i) an
instrument of assumption by PHL or Holdings or, in the case of the Owned Real
Properties, any of their Subsidiaries of the Excluded Liabilities, (ii) either a
"sworn affidavit" or a "qualifying statement" that complies with Section 1445 of
the Code and (iii) resignation letters from such officers and directors of APC
or any of its Subsidiaries as are primarily employed by PHL or Holdings.
ARTICLE VII
Conditions to the Obligation of Sellers to Close
The obligations of Sellers at the Closing to sell and transfer the APC
Shares and to execute and deliver the Closing Agreements to which they are a
party are subject to the satisfaction, at or prior to the Closing, of each of
the following conditions, compliance with which, or the occurrence of which, may
be waived prior to the Closing in writing by Sellers in their sole discretion:
Section 7.1. Representations, Warranties and Covenants.
7.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement or any
Closing Agreement that include qualifications as to materiality shall be true
and correct as of the Closing Date and all other representations and warranties
of Buyer contained in this Agreement or any Closing Agreement shall be true and
correct in all material respects as of the Closing Date, in each case with the
same force and effect as if such representations and warranties were made at and
as of the Closing, except to the extent such representations and warranties
expressly speak as of a specified earlier date.
7.1.2. Performance of Agreements. Buyer shall have performed and
satisfied in all material respects all covenants and agreements required by this
Agreement or any Closing Agreement to be performed or satisfied by Buyer at or
prior to the Closing and shall have delivered all payments, Buyer Common Shares,
Subordinated Debentures, documents and instruments of transfer required by
Article II.
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7.1.3. Closing Certificate. At the Closing, Buyer shall furnish to
Sellers an unqualified certificate signed by the President of Buyer dated the
Closing Date, to the effect that the conditions specified in Sections 7.1.1 and
7.1.2 hereof have been satisfied.
Section 7.2. Closing Agreements. At or prior to the Closing, Buyer
shall have entered into each of the Closing Agreements to which it is party,
such agreements being in substantially the form attached hereto without change
other than such changes as may be reasonably satisfactory to Sellers.
Section 7.3. Legality; Government Authorization; Litigation. Sellers'
sale of the APC Shares, and the consummation of the other transactions
contemplated hereby, shall not be prohibited by any Legal Requirement. All
Required Filings and HSR Act filings shall have been made and related waiting
periods shall have expired or been terminated. No Action shall have been
instituted at or prior to the Closing by any Governmental Authority that seeks
to delay, enjoin or otherwise make illegal the consummation of the transactions
contemplated hereby; but if such Action shall have been instituted by a
non-federal Governmental Authority, then there must be no reasonable likelihood
that the result of such Action could be to delay, enjoin or otherwise make
illegal Sellers' sale of the APC Shares or the consummation of any other
transaction contemplated hereby.
Section 7.4. Opinion of Counsel. Buyer shall have furnished Sellers
with the favorable opinion of Williams, Mullen, Christian & ▇▇▇▇▇▇▇, P.C. dated
the Closing Date, in substantially the form of Exhibit N hereto.
Section 7.5. General. Sellers shall have received copies of such
officers' certificates, good standing certificates, incumbency certificates and
other customary closing documents as they may reasonably request in connection
with the transactions contemplated hereby.
Section 7.6. Update. The Buyer shall have provided the Sellers with a
written update of all of the information provided in, and consistent with the
form of, all parts of the Buyer Disclosure Letter as of a date which is no more
than five (5) Business Days prior to the Closing Date. The information provided
in such updates shall not constitute a Material Adverse Effect with respect to
Buyer. No written update provided by Buyer of the Buyer Disclosure Letter prior
to the Closing Date shall cure any breach of any representation and warranty of
Buyer.
Section 7.7. Listing of Shares Issuable Upon Conversion of Subordinated
Debentures.On or prior to the Closing Date, the shares of Buyer Common Stock
issuable upon conversion of the Subordinated Debentures shall be listed, on a
when issued basis, on the New York Stock Exchange.
Section 7.8. Board of Directors. On or prior to the Closing Date, the
Board of Directors of Buyer shall have been increased from nine (9) to thirteen
(13) directors and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall
have been elected to the Board of Directors of Buyer in accordance with the
provisions of the Voting and Standstill Agreement.
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Section 7.9. Payment. Buyer shall have delivered to Sellers the
payments provided for in Section 2.2 hereof and all other payments required to
be made by Buyer on the Closing Date pursuant to the terms hereof, and shall
have issued to Sellers the Buyer Common Shares and to Holdings and PHL the
Subordinated Debentures.
Section 7.10. Registration of the Buyer Common Shares. The issuance of
the Buyer Common Shares to Sellers shall have been registered under the
Securities Act of 1933, as amended, pursuant to Buyer's effective Registration
Statement on Form S-4. All certificates evidencing Buyer Common Stock delivered
to Sellers at the Closing shall be free of all restrictive legends, and no stop
transfer instructions shall be filed with the stock transfer agent with respect
to such shares. In the event that ▇▇▇▇▇▇▇ is unable to sell the Buyer Common
Shares acquired by him pursuant to this Agreement during the one year period
following the Closing Date due to the holding period requirements of Rule
144(d), then the Buyer will take such steps as may be necessary to permit
▇▇▇▇▇▇▇ to sell such shares free of such holding period requirements.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification by Sellers. In addition to other
obligations of indemnification contained in this Agreement, Sellers, jointly and
severally (collectively, in their capacities as indemnifying parties, the
"Indemnifying Party"), hereby agree, subject to the limitations set forth below,
to indemnify Buyer and its Affiliates and their respective directors, officers
and employees (including, without limitation, APC and each Subsidiary of APC
from and after the Closing) (each in its capacity as indemnified party, an
"Indemnitee"), regardless of any investigation conducted by or knowledge
obtained by any of them, and hold each of Buyer and such Affiliates and their
respective directors, officers and employees harmless, from, against and in
respect of any and all Losses arising from or related to any of the following:
(i) any breach of, untruth of or inaccuracy in (or any
allegation by any third party of facts which, if true as alleged, would
constitute such a breach or inaccuracy in) any representation or warranty made
by or on behalf of PHL or either of the Sellers in this Agreement (including,
without limitation, the Sellers' Disclosure Letter) or in any Closing Agreement
or other document, instrument or certificate delivered pursuant hereto;
(ii) any breach, non-fulfillment or violation of any covenant
or agreement made by PHL or either of the Sellers in this Agreement or in any
Closing Agreement or in any document, instrument or certificate delivered
pursuant hereto;
(iii) any Excluded Liability;
(iv) subject to the limitations and conditions set forth
elsewhere in this Agreement, any severance due and payable under any APC Plan or
APC Benefit Arrangement, Contractual Obligation or Legal Requirement by reason
of the execution and delivery of this Agreement, the Closing Agreements or the
consummation of the transactions contemplated
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hereunder or thereunder, including, without limitation, severance due and
payable with respect to any APC Headquarters Employee pursuant to Section 2.2.3;
(v) any Liability (other than Tax Liability covered by the
provisions of Section 5.7.2 hereof) that arises from or relates to the conduct
of the APC Business during any period prior to the Closing Date unless such
Liability was disclosed in the February 1999 APC Balance Sheet or in the
Sellers' Disclosure Letter or incurred in the Ordinary Course of Business since
the dates thereof;
(vi) any Liability (other than Tax Liability covered by the
provisions of Section 5.7.2 hereof) of APC or any of its Subsidiaries arising as
a result of APC or any of its Subsidiaries being a member of a group of
companies or other entities controlled by PHL or Holdings or any other Person
(other than APC or any of its Subsidiaries) prior to the Closing Date.
Section 8.2. Indemnification by Buyer. In addition to other obligations
of indemnification contained in this Agreement, Buyer (in its capacity as
indemnifying party, the "Indemnifying Party") hereby agrees, subject to the
limitations set forth below, to indemnify PHL, Sellers and their Affiliates
other than APC or any of its Subsidiaries and their respective directors,
officers and employees (each in its capacity as indemnified party, an
"Indemnitee") regardless of any investigation conducted by or knowledge obtained
by any of them, and hold each of PHL, Sellers and their Affiliates and their
respective directors, officers and employees harmless from, against and in
respect to any and all Losses arising from or related to any of the following:
(i) any breach of, untruth of or inaccuracy in (or any
allegation by any third party of facts which, if true as alleged, would
constitute such a breach or inaccuracy in) any representation or warranty made
by or on behalf of Buyer in this Agreement (including, without limitation, in
the Buyer Disclosure Letter) or in any Closing Agreement or other document,
instrument or certificate delivered pursuant hereto;
(ii) any breach, non-fulfillment or violation of any covenant
or agreement made by Buyer in this Agreement, or in any Closing Agreement or in
any document, instrument or certificate delivered pursuant hereto; or
(iii) any Liability incurred by PHL, Sellers or any of their
Affiliates relating to or arising from any time period after the Closing Date
arising out of, with respect to or in connection with the APC Business or any
matter or circumstance involving APC or any of its Subsidiaries, including,
without limitation, the APC Plans and the APC Benefit Arrangements, other than
matters with respect to (a) any Excluded Liabilities (b) any Losses covered by
Section 5.7 or the indemnity in Section 8.1 or (c) any Losses arising out of an
illegal or tortious course of conduct on the part of PHL, Sellers or any of
their Affiliates.
Section 8.3. Time Limitation on Indemnification. Notwithstanding the
foregoing, no claim may be made or suit instituted under any provision of this
Article VIII more than two (2) years following the Closing Date (the "General
Survival Period") except for Reserved Claims. The term "Reserved Claims" shall
mean (a) all Actions as to which any Indemnitee has given any
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Indemnifying Party notice on or prior to the end of the General Survival Period,
(b) all Actions by any Indemnitee based upon an alleged or actual breach of or
inaccuracy in the representations or warranties contained in Sections 3.1.4,
3A.1.4 and 3B.1.2 (Title to APC Shares), 3.1.6 (Subsidiaries), 3.13 (Tax
Matters), 3.14.2 (Employee Benefit Plans and Programs) and 3.15 (Environmental
Matters), (c) all Actions for Tax Losses pursuant to Section 5.7.2 and (d) all
Actions based upon fraud. With respect to clause (b) above, the only claims
concerning Section 3.1.4, 3A.1.4, 3B.1.2 or Section 3.1.6 which shall be
considered Reserved Claims are those which are based upon or arise out of an
allegation that Sellers have breached their representation as to the validity
of, in the case of Section 3.1.4, 3A.1.4 or 3B.1.2, Sellers' title, direct or
indirect, to the APC Shares and, in the case of Section 3.1.6, APC's title,
direct or indirect, to the capital stock of any APC Subsidiary. As to the
Reserved Claims, there shall be no time limitation with respect to any such
claims or any suit instituted with respect thereto, other than for any
applicable statute of limitations.
Section 8.4. Monetary Limitations on Indemnification.
8.4.1. Monetary Limitations on PHL's and Sellers' Indemnification
Obligations. Except with respect to claims referred to in clauses (b), (c) or
(d) of the definition of Reserved Claims and claims for breaches of any covenant
under Article V hereof, Sellers as Indemnifying Party shall not have any
obligation to indemnify Buyer or any of its Affiliates as Indemnitees under
Section 8.1 in respect of any Loss incurred by Buyer and/or any of its
Affiliates as Indemnitees unless the aggregate cumulative total of all Losses
(other than Losses arising out of claims referred to in clauses (b), (c) or (d)
of the definition of Reserved Claims or claims for breaches of any covenant
under Article V hereof) incurred by Buyer and/or any of its Affiliates as
Indemnitees exceeds $1,000,000, whereupon Buyer and each of its Affiliates as
Indemnitees shall be entitled to indemnification for the aggregate cumulative
amount of such Losses without regard to any dollar basket or limitation
(commencing with the first dollar of Losses). With respect to claims referred to
in clauses (b), (c) or (d) of the definition of Reserved Claims) and claims for
breaches of any covenant under Article V hereof, no such minimum dollar
limitation or basket shall apply.
8.4.2. Monetary Limitations on Buyer's Indemnification Obligations.
Except with respect to all claims based on fraud or claims for breaches by Buyer
of any covenant under Article V hereof, Buyer as Indemnifying Party shall not
have any obligation to indemnify PHL, Sellers or any of their Affiliates as
Indemnitees under Section 8.2 in respect of any Loss incurred by PHL, Sellers
and/or any of their Affiliates as Indemnitees unless the aggregate cumulative
total of all Losses (other than Losses arising out of claims based on fraud or
claims for breaches by Buyer of any covenant under Article V hereof) incurred by
PHL, Sellers and/or any of their Affiliates as Indemnitees exceeds $1,000,000,
whereupon PHL, Sellers and each of their Affiliates as Indemnitees shall be
entitled to indemnification for the aggregate cumulative amount of such Losses
without regard to any dollar basket or limitation (commencing with the first
dollar of Losses). With respect to claims based on fraud or claims for breaches
by Buyer of any covenant under Article V hereof, no such minimum dollar
limitation or basket shall apply.
Section 8.5 Reporting. Within forty-five (45) days after that date
which is one year after the Closing Date, each party shall provide the other
with a written report with respect to the
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claims that have arisen during that year which would be subject to
indemnification under this Article VIII had the aggregate amounts in controversy
reached the $1,000,000 level (the "Threshold"). Thereafter, each party shall
respond in a timely fashion to the other party's reasonable requests for
additional information concerning such claims and, if and when the Threshold is
reached, shall cooperate in trying to resolve such claims. In addition, once the
Threshold is reached for an Indemnitee, such Indemnitee shall provide the
Indemnifying Party with a written report within forty-five (45) days after the
end of each calendar quarter, identifying all new claims that arose during such
quarter. Notwithstanding the foregoing, any party's failure to comply in any
respect with this Section 8.5 shall not affect in any way such party's
indemnification rights under the terms of this Agreement.
Section 8.6. Third Party Claims. Promptly after the receipt by any
Indemnitee of notice of the commencement of any Action against such Indemnitee
by a third party (other than any Action relating to Taxes or any Tax Return,
which shall be governed by Section 5.7) such Indemnitee shall, if a claim with
respect thereto is or may be made against any Indemnifying Party pursuant to
this Article VIII, give such Indemnifying Party written notice thereof. The
failure to give such notice shall not relieve any Indemnifying Party from any
obligation hereunder except where, and then solely to the extent that, the
omission results in a failure of actual notice to the Indemnifying Party and the
Indemnifying Party is materially damaged as a result of such failure to give
notice. Such Indemnifying Party shall have the right to defend such Action, at
such Indemnifying Party's expense and with counsel of its choice reasonably
satisfactory to the Indemnitee, provided that the Indemnifying Party so notifies
the Indemnitee that it will defend such Action within fifteen (15) days after
receipt of such notice and then actually commences promptly the defense of such
Action, and otherwise the Indemnitee shall have the right to defend such Action
and the Indemnifying Party will reimburse the Indemnitee promptly and
periodically for the costs of defending such Action, including reasonable
attorneys' fees and expenses reasonably incurred. If the Indemnifying Party is
defending such Action, the Indemnitee may retain separate co-counsel at its sole
cost and expense and may participate in the defense of such Action.
Section 8.7. No Circular Recovery. PHL and Sellers hereby agree that
they will not make any claim for indemnification against Buyer, APC or any of
its Subsidiaries by reason of the fact that PHL, Sellers or any of their
officers, directors, agents or other representatives was a controlling Person,
director, officer, employee, agent or other representative of APC or any of its
Subsidiaries or was serving as such for another Person at the request of APC or
any Subsidiary of APC (whether such claim is for Losses of any kind or otherwise
and whether such claim is pursuant to any statute, Charter, Bylaw, Contractual
Obligation or otherwise) with respect to any Action brought by Buyer or any of
its Affiliates against PHL and/or Sellers (whether such Action is pursuant to
this Agreement, applicable law, or otherwise).
Section 8.8. Nature of Certain Payments. The following payments shall
be deemed for all purposes to be adjustments to the Purchase Consideration: all
payments pursuant to Article VIII or pursuant to Sections 2.2.3, 5.7, 5.14,
5.19, 5.21, 5.22 or 5.23.
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Section 8.9. Other Remedies. The remedies set forth under this Article
VIII are in addition to any other remedies and rights which might otherwise be
available or applicable under any other provisions of this Agreement or
otherwise under applicable law.
ARTICLE IX
Consent to Jurisdiction; Governing Law
Section 9.1. Consent to Jurisdiction. Each party to this Agreement, by
its execution hereof, (i) hereby irrevocably submits, and agrees to cause each
of its Affiliates to submit, to the exclusive jurisdiction of the federal courts
located either in the City of Richmond, Virginia, or in the City of Hartford
Connecticut, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, for the purpose of any Action arising out of or based upon this
Agreement or any Closing Agreement or relating to the subject matter hereof or
thereof or the transactions contemplated hereby or thereby, (ii) hereby waives,
and agrees to cause each of its Subsidiaries and Affiliates to waive, to the
extent not prohibited by applicable law, and agrees not to assert, and agrees
not to allow any of its Subsidiaries and Affiliates to assert, by way of motion,
as a defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or any
other Closing Agreement, or the subject matter hereof or thereof, may not be
enforced in or by such court and (iii) hereby agrees not to commence or to
permit any of its Subsidiaries or Affiliates to commence any Action arising out
of or based upon this Agreement or any Closing Agreement or relating to the
subject matter hereof or thereof other than before one of the above-named courts
nor to make any motion or take any other Action seeking or intending to cause
the transfer or removal of any such Action to any court other than one of the
above-named courts whether on the grounds of inconvenient forum or otherwise.
Each party hereby consents to service of process in any such proceeding in any
manner permitted by Virginia or Connecticut law, as the case may be, and agrees
that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 11.7 hereof is
reasonably calculated to give actual notice.
Section 9.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the Commonwealth of
Virginia, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the law of any other jurisdiction.
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ARTICLE X
Termination
Section 10.1. Termination of Agreement. This Agreement may be
terminated by the parties only as provided below:
(a) Buyer, Sellers and PHL may terminate this Agreement by
mutual written consent at any time prior to the Closing.
(b) Buyer may terminate this Agreement by giving written
notice to PHL and Sellers at any time prior to the Closing (i) in the event that
any representation or warranty made by or on behalf of PHL and Sellers herein or
pursuant hereto or in any Closing Agreement containing qualifications as to
materiality or Material Adverse Effect shall have been inaccurate when made, or
any other representation or warranty made by or on behalf of PHL and Sellers
herein or in any Closing Agreement shall have been inaccurate in any material
respect when made, or in each case if then made would be so inaccurate, and such
inaccuracy is not capable of cure or if capable of cure is not so cured within a
reasonable period following notice of such inaccuracy, (ii) in the event that
PHL or Sellers materially breach or violate any covenant or agreement contained
herein or in any Closing Agreement to be performed by PHL or Sellers and such
breach or violation is not capable of cure or if capable of cure is not so cured
within a reasonable period following notice of such breach or violation, (iii)
if the Closing shall not have occurred on or before June 30, 1999 by reason of
the failure of any condition set forth in Article VI hereof to be satisfied
(unless the failure results primarily from the failure of any representation or
warranty made by or on behalf of Buyer herein or in any Closing Agreement
containing qualifications as to materiality or Material Adverse Effect to be
true and correct or any other representation or warranty made by or on behalf of
Buyer herein or in any Closing Agreement to be true and correct in all material
respects or from the material breach or violation by Buyer of any covenant or
agreement contained herein or in any Closing Agreement).
(c) Sellers may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (i) in the event that any
representation or warranty made by or on behalf of Buyer herein or pursuant
hereto or in any Closing Agreement containing qualifications as to materiality
or Material Adverse Effect shall have been inaccurate when made, or any other
representation or warranty made by or on behalf of Buyer herein or in any
Closing Agreement shall have been inaccurate in any material respect when made,
or in each case if then made would be so inaccurate, and such inaccuracy is not
capable of cure or if capable of cure is not so cured within a reasonable period
following notice of such inaccuracy, (ii) in the event that Buyer materially
breaches or violates any covenant or agreement contained herein or in any
Closing Agreement to be performed by Buyer and such breach or violation is not
capable of cure or if capable of cure is not so cured within a reasonable period
following notice of such breach or violation, or (iii) if the Closing shall not
have occurred on or before June 30, 1999 by reason of the failure of any
condition set forth in Article VII hereof to be satisfied (unless the failure
results primarily from the failure of any representation or warranty made by or
on behalf of PHL and Sellers herein or in any Closing Agreement containing
qualifications as to materiality or Material Adverse Effect to be true and
correct or any other representation or warranty made by or on
68
behalf of PHL and Sellers herein or in any Closing Agreement to be true and
correct in all material respects or from the material breach or violation by PHL
or Sellers of any covenant or agreement contained herein or in any Closing
Agreement).
Section 10.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 10.1, all obligations of the parties
hereunder (other than the obligations under Sections 5.8 (Expenses of
Transaction; Accounts), 9.1 (Consent to Jurisdiction), 9.2 (Governing Law), 10.1
(Termination of Agreement), 10.2 (Effect of Termination), 11.1 (Entire
Agreement), 11.6 (Successors and Assigns), 11.7 (Notices), 11.8 (Public
Announcements) and 11.10 (Third Party Beneficiaries), each of which shall
survive termination) shall terminate without any liability of any party to any
other party; provided, however, that no termination shall relieve any party from
any liability arising from or relating to breach prior to termination.
ARTICLE XI
Miscellaneous
Section 11.1. Entire Agreement; Waivers. This Agreement, the Closing
Agreements and the Confidentiality Agreement constitute the entire agreement
among the parties hereto pertaining to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the parties with respect to such
subject matter. No waiver of any provision of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), shall constitute a continuing waiver unless otherwise expressly
provided nor shall be effective unless in writing and executed (i) in the case
of a waiver by Buyer, by Buyer and (ii) in the case of a waiver by Sellers, by
Sellers.
Section 11.2. Amendment or Modification. The parties hereto may not
amend or modify this Agreement except in such manner as may be agreed upon by a
written instrument executed and delivered by Buyer, PHL and Sellers.
Section 11.3. Survival, etc. All representations, warranties, covenants
and agreements made by or on behalf of any party hereto in this Agreement
(including, without limitation, in Sellers' Disclosure Letter and the Buyer
Disclosure Letter), or pursuant to any document, certificate or other instrument
referred to herein or delivered in connection with the transactions contemplated
hereby, shall be deemed to have been relied upon by the parties hereto,
notwithstanding any investigation made by or on behalf of any of the parties
hereto or any opportunity therefor (including without limitation the
availability for review of any document), and, subject to the provisions of
Article VIII, shall survive the execution and delivery of this Agreement and the
Closing. Neither the period of survival nor the liability of any party with
respect to such party's representations, warranties covenants and agreements
shall be reduced by any investigation made at any time by or on behalf of any
party. If notice of a claim has been given prior to the expiration of any time
period set forth herein for any such notice by a party in whose favor such
representations, warranties, covenants or agreements have been made to any party
that made such representations, warranties, covenants or agreements, then the
relevant
69
representations, warranties, covenants or agreements shall survive as to such
claim until such claims have been finally resolved.
Section 11.4. Independence of Representations and Warranties. The
parties hereto intend that each representation, warranty, covenant and agreement
contained herein shall have independent significance. If any party has breached
any representation, warranty, covenant or agreement contained herein in any
respect, the fact that there exists any other representation, warranty, covenant
or agreement relating to the same subject matter (regardless of the relative
levels of specificity) that the party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty, covenant or agreement.
Section 11.5. Severability. In the event that any provision hereof
(including, without limitation, any of the provisions of Section 5.17 hereof)
would, under applicable law, be invalid or unenforceable in any respect, such
provision shall (to the extent permitted under applicable law) be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. The provisions hereof
(including, without limitation, each of the provisions of Section 5.17 hereof)
are severable, and in the event any provision hereof should be held invalid or
unenforceable in any respect, it shall not invalidate, render unenforceable or
otherwise affect any other provision hereof.
Section 11.6. Successors and Assigns. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and permitted
assigns (each of which such transferees, successors and permitted assigns shall
be deemed to be a party hereto for all purposes hereof); provided, however, that
neither PHL, Sellers nor Buyer may assign or transfer (by operation of law or
otherwise) any of their respective rights or obligations hereunder.
Section 11.7. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given only if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to Holdings Phoenix Home Life Mutual Insurance Company
or PHL, (or, for Holdings) PM Holdings, Inc.
to either, at: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Stroock & Stroock & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esquire
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇▇, to
him at: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
70
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: Sorokin, Gross & Hyde, P.C.
One Corporate Center
Hartford, Connecticut
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, to it at: Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Williams, Mullen, Christian & ▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esquire
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three (3)
Business Days after being sent, if sent by registered or certified mail, with
first-class postage prepaid. Each of the parties hereto shall be entitled to
specify a different address by giving notice as aforesaid to each of the other
parties hereto.
Section 11.8. Public Announcements. At all times on or before the
Closing Date, no party hereto will issue or make any reports, statements or
releases to the public or generally to any Persons to whom Buyer or APC or their
Subsidiaries provides services or with whom Buyer or APC or their Subsidiaries
otherwise has significant business relationships with respect to this Agreement
or the transactions contemplated hereby without the prior written consent of the
other parties hereto. If any party hereto is unable to obtain, after reasonable
effort, the approval of its public report, statement or release from the other
parties hereto and such report, statement or release is, in the opinion of legal
counsel to such party, required by law in order to discharge such party's
disclosure obligations, then such party may make or issue the legally required
report, statement or release and promptly furnish the other parties with a copy
thereof. Each party hereto will also obtain the prior approval by the other
parties hereto of any press release to be issued immediately following the
Closing announcing the consummation of the transactions contemplated by this
Agreement.
71
Section 11.9. Headings, etc. Section and subsection headings are not to
be considered part of this Agreement, are included solely for convenience, are
not intended to be full or accurate descriptions of the content thereof and
shall not affect the construction hereof.
Section 11.10. Third Party Beneficiaries. Except as otherwise provided
in Article VIII, nothing in this Agreement is intended or shall be construed to
entitle any Person other than the parties, APC or their respective transferees,
successors and assigns permitted hereby to any claim, cause of Action, remedy or
right of any kind.
Section 11.11. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
(SIGNATURES ON FOLLOWING PAGE)
72
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed, or have caused to be executed by their respective
officers thereunto duly authorized, this Stock Purchase Agreement as of the date
first above written.
PHL: PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
SELLERS: PM HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President/Chief
Financial Officer
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
BUYER: HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇
COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief
Executive Officer
73
EXHIBITS
Exhibit A - Baltimore Lease [Omitted]
Exhibit B - Indenture [Omitted]
Exhibit C - Jamestown Lease [Omitted]
Exhibit D - Miami Lease [Omitted]
Exhibit E - Registration Rights Agreement
Exhibit F - Risk Management Agreement [Omitted]
Exhibit G - Rule 145 Representation Letter [Omitted]
Exhibit H - ▇▇▇▇▇▇▇ Employment Agreement [Omitted]
Exhibit I - Voting and Standstill Agreement
Exhibit J - Trademark License Agreement [Omitted]
Exhibit K - Form of Legal Opinion of Stroock & Stroock & ▇▇▇▇▇ LLP [Omitted]
Exhibit L - Form of Legal Opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ [Omitted]
Exhibit M - Form of Legal Opinion of Sorokin, Gross & Hyde, P.C. [Omitted]
Exhibit N - Form of Legal Opinion of Williams, Mullen, Christian & ▇▇▇▇▇▇▇, P.C.
[Omitted]
SCHEDULES
Schedule 5.7.1 - APC Electing Subsidiaries [Omitted]
The Company will provide the omitted exhibits and schedule to the
Commission upon request.
Exhibit E to Stock
Purchase Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
________ __, 1999, is made between Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company, a Virginia
corporation (the "Company"), PM Holdings, Inc., a Connecticut corporation
("Holdings"), and Phoenix Home Life Mutual Insurance Company, a New York life
insurance company ("PHL").
W I T N E S S E T H:
WHEREAS, the Company, Holdings, PHL and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III entered
into a Stock Purchase Agreement dated March 29, 1999 (the "Stock Purchase
Agreement"), under which the Company agreed to acquire from Holdings and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, III all of the issued and outstanding shares of the capital stock of
American Phoenix Corporation, a Connecticut corporation ("APC"); and
WHEREAS, pursuant to the Stock Purchase Agreement, (i) Holdings
acquired __________ shares of the Company's Common Stock (as hereinafter
defined) and $22,000,000
principal amount of the Company's Subordinated Debentures (as hereinafter
defined), and (ii) PHL acquired $10,000,000 principal amount of the Company's
Subordinated Debentures; and
WHEREAS, the Subordinated Debentures acquired by Holdings and PHL
pursuant to the Stock Purchase Agreement are convertible into shares of Common
Stock pursuant to the terms of the Subordinated Debentures; and
WHEREAS, the Company has agreed to enter into this Agreement to provide
certain registration rights to Holdings in order to facilitate the distribution
of the shares of Common Stock acquired by Holdings pursuant to the Stock
Purchase Agreement and any shares of Common Stock that may be acquired by
Holdings, PHL or their Affiliates upon conversion of the Subordinated
Debentures.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Stock Purchase Agreement, the Company, Holdings and
PHL hereby agree as follows:
ARTICLE I
Definitions
Except as otherwise specified herein, capitalized terms used in this
Agreement shall have the respective meanings assigned to such terms in the Stock
Purchase Agreement. For purposes of this Agreement, the following terms have the
following meanings:
(a) "Affiliate" shall mean, as to any specified Person, each other
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with that specified
Person. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, or by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, the following shall not be deemed to be an Affiliate of Holdings or
PHL for purposes of this Agreement: (i) Phoenix Investment Partners, Ltd., a
Delaware corporation, and its subsidiaries (or any successor thereof), and (ii)
any Person registered as an investment company under the Investment Company Act
of 1940, as amended.
(b) "Blue Sky Filing" shall mean a filing made in connection with the
registration or qualification of the Registrable Shares under a particular
state's securities or blue sky laws.
(c) "Common Shares" shall mean the __________ shares of Common Stock
that Holdings acquired from the Company pursuant to the Stock Purchase Agreement
and such additional shares of Common Stock that the Company may issue with
respect to such shares pursuant to any stock splits, stock dividends,
recapitalizations, restructurings, reclassifications or similar transactions.
(d) "Common Stock" shall mean the Common Stock, without par value, of
the Company.
(e) "Effective Period," with respect to the Registrable Shares, shall
mean the period from the date of effectiveness of the Registration Statement
relating to the Registrable Shares under Section 2.3 below to the date that is
two years from the date of such effectiveness; provided, that, for each Holdback
Period required by the Company under Article III of this Agreement and for each
Discontinuance Period (as defined in Section 2.5(k) below), the Effective Period
shall be extended by the number of days during which the applicable Holdback
Period or Discontinuance Period was in effect.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "NYSE" shall mean the New York Stock Exchange.
(h) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act as in effect on the date of this Agreement, and shall include,
without limitation, corporations, partnerships, limited liability companies and
trusts.
(i) "Prospectus" shall mean the prospectus included in a Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration Statement, and
all other amendments and supplements to such prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in any such prospectus.
-2-
(j) "Registrable Shares" shall mean collectively (i) the Common Shares
and (ii) the aggregate number of shares of Common Stock into which the
Subordinated Debentures are convertible pursuant to the terms of the
Subordinated Debentures and such additional shares of Common Stock that the
Company may issue with respect to such shares pursuant to any stock splits,
stock dividends, recapitalizations, restructurings, reclassifications or similar
transactions.
(k) "Registration Statement" shall mean a registration statement of the
Company under the Securities Act that covers the resale of the Registrable
Shares pursuant to the terms of this Agreement, including the related
Prospectus, all amendments and supplements to such registration statement,
including pre- and post-effective amendments, all exhibits thereto and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
(l) "SEC" shall mean the Securities and Exchange Commission.
(m) "Securities Act" shall mean the Securities Act of 1933, as amended.
(n) "Subordinated Debentures" shall mean the Company's 5.25%
Convertible Subordinated Debentures (Due 2014), in the aggregate principal
amount of $32,000,000.
(o) "Voting and Standstill Agreement" shall mean the Voting and
Standstill Agreement, dated ________ __, 1999, executed by the Company, Holdings
and PHL in connection with the Stock Purchase Agreement.
ARTICLE II
Registration of Securities
Section 2.1. Securities Subject to this Agreement. The securities
entitled to the benefits of this Agreement are the Registrable Shares. For the
purposes of this Agreement, one or more of the Registrable Shares will no longer
be subject to this Agreement when and to the extent that (i) a Registration
Statement covering such Registrable Shares has been declared effective under the
Securities Act and such Registrable Shares have been sold pursuant to such
effective Registration Statement, (ii) such Registrable Shares are distributed
to the public pursuant to Rule 144 under the Securities Act, (iii) such
Registrable Shares shall have been otherwise transferred or disposed of, new
certificates therefor not bearing a legend restricting further transfer or
disposition shall have been delivered by the Company and, at such time,
subsequent transfer or disposition of such securities shall not require
registration or qualification of such Registrable Shares under the Securities
Act or any similar state law then in force, or (iv) such Registrable Shares have
ceased to be outstanding.
Section 2.2. Registration Rights. Holdings may exercise the demand and
piggy-back registration rights to which it is entitled under this Agreement only
at a time at which the Holdings Ownership Percentage (as such term is defined in
the Voting and Standstill Agreement) exceeds
-3-
10% or Holdings is otherwise deemed by the Company to be an Affiliate of the
Company. Holdings may not exercise any such rights after ________ __, 2014.
Section 2.3. Demand Registration.
(a) Holdings shall have the right, subject to Section 2.2 above, to
make one written request to the Company for the registration of all of the
Registrable Shares subject to this Agreement that are beneficially owned by
Holdings, PHL and their Affiliates at the time of the request. The Company shall
not be obligated to register any of the Registrable Shares held by an Affiliate
of Holdings or PHL unless and until such Affiliate shall have agreed in writing
to indemnify the Company pursuant to Section 4.2 of this Agreement.
(b) Upon the receipt of the request described in Section 2.3(a) above,
the Company shall (i) within 45 days of such request, file a Registration
Statement with the SEC under the Securities Act to register the resale of the
Registrable Shares as set forth in such request and (ii) use its best efforts to
cause such Registration Statement to become effective as soon as practicable
after the filing thereof with the SEC. On or before the Closing Date, the
Company shall have listed on the NYSE, on a when issued basis, the Registrable
Shares.
(c) The Company shall use its best efforts to maintain the
effectiveness of the Registration Statement relating to the Registrable Shares,
and maintain the listing of such shares, as applicable, on the NYSE or any
exchange or automated interdealer quotation system on which the Common Stock is
then listed or quoted, during the Effective Period.
(d) If the Company is required to effect a Registration Statement
pursuant to this Section 2.3, the Company may, in its discretion, include
securities, other than Registrable Shares, among the securities covered by such
registration.
(e) The Company shall not be required to effect more than one
registration under this Section 2.3.
Section 2.4 Piggy-Back Registration.
(a) In the event that the Company shall propose to file a registration
statement under the Securities Act relating to a public offering by or through
one or more underwriters of shares of Common Stock for the Company's own account
or for the account of any holder of shares of Common Stock other than Holdings,
PHL or any of their Affiliates (a "Selling Shareholder") and on a form and in a
manner that would permit the registration of any of the Registrable Shares for
sale to the public under the Securities Act, the Company shall (i) give written
notice to Holdings of its intention to do so and of the right of Holdings,
subject to Section 2.2 above, to have any or all of the Registrable Shares
subject to this Agreement that are beneficially owned by Holdings, PHL and their
Affiliates at the time of such notice included among the securities to be
covered by such registration statement and (ii) at the written request of
Holdings given to the Company within 20 days after the Company provides such
notice, use its best efforts to include among the securities covered by such
registration statement the number of such Registrable Shares that
-4-
Holdings shall have requested be so included (subject, however, to reduction in
accordance with Section 2.4(b) below). None of Holdings, PHL and their
Affiliates, however, shall be entitled to participate in any offering pursuant
to this Section 2.4(a) unless and until Holdings, PHL, if participating, and any
participating Affiliate have entered into an underwriting or other agreement
with such underwriter or underwriters for such offering in such customary form
as such underwriter or underwriters shall reasonably determine.
(b) Holdings may include Registrable Shares in any registration
statement relating to any offering pursuant to Section 2.4(a) above to the
extent that the inclusion of such shares shall not reduce the number of shares
of Common Stock to be offered and sold by the Company or the Selling
Shareholder, as the case may be. If the lead managing underwriter selected by
the Company for any such offering determines that marketing factors require a
limitation on the number of Registrable Shares to be offered and sold by
Holdings, PHL and their Affiliates in such offering, there shall be included in
such offering only that number of Registrable Shares, if any, that such lead
managing underwriter reasonably and in good faith believes will not jeopardize
the success of the offering of all shares of Common Stock that the Company or
the Selling Shareholder, as the case may be, desires to sell for its own
account. In such event and provided that the lead managing underwriter has so
notified the Company in writing, the shares of Common Stock to be included in
such offering shall consist of (i) the securities that the Company or the
Selling Shareholder, as the case may be, proposes to sell, and (ii) the number,
if any, of Registrable Shares requested to be included in such registration
that, in the opinion of such lead managing underwriter, can be sold without
jeopardizing the success of the offering of the shares of Common Stock that the
Company or the Selling Shareholder, as the case may be, desires to sell for its
own account.
(c) Nothing in this Section 2.4 shall create any liability on the part
of the Company to Holdings, PHL or any of their Affiliates if the Company for
any reason should decide not to file a registration statement proposed to be
filed under Section 2.4(a) above or to withdraw such registration statement
subsequent to its filing, regardless of any action whatsoever that Holdings may
have taken, whether as a result of the issuance by the Company of any notice
hereunder or otherwise.
Section 2.5. Registration Procedures. In order to comply with the
requirements of Sections 2.3 and 2.4 above, the Company will:
(a) prepare and file with the SEC a Registration Statement covering the
Registrable Shares on any form or forms for which the Company then qualifies and
that counsel for the Company shall deem appropriate, and which form shall be
available for the sale of the Registrable Shares
(i) in connection with the registration of the Registrable
Shares pursuant to Section 2.3 above, on a delayed or continuous basis
in accordance with Rule 415 under the Securities Act (or any successor
rule); provided, however, that the methods of distribution permitted by
such Registration Statement shall not include underwritten offerings;
or
-5-
(ii) in connection with a registration that includes any
Registrable Shares pursuant to Section 2.4 above, in accordance with
the intended methods of distribution thereof.
(b) prepare and file with the SEC pre- and post-effective amendments to
the Registration Statement and such amendments and supplements to the Prospectus
used in connection therewith as may be required by the rules, regulations or
instructions applicable to the registration form utilized by the Company, or by
the Securities Act or the rules and regulations thereunder, and cause the
Prospectus as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and otherwise comply with the provisions of the Securities Act
with respect to the disposition of the Registrable Shares;
(c) furnish to Holdings such number of copies of the Registration
Statement and each pre- and post-effective amendment thereto, any Prospectus or
Prospectus supplement and each amendment thereto and such other documents as
Holdings may reasonably request in order to facilitate the transfer or
disposition of the Registrable Shares by Holdings;
(d) make such Blue Sky Filings, if necessary, to register or qualify
the Registrable Shares under such state securities or blue sky laws of such
jurisdictions as Holdings may reasonably request, and do any and all other acts
that may be reasonably necessary or advisable to enable Holdings to consummate
the transfer or disposition in such jurisdictions of the Registrable Shares,
except that the Company shall not for any such purpose be required (i) to
qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 2.5(d), it would not be
obligated to be so qualified, (ii) to subject itself to taxation in any such
jurisdiction, or (iii) to consent to general service of process in any such
jurisdiction;
(e) notify Holdings, at any time when a Prospectus is required to be
delivered under the Securities Act with respect to one or more of the
Registrable Shares, of the Company's becoming aware that a Prospectus included
in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and prepare and furnish to Holdings a reasonable number of
copies of an amendment to such Prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Shares, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(f) notify Holdings
(1) when any Prospectus or Prospectus supplement or pre- or
post-effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when such Registration Statement or
post-effective amendment has become effective;
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(2) of any request by the SEC or any other applicable
regulatory authority for amendments or supplements to the Registration Statement
or Prospectus or for additional information;
(3) of the issuance by the SEC or any other applicable
regulatory authority of any stop order of which the Company or its counsel is
aware suspending the effectiveness of the Registration Statement or any order
preventing the use of a related Prospectus, or the initiation or any threats of
any proceedings for such purpose; and
(4) of the receipt by the Company of any written notification
of the suspension of the registration or qualification of any of the Registrable
Shares for sale in any jurisdiction, or the initiation or any threats of any
proceeding for such purpose;
(g) make generally available to the Company's shareholders, as soon as
reasonably practicable, an earnings statement that shall satisfy the provisions
of Section 11(a) of the Securities Act, provided that the Company shall be
deemed to have complied with this Section 2.5(g) if it has complied with Rule
158 under the Securities Act;
(h) use its best efforts to provide a transfer agent and registrar for
the Registrable Shares covered by the Registration Statement no later than the
effective date of such Registration Statement;
(i) cooperate with Holdings to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing the
securities to be sold under the Registration Statement, and enable such
securities to be in such denominations and registered in such names as Holdings
may reasonably request;
(j) provide Holdings and any attorney, accountant or other agent
retained by Holdings (collectively, the "Inspectors") with reasonable access
during normal business hours to appropriate officers of the Company and its
subsidiaries to ask questions and to obtain information that any such Inspector
may reasonably request and make available for inspection all financial and other
records, pertinent corporate documents and properties of any of the Company and
its subsidiaries (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility; provided,
however, that the Records that the Company determines, in good faith, to be
confidential and that it notifies the Inspectors in writing are confidential
shall not be disclosed to any Inspector unless such Inspector signs or is
otherwise bound by a confidentiality agreement reasonably satisfactory to the
Company; and
(k) in the event of the issuance of any stop order of which the Company
or its counsel is aware suspending the effectiveness of the Registration
Statement or any order suspending or preventing the use of any related
Prospectus or suspending the registration or qualification of any Registrable
Shares for sale in any jurisdiction, the Company promptly will use its best
efforts to obtain its withdrawal.
-7-
Holdings shall furnish to the Company in writing such information
regarding Holdings, PHL and their Affiliates as is required to be disclosed
pursuant to the Securities Act. Holdings agrees to notify the Company promptly
of any inaccuracy or change in information previously furnished by Holdings to
the Company or of the happening of any event in either case as a result of which
the Registration Statement, a Prospectus, or any amendment or supplement thereto
contains an untrue statement of a material fact regarding Holdings, PHL or any
of their Affiliates or omits to state a material fact regarding Holdings, PHL or
any of their Affiliates required to be stated therein or necessary to make the
statements therein not misleading and to furnish promptly to the Company any
additional information required to correct and update any previously furnished
information or required so that such Registration Statement, Prospectus, or
amendment or supplement, shall not contain, with respect to Holdings, PHL or any
of their Affiliates, an 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.
Holdings agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Sections 2.5(e) or (k)
above, Holdings will forthwith discontinue (and cause any Affiliate, and PHL and
any of its Affiliates, to discontinue) the transfer or disposition of any
Registrable Shares pursuant to the Prospectus relating to the Registration
Statement covering such Registrable Shares until Holdings' receipt of the copies
of the amended or supplemented Prospectus contemplated by Section 2.5(e) or the
withdrawal of any order contemplated by Section 2.5(k), and, if so directed by
the Company, Holdings will deliver to the Company all copies, other than
permanent file copies then in Holdings' possession, of the Prospectus covering
such Registrable Shares at the time of receipt of such notice. The period during
which any discontinuance under this paragraph is in effect is referred to herein
as a "Discontinuance Period."
Section 2.6. Registration Expenses.
(a) In connection with the registration of the Registrable Shares
pursuant to Section 2.3 above, the Company will pay any and all out-of-pocket
expenses incident to the Company's performance of or compliance with this
Agreement, including, without limitation, (i) all registration and filing fees
with the SEC relating to the shares of Common Stock into which the Subordinated
Debentures are convertible pursuant to the terms of the Subordinated Debentures,
(ii) all fees and expenses of complying with state securities or blue sky laws,
(iii) all printing and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Shares on the NYSE, or any other
exchange or automated interdealer quotation system as then applicable, (v) the
fees and disbursements of the Company's counsel and of its independent public
accountants, and (vi) the fees and expenses of any special experts retained by
the Company in connection with the requested registration, and Holdings shall
pay any and all out-of-pocket expenses incurred by Holdings, including, without
limitation, (x) all registration and filing fees with the SEC relating to the
Common Shares, (y) all fees or disbursements of counsel to Holdings and (z) all
brokerage commissions, fees and expenses and all transfer taxes and documentary
stamp taxes, if any, relating to the sale or disposition of the Registrable
Shares.
-8-
(b) In connection with a registration that includes any Registrable
Shares pursuant to Section 2.4 above, Holdings will pay any and all
out-of-pocket expenses attributable to such Registrable Shares, including,
without limitation, (i) all registration and filing fees with the SEC and the
National Association of Securities Dealers, Inc., (ii) all fees and expenses
associated with qualifying the Registrable Shares with state securities or blue
sky laws, (iii) any fees or disbursements of counsel to Holdings, and (iv) any
brokerage commissions and fees, underwriting discounts and commissions, transfer
taxes and documentary stamp taxes, if any, relating to the sale or disposition
of the Registrable Shares.
ARTICLE III
Holdback Period
If one or more underwritten public offerings of shares of Common Stock
(other than the Registrable Shares) by the Company occur during the Effective
Period, then, in connection with each such public offering, the Company may
require Holdings, PHL and their Affiliates to refrain from, and Holdings, PHL
and their Affiliates will refrain from, selling any of the Registrable Shares
for a period determined by the Company but not to exceed 120 days (or such
lesser period as the Company may require its officers and directors or other
holders of shares of Common Stock to so refrain) (each such period referred to
as a "Holdback Period") so long as the Company delivers written notice to
Holdings of the Company's requirement of a Holdback Period and the length of
such Holdback Period prior to commencement of the Holdback Period.
ARTICLE IV
Indemnification; Contribution
Section 4.1. Indemnification by the Company. The Company will, and
hereby agrees to, indemnify and hold harmless, to the fullest extent permitted
by law, and, subject to Section 4.3 below, defend Holdings, PHL, each of their
Affiliates (i) to whom Holdings or PHL transferred Registrable Shares in a
manner permitted by the Voting and Standstill Agreement and (ii) who is listed
as a selling shareholder in the Prospectus, and their respective officers,
directors, employees, agents, representatives and each other Person, if any, who
controls Holdings within the meaning of the Securities Act (each, a "Company
Indemnitee"), against any and all losses, claims, damages, liabilities and
expenses, joint or several, to which they or any of them may become subject
under the Securities Act or any other statute or common law, including any
amount paid in settlement of any action or proceeding, commenced or threatened,
and to reimburse them for any reasonable legal or other expenses incurred by
them in connection with investigating any claims and defending any actions
(collectively, "Losses"), with respect to sales of Registrable Shares under the
Registration Statement, insofar as any Losses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any pre- or post-effective amendment thereto or in
any Blue Sky Filing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus or any amendment or supplement
-9-
thereto, or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the indemnification agreement contained herein shall not (i) apply to
Losses arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by such Company Indemnitee from time to time
specifically for use in the Registration Statement, the Prospectus or any such
amendment or supplement thereto or any Blue Sky Filing or (ii) inure to the
benefit of any Person, to the extent that any such Loss arises out of such
Person's failure to send or give a copy of the Prospectus, as the same may be
then supplemented or amended, to the Person asserting an untrue statement or
alleged untrue statement, or omission or alleged omission, at or prior to the
written confirmation of the sale of the Registrable Shares to such Person if
such statement or omission was corrected in the Prospectus or any amendment or
supplement thereto prior to the written confirmation of the sale. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Company Indemnitee or any other Person and shall survive the
transfer of such securities by such Company Indemnitee.
Section 4.2. Indemnification by Holdings. Holdings and PHL will, and
hereby agree to, indemnify and hold harmless and, subject to Section 4.3 below,
defend (in the same manner and to the same extent as set forth in Section 4.1
above), and cause each of their Affiliates who is listed as a selling
shareholder in the Prospectus to so indemnify, hold harmless and defend, the
Company and the Company's officers, directors, employees, agents,
representatives and each other Person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any such untrue statement or
alleged untrue statement in, or any such omission or alleged omission from, the
Registration Statement, any Prospectus, or any amendment or supplement thereto,
if such statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by Holdings, PHL or any of their
Affiliates from time to time specifically for use in the Registration Statement,
the Prospectus, and any such amendment or supplement thereto. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or any other Person
and shall survive the transfer of such securities by Holdings and PHL. The
liability of an indemnifying party under this Section 4.2 shall be limited to
the amount of the net proceeds received by such indemnifying party upon the
resale of any Registrable Shares pursuant to the Registration Statement creating
such liability.
Section 4.3. Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Sections 4.1 and 4.2 above, such indemnified
party will give, if a claim in respect thereof is to be made against an
indemnifying party, written notice to the latter of the commencement of such
action, provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Article IV, except to the extent that the indemnifying party is
actually prejudiced in any material respect by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to
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assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of reasonable investigation. If the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such Person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim in each case at the
indemnifying party's expense. In any event, unless and until the indemnifying
party elects in writing to assume and does so assume the defense of any such
claim, proceeding or action, the indemnified party's reasonable costs and
expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party that relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
informed at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense, except that the indemnifying party shall be liable for such reasonable
costs and expenses if, in such indemnified party's reasonable judgment, a
conflict of interest between such indemnified and indemnifying parties may exist
as described above. If the indemnifying party does not assume such defense, the
indemnified party shall keep the indemnifying party informed at all times as to
the status of the defense; provided, however, that the failure to keep the
indemnifying party so informed shall not affect the obligations of the
indemnifying party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the written consent of the indemnified party, consent to entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
general written release from all liability with respect to such claim or
litigation.
Section 4.4. Indemnification Payments. The indemnification required by
this Article IV shall be made by periodic payments of the amount thereof during
the course of the investigation or defense as and when bills are received or
Losses are incurred, subject to the receipt of such documentary support therefor
as the indemnifying party may reasonably request.
Section 4.5. Contribution. If the indemnification provided for in this
Article IV is unavailable to or insufficient to hold harmless a party otherwise
entitled to be indemnified thereunder in respect to any Losses referred to
therein, then the parties required to provide indemnification under this Article
IV shall contribute to the amount paid or payable by such party
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as a result of Losses in such proportion as is appropriate to reflect the
relative fault of each such indemnifying party in connection with the statements
or omissions that resulted in such Losses. The relative fault of each
indemnifying party shall be determined by reference to whether the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, Holdings and PHL agree that it would not be just and equitable if
contributions pursuant to this Section 4.5 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to above in this Section 4.5. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
Section 4.6. Other Rights and Liabilities. The indemnity and
contribution agreements contained herein shall be in addition to (i) any cause
of action or similar right of the indemnified party against the indemnifying
party or others and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.
ARTICLE V
Rule 144 Representations
The Company covenants that, for the time that the Holdings Ownership
Percentage (as such term is defined in the Voting and Standstill Agreement)
exceeds 10% or Holdings is otherwise deemed by the Company to be an Affiliate of
the Company, it will use its best efforts to:
(i) file with the SEC all reports and other documents required
to be filed by the Company under the Exchange Act and the rules and
regulations promulgated thereunder;
(ii) if not required to file such reports and documents
referred to in subsection (i) above, keep publicly available certain
information regarding the Company, as contemplated by Rule 144(c)(2)
under the Securities Act; and
(iii) take all other actions reasonably necessary to enable
Holdings, PHL and their Affiliates to sell the Registrable Shares
without registration under the Securities Act within the limitation of
the exemption provided by Rule 144 under the Securities Act.
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ARTICLE VI
Miscellaneous
Section 6.1. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to the Company, Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
to it at: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esquire
If to Holdings PM Holdings, Inc.
or PHL, to them at: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Phoenix Home Life Mutual Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
With a copy to: Stroock & Stroock & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
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Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three Business
Days after being sent, if sent by registered or certified mail, with first-class
postage prepaid. Each of the parties hereto shall be entitled to specify a
different address by giving notice as aforesaid to each of the other parties
hereto.
Section 6.2. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by Holdings and by the Company
following approval thereof by a majority of the Continuing Directors (as such
term is defined in the Voting and Standstill Agreement).
Section 6.3. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and their respective successors and assigns,
including without limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise; provided that no party may assign
this Agreement without the other party's prior written consent, which consent
will not be required in the event of the transfer of all of the Registrable
Shares beneficially owned by Holdings in accordance with Sections 4.1(g) or
4.1(h) of the Voting and Standstill Agreement.
Section 6.4. Entire Agreement. This Agreement embodies the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement and the Stock Purchase Agreement.
Section 6.5. Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
Section 6.6. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
Section 6.7. No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and
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any custom or practice of the parties at variance with the terms hereof, shall
not constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
Section 6.8. No Third Party Beneficiaries. Except as provided in
Article IV above, this Agreement is not intended to be for the benefit of and
shall not be enforceable by any Person who or which is not a party hereto.
Section 6.9. Consent to Jurisdiction. Each party to this Agreement, by
its execution hereof, (i) hereby irrevocably submits, and agrees to cause each
of its Affiliates to submit, to the jurisdiction of the federal courts located
either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, for the purpose of any Action (as such term is defined in the Stock
Purchase Agreement) arising out of or based upon this Agreement or relating to
the subject matter hereof or the transactions contemplated hereby, (ii) hereby
waives, and agrees to cause each of its Affiliates to waive, to the extent not
prohibited by applicable law, and agrees not to assert, and agrees not to allow
any of its Affiliates to assert, by way of motion, as a defense or otherwise, in
any such Action, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that any such proceeding brought in one of the above-named courts
is improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court and (iii) hereby agrees not to commence or to
permit any of its Affiliates to commence any Action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before one of
the above-named courts nor to make any motion or take any other action seeking
or intending to cause the transfer or removal of any such Action to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by Virginia or Connecticut law, as the case
may be, and agrees that service of process by registered or certified mail,
return receipt requested, at its address specified pursuant to Section 6.1 above
is reasonably calculated to give actual notice. Notwithstanding anything
contained in this Section 6.9 to the contrary with respect to the parties' forum
selection, if an Action is filed against a party to this Agreement, including
its Affiliates, by a person who or which is not a party to this Agreement, an
Affiliate of a party to this Agreement, or an assignee thereof (a "Third Party
Action"), in a forum other than the federal district court or a state court
located in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, and such Third Party Action is based upon, arises from, or
implicates rights, obligations or liabilities existing under this Agreement or
acts or omissions pursuant to this Agreement, then the party to this Agreement,
including its Affiliates, joined as a defendant in such Third Party Action shall
have the right to file cross-claims or third-party claims in the Third Party
Action against the other party to this Agreement, including its Affiliates, and
even if not a defendant therein, to intervene in such Third Party Action with or
without also filing cross-claims or third-party claims against the other party
to this Agreement, including its Affiliates.
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Section 6.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the Commonwealth of
Virginia, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the law of any other jurisdiction.
Section 6.11. Name, Captions. The name assigned to this Agreement and
the section captions used herein are for convenience of reference only and shall
not affect the interpretation or construction hereof.
Section 6.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by all,
the parties hereto.
Section 6.13. Expenses. Each of the parties hereto shall bear their own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
Section 6.14. Severability. In the event that any provision of this
Agreement would, under applicable law, be invalid or unenforceable in any
respect, such provision shall (to the extent permitted under applicable law) be
construed by modifying or limiting it so as to be valid and enforceable to the
maximum extent compatible with, and possible under, applicable law. The
provisions of this Agreement are severable, and in the event that any provision
hereof should be held invalid or unenforceable in any respect, it shall not
invalidate, render unenforceable or otherwise affect any other provision hereof.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Registration Rights Agreement to be executed, as of the
date first above written by their respective officers thereunto duly authorized.
HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ COMPANY
By: ______________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
PM HOLDINGS, INC.
By:
______________________________________
Name:
Title:
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
By:
______________________________________
Name:
Title:
-17-
Exhibit I to Stock
Purchase Agreement
VOTING AND STANDSTILL AGREEMENT
THIS VOTING AND STANDSTILL AGREEMENT (the "Agreement"), dated as of
___________, 1999, is made by and among Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company, a
Virginia corporation (the "Company"), PM Holdings, Inc., a Connecticut
corporation ("Holdings"), and Phoenix Home Life Mutual Insurance Company, a New
York life insurance company ("PHL").
W I T N E S S E T H:
WHEREAS, the Company, Holdings, PHL and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III entered
into a Stock Purchase Agreement dated March 29, 1999 (the "Stock Purchase
Agreement"), under which the Company agreed to acquire from Holdings and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, III all of the issued and outstanding shares of the capital stock of
American Phoenix Corporation, a Connecticut corporation ("APC"); and
WHEREAS, pursuant to the Stock Purchase Agreement, (i) Holdings
acquired __________ shares of the Company's Common Stock (as hereinafter
defined) and $22,000,000 principal amount of the Company's Subordinated
Debentures (as hereinafter defined), and (ii) PHL acquired $10,000,000 principal
amount of the Company's Subordinated Debentures; and
WHEREAS, the Subordinated Debentures acquired by Holdings and PHL
pursuant to the Stock Purchase Agreement are convertible into shares of Common
Stock pursuant to the terms of the Subordinated Debentures; and
WHEREAS, the parties to this Agreement desire to establish certain
rights and obligations in connection with the relationship of Holdings and PHL
to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Stock Purchase Agreement, the Company, Holdings and
PHL hereby agree as follows:
ARTICLE I
Definitions; Representations and Warranties
Section 1.1. Definitions. Except as otherwise specified herein,
capitalized terms used in this Agreement shall have the respective meanings
assigned to such terms in the Stock Purchase Agreement. For purposes of this
Agreement, the following terms have the following meanings:
(a) "Adjusted Outstanding Shares" shall mean, at any time and with
respect to the determination of (i) the Holdings Ownership Percentage as it
relates to Holdings and its Affiliates, (ii) the Standstill Percentage as it
relates to Holdings and its Affiliates, and (iii) any other percentage of the
beneficial ownership of Common Stock as it relates to a Person or Group, the
total number of shares of Common Stock then issued and outstanding together with
the total
number of shares of Common Stock not then issued and outstanding that would be
outstanding if all then existing Subordinated Debentures had been converted.
(b) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement, and shall include, with
respect to a determination of the Affiliates of Holdings, any Affiliate of PHL;
provided, however, that (i) PXP and its subsidiaries and (ii) any Person
registered as an investment company under the Investment Company Act of 1940, as
amended, which might otherwise be deemed to be an "affiliate" of Holdings or PHL
within the meaning of Rule 12b-2 under the Exchange Act (a "Related Investment
Company"), shall not be deemed to be Affiliates of Holdings or PHL for purposes
of this Agreement to the extent their respective businesses consist principally
of investing in securities, investment management and/or advisory services, and
any shares of Common Stock or other equity securities of the Company acquired,
or caused to be acquired, by PXP and its subsidiaries or such Related Investment
Company in the conduct of their respective businesses in the ordinary course for
the account of, or for the benefit of, clients of PXP or its subsidiaries,
policyholders or investors (other than Holdings, PHL or their Affiliates), and
not with the purpose of avoiding the provisions of Section 3.1 below, shall not
be deemed, for purposes of this Agreement, to be beneficially owned by Holdings,
PHL or their Affiliates.
(c) "Beneficial ownership," "beneficial owner" and "beneficially own"
shall have the meanings ascribed to such terms in Rule 13d-3 under the Exchange
Act as in effect on the date of this Agreement; provided that Holdings and each
of its Affiliates and any Person or Group shall be deemed to be the beneficial
owners of any shares of Common Stock that Holdings or such Affiliate, Person
and/or Group, as the case may be, has the right to acquire within sixty (60)
days after the determination date pursuant to any other agreement, arrangement
or understanding or upon the exercise of conversion or exchange rights,
warrants, options or otherwise, including but not limited to any right to
acquire shares of Common Stock through the conversion of the Subordinated
Debentures.
(d) "Board of Directors" shall mean the Board of Directors of the
Company.
(e) "Business Day" shall mean any day on which banking institutions in
New York, New York are customarily open for the purpose of transacting business.
(f) "Common Stock" shall mean the Common Stock, without par value, of
the Company.
(g) "Continuing Directors" shall mean the members of the Board of
Directors of the Company immediately prior to the Closing Date and any future
members of the Board of Directors nominated by the Board of Directors; provided,
however, that no Holdings Director shall constitute a Continuing Director or be
counted in determining the presence of a quorum of Continuing Directors.
-2-
(h) "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
(i) "Group" shall have the meaning comprehended by Section 13(d)(3) of
the Exchange Act as in effect on the date of this Agreement.
(j) "Holdings Designee" shall mean a member of the Board of Directors
of the Company who was designated by Holdings for nomination pursuant to this
Agreement, but shall not include ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III.
(k) "Holdings Directors" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and the
Holdings Designee.
(l) "Holdings Ownership Percentage" shall mean, at any time, the
percentage of the Adjusted Outstanding Shares that is beneficially owned in the
aggregate by Holdings, PHL and their Affiliates. Immediately following the
consummation of the transactions contemplated by the Stock Purchase Agreement,
the Holdings Ownership Percentage was ____%.
(m) "Holdings Securities" shall mean collectively (i) the _________
shares of Common Stock that Holdings acquired pursuant to the terms of the Stock
Purchase Agreement, (ii) the Subordinated Debentures acquired by Holdings and
PHL pursuant to the terms of the Stock Purchase Agreement, (iii) the shares of
Common Stock into which the Subordinated Debentures are convertible pursuant to
the terms of the Subordinated Debentures and (iv) any other shares of Common
Stock that Holdings, PHL and their Affiliates may acquire from time to time,
including without limitation such additional shares of Common Stock that the
Company may issue with respect to such shares pursuant to any stock splits,
stock dividends, recapitalizations, restructurings, reclassifications or similar
transactions.
(n) "HRH Designee" shall mean a member of the Board of Directors of the
Company who was designated by the Continuing Directors for appointment or
nomination pursuant to this Agreement.
(o) "Indenture" shall mean the Indenture, dated ____________, 1999,
executed by the Company and _______________, as Trustee, in connection with the
issuance of the Subordinated Debentures.
(p) "NYSE Rules" shall mean the rules and regulations of the New York
Stock Exchange as in effect from time to time.
(q) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act as in effect on the date of this Agreement, and shall include,
without limitation, corporations, partnerships, limited liability companies and
trusts.
(r) "PXP" shall mean Phoenix Investment Partners, Ltd., a Delaware
corporation, approximately 60% of the common stock of which is currently owned
by Holdings.
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(s) "Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated ___________, 1999, executed by the Company, Holdings and PHL in
connection with the Stock Purchase Agreement.
(t) "Subordinated Debentures" shall mean the Company's 5.25%
Convertible Subordinated Debentures (Due 2014), in the aggregate principal
amount of $32,000,000, acquired by Holdings and PHL pursuant to the Stock
Purchase Agreement.
(u) "Standstill Percentage" shall mean, at any time, 20.0% of the
Adjusted Outstanding Shares.
(v) "Transfer" shall mean sell, transfer, assign, pledge, hypothecate,
give away or in any manner dispose of any Common Stock or Subordinated
Debentures.
Section 1.2. Representations and Warranties of Holdings. Holdings
represents and warrants to the Company as follows:
(a) Holdings is a corporation duly organized, validly existing and in
good standing under the laws of the State of Connecticut.
(b) Except for the Holdings Securities, neither Holdings nor any of its
Affiliates beneficially owns any Common Stock or any options, warrants or rights
of any nature (including conversion and exchange rights) to acquire beneficial
ownership of any Common Stock.
(c) Holdings has full legal right, power and authority to enter into
and perform this Agreement, and the execution and delivery of this Agreement by
Holdings have been duly authorized by all necessary corporate action on behalf
of Holdings. This Agreement is enforceable against Holdings in accordance with
its terms, subject to bankruptcy, reorganization, insolvency and other similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or an action at law).
(d) The execution, delivery and performance of this Agreement by
Holdings does not and will not conflict with or constitute a violation of or
default under the Charter or Bylaws (or comparable documents) of Holdings, or
any statute, law, regulation, order or decree applicable to Holdings, or any
contract, commitment, agreement, arrangement or restriction of any kind to which
Holdings is a party or by which Holdings is bound, other than such violations as
would not prevent or materially delay the performance by Holdings of its
obligations hereunder or otherwise subject the Company to any material claim or
liability.
Section 1.3. Representations and Warranties of PHL. PHL represents and
warrants to the Company as follows:
(a) PHL is a life insurance company duly organized, validly existing
and in good standing under the laws of the State of New York.
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(b) PHL has full legal right, power and authority to enter into and perform this
Agreement, and the execution and delivery of this Agreement by PHL have been
duly authorized by all necessary corporate action on behalf of PHL. This
Agreement is enforceable against PHL in accordance with its terms, subject to
bankruptcy, reorganization, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or an action at
law).
(c) The execution, delivery and performance of this Agreement by PHL
does not and will not conflict with or constitute a violation of or default
under the Charter or Bylaws (or comparable documents) of PHL, or any statute,
law, regulation, order or decree applicable to PHL, or any contract, commitment,
agreement, arrangement or restriction of any kind to which PHL is a party or by
which PHL is bound, other than such violations as would not prevent or
materially delay the performance by PHL of its obligations hereunder or
otherwise subject the Company to any material claim or liability.
Section 1.4. Representations and Warranties of the Company. The Company
hereby represents and warrants to Holdings and PHL as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia.
(b) The Company has full legal right, power and authority to enter into
and perform this Agreement, and the execution and delivery of this Agreement by
the Company have been duly authorized by all necessary corporate action on
behalf of the Company. This Agreement is enforceable against the Company in
accordance with its terms, subject to bankruptcy, reorganization, insolvency and
other similar laws affecting the enforcement of creditors' rights generally and
to general principles of equity (regardless of whether considered in a
proceeding in equity or an action at law).
(c) The execution, delivery and performance of this Agreement by the
Company does not and will not conflict with or constitute a violation of or
default under the Charter or Bylaws of the Company, or any statute, law,
regulation, order or decree applicable to the Company, or any contract,
commitment, agreement, arrangement or restriction of any kind to which the
Company is a party or by which the Company is bound, other than such violations
as would not prevent or materially delay the performance by the Company of its
obligations hereunder or otherwise subject Holdings or PHL to any material claim
or liability.
ARTICLE II
Board Representation
Section 2.1. Initial Board Representation. On the later of the Closing
Date or the date of the Company's 1999 annual meeting of shareholders, the
Company will (a) take such action as may be necessary to increase the size of
the Board of Directors from nine (9) to thirteen (13) directors, (b) upon
receipt of executed letter agreements regarding resignation in the form attached
to this Agreement as Exhibit A, fill two (2) of the vacancies created thereby
with ▇▇▇▇▇▇
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▇. ▇▇▇▇▇▇▇, III and the Holdings Designee in accordance with the applicable
provisions of the Charter and Bylaws of the Company, and (c) fill the remaining
two (2) vacancies created thereby with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and the HRH Designee
in accordance with the applicable provisions of the Company's Charter and
Bylaws. With respect to the four (4) directors appointed to the Board of
Directors pursuant to this Section 2.1, the Company will (i) appoint ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III to the Class whose current term expires in
2000, the Holdings Designee to the Class whose current term expires in 2001 and
the HRH Designee to the Class whose current term expires in 2002, and (ii)
subject to the right of Holdings to designate a new Holdings Designee as a
substitute for the initial Holdings Designee, nominate and recommend each for
election as a director to the respective Class designated above at the next
annual meeting of the Company's shareholders following such appointments;
provided that, if any such director is not elected by the shareholders of the
Company, the Company shall have no further obligations under this Section 2.1
for the applicable year; and provided further that the Company shall be under no
obligation to appoint or recommend for election the Holdings Designee or ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, III to the Board of Directors unless and until it has received from
such director an executed letter agreement regarding resignation in the form
attached to this Agreement as Exhibit A. The HRH Designee shall be an executive
officer of the Company at the time of appointment or nomination by the Company.
Any person designated by Holdings to be the Holdings Designee shall be
reasonably acceptable to the Continuing Directors, and, if found unacceptable by
the Continuing Directors (i) the Company shall not be obligated to appoint or
recommend for election any such person to the Board of Directors and (ii)
Holdings shall be entitled to designate a replacement that is reasonably
acceptable to the Continuing Directors.
Section 2.2. Continuing Board Representation.
(a) Except as otherwise expressly provided by the provisions of this
Article II, the Company agrees that, during the term of this Agreement, it will
not take or recommend to its shareholders any action that would cause the Board
of Directors to consist of any number of directors other than thirteen (13)
directors; provided, however, that the Company may increase the number of
directors on the Board of Directors (i) in connection with the consummation of
business combination transactions wherein the Company has agreed to increase the
size of the Board of Directors or (ii) with the consent of Holdings, which will
not be unreasonably withheld; and provided further, that the Company may reduce
the number of directors on the Board of Directors in the event of the death,
resignation or removal of any director pursuant to the Company's Bylaws or this
Agreement (unless such death, resignation or removal relates to the Holdings
Designee and Holdings has the right under this Article II to designate a
replacement).
(b) Subject to the provisions of Sections 2.2(a), 2.2(c) and 2.5 hereof
regarding reductions in the size of the Board of Directors and any required
resignation of the Holdings Designee, during the term of this Agreement the
Company will nominate and recommend the Holdings Directors for election in the
applicable year in which their respective Class terms expire; provided that, if
any such Holdings Director is not elected by the shareholders of the Company,
the Company shall have no further obligations under this Section 2.2(b) for the
applicable year; and provided further that the Company shall be under no
obligation to nominate or recommend for election the Holdings Designee to the
Board of Directors unless and until it has received from such director an
executed letter agreement regarding resignation in the form attached to this
-6-
Agreement as Exhibit A. Any person designated by Holdings to be a Holdings
Designee shall be reasonably acceptable to the Continuing Directors, and, if
found unacceptable by the Continuing Directors (i) the Company shall not be
obligated to appoint or recommend for election any such person to the Board of
Directors and (ii) Holdings shall be entitled to designate a replacement that is
reasonably acceptable to the Continuing Directors.
(c) The Company shall have no obligation to nominate or recommend a
Holdings Director for election to the Board of Directors after the termination
of this Agreement pursuant to Article VI hereof or upon the occurrence of the
following events:
(i) With respect to the Holdings Designee, upon the earlier of
(x) the date when the Holdings Ownership Percentage is less than ten
percent (10%), or (y) subject to the right of Holdings to designate a
replacement Holdings Designee pursuant to Section 2.7 hereof, his
death, disability or attainment of the age of seventy (70) years; or
(ii) With respect to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, upon the earlier of
his death, disability or attainment of the age of seventy (70) years;
or
(iii) With respect to each of the Holdings Directors, upon a
final determination by a court of competent jurisdiction that this
Agreement has been breached by PHL, Holdings or their Affiliates.
For purposes of this Section 2.2(c) and Section 2.5(b) below, the term
"disability" shall mean the inability to perform the duties of a director as a
result of a physical or mental incapacity (or combination thereof) for a period
longer than three (3) consecutive months or for more than six (6) months in any
consecutive twelve (12) month period, in each case determined by the written
opinion of such director's regular attending physician.
The Company may take such action as may be necessary to reduce the size
of the Board of Directors upon the occurrence of the events set forth in (c)(i)
and (c)(iii) above or in the event of ▇▇. ▇▇▇▇▇▇▇▇▇'▇ death or disability. Upon
attaining the age of seventy (70) years, ▇▇. ▇▇▇▇▇▇▇▇▇ may continue to serve as
a director for the remainder of his then current term on the Board of Directors
and thereafter the Company may take such action as may be necessary to reduce
the size of the Board of Directors by one director.
(d) Until the earlier to occur of (i) the date on which there are no
Holdings Directors serving on the Board of Directors pursuant to this Agreement
or (ii) the expiration of this Agreement, the Company agrees that it will not
take or recommend to its shareholders any action that would result in any
amendment to the Company's Bylaws in effect on the date hereof that would impose
any qualifications on the eligibility of directors of the Company to serve on
any committee of the Board of Directors, except as may be required by the NYSE
Rules, the rules and regulations under the Internal Revenue Code of 1986, as
amended, relating to the qualification of employee stock benefit plans and the
deductibility of compensation paid to executive officers, the rules and
regulations under Section 16(b) of the Exchange Act, including Rule 16b-3
thereunder or any successor rule, and the Company's Bylaws.
-7-
Section 2.3. Committee Representation. Until the earlier to occur of
(i) the date on which there are no Holdings Directors serving on the Board of
Directors pursuant to this Agreement or (ii) the expiration of this Agreement,
to the extent that, and for so long as, but only insofar as required by
applicable law or NYSE Rules, any of the Holdings Directors is qualified under
the then-current NYSE Rules, the rules and regulations under the Internal
Revenue Code of 1986, as amended, relating to the qualification of employee
stock benefit plans and the deductibility of compensation paid to executive
officers, the rules and regulations under Section 16(b) of the Exchange Act,
including Rule 16b-3 thereunder or any successor rule, the Board of Directors
shall designate, as it deems appropriate, each of the Holdings Directors to
serve on at least one committee of the Board of Directors (whether existing on
the date hereof or formed or constituted after the date hereof).
Section 2.4. Resignations at the Request of Holdings; Vacancies.
Holdings shall have the right to request the resignation from the Board of
Directors of the Holdings Designee pursuant to the terms of Exhibit A. In the
event that the Holdings Designee for any reason ceases to serve as a member of
the Board of Directors during his or her term of office and at such time
Holdings would have the right to a designation hereunder if an election for the
resulting vacancy were to be held, Holdings may designate a person to fill such
vacancy (a "Holdings Designee Vacancy"); provided that, the person so designated
shall be reasonably acceptable to the Continuing Directors. Subject to the
foregoing and Section 2.2 hereof, the Company agrees to (i) appoint Holdings'
designee to the Board of Directors to fill the Holdings Designee Vacancy and to
serve until the next annual meeting of the Company's shareholders and (ii)
nominate and recommend the Holdings' designee for election to the Board of
Directors at the next annual meeting of the Company's shareholders to fill the
remaining term of the class of directors to which such designee was appointed;
provided further that the Company shall be under no obligation to appoint,
nominate or recommend for election any such designee to fill an Holdings
Designee Vacancy unless and until it has received from such designee an executed
letter agreement regarding resignation in the form attached to this Agreement as
Exhibit A. Other than with respect to the foregoing provisions relating to a
Holdings Designee Vacancy, the Board of Directors shall have the sole and
exclusive right to designate a replacement director in the event of any vacancy
on the Board of Directors.
Section 2.5. Required Resignations.
(a) On the earlier of (i) the date when the Holdings Ownership
Percentage is less than ten percent (10%), or (ii) the date of any final
determination by a court of competent jurisdiction that this Agreement has been
breached by PHL, Holdings or their Affiliates, Holdings shall, within five (5)
Business Days, use its best efforts to cause the Holdings Designee to resign
from the Board of Directors. In the event of any decrease in the Holdings
Ownership Percentage to below such ten percent (10%) threshold, any subsequent
increase in the Holdings Ownership Percentage to or above such ten percent (10%)
threshold shall not entitle Holdings to reinstate, elect or designate any
Holdings Designee to the Board of Directors. If Holdings does not cause the
resignation of the Holdings Designee within such five (5) Business Day period,
the Company may seek such resignation or, in the alternative, the Continuing
Directors may seek the removal of the Holdings Designee.
-8-
(b) In the event of the disability or termination of employment of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III under the Employment Agreement between the Company and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III dated ______________, 1999, the Company may request
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III to resign from the Board of Directors. If such
resignation is not received by the Company within five (5) Business Days from
the date of the Company's request for resignation, the Company may seek his
removal in accordance with the letter agreement attached hereto as Exhibit A.
(c) Upon any shareholder vote relating to the removal of a director for
failure to resign pursuant to this Section 2.5, Holdings and its Affiliates
shall (i) attend any meeting either in person or by proxy and (ii) vote in favor
of such removal. At such time as a director becomes subject to resignation
pursuant to this Section 2.5, the Board of Directors may amend its Bylaws or
take such other action as it deems appropriate to reduce the number of directors
constituting the Board of Directors proportionately or fill the vacancy caused
by such resignation(s) with its own nominee in accordance with the applicable
provisions of the Charter and Bylaws of the Company.
Section 2.6. No Voting Trust. This Agreement does not create or
constitute, and shall not be construed as creating or constituting, a voting
trust agreement under the Virginia Stock Corporation Act or any other applicable
corporation law.
Section 2.7. Notification of Designation. Holdings shall notify the
Company in writing not later than March 1st of the year in which the Holdings
Designee's term on the Board of Directors expires as to the designation of the
person to be nominated for election as the Holdings Designee at the annual
meeting of the Company's shareholders for such year; provided that, if Holdings
should fail to so notify the Company of its Holdings Designee by such date,
Holdings shall be deemed to have designated the then current Holdings Designee
for nomination to the Board of Directors at the next annual meeting of
shareholders. Holdings shall cause the Holdings Designee to provide promptly
information that may be required under the Exchange Act for inclusion in the
Company's proxy statement for such annual meeting and shall cooperate with the
Company in obtaining any such information, including but not limited to the
prompt completion of any director questionnaires applicable to the directors
generally. Holdings shall have the sole and exclusive right to designate the
Holdings Designee under this Article II and the Company shall not be required to
accept a designation from any Person other than Holdings; provided, however,
that to the extent that Holdings Transfers all of the Holdings Securities
beneficially owned by Holdings to (i) an Affiliate of Holdings or PHL in
compliance with Section 4.1(g) hereof or (ii) a Person surviving a merger or
formed by a consolidation pursuant to Section 4.1(h) hereof, such Affiliate or
Person shall have the sole and exclusive right to designate the Holdings
Designee under this Article II from and after the date of such Transfer.
Section 2.8. No Duty to Designate; Reduction of Board Representation.
Nothing contained in this Article II shall be construed as requiring Holdings to
designate any Holdings Designee or as requiring any Holdings Director, once
elected, to continue to serve in office if such Holdings Director elects to
resign. Until the earlier to occur of (i) the date on which there are no
Holdings Directors serving on the Board of Directors pursuant to this Agreement
or (ii) the expiration of this Agreement, in the event of any vacancy created by
the death, resignation or removal of the Holdings Designee or the failure of
Holdings to designate an Holdings Designee,
-9-
other than a vacancy created by the resignation or removal of an Holdings
Designee pursuant to Section 2.5 above, Holdings may notify the Company in
writing that it does not intend to designate a person to fill such vacancy, and
the Company thereafter may take such action as may be necessary either to reduce
the size of the Board of Directors by one director or fill the vacancy with its
own designee.
ARTICLE III
Standstill Restrictions; Voting Matters
Section 3.1. Standstill Restrictions.
(a) During the term of this Agreement, PHL and Holdings covenant and
agree that PHL and Holdings shall not, and shall not permit any of their
Affiliates to, either individually or as part of a Group, directly or
indirectly:
(i) acquire (other than acquisitions resulting from corporate
action taken by the Board of Directors with respect to any pro rata distribution
of shares of Common Stock in connection with any stock split, stock dividend,
recapitalization, reclassification or similar transaction), propose to acquire
(or publicly announce or otherwise disclose an intention to propose to acquire),
offer to acquire, or agree to acquire any Common Stock (or any options,
warrants, rights or other securities exercisable for, or convertible or
exchangeable into, Common Stock, including without limitation the Subordinated
Debentures) if the effect of such acquisition would cause the Holdings Ownership
Percentage to equal or exceed the Standstill Percentage (other than as a result
of any stock purchases or repurchases by the Company); provided that this
Section 3.1(a)(i) shall not apply to (a) any acquisition of Common Stock or of
options, warrants, rights or other securities exercisable for, or convertible or
exchangeable into, Common Stock granted to any Person, including without
limitation Holdings Directors, pursuant to any benefit plan of the Company or
any of its Affiliates or the exercise, conversion or exchange of any such
option, warrant, right or other security or (b) any acquisition of Common Stock
upon the exercise by PHL, Holdings or their Affiliates of rights pursuant to any
Rights Agreement that may be adopted by the Company for the purpose of deterring
coercive takeover activities with respect to the Company, provided that all of
the shares of Common Stock so acquired upon the exercise of the rights shall be
subject to all of the terms of this Agreement;
(ii) propose (or publicly announce or otherwise disclose an
intention to propose), solicit, offer, seek or take any action to effect,
negotiate with or provide any confidential information relating to the Company
or its business to any other Person with respect to, any tender or exchange
offer, merger, consolidation, share exchange, business combination,
restructuring, recapitalization or similar transaction involving the Company
(other than (x) any of the foregoing that has been approved by the Board of
Directors or (y) in connection with any tender or exchange offer in which the
Board of Directors has (a) recommended that its shareholders accept such offer
or (b) after ten (10) business days (as defined in Rule 14d-1 under the Exchange
Act as in effect on the date of this Agreement) from the date of commencement of
such offer, expressed no opinion, remained neutral, was unable to take a
position or otherwise did not oppose or recommend that its shareholders reject
such offer);
-10-
(iii) make, or in any way participate in, any "solicitation"
of "proxies" to vote (as such terms are defined in Rule 14a-1 under the Exchange
Act), solicit any consent or communicate with or seek to advise or influence any
person or entity with respect to the voting of any Common Stock or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 under the Exchange Act) with respect to the Company; provided that
nothing in this Section 3.1(a)(iii) shall apply to any deemed solicitation of
proxies by the Holdings Directors that may result from such Holdings Directors'
position or status as a director of the Company at the time of any general
solicitation of proxies by the management of the Company;
(iv) form, participate in or join any Person or Group with
respect to any Common Stock or Subordinated Debentures, or otherwise act in
concert with any Person for the purpose of (x) acquiring beneficial ownership of
any Common Stock or Subordinated Debentures or (y) holding or disposing of
Common Stock or Subordinated Debentures for any purpose prohibited by this
Section 3.1(a);
(v) except as specifically provided in Section 3.2 below,
deposit any Common Stock or Subordinated Debentures into a voting trust or
subject any Common Stock or Subordinated Debentures to any arrangement or
agreement with respect to the voting thereof;
(vi) initiate, propose or otherwise solicit shareholders for
the approval of any shareholder proposal with respect to the Company as
described in Rule 14a-8 under the Exchange Act, or induce or attempt to induce
any other Person to initiate, propose or otherwise solicit any such shareholder
proposal;
(vii) except as specifically provided in Article II of this
Agreement, seek election to or seek to place a representative on the Board of
Directors, or seek the removal of any member of the Board of Directors (other
than a Holdings Director);
(viii) call or seek to have called any meeting of the
shareholders of the Company for any purpose;
(ix) take any other action to seek to Control the management
or policies of the Company;
(x) demand, request or propose to amend, waive or terminate
the provisions of this Section 3.1(a); or
(xi) agree to do any of the foregoing, or advise, assist,
encourage or persuade any third party to take any action with respect to any of
the foregoing.
(b) PHL and Holdings agree that they will notify the Company promptly
if any inquiries or proposals are received by, any information is exchanged with
respect to, or any negotiations or discussions are initiated or continued by or
with, PHL, Holdings or any of their Affiliates regarding any matter described in
Section 3.1(a) above. PHL and the Company shall
-11-
mutually agree upon an appropriate response to be made to any such proposals
received by PHL, Holdings or any of their Affiliates.
(c) Nothing contained in this Article III shall be deemed to restrict
the manner in which the Holdings Directors may participate in deliberations or
discussions of the Board of Directors or individual consultations with any
member of the Board of Directors, so long as such actions do not otherwise
violate any provision of Section 3.1(a) above.
(d) Each of Holdings and PHL covenants and agrees that, during the term
of this Agreement and so long as Holdings, PHL or their Affiliates Control (i)
PXP and its subsidiaries (or any successor of PXP and its subsidiaries) or (ii)
any Person registered as an investment company under the Investment Company Act
of 1940, as amended, which might otherwise be deemed to be an "affiliate" of
Holdings or PHL within the meaning of Rule 12b-2 under the Exchange Act (a
"Related Investment Company"), it will not, and will not permit any of its
Affiliates to, cause or permit PXP and its subsidiaries (or any such successor
of PXP and its subsidiaries) or such Related Investment Company, directly or
indirectly, to (i) attempt to exercise Control or influence over the business
and affairs of the Company, (ii) act in concert with Holdings, PHL or their
Affiliates to violate the provisions of this Agreement or (iii) act in concert
with any other Person for the purposes of violating the provisions of this
Agreement or otherwise effecting a change of Control of the Company. Each of
Holdings and PHL also covenants and agrees that, during the term of this
Agreement, it will not direct or influence, or attempt to direct or influence,
the voting or disposition of shares of Common Stock owned of record or
beneficially by PXP and its subsidiaries (or any successor of PXP and its
subsidiaries).
Section 3.2. Voting Matters.
(a) During the term of this Agreement, PHL and Holdings will take all
such action as may be required so that the Common Stock beneficially owned and
entitled to be voted by PHL, Holdings and their Affiliates, as a Group, are
voted or caused to be voted (in person or by proxy):
(i) with respect to the Continuing Director's nominees to the
Board of Directors, in accordance with the recommendation of the Board of
Directors, or a nominating or similar committee of the Board of Directors, if
any such committee exists and makes a recommendation; and
(ii) in accordance with the recommendation of the Board of
Directors with respect to any transaction to be effected with the Company or its
Affiliates in connection with an unsolicited tender or exchange offer, any
"election contest" (as such term is defined or used in Rule 14a-11 under the
Exchange Act as in effect on the date of this Agreement) with respect to the
Board of Directors of the Company or any other attempt to acquire Control of the
Company or the Board of Directors.
(b) For a period of five (5) years from the date of this Agreement, PHL
and Holdings will take all such action as may be required so that the Common
Stock beneficially owned and entitled to be voted by PHL, Holdings and their
Affiliates, as a Group, are voted or caused to be voted (in person or by proxy)
in accordance with the recommendation of the Board of Directors
-12-
of the Company with respect to negotiated mergers, acquisitions, divestitures,
consolidations, sale of assets, share exchanges or other similar transactions
for which shareholder approval is sought.
(c) With respect to all matters brought before the Company's
shareholders for a vote not otherwise provided for in Section 2.5(c) or Section
3.2(a) and (b) above, PHL, Holdings and their Affiliates may vote in accordance
with their independent judgment without regard to any request or recommendation
of the Board of Directors.
(d) PHL, Holdings and their Affiliates who beneficially own any of the
Common Stock shall be present, in person or by proxy, at all duly held meetings
of shareholders of the Company so that the Common Stock held by PHL, Holdings
and their Affiliates may be counted for the purposes of determining the presence
of a quorum at such meetings.
ARTICLE IV
Transfers of Holdings Securities
Section 4.1. Transfer Restrictions. During the term of this Agreement,
PHL, Holdings and their Affiliates, shall not, directly or indirectly, Transfer
any of the Holdings Securities beneficially owned by PHL, Holdings and their
Affiliates to any Person or Group without the prior written consent of the
Company (which consent may be withheld in the Company's sole discretion), if (i)
as a result of such Transfer, such Person or Group would have beneficial
ownership of Common Stock representing in the aggregate more than 9.9% of the
issued and outstanding shares of Common Stock, such determination to be based
upon (x) the most recent publicly available information as to the number of
shares of Common Stock beneficially owned by such Person or Group (to the extent
such information is available) or the transferor's actual knowledge, after due
inquiry, as to such beneficial ownership, (y) the number or amount of Holdings
Securities proposed to be Transferred and (z) the number of issued and
outstanding shares of Common Stock on the date of Transfer (as adjusted pursuant
to Rule 13d- 3(d)(1)(i) under the Exchange Act), or (ii) prior to such Transfer,
such Person or Group has beneficial ownership of Common Stock representing in
the aggregate more than 9.9% of the issued and outstanding shares of Common
Stock, such determination to be based upon (x) the most recent publicly
available information as to the number of shares of Common Stock beneficially
owned by such Person or Group (to the extent such information is available) or
the transferor's actual knowledge, after due inquiry, as to such beneficial
ownership and (y) the number of issued and outstanding shares of Common Stock on
the date of Transfer (as adjusted pursuant to Rule 13d-3(d)(1)(i) under the
Exchange Act). Subject to the foregoing limitation (except in the case of
subparagraphs (g) and (h) of this Section 4.1) and, with respect to any Transfer
of the Subordinated Debentures, the provisions of the Indenture, PHL, Holdings
and their Affiliates may Transfer the Holdings Securities beneficially owned by
PHL, Holdings and their Affiliates in the following manner:
(a) to the Company or any Affiliate of the Company;
-13-
(b) pursuant to an effective registration statement under the
Securities Act as provided in the Registration Rights Agreement; provided that
such registration statement shall apply only to sales of the Common Stock of the
Company and not to sales of the Subordinated Debentures;
(c) pursuant to Rule 144, Rule 144A, Regulation S or any other
applicable exemption from registration under the Securities Act;
(d) pursuant to a distribution (including any such distribution
pursuant to any liquidation or dissolution) by PHL or Holdings to its
shareholders; provided that, upon a change in Control of PHL or Holdings
occurring after the date of this Agreement, PHL or Holdings shall not distribute
any of the Holdings Securities to its Affiliates pursuant to this Section 4.1(d)
or otherwise unless PHL or Holdings has received the prior written consent of
the Company (which consent may be withheld in the Company's sole discretion) and
obtained an agreement in writing by the distributee to be bound by the terms and
conditions of this Agreement, such agreement to be substantially in the form of
Exhibit B attached hereto;
(e) pursuant to a merger or consolidation of the Company or pursuant to
a plan of liquidation of the Company, which has been approved by the affirmative
vote of a majority of the members of the Board of Directors then in office;
(f) pursuant to a tender or exchange offer in which more than 67% of
the issued and outstanding shares of Common Stock have been tendered by Persons
who are not Affiliates of Holdings, PHL or its Affiliates or in which the Board
of Directors has (i) recommended that its shareholders accept such offer or (ii)
after ten (10) business days (as defined in Rule 14d-1 under the Exchange Act as
in effect on the date of this Agreement) from the date of commencement of such
offer, expressed no opinion, remained neutral, was unable to take a position or
otherwise did not oppose or recommend that its shareholders reject such offer;
(g) to any Affiliate of Holdings or PHL; provided that such Affiliate
has delivered to the Company an agreement in writing by such Affiliate to be
bound by the terms and conditions of this Agreement, such agreement to be
substantially in the form of Exhibit B attached hereto;
(h) pursuant to a merger or consolidation of Holdings or PHL or any
Affiliate to which the Holdings Securities have theretofore been Transferred;
provided that the Person surviving such merger or formed by such consolidation
shall have delivered to the Company an agreement in writing by such Person to be
bound by the terms and conditions of this Agreement, such agreement to be
substantially in the form of Exhibit B attached hereto.
In connection with any permitted Transfer pursuant to this Section 4.1,
the rights of PHL and Holdings under this Agreement shall not transfer to any
transferee(s) of the Holdings Securities, except to the extent provided in
Section 2.7 hereof or upon express assignment of such rights to the extent
permitted by Section 7.3 hereof.
Section 4.2. Transfers to Affiliates. In the event of any Transfer of
the Holdings Securities to an Affiliate of PHL or Holdings under Section 4.1
above, or such Affiliate otherwise becomes the beneficial owner of any of the
Holdings Securities, PHL shall use its best efforts to
-14-
cause such Affiliate to comply with all of the provisions of this Agreement,
including without limitation this Article IV.
Section 4.3. Confidential Information. In connection with any permitted
Transfer of the Holdings Securities pursuant to this Article IV, neither PHL,
Holdings nor their Affiliates shall disclose any confidential information
relating to the Company or its business to any Person except as required by
applicable law, including without limitation Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder, but only to the extent that any required disclosure
of such confidential information has been preceded by the execution of a
confidentiality agreement by PHL, Holdings or their Affiliates, as the case may
be, and such Person substantially in the form attached hereto as Exhibit C. Such
confidentiality agreement shall be promptly forwarded to the Company for its
execution, which execution by the Company may be subsequent to the permitted
Transfer or disclosure to such Person; provided that the failure of the Company
to so execute such confidentiality agreement shall in no way be construed to be
a failure on the part of PHL, Holdings or their Affiliates, as the case may be,
to fulfill its obligations under this paragraph or to limit or affect the
validity of such confidentiality agreement as between PHL, Holdings or their
Affiliates, as the case may be, and such Person.
ARTICLE V
Further Assurances
Each party shall execute and deliver such additional instruments and
other documents and shall take such further actions as may be necessary or
appropriate to effectuate, carry out and comply with all of its respective
obligations under this Agreement. Holdings shall deliver to the Company,
concurrently with the filing thereof with the Securities and Exchange
Commission, copies of all Forms 3, 4 and 5, Form 144 and Schedules 13D or 13G,
and each amendment thereto, filed by Holdings, PHL or its Affiliates pursuant to
the Exchange Act. Holdings and PHL agree to provide any additional information
requested by the Company regarding Transfers of the Holdings Securities for the
purpose of determining compliance with this Agreement. Holdings shall notify the
Company promptly of any proposed Transfer of the Holdings Securities pursuant to
Sections 4.1(g) and (h) hereof. If reasonably requested by the Company at any
time during the term of this Agreement, Holdings agrees to confirm in writing to
the Company the number of Holdings Securities held, beneficially and of record,
by Holdings and its Affiliates as of the latest practicable date.
ARTICLE VI
Termination
Unless earlier terminated by written agreement of the parties hereto,
this Agreement shall terminate on the expiration of ten (10) years from the date
hereof. Any termination of this Agreement as provided herein shall be without
prejudice to the rights of any party arising out of the breach by any other
party of any provisions of this Agreement that occurred prior to the
termination.
-15-
ARTICLE VII
Miscellaneous
Section 7.1. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to the Company, Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
to it at: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esquire
If to Holdings PM Holdings, Inc.
or PHL, One American Row
to them at: ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Phoenix Home Life Mutual Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
With a copy to: Stroock & Stroock & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three (3)
Business Days after being
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sent, if sent by registered or certified mail, with first-class postage prepaid.
Each of the parties hereto shall be entitled to specify a different address by
giving notice as aforesaid to each of the other parties hereto.
Section 7.2. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by Holdings, PHL and the Company
following approval thereof by a majority of the Continuing Directors.
Section 7.3. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and their respective successors and assigns,
including without limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise; provided that no party may assign
this Agreement without the other party's prior written consent, which consent
will not be required in the event of the Transfer of the Holdings Securities in
accordance with Sections 4.1(g) or 4.1(h) hereof. Notwithstanding the foregoing,
during the term of this Agreement, as long as Holdings, PHL or any of their
Affiliates beneficially own any of the Holdings Securities, no assignment of
this Agreement by Holdings, PHL or any of their Affiliates shall relieve the
assignor from its obligation to fully perform or comply with the terms of this
Agreement and, unless otherwise expressly agreed in writing by the Company, such
assignor shall remain bound by all of the provisions hereof.
Section 7.4. Entire Agreement. This Agreement, the Stock Purchase
Agreement, the Indenture and the Registration Rights Agreement embody the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter. There are no covenants by the parties hereto relating to such
subject matter other than those expressly set forth in this Agreement, the Stock
Purchase Agreement, the Indenture and the Registration Rights Agreement.
Section 7.5. Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
Section 7.6. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
Section 7.7. No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a
-17-
waiver by such party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
Section 7.8. No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of and shall not be enforceable by any Person who
or which is not a party hereto.
Section 7.9. Consent to Jurisdiction. Each party to this Agreement, by
its execution hereof, hereby (i) irrevocably submits, and agrees to cause each
of its Affiliates to submit, to the jurisdiction of the federal courts located
either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, for the purpose of any Action arising out of or based upon this
Agreement or relating to the subject matter hereof or the transactions
contemplated hereby, (ii) waives, and agrees to cause each of its Affiliates to
waive, to the extent not prohibited by applicable law, and agrees not to assert,
and agrees not to allow any of its Affiliates to assert, by way of motion, as a
defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or the
subject matter hereof may not be enforced in or by such court and (iii) hereby
agrees not to commence or to permit any of its Affiliates to commence any Action
arising out of or based upon this Agreement or relating to the subject matter
hereof other than before one of the above-named courts nor to make any motion or
take any other action seeking or intending to cause the transfer or removal of
any such Action to any court other than one of the above-named courts whether on
the grounds of inconvenient forum or otherwise. Each party hereby consents to
service of process in any such proceeding in any manner permitted by Virginia or
Connecticut law, as the case may be, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 7.1 above is reasonably calculated to give actual notice.
Notwithstanding anything contained in this Section 7.9 to the contrary with
respect to the parties' forum selection, if an Action is filed against a party
to this Agreement, including its Affiliates, by a Person who or which is not a
party to this Agreement, an Affiliate of a party to this Agreement, or an
assignee thereof (a "Third Party Action"), in a forum other than the federal
district court or a state court located in the City of Richmond, Virginia, or in
the City of Hartford, Connecticut, and such Third Party Action is based upon,
arises from, or implicates rights, obligations or liabilities existing under
this Agreement or acts or omissions pursuant to this Agreement, then the party
to this Agreement, including its Affiliates, joined as a defendant in such Third
Party Action shall have the right to file cross-claims or third-party claims in
the Third Party Action against the other party to this Agreement, including its
Affiliates, and even if not a defendant therein, to intervene in such Third
Party Action with or without also filing cross-claims or third-party claims
against the other party to this Agreement, including its Affiliates.
Section 7.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the Commonwealth of
Virginia, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the law of any other jurisdiction.
-18-
Section 7.11. Name, Captions. The name assigned to this Agreement and
the section captions used herein are for convenience of reference only and shall
not affect the interpretation or construction hereof.
Section 7.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by fewer than all, but together signed by all,
the parties hereto.
Section 7.13. Expenses. Each of the parties hereto shall bear their own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements
reasonably incurred from the other party or parties to such dispute.
Section 7.14. Severability. In the event that any provision hereof
would, under applicable law, be invalid or unenforceable in any respect, such
provision shall (to the extent permitted under applicable law) be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. The provisions hereof are
severable, and in the event any provision hereof should be held invalid or
unenforceable in any respect, it shall not invalidate, render unenforceable or
otherwise affect any other provision hereof.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Voting and Standstill Agreement to be executed, as of
the date first above written by their respective officers thereunto duly
authorized.
HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ COMPANY
By: ____________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
PM HOLDINGS, INC.
By: ____________________________________________
Name:
Title:
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
By: ____________________________________________
Name:
Title:
-20-
Exhibit A
Form of Resignation Agreement
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I hereby acknowledge that my position on the Board of Directors of
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company ("the Company") is subject to the provisions of
a Voting and Standstill Agreement (the "Agreement"), dated _____________, 1999,
between the Company, PM Holdings, Inc., a Connecticut corporation ("Holdings"),
and Phoenix Home Life Mutual Insurance Company, a New York life insurance
company ("PHL"). Accordingly, I hereby agree to resign immediately from such
Board of Directors under the terms of Article II of the Agreement in the event
that the Company or Holdings (with respect to the Holdings Designee) requests
such resignation in accordance with such terms. I understand that, if I do not
resign as requested within five (5) Business Days (as defined in the Agreement),
the Company may seek specific performance of this letter agreement through court
proceedings or otherwise may seek to remove me from office. I agree that any
failure to resign upon request shall be deemed to be "cause" for my removal from
the Board of Directors.
Date: _________________
_________________________________
Name
Agreed to and Accepted:
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
By:___________________________
Name:
Title:
Exhibit B
Form of Assumption Agreement
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Pursuant to Section 4.1[(d), (g) or (h)] of the Voting and Standstill
Agreement (the "Agreement"), dated _____________, 1999, between Hilb, ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ Company ("the Company"), PM Holdings, Inc., a Connecticut corporation
("Holdings"), and Phoenix Home Life Mutual Insurance Company, a New York life
insurance company ("PHL"), the undersigned hereby agrees to be bound by all of
the terms and conditions of the Agreement to the same extent as if it were a
party thereto and assumes all of the obligations of [Holdings, PHL or their
Affiliate] under the Agreement with respect to the Holdings Securities (as
defined in the Agreement).
[HOLDINGS, PHL or AFFILIATE]
Date: _________________ By:_________________________________
Name:
Title:
[TRANSFEREE]
Date: _________________ By:_________________________________
Name:
Title:
Agreed to and Accepted:
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
By:___________________________
Name:
Title:
Exhibit C
Form of Confidentiality Agreement
________ __, 19__
CONFIDENTIAL
[Name]
[Address]
Re: Confidentiality Agreement
Ladies and Gentlemen:
In connection with our [soliciting, offering, seeking to effect or
negotiating] with you with respect to the [sale, transfer, assignment, pledge,
etc.] of [shares of Common Stock, without par value, or 5.25% Convertible
Subordinated Debentures], of Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company (the "Company"),
we are prepared to make available to you certain confidential information
relating to the Company and its business (the "Confidential Information"). As a
condition to your being furnished the Confidential Information, you agree to
comply with the terms and conditions of this letter agreement (this
"Agreement").
For the purposes of this Agreement, the term "Representatives" shall
mean your employees, agents and advisors and the directors, officers, employees
and agents of any of your advisors. The term "Third Party" shall be broadly
interpreted to include without limitation any corporation, company, group,
partnership, other entity or individual. The term "Confidential Information"
shall not include information that (i) was or becomes generally available to the
public other than as a result of a disclosure by you or your Representatives, or
(ii) was or becomes available to you on a non-confidential basis from a source
other than the Company or its advisors.
You hereby agree to treat the Confidential Information as confidential
and, unless required by applicable law, you shall not, and shall direct your
Representatives not to, use in any way or to disclose, directly or indirectly,
the Confidential Information to any Third Party without the written consent of
the Company.
It is understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement by you and that the Company
shall be entitled to specific performance and injunctive or other equitable
relief as a remedy for any such breach, and you further agree to waive any
requirement for the securing or posting of any bond in connection with such
remedy.
Such remedy shall not be deemed to be the exclusive remedy for your breach of
this Agreement, but shall be in addition to all other remedies available at law
or equity to the Company.
If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this Agreement, whereupon it will constitute
our agreement with respect to the subject matter hereof.
Very truly yours,
[Name]
Officer of [Holdings or Affiliate]
CONFIRMED AND AGREED as of
the date first written
above:
[NAME]
By:_________________________________
Name:
Title:
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
By:_________________________________
Name:
Title: