Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT
AND PLAN OF MERGER (the "Agreement"), dated as of December
8, 2005, by and between PROASSURANCE
CORPORATION, a Delaware corporation ("PRA")
and PHYSICIANS INSURANCE COMPANY OF
WISCONSIN, INC., a Wisconsin stock insurance
corporation ("PIC WISCONSIN").
WITNESSETH:
WHEREAS,
PRA is an insurance
holding company which
provides, through
its
insurance subsidiaries, medical
professional liability insurance; and
WHEREAS, PIC
WISCONSIN is an insurance company which provides, directly and
through its subsidiaries, medical
professional liability insurance to physicians
and other health care providers; and
WHEREAS,
the Boards of
Directors of PRA and PIC WISCONSIN have determined
that it is in the best interests of their
respective companies
and shareholders
for PRA to acquire PIC WISCONSIN through the consummation of the business
combination transaction provided for in
this Agreement.
NOW, THEREFORE,
in consideration of the mutual covenants, representations,
warranties and agreements contained in this Agreement, and intending to be
legally bound by this Agreement, the
parties to this Agreement agree as follows:
ARTICLE 1
FORMATION OF NEWCO
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1.1 Formation.
Between the date
hereof and the Closing Date (as defined in
Section 9.1 of this Agreement), PRA shall cause to be formed as a
wholly owned
subsidiary of PRA a newly organized stock corporation under the name of
Physicians Merger Company pursuant to Wisconsin Statutes, Chapter 180 or, if
required to effect the Merger (defined in Section 2.1 of this Agreement), a
newly organized stock insurance corporation pursuant to Wisconsin Statutes
Chapter 611 ("NEWCO"). Prior to the Closing Date (as
defined in Section 10.1 of
this Agreement), NEWCO shall not engage in any
business activities
other than
those business activities that are expressly
provided for in this
Agreement or
are necessary to complete the transactions
provided for in this Agreement.
1.2 Issuance of
Stock. Prior to the
Closing Date, PRA shall cause NEWCO to
have authorized 1,000 shares of common stock par
value $1.00 per share,
all of
which shall be issued and held by PRA.
1.3 Board of
Directors and Officers of NEWCO. PRA shall be entitled to
elect the initial members of the Board of
Directors and the initial officers of
NEWCO.
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ARTICLE 2
THE MERGER
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2.1 Merger.
Subject to the terms
and conditions of this
Agreement and in
accordance with the Wisconsin Statutes Sections 611.72, 180.1101, 180.1103,
180.1105 and 180.1106 (collectively, the "Merger Statutes"),
at the Effective
Time (as defined in Section 2.2 of this
Agreement),
NEWCO shall merge with
and
into PIC WISCONSIN (the "Merger"). PIC WISCONSIN shall be the surviving
corporation in the Merger (the "Surviving
Corporation"), and
shall continue its
corporate existence under the laws of the
State of Wisconsin.
Upon consummation
of the Merger, the separate corporate
existence of NEWCO shall terminate.
2.2 Effective
Time. Subject to the provisions of this
Agreement,
and in
connection with the Closing (as defined in Section 10.1 of this Agreement),
articles of merger (the "Articles of Merger") will be filed with the Office
of
the Commissioner ("OCI") of Wisconsin as required
by the Merger
Statutes. The
parties will make all other filings or
recordings as may be
required under any
other applicable laws of the State of Wisconsin, and the Merger will become
effective when the Articles of Merger are
filed with the OCI of Wisconsin, or at
such later date or time as PRA and PIC
WISCONSIN agree and specify in the
Articles of Merger (the time the Merger
comes effective being the "Effective
Time").
2.3 Effects of
Merger. At and after
the Effective Time,
the Merger shall
have the effects set forth in this Agreement, the Articles of Merger and the
Merger Statutes. At the Effective Time, (i)
all rights, franchises, licenses and
interests of PIC WISCONSIN in and to every
type of property,
real, personal and
mixed, and all choses in action of PIC
WISCONSIN shall continue unaffected and
uninterrupted by the Merger and shall
accrue to the Surviving Corporation; (ii)
all rights, franchises, licenses and interests of NEWCO in
and to every type of
property, real, personal and mixed, and all choses in action of NEWCO
shall
continue unaffected and uninterrupted by the Merger and shall
accrue to the
Surviving Corporation; (iii) all obligations and liabilities of NEWCO then
outstanding shall become and be obligations
of the Surviving
Corporation; (iv)
all obligations and liabilities of PIC
WISCONSIN then
outstanding shall
become
and be obligations of the Surviving
Corporation; and (v) no action or proceeding
then pending and to which PIC
WISCONSIN or NEWCO is
a party shall be abated or
discontinued but may be prosecuted to final judgment by the Surviving
Corporation.
2.4 NEWCO
Shares. At the
Effective Time, the
shares of NEWCO common stock
issued and outstanding prior to the Effective Time shall convert into such
number of shares of common stock of the
Surviving Corporation as will enable the
Surviving Corporation to meet the minimum
capital requirements under applicable
state insurance laws and regulations. It is the intention of the parties
that,
immediately after the Effective Time, PRA shall own all of the issued and
outstanding shares of common stock of the
Surviving Corporation.
2.5 Conversion
of PIC WISCONSIN Common Stock.
(a) At the
Effective Time, each share of PIC WISCONSIN common stock issued
and outstanding immediately prior to Merger (the "PIC
WISCONSIN Common Stock")
shall be converted into the right to
receive such number of shares of PRA Common
Stock (as defined in Section 5.3 of this Agreement) determined based on an
exchange ratio (the "Exchange Ratio"). The
Exchange Ratio shall be determined as
follows:
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(i) If the PRA Closing Stock Price (as defined below) is greater than
120% of the PRA
Agreement Stock Price (as defined below), then the Exchange
Ratio will
equal the number
obtained by dividing (A) $5,000 by (B) the
product of (x)
1.20 and (y) the PRA Agreement Stock Price;
(ii) If the PRA Closing Stock Price is less than or equal to 120%,
but
more than 80%,
of the PRA Agreement
Stock Price, then the
Exchange Ratio
will
equal the number obtained by dividing (A) $5,000 by (B) the PRA
Closing Stock
Price; or
(iii) If the PRA
Closing Stock Price is
less than or equal to 80% of
the PRA
Agreement Stock Price, then the Exchange Ratio will equal the
number
obtained by
dividing (A) $5,000 by (B) the product of
(x) .80 and
(y) the PRA
Agreement Stock Price.
By way of example, (i) if the PRA Agreement
Stock Price is $50 per share and the
PRA Closing Stock Price is $60 per share,
the Exchange
Ratio will equal
83.33
(i.e. $5,000 divided by $60 per share)
and each issued and outstanding share of
PIC WISCONSIN Common Stock will be converted
at the Effective Time into the
right to receive 83.33 shares of PRA Common
Stock, and (ii) if the PRA Agreement
Stock Price is $50 per share, but the PRA Closing Stock Price is
$40 per share,
the Exchange Ratio will equal 125 (i.e.
$5,000 divided by $40 per share) and
each issued and outstanding share of PIC WISCONSIN Common Stock will be
converted at the Effective Time into the right to
receive 125 shares of PRA
Common Stock.
(b) For
purposes hereof, "PRA Agreement Stock Price" shall mean the
arithmetic average of the last reported
sales price of one
share of PRA Common
Stock as reported on the NYSE (as defined
in Section 4.5(c) of
this Agreement)
for the ten (10) trading days preceding the date of this Agreement, and "PRA
Closing Stock Price" shall mean the arithmetic average of the last reported
sales price of one share of PRA Common
Stock as reported on the NYSE for the ten
(10) trading days preceding the Effective
Time. For purposes hereof, the number
of shares of PRA Common Stock into which each issued and
outstanding
share of
PIC WISCONSIN Common Stock is converted
based on the Exchange
Ratio is defined
as the "Merger Consideration".
(c) Each share
of PIC WISCONSIN Common Stock that is owned by PIC WISCONSIN
or any PIC WISCONSIN Subsidiary shall
automatically be cancelled and retired and
shall cease to exist, and no Merger
Consideration shall be delivered in exchange
therefor.
2.6 No Fractional Shares. No certificates or scrip representing a
fractional share of PRA Common Stock (as defined in Section 5.3 of this
Agreement) shall be issued upon the
surrender of PIC WISCONSIN Common Stock
certificates for exchange; no dividend or distribution with respect to PRA
Common Stock shall be payable on or with
respect to any
fractional share;
and
such fractional share interests shall not entitle
the owner thereof to vote or
to any other rights of a stockholder of PRA. In lieu of any such fractional
share, PRA shall pay to each former
holder of PIC
WISCONSIN Common Stock who
otherwise would be entitled to receive a
fractional share of PRA Common Stock an
amount in cash determined by multiplying the fractional share of PRA Common
Stock to which such holder would otherwise
be entitled by the Exchange Ratio.
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2.7 PIC
WISCONSIN Long-Term
Stock Plan. All outstanding awards ("Awards")
under the PIC WISCONSIN Long-Term Stock Plan, updated December 15, 2004 (the
"Stock Plan") at the Effective Time shall be vested and the shares of PIC
WISCONSIN Common Stock subject to the Awards shall be
issued to the holders of
the Awards in accordance with the terms of the Stock
Plan. The shares of PIC
WISCONSIN Common Stock so issued pursuant to
the Awards shall be converted into
and exchanged for shares of PRA Common
Stock in accordance
with the
provisions
of Section 2.5(a) of this Agreement as if such shares had
been outstanding
at
the Effective Time. Notwithstanding the
foregoing, the holder of an Award may at
any time prior to the Effective Time
deliver written notice to PRA of his or her
intention to require PIC WISCONSIN to repurchase the shares of PIC WISCONSIN
Common Stock subject to any or all of the
Awards issued to such holder or in the
alternative, PRA may by delivery of written
notice request PIC WISCONSIN to
repurchase the shares of PIC WISCONSIN
Common Stock subject to the Awards issued
under the Stock Plan (shares to be so
repurchased in either event being referred
to as the "Repurchased Shares"), in which
event such Repurchased Shares shall be
converted into the right to receive
cash in an amount
equal to $5,000 for each
Repurchased Share at the Effective Time and
the Repurchased Shares
shall not be
converted into and exchanged for shares of
PRA Common Stock in accordance with
the provisions of Section 2.5(a) of this Agreement. PRA shall assume the
obligation to repurchase the Repurchased
Shares from holders of Awards under the
Stock Plan and shall pay the cash price to such holders promptly after the
Effective Time.
2.8 Merger
Tax Consequences. It is intended (i) that the Merger shall
constitute a reorganization within the meaning of Section
368(a)(1)(A) of
the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.9 Surviving
Corporation Articles
of Incorporation.
Subject to the terms
and conditions of this Agreement, at the Effective Time, the Articles of
Incorporation of PIC WISCONSIN then in effect shall be, and shall
continue in
effect as, the Articles of Incorporation of the Surviving Corporation, until
amended in accordance with applicable
law.
2.10 Surviving
Corporation Bylaws.
Subject to the terms
and conditions of
this Agreement, at the Effective Time, the Bylaws of PIC WISCONSIN then in
effect shall be, and shall continue in effect as, the Bylaws
of the Surviving
Corporation, until amended in accordance
with applicable law.
2.11 Surviving
Corporation Management
and Officers. At the Effective Time,
the directors of NEWCO shall be the Board of Directors of the Surviving
Corporation until their successors are elected
and qualified. At the
Effective
Time, the officers of PIC WISCONSIN, as the
surviving corporation in the Merger,
shall continue as the Officers of the Surviving Corporation until their
successors are elected and qualified.
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2.12 Advisory
Committees.
(a) PRA shall
offer to each Person
who, as of the date of this Agreement,
is a member of the Board of Directors of PIC WISCONSIN , but is neither a
full-time employee of PIC WISCONSIN nor a
Selected Person (as defined in Section
2.17 of this Agreement), a Consulting and Noncompetition Agreement (each a
"Consulting Agreement"), substantially in the form set
forth in Section 2.12(a)
of the PRA Disclosure Schedule. Pursuant to his or her
Consulting
Agreement,
each such Person shall be paid a monthly
consulting fee through June 30, 2007 in
the following amounts: the current Chairman and Vice Chairman of the
Board of
Directors of PIC WISCONSIN shall receive
$2,000 per month, and all other Persons
shall receive $1,500 per month.
Notwithstanding
the foregoing,
no fees of any
type shall be paid to such Person unless he or she shall have executed a
Consulting Agreement. PRA shall cause each Person who executes a Consulting
Agreement to be appointed to a transition committee maintained by PRA or its
Subsidiaries. Such transition committee
shall be chaired by the current Chairman
of the Board of Directors of PIC WISCONSIN
and shall provide advice as to the
transition of PIC WISCONSIN's business
after the Merger.
(b) After June
30, 2007, PRA will maintain a physician underwriting/claims
committee for the State of Wisconsin (the
"Wisconsin Advisory
Committee"). The
members of the Wisconsin Advisory Committee shall consist of the physician
members of the Board of Directors of PIC WISCONSIN. The Wisconsin Advisory
Committee shall provide advice as to
underwriting and
claims matters
regarding
medical professional liability insurance.
The members of the
Wisconsin Advisory
Committee shall receive the same per diem
rate as paid by PRA to such committee
members in other states or regions.
2.13 PRA Common
Stock. At and after
the Effective Time,
each share of PRA
Common Stock issued and outstanding immediately prior thereto shall remain an
issued and outstanding share of common
stock of PRA and shall not be affected by
the Merger.
2.14 PRA Stock
Options. At and after
the Effective Time, each stock option
granted by PRA to purchase shares of PRA Common Stock which
is outstanding and
unexercised immediately prior thereto shall continue to represent a right
to
acquire shares of PRA Common Stock and
shall remain an issued
and outstanding
option to purchase from PRA shares of PRA
Common Stock in the same amount and at
the same exercise price subject to the
terms of the PRA stock option plans under
which they were issued and the agreements evidencing grants thereunder, and
shall not be affected by the Merger.
2.15 PRA
Certificate of Incorporation. Subject to the terms and
conditions
of this Agreement, at the Effective Time, the
Certificate of
Incorporation of
PRA then in effect shall be, and shall
continue in effect as, the Certificate of
Incorporation of PRA until thereafter
amended in accordance with applicable law.
2.16 PRA Bylaws.
Subject to the terms and conditions of this Agreement, at
the Effective Time, the Bylaws of PRA then in effect shall be, and shall
continue in effect as, the Bylaws of PRA
until thereafter
amended in accordance
with applicable law.
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2.17 PRA Board
of Directors. PIC WISCONSIN may nominate one person who is a
physician for election as a director of PRA and
PRA shall cause such person to
be elected as a director of PRA promptly
after the Closing Date. Notwithstanding
anything to the contrary in the Bylaws of
PRA, the Nominating
Committee of the
Board of Directors of PRA shall
nominate the person so
selected by the Board of
Directors of PIC WISCONSIN (the "Selected Person") for election at the
next
annual meeting of the stockholders of PRA to the board for a term of
three (3)
years, provided the Selected Person (i)
consents to being named as a director in
the proxy statement of PRA for such annual
meeting and to serving as a director
of PRA, (ii) provides such information
relating to him or her
as is required to
be disclosed in such proxy statement under Regulation 14A of the Securities
Exchange Act of 1934, as amended (the
"Exchange Act"), and (iii) qualifies as an
independent director under the policy
established by the
Board of Directors of
PRA for determining director independence. The Board of Directors of PRA
shall
recommend to the stockholders of PRA that they vote for the
election of the
Selected Person as a director of PRA in such proxy statement. The Selected
Person may serve additional three-year
terms subject to the rules and nomination
procedures generally applicable to all PRA
directors.
2.18 Insurance
Operations. It is the
intention of the parties, subject to
operating constraints, to maintain the PIC WISCONSIN home
office (the "Madison
Office") as a PRA regional office with a substantial
number of staff
positions
for the conduct of insurance operations in the Northwest region after the
Merger. The Northwest region will consist of the states of Iowa,
Minnesota,
Nebraska, Nevada, North Dakota, South Dakota and Wisconsin. Initially, PIC
WISCONSIN would operate as a distinct operating division reporting to the
ProAssurance Professional Liability Group with
such consolidation of operations
into PRA as is reasonably required to support the accounting, financial
reporting and SOX (as defined in Section
4.7(h) of this
Agreement)
compliance
obligations of PRA. Over a time period of two (2) to five (5) years, PIC
WISCONSIN will move to the PRA regional structure, or such other operating
structure as PRA is using at that time.
The Madison
Office will
continue as a
regional office of PRA providing claims, underwriting, marketing and risk
management services for the Northwest region.
PRA may, after the
Closing Date,
modify or change the operating structure in the exercise of its business
judgment.
2.19
Anti-Dilution Provisions.
(a) In the event
PRA issues (or provides for or establishes a record date
for the issuance of) with respect to, or
provides for the exchange of, shares of
PRA Common Stock issued and outstanding
prior to the Effective
Time as a result
of warrants, rights, a stock split, stock dividend, recapitalization,
reclassification, or similar transaction and the record date
therefor shall be
on or prior to the Effective Time, the Exchange Ratio shall be
proportionately
and appropriately adjusted, to reflect the
economic substance of the event, in a
manner that is mutually acceptable;
provided, however, that no such
adjustment
shall be made with regard to PRA Common
Stock if PRA issues additional shares of
Common Stock and receives fair market value
consideration for such shares.
(b) In the event
PIC WISCONSIN issues,
provides a right to, or establishes
a record date for, the issuance of
additional
shares of PIC
WISCONSIN Common
Stock with respect to, or provides for the
exchange of,
outstanding
shares of
PIC WISCONSIN Common Stock as a result of warrants or
rights, a stock
split,
stock dividend, recapitalization, reclassification
or similar transaction
(including, without limitation, the exchange of Rights for shares of PIC
WISCONSIN Common Stock under the Rights
Agreement described in Section 4.25 of
this Agreement) and the record date therefor shall be on or prior to the
Effective Time, the Exchange Ratio shall be
proportionately
and appropriately
adjusted to reflect the economic substance of the effect of the event,
in a
manner that is mutually acceptable;
provided, however, that no such
adjustment
shall be made with regard to the issuance
of PIC WISCONSIN Common Stock pursuant
to the Stock Plan.
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ARTICLE
3
EXCHANGE PROCEDURES
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3.1 Exchange
Agent. Prior to the mailing of the Proxy Statement (as defined
in Section 4.5(c) of this Agreement),
PRA shall appoint a
bank or trust company
to act as an exchange agent who shall be acceptable to PIC WISCONSIN (the
"Exchange Agent") for the payment of the
Merger Consideration. PRA shall pay the
charges and expenses of the Exchange
Agent.
3.2 Exchange
Procedures.
(a) Prior to the
Effective Time, PRA
shall deposit with the Exchange Agent
(or otherwise make available to the
reasonable satisfaction of PIC WISCONSIN and
the Exchange Agent), for the benefit of the holders of
shares of PIC WISCONSIN
Common Stock, for exchange through the Exchange Agent, the certificates
representing shares of PRA Common Stock for the Merger Consideration (such
shares of PRA Common Stock together with any dividends or distributions with
respect to such shares with a record date
after the Effective
Time and any cash
payable in lieu of any fractional shares pursuant to this Agreement being
hereinafter referred to as the "Exchange Fund") issuable pursuant to this
Agreement in exchange for outstanding
shares of PIC WISCONSIN Common Stock.
(b) Promptly
after the Effective
Time, but no later than ten (10) business
days following the Effective Time, PRA will send or cause to be sent
to each
person who was a record holder of PIC
WISCONSIN Common Stock immediately before
the Effective Time transmittal materials for exchanging the certificates
representing PIC WISCONSIN Common Stock ("Old
Certificates")
for certificates
representing PRA Common Stock ("New
Certificates").
Upon surrender of the
Old
Certificate for cancellation to the Exchange Agent, together with the duly
executed transmittal materials, and such other documents as the
Exchange Agent
may reasonably require, the holder of such Old Certificate
shall be entitled to
receive in exchange therefor a certificate representing that number of New
Certificates which such holder has the right to receive in
respect of the Old
Certificates surrendered pursuant to the provisions of this
Section 3.2 (after
taking into account all shares of PIC
WISCONSIN Common Stock then held by such
holder) and any check in respect of
dividends or distributions or for fractional
shares that the holder will be entitled to
receive (without
interest), and the
Old Certificates so surrendered shall
forthwith be canceled. Neither PRA nor the
Surviving Corporation shall be obligated to
deliver the Merger Consideration to
which any former record holder of PIC WISCONSIN Common Stock is entitled as a
result of the Merger until such record
holder surrenders his
or her certificate
or certificates representing the shares of PIC WISCONSIN Common Stock for
exchange as provided in this Section
3.2.
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(c) At the
Effective Time, the
stock transfer books of PIC WISCONSIN shall
be closed as to holders of PIC WISCONSIN
Common Stock
immediately prior to
the
Effective Time, and no transfer of PIC
WISCONSIN Common Stock by any such record
holder shall thereafter be made or
recognized. Until surrendered for exchange in
accordance with the provisions of this
Section 3.2, each certificate theretofore
representing shares of PIC WISCONSIN Common Stock shall from and after the
Effective Time represent for all purposes only
the right to receive the Merger
Consideration provided in this Agreement in exchange therefor. To the extent
permitted by law, former shareholders of record of PIC WISCONSIN
Common Stock
shall be entitled to vote after the Effective Time at any meeting of the PRA
stockholders the number of shares of PRA Common Stock into which their
respective shares of PIC WISCONSIN
Common Stock are
converted,
regardless of
whether such holders have exchanged their
certificates for PIC
WISCONSIN Common
Stock for certificates representing the PRA
Common Stock.
(d) Any other
provision of this
Agreement notwithstanding, none of PRA,
NEWCO, the Surviving Corporation, or the Exchange Agent shall be liable to a
holder of PIC WISCONSIN Common Stock for
any amounts paid or property delivered
in good faith to a public official pursuant
to any applicable abandoned property
law.
3.3 Lost or
Stolen Certificates.
If any holder of PIC WISCONSIN Common
Stock convertible into the right to receive
shares of the PRA
Common Stock is
unable to deliver the certificate
which represents such shares, the Exchange
Agent, in the absence of actual
notice that any such
shares have been acquired
by a bona fide purchaser, shall deliver to such holder the
Merger Consideration
to which the holder is entitled for such shares upon presentation of the
following: (i) evidence to the reasonable
satisfaction of the Exchange Agent and
PRA that any such certificate has been
lost, wrongfully taken or destroyed; (ii)
such security or indemnity as may be
reasonably requested
by the Exchange Agent
or PRA to indemnify and hold PRA and the Exchange Agent harmless; and (iii)
evidence satisfactory to the Exchange Agent and PRA that such
person is the
owner of the shares theretofore
represented by each
certificate claimed by
the
holder to be lost, wrongfully taken or destroyed and that the holder is the
person who would be entitled to present
such certificate for
exchange pursuant
to this Agreement.
3.4 Dividends and other Distributions. Whenever a dividend or other
distribution is declared on the PRA Common
Stock, the record date
for which is
at or after the Effective Time, the
declaration shall include dividends or other
distributions on all shares of the PRA Common
Stock issuable to
holders of PIC
WISCONSIN Common Stock under this Agreement. Notwithstanding the preceding
sentence, any person holding any certificate for PIC WISCONSIN Common Stock
after the Effective Time shall not be entitled to
receive any dividend or other
distribution payable after the Effective Time to holders of the PRA Common
Stock, which dividend or other distribution
is attributable to such person's PIC
WISCONSIN Common Stock until such person
surrenders
said certificate for PIC
WISCONSIN Common Stock for exchange as provided in Section 3.2 of this
Agreement. However, upon surrender of such
certificate,
the PRA Common
Stock
certificate (together with all such undelivered dividends or other
distributions, without interest) shall be
delivered and paid (without interest)
with respect to each share represented by such certificate for PIC WISCONSIN
Common Stock.
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3.5 Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of PIC WISCONSIN Common Stock for six (6)
months
after the Effective Time shall be delivered
to PRA, upon demand, and any holders
of PIC WISCONSIN Common Stock who have not theretofore complied with this
Agreement shall thereafter look only to PRA for
payment of their claim for any
shares of PRA Common Stock, any cash in lieu of fractional shares and any
dividends or distributions with respect to
PRA Common Stock.
3.6 Withholding. PRA or the Exchange Agent will be
entitled to deduct and
withhold from the consideration
otherwise payable
pursuant to this Agreement or
the transactions contemplated thereby to any holder of PIC
WISCONSIN Common
Stock such amounts as PRA (or any Affiliate
(as defined in Section 10.17 of this
Agreement) thereof) or the Exchange Agent are required to deduct and
withhold
with respect to the making of such
payment under the Code, or any applicable
provision of U.S. federal, state, local or non-U.S. tax law.
To the extent that
such amounts are properly withheld by PRA or the Exchange
Agent, such
withheld
amounts will be treated for all
purposes of this
Agreement as having
been paid
to the holder of the PIC WISCONSIN Common Stock in respect of whom such
deduction and withholding were made by PRA
or the Exchange Agent.
3.7 Dissenting
Shareholders.
Notwithstanding anything in this Agreement to
the contrary, each share of PIC WISCONSIN
Common Stock that is
held by persons
who dissent from the Merger and fully
comply with the
provisions
of Section
611.785 and Sections 180.1301-180.1331 of
the Wisconsin Statutes (the "Dissenter
Provisions") shall not be converted into or be exchanged for shares of PRA
Common Stock. Instead, (i) the holders of
such shares (the "Dissenting Shares"),
upon compliance with the requirements of the Dissenter Provisions, shall be
entitled to payment of the fair value of such
shares in accordance with the
Dissenter Provisions, accompanied with the items as set forth in Section
180.1325 of the Wisconsin Statutes;
(ii) each of the
Dissenting Shares shall be
canceled and extinguished; and (iii) if any holder of
Dissenting Shares
shall
subsequently withdraw his demand for
payment of the fair value of such shares in
accordance with the Dissenter Provisions or shall deliver the certificates
representing such shares for exchange into PRA
Common Stock, such
holder shall
forfeit the right to payment of the fair
value of such shares
and such shares
shall thereupon be deemed to have been
converted into the
right to receive PRA
Common Stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PIC WISCONSIN
-----------------------------------------------
PIC WISCONSIN
represents and
warrants to PRA that the statements contained
in this Article 4 are correct and complete
as of the date of this
Agreement and
will be correct and complete as of the Closing Date
(as though made then and as
though the Closing Date was substituted for the date of this Agreement
throughout this Article), except (i) as set forth in the
disclosure
schedule
delivered by PIC WISCONSIN to PRA on the date hereof and initialed by the
parties (the "PIC WISCONSIN Disclosure Schedule"), or (ii) for any changes to
the PIC WISCONSIN Disclosure Schedule that
are disclosed by PIC WISCONSIN to PRA
in accordance with Section 7.9(b) of this
Agreement, or (iii) to the extent such
representations and warranties speak as of an
earlier date. Nothing
in the PIC
WISCONSIN Disclosure Schedule shall be
deemed adequate to disclose an exception
to a representation or warranty made herein
unless the PIC WISCONSIN Disclosure
Schedule identifies the exception with reasonable particularity. The PIC
WISCONSIN Disclosure Schedule will be arranged in
paragraphs
corresponding to
the lettered and numbered paragraphs contained in this Article; provided,
however, (i) that each exception set forth in the PIC WISCONSIN Disclosure
Schedule shall be deemed disclosed for purposes of all representations and
warranties if such exception is contained in a section of the PIC
WISCONSIN
Disclosure Schedule corresponding to a Section in this
Article 4, and (ii) the
mere inclusion of an exception in the
PIC WISCONSIN
Disclosure Schedule
shall
not be deemed an admission by PIC
WISCONSIN that such exception represents a
material fact, event or circumstance or would result in a material adverse
effect or material adverse change. All documents and instruments attached as
exhibits or annexes to the PIC WISCONSIN
Disclosure Schedule are incorporated by
reference into the PIC WISCONSIN Disclosure
Schedule.
9
<PAGE>
4.1 Corporate
Organization. PIC
WISCONSIN is a stock insurance corporation
duly organized, validly existing under the
laws of the State of Wisconsin and is
not delinquent in filing any reports
required to be filed
in order to maintain
its existence. PIC WISCONSIN has the corporate power and authority to own or
lease all of its properties and assets and
to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes
such licensing or qualification necessary, except where the failure to be
so
licensed or qualified would not have a Material
Adverse Effect (as defined in
Section 10.17(a) of this Agreement) on PIC WISCONSIN. Section 4.1 of the PIC
WISCONSIN Disclosure Schedule identifies
the type of insurance products that PIC
WISCONSIN is authorized or licensed to
offer in each state.
PIC WISCONSIN does
not offer any insurance products in any jurisdiction where it is neither
authorized nor licensed to offer such
insurance products.
All of such
licenses
are in full force and effect and there is
no proceeding or investigation pending
or, to the Knowledge of PIC WISCONSIN, threatened which would reasonably be
expected to lead to the revocation, amendment, failure to renew, limitation,
suspension or restriction of such
license.
4.2
Subsidiaries.
(a) Section
4.2(a) of the PIC WISCONSIN Disclosure Schedule sets forth
the
name and state of incorporation or organization of each Subsidiary
(as defined
in Section 10.17(a) of this Agreement) of PIC WISCONSIN (the "PIC WISCONSIN
Subsidiaries"). Each PIC WISCONSIN Subsidiary (i)
is duly organized and validly
existing as a corporation under the laws of its jurisdiction of organization,
(ii) is duly qualified to do business and
in good standing in all jurisdictions
(whether federal, state, local or foreign) where its ownership or leasing
of
property or the conduct of its business
requires it to be so
qualified and in
which the failure to be so qualified would
have a Material Adverse Effect on PIC
WISCONSIN, and (iii) has all requisite
corporate power and
authority to own or
lease its properties and assets and to
carry on its business as now conducted.
10
<PAGE>
(b) Section
4.2(b) of the PIC WISCONSIN Disclosure Schedule identifies
the
PIC WISCONSIN Subsidiaries that offer insurance and the states or other
jurisdictions in which they are authorized
or licensed to conduct business, and
the type of insurance products that they are authorized
or licensed to offer in
each such state (the "PIC WISCONSIN
Insurance
Subsidiaries"). No PIC
WISCONSIN
Insurance Subsidiary offers any insurance
products in any jurisdiction where it
is neither authorized nor licensed to offer such insurance products. The
business of each PIC WISCONSIN Insurance Subsidiary has been and is being
conducted in compliance with all of its
licenses in all material respects. All
of such licenses are in full force and effect
and there is no
proceeding
or
investigation pending or, to the Knowledge of
PIC WISCONSIN,
threatened which
would reasonably be expected to lead to
the revocation,
amendment, failure
to
renew, limitation, suspension or
restriction of such license.
(c) Except as
set forth in Section
4.2(c) of the PIC WISCONSIN Disclosure
Schedule, PIC WISCONSIN is, directly or indirectly,
the record and
beneficial
owner of all of the outstanding shares of capital stock of each of the PIC
WISCONSIN Subsidiaries. There are no irrevocable proxies granted by PIC
WISCONSIN or any PIC WISCONSIN Subsidiary
with respect to such shares. There are
no equity securities of any of the PIC
WISCONSIN Subsidiaries
that are or may
become required to be issued by reason of
any option, warrants,
scrip, rights,
to subscribe to, calls or commitments of
any character
whatsoever relating
to,
or securities or rights convertible into or exchangeable for, shares of any
capital stock of any of the PIC WISCONSIN
Subsidiaries except
shares of the PIC
WISCONSIN Subsidiaries issued to other
wholly owned PIC WISCONSIN Subsidiaries.
There are no contracts, commitments,
understandings or arrangements by which any
of the PIC WISCONSIN Subsidiaries is bound to issue additional shares of its
capital stock or options, warrants or rights to purchase or acquire any
additional shares of its capital stock or securities convertible into or
exchangeable for such shares. All of the shares of the PIC WISCONSIN
Subsidiaries described in the first sentence of
this Section 4.2(c) are validly
issued, fully paid and nonassessable
(subject to Section
180.0622(2)(b) of
the
Wisconsin Statutes, as judicially interpreted, to the extent applicable) and
free of preemptive rights, and are owned by PIC WISCONSIN or a PIC WISCONSIN
Subsidiary free and clear of any and all
Liens (as defined in Section 10.17(a)
of this Agreement) and free and clear of
any claim, right or
option to acquire
any such shares.
(d) No PIC
WISCONSIN Subsidiary
is the record or
beneficial owner of
any
shares of PIC WISCONSIN Common Stock.
4.3 Corporate
Affairs.
(a) PIC
WISCONSIN has made available to PRA correct and complete
copies of
the Articles of Incorporation and Bylaws of PIC WISCONSIN and each of the PIC
WISCONSIN Subsidiaries (as amended to
date). PIC WISCONSIN has made available to
PRA all of the minute books containing the records of the meetings of the
shareholders, the board of directors and
any committee of the board of directors
of PIC WISCONSIN and each of the PIC WISCONSIN Subsidiaries (except for
confidential portions of such minutes relating
to the Merger, but provided that
the availability of such information is subject to Section 7.3 of this
Agreement). The minute books of PIC
WISCONSIN and the PIC WISCONSIN Subsidiaries
reflect all of the material actions taken
by each of their respective Boards of
Directors (including each committee
thereof) and shareholders. PIC WISCONSIN has
made available to PRA all of the stock
ledgers of PIC
WISCONSIN and the PIC
WISCONSIN Subsidiaries.
11
<PAGE>
(b) The minute
books and stock
ledgers of PIC
WISCONSIN accurately and
completely list and describe all issuances, transfers and cancellations of
shares of capital stock of PIC WISCONSIN.
The minute books and
stock ledgers of
each PIC WISCONSIN Subsidiary accurately and completely
list and describe
all
issuances, transfers and cancellations of shares of capital stock of such
PIC
WISCONSIN Subsidiary.
4.4
Capitalization.
(a) The
authorized
capital stock of PIC
WISCONSIN consists of 1,000,000
shares, all of which are designated as common stock. As of the date of this
Agreement, 19,649.7 shares of common stock of PIC WISCONSIN were issued and
outstanding and 6,772.37 shares of common stock of PIC
WISCONSIN were held
in
treasury. All of the issued and outstanding shares of common stock of PIC
WISCONSIN have been duly authorized and validly issued and are fully paid,
nonassessable (subject to Section 180.0622(2)(b) of the Wisconsin
Statutes, as
judicially interpreted, to the extent
applicable) and free of preemptive rights.
As of the date of this Agreement, PIC WISCONSIN does not have and is
not bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or
issuance of any shares
of PIC WISCONSIN Common Stock or any other
equity securities of PIC WISCONSIN or
any securities representing the right to purchase or otherwise receive any
shares of PIC WISCONSIN Common Stock or any other equity securities of PIC
WISCONSIN except for (i) 91.5 shares of PIC
WISCONSIN Common Stock to be issued
pursuant to unvested awards under the Stock Plan and (ii) shares of PIC
WISCONSIN Common Stock that may be required to be issued under the Rights
Agreement (as defined in Section 4.25 of
this Agreement). As of the date of this
Agreement no shares of PIC WISCONSIN Common Stock were reserved for issuance.
Since January 1, 2005, PIC WISCONSIN has not issued any
shares of PIC WISCONSIN
Common Stock or other equity securities of PIC WISCONSIN, or any securities
convertible into or exercisable for any shares
of PIC WISCONSIN Common Stock or
other equity securities of PIC
WISCONSIN.
(b) Section
4.4(b) of the PIC
WISCONSIN Disclosure
Schedule sets forth
a
complete list of (i) the officers and
directors of PIC
WISCONSIN and each
PIC
WISCONSIN Subsidiary, (ii) the percentage of the
outstanding
voting stock of
such PIC WISCONSIN Subsidiary owned or controlled,
directly or
indirectly, by
PIC WISCONSIN, and (iii) the percentage of the
outstanding voting stock of such
PIC WISCONSIN Subsidiary owned or
controlled, directly
or indirectly, by one or
more of the other Subsidiaries of PIC
WISCONSIN. Except as
set forth in Section
4.4(b) of the PIC WISCONSIN Disclosure
Schedule, PIC WISCONSIN does not have any
direct or indirect equity or ownership
interest in any other
business or entity
and does not have any direct or indirect
obligation or any
commitment to invest
any funds in any corporation or other business or entity, other than for
investment purposes in the ordinary
course of business in
accordance with past
practices.
(c) PIC
WISCONSIN has provided to PRA a true and correct copy of the
Rights
Agreement as adopted by the Board of
Directors of PIC
WISCONSIN on November
4,
2004.
12
<PAGE>
(d) No shares of
PIC WISCONSIN Common Stock have been issued since December
31, 2002, except those shares issued
pursuant to the Stock
Plan. The shares of
PIC WISCONSIN Common Stock have not been
registered
under the Exchange Act
in
reliance of the exemption provided by
Section 12(g)(2)(G) of the Exchange Act or
other available exemption. To the Knowledge of PIC WISCONSIN,
PIC WISCONSIN is
in full compliance with the exemption from
registration
of the PIC
WISCONSIN
Common Stock under the Exchange Act and
applicable state
securities
laws. PIC
WISCONSIN has complied in all material
respects with the
requirements
of the
Exchange Act and all applicable
state securities laws in connection with any
purchases of shares of PIC WISCONSIN common stock, or offers to purchase PIC
WISCONSIN common stock, made by PIC
WISCONSIN or an affiliate.
4.5 Authority;
No Violation; Consents and Approvals.
(a) PIC
WISCONSIN has full corporate power and authority to execute
and
deliver this Agreement and to consummate
the transactions
contemplated by
this
Agreement. The execution and delivery of this
Agreement and the consummation of
the transactions contemplated by this Agreement have been duly and validly
approved by the Board of Directors of PIC
WISCONSIN.
The Board of Directors
of
PIC WISCONSIN has directed that this
Agreement and the transactions contemplated
by this Agreement be submitted to the
shareholders of PIC WISCONSIN for approval
at a meeting of such shareholders and,
except for the adoption of this Agreement
by the affirmative vote of the holders of a majority
of the outstanding
shares
of PIC WISCONSIN Common Stock and actions required to obtain all Requisite
Regulatory Approvals (as defined in Section
8.1(d) of this Agreement), no other
corporate proceedings on the part of PIC
WISCONSIN are necessary to approve this
Agreement and to consummate the
transactions
contemplated
by this Agreement.
This Agreement has been duly and validly
executed and delivered by PIC WISCONSIN
and (assuming due authorization, execution and delivery by PRA and
the receipt
of all Requisite Regulatory Approvals) constitutes a valid and binding
obligation of PIC WISCONSIN, subject to applicable bankruptcy, fraudulent
conveyance, insolvency and similar laws
affecting creditors'
rights generally,
and subject, as to enforceability,
to general principles
of equity. On or prior
to the date of this Agreement, the Board of Directors of PIC
WISCONSIN received
the opinion of Cochran Caronia & Co. that the Merger
Consideration
is fair to
the shareholders of PIC WISCONSIN from a
financial point of view.
(b) Neither the
execution and delivery
of this Agreement by
PIC WISCONSIN
nor the consummation by PIC WISCONSIN of
the transactions
contemplated by
this
Agreement, nor compliance by PIC WISCONSIN with
any of the terms or provisions
of this Agreement, will (i) violate any provision of the Articles of
Incorporation or Bylaws of PIC WISCONSIN or (ii) assuming that all Requisite
Regulatory Approvals and all of the consents and approvals referred to in
Section 4.5(c) of this Agreement are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction
applicable to PIC WISCONSIN or any of its
properties or assets,
or (y) violate,
conflict with, result in a breach of any
provision of or the loss of any benefit
under, constitute a default (or an event
which, with notice or lapse of time, or
both, would constitute a default) under,
result in the termination of or a right
of termination or cancellation under,
accelerate the performance required by, or
result in the creation of any Lien upon any
of the properties
or assets of PIC
WISCONSIN under, any of the terms, conditions or provisions of any
note, bond,
mortgage, indenture, surplus debentures, deed of trust, license, lease,
agreement or other instrument or obligation to which PIC
WISCONSIN is a party,
or by which it or any of its properties or assets may be bound or affected,
except (in the case of clause (y) above) as set forth in Section
4.5(b)(ii)(y)
of the PIC WISCONSIN Disclosure Schedule,
or (in the case of clauses (x) and (y)
above) for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, would not have a Material
Adverse Effect on
PIC WISCONSIN.
13
<PAGE>
(c) Except for
(i) the filing of applications, notices and forms with, and
the obtaining of approvals from, the
Insurance Regulators (as defined in Section
10.17(a) of this Agreement) pursuant to the Insurance Laws (as defined in
Section 10.17(a) of this Agreement), with respect to the transactions
contemplated by this Agreement, (ii) the
filing with the Securities and Exchange
Commission (the "SEC") of a registration statement on Form S-4 or other
applicable form (as amended or supplemented from time to time, the "S-4") in
which a proxy statement relating to the meeting of the shareholders of PIC
WISCONSIN to be held to vote on the Merger
will be included as a prospectus (the
"Proxy Statement") (iii) the filing of the
Articles of Merger
with the OCI of
Wisconsin and the Department of Financial
Institutions of the State of Wisconsin
pursuant to the Merger Statutes, (iv) the filing of a notification
and report
form (the "HSR Act Report") with the Pre-Merger Notification Office of the
Federal Trade Commission and with the Antitrust
Division of the
Department of
Justice (collectively, the "Pre-Merger Notification Agencies") pursuant
to the
Hart-Scott-Rodino Anti-Trust Improvements Act, as amended, and the rules and
regulations thereunder (collectively, the "HSR Act"), (v) any consents,
authorizations, orders and approvals required under the HSR Act, (vi) any
consents, authorizations, approvals, filings or exemptions in
connection with
compliance with the applicable provisions of federal and state
securities laws
relating to the regulation of
broker-dealers or investment advisers, and federal
commodities laws relating to the regulation
of futures commission
merchants and
the rules and regulations thereunder and of any applicable industry
self-regulatory organization (including, without limitation, the National
Association of Insurance Commissioners (the "NAIC") and the New York Stock
Exchange ("NYSE")) (each, an "SRO"),
or which are required
under the Insurance
Laws and other similar laws, (vii) such
filings and approvals as are required to
be made or obtained under the securities or
"Blue Sky" laws of various states in
connection with the issuance of the shares of
PRA Common Stock pursuant to this
Agreement, (viii) the approval of this
Agreement by the requisite votes of the
shareholders of PIC WISCONSIN and the shareholder of NEWCO, and (ix) the
consents and approvals referred to in
Section 4.5(b)(ii)(y) of the PIC WISCONSIN
Disclosure Schedule, no consents or approvals
of or filings or
registrations
with any Governmental Authority (as defined in Section 10.17(a) of this
Agreement), or with any other Person (as defined in Section 10.17(a) of this
Agreement) are necessary in connection with the execution and delivery by
PIC
WISCONSIN of this Agreement or the consummation by PIC WISCONSIN of the
transactions contemplated by this
Agreement.
(d) No
shareholder of PIC WISCONSIN or any PIC WISCONSIN Subsidiary shall
have any pre-emptive rights under
applicable law with respect to, or as a result
of, the transactions contemplated by this
Agreement (including the Merger).
14
<PAGE>
4.6 Insurance
Reports.
(a) "PIC WISCONSIN SAP Statements" means (i) the annual statutory
statements of each of PIC WISCONSIN and the
PIC WISCONSIN Insurance Subsidiaries
filed with any Insurance Regulator for each of the years ended
December 31,
2004, 2003 and 2002 and each calendar
year ending after December 31, 2004, (ii)
the quarterly statutory statements of each of PIC WISCONSIN and the PIC
WISCONSIN Insurance Subsidiaries filed with any Insurance
Regulator for each
quarterly period in 2005 and for each
quarterly period ending after the date of
this Agreement, and (iii) all exhibits,
interrogatories,
notes, schedules
and
any actuarial opinions, affirmations or certifications or other supporting
documents filed in connection with such annual statutory statements and
quarterly statutory statements.
(b) All such PIC
WISCONSIN SAP Statements were and will be prepared (i)
in
conformity with statutory accounting
principles ("SAP")
prescribed or permitted
by the OCI of Wisconsin and (ii) in
accordance with the books and records of PIC
WISCONSIN and the PIC WISCONSIN
Insurance Subsidiaries. The PIC WISCONSIN SAP
Statements, when read in conjunction with the notes thereto and any
statutory
audit reports relating thereto, present, and will present, fairly in all
material respects the financial condition and results of operations of PIC
WISCONSIN and the PIC WISCONSIN Insurance
Subsidiaries for the dates and periods
indicated and are consistent with the books and records of the
PIC WISCONSIN
Insurance Subsidiaries (which books and
records are correct and complete in all
material respects). The annual balance sheets and
income statements included in
the PIC WISCONSIN SAP Statements have been, and will be, where required by
Insurance Laws, audited by an independent
accounting firm of recognized national
reputation. In accordance with Section 4.6(b) of the PIC
WISCONSIN
Disclosure
Schedule, PIC WISCONSIN has made
available to PRA true
and complete copies
of
all of the PIC WISCONSIN SAP Statements and
all audit opinions related thereto.
(c) Since
January 1, 2002 PIC
WISCONSIN and each PIC
WISCONSIN
Insurance
Subsidiary (i) have filed or submitted with
all applicable
Insurance Regulators
all registration statements, notices and reports, together with
all supplements
and amendments thereto required under the
Insurance Laws applicable to insurance
holding companies (the "PIC WISCONSIN
Holding Company Act
Reports"), (ii)
have
filed all PIC WISCONSIN SAP Statements, (iii) have filed all other reports
and
statements, together with all amendments
and supplements thereto, required to be
filed with any Insurance Regulator under the Insurance
Laws, and (iv) have paid
all fees and assessments due and payable by them under the Insurance Laws.
Section 4.6(c) to the PIC WISCONSIN
Disclosure
Schedule sets forth a
list of,
and PIC WISCONSIN has made available to PRA, accurate and complete copies of,
all PIC WISCONSIN SAP Statements, all PIC
WISCONSIN Holding Company Act Reports,
and all other reports and statements filed by PIC WISCONSIN or any of
the PIC
WISCONSIN Insurance Subsidiaries with any
Insurance Regulator for periods ending
and events occurring, after January 1, 2002 and prior to
the Closing Date, and
the latest requests for approval of a rate increase in each state or other
jurisdiction that PIC WISCONSIN or a PIC
WISCONSIN Insurance
Subsidiary writes
insurance. All such PIC WISCONSIN SAP
Statements, PIC
WISCONSIN Holding Company
Act Reports and other reports and
statements
complied with the
Insurance Laws
when filed and, as of their respective
dates, contained all information required
under the Insurance Laws and did not contain any false
statements or
material
misstatements of fact or omit to state any
material facts necessary to make the
statements set forth therein not materially misleading in light of the
circumstances in which such statements were made. No deficiencies have been
asserted by any Governmental Authority with respect to such PIC WISCONSIN
SAP
Statements, PIC WISCONSIN Holding Company Act Reports and other
reports and
statements.
15
<PAGE>
(d) Except for
normal examinations conducted by a Governmental Authority in
the regular course of the business of PIC
WISCONSIN and its
Subsidiaries, and
except as set forth in Section 4.6(d) of
the PIC WISCONSIN
Disclosure Schedule,
no Governmental Authority has initiated any
proceeding or investigation into the
business or operations of PIC WISCONSIN,
any PIC WISCONSIN
Subsidiary,
or any
director or officer of PIC WISCONSIN or any PIC WISCONSIN Subsidiary, since
January 1, 2002. There is no unresolved
violation,
criticism,
or exception by
any Governmental Authority with respect to any
examinations of PIC WISCONSIN or
any of its Subsidiaries.
(e) Section 4.6(e) of the PIC WISCONSIN Disclosure Schedule lists all
financial examinations that any Insurance
Regulator has
conducted with respect
to PIC WISCONSIN or any of the PIC WISCONSIN Insurance Subsidiaries since
December 31, 2001. PIC WISCONSIN has made available
to PRA correct and complete
reports issued by the applicable Insurance Regulator with respect to such
financial examinations. There are no
regulatory examinations of PIC WISCONSIN or
any of the PIC WISCONSIN Insurance
Subsidiaries currently in process.
(f) Except as
set forth in Section
4.6(f) of the PIC WISCONSIN Disclosure
Schedule, since January 1, 2002, neither PIC WISCONSIN nor any PIC
WISCONSIN
Subsidiary has received from any Person any
Notice on Form A or such other form
as may be prescribed under applicable law
indicating that such Person intends to
make or has made a tender offer for or a
request or invitation
for tenders of,
or intends to enter into or has entered into any agreement to exchange
securities for, or intends to acquire or has
acquired (in the open market or
otherwise), any voting security of PIC WISCONSIN or a PIC
WISCONSIN
Insurance
Subsidiary, if after the consummation thereof such Person would directly or
indirectly be in control of PIC WISCONSIN or a PIC WISCONSIN Insurance
Subsidiary.
4.7 Financial
Statements; Financial Reporting.
(a) PIC
WISCONSIN has delivered to PRA true, correct and complete copies
of
(i) the audited balance sheets of each of PIC WISCONSIN and the PIC
WISCONSIN
Insurance Subsidiaries as of December 31, 2004, 2003 and
2002, and the related
audited statements of earnings,
shareholders'
equity and cash flows
of each of
PIC WISCONSIN and the PIC WISCONSIN
Insurance Subsidiaries for the periods ended
December 31, 2004, 2003 and 2002,
together with
unqualified reports on all such
financial statements by PricewaterhouseCoopers
LLP, and (ii) the unaudited
balance sheets of each of PIC WISCONSIN and the PIC WISCONSIN Insurance
Subsidiaries as of September 30, 2005 and the
related unaudited
statements of
earnings, shareholders' equity and cash flows for the nine
(9)-month period
ended September 30, 2005.
16
<PAGE>
(b) PIC
WISCONSIN has delivered to PRA unaudited balance sheets of each of
the PIC WISCONSIN Subsidiaries (but excluding the PIC WISCONSIN Insurance
Subsidiaries) as of December 31, 2004,
2003 and 2002,
and September 30,
2005,
and the related unaudited statements of
earnings,
shareholders' equity and cash
flows of each of such PIC WISCONSIN
Subsidiaries
for the years ended
December
31, 2004, 2003 and 2002, and the nine (9)
month period ended September 30, 2005.
(c) As soon as
practicable,
but in any event
within forty-five (45)
days
following the end of each calendar quarter which is completed prior to the
Closing Date, commencing with the quarter ending December 31, 2005, PIC
WISCONSIN shall cause to be delivered to PRA
the "Quarter End Report" prepared
by PIC WISCONSIN with respect to such
quarter, which report
shall include (x) a
balance sheet of PIC WISCONSIN as of the
end of such quarter and (y) a statement
of earnings and shareholders' equity of PIC WISCONSIN for the year-to-date
period ending the end of such quarter,
prepared in a manner consistent with, and
in a format comparable to, the statements
of earnings and
shareholders'
equity
referred to in Section 4.7(a).
(d) Each of the
balance sheets referred to in Section 4.7(a), Section
4.7(b) and Section 4.7(c) presents (or will present) fairly the financial
condition, assets, liabilities and
shareholders' equity of each of PIC WISCONSIN
and the PIC WISCONSIN Subsidiaries, as the case may be, as of its
date; each
such statement of earnings or shareholders' equity referred to above presents
(or will present) fairly the results of operations
of each of PIC WISCONSIN and
the PIC WISCONSIN Subsidiaries, as the case may be, for the
periods indicated;
and each such statement of cash flows referred to above presents fairly the
information purported to be shown therein, except, in each case, interim
unaudited financial statements need not reflect year-end adjustments. The
financial statements referred to in Section
4.7(a) and Section 4.7(c) including
all notes and schedules thereto, have been (or will be) prepared in
accordance
with SAP throughout the periods involved (except that they are unaudited
financial statements and do not contain all
footnotes and year-end
adjustments
which may be required by generally accepted
accounting principles
in the United
States ("GAAP")) and are (or will be) in
accordance with the
books and records
of each of PIC WISCONSIN and the PIC WISCONSIN
Insurance Subsidiaries, which
books and records are correct and complete in all material respects. The
financial statements referred to in Section
4.7(b), including all notes and
schedules thereto, have been prepared in accordance
with SAP throughout the
periods involved, except that they are
unaudited financial statements and do not
contain all footnotes and year-end
adjustments
which may be required
by GAAP,
and are in accordance with the books and records of the
subject PIC
WISCONSIN
Subsidiaries, which books and records are
correct and complete
in all material
respects.
(e) Each of PIC
WISCONSIN and the PIC WISCONSIN Subsidiaries maintains
accurate books and records reflecting its assets and
liabilities,
and in the
opinion of PIC WISCONSIN's management,
maintains effective
internal controls to
provide reasonable assurance regarding the reliability of
financial
reporting
and the preparation of the financial statements of PIC WISCONSIN and
the PIC
WISCONSIN Subsidiaries. Neither the accountants for, nor
the board of directors
or audit committee of PIC WISCONSIN or any
PIC WISCONSIN
Subsidiary have
been
advised of: (x) any significant deficiencies or material weaknesses in the
design or operation of the internal
controls over
financial reporting
(as such
term is defined in Section 13(b)(2)(B) and Rules 13a-15(f)
and 15d-15(d) of the
Exchange Act) of PIC WISCONSIN or any PIC WISCONSIN Subsidiary which could
adversely affect its ability to record,
process, summarize and
report financial
data, or (y) any fraud, whether or not material,
that involves
management or
other employees who have a role in the internal controls over financial
reporting of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary.
17
<PAGE>
(f) At the dates of the aforementioned balance sheets, neither PIC
WISCONSIN nor any of the PIC WISCONSIN Subsidiaries had (or will have with
respect to such balance sheets dated subsequent to the date hereof) any
liabilities or obligations of any nature,
whether accrued, absolute, contingent
or otherwise, whether due or to become due,
and whether or not
required to be
disclosed on a balance sheet prepared in conformity with SAP, not fully or
properly reflected or reserved against in
such balance sheets,
or in any notes
thereto, other than liabilities pursuant to
contractual
obligations identified
in this Agreement or the PIC WISCONSIN
Disclosure Schedule.
(g) Section
4.7(g) of the PIC WISCONSIN Disclosure Schedule lists, and
PIC
WISCONSIN has delivered to PRA copies of the documentation creating or
governing, all securitization transactions and "off-balance
sheet arrangements"
(as defined in Item 303(a)(4)(ii) of Regulation S-K of
the SEC) effected by PIC
WISCONSIN or any of the PIC WISCONSIN
Subsidiaries since December 31, 2002.
(h) PricewaterhouseCoopers
LLP, which has expressed its opinion with
respect to the financial statements of PIC WISCONSIN and the PIC WISCONSIN
Subsidiaries (including the related notes), is and has been throughout the
periods covered by such financial
statements a registered public accounting firm
(as defined in Section 2(a)(12) of Sarbanes Oxley Act of
2002 ("SOX").
Section
4.7(h) of the PIC WISCONSIN Disclosure
Schedule lists all non-audit services (as
such term is defined by SOX) performed by PricewaterhouseCoopers
LLP for PIC
WISCONSIN and each PIC WISCONSIN Subsidiary for each year commencing after
December 31, 2002.
(i) The books
and records of PIC
WISCONSIN and each of
the PIC WISCONSIN
Subsidiaries (i) are and have been properly
prepared and
maintained in form and
substance adequate for preparing audited
consolidated financial
statements, in
accordance with regulatory accounting principles required by SAP and any
other
applicable legal and accounting requirements, (ii) reflect only actual
transactions, and (iii) fairly and
accurately reflect all assets and liabilities
of PIC WISCONSIN and each of the PIC
WISCONSIN Subsidiaries and all contracts
and other transactions to which PIC WISCONSIN or any of the PIC WISCONSIN
Subsidiaries is or was a party or by which PIC WISCONSIN or any of the PIC
WISCONSIN Subsidiaries or any of their
respective businesses or assets is or was
affected.
4.8 Broker's
Fees. Except as set
forth in Section 4.8 of the PIC WISCONSIN
Disclosure Schedule (which sets forth amounts paid or to be paid and
names of
parties to which such amounts were or will
be paid), none of PIC WISCONSIN, the
PIC WISCONSIN Subsidiaries and their respective officers and directors,
has
employed any broker or finder or incurred
any liability for any broker's fees or
commissions, or investment banker fees or commissions, or finder's fees in
connection with the transactions
contemplated by this Agreement.
18
<PAGE>
4.9 Absence of
Certain Changes or Events.
(a) Since
December 31, 2004,
and except as set
forth in Section 4.9(a) of
the PIC WISCONSIN Disclosure Schedule,
neither PIC WISCONSIN
nor any of the PIC
WISCONSIN Subsidiaries has (except as
required by applicable law): (i) increased
the wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive
officer, employee, or director from the
amount thereof in effect as of December 31,
2004, except for changes in benefits
in the ordinary course of business,
(ii) granted any stock
options or severance
or termination pay, entered into any
contract to make or grant any stock options
or severance or termination pay, or paid any bonuses, or (iii) suffered any
strike, work stoppage, slowdown, or other
labor disturbance.
(b) Since
December 31, 2004,
and except as set
forth in Section 4.9(b) of
the PIC WISCONSIN Disclosure Schedule, there has not been: (i) any Material
Adverse Effect on PIC WISCONSIN and the
PIC WISCONSIN
Subsidiaries taken as
a
whole; (ii) any material change in any method of accounting or accounting
principles or practice by PIC WISCONSIN or
any PIC WISCONSIN Subsidiary, except
as required by SAP and disclosed in the notes to the unaudited financial
statements of PIC WISCONSIN and the PIC WISCONSIN Subsidiaries; (iii) any
material change in the actuarial,
investment, reserving,
underwriting or claims
administration policies, practices, procedures, methods, assumptions or
principles of PIC WISCONSIN or any PIC
WISCONSIN Insurance Subsidiary; (iv) any
damage, destruction or loss, whether or not
covered by insurance, materially and
adversely affecting the properties or business of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary; (v) any declaration or payment of any dividends or
distribution of any kind in respect of any
of the capital stock of PIC WISCONSIN
or any PIC WISCONSIN Subsidiary; (vi) any direct or indirect redemption,
purchase or other acquisition by PIC WISCONSIN or
any PIC WISCONSIN
Subsidiary
of any of the capital stock of PIC
WISCONSIN or any PIC
WISCONSIN Subsidiary;
(vii) any discharge or cancellation, whether in part or in whole, of any
indebtedness owed by PIC WISCONSIN or any PIC WISCONSIN Subsidiary to any
Person, except reimbursement to employees
of ordinary business expenses or other
debts arising in the ordinary course of
business; (viii) any sale or transfer or
cancellation of any of the assets,
properties, or claims of PIC WISCONSIN or any
PIC WISCONSIN Subsidiary, except in the ordinary course of
business; (ix) any
sale, assignment or transfer of any
trademarks, trade names, or other intangible
assets of PIC WISCONSIN or any PIC WISCONSIN Subsidiary; or (x) any material
amendment to or termination of any material
contract, agreement,
instrument or
license to which PIC WISCONSIN or any PIC
WISCONSIN Subsidiary is a party.
4.10 Legal
Proceedings and Judgments.
(a) Except as
set forth in Section 4.10(a) of the PIC WISCONSIN Disclosure
Schedule, neither PIC WISCONSIN nor any PIC
WISCONSIN Subsidiary
is a party to
any, and there are no pending or, to the
Knowledge of PIC WISCONSIN, threatened,
legal, administrative, arbitral or other
inquiries, proceedings, claims (whether
asserted or unasserted), actions or governmental or regulatory or SRO
investigations of any nature (including
noncontractual claims,
bad faith claims
and claims against any directors or officers of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary, but excluding coverage and other
claims made with respect
to insurance policies issued by PIC WISCONSIN or any PIC
WISCONSIN Insurance
Subsidiary for which claims reserves
believed by PIC
WISCONSIN's management
to
be adequate have been established) against PIC WISCONSIN, any PIC WISCONSIN
Subsidiary, any of their respective businesses or assets, any assets of any
other Person which are used in any of the business or operations of PIC
WISCONSIN or any PIC WISCONSIN Subsidiary, any directors or officers of PIC
WISCONSIN or any PIC WISCONSIN Subsidiary, in their respective capacities as
directors and officers, or the transactions
contemplated by this
Agreement, or
challenging the validity or propriety of
the transactions
contemplated by
this
Agreement.
19
<PAGE>
(b) Except as
set forth in Section 4.10(b) of the PIC WISCONSIN Disclosure
Schedule, there is no injunction, order, judgment, decree, or regulatory
restriction (including noncontractual claims, bad faith claims and claims
against any directors or officers of PIC WISCONSIN or any PIC WISCONSIN
Subsidiary, but excluding coverage and other claims made with respect to
insurance policies issued by PIC WISCONSIN or any PIC WISCONSIN Insurance
Subsidiary for which claims reserves
believed by PIC
WISCONSIN's management
to
be adequate have been established) imposed
upon PIC WISCONSIN, any PIC WISCONSIN
Subsidiary or the assets of PIC WISCONSIN
or any PIC WISCONSIN Subsidiary.
(c) Except as
set forth in Section 4.10(c) of the PIC WISCONSIN Disclosure
Schedule, no breach of contract,
breach of fiduciary
duties under ERISA,
bad
faith, breach of warranty, tort, negligence, infringement,
fraud,
discrimination, wrongful discharge or other claim of any nature has been
asserted or, to the Knowledge of PIC
WISCONSIN, threatened against PIC WISCONSIN
or any PIC WISCONSIN Subsidiary.
(d) As to each
matter, if any,
described on Sections 4.10(a), 4.10(b) and
4.10(c) of the PIC WISCONSIN Disclosure
Schedule, accurate and complete copies
of all relevant pleadings, judgments, orders and correspondence have
been made
available to PRA.
(e) Except for
each matter (if any) described on Section 4.10(e) of the PIC
WISCONSIN Disclosure Schedule, no legal, administrative, arbitral or other
inquiries, proceedings, claims, actions or governmental or regulatory or
SRO
investigations alleging violations of Federal or state securities laws
(including the Securities Act of 1933, as
amended (the "Securities Act") and the
Exchange Act) have been filed against PIC WISCONSIN, any PIC WISCONSIN
Subsidiary or, to the Knowledge of PIC WISCONSIN, against any director or
officer of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary, in their capacities as
a director or officer, and not dismissed
with prejudice.
4.11
Insurance.
(a) Except as
set forth in Section 4.11(a) of the PIC WISCONSIN Disclosure
Schedule, PIC WISCONSIN and the PIC
WISCONSIN Insurance
Subsidiaries
maintain
policies of general liability, fire and casualty, automobile, directors and
officers, errors and omissions, fiduciary, and other forms of insurance
(the
"PIC WISCONSIN Insurance Policies") in such amounts,
with such deductibles
and
against such risks and losses which PIC WISCONSIN's management believes are
reasonable for the business and assets of PIC
WISCONSIN and the PIC WISCONSIN
Insurance Subsidiaries. All such policies are in full force and effect,
all
premiums due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments that are not yet, but
may be, required to be
paid with respect to any period ending prior to the Closing Date under
comprehensive general liability and
worker's compensation
insurance
policies),
and no notice of cancellation or termination has been received
with respect to
any such policy which has not been replaced
on substantially similar terms prior
to the date of such cancellation. To the Knowledge of PIC WISCONSIN, the
activities and operations of PIC WISCONSIN and the PIC WISCONSIN Insurance
Subsidiaries have been conducted in a manner so as to conform in
all material
respects to all applicable provisions of
such insurance policies.
20
<PAGE>
(b) No
issuer of the PIC WISCONSIN Insurance Policies has issued a
reservation-of-rights letter, or entered into a nonwaiver agreement, or
otherwise denied or limited coverage (in
whole or in part), under any of the PIC
WISCONSIN Insurance Policies, and to the Knowledge of PIC WISCONSIN, no
declaratory judgment has been sought by any Person or entered by
any court of
competent jurisdiction that denies or limits coverage (in whole or in part)
under any of the PIC WISCONSIN Insurance
Policies.
4.12 Taxes and
Tax Returns.
(a) As used in
this Agreement: "Tax"
or "Taxes" means all federal, state,
county, local, and foreign income, excise, gross receipts, gross income,
profits, franchise, license, ad valorem, profits, gains, capital, sales,
transfer, use, payroll, employment,
severance, withholding, duties, intangibles,
franchise, backup withholding, stamp, occupation, premium, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, registration, alternative or add on minimum,
estimated,
and other taxes,
charges, levies or like assessments
together with all penalties and additions to
tax and interest thereon). "Tax Return" or "Tax Returns" means any and all
returns, declarations, claims for refunds, reports, information returns and
information statements (including,
without limitation,
Form 1099, Form W-2
and
W-3, Form 5500, and Form 990) with respect to
Taxes filed,
or required to be
filed, by any Person or any Subsidiary of
such Person with the Internal Revenue
Service ("IRS") or any other Governmental
Authority or tax
authority or agency,
whether domestic or foreign (including consolidated, combined and unitary tax
returns).
(b) PIC
WISCONSIN and the PIC
WISCONSIN Subsidiaries
have duly filed
all
Tax Returns required to be filed by them on or prior to the date of this
Agreement (all such Tax Returns being accurate and complete in all material
respects) and have duly paid or made
sufficient
provisions
for the payment of
all Taxes shown thereon as owing on or prior to the date of this
Agreement
(including, if and to the extent applicable, those due in respect of their
properties, income, business, capital stock, premiums,
franchises,
licenses,
sales and payrolls) other than Taxes which are not yet
delinquent or are
being
contested in good faith and have not been
finally determined for
which adequate
reserves have been made on the financial
statements described
in Section 4.7(a)
of this Agreement. Except as disclosed on Section
4.12(b) of the PIC WISCONSIN
Disclosure Schedule, neither PIC WISCONSIN nor any PIC
WISCONSIN Subsidiary has
waived any statute of limitations in
respect of Taxes or agreed to any extension
of time with respect to a Tax Return or tax
assessment or deficiency other than
extensions that are automatically
granted by the taxing
authorities upon filing
an application therefor. The unpaid Taxes
of PIC WISCONSIN and the PIC WISCONSIN
Subsidiaries do not exceed the reserve for tax liability set forth on the
balance sheets referenced in Section 4.7 of this
Agreement as adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of PIC WISCONSIN in filing its
returns. No claim has been made since
December 31, 2000 by an authority in a
jurisdiction
where PIC WISCONSIN or
any
PIC WISCONSIN Subsidiary does not file Tax
Returns that it is or may be subject
to taxation by that jurisdiction.
21
<PAGE>
(c) There is no
claim, audit, action, suit, proceeding or investigation now
pending or, to the Knowledge of PIC WISCONSIN, threatened against or with
respect to PIC WISCONSIN or any PIC WISCONSIN Subsidiary in respect of any
material Tax. PIC WISCONSIN and each PIC
WISCONSIN Subsidiary in connection with
amounts paid or owed to any employee, independent contractor, creditor,
shareholder or other third party have
complied with
applicable tax
withholding
in all material respects. PIC WISCONSIN and each PIC
WISCONSIN Subsidiary
have
reported such withheld amounts to the appropriate
taxing authority and
to each
such employee, independent contractor, creditor, shareholder or other third
party as required by applicable law.
(d) There are no
Tax Liens upon any property or assets of PIC WISCONSIN or
its Subsidiaries except Liens for current Taxes not yet due. Neither PIC
WISCONSIN nor any PIC WISCONSIN Subsidiary has been required to include in
income any adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in accounting method initiated by PIC WISCONSIN or any PIC
WISCONSIN Subsidiary, and the IRS has not initiated or proposed any such
adjustment or change in accounting method.
Except as set forth in
the financial
statements described in Section 4.7(a) of
this Agreement,
neither PIC WISCONSIN
nor any PIC WISCONSIN Subsidiary has entered into a
transaction which is
being
accounted for as an installment obligation under Section 453 of the Code.
Neither PIC WISCONSIN nor any PIC WISCONSIN
Subsidiary is a party to or bound by
any tax indemnity, tax sharing or tax allocation agreement (other than such
agreements as exist by and among themselves). Except as set forth in
Section
4.12(d) of the PIC WISCONSIN Disclosure
Schedule, neither PIC
WISCONSIN nor any
PIC WISCONSIN Subsidiary has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code other than an
affiliated group in which PIC WISCONSIN has
been the common parent
corporation.
Neither PIC WISCONSIN nor any PIC WISCONSIN Subsidiary is liable for the
Taxes
of any person under Section 1.1502-6 of the
Treasury Regulations (or any similar
provision of state, local or foreign Tax
law) or by contract,
as a successor or
otherwise. During the five (5) year period
ending on the date of this Agreement,
neither PIC WISCONSIN nor any PIC WISCONSIN Subsidiary was a distributing
corporation or a controlled corporation in
a transaction intended to be governed
by Section 355 of the Code. Neither PIC WISCONSIN nor any PIC WISCONSIN
Subsidiary is a party to any joint venture,
partnership or other
arrangement or
contract that could be treated as a
partnership for federal income tax purposes.
PIC WISCONSIN's basis and excess loss account, if any, in each PIC WISCONSIN
Subsidiary is set forth in Section 4.12(d) of the PIC WISCONSIN Disclosure
Schedule.
(e) Except as
set forth in Section 4.12(e) of the PIC WISCONSIN Disclosure
Schedule, any amount that is reasonably
likely to be received
(whether in cash
or property or the vesting of property)
as a result of any of
the transactions
contemplated by this Agreement by any employee, officer or director of PIC
WISCONSIN or any of its affiliates who is a
"Disqualified
Individual" (as
such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination
agreement, other
compensation arrangement
or PIC WISCONSIN Benefit Plan (as defined in
Section 4.13 of this
Agreement)
currently in effect will not be
characterized as an "excess parachute payment"
(as such term is defined in Section
280G(b)(1) of the Code).
22
<PAGE>
(f) To the
Knowledge of PIC WISCONSIN, there is no dispute or claim
concerning any tax liability of PIC
WISCONSIN or any PIC
WISCONSIN
Subsidiary
except as disclosed in Section 4.12(f) of
the PIC WISCONSIN Disclosure Schedule.
Section 4.12(f) of the PIC WISCONSIN
Disclosure Schedule identifies the last Tax
Returns that have been audited by the taxing authority with whom they were
filed, and indicates those Tax Returns that
currently are the subject of an
audit procedure or that PIC WISCONSIN or any PIC WISCONSIN Subsidiary has
received notice will be subject to an audit
procedure.
PIC WISCONSIN has
made
available to PRA correct and complete
copies of all federal
income tax returns
(including amendments thereto) of, all
examination reports of, and statements of
deficiencies assessed against or agreed to by, PIC WISCONSIN or any PIC
WISCONSIN Subsidiary since December 31,
2000.
4.13 Employee
Plans; Labor Matters.
(a) Section
4.13(a) of the PIC WISCONSIN Disclosure Schedule sets forth a
true and complete list of all of the Employee Plans (as defined in Section
10.17(a)) for employees of PIC WISCONSIN
and any PIC WISCONSIN
Subsidiary ("PIC
WISCONSIN Employee Plans"). PIC WISCONSIN does not maintain any stock
option
plan or stock purchase plan. Those PIC WISCONSIN Employee Plans which are
non-qualified deferred compensation plans for purposes of Section 409A
of the
Code are separately identified in Section 4.13(a) of the PIC WISCONSIN
Disclosure Schedule. Except with respect to the PIC
WISCONSIN Employee
Plans,
neither PIC WISCONSIN nor any PIC WISCONSIN
Subsidiary
sponsors, maintains or
contributes to, or has any ongoing
obligation
or liability whatsoever with
respect to: (i) any employee benefit plan as defined in Section
3(3) of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or (ii)
any other program, plan, trust agreement or arrangement for any bonus,
severance, hospitalization, vacation, sick pay, deferred
compensation, pension,
profit sharing, post-employment, retirement, payroll savings, stock option,
stock purchase, group insurance, self
insurance, death
benefit, fringe benefit,
welfare or any other employee benefit plan
or fringe benefit
arrangement of any
nature whatsoever including those for the benefit of former employees. PIC
WISCONSIN and the PIC WISCONSIN
Subsidiaries
have not made or
entered into any
written or oral agreement, arrangement, commitment, or understanding to
create
any additional PIC WISCONSIN Employee Plan or to continue,
modify, change, or
terminate, in any material respect, any PIC
WISCONSIN Employee Plan.
(b) PIC
WISCONSIN has
heretofore delivered
or made available to
PRA true
and complete copies of each PIC WISCONSIN Employee Plan and certain related
documents, including: (i) the plan document and the
related trust agreement or
annuity contract for such PIC WISCONSIN
Employee Plan; (ii) the summary plan
description and material employee
communication document
for such PIC WISCONSIN
Employee Plan; (iii) the actuarial
report for such PIC
WISCONSIN Employee
Plan
(if applicable) for each of the last two
years; (iv) all
determination
letters
from the IRS (if applicable) for such PIC WISCONSIN Employee Plan; (v) all
insurance policies relating thereto and any written materials used by PIC
WISCONSIN to describe employee benefits to employees of PIC
WISCONSIN and the
PIC WISCONSIN Subsidiaries; (vi) the most recent annual return on Form 5500
(including all schedules thereto along with
the accompanying
auditor's opinion,
if applicable) and tax return (Form 990) for such
PIC WISCONSIN Employee
Plan;
(vii) the most current actuarial, valuation, and trustee's reports (as
applicable) for such PIC WISCONSIN Employee Plan; and (viii) all material
communications with any governmental entity or
agency (including the Department
of Labor, the Internal Revenue Service, the Pension Benefit Guaranty
Corporation, and the SEC) with respect to
such PIC WISCONSIN Employee Plan. Each
such actuarial or valuation report correctly shows the value of the assets
of
such PIC WISCONSIN Employee Plan as of the date
thereof, the total
accrued and
vested liabilities, all contributions by PIC WISCONSIN and the PIC
WISCONSIN
Subsidiaries, and the assumptions on which
the calculations are based.
23
<PAGE>
(c) Except as
set forth in Section 4.13(c) of the PIC WISCONSIN Disclosure
Schedule, each of the PIC WISCONSIN Employee Plans has been operated and
administered in all material respects in compliance with applicable laws,
including, but not limited to, ERISA and the Code. To the Knowledge of PIC
WISCONSIN, there has not been any material violation of the reporting and
disclosure provisions of the Code and ERISA.
There has not been any termination
or partial termination (including any termination or partial termination
attributable to the transactions
contemplated by this
Agreement) of such plans.
Neither PIC WISCONSIN nor any PIC WISCONSIN Subsidiary nor any of their
respective ERISA affiliates, nor any
predecessor thereof, contributes to, or has
within the past six years contributed to,
any multiemployer plans, as defined in
Section 3(37) of ERISA, or any multiple employer welfare arrangements, as
defined in Section 3(40) of ERISA. Neither PIC WISCONSIN nor any PIC
WISCONSIN
Subsidiary nor any of their respective ERISA affiliates, nor any predecessor
thereof, sponsors, participates in, or
contributes to, or has at any time in the
past sponsored, participated in, or
contributed to (i) any plan which is subject
to the funding standards or requirements
described in Section
412 of the Code,
or (ii) any plan which is subject to any of
the requirements,
obligations, and
liabilities imposed by Title IV of
ERISA.
(d) Each PIC
WISCONSIN Employee Plan which is intended
to be qualified
under Section 401(a) of the Code is so qualified
and has received a
favorable
determination letter or has pending or has time
remaining in which to
file, an
application for such determination from the IRS, and
PIC WISCONSIN is not aware
of any reason why any such determination letter should be revoked or not be
reissued, and any related trust is exempt
from taxation under Section 501(a) of
the Code. PIC WISCONSIN has made available to PRA copies of the most
recent
Internal Revenue Service determination letters with respect to each such
PIC
WISCONSIN Employee Plan (if applicable).
Except as set forth in
Section 4.13(d)
of the PIC WISCONSIN Disclosure
Schedule, each PIC WISCONSIN Employee Plan
has
been maintained in material compliance with its terms and with
the requirements
prescribed by any and all applicable laws and regulations, including but not
limited to ERISA and the Code. No
prohibited transaction
within the meaning
of
Section 406 of ERISA or Section 4975 of the
Code, or breach of
fiduciary duty
under Title I of ERISA has occurred with
respect to any PIC
WISCONSIN Employee
Plan or with respect to PIC WISCONSIN or
any PIC WISCONSIN Subsidiary. No events
have occurred with respect to any PIC
WISCONSIN Employee
Plan that could result
in payment or assessment by or against
Parent or any of its
Subsidiaries of any
material excise taxes under Sections 4972,
4975, 4976, 4977, 4979, 4980B, 4980D,
4980E or 5000 of the Code.
24
<PAGE>
(e) There has
been no amendment to, written interpretation or announcement
(whether or not written) by PIC WISCONSIN or any of the PIC WISCONSIN
Subsidiaries relating to, or change in
employee participation or coverage under,
any PIC WISCONSIN Employee Plan which would increase
materially the expense
of
maintaining PIC WISCONSIN Employee Plans
above the level of the expense incurred
in respect thereof for the fiscal year ended
December 31,
2004. No event has
occurred or circumstances exist that could result in a
material increase in the
premium costs of PIC WISCONSIN Employee Plans that are insured,
or a material
increase in benefit costs of the PIC WISCONSIN Employee Plans that are
self-insured.
(f) Except as
set forth in Section 4.13(f) of the PIC WISCONSIN Disclosure
Schedule, there is no action, suit,
investigation,
audit or proceeding
pending
against or involving or, to the Knowledge
of PIC WISCONSIN,
threatened against
or involving any PIC WISCONSIN Employee Plan before any court or
arbitrator or
any state, federal or local governmental body, agency or official,
except as
would not, individually or in the aggregate, reasonably be expected to have
a
Material Adverse Effect on PIC WISCONSIN. Other than claims for benefits
submitted by participants or beneficiaries, no claim against, or legal
proceeding involving, any PIC WISCONSIN Employee Plan is pending or, to the
Knowledge of PIC WISCONSIN, threatened.
(g) Except as
described in Section 4.13(g) of the PIC WISCONSIN Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions
contemplated by this
Agreement will (i) result
in any material payment (including
severance,
unemployment compensation, golden
parachute or otherwise) becoming due to any director or employee of PIC
WISCONSIN or any of its Subsidiaries from PIC WISCONSIN or any of its
Subsidiaries under any PIC WISCONSIN
Employee Plan or otherwise; (ii) materially
increase any benefits otherwise payable under any PIC
WISCONSIN Employee
Plan;
(iii) result in any acceleration of the time of payment or vesting
of any such
benefits to any material extent (in each case under
clauses (i), (ii) or
(iii)
whether or not such payment or benefit would constitute a parachute payment
within the meaning of Section 280G of the
Code); or (iv) constitute a prohibited
transaction within the meaning of Section
406 of ERISA or
Section 4975 of
the
Code, or breach of fiduciary duty under
Title I of ERISA.
(h) Neither PIC
WISCONSIN nor any PIC WISCONSIN Subsidiary has any direct
or indirect material liability or obligation under any
PIC WISCONSIN
Employee
Plan other than as described in the terms
of such PIC WISCONSIN
Employee Plans.
There are no circumstances arising out of the sponsorship of
any PIC WISCONSIN
Employee Plan which will result in any
direct or indirect material liability to
PIC WISCONSIN or any PIC WISCONSIN Subsidiary, other than liability for
contributions, benefit payments, administrative costs and
liabilities incurred
in accordance with the terms of the PIC
WISCONSIN Employee Plans consistent with
past practice.
(i) PIC
WISCONSIN and each PIC WISCONSIN Subsidiary have made all
payments
and contributions due from them to each PIC
WISCONSIN Employee
Plan. There are
no funded benefit obligations under any PIC WISCONSIN
Employee Plan for
which
contributions have not been made or
properly accrued, and
there are no unfunded
benefit obligations that have not been
accounted for by reserves, or otherwise
properly footnoted on the PIC WISCONSIN SAP
Statements.
25
<PAGE>
(j) Each PIC
WISCONSIN Employee
Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2)
of ERISA that is not
qualified under
Section 401(a) or 403(a) of the Code is
exempt from Parts 2, 3, and 4 of Title I
of ERISA as an unfunded plan that is maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees, pursuant to Sections 201(2),
301(a)(3), and 401(a)(1) of
ERISA. Except as set forth in Section
4.13(j) of the PIC
WISCONSIN
Disclosure
Schedule, no assets of PIC WISCONSIN or any PIC WISCONSIN Subsidiary are
allocated to or held in a "rabbi trust" or
similar funding vehicle.
(k) Each PIC
WISCONSIN Employee Plan that is a "group health plan" (as
defined in Section 607(1) of ERISA or Section
5001(b)(1) of the
Code) has been
operated at all times in compliance in all
material respects with the provisions
of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA
("COBRA"), with the provisions of the Code and ERISA enacted by the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA"),
and with the
provisions of any applicable similar state
law.
(l) Except as
set forth in Section 4.13(l) of the PIC WISCONSIN Disclosure
Schedule, no PIC WISCONSIN Employee Plan
provides benefits to current or former
employees beyond their retirement or other termination of service (other
than
coverage mandated by COBRA, the cost of which is fully paid by
the current or
former employee or his or her
dependents).
4.14
Employees.
(a) PIC
WISCONSIN has made
available to PRA a true and correct list of the
names of the employees of PIC WISCONSIN and the PIC WISCONSIN Subsidiaries,
their birth dates, hire dates, compensation
rates, name of employer and capacity
in which employed, and accrued vacation and sick leave, if any, all as of
September 30, 2005. Except as limited by
any employment agreements and severance
agreements listed on Section 4.14(a) of the
PIC WISCONSIN
Disclosure
Schedule,
and except for any limitations of general
application which may be imposed under
applicable employment laws, PIC WISCONSIN and the PIC
WISCONSIN
Subsidiaries
have the right to terminate the employment
of any of their respective employees
at will and without payment to such
employees.
(b) PIC
WISCONSIN and the PIC WISCONSIN Subsidiaries are in compliance,
in
all material respects, with all applicable
ordinances or other laws, orders, and
regulations regarding labor and employment
and the compensation therefor, labor
and employment matters, discrimination in employment,
terms and conditions
of
employment, wages, hours and occupational safety and health, and employment
practices, whether state or federal (including, without limitation, to the
extent applicable, wage and hour laws; workplace safety laws; workers'
compensation laws; equal employment opportunity laws; equal pay laws; civil
rights laws; the Occupational Safety and Health Act of 1970, as
amended; the
Equal Employment Opportunity Act, as amended;
the Americans With
Disabilities
Act, 42 U.S.C. ss. 12101 et seq., as amended;
the Fair Labor
Standards Act, 29
U.S.C. ss. 201 et seq., as amended;
the Equal Pay Act, 29
U.S.C. ss. 206d,
as
amended, the Portal-to-Portal Pay Act of 1947, 29 U.S.C.
ss. 255 et seq.,
as
amended; Title VII of the Civil Rights Act
of 1964, 42 U.S.C.
ss. 2000e, as
amended and 42 U.S.C. ss. 1981, as amended;
the Rehabilitation Act of 1973, as
amended; the Vietnam-Era Veterans' Readjustment Assistance Act of 1974, as
amended; the Immigration Reform and Control
Act, 8 U.S.C. ss. 1324A et seq., as
amended; the Employee Polygraph Protection
Act of 1988, as amended; the Veterans
Re-employment Act - Handicap Bias, 38 U.S.C. ss.
2027 et seq., as amended; the
Civil Rights Act of 1991, as amended;
the Family and Medical
Leave Act of 1993,
as amended; the Religious Freedom Restoration
Act of 1993, as amended; and the
Age Discrimination and Employment Act of 1967, as amended). No action or
investigation has been instituted or, to the Knowledge of PIC
WISCONSIN,
is
threatened to be conducted by any state or federal agency regarding any
potential violation by PIC WISCONSIN or any PIC WISCONSIN Subsidiary of any
laws, orders, ordinances and regulations
regarding labor and
employment or the
compensation therefor (including,
without limitation,
any of the aforementioned
statutes) during the past five (5)
years.
26
<PAGE>
(c) Neither PIC
WISCONSIN nor any PIC WISCONSIN Subsidiary has ever been a
party to or bound by any union or
collective
bargaining
contract, nor is any
such contract currently in effect or being
negotiated by PIC
WISCONSIN or any
PIC WISCONSIN Subsidiary. PIC WISCONSIN does not know of any activities or
proceedings of any labor union to organize
any employees of PIC WISCONSIN or any
PIC WISCONSIN Subsidiary. Since December 31, 2004, no
executive officer of PIC
WISCONSIN or any PIC WISCONSIN Subsidiary has indicated to the
Chief Executive
Officer of PIC WISCONSIN an intention to
terminate his or her
employment.
(d) PIC
WISCONSIN and each PIC
WISCONSIN Subsidiary
have complied in
all
material respects with all applicable
notice provisions of and have no material
obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder. Except as set forth in
Section 4.14(d) of the PIC
WISCONSIN Disclosure Schedule, there is no action, claim, cause
of action, suit
or proceeding pending or, to the Knowledge
of PIC WISCONSIN,
threatened, on the
part of any employee, independent contractor or applicant for employment,
including any such action, claim, cause of action,
suit or proceeding
based on
allegations of wrongful termination or
discrimination on the basis of age, race,
religion, sex, sexual preference,
or mental or physical
handicap or disability.
Except as set forth in Section 4.14(d) of
the Disclosure Schedule, all sums due
from PIC WISCONSIN or any PIC WISCONSIN Subsidiary for employee compensation
(including, without limitation, wages, salaries, bonuses,
relocation benefits,
stock options and other incentives) have been paid, accrued or otherwise
provided for, and all employer contributions for employee
benefits, including
deferred compensation obligations, and all benefits under any PIC WISCONSIN
Employee Plan have been duly and
adequately
paid or provided for
in accordance
with plan documents. To the Knowledge of PIC WISCONSIN,
no person treated as an
independent contractor by PIC WISCONSIN or any PIC WISCONSIN
Subsidiary is an
employee as defined in Section 3401(c) of the Code, nor has any employee been
otherwise improperly classified, as exempt,
nonexempt or otherwise, for purposes
of federal or state income tax withholding or overtime laws, rules, or
regulations.
(e) Since
December 31, 2004,
neither PIC
WISCONSIN nor any PIC
WISCONSIN
Subsidiary has effectuated (i) a "plant closing" (as defined in the Worker
Adjustment and Retraining Notification Act (the "WARN Act"))
affecting any site
of employment or one or more
facilities or
operating units within
any site of
employment or facility of PIC WISCONSIN or
any PIC WISCONSIN Subsidiary; (ii) a
"mass layoff" (as defined in the WARN Act);
or (iii) such other
transaction,
layoff, reduction in force or employment
terminations
sufficient in number
to
trigger application of any similar foreign,
state or local law.
27
<PAGE>
4.15 Compliance
with Applicable Law.
(a) PIC
WISCONSIN and the PIC
WISCONSIN Subsidiaries hold all licenses,
franchises, permits and authorizations
necessary for the lawful conduct of their
respective businesses under and pursuant to, and to the Knowledge of PIC
WISCONSIN have complied in all material
respects with, and are not in default in
any respect under any, and have maintained and conducted their respective
businesses in all respects in compliance
with, all applicable
laws, statutes,
orders, rules, regulations, policies and/or guidelines,
except any failure
to
have such licenses, franchises, permits or authorizations or the
failure to so
comply that does not have a Material
Adverse Effect on PIC WISCONSIN and the PIC
WISCONSIN Subsidiaries, taken as a
whole.
(b) Neither PIC
WISCONSIN nor any PIC
WISCONSIN Subsidiary is subject to
any cease-and-desist or other order issued by, or is a party to any
written
agreement, consent agreement or memorandum of
understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to
any order
or directive by, or has been a recipient
of any supervisory letter from, or
since that date, has adopted any board resolutions at the request of any
Governmental Authority that: (i) limits the
ability of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary to conduct any line of business, (ii) require any
investments of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary to be treated as
non-admitted assets, (iii) require divestiture of any investments of PIC
WISCONSIN or any PIC WISCONSIN Subsidiary, (iv) in any manner imposes any
requirements on PIC WISCONSIN or any PIC WISCONSIN Insurance Subsidiary in
respect of risk based capital requirements that add to or otherwise modify
the
risk based capital requirements imposed under the Insurance
Laws, (v) in any
manner relate to the ability of PIC
WISCONSIN or any PIC WISCONSIN Subsidiary to
pay or declare dividends or distributions, or (vi) restricts in any material
respect the conduct of the business, credit policies or PIC WISCONSIN's
management or any PIC WISCONSIN
Subsidiary
(each, whether or not set forth in
the PIC WISCONSIN Disclosure Schedule, a
"PIC WISCONSIN Regulatory Agreement"),
nor has PIC WISCONSIN or any of the PIC
WISCONSIN Subsidiaries
been advised by
any Governmental Authority that it is
considering issuing or requesting any such
PIC WISCONSIN Regulatory Agreement.
Neither PIC WISCONSIN
nor any PIC WISCONSIN
Subsidiary, directly or indirectly, engages in any activity prohibited by
applicable law.
(c) Except as
set forth in Section 4.15(c) of the PIC WISCONSIN Disclosure
Schedule, there is no pending or, to the
Knowledge of PIC WISCONSIN, threatened
charge by any Governmental Authority that PIC WISCONSIN or any PIC WISCONSIN
Subsidiary has violated any applicable
laws, rules or regulations (including any
Insurance Laws), nor any pending or, to the Knowledge of PIC WISCONSIN,
threatened investigation by any Governmental
Authority with respect to possible
violations of any applicable laws, rules or
regulations (including any Insurance
Laws).
28
<PAGE>
(d) There are no
contracts (other than
contracts relating to
employment),
real estate leases, loans, guarantees or other arrangements
or transactions of
any nature between PIC WISCONSIN or any PIC WISCONSIN
Subsidiary,
on the one
hand, and any of their respective
officers, directors, or affiliates (as such
term is defined in Rule 405 of the SEC),
on the other hand.
PIC WISCONSIN has
not, since July 30, 2002, extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of PIC WISCONSIN or any PIC WISCONSIN Subsidiary, except for
advancement of expenses incurred in the performance of business for PIC
WISCONSIN consistent with the travel expense policy of
PIC WISCONSIN.
Section
4.15(d) of the PIC WISCONSIN Disclosure Schedule identifies each loan or
extension of credit maintained by PIC
WISCONSIN or any PIC WISCONSIN Subsidiary
to which the second sentence of Section
13(k)(1) of the Exchange Act applies.
(e) None of PIC
WISCONSIN,
the PIC WISCONSIN
Subsidiaries,
any of their
respective current directors or officers, and, to the Knowledge of PIC
WISCONSIN, any of their respective former officers or directors or
current or
former employees, agents or representatives
have: (i) used any
corporate funds
for any illegal contributions, gifts, entertainment or other unlawful
expenses
relating to political activity,
(ii) used any
corporate funds for any direct or
indirect unlawful payments to any foreign
or domestic government
officials or
employees, (iii) violated any provision of
the Foreign Corrupt Practices Act of
1977, (iv) established or maintained any unlawful or unrecorded fund of
corporate monies or other assets,
(v) made any false or
fictitious entries
on
the books and records of PIC WISCONSIN or any PIC WISCONSIN Subsidiary, (vi)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature, or (vi) made any material favor or gift which is not
deductible for federal income tax purposes. To the Knowledge of PIC
WISCONSIN,
no director or officer of PIC WISCONSIN or any PIC WISCONSIN Subsidiary has
engaged in any "insider trading" in violation of
applicable law with respect to
any security issued by PIC WISCONSIN.
4.16 Certain
Contracts.
(a) Section
4.16(a) of the PIC
WISCONSIN Disclosure Schedule lists all
contracts, agreements, arrangements, commitments, or understandings (whether
written or oral) to which PIC WISCONSIN or
a PIC WISCONSIN Subsidiary is a party
to or bound by: (i) with respect to the
employment of any directors, officers or
employees; (ii) which, upon the
consummation of the transactions contemplated by
this Agreement will (either alone or upon
the occurrence of any additional acts
or events) result in any payment (whether of severance pay or otherwise)
becoming due from PIC WISCONSIN, PRA, NEWCO, or any of their respective
Subsidiaries to any director, officer or employee thereof; (iii) which is a
"material contract" (as such term is defined in Item
601(b)(10) of
Regulation
S-K of the SEC) with respect to PIC
WISCONSIN to be performed after the date of
this Agreement; (iv) that concerns a partnership
or joint venture that
is not
consolidated with PIC WISCONSIN for financial reporting purposes; (v) the
purpose of which is to limit the ability of
PIC WISCONSIN or any
PIC WISCONSIN
Subsidiary to compete with respect to any
product, service or
territory;
(vi)
that is in the nature of a collective bargaining agreement, employment
agreement, consulting agreement or
severance agreement that is not cancelable by
PIC WISCONSIN or any PIC WISCONSIN
Subsidiary without penalty or compensation on
thirty (30) days notice or less; (vii) that provides for the payment to an
employee of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary any incentive or bonus
compensation based on the productivity or
performance of such employee or of PIC
WISCONSIN or any PIC WISCONSIN Subsidiary; (viii) that is with any
Insurance
Regulator and restricts (A) distributions or other payments to
the shareholders
of PIC WISCONSIN or any PIC WISCONSIN
Subsidiary, (B) the continued operation of
PIC WISCONSIN or any PIC WISCONSIN
Subsidiary, or (C) any
other matter relating
to PIC WISCONSIN or any PIC WISCONSIN
Subsidiary and its affairs; or (ix) any of
the benefits of which will be increased, or
the vesting of the benefits of which
will be accelerated, by the occurrence of any of the
transactions
contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. PIC WISCONSIN has previously
made available to PRA
true and correct
copies of all employment and deferred compensation agreements which are in
writing and to which PIC WISCONSIN or any
PIC WISCONSIN
Subsidiary is a
party.
Each contract, agreement, arrangement, commitment, or understanding (whether
written or oral) of the type described in Sections 4.16(a) and (b) of this
Agreement, whether or not set forth in the
PIC WISCONSIN Disclosure Schedule, is
referred to in this Agreement as a "PIC WISCONSIN Contract", and neither PIC
WISCONSIN nor any PIC WISCONSIN
Subsidiary knows of,
or has received notice of,
any violation of any PIC WISCONSIN Contract
by any of the other parties thereto.
29
<PAGE>
(b) Section
4.16(b) of the PIC WISCONSIN Disclosure Schedule sets forth a
list of, and PIC WISCONSIN has made
available to PRA correct and complete copies
of, all written arrangements (or group of
related written
arrangements) from or
to third parties, for the furnishing of services to,
or receipt of services by,
PIC WISCONSIN or any PIC WISCONSIN
Subsidiary
(including
without limitation,
legal and accounting services, risk management services, agency agreements,
managing general agent agreements,
reinsurance intermediary agreements and other
distribution agreements, and agreements relating to the sale or servicing
of
medical professional liability insurance products offered by PIC
WISCONSIN or
any PIC WISCONSIN Subsidiary) under which
payments were made during any calendar
year since December 31, 2002 in excess of
$100,000 or that has a
non-cancelable
term in excess of one (1) year (as to the
latter, which is still in effect).
(c) With respect to each PIC WISCONSIN Contract: Such PIC WISCONSIN
Contract is in full force and effect
(except for
contracts that have expired
pursuant to the terms thereof) and is legally
valid, binding and enforceable
against PIC WISCONSIN or any of the PIC WISCONSIN Subsidiaries and to the
Knowledge of PIC WISCONSIN, the other party
thereto in accordance with its terms
(except as may be limited by bankruptcy, fraudulent conveyance, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies). There are no material
defaults by PIC WISCONSIN or any PIC
WISCONSIN Subsidiary,
or, to the Knowledge
of PIC WISCONSIN, any other party, under such PIC
WISCONSIN Contract.
Neither
PIC WISCONSIN nor any PIC WISCONSIN
Subsidiary has
received written or,
to the
Knowledge of PIC WISCONSIN or any PIC
WISCONSIN Subsidiary,
oral notice of any
default, offset, counterclaim or defense under such
PIC WISCONSIN Contract. No
condition or event has occurred
which with the passage
of time or the giving of
notice or both would constitute a default or breach by
PIC WISCONSIN or any PIC
WISCONSIN Subsidiary, or, to the Knowledge of PIC
WISCONSIN,
any other party
under the terms of such PIC WISCONSIN
Contract. All security
deposits, reserve
funds, and other sums and charges
that have become due
and payable under
such
PIC WISCONSIN Contract have been paid in full.
No party has
repudiated
any
provision of such PIC WISCONSIN
Contract.
30
<PAGE>
4.17 Investments
and Interest Rate Risk Management Instruments.
(a) Except as
set forth in Section 4.17(a) of the PIC WISCONSIN Disclosure
Schedule, PIC WISCONSIN and each PIC WISCONSIN Subsidiary have good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency
capacity),
free and
clear of any Lien. Such securities are permissible investments under all
applicable laws and are valued on the books
of PIC WISCONSIN in accordance with
SAP. Section 4.17(a) of the PIC WISCONSIN
Disclosure Schedule
sets forth a list
of the securities which are in default in
the payment of principal, interest or
dividends or are impaired to any extent.
PIC WISCONSIN has provided to PRA a
copy of the investment policies of PIC WISCONSIN and the PIC WISCONSIN
Subsidiaries as of September 30, 2005. There has been no material
change in
investment policy of PIC WISCONSIN and the
PIC WISCONSIN
Subsidiaries or in the
composition of the investments of PIC WISCONSIN and the PIC WISCONSIN
Subsidiaries s
