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ASSET PURCHASE AND SALE AGREEMENT
By and Between
▇▇▇▇ ▇▇▇▇▇ LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated November 29, 1996
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TABLE OF CONTENTS
PAGE
ARTICLE 1 - PURCHASE AND SALE OF ASSETS; CLOSING................................................................ 2
1.1. Closing...................................................................................... 2
1.2. Transfer of Assets........................................................................... 3
1.3. Ceding Commission; Payment................................................................... 5
1.4. Closing Deliveries........................................................................... 9
1.5. Additional Closing Deliveries................................................................ 12
1.6. Post Closing Adjustments..................................................................... 12
ARTICLE 2 - ASSUMPTION OF LIABILITIES AND OBLIGATIONS........................................................... 15
2.1. Assumption of Seller Liabilities............................................................. 15
2.2. Guaranty Fund Assessments.................................................................... 15
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF SELLER............................................................ 18
3.1. Organization, Standing and Authority of Seller............................................... 18
3.2. Authorization................................................................................ 18
3.3. Actions and Proceedings...................................................................... 19
3.4. No Conflict or Violation..................................................................... 19
3.5. Consents and Approvals....................................................................... 20
3.6. Brokerage and Financial Advisers............................................................. 21
3.7. Compliance With Laws......................................................................... 21
3.8. Annuity Contracts............................................................................ 21
3.9. Permits, Licenses and Franchises............................................................. 24
3.10. Regulatory Filings........................................................................... 25
3.11. Reinsurance.................................................................................. 26
3.12. Absence of Certain Changes or Events......................................................... 26
3.13. Assigned Contracts........................................................................... 28
3.14. Intellectual Property........................................................................ 29
3.15. Purchased Assets............................................................................. 29
3.16. Statutory Financial Statements............................................................... 30
3.17. Reserves..................................................................................... 31
3.18. Threats of Cancellation...................................................................... 32
3.19. Credited Rates............................................................................... 33
3.20. Related Agreements........................................................................... 33
3.21. Third Party Administration Agreements........................................................ 33
3.22. Mortgage Loans............................................................................... 34
3.23. No Waiver of Defenses........................................................................ 40
3.24. Agent Balances............................................................................... 41
3.25. GAAP Financial Statements.................................................................... 41
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TABLE OF CONTENTS
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ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 42
4.1. Organization and Standing.................................................................... 42
4.2. Authorization................................................................................ 42
4.3. Actions and Proceedings...................................................................... 43
4.4. No Conflict or Violation..................................................................... 43
4.5. Consents and Approvals....................................................................... 44
4.6. Brokerage and Financial Advisers............................................................. 44
4.7. GAAP Financial Statements.................................................................... 45
4.8. Statutory Financial Statements............................................................... 45
4.9. Rating....................................................................................... 46
ARTICLE 5 - PRE-CLOSING COVENANTS............................................................................... 47
5.1. Conduct of Business.......................................................................... 47
5.2. Certain Transactions......................................................................... 50
5.3. Investigations............................................................................... 50
5.4. HSR Act Filings.............................................................................. 51
5.5. Consents and Reasonable Efforts.............................................................. 51
5.6. Representations and Warranties............................................................... 52
5.7. Computer Software and Other Intellectual Property............................................ 53
5.8. Financial Statements and Reports............................................................. 53
5.9. Termination of Certain Reinsurance Arrangements.............................................. 54
5.10. Woodland Hills Option........................................................................ 54
5.11. Oxford Put................................................................................... 54
5.12. Marketing Agreement.......................................................................... 55
ARTICLE 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER
TO CLOSE.......................................................................................... 55
ARTICLE 7 - CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
TO CLOSE.......................................................................................... 58
ARTICLE 8 - POST-CLOSING COVENANTS.............................................................................. 61
8.1. Continued Access and Cooperation............................................................. 61
8.2. Further Assurances........................................................................... 63
8.3. Expenses..................................................................................... 63
8.4. Employee Plans............................................................................... 64
8.5. Non-Discriminatory Treatment of Policyholders................................................ 65
8.6. Repayment of Agent Balances.................................................................. 65
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TABLE OF CONTENTS
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8.7. No Inducement to Replace; Non-Twisting; Non-Churning;
Non-Competition............................................................................. 66
8.8. Preferred Stock Divided Repayment............................................................ 70
8.9. Policyholder Consents........................................................................ 70
8.10. Current Report on Form 8-K................................................................... 71
ARTICLE 9 - TERMINATION; SURVIVAL............................................................................... 71
9.1. Termination of Agreement..................................................................... 71
9.2. Effect of Termination........................................................................ 73
ARTICLE 10 - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION....................................................... 73
10.1. Survival of Representations.................................................................. 73
10.2. Indemnification by Purchaser................................................................. 74
10.3. Indemnification by Seller.................................................................... 76
10.4. Indemnification Procedure.................................................................... 78
ARTICLE 11 - PUBLICITY AND CONFIDENTIALITY...................................................................... 82
11.1. Publicity.................................................................................... 82
11.2. Confidentiality.............................................................................. 83
ARTICLE 12 - MISCELLANEOUS...................................................................................... 84
12.1. Notices...................................................................................... 84
12.2. Entire Agreement............................................................................. 86
12.3. Amendments................................................................................... 87
12.4. Waivers...................................................................................... 88
12.5. Governing Law................................................................................ 88
12.6. Binding Effect; Assignment; Third Party Beneficiaries........................................ 89
12.7. Severability................................................................................. 89
12.8. Headings..................................................................................... 90
12.9. Counterparts................................................................................. 90
12.10. Arbitration.................................................................................. 90
SIGNATURES ..................................................................................................... 92
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TABLE OF CONTENTS
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ANNEX A - Definitions
EXHIBITS -
A - Indemnity Reinsurance Agreement
B - Assumption Reinsurance Agreement
C - Trust Agreement
D - Transition Services Agreement
E - Administrative Services Agreement
F - Assignment and Assumption Agreement
G - License Agreement
H - ▇▇▇▇ of Sale
I - Opinion of Seller's Counsel
J - Opinion of Purchaser's Counsel
K - Loan Documentation
L - Terms of Marketing Agreement
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TABLE OF CONTENTS
SCHEDULES -
1.2(a)(i) - Closing Date Portfolio Securities
1.2(a)(ii) - Policy Loans
1.2(a)(iii) - Additional Assets
1.2(d)(i) - Assigned Contracts
1.2(d)(ii) - Licensing Restrictions
3.3 - Actions and Proceedings
3.4 - Certain Matters
3.5 - Consents and Approvals
3.7 - Compliance
3.8(a) - Annuity Contract Forms
3.8(b) - Annuity Contracts
3.8(c) - Certain Commission Contracts
3.8(e) - Contested Benefits
3.8(h) - Known Agent Violations
3.9(a) - Licensed Jurisdictions
3.9(b) - Permit Exceptions
3.10 - Regulatory Filings
3.11 - Reinsurance Agreements
3.12 - Certain Changes or Events
3.13 - Other Necessary Contracts
3.14 - Intellectual Property
3.17(a) - Reserve Liabilities
3.17(b) - Reserve Exceptions
3.18 - Threats of Cancellation
3.20 - Related Agreements
3.21 - Third Party Administration Agreements
3.22(a) - Mortgage Loans
3.22(b) - Participations
3.22(d) - Waivers, Amendments & Releases
3.22(f) - Missing Original Notes
3.22(l) - Tax Delinquencies
3.24 - Agent Balances
4.3 - Purchaser's Litigation
4.4 - Purchaser's Certain Matters
4.5 - Purchaser's Consents and Approvals
Excluded Transactions
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ASSET PURCHASE AND SALE AGREEMENT
ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") dated November 29,
1996 by and between ▇▇▇▇ ▇▇▇▇▇ Life Insurance Company, a Minnesota corporation
("Seller"), and SunAmerica Life Insurance Company, an Arizona corporation
("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is engaged, among other businesses, in the business of
selling and administering annuity policies and related activities in the United
States other than in the State of New York (the "Annuity Business");
WHEREAS, ▇▇▇▇ ▇▇▇▇▇ Life Insurance Company of New York, a New York
corporation ("JANY"), is engaged in the business of selling and administering
annuity, life and health related insurance policies and related activities
solely in the State of New York;
WHEREAS, Seller owns or holds certain assets used or held for use in
the Annuity Business and owns all of the outstanding capital stock of JANY (the
"JANY Stock"); and
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser wishes to
acquire from Seller, certain of the assets of Seller used in the conduct of the
Annuity Business pursuant to the terms and conditions set forth in this
Agreement and the JANY Stock pursuant to the terms and conditions set forth in a
Stock Purchase and Sale Agreement between Seller and Purchaser dated
concurrently herewith (the "JANY Stock Purchase Agreement").
NOW, THEREFORE, in consideration of the premises, representations and
warranties and the mutual covenants and agreements contained herein and other
good, valuable and
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sufficient consideration, the receipt of which is hereby acknowledged, Seller
and Purchaser (collectively, the "Parties" and, sometimes individually, a
"Party"), intending to be legally bound, hereby agree as follows.
The capitalized terms used in this Agreement and not defined herein
shall have the meanings specified in Annex A attached hereto. Unless the context
otherwise requires, such capitalized terms shall include the singular and plural
and the conjunctive and disjunctive forms of the terms defined.
ARTICLE 1
PURCHASE AND SALE OF ASSETS; CLOSING
Section 1.1. Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at 10:00 a.m. local time at the offices
of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such
other time and place as Purchaser and Seller may mutually agree in writing, on
the last business day of the month in which the satisfaction of all conditions
set forth in Articles 6 and 7 hereof concerning the Parties' respective
obligations to consummate the transactions contemplated herein occurs or such
other date as Seller and Purchaser may mutually agree in writing (the "Closing
Date") and, subject to completion, shall be deemed to have been consummated and
become effective for all purposes as of 11:59 p.m. on the Closing Date.
Section 1.2. Transfer of Assets.
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(a) Subject to the terms and conditions set forth herein, at
the Closing, Seller shall sell, assign, transfer, convey and deliver to
Purchaser as a reinsurance premium, and Purchaser shall purchase and accept from
Seller, all of Seller's right, title and interest in and to the following
assets, with such changes therein, additions thereto and deletions therefrom as
may occur from the date hereof through the Closing as permitted or required
pursuant to the terms hereof or otherwise agreed to by the Parties in writing
(collectively, the "Reinsurance Premium"):
(i) the Closing Date Portfolio Securities, including
the Accrued and Unpaid Investment Income thereon and all
documentation related thereto.
(ii) all of Seller's right and interest to receive
principal and interest paid on policy loans under the Annuity
Contracts (with the exception of any policy loans listed in
Schedule 1.2(a)(iii)) (the "Policy Loans") outstanding after
the Closing Date. The Policy Loans outstanding as of September
21, 1996 are listed on Schedule 1.2(a)(ii) attached hereto. An
estimate of all Policy Loans outstanding on the Closing Ledger
Date will be set forth in an updated Schedule 1.2(a)(ii) to be
delivered by Seller to Purchaser at the Closing. Schedule
1.2(a)(ii) includes with respect to each Policy Loan
outstanding on September 21, 1996, and will include with
respect to each Policy Loan set forth on the updated Schedule
1.2(a)(ii) to be delivered on the Closing Date, the policy
number, balance and form and contract number.
(iii) those additional assets listed on Schedule
1.2(a)(iii) attached hereto.
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(iv) cash in the amounts required to be paid
pursuant to Sections 1.2(c) hereof, with respect to Rejected
Mortgages, and 1.3(d)(i) hereof, with respect to excess
Reserve Liabilities.
(b) On the Closing Date, delivery of the Closing Date
Portfolio Securities shall be made by transfer to the trust account (the
"Trust") established pursuant to the Trust Agreement. The cash portion of the
Reinsurance Premium shall be transferred to the Trust by wire transfer of
immediately available funds. Securities, cash equivalents, mortgage loans and
other assets included among the Closing Date Portfolio Securities shall be
transferred by such instruments of transfer as are acceptable to the Trustee and
reasonably acceptable to Purchaser. The gross amount of the cash payment wired
by Seller shall be reduced by an amount equal to one day's interest on such
gross amount at an interest rate equal to the three month LIBOR rate in effect
on the Business Day preceding the Closing Date plus 25 basis points.
(c) Notwithstanding anything contained in this Section 1.2 to
the contrary, Purchaser shall have the right not to purchase up to $50,000,000
Book Value of (i) mortgages or (ii) mortgage related private placements which
comprise a portion of the October 21 Portfolio Securities (the "Rejected
Mortgages"), and such Rejected Mortgages shall not be sold, assigned,
transferred, conveyed or delivered to Purchaser hereunder; provided, however,
that upon written notice by Purchaser to Seller delivered not less than 10 days
prior to the Closing specifying such Rejected Mortgages, Seller shall deliver
cash to the Trust, as part of the Reinsurance Premium, in an amount equal to the
Book Value of the Rejected Mortgages.
(d) At the Closing, Seller shall assign, transfer, convey and
deliver to Purchaser, and Purchaser shall accept from Seller, the following:
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(i) Seller's rights including all claims arising
under the contracts and license agreements listed on Schedule
1.2(d)(i) attached hereto (the "Assigned Contracts"); and
(ii) originals or copies of all customer lists,
policy information, Seller's Annuity Contract forms and rating
plans, disclosure and other documents and filings required
under applicable Laws, and all claim, sales, underwriting,
financial, accounting, tax, business, marketing and compliance
records in the possession or control of Seller ("control" for
the purposes of this Section 1.2(d)(ii) being defined as the
ability to cause delivery to Seller) and relating to the
Annuity Business, including, without limitation, any database,
magnetic or optical media (to the extent not subject to the
licensing restrictions listed on Schedule 1.2(d)(ii) attached
hereto) and any other form of recorded, computer generated or
stored information or process, but excluding any such records
that both (A) are, and would upon transfer cease to be,
subject to the attorney-client privilege and (B) do not relate
to the Purchased Assets or Assumed Liabilities (collectively,
the "Books and Records").
(e) Seller and Purchaser agree that for tax purposes, the fair
market value of the Closing Date Portfolio Securities shall be the GAAP book
values used by Purchaser to reflect the Closing Date Portfolio Securities on its
Financial Statements on the Closing Date.
Section 1.3. Ceding Commission; Payment.
(a) In consideration for the sale, assignment, transfer,
conveyance and delivery of the Reinsurance Premium to Purchaser by Seller in
accordance with and upon the terms and
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conditions set forth in this Agreement, on the Closing Date Purchaser shall pay
to Seller One Hundred Eight Million Fifty Thousand Dollars ($108,050,000) in
cash, subject to adjustment as provided in Section 1.3(c) below (the "Closing
Date Ceding Commission"). Purchaser shall pay the Closing Date Ceding Commission
to Seller on the Closing Date by wire transfer of immediately available funds to
such bank account as Seller shall designate to Purchaser in writing at least
three Business Days prior to the Closing Date. Payment of the Closing Date
Ceding Commission shall be accompanied by (i) an amount in cash equal to the
Accrued and Unpaid Investment Income as set forth on the Estimated Closing Date
Statement and (ii) any payments required to be made as a reduction in the
Reinsurance Premium pursuant to Section 1.3(d)(ii) hereof. The gross amount of
the cash payment wired to Seller pursuant to this Section 1.3(a) shall be
reduced by an amount equal to one day's interest on such gross amount at an
interest rate equal to the three month LIBOR rate in effect on the Business Day
preceding the Closing Date plus 25 basis points.
(b) On the Closing Date, Seller shall deliver to the Purchaser
a statement (the "Estimated Closing Date Statement") of Seller's good faith
estimate as of the Closing Date unless otherwise noted below of (i) all Reserve
Liabilities (ii) the Policy Loan Balance, (iii) the Book Value of all Closing
Date Portfolio Securities, (iv) all JANY Reserve Liabilities (as defined in the
JANY Stock Purchase Agreement), (v) the Accrued and Unpaid Investment Income,
(vi) the gross amount on a tax lot by tax lot basis of any realized capital gain
("Capital Gain") or capital loss ("Capital Loss") on the disposition of any June
21 Portfolio Securities between June 21, 1996 and the Closing Date, (vii) the
Adjusted Capital and Surplus of JANY and (viii) the amount of cash flows
applicable to the Combined Reserve Liabilities from the
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Closing Ledger Date through Closing Date (the "Net Cash Flows"). The Estimated
Closing Date Statement shall be prepared in a manner consistent with the
calculation of such items as of June 21, 1996. Such calculations are reflected
in Schedules 1.2(a)(i) (Closing Date Portfolio Securities), 1.2(a)(ii) (Policy
Loans) and 3.17 (Reserve Liabilities) attached hereto and have been prepared in
accordance with SAP.
(c) The Closing Date Ceding Commission shall be adjusted as
follows (using the calculations set forth on the Estimated Closing Date
Statement for this purpose):
(i) To the extent Combined Reserve Liabilities as
set forth on the Estimated Closing Date Statement, as adjusted
below, are less than $5,013,914,419 ("Expected Reserves"), the
Closing Date Ceding Commission shall be reduced by an amount
equal to (i) (A) the amount by which the Expected Reserves
exceed the Combined Reserve Liabilities divided by (B) the
Expected Reserves multiplied by (ii) the difference between
$240,000,000 and the Adjusted Capital and Surplus of JANY. For
purposes of this Section 1.3(c)(i), Combined Reserve
Liabilities shall be adjusted for the Net Cash Flows
applicable to the Combined Reserves not included in such
reserves from the Closing Ledger Date through the Closing
Date.
(ii) The Closing Date Ceding Commission will be
adjusted by interest at a rate of 2% per annum on the net cash
flows applicable to the Combined Reserves not included in such
reserves from the Closing Ledger Date through the Closing
Date.
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(iii) The Closing Date Ceding Commission shall be
(A) reduced by any Capital Gains realized with respect to the
June 21 Portfolio Securities between June 21, 1996 and the
Closing Date and (B) increased by any Capital Losses realized
with respect to the June 21 Portfolio Securities between June
21, 1996 and the Closing Date. For purposes of this Section
1.3(c)(iii), Capital Gains and Capital Losses shall be deemed
to include, without limitation, any gain or loss resulting
from any sale, pre-payment, maturity or similar event
affecting a June 21 Portfolio Security, but shall be deemed to
exclude Capital Gains or Capital Losses with respect to
Excluded Transactions.
(d) As of the Closing Date, the Reinsurance Premium shall be
adjusted as follows (using the calculations set forth on the Estimated Closing
Date Statement):
(i) To the extent Reserve Liabilities exceed the sum
of (A) the Book Value of the Closing Date Portfolio
Securities, (B) any cash deposited in the Trust pursuant to
Section 1.2(c) hereof and (C) the Policy Loan Balance, Seller
shall deliver to Purchaser at Closing by transfer to the Trust
cash equal to such deficiency. The amount of any such cash
payment shall be made by wire transfer of immediately
available funds, and the gross amount thereof shall be reduced
by an amount equal to one day's interest on such gross amount
at an interest rate equal to the three month LIBOR rate in
effect on the Business Day preceding the Closing Date plus 25
basis points.
(ii) To the extent the sum of (A) the Book Value of
the Closing Date Portfolio Securities, (B) any cash deposited
pursuant to Section 1.2(c) hereof and
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(C) the Policy Loan Balance exceeds Reserve Liabilities,
Purchaser shall deliver to Seller cash equal to said excess.
Section 1.4. Closing Deliveries.
(a) At the Closing, Seller shall execute and deliver or cause
to be executed and delivered to Purchaser the following:
(i) the Indemnity Reinsurance Agreement between
Seller and Purchaser substantially in the form of Exhibit A
attached hereto (the "Indemnity Reinsurance Agreement");
(ii) the Assumption Reinsurance Agreement between
Seller and Purchaser substantially in the form of Exhibit B
attached hereto (the "Assumption Reinsurance Agreement");
(iii) the Trust Agreement among Seller, Purchaser
and Bankers Trust Company of California, N.A., in its capacity
as trustee thereunder (the "Trustee"), substantially in the
form of Exhibit C attached hereto (the "Trust Agreement");
(iv) the Transition Services Agreement between
Seller and Purchaser substantially in the form of Exhibit D
attached hereto (the "Transition Services Agreement");
(v) the Administrative Services Agreement between
Seller and Purchaser substantially in the form of Exhibit E
attached hereto (the "Administrative Services Agreement");
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(vi) the Assignment and Assumption Agreement between
Seller and Purchaser substantially in the form of Exhibit F
attached hereto (the "Assignment and Assumption Agreement");
(vii) the License Agreement between Seller and
Purchaser substantially in the form of Exhibit G attached
hereto (the "License Agreement");
(viii) the ▇▇▇▇ of Sale between Seller and Purchaser
substantially in the form of Exhibit H attached hereto (the
"▇▇▇▇ of Sale");
(ix) the opinion of counsel to Seller, substantially
in the form of Exhibit I attached hereto ("Seller's Opinion");
(x) the Reinsurance Premium pursuant to Section 1.2
hereof;
(xi) the Assigned Contracts;
(xii) the Books and Records;
(xiii) a certificate of an executive officer of
Seller, dated the Closing Date, representing and warranting to
the effect that (A) the person signing such certificate is
familiar with the provisions of this Agreement and (B) the
conditions specified in Article 6 of this Agreement have been
satisfied;
(xiv) written consents to assignments, where
necessary, from all applicable parties relating to the Third
Party Administration Agreements; and
(xv) such other documents as may be necessary or
advisable in Purchaser's reasonable judgment to vest in
Purchaser all of Seller's rights, title and interest in and to
the (i) assets transferred as the Reinsurance Premium, (ii)
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the Assigned Contracts and (iii) the Books and Records
(clauses (i), (ii) and (iii), collectively the "Purchased
Assets") and the Assumed Liabilities.
The Indemnity Reinsurance Agreement, the Assumption Reinsurance Agreement, the
Transition Services Agreement, the Administrative Services Agreement, the ▇▇▇▇
of Sale, the Assignment and Assumption Agreement, the Trust Agreement and the
License Agreement are referred to collectively herein as the "Ancillary
Agreements."
(b) At the Closing, Purchaser shall execute and deliver or
cause to be executed and delivered to Seller the following:
(i) the Indemnity Reinsurance Agreement;
(ii) the Assumption Reinsurance Agreement;
(iii) the Trust Agreement;
(iv) the Transition Services Agreement;
(v) the Administrative Services Agreement;
(vi) the Assignment and Assumption Agreement;
(vii) the License Agreement;
(viii) the opinion of counsel to Purchaser,
substantially in the form of Exhibit J hereto ("Purchaser's
Opinion");
(ix) a certificate of an executive officer of
Purchaser, dated the Closing Date, representing and warranting
to the effect that (A) the person signing such certificate is
familiar with the provisions of this Agreement and (B) the
conditions specified in Article 7 of this Agreement have been
satisfied;
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(x) such other documents as may be necessary or
advisable in Seller's reasonable judgment to consummate the
transactions contemplated hereby; and
(xi) the Closing Date Ceding Commission.
Section 1.5. Additional Closing Deliveries. In addition to the
transactions and deliveries contemplated above, at the Closing each of the
agreements between or among JANY and Seller or any Affiliates of Seller will be
terminated (other than the Transition Services Agreement to be entered into
pursuant to the JANY Stock Purchase Agreement).
Section 1.6. Post Closing Adjustments.
(a) No later than 60 days after the Closing Date, Seller shall
prepare and deliver to Purchaser a statement (the "Final Closing Date
Statement") that sets forth the actual financial data as of the Closing Date
required to be estimated in the Estimated Closing Date Statement. The Final
Closing Date Statement shall be prepared in a manner consistent with the
Estimated Closing Date Statement and shall be accompanied by a copy of all
documents used in the preparation thereof. The Final Closing Date Statement and
the calculations and information set forth therein shall be reviewed and
certified by a Fellow of the Society of Actuaries who is also a Member of the
American Academy of Actuaries (an FSA and MAAA) familiar with the business of
Seller and in particular the Annuity Business. The Final Closing Date Statement
shall be binding on Purchaser unless Purchaser delivers to Seller within 60 days
after its receipt of the Final Closing Date Statement from Seller written notice
of disagreement specifying in reasonable detail the nature and extent of the
disagreement.
(b) If Purchaser and Seller are unable to resolve any
disagreement with respect to the Final Closing Date Statement within 30 days
after Seller receives a timely notice
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of disagreement, the items of disagreement alone shall be referred for final
determination to the U.S. national office of Price Waterhouse or, if such firm
is unable or unwilling to make such final determination, to such other
independent accounting firm as the Parties shall mutually designate. The firm
making such determination is referred to herein as the "Independent Party." The
Final Closing Date Statement shall be deemed to be binding on Purchaser and
Seller upon the earlier to occur of (i) Purchaser's failure to deliver to Seller
a notice of disagreement within 30 days after its receipt of the Final Closing
Date Statement prepared by Seller, (ii) resolution of any disagreement by mutual
agreement of the Parties after a timely notice of disagreement has been
delivered to Seller or (iii) notification by the Independent Party of its final
determination of the items of disagreement submitted to it. The fees and
disbursements of the Independent Party shall be borne equally, one-half by
Purchaser and one-half by Seller.
(c) The Closing Date Ceding Commission, including the
adjustments set forth in Section 1.3(c) hereof, shall be recalculated based on
the actual financial information set forth in the Final Closing Date Statement,
which will establish the "Final Ceding Commission." If the Final Ceding
Commission is greater than the Closing Date Ceding Commission, Purchaser will
pay to Seller an amount equal to the difference between the Final Ceding
Commission and the Closing Date Ceding Commission. If the Final Ceding
Commission is less than the Closing Date Ceding Commission, Seller shall pay to
Purchaser an amount equal to the difference between the Final Ceding Commission
and the Closing Date Ceding Commission.
(d) A Reinsurance Premium adjustment shall be made as follows
using the calculations set forth on the Final Closing Date Statement):
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(i) If the Final Closing Net Assets are less than
the amount of the Reserve Liabilities, Seller shall deliver
cash to the Trustee in an amount equal to such difference for
deposit in the Trust.
(ii) If the Final Closing Net Assets are greater
than the amount of the Reserve Liabilities, Purchaser and
Seller shall cause the Trustee to pay cash to Seller in an
amount equal to such excess, as contemplated by the Trust
Agreement.
(e) An adjustment with respect to the Accrued but Unpaid
Investment Income will be made as follows (using the calculations set forth on
the Final Closing Date Statement):
(i) If the Accrued but Unpaid Investment Income is
greater than Accrued but Unpaid Investment Income set forth on
the Estimated Closing Date Statement, Purchaser shall pay cash
to Seller in an amount equal to such excess.
(ii) If the Accrued but Unpaid Investment Income is
less than Accrued but Unpaid Investment Income set forth on
the Estimated Closing Date Statement, Seller shall pay cash to
Purchaser in an amount equal to such difference.
(f) All amounts paid under this Section 1.6 shall be paid in
cash in immediately available funds within 10 days after receipt by Purchaser of
a binding Final Closing Date Statement with interest calculated at a rate equal
to the three month LIBOR rate plus 25 basis points on the amount due from the
Closing Date through but not including the date on which such amount is actually
paid.
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ARTICLE 2
ASSUMPTION OF LIABILITIES AND OBLIGATIONS
Section 2.1. Assumption of Seller Liabilities. On the Closing Date,
Purchaser shall assume (a) pursuant to the Indemnity Reinsurance Agreement, as
between Seller and Purchaser, any and all Insurance Liabilities and Other
Liabilities of Seller arising out of or with respect to each Annuity Contract
pending its Novation (as contemplated by Section 2.4 of the Assumption
Reinsurance Agreement); (b) pursuant to the Assumption Reinsurance Agreement,
any and all Insurance Liabilities and Other Liabilities of Seller arising out of
or with respect to each Annuity Contract from and after its Novation (as
contemplated by Section 2.4 of the Assumption Reinsurance Agreement); and (c)
pursuant to the Assignment and Assumption Agreement, all contractual liabilities
and obligations of Seller relating to the period after the Closing Date under
the Assigned Contracts. The liabilities referred to in the preceding clauses (a)
through (c) are herein referred to as the "Assumed Liabilities." Purchaser is
not assuming any liabilities or obligations of any nature whatsoever, fixed or
contingent, known or unknown, other than the Assumed Liabilities.
Section 2.2. Guaranty Fund Assessments.
(a) Purchaser shall pay or reimburse Seller for 100% of all
guaranty fund assessments (or any other assessment of a state entity formed to
protect policyholders against failure of an insurer to perform its contractual
obligations due to impairment or insolvency, including but not limited to
assessments of the Colorado Life and Health Insurance Protection Association and
the Wisconsin Insurance Security Fund) ("Guaranty Fund Assessments") payable by
Seller and included in Other Liabilities.
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(b) On or before the Closing Date, Seller shall deliver to
Purchaser a report of annuity premiums written by state as reported to the
National Organization of Life & Health Guaranty Associates ("NOLHGA") for 1993,
1994 and 1995. Seller shall deliver to Purchaser copies of reports for 1996 and
each subsequent year when filed with NOLHGA until Purchaser determines that it
no longer needs such reports. With respect to each report of premiums, Seller
shall prepare a schedule allocating premiums between the Annuity Contracts and
other annuities issued by Seller on a state-by-state basis for the time period
covered by the report of premiums and Seller shall deliver same to Purchaser
(prior to the Closing Date, with respect to the reports for 1993, 1994 and
1995). Seller shall deliver to Purchaser a copy of any notice (including but not
limited to a notice of assessment) that Seller receives relating to any
insolvency which occurs on or after the Closing Date.
(c) With respect to each notice of assessment by the fund of a
state delivered to Purchaser by Seller, Seller shall prepare a schedule showing
the allocation of such assessment between the Seller and the Purchaser. Subject
to Section 2.2(d) below, Purchaser shall pay its share of such assessment within
30 days after its receipt of the notice of assessment and the schedules
contemplated by this paragraph.
(d) Each notice and schedule delivered to Purchaser pursuant
to Section 2.2(c) hereof shall be binding on Purchaser unless Purchaser notifies
Seller of any disagreement, specifying in reasonable detail the nature and
extent of the disagreement. If Purchaser and Seller are unable to resolve any
disagreement with respect to any assessment within 30 days after Seller receives
a timely notice of disagreement, the items of disagreement alone shall be
referred for final determination to the U.S. national office of Price Waterhouse
or, if such firm is unable or
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unwilling to make such final determination, to such other independent accounting
firm as the Parties shall mutually designate. The firm making such determination
is referred to herein as the "Independent Party." Each assessment shall be
deemed to be binding on Purchaser and Seller upon the earlier to occur of (i)
Purchaser's failure to deliver to Seller a notice of disagreement within 30 days
after its receipt of the assessment and related schedules prepared by Seller,
(ii) resolution of any disagreement by mutual agreement of the Parties after a
timely notice of disagreement has been delivered to Seller or (iii) notification
by the Independent Party of its final determination of the items of disagreement
submitted to it. The fees and disbursements of the Independent Party shall be
borne equally, one-half by Purchaser and one-half by Seller.
(e) Except as provided in Section 3.4 of the Indemnity
Reinsurance Agreement, to the extent Seller realizes a credit against any
premium tax payable by it as a result of any Guaranty Fund Assessment paid by
Purchaser pursuant to this Section 2.2, it shall pay to Purchaser an amount
equal to such credit within 30 days after the date for filing of the annual
premium tax return for such state. For purposes of this Section 2.2, Seller will
be deemed to realize a credit for Guaranty Fund Assessments paid by Purchaser
pursuant to this Section 2.2 if and when the premium tax payable by Seller
calculated without giving effect to available credits for Guaranty Fund
Assessments paid by Purchaser pursuant to this Section 2.2 (but applying all
other credits and debits available to Seller in such manner as Seller elects in
its sole discretion, except that guaranty fund credits atttributable to Guaranty
Fund Assessments paid by Purchaser will be deemed utilized first against premium
taxes paid by Purchaser under Section 3.4 of the Indemnity Reinsurance
Agreement) is greater than the premium tax payable
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by Seller giving effect to such credit, and the amount of such credit realized
shall be deemed to equal such difference; provided, however, that in the event
of a merger, only Seller credits shall be taken into account. Purchaser's right
to the benefit of any credit shall be determined first under Section 3.5 of the
Indemnity Reinsurance Agreement and then under this Section 2.2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 3.1. Organization, Standing and Authority of Seller. Seller is
a corporation duly organized as a capital stock life and health insurance
company, validly existing and in good standing under the Laws of the State of
Minnesota. Seller has all corporate power and authority necessary or required by
Law to engage in the conduct of the Annuity Business as currently conducted by
it.
Section 3.2. Authorization. Seller has all corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and under each of the Ancillary Agreements to be executed by it.
Seller is duly licensed, qualified or admitted to do business and is in good
standing in all jurisdictions in which it is required to be so qualified,
licensed or admitted to do business by the Laws thereof, including, without
limitation in each jurisdiction in which Annuity Contracts have been issued,
except where the failure to so qualify, be admitted or licensed, individually or
in the aggregate, is not reasonably likely to have a Material Adverse Effect.
The execution and delivery by Seller of this Agreement and the Ancillary
Agreements to be executed by it, and the performance by Seller of its
obligations
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under such agreements, have been duly authorized by all necessary corporate and
shareholder actions on the part of Seller. This Agreement and each of the
Ancillary Agreements executed by Seller, when executed by all of the parties
thereto, will constitute a valid and binding obligation of Seller enforceable
against Seller in accordance with its terms, except insofar as enforceability
may be limited by bankruptcy, insolvency, moratorium or other Laws which may
affect creditors' rights and remedies generally and by principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
Section 3.3. Actions and Proceedings. Except as disclosed on Schedule
3.3 attached hereto, (a) there are no outstanding Orders by or with any court,
arbitrator or Governmental Entity before which Seller or any of its material
Affiliates is or was a party that, (i) relate to the Annuity Business or the
Purchased Assets or (ii) individually or in the aggregate, have a Material
Adverse Effect and (b) there are no Actions pending or, to the knowledge of
Seller, threatened against Seller or any of its material Affiliates (i) related
to the Annuity Business or to which any of the Purchased Assets is subject that
seeks monetary damages in excess of $100,000 individually or $500,000 in the
aggregate or seeks an unspecified amount of damages, (ii) that seeks injunctive
or similar relief or (iii) which would, individually or in the aggregate, have a
Material Adverse Effect.
Section 3.4. No Conflict or Violation. Except as disclosed on Schedule
3.4 attached hereto, the execution, delivery and performance by Seller of this
Agreement and the Ancillary Agreements to which it is a party in accordance with
the respective terms and conditions hereof and thereof do not and will not (a)
violate any provision of the charter or by-laws of Seller, as amended to date,
(b) violate, constitute a default under or result in the breach, cancellation or
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termination of, accelerate the performance required under, or result in the
creation of any lien, claim, restriction, charge or encumbrance or other defect
of title ("Liens") upon any of the assets of Seller or any of the Purchased
Assets pursuant to, any mortgage, deed of trust, guaranty, note, indenture,
bond, lease, agreement or other instrument to which Seller is a party or by or
to which it or any of such assets or the Purchased Assets may be bound, (c)
violate any Order of any court, arbitrator or Governmental Entity against, or
binding upon, or any agreement with, or condition imposed by, any court,
arbitrator or Governmental Entity binding upon Seller, such assets or any of the
Purchased Assets, (d) violate any Law or (e) result in the breach or violation
of any of the terms or conditions of, constitute a default under, or otherwise
cause an impairment or revocation of, any license, permit, order, approval,
registration, authorization, qualification or filing with or under any Law or
Governmental Entity (collectively, "Permits") related to the Annuity Business,
except for Liens, violations, breaches or defaults with respect to assets of
Seller other than the Purchased Assets that, individually or in the aggregate,
do not have a Material Adverse Effect.
Section 3.5. Consents and Approvals. Except as required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and rules and
regulations thereunder (the "HSR Act") or as set forth on Schedule 3.5 attached
hereto, no consent, approval, exemption or authorization is required to be
obtained from, no notice is required to be given to and no filing is required to
be made with any third party (including, without limitation, Governmental
Entities of competent jurisdiction) by Seller in order (a) for this Agreement,
each of the Ancillary Agreements and each of the Assigned Contracts to which
Seller will be a party to constitute a valid and binding obligation of Seller,
(b) to authorize or permit the consummation
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of the transactions contemplated hereby by Seller or (c) to prevent the
termination of any material right, privilege, franchise, Permit or agreement
related to the Annuity Business or to prevent any material loss related to the
Annuity Business.
Section 3.6. Brokerage and Financial Advisers. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, Seller in connection with this Agreement or the
transactions contemplated hereby, except CS First Boston, whose fees for
services rendered in connection with such transactions will be paid by Seller.
Section 3.7. Compliance With Laws. Except as disclosed in Schedule 3.7
attached hereto, Seller is not in material violation of any Law or any Order of
any court, arbitrator or Governmental Entity pertaining to the Annuity Business.
Section 3.8. Annuity Contracts. The forms of all policies and
endorsements utilized for all Annuity Contracts in effect on the date of this
Agreement are listed and described on Schedule 3.8(a) attached hereto. All
Annuity Contracts in effect on October 21, 1996 are listed and described on
Schedule 3.8(b) attached hereto. All Annuity Contracts in effect on the Closing
Ledger Date will be set forth in an updated Schedule 3.8(b) delivered to
Purchaser at the Closing. Schedule 3.8(b) includes with respect to each Annuity
Contract in effect on October 21, 1996 and will include with respect to each
Annuity Contract in effect on the Closing Ledger Date, the policy number,
policyholder name, form, plan code and account balance. Schedule 3.8(b) attached
hereto also sets forth statutory reserves by plan code with respect to the
Annuity Contracts as of September 21, 1996 and the updated Schedule 3.8(b) will
set forth such information with respect to the Annuity Contracts as of the date
of such Schedule set forth above. All Annuity Contracts are in all respects, to
the extent required under applicable Laws,
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on forms approved by applicable insurance regulatory authorities or which have
been filed and not objected to by such authorities within the period provided
for objection, and such forms comply in all material respects and have been
administered in all material respects in accordance with applicable Laws.
Without limiting the foregoing:
(a) Seller has offered and sold each Annuity Contract in
compliance with all applicable Laws (it being acknowledged that no
representation is made with respect to independent agents of Seller except as
provided in Section 3.8(h) hereof) and all of Seller's registrations, filings or
submissions made by it with respect to the Annuity Contracts with any
Governmental Entity were in material compliance with applicable Laws when filed.
(b) The transactions contemplated by this Agreement will not
affect the validity and binding character of any Annuity Contract entered into
or issued by Seller or render any admitted assets of Seller non-admitted under
applicable Laws up to and including the Closing Date.
(c) Except as set forth in Schedule 3.8(c) attached hereto,
and except in accordance with customary insurance industry practice, (i) Seller
is not liable to pay commissions upon the renewal of any Annuity Contract nor
(ii) is it a party to any agreement providing for the third-party collection of
annuity premiums payable to Seller by any other Person which commissions or
premiums exceed $100,000 in the aggregate.
(d) All Annuity Contracts (including all Policy Loans related
thereto and the policy loans identified on Schedule 1.2(a)(iii) attached hereto)
are in full force and effect and are legal, valid and binding obligations of
Seller, and to the knowledge of Seller the other parties thereto, and are
enforceable against Seller, and to the knowledge of Seller the other parties
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thereto, in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by or subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of
general application relating to or affecting creditors' rights and to general
equity principles (other than equitable rescission rights).
(e) All Annuity Contract benefits payable by Seller, and to
the knowledge of Seller, by any other Person that is a party to or bound by any
reinsurance, coinsurance or other similar contract with Seller, have been paid
in accordance with the terms of the Annuity Contracts under which they arose,
except for such benefits for which there is, in the reasonable opinion of
Seller, a reasonable basis to contest and all such contested benefits have been
disclosed in Schedule 3.8(e) attached hereto.
(f) No outstanding Annuity Contract issued, reinsured or
underwritten by Seller entitles the holder thereof or any other Person to
receive dividends, distributions or other benefits based on the revenues or
earnings of Seller or any other Person.
(g) The underwriting standards utilized and ratings applied by
Seller and, to the knowledge of Seller, by any other Person that is a party to
or bound by any reinsurance, coinsurance or other similar contract with Seller
conform in all respects to industry accepted practices and to the standards and
ratings required pursuant to the terms of the respective reinsurance,
coinsurance or other similar contracts.
(h) To the knowledge of Seller, each producer who wrote, sold
or produced any portion of the Annuity Business for Seller was duly licensed as
an insurance agent (for the type of business written, sold or produced by such
producer) in the particular jurisdiction in which such producer wrote, sold or
produced such business. Except as otherwise provided in
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Schedule 3.8(h) attached hereto, to the knowledge of Seller, no insurance agent
who wrote, sold or produced any portion of the Annuity Business for Seller
violated in any material respect any terms or provisions of any Law, except such
violations as have been (i) cured, (ii) resolved through agreements with
applicable Governmental Entities or (iii) are barred by an applicable statute of
limitations.
(i) The treatment under the Internal Revenue Code of 1986, as
amended, and any successor thereto (the "Code") of all Annuity Contracts is no
less favorable to the Policyholder thereof than the treatment under the Code for
which such Annuity Contracts were intended to qualify at the time of their
issuance, except for any failure to qualify for such treatment that results from
(i) changes to the Code, regulations, pronouncements, announcements or guidance
issued in connection with the treatment of the contracts under the Code which
were enacted (or have an effective date) after the Closing Date, (ii)
amendments, modifications, supplements, riders, endorsements or revisions to the
Annuity Contracts after the Closing Date or (iii) changes in the manner in which
the Annuity Contracts are administered after the Closing Date.
Section 3.9. Permits, Licenses and Franchises. Schedule 3.9 attached
hereto lists all jurisdictions in which Seller is licensed to issue the Annuity
Contracts and each Annuity Contract form utilized in the respective
jurisdictions. Seller has been duly authorized by all relevant Governmental
Entities to issue the Annuity Contracts that it is currently writing, and was
duly authorized to issue the Annuity Contracts that it is not currently writing
at the time such Annuity Contracts were issued, in each of the respective
jurisdictions in which it conducts the Annuity Business. Except as set forth on
Schedule 3.9 attached hereto, Seller has all Permits necessary
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to conduct the Annuity Business as currently conducted by Seller. All of the
Permits are in full force and effect and Seller has not received notice from any
Governmental Entity of its intention to revoke or not renew any Permit, except
for such failures to have Permits in full force and effect, revocations,
non-renewals and other events which do not and will not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.10. Regulatory Filings. Seller has made available for
inspection by Purchaser all material registrations, filings and submissions made
by Seller with any Governmental Entity and final financial and market conduct
reports of examinations with respect to Seller issued by any such Governmental
Entity along with copies of Seller's responses thereto to the extent that such
registrations, filings, submissions and reports relate to the Annuity Business
and were made or issued on or subsequent to January 1, 1993. Except as listed on
Schedule 3.10 attached hereto, Seller has filed all material reports,
statements, documents, registrations, filings or submissions (including without
limitation any sales, marketing or advertising material) required to be filed by
it with any Governmental Entity to the extent the same relate to the Annuity
Business. Except as listed on Schedule 3.10 attached hereto, (a) no material
deficiencies have been asserted by any such Governmental Entity with respect to
such registrations, filings or submissions that have not been satisfied; (b)
such registrations, filings or submissions were in material compliance with
applicable Law when filed; (c) since December 31, 1994, Seller has not submitted
any written response with respect to material comments related to the Annuity
Business from any Governmental Entity concerning such registrations, filings,
submissions or reports of examination; (d) since December 31, 1992, no fine or
penalty has been imposed on Seller by any Governmental Entity specifically with
respect to the Annuity Business; and (e) no
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deposits have been made by Seller with, or at the direction of, any Governmental
Entity with respect to the Annuity Business which were not shown in the most
recent Annual Statement of Seller.
Section 3.11. Reinsurance. Schedule 3.11 sets forth all reinsurance or
co-insurance agreements (together with all other agreements related thereto)
related to the Annuity Contracts to which Seller is a party and all such
contracts, arrangements, treaties, understandings and agreements under which
Seller has any obligation to cede or assume insurance. All such agreements are
valid and binding against Seller and, to the knowledge of Seller, the other
parties thereto, and are in full force and effect in accordance with their terms
and conform in all material respects to all applicable Laws and neither Seller,
nor to the knowledge of Seller, any other party thereto is in material default
under any such agreement. Except as otherwise provided on Schedule 3.11, no
party to any such agreement has audited Seller with respect thereto.
Section 3.12. Absence of Certain Changes or Events. Except as disclosed
on Schedule 3.12 attached hereto or except as expressly contemplated or required
by this Agreement, since December 31, 1995, (a) with respect to Seller's Annuity
Business, Seller has not, except in the ordinary course of the Annuity Business
consistent with past practice, (I) engaged in any material transaction, (II)
entered into any material agreement or (III) waived or released any material
right or obligation and (b) except as disclosed on Schedule 3.12 attached
hereto, there has not been, occurred or arisen in connection with Seller's
Annuity Business:
(i) any work stoppage, strike, labor difficulty or
union organizational campaign (in process or threatened) at or
affecting Seller's Annuity Business;
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(ii) any payment, discharge or satisfaction by
Seller of any material Lien or liability other than material
Liens or liabilities that were paid, discharged or satisfied
in the ordinary course of business and consistent with past
practice;
(iii) any sale, transfer or conveyance of any
investments or other assets of Seller related to the Annuity
Business with an individual Book Value in excess of $100,000
or an aggregate Book Value in excess of $10,000,000, except in
the ordinary course of business and consistent with past
practice;
(iv) any amendment, termination, waiver, disposal or
lapse of, or other failure to preserve, any material license,
Permit or other form of authorization of Seller;
(v) any amendment of, or any failure by Seller to
perform all of its obligations under, or any default under, or
any waiver of any right under, or any termination (other than
on the stated expiration date) of, any contract that involves
or reasonably would involve the annual expenditure or receipt
by Seller of more than $100,000 except for actions taken with
respect to Annuity Contracts in force (including, without
limitation, reinsurance thereon) in the ordinary course of
business and consistent with past practice;
(vi) any termination, amendment or entering into by
Seller as ceding or assuming insurer of any reinsurance,
coinsurance or other similar contract or any trust agreement
or security agreement related thereto except as disclosed in
Schedule 3.11 attached hereto or contemplated hereby;
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(vii) any Lien created on or in any of the Purchased
Assets or assumed by Seller with respect to any of such
assets, which Lien relates to liabilities individually or in
the aggregate exceeding $100,000 (but excluding Liens arising
through securities lending in the ordinary course of Seller's
business);
(viii) any material change in any underwriting,
actuarial, investment, financial reporting, marketing or
accounting practice or policy followed by Seller related to
the Annuity Business, or in any assumption underlying such a
practice or policy, or in any method of calculating any bad
debt, contingency, or other reserve for financial reporting or
any other accounting purposes related to the Annuity Business
other than as required by GAAP, SAP or applicable Law.
(ix) any contract or agreement, written or oral, to
take any of the actions set forth in clauses (i) through
(viii) of this Section 3.12.
Section 3.13. Assigned Contracts. Each of the Assigned Contracts is
valid and binding against Seller and, to the knowledge of Seller, each other
party thereto, and in full force and effect according to its terms and is freely
assignable to Purchaser pursuant to this Agreement and the Assignment and
Assumption Agreement without notice to or consent of any person or entity, other
than as specified on Schedule 3.5 attached hereto. Other than as set forth on
Schedule 3.13 attached hereto, except for the Assigned Contracts, there are no
contracts of Seller necessary to the Annuity Business as currently conducted by
Seller. Neither Seller nor, to Seller's knowledge, any other party to any
Assigned Contract is in violation, breach or default in any material respect
with respect to any such Assigned Contract.
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Section 3.14. Intellectual Property. Schedule 3.14 attached hereto sets
forth a list of all computer software programs and other intellectual property
used by Seller that Seller reasonably believes to be necessary to conduct the
Annuity Business as currently being conducted. Schedule 3.14 attached hereto
also sets forth whether each such computer software program is (i) owned by
Seller or (ii) licensed by Seller. Schedule 3.14 attached hereto sets forth each
licensing agreement pursuant to which Seller has the right to use such licensed
software. To the knowledge of Seller, Seller is not in conflict with or in
violation or infringement of any rights, asserted or otherwise, of any other
Person with respect to any such software and other intellectual property, nor
has Seller received any notice of any such conflict, violation or infringement.
Seller has the non-exclusive right to use all such licensed software and other
intellectual property and will have the right to use such software after the
Closing Date to the extent necessary to provide administration services under
the Transition Services Agreement and the Transition Services Agreement
contemplated by the JANY Stock Purchase Agreement so long as the services
provided thereunder do not substantively change from the administration
currently conducted by Seller. Schedule 3.14 attached hereto sets forth the
amounts paid by Seller since December 31, 1995 for use of the licensed software.
Section 3.15. Purchased Assets. Seller has good and marketable title to
all assets included within the Purchased Assets (other than cash and the
Assigned Contracts), free of any Lien, except to the extent the Annuity
Contracts are subject to a reinsurance, coinsurance or similar agreement as set
forth on Schedule 3.11 attached hereto. As of June 21, 1996, the June 21
Portfolio Securities in the aggregate had a Book Value equal to the amount set
forth on
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Schedule 1.2(a)(i) attached hereto and an aggregate gross book annual effective
yield (before reduction for third party mortgage servicing costs) of at least
8.18%.
Section 3.16. Statutory Financial Statements. Seller has previously
delivered to Purchaser true, complete and correct copies of the audited
statements of admitted assets, liabilities and capital and surplus (statutory
basis) of Seller as of December 31, 1993, 1994 and 1995, and the related
summaries of operations, statements of capital and surplus and cash flow
(statutory basis) for the years then ended, together with the notes related
thereto. Seller has previously delivered to Purchaser true, complete and correct
copies of the Annual Statements of Seller as filed with the Department of
Commerce, State of Minnesota for the years ended December 31, 1993, 1994 and
1995, together with all attachments, exhibits and schedules thereto and all
affirmations and certifications filed therewith applicable to the Annuity
Business and the actuarial opinions applicable to the Annuity Business for such
years. Seller has previously made available to Purchaser for review (without the
right to remove or make copies) all auditors' work papers related to the Annuity
Business and related to the foregoing audited financial information. Seller has
previously delivered to Purchaser true, complete and correct copies of the
Quarterly Statements of Seller as filed with the Department of Commerce, State
of Minnesota for the quarters ended March 31, 1996, June 30, 1996 and September
30, 1996, together with all attachments, exhibits and schedules thereto and all
affirmations and certifications filed therewith applicable to the Annuity
Business. Each such Annual Statement and Quarterly Statement complied in all
material respects with all applicable Laws when so filed and was timely filed
with all required Governmental Entities. No material deficiencies have been
asserted or are otherwise known by Seller with respect thereto. Each such
financial
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statement (and the exhibits and schedules relating thereto), including without
limitation each statement of assets, liabilities, surplus and other funds
(statutory basis) of Seller and each of the summaries of operations, statements
of capital and surplus and cash flow (statutory basis) contained in the
respective financial statement was prepared in accordance with SAP applied on a
consistent basis (except for changes, if any, disclosed therein) and each such
Annual Statement and Quarterly Statement fairly presents (in accordance with
SAP) the financial condition of Seller as of the respective dates thereof, and
its results of operations or cash flows, as the case may be, for and during the
respective periods covered thereby (provided the Quarterly Statements are
subject to normal year end adjustments and lack footnotes and other presentation
items). There were no material liabilities affecting Seller as of December 31,
1995 required in accordance with SAP to be reflected or disclosed in the Annual
Statement for the period then ended, or as of March 31, 1996, June 30, 1996 or
September 30, 1996 required in accordance with SAP to be reflected or disclosed
in the Quarterly Statement for the period then ended, which are not so reflected
or disclosed therein. Seller has not prepared any GAAP financial statements with
respect to the Annuity Business.
Section 3.17. Reserves. The Reserve Liabilities as of June 30, 1996 and
September 21, 1996 have been calculated in the manner reflected on Schedule
3.17(a) attached hereto. Except as set forth in Schedule 3.17(b) attached
hereto, all reserves with respect to Annuity Contracts as established or
reflected, and all other provisions made for policy and contract claims with
respect to Annuity Contracts (calculated gross of reinsurance applicable to
London Life Reinsurance Company pursuant to the agreement dated October 1, 1996
and Lincoln National Reassurance Company pursuant to the agreement dated
December 31, 1991 and, at a
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minimum, to be calculated to include 66-2/3% of the additional reserves (or such
greater amount of reserves as have actually been posted), solely due to
compliance with Actuarial Guideline 33, for policies issued on or prior to
December 21, 1994, and 100% of such additional reserves (or such greater amount
of reserves as have actually been posted) for policies issued subsequent to
December 21, 1994) (collectively, "Reserve Liabilities"), in the respective
Annual and Quarterly Statements were determined in accordance with SAP and
generally recognized actuarial methods and standards, consistently applied, were
fairly stated in accordance with sound actuarial principles, using prescribed
morbidity and mortality tables and interest rates that are in accordance with
the nature of the benefits specified in the related Annuity Contracts of Seller,
and such Reserve Liabilities and other provisions met the applicable
requirements of the insurance Laws and regulations of the State of Minnesota.
Without limitation of the foregoing sentence, to Seller's knowledge, adequate
provision for all Reserve Liabilities has been made to cover the total amount of
all reasonably anticipated matured and unmatured benefits, claims and other
liabilities under all Annuity Contracts.
Section 3.18. Threats of Cancellation. Except as set forth in Schedule
3.18 attached hereto, since December 31, 1995 through the date of this
Agreement, no Policyholder, group of Policyholder Affiliates, or Persons
writing, selling or producing, either directly or through reinsurance assumed,
insurance business that individually or in the aggregate for each such
Policyholder, group or Person, respectively, accounted for (i) 5% or more of the
annual premium or annuity income (as determined in accordance with SAP) or (ii)
1% of account values of Seller's and JANY's Annuity Business, taken as a whole,
in each case at or for the 12 month
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period then ended, has terminated or, to the knowledge of Seller, threatened to
terminate its relationship with Seller.
Section 3.19. Credited Rates. Seller has complied and is in compliance
with all applicable contract provisions and Laws associated with credited
interest rates related to the Annuity Contracts.
Section 3.20. Related Agreements. Each of the Related Agreements is
similar in all material respects to one of the forms set forth on Schedule 3.20
attached hereto. Seller knows of no Related Agreements other than those listed
in Schedule 3.20 attached hereto concerning commissions payable on the Annuity
Contracts. Seller is not in breach of any of the Related Agreements, and to the
knowledge of Seller, none of the other parties to the Related Agreements is in
breach thereof.
Section 3.21. Third Party Administration Agreements. Schedule 3.21
attached hereto lists all third party administration agreements relating to the
Annuity Contracts, regardless of whether Seller is receiving or providing
services (the "Third Party Administration Agreements"). The Third Party
Administration Agreements are valid and binding obligations of Seller,
enforceable against Seller in accordance with their terms, and to Seller's
knowledge, are valid and binding obligations of the other parties thereto,
enforceable against such other parties in accordance with their terms. Seller is
not in breach of any of such Third Party Administration Agreements and, to the
knowledge of Seller, none of the other parties to such Third Party
Administration Agreements is in breach thereof.
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Section 3.22. Mortgage Loans.
(a) Except as set forth on Schedule 3.22(a) attached hereto,
Seller is the holder of a first lien position on the Mortgage Loans free and
clear of any other Liens, except for with respect to the Mortgaged Property or
the mortgage related thereto (a) the lien of current real property taxes and
assessments, ground rents, personal property taxes, water rates, water frontage
charges and/or meter charges, sewer taxes or rents and other similar charges or
assessments, in each case not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record of a
type acceptable to lending institutions generally or specifically referred to in
the title insurance policy or title opinion issued in connection with the
original loan made with respect to the Mortgaged Property, (c) mechanics' or
similar liens or claims for work, labor and materials, (d) zoning and other land
use restrictions and ordinances, including, without limitation, landmark,
historic and wetland designations, (e) rights of tenants under leases or other
rights of tenants or rights of other occupants of the premises with or without
the legal right to do so, (f) any state of facts an accurate survey would show
with respect to the Mortgaged Property, (g) the failure of the premises to
comply with applicable occupancy Law or municipal violations of record, (h) in
the case where the Mortgaged Property is a condominium unit, the lien of a
condominium association on such Mortgaged Property for unpaid maintenance or
common expense assessments not yet due and payable, (i) littoral or riparian
rights, if any, (j) any right, title or interest in any minerals, mineral rights
or related matters including but not limited to oil, gas, coal and other
hydrocarbons whether or not shown by the public records and (l) the lien of any
secondary financing, in each case, which do not materially impair the Mortgage
Loan ("Permitted
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Mortgage Liens"). As of the date specified therein, the (i) loan number, (ii)
loan class, (iii) lien priority, (iv) borrower's name, (v) property address,
(vi) outstanding principal amount, (vii) book value, (viii) delinquency status,
(ix) status code, (x) current interest rate (or the method of calculating same),
(xi) service fee rate, (xii) net interest rate, (xiii) maturity date and (xiv)
percentage owned by Seller for each Mortgage Loan are materially as set forth in
the Mortgage Loan Schedule. Except as set forth on Schedule 3.22(a) attached
hereto, the proceeds of each Mortgage Loan have been fully disbursed and there
are no future or additional advances to be made with respect to any Mortgage
Loans. Except as set forth on Schedule 3.22(a) attached hereto, no Mortgage Loan
has been delinquent for a period of more than 30 days within the last 12 months
in the payment of any principal or interest thereon. Each Mortgage Loan is a
permitted investment for Minnesota life insurers under applicable Law.
(b) With respect to each Mortgage Loan and any and all Loan
Documents relating thereto, to Seller's knowledge (i) each of such Mortgage
Loans and Loan Documents are the legal, valid, and binding obligation of the
mortgagor, obligor or the guarantor, as applicable, and each is enforceable in
accordance with its terms, except as enforcement thereof may be limited by
applicable bankruptcy or insolvency Laws, provided that in this case, Seller may
rely upon borrower's closing counsel's opinion letter if originated by Seller,
or upon representations and warranties given to Seller by another financial
institution or entity if purchased by Seller, or in the absence of either,
without due inquiry or investigation by Seller so long as Purchaser is assigned
the benefits of such opinions, representations or warranties, (ii) none of such
Mortgage Loans or Loan Documents is the subject of any agreement, contract or
other arrangement (other than this Agreement) pursuant to which any interest in
any Mortgage
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Loan or any payment due under any Mortgage Loan or with respect to any Mortgage
Property has been or is intended to be sold, used as collateral, transferred to
or otherwise disposed of to any Person or Persons by the original lender,
subject to the participatory interests of other lenders or investors as are set
forth on Schedule 3.22(b) attached hereto.
(c) With respect to each Mortgage Loan and any and all Loan
Documents relating thereto, the mortgagor does not have a valid defense to the
payment in full of such Mortgage Loan that arises from applicable Laws and such
Mortgage Loan is not subject to any right of rescission, set-off, abatement,
diminution or counterclaim, except in any case as such right or defense may be
provided by bankruptcy, insolvency, reorganization or other similar Laws
affecting the enforcement of creditors' rights generally and by general equity
principles (regardless of whether such enforcement is considered in a proceeding
in equity or at law).
(d) None of the terms of any Loan Documents relating to any
Mortgage Loan have been waived, amended or modified in any respect, except as
set forth on the Mortgage Loan Schedule and except for such waivers, amendments
and modifications as do not adversely affect (i) any mortgagor's, obligor's or
guarantor's obligation to pay principal, interest or other sums required
(including the timing of such payments) to be paid under such Loan Documents,
(ii) Seller's Liens against the Mortgage Property securing the Mortgage Loan or
(iii) the enforceability in a timely manner of such Liens. Except as set forth
in the Mortgage Loan Schedule, no Mortgage Loan has been satisfied, subordinated
or rescinded, in whole or in part, except (i) upon full payment of the
underlying loan or, in the case of a partial release, in connection with the
receipt of an independent third party MAI self-contained appraisal evidencing
that there is sufficient collateral (which for this purposes shall mean no more
than
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80% loan to value) remaining with respect to such Mortgage Loan or (ii) as a
result of a final judgment or its equivalent of a condemnation or eminent domain
proceeding which does not materially impair the Mortgaged Property or Mortgage
Loan. Except as set forth on Schedule 3.22(d) attached hereto, no mortgagor,
obligor nor any guarantor listed on the Mortgage Loan Schedule in respect of any
Mortgage Loan has been released, in whole or in part except in accordance with
the terms of the Note and Mortgage, except in the case of a partial release
either (i) as a result of a written loan modification or assumption agreement or
(ii) if, prior to the release of any mortgagor, obligor or guarantor, a
determination was made by Seller that (a) such mortgagor, obligor or guarantor
was insolvent or deemed to have a lack of ability to make any material
contribution with respect to the outstanding Mortgage Loan debt and (b) that the
remaining mortgagor, obligor or guarantor was able to repay the outstanding
Mortgage Loan debt, in either case such that the release of any mortgagor,
obligor or guarantor would not have a material adverse impact on the repayment
of the Mortgage Loan.
(e) None of the Mortgage Loans are cross-collateralized with
any other mortgage loan except for another Mortgage Loan other than a
cross-collateralization which does not have a material adverse impact on the
repayment of the Mortgage Loan.
(f) The Mortgage File with respect to each Mortgage Loan
contains all of the Loan Documents relating to each such Mortgage Loan,
including, but not limited to, all documents described on Exhibit K and all such
documents are true, complete and correct copies of the documents they purport to
be. Except as set forth on Schedule 3.22(f) attached hereto, the Mortgage Loan
Files contain the original promissory notes and/or other evidence of
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indebtedness (including all amendments thereto) and the originals of all credit
enhancements, if any, as applicable.
(g) With regard to the Mortgaged Property relating to any
Mortgage Loan, to the knowledge of Seller no material amount of Hazardous
Substances has been disposed of or identified on, under or at such Mortgaged
Property the presence of which is either in violation of Law or would, under
applicable Laws require (or permit any Governmental Entity to require) removal
or remediation of such Hazardous Substance, except to the extent that removal or
remediation has occurred or will occur prior to the Closing Date and except as
would not materially affect the Mortgaged Property or the repayment of the
Mortgaged Loan.
(h) To the knowledge of Seller, there is no pending or
threatened condemnation proceeding affecting any Mortgaged Property, or any part
thereof, which could have an adverse effect upon the current use of such
Mortgaged Property.
(i) To the knowledge of Seller, there is no pending or
threatened Action relating to such Mortgage Loan affecting the Mortgaged
Property relating to such Mortgage Loan which would have a material and adverse
effect upon such Mortgage Loan.
(j) Seller has received no written notice (i) of any material
violation of any Law which is a direct result of the maintenance, operation,
occupancy, or use of any of the Mortgaged Property related to such Mortgage
Loan, in its present manner such that the violation would materially adversely
affect the operation, occupancy or other use of such Mortgaged Property and (ii)
that any material Permits and approvals required by Governmental Entities having
jurisdiction over the operation of such Mortgaged Property in its present manner
have not been performed, issued or paid for or are not in full force and effect.
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(k) With respect to each Mortgage Loan, (i) each Mortgage is
covered by a title insurance policy or where customary an opinion of title from
a law firm in such jurisdiction insuring or opining that the Mortgage creates
the first priority Lien it purports to create and that the Mortgage is not
subject to any defect or encumbrance except Permitted Mortgage Liens, (ii) no
claims have been made by Seller or, to Seller's knowledge, any other Person
under any title policy relating to any Mortgage Loan, (iii) there has been no
act or omission by Seller, or to Seller's knowledge, any party holding an
interest in any title policy (including without limitation any failure to pay
the premiums therefor) that creates sufficient grounds for the defense by the
title insurer of any claims by the insured or that otherwise limits the title
insurer's liability under any title policy relating to any Mortgage Loan and
(iv) there has been no act or omission by Seller, or to Seller's knowledge, any
party holding an interest in any title policy that has caused a subordination of
the priority of any Lien as insured under any title policy relating to any
Mortgage Loan. Seller is the insured under any title policy relating to any
Mortgage Loan, either by name, endorsement or by virtue of being the successor
to the original named insured lender. Seller is either the sole insured or a
participant insured in those Mortgage Loans in which the Seller does not hold
100% of the first Lien.
(l) There are no delinquent real estate taxes in respect of
any Mortgage Property except as set forth on the Mortgage Loan Schedule or any
deficiency in any obligor's obligations to pay amounts into escrow (other than
in the case of escrows where property taxes have been increased in the past 12
months).
(m) If upon origination the Mortgaged Property relating to
such Mortgage Loan was in an area identified in the Federal Register by the
Federal Emergency Management
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Agency as having special flood hazards (and the flood insurance described below
is available), a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administrator, if available, is in effect
with a generally acceptable insurance carrier, in an amount representing
coverage not less than the lesser of (i) the unpaid principal balance of such
Mortgage Loan, (ii) the full insurable value of such Mortgaged Property or (iii)
the maximum amount of insurance available under the Flood Disaster Protection
Act of 1973.
(n) A hazard insurance policy with a standard mortgagee clause
is in effect with respect to each Mortgage Loan (other than a Mortgage Loan
secured solely by unimproved land), in an amount representing coverage not less
than the lesser of (i) the unpaid principal balance of such Mortgage Loan or
(ii) the full insurable value of the Mortgaged Property relating to such
Mortgage Loan.
(o) With respect to any Mortgage Loan that is secured in whole
or in part by the interest of a borrower as a lessee under a ground lease of a
Mortgaged Property, such ground lease has an original term (including any
extension options set forth therein) which extends not less than five years
beyond the maturity date of the related Mortgage Loan.
(p) All servicing contracts related to the Mortgage Loans
originated by Seller are terminable at the election of Seller at termination
fees that are no greater than customary termination fees paid in accordance with
industry practice.
Section 3.23. No Waiver of Defenses. Seller has not waived any
defenses, claims or Actions which would have been available to Seller under the
Annuity Contracts or the Related Agreements.
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Section 3.24. Agent Balances. Schedule 3.24 attached hereto sets forth
all producers with respect to the Annuity Contracts having a balance owed by
such producer to Seller for fees and commissions relating to the Annuity
Contracts and the nature and amount of such balance.
Section 3.25. GAAP Financial Statements. On or prior to the date
hereof, Seller has delivered to Purchaser true, correct and complete copies of
(a) the audited consolidated balance sheets of ▇▇▇▇ ▇▇▇▇▇ Financial Corporation
("▇▇▇▇ ▇▇▇▇▇") and its subsidiaries as of December 31, 1995 and 1994, prepared
in accordance with GAAP, together with the notes thereon and the related report
of Price Waterhouse the independent certified public accountant of ▇▇▇▇ ▇▇▇▇▇,
and (b) the audited consolidated statements of income, stockholders' equity and
cash flows of ▇▇▇▇ ▇▇▇▇▇ and its subsidiaries for the years ended December 31,
1995, 1994 and 1993 prepared in accordance with GAAP, together with the notes
thereon and the related report of Price Waterhouse (collectively, the "▇▇▇▇
▇▇▇▇▇ Financial Statements"). Seller has delivered to Purchaser true, correct
and complete copies of the consolidated balance sheets, and the related
consolidated statements of income, stockholders' equity and cash flows of ▇▇▇▇
▇▇▇▇▇ and its subsidiaries for the quarters ended March 31, 1996, June 30, 1996
and September 30, 1996, prepared in accordance with GAAP (the "Interim ▇▇▇▇
▇▇▇▇▇ Financial Statements"). The ▇▇▇▇ ▇▇▇▇▇ Financial Statements and the
Interim ▇▇▇▇ ▇▇▇▇▇ Financial Statements are based on the books and records of
▇▇▇▇ ▇▇▇▇▇ and its subsidiaries and have been prepared in accordance with GAAP
consistently applied (except in the case of the Interim ▇▇▇▇ ▇▇▇▇▇ Financial
Statements for normal year end adjustments). The ▇▇▇▇ ▇▇▇▇▇ Financial Statements
have been, audited by Price Waterhouse. The ▇▇▇▇ ▇▇▇▇▇ Financial Statements and
the Interim ▇▇▇▇ ▇▇▇▇▇ Financial Statements fairly present in all material
respects the consolidated financial position and results
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of operations of ▇▇▇▇ ▇▇▇▇▇ and its subsidiaries as of the dates and for the
periods indicated therein.
For purposes of this Article 3, references to the knowledge of Seller
means, after reasonable inquiry, the actual knowledge of officers of Seller
having the title of Senior Vice President or higher.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1. Organization and Standing. Purchaser is a corporation duly
organized and validly existing under the Laws of the State of Arizona. Purchaser
has all corporate power and authority necessary or required by Law to own, lease
and operate its assets, properties and business and to carry on the operations
of its business as currently conducted by it.
Section 4.2. Authorization. Purchaser has all corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and under each of the Ancillary Agreements to be executed by it.
Purchaser is duly licensed, qualified or admitted to do business and is in good
standing in all jurisdictions in which it is required to be so qualified,
licensed or admitted to do business by the Laws thereof, except where the
failure to so qualify, be admitted or licensed, individually or in the aggregate
is not reasonably likely to have a Material Adverse Affect on Purchaser. The
execution and delivery by Purchaser of this Agreement and the Ancillary
Agreements to be executed by it, and the performance by
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Purchaser of its obligations under such agreements, have been duly authorized by
all necessary corporate and shareholder actions on the part of Purchaser. This
Agreement and each of the Ancillary Agreements executed by Purchaser, when
executed by all of the parties thereto, will constitute a valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, moratorium or other Laws which may affect creditors' rights and
remedies generally and by principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
Section 4.3. Actions and Proceedings. Except as disclosed on Schedule
4.3 attached hereto, (a) there are no outstanding Orders by or with any court,
arbitrator or Governmental Entity before which Purchaser or any of its material
Affiliates is or was a party that, individually or in the aggregate, have a
Material Adverse Effect on Purchaser, and (b) there are no Actions pending or,
to Purchaser's knowledge, threatened against Purchaser or any of its material
Affiliates which would, individually or in the aggregate, have a Material
Adverse Effect on Purchaser.
Section 4.4. No Conflict or Violation. Except as disclosed on Schedule
4.4 attached hereto, the execution, delivery and performance by Purchaser of
this Agreement and the Ancillary Agreements to which it is a party in accordance
with the respective terms and conditions hereof and thereof do not and will not
(a) violate any provision of the charter, by-laws or other organizational
document of Purchaser, in each case, as amended to date, (b) violate, constitute
a default under, or result in the breach, cancellation or termination of,
accelerate the performance required under, or result in the creation of any Lien
upon any of the
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assets of Purchaser, pursuant to, any mortgage, deed of trust, guaranty, note,
indenture, bond, lease, agreement or other instrument to which Purchaser is a
party or by or to which it or any of its assets may be bound, (c) violate any
Order of any court, arbitrator or Governmental Entity against, or binding upon,
or any agreement with, or condition imposed by, any court, arbitrator or
Governmental Entity binding upon Purchaser or any of its assets, (d) violate any
Law or (e) result in the breach of any of the terms or conditions of, constitute
a default under, or otherwise cause an impairment or revocation of, any Permit
necessary for Purchaser to conduct the Annuity Business.
Section 4.5. Consents and Approvals. Except as required under the HSR
Act or as set forth on Schedule 4.5 attached hereto, no consent, approval,
exemption or authorization is required to be obtained from, no notice is
required to be given to and no filing is required to be made with any third
party (including, without limitation, Governmental Entities of competent
jurisdiction) by Purchaser in order (a) for this Agreement, each of the
Ancillary Agreements and each of the Assigned Contracts to which Purchaser will
be a party to constitute a valid and binding obligation of Purchaser, (b) to
authorize or permit the consummation of the transactions contemplated hereby by
Purchaser or (c) to authorize or permit Purchaser to conduct the Annuity
Business after the Closing.
Section 4.6. Brokerage and Financial Advisers. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, Purchaser in connection with this Agreement or the
transactions contemplated hereby, except ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, whose fees for
services rendered in connection with such transactions will be paid by
Purchaser.
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Section 4.7. GAAP Financial Statements. On or prior to the date hereof,
Purchaser has delivered to Seller true, correct and complete copies of (a) the
audited consolidated balance sheets of SunAmerica Inc. ("SunAmerica") and its
subsidiaries as of December 31, 1995 and 1994, prepared in accordance with GAAP,
together with the notes thereon and the related report of Price Waterhouse, the
independent certified public accountant of SunAmerica, and (b) the audited
consolidated statements of income, stockholders' equity and cash flows of
SunAmerica and its subsidiaries for the years ended December 31, 1995, 1994 and
1993 prepared in accordance with GAAP, together with the notes thereon and the
related report of Price Waterhouse (collectively, the "SunAmerica Financial
Statements"). Purchaser has delivered to Seller true, correct and complete
copies of the consolidated balance sheets, and the related consolidated
statements of income, stockholders' equity and cash flows of SunAmerica and its
subsidiaries for the quarters ended March 31, 1996 and June 30, 1996, prepared
in accordance with GAAP (the "Interim SunAmerica Financial Statements"). The
SunAmerica Financial Statements and the Interim SunAmerica Financial Statements
are based on the books and records of SunAmerica and its subsidiaries, and the
SunAmerica Financial Statements have been prepared in accordance with GAAP
consistently applied, audited by Price Waterhouse and fairly present in all
material respects the consolidated financial position and results of operations
of SunAmerica and its subsidiaries as of the dates and for the periods indicated
therein.
Section 4.8. Statutory Financial Statements. Purchaser has furnished to
Seller true, complete and correct copies of the Annual Statements of Purchaser
as filed with the Arizona Department of Insurance for the years ended December
31, 1995, 1994 and 1993, together with all attachments, exhibits and schedules
thereto and all affirmations and certifications filed
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therewith and applicable actuarial opinions for such years. Purchaser has
furnished to Seller true, complete and correct copies of the Quarterly
Statements of Purchaser as filed with the Arizona Department of Insurance for
the quarters ended March 31, 1996 and June 30, 1996, together with all
attachments, exhibits and schedules thereto and all affirmations and
certifications filed therewith and no further amendments thereto are being
considered. Each such Annual Statement and Quarterly Statement complied in all
material respects with all applicable Laws when so filed and were timely filed
with all required Governmental Entities. No material deficiencies have been
asserted or are otherwise known by Purchaser with respect thereto. Each such
Annual Statement and Quarterly Statement was prepared in accordance with SAP
applied on a consistent basis (except for changes, if any, disclosed therein)
and fairly presents (in accordance with SAP) the financial condition of
Purchaser as of the respective dates thereof or its results of operations or
cash flows, as the case may be, for and during the respective periods covered
thereby (provided the Quarterly Statements are subject to normal year end
adjustments and lack footnotes and other presentation items). There were no
material liabilities affecting Purchaser as of December 31, 1995 required in
accordance with SAP to be reflected or disclosed in the Annual Statement for the
period then ended, or as of March 31, 1996 or June 30, 1996 required in
accordance with SAP to be disclosed in the Quarterly Statement for the period
then ended, which are not so reflected or disclosed therein.
Section 4.9. Rating. As of the date hereof, the Standard & Poor's
Corporation Claims - Paying Ability Rating of Purchaser is AA- and the ▇▇▇▇▇'▇
Investor Service, Inc. Financial Strength rating of Purchaser is A2. Purchaser's
A.M. Best & Co. rating is A+ (superior) and its Duff & ▇▇▇▇▇▇ rating is AA.
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For purposes of this Article 4, references to the knowledge of
Purchaser means, after reasonable inquiry, the actual knowledge of officers of
Purchaser having the title of Senior Vice President or higher.
ARTICLE 5
PRE-CLOSING COVENANTS
Section 5.1. Conduct of Business.
(a) Prior to the Closing, Seller shall, unless Seller shall
receive the prior written consent of Purchaser:
(i) operate the Annuity Business as presently
operated and only in the ordinary course and consistent with
past practice (including but not limited to past underwriting
standards and investment philosophies) subject however to such
changes as may be required by changes in applicable Laws or
contemplated by this Agreement ; and
(ii) use commercially reasonable efforts to preserve
its relationship with and the goodwill of its brokers,
customers, suppliers, employees and other Persons having
business dealings with Seller in connection with the Annuity
Business.
(b) Without limiting the generality of the foregoing, Seller
will:
(i) use commercially reasonable efforts to maintain
in full force and effect all material contracts, documents and
arrangements related to the Annuity Business, to continue all
current marketing and selling programs relating to the
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Annuity Business in accordance with its current marketing
plan, to process Annuity Contracts consistent with past
practice, and to maintain each rating classification assigned
to Seller as of the date hereof by insurance rating agencies.
(ii) cause the Books and Records to be maintained in
the usual manner and consistent with past practice and not
permit a material change in any underwriting, investment,
actuarial, financial reporting or accounting practice or
policy of Seller or in any assumption underlying such a
practice or policy, or in any method of calculating any bad
debt, contingency or other reserve for financial reporting
purposes (including without limitation any practice, policy,
assumption or method relating to or affecting the
determination of Annuity Contracts in force, premium or
investment income, Reserve Liabilities or operating ratios
with respect to expenses, losses or lapses) except as may be
required by a change in GAAP, SAP or Law.
(iii) (A) cause all Reserve Liabilities with respect
to Annuity Contracts established or reflected in the Books and
Records of Seller to be (1) established or reflected on a
basis consistent with those Reserve Liabilities and reserving
methods followed by Seller in the preparation of its December
31, 1995 Annual Statement filed with the Department of
Commerce, State of Minnesota and (2) adequate to cover the
total amount of all reasonably anticipated matured and
unmatured benefits, dividends, losses, claims, expenses and
other liabilities of Seller under all Annuity Contracts
pursuant to which Seller has or will have any liability
(including without limitation any liability arising under or
as a result of
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any reinsurance, coinsurance or other similar contract); and
(B) continue to own assets that qualify as legal reserve
assets under all applicable Laws in an amount at least equal
to its Reserve Liabilities.
(iv) continue to comply with all Laws applicable to
its Annuity Business, operations or affairs.
(c) Unless otherwise provided in this Agreement, without the
approval of Purchaser, which approval shall not be unreasonably withheld, from
and after the date hereof until the Closing, Seller will refrain from:
(i) selling or otherwise transferring, assigning,
disposing of, granting or permitting to exist any Lien on, any
October 21 Portfolio Securities;
(ii) increasing the rates of compensation (including
bonuses) payable or to become payable to any officer,
employee, agent, independent contractor or consultant of
Seller in connection with the Annuity Business other than in
the ordinary course of business, consistent with past
practice;
(iii) except in the ordinary course of business
consistent with past practice, incurring any obligation,
liability or indebtedness, incurring any extraordinary losses,
or disposing of, canceling, waiving or permitting to lapse any
rights of material value relating to or affecting the Annuity
Business;
(iv) changing in any material respect its accounting
principles or practices (including, without limitation, any
changes in depreciation or amortization policies or rates or
any changes in any assumptions underlying any
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method of calculating reserves) other than as required by a
change in GAAP, SAP or Law;
(v) except as disclosed herein, entering into or
amending or terminating any transaction or contract related to
the Annuity Business that could reasonably be expected to have
a Material Adverse Effect;
(vi) except in the ordinary course of business
consistent with past practice, terminating, amending or
executing any material reinsurance, coinsurance or other
similar contract, as ceding or assuming insurer related to the
Annuity Contracts, except as contemplated by Section 5.9
hereof; or
(vii) entering into any contract or agreement to do
any of the foregoing.
Section 5.2. Certain Transactions. Except as contemplated by the
reinsurance agreements listed on Schedule 3.11 attached hereto, from the date of
this Agreement through the Closing, neither Seller nor any of its directors or
officers will (and Seller shall cause its investment bankers and legal counsel
not to) solicit, encourage, initiate or engage in any negotiations or
discussions with, or provide any information to, or otherwise cooperate in any
other manner with, any Person or group (other than Purchaser and its Affiliates)
concerning any coinsurance, reinsurance, replacement, sale or other disposition,
directly or indirectly, of the Annuity Business.
Section 5.3. Investigations. From the date hereof through the Closing
Date, Purchaser shall be entitled, through its employees, counsel, actuaries and
other Representatives, to make such investigation of the assets, liabilities,
business and operations of the Annuity Business, and such examination of the
Books and Records, as Purchaser may reasonably request, including,
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without limitation, for the purpose of investigating the financial condition,
service quality and operations of Seller. Any investigation, examination or
interview by Purchaser of employees of Seller shall be conducted at reasonable
times upon reasonable prior notice; and each of the Parties and its officers,
employees and Representatives, including, without limitation, counsel,
investment bankers and independent public accountants, shall cooperate with the
other's employees and Representatives, as the case may be, in connection with
such review and examination; provided, however, that such examination shall not
be deemed a waiver by Purchaser of any of its rights with respect to the
representations and warranties of Seller.
Section 5.4. HSR Act Filings. Seller and Purchaser shall, as promptly
as practicable, file, or cause to be filed, Notification and Report Forms under
the HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
in connection with the transactions contemplated by this Agreement, the
Ancillary Agreements and the other agreements contemplated hereby and thereby,
and will use their respective reasonable efforts to respond as promptly as
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation and to cause the waiting periods under
the HSR Act to terminate or expire at the earliest possible date. Seller and
Purchaser will each furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of necessary filings or submissions to any government or regulatory
agency, including, without limitation, any filings necessary under the
provisions of the HSR Act.
Section 5.5. Consents and Reasonable Efforts. Seller and Purchaser
shall cooperate and use their commercially reasonable efforts to obtain all
consents, approvals and agreements
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of, and to give and make all notices and filings with, any Governmental
Entities, necessary to authorize, approve or permit the consummation of the
transactions contemplated by this Agreement, the Ancillary Agreements and the
other agreements contemplated hereby and thereby. Seller shall use its
commercially reasonable efforts to obtain all approvals and consents to the
transactions contemplated by this Agreement and the Ancillary Agreements as set
forth on Schedule 3.5 attached hereto. Purchaser will use its commercially
reasonable efforts to obtain all approvals and consents to the transactions
contemplated by this Agreement and the Ancillary Agreements as set forth on
Schedule 4.5 attached hereto. Without limiting the foregoing, Purchaser will
permit Representatives of Seller to participate in the meeting at which the
transactions contemplated by this Agreement are presented to the Arizona
Department of Insurance for approval.
Section 5.6. Representations and Warranties. From the date hereof
through the Closing Date, (a) Seller shall use its reasonable efforts to conduct
its affairs in such a manner so that, except as otherwise contemplated or
permitted by this Agreement, the representations and warranties contained in
Article 3 shall continue to be true, complete and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date,
(b) Purchaser shall use its reasonable efforts to conduct its affairs in such a
manner so that, except as otherwise contemplated or permitted by this Agreement,
the representations and warranties as to Purchaser contained in Article 4 shall
continue to be true and correct in all material respects on and as of the
Closing Date as if made on and as of the Closing Date, (c) Seller shall notify
Purchaser promptly of any event, condition or circumstance known to Seller
occurring from the date hereof through the Closing Date that would constitute a
violation or breach of this
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Agreement by Seller and (d) Purchaser shall notify Seller promptly of any event,
condition or circumstance known to Purchaser occurring from the date hereof
through the Closing Date that would constitute a violation or breach of this
Agreement by Purchaser.
Section 5.7. Computer Software and Other Intellectual Property. With
respect to software and other intellectual property listed on Schedule 3.14
attached hereto that is licensed to Seller, but which is not freely assignable
by Seller to Purchaser, Seller will use its best efforts to cooperate with
Purchaser, upon Purchaser's request, to obtain at Purchaser's sole cost and
expense from the licensors of such software and other intellectual property the
right for Purchaser to operate such software and other intellectual property.
Section 5.8. Financial Statements and Reports.
(a) At the time of filing with the Department of Commerce,
State of Minnesota, Seller will deliver to the Purchaser true and complete
copies of each Annual Statement and Quarterly Statement filed after the date
hereof and on or prior to the Closing Date.
(b) From and after the date hereof and through the Closing
Date, Seller shall continue to prepare in the ordinary course of business
consistent with past practice and shall deliver, as soon as available, to
Purchaser, true and complete copies of customarily prepared internal management
information reports (including financial statements, reports and analyses
prepared by or for Seller) prepared by Seller related to the Annuity Business,
including without limitation normal internal reports which Seller prepares (such
as those reflecting weekly net production, surrenders, head count and claims and
monthly cash flow and operations expense) but excluding any statements, reports
or analyses prepared in connection with any analyses of
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the transaction contemplated in this Agreement. Without limiting the foregoing,
Seller will provide to Purchaser weekly a list of the October 21 Portfolio
Securities held by Seller, which reflects the Market Value and Book Value
thereof (monthly) and any changes from the immediately preceding week (weekly),
including, without limitation, weekly maturities, prepayments, sales,
redemptions or similar events.
Section 5.9. Termination of Certain Reinsurance Arrangements. Prior to
the Closing, Seller will terminate the Coinsurance Agreement effective October
1, 1996 between Seller and London Life Reinsurance Company and recapture of the
annuity portion of the Coinsurance Agreement effective December 31, 1991 with
Lincoln National Reassurance Company. Seller shall be responsible for payment of
the recapture fees payable thereunder and, under no circumstances shall
Purchaser be responsible for any costs or fees of any type in connection with
the termination of such agreements.
Section 5.10. Woodland Hills Option. Seller hereby grants to Purchaser
an option to assume Seller's rights and obligations with respect to Seller's
equipment and facilities located at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, subject to appropriate lessor consent, on the same financial
terms currently available to Seller and on such other terms as Purchaser and
Seller shall mutually agree; provided, however, such option shall result in no
costs to Seller or any ongoing liability to Seller.
Section 5.11. Oxford Put. In the event Purchaser does not obtain the
consent of Oxford Life Insurance Company to the assignment of the Coinsurance
Agreement dated January 31, 1990 between Seller and Oxford Life Insurance
Company and the related trust agreement (the "Oxford Agreement") on or prior to
the 15th Business Day preceding the Closing Date, it will
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on such Business Day notify Purchaser of the failure to obtain such consent and
(i) the Annuity Contracts subject to the Oxford Agreement (the "Oxford Annuity
Contracts") shall be excluded from the Annuity Contracts to be assumed by
Purchaser at the Closing (ii) the policy loans with respect to the Oxford
Annuity Contracts will not be included in the Policy Loans, (iii) the reserve
liabilities with respect to the Oxford Annuity Contracts will not be included in
Reserve Liabilities and (iv) the Oxford Agreement shall not be included as an
Assigned Contract (the "Oxford Put"). If the Oxford Put is implemented, at
Purchaser's election, the Parties will execute and deliver at the Closing an
administration services agreement on terms substantially similar to those of the
Administrative Services Agreement, provided that the compensation will be
structured to provide a pass-through to Purchaser of the compensation payable to
Seller pursuant to the Oxford Agreement with respect to the Oxford Annuity
Contracts. In addition, all references to Oxford Life Insurance Company, the
Oxford Agreement and the Oxford Annuity Contracts in the Schedules to this
Agreement shall be deemed deleted.
Section 5.12. Marketing Agreement. The Parties will negotiate in good
faith towards a marketing agreement, containing among other things, the terms
set forth on Exhibit N attached hereto and such other terms and conditions as
may be mutually acceptable to the Parties.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligations of Purchaser to consummate the transactions
contemplated hereby are, unless waived by Purchaser in accordance with Section
12.4 hereof, subject to the fulfillment, at or before the Closing, of each of
the following conditions:
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(i) No Law or Order of a court, arbitrator or
Governmental Entity of competent jurisdiction shall be in
effect which prohibits, restricts or enjoins, and no Action
shall be pending or threatened which seeks to prohibit,
restrict, enjoin, nullify, seek material damages with respect
to or otherwise materially adversely affect, the consummation
of the transactions contemplated by this Agreement.
(ii) The applicable waiting period under the HSR
Act, including all extensions thereof, shall have expired or
been terminated and Purchaser shall have been furnished with
appropriate evidence, reasonably satisfactory to it, of such
expiration or termination.
(iii) All Permits, consents and waivers required
from all Governmental Entities legally required to consummate
the Closing and to perform this Agreement and each of the
Ancillary Agreements and to consummate the transactions
contemplated herein and thereby shall have been obtained and
shall be in full force and effect and Purchaser shall have
been furnished with appropriate evidence, reasonably
satisfactory to it, of the granting of such Permits, consents
and waivers; provided, however, that this condition shall be
deemed satisfied with respect to approvals of the transactions
contemplated by the Assumption Reinsurance Agreement by state
insurance regulators, upon receipt of the required Permits,
consents and waivers from the Minnesota Department of Commerce
and the Arizona Department of Insurance.
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(iv) All necessary consents to the transactions
contemplated by this Agreement and the Ancillary Agreements
shall have been obtained, including, without limitation, those
listed on Schedule 3.5 attached hereto.
(v) Except for such changes as may be permitted or
required pursuant to the terms hereof, the representations and
warranties of Seller set forth in Article 3 hereof shall be
true and correct in all material respects on and as of the
Closing with the same effect as though such representations
and warranties had been made on and as of the Closing, except
that any such representations and warranties that are given as
of a specified date and relate solely to a specified date or
period shall be true and correct only as of such date or
period.
(vi) Seller shall have performed and complied with
all covenants and agreements required to be performed or
complied with by Seller under this Agreement prior to or
concurrently with the Closing in all material respects.
(vii) Purchaser shall have received all certificates
and other documents required to be delivered to Purchaser at
or before the Closing pursuant to this Agreement duly executed
by all necessary Persons (other than Purchaser).
(viii) Purchaser shall have received the Closing
deliveries described in Section 1.4 hereof.
(ix) Purchaser and Seller shall have previously or
concurrently closed the transactions contemplated by the JANY
Stock Purchase Agreement.
(x) The Combined Reserve Liabilities as of the
Closing shall be at least $4,813,357,842 [96% of the aggregate
of such reserve liabilities as at June 21,
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1996]; provided, however, that if the Oxford Put has been
exercised, the Reserve Liabilities with respect to the Oxford
Annuity Contracts will be included in Combined Reserve
Liabilities for the purpose of this calculation.
(xi) Since December 31, 1995, there shall not have
occurred any event or events or state of facts that
individually or in the aggregate has or could reasonably be
expected to have a Material Adverse Effect; provided, however,
that for purposes of this subclause (xi), events or facts
which affect the insurance or annuity industry generally
(e.g., a change in general economic or market conditions, a
change in tax Law or a change in insurance Law), shall not be
included in determining whether a Material Adverse Effect has
occurred.
(xii) The Closing Date Portfolio Securities tendered
by Seller to the Trust pursuant to Section 1.2(b) hereof and
any other assets therein (to the extent such assets would be
admitted assets if held by Purchaser outside of the Trust)
shall qualify as admitted assets of Purchaser in Arizona for
purposes of SAP and Purchaser shall have received regulatory
confirmation thereof from the Arizona Department of Insurance.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
The obligations of Seller to consummate the transactions contemplated
hereby are, unless waived by Seller in accordance with Section 12.4 hereof,
subject to the fulfillment, at or before the Closing, of each of the following
conditions:
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(i) No Law or Order of a court, arbitrator or
Governmental Entity of competent jurisdiction shall be in
effect which prohibits, restricts or enjoins, and no Action
shall be pending or threatened which seeks to prohibit,
restrict, enjoin, nullify, seek material damages with respect
to or otherwise materially adversely affect, the consummation
of the transactions contemplated by this Agreement.
(ii) The applicable waiting period under the HSR
Act, including all extensions thereof, shall have expired or
been terminated and Seller shall have been furnished with
appropriate evidence, reasonably satisfactory to it, of such
expiration or termination.
(iii) All Permits, consents and waivers required
from all Governmental Entities legally required to consummate
the Closing and to perform this Agreement and each of the
Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby shall have been obtained and
shall be in full force and effect and Seller shall have been
furnished with appropriate evidence, reasonably satisfactory
to it, of the granting of such Permits, consents and waivers;
provided, however, that this condition shall be deemed
satisfied with respect to approvals of the transactions
contemplated by the Assumption Reinsurance Agreement by state
insurance regulators, upon receipt of the required Permits,
consents and waivers from the Minnesota Department of Commerce
and the Arizona Department of Insurance.
(iv) All necessary consents to the transactions
contemplated by this Agreement, the Assigned Contracts and
each of the Ancillary Agreements shall
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have been obtained, including, without limitation, those
listed on Schedule 4.5 attached hereto.
(v) Except for changes as may be permitted or
required pursuant to the terms hereof, the representations and
warranties of Purchaser set forth in Article 4 hereof shall be
true and correct in all material respects on and as of the
Closing with the same effect as though such representations
and warranties had been made on and as of the Closing, except
that any such representations and warranties that are given as
of a specified date and relate solely to a specified date or
period shall be true and correct only as of such date or
period.
(vi) Purchaser shall have performed and complied
with all covenants and agreements required to be performed or
complied with by Purchaser under this Agreement prior to or
concurrently with the Closing in all material respects.
(vii) Seller shall have received all certificates
and other documents required to be delivered to Seller at or
before the Closing pursuant to this Agreement duly executed by
all necessary Persons (other than Seller).
(viii) Seller shall have received the Closing
deliveries described in Sections 1.3 and 1.4 hereof.
(ix) Purchaser and Seller shall have previously or
concurrently closed the transactions contemplated by the JANY
Stock Purchase Agreement.
(x) Since December 31, 1995, there shall not have
occurred any event or events or state of facts that
individually or in the aggregate has or could reasonably be
expected to have a Material Adverse Effect on Purchaser;
provided,
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however, that for purposes of this subclause (x), events or
facts which affect the insurance or annuity industry generally
(e.g., a change in general economic or market conditions, a
change in tax Law or a change in insurance Law), shall not be
included in determining whether a Material Adverse Effect on
Purchaser has occurred.
ARTICLE 8
POST-CLOSING COVENANTS
Section 8.1. Continued Access and Cooperation.
(a) Following the Closing Date, Seller shall (i) allow
Purchaser, upon reasonable prior notice and during regular business hours,
through its employees and other Representatives, at Purchaser's expense to
examine and make copies of any books and records retained by Seller within its
possession or control ("control" for the purposes of this Section 8.1(a) being
defined as the ability to cause delivery to Seller or access by Purchaser) and
furnish Purchaser with such financial and reporting data and other information
with respect to the Annuity Contacts, the Third Party Administration Agreements,
Assigned Contracts and the Related Agreements as Purchaser may from time to time
reasonably request, to the extent they relate to the Annuity Business, for any
reasonable business purpose, including, without limitation, the preparation or
examination of Tax Returns, regulatory filings and financial statements and the
conduct of any Action, whether pending or threatened, concerning the conduct of
the Annuity Business prior to the Closing Date at Seller's offices or other
facilities or properties and (ii) maintain such books and records for
Purchaser's examination and copying.
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Access to such books and records shall be at Purchaser's expense and may not
unreasonably interfere with Seller's or any successor company's business
operations and Purchaser shall reimburse Seller for all reasonable out-of-pocket
expenses incurred by Seller in copying such records. Seller shall retain such
books and records for a period of at least seven years (extended by a period
equal to any extension of the statute of limitations with respect to tax matters
with respect to which such books and records are necessary and of which
Purchaser shall notify Seller), after which time such books and records shall be
delivered to Purchaser. Purchaser shall not copy or remove from Seller's
premises the accountant's work papers made available to Purchaser and its
Representatives.
(b) Following the Closing Date, Purchaser shall (i) allow
Seller, upon reasonable prior notice and during regular business hours, through
its employees and other Representatives, at Seller's expense to examine and make
copies of the Books and Records transferred to Purchaser at the Closing for any
reasonable business purpose, including, without limitation, the preparation or
examination of Tax Returns, regulatory filings and financial statements and the
conduct of any Action or the conduct of any regulatory, contract holder,
participant or other dispute resolution, whether pending or threatened, at
Purchaser's offices or other facilities or properties and (ii) maintain such
Books and Records for Seller's examination and copying. Access to such Books and
Records shall be at Seller's expense and may not unreasonably interfere with
Purchaser's or any successor company's business operations and Seller shall
reimburse Purchaser for all reasonable out-of-pocket expenses incurred by
Purchaser in copying such records. Purchaser shall retain any such Books and
Records for a period of at least seven years (extended by a period equal to any
extension of the statute of limitations with
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respect to tax matters with respect to which such Books and Records are
necessary and of which Seller shall notify Purchaser).
Section 8.2. Further Assurances.
(a) Upon the terms and subject to the conditions herein
provided, each of Seller and Purchaser shall use all commercially reasonable
efforts to take or cause to be taken, all actions or do, or cause to be done,
all things or execute or cause to be executed any documents necessary, proper or
advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, the Ancillary Agreements and the
other agreements contemplated hereby and thereby.
(b) On and after the Closing Date, Seller and Purchaser shall
take all commercially reasonable action and execute any additional documents,
instruments or conveyances of any kind (not containing additional
representations and warranties) and give all notices and obtain all consents,
approvals and Orders of Governmental Entities and other third parties which may
be necessary to carry out any of the provisions hereof, including, without
limitation, putting Purchaser in full possession and operating control of the
Purchased Assets and the Annuity Business it is assuming pursuant to this
Agreement and the Ancillary Agreements.
Section 8.3. Expenses. Except as otherwise specifically provided in
this Agreement and the respective Ancillary Agreements, the Parties shall bear
their respective expenses incurred in connection with the preparation, execution
and performance of this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby, including, without limitation, all fees and
expenses of their respective Representatives; provided, however, that Purchaser
shall bear (a) the cost of the filing fees in connection with the filings with
the FTC and the Antitrust
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Division under the HSR Act with respect to the transactions contemplated hereby
(which expense shall be borne equally by Seller and Purchaser if separate
filings are required with respect to the transactions contemplated by this
Agreement and the transactions contemplated by the Stock Purchase Agreement) and
(b) the actual out-of-pocket costs of providing policyholder notices in order to
implement the Assumption Reinsurance Agreement in accordance with its terms.
Section 8.4. Employee Plans. Purchaser will provide to any employee of
Seller or its Affiliates who on or after the Closing Date, at the sole
discretion of Purchaser, becomes an employee of Purchaser or its Affiliates (an
"Ex-Employee") with such compensation and benefits as are currently being
provided to Purchaser's employees of similar rank and tenure level. Nothing in
this Section 8.4 shall be construed as requiring the Purchaser to (i) employ any
of Seller's employees or (ii) provide any Ex-Employee with such compensation or
employee benefits as such Ex-Employee had previously received from Seller or its
Affiliates or (iii) provide any former employee of Seller who is not an
Ex-Employee with any severance benefits. Any Ex-Employee actually employed by
Purchaser may request that assets held by Seller in Seller's 401(k) Plan on
behalf of such Ex-Employee will be transferred as soon as practicable after the
Service Transfer Date to the trustees of a qualified plan maintained by
Purchaser or its Affiliate (if permitted) or retained in Seller's 401(k) Plan
(subject to the rights of Ex-Employees with respect thereto). Each request will
be honored by Seller if Seller, in its sole discretion, determines that such
transfer complies with applicable Law. Any such assets transferred will be
transferred in accordance with the provisions of Purchaser's and Seller's 401(k)
Plan.
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Section 8.5. Non-Discriminatory Treatment of Policyholders. Except as
otherwise provided in the Indemnity Reinsurance Agreement, from and after the
Closing Date Purchaser shall use all commercially reasonable efforts to provide,
at all times and from time to time, to the Policyholders under the Annuity
Contracts crediting rates and renewal rates and standards of policyholder
service and administration which are no less than those provided to other
policyholders of annuity contracts issued, coinsured or reinsured by Purchaser
or its Affiliates with respect to policies of a similar type and nature
(including without limitation factors such as issue date, actual and anticipated
lapse rates and surrender charge periods and other relevant features and market
conditions) as the Annuity Contracts. Purchaser will use commercially reasonable
efforts to include a provision substantially similar to this Section 8.5 in any
agreement for the sale, transfer or bulk reinsurance of all or substantially all
of the Annuity Contracts.
Section 8.6. Repayment of Agent Balances. Within 10 days after the
Closing Date, Seller shall deliver to Purchaser a schedule setting forth those
producers with respect to the Annuity Contracts having a balance owed by such
producers to Seller for fees or commissions relating to the Annuity Contracts,
the amount and nature of such balances, the specific Annuity Contracts to which
they relate, the dates such balances were incurred and all other information
required by Purchaser to facilitate the recovery by Purchaser of such amounts.
From and after the Closing until the Service Transfer Date, if at any time any
producer identified on such schedule becomes entitled to a payment from
Purchaser in connection with the sale of an Annuity Contract, such payment shall
be first applied to reduce the amount of such balance and shall be paid by
Purchaser to Seller (in accordance with Purchaser's normal payment cycle).
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Purchaser shall provide Seller with a quarterly report of all such payments and
balances pursuant to this Section 8.6.
Section 8.7. No Inducement to Replace; Non-Twisting; Non-Churning; Non-
Competition.
(a) In partial consideration of the payment of the Final
Ceding Commission, the Parties agree that, for a period of seven years after the
Closing (the "Restricted Period"), neither Seller nor any of its present or
future Affiliates shall carry on or engage in, directly or indirectly, the
business of selling or administering annuity contracts (a "Competing Business")
in any county or city in which the Annuity Business has been conducted) or in
New York State, where JANY is engaged in the business of selling and
administering annuity contracts) or where Purchaser or its Affiliates conduct a
similar business after the Closing Date.
(b) Notwithstanding the provisions of Section 8.7(a) hereof,
during the Restricted Period, Seller and Houston National Life Insurance Company
("Houston") may (A) market, underwrite and sell directly or indirectly (i)
policies of Houston and (ii) single premium immediate annuities of the Seller
and (B) assume annually up to $200,000,000 of deferred annuities; provided,
however, that (I) the aggregate of any sales made in accordance with (A) above
shall not exceed $50,000,000 annually and (II) any assumptions made pursuant to
(B) above shall not exceed $200,000,000 annually; provided further, however,
that the Purchaser must consent in writing to all assumptions made pursuant to
(B) above which in the aggregate will exceed $100,000,000 annually, such consent
not to be unreasonably withheld; and provided further, however, that the sales
and assumptions set forth in (i) and (ii) above shall be limited in amount to
the minimum amount and extent reasonably necessary to (x) assure Houston
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and Seller each maintains its qualification as a life insurance company for
federal income tax purposes and (y) to enable Houston and Seller to maintain
their licenses as life insurance companies in the states in which they are
licensed to do business. Clause (B) above shall not permit Seller, whether
individually or in concert with others, to re-enter the Annuity Business. With
respect to the assumption of deferred annuities by Seller or Houston pursuant to
clause (B) of this Section 8.7(b) during the Restricted Period, Seller shall,
and shall cause Houston to, offer to Purchaser the right to provide such
annuities, provided Purchaser is able to provide such annuities on terms no less
favorable in the aggregate to Seller or Houston, as the case may be, than those
available from independent third parties. Purchaser shall have a period of 30
days to respond to each such offer. Notwithstanding the provisions of Section
8.7(a) hereof, (i) Seller may administer (A) the annuity contracts excluded from
the definition of "Annuity Contracts" by the last sentence thereof, (B) direct
written annuity contracts of Aristar Life Insurance Company pursuant to that
service agreement between Seller and Aristar Life Insurance Company dated
October 29, 1987 and (C) annuity contracts of Houston and Seller issued pursuant
to the foregoing provisions of this 8.7(b), and (ii) Seller may market annuity
products issued by unaffiliated third parties.
(c) Notwithstanding the provisions of Section 8.7(a) hereof,
during the Restricted Period, Seller or its Affiliates may acquire after the
Closing an entity or business engaged in a Competing Business if not more than
50% of the gross revenues, computed in accordance with statutory accounting
principles for insurance companies or GAAP for other companies, of such entity
or business (for the fiscal year of such entity or business immediately
preceding such acquisition) are derived from a Competing Business, provided that
promptly
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upon consummation of such acquisition, Seller or its Affiliate, as the case may
be, shall provide to Purchaser an opportunity to negotiate to acquire such
Competing Business (and Seller or such Affiliate will negotiate such sale to
Purchaser in good faith) and, provided, further, if such Competing Business is
not acquired by Purchaser, Seller shall not, and shall not permit any of its
Affiliates to, expand the Competing Business through the sale of any annuity
product and shall hold such business as a liquidating "closed block."
Notwithstanding the foregoing, in no event shall the name "▇▇▇▇ ▇▇▇▇▇" or any
derivation thereof, be used in connection with such Competing Business.
(d) The provisions of Section 8.7(a) hereof shall not apply to
any Person who becomes an Affiliate of Seller after the Closing Date by virtue
of an acquisition of an ownership interest in Seller or any Affiliate of Seller,
if such Person was engaged in the business of selling, issuing or administering
annuity contracts in the United States of America immediately prior to such
acquisition, and such new Affiliate's only relationship with Seller and its
Affiliates related to such Competing Business arises solely as a result of such
ownership interest. Notwithstanding the foregoing, in no event (i) shall the
name "▇▇▇▇ ▇▇▇▇▇" or any derivation thereof be used in connection with such
business or (ii) shall Seller or its controlled Affiliates market their own
annuity products. Furthermore, during the four-year period after the Closing
Date, not more than 50% of the annuity products sold or marketed by Seller or
its controlled Affiliates may be annuity products of such Competing Business,
such New Affiliate or its Affiliates.
(e) Seller will refrain and will cause its present and future
Affiliates, Subsidiaries and employees to refrain from causing or attempting to
cause, influence or induce (or assisting any other Person in causing or
attempting to cause, influence or induce) (i) any
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Policyholder to replace or terminate any Annuity Contract issued, reinsured,
underwritten, or sold by Seller, in whole or in part, with products of Seller or
any other Person at any time; (ii) any reinsurer to terminate or reduce any
reinsurance, coinsurance, or other similar contract, or sever a relationship,
with Purchaser at any time relating to annuity contracts; or (iii) any agent
(including without limitation any insurance agent) to resign or sever or reduce
a relationship with Purchaser at any time relating to annuity contracts. Seller
will not participate as principal or agent in any transfer involving a "Section
1035" exchange or replacement of any Annuity Contract.
(f) Seller acknowledges that the covenants of Seller set forth
in this Section 8.7 are an essential element of this Agreement and that, but for
the agreement of Seller to comply with these covenants, Purchaser would not have
entered into this Agreement. Seller acknowledges that each of the covenants of
Seller set forth in this Section 8.7 constitutes an independent covenant and
shall not be affected by performance or nonperformance of any other provision of
this Agreement by Purchaser.
(g) Seller recognizes and agrees that a breach by Seller or
any of its Affiliates of any provision of this Section 8.7 could cause
irreparable harm to Purchaser, that Purchaser's remedies at law in the event of
such breach or threatened breach could be inadequate, and that, accordingly, in
the event of such breach or threatened breach, Purchaser shall be authorized to
seek a restraining order or injunction or both against Seller or any such
Affiliate, in addition to any other rights and remedies which are available to
Purchaser.
(h) If the provisions of this Section 8.7 are more
restrictive, as to duration, geographic limitations or scope, than permitted by
the Laws of any jurisdiction in which
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Purchaser seeks enforcement hereof, it shall be limited to the extent required
to permit enforcement under such Laws. In particular, the parties intend that,
to the extent appropriate to permit the enforcement hereof, the covenants
contained in this Section 8.7 shall be construed as a series of separate and
divisible covenants, one for each county and city in which the Annuity Business
has been carried on and in which Purchaser conducts a similar business after the
Closing Date. Except for geographic coverage, each such separate covenant shall
be deemed identical in all respects. If, in any judicial proceeding, a court
shall refuse to enforce any of the separate covenants deemed included in this
section, then such unenforceable covenant shall be deemed reformed or eliminated
for the purpose of those proceedings to the extent necessary to permit the
remaining separate covenants to be enforced.
Section 8.8. Preferred Stock Divided Repayment. Within 30 days after
receipt by Purchaser, Purchaser shall remit to Seller, by wire transfer of
immediately available funds, the portion of any dividend or dividends undeclared
as of the Closing Date received by Purchaser after the Closing Date on preferred
stock (or similar instrument) included in the Closing Date Portfolio Securities
which relate to the period up to and including the Closing Date. Each such
payment shall be accompanied by interest calculated at a rate equal to the three
month LIBOR rate plus 25 basis points on the amount of such payment from the
date receipt by the Company through the date on which such amount is actually
paid.
Section 8.9. Policyholder Consents. Promptly after the
Closing, Purchaser shall (i) distribute to policyholders of Annuity Contracts
notice of the transactions reflected herein and (ii) use commercially reasonable
efforts to obtain Novations of all Annuity Contracts (as contemplated by Section
2.4 of the Assumption Reinsurance Agreement). Seller shall provide,
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at Purchaser's expense, such assistance as Purchaser reasonably requests with
respect to Purchaser's performance of the preceding sentence.
Section 8.10. Current Report on Form 8-K. Seller will cooperate with
Purchaser, at Seller's expense, in SunAmerica's preparation of a Current Report
on Form 8-K prepared in connection with the transactions contemplated hereby;
provided, however, that notwithstanding anything else contained in this Section
8.10, Purchaser shall bear any and all costs and expenses incurred by Seller's
independent accountants in connection with their preparation of the GAAP
financial statements of the Annuity Business. Purchaser shall use reasonable
efforts to provide Seller and Seller's counsel with an opportunity to review
references to Seller contained in such filing.
ARTICLE 9
TERMINATION; SURVIVAL
Section 9.1. Termination of Agreement. Notwithstanding anything
contained herein to the contrary, this Agreement may be terminated:
(a) at any time prior to the Closing, by mutual written
consent of Seller and Purchaser;
(b) by written notice by Purchaser to Seller if there has been
a material breach by Seller of any of the representations, warranties,
agreements or covenants of Seller set forth herein which is not subject to cure
prior to the Closing, or a failure of any other condition not subject to cure
prior to the Closing to which the obligations of Purchaser are subject;
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(c) by written notice by Seller to Purchaser if there has been
a material breach by Purchaser of any of the representations, warranties,
agreements or covenants of Purchaser set forth herein which is not subject to
cure prior to the Closing, or a failure of any other condition not subject to
cure prior to the Closing to which the obligations of Seller are subject;
(d) at any time after April 30, 1997 (the "Termination Date")
and prior to the Closing, by Purchaser by written notice to Seller, if (A) the
Closing shall not have been consummated on or before the Termination Date and
(B) the failure to consummate the Closing on or before the Termination Date did
not result from the failure by Purchaser to perform or comply with any covenant
or agreement contained in this Agreement required to be performed or complied
with prior to the Closing by Purchaser;
(e) at any time after the Termination Date and prior to the
Closing, by Seller by written notice to Purchaser, if (i) the Closing shall not
have been consummated on or before the Termination Date and (ii) the failure to
consummate the Closing on or before the Termination Date did not result from the
failure by Seller to perform or comply with any covenant or agreement contained
in this Agreement required to be performed or complied with prior to the Closing
by Seller; or
(f) subject to Section 8.2 hereof, by written notice to
Purchaser or Seller to the other, at any time after a Governmental Entity having
jurisdiction over Purchaser or Seller has notified such Party that it will not
provide an approval, consent or Order necessary for the terminating Party to
consummate the transactions contemplated by this Agreement or the
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Ancillary Agreements and the Parties cannot subsequently procure such approval,
consent or Order using their respective commercially reasonable efforts.
Section 9.2. Effect of Termination. In the event that this Agreement
shall be terminated pursuant to Section 9.1, all further obligations of the
Parties under this Agreement shall terminate without further liability of either
Party to the other; provided that the obligations of the Parties contained in
Section 8.3 (Expenses), Article 11 (Confidentiality) and Article 12
(Miscellaneous) shall survive any such termination. A termination under Section
9.1 shall not relieve any Party of any liability for a breach of, or for any
misrepresentation under, this Agreement, or be deemed to constitute a waiver of
any available remedy (including specific performance if available) for any such
breach or misrepresentation.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 10.1. Survival of Representations. (a) The representations and
warranties of Purchaser set forth in Article 4 hereof shall survive the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby for a period of 21 months following the
Closing Date; provided, however, that the representations contained in Sections
4.1 (Organization, Standing and Authority of Seller), and 4.2 (Authorization)
shall survive until the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive).
(b) The representations and warranties of Seller set forth in
Article 3 hereof shall survive the execution, delivery and performance of this
Agreement and the consummation
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of the transactions contemplated hereby for a period of 21 months following the
Closing Date; provided, however, that the representations contained in Sections
3.1 (Organization, Standing and Authority of Seller), 3.2 (Authorization), 3.8
(Annuity Contracts) (paragraph (i) only) and 3.15 (Purchased Assets) shall
survive until the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive) and the
representations and warranties contained in Section 3.22 (Mortgage Loans)
(paragraph (g) only) will survive until the fifth anniversary of the Closing
Date
(c) No Action may be commenced by any Person with respect to
any claim arising out of or relating to such warranties or representations after
the expiration of the period for which such representations and warranties shall
survive pursuant to this Section 10.1 (the "Applicable Survival Period");
provided, however, that, subject to this Article 10, any Person shall have the
right to commence a suit, action or proceeding after the expiration of the
Applicable Survival Period with respect to claims arising out of or relating to
such representations and warranties which shall have been asserted by such
Person under Section 10.4 hereof before the expiration of the Applicable
Survival Period.
Section 10.2. Indemnification by Purchaser.
(a) Subject to Sections 10.1, the following provisions of this
Section 10.2 and 10.4 hereof, Purchaser shall indemnify Seller and its
Affiliates (collectively, the "Seller Group") for, and shall hold it harmless
from, any and all damages, claims, suits, actions, causes of action,
proceedings, investigations, losses, liabilities, assessments, judgments,
deficiencies and expenses (including, without limitation, reasonable legal,
accounting and other professional expenses) ("Liabilities") asserted against or
incurred or sustained by the Seller Group relating
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to, associated with or arising out of (i) any breach by Purchaser of any
covenant or agreement contained in this Agreement applicable to Purchaser, (ii)
any breach by Purchaser of any of the warranties or representations of Purchaser
set forth in Article 4 of this Agreement, (iii) any of the Assumed Liabilities
or (iv) the conduct of the Annuity Business by Purchaser or the ownership,
leasing or use of the Purchased Assets by Purchaser during the period after the
Closing; provided, however, that notwithstanding anything contained in this
Section 10.2(a) to the contrary, Purchaser shall not be obligated hereunder to
indemnify the Seller Group for, or to hold the Seller Group harmless from, any
Liabilities under this Section 10.2(a) to the extent that Seller is obligated to
indemnify Purchaser in respect of the same Liabilities pursuant to Section 10.3
hereof.
(b) The Seller Group shall be entitled to indemnification
under Section 10.2(a)(ii) hereof only when the aggregate amount of all
Liabilities with respect to which the Seller Group would otherwise be entitled
to indemnification under Section 10.2(a)(ii) hereof and Sections 9.2(a)(ii) and
9.2(b) under the JANY Stock Purchase Agreement exceed $1.5 million. In addition,
as soon as practicable after such Liabilities exceed $1.5 million, Purchaser
shall pay to Seller $750,000. In no event shall the amount payable by Purchaser
and its Affiliates to the Seller Group pursuant to Section 10.2(a)(ii) hereof
and Sections 9.2(a)(ii) and 9.2(b) of the JANY Stock Purchase Agreement exceed
$240,000,000.
(c) If any event shall occur or circumstance shall exist which
would otherwise entitle the Seller Group to indemnification hereunder,
Liabilities shall be deemed reduced to the extent of any proceeds (other than
(i) proceeds from self-insurance and (ii) proceeds under experience-rated
insurance policies the premiums for which would be increased by reason of the
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filing of a claim thereunder with respect to such Liability) actually recovered,
net of the cost of such recovery, by the Seller Group from any third party
(including, without limitation, any insurance company) with respect thereto. In
furtherance of the immediately preceding sentence, Seller agrees to, and to
cause its Affiliates to, (i) in good faith, diligently seek recovery, at its or
their own expense, all such proceeds from all third parties with respect to all
Liabilities with respect to which it or they make or may make a claim for
indemnification hereunder and (ii) keep Purchaser fully and promptly informed of
all material matters related thereto.
(d) To the extent that the undertakings set forth in Section
10.2(a) hereof may be unenforceable, Purchaser shall contribute the maximum
amount that it is permitted to contribute under applicable Law to the payment
and satisfaction of all Liabilities incurred by the Seller Group.
Section 10.3. Indemnification by Seller.
(a) Subject to Sections 10.1, the following provisions of this
Section 10.3 and 10.4 hereof, Seller shall indemnify Purchaser and its
Affiliates (collectively, the "Purchaser Group") for, and shall hold it harmless
from, any and all Liabilities asserted against or incurred or sustained by
Purchaser Group relating to, associated with or arising out of: (i) any breach
by Seller of any covenant or agreement contained in this Agreement by Seller,
(ii) any breach by Seller of any of the warranties or representations set forth
in Article 3 of this Agreement (other than Section 3.22(g) hereof), (iii) any
Excluded Liability or Extra Contractual Obligation or (iv) any Liability related
to the Annuity Contracts or the Annuity Business, or the ownership, leasing or
use of the Purchased Assets prior to the Closing Date, regardless of whether at
the time of the Closing such Liabilities were (A) foreseen or unforeseen, (B)
known or unknown,
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(C) existing or arose in the future, (D) fixed or contingent, (E) matured or
unmatured, (F) asserted before or after the Closing Date or (G) reflected in any
of the Schedules attached hereto, other than Assumed Liabilities.
(b) Subject to Section 10.1, the following provisions of this
Section 10.3 and 10.4 hereof, Seller shall indemnify the Purchaser Group for,
and shall hold it harmless from, (i) one-half of any and all Liabilities up to
an aggregate of $3,000,000 (i.e., $1.5 million of the first $3.0 million)and
(ii) any and all Liabilities in excess of $3,000,000 asserted against or
incurred or sustained by the Purchaser Group relating to, associated with or
arising out of any breach of the representations and warranties of Seller set
forth in Section 3.22(g) hereof and Sections 2.32(g) and 2.18(b) of the JANY
Stock Purchase Agreement (without giving effect to the knowledge and materiality
qualifiers set forth therein).
(c) The Purchaser Group shall be entitled to indemnification
under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii) under the JANY
Stock Purchase Agreement, only when the aggregate amount of all Liabilities with
respect to which the Purchaser Group would otherwise be entitled to
indemnification under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii)
under the JANY Stock Purchase Agreement exceed $1.5 million. In addition, as
soon as practicable after such Liabilities exceeds $1.5 million, Seller shall
pay to Purchaser $750,000. In no event shall the amount payable by Seller and
its Affiliates to the Purchaser Group pursuant to Section 10.3(a)(ii) hereof and
9.3(a)(ii) and 9.3(a)(iii) under the JANY Stock Purchase Agreement exceeds
$240,000,000.
(d) If any event shall occur or circumstance shall exist which
would otherwise entitle the Purchaser Group to indemnification hereunder,
Liabilities shall be deemed reduced
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to the extent of any proceeds (other than (i) proceeds from self-insurance and
(ii) proceeds under experience-rated insurance policies the premiums for which
would be increased by reason of the filing of a claim thereunder with respect to
such Liability) actually recovered, net of the cost of such recovery, by the
Purchaser Group from any third party (including, without limitation, any
insurance company) with respect thereto. In furtherance of the immediately
preceding sentence, Purchaser agrees to, and to cause its Affiliates to, (i) in
good faith, diligently seek recovery, at its or their own expense, all such
proceeds from all third parties with respect to all Liabilities with respect to
which it or they make or may make a claim for indemnification hereunder and (ii)
keep Seller fully and promptly informed of all material matters related thereto.
(e) To the extent that the undertakings set forth in Section
10.3(a) hereof may be unenforceable, Seller shall contribute the maximum amount
that it is permitted to contribute under applicable Law to the payment and
satisfaction of all Liabilities incurred by the Purchaser Group.
Section 10.4. Indemnification Procedure.
(a) Within a reasonable time after obtaining knowledge
thereof, a Person who may be entitled to indemnification hereunder (the
"Indemnitee") shall promptly give the Party who may be obligated to provide such
indemnification (the "Indemnitor") written notice of any Liability which the
Indemnitee has determined has given or could give rise to a claim for
indemnification hereunder (a "Notice of Claim"); provided, however, no failure
or delay in giving any such Notice of Claim shall relieve the Indemnitor of its
obligations except, and only to the extent, that it is prejudiced thereby. A
Notice of Claim shall specify in reasonable detail the nature and all known
particulars related to a Liability. The Indemnitor shall perform its
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indemnification obligations in respect of a Liability described in a Notice of
Claim under Sections 10.2 or 10.3 hereof, as the case may be, within 30 days
after the Indemnitor shall have received such Notice of Claim.
(b) The Indemnitor shall inform the Indemnitee promptly after
the Indemnitor has made a good faith determination, based on the facts alleged
in such Notice of Claim or which have otherwise become known to the Indemnitor,
either that the Indemnitor acknowledges that it has an indemnification
obligation hereunder in respect of such Liability or that the Indemnitor has
made a good faith determination that it has no indemnification obligation
hereunder in respect of such Liability. If the Indemnitor fails to perform its
obligations under this Section 10.4, or if the Indemnitor shall have informed
the Indemnitee in writing in that the Indemnitor does not have an
indemnification obligation hereunder in respect of such Liability, then the
Indemnitee shall have the right, but not the obligation, to take the actions
which the Indemnitor would have had the right to take in connection with the
performance of such obligations and, if the Indemnitee is entitled to
indemnification hereunder in respect of the event or circumstance as to which
the Indemnitee takes such actions, then the Indemnitor shall, in addition to
indemnifying Indemnitee for the Liability, indemnify the Indemnitee for all of
the legal, accounting and other costs, fees and expenses reasonably and actually
incurred in connection therewith.
(c) The Indemnitor shall have the right and obligation, in
good faith and at its own cost and expense, to cure, remediate, mitigate, remedy
or otherwise handle any event or circumstance which gives rise to a Liability in
respect of which a Notice of Claim has been given (including events and
circumstances which can be cured, remediated, mitigated or
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remedied through the expenditure of money and events and circumstances which
give rise to a Liability which can be measured in terms of money), regardless of
the nature of such Liability. Such right and obligation shall include, without
limitation, (i) the right to investigate any such event or circumstance, and
(ii) the right to defend, contest or otherwise oppose any third party claim,
demand, suit, action or proceeding related to such event or circumstance with
legal counsel selected by it. The exercise of such right and performance of such
obligation shall not constitute an admission or agreement by Indemnitor that it
has an indemnification obligation hereunder in respect of such Liability. If the
Indemnitor proposes to settle or compromise any such third party action, demand,
claim, suit or proceeding, the Indemnitor shall give written notice to that
effect (together with a statement in reasonable detail of the terms and
conditions of such settlement or compromise) to the Indemnitee a reasonable time
prior to effecting such settlement or compromise.
(d) The Indemnitee shall have the right, but not the
obligation, to participate, at its own cost and expense, in the defense, contest
or other opposition of any such third party claim, demand, suit, action or
proceeding through legal counsel selected by it and shall have the right, but
not the obligation, to assert any and all cross-claims or counterclaims which it
may have. So long as the Indemnitor is in good faith performing its obligations
under this Section 10.4, the Indemnitee shall (i) at Indemnitor's cost and
expense, cooperate in all reasonable ways with, make its and its Affiliates'
relevant files and records available for inspection and copying by, make its and
its Affiliates' employees reasonably available to and otherwise render
reasonable assistance to the Indemnitor upon request and (ii) not compromise or
settle any such claim, demand, suit, action or proceeding without the prior
written consent of the Indemnitor.
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The Indemnitee shall have the right (i) to object to the settlement or
compromise of any such third party action, demand, claim, suit or proceeding
whereupon if such settlement is solely a cash settlement (A) the Indemnitee will
assume the defense, contest or other opposition of any such third party action,
demand, claim, suit or proceeding for its own account and as if it were the
Indemnitor and (B) the Indemnitor shall be released from any and all liability
with respect to any such third party action, demand, claim, suit or proceeding
to the extent that such liability exceeds the liability which the Indemnitor
would have had in respect of such a settlement or compromise, or (ii) to assume,
at any time by giving written notice to that effect to the Indemnitor, the cure,
mitigation, remediation, remedy or other handling of such event or circumstance
and the defense, contest or other opposition of any such third party action,
demand, claim, suit or proceeding for its own account whereupon the Indemnitor
shall be released from any and all liability with respect to such event or
circumstance and such third party action, demand, claim, suit or proceeding.
(e) After the Closing, each Party shall take all commercially
reasonable actions which may be necessary to enable the other Party to exercise
its rights and perform its obligations under this Section 10.4.
(f) Notwithstanding anything contained herein to the contrary,
each Party shall use, and shall cause its Affiliates to use, commercially
reasonable efforts to mitigate any and all damages, losses, liabilities, costs
and expenses in respect of which it may be entitled to indemnification
hereunder.
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ARTICLE 11
PUBLICITY AND CONFIDENTIALITY
Section 11.1. Publicity. Neither Party, shall or shall permit its
Affiliates to, issue any publicity, release or announcement concerning the
execution and delivery of this Agreement, the provisions hereof or the
transactions contemplated hereby without the prior written approval of the form
and content of such publicity, release or announcement by the other; provided,
however, that no such approval shall be required when such publicity, release or
announcement is required by (i) applicable Law, (ii) applicable rules or
regulations of, or any listing agreement with, a national or foreign stock
exchange or the Automated Quotation System maintained by the National
Association of Securities Dealers, Inc. or (iii) any Order of any court,
arbitrator or Governmental Entity of competent jurisdiction; and, provided
further, that, prior to issuing any publicity, release or announcement without
such prior written approval, the Party issuing or whose Affiliate is issuing
such publicity, release or announcement shall have given reasonable prior notice
to the other Party of such intended issuance and, if requested by the other
Party, shall have used reasonable efforts at such other Party's cost and expense
to obtain a protective order or similar protection for the benefit of the other
Party. In addition, with the prior written consent of the Parties, not to be
unreasonably withheld, CS First Boston and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company each may
cause to be published such tombstone advertisements with respect to the
transactions contemplated by this Agreement as it shall deem appropriate.
Nothing contained herein shall prevent the communication of information with any
Governmental Entity or any agency or other organization which rates the
financial solvency or claims-paying ability of Seller or Purchaser, including
without limitation, A.M. Best Company, Inc., Duff & ▇▇▇▇▇▇, Standard
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& Poor's Corporation and ▇▇▇▇▇'▇ Investors Services, Inc. or state insurance
departments or other regulatory bodies.
Section 11.2. Confidentiality.
(a) All data, reports, records and other information of any
kind received by a Party or its Affiliates or Representatives (such Party being
hereinafter referred to as the "Receiving Party") from the other Party or its
Affiliates or Representatives (such other Party being hereinafter referred to as
the "Delivering Party") under this Agreement or in connection with the
transactions contemplated hereby shall be treated as confidential (collectively,
"Confidential Information"). Except as otherwise provided herein, the Receiving
Party shall not use (and shall not permit its Affiliates or Representatives to
use) Confidential Information for its own (or their own) benefit and shall use
commercially reasonable efforts (and shall cause its Affiliates, directors,
officers and employees to use commercially reasonable efforts) to maintain the
confidentiality of Confidential Information. If the Receiving Party or any of
its Affiliates or Representatives is required to disclose Confidential
Information by or to any court, arbitrator or Governmental Entity of competent
jurisdiction, the Receiving Party shall, prior to such disclosure, promptly
notify the Delivering Party of such requirement and all particulars related to
such requirement. The Delivering Party shall have the right, at its own cost and
expense, to object to such disclosure and to seek confidential treatment of any
Confidential Information to be so disclosed on such terms as it shall determine.
(b) The restrictions set forth in Section 11.2(a) hereof shall
not apply to the use or disclosure of Confidential Information to the extent,
but only to the extent, (i) permitted or required pursuant to any other
agreement between or among the Parties or their respective
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Affiliates or Representatives, (ii) necessary by a Party or its Affiliates in
connection with exercising its or their rights or performing its or their duties
or obligations under this Agreement, the Ancillary Agreements or the other
agreements described in clause (i) of this sentence, (iii) contemplated by the
last two sentences of Section 11.2(a) hereof or (iv) that the Receiving Party
can demonstrate such Confidential Information (A) is or becomes generally
available to the public through no fault or neglect of the Receiving Party, (B)
is received in good faith on a non-confidential basis from a third party who
discloses such Confidential Information without violating any obligations of
secrecy or confidentiality, (C) is independently developed after the time of
receipt as shown by dated written records or (D) was already possessed at the
time of receipt as shown by prior dated written records.
(c) For the purposes of this Section 11.2, (i) information
which is specific shall not be deemed to be within an exception set forth in
Section 11.2(b) hereof merely because it is embraced by general information
which is within such an exception and (ii) a combination of information shall
not be deemed to be within an exception set forth in Section 11.2(b) hereof
merely because individual aspects of such combination are within such an
exception unless the combination of information itself, its principle of
operation and its value or advantages are within such an exception.
ARTICLE 12
MISCELLANEOUS
Section 12.1. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally (by
courier or otherwise), sent
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by certified, registered or express mail, postage prepaid and return receipt
requested, or transmitted by facsimile (with a copy of such notice or other
communication and a confirmation of transmission sent by certified, registered
or express mail, postage prepaid and return receipt requested no later than the
close of business on the next business day following such transmission) and
shall be addressed as follows:
when Purchaser is to be notified:
SunAmerica Life Insurance Company
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
SunAmerica Life Insurance Company
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Controller
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
O'Melveny & ▇▇▇▇▇
1999 Avenue of the Stars
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
when Seller is to be notified:
▇▇▇▇ ▇▇▇▇▇ Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With copies to:
▇▇▇▇ ▇▇▇▇▇ Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
Two Stamford Plaza
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
A Party may, by notice given in accordance with this Section 12.1 to the other
Party, designate another address or Person to which notices required or
permitted to be given pursuant to this Agreement shall thereafter be
transmitted. Each notice transmitted in the manner described in this Section
12.1 shall be deemed to have been given, received and become effective for all
purposes at the time it shall have been (i) delivered to the addressee as
indicated by the return receipt (if transmitted by mail), transmitted to the
addressee (if transmitted by facsimile and subject to delivery of the mailed
copy thereof) or the affidavit of the messenger (if transmitted by personal
delivery) or (ii) presented for delivery to the addressee as so indicated during
normal business hours, if such delivery shall have been refused for any reason.
Section 12.2. Entire Agreement. This Agreement (including the Ancillary
Agreements, the other agreements contemplated hereby and thereby, the JANY Stock
Purchase Agreement, the Annex, the Exhibits and the Schedules attached hereto
(the "Transaction Agreements")) contains the entire agreement and understanding
between the Parties with respect to the subject matter hereof and cancels and
supersedes all of the previous or contemporaneous agreements, representations,
warranties and understandings, whether written or oral, by or between the
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Parties with respect to the subject matter hereof. Except for the
representations and warranties expressly set forth in the Transaction
Agreements, Purchaser disclaims reliance upon (i) any representations,
warranties or guarantees (whether express or implied and whether oral or
written) by Seller, JANY or any of their Affiliates or any of their respective
Affiliates' Representatives (including, without limitation, any projections of
future sales, revenues, expenses or earnings and any statements regarding the
prospects of the Annuity Business as presently conducted by Seller) or (ii) any
other information with respect to the Annuity Business, the Purchased Assets,
Seller, JANY or their industry provided by or on behalf of them. Nothing
contained in any document or instrument of conveyance, transfer, assignment or
delivery executed or delivered at the Closing pursuant to this Agreement shall
amend, extend, modify, renew or alter in any manner any representation,
warranty, covenant, agreement or indemnity contained herein. Nothing contained
in the Transaction Agreements or in any of the Schedules hereto or thereto or in
any of the other agreement contemplated hereby or thereby shall constitute or be
interpreted or construed as an admission by any Party or any of its Affiliates
of liability to third parties, whether under Laws or otherwise, or as an
admission that any Party or any of its Affiliates are in violation of or have
ever violated any Law.
Section 12.3. Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of or approval under, this Agreement shall
be binding upon a Party unless such addition, cancellation, renewal, extension,
modification, amendment or approval is set forth in a written instrument which
states that it adds to, amends, cancels, renews or extends this Agreement or
grants an approval hereunder and which is executed and delivered on behalf of
each Party by an officer of, or attorney-in-fact for, such Party.
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Section 12.4. Waivers. No waiver of any provision of this Agreement
shall be binding upon a Party unless such waiver is expressly set forth in a
written instrument which is executed and delivered on behalf of such Party by an
officer of, or attorney-in-fact for such Party. Such waiver shall be effective
only to the extent specifically set forth in such written instrument. Neither
the exercise (from time to time or at any time) nor the delay or failure (at any
time or for any period of time) to exercise any right, power or remedy shall
operate as a waiver of, the right to exercise, or impair, limit or restrict the
exercise of part of any Party of any such right, power or remedy any other
right, power or remedy at any time and from time to time thereafter. No waiver
of any right, power or remedy of a Party shall be deemed to be a waiver of any
other right, power or remedy of such Party or shall, except to the extent so
waived, impair, limit or restrict the exercise of such right, power or remedy.
Section 12.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Each Party consents and
submits to the non-exclusive personal jurisdiction of any federal court in the
State of Delaware in respect of any proceeding for the sole purpose of
injunctive relief or to enforce an arbitration award under Section 12.10 hereof.
Each Party consents to service of process upon it with respect to any such
proceeding by registered mail, return receipt requested, and by any other means
permitted by applicable Laws. Each Party waives any objection that it may now or
hereafter have to the laying of venue of any such proceeding in federal court in
the State of Delaware and any claim that it may now or hereafter have that any
such proceeding in any such court has been brought in an inconvenient forum.
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Section 12.6. Binding Effect; Assignment; Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns. Neither Seller nor Purchaser
shall assign any of its rights or delegate any of its duties hereunder, (in
whole or in part and by operation of law or otherwise) without the prior written
consent of the other Party hereto, except that Purchaser may assign its rights
and obligations under this Agreement to any of its Affiliates provided Purchaser
shall remain liable for its obligations hereunder notwithstanding such
assignment. Any assignment of rights or delegation of duties under this
Agreement by a Party without the prior written consent of the other Party, if
such consent is required hereby, shall be void. No Person (including, without
limitation, any employee of a Party) shall be, or be deemed to be, a third party
beneficiary of this Agreement.
Section 12.7. Severability. If any provision of this Agreement shall
hereafter be held to be invalid, unenforceable or illegal, in whole or in part,
in any jurisdiction under any circumstances for any reason, (i) such provision
shall be reformed to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the Parties as
expressed in, and the benefits to the Parties provided by, this Agreement or
(ii) if such provision cannot be so reformed, such provision shall be severed
from this Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to this
Agreement) so as to give effect to the intent as so expressed and the benefits
so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other
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circumstances. Neither such holding nor such reformation or severance shall
affect or impair the legality, validity or enforceability of any other provision
of this Agreement.
Section 12.8. Headings. The headings in this Agreement have been
inserted for convenience of reference only, and shall not be considered a part
of this Agreement and shall not limit, modify or affect in any way the meaning
or interpretation of this Agreement.
Section 12.9. Counterparts. This Agreement may be executed by the
parties in any number of counterparts, each of which when so executed and
delivered shall constitute an original instrument, but all such counterparts
shall together constitute one and the same instrument. This Agreement shall
become effective and be deemed to have been executed and delivered by all of the
Parties at such time as counterparts shall have been executed and delivered by
both of the Parties, regardless of whether each of the Parties has executed the
same counterpart. It shall not be necessary when making proof of this Agreement
to account for any counterparts other than a sufficient number of counterparts
which, when taken together, contain signatures of both of the Parties.
Section 12.10. Arbitration. The Parties acknowledge and agree that the
transactions contemplated herein substantially affect and impact interstate
commerce. Therefore, all disputes or differences between Seller and Purchaser
arising under or which are related to this Agreement (other than proceedings for
the sole purpose of injunctive relief) upon which an amicable understanding
cannot be reached within 30 days shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
except as hereinafter provided, and judgment upon the award entered by the
Arbitrators (as defined below) may be entered in any court having jurisdiction
thereof. The Arbitrators provided for herein shall
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construe this Agreement in light of the prevailing custom and practices for
acquisition transactions of a similar nature. The "Arbitrators" shall consist of
one neutral arbitrator (or as provided below, three neutral arbitrators). The
Parties agree that the arbitration, if implemented under this Agreement, shall
be held at a site selected by the Arbitrators. The Parties agree to arbitrate
within 90 days following the transmittal of written demand of either Party to
arbitrate any dispute arbitrable under this Agreement. The Parties will in good
faith, within 15 days following notice of written demand to arbitrate attempt to
agree on a single Arbitrator. If the Parties cannot within 15 days thereafter
agree on a single arbitrator, each of the Parties shall appoint an Arbitrator,
notifying the other Party of the name and address of such Arbitrator. The
Arbitrators appointed by each Party shall agree upon and appoint a third neutral
Arbitrator. If either Party shall fail to appoint an Arbitrator as herein
provided, or should the two Arbitrators so named fail to select the third
Arbitrator within 30 days after their appointment, then, in either event, the
President of the American Arbitration Association or its successor shall appoint
such second and/or third Arbitrator. A decision of a majority of the Arbitrators
shall be final and binding and there shall be no appeal therefrom. The
Arbitrators shall within 45 days after the final hearing enter an award and the
award shall be supported by a written opinion. The fees of the Arbitrators and
the direct costs of the arbitration shall be shared equally by the Parties; all
other costs of the respective Parties, including without limitation fees and
expenses of the respective Party's attorneys, witnesses, and discovery shall be
paid by the respective Party, except to the extent that the Arbitrators
otherwise direct based on the equities of the situation. The arbitration shall
be held in New York, New York, unless otherwise agreed between the Parties.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
▇▇▇▇ ▇▇▇▇▇ LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
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ANNEX A
The following terms are defined in the following Sections.
DEFINED TERM SECTION
------------ -------
Administrative Services Agreement 1.5
Agreement Introduction
Ancillary Agreements 1.5
Annuity Business Introduction
Antitrust Division 5.4
Applicable Survival Period 10.1
Assigned Contracts 1.2
Assignment and Assumption Agreement 1.5
Assumed Liabilities 2.1
Assumption Reinsurance Agreement 1.5
▇▇▇▇ of Sale 1.5
Books and Records 1.2
Capital Loss 1.3
Capital Gain 1.3
Ceding Commission 1.3
Closing Date Adjustments 1.3
Closing Date Ceding Commission 1.3
Closing 1.1
Closing Date 1.1
Code 3.8
Competing Business 8.7
Confidential Information 11.2(a)
Continuing Employees 8.4
Delivering Party 11.2(a)
Dividend Declaration Date 8.8
Estimated Closing Date Statement 1.3
Excluded Transactions 1.3
Final Closing Adjustments 1.7
Final Closing Date Statement 1.7
FTC 5.4
Houston 8.7
HSR Act 3.5
Indemnitee 10.4(a)
Indemnitor 10.4(a)
Indemnity Reinsurance Agreement 1.5
Independent Party 1.7
Interim ▇▇▇▇ ▇▇▇▇▇ Financial Statements 3.25
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Interim SunAmerica Financial Statements 4.7
JANY Stock Purchase Agreement Introduction
JANY Stock Introduction
JANY Introduction
▇▇▇▇ ▇▇▇▇▇ 3.25
Liabilities 10.2(a)
License Agreement 1.5
Liens 3.4
Net Cash Flows 1.3(c)(i)
NOLHGA 2.2
Notice of Claim 10.4(a)
Oxford Agreement 5.11
Oxford Annuity Contracts 5.11
Oxford Put 5.11
Parties Introduction
Party Introduction
Permits 3.4
Permitted Mortgage Liens 3.22
Policy Loans 1.2
Portfolio Securities 1.2
Purchased Assets 1.2
Purchaser Introduction
Purchaser Financial Statements 4.7
Purchaser Group 10.3(a)
Purchaser's Opinion 1.5
Receiving Party 11.2(a)
Reinsurance Premium 1.2
Rejected Mortgage 1.2
Reserve Liabilities 3.17
Restricted Period 8.7
Seller Introduction
Seller Group 10.2(a)
Seller's Opinion 1.5
SunAmerica 4.7
SunAmerica Financial Statements 4.7
Termination Date 9.1
Third Party Administration Agreements 3.25
Transition Services Agreement 1.5
Transaction Agreements 12.2
Trust Agreement 1.5
Trustee 1.5
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"Accrued and Unpaid Investment Income" means the aggregate accrued but
unpaid interest through and including the Closing Date on bonds, mortgages and
other interest bearing instruments included in the Closing Date Portfolio
Securities plus accrued but unpaid interest through and including the Closing
Date on any and all Policy Loans related to the Policy Loan Balance plus
declared but unpaid dividends on Preferred Stock.
"Action" means any action, claim, complaint, cause of action,
arbitration, petition, investigation, suit or administrative or other
proceeding, whether civil or criminal, at law or in equity, before any court,
arbitrator or Governmental Entity.
"Adjusted Capital and Surplus of JANY" means, as of the Closing Date,
capital and surplus plus asset valuation reserves of JANY as shown on lines 38,
11.4 and 24.1 of page 3 of the 1995 Annual Statement of JANY, calculated as of
the Closing Date in a manner consistent with such calculation at year end.
"Affiliate" shall mean any Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified. For purposes of this definition, "control"
(and its derivative terms "controlled," "controls," etc.) shall mean the power
and right to direct the management and policies of another Person, whether by
ownership of voting securities, the ability to elect a majority of the board of
directors or other managing board or committee, management contract, or
otherwise.
"Annuity Contracts" means all policies described on Schedule 3.8(a)
attached hereto. Annuity Contracts as used in this Agreement is intended to
refer to all single premium deferred annuity policies, flexible premium deferred
annuity policies, single premium immediate annuity policies, supplementary
contracts and guaranteed investment contracts included in the Annuity Business
which are in-force as of the Closing Ledger Date, as well as any riders
providing for other supplemental benefits, and all supplements, endorsements,
riders and ancillary agreements in connection therewith and specifically
includes without limitation (i) all lapsed Annuity Contracts that are reinstated
and (ii) any supplemental benefits arising out of the Annuity Contracts.
Notwithstanding anything to the contrary in this Agreement, "Annuity Contracts"
shall not include (i) any policy for which the reserves or applicable premiums
are not actually transferred to Purchaser, (ii) any policy not described in
Schedule 3.8(b) attached hereto, (iii) Annuity Contracts issued on or prior to
April 1, 1978, (iv) single premium immediate annuities and supplementary
contracts involving life contingencies, (v) universal life flexible premium
deferred annuity riders, (vi) annuity policies assumed by Seller from Aristar
Life Insurance Company and (vii) if the Oxford Put is implemented pursuant to
Section 5.10 hereof, the Oxford Annuity Contracts. For purposes of the
representations and warranties of Seller set forth in Article 3 hereof, the term
"Annuity Contracts" shall be deemed to include policies described on Schedule
3.8(a) attached hereto sold after the Closing Ledger Date and on or prior to the
Closing Date or which terminated after the Closing Ledger Date and on or prior
to the Closing Date.
"Book Value" means book value computed in accordance with SAP, without
marking to market and without including Accrued and Unpaid Investment Income.
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"Business Day" means any day on which banks and other financial
institutions are not required to be closed pursuant to applicable Laws in any of
New York, New York, Los Angeles, California and Miami, Florida.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act.
"Closing Date Portfolio Securities" means the cash, securities,
mortgage loans and other assets of Seller identified on Schedule 1.2(a)(i)
attached hereto (which Schedule also sets forth the Book Value of each such
asset as of October 21, 1996) (the "October 21 Portfolio Securities"), (i) less
the Rejected Mortgages, (ii) less any such assets which have been sold before
the Closing Date with the approval of Purchaser in accordance with Section
5.1(c)(i) hereof, (iii) less any October 21 Portfolio Securities that have
matured or been redeemed in accordance with their terms between October 21, 1996
and the Closing Date.
"Closing Ledger Date" means the 21st day of the month in which the
Closing occurs or, if such day is not a Business Day, on the next preceding
Business Day.
"Combined Reserve Liabilities" means the Reserve Liabilities for
Annuity Contracts plus all reserves with respect to JANY's Insurance Contracts
(as defined in the JANY Stock Purchase Agreement), in the aggregate.
"Commercially reasonable efforts" when used with respect to any Party,
means the reasonable efforts of such Party without the requirement that such
Party incur any extraordinary out-of-pocket expenses, incur any other
unanticipated burden or commence or pursue any action, suit or proceeding.
"Environmental Laws" means any Law pertaining to health, industrial
hygiene or the environmental condition on or under any property including,
without limitation, CERCLA and the Toxic Substance Control Act, and the rules
and regulations thereunder.
"Excluded Liabilities" means (i) all liability for premium taxes
arising on account of premiums paid on or prior to the Closing Ledger Date with
respect to the Annuity Contracts, (ii) all liability for commission payments and
other fees or compensation payable with respect to the Annuity Contracts to or
for the benefit of brokers and agents and other distribution sources, to the
extent that such amounts are based on premiums paid on or prior to the Closing
Ledger Date, (iii) trailer commissions (which are based upon account values)
accruable on or prior to the Closing Ledger Date and (iv) all Guaranty Fund
Assessments imposed as a result of a conservatorship or other insolvency
proceeding commenced on or prior to the Closing Date with respect to the Annuity
Contracts.
"Excluded Transactions" means with respect to the June 21 Portfolio
Securities the sale or assignment of such Portfolio Securities which resulted in
(i) $1,174,000 of capital losses on bonds, (ii) $1,072,000 in capital gains on
bonds, (iii) $3,107,000 of losses due to mortgage write
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downs and sales, and (iv) $161,000 of gains on mortgage prepayments, as set
forth on the Schedule attached hereto entitled "Excluded Transactions."
"Execution Date" means the date of this Agreement.
"Extra Contractual Obligations" means all liabilities (i) for
compensatory, consequential, exemplary, punitive or similar damages which
directly relate to any alleged or actual act, error, omission, fraud or
misrepresentation by Seller, any of its Affiliates or any of its or its
Affiliates' officers or employees, whether intentional or otherwise, prior to
the Closing Date, or (ii) from any actual or alleged reckless conduct or bad
faith by Seller, any of its Affiliates or any of its or its Affiliates' officers
or employees in connection with Seller's handling of any claim under any of the
Annuity Contracts or in connection with the issuance, offer, sale, delivery,
cancellation or administration by Seller or any of its Affiliates or any of its
or its Affiliates' officers or employees of any of the Annuity Contracts or
(iii) in connection with any acceleration of the benefits under the Annuity
Contracts or any claims for the present value of the Annuity Contracts, in
either case, in connection with rehabilitation, liquidation, receivership or
other similar proceedings filed against Seller.
"Final Closing Net Assets" means the sum of (i) the Book Value of the
Closing Date Portfolio Securities as of the Closing Date as set forth on the
Final Closing Date Statement, (ii) any cash deposited in the Trust pursuant to
Section 1.2(c) hereof and (iii) the Policy Loan Balance as set forth on the
Final Closing Date Statement, which sum will be (x) increased by any amount paid
by Seller pursuant to Section 1.3(d)(i) hereof or (y) decreased by the amount
paid by Purchaser pursuant to Section 1.3(d)(ii) hereof.
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time, consistently applied throughout the
specified period and in the immediately prior comparable period.
"Governmental Entity" means any agency, administrative division or
department (or administrative subdivision), commission, regulatory authority
(including without limitation any insurance regulatory authority), taxing or
administrative authority, court or other judicial body, legislature of the
government of the United States or any state, city, municipality, county, town,
district or other political subdivision thereof or any state, city,
municipality, county, town, district or other political subdivision thereof or
any quasi-governmental entity, including, without limitation, the employees or
agents thereof.
"Hazardous Substance" means (i) any and all substances defined as
"hazardous substances," "extremely hazardous substances," "toxic substances,"
"hazardous waste," "hazardous materials" or "infectious waste" for purposes of
CERCLA or any other Environmental Law and (ii) any petroleum or petroleum-based
products.
"Insurance Liabilities" means only the contractual liabilities and
obligations of Seller arising under the Annuity Contracts, as evidenced by the
written policy forms and riders, and
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no other liabilities whatsoever. Without limiting the foregoing, Insurance
Liabilities shall not include Excluded Liabilities or any Extra Contractual
Obligations.
"June 21 Portfolio Securities" means the cash, securities, mortgage
loans and other assets identified on Schedule 1.2(a)(i) as of June 21, 1996.
"Laws" means any and all federal, state or local statutes, laws,
ordinances, rules and regulations.
"Loan Documents" means the Mortgage Note, the Mortgage and any and all
other agreements, certificates, documents or instruments in Seller's possession
or under its control relating to the origination, closing and modification of a
Mortgage Loan, including without limitation any related assignment of rents,
security agreement, UCC financing statement, guaranty, letter of credit, pledge
agreement, loan agreement or other instrument creating a security interest in,
and Lien upon, real and/or personal property.
"Market Value" means (i) with respect to any publicly traded security,
the last reported sales price on the business day immediately preceding the date
on which such valuation is being made, (ii) with respect to other (private)
securities, the value estimated using publicly quoted market prices for similar
securities, as identified by Seller, increased by 30 basis points and (iii) with
respect to mortgages, the GAAP book value per Seller's financial statements.
"Material Adverse Effect" means any change, effect, event or occurrence
that has, or is reasonably likely to have, individually or in the aggregate, a
material adverse impact on (i) the assets, business, financial position or
results of operations of the Annuity Business, the Annuity Contracts or the
Purchased Assets or (ii) the ability of Seller to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements; provided that
"Material Adverse Effect" shall be deemed to exclude the impact of (i) changes
in Laws, or interpretations thereof by any Governmental Entity, relating to or
affecting the Annuity Business and (ii) changes in GAAP or SAP.
"Material Adverse Effect on Purchaser" means any change, effect, event
or occurrence that has, or is reasonably likely to have, individually or in the
aggregate, a material adverse impact on (i) the business, financial position or
results of operations of Purchaser (either before or after the Closing and the
closing under the JANY Stock Purchase Agreement) or (ii) the ability of
Purchaser to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements; provided that "Material Adverse Effect on Purchaser" shall
be deemed to exclude the impact of (i) changes in Laws or interpretations
thereof by any Governmental Entity relating to or affecting the business of
Purchaser and (ii) changes in GAAP or SAP.
"Mortgage" means the mortgage, deed of trust or other instrument (and
all modifications thereto) creating a lien on real property described therein or
on the tenant's interest under a ground lease of real property described
therein, in either case securing a Mortgage Note.
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"Mortgage Loan" means any individual mortgage loan that is identified
on the Mortgage Loan Schedule.
"Mortgage Loan Principal Balance" means, with respect to any Mortgage
Loan, the unpaid principal balance as of the date specified in the Mortgage Loan
Schedule.
"Mortgage Loan Schedule" means the list of Mortgage Loans subject to
this Agreement and identified on Schedule 3.22(a) attached hereto, which
schedule sets forth the following information with respect to each Mortgage Loan
as of the date specified therein.
(i) the Mortgage Loan numbers;
(ii) the name of the mortgagor and the name or address of
the Mortgaged Property;
(iii) the Mortgage Loan Principal Balance;
(iv) lien priority of the Mortgage;
(v) the maturity date; and
(vi) the current interest rate.
(vii) the Mortgage Loan Status (current, litigation,
bankruptcy, tax plans, etc.).
"Mortgage Note" means the note or other evidence of the indebtedness
under a Mortgage Loan.
"Mortgaged Property" means the land and improvements that secure a
Mortgage, which in the case of a leasehold mortgage shall mean the tenant's
interest in the real property underlying the ground lease or, where the context
so requires, the real property underlying the ground lease.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Other Liabilities" means (i) all liability for premium taxes arising
on account of premiums paid to Purchaser with respect to the Annuity Contracts
after the Closing Ledger Date, (ii) all liability for commission payments and
other fees or compensation payable with respect to the Annuity Contracts to or
for the benefit of brokers and agents and other distribution sources, to the
extent that such amounts are based on premiums paid to Purchaser after the
Closing Ledger Date, (iii) trailer commissions (which are based upon account
values) accruable after the Closing Ledger Date and (iv) all Guaranty Fund
Assessments imposed as a result of
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conservatorship or other insolvency proceedings commenced subsequent to the
Closing Date with respect to the Annuity Contracts.
"Person" shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company, proprietorship,
trust, union, association, court, tribunal, agency, government, department,
commission, self-regulatory organization, arbitrator, board, bureau,
instrumentality, or other entity, enterprise, authority, or business
organization.
"Policyholders" means, as applicable, the beneficiaries under, or
policyholders with respect to, or owners of, the Annuity Contracts, or any other
Person entitled to payment with respect to the Annuity Contracts.
"Policy Loan Balance" means the aggregate outstanding principal amount
of all Policy Loans as of a date of calculation (other than the Policy Loans
associated with the Oxford Annuity Contracts in the event the Oxford Put is
implemented).
"Qualified Investments" means (A) readily marketable direct obligations
of the Government of the United States or any agency or instrumentality thereof
or obligations unconditionally guaranteed by the full faith and credit of the
Government of the United States; (B) demand deposits with (1) any commercial
bank that is a member of the Federal Reserve System, the parent of which issues
commercial paper rated at least "P-1" (or the then equivalent grade) by ▇▇▇▇▇'▇
and "A-1" (or the then equivalent grade) by S&P, is organized under the Laws of
the United States or any State thereof and is rated "TBW-1" or the equivalent or
better by Thomson BankWatch or any other nationally recognized agency or, (2) a
United States branch or agency of any commercial bank organized under the Laws
of any Organization for Economic Cooperation and Development member country (as
of the Execution Date of this Agreement) which is rated "TBW-1" or the
equivalent or better by Thomson BankWatch or other internationally recognized
agency; (C) commercial paper issued by any corporation rated at least P-1 or the
then equivalent grade by ▇▇▇▇▇'▇ and A-1 or the then equivalent grade by S&P;
(D) money market mutual funds (i) whose portfolio is comprised solely of (1)
marketable direct obligations of the United States government or its agencies,
and/or (2) bank or corporate obligations which individually meet the rating
criteria stipulated in (B) or (C) above, (ii) whose total net assets exceed $1
billion and (iii) where the Seller's investment in such fund is limited to an
amount not exceeding 10% of such fund's assets; or (E) such other assets as the
Party receiving such Qualified Investments may expressly approve in writing.
"Related Agreements" means the agreements providing for the payment of
commissions relating to the Annuity Contracts.
"Representatives" means, with respect to any Person, such person's
Affiliates, subsidiaries, shareholders, directors, partners, joint ventures,
officers, employees, agents, representatives, producers, independent
contractors, consultants, lenders, brokers, finders, investment bankers,
financial advisors, attorneys and accountants. Seller's Representatives
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include without limitation CS First Boston. Purchaser's Representatives
include without limitation ▇▇▇▇▇▇▇ Sachs & Company.
"Service Transfer Date" means the date which is nine months from the
Closing Date, unless an earlier date is agreed to in writing by Seller and
Purchaser.
"SAP" means the statutory accounting principals and practices, as in
effect from time to time, required or permitted for life insurance companies by
applicable Laws of the National Association of Insurance Commissioners and the
insurance regulatory authority in the state in which the company in question is
domiciled, consistently applied throughout the specified period and in the
immediately prior comparable period.
"Taxes" shall mean all taxes, charges, fees, levies, or other similar
assessments, including, without limitation, income, gross receipts, ad valorem,
premium, excise, real property, personal property, windfall profit, sales, use,
transfer, licensing, withholding, employment, payroll, and franchise taxes
imposed by any Governmental Entity; and such term shall include any interest
(through the date of payment), penalties, assessments, or additions to tax
resulting from, attributable to, or incurred in connection with any such tax or
any contest or dispute thereof.
"Tax Returns" shall mean returns, declarations, statements, reports,
schedules, forms and information returns and any amended Tax Return required to
be supplied to a taxing authority in respect of or relating to Taxes.
9
108
EXHIBIT K
Loan Documentation
With respect to each Mortgage Loan, Seller has in its possession each
of the following items:
1. A summary of the terms of the Loan as presented to and approved by
Seller's loan committee.
2. An original promissory note (or a certified copy thereof) executed
by the borrower or its agent endorsed in favor of Seller showing the
Participant's respective interests therein.
3. An original recorded deed of trust or mortgage executed by the
borrower or its agent with applicable exhibits and riders.
4. An original policy of lender's title insurance and applicable
endorsements.
5. Evidence of the current Hazard Insurance Policy.
6. Evidence of current Flood Insurance, if applicable.
7. An original commitment letter to borrower, if available.
8. A certificate of occupancy, if available.
9. Credit report(s) with respect to the borrower prepared by Seller or
at Seller's request, if available.
10. Financial statements of the borrower current as of the date of the
Mortgage Loan application, executed by the borrower disclosing the ability to
repay the Mortgage Loan if applicable, and any updates thereof.
11. Franchise agreements, if applicable.
12. Partnership agreements, if applicable.
13. Current rent rolls if available in Seller's files.
14. An appraisal prepared for Seller executed prior to the approval of
the Mortgage Loan application by persons duly appointed and qualified as
appraisers by Seller's board of directors which appraisal discloses the market
value of the Mortgaged Property, containing sufficient information regarding the
Mortgaged Property to substantiate the appraisal.
15. Any and all documentation evidencing release of any part of the
pledged collateral, showing portion released, the consideration paid and the
approval obtained.
109
Exhibit L
Marketing Agreement Terms
The Marketing Agreement will contain, among other things, the following
terms and such other terms and conditions as may be mutually acceptable to the
Parties:
a. ▇▇▇▇ ▇▇▇▇▇ shall market the following investment products of
SunAmerica and its Affiliates:
- SunAmerica's market value adjusted products
- S&P Index Annuity
- at least four current ▇▇▇▇ ▇▇▇▇▇ products selected by ▇▇▇▇
▇▇▇▇▇ that SunAmerica will refile and sell under its own name.
b. ▇▇▇▇ ▇▇▇▇▇ shall continue (through the date of termination of
the Transition Services Agreement) to make ▇▇▇▇ ▇▇▇▇▇ products
available to their marketing organization. Any product sales
after closing of these products will be reinsured through
SunAmerica.
c. The terms and conditions of the agreement between ▇▇▇▇ ▇▇▇▇▇
and SunAmerica shall be no less favorable to SunAmerica than
the terms and conditions of the agreement between ▇▇▇▇ ▇▇▇▇▇
and North Star Marketing relating to annuity products and
between any other firms that market their annuity products
through NorthStar.
d. ▇▇▇▇ ▇▇▇▇▇ and NorthStar will position the SunAmerica products
it is marketing in a position no less prominent than other
products it markets.
e. The agreements shall have a three year term with customary
termination provisions.
Except with respect to the agreement to negotiate in good faith towards
a marketing agreement, this Exhibit N is not intended to, and does not,
constitute a complete statement of, or a legally binding or enforceable
agreement or commitment on the part of Seller or Purchaser with respect to, the
matters described herein and Seller and Purchaser agree not to assert any
argument to the contrary. A marketing agreement will arise only as a result of
the negotiation, execution and delivery of formal written agreements containing
terms and conditions satisfactory to the Parties.