Exhibit 2.3
ACQUISITION AGREEMENT
BY AND BETWEEN
CITIGROUP INC.
AND
METLIFE, INC.
DATED AS OF JANUARY 31, 2005
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS
Section 1.1 Certain Defined Terms.............................................. 1
Section 1.2 Index to Defined Terms............................................. 17
Section 1.3 Construction; Absence of Presumption............................... 23
Section 1.4 Headings........................................................... 24
ARTICLE II PURCHASE AND SALE
Section 2.1 Purchase and Sale of the Transferred Shares........................ 24
Section 2.2 Closing Date Purchase Price........................................ 24
Section 2.3 Closing Date Balance Sheet; Payments on the Settlement Date........ 24
Section 2.4 Allocation of Purchase Price....................................... 26
ARTICLE III THE CLOSING
Section 3.1 Closing............................................................ 27
Section 3.2 Preliminary Information............................................ 27
Section 3.3 Sellers' Deliveries at Closing..................................... 28
Section 3.4 Purchaser's Deliveries at Closing.................................. 29
Section 3.5 Proceedings at Closing............................................. 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS
Section 4.1 Organization and Good Standing..................................... 30
Section 4.2 Shares in Acquired Subsidiaries; Interests in Joint Ventures....... 30
Section 4.3 Authorization; Binding Obligations................................. 31
Section 4.4 No Conflicts....................................................... 31
Section 4.5 Approvals.......................................................... 31
Section 4.6 Litigation......................................................... 32
Section 4.7 Compliance with Requirements of Law................................ 32
Section 4.8 Financial Statements............................................... 32
Section 4.9 Title.............................................................. 33
Section 4.10 Sufficiency of Assets.............................................. 34
Section 4.11 Employee Benefit Plans; Employee Matters........................... 34
Section 4.12 Undisclosed Liabilities............................................ 36
Section 4.13 Absence of Certain Changes......................................... 36
Section 4.14 Real Property...................................................... 36
Section 4.15 Permits............................................................ 37
Section 4.16 Certain Contracts.................................................. 37
Section 4.17 Intellectual Property.............................................. 38
Section 4.18 Taxes.............................................................. 39
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Section 4.19 Affiliate Transactions............................................. 42
Section 4.20 Regulatory Filings................................................. 43
Section 4.21 Reinsurance........................................................ 44
Section 4.22 Portfolio Investments.............................................. 44
Section 4.23 Acquisition of Shares for Investment............................... 44
Section 4.24 Environmental Matters.............................................. 45
Section 4.25 Brokers............................................................ 45
Section 4.26 Registered Management Investment Companies......................... 45
Section 4.27 Insurance.......................................................... 47
Section 4.28 Bank Holding Company Act........................................... 47
Section 4.29 No Parent Stockholder Vote Required................................ 47
Section 4.30 Property and Casualty Business..................................... 47
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1 Organization and Good Standing..................................... 48
Section 5.2 Capital Structure.................................................. 48
Section 5.3 Authorization; Binding Obligations................................. 48
Section 5.4 No Conflicts....................................................... 49
Section 5.5 Approvals.......................................................... 49
Section 5.6 Litigation......................................................... 49
Section 5.7 Compliance with Requirements of Law................................ 49
Section 5.8 SEC Filings and Financial Statements............................... 50
Section 5.9 Financing.......................................................... 51
Section 5.10 Absence of Certain Changes......................................... 51
Section 5.11 Acquisition of Transferred Shares for Investment................... 51
Section 5.12 No Purchaser Stockholder Vote Required............................. 51
Section 5.13 Brokers............................................................ 51
ARTICLE VI COVENANTS
Section 6.1 Conduct of Business................................................ 52
Section 6.2 Certain Transactions............................................... 55
Section 6.3 Additional Sellers' Covenants...................................... 56
Section 6.4 Access and Confidentiality......................................... 56
Section 6.5 Notice of Changes.................................................. 59
Section 6.6 Efforts; Filings................................................... 59
Section 6.7 Approval of New Fund Contracts..................................... 60
Section 6.8 Further Assurances................................................. 62
Section 6.9 Notice of Proceedings.............................................. 62
Section 6.10 Guaranties; Letters of Credit; Intercompany Agreements............. 62
Section 6.11 Certain Other Actions.............................................. 63
Section 6.12 Names of Acquired Subsidiaries..................................... 63
Section 6.13 Related Agreements................................................. 63
Section 6.14 Restructuring...................................................... 64
Section 6.15 Employee Matters................................................... 64
Section 6.16 Stock Exchange Listing............................................. 67
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Section 6.17 Noncompetition; Nonsolicitation.................................... 68
Section 6.18 RBC Ratio.......................................................... 70
Section 6.19 Cooperation........................................................ 71
Section 6.20 Security Information............................................... 72
Section 6.21 Asset Valuation.................................................... 72
Section 6.22 Certain Intellectual Property Matters.............................. 73
Section 6.23 Termination of Specified Third-Party Investment
Advisory Agreements............................................. 74
ARTICLE VII CONDITIONS PRECEDENT
Section 7.1 Conditions of All Parties to Closing............................... 74
Section 7.2 Conditions to Obligations of Purchaser to Close.................... 75
Section 7.3 Conditions to Obligations of Sellers to Close...................... 75
ARTICLE VIII TAX MATTERS
Section 8.1 Allocation of Taxes and Indemnification............................ 76
Section 8.2 Tax Returns and Refunds............................................ 81
Section 8.3 Conveyance Taxes................................................... 83
Section 8.4 Section 338(h) (10) Elections...................................... 83
Section 8.5 Resolution of All Tax Related Disputes............................. 85
Section 8.6 Survival of Tax Provisions......................................... 85
Section 8.7 Exclusivity........................................................ 85
Section 8.8 Tax Sharing Agreements............................................. 85
Section 8.9 Characterization of Indemnification Payments....................... 86
Section 8.10 Cooperation, Exchange of Information and Record Retention.......... 86
Section 8.11 Tax Benefits....................................................... 87
ARTICLE IX TERMINATION
Section 9.1 Termination........................................................ 88
Section 9.2 Special Termination................................................ 89
Section 9.3 Effect of Termination.............................................. 89
ARTICLE X INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties and Covenants........... 89
Section 10.2 Indemnification of Purchaser....................................... 89
Section 10.3 Indemnification of Sellers......................................... 90
Section 10.4 Claims............................................................. 90
Section 10.5 Limitations; Payments.............................................. 92
Section 10.6 Insurance; Tax Benefits............................................ 94
Section 10.7 Remedies Exclusive................................................. 95
Section 10.8 Mitigation......................................................... 95
Section 10.9 Tax Indemnification................................................ 95
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ARTICLE XI MISCELLANEOUS
Section 11.1 Notices............................................................ 95
Section 11.2 Governing Law...................................................... 96
Section 11.3 Jurisdiction; Venue; Consent to Service of Process................. 96
Section 11.4 Entire Agreement................................................... 97
Section 11.5 Amendment, Modification and Waiver................................. 97
Section 11.6 Severability....................................................... 97
Section 11.7 Successors and Assigns; No Third-Party Beneficiaries............... 97
Section 11.8 Publicity.......................................................... 98
Section 11.9 Use of Logos to Announce Transaction............................... 98
Section 11.10 WAIVER OF JURY TRIAL............................................... 98
Section 11.11 Expenses........................................................... 98
Section 11.12 Specific Performance and Other Equitable Relief.................... 98
Section 11.13 Counterparts....................................................... 99
Section 11.14 No Other Representations or Warranties............................. 99
EXHIBITS:
Exhibit A-1 Transferred Subsidiaries
Exhibit A-2 Acquired Subsidiaries
Exhibit B-1 Form of Domestic Distribution Agreements
Exhibit B-2 Form of International Distribution Agreements
Exhibit C Terms of Investment Management Agreement
Exhibit D Terms of Licensing Agreement
Exhibit E Terms of Investor Rights Agreement
Exhibit F Restructuring Transactions
Exhibit G Terms of Transition Services Agreement
Exhibit H Terms of Purchaser Convertible Preferred Stock
Exhibit I Transition Planning
Exhibit J Use of Logo
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this "Agreement") is entered into as of
January 31, 2005, by and between Citigroup Inc., a Delaware corporation
("Parent"), and MetLife, Inc., a Delaware corporation ("Purchaser") (together
with Parent, the "Parties," and each, individually, a "Party").
RECITALS
WHEREAS, certain indirect Subsidiaries (as defined herein) of Parent
set forth in Exhibit A-1 hereto (the "Transferred Subsidiaries") and certain of
their Subsidiaries set forth in Exhibit A-2 (together with the Transferred
Subsidiaries, the "Acquired Subsidiaries") conduct the Business (as defined
herein); and
WHEREAS, upon the terms and subject to the conditions set forth
herein, Sellers (as defined herein) desire to sell to Purchaser, and Purchaser
desires to purchase from Sellers, all of the outstanding shares of capital stock
(or equivalent equity interests) of the Transferred Subsidiaries owned by
Sellers (the "Transferred Shares").
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound,
the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement,
unless the context requires otherwise, the following terms shall have the
following meanings:
"Acquired Domestic Subsidiaries" shall mean those Acquired
Subsidiaries that are created or organized in the United States or under
the Law of the United States or of any state thereof.
"Acquired Foreign Subsidiaries" shall mean those Acquired Subsidiaries
that are not Acquired Domestic Subsidiaries.
"Acquired Intellectual Property" shall mean the Owned Intellectual
Property and the Licensed Intellectual Property.
"Adjusted Capital and Surplus" shall mean, for TIC or CLIC, (i) its
capital and surplus determined in accordance with SAP applied in a manner
consistent with its past practice, plus (ii) its asset valuation reserve
and the asset valuation reserves of its subsidiaries, determined in
accordance with SAP applied in a manner consistent with its past practice,
plus (iii) if the transaction set forth in Section 1.1(a) of the Sellers
Disclosure Letter shall have been consummated, the statutory capital impact
of such transaction, but in no event more than $50 million, minus (iv) the
amount of any cash dividends contemplated to be made by TIC or CLIC on
Exhibit F which have not been made prior to the Closing (calculated pro
rata, in the case of quarterly dividends).
"Affiliate" shall mean, with respect to any Person, any other Person
that directly or indirectly, through one or more intermediaries, controls,
is controlled by or is under common control with such first Person. The
term "control" (including its correlative meanings "controlled by" and
"under common control with") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). For the avoidance of doubt, the Joint
Ventures shall not be deemed Affiliates of any of the Acquired
Subsidiaries.
"AFJP" shall mean Siembra Administradora de Fondos de Jubilaciones y
Pensiones S.A.
"AHLIC" shall mean American Health & Life Insurance Company.
"Annuity Contract" shall mean any annuity contract, funding agreement,
guaranteed investment contract or similar contract, including endorsements,
riders and amendments thereto, and forms with respect thereto, issued,
assumed, reinsured, exchanged, modified, marketed or administered by the
Acquired Subsidiaries.
"Aon Report" shall mean the analysis and report prepared by Parent and
its Affiliates and to be reviewed and signed by Aon Corporation or one of
its Affiliates that will identify the products, if any, issued, assumed,
exchanged, modified, sold or marketed by any of the Acquired Subsidiaries
that are not compliant with applicable Tax Law.
"Applicable Argentina Losses" shall mean Losses arising from or
relating to (i) claims relating to the pesification prior to the date
hereof, pursuant to the decrees specified in Section 1.1(b)(i) of the
Sellers Disclosure Letter, of Insurance Contracts to which any of the
Applicable Argentina Subsidiaries is a party or to which any of the assets
of the Applicable Argentina Subsidiaries is subject, less any specific
reserves therefor on SSdRSA's or SSdVSA's books, (ii) death and disability
claims of AFJP customers from policies set forth in Section 1.1(b)(ii) of
the Sellers Disclosure Letter incurred as of the Closing Date in excess of
the reserves on the Closing Date Balance Sheet, (iii) the failure by AFJP
to achieve the target performance guarantee specified in Section
1.1(b)(iii) of the Sellers Disclosure Letter by virtue of the investment of
funds in Argentinean sovereign (federal and provincial) debt and (iv)
claims by or on behalf of AFJP customers alleging breach of fiduciary duty,
mismanagement or the like, by reason of (x) investment decisions by AFJP
prior to the Closing Date of such customers' assets in Argentinean
sovereign (federal and provincial) debt defaulted prior to the Closing Date
or (y) the debt exchange of January 17, 2005 pursuant to the decree set
forth in Section 1.1(b)(iv) of the Sellers Disclosure Letter; provided that
the Applicable Argentina Losses shall not include any Losses not expressly
included in clauses (i) to (iv) above.
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"Applicable Argentina Losses Threshold" shall mean the Applicable
Argentina Losses up to an amount equal to five hundred million dollars
($500,000,000).
"Applicable Argentina Subsidiaries" shall mean SSdRSA, SSdVSA, AFJP,
CP and Best Market S.A.
"Applicable Litigation Losses" shall mean Losses arising from or
relating to the matters set forth in Section 1.1(c) of the Sellers
Disclosure Letter.
"Applicable LTC Losses" shall mean (i) all Losses, net of inuring
reinsurance and insurance actually collected by TIC, of TIC based upon or
arising out of the LTC Policies, including, after the Closing Date, the
Acquired Subsidiaries, including all (A) benefit payments arising under or
relating to such policies, (B) amounts payable for returns or refunds of
premium under such policies, (C) commissions and similar payments payable
in respect of such policies, (D) premium taxes and retaliatory taxes
payable which are attributable to such policies, (E) extra-contractual
liabilities and obligations payable that relate to or arise under such
policies and arise from conduct prior to the Closing Date (including fines,
penalties, forfeiting, compensatory, contractual, exemplary, punitive,
statutory or similar extra-contractual damage that relates to or arises in
connection with any alleged or actual act, error or omission prior to the
Closing Date in connection with such policies, whether or not intentional,
negligent, in bad faith or otherwise) and (F) all losses, liabilities,
costs, fees and expenses arising out of (1) TIC's participation in any
joint underwriting associating guaranty fund or other governmental mandated
program or association of any kind that is predicated in any way on such
policies or the premium value generated by such policies, regardless of
when the losses, liabilities, costs or expenses are incurred, any premium,
loss or charge is assessed, or any policy under any such association, fund
or program is written, (2) the handling of any claim under any such
policies prior to the Closing Date and (3) obligations to reinsurers under
reinsurance agreements relating to such policies, whether for premiums,
additional premiums or otherwise; and (ii) Losses of TIC or any other
Acquired Subsidiaries arising under or relating to the LTC Acquisition
Agreement, the LTC Agreement or the NY LTC Agreement, including any
obligation to indemnify GECA under the LTC Acquisition Agreement, other
than any Losses to the extent arising out of or relating to any action or
omission of Purchaser and its Affiliates, including, after the Closing, the
Acquired Subsidiaries.
"Applicable LTC Losses Threshold" shall mean the Applicable LTC Losses
up to an amount initially equal to zero, which amount shall be adjusted
over time by (i) increasing such amount on a dollar-for-dollar basis in
respect of earnings recognized by Purchaser or its Affiliates when and as
recognized by such Persons as amortization of any deferred gain reflected
on the financial statements of the Acquired Subsidiary resulting from the
LTC Agreement, NY LTC Agreement and the LTC Acquisition Agreement that is
able to be recognized under GAAP following the Closing or (ii) decreasing
such amount by the amount of the Applicable LTC Losses, which but for the
Applicable LTC Losses Threshold, would have been paid by Parent to
Purchaser.
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"Applicable Other Losses" shall mean penalties, fines, assessments,
other monetary sanctions and amounts payable to funds or other set asides
which arise from or relate to the matters set forth in Section 1.1(d) of
the Sellers Disclosure Letter and are mandated by, or agreed to with, the
applicable Governmental Authority identified in Section 1.1(d) of the
Sellers Disclosure Letter.
"Applicable Shared Losses" means Losses, net of inuring reinsurance
and insurance actually collected as well as net of reserves and accruals on
the December 31 Balance Sheet, arising from or relating to (i) allegations
that the Acquired Subsidiaries learned or should have learned of health
risks posed by asbestos and improperly publicized or failed to disclose
those health risks, other than liabilities arising under insurance or
reinsurance contracts, (ii) asbestos liabilities of the International
Insurance Companies and the Joint Ventures arising out of risks and
exposures entirely outside the United States and its territories and (iii)
liabilities to third parties arising out of the marketing and sale of COLI
policies, other than to the extent of claims for benefits arising under the
terms of the COLI policies themselves.
"Applicable Stock Price" shall mean the Average Stock Price calculated
by reference to the Closing Date; provided that if the Average Stock Price
is $36.47 per share or less, the Applicable Stock Price shall be $36.47;
provided, further, that in the event that the Average Stock Price is
greater than $44.57 per share, the Applicable Stock Price shall be $44.57;
and provided, further, that if after the date hereof and prior to Closing
the outstanding shares of Purchaser Common Stock shall have been changed
into a different number of shares or a different class, by reason of any
stock split, dividend, distribution, subdivision, reclassification,
recapitalization, reorganization, combination or exchange of shares, the
foregoing method for determining the Applicable Stock Price shall be
correspondingly adjusted to reflect such stock split, dividend,
distribution, subdivision, reclassification, recapitalization,
reorganization, combination or exchange of shares.
"Applicable TIN Losses" shall mean Losses arising from or relating to
any failure of TIN to perform its obligations under the reinsurance
agreements identified in Section 1.1(e) of the Sellers Disclosure Letter as
a result of being determined to be insolvent or placed into receivership.
"Aristar" shall mean the Aristar Insurance Company.
"Average Stock Price" shall mean the average of the closing prices of
Purchaser Common Stock on the Composite Tape of the NYSE as reported in The
Wall Street Journal, for the ten (10) trading days immediately preceding
the Closing Date.
"Business" shall mean the businesses carried on by the Acquired
Subsidiaries and the Joint Ventures, after giving effect to the
transactions contemplated by Section 6.14, including life insurance and
annuity operations, product administration and operating those Acquired
Subsidiaries that are registered broker-dealers. For the avoidance of
doubt, the Business does not include any other insurance business conducted
by any Affiliate of Parent, including the distribution of any insurance
products (other than
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distribution currently conducted by the Acquired Subsidiaries) and the
business conducted by PLIC and its Subsidiaries, the business conducted by
AHLIC and its Subsidiaries, the business conducted by Triton and Aristar
and the business conducted by GFBSAdCV and its Subsidiaries.
"Business Confidential Information" shall mean all non-public
information disclosed prior to the Closing by the Acquired Subsidiaries to
any Seller, its Affiliates (other than the Acquired Subsidiaries) or their
respective representatives (including information disclosed in the course
of negotiation of this Agreement or the Related Agreements) that is related
to the Business; provided, however, that the term Business Confidential
Information shall not include any information independently developed by
Sellers without violating any obligation under this Agreement, so long as
such information was not obtained from a third party that Sellers knew or
should have known misappropriated or otherwise wrongly obtained such
knowledge from Purchaser or its Affiliates.
"Business Day" shall mean any day other than a Saturday, Sunday or day
on which banking institutions in New York, New York are authorized or
obligated by Law or executive order to be closed.
"Business Employee" shall mean all persons employed by Sellers or
their Subsidiaries primarily in or in support of the Business as of the
Closing; provided, that for purposes of (i) the definition of Sellers
Benefit Plan, the term "Business Employee" shall be deemed to refer to any
person employed by Sellers or their Subsidiaries primarily in or in support
of the Business as of the date hereof, and (ii) Section 6.1(b)(vi), the
term "Business Employee" shall be deemed to refer to any person employed by
Sellers or their Subsidiaries primarily in or in support of the Business as
of the date of the proposed action thereunder.
"Business Material Adverse Effect" shall mean (i) a material adverse
effect on the business, assets, properties, liabilities, results of
operations or condition (financial or otherwise) of the Business, taken as
a whole, excluding any such effect arising out of or in connection with or
resulting from (A) general economic or business conditions, including
interest or currency rates, or changes therein or any act of terrorism,
similar calamity or war, to the extent that they do not have a materially
disproportionate effect on the Business, (B) changes in Law or conditions
or trends in economic, business, financial, regulatory or legal enforcement
environment generally affecting the life insurance industry or the pension
industry, to the extent that they do not have a materially disproportionate
effect on the Business, (C) changes in GAAP or regulatory accounting
principles, including SAP, after the date of this Agreement (in the case of
clauses (A) through (C), globally or in any of the countries in which the
Business is conducted), or (D) any action, omission, change, effect,
circumstance or condition primarily attributable to the execution and
delivery of this Agreement or the Related Agreements or the announcement of
the transactions contemplated hereby or thereby, which adversely affects
the Acquired Subsidiaries' relationships with Business Employees, customers
or distributors; or (ii) a material adverse change or effect on the ability
of Sellers or any of their Affiliates to perform timely their obligations
under this Agreement or the Related
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Agreements or to consummate the transactions contemplated hereby or thereby
on a timely basis.
"CGLIC" shall mean Connecticut General Life Insurance Company.
"CLIC" shall mean Citicorp Life Insurance Company.
"Closing Agreement" shall mean a written and legally binding agreement
with a Governmental Authority with respect to Taxes.
"Closing RBC Ratio" shall mean, for TIC or CLIC, its RBC Ratio as of
the date of the Closing Date Balance Sheet, taking into account the effect
of the transactions contemplated by this Agreement, and, if the Net Price
Adjustment is positive, treating TIC as having received as of such date a
contribution to capital in an amount equal to the Net Price Adjustment.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COLI" shall mean corporate owned life insurance.
"Copyrights" shall mean all registered and unregistered copyrights,
including moral rights and rights of attribution and integrity, copyrights
and any other proprietary rights in computer Software and the content
contained on any Web site.
"Covered Applicable Argentina Losses" shall mean the Applicable
Argentina Losses for which Parent shall be required to indemnify the
Purchaser Indemnified Parties pursuant to Section 10.5(d).
"Covered Applicable Litigation Losses" shall mean the Applicable
Litigation Losses for which Parent shall be required to indemnify the
Purchaser Indemnified Parties pursuant to Section 10.5(h).
"Covered Applicable LTC Losses" shall mean the Applicable LTC Losses
for which Parent shall be required to indemnify Purchaser pursuant to
Section 10.5(g).
"Covered Applicable Other Losses" shall mean the Applicable Other
Losses for which Parent shall be required to indemnify the Purchaser
Indemnified Parties pursuant to Section 10.5(f).
"Covered Applicable Shared Losses" shall mean the Applicable Shared
Losses for which Parent shall be required to indemnify the Purchaser
Indemnified Parties pursuant to Section 10.5(i).
"Covered Applicable TIN Losses" shall mean the Applicable TIN Losses
for which Parent shall be required to indemnify the Purchaser Indemnified
Parties pursuant to Section 10.5(e).
"CP" shall mean Compania Previsional Citi S.A.
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"December 31 Balance Sheet" shall mean the adjusted and combined
balance sheet of the Acquired Subsidiaries and the Joint Ventures as of
December 31, 2004, giving effect to the transactions contemplated by
Section 6.14, as attached hereto as Section 1.1(f) of the Sellers
Disclosure Letter.
"Deferred Taxes" shall mean deferred Tax assets or deferred Tax
liabilities computed under GAAP in accordance with Statement of Financial
Accounting Standards No. 109.
"Determination" shall have the meaning set forth in section 1313(a) of
the Code or any similar state or local Tax Law.
"Distribution Agreements" shall mean the Domestic Distribution
Agreement and the International Distribution Agreement in the forms of
Exhibit B-1 and Exhibit B-2 attached hereto and the related selling
agreements contemplated thereby.
"DOJ" shall mean the United States Department of Justice.
"Domestic Insurance Companies" shall mean those entities set forth in
Section 1.1(g) of the Sellers Disclosure Letter.
"Domestic Purchaser Insurance Companies" shall mean the Purchaser
Insurance Companies which are licensed to do business in the United States.
"Environmental Laws" shall mean any and all local, state and federal
laws, regulations, codes, decrees, orders, judgments, principles of common
law and binding judicial or administrative interpretation thereof
pertaining to: (a) the protection of the environment (including air
quality, surface water, groundwater, soils, subsurface strata, drinking
water, natural resources and biota) or human health; or (b) the presence,
use, processing, generation, management, storage, treatment, recycling,
disposal, discharge, release, threatened release, investigation or
remediation of Hazardous Materials, including the Federal Resource
Conservation and Recovery Act, the Federal Comprehensive Environmental
Response, Compensation and Liability Act, the Federal Clean Water Act, the
Federal Clean Air Act and the Federal Occupational Safety and Health Act
(as it relates solely to exposure to Hazardous Materials) and their
implementing regulations as well as state analogues.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with Sellers would be deemed a "single
employer" within the meaning of section 4001(b) of ERISA.
"Estimated Closing Date Balance Sheet" shall mean the adjusted and
combined balance sheet of the Acquired Subsidiaries and the Joint Ventures
which shall reflect Parent's good faith estimate of the Closing Date
Balance Sheet and Final Total Equity and shall be prepared by Parent using
the accounting principles, procedures, policies and
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methods used in preparing the Audited Balance Sheet, including the type of
adjustments used in preparing the Audited Balance Sheet as set forth in the
notes to the Audited Balance Sheet.
"Estimated Total Equity" shall mean an amount equal to the Total
Equity as reflected on the Estimated Closing Date Balance Sheet.
"Existing Shares" shall mean, as of the date in question, the number
of shares of Purchaser capital stock owned by Parent or its Affiliates,
including shares held in respect of or on behalf of a third party over
which Parent or one of its Affiliates has the power to vote.
"Federal Funds Rate" shall mean the offered rate as reported in The
Wall Street Journal in the "Money Rates" section for reserves traded among
commercial banks for overnight use in amounts of one million dollars or
more on the Business Day immediately prior to the day on which a payment is
due hereunder.
"FTC" shall mean the U.S. Federal Trade Commission.
"GAAP" shall mean U.S. generally accepted accounting principles as in
effect as of the date hereof.
"GECA" shall mean General Electric Capital Assurance Company.
"GECLANY" shall mean GE Capital Life Assurance Company of New York.
"GFBSAdCV" shall mean Grupo Financiero Banamex, S.A. de. C.V.
"GMDB Reinsurance Agreement" shall mean the Variable Annuity Death
Benefit Reinsurance Agreement, effective June 30, 1998, by and among TLAC,
TIC and CGLIC.
"Governmental Authority" shall mean any federal, state or local
domestic, foreign or supranational governmental, regulatory or
self-regulatory authority, agency, court, tribunal, commission or other
governmental, regulatory or self-regulatory entity, including any competent
governmental authority responsible for the determination, assessment or
collection of Taxes.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products or by-products, waste, waste oil, radon gas, asbestos in any form
that is or could become friable or any material containing asbestos,
lead-based paint, urea formaldehyde foam insulation and polychlorinated
biphenyls; or (b) any chemicals, materials or substances defined in any
Environmental Law as or included in the definition, or having the
characteristics, of "hazardous substances," "hazardous chemicals,"
"hazardous wastes," "hazardous materials," "toxic substances,"
"contaminants" or "pollutants" or words of similar meaning or regulatory
effect.
"HKJV" shall have the meaning set forth in Section 1.1(h) of the
Sellers Disclosure Letter.
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"Insurance Companies" shall mean the Domestic Insurance Companies and
the International Insurance Companies.
"Insurance Contracts" shall mean all insurance policies and contracts
(other than reinsurance and retrocessional agreements), including
endorsements, riders and amendments thereto, issued or administered by the
Acquired Subsidiaries in connection with the Business.
"Intellectual Property" shall mean all Copyrights, Patents,
Trademarks, Trade Secrets, all other similar intangible assets, any
applications for any of the foregoing and the right to ▇▇▇ for past
infringement of any of the foregoing.
"International Insurance Companies" shall mean those entities set
forth in Section 1.1(i) of the Sellers Disclosure Letter.
"Investment Management Agreement" shall mean the Investment Management
Agreement to be entered into as of the Closing, with such terms set forth
in Exhibit C attached hereto and other customary terms.
"Investor Rights Agreement" shall mean the Investor Rights Agreement
to be entered into as of the Closing, with such terms set forth in Exhibit
E attached hereto and other customary terms.
"JJV" shall have the meaning set forth in Section 1.1(h) of the
Sellers Disclosure Letter.
"Joint Venture Agreements" shall mean those agreements set forth in
Section 1.1(j) of the Sellers Disclosure Letter.
"Joint Ventures" shall mean the entities set forth in Section 1.1(h)
of the Sellers Disclosure Letter.
"Knowledge" shall mean, with respect to Sellers, the actual knowledge
of the individuals set forth in Section 1.1(k) of the Sellers Disclosure
Letter and, with respect to Purchaser, shall mean the actual knowledge of
the individuals set forth in Section 1.1(a) of the Purchaser Disclosure
Letter.
"Law" shall mean any law (including common law), ordinance, writ,
statute, treaty, rule or regulation.
"Lease" shall mean any lease, sublease or license, including any
amendment with respect thereto, pursuant to which the Acquired Subsidiaries
use or hold any material Leased Real Property.
"Leased Real Property" shall mean the real property leased by the
Acquired Subsidiaries, as tenant, together with, to the extent leased by
the Acquired Subsidiaries, all buildings and other structures, facilities
or improvements currently located thereon, all
9
fixtures thereto, and all easements, licenses, rights and other
appurtenances relating to the foregoing.
"Licensed Intellectual Property" shall mean the Intellectual Property
owned by a third party that is used by any of the Acquired Subsidiaries,
excluding off-the-shelf standard commercially available Software.
"Licensing Agreement" shall mean the Licensing Agreement to be entered
into as of the Closing, with such terms set forth in Exhibit D attached
hereto and other customary terms.
"Liens" shall mean any liens, pledges, charges, claims, security
interests or other encumbrances.
"Life Insurance Contract" shall mean any life insurance contract, and
forms with respect thereto, issued, assumed, exchanged, modified, marketed,
administered or reinsured by the Acquired Subsidiaries.
"Losses" shall mean all costs, damages, disbursements, obligations,
penalties, liabilities, assessments, judgments, losses, injunctions,
orders, decrees, rulings, dues, fines, fees, settlements, deficiencies or
awards (including interest, penalty, investigation, reasonable legal,
accounting and other professional fees, and other costs or expenses
incurred in the investigation, collection, prosecution and defense of any
action, suit, proceeding or claim and amounts paid in settlement) imposed
upon or incurred, sustained or suffered by an Indemnified Party; provided,
however, that Losses shall include only actual losses, and shall not
include (i) Taxes or (ii) lost profits or opportunity costs or
consequential, incidental, special, indirect, exemplary or punitive
damages, unless such consequential, incidental, special, indirect,
exemplary or punitive damages are awarded against any of the Indemnified
Parties in a Third Party Claim.
"LTC Acquisition Agreement" shall mean the Acquisition Agreement,
dated as of April 14, 2000, as amended, by and between TIC and GECA.
"LTC Agreement" shall mean the Indemnity Reinsurance Agreement, dated
as of July 1, 2000, by and between TIC and GECA.
"LTC Amounts" shall mean (i) all amounts received by TIC pursuant to
the LTC Agreement, (ii) all amounts received by TIC pursuant to the NY LTC
Agreement; (iii) all amounts received by TIC pursuant to the LTC
Acquisition Agreement; (iv) all incoming amounts and collections with
respect to the LTC Policies, including premiums, fees, premium tax refunds,
and recoveries of previously paid Losses; and (v) any LTC Reserves
remaining after the satisfaction of all liabilities relating to the LTC
Policies.
"LTC Policies" shall mean the insurance policies reinsured by GECA
pursuant to the LTC Agreement and by GECLANY pursuant to the NY LTC
Agreement.
"LTC Reserves" shall mean the reserves for the LTC Policies reflected
on the Closing Date Balance Sheet, reduced by any LTC Losses.
10
"Multi-employer Plan" shall have the meaning ascribed to such term in
section 3(37) of ERISA.
"NBLIC" shall mean National Benefit Life Insurance Company.
"Net Price Adjustment" shall mean (a) the positive amount (if any)
referred to in Section 2.2(i)(C) plus (b) the positive amount (if any) of a
Final Adjustment Payment from Parent to Purchaser plus (c) the Shortfall
Reference Equity (if any) minus (d) the positive amount (if any) referred
to in Section 2.2(i)(B) minus (e) the positive amount (if any) of a Final
Adjustment Payment from Purchaser to Parent minus (f) the Excess Reference
Equity (if any).
"Nominal Stock Consideration Amount" shall be the dollar value of the
Stock Consideration to be included in the Closing Date Purchase Price;
provided that in no event shall such amount exceed three billion dollars
($3,000,000,000).
"NY LTC Agreement" shall mean the New York Indemnity Reinsurance
Agreement, dated as of July 1, 2000, by and between TIC and GECLANY.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Owned Intellectual Property" shall mean the Intellectual Property
owned solely, or jointly with other parties, by any of the Acquired
Subsidiaries.
"Owned Real Property" shall mean the real property owned by any of the
Acquired Subsidiaries, other than real property owned by the Acquired
Subsidiaries for investment purposes, together with all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures thereto, and all easements, licenses, rights and
other appurtenances relating to the foregoing.
"Patents" shall mean all patents and patent applications, including
any continuations, divisionals, continuations-in-part, renewals and
reissues.
"PC Liabilities" shall mean all liabilities and obligations based upon
or arising out of policies or contracts of property and casualty insurance
and reinsurance, without regard to inuring reinsurance.
"Permits" shall mean all licenses, registrations, franchises, permits,
certificates, approvals, accreditation or other similar authorizations from
Governmental Authorities required for the conduct of the Business,
including required under Environmental Laws.
"Permitted Lien" shall mean any Lien (A) for Taxes, assessments and
other governmental charges which are not yet due and payable or are being
contested in good faith by appropriate proceedings, (B) deemed to be
created by this Agreement or (C) which does not affect materially and
adversely the current use, occupancy or value of the asset subject thereto.
11
"Person" shall mean any individual, corporation, business trust,
partnership, association, limited liability company, unincorporated
organization or similar organization, or any Governmental Authority.
"PFS" shall mean Primerica Financial Services, Inc.
"PLIC" shall mean Primerica Life Insurance Company.
"Purchaser Disclosure Letter" shall mean a letter delivered by
Purchaser to Parent on or before the execution and delivery of this
Agreement setting forth, among other things, items the disclosure of which
is required under this Agreement either in response to an express
disclosure requirement contained in a provision of this Agreement or as an
exception to one or more of the representations, warranties, covenants or
agreements contained in this Agreement; provided that the mere inclusion of
an item in the Purchaser Disclosure Letter as an exception to a
representation or warranty will not be deemed an admission by Purchaser
that such item (or any non-disclosed item or information of comparable or
greater significance) represents a material exception or fact, event or
circumstance or that such item has had or is expected to result in a
Purchaser Material Adverse Effect.
"Purchaser Insurance Companies" shall mean the Affiliates of Purchaser
which (i) are licensed or authorized to conduct the business of insurance
in any jurisdiction, (ii) carry on such business or (iii) hold themselves
out as being so licensed or authorized.
"Purchaser Material Adverse Effect" shall mean (i) a material adverse
effect on the business, assets, properties, liabilities, results of
operations or financial condition (financial or otherwise) of Purchaser and
its Subsidiaries, taken as a whole, excluding any such effect arising out
of or in connection with or resulting from (A) general economic or business
conditions, including interest or currency rates, or changes therein or any
act of terrorism, similar calamity or war, to the extent that they do not
have a materially disproportionate effect on Purchaser's business, (B)
changes in Law or conditions or trends in economic, business, financial or
regulatory or legal enforcement conditions generally affecting the
insurance industry, to the extent that they do not have a materially
disproportionate effect on Purchaser, (C) changes in GAAP or regulatory
accounting principles, including SAP, after the date of this Agreement (in
the case of clauses (A) through (C), globally or in any of the countries in
which Purchaser's business is conducted), or (D) any action, omission,
change, effect, circumstance or condition primarily attributable to the
execution and delivery of this Agreement or the Related Agreements or the
announcement of the transactions contemplated hereby or thereby, which
adversely affects Purchaser's relationships with its employees, customers
or distributors; or (ii) a material adverse change or effect on the ability
of Purchaser to perform timely its obligations under this Agreement or the
Related Agreements or to consummate the transactions contemplated hereby or
thereby on a timely basis.
"Purchaser Rights Agreement" shall mean the Rights Agreement, dated as
of April 4, 2000, by and between Purchaser and ChaseMellon Shareholder
Services, L.L.C.
12
"Purchaser SEC Documents" shall mean any forms, reports, schedules,
statements, prospectuses and other documents and exhibits required to be
publicly filed with, or furnished to, the SEC by Purchaser or any of its
Subsidiaries since January 1, 2002 (as such forms, reports, schedules,
statements, prospectuses and other documents have been amended and
supplemented since the time of their respective filing or furnishing).
"RBC Deficit" shall mean, as of the date of the Closing Date Balance
Sheet, for TIC, the amount (if any) by which its Adjusted Capital and
Surplus is less than that needed to give it a Closing RBC Ratio of 710%,
and for CLIC, the amount (if any) by which its Adjusted Capital and Surplus
is less than that needed to give it a Closing RBC Ratio of 650%.
"RBC Excess" shall mean, as of the date of the Closing Date Balance
Sheet, for TIC, the amount (if any) by which its Adjusted Capital and
Surplus is more than that needed to give it a Closing RBC Ratio of 710%,
and for CLIC, the amount (if any) by which its Adjusted Capital and Surplus
is more than that needed to give it a Closing RBC Ratio of 650%.
"RBC Instructions" shall mean the RBC Instructions of the National
Association of Insurance Commissioners in effect as of the date of this
Agreement.
"RBC Ratio" shall mean, as of any date of determination, for TIC or
CLIC, the ratio (expressed as a percentage) that its Adjusted Capital and
Surplus bears to its authorized control level (as defined in the RBC
Instructions) as of such date, calculated in accordance with the life
insurance risk-based capital formula contained in the RBC Instructions, and
using reserving methodologies and asset classifications consistent with the
manner in which the Domestic Insurance Companies have, consistent with past
practice, prepared their statutory financial statements. If such
calculation is not made on the basis of data contained in annual statutory
financial statements, premium (as defined in the RBC Instructions) for the
year-to-date period will be annualized wherever required in such
calculation.
"Real Property" shall mean the Owned Real Property and the Leased Real
Property.
"Reference Equity" shall mean $7,712,000,000, which is calculated as
the amount of "Total Rainbow GAAP Equity: Equity (excl. Unrealized)" on the
December 31, Balance Sheet of $7,480,000,000 plus $232,000,000, as may be
adjusted pursuant to Sections 6.19 and 6.21.
"Related Agreements" shall mean each of the Licensing Agreement,
Transition Services Agreement, Investor Rights Agreement, Distribution
Agreements and Investment Management Agreement.
"Requirement of Law" shall mean, with respect to any Person, any Law,
judgment, order, decree, injunction of (or an agreement with) a
Governmental Authority
13
(including any memorandum of understanding or similar arrangement with any
Governmental Authority), in each case binding on that Person or its
property or assets.
"Restricted Business" shall mean whether on a group, individual or
other basis, (i) the issuance or reinsurance of all forms of life insurance
contracts and annuity contracts (including guaranteed investment contracts,
funding agreements and structured settlements) worldwide (other than
Mexico) and (ii) in those jurisdictions outside the United States set forth
in Section 1.1(l) of the Sellers Disclosure Letter, the issuance or
reinsurance of all forms of accident and health insurance.
"SAP" shall mean, with respect to any Domestic Insurance Company or
Domestic Purchaser Insurance Company, the statutory accounting practices,
rules, principles and procedures prescribed or permitted by its domiciliary
state.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sellers" shall mean Parent and the Subsidiaries of Parent that own
the Transferred Shares; it being hereby understood that Parent shall cause
each of the other Sellers to comply with such Seller's respective
obligations under this Agreement.
"Sellers Benefit Plan" shall mean each deferred compensation, fringe
benefit, severance, termination and bonus or other incentive compensation
(including any equity or equity-based compensation) plan, program,
agreement, award or arrangement; each "welfare" plan, fund or program
(within the meaning of section 3(1) of ERISA); each "pension" plan, fund or
program (within the meaning of section 3(2) of ERISA); each employment
agreement or arrangement; and each other employee benefit plan, fund,
program, agreement, award or arrangement, for the benefit of any current or
former service provider to the Sellers or any of its Affiliates (other than
in the capacity as a customer), in each case, (i) that is sponsored,
maintained or contributed to or required to be contributed to by any of the
Acquired Subsidiaries, (ii) to which any of the Acquired Subsidiaries is a
party or (iii) with respect to which any of the Acquired Subsidiaries has
or could have any liability, directly or indirectly, in each case, whether
written or oral.
"Sellers Confidential Information" shall mean all non-public
information disclosed by any Seller, its Affiliates (other than the
Acquired Subsidiaries) or their respective representatives to Purchaser, or
prior to the Closing, to the Acquired Subsidiaries (including information
disclosed in the course of negotiation of this Agreement or the Related
Agreements) regarding Sellers and not related to the Business; provided,
however, that the term Sellers Confidential Information shall not include
any information independently developed by Purchaser or the Acquired
Subsidiaries without violating any obligation under this Agreement, so long
as such information was not obtained from a third party that Purchaser or
the Acquired Subsidiaries knew or should have known misappropriated or
otherwise wrongly obtained such knowledge from any Seller or its Affiliates
(other than the Acquired Subsidiaries).
14
"Sellers Disclosure Letter" shall mean a letter delivered by Parent to
Purchaser on or before the execution and delivery of this Agreement setting
forth, among other things, items the disclosure of which is required under
this Agreement either in response to an express disclosure requirement
contained in a provision of this Agreement or as an exception to one or
more of the representations, warranties, covenants or agreements contained
in this Agreement; provided that the mere inclusion of an item in the
Sellers Disclosure Letter as an exception to a representation or warranty
will not be deemed an admission by Sellers that such item (or any
non-disclosed item or information of comparable or greater significance)
represents a material exception or fact, event or circumstance or that such
item has had or is expected to result in a Business Material Adverse
Effect.
"Software" shall mean computer software, including all programs,
applications, tools and databases (whether in object code, source code or
other form), and all documentation related thereto.
"SSdRSA" shall mean Siembra Seguros de Retiro S.A.
"SSdVSA" shall mean Siembra Seguros de Vida S.A.
"Subsidiary" shall mean, with respect to any Person, any other Person
of which such first Person (either alone or through or together with any
other Subsidiary) owns, directly or indirectly, a majority of the
outstanding equity securities or securities carrying a majority of the
voting power in the election of the board of directors or other governing
body of such Person. For the avoidance of doubt, the Joint Ventures shall
not be deemed Subsidiaries of any of the Acquired Subsidiaries.
"Tax" or "Taxes" shall mean (i) all federal, state, county, local,
foreign and other taxes, assessments, charges, duties, fees, levies,
imposts or other similar charges imposed by a Governmental Authority,
including all income, franchise, profits, capital gains, capital stock,
transfer, gross receipts, production, pesification, customs, sales, use,
transfer, service, state guarantee fund assessment, occupation, ad valorem,
property, excise, severance, windfall profits, premium, stamp, license,
payroll, employment, social security, workers compensation, unemployment,
disability, environmental (including all taxes under section 59A of the
Code), alternative minimum, add-on, value-added, capital taxes, withholding
and other taxes, assessments, deficiencies, charges, duties, fees, levies,
imposts, adjustments for inflation or other similar charges of any kind
whatsoever (whether payable directly, by withholding or pursuant to a
Closing Agreement and whether or not requiring the filing of a Tax Return),
and all estimated taxes, deficiency assessments, additions to tax and
penalties (civil or criminal), additional amounts imposed by any
Governmental Authority and interest on or in respect of a failure to comply
with any requirement relating to such taxes or any Tax Return; (ii) any
liability of any Person for the payment of amounts with respect to payments
of a type described in clause (i) above as a transferee, successor, or
payable pursuant to a contractual obligation, and (iii) all reasonable
out-of-pocket costs, expenses and fees, including reasonable fees for
attorneys and other outside consultants, incurred in contesting,
determining, settling or litigating of any Taxes described in clauses (i) -
(ii) herein.
15
"Tax Attribute" shall mean any net operating loss, net capital loss,
investment Tax credit, foreign Tax credit, charitable deduction or any
other credit or Tax attribute, including basis of property, which could
reduce liability for Taxes including deductions, credits, or alternative
minimum net operating loss carryforwards related to alternative minimum
Taxes.
"Tax Benefit" shall mean the Tax effect of any item of loss, deduction
or credit or any other item which decreases Taxes paid or payable or
increases Tax basis, including any interest with respect thereto.
"Tax Personnel" shall mean ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
the employees that are responsible for Tax matters at each of the Acquired
Subsidiaries, Parent's chief tax officer and any employee that directly
reports to Parent's chief tax officer.
"Tax Proceeding" shall mean any Tax audit, contest, litigation,
defense or other proceeding with or against any Governmental Authority.
"Tax Return" shall mean any return, declaration, report, claim for
refund, information return or similar statement filed or required to be
filed with respect to any Taxes, including any schedule or attachment
thereto, and including any amendment thereof, provided, however, that with
respect to Section 4.18 the term "Tax Return" shall not include any
Internal Revenue Service Form 5471.
"Tax Sharing Agreement" shall mean any written or unwritten agreement,
indemnity or other arrangement for the allocation or payment of Tax
liabilities or payment for Tax benefits that may exist as of the Closing
Date with any Acquired Subsidiaries and any Person (other than any
indemnity provided pursuant to this Agreement).
"Term Insurance" shall mean life insurance coverage, through term
insurance products with a primary focus on protection rather than
investment, for a particular period of time rather than for the life of the
insured.
"TIC" shall mean The Travelers Insurance Company.
"TIC SEC Documents" shall mean any forms, reports, schedules,
statements, prospectuses and other documents and exhibits required to be
publicly filed with, or furnished to, the SEC by TIC, on behalf of itself
or its separate accounts, since January 1, 2002 (as such forms, reports,
schedules, statements, prospectuses and other documents have been amended
and supplemented since the time of their respective filing or furnishing).
"TIN" shall mean The Travelers Indemnity Company.
"TLAC" shall mean The Travelers Life and Annuity Company.
16
"TLAC SEC Documents" shall mean any forms, reports, schedules,
statements, prospectuses and other documents and exhibits required to be
publicly filed with, or furnished to, the SEC by TLAC, on behalf of itself
or its separate accounts, since January 1, 2002 (as such forms, reports,
schedules, statements, prospectuses and other documents have been amended
and supplemented since the time of their respective filing or furnishing).
"Total Equity" shall mean, as of any date, an amount equal to the
excess of (x) the total assets of the Acquired Subsidiaries and the Joint
Ventures, as of such date, over (y) the total liabilities of the Acquired
Subsidiaries and the Joint Ventures, as of such date, in each case, after
giving effect to the transactions contemplated by Section 6.14 and the
applicable adjustment, if any, provided for in Section 6.11 of the Sellers
Disclosure Letter, in each case as shown on a balance sheet of the Acquired
Subsidiaries and the Joint Ventures, prepared using the same accounting
principles, procedures, policies and methods used in preparing the Audited
Balance Sheet, including the types of adjustments used in preparing the
Audited Balance Sheet as set forth in the notes to the Audited Balance
Sheet; provided, however, that the impact of realized gains and losses
since December 31, 2004 and unrealized gains and losses, in each case, net
of any current and Deferred Taxes, and changes in Deferred Taxes shall be
disregarded for purposes of calculating Total Equity; provided, further,
Total Equity shall be increased by $20 million in respect of previously
forecast realized gains.
"TPC" shall mean The Travelers Property Casualty Corp.
"Trade Secrets" shall mean all trade secrets and other confidential
information, including customer lists, forms and types of financial,
business, scientific, technical, economic, or engineering information or
know-how, including patterns, plans, compilations, program devices,
formulas, designs, prototypes, methods, techniques, processes, inventions,
procedures, programs or codes, whether tangible or intangible, and whether
or how stored, compiled or memorialized physically, electronically,
graphically, photographically or in writing.
"Trademarks" shall mean all registered and unregistered trademarks,
intent-to-use applications, service marks, trade names, designs, logos,
emblems, signs or insignia, slogans, Internet domain names, other similar
designations of source or origin and general intangibles of like nature,
together with the goodwill symbolized by any of the foregoing.
"Transition Services Agreement" shall mean the Transition Services
Agreement to be entered into as of the Closing, with such terms set forth
in Exhibit G attached hereto and other customary terms.
"Triton" shall mean Triton Insurance Company.
17
Section 1.2 Index to Defined Terms. Each of the following terms is
defined on the page of this Agreement set forth opposite such term:
Defined Term Page
----
Accountant............................................................... 26
Acquired Domestic Subsidiaries........................................... 1
Acquired Foreign Subsidiaries............................................ 1
Acquired Intellectual Property........................................... 1
Acquired Subsidiaries.................................................... 1
Adjusted Capital and Surplus............................................. 1
Affiliate................................................................ 2
AFJP..................................................................... 2
Agent Deferred Compensation Plans........................................ 35
Agreement................................................................ 1
AHLIC.................................................................... 2
Allocation............................................................... 26
Annuity Contract......................................................... 2
Aon Report............................................................... 2
Applicable Argentina Losses.............................................. 2
Applicable Argentina Losses Threshold.................................... 3
Applicable Argentina Subsidiaries........................................ 3
Applicable Contracts..................................................... 37
Applicable Litigation Losses............................................. 3
Applicable LTC Losses.................................................... 3
Applicable LTC Losses Threshold.......................................... 3
Applicable Other Losses.................................................. 4
Applicable Shared Losses................................................. 4
Applicable Stock Price................................................... 4
Applicable TIN Losses.................................................... 4
Aristar.................................................................. 4
Asset Class.............................................................. 72
Asset Classes............................................................ 72
Asset FV................................................................. 73
Audited Balance Sheet.................................................... 71
Audited Financial Statements............................................. 71
Average Stock Price...................................................... 4
Bank Holding Company Act................................................. 47
Business................................................................. 4
Business Confidential Information........................................ 5
Business Day............................................................. 5
Business Employee........................................................ 5
Business Material Adverse Effect......................................... 5
Cash Consideration....................................................... 24
CGLIC.................................................................... 6
CLIC..................................................................... 6
Closing.................................................................. 27
Closing Agreement........................................................ 6
Closing Date............................................................. 27
18
Closing Date Balance Sheet............................................... 25
Closing Date Purchase Price.............................................. 24
Closing RBC Ratio........................................................ 6
Code..................................................................... 6
COLI..................................................................... 6
Competitive Business..................................................... 69
Confidentiality Agreements............................................... 58
Continuing Business Employee............................................. 64
Controlling Party........................................................ 80
Conveyance Taxes......................................................... 83
Copyrights............................................................... 6
Covered Applicable Argentina Losses...................................... 6
Covered Applicable Litigation Losses..................................... 6
Covered Applicable LTC Losses............................................ 6
Covered Applicable Other Losses.......................................... 6
Covered Applicable Shared Losses......................................... 6
Covered Applicable TIN Losses............................................ 6
CP....................................................................... 6
December 31 Balance Sheet................................................ 7
Deferred Taxes........................................................... 7
Determination............................................................ 7
Distribution Agreements.................................................. 7
DOJ...................................................................... 7
Domestic Insurance Companies............................................. 7
Domestic Purchaser Insurance Companies................................... 7
Domestic SAP Financial Information....................................... 33
Environmental Laws....................................................... 7
ERISA.................................................................... 7
ERISA Affiliate.......................................................... 7
Estimated Closing Date Balance Sheet..................................... 7
Estimated Net RBC Deficit................................................ 70
Estimated RBC Calculation................................................ 70
Estimated Total Equity................................................... 8
Excess Reference Equity.................................................. 72
Exchange Act............................................................. 43
Existing Shares.......................................................... 8
Fair Value............................................................... 72
Federal Funds Rate....................................................... 8
Final Adjustment Payment................................................. 25
Final RBC Calculation.................................................... 70
Final Total Equity....................................................... 25
Financial Information.................................................... 32
FIRPTA Certificate....................................................... 28
Forms 8023............................................................... 83
FTC...................................................................... 8
Fund Board............................................................... 46
19
Fund Board Resolutions................................................... 60
Fund Filings............................................................. 46
Fund Transactions........................................................ 61
Funds.................................................................... 45
GAAP..................................................................... 8
GECA..................................................................... 8
GECLANY.................................................................. 8
GFBSAdCV................................................................. 8
GMDB Reinsurance Agreement............................................... 8
Governmental Authority................................................... 8
Guaranties............................................................... 63
Hazardous Materials...................................................... 8
HKJV..................................................................... 8
HSR Act.................................................................. 60
Income Statement......................................................... 32
Indemnified Parties...................................................... 90
Indemnified Party........................................................ 90
Indemnifying Party....................................................... 91
Independent Valuation.................................................... 73
In-force Reinsurance Agreements.......................................... 44
Insolvency............................................................... 93
Insurance Companies...................................................... 9
Insurance Company Financial Information.................................. 33
Insurance Contracts...................................................... 9
Intellectual Property.................................................... 9
International Insurance Companies........................................ 9
International Insurance Company Financial Information.................... 33
Investment Company Act................................................... 37
Investment Contract...................................................... 46
Investment Management Agreement.......................................... 9
Investment Pools......................................................... 45
Investor Rights Agreement................................................ 9
JJV...................................................................... 9
Joint Venture Agreements................................................. 9
Joint Venture Interests.................................................. 31
Joint Ventures........................................................... 9
Knowledge................................................................ 9
Law...................................................................... 9
Lease.................................................................... 9
Leased Real Property..................................................... 9
Licensed Intellectual Property........................................... 10
Licensing Agreement...................................................... 10
Liens.................................................................... 10
Life Insurance Contract.................................................. 10
Losses................................................................... 10
LTC Acquisition Agreement................................................ 10
20
LTC Agreement............................................................ 10
LTC Amounts.............................................................. 10
LTC Policies............................................................. 10
LTC Reserves............................................................. 10
Maximum Indemnification Amount........................................... 92
Met SAP Financial Statements............................................. 51
Multi-employer Plan...................................................... 11
NBLIC.................................................................... 11
NBLIC Business........................................................... 69
Net Price Adjustment..................................................... 11
Nominal Stock Consideration.............................................. 11
NY LTC Agreement......................................................... 11
NYSE..................................................................... 11
NYSID.................................................................... 51
Offer Schedule........................................................... 65
Other Purchaser Reports.................................................. 50
Other Reports............................................................ 44
Owned Intellectual Property.............................................. 11
Owned Real Property...................................................... 11
Parent................................................................... 1
Parent Affiliated Group.................................................. 85
Parties.................................................................. 1
Partnerships............................................................. 86
Party.................................................................... 1
Patents.................................................................. 11
PC Liabilities........................................................... 11
Permits.................................................................. 11
Permitted Lien........................................................... 11
Person................................................................... 12
PFS...................................................................... 12
PLIC..................................................................... 12
Portfolio Appraiser...................................................... 73
Portfolio Appraisers..................................................... 73
Post-Closing Tax Period.................................................. 77
Post-Closing Taxes....................................................... 77
Pre-Closing Tax Period................................................... 76
Pre-Closing Taxes........................................................ 77
Proposed Allocation...................................................... 84
Purchaser................................................................ 1
Purchaser Common Stock................................................... 24
Purchaser Consents....................................................... 49
Purchaser Convertible Preferred Stock.................................... 24
Purchaser Disclosure Letter.............................................. 12
Purchaser Indemnified Parties............................................ 89
Purchaser Insurance Companies............................................ 12
Purchaser Material Adverse Effect........................................ 12
21
Purchaser Preferred Stock................................................ 48
Purchaser Rights Agreement............................................... 12
Purchaser SEC Documents.................................................. 13
Purchaser Valuation...................................................... 72
Qualified Plan........................................................... 34
RBC Deficit.............................................................. 13
RBC Excess............................................................... 13
RBC Instructions......................................................... 13
RBC Ratio................................................................ 13
Real Property............................................................ 13
Reference Equity......................................................... 13
Refund Payor............................................................. 82
Refund Recipient......................................................... 82
Related Agreements....................................................... 13
Requirement of Law....................................................... 13
Restricted Business...................................................... 14
Retained Sellers Benefit Plans Liabilities............................... 35
RIC...................................................................... 46
SAP...................................................................... 14
SEC...................................................................... 14
Seconded Employee........................................................ 65
Section 338(h)(10) Companies............................................. 83
Securities Act........................................................... 14
Sellers.................................................................. 14
Sellers Benefit Plan..................................................... 14
Sellers Carrying Value................................................... 72
Sellers Confidential Information......................................... 14
Sellers Consents......................................................... 32
Sellers Disclosure Letter................................................ 15
Sellers Indemnified Parties.............................................. 90
Settlement Date.......................................................... 25
Shortfall Reference Equity............................................... 72
Software................................................................. 15
SSdRSA................................................................... 15
SSdVSA................................................................... 15
Stock Consideration...................................................... 24
Straddle Period.......................................................... 78
Subsidiary............................................................... 15
Subsidiary Shares........................................................ 30
Target Business.......................................................... 69
Tax Attribute............................................................ 16
Tax Benefit.............................................................. 16
Tax Claim................................................................ 79
Tax Indemnified Party.................................................... 79
Tax Indemnifying Party................................................... 79
Tax Notice............................................................... 79
22
Tax or Taxes............................................................. 15
Tax Personnel............................................................ 16
Tax Proceeding........................................................... 16
Tax Return............................................................... 16
Tax Sharing Agreement.................................................... 16
Term Insurance........................................................... 16
Termination Date......................................................... 88
Third Party Claim........................................................ 90
Threshold................................................................ 92
TIC...................................................................... 16
TIC SEC Documents........................................................ 16
TIN...................................................................... 16
TLAC..................................................................... 16
TLAC SEC Documents....................................................... 17
Total Equity............................................................. 17
TPC...................................................................... 17
Trade Secrets............................................................ 17
Trademarks............................................................... 17
Transferred Shares....................................................... 1
Transferred Subsidiaries................................................. 1
Transition Services Agreement............................................ 17
Triton................................................................... 17
Unaudited Financial Statements........................................... 71
WARN..................................................................... 66
Section 1.3 Construction; Absence of Presumption.
(a) For the purposes of this Agreement: (i) words (including
capitalized terms defined herein) in the singular shall be held to include the
plural and vice versa and words (including capitalized terms defined herein) of
one gender shall be held to include the other gender as the context requires;
(ii) the terms "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole (including all of the Exhibits) and not to any particular provision of
this Agreement, and Article, Section, paragraph and Exhibit references are to
the Articles, Sections, paragraphs and Exhibits to this Agreement, unless
otherwise specified; (iii) the word "including" and words of similar import when
used in this Agreement shall mean "including, without limitation"; (iv)
"commercially reasonable efforts" shall not require a waiver by any Party of any
material rights or any action or omission that would be a breach of this
Agreement; (v) all references to any period of days shall be deemed to be to the
relevant number of calendar days unless otherwise specified; and (vi) all
references herein to "$" or dollars shall refer to United States dollars, unless
otherwise specified.
(b) The Parties hereby acknowledge that each Party and its counsel
have reviewed and revised this Agreement and that no rule of construction to the
effect that any ambiguities are to be resolved against the drafting Party shall
be employed in the interpretation of this Agreement (including all of the
Exhibits) or any amendments hereto or thereto.
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(c) The Parties hereby acknowledge and agree that to the extent that
there is a conflict between any (i) general provision of this Agreement and (ii)
provision specifically relating to Tax matters, the terms of the specific Tax
provision shall control.
Section 1.4 Headings. The Article and Section headings contained in
this Agreement are inserted for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of the Transferred Shares. Upon the
terms and subject to the conditions of this Agreement, at the Closing, the
applicable Seller shall sell, assign, transfer and convey to Purchaser, and
Purchaser shall purchase, acquire and accept from the applicable Seller, the
Transferred Shares owned by the applicable Seller, free and clear of all Liens
and adverse claims.
Section 2.2 Closing Date Purchase Price. Subject to Section 2.3, in
consideration for the sale of the Transferred Shares, the aggregate purchase
price payable by Purchaser to Sellers shall consist of (i) cash in an amount
(the "Cash Consideration") equal to (A) eight billion five hundred million
dollars ($8,500,000,000) plus the excess, if any, of three billion dollars
($3,000,000,000) over the Nominal Stock Consideration Amount, plus (B) the
excess, if any, of the Estimated Total Equity over the Reference Equity, minus
(C) the excess, if any, of the Reference Equity over the Estimated Total Equity,
plus (D) the Excess Reference Equity, if any, minus (E) the Shortfall Reference
Equity, if any, minus (F) the Estimated Net RBC Deficit calculated pursuant to
Section 6.18(a), and (ii) such number of validly issued, fully paid and
non-assessable shares of common stock, par value $0.01 per share of Purchaser
(together with the associated Rights (as defined in the Purchaser Rights
Agreement), the "Purchaser Common Stock") determined by dividing the Nominal
Stock Consideration Amount by the Applicable Stock Price; provided, however,
that in lieu of part of the foregoing shares of Purchaser Common Stock, Parent
shall have the right to require Purchaser to deliver shares of a new series of
non-voting, convertible participating preferred stock, par value $.01 per share,
of Purchaser (the "Purchaser Convertible Preferred Stock") having substantially
the terms set forth in Exhibit H attached hereto and initially being convertible
into the number of shares of Purchaser Common Stock in respect of which the
Purchaser Convertible Preferred Stock is to be issued (the "Stock
Consideration," and together with the Cash Consideration, the "Closing Date
Purchase Price"); provided, however, that in no event shall the Stock
Consideration exceed 9.4% of Purchaser's issued and outstanding capital stock;
provided, further, that Parent shall only be entitled to request that shares of
Purchaser Convertible Preferred Stock be issued in lieu of Purchaser Common
Stock to the extent that the Stock Consideration, when taken together with the
Existing Shares, exceeds 4.9% of Purchaser's issued and outstanding capital
stock.
Section 2.3 Closing Date Balance Sheet; Payments on the Settlement
Date.
(a) (i) Not later than ninety (90) days after the Closing Date or such
other time as is mutually agreed by the Parties, Purchaser shall prepare, or
cause to be prepared, and
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deliver to Parent a balance sheet of the Acquired Subsidiaries and the Joint
Ventures (the "Closing Date Balance Sheet"), as of the close of business on the
Business Day immediately prior to the Closing Date. The Closing Date Balance
Sheet shall be prepared using the accounting principles, procedures, policies
and methods used by Sellers in preparing the Audited Balance Sheet, including
the types of adjustments set forth in the notes to the Audited Balance Sheet.
Based on the Closing Date Balance Sheet, Purchaser shall prepare a certificate
setting forth the calculation of the Total Equity as of the Closing Date (the
"Final Total Equity"). Final Total Equity shall be adjusted so as not to take
into account adjustments to Reference Equity made pursuant to Section 6.21 to
the extent the result would be to duplicate the impact of such prior adjustments
to Reference Equity.
(ii) In connection with the preparation of the Closing Date
Balance Sheet and the calculation of the Final Total Equity, and during the
period of any dispute within the contemplation of this Section 2.3, Purchaser
shall, and shall cause the Acquired Subsidiaries to, and Sellers shall (A)
provide the other Party and the other Party's authorized representatives with
reasonable access to the relevant books and records, facilities and employees;
and (B) cooperate in good faith with the other Party and its authorized
representatives, including by providing on a timely basis all information
necessary or useful in the calculation of the Final Total Equity.
(iii) On the fifth Business Day after Purchaser and Parent agree
to the Closing Date Balance Sheet and the Final Total Equity or Purchaser and
Parent receives notice of any final determination of the Closing Date Balance
Sheet and the Final Total Equity (the "Settlement Date"), if the Estimated Total
Equity exceeds the Final Total Equity, Parent shall pay to Purchaser or, if the
Final Total Equity exceeds the Estimated Total Equity, Purchaser shall pay to
Parent, an amount in dollars equal to the absolute value of the difference
between the Estimated Total Equity and the Final Total Equity (the "Final
Adjustment Payment").
(b) Within twenty (20) days following its receipt of the Closing Date
Balance Sheet, Parent shall deliver to Purchaser either (i) its agreement as to
the calculation of the Closing Date Balance Sheet and the Final Total Equity or
(ii) its dispute thereof, specifying in reasonable detail the nature of its
dispute; provided that Parent may dispute items reflected in the Closing Date
Balance Sheet only on the basis that such amounts were not determined in
accordance with the accounting principles, procedures, policies and methods
employed by Sellers in preparing the Audited Balance Sheet, or on the basis of
arithmetic error. During the thirty (30) days after the delivery of such dispute
notice to Purchaser, Purchaser and Parent shall attempt in good faith to resolve
any such dispute and finally determine the Closing Date Balance Sheet and the
Final Total Equity. If at the end of such thirty (30) day period, Purchaser and
Parent have failed to reach agreement with respect to such dispute, the matter
shall be submitted to Ernst & Young LLP which shall act as arbitrator. If Ernst
& Young LLP is unable to serve, Purchaser and Parent shall jointly select
another nationally recognized accounting firm that is not the independent
auditor for either Parent or Purchaser and is otherwise neutral and impartial;
provided, however, that if Parent and Purchaser are unable to select such other
accounting firm within forty-five (45) days after delivery of written notice of
a disagreement, either party may request the American Arbitration Association to
appoint, within twenty (20) Business Days from the date of such request, an
independent accounting firm meeting the requirements set forth above or a
neutral and impartial certified public accountant with significant relevant
experience.
25
The accounting firm or accountant so selected shall be referred to herein as the
"Accountant." The Accountant shall determine all disputed portions of the
Closing Date Balance Sheet, in accordance with the terms and conditions of this
Agreement. In making such determination, the Accountant may only consider those
items and amounts (and related items and amounts) as to which Purchaser and
Parent have disagreed within the time periods and on the terms specified above
and must resolve the matter in accordance with the terms and provisions of this
Agreement; provided that the determination of the Accountant will neither be
more favorable to Purchaser than reflected in the Closing Date Balance Sheet nor
more favorable to Sellers than reflected in Parent's dispute notice. The
Accountant shall deliver to Parent and Purchaser, as promptly as practicable and
in any event within forty-five (45) days after its appointment, a written report
setting forth the resolution of each disputed matter and its determination of
the Final Total Equity and the Closing Date Balance Sheet, each as determined in
accordance with the terms of this Agreement. Such report shall be final and
binding upon the Parties to the fullest extent permitted by applicable Law and
may be enforced in any court having jurisdiction. The 45-day period for
delivering the written report may be extended by the mutual written consent of
the Parties or by the Accountant for up to an additional thirty (30) days for
good cause shown. Each of Purchaser and Parent shall bear all the fees and costs
incurred by it in connection with this arbitration, except that all fees and
expenses relating to the foregoing work by the Accountant shall be borne by
Purchaser and Parent in inverse proportion as they may prevail on the matters
resolved by the Accountant, which proportionate allocation will also be
determined by the Accountant and be included in the Accountant's written report.
(c) The Final Adjustment Payment (plus interest on such amount from
the Closing Date up to but excluding the date on which each such payment is made
at a rate per annum equal to the Federal Funds Rate as of the Closing Date,
calculated on the basis of a year of 360 days and the actual number of days
elapsed), as and when due and payable under this Section 2.3, shall be made by
federal funds wire transfer of immediately available funds to the account(s) of
the Party entitled to receive such payment, which account(s) shall be identified
by Purchaser to Parent or by Parent, on behalf of Sellers, to Purchaser, as the
case may be, not less than two (2) Business Days prior to the date such payment
would be due.
(d) Each Party shall make available to the other Party its and its
accountants' work papers, schedules and other supporting data as may be
reasonably requested by such Party to enable such Party to verify the amounts
set forth on the Closing Date Balance Sheet, subject to customary
confidentiality and indemnity agreements.
Section 2.4 Allocation of Purchase Price.
(a) Purchaser and Parent shall endeavor in good faith to agree, within
one hundred twenty (120) days after the Closing Date, on the allocation of the
total consideration among the Transferred Shares (the "Allocation"). The
Allocation shall be made in accordance with section 1060 of the Code and the
rules and regulations promulgated thereunder.
(b) Except as may be required by a Determination, Purchaser and
Sellers agree to act in accordance with the Allocation in the preparation and
filing of all Tax Returns (including filing a Form 8594 with their respective
Federal income tax returns for the taxable year that includes the Closing Date
and any other forms or statements required by the Code,
26
Treasury regulations, the Internal Revenue Service or any applicable state or
local or foreign taxing authority) and in the course of any Tax Proceeding.
(c) In the event that Purchaser and Parent do not agree on the
Allocation, Parent and Purchaser (and their respective Affiliates) shall settle
any such disputes in the manner provided in Section 8.5.
(d) Purchaser and Parent shall promptly inform one another of any
challenge by any Governmental Agency to any allocation made pursuant to this
Section 2.4 and shall consult and keep one another informed with respect to the
status of, and any discussion, proposal or submission with respect to, such
challenge.
(e) Section 8.4(d) shall govern all allocations resulting from any
Election and the Allocation shall be consistent with all allocations resulting
from the Election.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the transactions provided for in
this Agreement (the "Closing") shall take place (i) at the offices of Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, Four Times Square, New York, New York,
10036-6522 at 9:00 a.m., New York City time, on the first Business Day of the
month following the date on which the last of the conditions required to be
satisfied or waived pursuant to Article VII is either satisfied or waived (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to satisfaction or waiver thereof); provided, however, that the
Closing Date shall be delayed to a day which is the first Business Day of the
month at (x) Purchaser's election, following a period of time not to exceed two
(2) months, if an act of terrorism or war (whether or not declared) affecting
the United States banking or financial markets materially impairs the financing
by Purchaser of the Cash Consideration, (y) Purchaser's election, following a
period of time not to exceed three (3) months following the date on which the
SEC has confirmed that it is not undertaking a review of a registration
statement of Purchaser to be used to offer and sell securities as part of the
financing by Purchaser of the Cash Consideration or that it has completed its
review of such registration statement or (z) Parent's election, until the first
Business Day following the end of the month immediately following the month in
which Parent makes such election, in the event that the expected number of
shares included in the Stock Consideration, when taken together with the
Existing Shares, would constitute an amount that exceeds 9.9% of Purchaser's
outstanding capital stock, or (ii) at such other place, time or date as the
Parties shall agree upon in writing. The date on which the Closing is to occur
is referred to herein as the "Closing Date."
Section 3.2 Preliminary Information.
(a) Parent, on behalf of Sellers, shall deliver to Purchaser (i) at
least two (2) Business Days prior to the Closing Date, (A) instructions
designating the account or accounts to which the Cash Consideration shall be
deposited by federal funds wire transfer on the Closing Date and (B) the
Estimated Closing Date Balance Sheet and a certificate duly executed by an
appropriate executive officer of Parent setting forth the calculation of the
Estimated Total Equity,
27
and (ii) on the Business Day prior to the Closing Date, the (x) amount of Stock
Consideration to be issued in the form of Purchaser Convertible Preferred Stock
(if any), (y) name(s) of one or more Sellers or Affiliates thereof to whom the
Stock Consideration shall be issued and in whose name(s) the issuance of the
Stock Consideration shall be registered on Purchaser's transfer books by
Purchaser's transfer agent and (z) amount(s) and form of shares comprising the
Stock Consideration to be issued to each such Seller or Affiliate thereof.
(b) Purchaser shall notify Parent of the Nominal Stock Consideration
Amount three (3) days prior to the Closing Date. Purchaser shall keep Parent
reasonably informed with respect to the status of its financing and other
activities relating to its determination of the Nominal Stock Consideration
Amount.
Section 3.3 Sellers' Deliveries at Closing. At the Closing, Parent,
on behalf of Sellers, shall, or shall cause an Affiliate to, deliver to
Purchaser:
(a) stock certificates (or similar evidence) representing the
Transferred Shares, duly endorsed in blank or with stock powers executed in
proper form for transfer, and with any required stock transfer stamps affixed
thereto;
(b) the Distribution Agreements and the selling agreements
contemplated thereby, duly executed;
(c) the Licensing Agreement, duly executed;
(d) the Transition Services Agreement, duly executed;
(e) the Investor Rights Agreement, duly executed;
(f) the Investment Management Agreement, duly executed;
(g) the resignations of the officers and directors of the Acquired
Subsidiaries designated by Purchaser in writing at least thirty (30) days prior
to the Closing Date;
(h) the officer's certificate required pursuant to Section 7.2(d);
(i) a duly executed certificate of non-foreign status (a "FIRPTA
Certificate") from each of Sellers (or from Parent with respect to any Seller)
in the form and manner that complies with section 1445 of the Code and the
Treasury Regulations promulgated thereunder; provided, however, that if a FIRPTA
Certificate is unable to be furnished by a Seller (or by Parent with respect to
such Seller), then each Acquired Subsidiary being sold by such Seller must
provide a certificate on which each such Acquired Subsidiary certifies (in the
form and manner required under section 1.1445-2(c)(3) of the Treasury
Regulations) under penalties of perjury that such Acquired Subsidiary does not
constitute a United States real property interest (as defined in section 897(c)
of the Code and the Treasury Regulations promulgated thereunder);
(j) copies (or other evidence) of all valid approvals or
authorizations of, filings or registrations with, or notifications to, all
Governmental Authorities required to be obtained, filed or made by Sellers in
satisfaction of Section 7.1(b);
28
(k) executed and completed copies of Internal Revenue Form 8023 as
provided in Section 8.4; and
(l) all such additional instruments, documents and certificates
provided for by this Agreement or as may be reasonably requested by Purchaser in
connection with the Closing of the transactions contemplated by this Agreement
and the Related Agreements.
Section 3.4 Purchaser's Deliveries at Closing. At the Closing,
Purchaser shall deliver to Parent, on behalf of Sellers, or at Parent's request,
to Sellers directly (in each case consistent with Section 3.2):
(a) cash in an amount equal to the Cash Consideration to be paid by
Purchaser by federal funds wire transfer of immediately available funds to the
account or accounts designated pursuant to Section 3.2;
(b) one or more stock certificates representing the Stock
Consideration, registered in accordance with the instructions provided pursuant
to Section 3.2;
(c) the Distribution Agreements and the selling agreements
contemplated thereby, duly executed;
(d) the Licensing Agreement, duly executed;
(e) the Transition Services Agreement, duly executed;
(f) the Investor Rights Agreement, duly executed;
(g) the Investment Management Agreement, duly executed;
(h) the officer's certificate required pursuant to Section 7.3(e);
(i) copies (or other evidence) of all valid approvals or
authorizations of, filings or registrations with, or notifications to, all
Governmental Authorities required to be obtained, filed or made by Purchaser in
satisfaction of Section 7.1(b);
(j) all such additional instruments, documents and certificates
provided for by this Agreement or as may be reasonably requested by Parent on
behalf of in connection with the Closing of the transactions contemplated by
this Agreement and the Related Agreements; and
(k) executed and completed copies of Internal Revenues Form 8023 as
provided in Section 8.4.
Section 3.5 Proceedings at Closing. All proceedings to be taken, and
all documents to be executed and delivered by the Parties, at the Closing shall
be deemed to have been taken and executed simultaneously, and, except as
permitted hereunder, no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken, executed and delivered.
29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the specific section in the Sellers Disclosure
Letter to which such exception or information relates and subject to Section
11.14(a), Parent hereby represents and warrants to Purchaser as set forth below.
Section 4.1 Organization and Good Standing. Each Seller, each
Acquired Subsidiary and each of the HKJV and the JJV is a legal entity duly
organized, validly existing and (where applicable) in good standing under the
Laws of its jurisdiction of organization and has all requisite corporate power
and authority to own, operate and lease its assets and to carry on its business
as currently conducted. Each Seller, each Acquired Subsidiary and each of the
HKJV and the JJV is duly qualified to do business and is in good standing
(where applicable) as a foreign corporation in each jurisdiction where the
ownership, leasing or operation of its assets or the conduct of its business as
currently conducted requires such qualification, except for those jurisdictions
where the failure to be so qualified or to be in good standing would not,
individually or in the aggregate, reasonably be expected to have a Business
Material Adverse Effect. Except as set forth in Section 4.1 of the Sellers
Disclosure Letter, Sellers have made available to Purchaser prior to the
execution of this Agreement true and complete copies of the certificate of
incorporation and by-laws (or comparable organizational documents) for each
material Acquired Subsidiary and each of HKJV and JJV.
Section 4.2 Shares in Acquired Subsidiaries; Interests in Joint
Ventures.
(a) Section 4.2(a) of the Sellers Disclosure Letter sets forth the
name, jurisdiction of organization or incorporation, and the current ownership
of outstanding shares, partnership interests or other ownership interests of
each Acquired Subsidiary.
(b) All of the Transferred Shares (i) are beneficially and legally
owned, directly or indirectly, by Sellers, free and clear of all Liens, and (ii)
have been duly authorized, validly issued and are fully paid and non-assessable
and have not been issued in violation of any preemptive rights. Except as set
forth in Section 4.2(b) of the Sellers Disclosure Letter, all of the outstanding
shares, partnership interests or other ownership interests owned by Sellers,
directly or indirectly, of each Acquired Subsidiary (other than the Transferred
Subsidiaries) (the "Subsidiary Shares") (A) are beneficially and legally owned,
directly or indirectly, by a Transferred Subsidiary, free and clear of all
Liens, and (B) have been duly authorized, validly issued and are fully paid and
non-assessable and have not been issued in violation of any preemptive rights.
(c) Except as set forth in Section 4.2(c) of the Sellers Disclosure
Letter, there are no outstanding options, warrants, convertible securities or
other rights (including preemptive rights), agreements, arrangements or
commitments relating to the Transferred Shares or the Subsidiary Shares or
obligating Sellers or any of their Affiliates, at any time or upon the
occurrence of certain events, to offer, issue, sell, transfer, vote or otherwise
dispose of or sell any shares of capital stock of any of the Acquired
Subsidiaries, or to purchase, acquire or redeem any Subsidiary Shares. There are
no bonds, debentures, notes or other indebtedness having voting
30
rights (or convertible into securities having such rights) in or of any of the
Acquired Subsidiaries issued and outstanding.
(d) Section 4.2(d) of the Sellers Disclosure Letter sets forth the
applicable Acquired Subsidiary which is party to the HKJV and the JJV and the
respective ownership interest of each such Acquired Subsidiary in each such
Joint Venture (the "Joint Venture Interests"). Each of the Joint Venture
Interests (i) is beneficially and legally owned by the Acquired Subsidiary so
identified in Section 4.2(d) of the Sellers Disclosure Letter and (ii) has been
duly authorized, validly issued and are fully paid and non-assessable.
Section 4.3 Authorization; Binding Obligations. Parent and each of
its applicable Affiliates has all necessary corporate power and authority to
make, execute and deliver this Agreement (in the case of Parent) and the Related
Agreements to which it is a party and to perform all of the obligations to be
performed by it hereunder and thereunder. The making, execution, delivery and
performance by Parent and each of its applicable Affiliates of this Agreement
(in the case of Parent) and the Related Agreements and the consummation by them
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and its
applicable Affiliates. This Agreement (in the case of Parent) has been and, as
of the Closing Date, the Related Agreements will be, duly and validly executed
and delivered by Parent and each of its applicable Affiliates, and assuming the
due authorization, execution and delivery by Purchaser and each of its
applicable Affiliates (as the case may be), each of this Agreement and the
Related Agreements will constitute the valid, legal and binding obligation of
Parent and each of its applicable Affiliates that is a party thereto,
enforceable against it in accordance with its terms, except as may be subject to
applicable bankruptcy, insolvency, moratorium or other similar Laws, now or
hereafter in effect, relating to or affecting the rights of creditors generally
and by legal and equitable limitations on the enforceability of specific
remedies.
Section 4.4 No Conflicts. Except as set forth in Section 4.4 of the
Sellers Disclosure Letter, assuming the Sellers Consents are obtained, neither
the execution and delivery of this Agreement or the Related Agreements by Parent
and its applicable Affiliates that are a party hereto or thereto, nor the
consummation by Parent and its applicable Affiliates of the transactions
contemplated hereby or thereby, will (i) violate, conflict with, result in the
breach of, constitute a default under, be prohibited by, require any additional
approval under or accelerate the performance provided by any (x) terms,
conditions or provisions of the organizational documents of Parent, its
applicable Affiliates or any Acquired Subsidiary, (y) contract to which Parent,
its applicable Affiliates or any Acquired Subsidiary is now a party or by which
it is bound or (z) Requirement of Law applicable to Parent, its applicable
Affiliates or any Acquired Subsidiary, other than, in the case of clauses (y)
and (z), any such violation, conflict, breach, default, prohibition, approval or
acceleration that would not reasonably be expected to have a Business Material
Adverse Effect; or (ii) result in the creation or imposition of any Lien (other
than any Permitted Lien), with or without the giving of notice or the lapse of
time or both, upon the Transferred Shares.
Section 4.5 Approvals. There are no notices, reports or other filings
required to be made by Parent or any of its Affiliates with, or consents,
registrations, approvals, permits, licenses, certificates or other
authorizations required to be obtained by Parent or any of its
31
Affiliates from, any Governmental Authority or other third party in order for
Sellers to execute or deliver this Agreement or the Related Agreements or to
consummate the transactions contemplated hereby or thereby (collectively, the
"Sellers Consents"), except (i) as set forth in Section 4.5 of the Sellers
Disclosure Letter or (ii) where the failure to make such notices, reports or
other filings or the failure to obtain such consents, registrations, approvals,
permits, licenses, certificates or other authorizations would not reasonably be
expected to have a Business Material Adverse Effect.
Section 4.6 Litigation. Except as set forth in Section 4.6(a) of the
Sellers Disclosure Letter or for ordinary course benefit claims arising under
any Insurance Contract, as of the date hereof, there is no action, suit,
proceeding, claim, arbitration or other litigation pending or any investigation
by any Governmental Authority or, to the Knowledge of Sellers, any action, suit,
proceeding, claim or other litigation or governmental investigation threatened,
against any Seller, any Acquired Subsidiary or any Joint Venture that would
reasonably be expected to have, individually or in the aggregate, a Business
Material Adverse Effect. Except as set forth in Section 4.6(b) of the Sellers
Disclosure Letter, there are no judgments, injunctions, writs, orders or decrees
binding upon Sellers, any Acquired Subsidiary or any Joint Venture that would
(i) be binding upon Purchaser following consummation of such transactions and
(ii) reasonably be expected to have, individually or in the aggregate, a
Business Material Adverse Effect.
Section 4.7 Compliance with Requirements of Law. Except as set forth
in Section 4.7(a) of the Sellers Disclosure Letter, each Acquired Subsidiary and
each Joint Venture is in compliance in all material respects with all applicable
Requirements of Law. Except as set forth in Section 4.7(b) of the Sellers
Disclosure Letter or as would not reasonably be expected to have a Business
Material Adverse Effect, since January 31, 2000, no Acquired Subsidiary or Joint
Venture has violated any applicable Requirement of Law, and no Seller or
Acquired Subsidiary has received any written, or, to the Knowledge of Sellers,
oral, notice from (and otherwise does not have any Knowledge of) any
Governmental Authority that alleges any noncompliance (or that any Acquired
Subsidiary or Joint Venture is under any investigation by any such Governmental
Authority for such alleged noncompliance) with any Requirement of Law relating
to the Business. Except as set forth in Section 4.7(c) of the Sellers Disclosure
Letter, none of the Acquired Subsidiaries have been the subject of any
examination by the United States Federal Reserve. Each of the Acquired
Subsidiaries is in substantial compliance with its own, Parent's and Sellers'
policies, in each case, applicable to its collection, use and disclosure of
personal or private information of customers or consumers.
Section 4.8 Financial Statements.
(a) Except as set forth in Section 4.8(a) of the Sellers Disclosure
Letter, Purchaser has previously been provided with (i) a consolidated income
statement for the Acquired Subsidiaries and the Joint Ventures, after giving
effect to the transactions contemplated by Section 6.14, for the 12 months ended
December 31, 2004 (the "Income Statement"), (ii) the December 31 Balance Sheet
(together with the Income Statement, the "Financial Information"), (iii)
financial statements of each of the Domestic Insurance Companies as of and for
the year ended December 31, 2003 and as of and for each of the quarters ended
March 31, 2004, June 30, 2004 and September 30, 2004, prepared in accordance
with applicable SAP (collectively, the
32
"Domestic SAP Financial Information") and (iv) a statement of local statutory
capital requirements as of September 30, 2004 for the International Insurance
Companies (the "International Insurance Company Financial Information" and,
together with the Domestic SAP Financial Information, the "Insurance Company
Financial Information").
(b) The Financial Information has been derived from the accounting
books and records of the Acquired Subsidiaries and the Joint Ventures, after
giving effect to the transactions contemplated by Section 6.14, has been
prepared in accordance with GAAP consistently applied, subject only to normal
recurring year-end adjustments and the absence of notes and except as provided
in the Financial Information. The December 31 Balance Sheet presents fairly in
all material respects the financial position of the Acquired Subsidiaries and
the Joint Ventures, after giving effect to the transactions contemplated by
Section 6.14, as at the date thereof, and the Income Statement presents fairly
in all material respects the results of operations of the Acquired Subsidiaries
and the Joint Ventures, after giving effect to the transactions contemplated by
Section 6.14, for the period indicated. Except as set forth in Section 4.8(b) of
the Sellers Disclosure Letter, the Domestic SAP Financial Information has been
prepared in all material respects in accordance with SAP. The Domestic SAP
Financial Information presents fairly, in all material respects, the financial
condition of each of the Domestic Insurance Companies and results of operations
of each Domestic Insurance Company as of the dates and periods specified therein
in conformity with SAP. The International Insurance Company Financial
Information reflects in all material respects the statutory capital requirements
of the applicable jurisdictions.
(c) The reserves for payment of benefits, losses, claims and expenses
under all insurance policies and contracts of each Insurance Company in force as
of the date of the applicable financial statement reflected in, or included
with, in the case of the Domestic Insurance Companies, the SAP Financial
Statements and the GAAP Financial Statements, were determined in accordance with
SAP or GAAP, as applicable, consistently applied throughout the specified period
and, in the case of the International Insurance Subsidiaries, reflected in or
included with the appropriate financial statements filed in their local
jurisdictions, were determined in accordance with the applicable accounting
procedures consistently applied throughout the period, and, in all cases, were
calculated, in all material respects, in accordance with generally accepted
actuarial principles.
(d) The Business maintains a system of internal accounting controls
sufficient to comply in all material respects with all legal and accounting
requirements applicable to the Business. There are no significant deficiencies
in the internal accounting controls of the Business which would reasonably be
expected to adversely affect in any material respect the ability of the Business
to record, process, summarize and report financial data. Neither Parent nor any
Seller has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods,
including any material complaint, allegation, assertion or claim that the
Business has engaged in questionable accounting or auditing practices.
Section 4.9 Title. Assuming that the Sellers Consents are filed or
obtained, as the case may be, upon consummation of the transactions contemplated
by this Agreement, including the execution and delivery of the documents to be
delivered at the Closing, at the
33
Closing, Purchaser shall be vested with good and marketable title in and to the
Transferred Shares, free and clear of all Liens.
Section 4.10 Sufficiency of Assets. Subject to Section 4.5, Section
6.14 and except as set forth in Section 4.10 of the Sellers Disclosure Letter,
immediately after giving effect to the transactions contemplated by this
Agreement and the Related Agreements, Purchaser, the Acquired Subsidiaries and
the Joint Ventures, taken together, will own, possess, license, lease or have
control of all tangible and intangible assets and contractual rights necessary
to conduct the Business in all material respects as currently conducted and as
the same will be conducted on the Closing Date.
Section 4.11 Employee Benefit Plans; Employee Matters.
(a) Section 4.11(a) of the Sellers Disclosure Letter lists each
material Sellers Benefit Plan (other than any Sellers Benefit Plan that is
sponsored, maintained, contributed to, or required to be contributed to, or
entered into solely by, one or more Acquired Foreign Subsidiaries), with any
Sellers Benefit Plans sponsored by any of the Acquired Domestic Subsidiaries, or
with respect to which an Acquired Domestic Subsidiary has a direct or indirect
liability, clearly identified as such.
(b) Each of the Sellers Benefit Plans (i) is in compliance with all
applicable provisions of ERISA, the Code, and all other applicable Laws and (ii)
has been administered, operated and managed in accordance with its governing
documents, except where the failure to be in compliance or to have been so
administered, operated or managed would not, individually or in the aggregate,
reasonably be expected to result in a Business Material Adverse Effect.
(c) No liability under Title IV or section 302 of ERISA has been
incurred by Sellers, any Acquired Subsidiaries or any ERISA Affiliate that has
not been satisfied in full, nor do any circumstances exist that could reasonably
be expected to result in any liabilities under (i) Title IV of ERISA, (ii)
section 302 of ERISA or (iii) sections 412, 4971 or 4975 of the Code, in each
case, that would reasonably be expected to be a liability of any of the Acquired
Subsidiaries following the Closing Date.
(d) The Internal Revenue Service has issued a favorable determination
letter with respect to each of the Sellers Benefit Plans that is intended to be
qualified under section 401(a) of the Code (a "Qualified Plan") and the related
trust that has not been revoked, and to the Knowledge of Sellers, no existing
circumstances and no events have occurred that would adversely affect the
qualified status of any Qualified Plan or the related trust, except as would
not, individually or in the aggregate, reasonably be expected to result in a
Business Material Adverse Effect.
(e) There are no pending or, to the Knowledge of Sellers, threatened
claims (other than claims for benefits in the ordinary course), lawsuits or
arbitrations that have been asserted or instituted, and, to the Knowledge of
Sellers, no set of circumstances exists that would reasonably be expected to
give rise to a claim or lawsuit relating to the Sellers Benefit Plans that, in
each case, would reasonably be expected to result in a liability of the Acquired
Subsidiaries to the Pension Benefit Guaranty Corporation, the Department of
Treasury, the Department of
34
Labor, any Multi-employer Plan, any Sellers Benefit Plan, any participant in a
Sellers Benefit Plan, or any other Person, except as would not, individually or
in the aggregate, reasonably be expected to result in a Business Material
Adverse Effect.
(f) To the Knowledge of Sellers, no labor organization or group of
employees of any Acquired Subsidiary has made a pending demand for recognition
or certification with respect to the Business Employees and there are no
representation or certification proceedings or petitions seeking a
representation proceeding with respect to the Business Employees presently
pending or, to the Knowledge of Sellers, threatened to be brought or filed, with
the National Labor Relations Board or any other labor relations tribunal or
authority, except as would not, individually or in the aggregate, reasonably be
expected to result in a Business Material Adverse Effect. There are no strikes,
organized work stoppages, organized slowdowns or lockouts pending or threatened
against or involving the Business Employees, except as would not, individually
or in the aggregate, reasonably be expected to result in a Business Material
Adverse Effect. Except as set forth in Section 4.11(f) of the Sellers Disclosure
Letter, no Acquired Subsidiary is a party to a collective bargaining agreement
covering any of the Business Employees. None of the Sellers Benefit Plans are
Multi-employer Plans subject to Title IV of ERISA.
(g) None of Purchaser, its Affiliates or any Acquired Subsidiary shall
have any liability at or after the Closing Date with respect to the Sellers
Benefit Plans (other than liabilities arising under (i) the non-employee agent
deferred compensation plans listed in Section 4.11(g) of the Sellers Disclosure
Letter (the "Agent Deferred Compensation Plans"), (ii) the vacation buy-back
plan listed in Section 4.11(a) of the Sellers Disclosure Letter, (iii)
employment agreements of Business Employees who are not on a U.S. payroll and
are not employed by an Acquired Subsidiary if, and to the extent, Purchaser
assumes (by agreement or by Law) such employment agreement in connection with
the employment of such Business Employee or (iv) the Sellers Benefit Plans
(other than employment agreements of Business Employees who are not on a U.S.
payroll and are not employed by an Acquired Subsidiary unless assumed pursuant
to clause (iii) above) that are sponsored, maintained, contributed to, or
required to be contributed to, or entered into solely by one or more Acquired
Foreign Subsidiaries (the liabilities described in clauses (i) through (iv)
above, the "Retained Sellers Benefit Plans Liabilities").
(h) Sellers and the Acquired Subsidiaries are, and have been, in
compliance with all applicable Laws respecting terms and conditions of
employment and employment practices with respect to each Business Employee, and
there are no pending or, to the Knowledge of Sellers, threatened claims or
lawsuits (including class action lawsuits) that have been asserted or instituted
against any of the Acquired Subsidiaries by or on behalf of the Business
Employees, and, to the Knowledge of Sellers, no set of circumstances exists
which would reasonably be expected to give rise to such a claim or lawsuit
against any of the Acquired Subsidiaries respecting the Business Employees, in
each case, except as would not, individually or in the aggregate, reasonably be
expected to result in a Business Material Adverse Effect.
(i) As of the Closing Date, none of the Acquired Subsidiaries will be
a party to, maintain, contribute to or have any obligation or liability to any
Person with respect to, any
35
COLI policies insuring the lives of any current or former service provider to
the Sellers or any of its Affiliates.
(j) No more than ten (10) Business Employees employed in the United
States are employed by an entity other than an Acquired Subsidiary.
Section 4.12 Undisclosed Liabilities. Except for liabilities or
obligations, to the extent (i) identified in Section 4.12 of the Sellers
Disclosure Letter, (ii) accrued or reserved against in the Financial Information
or the Insurance Company Financial Information or (iii) incurred in the ordinary
course of business consistent with past practice since December 31, 2004, there
are no undisclosed liabilities or obligations relating to the Acquired
Subsidiaries or the Joint Ventures of a nature that would be required to be
reflected on or disclosed in the notes to a GAAP balance sheet prepared in a
manner consistent with the Audited Balance Sheet or that, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect.
Section 4.13 Absence of Certain Changes. Except for the matters
contemplated by this Agreement or as set forth in Section 4.13 of the Sellers
Disclosure Letter, since December 31, 2004, (i) the Acquired Subsidiaries have
conducted the Business only in the ordinary course of business; and (ii) except
for ordinary course benefit claims arising under policies of insurance or
reinsurance from and after the date of this Agreement, there has not occurred
(A) any change or event that, individually or in the aggregate, has had or would
reasonably be expected to have a Business Material Adverse Effect; or (B) prior
to the date hereof, any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
equity interests of any Acquired Subsidiary or any Joint Venture, other than to
another wholly owned Acquired Subsidiary. Since January 1, 2002, there has been
no material change by Sellers, the Acquired Subsidiaries or the Joint Ventures
in accounting principles or methods materially affecting the Business, except
insofar as may have been required by a change in GAAP, SAP or applicable Law.
Section 4.14 Real Property.
(a) Section 4.14(a) of the Sellers Disclosure Letter sets forth a true
and complete list of each material parcel of Owned Real Property.
(b) Section 4.14(b) of the Sellers Disclosure Letter sets forth a true
and complete list of all material Leased Real Property. Within thirty (30) days
from the date hereof, true, correct and complete copies of the Leases in
Sellers' possession and control will be provided to Purchaser or its
representatives. All of the Leases are in full force and effect and no (i)
Acquired Subsidiary is in default (or has taken or failed to take any action
which with notice, the passage of time, or both, would constitute a default)
under the terms of any Lease and no Acquired Subsidiary has received notice of
default under any Lease which has not been cured within applicable grace periods
and (ii) landlord is in default under any Lease.
(c) Except as set forth in Section 4.14(c) of the Sellers Disclosure
Letter, one or more Acquired Subsidiaries hold good and valid title to each
parcel of Owned Real Property
36
in fee simple absolute, free and clear of all Liens, except for Permitted Liens,
and is in exclusive possession thereof.
(d) Except as set forth in Section 4.14(d) of the Sellers Disclosure
Letter, there are no condemnation proceedings or eminent domain proceedings of
any kind pending or, to the Knowledge of Sellers, threatened with respect to any
portion of the Real Property.
(e) Section 4.14(b) of the Sellers Disclosure Letter includes all
Leases for premises of 20,000 rentable square feet or more.
(f) The consent of the landlord or any other Person to the
transactions contemplated under the terms of this Agreement is not required by
the terms of any Lease set forth in Section 4.14(b) of the Sellers Disclosure
Letter (or if such consent is required, such consent may not be unreasonably
withheld).
Section 4.15 Permits. Except as set forth in Section 4.15 of the
Sellers Disclosure Letter or as would not reasonably be expected to have,
individually or in the aggregate, a Business Material Adverse Effect: (i) each
Seller, Acquired Subsidiary and, to the Knowledge of Sellers, each of the Joint
Ventures, possesses all Permits material to the conduct of its business, and all
such Permits are valid and in full force and effect; (ii) no Seller or Acquired
Subsidiary or, to the Knowledge of Sellers, Joint Venture is in default, and no
condition exists that with notice or lapse of time or otherwise would constitute
a default, under such Permit; (iii) no Acquired Subsidiary and no associated
person of any Acquired Subsidiary is subject to a statutory disqualification
that could be the basis for a suspension, revocation or limitation of any
Permit, or is subject to disqualification under section 9(a) of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), in either case,
except where appropriate exemptive orders have been obtained; and (iv) assuming
that the Sellers Consents are filed or obtained, as the case may be, no such
Permit shall be terminated or materially impaired or become terminable, in whole
or in part, as a result of the transactions contemplated by this Agreement and
the Related Agreements.
Section 4.16 Certain Contracts.
(a) Except as set forth in Section 4.16(a) of the Sellers Disclosure
Letter, Sellers have made available true and complete copies of each of the
following contracts of the Acquired Subsidiaries (collectively, the "Applicable
Contracts"): (i) any material agreement for the incurrence of indebtedness by
any Acquired Subsidiary, other than agreements with Affiliates which are to be
terminated pursuant to Section 6.10(b); (ii) any non-competition agreement
(other than any Permit granted by any Governmental Authority) which limits in
any material respect the manner in which, or the localities in which, the
Business, or following the consummation of the transactions contemplated by this
Agreement and the Related Agreements, Purchaser's businesses, is or would be
conducted; (iii) any material joint venture, including the Joint Venture
Agreements, or partnership agreement, other than in respect of joint ventures or
similar investments held in an investment portfolio; (iv) any collective
bargaining agreement; (v) any Contract providing for the indemnification by any
of the Acquired Subsidiaries of any special purpose vehicle or other financing
entity, including off balance sheet entities; (vi) any contract providing for
future payments that are conditioned on, in whole or in part, or that cause
37
an event of default as a result of, a change of control or similar event; (vii)
any Contract containing any restrictions on acquisitions of the equity of the
counterparties thereto; (viii) any agency, broker, selling, marketing or similar
Contract involving payments in 2004 in excess of five million dollars
($5,000,000), other than distribution arrangements to which the International
Insurance Companies or the Joint Ventures, on the one hand, and other Affiliates
of Sellers, on the other hand, are parties; (ix) the forms of any Insurance
Contract used in the United States containing rate guarantees, rate caps or rate
escalators; (x) any agreement to which any Acquired Subsidiary is a party
granting or obtaining any right to use or practice any rights under any material
Intellectual Property (other than licenses for off-the-shelf standard
commercially available commercial software), all material information technology
service agreements, material service agreements that involve Intellectual
Property and all material outsourcing agreements; (xi) any agreements set forth
in Section 1.1(e) of the Sellers Disclosure Letter and (xii) other Contracts not
listed above granting material exclusive rights. Except as would not,
individually or in the aggregate, reasonably be expected to result in a Business
Material Adverse Effect, each Applicable Contract, is the legal, valid and
binding obligation of an Acquired Subsidiary that is a party thereto and, to the
Knowledge of Sellers, of each other party thereto, enforceable in accordance
with its terms subject to bankruptcy, receivership, insolvency, reorganization,
moratorium, fraudulent transfer and other Laws relating to or affecting the
rights of creditors in general and by legal and equitable limitations on the
enforceability of specific remedies. Except as set forth in Section 4.16(a)(i)
of the Sellers Disclosure Letter or as would not, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect,
neither any Seller nor any Acquired Subsidiary that is a party thereto nor, to
the Knowledge of Sellers, any other party, is in violation or default of any
term of any such Applicable Contract and no condition or event exists which with
the giving of notice or the passage of time, or both would constitute a
violation or default by a Seller or any Acquired Subsidiary, as the case may be,
or any other party thereto or permit the termination, modification, cancellation
or acceleration of performance of the obligations of a Seller or any Acquired
Subsidiary, as the case may be, or any other party to the Applicable Contract.
(b) To the extent required by Law, (i) except as set forth in Section
4.16(b)(i) of the Sellers Disclosure Letter, all Insurance Contracts in force
and effect as of the date hereof are in compliance with applicable Law in all
material respects on forms approved by insurance regulatory authorities of the
jurisdiction in which they were issued or on forms which have been filed with
and not objected to by such authorities within the period provided for
objection, and (ii) in all material respects, any premium rates and reinsurance
agreements with respect to such Insurance Contracts required to be filed with or
approved by such applicable insurance regulatory authorities have been so filed
or approved.
Section 4.17 Intellectual Property.
(a) Section 4.17(a) of the Sellers Disclosure Letter sets forth, as of
the date hereof, a complete list of all Owned Intellectual Property that is the
subject of an application or registration.
(b) Except as would not reasonably be expected to have a Business
Material Adverse Effect, an Acquired Subsidiary owns all Owned Intellectual
Property and has a valid
38
right to use all Licensed Intellectual Property, free and clear of all Liens,
other than Permitted Liens.
(c) Except as set forth in Section 4.17(c) of the Sellers Disclosure
Letter, (i) there is no litigation pending or, to the Knowledge of Sellers,
threatened against any Seller or Acquired Subsidiary that involves a claim (A)
alleging that the operation of the Business infringes, misappropriates, dilutes
or otherwise violates a third party's Intellectual Property rights, or (B)
challenging the ownership, use, validity, enforceability or registrability of
any Acquired Intellectual Property and (ii) there is no basis for a claim of
infringement, misappropriation, dilution or other violation of a third party's
Intellectual Property rights, whether the claim has been asserted or is
unasserted, regarding any of the Owned Intellectual Property and, to the
Knowledge of Sellers, there is no basis for a claim of infringement,
misappropriation, dilution or other violation of a third party's Intellectual
Property rights, whether the claim has been asserted or is unasserted, regarding
any of the Licensed Intellectual Property.
(d) Except as set forth in Section 4.17(d) of the Sellers Disclosure
Letter, no Seller or Affiliate has brought or, to the Knowledge of Sellers,
threatened a claim against any third party (A) alleging infringement,
misappropriation, dilution or other violation of (i) any material Owned
Intellectual Property, or (ii) except as would not reasonably be expected to
have a Business Material Adverse Effect on any non-material Owned Intellectual
Property, or (B) challenging any such third party's ownership or use of, or the
validity, enforceability or registrability of, such third party's Intellectual
Property, and, to the Knowledge of Sellers, there is no basis for a claim
regarding any of the foregoing.
(e) Except as would not reasonably be expected to have a Business
Material Adverse Effect, to the Knowledge of Sellers, no Acquired Subsidiary is
in material breach of any agreement for the provision or use of Licensed
Intellectual Property.
(f) Each Acquired Subsidiary has established and maintains a
commercially reasonable security program, and is in substantial compliance with
such program.
(g) Each Acquired Subsidiary utilizes commercially available
anti-virus software in accordance with industry standards.
Section 4.18 Taxes. Any representations with respect to the Joint
Ventures in this Section 4.18 are made to the actual knowledge of the Tax
Personnel. Except as set forth in Section 4.18 of the Sellers Disclosure Letter:
(a) (i) All material Tax Returns required to have been filed by, or
with respect to any of the Acquired Subsidiaries and the Joint Ventures have
been filed on a timely basis in the manner prescribed by Law and (ii) all
material Taxes shown to be due on such Tax Returns or otherwise due have been
paid. All such Tax Returns were and continue to be correct and complete, except
where the failure of such Tax Returns to be correct and complete is not material
and with respect to any taxable period for which such Tax Returns have not yet
been filed, or for which Taxes are not yet due or owing, the Acquired
Subsidiaries and Joint Ventures have made due and sufficient current accruals
for any such material Taxes on the December 31 Balance
39
Sheet in accordance with the generally accepted accounting principles which are
used in the applicable jurisdiction of each such applicable Acquired Subsidiary
and Joint Venture.
(b) (i) No written notice has been received of any material
deficiencies for Taxes claimed, proposed or assessed by any Governmental
Authority with respect to the Acquired Subsidiaries or the Joint Ventures for
which Sellers or any of their Affiliates may have any liability; (ii) there are
no pending, current or, proposed in writing audits, suits, proceedings,
investigations, claims or administrative proceedings for or relating to any
liability in respect of any such Taxes; and (iii) no Closing Agreement pursuant
to section 7121 of the Code (or any similar provision of state, local or foreign
Law) has been entered into by or with respect to any of the Acquired
Subsidiaries or the Joint Ventures.
(c) The Acquired Subsidiaries and Joint Ventures have complied in all
material respects with all applicable Law relating to the payment and
withholding of Taxes and each of them has withheld and paid all material Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any Employee, independent contractor, creditor, stockholder, foreign person,
or other third party.
(d) There are no proposed reassessments of any property owned by the
Acquired Subsidiaries or Joint Ventures or any other proposals with respect to
an assessment of any such property that could increase the amount of any
material Tax to which the Acquired Subsidiaries or Joint Ventures could be
subject to after the Closing Date.
(e) There are no material Liens for Taxes upon the assets or
properties of the Acquired Subsidiaries or the Joint Ventures except for
statutory Liens for Taxes not yet due. There are no outstanding waivers or
comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns of the Acquired Subsidiaries or the Joint
Ventures. None of the Acquired Subsidiaries or Joint Ventures has requested an
extension of time within which to file any Tax Return in respect of any taxable
period for which such Tax Return has not since been filed.
(f) Since the date of the December 31 Balance Sheet, none of the
Acquired Subsidiaries or Joint Ventures has incurred any material liability for
Taxes other than in the ordinary course of business or as a result of the
Elections under section 338(h)(10) of the Code.
(g) Each Acquired Subsidiary or Joint Venture that is a partnership or
limited liability company has been treated by Parent and its Affiliates as a
partnership or disregarded entity for United States federal income tax purposes
since its formation.
(h) The federal income Tax Returns of the Acquired Domestic
Subsidiaries and Joint Ventures for all tax years through 1998 (i) have been
examined and the tax years closed by the Internal Revenue Service or (ii) the
statute of limitations with respect to all such Tax Returns has expired.
(i) Sellers (and to the extent necessary Parent) are eligible to join
with Purchaser in making the election provided for by section 338(h)(10) of the
Code and the Treasury Regulations promulgated thereunder with respect to each of
the Acquired Domestic Subsidiaries that is treated as a corporation for United
States federal income tax purposes.
40
(j) To the actual knowledge of the Tax Personnel, no written claim has
ever been made by a Governmental Authority in a jurisdiction where an Acquired
Subsidiary or Joint Venture does not file Tax Returns that such Acquired
Subsidiary or Joint Venture is or may be subject to taxation by that
jurisdiction and to the actual knowledge of the Tax Personnel there is no basis
for any such jurisdiction to assert that any Acquired Subsidiaries or Joint
Ventures are or may be subject to taxation in such jurisdiction.
(k) Except as required by applicable Law, since December 31, 2004,
none of the Acquired Subsidiaries or Joint Ventures has: (A) made or changed any
election or method of accounting concerning any material Taxes, (B) filed any
amended Tax Return, (C) settled any Tax Claim or assessment or (D) surrendered
any right to claim a refund of any Taxes, in each case, to the extent such
action would materially affect the Taxes or any Tax Benefit of such Acquired
Subsidiary or Joint Venture following the Closing Date.
(l) There are no Tax Rulings, requests for Tax Rulings, or Closing
Agreements relating to the Acquired Subsidiaries, Joint Ventures, or Parent's
United States federal income tax consolidated group which could have a material
adverse effect on Purchaser (or any Affiliate thereof including the Acquired
Subsidiaries') liability for Taxes for any period (or portion thereof)
commencing after the Closing Date.
(m) None of the Acquired Subsidiaries or Joint Ventures, as a result
of any agreement with a Governmental Authority, will be required to include any
material item of income in, or exclude any material Tax credit or item of
deduction from, any taxable period beginning on or after the Closing Date.
(n) No indebtedness of the Acquired Subsidiaries is "corporate
acquisition indebtedness" within the meaning of section 279(b) of the Code.
(o) To the actual knowledge of the Tax Personnel, none of the assets
or liabilities of any of the Acquired Subsidiaries or Joint Ventures is a debt
obligation that (A) is a "registration-required obligation" as defined in
section 163(f)(2) of the Code; (B) is an "applicable high yield discount
obligation" as defined in section 163(i)(1) of the Code; or (C) is a
"disqualified debt instrument" as defined in section 163(b)(2) of the Code.
(p) To the actual knowledge of the Tax Personnel, none of the Acquired
Subsidiaries or Joint Ventures has engaged in a trade or business, had a
permanent establishment (within the meaning of an applicable tax treaty or local
Law) or has otherwise become subject to Tax in a jurisdiction other than the
country of its formation, and none of the Acquired Domestic Subsidiaries has
foreign branches.
(q) Tax reserves have been computed and maintained in the manner
required under sections 807, 832, 954 and 846 of the Code.
(r) Each Insurance Company that issues, assumes, has modified,
exchanged, administers, markets or sells Life Insurance Contracts satisfies the
definition of a "life insurance company" for purposes of the Code and all
reinsurance contracts entered into by such life insurance companies are
insurance contracts for U.S. federal income tax purposes.
41
(s) To the actual knowledge of the Tax Personnel, the Acquired
Subsidiaries or Joint Ventures will not have as of the Closing Date any material
liability for Taxes of any other Person (i) as a transferee or successor, (ii)
by operation of applicable Law or (iii) otherwise.
(t) No power of attorney currently in force has been granted with
respect to any matter relating to the Taxes of the Acquired Subsidiaries or the
Joint Ventures, which will be in force for any taxable period beginning after
the Closing Date.
(u) To the actual knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, none of the Acquired
Subsidiaries or Joint Ventures nor any Sellers with respect to any of the
Acquired Subsidiaries have participated, within the meaning of Treasury
Regulation Section 1.6011-4(c), or have been a "material advisor" or "promoter"
(as those terms are defined in section 6111 and 6112 of the Code and the
Treasury Regulations promulgated thereunder) in (i) any "reportable transaction"
within the meaning of section 6011 of the Code and the Treasury Regulations
promulgated thereunder other than any "reportable transaction" with respect to
the Acquired Subsidiaries, the Joint Ventures or Sellers that will be reported
on the United States consolidated federal income Tax Return of Parent for the
taxable years ending on December 31, 2004 and December 31, 2005, (ii) any
"confidential corporate tax shelter" within the meaning of section 6111 of the
Code and the Treasury Regulations promulgated thereunder, or (iii) any
"potentially abusive tax shelter" within the meaning of section 6112 of the Code
and the Treasury Regulations promulgated thereunder.
(v) None of the Acquired Subsidiaries is (i) obligated to make any
payments, or (ii) a party to any agreement, contract or arrangement that under
certain circumstances could obligate it to make any payments that could result,
separately or in the aggregate, in the payment of any payments that are subject
to section 280G of the Code solely as a result of the transactions contemplated
by this Agreement.
(w) To the actual knowledge of the Tax Personnel, no Partnership has
in effect a valid election pursuant to section 754 of the Code, which election
will remain in effect for the taxable year of such Partnership in which the
transactions contemplated by this Agreement occur.
(x) To the actual knowledge of the Tax Personnel, for federal income
tax purposes, none of the allocations of income, gain, loss or deductions in
respect of any Partnership for the respective Partnership taxable years in which
the transactions contemplated by this Agreement occur (or prior taxable years)
are (or were) required to be determined under section 704(c) of the Code or the
principles thereof.
(y) To the actual knowledge of the Tax Personnel, none of the
transactions contemplated in this Agreement will cause a termination of any
Partnership pursuant to section 708(b) of the Code and the Treasury Regulations
promulgated thereunder.
Section 4.19 Affiliate Transactions. Except (i) as set forth in
Section 4.19(i) of the Sellers Disclosure Letter, (ii) for transactions which
are on customary third party terms, (iii) for services, products or matters
which are to be continued or provided by the Related
42
Agreements or (iv) where the transaction in question will be terminated pursuant
to Section 6.10(b) on or prior to the Closing Date, there are no outstanding
amounts payable to, or receivable from, or advances by Sellers or any of their
Subsidiaries (other than an Acquired Subsidiary) to, and neither Sellers nor any
of their Subsidiaries is otherwise a creditor or debtor to any of the Acquired
Subsidiaries or the Joint Ventures, and no Seller nor any Subsidiary of any
Seller (other than an Acquired Subsidiary) is a party to any transaction or
agreement with any of the Acquired Subsidiaries or the Joint Ventures.
Section 4.20 Regulatory Filings.
(a) TIC has filed with, or furnished to, the SEC all required TIC SEC
Documents. As of their respective dates, the TIC SEC Documents complied in all
material respects with the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or the Investment Company
Act, as the case may be, applicable to such TIC SEC Documents, and none of the
TIC SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, unless such information contained in any TIC SEC Document
has been corrected by a later-filed TIC SEC Document. The financial statements
of TIC and any of its separate accounts included in the TIC SEC Documents comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the financial position of TIC and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and to normal and
recurring year-end audit adjustments).
(b) TLAC has filed with, or furnished to, the SEC all required TLAC
SEC Documents. As of their respective dates, the required TLAC SEC Documents
complied in all material respects with the requirements of the Securities Act,
the Exchange Act or the Investment Company Act, and related regulations, as the
case may be, applicable to such TLAC SEC Documents, and none of the TLAC SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, unless such information contained in any TLAC SEC Document has
been corrected by a later-filed TLAC SEC Document. The financial statements of
TLAC and any of its separate accounts included in the TLAC SEC Documents comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the financial position of TLAC and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and to normal and
recurring year-end audit adjustments).
43
(c) Except as set forth in Section 4.20(c) of the Sellers Disclosure
Letter and except for filings with the SEC which are the subject of Section
4.20(a) and (b), all reports, statements, documents, registrations, filings or
submissions required to be filed by any Acquired Subsidiary or any Joint Venture
with any Governmental Authority (the "Other Reports"), have been filed, except
where the failure to make such filings would not, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect,
and the Acquired Subsidiaries and the Joint Ventures have timely paid all
material fees due and payable in connection therewith. Except as set forth in
Section 4.20(c) of the Sellers Disclosure Letter, all the Other Reports were
true and complete in all material respects, and were in compliance with Law when
filed or as amended or supplemented, and no deficiencies have been asserted in
writing by any such Governmental Authority with respect to any Other Report that
have not been remedied, except for any non-compliance or deficiencies which
would not, individually or in the aggregate, reasonably be expected to have a
Business Material Adverse Effect.
Section 4.21 Reinsurance. Section 4.21 of the Sellers Disclosure
Letter sets forth a true and complete list as of the date of this Agreement of
each material (i) reinsurance agreement (ceded or assumed) currently in force
and effect to which any of the Acquired Subsidiaries or any of the Joint
Ventures is a party (the "In-force Reinsurance Agreements"), (ii) reinsurance
agreement (ceded or assumed) with respect to previously issued business to which
any of the Acquired Subsidiaries or any of the Joint Ventures is a party and
(iii) reinsurance trust agreement or letter of credit required under SAP to
claim credit in the Domestic SAP Financial Information for any agreement
described in clause (i) above. Except as would not, individually or in the
aggregate, reasonably be expected to result in a Business Material Adverse
Effect, each In-force Reinsurance Agreement is the legal, valid and binding
obligation of an Acquired Subsidiary that is a party thereto and, to the
Knowledge of Sellers, of each other party thereto, enforceable in accordance
with its terms subject to bankruptcy, receivership, insolvency, reorganization,
moratorium, fraudulent transfer and other Laws relating to or affecting the
rights of creditors in general and by legal and equitable limitations on the
enforceability of specific remedies. The GMDB Reinsurance Agreement does not
contain any provisions providing that CGLIC may terminate such agreement by
reason of the transactions contemplated by this Agreement.
Section 4.22 Portfolio Investments. All investments included in the
investment portfolios of each of the Insurance Companies as of the date of this
Agreement comply with all Laws applicable to the Insurance Companies, except as
would not reasonably be expected to have a Business Material Adverse Effect.
Except as set forth in Section 4.22 of the Sellers Disclosure Letter, as of
December 31, 2004, none of the material investments included in the investment
portfolios of the Insurance Companies is in material default in the payment of
principal or interest or dividends.
Section 4.23 Acquisition of Shares for Investment. Sellers are
acquiring the shares comprising the Stock Consideration for investment and not
with a view toward sale in connection with any distribution thereof in violation
of the Securities Act. Parent hereby acknowledges and agrees that the shares
comprising the Stock Consideration may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration under
the Securities Act, except pursuant to an exemption from such registration
available under
44
such Act, and without compliance with state and foreign securities Laws, in each
case, to the extent applicable.
Section 4.24 Environmental Matters. Except as set forth in Section
4.24 of the Sellers Disclosure Letter: (i) each Acquired Subsidiary has operated
the Business in compliance in all material respects with all applicable material
Environmental Laws and Permits required thereunder; (ii) there are no present
events, conditions or circumstances associated with the Business that would
reasonably be expected to result in any action or claim against the Acquired
Subsidiaries under applicable Environmental Laws that would reasonably be
expected to have a Business Material Adverse Effect, nor has any Acquired
Subsidiary or any Seller received any notice that any Owned Real Property or
Leased Real Property is in violation of any Environmental Laws or that such
Acquired Subsidiary is responsible (or potentially responsible) for the
investigation, cleanup, monitoring or other remediation of any Hazardous
Materials on, at or under any Owned Real Property or Leased Real Property that
would reasonably be expected to have a Business Material Adverse Effect; and
(iii) each Acquired Subsidiary has not assumed or retained, contractually or by
operation of law, any liability under Environmental Laws or related to Hazardous
Materials that would reasonably be expected to have a Business Material Adverse
Effect.
Section 4.25 Brokers. No broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Sellers, except
those for which Sellers will be solely responsible.
Section 4.26 Registered Management Investment Companies.
(a) Section 4.26(a) of the Sellers Disclosure Letter contains a list,
as of the date hereof, of all of the investment companies registered under the
Investment Company Act for which any Acquired Subsidiary acts as investment
adviser or sub-adviser, together with any such investment company for which any
Acquired Subsidiary acts as an investment adviser between the date hereof and
the Closing (the "Funds") and each pooled investment vehicle, (other than the
Funds) for which any Acquired Subsidiary acts as investment adviser,
administrator, sub-adviser, commodity pool operator or commodity trading
adviser, or for which it acts as a general partner or managing member, together
with any such vehicle (other than a fund) for which an Acquired Subsidiary acts
in such capacity between the date hereof and the Closing (the "Investment
Pools"). Each Fund is, and at all times as required under the Investment Company
Act, has been, duly registered with the SEC as an investment company under the
Investment Company Act. Each Investment Pool is not an "investment company"
within the meaning of, or is otherwise exempt from registration under, the
Investment Company Act.
(b) Except as set forth in Section 4.26(b) of the Sellers Disclosure
Letter, each of the Funds has at all times as required under the Securities Act
and any other applicable securities or blue sky Laws, duly registered all
securities of which it is the issuer under the Securities Act and such other
Laws, and each Investment Pool has offered and sold its securities pursuant to
an applicable exemption from the registration requirements of the Securities Act
and has duly registered or qualified its securities in accordance with, or has
offered and sold such securities pursuant to an available exemption under, all
applicable securities or blue sky Laws of
45
any jurisdiction, except for such failure as would not, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect.
Each of the Funds has duly filed all registration statements, prospectuses,
financial statements and any other documents required to be filed with
applicable Governmental Authorities or delivered to Fund shareholders ("Fund
Filings"), and any amendments thereto, in accordance with applicable Laws,
except for instances of noncompliance which would not, individually or in the
aggregate, have a Business Material Adverse Effect. None of the Fund Filings
filed or used since January 1, 2002 contained, or will contain, any untrue
statement of material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were or are made, not misleading. Except as set
forth in Section 4.26(b) of the Sellers Disclosure Letter, each of the financial
statements contained in or incorporated by reference into the Fund Filings
comply in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved and fairly presents in all material respects the financial
position of the entity or entities to which it relates as of its date, except in
each case as may be noted therein, subject to normal year end audit adjustments
in the case of unaudited statements.
(c) Each of the Funds is governed by a board of directors or trustees
or, in the case of Funds that are managed separate accounts, a board of managers
(each, a "Fund Board") at least 75% of whose members are not "interested
persons" (as defined in the Investment Company Act) of the investment adviser to
such Fund.
(d) Each Fund, other than the Funds that are managed separate
accounts, has elected to qualify and, for all taxable years with respect to
which the applicable statute of limitations (including any extensions) has not
expired, has continuously qualified to be treated as a "regulated investment
company" under Subchapter M of the Code (a "RIC") and has continuously been
eligible to compute, and has for each such taxable year computed, its federal
income tax under section 852 of the Code. Each such Fund has timely filed in the
manner prescribed by Law all material Tax Returns required to have been filed
by, or with respect to, any Fund.
(e) (i) Each contract or agreement pursuant to which an Acquired
Subsidiary renders investment advisory or management services, administration,
transfer agency, pricing and book-keeping or distribution services to any Fund,
Investment Pool or non-Fund client (each, an "Investment Contract") and any
subsequent renewal has been duly authorized, executed and delivered by an
Acquired Subsidiary and, if applicable, each Fund, or Investment Pool party
thereto in accordance with applicable Law, is when executed a valid and binding
obligation of each party thereto that is an Acquired Subsidiary, Fund or
Investment Pool, and currently is, or will be, as applicable, in full force and
effect with respect to such parties; and (ii) to the Knowledge of Sellers, each
party to each such agreement is in compliance therewith, and no event has
occurred or condition exists that with notice or the passage of time or both
would constitute such a default, except in the case of each of clauses (i) and
(ii) above, for such exceptions as would not, individually or in the aggregate,
reasonably be expected to have a Business Material Adverse Effect.
46
(f) The accounts of each investment advisory client (other than a
Fund) that is subject to ERISA that are managed by an Acquired Subsidiary have
been managed by an Acquired Subsidiary in compliance with all the applicable
requirements of ERISA, except (i) as set forth in Section 4.26(f) of the Sellers
Disclosure Letter or (ii) for any failure that would not, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect.
(g) Other than information or statements provided by Purchaser or its
Affiliates in connection with the Sellers Consents, each of (i) the proxy
solicitation materials to be distributed to the shareholders of each Fund and
(ii) the materials provided to the Fund Boards in connection with the Sellers
Consents will be complete in all material respects and will not contain (at the
time such materials or information is distributed, filed or provided, as the
case may be) any statement which, at the time and in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, and will not omit to state any material fact necessary in order to make
the statements therein not false or misleading or (with respect to information
included in proxy statements) necessary to correct any statement or any earlier
communication with respect to the solicitation of a proxy for the same meeting
or subject matter which has become false or misleading.
Section 4.27 Insurance. The Acquired Subsidiaries, the Joint Ventures
and, with respect to the Business, Sellers, maintain insurance policies and
performance bonds on their respective properties and assets, and with respect to
their employees and operations, with reputable insurance carriers, and such
insurance policies provide reasonable coverage for risk incident to the Business
and the respective properties and assets of the Acquired Subsidiaries and the
Joint Ventures and are in character and amounts comparable to that carried by
Persons engaged in similar businesses in similar jurisdictions and subject to
the same or similar perils or hazards, as part of organizations of comparable
size. To the Knowledge of Sellers, Sellers, the Acquired Subsidiaries and the
Joint Ventures are not in default under any such insurance policies and have
paid all premiums owed thereunder, and, except as would not be reasonably
expected to result in a Business Material Adverse Effect, since January 1, 2002,
no claims for coverage thereunder have been denied.
Section 4.28 Bank Holding Company Act. All of the activities of the
Acquired Subsidiaries are financial in nature within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act").
Section 4.29 No Parent Stockholder Vote Required. No vote or other
action of the stockholders of Parent is required pursuant to any Requirement of
Law, the organizational documents of Parent or otherwise in order for Parent to
consummate the transactions contemplated by this Agreement and the Related
Agreements.
Section 4.30 Property and Casualty Business. No Domestic Insurance
Company has any PC Liabilities other than those subject to one hundred percent
(100%) reinsurance by TIN and indemnification by TPC. Parent has prior to the
date hereof provided Purchaser with true and correct copies of all agreements
pursuant to which the Accident Department of TIC reinsured all of its PC
Liabilities for workers' compensation policies to TIN. Such agreements are valid
and binding and in full force and effect. Neither TIC nor, to the
47
Knowledge of Sellers, TIN is, or is claimed to be, in breach of any such
agreements. There are no provisions in such agreements or any other agreement or
understanding, written or oral, that would permit TIN to cancel, commute or
terminate such reinsurance without the prior consent of TIC.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in the specific section in the Purchaser
Disclosure Letter to which such exception or information relates and subject to
Section 11.14(b), Purchaser hereby represents and warrants to Sellers as set
forth below.
Section 5.1 Organization and Good Standing. Each of Purchaser and
each of its Significant Subsidiaries (as defined in Regulation S-X) is a legal
entity duly organized, validly existing and (where applicable) in good standing
under the Laws of its jurisdiction of organization and has all requisite
corporate power and authority to own, operate and lease its assets and, as
applicable, the Transferred Shares and to carry on its business and, as
applicable, the Business, each as currently conducted, and, as of the Closing
Date, will be duly qualified to do business and will be in good standing (where
applicable) as a foreign corporation in each jurisdiction where the ownership,
leasing or operation of the Transferred Shares or the conduct of the Business
requires such qualification, except for those jurisdictions where the failure to
be so qualified or to be in good standing would not, individually or in the
aggregate, reasonably be expected to have a Purchaser Material Adverse Effect.
Section 5.2 Capital Structure. As of December 31, 2004, the
authorized capital stock of Purchaser consists of 3,000,000,000 shares of
Purchaser Common Stock and 10,000,000 shares of preferred stock, par value $.01
per share (the "Purchaser Preferred Stock"). At the close of business on January
19, 2005, (i) 786,766,664 shares of Purchaser Common Stock were issued and
outstanding, (ii) 52,909,655 shares of Purchaser Common Stock were held by
Purchaser in its treasury, (iii) 36,218,214 shares of Purchaser Common Stock
were reserved for issuance (including shares underlying outstanding stock
options and shares available for future grant) pursuant to the incentive plans
listed in Section 5.2 of the Purchaser Disclosure Letter and (iv) no shares of
Purchaser Preferred Stock were issued and outstanding. Except as set forth above
in this Section 5.2 or in Section 5.2 of the Purchaser Disclosure Letter, at the
close of business on January 19, 2005, no (x) shares of capital stock or other
voting securities of Purchaser were issued, reserved for issuance or outstanding
and (y) agreements regarding the rights of holders of capital stock of
Purchaser, including voting or registration rights, are in effect. All shares of
Purchaser Common Stock to be issued in accordance with this Agreement will be,
when issued, duly authorized, validly issued, fully paid and non-assessable,
free and clear of all Liens, except for Liens imposed by Sellers, their
Affiliates or their creditors.
Section 5.3 Authorization; Binding Obligations. Purchaser has all
necessary corporate power and authority to make, execute and deliver this
Agreement and the Related Agreements and to perform all of the obligations to be
performed by it hereunder and thereunder. The making, execution, delivery and
performance by Purchaser of this Agreement and the Related Agreements and the
consummation by Purchaser of the transactions contemplated
48
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been, and, as of
the Closing Date, the Related Agreements will be, duly and validly executed and
delivered by Purchaser, and assuming the due authorization, execution and
delivery by Sellers that are party thereto, each of this Agreement and the
Related Agreements will constitute the valid, legal and binding obligation of
Purchaser, enforceable against it in accordance with its terms, except as may be
subject to applicable bankruptcy, insolvency, moratorium or other similar Laws,
now or hereafter in effect, relating to or affecting the rights of creditors
generally and by legal and equitable limitations on the enforceability of
specific remedies.
Section 5.4 No Conflicts. Assuming the Purchaser Consents are
obtained, neither the execution and delivery of this Agreement or the Related
Agreements by Purchaser, nor the consummation by Purchaser of the transactions
contemplated hereby or thereby, will violate, conflict with, result in the
breach of, constitute a default under, be prohibited by, require any additional
approval under or accelerate the performance provided by any (x) terms,
conditions or provisions of Purchaser's organizational documents or by-laws, (y)
contract or (z) Requirements of Law applicable to Purchaser, other than, in the
case of clauses (y) and (z), any such violation, conflict, breach, default,
prohibition, approval or acceleration that would not reasonably be expected to
have a Purchaser Material Adverse Effect. There are no restrictions on
Purchaser's ability to issue and deliver to Parent the Stock Consideration as
provided in Section 2.2.
Section 5.5 Approvals. There are no notices, reports or other filings
required to be made by Purchaser with, or consents, registrations, approvals,
permits or other authorizations required to be obtained by Purchaser or any of
its Affiliates from, any Governmental Authority or other third party in order
for Purchaser or any of its Affiliates to execute or deliver this Agreement or
the Related Agreements or to consummate the transactions contemplated hereby or
thereby (collectively, the "Purchaser Consents"), except (i) as set forth in
Section 5.5 of the Purchaser Disclosure Letter or (ii) where the failure to make
such notices, reports or other filings or the failure to obtain such consents,
registrations, approvals, permits or other authorizations would not reasonably
be expected to have a Purchaser Material Adverse Effect.
Section 5.6 Litigation. Except as set forth in Section 5.6(a) of the
Purchaser Disclosure Letter or ordinary course benefit claims arising under any
Insurance Contract, as of the date hereof, there is no action, suit, proceeding,
claim, arbitration or other litigation pending or any investigation by any
Governmental Authority or to the Knowledge of Purchaser, any action, suit,
proceeding, claim or other litigation or governmental investigation threatened,
against Purchaser or any of its Affiliates that would reasonably be expected to
have, individually or in the aggregate, a Purchaser Material Adverse Effect.
Except as set forth in Section 5.6(b) of the Purchaser Disclosure Letter, there
are no judgments, injunctions, writs, orders or decrees binding upon Purchaser
or any of its Affiliates that would reasonably be expected to have a Purchaser
Material Adverse Effect.
Section 5.7 Compliance with Requirements of Law. Except as set forth
in Section 5.7(a) of the Purchaser Disclosure Letter, Purchaser is in compliance
in all material respects with all applicable Requirements of Law relating to, or
materially affecting, its
49
businesses. Except as set forth in Section 5.7(b) of the Purchaser Disclosure
Letter or as would not reasonably be expected to have a Purchaser Material
Adverse Effect, since January 31, 2000, Purchaser has not violated any
Requirement of Law relating to its businesses, and has not received any written,
or, to the Knowledge of Purchaser, oral, notice from (and otherwise does not
have any Knowledge of) any Governmental Authority that alleges any noncompliance
(or that Purchaser or any of its Affiliates is under any investigation by any
such Governmental Authority for such alleged noncompliance) with any Requirement
of Law relating to Purchaser's businesses, except as may be required under the
Securities Act.
Section 5.8 SEC Filings and Financial Statements.
(a) Purchaser has filed with, or furnished to, the SEC all required
Purchaser SEC Documents. As of their respective dates, the Purchaser SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, applicable to such
Purchaser SEC Documents, and none of the Purchaser SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, unless
such information contained in any Purchaser SEC Document has been corrected by a
later-filed Purchaser SEC Document. The financial statements of Purchaser
included in the Purchaser SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q) applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly present in all material respects
the financial position of Purchaser and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to the
absence of footnote disclosure and to normal and recurring year-end audit
adjustments).
(b) Except as set forth in Section 5.8(b) of the Purchaser Disclosure
Letter and except for filings with the SEC which are the subject of Section
5.8(a), all reports, statements, documents, registrations, filings or
submissions required to be filed by Purchaser or its Affiliates with any
Governmental Authority (the "Other Purchaser Reports"), have been filed, except
where the failure to make such filings would not, individually or in the
aggregate, reasonably be expected to have a Purchaser Material Adverse Effect.
Except as set forth in Section 5.8(b) of the Purchaser Disclosure Letter, all
the Other Purchaser Reports were in compliance with Law when filed or as amended
or supplemented, and no deficiencies have been asserted in writing by any such
Governmental Authority with respect to any Other Purchaser Report that have not
been remedied, except for any non-compliance or deficiencies which would not,
individually or in the aggregate, reasonably be expected to have a Purchaser
Material Adverse Effect.
(c) Except as (i) set forth in the financial statements included in
Purchaser's quarterly report on Form 10-Q filed prior to the date hereof for the
nine months ended September 30, 2004 or (ii) incurred in the ordinary course of
business since September 30, 2004, neither Purchaser nor any of its Subsidiaries
has any liabilities that, individually or in the aggregate, have had or would
reasonably be expected to have a Purchaser Material Adverse Effect.
50
(d) Purchaser has made available to Parent true and complete copies of
all annual and quarterly statements of Metropolitan Life Insurance Company as
filed with the New York State Insurance Department (the "NYSID") as of and for
the year ended December 31, 2003 and for each of the quarters ended March 31,
2004, June 30, 2004 and September 30, 2004, prepared in accordance with
applicable SAP (collectively, the "Met SAP Financial Statements"). The Met SAP
Financial Statements (i) are unaudited, (ii) have been prepared from the books
and records of its businesses, (iii) are subject to Purchaser's internal
accounting policies and procedures and (iv) have been prepared in all material
respects in accordance with applicable SAP prescribed or permitted by the NYSID.
(e) Financial Information. Purchaser makes the representation and
warranty set forth in Section 5.8(e) of the Purchaser Disclosure Letter, which
representation and warranty is incorporated herein by reference and shall be
made as if set forth herein.
Section 5.9 Financing. Purchaser will have at the Closing Date
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to pay the Cash Consideration as required by this
Agreement.
Section 5.10 Absence of Certain Changes. Since September 30, 2004,
Purchaser has conducted its business only in the ordinary course of business;
and there has not occurred any change or event that, individually or in the
aggregate, has had a Purchaser Material Adverse Effect.
Section 5.11 Acquisition of Transferred Shares for Investment.
Purchaser is acquiring the Transferred Shares for investment and not with a view
toward sale in connection with any distribution thereof in violation of the
Securities Act. Purchaser hereby acknowledges and agrees that the Transferred
Shares may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act, except
pursuant to an exemption from such registration available under the Securities
Act, and without compliance with state and foreign securities Laws, in each
case, to the extent applicable.
Section 5.12 No Purchaser Stockholder Vote Required. No vote or other
action of the stockholders of Purchaser is required pursuant to any Requirement
of Law, the organizational documents of Purchaser or otherwise in order for
Purchaser to consummate the transactions contemplated by this Agreement and the
Related Agreements.
Section 5.13 Brokers. No broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser, except
those for which Purchaser will be solely responsible.
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ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business.
(a) Except (i) for matters set forth in Section 6.1(a)(i) of the
Sellers Disclosure Letter or Section 6.10(b)(ii) of the Sellers Disclosure
Letter, (ii) for matters contemplated by Section 6.14 or as otherwise expressly
contemplated hereby or (iii) with the prior written consent of Purchaser, from
and after the date hereof and prior to and including the Closing Date, Parent
hereby covenants and agrees that the Business shall be conducted in the ordinary
course of business consistent with past practice. Prior to and including the
Closing Date and except as otherwise specifically contemplated by this Agreement
or specifically consented to by Purchaser in writing, including email
transmission, Parent shall cause each of the Acquired Subsidiaries to (i)
maintain insurance coverages (to the extent available on commercially reasonable
terms) and maintain its books, accounts and records in the usual manner on a
basis consistent with past practice, with such changes therefrom as may be
required by changes in accounting rules to which such Acquired Subsidiary is
subject; (ii) maintain and keep its properties and equipment in good repair,
working order and condition; (iii) preserve and maintain the Permits of the
Insurance Companies necessary for the conduct of the Business as currently
conducted; and (iv) use reasonable efforts to maintain and preserve its business
organization, retain the services of its present officers and employees
(provided that the foregoing shall not require Sellers to expend any money) and
maintain its relationships with its agents, producers, policyholders, suppliers
and customers.
(b) Without limiting the provisions of Section 6.1(a), Parent hereby
covenants and agrees that, except (i) as set forth in Section 6.1(b)(i) of the
Sellers Disclosure Letter or Section 6.10(b)(ii) of the Sellers Disclosure
Letter, (ii) for matters contemplated by Section 6.14 or as otherwise expressly
contemplated hereby or (iii) with the prior written consent of Purchaser, from
and after the date hereof and prior to and including the Closing Date, none of
Sellers (with respect to the Business) nor the Acquired Subsidiaries, as
applicable, will:
(i) amend the articles of incorporation or bylaws or similar
organizational documents of any of the Acquired Subsidiaries;
(ii) authorize, issue or sell, or agree to authorize, issue or
sell, any additional shares or other equity or ownership interests, or grant,
confer or award any options, warrants or rights to acquire any shares, including
securities convertible or exchangeable for shares or other equity or ownership
interests, of any Acquired Subsidiary, or take or agree to take any of the
foregoing actions as a partner in a Joint Venture with respect to any Seller's
equity interests in such Joint Venture;
(iii) enter into any contract relating to the Business, in each
case, other than (A) such contracts that are entered into in the ordinary course
of business consistent with past practice (including guaranteed investment
contracts and funding agreements and investments made pursuant to Section
6.1(b)(xvi); provided that such guaranteed investment contracts and funding
agreements do not have put provisions that would permit the acceleration of the
stated maturity thereof upon a change of control or ratings downgrade; and (B)
any such
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contract not entered into in the ordinary course of business consistent
with past practice and pursuant to which any Seller or any Acquired Subsidiary
receives, or is reasonably expected to receive, payments, or makes, or is
reasonably expected to make, payments, of less than fifteen million dollars
($15,000,000) for all contracts outside the ordinary course of business in the
aggregate per calendar year;
(iv) modify, amend or terminate any of the Applicable Contracts,
except in the ordinary course of business consistent with past practice;
(v) (A) incur or assume any indebtedness for borrowed money
(including surplus notes or capital notes), (B) guarantee any indebtedness of
another, (C) make any loans or advances of borrowed money or capital
contributions to, or equity investments in, any other Person, other than
indebtedness, guarantees, loans, advances, contributions and (1) investments
pursuant to Section 6.1(b)(xvi) or (2) loans or borrowings under currently
available lines of credit or (D) create or assume any other liability or
obligation material to any Acquired Subsidiary, other than in the ordinary
course of business, or grant or create any Lien on any of its assets, other than
Permitted Liens and other Liens in the ordinary course of business; it being
hereby understood that the foregoing clauses shall apply only to the Acquired
Subsidiaries;
(vi) except as required by Law and except with respect to the
retention agreements contemplated by Section 6.15(k), (A) adopt or amend a
Sellers Benefit Plan (or any plan that would be a Sellers Benefit Plan if
adopted) that would increase the liability of any Acquired Subsidiary (unless
such adoption or amendment applies generally to all employees of Sellers), (B)
enter into, adopt, extend, renew or amend any (1) collective bargaining
agreement (except in the ordinary course of business consistent with past
practice after consultation with Purchaser) or (2) employment agreement, in each
case, that would increase the liability of any Acquired Subsidiary, (C) employ,
or offer to employ, any individual at any of the Acquired Subsidiaries, except
in the ordinary course of business consistent with past practice, (D) transfer
any employee or service provider (x) to an Acquired Subsidiary from a Person
that is not an Acquired Subsidiary or (y) from an Acquired Subsidiary to a
Person that is not an Acquired Subsidiary, unless the transferred employee or
service provider was a Business Employee before the transfer and would remain a
Business Employee immediately after the transfer, (E) grant any increase in
compensation or benefits to any Business Employee, except in the ordinary course
of business consistent with past practice for Business Employees who are neither
officers nor executives or (F) reassign any expatriate Business Employees to the
United States or to any country to which such expatriate is not assigned as of
the date of this Agreement, unless the transferred expatriate Business Employee
was a Business Employee before the transfer and would remain a Business Employee
immediately after the transfer;
(vii) change any of its material accounting, hedging, investing,
underwriting, actuarial, pricing, Tax, agency principles, marketing or agency
principles, practices, methods or policies (including reserving methods,
practices or policies) employed with respect to the Business in any material
respect, except as may be required as a result of a change in Law, GAAP or SAP
and except as contemplated herein;
(viii) except as required by Law or by any Governmental Authority
and except for elections made in the ordinary course of business, with respect
to any Acquired
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Subsidiary, (A) make any settlement or compromise of any current audit, except
as set forth in Section 4.18 of the Sellers Disclosure Letter, or settle or
compromise any audit that is not disclosed in such Section of the Sellers
Disclosure Letter, (B) consent to any extension or waiver of any limitation
period with respect to any material Taxes or (C) make a request for a Tax Ruling
or enter into a Closing Agreement, or settle or compromise any audit or other
controversy relating to Taxes, in each of clauses (A), (B) and (C), to the
extent such action results in a material adverse effect to any of the Acquired
Subsidiaries for any Post-Closing Tax Periods;
(ix) pledge or otherwise encumber shares of capital stock or
other equity or ownership interest of any Acquired Subsidiary or any interest in
a Joint Venture, other than Permitted Liens;
(x) (A) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise) any Person or assets comprising a business or any
material amount of property or assets in or of any other Person or (B) dispose,
transfer, encumber, pledge or lease any material property or assets;
(xi) declare or pay any dividend or distribution with respect to
the capital stock of, or other equity or ownership interest in, any Acquired
Subsidiary, other than (i) as contemplated by Section 6.14 or (ii) to the extent
that Excess Reference Equity exceeds $200,000,000;
(xii) except as provided for in Section 6.1(b)(viii), settle any
material claim, action or proceeding or waive any material rights or material
claims in respect of the Business;
(xiii) enter into or terminate any exclusive distribution
agreement with respect to the Business;
(xiv) forfeit, abandon, modify, waive or terminate any material
Permit;
(xv) enter into any activities that are not financial in nature
within the meaning of the Bank Holding Company Act;
(xvi) (A) make or dispose of any investments, other than in the
ordinary course of business consistent with past practice or pursuant to the
investment policies of the Acquired Subsidiaries or the investment asset
allocation plan set forth in Section 6.1(b)(xvi) of the Sellers Disclosure
Letter or (B) enter into, or amend, modify or terminate, any reinsurance
contract other than in the ordinary course of business consistent with past
practice with the primary effect of increasing the RBC Ratio of TIC or CLIC;
(xvii) transfer or assign any Subsidiary Shares of any Acquired
Foreign Subsidiary to any Domestic Insurance Company;
(xviii) make any capital contribution to, or equity investment
in, TIC or CLIC, including surplus notes, capital notes and capital stock; and
54
(xix) enter into a contract to do, or to authorize, or commit to
do, any of the foregoing.
(c) For purposes of Section 6.1(a) and 6.1(b), except as (i) expressly
set forth therein or (ii) set forth in Section 6.1(a)(i) of the Sellers
Disclosure Letter, the actions contemplated thereby shall not refer to any
action by the Joint Ventures or actions taken by Sellers or their Subsidiaries
in respect of the Joint Ventures; provided, that Parent shall use commercially
reasonable efforts to cause the business of each Joint Venture to be conducted
in the ordinary course consistent with past practice from and after the date
hereof and prior to and including the Closing Date.
(d) Nothing contained in this Agreement shall give to Purchaser,
directly or indirectly, rights to control or direct the operation of the
Business prior to the Closing. Prior to the Closing, Sellers and their
Affiliates shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision of the operations of the Business.
Section 6.2 Certain Transactions.
(a) Purchaser hereby covenants and agrees that, except as expressly
permitted in this Agreement, or with the prior written consent of Parent (which
consent shall not be unreasonably withheld, delayed or conditioned), from and
after the date hereof and prior to and including the Closing Date, Purchaser
will not:
(i) amend its certificate of incorporation or the Purchaser
Rights Agreement;
(ii) except for regular annual dividends, declare, set aside or
pay any dividends on, or make any other distributions (whether in cash, stock or
property) in respect of, any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock;
(iii) adopt a plan of complete or partial liquidation or
resolutions providing for the complete or partial liquidation, dissolution,
amalgamation, consolidation, restructuring, recapitalization or other
reorganization of Purchaser; or
(iv) enter into a contract to do, or to authorize, or commit to
do, any of the foregoing.
(b) During the period beginning five (5) Business Days prior to
commencement of the measurement period for calculating the Applicable Stock
Price until the Closing Date, Purchaser and its Affiliates shall not purchase,
or take any other actions with respect to, the Purchaser Common Stock reasonably
likely to affect the ordinary course trading price of the Purchaser Common
Stock, except as required by applicable Law or stock exchange rules or
regulations; provided, that the foregoing shall not restrict market making and
other activities in the ordinary course of business.
(c) During the period beginning five (5) Business Days prior to
commencement of the measurement period for calculating the Applicable Stock
Price until the
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Closing Date, Parent and its Affiliates shall not purchase, or take any other
actions with respect to, the Purchaser Common Stock reasonably likely to affect
the ordinary course trading price of the Purchaser Common Stock, except as
required by applicable Law or stock exchange rules or regulations; provided,
that the foregoing shall not restrict market making and other activities in the
ordinary course of business.
Section 6.3 Additional Sellers' Covenants.
(a) Prior to the Closing Date, Sellers shall cause each Acquired
Subsidiary to sell all Purchaser securities held, directly or indirectly, by
such Acquired Subsidiary, subject to all Requirements of Law and consistent with
contractual commitments and investment guidelines.
(b) Until the Closing Date, Parent and its Affiliates shall use
commercially reasonable efforts to (i) continue the negotiations in progress on
the date hereof with TPC regarding the administration of previously reinsured
accident business of TIC, (ii) attempt to agree upon such an arrangement
reasonably acceptable to Purchaser, (iii) periodically advise Purchaser of the
progress of such negotiations and (iv) not enter into any such agreement without
the consent of Purchaser, such consent not to be unreasonably withheld.
(c) Notwithstanding anything to the contrary in this Agreement, Parent
shall cause Sellers to use commercially reasonable efforts (including diligently
pursuing all required applications with any applicable Governmental Authority),
to cause the payment of $200,000,000 of cash dividends by Acquired Foreign
Subsidiaries in the amounts and by the Acquired Foreign Subsidiaries set forth
in Exhibit F. Parent shall further cause the Acquired Foreign Subsidiaries to
not pay any cash dividends following the date of this Agreement to Parent or any
of its Affiliates (which are not Acquired Foreign Subsidiaries) in excess of the
$200,000,000 of dividends provided for in the prior sentence. In addition,
Parent shall not permit any Acquired Foreign Subsidiary to pay any dividend or
make any other distribution to any Acquired Domestic Subsidiary or make any
investment in any Acquired Domestic Subsidiary, including an investment in
surplus notes issued by such Acquired Domestic Subsidiary.
Section 6.4 Access and Confidentiality.
(a) From the date hereof to the Closing, subject to any applicable
Requirement of Law, (i) Parent shall, and shall cause the Acquired Subsidiaries
to, furnish promptly to Purchaser (A) a copy of each annual statement, quarterly
statement and registration statement filed by any Acquired Subsidiary pursuant
to any Requirement of Law; (B) management financial reports (together with all
accompanying documents) provided with respect to any Acquired Subsidiary; (C)
all inquiries and subpoenas from any Governmental Authority to any Acquired
Subsidiary with respect to any alleged deficiency or violation material to the
financial condition or operations of such Acquired Subsidiary; and (D) each
written report or examination or examination of financial condition or market
conduct (in final form) of any Insurance Company; provided that the foregoing
shall not require Parent or any Acquired Subsidiary to prepare and furnish any
report or other information not otherwise prepared in the ordinary course of
business consistent with past practice; and (ii) each Seller will permit
56
Purchaser and its representatives to have reasonable access, during regular
business hours and upon reasonable advance notice to such Seller's properties,
premises, facilities, information technology systems, employees and
representatives and books and records, including all computer tapes and
similarly stored data, of Sellers and the Acquired Subsidiaries (such access to
include access to joint venture representatives appointed by any Acquired
Subsidiaries, access for underwriters with respect to the financing by Purchaser
of the Cash Consideration only so long as such underwriters shall have entered
into confidentiality agreements and Sellers will use commercially reasonable
efforts to provide full access to the project set forth in Section 6.4(a) of the
Sellers Disclosure Letter for due diligence), but only to the extent that such
access does not unreasonably interfere with the respective businesses of Sellers
and only to the extent related to the Business, and each Seller shall direct its
respective employees, agents and representatives and shall cause the employees,
agents and representatives of their respective Affiliates, to cooperate fully
with Purchaser and its representatives; provided that Purchaser, and its
respective representatives shall comply with the confidentiality obligations
referred to in Sections 6.4(b) to (d); and provided, further, that the foregoing
shall not require (1) Sellers or any of their Affiliates to (x) permit any
inspection, or to disclose any information, that would result in the disclosure
of any trade secrets of Sellers or of any of their respective Affiliates
unrelated to the Business, (y) violate any obligations of Sellers or Purchaser
or their respective Affiliates, as the case may be, to any third party with
respect to confidentiality; provided that Sellers shall have used commercially
reasonable efforts to obtain the consent of such third party to such inspection
or disclosure or (z) disclose consolidated Tax Returns or Tax-related work
papers to each other or (2) any disclosure by Sellers or Purchaser, as the case
may be, or any of their respective Affiliates, that would reasonably be
expected, as a result of such disclosure, and in the opinion of outside counsel,
to have the effect of causing the waiver of any attorney-client privilege.
(b) From and after the date hereof, Purchaser shall not, and shall
cause each of its Affiliates (including the Acquired Subsidiaries) and its and
its Affiliates' personnel (including each of its and its Affiliates'
accountants, legal advisers and other professional advisers) not to, disclose to
any other Person or otherwise use any Sellers Confidential Information;
provided, that Purchaser and its Affiliates may disclose Sellers Confidential
Information (i) to the extent required by Law, in any report, statement,
testimony or other submission to any Governmental Authority having jurisdiction
over Purchaser or any of its Affiliates, (ii) with respect to the investment
portfolio of the Acquired Subsidiaries, to Portfolio Appraisers in accordance
with Section 6.21 or (iii) in order to comply with any Law applicable to
Purchaser or any of its Affiliates, or in response to any summons, subpoena or
other legal process or formal or informal investigative demand issued to
Purchaser or any of its Affiliates in the course of any litigation,
investigation or administrative proceeding; provided, further, that, if
Purchaser or any of its Affiliates becomes legally compelled by deposition,
interrogatory, request for documents, subpoena, civil investigative demand or
similar judicial or administrative process to disclose any Sellers Confidential
Information, Purchaser shall provide Parent with reasonably prompt prior written
notice of such requirement, and, to the extent reasonably practicable, cooperate
reasonably with Parent and Parent's Affiliates (at Parent's expense) to obtain a
protective order or similar remedy to cause Sellers Confidential Information not
to be disclosed. In the event that such protective order or other similar remedy
is not obtained, Purchaser shall furnish only that portion of Sellers
Confidential Information that has been legally compelled. Purchaser hereby
agrees, and shall cause its Affiliates, to protect Sellers Confidential
Information by using the same degree of care, but no less than a reasonable
degree of care, to prevent the unauthorized
57
disclosure of such Sellers Confidential Information as Purchaser uses to protect
its own confidential information of a like nature.
(c) From and after the Closing, Sellers shall not, and shall cause
each of their Affiliates and their Affiliates' personnel (including each of
their and their Affiliates' accountants, legal advisers and other professional
advisers) not to, disclose to any other Person any Business Confidential
Information; provided, that any Seller may disclose Business Confidential
Information (i) to the extent required by Law, in any report, statement,
testimony or other submission to any Governmental Authority having jurisdiction
over such Seller or (ii) in order to comply with any Law applicable to such
Seller, or in response to any summons, subpoena or other legal process or formal
or informal investigative demand issued to such Seller in the course of any
litigation, investigation or administrative proceeding; provided, further, that,
if a Seller or any of its Affiliates becomes legally compelled by deposition,
interrogatory, request for documents, subpoena, civil investigative demand or
similar judicial or administrative process to disclose any Business Confidential
Information, such Seller shall provide Purchaser with prompt prior written
notice of such requirement, and, to the extent reasonably practicable, cooperate
with Purchaser and Purchaser's Affiliates (at Purchaser's expense) to obtain a
protective order or similar remedy to cause Business Confidential Information
not to be disclosed, including interposing all available objections thereto,
such as objections based on settlement privilege. In the event that such
protective order or other similar remedy is not obtained, such Seller shall
furnish only that portion of Business Confidential Information that has been
legally compelled. Parent hereby agrees, and shall cause its Affiliates, to
protect Business Confidential Information by using the same degree of care, but
no less than a reasonable degree of care, to prevent the unauthorized disclosure
of such Business Confidential Information as Sellers use to protect their own
confidential information of a like nature.
(d) All information provided or obtained in connection with the
transactions contemplated by this Agreement and the Related Agreements
(including pursuant to subsections (a) through (c) above) will be held in
accordance with the confidentiality agreements, by and between Purchaser and
Parent (the "Confidentiality Agreements"). In the event of a conflict or
inconsistency between the terms of this Agreement and the Confidentiality
Agreements, the terms of this Agreement will govern. Each of Purchaser and
Parent hereby agrees to extend the term of the Confidentiality Agreements to one
(1) year from the Closing Date without any further action by either Party.
(e) Following the Closing, subject to any applicable Requirement of
Law, each of Sellers will permit Purchaser and its respective representatives to
have reasonable access, during regular business hours and upon reasonable
advance notice to examine and make copies of any books and records and personnel
relating to the Business which were retained by Sellers or their Subsidiaries
for any reasonable purpose relating to the Business, including in connection
with (i) the preparation of the Closing Date Balance Sheet and any dispute in
connection therewith, (ii) the preparation of Purchaser's accounting records or
with any audits, (iii) any suit, claim, action, proceeding or investigation
relating to the Business, (iv) any regulatory filing or matter or (v) any other
valid legal or business purpose of Purchaser. Sellers shall cooperate with
Purchaser to respond to any inquiry from any Governmental Authority regarding
the Business.
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(f) Following the Closing, subject to any applicable Requirement of
Law, Purchaser will permit Sellers and their respective representatives to have
reasonable access, during regular business hours and upon reasonable advance
notice, to the books and records and personnel relating to the Business which
were not retained by Sellers or their Subsidiaries for any reasonable purpose
relating to the business of Sellers, including in connection with (i) the
preparation of Sellers' accounting records or with any audits, (ii) any suit,
claim, action, proceeding or investigation relating to the Business, (iii) any
regulatory filing or matter or (iv) in connection with any other valid legal or
business purpose of Sellers.
(g) Each Party shall preserve and keep all books and records and all
information relating to the accounting, business and financial affairs that are
retained by any Seller or any Affiliate of any Seller or are obtained by
Purchaser hereunder, as the case may be, which information relates to the
Transferred Shares or the Business for a reasonable period (not less than seven
(7) years) after the Closing Date, or for any longer period as may be (i)
required by Law or any Governmental Authority or (ii) reasonably necessary with
respect to the prosecution or defense of any audit or other legal action that is
then pending or threatened and with respect to which the requesting Party has
notified the other Party as to the need to retain such books, records or
information. Notwithstanding the foregoing provisions of this Section 6.4(g),
the provisions of Article VIII shall govern the preservation, retention and
sharing of Tax Returns and Tax work papers.
Section 6.5 Notice of Changes. From the date hereof to the Closing
Date, Sellers, on the one hand, and Purchaser, on the other hand, shall promptly
advise the other in writing upon acquiring Knowledge of any fact which, if
existing or known on the date hereof, would have been required to be set forth
or disclosed pursuant to this Agreement or of any fact which, if existing or
known on the date hereof, would have made any of the representations of such
Party contained herein untrue in any material respect. No such information shall
impact any representation or warranty of the Party disclosing such information
or any rights or remedies available to the Party receiving such information in
connection with any breach of any representation or warranty; provided that a
breach of this Section 6.5 shall not be considered for purposes of determining
the satisfaction of the closing conditions set forth in Article VII or give rise
to a right of termination under Article IX if the underlying breach or breaches
with respect to which the other Party failed to give notice would not result in
the failure of the closing conditions set forth in Article VII or would not
result in the ability of such non-breaching Party to terminate this Agreement
under Article IX, as the case may be.
Section 6.6 Efforts; Filings.
(a) Under the terms and subject to the conditions of this Agreement,
each of Parent and Purchaser shall use its commercially reasonable efforts to
take, agree to take, or cause to be taken, any and all actions and to do, or
cause to be done, any and all things necessary, proper or advisable under any
Requirement of Law or otherwise, so as to, as promptly as practicable (i) permit
consummation of the purchase of the Transferred Shares and (ii) otherwise enable
consummation of the transactions contemplated by this Agreement and the Related
Agreements, and each such Party shall, and shall cause its respective Affiliates
to, cooperate fully to that end. As used in this Section 6.6, "commercially
reasonable efforts" shall be deemed to include promptly agreeing to take,
taking, or causing to be taken, any and all other reasonable
59
actions required by any Governmental Authority in jurisdictions where both the
Acquired Subsidiaries and Purchaser or its Subsidiaries conduct business and the
applicable Governmental Authority or applicable Law restricts the number of
licenses which may be held by any group of Affiliated Persons.
(b) As promptly as practicable after the date of this Agreement, but
in no event later than twenty-one (21) days after the date of this Agreement,
(i) if and to the extent required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), Parent and Purchaser shall prepare and file all
documents and notifications with the FTC and the DOJ as are required to comply
with the HSR Act and (ii) Purchaser and its Affiliates shall prepare and file
all required Statements on Form A and similar filings with respect to the
acquisitions of control over the Domestic Insurance Companies contemplated
hereby. As promptly as practicable after the date of this Agreement, Parent and
Purchaser shall prepare and file any similar filings in respect of the
acquisitions of control over the International Insurance Companies contemplated
hereby and any other filings with Governmental Authorities otherwise required in
connection with the transactions contemplated by this Agreement and the Related
Agreements. Parent and Purchaser shall cooperate with each other in good faith
in the preparation of all such filings and responses, and shall do, or cause to
be done, all things and take, or cause to be taken, all actions required to
obtain the prompt termination of the waiting period thereunder.
(c) Without limiting the foregoing, each of Parent and Purchaser
hereby agrees to use its commercially reasonable efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
clearances, waivers, approvals and authorizations of all Governmental
Authorities and other Persons necessary to consummate the transactions
contemplated by this Agreement and the Related Agreements as promptly as
practicable. In connection with effecting any such filing or obtaining any such
permit, consent, clearance, waiver, approval or authorization necessary to
consummate the transactions contemplated by this Agreement and the Related
Agreements, each of Parent and Purchaser shall, subject to applicable Law, (i)
permit counsel for the other Party to review in advance, and consider in good
faith the views of the other Party in connection with, any proposed written
communication to any Governmental Authority, and (ii) provide counsel for the
other party with copies of all filings made by such Party, and all
correspondence between such Party (and its advisors) with any Governmental
Authority and any other information supplied by such Party and such Party's
Subsidiaries to, or received from, a Governmental Authority relating to the
transactions contemplated hereby; provided, however, that materials may be
redacted or withheld (x) to the extent that they concern the valuation of the
Business or alternatives to the transactions contemplated by this Agreement and
the Related Agreements and (y) as necessary to comply with contractual
arrangements.
Section 6.7 Approval of New Fund Contracts.
(a) Purchaser and Sellers recognize that the transactions contemplated
hereunder shall constitute an assignment and/or termination of certain of the
Investment Contracts and the underwriting agreement for each of the Funds under
the terms thereof and the Investment Company Act. Sellers will, and Purchaser
will use all commercially reasonable efforts to cooperate to solicit the
approval ("Fund Board Resolutions") of each of the Fund
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Boards, in accordance with the requirements of the Investment Company Act with
respect to the Fund Transactions pertaining to such Fund. The term "Fund
Transactions" shall mean (i) adoption by or on behalf of such Fund of (A) an
investment management agreement with the applicable Acquired Subsidiary (which
agreement shall be in form and substance substantially identical to such Fund's
existing investment management agreement with such Acquired Subsidiary), (B) an
underwriting agreement on behalf of such Fund with an appropriately licensed
Affiliate of Purchaser, (which agreement shall be in form and substance
substantially identical to the existing underwriting agreement with such Fund),
provided, however, that this clause (B) shall not apply to any Fund which as of
the date hereof does not have an underwriting agreement with an Affiliate of
Sellers, and (C) administrative services, transfer agency services and pricing
and book-keeping services agreements with the applicable Acquired Subsidiaries
with respect to other services provided to the Funds (which agreements shall be
in form and substance substantially identical to such Funds' existing agreements
with such Acquired Subsidiaries for such services), with each such agreement to
be effective upon the Closing and (ii) all required actions under federal or
state securities Laws in connection with the foregoing.
(b) Purchaser and Sellers will expeditiously use all commercially
reasonable efforts and cooperate to cause (i) to be prepared and filed with the
SEC, cleared by the SEC and mailed to the shareholders of the Funds, proxy
statements pertaining to such of the Fund Transactions as may require approval
of such shareholders under the Investment Company Act, such proxy statements to
contain all required information and disclosures and to be subject to
Purchaser's review and approval, which will not be unreasonably withheld or
delayed, (ii) special meetings of the shareholders of the Funds to be called to
vote on such Fund Transactions and (iii) the shareholders of the Funds to
approve such Fund Transactions. The costs of seeking such shareholder approval
(including printing, mailing and proxy solicitation costs) shall be borne
equally by Purchaser and Sellers.
(c) Purchaser and its Affiliates will provide to the Trustees of the
respective Funds, their counsel and Sellers, all information regarding them and
the applicable Fund Transactions reasonably requested in connection therewith.
(d) Except as specified in Section 6.23 hereof, promptly following the
date hereof, and in any event at least forty-five (45) days prior to the Closing
Date, the appropriate Acquired Subsidiary shall inform each of its non-Fund
clients in writing of the transactions contemplated by this Agreement by sending
such client a notice of, and will use commercially reasonable efforts to seek,
such client's consent to the continuation of its investment advisory agreements
with such Subsidiary following consummation of the transactions contemplated
hereby, which notice shall be subject to Purchaser's review and approval, which
will not be unreasonably withheld or delayed. To the extent consistent with
applicable Law or SEC pronouncements, such consent may take the form of a
so-called implied or negative consent. Purchaser and its Affiliates will provide
to Sellers all information regarding them reasonably required in connection
therewith.
(e) Subject to applicable fiduciary duties to the Funds, Sellers will
use commercially reasonable efforts to ensure that the Funds take no action that
would (i) prevent any Fund from qualifying as an RIC or (ii) be inconsistent
with any Fund's prospectus and other offering, advertising and marketing
materials.
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(f) Each of Purchaser and Parent hereby agrees that neither it nor any
of its Affiliates has any express or implied understanding or agreement that
would impose an "unfair burden" (as defined in the Investment Company Act) on
any Fund or would in any way interfere with any Fund's reliance on section 15(f)
of the Investment Company Act as a result of the transactions contemplated by
this Agreement. Purchaser and Parent hereby agree to comply and to use their
respective commercially reasonable efforts to cause the respective Fund Boards
to comply with the provisions of section 15(f) of the Investment Company Act
prior to the Closing. Following the Closing, Purchaser shall not fail to take,
and shall use commercially reasonable efforts to cause each Affiliate of
Purchaser not to fail to take, any action if the failure to take such action
would have the effect, directly or indirectly, of causing the requirements of
any of the provisions of section 15(f) of the Investment Company Act not to be
met in respect of this Agreement and the transactions contemplated hereby. In
that regard, Purchaser shall conduct its business and shall, subject to the
applicable fiduciary duties to the Funds, use its commercially reasonable
efforts to cause each of its Affiliates to conduct its business so as to assure
that, insofar as within the control of Purchaser or its Affiliates, (1) for a
period of three (3) years after the Closing, at least seventy-five percent (75%)
of the members of the governing board of each Fund or their successors are not
(A) "interested persons" (as defined in the Investment Company Act) of the
investment adviser of such Fund after the Closing, or (B) "interested persons"
of the present or successor investment manager of such Fund; and (2) for a
period of two (2) years after the Closing, there shall not be imposed on any
Fund an "unfair burden" as a result of the transactions contemplated under this
Agreement, or any express or implied terms, conditions or understandings
applicable thereto.
Section 6.8 Further Assurances. After the Closing Date, each of
Parent and Purchaser shall use its commercially reasonable efforts from time to
time to (a) execute and deliver at the reasonable request of the other Party
such additional documents and instruments as may be reasonably required to give
effect to this Agreement and the transactions contemplated by this Agreement and
the Related Agreements and (b) provide whatever documents or other evidence of
ownership as may be reasonably requested by Purchaser to confirm Purchaser's
ownership of the Transferred Shares.
Section 6.9 Notice of Proceedings. Purchaser will promptly notify
Parent, and Parent will promptly notify Purchaser, in writing, upon (a) becoming
aware of any order or decree or any complaint praying for an order or decree
restraining or enjoining the execution of this Agreement or the consummation of
the transactions contemplated by this Agreement and the Related Agreements, or
(b) receiving any notice from any Governmental Authority of its intention to (i)
institute a suit or proceeding to restrain or enjoin the execution of this
Agreement or the consummation of the transactions contemplated by this Agreement
and the Related Agreements or (ii) nullify or render ineffective this Agreement
or such transactions if consummated.
Section 6.10 Guaranties; Letters of Credit; Intercompany Agreements.
(a) Purchaser shall cause itself or one or more of its Affiliates to
be substituted in all respects for any Seller or any of its Affiliates (other
than the Acquired Subsidiaries) as applicable, effective as of the Closing, in
respect of all obligations of each such Seller or its Affiliates (other than the
Acquired Subsidiaries) under each of the guaranties,
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bonding arrangements, keepwells, net worth maintenance agreements, letters of
credit, reimbursement obligations and letters of comfort obtained by any such
Seller or its Affiliates (other than Acquired Subsidiaries) for the benefit of
the Business (the "Guaranties"), including those set forth in Section 6.10(a) of
the Sellers Disclosure Letter, which Sellers acknowledge constitute all material
Guaranties. In the event that the Guaranties set forth in Section 6.10(a) of the
Sellers Disclosure Letter and any Guaranties entered into in accordance with
Section 6.1 do not constitute all of the material Guaranties, Purchaser shall be
entitled to indemnification by Parent of any costs incurred by Purchaser to the
extent such costs would not have been incurred had such omitted Guaranties been
included in Section 6.10(a) of the Sellers Disclosure Letter; provided, that
such incremental costs shall not include the amount of the Guaranty obligations
incurred by virtue of the terms of this Section 6.10 in respect thereto. If
Purchaser is unable to effect such a substitution with respect to any Guaranty
after using its commercially reasonable efforts to do so, Purchaser shall hold
the relevant Sellers and their Affiliates (other than the Acquired Subsidiaries)
harmless with respect to the obligations covered by each of the Guaranties for
which Purchaser does not effect such substitution.
(b) Except as set forth in Section 6.10(b)(i) of the Sellers
Disclosure Letter or as otherwise contemplated by this Agreement, Sellers shall,
and shall cause their respective Affiliates to, immediately prior to the
Closing, among other things, execute and deliver such releases, termination
agreements on terms reasonably acceptable to Purchaser and discharges as are
necessary to terminate all arrangements, commitments, contracts and
understandings among any Seller and any Affiliate set forth in Section
6.10(b)(ii) of the Sellers Disclosure Letter.
Section 6.11 Certain Other Actions. The Parties agree that Section
6.11 of the Sellers Disclosure Letter are incorporated herein by reference and
shall be binding as if set forth herein, and the Parties agree to take all
actions set forth in Section 6.11 of the Sellers Disclosure Letter.
Section 6.12 Names of Acquired Subsidiaries. As soon as practicable
after the Closing, Purchaser shall cause the certificate of incorporation (or
equivalent organizational documents) of each Acquired Subsidiary and each
Subsidiary thereof to be amended to remove any reference to "Citi" or "citi,"
any name or ▇▇▇▇ that incorporates "Citi" or "citi" or any variation thereof or
any name or ▇▇▇▇ similar to "Citi" or "citi" or any other Trademarks owned by
Sellers, Parent or any of their Affiliates from the name of such Acquired
Subsidiary or such Subsidiary thereof, and within ninety (90) days from the
Closing, Purchaser shall file the applicable documents relating thereto with the
appropriate Governmental Authorities.
Section 6.13 Related Agreements. The Parties will negotiate in good
faith the terms of each of the Related Agreements (it being understood that
representatives of Purchaser shall act on behalf of the Acquired Subsidiaries in
connection therewith) and a certificate of designations regarding the Purchaser
Convertible Preferred Stock consistent with the term sheets attached hereto and
on other customary terms reasonably satisfactory to the Parties. On the Closing
Date, (i) each of the Parties shall enter into, and shall cause its applicable
Affiliates to enter into, each of the Related Agreements to which it is intended
to be a party and (ii) if shares of the Purchaser Convertible Preferred Stock
are to be issued, Purchaser shall file a certificate of designations regarding
the Purchaser Convertible Preferred Stock, including the terms set forth
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in Exhibit H and other customary terms, with the Secretary of State of the State
of Delaware in accordance with Delaware Law.
Section 6.14 Restructuring. Prior to the Closing, Sellers shall cause
(i) the ownership of the assets (including equity interests) and liabilities
identified in Exhibit F attached hereto to be transferred out of the Acquired
Subsidiaries and the Subsidiaries of any Acquired Subsidiaries and (ii) the
consummation of the other transactions contemplated by such Exhibit ▇. ▇▇▇▇▇▇▇
shall undertake the foregoing transactions in a commercially reasonable manner
which preserves the economic value for Purchaser of the transactions
contemplated hereby, and effects the goal of separating the Business from Parent
and its Affiliates and otherwise consummating the transactions contemplated by
this Section 6.14. Sellers shall regularly consult with Purchaser regarding the
transactions contemplated by this Section 6.14. For the avoidance of doubt, any
Trademark which includes the words "Citigroup", "Citi", "citi" or the umbrella
logo shall be deemed not primarily related to the Business.
Section 6.15 Employee Matters.
(a) No later than June 15, 2005, Purchaser and/or any of its
Affiliates shall make offers of employment, either individually and/or as a
group, to Business Employees who are not employed by any Acquired Subsidiary.
Each Business Employee who accepts such offer of employment and each Business
Employee employed by the Acquired Subsidiaries as of the Closing Date is
referred to herein as a "Continuing Business Employee." Purchaser hereby
acknowledges that individuals who are employees of the Acquired Foreign
Subsidiaries on the Closing Date will be employees of Purchaser or an Affiliate
of Purchaser immediately following the Closing Date.
(b) From the Closing Date through the first anniversary of the Closing
Date, Purchaser shall provide, or shall cause to be provided, to the Continuing
Business Employees, as a group, rate of base pay and benefits that (as
determined in good faith by Purchaser) are materially no less favorable in the
aggregate than those provided to such Continuing Business Employees immediately
prior to the Closing Date.
(c) With respect to Business Employees in the U.S., effective as of
the Closing Date, Purchaser shall cause to be (i) waived all limitations as to
pre-existing conditions, if any, under any welfare plan of Purchaser or its
Affiliates in which such Continuing Business Employees may be eligible to
participate after the Closing Date, to the extent that such conditions would
have been waived or satisfied under the corresponding welfare plan in which any
such Continuing Business Employee participated immediately prior to the Closing
Date or (ii) provided to each Continuing Business Employee credit for all
service recognized by Sellers and their Affiliates under the corresponding
Sellers Benefit Plan for purposes of eligibility, waiting periods and vesting in
Purchaser's or its Affiliate's 401(k) Plan, Personal Retirement Account pension
program and active employee medical, active employee dental, active employee
long-term or short-term disability, and active employee salary continuation
coverage.
(d) Purchaser shall provide to each Continuing Business Employee
(other than an employee identified in Section 6.15(k) of the Sellers Disclosure
Letter) whose employment is terminated during the period commencing on the
Closing Date and ending six (6) months thereafter, severance pay, the principle
terms of which are no less favorable than the following:
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(i) covers full time U.S. citizens on a U.S. payroll who are FLSA exempt; (ii)
paid only for an involuntary termination due to staff reduction or realignment
of the work force; (iii) transfers and relocations are not covered; (iv) subject
to execution of a release; (v) payment is two (2) weeks base pay for each full
twelve (12) months of service, up to maximum of fifty-two (52) weeks, with the
following minimums: four (4) weeks base pay if base pay is less than $50,001;
eight (8) weeks base pay if base pay is from $50,001 to $100,000; and twelve
(12) weeks base pay if base pay is over $100,000; (vi) provide six (6) months of
subsidized COBRA coverage and provide outplacement services, in each case,
consistent with the terms of Purchaser's severance program; and (vii) may be
provided under a plan providing for administrator discretion sufficient to
qualify for deferential review under the ERISA Firestone doctrine. For purposes
of the preceding sentence and Purchaser's or an Affiliate's paid time off or
vacation program, Purchaser shall take into account a Continuing Business
Employee's service with Purchaser and its Affiliates from and after the Closing
Date, plus all service before the Closing Date for which such Continuing
Business Employee was credited under the corresponding Sellers Benefit Plan. In
all cases, severance pay provided by Purchaser and its Affiliates to any
Continuing Business Employee shall not be less than what is required to be
provided under applicable Law.
(e) The Parties agree that Section 6.15(e) of the Sellers Disclosure
Letter is incorporated herein by reference and shall be binding as if set forth
herein, and the Parties agree to take all actions set forth in Section 6.15(e)
of the Sellers Disclosure Letter.
(f) At least ten (10) Business Days prior to the Closing Date,
Purchaser shall provide to Sellers a written schedule identifying all Business
Employees not employed by an Acquired Subsidiary who have accepted Purchaser's
offer of employment (the "Offer Schedule"). During the period commencing on the
date of this Agreement and ending on the first anniversary of the later of (i)
the Closing Date or (ii) the last day on which such Business Employee is
seconded to Purchaser or one of its Affiliates in accordance with this Section
6.15(f), neither Purchaser nor any of its Affiliates shall offer employment, or
engagement for services, to, or solicit (other than a general public
solicitation), any Business Employee (other than an employee identified in
Section 6.15(k) of the Sellers Disclosure Letter and other than with respect to
a Business Employee to whom Purchaser or one of its Affiliates makes an offer
which replicates compensation and benefits provided to such Business Employee by
the Sellers or one of their Affiliates immediately prior to such offer except in
the case where replication of such benefits is not reasonably practicable) who
receives severance (or, if outside the U.S., payments of a similar nature) from
Sellers or any of their Affiliates in connection with the transactions
contemplated by this Agreement. To the extent permitted by applicable Law,
effective as of the Closing Date, Sellers shall second to Purchaser or one of
its Affiliates each Business Employee identified by Purchaser who is employed by
Sellers or one of their Affiliates (other than by an Acquired Subsidiary) on the
Closing Date and who is not identified on the Offer Schedule (the "Seconded
Employees"). The secondment of each Seconded Employee shall terminate on the
earliest to occur of (i) thirty (30) days following the date on which Purchaser
notifies the Sellers that it wishes to end the Seconded Employee's secondment,
(ii) the date on which such Seconded Employee's employment with Sellers and/or
their Affiliates terminates or (iii) the first anniversary of the Closing Date.
Purchaser shall (i) be responsible for, pay, and shall indemnify, defend, save
and hold harmless Sellers and their Affiliates from any and all costs (including
but not limited to costs of compensation and benefits but excluding any
severance or severance related benefits) in respect of any Seconded Employee
with respect to the period during which
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such employee is seconded and (ii) be responsible for and shall pay one-half of
all severance costs due to a Seconded Employee whose secondment is terminated by
Purchaser or any of its Affiliates during the period commencing on the Closing
Date and ending on the six (6) month anniversary of the Closing Date.
(g) Prior to Closing, Sellers shall take all actions required so that
none of the Acquired Subsidiaries shall have any liability with respect to any
of the Sellers Benefit Plans, except for the Retained Sellers Benefit Plans
Liabilities. To the fullest extent permitted by Law, within twenty (20) Business
Days after the date of this Agreement, Sellers shall provide to Purchaser a
schedule setting forth the accrued liabilities for the Retained Sellers Benefit
Plans Liabilities, as well as any related agreements (including election forms),
plan summaries, participant communications, any other information necessary for
plan administration, and any trust agreements, insurance or annuity contracts or
other arrangements the assets of which are or may be used to satisfy, in whole
or in part, benefits obligations with respect to Retained Sellers Benefit Plan
Liabilities. Sellers shall provide an updated schedule setting forth the accrued
liabilities related to (and any additional documents or plan materials related
to) Retained Sellers Benefit Plans Liabilities on the Closing Date.
(h) Sellers shall be responsible for compliance with all applicable
requirements of the Worker Adjustment and Retraining Notification Act or any
similar state Law ("WARN") arising out of, or relating to, any actions taken by
Sellers at or before the Closing Date. Subject to Purchaser's provision of
appropriate indemnification (as determined in good faith by Sellers and
Purchaser) to Sellers, Sellers agree to provide WARN notices supplied by
Purchaser to any or all Business Employees identified by Purchaser.
(i) Sellers shall not, at any time prior to January 1, 2007, encourage
or facilitate in any way the employees of Purchaser and/or its Affiliates with
whom Sellers came into contact in association with this Agreement to discontinue
employment or suggest that such employees discontinue employment with Purchaser
or any of its Affiliates, other than in connection with a general public
solicitation. Purchaser shall not, at any time prior to January 1, 2007,
encourage or facilitate in any way the employees of Sellers and/or their
Affiliates with whom Purchaser came into contact in association with this
Agreement to discontinue employment or suggest that such employees discontinue
employment with Sellers or their Affiliates, other than in connection with a
general public solicitation.
(j) Effective as of the Closing Date, Sellers shall 100% vest all
Business Employees in their benefits under Sellers' U.S. 401(k) plan and U.S.
pension plan and, subject to any required approval by the applicable Seller's
Compensation Committee, any equity-based incentive awards then outstanding. To
the extent any Business Employee forfeits any equity-based compensation because
the applicable Seller's Compensation Committee does not approve the vesting of
equity-based incentive awards, Sellers shall pay to such Business Employee a
cash payment of equivalent value; provided, that if the forfeited equity-based
incentive award is restricted stock, the equivalent cash payment shall be equal
to the sum of (i) the number of shares of restricted stock forfeited, multiplied
by Parent's closing stock price on the Closing Date, plus (ii) any forfeited
accumulated but unpaid dividends.
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(k) Section 6.15(k) of the Sellers Disclosure Letter shall identify
the Business Employees to whom Parent or its Affiliates intends to provide
retention agreements providing for compensation and benefits in excess of 100%
of the recipient's annual base salary. Between the date of this Agreement and
the Closing Date, Sellers may enter into such retention agreements with
additional Business Employees, provided, that the total number of Business
Employees receiving such retention agreements does not exceed thirty-five (35).
Sellers shall provide Purchaser with copies of the retention agreements at the
same time that the initial disclosure is made in Section 6.15(k) of the Sellers
Disclosure Letter and, if Sellers make any changes to such disclosure schedule,
Parent shall, at the same time, provide copies of such additional agreements to
Purchaser. Sellers shall provide to Purchaser an updated schedule within five
(5) Business Days after entering into any such additional retention agreements.
Parent may establish other retention agreements or arrangements; provided, that
the compensation and benefits to be received under each such other retention
agreement or arrangement shall not exceed 100% of the recipient's annual base
salary and shall be paid or provided not later than the Closing Date. Sellers or
their Affiliates shall have and retain all responsibilities and liabilities with
respect to any retention agreements or arrangements described in the preceding
sentences of this Section 6.15(k). Any retention arrangements entered into with
a Business Employee by Purchaser or an Affiliate of Purchaser (other than an
Acquired Subsidiary) in respect of all periods after the Closing Date shall be
the sole responsibility and liability of Purchaser or its Affiliate, as the case
may be.
(l) Sellers shall cause all amounts under the Citigroup Inc. Travelers
Life and Annuity Agency Capital Accumulation Plan to fully vest and be
distributed to participants as of the Closing Date and shall take actions
necessary to terminate such plan effective on or prior to the Closing Date.
Within ten (10) Business Days following the date hereof, Sellers shall cause to
be provided to Purchaser all such documents and information in the possession of
Sellers or their Affiliates relating to the Agent Deferred Compensation Plans as
Purchaser shall request and shall make reasonably available to Purchaser such
personnel who are knowledgeable with respect to the Agent Deferred Compensation
Plans. To the extent permitted by Law and to the extent that the Sellers'
actions do not result in a contractual breach by the Sellers or one of their
Affiliates to any third party (including participants in the Agent Deferred
Compensation Plans), Sellers shall take all actions necessary to provide for
termination, vesting and/or complete distribution of benefits under one or more
of the Agent Deferred Compensation Plans to the extent requested by Purchaser
upon receipt by Sellers of reasonable notice from Purchaser.
(m) Any Business Employee receiving short or long-term disability as
of the Closing Date shall continue to be eligible for such disability benefits
and other benefits associated with such disability benefits, in each case, under
Sellers' benefit plans until such time as such employee presents himself or
herself for active employment. Notwithstanding anything herein to the contrary,
nothing herein shall require Purchaser or one of its Affiliates from providing
any benefits to a Business Employee who is receiving workers' compensation
benefits on the Closing Date.
Section 6.16 Stock Exchange Listing. Purchaser shall use its
commercially reasonable efforts to cause the shares of Purchaser Common Stock
comprising the Stock Consideration to be issued and delivered to Sellers in
accordance with Section 2.2 (including
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shares issuable upon conversion of any Purchaser Convertible Preferred Stock) to
be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
Section 6.17 Noncompetition; Nonsolicitation.
(a) Except as otherwise contemplated by this Agreement and the Related
Agreements, and subject to the following provisions of this Section 6.17, until
the seventh anniversary of the Closing Date, Parent shall not, and shall cause
its Affiliates not to, directly or indirectly, engage in any Restricted
Business. Nothing in this Section 6.17 shall restrict Parent or any of its
Affiliates from:
(i) conducting or engaging in any business activities that do not
constitute part of the Restricted Business, including (A) lending, financing and
other banking activities, (B) proprietary and third party portfolio and asset
management, merchant banking and fund activities, (C) securities trading and
brokerage activities, (D) advisory and other investment or commercial banking
activities and (E) custodial, trust, agent or fiduciary services (in the case of
clauses (A) through (E), the foregoing activities or services shall include
activities or services on behalf, in respect or for the account, of any Person
conducting or engaging in the Restricted Business);
(ii) distributing any insurance products, except as provided in
the Distribution Agreements (including the selling agreements thereunder);
(iii) in the case of AHLIC and its Subsidiaries and Triton and
Aristar, issuing and distributing in the United States and Canada through
Parent's United States and Canadian consumer bank distribution channels, (A) any
insurance products (but not annuities) in conjunction with any of Parent's or
its Affiliates' consumer credit relationships or the consumer's credit exposure;
provided that a product shall not be deemed to satisfy this clause (A) if the
only connection to such consumer credit relationship or credit exposure is the
cross-selling of such product to the customer and (B) accidental death,
accidental death and dismemberment, HIP/HAP, YRT term life and home rebound
products;
(iv) in the case of PLIC and its Subsidiaries, in any of the
countries and principalities in Europe (including Russia) and in the United
States, Puerto Rico, Guam, the Virgin Islands and Canada, issuing and
distributing (A) Term Insurance products and (B) critical care and disability
insurance products which any of them currently issue and distribute;
(v) insuring (whether by self-insurance, reinsurance, captive
arrangements or otherwise) the insurance risks of, and issuing bonds related to,
the business and operations of Parent or any of its Subsidiaries;
(vi) applying for and holding any insurance license, permit or
other authorization to the extent necessary to conduct any business not
prohibited by this Section 6.17;
(vii) in the case of any existing insurance company Affiliate of
Parent existing on the date hereof and not covered by clause (iii) or (iv)
above, issue, distribute or administer any insurance products, which business in
the aggregate, for all such insurance companies, accounts for no more than
eighty million dollars ($80,000,000) in net revenues on an
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annual basis in the United States and twenty million dollars ($20,000,000) in
net revenues on an annual basis outside the United States;
(viii) reinsuring insurance (A) which AHLIC and its Subsidiaries
are permitted to issue in accordance with clause (iii) above, (B) which PFS and
its Subsidiaries are permitted to issue in accordance with clause (iv) above,
(C) which NBLIC is permitted to issue in accordance with clause (ix) below, and
(D) in connection with Parent's corporate financial planning, including through
purchases of run-off blocks of business (but not any form of annuity business
(including guaranteed investment contracts, funding agreements and structured
settlements) and with respect to the life insurance business, only Term
Insurance products); provided that this clause (viii) shall not permit Parent
and its Affiliates to conduct an active third-party reinsurance business or an
active business for the purchase of run-off blocks of business or use
reinsurance to engage indirectly in a business that is not permitted under this
Section 6.17 (other than clause (D) above);
(ix) in the case of NBLIC, issuing disability and student life
insurance products in New York State and selling such products through
third-party distributors; provided that Purchaser shall have an option to
acquire the assets and liabilities of NBLIC, other than any assets and
liabilities relating to Term Insurance products distributed by PFS or one of its
Subsidiaries (the "NBLIC Business"), within ninety (90) days from the date
hereof in accordance with the terms set forth in Section 6.17(a)(ix) of the
Sellers Disclosure Letter;
(x) acquiring any Person or assets (a "Target Business") that
includes or include operations the conduct of which by Parent or its
Subsidiaries would otherwise be deemed to be a Restricted Business (a
"Competitive Business") so long as (A) in the case of a Target Business which
has financial statements prepared in accordance with United States GAAP, (1) the
net revenues (i.e., revenues disregarding benefits and changes in reserves,
interest credited to customers and extraordinary items) derived by the Target
Business from the Competitive Business, excluding realized gains, and (2) the
net earnings (i.e., revenues disregarding extraordinary items), in the case of
clauses (A)(1) or (A)(2), based on an average of the most recently completed
three (3) fiscal years preceding such acquisition, constituted less than
twenty-five percent (25%) of such net revenues and net earnings of the Target
Business, respectively, or (B) in the case of a Target Business which does not
have financial statements prepared in accordance with United States GAAP, (1)
the net revenues (or the applicable equivalent thereof) (disregarding benefits
and changes in reserves, interest credited to customers and extraordinary items)
derived by the Target Business from the Competitive Business, excluding realized
gains, and (2) the net earnings (or the applicable equivalent thereof)
(disregarding extraordinary items), in the case of clauses (B)(1) or (B)(2),
based on an average of the most recently completed three (3) fiscal years
preceding such acquisition, constituted less than twenty-five percent (25%) of
such net revenues and net earnings of the Target Business, respectively; it
being hereby understood that in the case of a permitted acquisition of a
Competitive Business in accordance with clauses (A) or (B), Parent can
distribute the Target Business' products so acquired through its distribution
channels, subject to the terms of the applicable Distribution Agreement and
the selling agreements thereunder;
(xi) acquiring any Target Business that includes operations the
conduct of which by Parent or its Subsidiaries would be deemed to be a
Competitive Business where the
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net revenues or the net earnings derived by the Target Business from the
Competitive Business (calculated in accordance with clause (x) above)
constituted between twenty-five percent (25%) and fifty percent (50%) of such
net revenues or net earnings of the Target Business, as the case may be,
provided that in the event of such an acquisition, Parent complies with the
procedures set forth in Section 6.17(a)(xi) of the Sellers Disclosure Letter;
and
(xii) running off any of AHLIC's, PLIC's or NBLIC's whole life
insurance or reinsurance portfolios existing as of the Closing.
(b) Prior to the third anniversary of the Closing Date, Parent shall
not, and shall not permit any of its Affiliates to, solicit or offer employment,
other than for purposes of seconding such Business Employee in accordance with
Section 6.15, to any Business Employee or any employee of the Joint Ventures
without the prior written consent of Purchaser (not to be unreasonably
withheld); provided that the foregoing provision shall not prohibit Parent or
any of its Affiliates from offering employment to or employing persons (i) who
respond to a general solicitation or advertisement that is not specifically
directed only to Business Employees and employees of the Joint Ventures (and
nothing shall prohibit the making of any such solicitation or advertisement) or
(ii) who are referred to Parent by search firms, employment agencies or other
similar entities, provided that such entities have not been specifically
instructed by Parent to solicit the Business Employees and employees of the
Joint Ventures or (iii) whose employment has been involuntarily terminated by
Purchaser or any of its Affiliates. In addition, prior to the third anniversary
of the Closing, Parent and its Affiliates shall not hire any of the Persons
identified in Section 6.17(b) of the Sellers Disclosure Letter, unless their
employment has been involuntarily terminated by Purchaser or its Affiliates.
Section 6.18 RBC Ratio.
(a) Simultaneously with the delivery of the Estimated Closing Date
Balance Sheet pursuant to Section 3.2, Parent shall deliver to Purchaser an
estimate of the Closing RBC Ratio for TIC and for CLIC (the "Estimated RBC
Calculation"). If the Estimated RBC Calculation reflects an RBC Deficit for TIC
or for CLIC, Parent shall pay to Purchaser the amount of the RBC Deficit
reflected in the Estimated RBC Calculation, except that, if the Estimated RBC
Calculation reflects an RBC Deficit for one such Acquired Subsidiary and an RBC
Excess for the other, the amount of any required payment with respect to an RBC
Deficit shall be reduced (but not below zero) by the amount of the RBC Excess
(the net payment amount being referred to as the "Estimated Net RBC Deficit").
Any payment required pursuant to this Section 6.18(a) shall be made in the form
of a Closing Date Purchase Price reduction pursuant to Section 2.2(i)(F).
(b) Simultaneously with the preparation of the Closing Date Balance
Sheet and the Final Total Equity pursuant to Section 2.3, Purchaser shall
prepare a calculation of the Closing RBC Ratio for TIC and for CLIC (the "Final
RBC Calculation"). The Final RBC Calculation shall be subject to adjustment to
take into account any change to the Final Total Equity made in accordance with
Section 2.3. In the event of any dispute regarding the Final RBC Calculation,
such dispute shall be resolved by the Accountant in accordance with the
procedures provided in Section 2.3(b).
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(c) Using the Final RBC Calculation, as adjusted, if necessary,
pursuant to Section 6.18(b), the total of the RBC Deficits after offset of any
RBC Excess (the "Final Net RBC Deficit") shall be calculated using the same
methodology as was used for calculating the Estimated Net RBC Deficit. If the
Final Net RBC Deficit is greater than the Estimated Net RBC Deficit, Parent
shall pay to Purchaser the amount of the excess of Final Net RBC Deficit over
Estimated Net RBC Deficit. If the Final Net RBC Deficit is less than Estimated
Net RBC Deficit, Purchaser will pay Parent the difference between Estimated Net
RBC Deficit and Final Net RBC Deficit. Any payment required to be made by one
party to the other pursuant to this Section 6.18(c) shall be added to or netted
against the Final Adjustment Payment and shall bear interest in the manner
specified by Section 2.3(c).
Section 6.19 Cooperation.
(a) Sellers shall (A) deliver to Purchaser (i) as soon as practicable,
but in any event within ninety (90) days of the date hereof, combined (with
eliminations for any cross-ownership interests) audited financial statements of
the Acquired Subsidiaries and the Joint Ventures (the "Audited Financial
Statements") as of December 31, 2004 and for the year then ended and combined
(with eliminations for cross-ownership interests) unaudited financial statements
of the Acquired Subsidiaries and the Joint Ventures as of December 31, 2003 and
2002, and for the years then ended (the "Unaudited Financial Statements")
prepared in accordance with GAAP in a manner consistently applied, (ii) to the
extent necessary in connection with any financing transaction undertaken by
Purchaser to fund the Cash Consideration, as soon as practicable, but in any
event, within forty-five (45) days of the end of each quarterly period ending
after December 31, 2004, unaudited consolidated financial statements of the
Acquired Subsidiaries and the Joint Ventures as of and for such quarterly
periods prepared in accordance with GAAP in a manner consistently applied and
(iii) consolidated pro forma financial information of the Acquired Subsidiaries
and the Joint Ventures and other disclosures reasonably requested by Purchaser
in connection with any financing transaction undertaken by Purchaser to fund the
Cash Consideration, and (B) reasonably cooperate with Purchaser, and shall use
commercially reasonable efforts to cause its independent auditors to so
cooperate, in the preparation and filing of any registration statement or
offering memorandum and the issuance of any comfort letter in connection with
any financing transaction undertaken by Purchaser to fund the Cash
Consideration. Any Audited Financial Statements provided hereunder will be
audited by Sellers' independent auditors at Sellers' expense.
(b) Upon delivery of the Audited Financial Statements and the
Unaudited Financial Statements pursuant to Section 6.19(a), Parent shall be
deemed to have represented to Purchaser that the Audited Financial Statements
and the Unaudited Financial Statements have been derived from the accounting
books and records of the Acquired Subsidiaries, after giving effect to the
transactions contemplated by Section 6.14, and have been prepared in accordance
with GAAP consistently applied; the balance sheet included in each of the
Audited Financial Statements (the "Audited Balance Sheet") and the Unaudited
Financial Statements presents fairly in all material respects the financial
position of the Acquired Subsidiaries, after giving effect to the transactions
contemplated by Section 6.14, as at the date thereof; and the income statement
included in the Audited Financial Statements and the Unaudited Financial
Statements presents fairly in all material respects the results of operations of
the Acquired Subsidiaries, after giving effect to the transactions contemplated
by Section 6.14, for the period indicated.
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(c) Following delivery of the Audited Financial Statements pursuant to
Section 6.19(a), Reference Equity shall be adjusted to equal the amount set
forth in the Audited Balance Sheet that is the comparable of "Total Rainbow GAAP
Equity: Equity (excl. Unrealized)" on the December 31 Balance Sheet, plus
$232,000,000.
(d) In the event that the difference (if any) between Reference
Equity, as may be adjusted pursuant to Section 6.19(c), and $7,712,000,000 is
less than or equal to fifty million dollars ($50,000,000), then Excess Reference
Equity and Shortfall Reference Equity shall be zero.
(e) In the event that Reference Equity, as adjusted pursuant to
Section 6.19(c), is in excess of $7,712,000,000 by more than fifty million
dollars ($50,000,000), then Excess Reference Equity shall be equal to the entire
amount of such excess (the "Excess Reference Equity"); provided, however, that
in no event shall the Excess Reference Equity exceed $200 million dollars. In
the event that Reference Equity, as adjusted pursuant to Section 6.19(c), is
less than $7,712,000,000 by more than fifty million dollars ($50,000,000), then
Shortfall Reference Equity shall be equal to the entire amount of such shortfall
(the "Shortfall Reference Equity").
Section 6.20 Security Information. As soon as possible following the
date hereof, Sellers shall make available to Purchaser the appropriate personnel
to discuss the Acquired Subsidiaries' information security policies, experiences
complying with such policies and material breach of such policies.
Section 6.21 Asset Valuation.
(a) Section 6.21(a) of the Sellers Disclosure Letter sets forth
Sellers' GAAP carrying value as of December 31, 2004 of each of the assets
within the asset classes described therein as "Commercial & Agricultural Loans",
"Direct Real Estate Equity Investments", "Direct Private Equity Investments" and
"Private Placements" (each, an "Asset Class" and collectively, the "Asset
Classes"). The aggregate of the GAAP carrying value of all such assets in all
Asset Classes is herein referred to as the "Sellers Carrying Value."
(b) From the date hereof until February 28, 2005, Purchaser shall have
the option to provide Parent with Purchaser's determination of the Fair Value
(as defined below) of each of the assets set forth in Section 6.21(a) of the
Sellers Disclosure Letter. The aggregate of the Fair Value of all such assets in
all Asset Classes is herein referred to as the "Purchaser Valuation." For
purposes of this Section 6.21, "Fair Value" shall mean the amount for which a
particular asset could have been sold as of December 31, 2004 in an orderly
disposition and under no compulsion over a reasonable period of time, taking
into account the nature of such asset.
(c) In connection with the preparation of the Purchaser Valuation,
Sellers shall, and shall cause the Acquired Subsidiaries to, cooperate with
Purchaser and provide Purchaser with commercially reasonable access to all books
and records in their possession relating to each of the assets set forth in
Section 6.21(a) of the Sellers Disclosure Letter.
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(d) In the event that Purchaser opts to provide the Purchaser
Valuation, and the Purchaser Valuation is less than 99.0% of the Sellers
Carrying Value, Parent shall deliver to Purchaser, on or before March 15, 2005,
either a notice of (i) Parent's agreement with the Purchaser Valuation or (ii)
Parent's dispute with the Purchaser Valuation. During the thirty (30) days after
the delivery of any dispute notice to Purchaser, Purchaser and Parent shall
attempt in good faith to resolve any such dispute and finally determine the
aggregate Fair Value of all of the assets within all of the Asset Classes (the
"Asset FV"). If Purchaser and Parent cannot mutually agree on the Asset FV
within such thirty (30) day period, Purchaser and Parent shall, within fifteen
(15) days of the expiration of such thirty (30) day period, retain mutually
acceptable, independent investment banking or appraisal firms of national
reputation and expertise relating to each of the Asset Classes (each a
"Portfolio Appraiser," and collectively, the "Portfolio Appraisers") to
determine the Asset FV as promptly as practicable thereafter. If Purchaser and
Parent cannot mutually agree on the selection of one or more of the Portfolio
Appraisers for any Asset Class within such fifteen (15) day period, then the
Accountant shall select the Portfolio Appraisers for such Asset Class or Asset
Classes as necessary to determine the Asset FV. Each of Purchaser and Parent
shall use its commercially reasonable efforts to cooperate so as to enable the
Portfolio Appraisers to provide an appraisal of the Asset FV. The determination
of the Asset FV by the Portfolio Appraiser shall be final and binding on
Purchaser and Parent. All fees and expenses relating to the foregoing work by
the Portfolio Appraisers shall be borne (i) by Purchaser, in the event that the
Independent Valuation (as defined below) is greater than the Purchaser Valuation
or (ii) by Parent, in the event the Independent Valuation is equal to or less
than the Purchaser Valuation.
(e) Reference Equity shall be (i) decreased in the amount by which the
Independent Valuation exceeds 101.0% of the Sellers Carrying Value or (ii)
increased by the amount by which the Independent Valuation is less than 99.0% of
the Sellers Carrying Value, as the case may be. In the event that the
Independent Valuation is equal to or greater than 99.0% of the Sellers Carrying
Value and equal to or less than 101.0% of the Sellers Carrying Value, Reference
Equity shall not be adjusted pursuant to this Section 6.21. As used herein,
"Independent Valuation" shall mean the aggregate of the Asset FV for all Asset
Classes as determined by the Portfolio Appraisers or as agreed to by Parent and
Purchaser.
(f) Notwithstanding anything contained herein to the contrary, in the
event that Purchaser (i) fails to provide Parent with the Purchaser Valuation on
or before February 28, 2005, no adjustment to the Reference Equity shall be made
and the provisions of Sections 6.21(d) and (e) shall not apply or (ii) provides
Parent with the Purchaser Valuation on or before February 28, 2005, and Parent
fails to provide Purchaser with a notice disputing the Purchaser Valuation on or
before March 15, 2005, Section 6.21(e) shall not apply and Reference Equity
shall be increased by the amount by which the Purchaser Valuation is less than
99.0% of the Sellers Carrying Value.
(g) Parent shall have five (5) Business Days from the date hereof to
identify and correct any manifest error in Section 6.21(a) of the Sellers
Disclosure Letter.
Section 6.22 Certain Intellectual Property Matters. The Parties agree
that Section 6.22 of the Sellers Disclosure Letter is incorporated herein by
reference and shall be
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binding as if set forth herein, and the Parties agree to take all actions set
forth in Section 6.22 of the Sellers Disclosure Letter.
Section 6.23 Termination of Specified Third-Party Investment Advisory
Agreements. Prior to the Closing Date, Parent shall cause the Acquired
Subsidiaries to terminate or assign to a Person that is not an Acquired
Subsidiary any agreement by which any Acquired Subsidiary provides investment
advisory or sub-advisory services to any client, other than those agreements
pursuant to which such services are provided to: (i) a registered open-end
management investment company, except as set forth in Section 6.23 of the
Sellers Disclosure Letter, (ii) an Acquired Subsidiary or separate account
thereof, (iii) a Joint Venture or (iv) Parent or its Affiliates (other than any
entity in subsections (i) through (iii) hereof), provided that the agreements
covered by this subsection (iv) shall be transferred or assigned as agreed upon
in the Transition Services Agreement. Section 6.23 of the Sellers Disclosure
Letter lists all of the investment advisory and sub-advisory agreements to be
terminated or assigned pursuant to this provision.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions of All Parties to Closing. The respective
obligations of each Party to sell and purchase the Transferred Shares and to
consummate the transactions contemplated hereby are subject to the satisfaction
or waiver, prior to or at the Closing, of each of the following conditions:
(a) HSR Act. Any applicable waiting period under the HSR Act with
respect to the transactions contemplated hereby shall have expired or been
terminated.
(b) Regulatory Approvals. Other than with respect to the HSR Act, all
(i) authorizations, consents and approvals of, and filings and notifications
with or to any insurance regulatory authority required to be made or obtained
prior to the Closing Date in connection with the execution, delivery and
performance of this Agreement and the Related Agreements shall have been made or
obtained, as the case may be, and (ii) other authorizations, consents and
approvals of, and filings and notifications with or to, other Governmental
Authorities required to be made prior to the Closing Date in connection with the
execution, delivery and performance of this Agreement and the Related Agreements
shall have been made or obtained, except, in the case of clause (ii), to the
extent that the failure to make or obtain such authorizations, consents,
approvals, filings and notifications would not, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect, a
Purchaser Material Adverse Effect or a material adverse effect on Parent, and,
in the case of both clauses (i) and (ii), without any conditions, restrictions,
undertakings or limitations which would, individually or in the aggregate,
reasonably be expected to have a Business Material Adverse Effect, a Purchaser
Material Adverse Effect or a material adverse effect on Parent.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction, determination or other
order that, in each case, restrains, enjoins or
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otherwise prohibits consummation of the transactions contemplated by this
Agreement or makes illegal the consummation of such transactions.
Section 7.2 Conditions to Obligations of Purchaser to Close.
Purchaser's obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, prior to or at the Closing,
of each of the following conditions:
(a) Each of the representations and warranties of Sellers contained in
this Agreement shall be true and correct as of the date hereof and as of the
Closing Date as though made on and as of the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall be true and correct as of such particular date), except where the
failure to be so true and correct (without regard to any Business Material
Adverse Effect or materiality qualifications set forth in any such
representation or warranty) would not reasonably be expected, individually or in
the aggregate, to have a Business Material Adverse Effect.
(b) The obligations of Sellers to be performed on or before the
Closing Date pursuant to the terms of this Agreement shall have been duly and
fully performed in all material respects on or before the Closing Date.
(c) Sellers shall have delivered, or caused to be delivered, to
Purchaser each of the deliverables specified in Section 3.3.
(d) Purchaser shall have received at the Closing a certificate dated
the Closing Date, which certificate shall be validly executed on behalf of each
Seller by an appropriate executive officer of Parent, certifying that the
conditions specified in Section 7.2(a) and Section 7.2(b) have been satisfied.
Section 7.3 Conditions to Obligations of Sellers to Close. The
obligations of Sellers to consummate the transactions contemplated by this
Agreement are subject to the satisfaction or waiver, prior to or at the Closing,
of each of the following conditions:
(a) Each of the representations and warranties of Purchaser contained
in this Agreement shall be true and correct as of the date hereof and as of the
Closing Date as though made on and as of the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall be true and correct as of such particular date), except where the
failure to be so true and correct (without regard to any Purchaser Material
Adverse Effect or materiality qualifications set forth in any such
representation or warranty) would not reasonably be expected, individually or in
the aggregate, to have a Purchaser Material Adverse Effect.
(b) The obligations of Purchaser to be performed on or before the
Closing Date pursuant to the terms of this Agreement shall have been duly and
fully performed in all material respects on or before the Closing Date.
(c) The shares of Purchaser Common Stock comprising the Stock
Consideration issuable to Sellers (including shares issuable upon conversion of
any Purchaser
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Convertible Preferred Stock) shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(d) Purchaser shall have delivered, or caused to be delivered, to
Parent each of the deliverables specified in Section 3.4.
(e) Parent, on behalf of Sellers, shall have received at the Closing a
certificate dated the Closing Date, which certificate shall be validly executed
on behalf of Purchaser by an appropriate executive officer of Purchaser,
certifying that the conditions specified in Section 7.3(a) through Section
7.3(c) have been satisfied.
ARTICLE VIII
TAX MATTERS
Section 8.1 Allocation of Taxes and Indemnification.
(a) Except as provided in Sections 8.8 and 8.11(b), from and after the
Closing Date, Parent shall be responsible for, and shall indemnify and hold
Purchaser and its Affiliates (which, for purposes of this Article VIII, shall
include the Acquired Subsidiaries) harmless against (i) any liability for Taxes
imposed on or with respect to any of the Acquired Subsidiaries or Joint Ventures
for any taxable period ending on or before the Closing Date, and for the portion
of any Straddle Period ending on the Closing Date (a "Pre-Closing Tax Period"),
(ii) with respect to the Applicable Argentina Subsidiaries, 50% of any Taxes
relating to pesification and any related inflation adjustments (coeficiente de
estabilizacion de referencia) for a Pre-Closing Tax Period; (iii) 50% of the
excess of Taxes imposed on the Acquired Subsidiaries and the applicable Seller
by any United States state or local Tax jurisdiction that does not recognize
Elections filed under section 338(h)(10) of the Code but rather characterizes
such Elections as qualifying under section 338(g) of the Code over the amount of
Taxes that would have been imposed on such Seller had the Election been treated
by such jurisdiction in the manner provided under section 338(h)(10); (iv) any
Taxes imposed on any member of any affiliated group, within the meaning of
section 1504(a) of the Code with which the Acquired Subsidiaries or the Joint
Ventures file or have filed a Tax Return on a consolidated, unitary, affiliated
or combined basis prior to the Closing Date, (v) with respect to any claim by
Purchaser brought prior to the expiration of the survival period provided in
Section 8.6(b), any Taxes and reasonable external advisory and technology
service fees and other reasonable external expenses (but only to the extent
Purchaser, in good faith, uses all internal resources before incurring such
external fees and expenses) attributable to, arising from or related to the
failure of any Annuity Contract, Life Insurance Contract or other tax favored
product issued, assumed, exchanged, modified, sold or marketed by any of the
Acquired Subsidiaries to comply with applicable Tax Law, including all such
Taxes, fees and expenses incurred to correct any such problems related thereto,
to amend, create substitute forms or that are incurred in connection with taking
any other actions necessary to cause such products to comply with applicable Tax
Law, provided, however, that this Section 8.1(a)(v) shall not cover products
with respect to which the issue relating to noncompliance did not exist as of
the Closing Date or that are noncompliant due to (A) changes in (1) Tax Law or
(2) published Internal Revenue Service interpretations thereof, in either case,
occurring after the Closing Date or (B) any actions taken by Purchaser or its
Affiliates after the Closing Date; (vi)
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all Taxes for all taxable periods or portions thereof ending on or before the
expiration of the survival period provided in Section 8.6 (and, solely with
respect to the representations contained in Section 4.18(w), (x) and (y), any
reduction in, or loss of, net Tax Benefits, calculated on a net present value
basis using the principles of Section 8.11(a)) that result from, arise out of or
are based upon an inaccuracy or breach of the representations and warranties
provided under Section 4.18 (without regard to the knowledge qualifier in the
representations contained in Section 4.18(w), (x) and (y) only) or the covenants
and agreements relating to Taxes as provided in Sections 2.4, 3.3, 6.1 and
Articles VIII and X; (vii) any Taxes (other than Conveyance Taxes) resulting
from or attributable to: (A) any of the transactions contemplated by Section
6.14, (B) any transactions contemplated by this Agreement that are required to
occur on or prior to the Closing Date and (C) any actions that are undertaken by
or at the direction of or for the benefit of Parent or Sellers or any Affiliates
thereof (clauses (i) - (vii) hereinafter referred to as the "Pre-Closing Taxes")
and (viii) 50% of all Conveyance Taxes; provided, however, that Pre-Closing
Taxes (x) shall be net of any specific accruals and reserves specifically
established for any such Tax or expense covered in Section 8.1(a)(v) to the
extent reflected on the Closing Date Balance Sheet (not including any amounts of
Deferred Taxes reflected on such balance sheet) but only to the extent Purchaser
or the Acquired Subsidiaries have not pursuant to Section 8.1(g)(ix) or 8.8 made
a payment relating to such accrual or reserve, provided, further, that Parent
shall not be liable under this Section 8.1(a) until the aggregate amount of
Parent's indemnification obligation under this Section 8.1(a) is greater than
$100,000 after taking into account subclause (x) above, at which point Parent
shall be liable for the full amount of such indemnification obligation.
Notwithstanding any provision to the contrary, this Section 8.1 shall not be
interpreted in a manner that would require Parent to indemnify Purchaser and its
Affiliates for any (1) reduction of the amount of the Tax Attributes of the
Applicable Argentina Subsidiaries and (2) Third Party Claims other than claims
for Taxes.
(b) Except as provided in Sections 8.1(a) and 8.11(b), from and after
the Closing Date, Purchaser shall be responsible for, and shall hold Parent and
its Affiliates harmless against, any Taxes imposed on the Acquired Subsidiaries
and the Joint Ventures (i) for all taxable periods beginning after the Closing
Date or portions of the Straddle Period beginning after the Closing Date (each
such period, a "Post-Closing Tax Period"), (ii) that are attributable to any
action of Purchaser or any of its Affiliates that occurs after the Closing on
the Closing Date (other than actions contemplated by this Agreement or that are
undertaken at the direction of or for the benefit of Parent or Sellers,
including the making of the Elections), (iii) 50% of the excess of Taxes imposed
on the Acquired Subsidiaries and the applicable Seller by any United States
state or local Tax jurisdiction that does not recognize Elections filed under
section 338(h)(10) of the Code but rather characterize such Elections as
qualifying under section 338(g) of the Code over the amount of Taxes that would
have been imposed on such Seller had the Election been treated by such
jurisdiction in the manner provided under section 338(h)(10), and (iv) with
respect to the Applicable Argentina Subsidiaries, 50% of any Taxes relating to
pesification and any related inflation adjustments (coeficiente de
estabilizacion de referencia) for a Pre-Closing Tax Period (clauses (i) - (iv)
hereinafter referred to as the "Post-Closing Taxes"), and (v) 50% of all
Conveyance Taxes.
(c) For purposes of Section 8.1(a)(v), the Parties agree that
Purchaser shall be permitted to bring a claim (based on Purchaser's
calculations) against Parent even if no Third-
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Party Claim has been brought against Purchaser as of the time Purchaser has
asserted its claim against Parent.
(d) Straddle Periods.
(i) For purposes of Section 8.1(a)(i) and 8.1(b)(i), in the case
of Taxes that are payable with respect to a taxable period that begins before
the Closing Date and ends after the Closing Date (a "Straddle Period"), the
portion of any such Tax that is allocable to the portion of the period ending on
the Closing Date shall be:
(1) in the case of Taxes that are either (x) based upon or
related to income, or receipts, or (y) imposed in connection with any sale
or other transfer or assignment of property (real or personal, tangible or
intangible), deemed equal to the amount that would be payable if the
taxable year ended with (and included) the Closing Date;
(2) in the case of Taxes that are based upon gross premiums
deemed equal to the amount that would be payable with respect to the
premium written as of the Closing Date; and
(3) in the case of Taxes imposed on a periodic basis with
respect to the assets of the Acquired Subsidiaries , or otherwise measured
by the level of any item, deemed to be the amount of such Taxes for the
entire period (or, in the case of such Taxes determined on an arrears
basis, the amount of such Taxes for the immediately preceding period),
multiplied by a fraction the numerator of which is the number of calendar
days in the period ending on the Closing Date and the denominator of which
is the number of calendar days in the entire period,
(ii) To the extent permitted under applicable Law, Parent and
Purchaser shall take all actions reasonably necessary to terminate the taxable
year of the Acquired Subsidiaries on the Closing Date. To the extent any such
taxable year of the Acquired Subsidiaries is terminated on the Closing Date, the
parties hereto agree to cause the Acquired Subsidiaries to file all Tax Returns
for the period including the Closing Date on the basis that the relevant taxable
period ended as of the close of business on the Closing Date, unless the
relevant taxing authority will not accept a Tax Return filed on that basis.
(e) To the extent that an indemnification obligation of one Party
pursuant to this Section 8.1 may overlap with another indemnification obligation
of such Party pursuant to this Section 8.1, the Party entitled to such
indemnification shall be limited to only one of such indemnification payments.
(f) Whenever in accordance with this Article VIII Purchaser shall be
required to pay Parent or its Affiliates an amount pursuant to Section 8.1(b),
or Parent shall be required to pay Purchaser or its Affiliates an amount
pursuant to Section 8.1(a), such payments shall be made the later of 30 days
after such payments are requested or 10 days before the requesting party is
required to pay the related Tax liability.
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(g) Procedures Relating to Tax Indemnification.
(i) If a claim for Taxes (including notice of a pending audit)
shall be made by any Governmental Authority in writing (a "Tax Claim"), which,
if successful, might result in an indemnity payment pursuant to this Section
8.1, the party seeking indemnification (the "Tax Indemnified Party") shall
notify the other party (the "Tax Indemnifying Party") in writing of the Tax
Claim within 10 Business Days of the receipt of such Tax Claim. If notice of a
Tax Claim (a "Tax Notice") is not given to the Tax Indemnifying Party within
such period or in detail sufficient to apprise the Tax Indemnifying Party of the
nature of the Tax Claim, the Tax Indemnifying Party shall not be liable to the
Tax Indemnified Party to the extent that the Tax Indemnifying Party is
materially prejudiced as a result thereof; provided, that in no event shall such
failure relieve the Tax Indemnifying Party of any other liability and/or
obligation which it may have to a Tax Indemnified Party.
(ii) The Tax Indemnifying Party may discharge, at any time, its
indemnification obligation under Section 8.1 by paying to the Tax Indemnified
Party the amount of the applicable Tax calculated on the date of such payment.
Subject to clause (vii) below, the Tax Indemnified Party may, at its own
expense, participate in and, upon notice to the Tax Indemnifying Party, assume
the defense of any Tax Claim for which the Tax Indemnifying Party has sole
liability, in the event the Tax Indemnifying Party has not assumed the defense
of such claim by providing written notice of its intent to assume the defense of
such claim to the Tax Indemnified Party within 30 days of the receipt of the
notice required under Section 8.1(g)(i). If the Tax Indemnifying Party does not
assume the defense of any such Tax Claim, the Tax Indemnified Party may defend
the same in such manner as it may deem appropriate, including, but not limited
to, settling, provided, however, that the Tax Indemnified Party shall not settle
such Tax Claim without the prior written consent of the Tax Indemnifying Party
which shall not be unreasonably withheld.
(iii) Notwithstanding any other provision in this Agreement to
the contrary, Purchaser shall control the conduct of all Tax Claims and any
other claims that may be brought by a Third-Party that relate to whether the
Life Insurance Contracts, Annuity Contracts and/or any other products issued,
assumed, modified, exchanged, administered, marketed or sold by the Acquired
Subsidiaries satisfy the conduct requirements of sections 72, 101, 7702 and/or
7702A (as relevant) of the Code and Treasury Regulations promulgated thereunder
or any other applicable provisions of Law relating to Taxes; provided, however,
Parent shall control all such Tax Claims if such Tax Claims could result in an
indemnity obligation by Parent under Section 8.1(a).
(iv) Except as provided in clauses (iii) and (vii) herein, in the
event of a Tax Claim that involves issues (A) relating to a potential adjustment
for which the Tax Indemnifying Party has liability and (B) that are required to
be dealt with in a proceeding that also involves separate issues that could
affect the Taxes of the Tax Indemnified Party, to the extent permitted by
applicable Law, (x) the Tax Indemnifying Party shall have the right at its
expense to control the Tax Claim but only with respect to the former issues and
(y) the Tax Indemnified Party shall have the right at its expense to control the
Tax Claim but only with respect to the latter issues.
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(v) Except as provided in clause (vii) below, with respect to all
other Tax Claims, the applicable Purchaser or Acquired Subsidiary that is
directly or indirectly affected by such Tax Claim shall have the right to
control the conduct of such proceedings.
(vi) Except as provided in clause (vii) below, the party that is
controlling the Tax Claim pursuant to Sections 8.1(g)(ii), (iii), (iv) or (v)
(the "Controlling Party") shall provide the Non-Controlling Party with notice
reasonably in advance of, and the Non-Controlling Party shall have the right, at
its expense, to participate in such Tax Claim to the extent allowed by Law
including the right to attend any meetings with a Governmental Authority
(including meetings with examiners) or hearings or proceedings before any
Governmental Authority to the extent they relate to such Tax Claim.
(vii) Notwithstanding any other provision of this Agreement or
the Related Agreements to the contrary, neither Purchaser nor any of its
Affiliates shall be entitled to participate in any Tax Claim relating to any
consolidated, combined, affiliated or unitary Tax Return which includes Parent
or any of its Affiliates; provided, however, that Parent shall notify Purchaser
to the extent any such Tax Claim involves any issues that could materially
adversely effect Purchaser or any of their Affiliates and will inform and
discuss with Purchaser how Parent is addressing and contesting such issues and
will consider and act in good-faith with respect to such issues.
(viii) Except with respect to any Tax Claim subject to Section
8.1(g)(iii) or (vii), the Indemnifying Party shall have no right to contest any
Tax Claim in accordance with Section 8.1(g) unless:
(1) the Tax Indemnifying Party shall have agreed to pay, and
shall be currently paying, all reasonable costs and expenses incurred by
the Tax Indemnified Party to contest such Tax Claim including reasonable
outside attorneys', accountants' and investigatory fees and disbursements;
and
(2) the Tax Indemnifying Party shall have advanced to the
Tax Indemnified Party, on an interest-free basis (and with no additional
net after-tax cost to the Tax Indemnified Party), the amount of Tax in
controversy (but not in excess of the lesser of (A) the amount of Tax for
which the Tax Indemnifying Party could be liable under this Agreement or
(B) the amounts actually expended by the Tax Indemnified Party) to the
extent necessary for the contest to proceed in the forum selected by the
Tax Indemnifying Party.
(ix) To the extent not prohibited by applicable Law or the
relevant Governmental Authority, the relevant Acquired Subsidiary shall pay to
Parent on the Closing Date the amount of any liability for current Taxes (other
than Taxes for any Straddle Periods or any amounts relating to Deferred Taxes)
that are reflected on the Estimated Closing Date Balance Sheet, provided,
however, to the extent all or a portion of such Taxes cannot be paid under
applicable Law or pursuant to a rule or regulation of a relevant Governmental
Authority, then Purchaser shall pay to Parent such amounts on the Closing Date,
but only to the extent that the amount of such liability for current Taxes
(other than Taxes for Straddle Periods or any amounts relating to Deferred
Taxes) shown on the Estimated Closing Date Balance Sheet (before
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any amounts are paid by Purchaser or any Acquired Subsidiary pursuant to
Sections 8.1(g)(ix) or Section 8.8) has decreased (in the case of such current
Tax liability) the Closing Date Purchase Price by such amount. Parent shall pay
Purchaser or Purchaser shall pay Parent, as the case may be, an appropriate
amount reflecting any increase or decrease in the amounts reflected as a
liability for current Taxes (other than Taxes for any Straddle Periods or any
amounts relating to Deferred Taxes) on the Estimated Closing Date Balance Sheet
when compared to the Closing Date Balance Sheet.
(x) Notwithstanding any provision in this Agreement to the
contrary, no provision in this Article VIII shall be interpreted in any manner
which will require Purchaser or Parent to pay any amount more than once whether
as Closing Date Purchase Price, as an indemnity or as a set-off or credit
against any amounts required to be paid pursuant to this Agreement (including
any set-offs required under Section 8.1(a) with respect to liabilities accrued
and reserves established for specific Taxes on the Closing Date Balance Sheet
other than any amounts for Deferred Taxes).
Section 8.2 Tax Returns and Refunds.
(a) Parent shall prepare or cause to be prepared and timely file or
cause to be filed all required Tax Returns relating to the Acquired Subsidiaries
for any taxable period which ends on or before the Closing Date. Purchaser shall
prepare or cause to be prepared and timely file or cause to be filed all
required Tax Returns relating to the Acquired Subsidiaries for taxable periods
ending after the Closing Date and all required Tax Returns for subsequent
taxable periods; provided, that with respect to any such Tax Returns for a
Straddle Period, such Tax Returns shall be prepared and all elections with
respect to such Tax Returns shall be made (but only to the extent such elections
will have no continuing effect with respect to any Post-Closing Tax Period), to
the extent permitted by Law, in a manner consistent with past practice. Before
filing any Tax Return with respect to any Straddle Period, Purchaser shall
provide Parent with a copy of such Tax Return at least thirty (30) days prior to
the last date for timely filing such Tax Return (giving effect to any valid
extensions thereof) accompanied by a statement calculating in reasonable detail
Parent's indemnification obligation, if any, pursuant to Section 8.1(a). If for
any reason Parent does not agree with Purchaser's calculation of its
indemnification obligation, Parent shall notify Purchaser of its disagreement
within fifteen (15) Business Days of receiving a copy of the Tax Return and
Purchaser's calculation. If Parent agrees with Purchaser's calculation of its
indemnification obligation, Parent shall pay to Purchaser the amount of Parent's
indemnification at the time specified in Section 8.1(f).
(b) With respect to Tax Returns that Parent is required to file or
cause to be filed pursuant to Section 8.2(a), Parent shall pay or cause to be
paid when due and payable all Taxes with respect to the Acquired Subsidiaries
for any taxable period ending on or before the Closing Date to the extent such
Taxes exceed the amount, if any, specifically accrued or specifically reserved
for such Taxes on the Closing Date Balance Sheet (but not including any amounts
for Deferred Taxes) to the extent not already paid pursuant to Sections
8.1(g)(ix) or Section 8.8.
(c) With respect to Taxes for Straddle Periods, to the extent that
payments, if any, made by Parent, its Affiliates or any Acquired Subsidiary
prior to the Closing Date to a
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Governmental Authority plus the amount of any liability for current Taxes for
Straddle Periods that are specifically accrued for such Taxes on the Closing
Date Balance Sheet (to the extent not already paid pursuant to Sections
8.1(g)(ix) or Section 8.8 and not including any amounts for Deferred Taxes) is
greater than Parent's allocable portion of such Straddle Period Taxes as
determined pursuant to Section 8.1(a), Purchaser shall pay to Parent the amount
of such excess within 10 Business Days of filing such Straddle Period Tax
Return.
(d) With respect to a Tax (other than for a Straddle Period) for which
Parent has provided an indemnity under Section 8.1(a), to the extent that the
amount, if any, specifically accrued or reserved for any such Taxes on the
Closing Date Balance Sheet (other than to the extent not already paid pursuant
to Sections 8.1(g)(ix) or Section 8.8 and not including any amounts for Deferred
Taxes) exceeds the amount of such Taxes actually due and payable, Purchaser
shall pay Parent the amount of such excess; provided, that upon such payment the
amounts of any such accruals or reserves will no longer be taken into account
for purposes of this Agreement.
(e) Except for all refunds or credits of Taxes arising from a Tax
Attribute attributable to the Acquired Subsidiaries that are generated in a
Post-Closing Tax Period, any refunds or credits of Taxes of the Acquired
Subsidiaries, Parent or any of Parent's Affiliates plus any interest received
with respect thereto from the applicable Governmental Authority for any taxable
period ending on or before the Closing Date (including refunds or credits
arising by reason of amended Tax Returns filed after the Closing Date but
excluding any refund or credit included on the Closing Date Balance Sheet, which
shall be the property of Purchaser) shall be for the account of Parent and shall
be paid by Purchaser or any of its Affiliates to Parent within 10 Business Days
after Purchaser or any of its Affiliates receives such refund or after the
relevant Tax Return is filed in which the credit is applied against Purchaser 's
or any of its Affiliates' liability for Taxes. All refunds or credits (i) of
Taxes of the Acquired Subsidiaries plus any interest received with respect
thereto from the applicable Governmental Authority for any taxable period
beginning after the Closing Date, (ii) reflected as an asset on the Closing Date
Balance Sheet (to the extent not already paid pursuant to Section 8.1(g)(ix) and
Section 8.8), and (iii) of Taxes received that result from or are attributable
to a Tax Attribute of the Acquired Subsidiaries that are generated in a
Post-Closing Tax Period, in each case, shall be for the account of Purchaser and
shall be paid by Parent or any of its Affiliates to Purchaser within 10 Business
Days after Parent or any of its Affiliates receives such refund or after the
relevant Tax Return is filed in which the credit is applied against Parent's or
any of its Affiliates' liability for Taxes. Any refunds or credits of Taxes of
the Acquired Subsidiaries for any Straddle Period that are not reflected on the
December 31 Balance Sheet, the Estimated Closing Date Balance Sheet or the
Closing Date Balance Sheet shall be apportioned between Parent and Purchaser in
the same manner as the liability for such Taxes is apportioned pursuant to
Section 8.1.
(f) With respect to any refund or credit for which either Parent or
Purchaser are entitled pursuant to Section 8.2(c) (the "Refund Recipient"), (i)
at the request of the Refund Recipient, the other party shall and shall cause
its relevant Affiliates (the "Refund Payor") to file for and obtain any refunds
or credits to which the Refund Recipient is entitled under this Article VIII and
(ii) any payment to the Refund Recipient shall be net of any additional amounts
of Taxes that are imposed on the Refund Payor or any of its Affiliates as a
direct result of the Refund Payor or its Affiliate filing for such refund or
credit.
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Section 8.3 Conveyance Taxes. Parent and Purchaser shall be equally
responsible for and shall each pay fifty percent (50%) of all documentary,
sales, use, registration, value added, transfer, stamp, recording, registration
and similar Taxes, fees and costs incurred in connection with the transactions
contemplated by this Agreement (collectively, "Conveyance Taxes"). Purchaser and
Parent shall be responsible for jointly preparing and timely filing any Tax
Returns required with respect to any such Conveyance Taxes. Parent and Purchaser
will provide to one another a true copy of each such Tax Return as filed and
evidence of the timely filing thereof. Prior to the filing of such Tax Returns,
Parent and Purchaser shall agree upon the portion of the "Modified Aggregate
Deemed Sales Price" (as defined under applicable Treasury Regulations) to be
allocated to the assets that are the subject of such Tax Returns, which
allocation shall be binding for purposes of Section 8.4.
Section 8.4 Section 338(h) (10) Elections.
(a) With respect to the sale and acquisition of each of the Acquired
Subsidiaries pursuant to this Agreement: (i) Purchaser at its discretion shall
file any Election pursuant to section 338(g) of the Code with respect to the
Acquired Foreign Subsidiaries, (ii) Purchaser and Parent shall, in the manner
described herein, make an Election under section 338(h)(10) with respect to each
of the Acquired Domestic Subsidiaries that is not a Partnership (as defined
below) or identified in Section 4.18 of the Sellers Disclosure Letter (the
"Section 338(h)(10) Companies"). At least 10 days prior to the Closing Date,
Parent and Purchaser shall agree on the form and content of the IRS Forms 8023
(the "Forms 8023") on which any such Election under section 338(h)(10) shall be
made and at or prior to the Closing, Parent shall deliver to Purchaser and
Purchaser shall deliver to Parent properly executed and mutually agreed upon
Forms 8023 with respect to each Section 338(h)(10) Company containing
information then available, which Purchaser shall file or cause to be filed with
the Internal Revenue Service not later than thirty (30) days following the
Closing Date; (iii) Parent, Purchaser and their respective relevant Affiliates
shall jointly and timely make Elections under section 338(h)(10) of the Code and
Elections under any applicable state or local tax Law comparable to the
Elections with respect to each Section 338(h)(10) Company; (iv) with respect to
all Elections, Parent, Purchaser and their respective Affiliates shall, as
promptly as practicable following the Closing Date, cooperate with each other to
take all other actions necessary and appropriate (including filing such forms,
returns, elections, schedules and other documents as may be required) otherwise
to effect, perfect and preserve timely Elections in accordance with the
provisions of section 338 of the Code (including with respect to Elections under
section 338(h)(10), Treasury Regulation Section 1.338(h)(10)-l (and any
comparable provisions of state or local tax Law)) or any successor provisions;
and (v) Parent and its Affiliates and Purchaser and its Affiliates shall report
the sale and acquisition, respectively, of the stock of each of the Acquired
Subsidiaries pursuant to this Agreement consistent with the Elections (and any
comparable elections under state or local tax Laws) made and shall take no
position to the contrary thereto in any Tax Return, or in any proceeding before
any Governmental Authority or otherwise.
(b) To the extent permissible by or required by Law, Parent, Purchaser
and their respective Affiliates shall cooperate in the preparation and timely
filing of any (i) corrections, amendments or supplements to the Forms 8023
(including Form 8883) and (ii) state or local forms or reports that are
necessary or appropriate for purposes of complying with the requirements for
making any state or local election that is comparable to the Elections.
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(c) Neither Parent, Purchaser nor any of their respective Affiliates
shall take any action to modify any of the forms or reports (including any
corrections, amendments or supplements thereto) that are required for the making
of the Elections and any comparable elections under state or local tax Law after
their execution or to modify or revoke any of the Elections following the filing
of the Forms 8023 by Parent without the written consent of Parent and Purchaser,
as the case may be.
(d) Allocation.
(i) In connection with the Elections under section 338(h)(10) as
described in Section 8.4(a) and consistent with Section 2.4, within one hundred
twenty (120) days after the Closing Date, Purchaser shall provide (or shall
cause its Affiliates to provide) to Parent (i) a proposed allocation of the
"Modified Aggregate Deemed Sales Price" and the "Adjusted Grossed Up Basis"
(each, as defined under applicable Treasury Regulations) among the assets of
each Section 338(h)(10) Company, which allocations shall be made in accordance
with section 338(b) of the Code and any applicable Treasury Regulations
(including Proposed Treasury Regulation Section 1.338-11), and (ii) a complete
set of IRS Forms 8883 (and any comparable forms required to be filed under
state, local or foreign Tax Law) and any additional data or materials required
to be attached to Form 8883 pursuant to the Treasury Regulations promulgated
under section 338 of the Code (collectively, the "Proposed Allocation"). In the
event Parent objects to the Proposed Allocation, Parent will notify Purchaser
within twenty (20) days of receipt of the Proposed Allocation of such objection,
and the parties will endeavor within the next fifteen (15) days to resolve such
dispute in good faith.
(ii) In the event that Parent and Purchaser resolve such dispute
and agree on the manner in which such allocations should be made, Parent and
Purchaser (and their respective Affiliates) shall (i) be bound by the allocation
determined pursuant to this paragraph for all Tax purposes, (ii) prepare and
file all Tax Returns to be filed with any Governmental Authority (including Form
8883 and Form 8594 filed with the Parties' respective federal income Tax Returns
for the taxable year that includes the Closing Date and any other forms or
statements required by the Code, Treasury regulations, the Internal Revenue
Service or any applicable state or local Governmental Authority) in a manner
consistent with such allocations and (iii) take no position inconsistent with
such allocations in any Tax Return, any proceeding before any Governmental
Authority or otherwise. In the event that any such allocation is disputed by any
Governmental Authority, the party receiving notice of such dispute shall
promptly notify and consult with the other Party concerning resolution of such
dispute.
(iii) In the event that Parent and Purchaser disagree on the
manner in which such allocations should be made and do not resolve such dispute
within the time provided under Section 8.4(d) (i) such dispute shall be settled
pursuant to the provisions of Section 8.5.
(e) To the extent allowed by applicable Law, Parent and Purchaser
shall, and shall cause their respective Affiliates to, treat any assets or
shares of stock that are distributed by any of the Section 338(h)(10) Companies
to any Seller pursuant to Section 6.14 as having been distributed in the deemed
liquidation resulting from the 338(h)(10) Election.
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(f) If Purchaser or any of its Affiliates makes an Election under
section 338(g) of the Code (or any comparable provisions of state or local Tax
Law) with respect to any of the Acquired Foreign Subsidiaries in connection with
the transactions contemplated by this Agreement, Parent and Purchaser shall
follow the principles of Treasury Regulation Section 1.338-9(d) and shall
provide to each other all documents reasonably necessary to comply with such
regulation. Neither Purchaser nor any of its Affiliates shall change the taxable
year of any Acquired Foreign Subsidiary which includes but does not end on the
Closing Date without the prior written consent of Parent.
Section 8.5 Resolution of All Tax Related Disputes. Except as
otherwise provided, with respect to any dispute or a disagreement relating to
Taxes between the Parties, the Parties shall cooperate in good faith to resolve
such dispute between them; but if the Parties are unable to resolve such
dispute, the Parties shall submit the dispute to the Accountant for resolution,
which resolution shall be final, conclusive and binding on the Parties.
Notwithstanding anything in this Agreement to the contrary, the fees and
expenses relating to any dispute as to the amount of Taxes owed by either of the
Parties shall be paid by Purchaser, on the one hand, and Parent, on the other
hand, in proportion to each party's respective liability for the portion of the
Taxes in dispute, as determined by the Accountant.
Section 8.6 Survival of Tax Provisions.
(a) Notwithstanding any provision in this Agreement to the contrary,
the representations and warranties provided by Parent in Section 4.18 shall
survive until the date that is one year after the Closing Date.
(b) Notwithstanding any provision in this Agreement to the contrary,
Purchaser shall be entitled to bring a claim pursuant to Section 8.1(a)(v) so
long as such claim is made prior to March 31, 2007.
(c) Except as provided in Section 8.6(a) and (b), any other claim made
pursuant to this Article VIII must be made within the period that is 6 months
after the expiration (giving effect to any valid extensions, waivers and tolling
periods) of the applicable statutes of limitations relating to the Taxes at
issue.
Section 8.7 Exclusivity. Article VIII shall govern (i) the retention
of records with respect to each of the Acquired Subsidiaries and (ii) all
indemnification claims, in each case with respect to Taxes.
Section 8.8 Tax Sharing Agreements. Any and all Tax Sharing
Agreements between any of the Acquired Subsidiaries and any member of the
affiliated group, within the meaning of section 1504(a) of the Code, of which
Parent is the common parent (the "Parent Affiliated Group") shall be terminated
as of the Closing Date. After the Closing Date, none of the Acquired
Subsidiaries or any member of the Parent Affiliated Group shall have any further
rights or obligations under any such Tax Sharing Agreement, except to the extent
that any outstanding payments need to be made under any such Tax Sharing
Agreement with respect to current Taxes (other than Taxes for Straddle Periods)
shown on the Closing Date Balance Sheet (other than for any such amounts
relating to Deferred Taxes).
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Section 8.9 Characterization of Indemnification Payments. To the
extent permitted under applicable Law, any payments made pursuant to Section
2.3, Article VIII or Article X shall be treated for all Tax purposes as
adjustments to the Closing Date Purchase Price and allocated to the relevant
Acquired Subsidiary.
Section 8.10 Cooperation, Exchange of Information and Record
Retention.
(a) Purchaser and Parent shall provide each other, and shall cause
their respective Affiliates, officers, employees, agents, auditors and
representatives reasonably to provide each other, with such cooperation and
information relating to the Acquired Subsidiaries (including cooperation
relating to any Audit request) as any of them reasonably may request of another,
including in (i) preparing and filing any Tax Return (including pro-forma Tax
Returns), amended Tax Return or claim for refund, including maintaining and
making available to each other all records necessary in connection with Taxes;
(ii) resolving all disputes and audits with respect to all taxable periods
relating to Taxes; (iii) contesting or compromising any Tax Claim; (iv)
determining a Tax liability or a right to a refund of Taxes; (v) participating
in or conducting any audit or other proceeding in respect of Taxes; (vi)
assessing whether any of the reinsurance contracts of the Business may be
subject to Section 845 of the Code, (vii) determining the identity of all the
consolidated, unified, combined or affiliated groups the Acquired Subsidiaries
or the Joint Ventures have been a member of since 1997 to the extent Parent was
or is not the common parent of such group and (viii) connection with all other
matters covered in this Article VIII. Each such party shall make its employees
available on a mutually convenient basis to provide explanations of any
documents or information provided hereunder.
(b) At Purchaser's request, Parent and its Affiliates shall cooperate
and make a good faith effort to provide Purchaser with all of the information
possessed by Parent and its Affiliates or that is reasonably obtainable by
Parent and its Affiliates (including access to personnel of the Parent or its
Affiliates) relating to any Acquired Subsidiary or Joint Venture which is
characterized as a partnership for U.S. federal income tax purposes and for any
entity in which a Joint Venture or Acquired Subsidiary own an equity interest
that is characterized as a partnership for U.S. federal income tax purposes (the
"Partnerships"), including:
(i) A list of the Partnerships which the Tax Personnel (after due
inquiry) know to have in place a section 754 election and all information
requested by Purchaser that will assist Purchaser in determining whether a
section 754 election should be made for any of the Partnerships;
(ii) A list of the Partnerships that will terminate pursuant to
section 708 of the Code as a result of the transactions contemplated by this
Agreement, and all information requested by Purchaser that relate to the Tax
effects such a termination may have for Post-Closing Tax Periods; and
(iii) A list of all Partnerships in which either an Acquired
Subsidiary or a Joint Venture is allocated amounts under section 704(c) and all
information requested by Purchaser relating to such allocations.
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(c) Parent and its Affiliates shall allow Purchaser to participate in
the conduct of the review being performed by the Acquired Subsidiaries with
respect to its products and which is the subject of the Aon Report and with
respect to the preparation and drafting of the Aon Report, and Purchaser will
have the right to review and comment with respect to such review and report and
Parent shall be required to take into account and accept all reasonable comments
provided by Purchaser.
(d) Purchaser and Parent recognize that Parent and its Affiliates will
need access, from time to time, after the Closing Date, to certain accounting
and Tax records and information held by the Acquired Subsidiaries to the extent
such records and information pertain to events occurring on or prior to the
Closing Date; therefore, Purchaser and Parent agree that from and after the
Closing Date, Parent, Purchaser and their respective Affiliates shall (i) retain
and maintain all such records including all Tax Returns, schedules and work
papers, records and other documents in their possession relating to Tax matters
of the Acquired Subsidiaries for taxable periods ending on or prior to the
Closing Date and for the Straddle Period for the longer of (x) the seven-year
period beginning on the Closing Date or (y) the full period of the applicable
statute of limitations, including any extension thereof and (ii) allow the
agents and representatives of each other, upon reasonable notice and at mutually
convenient times to inspect, review and make copies of such records (at the
expense of the party requesting the records) as Parent and Purchaser may deem
reasonably necessary or appropriate from time to time. Parent and Purchaser
agree that the holder of any records, books, workpapers, reports, correspondence
and other similar materials shall provide the other party with written notice
thirty (30) calendar days prior to transferring, destroying or discarding the
last copy of any such materials and such other party shall have the right, at
its expense, to copy or take any such materials; provided, that such other party
provide written notice stating its intent to copy or take such materials no
later than twenty (20) days after having received notice that such materials are
being transferred, destroyed or discarded. Any information obtained under this
Section 8.10(d) shall be kept confidential except as may be otherwise necessary
in connection with the filing of Tax Returns or claims for refund or in
conducting an audit or other proceeding.
(e) Neither Party nor any of its Affiliates shall be entitled to any
information regarding or a copy of any consolidated, combined, affiliated or
unitary Tax Return which includes Parent or Purchaser, provided, however, that
Purchaser shall be entitled to a copy of a pro forma Tax Return for the relevant
Acquired Subsidiary and all information related thereto.
Section 8.11 Tax Benefits. (a) Any indemnity payments made pursuant
to Article VIII shall be adjusted to account for any Taxes imposed upon the
receipt of such payment and shall be made net of any Tax Benefit available to
the recipient of such payment that results from the loss giving rise to such
indemnity payments. For purposes of determining the amount of any Tax Benefit,
the recipient of the Tax Benefit shall be deemed to pay Tax at the highest U.S.
federal income tax corporate marginal rate in effect in the year such
indemnifiable loss is incurred and shall be deemed to realize or utilize any Tax
Benefit in the first taxable year that such Tax Benefit may be realized or
utilized under applicable Law after taking into account all other Tax Attributes
of such indemnified party and the projected utilization of such Tax Attributes
as computed by the recipient of such Tax Benefit. If a Tax Benefit resulting
from an indemnifiable loss is available in multiple Tax years, the amount of
such Tax Benefit for purposes of this Section 8.11(a) shall be the net present
value of all of such available Tax
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Benefits, calculated by using a discount rate equal to the long-term applicable
federal rate for the month in which such indemnifiable loss is incurred.
(b) Purchaser shall pay to Parent any Tax Benefit arising from (i) any
deduction arising from the exercise of options to acquire Parent stock held by
Business Employees (if any) to the extent the Closing Date Balance Sheet does
not reflect any amounts related to these deductions as an asset of any Acquired
Subsidiary or as a reduction of any liability accrued thereon and (ii) any
payment by Purchaser or its Affiliates of any state guarantee fund assessment as
shown on the Closing Date Balance Sheet (net of any amounts reflected on such
balance sheet as an asset or that otherwise reduced the amount of any liability
reflected on such balance sheet and not including any Deferred Taxes), within 10
days of filing the Tax Return in which such Tax Benefit is claimed. Purchaser
without prior approval from Parent shall not, and shall cause its Affiliates not
to, claim the amount of any items listed in clauses (i) and (ii) above as a
deduction for which Parent would be owed an amount under this Section 8.11(b) on
any Tax Return that Purchaser is responsible for preparing under Section 8.2;
provided, however, that if Parent under applicable Law or administrative
practice is not permitted to report such deductions on any Tax Return that it or
any of its Affiliates is required to file under Section 8.2 and such deduction
is permitted by Law or administrative practice to be reported on a Tax Return
for which Purchaser has filing responsibility under Section 8.2, then Purchaser
shall claim such deduction and pay to Parent the amount required under this
Section 8.11(b) within 10 Business Days of filing the relevant Tax Return.
Notwithstanding any provision to the contrary, Parent will agree to indemnify
Purchaser and its Affiliates against Taxes that relate to any Tax Claim
regarding the taking of any deductions described in clauses (i) and (ii) above,
to the extent Purchaser was required to pay Parent an amount for the use of such
deductions or Parent was able to report such deductions on Tax Returns which
Parent or one of its Affiliates filed pursuant to Section 8.2.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of Purchaser and Parent; or
(b) by either Purchaser or Parent, if the transactions contemplated by
this Agreement are not consummated by the first anniversary of the date of this
Agreement (the "Termination Date"), except to the extent that such failure
arises out of, or results from, a material breach by the Party seeking to
terminate this Agreement of any representation, warranty, covenant or obligation
of such Party contained herein; or
(c) by either Purchaser or Parent, if there shall have been a breach
by Sellers or Purchaser, as the case may be, of any of the representations,
warranties, covenants or obligations contained herein, which breach would result
in the failure to satisfy any condition set forth in Sections 7.1 or 7.2 (in the
case of a breach by Sellers), or Sections 7.1 or 7.3 (in the case of a breach by
Purchaser), and in any such case such breach shall be incapable of being cured
or,
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if capable of being cured, shall not have been cured within sixty (60) calendar
days after written notice thereof shall have been received by the Party alleged
to be in breach.
Section 9.2 Special Termination. In the event that Shortfall
Reference Equity exceeds five hundred million dollars ($500,000,000), then
Parent shall have the right to terminate this Agreement for a period of fourteen
(14) days after delivery of the Audited Financial Statements pursuant to Section
6.19(a).
Section 9.3 Effect of Termination. If this Agreement is terminated,
no Party (or any of its Affiliates, directors, officers, representatives or
agents) will have any liability or further obligation to any other Party to this
Agreement, except for any liability arising out of any knowing, willful or
fraudulent breach of this Agreement prior to such termination and except for the
obligations set forth in Sections 6.4(a) through (d) and 11.11, which shall
survive termination.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties and Covenants.
(a) The representations and warranties set forth herein (other than
the representations and warranties in Section 4.18), and the right to commence
any claim with respect thereto, shall survive until March 31, 2007; provided
that the representations and warranties contained in Section 4.11 shall survive
until six months after the expiration of the applicable statute of limitations
and the representations and warranties contained in Sections 4.2, 4.3, 4.9,
4.23, 4.25, 4.29, 5.2, 5.3, 5.11 and 5.12 shall survive indefinitely; provided,
however, that in the event written notice of any bona fide claim for
indemnification under Section 10.2(a) or Section 10.3(b) shall have been given
in accordance herewith within the applicable survival period setting forth in
reasonable detail the nature of such claim (including a reasonable specification
of the legal and factual basis for such claim), the representations and
warranties that are the subject of such indemnification claim shall survive with
respect to such claim until such time as such claim is fully and finally
resolved. Notwithstanding anything contained herein to the contrary, after
Parent delivers the Audited Financial Statements pursuant to Section 6.19,
Parent and its Affiliates shall not have any liability in respect of, or any
indemnification obligations to the Purchaser Indemnified Parties for Losses
arising out of or relating to, the Financial Information.
(b) This Section 10.1 shall not limit any covenant or agreement of the
Parties contained in this Agreement or the Related Agreements which by its
respective terms contemplates performance after the Closing.
Section 10.2 Indemnification of Purchaser. Subject to the terms of
this Article X, from and after the Closing Date, Parent shall indemnify, defend,
save and hold harmless Purchaser and its Affiliates and each of their respective
officers, directors, employees, agents and representatives (collectively, the
"Purchaser Indemnified Parties"), from and against any and all Losses resulting
from, arising out of or related to:
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(a) any breach by Parent of any representation or warranty (without
regard to any Knowledge, Business Material Adverse Effect or materiality
qualifications, except for the representations and warranties set forth in
Sections 4.11(a), 4.13, 4.14(a), 4.14(b), the first sentence of Sections 4.16,
4.20(a) and (b), the first sentence of Section 4.21 and the third sentence of
Section 4.26(b) in this Agreement) (other than the representations and
warranties set forth in Section 4.18) or any of the Related Agreements if and
only to the extent of any representation and warranty in any Related Agreement
that is substantially similar to a representation or warranty in this Agreement;
(b) the failure by any Seller to perform timely any of its covenants
or agreements contained in this Agreement;
(c) subject to Section 10.5(d), the Covered Applicable Argentina
Losses;
(d) subject to Section 10.5(e), the Covered Applicable TIN Losses;
(e) subject to Section 10.5(f), the Covered Applicable Other Losses;
(f) subject to Section 10.5(g), the Covered Applicable LTC Losses;
(g) subject to Section 10.5(h), the Covered Applicable Litigation
Losses; and
(h) subject to Section 10.5(i), the Covered Applicable Shared Losses.
Section 10.3 Indemnification of Sellers. Subject to the terms of this
Article X, from and after the Closing Date, Purchaser shall indemnify, defend,
save and hold harmless Sellers and their respective Affiliates and each of their
respective officers, directors, employees, agents and representatives
(collectively, the "Sellers Indemnified Parties" and together with the Purchaser
Indemnified Parties, the "Indemnified Parties," and each, an "Indemnified
Party") from and against any and all Losses resulting from, arising out of or
related to:
(a) the ownership or operation of the Business or the Transferred
Shares, including the Applicable Argentina Losses, the Applicable TIN Losses,
the Applicable Shared Losses, the Applicable Other Losses and other Losses
resulting from, arising out of or related to the Applicable Argentina
Subsidiaries or their respective businesses, except to the extent the Purchaser
Indemnified Parties are entitled to indemnification under Section 10.2;
(b) any breach by Purchaser of any representation or warranty (without
regard to any Knowledge, Purchaser Material Adverse Effect or materiality
qualifications, except for the representations and warranties set forth in
Sections 5.8(a) and 5.10 in this Agreement or in any of the Related Agreements;
and
(c) the failure by Purchaser to perform timely any of its covenants or
agreements contained in this Agreement.
Section 10.4 Claims. Upon receipt by an Indemnified Party of notice
of any action, suit, proceedings, claim, demand or assessment made or brought by
an unaffiliated third party (a "Third Party Claim") with respect to a matter for
which such Indemnified Party is
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indemnified under this Article X which has or is expected to give rise to a
claim for Losses, the Indemnified Party shall promptly, in the case of a
Purchaser Indemnified Party, notify Parent and in the case of a Sellers
Indemnified Party, notify Purchaser (Parent or Purchaser, as the case may be,
the "Indemnifying Party"), in writing, indicating the nature of such Third Party
Claim and the basis therefor; provided, however, that any delay or failure by
the Indemnified Party to give notice to the Indemnifying Party shall relieve the
Indemnifying Party of its obligations hereunder only to the extent, if at all,
that it is prejudiced by reason of such delay or failure. Such written notice
shall (i) describe such Third Party Claim in reasonable detail as is practicable
including the sections of this Agreement which form the basis for such claim;
provided that the failure to identify a particular section in such notice shall
not preclude the Indemnified Party from subsequently identifying such section as
a basis for such claim, (ii) attach copies of all material written evidence
thereof and (iii) set forth the estimated amount of the Losses that have been or
may be sustained by an Indemnified Party. The Indemnifying Party shall have
thirty (30) days after receipt of notice to elect, at its option, to assume and
control the defense of, at its own expense and by its own counsel, any such
Third Party Claim and shall be entitled to assert any and all defenses available
to the Indemnified Party to the fullest extent permitted by applicable Law. If
the Indemnifying Party shall undertake to compromise or defend any such Third
Party Claim, it shall promptly notify the Indemnified Party of its intention to
do so, and the Indemnified Party agrees to cooperate fully with the Indemnifying
Party and its counsel in the compromise of, or defense against, any such Third
Party Claim; provided, however, that the Indemnifying Party shall not settle,
compromise or discharge, or admit any liability with respect to, any such Third
Party Claim without the prior written consent of the Indemnified Party (which
consent will not be unreasonably withheld or delayed), unless the relief
consists solely of money Losses to be paid by the Indemnifying Party and
includes a provision whereby the plaintiff or claimant in the matter releases
the Purchaser Indemnified Parties or the Sellers Indemnified Parties, as
applicable, from all liability with respect thereto. Notwithstanding an election
to assume the defense of such action or proceeding, the Indemnified Party shall
have the right to employ separate counsel and to participate in the defense of
such action or proceeding, and the Indemnifying Party shall bear the reasonable
fees, costs and expenses of such separate counsel if the (A) Indemnified Party
shall have determined in good faith that an actual or potential conflict of
interest makes representation by the same counsel or the counsel selected by the
Indemnifying Party inappropriate or (B) Indemnifying Party shall have authorized
the Indemnified Party to employ separate counsel at the Indemnifying Party's
expense. In any event, the Indemnified Party and Indemnifying Party and their
counsel shall cooperate in the defense of any Third Party Claim subject to this
Article X and keep such Persons informed of all developments relating to any
such Third Party Claims, and provide copies of all relevant correspondence and
documentation relating thereto. All costs and expenses incurred in connection
with the Indemnified Party's cooperation shall be borne by the Indemnifying
Party. In any event, the Indemnified Party shall have the right at its own
expense to participate in the defense of such asserted liability. If the
Indemnifying Party receiving such notice of a Third Party Claim does not elect
to defend such Third Party Claim or does not defend such Third Party Claim in
good faith, the Indemnified Party shall have the right, in addition to any other
right or remedy it may have hereunder, at the Indemnifying Party's expense, to
defend such Third Party Claim; provided, however, that the Indemnified Party
shall not settle, compromise or discharge, or admit any liability with respect
to, any such Third Party Claim without the written consent of the Indemnifying
Party (which consent will not be unreasonably withheld or delayed).
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Section 10.5 Limitations; Payments.
(a) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall not be (i) liable for any amounts for which the Purchaser
Indemnified Parties are otherwise entitled to indemnification pursuant to
Section 10.2(a), unless (x) a claim is timely asserted during the survival
period specified in Section 10.1(a), (y) the amount of Losses, after taking into
account Section 10.6, with respect to the particular act, circumstance,
development, event, fact, occurrence or omission exceeds one hundred thousand
dollars ($100,000) (aggregating all such Losses arising from substantially
identical facts) and (z) the aggregate amount of all Losses for which the
Purchaser Indemnified Parties are entitled to indemnification pursuant to
Section 10.2(a) exceeds, on a cumulative basis, seventy-five million dollars
($75,000,000) (the "Threshold"), and then only to the extent of such excess, and
(ii) required to make indemnification payments pursuant to Section 10.2(a) to
the extent indemnification payments thereunder would exceed in the aggregate two
billion dollars ($2,000,000,000) (the "Maximum Indemnification Amount");
provided that the limitations in clauses (i) and (ii) shall not apply to any
Losses resulting from, arising out of or relating to, the representations and
warranties set forth in Sections 4.2, 4.3 and 4.9 and any such Losses or
indemnification payments shall not be counted in determining whether the
Threshold or Maximum Indemnification Amount have been exceeded.
(b) Notwithstanding anything contained in this Agreement to the
contrary, Purchaser shall not be (i) liable for any amounts for which the
Sellers Indemnified Parties are otherwise entitled to indemnification pursuant
to Section 10.3(b), unless (x) a claim is timely asserted during the survival
period specified in Section 10.1(a), (y) the amount of Losses, after taking into
account Section 10.6, with respect to the particular act, circumstance,
development, event, fact, occurrence or omission exceeds one hundred thousand
dollars ($100,000) (aggregating all such Losses arising from substantially
identical facts) and (z) the aggregate amount of all Losses for which the
Sellers Indemnified Parties are entitled to indemnification pursuant to Section
10.3(b) exceeds, on a cumulative basis, the Threshold, and then only to the
extent of such excess, and (ii) required to make indemnification payments
pursuant to Section 10.3(b) to the extent indemnification payments thereunder
would exceed in the aggregate the Maximum Indemnification Amount; provided that
the limitations in clauses (i) and (ii) shall not apply to any Losses resulting
from, arising out of or relating to, the representations and warranties set
forth in Sections 5.2 and 5.3 and any such Losses or indemnification payments
shall not be counted in determining whether the Threshold or Maximum
Indemnification Amount have been exceeded.
(c) In determining the foregoing Threshold, the Applicable Argentina
Losses Threshold and in otherwise determining the amount to which Indemnified
Parties are entitled to assert a claim for indemnification pursuant to this
Article X or Article VIII, respectively, only actual losses, and not claims for
lost profits or opportunity costs, except for any items specifically included in
the definition of "Taxes," shall be taken into account, and except in connection
with a Third Party Claim in which damages are awarded to a third party, the
Parties waive any claim to consequential, incidental, special, indirect,
exemplary or punitive damages relating to claims against each other.
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(d) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall not be liable for any amounts for which the Purchaser
Indemnified Parties are otherwise entitled to indemnification pursuant to
Section 10.2(c), unless the aggregate amount of all Applicable Argentina Losses
actually incurred by Purchaser and its Affiliates (including the Applicable
Argentina Subsidiaries) exceeds, on a cumulative basis, the Applicable Argentina
Losses Threshold, after taking into account Section 10.6, and then Parent shall
be responsible only for 50% (fifty percent) of such excess. In connection with
determining whether the Applicable Argentina Losses Threshold has been exceeded,
Purchaser shall provide to Parent documentation reasonably satisfactory to
Parent to evidence that the aggregate amount of all Applicable Argentina Losses
actually incurred by Purchaser and its Affiliates (including the Applicable
Argentina Subsidiaries) exceeds the Applicable Argentina Losses Threshold. For
purposes of calculating the Applicable Argentina Losses and the Applicable
Argentina Losses Threshold, the amounts of any Losses shall be converted from
Argentinean pesos to dollars based upon the exchange rate applicable as of the
date on which such Losses are paid. In no event shall a Purchaser Indemnified
Party be entitled to indemnification under Section 10.2(a) in respect of the
Applicable Argentina Losses, and any amounts for which the Purchaser Indemnified
Parties are otherwise entitled to indemnification pursuant to Section 10.2(c)
shall not count towards the Threshold or the Maximum Indemnification Amount.
(e) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall not be liable to indemnify the Purchaser Indemnified
Parties pursuant to Section 10.2(d), unless TIN shall have been determined to be
insolvent or placed into receivership (an "Insolvency") within five (5) years
from the Closing Date, and then Parent shall be responsible only for fifty
percent (50%) of the Applicable TIN Losses incurred by a Purchaser Indemnified
Party after an Insolvency has been made. In no event shall a Purchaser
Indemnified Party be entitled to indemnification under Section 10.2(d) if an
Insolvency has not been made prior to the fifth anniversary of the Closing Date.
In addition, in no event shall a Purchaser Indemnified Party be entitled to
indemnification under Section 10.2(a) in respect of the Applicable TIN Losses,
and any amounts for which the Purchaser Indemnified Parties are otherwise
entitled to indemnification pursuant to Section 10.2(d) shall not count towards
the Threshold or the Maximum Indemnification Amount.
(f) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall be responsible only for fifty percent (50%) of the
Applicable Other Losses. In no event shall a Purchaser Indemnified Party be
entitled to indemnification under Section 10.2(a) in respect of the Applicable
Other Losses, and any amounts for which the Purchaser Indemnified Parties are
otherwise entitled to indemnification pursuant to Section 10.2(e) shall not
count towards the Threshold or the Maximum Indemnification Amount.
(g) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall not be liable for any amounts for which the Purchaser
Indemnified Parties are otherwise entitled to indemnification pursuant to
Section 10.2(f), unless the aggregate amount of all Applicable LTC Losses
actually incurred by Purchaser and its Affiliates exceeds, on a cumulative
basis, the Applicable LTC Losses Threshold, after taking into account Section
10.6, and then Parent shall be responsible only for the amount of such excess.
In connection with determining whether the Applicable LTC Losses Threshold has
been exceeded, Purchaser shall provide to Parent documentation reasonably
satisfactory to Parent to evidence that the aggregate
93
amount of all Applicable LTC Losses actually incurred by Purchaser and its
Affiliates exceeds the Applicable LTC Losses Threshold. In addition, Purchaser
shall provide to Parent documentation and other information reasonably requested
by Parent in respect to the calculation of the Applicable LTC Losses Threshold.
In no event shall a Purchaser Indemnified Party be entitled to indemnification
under Section 10.2(a) in respect of the Applicable LTC Losses, and any amounts
for which the Purchaser Indemnified Parties are otherwise entitled to
indemnification pursuant to Section 10.2(f) shall not count towards the
Threshold or the Maximum Indemnification Amount.
(h) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall be responsible only for Applicable Litigation Losses in
excess of the reserves or accruals therefor on the Closing Date Balance Sheet.
In no event shall a Purchaser Indemnified Party be entitled to indemnification
under Section 10.2(a) in respect of the Applicable Litigation Losses, and any
amounts for which the Purchaser Indemnified Parties are otherwise entitled to
indemnification pursuant to Section 10.2(g) shall not count towards the
Threshold or the Maximum Indemnification Amount.
(i) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall be responsible only for fifty percent (50%) of the
Applicable Shared Losses. In no event shall a Purchaser Indemnified Party be
entitled to indemnification under Section 10.2(a) in respect of the Applicable
Shared Losses, and any amounts for which the Purchaser Indemnified Parties are
otherwise entitled to indemnification pursuant to Section 10.2(h) shall not
count towards the Threshold or the Maximum Indemnification Amount.
(j) Notwithstanding anything contained in this Agreement to the
contrary, in no event shall any Indemnifying Party or Tax Indemnifying Party be
obligated under this Article X or Article VIII, respectively, to indemnify any
Person otherwise entitled to indemnity hereunder in respect of any Losses or
Taxes that result from the willful misconduct, bad faith or negligent acts or
omissions of such Person.
(k) Notwithstanding anything contained in this Agreement to the
contrary, in the event that any fact, event or circumstance which results in an
adjustment to the Closing Date Purchase Price (including in calculating the
Final Adjustment Payment and Reference Equity) would also constitute a breach or
inaccuracy of any of Parent's representations, warranties, covenants or
agreements under this Agreement, Sellers and their respective Affiliates shall
have no obligation to indemnify any Purchaser Indemnified Party with respect to
such breach or inaccuracy to the extent of such adjustment.
Section 10.6 Insurance; Tax Benefits.
(a) Notwithstanding anything contained in this Agreement to the
contrary, Losses shall be net of any insurance or other prior or subsequent
recoveries actually received by the Indemnified Party or its Affiliates in
connection with the facts giving rise to the right of indemnification. If an
Indemnified Party shall have used its commercially reasonable efforts to recover
any amounts recoverable under insurance policies and shall not have recovered
the applicable Losses, the Indemnifying Party shall be liable for the amount by
which such Losses exceeds the amounts actually recovered.
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(b) Any indemnity payments made pursuant to Article X by Purchaser to
Parent and any Losses applied to the Threshold, the Applicable Argentina Losses
Threshold or the Applicable LTC Losses Threshold shall be made net of any Tax
Benefit available to Purchaser or any of its Affiliates resulting from the
incurrence or payment of Losses. The amount of any Tax Benefit shall be
determined pursuant to Section 8.11.
Section 10.7 Remedies Exclusive. Except in cases of common law fraud
or as otherwise specifically provided herein (including Section 10.9), the
remedies provided in Article VIII and this Article X shall be the exclusive
monetary remedies (including equitable remedies that involve monetary payment,
such as restitution or disgorgement, other than specific performance to enforce
any payment or performance due hereunder) of the Parties from and after the
Closing in connection with any breach of a representation or warranty, or
non-performance, partial or total, of any covenant or agreement contained
herein.
Section 10.8 Mitigation. Each Indemnified Party shall use its
commercially reasonable efforts, at the expense of the Indemnifying Party, to
mitigate any claim or liability that an Indemnified Party asserts or is
reasonably likely to assert under this Article X. In the event that an
Indemnified Party shall fail to make such commercially reasonable efforts to
mitigate any such claim or liability, then notwithstanding anything contained in
this Agreement to the contrary, neither Parent nor Purchaser, as the case may
be, shall be required to indemnify any Indemnified Party for that portion of any
Losses that could reasonably be expected to have been avoided if the Indemnified
Party had made such efforts.
Section 10.9 Tax Indemnification. Except as expressly provided in
Article VIII or this Article X, this Article X shall not apply to
indemnification with respect to Taxes as provided in Article VIII.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. All notices, demands and other communications
required or permitted to be given to any Party under this Agreement shall be in
writing and any such notice, demand or other communication shall be deemed to
have been duly given when delivered by hand, courier or overnight delivery
service or, if mailed, two (2) Business Days after deposit in the mail and sent
certified or registered mail, return receipt requested and with first-class
postage prepaid, or in the case of facsimile notice, when sent and transmission
is confirmed, and, regardless of method, addressed to the Party at its address
or facsimile number set forth below (or at such other address or facsimile
number as the Party shall furnish the other Parties in accordance with this
Section) and, in the case of Parent, also included in an email transmission:
95
(a) If to Parent:
Citigroup Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Deputy General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Purchaser:
MetLife, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 11.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflict of laws principles of such State.
Section 11.3 Jurisdiction; Venue; Consent to Service of Process.
(a) Each of the Parties irrevocably and unconditionally submits to the
non-exclusive jurisdiction of the United States District Court for the Southern
District of New York or, if such court will not accept jurisdiction, the Supreme
Court of the State of New York or any court of competent civil jurisdiction
sitting in New York County, New York. In any action, suit or other proceeding,
each of the Parties irrevocably and unconditionally waives and agrees not to
assert by way of motion, as a defense or otherwise any claims that it is not
subject
96
to the jurisdiction of the above courts, that such action or suit is brought in
an inconvenient forum or that the venue of such action, suit or other proceeding
is improper. Each of the Parties also hereby agrees that any final and
unappealable judgment against a Party in connection with any action, suit or
other proceeding shall be conclusive and binding on such Party and that such
award or judgment may be enforced in any court of competent jurisdiction, either
within or outside of the United States. A certified or exemplified copy of such
award or judgment shall be conclusive evidence of the fact and amount of such
award or judgment.
(b) Each Party irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to Section 11.1 of this
Agreement. Nothing in this Section 11.3 shall affect the right of any Party to
serve process in any other manner permitted by Law.
Section 11.4 Entire Agreement. This Agreement, together with the
Related Agreements and the Confidentiality Agreement and all annexes and
exhibits hereto and thereto, embody the entire agreement of the Parties with
respect to the subject matter hereof and supersede all prior agreements with
respect thereto. The Parties intend that this Agreement shall constitute the
complete and exclusive statement of its terms and that no extrinsic evidence
whatsoever may be introduced in any judicial proceeding involving this
Agreement.
Section 11.5 Amendment, Modification and Waiver. No amendment to this
Agreement shall be effective unless it shall be in writing and signed by each
Party. Any failure of a Party to comply with any obligation, covenant, agreement
or condition contained in this Agreement may be waived by the Party entitled to
the benefits thereof only by a written instrument duly executed and delivered by
the Party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure of compliance.
Section 11.6 Severability. If any provision of this Agreement or the
application of any such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable Law,
the Parties waive any provision of Law that renders any provision of this
Agreement invalid, illegal or unenforceable in any respect. The Parties shall,
to the extent lawful and practicable, use their commercially reasonable efforts
to enter into arrangements to reinstate the intended benefits, net of the
intended burdens, of any such provision held invalid, illegal or unenforceable.
Section 11.7 Successors and Assigns; No Third-Party Beneficiaries.
Subject to the terms of this Section 11.7, this Agreement and all its provisions
shall be binding upon and inure to the benefit of the Parties and their
respective permitted successors and assigns. Nothing in this Agreement, whether
expressed or implied, will confer on any Person, other than the Parties or their
respective permitted successors and assigns, any rights, remedies or
liabilities; provided that the provisions of Article X will inure to the benefit
of the Indemnified Parties. No Party may assign its rights or obligations under
this Agreement without the prior written consent of the other Parties (which
consent may not be unreasonably withheld) and any purported
97
assignment without such consent shall be void; provided that Purchaser may,
without the consent of Parent, assign any or all of its rights, but not its
obligations hereunder, to any of its Affiliates (although no such assignment
shall relieve Purchaser of its obligations to Parent or any Purchaser
Indemnified Party hereunder); provided, further, that Parent may, without the
consent of Purchaser, assign any or all of its rights (including its ownership
interest in any Acquired Subsidiary), and its respective related obligations
hereunder, to any of its Affiliates (although no such assignment shall relieve
Parent of its obligations to Purchaser or any Sellers Indemnified Party
hereunder).
Section 11.8 Publicity. Except for any notice which is required by
Law or obligations pursuant to any listing agreement with any national
securities exchange, each of Parent and Purchaser hereby agrees that neither it
nor any of its Affiliates will issue a press release or make any other public
statement with respect to the transactions contemplated by this Agreement and
the Related Agreements without the prior written consent of the other Party,
which consent will not be unreasonably withheld or delayed. Each of Purchaser
and Parent hereby agrees, to the extent possible and legally permissible, to
notify and consult with the other Party at least twenty-four (24) hours in
advance of filing any notice so required.
Section 11.9 Use of Logos to Announce Transaction. Parent hereby
grants, or will cause a Seller to grant, a non-exclusive, non-transferable, and
non-sublicenseable license to Purchaser, for a period of one (1) month following
the date hereof, to use its logo in the manner set forth on Exhibit J hereto
solely (with respect to Purchaser) on the website located at
(▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇.▇▇▇/) solely for purposes of announcing the transaction
contemplated hereby. The Parties acknowledge and agree that the restrictions
identified under the heading "Acknowledgement of Ownership" in the Licensing
Agreement shall apply to all such usage, and that, in addition to its other
rights and remedies hereunder or at law or in equity, Parent may terminate the
license granted herein upon written notice in the event that Purchaser breaches
or does not comply with such restrictions. Purchaser shall cease all such use of
the Trademark licensed hereunder immediately upon termination or, if not earlier
terminated, no later than one (1) month following the date hereof.
Section 11.10 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED
BY LAW, EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
Section 11.11 Expenses. Except as otherwise expressly stated in this
Agreement, any costs, expenses, or charges incurred by any of the Parties shall
be borne by the Party incurring such cost, expense or charge whether or not the
transactions contemplated by this Agreement and the Related Agreements shall be
consummated.
Section 11.12 Specific Performance and Other Equitable Relief. The
Parties hereby expressly recognize and acknowledge that immediate, extensive and
irreparable damage would result, no adequate remedy at law would exist and
damages would be difficult to determine in the event that any provision of this
Agreement is not performed in accordance with its specific terms or otherwise
breached. Therefore, in addition to, and not in limitation of, any
98
other remedy available to any Party, an aggrieved Party under this Agreement
would be entitled to specific performance of the terms hereof and immediate
injunctive relief, without the necessity of proving the inadequacy of money
damages as a remedy. Such remedies, and any and all other remedies provided for
in this Agreement, shall, however, be cumulative in nature and not exclusive and
shall be in addition to any other remedies whatsoever which any Party may
otherwise have.
Section 11.13 Counterparts. This Agreement may be executed by the
Parties in multiple counterparts which may be delivered by facsimile
transmission. Each counterpart when so executed and delivered shall be deemed an
original, and all such counterparts taken together shall constitute one and the
same instrument.
Section 11.14 No Other Representations or Warranties.
(a) Subject to Section 10.7, except for the representations and
warranties contained in this Agreement or the Related Agreements, no Seller nor
any agent, Affiliate, officer, director, employee or representative of any
Seller, nor any other Person, makes, or shall be deemed to make, any
representation or warranty to Purchaser, express or implied, at law or in
equity, on behalf of Sellers, and Sellers hereby exclude and disclaim any such
representation or warranty whether by any Seller or any Seller's agents,
Affiliates, officers, directors, employees or representatives or any other
Person, notwithstanding the delivery or disclosure to Purchaser or any of its
officers, directors, employees or representatives or any other Person of any
documentation or other information by Sellers or any of their respective agents,
Affiliates, officers, directors, employees or representatives or any other
Person with respect to any one or more of the foregoing. Purchaser hereby agrees
that notwithstanding any other provision of this Agreement to the contrary,
Sellers are not making any representation as to the adequacy or sufficiency of
any reserves for payment of benefits, losses, claims and expenses under all
insurance policies and contracts.
(b) Subject to Section 10.7, except for the representations and
warranties contained in this Agreement or the Related Agreements, neither
Purchaser nor any agent, Affiliate, officer, director, employee or
representative of Purchaser, nor any other Person, makes, or shall be deemed to
make, any representation or warranty to Sellers, express or implied, at law or
in equity, on behalf of Purchaser, and Purchaser hereby excludes and disclaims
any such representation or warranty whether by Purchaser or any of Purchaser's
agents, Affiliates, officers, directors, employees or representatives or any
other Person, notwithstanding the delivery or disclosure to Sellers any or any
of their respective officers, directors, employees or representatives or any
other Person of any documentation or other information by Purchaser or any of
its respective agents, Affiliates, officers, directors, employees or
representatives or any other Person with respect to any one or more of the
foregoing. Sellers hereby agree that notwithstanding any other provision of this
Agreement to the contrary, Purchaser is not making any representation as to the
adequacy or sufficiency of any reserves for payment of benefits, losses, claims
and expenses under all insurance policies and contracts.
(c) Nothing contained in this Section 11.14 shall affect the Parties'
rights under Section 2.3.
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IN WITNESS WHEREOF, each Party has caused this Agreement to be duly
executed on its behalf by an authorized officer as of the date first above
written.
CITIGROUP INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
METLIFE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT B-1
================================================================================
DOMESTIC DISTRIBUTION AGREEMENT
BY AND BETWEEN
CITIGROUP INC.
AND
METLIFE, INC.
AS OF [ ], 2005
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS...................................................... 1
Section 1.1. Defined Terms................................................. 1
Section 1.2. Purposes of Agreement......................................... 4
Section 1.3. Construction.................................................. 5
Section 1.4. Headings...................................................... 5
ARTICLE II. REPRESENTATIONS AND WARRANTIES.................................... 5
Section 2.1. Representations and Warranties of Parent...................... 5
Section 2.2. Representations and Warranties of Purchaser................... 6
ARTICLE III. DOMESTIC DISTRIBUTION............................................. 6
Section 3.1. Selling Agreements............................................ 6
Section 3.2. Exclusive Distribution Arrangements........................... 7
Section 3.3. Non-Exclusive Distribution Arrangements....................... 7
Section 3.4. Private Label Products........................................ 8
Section 3.5. New Products; Additional Products; Substitute Products........ 8
Section 3.6. Acquisitions.................................................. 10
Section 3.7. No Obligation................................................. 10
ARTICLE IV. ACCESS AND BRANDING................................................ 11
Section 4.1. Access....................................................... 11
Section 4.2. Branding; Use of Names; Confidential Information; Approval of
Certain Materials............................................ 11
ARTICLE V. TERM OF THE AGREEMENT; CERTAIN CONDITIONS........................... 13
Section 5.1. Term......................................................... 13
Section 5.2. Survival..................................................... 13
Section 5.3. Certain Conditions........................................... 13
ARTICLE VI. INDEMNIFICATION.................................................... 15
Section 6.1. Indemnification of Parent.................................... 15
Section 6.2. Indemnification of Purchaser................................. 15
Section 6.3. Indemnity Provisions in Domestic Selling Agreements.......... 16
Section 6.4. Indemnification Procedures................................... 16
Section 6.5. General...................................................... 17
ARTICLE VII. MISCELLANEOUS...................................................... 17
Section 7.1. Equitable Remedies........................................... 17
Section 7.2. Severability................................................. 17
Section 7.3. Further Assurance and Assistance............................. 18
Section 7.4. Notices...................................................... 18
Section 7.5. Successors and Assigns....................................... 19
Section 7.6. Governing Law................................................ 19
Section 7.7. Jurisdiction; Venue; Consent to Service of Process........... 19
Section 7.8. Frustration.................................................. 19
Section 7.9. Entire Agreement............................................. 20
Section 7.10. Amendment and Waiver......................................... 20
Section 7.11. Access to Records............................................ 20
Section 7.12. Counterparts................................................. 20
Section 7.13. Waiver of Jury Trial......................................... 20
DOMESTIC DISTRIBUTION AGREEMENT
THIS DOMESTIC DISTRIBUTION AGREEMENT (this "Agreement"), dated as of [ ],
2005, is made by and between Citigroup Inc., a Delaware corporation ("Parent"),
and MetLife, Inc., a Delaware corporation ("Purchaser").
WHEREAS, Purchaser and certain of its Affiliates provide insurance and
annuity products throughout the United States and in numerous countries around
the world;
WHEREAS, Parent, through its Affiliates, has an extensive proprietary
distribution network that distributes, on behalf of insurance companies,
insurance and annuity products throughout the United States and in numerous
countries around the world;
WHEREAS, Parent and Purchaser have entered into an Acquisition Agreement,
dated as of January 31, 2005 (the "Acquisition Agreement"), pursuant to which
Purchaser will acquire on the terms and subject to the conditions set forth
therein, all of the outstanding shares of capital stock of certain subsidiaries
of, and the equity interests owned by Parent in certain joint ventures of,
Parent or its Affiliates, including the Travelers Insurers;
WHEREAS, in connection with the transactions contemplated by the
Acquisition Agreement, the parties hereto desire to enter into a distribution
relationship outside the United States pursuant to an International Distribution
Agreement to be entered into on the date hereof and the distribution
relationship inside the United States contemplated by this Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
closing of the transactions contemplated by the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises herein contained, the parties do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Defined Terms. For purposes of this Agreement, unless the
context requires otherwise, the following terms shall have the following
meanings:
"Acquisition Agreement" has the meaning set forth in the recitals hereto.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such first Person. The term
"control" (including its correlative meanings "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
"Agreement" shall have the meaning set forth in the introductory paragraph
hereof.
"Comparable Distributor" shall mean a distributor using a substantially
similar approach to the marketing, servicing, sales support and overall
distribution of products.
"Competitive" means (i) the terms, total compensation, customer appeal,
consumer pricing and value, wholesaler coverage, training and support, features
and service standards and metrics of the applicable product, taken as a whole,
are at least equivalent to those of other comparable products, considered as a
group, then distributed by the applicable Domestic Parent Distributor and (ii)
the financial strength rating of the applicable provider is substantially
similar to the other providers (considered as a group) then providing such
comparable products to such Domestic Parent Distributor.
"Confidential Information" shall have the meaning set forth in Section
4.2(b).
"Domestic Exclusive Parent Distributor" means each Domestic Parent
Distributor to which a Travelers Insurer is the exclusive provider of any
Product on the date of this Agreement and such Person's successors and assigns.
"Domestic Parent Distributor" means (i) any Person Affiliated with Parent
that, as of the date hereof, distributes any Product that a Travelers Insurer
offers in the United States and such Person's successors and assigns and (ii)
from and after the time of its acquisition by Parent or an Affiliate of
Parent, a Target Affiliated Distributor that distributes any life insurance or
annuity products for any Purchaser Insurer pursuant to Section 3.6(b), and such
Target Affiliated Distributor's successors and assigns.
"Domestic Selling Agreements" has the meaning set forth in Section 3.1.
"Exclusive Products" means the Products designated on Schedule 3.2(a) as
being subject to an exclusive relationship.
"Existing Product" has the meaning set forth in Section 3.5(d).
"First Term" means the five-year period commencing on the date of this
Agreement and ending on the fifth anniversary of the date of this Agreement.
"Indemnified Party" has the meaning set forth in Section 6.4.
"Indemnifying Party" has the meaning set forth in Section 6.4.
"Law" shall have the meaning set forth in the Acquisition Agreement.
"Level Playing Field" means, with respect to a product, Parent (i) shall,
and shall cause any Domestic Parent Distributor entering into a Domestic Selling
Agreement with respect to such product pursuant to Section 3.1 to, afford the
same access to its distribution platforms for such product offered by a
Travelers Insurer (or a Purchaser Insurer, as applicable) as the access it
affords to comparable products offered by a Third Party Insurer and (ii) shall
not, and shall cause its Affiliates (including the Domestic Parent Distributors)
not to, provide to its Sales Force any compensation or other economic inducement
or benefit for the sale of comparable products sold in a comparable sales
support and compensation framework offered by a Third Party Insurer that
2
are more favorable than the compensation or other economic inducements or
benefits provided to such Sales Force for the sale of such products offered by a
Travelers Insurer (or a Purchaser Insurer, as applicable); provided, that a
Level Playing Field may include variations in Sales Force compensation that are
(x) based upon neutral criteria that do not differentiate between product
providers, such as achieving sales volume or persistency objectives, or (y) for
products (including combined product and service arrangements) for which
distributor compensation is negotiated by the provider on a sale-by-sale basis,
such as group retirement products.
"Licensing Agreement" shall have the meaning set forth in the Acquisition
Agreement.
"Losses" has the meaning set forth in Section 6.1.
"Marks" shall mean the Parent Distributor Marks, as defined in the
Licensing Agreement in respect of this Agreement, including "PrimElite",
"Blueprint", "Vintage" and "Marquis."
"New Products" means, (i) with respect to each Domestic Parent
Distributor, any life insurance or annuity product that a Purchaser Insurer is
authorized to offer but was not included among the types of insurance or annuity
products distributed by such Domestic Parent Distributor on the date of this
Agreement and (ii) any products offered by a Purchaser Insurer pursuant to
arrangements contemplated by Section 3.6(b). For avoidance of doubt, (i) the
addition of new features to Products shall not constitute New Products in whole
or in part, regardless of whether any insurance regulatory filing is required in
connection therewith and (ii) the following products shall not be deemed to be
New Products with respect to PFSI: long-term care insurance, prepaid legal
services and individual term life insurance the primary purpose of which is
protection rather than investment.
"Non-Exclusive Products" has the meaning set forth in Section 3.3.
"Parent" has the meaning set forth in the introductory paragraph hereof.
"Parent Indemnified Parties" has the meaning set forth in Section 6.1.
"Parent Standards and Practices" means the client service and relationship
standards, business practices, ethical standards, customer privacy and
protection policies and general service quality standards, reputational
considerations and industry standards, as determined from time to time by Parent
or any of its Affiliates, provided that such Parent Standards and Practices, to
the extent they relate to a Product or New Product and/or Domestic Parent
Distributor, shall be applied, and changes thereto shall be made, without
discriminating in any material manner against any Travelers Insurer or Purchaser
Insurer, as applicable, relative to all other similarly situated providers of
such Products or New Products distributed by such Domestic Parent Distributor.
"Person" shall have the meaning set forth in the Acquisition Agreement.
"PFSI" has the meaning set forth in Section 3.5(b).
"PLP Distributor" has the meaning set forth in Section 3.4(b).
3
"Private Label Product" means a life insurance or annuity product
customized for a Domestic Parent Distributor that (i) is branded under the name
of a Domestic Parent Distributor or (ii) is a variable life insurance or
variable annuity contract that offers as an option more than two investment
choices or mutual funds that are advised or managed by Parent or a Parent
Affiliate, including a Domestic Parent Distributor (in the capacity of either an
advisor or sub-advisor). For the avoidance of doubt, a Private Label Product
(whether existing on the date of this Agreement or thereafter) shall be deemed a
Product for all purposes under this Agreement.
"Products" means the life insurance and annuity products issued by the
Travelers Insurers and distributed through the Domestic Parent Distributors on
the date of this Agreement which are listed on Schedule 3.2(a), and any
Substitute Products distributed in replacement thereof pursuant to Section
3.5(d).
"Purchaser" shall have the meaning set forth in the introductory paragraph
hereof.
"Purchaser Indemnified Parties" has the meaning set forth in Section 6.2.
"Purchaser Insurer" means any insurance company Affiliate of Purchaser,
including the Travelers Insurers.
"Sales Force" means those point of sale representatives and their direct
supervisors utilized by Parent, Domestic Parent Distributors or one of their
respective Affiliates whose job responsibility includes the sale or promotion of
Products or New Products offered by a Travelers Insurer (or a Purchaser Insurer,
as applicable).
"Second Term" means the five-year period commencing upon the expiration of
the First Term and ending on the tenth anniversary of the date of this
Agreement.
"Substitute Product" has the meaning set forth in Section 3.5(d).
"Target Affiliated Distributor" means any Person Affiliated with Parent
that (i) was an Affiliate of a Target Business (as defined in the Acquisition
Agreement) immediately prior to the acquisition of such Target Business by
Parent or an Affiliate of Parent and (ii) is engaged in the business of
distributing financial services products.
"Term" has the meaning set forth in Section 5.1.
"Third Party Claim" has the meaning set forth in Section 6.4.
"Third Party Insurer" means an insurance company that is not Affiliated
with Purchaser.
"Travelers Insurers" means the Domestic Insurance Companies (as defined in
the Acquisition Agreement) to be acquired by Purchaser pursuant to the
Acquisition Agreement and their successors and assigns, and with respect to a
Substitute Product that is offered pursuant to Section 3.5(d), a Purchaser
Insurer and its successors and assigns.
Section 1.2 Purposes of Agreement. Notwithstanding anything in this
Agreement to the contrary, Purchaser and Parent agree that this Agreement is
intended to set forth certain
4
principal business terms upon which they will enter into Domestic Selling
Agreements during the Term and that nothing herein creates a Domestic Selling
Agreement.
Section 1.3. Construction. For the purposes of this Agreement: (i) words
(including capitalized terms defined herein) in the singular shall be held to
include the plural and vice versa, and words (including capitalized terms
defined herein) of one gender shall be held to include the other gender as the
context requires; (ii) the terms "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules) and not to any particular
provision of this Agreement, and Article, Section, paragraph and Schedule
references are to the Articles, Sections, paragraphs and Schedules to this
Agreement, unless otherwise specified; (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including, without
limitation"; (iv) all references to any period of days shall be deemed to be to
the relevant number of calendar days unless otherwise specified; and (v)
"commercially reasonable efforts" shall not require a waiver by any party of any
material rights or any action or omission that would be a breach of this
Agreement.
Section 1.4 Headings. The Article and Section headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of Parent. Parent hereby
represents and warrants to Purchaser as set forth below.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation.
(b) Parent has all necessary corporate power and authority to make,
execute and deliver this Agreement and to perform all of the obligations to be
performed by it hereunder. The making, execution, delivery and performance by
Parent of this Agreement and the consummation by Parent of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly and validly
executed and delivered by Parent, and assuming the due authorization, execution
and delivery by Purchaser, this Agreement will constitute the valid, legal and
binding obligation of Parent, enforceable against it in accordance with its
terms, except as may be subject to applicable bankruptcy, insolvency, moratorium
or other similar Laws, now or hereafter in effect, relating to or affecting the
rights of creditors generally and by legal and equitable limitations on the
enforceability of specific remedies.
(c) Neither the execution and delivery of this Agreement by Parent,
nor the consummation of the transactions contemplated hereby, will (i) violate
or conflict with any provision of the articles of incorporation or bylaws or
other organizational documents of Parent or any Domestic Parent Distributor,
(ii) violate any of the terms, conditions, or provisions of any Law or license
to which Parent or any Domestic Parent Distributor is subject or by which it or
5
any Domestic Parent Distributor or any of its or their assets are bound, or
(iii) violate, breach, or constitute a default under any contract to which
Parent or any Domestic Parent Distributor is a party or by which it or any
Domestic Parent Distributor or any of its or their assets is bound. The
distribution of any Products offered by a Travelers Insurer and distributed by a
Domestic Parent Distributor on the date hereof does not violate, breach, or
constitute a default under any contract to which Parent or any Domestic Parent
Distributor is a party or by which any of them or any of their respective assets
is bound.
(d) None of the arrangements by which any Domestic Parent
Distributor distributes any Products on behalf of a Travelers Insurer in force
on the date of the Acquisition Agreement or the date of this Agreement violated
or violates any of the Parent Standards and Practices in effect on such date.
Section 2.2. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Parent as set forth below.
(a) Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation.
(b) Purchaser has all necessary corporate power and authority to
make, execute and deliver this Agreement and to perform all of the obligations
to be performed by it hereunder. The making, execution, delivery and performance
by Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has been
duly and validly executed and delivered by Purchaser, and assuming the due
authorization, execution and delivery by Parent, this Agreement will constitute
the valid, legal and binding obligation of Purchaser, enforceable against it in
accordance with its terms, except as may be subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws, now or hereafter in effect,
relating to or affecting the rights of creditors generally and by legal and
equitable limitations on the enforceability of specific remedies.
(c) Neither the execution and delivery of this Agreement by
Purchaser, nor the consummation of the transactions contemplated hereby, will
(i) violate or conflict with any provision of the articles of incorporation or
bylaws or other organizational documents of Purchaser or any Purchaser Insurer
(other than the Travelers Insurers), (ii) violate any of the terms, conditions,
or provisions of any Law or license to which Purchaser is subject or by which it
or any of its assets is bound, or (iii) violate, breach, or constitute a default
under any contract to which Purchaser is a party or by which it or any of its
assets is bound.
ARTICLE III.
DOMESTIC DISTRIBUTION
Section 3.1. Selling Agreements. In order to effectuate the distribution
arrangements contemplated hereby among the Travelers Insurers (and Purchaser
Insurers, as applicable) and the Domestic Parent Distributors for distribution
of the Products and New Products offered by the Travelers Insurers (and
Purchaser Insurers, as applicable) within the United States, Parent shall cause
the Domestic Parent Distributors, and Purchaser shall cause the Travelers
Insurers
6
(and Purchaser Insurers, as applicable), to negotiate in good faith and enter
into written selling agreements that are consistent with industry practice and
with the principles set forth in this Agreement and that contain terms and
conditions taken as a whole that are no less favorable to the Travelers Insurers
(and Purchaser Insurers, as applicable) and the Domestic Parent Distributors
than the terms and conditions of the selling and selling-related arrangements
existing on the date of this Agreement between the Travelers Insurers and the
Domestic Parent Distributors (the "Domestic Selling Agreements"). For each
Domestic Parent Distributor that distributes a Product for a Travelers Insurer
on the date of this Agreement, a Domestic Selling Agreement for the distribution
of such Product, to take effect on the date of this Agreement, shall be executed
and delivered by such Domestic Parent Distributor and the applicable Travelers
Insurer on or prior to the date of this Agreement. The Domestic Selling
Agreements will contain provisions concerning the periodic readjustment of
compensation as agreed by the parties thereto.
Section 3.2. Exclusive Distribution Arrangements.
(a) Parent represents and warrants that Schedule 3.2(a) sets forth a
complete and accurate list of all life insurance and annuity products issued by
a Travelers Insurer and distributed by a Domestic Parent Distributor in the
United States on behalf of a Travelers Insurer on the date of this Agreement,
the identity of each Domestic Parent Distributor that distributes each such
product and whether or not a Travelers Insurer is the exclusive provider of such
product to such Domestic Parent Distributor.
(b) During the First Term, each Travelers Insurer shall have the
right to be the exclusive provider in the United States of any Exclusive Product
to any Domestic Exclusive Parent Distributor. During the Second Term, each
Travelers Insurer shall have the right to be a provider, on a non-exclusive,
Level Playing Field basis, to each Domestic Exclusive Parent Distributor of each
Exclusive Product distributed by such Domestic Exclusive Parent Distributor on
the date of this Agreement. During the First Term, Parent shall not make any
change in the Parent Standards and Practices (except changes that may be
reasonably appropriate to comply with applicable Law) that would conflict with
the rights granted to the Travelers Insurers under the first sentence of this
Section 3.2(b).
(c) Notwithstanding anything herein to the contrary (including,
without limitation, Section 3.5(d)), prior to the earlier of (i) the end of the
60-day period beginning on the date of this Agreement and (ii) December 31,
2005, (x) Purchaser shall cause the Exclusive Products to be marketed under the
brand name and with such trademarks or trade names (including the identity of
the underwriter of such Exclusive Product) as used on the date of this Agreement
and (y) no Purchaser Insurer shall be permitted to provide a Substitute Product
in place of an Exclusive Product.
Section 3.3. Non-Exclusive Distribution Arrangements. If any Travelers
Insurer is a non-exclusive provider of a Product to any Domestic Parent
Distributor on the date of this Agreement (the "Non-Exclusive Products"), such
Travelers Insurer shall have the right to be a provider of such Product, on a
non-exclusive, Level Playing Field basis, to such Domestic Parent Distributor
during the Term.
7
Section 3.4. Private Label Products.
(a) If any Travelers Insurer is the provider of a Private Label
Product to a Domestic Parent Distributor on the date of this Agreement, such
Travelers Insurer shall have the right to be the provider of such Private Label
Product during the Term.
(b) Subject to the last sentence of this Section 3.4(b), if, prior
to the seventh anniversary of the date of this Agreement, any Domestic Parent
Distributor desires to distribute, as a Private Label Product, a life insurance
product (other than term life insurance) or annuity product that it does not
distribute as a Private Label Product on the date of this Agreement, Parent
shall cause such Domestic Parent Distributor (a "PLP Distributor") to notify
Purchaser no later than the time of notification of any Third Party Insurer. If
the PLP Distributor does not select a Purchaser Insurer as the provider of the
new Private Label Product and the PLP Distributor desires to continue to seek a
Third Party Insurer, as the provider, Parent shall cause the PLP Distributor to
include the Purchaser Insurers in the process for selection of such provider
(whether by formal request for proposals or otherwise) to provide such Private
Label Product prior to selecting a Third Party Insurer. Parent shall cause the
PLP Distributor to entertain in good faith, and on terms no less favorable than
those extended to any other proposed provider, proposals from the Purchaser
Insurers to provide such new Private Label Product. Such PLP Distributor (i)
shall have exclusive discretion in determining the process for selection of, and
the criteria for evaluation of, potential providers of any such Private Label
Product and (ii) shall make a good faith determination of the relative
suitability of proposals from potential providers for satisfying the
requirements of such Private Label Product (it being understood that if such PLP
Distributor determines that a proposal from a Purchaser Insurer satisfies such
requirements, considered as a whole, at least as well as the most favorable
proposal or proposals of the other potential providers, such Purchaser Insurer's
proposal shall be selected); provided, however, that such PLP Distributor shall
not be required to select any such proposal. The rights granted to the Purchaser
Insurers under this Section 3.4(b) shall not apply with respect to any new
Private Label Product if an insurance company not Affiliated with Parent or
Purchaser contacts or approaches the Domestic Parent Distributor, without
solicitation by such Domestic Parent Distributor relating to such Private Label
Product, about developing or the possibility of developing such Private Label
Product. Notwithstanding the foregoing, but subject to Section 3.5, nothing in
this Section 3.4 shall be construed to limit such Domestic Parent Distributor's
ability to offer Products substantially the same as any Private Label Product on
a non-private label basis.
Section 3.5. New Products; Additional Products; Substitute Products.
(a) At any time during the Term, (i) Purchaser may propose to a
Domestic Parent Distributor that such Domestic Parent Distributor or one or more
of its Affiliates distribute a New Product offered by a Purchaser Insurer and
(ii) a Domestic Parent Distributor may propose to Purchaser that such Domestic
Parent Distributor or one or more of its Affiliates distribute a New Product
offered by a Purchaser Insurer.
(b) If, prior to the seventh anniversary of the date of this
Agreement, PFS Financial Services Inc. ("PFSI") desires to offer a New Product
on an exclusive basis, Parent shall cause PFSI to notify Purchaser no later than
the time of any notification of any Third Party
8
Insurer. If PFSI does not select a Purchaser Insurer as the provider of such New
Product and PFSI desires to continue to seek a Third Party Insurer, as the
provider, Parent shall cause PFSI to include the Purchaser Insurers in the
process for selection of such provider (whether by formal request for proposals
or otherwise). Parent shall cause PFSI to entertain in good faith, and on terms
no less favorable than those extended to any other proposed provider, proposals
from the Purchaser Insurers to provide such New Product. PFSI (i) shall have
exclusive discretion in determining the process for selection of, and the
criteria for evaluation of, potential providers of any such New Product and (ii)
shall make a good faith determination of the relative suitability of proposals
from potential providers for satisfying the requirements of such New Product (it
being understood that if PFSI determines that a proposal from a Purchaser
Insurer satisfies such requirements, considered as a whole, at least as well as
the most favorable proposal or proposals of the other potential providers, such
Purchaser Insurer's proposal shall be selected); provided, however, that PFSI
shall not be required to select any such proposal. The rights granted to the
Purchaser Insurers under this Section 3.5(b) shall not apply with respect to a
New Product if an insurance company not Affiliated with Purchaser or Parent
contacts or approaches PFSI, without solicitation by PFSI relating to such New
Product, about providing or the possibility of providing such New Product to be
provided on an exclusive basis.
(c) If, during the Term, any Domestic Parent Distributor proposes to
issue a formal written request for proposals to any Third Party Insurer that
involves any life insurance or annuity product that a Purchaser Insurer is
authorized to offer, Parent shall, and shall cause such Domestic Parent
Distributor to, give notice thereof to Purchaser and entertain proposals from
the Purchaser Insurers to be a provider to such Domestic Parent Distributor of
such product. Parent shall cause such Domestic Parent Distributors to consider
such proposals in good faith and on terms no less favorable than the terms
extended to any other proposed provider.
(d) At any time during the Term, Purchaser may propose in writing
that any Purchaser Insurer offer, in place of any Product then offered by a
Travelers Insurer through a Domestic Parent Distributor (an "Existing Product"),
a substitute product and if (i) such Purchaser Insurer has been assigned a
financial strength rating of at least Aa3 by ▇▇▇▇▇'▇ Investors Service, Inc. (or
any successor thereto) or at least AA- by Standard and Poor's (or any successor
thereto) and (ii) such substitute product is substantially the same as the
Existing Product in the terms, total compensation, consumer pricing, wholesaler
coverage, training and support, features and service standards and metrics (a
"Substitute Product"), then Parent shall cause such Domestic Parent Distributor
to distribute such Substitute Product in place of the Existing Product. The
Purchaser Insurer that offers such Substitute Product shall have the same rights
under this Agreement with respect to the Substitute Product as the Travelers
Insurer that offered the Existing Product possessed with respect to the Existing
Product. By way of illustration and without limiting the generality of the
foregoing, if the Travelers Insurer was entitled to provide the Existing Product
on a non-exclusive, Level Playing Field basis through the Domestic Parent
Distributor, the Purchaser Insurer shall be entitled to provide the Substitute
Product on a non-exclusive, Level Playing Field basis through such Domestic
Parent Distributor in place of such Existing Product. Parent shall cause the
applicable Domestic Parent Distributor and Purchaser shall cause the Purchaser
Insurer to enter into a Domestic Selling Agreement with respect to the
Substitute Product that is substantially the same as the Domestic Selling
Agreement with respect to the Existing Product. The Purchaser Insurer providing
the Substitute Product shall bear reasonable costs incurred by the applicable
Domestic Parent Distributor in
9
connection with or arising out of the replacement of the Existing Product with
the Substitute Product.
Section 3.6. Acquisitions.
(a) Notwithstanding anything in this Agreement to the contrary, but
subject to Section 3.6(b), neither Parent nor any Domestic Parent Distributor
shall be (i) deemed to be in violation of this Agreement or any Domestic Selling
Agreement or (ii) obligated hereunder or under any Domestic Selling Agreement to
take any action (including to make any adjustment to commissions, economic
inducements or other benefits for the Sales Force), if such violation would
arise, or such action would be required to be taken, solely as a result of
Parent or one of its Affiliates acquiring assets or a business of any Person
engaged in the distribution of financial services products following the date of
this Agreement; provided, however, that nothing in this Section 3.6 (a) shall
limit or restrict any obligations that Parent or any Domestic Parent Distributor
has to distribute on an exclusive basis a Product or a New Product offered by a
Purchaser Insurer if such Purchaser Insurer has the right under this Agreement
or any Domestic Selling Agreement to be the exclusive provider of such Product
or New Product to such Domestic Parent Distributor.
(b) If, at any time prior to the seventh anniversary of the date of
this Agreement, (i) Parent acquires a Target Business (as defined in the
Acquisition Agreement), of which the net revenues and net earnings (in each
case, calculated in a manner consistent with Section 6.17(a)(x) of the
Acquisition Agreement, and, for the avoidance of doubt, excluding realized
gains) derived from a Competitive Business (as defined in the Acquisition
Agreement) are more than a de minimis amount, and (ii) Parent or its Affiliates
are permitted to acquire such Target Business pursuant to Sections 6.17(a)(x) or
6.17(a)(xi) of the Acquisition Agreement, then Purchaser through the Purchaser
Insurers shall have the right during the remainder of such seven-year period to
be a provider to each Target Affiliated Distributor, if any, on a non-exclusive
Level Playing Field basis, of any life insurance or annuity product that is
distributed by such Target Affiliated Distributor on a non-exclusive basis
either immediately before or following such acquisition; provided, that such
right shall be subject to any applicable contractual or other restrictions by
which such Target Affiliated Distributor is bound.
Section 3.7. No Obligation. For the avoidance of doubt, nothing in this
Agreement or any Domestic Selling Agreement shall (i) impose upon any Purchaser
Insurer any obligation to distribute any Products or New Products offered by a
Purchaser Insurer through the Domestic Parent Distributors, (ii) impose upon
Parent or its Affiliates any obligation to provide to its or their employees any
Product or New Product issued by Purchaser or any Travelers Insurers, (iii)
restrict the ability of Purchaser or Parent or any of their Affiliates from
acquiring or disposing of any assets of, or reorganizing or consolidating, any
business, subject to the proviso in Section 3.6(a) or (iv) restrict the ability
of any Purchaser Insurer to distribute insurance or annuity products through
Persons other than Domestic Parent Distributors. Subject to Section 3.6(b),
nothing in this Agreement shall impose upon any Affiliate of Parent that becomes
an Affiliate of Parent after the date of this Agreement any obligation to
distribute any Product or New Product on behalf of a Purchaser Insurer. For the
avoidance of doubt, in the event any Domestic Parent Distributor ceases to be an
Affiliate of Parent, Parent's obligations under this Agreement with respect to
such Domestic Parent Distributor shall no longer be applicable.
10
ARTICLE IV.
ACCESS AND BRANDING
Section 4.1. Access.
(a) To the extent that as of the date of this Agreement, a Domestic
Exclusive Parent Distributor permits wholesalers or Product representatives of
the Travelers Insurers to have access to such Domestic Exclusive Parent
Distributor, including its Sales Force, sales offices or sales, education or
training meetings that involve the promotion of Products made available by a
Travelers Insurer for distribution by such Domestic Exclusive Parent
Distributor, Parent shall, during the First Term, cause such Domestic Exclusive
Parent Distributor to continue to permit such access on the same terms and
conditions as on the date hereof in a manner consistent with applicable Law and
the Parent Standards and Practices. The applicable Purchaser Insurer providing
the Exclusive Products shall continue during the First Term to maintain
wholesaler coverage, training, and sales support to the Domestic Exclusive
Parent Distributor on terms and conditions that are no less favorable than those
provided by the applicable Travelers Insurer to such Domestic Exclusive Parent
Distributor on the date of this Agreement.
(b) To the extent that as of the date of this Agreement, a Domestic
Parent Distributor (other than a Domestic Exclusive Parent Distributor) permits
wholesalers, Product representatives or bank marketing representatives of the
Travelers Insurers to have access to such Domestic Parent Distributor, including
its Sales Force, bank branches, sales offices or sales, education or training
meetings that involve the promotion of Products made available by a Travelers
Insurer for distribution by such Domestic Parent Distributor, in a manner
consistent with applicable Law and with the Parent Standards and Practices,
Parent shall, until the third anniversary of the date hereof, cause such
Domestic Parent Distributor to provide such access on terms and conditions that
are no less favorable than those generally applicable to any Third Party
Insurer.
Section 4.2. Branding; Use of Names; Confidential Information; Approval of
Certain Materials.
(a) Unless otherwise provided in a Domestic Selling Agreement and,
in all cases in accordance with the terms and subject to the conditions of the
Licensing Agreement, during the Term, Purchaser shall cause all Purchaser
Insurers providing, and Parent shall cause all Domestic Parent Distributors
distributing, Products (including Private Label Products in respect of which any
Purchaser Insurer is the provider on the date of this Agreement) to cause such
Products distributed through a Domestic Parent Distributor to be offered and
branded utilizing the Marks that relate to each such Product as of the date of
this Agreement; provided that Purchaser and the Purchaser Insurers shall have
been granted adequate rights to use the Marks under the Licensing Agreement; and
provided, further, that the parties hereto agree that any trademark or trade
name on such product shall be appropriately altered to reflect any change to the
trademark or trade name of the applicable Domestic Parent Distributor and,
subject to Section 3.2(c), in the case of a Substitute Product, to reflect any
change that is required by Law as a result of the change in the issuer of such
Substitute Product. To the extent that a Private Label Product is distributed by
a PLP Distributor on behalf of a Purchaser Insurer after the date
11
of this Agreement in accordance with Section 3.4, then Parent shall cause such
PLP Distributor and Purchaser shall cause all Purchaser Insurers providing such
Private Label Product to cause such Private Label Product to be offered and
branded using such trademarks or trade names as may be applicable to such
Private Label Product by such PLP Distributor, provided that Purchaser and the
applicable Purchaser Insurers shall own or shall have been granted adequate
rights to use such trademarks or trade names.
(b) During the Term of this Agreement, the Travelers Insurers and,
as applicable, the Purchaser Insurers will have access to confidential
information and other proprietary information ("Confidential Information") of
Parent and its Affiliates. Confidential Information includes, but is not limited
to, the names, addresses, telephone numbers and social security numbers of
applicants for, purchasers of and other customers of Products and New Products
as well as other identity and private information in respect of Parent's or its
Affiliates' customers, employees, representatives, and agents. Confidential
Information shall not include any customer information (i) that was previously
known by a Purchaser Insurer from a source other than any Domestic Parent
Distributor without obligations of confidence; or (ii) that was or is rightfully
received by a Purchaser Insurer from a third party without obligations of
confidence to any Domestic Parent Distributor or from publicly available sources
without obligations of confidence to any Domestic Parent Distributor; or (iii)
that was or is developed by means independent of information obtained from any
Domestic Parent Distributor. As a condition to such access, neither Purchaser
nor any Purchaser Insurer shall use, copy or disclose such Confidential
Information in any manner (including without limitation, to sell or cross-sell
their products). Confidential Information may be used to service Products and
New Products, including, as appropriate, to accept additional contributions and
premium for and to modify, add, or exchange coverage to any Product or New
Product purchased by a policy owner who purchased from a Domestic Parent
Distributor. Purchaser and its Affiliates shall take all appropriate action to
ensure the protection, confidentiality and security of such Confidential
Information. The Purchaser and its Affiliates acknowledge and agree that this
Confidential Information is the property of the Domestic Parent Distributors.
The parties also understand that the Purchaser Insurers may respond to inquiries
from holders of Products or New Products concerning other Purchaser Insurer
products and services, provided there was no solicitation of such inquiry using
Confidential Information. The parties also agree that this Section 4.2(b) shall
not apply to individuals with whom Purchaser or the Purchaser Insurers have a
pre-existing relationship other than through a Domestic Parent Distributor.
(c) (i) Any marketing, training or other materials to be made
available by any Purchaser Insurer to any Domestic Parent Distributor's Sales
Force or customers in connection with Products and New Products (other than
ordinary course communications to policyholders and contract holders) shall be
made available only with the prior consent (which shall not be unreasonably
withheld or delayed) of the applicable Domestic Parent Distributor; provided
that all such materials that are used by the Travelers Insurers in connection
with the distribution of Products through the Domestic Parent Distributors on
the date of this Agreement shall not require any such consent. In the event that
the applicable Purchaser Insurer or the applicable Domestic Parent Distributor
determines to discontinue the use of any such materials, the parties shall
cooperate with the applicable Purchaser Insurer to ensure that such use is
discontinued by such Domestic Parent Distributor's Sales Force.
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(ii) Any marketing, training or other materials prepared by a
Domestic Parent Distributor and to be made available by such Domestic
Parent Distributor to its Sales Force or customers that describes any
Purchaser Insurer or any of its Affiliates or any insurance or annuity
product offered by any of them may be made available only with the prior
consent (which shall not be unreasonably withheld or delayed) of the
applicable Purchaser Insurer; provided that all such materials that are
used by the Domestic Parent Distributors in connection with the
distribution of Products on the date of this Agreement shall not require
any such consent. In the event that the applicable Purchaser Insurer or
the applicable Domestic Parent Distributor determines to discontinue the
use of any such materials, the parties shall cooperate with the applicable
Domestic Parent Distributor to ensure that such use is discontinued by its
Sales Force.
ARTICLE V.
TERM OF THE AGREEMENT; CERTAIN CONDITIONS
Section 5.1. Term. The term of this Agreement (the "Term") will commence
on the date of this Agreement and shall continue until the tenth anniversary of
the date of this Agreement; provided, however, the expiration of this Agreement
shall not reduce or curtail the term of any Domestic Selling Agreement that
extends beyond the end of the Term.
Section 5.2. Survival. Upon expiration of this Agreement, the provisions
of this Section 5.2 and Article VI and Article VII shall survive without
modification.
Section 5.3. Certain Conditions.
(a) Subject to Section 5.3(b), but notwithstanding anything else to
the contrary in this Agreement or in any Domestic Selling Agreement, no Domestic
Parent Distributor shall be required to enter into (and may refuse to enter
into) a Domestic Selling Agreement in respect of, or have any obligation to
offer (and may immediately cease to offer), any Product or New Product offered
by a Purchaser Insurer, if:
(i) Parent reasonably determines that such Product or New
Product offered by a Purchaser Insurer is not Competitive; provided,
however, that this clause (i) shall not apply to any Exclusive Product
during the First Term;
(ii) any change is made or any feature is added to such
Product or New Product (or a fund or investment option therein) without
Parent's or the applicable Domestic Parent Distributor's prior written
approval, which approval shall not be unreasonably withheld or delayed;
(iii) such Product or New Product or the offering thereof
(including on an exclusive basis) conflicts with:
(x) applicable Law, including any regulatory compliance
procedures or restrictions in connection therewith;
(y) any material provision of any existing agreement by
which Parent or its Affiliates or any of their respective assets or
properties are bound;
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provided that this clause (y) shall not apply to any Product offered by a
Travelers Insurer and distributed by a Domestic Parent Distributor
pursuant to an arrangement in effect on the date hereof or any Substitute
Products distributed in replacement thereof pursuant to Section 3.5(d),
unless the violation is caused by or relates to (1) any difference between
the Substitute Product and the Existing Product it replaced, or (2) solely
the fact of the replacement of the Existing Product with the Substitute
Product; or
(z) the Parent Standards and Practices, provided that in the
case of the application of this clause (z) during the First Term to any
Exclusive Product following a change in the Parent Standards and
Practices, any such change in the Parent Standards and Practices shall be
in accordance with the third sentence of Section 3.2(b);
(iv) such Product is an Exclusive Product and (x) any Purchaser
Insurer provides to any Comparable Distributor a product that is substantially
the same as such Exclusive Product and (y) the terms, total compensation,
consumer pricing, wholesaler coverage, training and support, features and
service standards and metrics of such product, taken as a whole, are more
favorable than the terms, total compensation, consumer pricing, wholesaler
coverage, training and support, features and service standards and metrics of
such Exclusive Product, taken as a whole; provided, however, that this Section
5.3(a)(iv) shall not apply to any distribution arrangements of any Purchaser
Insurer in effect on the date of this Agreement;
(v) with respect to any Exclusive Product, the financial strength
rating assigned to the provider of such Exclusive Product falls below both (x)
A1 by ▇▇▇▇▇'▇ Investors Service, Inc. (or any successor thereto) and (y) A+ by
Standard & Poor's (or any successor thereto); or
(vi) with respect to any Exclusive Product, a federal, state or
local domestic, foreign or supranational governmental, regulatory or
self-regulatory authority, agency, court, tribunal, commission or other
governmental, regulatory or self-regulatory entity, with jurisdiction over the
Domestic Exclusive Parent Distributor requests or mandates that the Domestic
Exclusive Parent Distributor cease offering or no longer offer the Exclusive
Product on an exclusive basis; provided, however, in the case of such a request
(but not a mandate), the Domestic Exclusive Parent Distributor shall provide
prompt notice of any such request to the Purchaser Insurer providing the
Exclusive Product, and shall consult and cooperate with such Purchaser Insurer
in its efforts to obtain from such regulatory agency an agreement that permits
the Domestic Exclusive Parent Distributor to continue to distribute such
Exclusive Product on an exclusive basis. If such an agreement is reached, the
Domestic Exclusive Parent Distributor shall continue to distribute the Exclusive
Product on an exclusive basis in accordance with the terms of Section 3.2. If
such an agreement cannot be reached, the Domestic Exclusive Parent Distributor
shall distribute the Exclusive Product on a non-exclusive, Level Playing Field
basis, for the remainder of the Term in accordance with the terms of this
Agreement.
14
(b) Prior to any Domestic Parent Distributor's exercising its right
under Section 5.3(a) not to enter into a Domestic Selling Agreement with respect
to any Product or New Product or to cease offering any Product or New Product,
such Domestic Parent Distributor shall provide written notice to Purchaser,
containing a reasonably detailed statement of the grounds for such exercise, and
shall afford Purchaser a period of 30 days in which to cure the deficiency
unless the deficiency is not capable of being cured. Such Domestic Parent
Distributor shall consult and cooperate with Purchaser as reasonably requested
during such period in identifying possible cures. If Purchaser is able to
propose a cure that is reasonably satisfactory to such Domestic Parent
Distributor before the expiration of such period, such Domestic Parent
Distributor shall not be entitled to exercise its right to refuse to enter into
a Domestic Selling Agreement or to cease offering the applicable Product or New
Product, provided that if any cure involves a change in such Product's or New
Product's terms or features that requires filing with or approval (or
non-disapproval) by any regulatory authority, such Domestic Parent Distributor
shall, prior to exercising such right, afford Purchaser such further period of
time as may be reasonably necessary to accomplish such filing or obtain such
approval or non-disapproval. Notwithstanding anything to the contrary in this
Section 5.3(b), no Domestic Parent Distributor shall be required to continue to
distribute any Product or New Product pending any cure period, if the offering
of such Product or New Product would reasonably be expected to (i) violate
applicable Law, including any regulatory compliance procedures or restriction in
connection therewith, (ii) conflict with the Parent Standards and Practices
insofar as they relate to reputational considerations or industry standards or
(iii) in the case of an Exclusive Product under Section 5.3(a)(vi) above,
conflict with a mandate from a federal, state or local domestic, foreign or
supranational governmental, regulatory or self-regulatory authority, agency,
court, tribunal, commission or other governmental, regulatory or self-regulatory
entity, with jurisdiction over the Domestic Exclusive Parent Distributor that
such Domestic Exclusive Parent Distributor cease offering or no longer offer the
Exclusive Product on an exclusive basis; provided, in the case of this clause
(iii), such Domestic Exclusive Parent Distributor shall distribute the Exclusive
Product on a non-exclusive, Level Playing Field basis, for the remainder of the
Term in accordance with the terms of this Agreement.
ARTICLE VI.
INDEMNIFICATION
Section 6.1. Indemnification of Parent. Purchaser will defend and hold
harmless Parent and its Affiliates and their respective officers, directors,
employees and agents (the "Parent Indemnified Parties") from and against any
losses, liabilities, damages (including consequential damages), actions, claims,
demands, regulatory investigations, settlements, judgments and other expenses
including, but not limited to, reasonable attorneys fees and expenses ("Losses")
which are asserted against, incurred or suffered by any Parent Indemnified Party
and which arise from or are related to Purchaser's breach of any representation
or warranty (except to the extent indemnification therefor is available under
the Acquisition Agreement) or any covenant, condition or duty contained in this
Agreement.
Section 6.2. Indemnification of Purchaser. Parent will defend and hold
harmless Purchaser and its Affiliates and their respective officers, directors,
employees and agents (the "Purchaser Indemnified Parties") from and against any
Losses which are asserted against, incurred or suffered by any Purchaser
Indemnified Party and which arise from or are related to
15
Parent's breach of any representation or warranty (except to the extent
indemnification therefor is available under the Acquisition Agreement) or any
covenant, condition or duty contained in this Agreement.
Section 6.3. Indemnity Provisions in Domestic Selling Agreements. Each
Domestic Selling Agreement shall provide indemnification for Losses asserted
against each of the parties thereto in respect of a failure of the other party
to comply with applicable Law and a breach by such other party of any
representation, warranty, covenant, condition or duty contained in such Domestic
Selling Agreement.
Section 6.4. Indemnification Procedures. Upon receipt by a Parent
Indemnified Party or a Purchaser Indemnified Party (each, an "Indemnified
Party"), as the case may be, of notice of any action, suit, proceedings, claim,
demand or assessment made or brought by an unaffiliated third party (a "Third
Party Claim") with respect to a matter for which such Indemnified Party is
indemnified under this Article VI which has or is expected to give rise to a
claim for Losses, the Indemnified Party shall promptly, in the case of a
Purchaser Indemnified Party, notify Parent and in the case of a Parent
Indemnified Party, notify Purchaser (Purchaser or Parent, as the case may be,
the "Indemnifying Party"), in writing, indicating the nature of such Third Party
Claim and the basis therefor; provided, however, that any delay or failure by
the Indemnified Party to give notice to the Indemnifying Party shall relieve the
Indemnifying Party of its obligations hereunder only to the extent, if at all,
that it is prejudiced by reason of such delay or failure. Such written notice
shall (i) describe such Third Party Claim in reasonable detail as is practicable
including the sections of this Agreement, which form the basis for such claim;
provided that the failure to identify a particular section in such notice shall
not preclude the Indemnified Party from subsequently identifying such section as
a basis for such claim, (ii) attach copies of all material written evidence
thereof and (iii) set forth the estimated amount of the Losses that have been or
may be sustained by an Indemnified Party. The Indemnifying Party shall have 30
days after receipt of notice to elect, at its option, to assume and control the
defense of, at its own expense and by its own counsel, any such Third Party
Claim and shall be entitled to assert any and all defenses available to the
Indemnified Party to the fullest extent permitted by applicable Law. If the
Indemnifying Party shall undertake to compromise or defend any such Third Party
Claim, it shall promptly notify the Indemnified Party of its intention to do so,
and the Indemnified Party agrees to cooperate fully with the Indemnifying Party
and its counsel in the compromise of, or defense against, any such Third Party
Claim; provided, however, that the Indemnifying Party shall not settle,
compromise or discharge, or admit any liability with respect to, any such Third
Party Claim without the prior written consent of the Indemnified Party (which
consent will not be unreasonably withheld or delayed), unless the relief
consists solely of money Losses to be paid by the Indemnifying Party and
includes a provision whereby the plaintiff or claimant in the matter releases
the Purchaser Indemnified Parties or the Parent Indemnified Parties, as
applicable, from all liability with respect thereto. Notwithstanding an election
to assume the defense of such action or proceeding, the Indemnified Party shall
have the right to employ separate counsel and to participate in the defense of
such action or proceeding, and the Indemnifying Party shall bear the reasonable
fees, costs and expenses of such separate counsel if the (A) Indemnified Party
shall have determined in good faith that an actual or potential conflict of
interest makes representation by the same counsel or the counsel selected by the
Indemnifying Party inappropriate or (B) Indemnifying Party shall have authorized
the Indemnified Party to employ separate counsel at the Indemnifying Party's
expense. In any event, the Indemnified
16
Party and Indemnifying Party and their counsel shall cooperate in the defense of
any Third Party Claim subject to this Article VI and keep such Persons informed
of all developments relating to any such Third Party Claims, and provide copies
of all relevant correspondence and documentation relating thereto. All costs and
expenses incurred in connection with the Indemnified Party's cooperation shall
be borne by the Indemnifying Party. In any event, the Indemnified Party shall
have the right at its own expense to participate in the defense of such asserted
liability. If the Indemnifying Party receiving such notice of a Third Party
Claim does not elect to defend such Third Party Claim or does not defend such
Third Party Claim in good faith, the Indemnified Party shall have the right, in
addition to any other right or remedy it may have hereunder, at the Indemnifying
Party's expense, to defend such Third Party Claim; provided, however, that the
Indemnified Party shall not settle, compromise or discharge, or admit any
liability with respect to, any such Third Party Claim without the written
consent of the Indemnifying Party (which consent will not be unreasonably
withheld or delayed).
Section 6.5. General.
(a) The provisions of this Article VI will survive the expiration of
this Agreement.
(b) The rights and remedies provided herein shall be cumulative and
in addition to all other rights and remedies available to the parties at law or
equity, and the exercise or beginning of the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
rights or remedies by such party. Notwithstanding the preceding sentence,
nothing in this Agreement shall restrict or prevent any party from seeking
indemnification under any applicable provision of the Acquisition Agreement, or
any of the other Related Agreements (as defined in the Acquisition Agreement),
provided that no party shall obtain duplicative recoveries.
ARTICLE VII.
MISCELLANEOUS
Section 7.1. Equitable Remedies. The parties hereto acknowledge that money
damages may not be an adequate remedy for violations of this Agreement and that
any party, in addition to any other rights and remedies which the parties may
have hereunder or at law or in equity, may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunction or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable Law, each party waives any objection to the imposition of such
relief.
Section 7.2. Severability. If any provision of this Agreement or the
application of any such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable Law,
the parties waive any provision of Law that renders any provision of this
Agreement invalid, illegal or unenforceable in any respect. The parties shall,
to the extent lawful and practicable, use their commercially reasonable efforts
to enter into arrangements to reinstate the
17
intended benefits, net of the intended burdens, of any such provision held
invalid, illegal or unenforceable.
Section 7.3. Further Assurance and Assistance. Parent and Purchaser agree
that each will, and will cause their respective Affiliates to, execute and
deliver any and all documents, and take such further acts, in addition to those
expressly provided for herein, that may be necessary or appropriate to
effectuate the provisions of this Agreement.
Section 7.4. Notices. All notices, demands and other communications
required or permitted to be given to any party under this Agreement shall be in
writing and any such notice, demand or other communication shall be deemed to
have been duly given when delivered by hand, courier or overnight delivery
service or, if mailed, two (2) Business Days (as defined in the Acquisition
Agreement) after deposit in the mail and sent certified or registered mail,
return receipt requested and with first-class postage prepaid, or in the case of
facsimile notice, when sent and transmission is confirmed, and, regardless of
method, addressed to the party at its address or facsimile number set forth
below (or at such other address or facsimile number as the party shall furnish
the other parties in accordance with this Section 7.4):
(a) If to Parent:
Citigroup Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Deputy General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
e-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Purchaser:
MetLife, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President and General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
18
With a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Section 7.5. Successors and Assigns. Subject to the terms of this Section
7.5, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that the
Parent Indemnified Parties and the Purchaser Indemnified Parties shall be
intended third-party beneficiaries of Article VI. No party hereto may assign its
rights or obligations under this Agreement without the prior written consent of
the other party (which consent may not be unreasonably withheld) and any
purported assignment without such consent shall be void.
Section 7.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflict of laws principles of such State.
Section 7.7. Jurisdiction; Venue; Consent to Service of Process.
(a) Each of the parties hereto irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the United States District Court
for the Southern District of New York or, if such court will not accept
jurisdiction, the Supreme Court of the State of New York or any court of
competent civil jurisdiction sitting in New York County, New York. In any
action, suit or other proceeding, each of the parties hereto irrevocably and
unconditionally waives and agrees not to assert by way of motion, as a defense
or otherwise any claims that it is not subject to the jurisdiction of the above
courts, that such action or suit is brought in an inconvenient forum or that the
venue of such action, suit or other proceeding is improper. Each of the parties
hereto also hereby agrees that any final and unappealable judgment against a
party hereto in connection with any action, suit or other proceeding shall be
conclusive and binding on such party and that such award or judgment may be
enforced in any court of competent jurisdiction, either within or outside of the
United States. A certified or exemplified copy of such award or judgment shall
be conclusive evidence of the fact and amount of such award or judgment.
(b) Each party irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to Section 7.4 of this
Agreement. Nothing in this Section 7.7 shall affect the right of any party
hereto to serve process in any other manner permitted by Law.
Section 7.8. Frustration. Parent and Purchaser agree that neither party
shall take any action that would reasonably be expected to frustrate the intent
of this Agreement nor shall any party omit to take any action, the omission of
which would reasonably be expected to frustrate the intent of this Agreement.
19
Section 7.9. Entire Agreement. This Agreement, together with all schedules
hereto, embodies the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements with respect thereto. The
parties intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial proceeding involving this Agreement.
Section 7.10. Amendment and Waiver. No amendment to this Agreement shall
be effective unless it shall be in writing and signed by each party. Any failure
of a party to comply with any obligation, covenant, agreement or condition
contained in this Agreement may be waived by the party entitled to the benefits
thereof only by a written instrument duly executed and delivered by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure of compliance. In the event that the terms of a Domestic Selling
Agreement shall conflict with the terms of this Agreement, the terms of such
Domestic Selling Agreement shall control for purposes of such Domestic Selling
Agreement.
Section 7.11. Access to Records. Parent shall cause the Domestic Parent
Distributors to maintain adequate books and records related to the activities of
the Domestic Parent Distributors under the Domestic Selling Agreements with
respect to the Products and New Products distributed thereunder. Upon written
request, but no more frequently than annually, (i) Parent shall certify to
Purchaser its material compliance with the terms of Sections 3.2(b), 3.3 and
3.4(a) of this Agreement during the period covered by such certificate and (ii)
Purchaser shall certify to Parent that no Purchaser Insurer has, during the
period covered by such certification, provided to any Comparable Distributor any
product that is substantially the same as an Exclusive Product provided by a
Travelers Insurer on an exclusive basis to a Domestic Exclusive Parent
Distributor under a Domestic Selling Agreement with terms, total compensation,
consumer pricing, wholesaler coverage, training and support, features and
service standards and metrics, taken as a whole, that are materially more
favorable to such Comparable Distributor than the terms, total compensation,
consumer pricing, wholesaler coverage, training and support, features and
service standards and metrics of such Exclusive Product, taken as a whole.
Section 7.12. Counterparts. This Agreement may be executed by the parties
in multiple counterparts which may be delivered by facsimile transmission. Each
counterpart when so executed and delivered shall be deemed an original, and all
such counterparts taken together shall constitute one and the same instrument.
Section 7.13. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
[Remainder of Page Intentionally Left Blank.]
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective authorized representatives.
CITIGROUP INC.
By:_______________________________
Name:
Title:
METLIFE, INC.
By:_______________________________
Name:
Title:
SCHEDULE 3.2(a)
EXISTING DISTRIBUTION RELATIONSHIPS BETWEEN
DOMESTIC PARENT DISTRIBUTORS AND TRAVELERS INSURERS(1)
NATURE OF RELATIONSHIP (EXCLUSIVE
OR
DOMESTIC PARENT DISTRIBUTOR(2) PRODUCTS OFFERED NON-EXCLUSIVE)
------------------------------------- --------------------------------- ---------------------------------
PFS Investments Inc. Variable Annuities(3) Exclusive
▇▇▇▇▇ ▇▇▇▇▇▇, a division of Citigroup Universal Annuity Non-exclusive
Global Markets Inc. TFLEX
Goldtrack Registered
Goldtrack Unregistered
Portfolio Architect Select
Vintage L
Vintage XTRA (Series II)
Travelers Access Select
Vintage Access
Vintage
Vintage II
Vintage III
Vintage Xtra
Vintage II (series II)
Marquis
TPLUS
Protected Equity
Travelers Target Maturity
Single Premium Immediate Annuity
Travelers Index Annuity
Blueprint
Blueprint II
Pioneer Annuistar
Pioneer Annuistar Plus
Pioneer Annuistar Flex
Pioneer Annuistar Value
▇▇▇▇▇▇▇ Advocate Advisor
------------------
(1) To be finalized and updated as of Closing Date.
(2) Together with certain affiliated and insurance entities.
(3) SPIA; Gold Track Express; PrimeBuilder II; PrimElite; PrimElite II;
Protected Equity Portfolio; Travelers Target Maturity
▇▇▇▇▇▇▇ Advocate Rewards
▇▇▇▇▇▇▇ Advocate Advisor ST1
412(i)
▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
Special T 15-19
Special T 20
Special T 5-14
UL Bonus
UL Bonus - Excess
Market Life
Market Life - Excess
TVLAC
TVLAC - Excess
TVLDB
TVLDB - Excess
VSL
VSL - Excess
First To Die
First To Die - Excess
TSL
TSL - Excess
MVP
MVP - Excess
Citibank, N.A. FPDA / SPDA Non-exclusive
Portfolio Architect
Vintage L
Vintage XTRA (series II)
Travelers Access
Vintage Access
Vintage II
Vintage III
Vintage Xtra
Vintage II (series II)
TPLUS
Travelers Index Annuity
Protected Equity Portfolio
Travelers Target Maturity
CitiVariable
CitiElite
GoldTrack Express
Single Premium Immediate Annuity
PTM with Principal Protection
3
CitiIndex
412(i)
▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
Special T 15-19
Special T 20
Special T 5-14
UL Bonus
UL Bonus - Excess
Market Life
Market Life - Excess
TVLAC
TVLAC - Excess
TVLDB
TVLDB - Excess
VSL
VSL - Excess
First To Die
First To Die - Excess
TSL
TSL- Excess
MVP
MVP - Excess
Prosperity Builder
PLIFE
The Citigroup Private Bank, a 10LT Non-exclusive
division of Citibank, N.A. 15LT
20LT
▇▇▇▇▇
▇▇▇▇▇
Special T 15-19
Special T 20
Special T 5-14
First To Die
First To Die - Excess
TSL
TSL- Excess
MVP
MVP - Excess
Market Life
Market Life - Excess
TVLAC
TVLAC - Excess
4
TVLDB
TVLDB - Excess
VSL
VSL - Excess
▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇ - ▇▇▇▇▇▇
▇
▇▇▇▇▇▇▇ ▇-▇
================================================================================
INTERNATIONAL DISTRIBUTION AGREEMENT
BY AND BETWEEN
CITIGROUP INC.
AND
METLIFE, INC.
AS OF [ ], 2005
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS................................................................................ 1
Section 1.1. Defined Terms...................................................................... 1
Section 1.2. Purposes of Agreement.............................................................. 5
Section 1.3. Construction....................................................................... 5
Section 1.4. Headings........................................................................... 5
ARTICLE II. REPRESENTATIONS AND WARRANTIES............................................................. 5
Section 2.1. Representations and Warranties of Parent........................................... 5
Section 2.2. Representations and Warranties of Purchaser........................................ 6
ARTICLE III. INTERNATIONAL DISTRIBUTION................................................................. 7
Section 3.1. Selling Agreements................................................................. 7
Section 3.2. Exclusive Distribution Arrangements................................................ 7
Section 3.3. Non-Exclusive Distribution Arrangements............................................ 8
Section 3.4. Private Label Products............................................................. 8
Section 3.5. New Products; New Countries; Substitute Products................................... 9
Section 3.6. Acquisitions....................................................................... 10
Section 3.7. Reinsurance of Products Distributed on Behalf of Third Party Insurers.............. 10
Section 3.8. No Obligation...................................................................... 11
ARTICLE IV. ACCESS AND BRANDING........................................................................ 11
Section 4.1. Access............................................................................. 11
Section 4.2. Branding; Use of Names; Confidential Information Approval of Certain
Materials.......................................................................... 12
ARTICLE V. TERM OF THE AGREEMENT; CERTAIN CONDITIONS.................................................. 14
Section 5.1. Term............................................................................... 14
Section 5.2. Survival........................................................................... 14
Section 5.3. Certain Conditions................................................................. 14
ARTICLE VI. INDEMNIFICATION............................................................................ 16
Section 6.1. Indemnification of Parent.......................................................... 16
Section 6.2. Indemnification of Purchaser....................................................... 16
Section 6.3. Indemnity Provisions in International Selling Agreements........................... 16
Section 6.4. Indemnification Procedures......................................................... 16
Section 6.5. General............................................................................ 17
ARTICLE VII. MISCELLANEOUS.............................................................................. 18
Section 7.1. Equitable Remedies................................................................. 18
Section 7.2. Severability....................................................................... 18
Section 7.3. Further Assurance and Assistance................................................... 18
Section 7.4. Notices............................................................................ 18
Section 7.5. Successors and Assigns............................................................. 19
Section 7.6. Governing Law...................................................................... 19
Section 7.7. Jurisdiction; Venue; Consent to Service of Process................................. 20
Section 7.8. Frustration........................................................................ 20
Section 7.9. Entire Agreement................................................................... 20
Section 7.10. Amendment and Waiver............................................................... 20
Section 7.11. Access to Records.................................................................. 20
Section 7.12. Counterparts....................................................................... 21
Section 7.13. Waiver of Jury Trial............................................................... 21
2
INTERNATIONAL DISTRIBUTION AGREEMENT
THIS INTERNATIONAL DISTRIBUTION AGREEMENT (this "Agreement"), dated as of
[ ], 2005, is made by and between Citigroup Inc., a Delaware corporation
("Parent"), and MetLife, Inc., a Delaware corporation ("Purchaser").
WHEREAS, Purchaser and certain of its Affiliates provide insurance and
annuity products throughout the United States and in numerous countries around
the world;
WHEREAS, Parent, through its Affiliates, has an extensive proprietary
distribution network that distributes, on behalf of insurance companies,
insurance and annuity products throughout the United States and in numerous
countries around the world;
WHEREAS, Parent and Purchaser have entered into an Acquisition Agreement,
dated as of January 31, 2005 (the "Acquisition Agreement"), pursuant to which
Purchaser will acquire on the terms and subject to the conditions set forth
therein, all of the outstanding shares of capital stock of certain subsidiaries
of, and the equity interests owned by Parent in certain joint ventures of,
Parent or its Affiliates, including the Travelers Insurers;
WHEREAS, in connection with the transactions contemplated by the
Acquisition Agreement, the parties hereto desire to enter into a distribution
relationship inside the United States pursuant to a Domestic Distribution
Agreement to be entered into on the date hereof and the distribution
relationship outside the United States contemplated by this Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
closing of the transactions contemplated by the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises herein contained, the parties do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Defined Terms. For purposes of this Agreement, unless
the context requires otherwise, the following terms shall have the following
meanings:
"Acquisition Agreement" has the meaning set forth in the recitals hereto.
"Adequate Financial Strength Rating" means, with respect to a Purchaser
Insurer in a particular country, such criteria related to financial strength of
the Purchaser Insurer compared to other similarly situated providers (considered
as a group) of similar products in such country determined on the basis of
criteria to be reasonably determined in good faith by the parties and as
reflected in the applicable International Selling Agreement. Such criteria will
take into account factors such as the availability of financial strength ratings
in the country in which the products of the Purchaser Insurer are sold.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such first Person. The term
"control" (including its correlative meanings "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
"Agreement" shall have the meaning set forth in the introductory paragraph
hereof.
"Comparable Distributor" shall mean a distributor using a substantially
similar approach to the marketing, servicing, sales support and overall
distribution of products.
"Competitive" means (i) the terms, total compensation, customer appeal,
consumer pricing and value, wholesaler coverage, training and support, features
and service standards and metrics of the applicable product, taken as a whole,
are at least equivalent to those of other comparable products, considered as a
group, then distributed by the applicable Affiliate of Parent and (ii) the
Purchaser Insurer shall have an Adequate Financial Strength Rating.
"Confidential Information" shall have the meaning set forth in Section
4.2(b).
"Covered Country" means each of the following countries: Argentina,
Australia, Belgium, Brazil, Hong Kong, Japan, Poland and the United Kingdom.
"Exclusive Products" means the Products designated on Schedule 3.2(a) as
being subject to an exclusive relationship.
"Existing Product" has the meaning set forth in Section 3.5(c).
"First Term" means the five-year period commencing on the date of this
Agreement and ending on the fifth anniversary of the date of this Agreement.
"Indemnified Party" has the meaning set forth in Section 6.4.
"Indemnifying Party" has the meaning set forth in Section 6.4.
"International Exclusive Parent Distributor" means each International
Parent Distributor to which a Travelers Insurer is the exclusive provider of any
Product on the date of this Agreement and such Person's successors and assigns.
"International Parent Distributor" means (i) any Person Affiliated with
Parent that, as of the date hereof, distributes any Product that a Travelers
Insurer offers in any Covered Country and such Person's successors and assigns
and (ii) any Person Affiliated with Parent that distributes any product offered
by a Purchaser Insurer in any country other than a Covered Country pursuant to
an arrangement contemplated by Sections 3.4(b), 3.5(b) and 3.6(b) (but in each
case only from and after such time that such Person begins distributing such
product for a Purchaser Insurer) and such Person's successors and assigns.
"International Selling Agreements" has the meaning set forth in Section
3.1.
2
"Law" shall have the meaning set forth in the Acquisition Agreement.
"Level Playing Field" means, with respect to a product, Parent (i) shall,
and shall cause any International Parent Distributor entering into an
International Selling Agreement with respect to such product pursuant to Section
3.1 to, afford the same access to its distribution platforms for such product
offered by a Travelers Insurer (or a Purchaser Insurer, as applicable) as the
access it affords to comparable products offered by a Third Party Insurer and
(ii) shall not, and shall cause its Affiliates (including the International
Parent Distributors) not to, provide to its Sales Force any compensation or
other economic inducement or benefit for the sale of comparable products sold in
a comparable sales support and compensation framework offered by a Third Party
Insurer that are more favorable than the compensation or other economic
inducements or benefits provided to such Sales Force for the sale of such
products offered by a Travelers Insurer (or a Purchaser Insurer, as applicable);
provided, that a Level Playing Field may include variations in Sales Force
compensation that are (x) based upon neutral criteria that do not differentiate
between product providers, such as achieving sales volume or persistency
objectives, or (y) for products (including combined product and service
arrangements) for which distributor compensation is negotiated by the provider
on a sale-by-sale basis, such as group retirement products.
"Licensing Agreement" shall have the meaning set forth in the Acquisition
Agreement.
"Local Incumbent" has the meaning set forth in Section 3.7.
"Losses" has the meaning set forth in Section 6.1.
"Marks" shall mean the Parent Distributor Marks, as defined in the
Licensing Agreement in respect of this Agreement.
"New Products" means (i), with respect to each Covered Country, any life
insurance or annuity product that a Purchaser Insurer is authorized to offer but
was not included among the types of insurance or annuity products distributed by
an International Parent Distributor in such Covered Country on the date of this
Agreement and (ii) products offered by a Purchaser Insurer pursuant to
arrangements contemplated by Sections 3.5(b) and 3.6(b). For avoidance of doubt,
the addition of new features to Products shall not constitute New Products in
whole or in part, regardless of whether any insurance regulatory filing is
required in connection therewith.
"Non-Exclusive Products" has the meaning set forth in Section 3.3.
"Parent" has the meaning set forth in the introductory paragraph hereof.
"Parent Indemnified Parties" has the meaning set forth in Section 6.1.
"Parent Standards and Practices" means the client service and relationship
standards, business practices, ethical standards, customer privacy and
protection policies and general service quality standards, reputational
considerations and industry standards, as determined from time to time by Parent
or any of its Affiliates, provided that such Parent Standards and Practices, to
the extent they relate to a Product or New Product and/or International Parent
Distributor, shall be applied, and changes thereto shall be made, without
discriminating in any material
3
manner against any Travelers Insurer or Purchaser Insurer, as applicable,
relative to all other similarly situated providers of such Products or New
Products distributed by such International Parent Distributor.
"Person" shall have the meaning set forth in the Acquisition Agreement.
"PLP Distributor" has the meaning set forth in Section 3.4(b).
"Private Label Product" means a life insurance or annuity product
customized for an International Parent Distributor in a Covered Country or
Supplemental Country that (i) is branded under the name of the International
Parent Distributor in such Covered Country or Supplemental Country or (ii) is
a variable life insurance or variable annuity contract that offers as an
option more than two investment choices or mutual funds that are advised or
managed by Parent or a Parent Affiliate, including an International Parent
Distributor (in the capacity of either an advisor or sub-advisor). For the
avoidance of doubt, a Private Label Product (whether existing on the date of
this Agreement or thereafter) shall be deemed a Product for all purposes under
this Agreement.
"Products" means the life insurance and annuity products issued by the
Travelers Insurers and distributed through the International Parent Distributors
on the date of this Agreement, and any Substitute Products distributed in
replacement thereof pursuant to Section 3.5(c).
"Purchaser" shall have the meaning set forth in the introductory paragraph
hereof.
"Purchaser Indemnified Parties" has the meaning set forth in Section 6.2.
"Purchaser Insurer" means any insurance company Affiliate of Purchaser,
including the Travelers Insurers.
"Sales Force" means those point of sale representatives and their direct
supervisors utilized by Parent, International Parent Distributors or one of
their respective Affiliates whose job responsibility includes the sale or
promotion of Products or New Products offered by a Travelers Insurer (or a
Purchaser Insurer, as applicable).
"Second Term" means the five-year period commencing upon the expiration of
the First Term and ending on the tenth anniversary of the date of this
Agreement.
"Substitute Product" has the meaning set forth in Section 3.5(c).
"Supplemental Country" means each of the following countries: Chile,
China, India, Indonesia, South Korea, Taiwan, and Uruguay.
"Target Affiliated Distributor" means any Person Affiliated with Parent
that (i) was an Affiliate of a Target Business (as defined in the Acquisition
Agreement) immediately prior to the acquisition of such Target Business by
Parent or an Affiliate of Parent and (ii) is engaged in the business of
distributing financial services products.
"Term" has the meaning set forth in Section 5.1.
4
"Third Party Claim" has the meaning set forth in Section 6.4.
"Third Party Insurer" means an insurance company that is not Affiliated
with Purchaser.
"Travelers Insurers" means the International Insurance Companies (as
defined in the Acquisition Agreement) and the Joint Ventures (as defined in the
Acquisition Agreement) to be acquired by Purchaser pursuant to the Acquisition
Agreement and their successors and assigns, and with respect to a Substitute
Product that is offered pursuant to Section 3.5(c), a Purchaser Insurer and its
successors and assigns.
Section 1.2 Purposes of Agreement. Notwithstanding anything in this
Agreement to the contrary, Purchaser and Parent agree that this Agreement is
intended to set forth certain principal business terms upon which they will
enter into International Selling Agreements during the Term and that nothing
herein creates an International Selling Agreement.
Section 1.3 Construction. For the purposes of this Agreement: (i) words
(including capitalized terms defined herein) in the singular shall be held to
include the plural and vice versa, and words (including capitalized terms
defined herein) of one gender shall be held to include the other gender as the
context requires; (ii) the terms "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules) and not to any particular
provision of this Agreement, and Article, Section, paragraph and Schedule
references are to the Articles, Sections, paragraphs and Schedules to this
Agreement, unless otherwise specified; (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including, without
limitation"; (iv) all references to any period of days shall be deemed to be to
the relevant number of calendar days unless otherwise specified; and (v)
"commercially reasonable efforts" shall not require a waiver by any party of any
material rights or any action or omission that would be a breach of this
Agreement.
Section 1.4 Headings. The Article and Section headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of Parent. Parent hereby
represents and warrants to Purchaser as set forth below.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation.
(b) Parent has all necessary corporate power and authority to make,
execute and deliver this Agreement and to perform all of the obligations to be
performed by it hereunder. The making, execution, delivery and performance by
Parent of this Agreement and the consummation by Parent of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly and validly
executed and delivered by Parent, and assuming the due authorization, execution
and
5
delivery by Purchaser, this Agreement will constitute the valid, legal and
binding obligation of Parent, enforceable against it in accordance with its
terms, except as may be subject to applicable bankruptcy, insolvency, moratorium
or other similar Laws, now or hereafter in effect, relating to or affecting the
rights of creditors generally and by legal and equitable limitations on the
enforceability of specific remedies.
(c) Neither the execution and delivery of this Agreement by Parent,
nor the consummation of the transactions contemplated hereby, will (i) violate
or conflict with any provision of the articles of incorporation or bylaws or
other organizational documents of Parent or any International Parent
Distributor, (ii) violate any of the terms, conditions, or provisions of any Law
or license to which Parent or any International Parent Distributor is subject or
by which it or any International Parent Distributor or any of its or their
assets are bound, or (iii) violate, breach, or constitute a default under any
contract to which Parent or any International Parent Distributor is a party or
by which it or any International Parent Distributor or any of its or their
assets is bound. The distribution of any Products offered by a Travelers Insurer
and distributed by an International Parent Distributor on the date hereof does
not violate, breach, or constitute a default under any contract to which Parent
or any International Parent Distributor is a party or by which any of them or
any of their respective assets is bound.
(d) None of the arrangements by which any International Parent
Distributor distributes any Products on behalf of a Travelers Insurer in force
on the date of the Acquisition Agreement or the date of this Agreement violated
or violates any of the Parent Standards and Practices in effect on such date.
Section 2.2. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Parent as set forth below.
(a) Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation.
(b) Purchaser has all necessary corporate power and authority to
make, execute and deliver this Agreement and to perform all of the obligations
to be performed by it hereunder. The making, execution, delivery and performance
by Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has been
duly and validly executed and delivered by Purchaser, and assuming the due
authorization, execution and delivery by Parent, this Agreement will constitute
the valid, legal and binding obligation of Purchaser, enforceable against it in
accordance with its terms, except as may be subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws, now or hereafter in effect,
relating to or affecting the rights of creditors generally and by legal and
equitable limitations on the enforceability of specific remedies.
(c) Neither the execution and delivery of this Agreement by
Purchaser, nor the consummation of the transactions contemplated hereby, will
(i) violate or conflict with any provision of the articles of incorporation or
bylaws or other organizational documents of Purchaser or any Purchaser Insurer
(other than the Travelers Insurers), (ii) violate any of the terms, conditions,
or provisions of any Law or license to which Purchaser is subject or by which
6
it or any of its assets is bound, or (iii) violate, breach, or constitute a
default under any contract to which Purchaser is a party or by which it or any
of its assets is bound.
ARTICLE III.
INTERNATIONAL DISTRIBUTION
Section 3.1. Selling Agreements. In order to effectuate the distribution
arrangements contemplated hereby among the Travelers Insurers (and Purchaser
Insurers, as applicable) and the International Parent Distributors for
distribution of the Products and New Products offered by the Travelers Insurers
(and Purchaser Insurers, as applicable) in the Covered Countries and the
Supplemental Countries, Parent shall cause the International Parent
Distributors, and Purchaser shall cause the Travelers Insurers (and Purchaser
Insurers, as applicable), to negotiate in good faith and enter into written
selling agreements that are consistent with industry practice and with the
principles set forth in this Agreement and that contain terms and conditions
taken as a whole that are no less favorable to the Travelers Insurers (and
Purchaser Insurers, as applicable) and the International Parent Distributors
than the terms and conditions of the selling and selling related arrangements
existing on the date of this Agreement between the Travelers Insurers and the
International Parent Distributors (the "International Selling Agreements"). For
each International Parent Distributor that distributes a Product for a Travelers
Insurer on the date of this Agreement, an International Selling Agreement for
the distribution of such Product, to take effect on the date of this Agreement,
shall be executed and delivered by such International Parent Distributor and the
applicable Travelers Insurer on or prior to the date of this Agreement. The
International Selling Agreements will contain provisions concerning the periodic
readjustment of compensation as agreed by the parties thereto.
Section 3.2. Exclusive Distribution Arrangements.
(a) Parent represents and warrants that Schedule 3.2(a), which was
provided to Purchaser no later than 45 days after the date of the Acquisition
Agreement, sets forth a complete and accurate list of all life insurance and
annuity products issued by a Travelers Insurer and distributed by an
International Parent Distributor (whether pursuant to a written agreement or de
facto) in a Covered Country on behalf of a Travelers Insurer on the date of this
Agreement, the identity of each International Parent Distributor that
distributes each such product and whether or not a Travelers Insurer is the
exclusive provider (whether pursuant to a written agreement or de facto) of such
product to such International Parent Distributor.
(b) If any Travelers Insurer is the exclusive provider (whether
pursuant to a written agreement or de facto) of an Exclusive Product to any
International Exclusive Parent Distributor in a Covered Country on the date of
this Agreement, such Travelers Insurer shall have the right to be the exclusive
provider of such Exclusive Product to such International Exclusive Parent
Distributor in such Covered Country during the First Term. During the Second
Term, each Travelers Insurer shall have the right to be a provider, on a
non-exclusive, Level Playing Field basis, to each International Exclusive Parent
Distributor of each Exclusive Product distributed by such International
Exclusive Parent Distributor on the date of this Agreement. During the First
Term, Parent shall not make any change in the Parent Standards and Practices
(except changes that may be reasonably appropriate to comply with applicable
Law) that would
7
conflict with the rights granted to the Travelers Insurers under the first
sentence of this Section 3.2(b).
(c) Notwithstanding anything herein to the contrary (including,
without limitation, Section 3.5(c)), prior to the earlier of (i) the end of the
60-day period beginning on the date of this Agreement and (ii) December 31,
2005, (x) Purchaser shall cause the Exclusive Products to be marketed under the
brand name and with such trademarks or trade names (including the identity of
the underwriter of such Exclusive Product) as used on the date of this Agreement
and (y) no Purchaser Insurer shall be permitted to provide a Substitute Product
in place of an Exclusive Product.
Section 3.3. Non-Exclusive Distribution Arrangements. If any Travelers
Insurer is a non-exclusive provider of a Product to any International Parent
Distributor in any Covered Country on the date of this Agreement (the
"Non-Exclusive Products"), such Travelers Insurer shall have the right to be a
provider of such Product, on a non-exclusive, Level Playing Field basis, to such
International Parent Distributor in such country during the Term.
Section 3.4. Private Label Products.
(a) If any Travelers Insurer is the provider of a Private Label
Product to an International Parent Distributor in any Covered Country on the
date of this Agreement, such Travelers Insurer shall have the right to be the
provider of such Private Label Product in such Covered Country during the Term.
(b) Subject to the last sentence of this Section 3.4(b), if, prior
to the seventh anniversary of the date of this Agreement, any International
Parent Distributor or any other Affiliate of Parent that distributes life
insurance or annuity products desires to distribute, as a Private Label Product
in any Covered Country or Supplemental Country, a life insurance product (other
than term life insurance) or annuity product that it does not distribute as a
Private Label Product in such country on the date of this Agreement, Parent
shall cause such International Parent Distributor or other Affiliate of Parent
(a "PLP Distributor") to notify Purchaser no later than the time of notification
of any Third Party Insurer. If the PLP Distributor does not select a Purchaser
Insurer as the provider of the new Private Label Product and the PLP Distributor
desires to continue to seek a Third Party Insurer, as provider, Parent shall
cause the PLP Distributor to include the Purchaser Insurers in the process for
selection of such provider (whether by formal request for proposals or
otherwise) to provide such Private Label Product prior to selecting a Third
Party Insurer. Parent shall cause the PLP Distributor to entertain in good
faith, and on terms no less favorable than those extended to any other proposed
provider, proposals from the Purchaser Insurers to provide such new Private
Label Product. Such PLP Distributor (i) shall have exclusive discretion in
determining the process for selection of, and the criteria for evaluation of,
potential providers of any such Private Label Product and (ii) shall make a good
faith determination of the relative suitability of proposals from potential
providers for satisfying the requirements of such Private Label Product (it
being understood that if such PLP Distributor determines that a proposal from a
Purchaser Insurer satisfies such requirements, considered as a whole, at least
as well as the most favorable proposal or proposals of the other potential
providers, such Purchaser Insurer's proposal shall be selected); provided,
however, that such PLP Distributor shall not be required to select any such
proposal. The rights granted to the
8
Purchaser Insurers under this Section 3.4(b) shall not apply with respect to any
new Private Label Product if an insurance company not Affiliated with Parent or
Purchaser contacts or approaches the International Parent Distributor, without
solicitation by such International Parent Distributor relating to such Private
Label Product, about developing or the possibility of developing such Private
Label Product. Notwithstanding the foregoing, but subject to Section 3.5,
nothing in this Section 3.4 shall be construed to limit such International
Parent Distributor's ability to offer Products substantially the same as any
Private Label Product on a non-private label basis.
Section 3.5. New Products; New Countries; Substitute Products.
(a) At any time during the Term, (i) Purchaser may propose to an
International Parent Distributor that such International Parent Distributor or
one or more of its Affiliates distribute a New Product offered by a Purchaser
Insurer and (ii) an International Parent Distributor may propose to Purchaser
that such International Parent Distributor or one or more of its Affiliates
distribute a New Product offered by a Purchaser Insurer.
(b) Subject to Section 3.6(b), if, prior to the seventh anniversary
of the date of this Agreement, (i) any Purchaser Insurer that, as of the date of
this Agreement, offers a life insurance or annuity product for distribution in
any Supplemental Country desires to offer such product for distribution through
an Affiliate of Parent in such country, (ii) such Affiliate of Parent
distributes a life insurance or annuity product that is substantially the same
as such product through an open architecture distribution platform in such
country at the time and has multiple providers of such product and (iii) the
product proposed to be offered by the Purchaser Insurer is Competitive, then
such Purchaser Insurer shall have the right to provide such product to such
Affiliate of Parent in such country on a non-exclusive, Level Playing Field
basis for the remainder of such seven-year period.
(c) At any time during the Term, Purchaser may propose in writing
that any Purchaser Insurer offer, in place of any Product then offered by a
Travelers Insurer through an International Parent Distributor (an "Existing
Product") in a Covered Country or a Supplemental Country, a substitute product
and if (i) such Purchaser Insurer has an Adequate Financial Strength Rating and
(ii) such substitute product is substantially the same as the Existing Product
in the terms, total compensation, consumer pricing, wholesaler coverage,
training and support, features and service standards and metrics (a "Substitute
Product"), then Parent shall cause such International Parent Distributor to
distribute such Substitute Product in place of the Existing Product in such
country. The Purchaser Insurer that offers such Substitute Product shall have
the same rights under this Agreement with respect to the Substitute Product as
the Travelers Insurer that offered the Existing Product possessed with respect
to the Existing Product. By way of illustration and without limiting the
generality of the foregoing, if the Travelers Insurer was entitled to provide
the Existing Product on a non-exclusive, Level Playing Field basis through the
International Parent Distributor, the Purchaser Insurer shall be entitled to
provide the Substitute Product on a non-exclusive, Level Playing Field basis
through such International Parent Distributor in place of such Existing Product.
Parent shall cause the applicable International Parent Distributor and Purchaser
shall cause the Purchaser Insurer to enter into an International Selling
Agreement with respect to the Substitute Product that is substantially the same
as the International Selling Agreement with respect to the Existing Product. The
Purchaser
9
Insurer providing the Substitute Product shall bear reasonable costs incurred by
the applicable International Parent Distributor in connection with or arising
out of the replacement of the Existing Product with the Substitute Product.
Section 3.6. Acquisitions.
(a) Notwithstanding anything in this Agreement to the contrary, but
subject to Section 3.6(b), neither Parent nor any International Parent
Distributor shall be (i) deemed to be in violation of this Agreement or any
International Selling Agreement or (ii) obligated hereunder or under any
International Selling Agreement to take any action (including to make any
adjustment to commissions, economic inducements or other benefits for the Sales
Force), if such violation would arise, or such action would be required to be
taken, solely as a result of Parent or one of its Affiliates acquiring assets or
a business of any Person engaged in the distribution of financial services
products following the date of this Agreement; provided, however, that nothing
in this Section 3.6(a) shall limit or restrict any obligations that Parent or
any International Parent Distributor has to distribute on an exclusive basis a
Product or a New Product offered by a Purchaser Insurer if such Purchaser
Insurer has the right under this Agreement or any International Selling
Agreement to be the exclusive provider of such Product or New Product to such
International Parent Distributor.
(b) If, at any time prior to the seventh anniversary of the date of
this Agreement, (i) Parent acquires a Target Business (as defined in the
Acquisition Agreement), of which the net revenues and net earnings (in each
case, calculated in a manner consistent with Section 6.17(a)(x) of the
Acquisition Agreement, and, for the avoidance of doubt, excluding realized
gains) derived from a Competitive Business (as defined in the Acquisition
Agreement) are more than a de minimis amount, and (ii) Parent or its Affiliates
are permitted to acquire such Target Business pursuant to Sections 6.17(a)(x) or
6.17(a)(xi) of the Acquisition Agreement, then Purchaser through the Purchaser
Insurers shall have the right during the remainder of such seven-year period to
be a provider to each Target Affiliated Distributor, if any, on a non-exclusive
Level Playing Field basis, of any life insurance or annuity product that is
distributed by such Target Affiliated Distributor on a non-exclusive basis
either immediately before or following such acquisition; provided, that such
right shall be subject to any applicable contractual or other restrictions by
which such Target Affiliated Distributor is bound.
Section 3.7. Reinsurance of Products Distributed on Behalf of Third Party
Insurers. During the Term, Parent shall, and shall cause each of its Affiliates
who, on the date of this Agreement, distributes life insurance or annuity
products on behalf of a Third Party Insurer ("Local Incumbent") where all or
part of such business written by such Third Party Insurer is reinsured by a
Travelers Insurer to, use its best efforts (x) to require each Local Incumbent
(which term shall include, for purposes of this Section 3.7, any successor or
replacement Local Incumbent) to continue to reinsure such business to a
Travelers Insurer or another Purchaser Insurer, as reasonably specified by
Purchaser, on terms no less favorable, taken as a whole, to the Travelers
Insurer or Purchaser Insurer than the terms on which such business is reinsured
on the date of this Agreement and (y) if any Local Incumbent refuses to continue
to reinsure such business in accordance with clause (x) (a "Refusing Insurer"),
to find a replacement insurance company for such Refusing Insurer (which
replacement shall have comparable financial strength to the Refusing Insurer (if
relevant with respect to the product offered by the Refusing Insurer)
10
and may be a Purchaser Insurer, if one is available to issue the relevant types
of products issued by the Refusing Insurer in the applicable country so long as
such products are substantially the same as the products issued by the Refusing
Insurer) that will agree to write such business and to reinsure it in accordance
with clause (x) and, once such a replacement is found, to exercise any rights it
has to terminate its distribution arrangement with the Refusing Insurer and to
replace the Refusing Insurer with such replacement insurance company; provided
that any administrative costs incurred by the applicable Affiliate of Parent in
connection with effecting such replacement shall be paid in full by Purchaser or
a Purchaser Insurer; and provided, further, that the obligations of the
applicable Affiliate of Parent under clauses (x) and (y) above shall be
conditioned during the Second Term on the applicable Travelers Insurer or other
Purchaser Insurer having an Adequate Financial Strength Rating. Parent shall not
permit any Affiliate of Parent to agree to any changes in the terms of its
relationship with any Local Incumbent in any Covered Country that would
significantly and adversely affect the profitability of the business reinsured
by the Travelers Insurer or Purchaser Insurer without obtaining the prior
written consent of Purchaser, which consent shall not be unreasonably withheld
or delayed.
Section 3.8. No Obligation. For the avoidance of doubt, nothing in this
Agreement or any International Selling Agreement shall (i) impose upon any
Purchaser Insurer any obligation to distribute any Products or New Products
offered by a Purchaser Insurer through the International Parent Distributors,
(ii) impose upon Parent or its Affiliates any obligation to provide to its or
their employees any Product or New Product issued by Purchaser or any Travelers
Insurers, (iii) restrict the ability of Purchaser or Parent or any of their
Affiliates from acquiring or disposing of any assets of, or reorganizing or
consolidating, any business, subject to the proviso in Section 3.6(a) or (iv)
restrict the ability of any Purchaser Insurer to distribute insurance or annuity
products through Persons other than Affiliates of Parent. Subject to Section
3.6(b), nothing in this Agreement shall impose upon any Affiliate of Parent that
becomes an Affiliate of Parent after the date of this Agreement any obligation
to distribute any Product or New Product on behalf of a Purchaser Insurer. For
the avoidance of doubt, in the event any International Parent Distributor ceases
to be an Affiliate of Parent, Parent's obligations under this Agreement with
respect to such International Parent Distributor shall no longer be applicable.
ARTICLE IV.
ACCESS AND BRANDING
Section 4.1. Access.
(a) To the extent that as of the date of this Agreement, an
International Exclusive Parent Distributor permits wholesalers, Product
representatives or bank marketing representatives of the Travelers Insurers to
have access to such International Exclusive Parent Distributor, including its
Sales Force, bank branches, sales offices or sales, education or training
meetings that involve the promotion of Products made available by a Travelers
Insurer for distribution by such International Exclusive Parent Distributor in a
Covered Country, Parent shall, during the First Term, cause such International
Exclusive Parent Distributor to continue to permit such access on the same terms
and conditions as on the date hereof in a manner consistent with applicable Law
and the Parent Standards and Practices. The applicable Purchaser Insurer
providing the Exclusive Products shall continue during the First Term to
maintain wholesaler coverage, training, and sales support to the International
Exclusive Parent Distributor on terms
11
and conditions that are no less favorable than those provided by the applicable
Travelers Insurer to such International Exclusive Parent Distributor on the date
of this Agreement.
(b) To the extent that as of the date of this Agreement, an
International Parent Distributor (other than an International Exclusive Parent
Distributor) permits wholesalers, Product representatives or bank marketing
representatives of the Travelers Insurers to have access to such International
Parent Distributor in a Covered Country, including its Sales Force, bank
branches, sales offices or sales, education or training meetings that involve
the promotion of Products made available by a Travelers Insurer for distribution
by such International Parent Distributor, in a manner consistent with applicable
Law and with the Parent Standards and Practices, Parent shall, until the third
anniversary of the date hereof, cause such International Parent Distributor to
provide such access on terms and conditions that are no less favorable than
those generally applicable to any Third Party Insurer.
Section 4.2. Branding; Use of Names; Confidential Information; Approval of
Certain Materials.
(a) Unless otherwise provided in an International Selling Agreement
and, in all cases in accordance with the terms and subject to the conditions of
the Licensing Agreement, during the Term, Purchaser shall cause all Purchaser
Insurers providing, and Parent shall cause all International Parent Distributors
distributing, Products (including Private Label Products in respect of which any
Purchaser Insurer is the provider on the date of this Agreement) to cause such
Products distributed through an International Parent Distributor to be offered
and branded utilizing the Marks that relate to each such Product as of the date
of this Agreement; provided that Purchaser and the Purchaser Insurers shall have
been granted adequate rights to use the Marks under the Licensing Agreement; and
provided, further, that the parties hereto agree that any trademark or trade
name on such product shall be appropriately altered to reflect any change to the
trademark or trade name of the applicable International Parent Distributor and,
subject to Section 3.2(c), in the case of a Substitute Product, to reflect any
change that is required by Law as a result of the change in the issuer of such
Substitute Product. To the extent that a Private Label Product is distributed by
a PLP Distributor on behalf of a Purchaser Insurer after the date of this
Agreement in accordance with Section 3.4, then Parent shall cause such PLP
Distributor and Purchaser shall cause all Purchaser Insurers providing such
Private Label Product to cause such Private Label Product to be offered and
branded using such trademarks or trade names as may be applicable to such
Private Label Product by such PLP Distributor, provided that Purchaser and the
applicable Purchaser Insurers shall own or shall have been granted adequate
rights to use such trademarks or trade names.
(b) During the Term of this Agreement, the Travelers Insurers and,
as applicable, the Purchaser Insurers will have access to confidential
information and other proprietary information ("Confidential Information") of
Parent and its Affiliates. Confidential Information includes, but is not limited
to, the names, addresses, telephone numbers and social security numbers of
applicants for, purchasers of and other customers of Products and New Products
as well as other identity and private information in respect of Parent's or its
Affiliates' customers, employees, representatives and agents. Confidential
Information shall not include any customer information (i) that was previously
known by a Purchaser Insurer from a source other than any International Parent
Distributor without obligations of confidence; or (ii) that was
12
or is rightfully received by a Purchaser Insurer from a third party without
obligations of confidence to any International Parent Distributor or from
publicly available sources without obligations of confidence to any
International Parent Distributor; or (iii) that was or is developed by means
independent of information obtained from any International Parent Distributor.
As a condition to such access, neither Purchaser nor any Purchaser Insurer shall
use, copy or disclose such Confidential Information in any manner (including,
without limitation, to sell or cross-sell their products). Confidential
Information may be used to service Products and New Products, including, as
appropriate, to accept additional contributions and premium for and to modify,
add, or exchange coverage to any Product or New Product purchased by a policy
owner who purchased from an International Parent Distributor. Purchaser and its
Affiliates shall take all appropriate action to ensure the protection,
confidentiality and security of such Confidential Information. The Purchaser and
its Affiliates acknowledge and agree that this Confidential Information is the
property of the International Parent Distributors. The parties also understand
that the Purchaser Insurers may respond to inquiries from holders of Products or
New Products concerning other Purchaser Insurer products and services provided
there was no solicitation of such inquiry using Confidential Information. The
parties also agree that this Section 4.2(b) shall not apply to individuals with
whom Purchaser or the Purchaser Insurers have a pre-existing relationship other
than through an International Parent Distributor.
(c) (i) Any marketing, training or other materials to be
made available by any Purchaser Insurer to any International Parent
Distributor's Sales Force or customers in connection with Products and New
Products (other than ordinary course communications to policyholders and
contract holders) shall be made available only with the prior consent (which
shall not be unreasonably withheld or delayed) of the applicable International
Parent Distributor; provided that all such materials that are used by the
Travelers Insurers in connection with the distribution of Products through the
International Parent Distributors on the date of this Agreement shall not
require any such consent. In the event that the applicable Purchaser Insurer or
the applicable International Parent Distributor determines to discontinue the
use of any such materials, the parties shall cooperate with the applicable
Purchaser Insurer to ensure that such use is discontinued by such International
Parent Distributor's Sales Force.
(ii) Any marketing, training or other materials prepared by
an International Parent Distributor and to be made available by such
International Parent Distributor to its Sales Force or customers that
describes any Purchaser Insurer or any of its Affiliates or any insurance
or annuity product offered by any of them may be made available only with
the prior consent (which shall not be unreasonably withheld or delayed) of
the applicable Purchaser Insurer; provided that all such materials that
are used by the International Parent Distributors in connection with the
distribution of Products on the date of this Agreement shall not require
any such consent. In the event that the applicable Purchaser Insurer or
the applicable International Parent Distributor determines to discontinue
the use of any such materials, the parties shall cooperate with the
applicable International Parent Distributor to ensure that such use is
discontinued by its Sales Force.
13
ARTICLE V.
TERM OF THE AGREEMENT; CERTAIN CONDITIONS
Section 5.1. Term. The term of this Agreement (the "Term") will commence
on the date of this Agreement and shall continue until the tenth anniversary of
the date of this Agreement; provided, however, the expiration of this Agreement
shall not reduce or curtail the term of any International Selling Agreement that
extends beyond the end of the Term.
Section 5.2. Survival. Upon expiration of this Agreement, the provisions
of this Section 5.2 and Article VI and Article VII shall survive without
modification.
Section 5.3. Certain Conditions.
(a) Subject to Section 5.3(b), but notwithstanding anything else
to the contrary in this Agreement or in any International Selling Agreement, no
International Parent Distributor shall be required to enter into (and may refuse
to enter into) an International Selling Agreement in respect of, or have any
obligation to offer (and may immediately cease to offer), any Product or New
Product offered by a Purchaser Insurer, if:
(i) Parent reasonably determines that such Product or New
Product offered by a Purchaser Insurer is not Competitive;
(ii) any change is made or any feature is added to such
Product or New Product (or a fund or investment option therein) without
Parent's or the applicable International Parent Distributor's prior
written approval, which approval shall not be unreasonably withheld or
delayed;
(iii) such Product or New Product or the offering thereof
(including on an exclusive basis) conflicts with:
(x) applicable Law, including any regulatory
compliance procedures or restrictions in connection therewith;
(y) any material provision of any existing agreement
by which Parent or its Affiliates or any of their respective assets
or properties are bound; provided that this clause (y) shall not
apply to any Product offered by a Travelers Insurer and distributed
by an International Parent Distributor pursuant to an arrangement in
effect on the date hereof or any Substitute Products distributed in
replacement thereof pursuant to Section 3.5(c), unless the violation
is caused by or relates to (1) any difference between the Substitute
Product and the Existing Product it replaced, or (2) solely the fact
of the replacement of the Existing Product with the Substitute
Product; or
(z) the Parent Standards and Practices, provided that
in the case of the application of this clause (z) during the First
Term to any Exclusive Product following a change in the Parent
Standards and Practices, any such change in the Parent Standards and
Practices shall be in accordance with the third sentence of Section
3.2(b);
14
(iv) such Product is an Exclusive Product and (x) any
Purchaser Insurer provides to any Comparable Distributor a product that is
substantially the same as such Exclusive Product and (y) the terms, total
compensation, consumer pricing, wholesaler coverage, training and support,
features and service standards and metrics of such product, taken as a
whole, are more favorable than the terms, total compensation, consumer
pricing, wholesaler coverage, training and support, features and service
standards and metrics of such Exclusive Product, taken as a whole;
provided, however, that this Section 5.3(a)(iv) shall not apply to any
distribution arrangements of any Purchaser Insurer in effect on the date
of this Agreement; or
(v) with respect to any Exclusive Product, a federal, state
or local domestic, foreign or supranational governmental, regulatory or
self-regulatory authority, agency, court, tribunal, commission or other
governmental, regulatory or self-regulatory entity, with jurisdiction over
the International Exclusive Parent Distributor requests or mandates that
the International Exclusive Parent Distributor cease offering or no longer
offer the Exclusive Product on an exclusive basis; provided, however, in
the case of such a request (but not a mandate), the International
Exclusive Parent Distributor shall provide prompt notice of any such
request to the Purchaser Insurer providing the Exclusive Product, and
shall consult and cooperate with such Purchaser Insurer in its efforts to
obtain from such regulatory agency an agreement that permits the
International Exclusive Parent Distributor to continue to distribute such
Exclusive Product on an exclusive basis. If such an agreement is reached,
the International Exclusive Parent Distributor shall continue to
distribute the Exclusive Product on an exclusive basis in accordance with
the terms of Section 3.2. If such an agreement cannot be reached, the
International Exclusive Parent Distributor shall distribute the Exclusive
Product on a non-exclusive, Level Playing Field basis, for the remainder
of the Term in accordance with the terms of this Agreement.
(b) Prior to any International Parent Distributor's exercising its
right under Section 5.3(a) not to enter into an International Selling Agreement
with respect to any Product or New Product or to cease offering any Product or
New Product, such International Parent Distributor shall provide written notice
to Purchaser, containing a reasonably detailed statement of the grounds for such
exercise, and shall afford Purchaser a period of 30 days in which to cure the
deficiency unless the deficiency is not capable of being cured. Such
International Parent Distributor shall consult and cooperate with Purchaser as
reasonably requested during such period in identifying possible cures. If
Purchaser is able to propose a cure that is reasonably satisfactory to such
International Parent Distributor before the expiration of such period, such
International Parent Distributor shall not be entitled to exercise its right to
refuse to enter into an International Selling Agreement or to cease offering the
applicable Product or New Product, provided that if any cure involves a change
in such Product's or New Product's terms or features that requires filing with
or approval (or non-disapproval) by any regulatory authority, such International
Parent Distributor shall, prior to exercising such right, afford Purchaser such
further period of time as may be reasonably necessary to accomplish such filing
or obtain such approval or non-disapproval. Notwithstanding anything to the
contrary in this Section 5.3(b), no International Parent Distributor shall be
required to continue to distribute any Product or New Product pending any cure
period, if the offering of such Product or New Product would reasonably be
expected to (i) violate applicable Law, including any regulatory compliance
15
procedures or restriction in connection therewith, (ii) conflict with the Parent
Standards and Practices insofar as they relate to reputational considerations or
industry standards in the applicable country or (iii) in the case of an
Exclusive Product under Section 5.3(a)(v) above, conflict with a mandate from a
federal, state or local domestic, foreign or supranational governmental,
regulatory or self-regulatory authority, agency, court, tribunal, commission or
other governmental, regulatory or self-regulatory entity, with jurisdiction over
the International Exclusive Parent Distributor that such International Exclusive
Parent Distributor cease offering or no longer offer the Exclusive Product on an
exclusive basis; provided, in the case of this clause (iii), such International
Exclusive Parent Distributor shall distribute the Exclusive Product on a
non-exclusive, Level Playing Field basis, for the remainder of the Term in
accordance with the terms of this Agreement.
ARTICLE VI.
INDEMNIFICATION
Section 6.1. Indemnification of Parent. Purchaser will defend and hold
harmless Parent and its Affiliates and their respective officers, directors,
employees and agents (the "Parent Indemnified Parties") from and against any
losses, liabilities, damages (including consequential damages), actions, claims,
demands, regulatory investigations, settlements, judgments and other expenses
including, but not limited to, reasonable attorneys fees and expenses ("Losses")
which are asserted against, incurred or suffered by any Parent Indemnified Party
and which arise from or are related to Purchaser's breach of any representation
or warranty (except to the extent indemnification therefor is available under
the Acquisition Agreement) or any covenant, condition or duty contained in this
Agreement.
Section 6.2. Indemnification of Purchaser. Parent will defend and hold
harmless Purchaser and its Affiliates and their respective officers, directors,
employees and agents (the "Purchaser Indemnified Parties") from and against any
Losses which are asserted against, incurred or suffered by any Purchaser
Indemnified Party and which arise from or are related to Parent's breach of any
representation or warranty (except to the extent indemnification therefor is
available under the Acquisition Agreement) or any covenant, condition or duty
contained in this Agreement.
Section 6.3. Indemnity Provisions in International Selling Agreements.
Each International Selling Agreement shall provide indemnification for Losses
asserted against each of the parties thereto in respect of a failure of the
other party to comply with applicable Law and a breach by such other party of
any representation, warranty, covenant, condition or duty contained in such
International Selling Agreement.
Section 6.4. Indemnification Procedures. Upon receipt by a Parent
Indemnified Party or a Purchaser Indemnified Party (each, an "Indemnified
Party"), as the case may be, of notice of any action, suit, proceedings, claim,
demand or assessment made or brought by an unaffiliated third party (a "Third
Party Claim") with respect to a matter for which such Indemnified Party is
indemnified under this Article VI which has or is expected to give rise to a
claim for Losses, the Indemnified Party shall promptly, in the case of a
Purchaser Indemnified Party, notify Parent and in the case of a Parent
Indemnified Party, notify Purchaser (Purchaser or Parent, as the case may be,
the "Indemnifying Party"), in writing, indicating the nature of such Third Party
Claim and the
16
basis therefor; provided, however, that any delay or failure by the Indemnified
Party to give notice to the Indemnifying Party shall relieve the Indemnifying
Party of its obligations hereunder only to the extent, if at all, that it is
prejudiced by reason of such delay or failure. Such written notice shall (i)
describe such Third Party Claim in reasonable detail as is practicable including
the sections of this Agreement, which form the basis for such claim; provided
that the failure to identify a particular section in such notice shall not
preclude the Indemnified Party from subsequently identifying such section as a
basis for such claim, (ii) attach copies of all material written evidence
thereof and (iii) set forth the estimated amount of the Losses that have been or
may be sustained by an Indemnified Party. The Indemnifying Party shall have 30
days after receipt of notice to elect, at its option, to assume and control the
defense of, at its own expense and by its own counsel, any such Third Party
Claim and shall be entitled to assert any and all defenses available to the
Indemnified Party to the fullest extent permitted by applicable Law. If the
Indemnifying Party shall undertake to compromise or defend any such Third Party
Claim, it shall promptly notify the Indemnified Party of its intention to do so,
and the Indemnified Party agrees to cooperate fully with the Indemnifying Party
and its counsel in the compromise of, or defense against, any such Third Party
Claim; provided, however, that the Indemnifying Party shall not settle,
compromise or discharge, or admit any liability with respect to, any such Third
Party Claim without the prior written consent of the Indemnified Party (which
consent will not be unreasonably withheld or delayed), unless the relief
consists solely of money Losses to be paid by the Indemnifying Party and
includes a provision whereby the plaintiff or claimant in the matter releases
the Purchaser Indemnified Parties or the Parent Indemnified Parties, as
applicable, from all liability with respect thereto. Notwithstanding an election
to assume the defense of such action or proceeding, the Indemnified Party shall
have the right to employ separate counsel and to participate in the defense of
such action or proceeding, and the Indemnifying Party shall bear the reasonable
fees, costs and expenses of such separate counsel if the (A) Indemnified Party
shall have determined in good faith that an actual or potential conflict of
interest makes representation by the same counsel or the counsel selected by the
Indemnifying Party inappropriate or (B) Indemnifying Party shall have authorized
the Indemnified Party to employ separate counsel at the Indemnifying Party's
expense. In any event, the Indemnified Party and Indemnifying Party and their
counsel shall cooperate in the defense of any Third Party Claim subject to this
Article VI and keep such Persons informed of all developments relating to any
such Third Party Claims, and provide copies of all relevant correspondence and
documentation relating thereto. All costs and expenses incurred in connection
with the Indemnified Party's cooperation shall be borne by the Indemnifying
Party. In any event, the Indemnified Party shall have the right at its own
expense to participate in the defense of such asserted liability. If the
Indemnifying Party receiving such notice of a Third Party Claim does not elect
to defend such Third Party Claim or does not defend such Third Party Claim in
good faith, the Indemnified Party shall have the right, in addition to any other
right or remedy it may have hereunder, at the Indemnifying Party's expense, to
defend such Third Party Claim; provided, however, that the Indemnified Party
shall not settle, compromise or discharge, or admit any liability with respect
to, any such Third Party Claim without the written consent of the Indemnifying
Party (which consent will not be unreasonably withheld or delayed).
Section 6.5. General.
(a) The provisions of this Article VI will survive the expiration of
this Agreement.
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(b) The rights and remedies provided herein shall be
cumulative and in addition to all other rights and remedies available to the
parties at law or equity, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such rights or remedies by such party. Notwithstanding the preceding
sentence, nothing in this Agreement shall restrict or prevent any party from
seeking indemnification under any applicable provision of the Acquisition
Agreement, or any of the other Related Agreements (as defined in the Acquisition
Agreement), provided that no party shall obtain duplicative recoveries.
ARTICLE VII.
MISCELLANEOUS
Section 7.1. Equitable Remedes. The parties hereto acknowledge that money
damages may not be an adequate remedy for violations of this Agreement and that
any party, in addition to any other rights and remedies which the parties may
have hereunder or at law or in equity, may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunction or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable Law, each party waives any objection to the imposition of such
relief.
Section 7.2. Severability. If any provision of this Agreement or the
application of any such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable Law,
the parties waive any provision of Law that renders any provision of this
Agreement invalid, illegal or unenforceable in any respect. The parties shall,
to the extent lawful and practicable, use their commercially reasonable efforts
to enter into arrangements to reinstate the intended benefits, net of the
intended burdens, of any such provision held invalid, illegal or unenforceable.
Section 7.3. Further Assurance and Assistance. Parent and Purchaser agree
that each will, and will cause their respective Affiliates to, execute and
deliver any and all documents, and take such further acts, in addition to those
expressly provided for herein, that may be necessary or appropriate to
effectuate the provisions of this Agreement.
Section 7.4. Notices. All notices, demands and other communications
required or permitted to be given to any party under this Agreement shall be in
writing and any such notice, demand or other communication shall be deemed to
have been duly given when delivered by hand, courier or overnight delivery
service or, if mailed, two (2) Business Days (as defined in the Acquisition
Agreement) after deposit in the mail and sent certified or registered mail,
return receipt requested and with first-class postage prepaid, or in the case of
facsimile notice, when sent and transmission is confirmed, and, regardless of
method, addressed to the party at its address or facsimile number set forth
below (or at such other address or facsimile number as the party shall furnish
the other parties in accordance with this Section 7.4):
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(a) If to Parent:
Citigroup Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Deputy General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
e-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Purchaser:
MetLife, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President and General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Section 7.5. Successors and Assigns. Subject to the terms of this Section
7.5, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that the
Parent Indemnified Parties and the Purchaser Indemnified Parties shall be
intended third-party beneficiaries of Article VI. No party hereto may assign its
rights or obligations under this Agreement without the prior written consent of
the other party (which consent may not be unreasonably withheld) and any
purported assignment without such consent shall be void.
Section 7.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflict of laws principles of such State.
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Section 7.7. Jurisdiction; Venue; Consent to Service of Process.
(a) Each of the parties hereto irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of New York or, if such court will not
accept jurisdiction, the Supreme Court of the State of New York or any court of
competent civil jurisdiction sitting in New York County, New York. In any
action, suit or other proceeding, each of the parties hereto irrevocably and
unconditionally waives and agrees not to assert by way of motion, as a defense
or otherwise any claims that it is not subject to the jurisdiction of the above
courts, that such action or suit is brought in an inconvenient forum or that the
venue of such action, suit or other proceeding is improper. Each of the parties
hereto also hereby agrees that any final and unappealable judgment against a
party hereto in connection with any action, suit or other proceeding shall be
conclusive and binding on such party and that such award or judgment may be
enforced in any court of competent jurisdiction, either within or outside of the
United States. A certified or exemplified copy of such award or judgment shall
be conclusive evidence of the fact and amount of such award or judgment.
(b) Each party irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to Section 7.4 of this
Agreement. Nothing in this Section 7.7 shall affect the right of any party
hereto to serve process in any other manner permitted by Law.
Section 7.8. Frustration. Parent and Purchaser agree that neither party
shall take any action that would reasonably be expected to frustrate the intent
of this Agreement nor shall any party omit to take any action, the omission of
which would reasonably be expected to frustrate the intent of this Agreement.
Section 7.9. Entire Agreement. This Agreement, together with all schedules
hereto, embodies the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements with respect thereto. The
parties intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial proceeding involving this Agreement.
Section 7.10. Amendment and Waiver. No amendment to this Agreement shall
be effective unless it shall be in writing and signed by each party. Any failure
of a party to comply with any obligation, covenant, agreement or condition
contained in this Agreement may be waived by the party entitled to the benefits
thereof only by a written instrument duly executed and delivered by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure of compliance. In the event that the terms of an International Selling
Agreement shall conflict with the terms of this Agreement, the terms of such
International Selling Agreement shall control for purposes of such International
Selling Agreement.
Section 7.11. Access to Records. Parent shall cause the International
Parent Distributors to maintain adequate books and records related to the
activities of the International Parent Distributors under the International
Selling Agreements with respect to the Products and New
20
Products distributed thereunder. Upon written request, but no more frequently
than annually, (i) Parent shall certify to Purchaser its material compliance
with the terms of Sections 3.2(b), 3.3 and 3.4(a) of this Agreement during the
period covered by such certificate and (ii) Purchaser shall certify to Parent
that no Purchaser Insurer has, during the period covered by such certification,
provided to any Comparable Distributor any product that is substantially the
same as an Exclusive Product provided by a Travelers Insurer on an exclusive
basis to an International Exclusive Parent Distributor under an International
Selling Agreement with terms, total compensation, consumer pricing, wholesaler
coverage, training and support, features and service standards and metrics,
taken as a whole, that are materially more favorable to such Comparable
Distributor than the terms, total compensation, consumer pricing, wholesaler
coverage, training and support, features and service standards and metrics of
such Exclusive Product, taken as a whole.
Section 7.12. Counterparts. This Agreement may be executed by the parties
in multiple counterparts which may be delivered by facsimile transmission. Each
counterpart when so executed and delivered shall be deemed an original, and all
such counterparts taken together shall constitute one and the same instrument.
Section 7.13. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
[Remainder of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective authorized representatives.
CITIGROUP INC.
By: _______________________
Name:
Title:
METLIFE, INC.
By: _______________________
Name:
Title:
SCHEDULE 3.2(a)
EXISTING TRAVELERS INSURER PROVIDER RELATIONSHIPS(1)
International Products Offered
Parent Products Offered on a Non- Private Label
Country Distributor Exclusively Exclusive Basis Products Offered
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(1) To be finalized and updated as of the Closing Date.