ACQUISITION AGREEMENT
BY AND BETWEEN
CITIGROUP INC.
AND
METLIFE, INC.
DATED AS OF JANUARY 31, 2005
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS
Section 1.1 Certain Defined Terms...........................................................................1
Section 1.2 Index to Defined Terms.........................................................................18
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....................................25
Section 2.4 Allocation of Purchase Price...................................................................26
ARTICLE III THE CLOSING
Section 3.1 Closing........................................................................................27
Section 3.2 Preliminary Information........................................................................28
Section 3.3 Sellers' Deliveries at Closing.................................................................28
Section 3.4 Purchaser's Deliveries at Closing..............................................................29
Section 3.5 Proceedings at Closing.........................................................................30
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......................................................................................32
Section 4.6 Litigation.....................................................................................32
Section 4.7 Compliance with Requirements of Law............................................................32
Section 4.8 Financial Statements...........................................................................33
Section 4.9 Title..........................................................................................34
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..........................................................................39
Section 4.18 Taxes..........................................................................................39
i
Section 4.19 Affiliate Transactions.........................................................................43
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...........................................................45
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.................................................................48
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.............................................................49
Section 5.4 No Conflicts...................................................................................49
Section 5.5 Approvals......................................................................................49
Section 5.6 Litigation.....................................................................................49
Section 5.7 Compliance with Requirements of Law............................................................50
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
ii
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
iii
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
iv
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.
2
"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.
3
"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
4
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
5
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.
6
"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
7
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.
8
"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
18
Closing Agreement 6
Closing Date 27
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 33
FIRPTA Certificate 28
Forms 8023 83
19
FTC 8
Fund Board 46
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 33
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
20
Losses 10
LTC Acquisition Agreement 10
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 ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇
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
21
Purchaser Insurance Companies 12
Purchaser Material Adverse Effect 12
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
22
Tax Indemnifying Party 79
Tax Notice 79
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
23
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.
(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.
24
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 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
25
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. 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.
26
(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, 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."
27
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, 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
28
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);
(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
29
(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.
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.
30
(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 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
31
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 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.
32
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 "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
33
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 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
34
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 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
35
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 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
36
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 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
37
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 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.
38
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 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:
39
(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 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.
40
(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.
(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
41
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.
(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
42
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 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
43
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).
(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
44
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 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.
45
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
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
46
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.
(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
47
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
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
48
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 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,
49
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 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
50
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.
(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
51
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.
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
52
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 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;
53
(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 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
55
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.
58
(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
60
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.
61
(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,
62
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
63
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
64
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: (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
65
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 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.
66
(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
67
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
68
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
69
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).
70
(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.
71
(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.
72
(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
73
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
74
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
75
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)
76
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-
77
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.
78
(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.
79
(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
80
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
81
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.
82
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.
83
(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.
84
(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).
85
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.
86
(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
87
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,
88
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:
89
(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
90
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).
91
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.
92
(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.
94
(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.
99
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