1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND AMONG
FORTIS, INC.,
FORTIS BENEFITS INSURANCE COMPANY,
FORTIS INSURANCE COMPANY,
FIRST FORTIS LIFE INSURANCE COMPANY,
HOUSTON NATIONAL LIFE INSURANCE COMPANY,
AND
XXXX XXXXX LIFE INSURANCE COMPANY
AND
HARTFORD LIFE, INC.,
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
AND
HARTFORD LIFE INSURANCE COMPANY
DATED AS OF JANUARY 25, 2001
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 - DEFINITIONS ..................................................... 2
1.1 Definitions ....................................................... 2
ARTICLE 2 - ACQUISITION OF ASSETS AND ASSUMPTION OF LIABILITIES ............. 19
2.1 Closing ........................................................... 19
2.2 Assets, Liabilities and Payments .................................. 20
2.3 Timing and Form of Payments; Trust Accounts; Investment Management 21
2.4 Interim Statements; Closing Statement ............................. 23
2.5 Post-Closing Statement ............................................ 25
2.6 Identification and Valuation of Investment Assets ................. 28
2.7 Prorations ........................................................ 34
2.8 Closing Deliveries; Certain Obligations of Parent and Fortis ...... 34
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES ............ 37
3.1 Corporate Existence and Power ..................................... 37
3.2 Authority ......................................................... 38
3.3 Governmental Authorization ........................................ 38
3.4 Non-Contravention ................................................. 38
3.5 Financial Statements .............................................. 39
3.6 Separate Accounts ................................................. 40
3.7 Investment Assets ................................................. 41
3.8 Absence of Certain Changes ........................................ 51
3.9 Litigation ........................................................ 52
3.10 Compliance with Laws .............................................. 53
3.11 Regulatory Filings ................................................ 53
3.12 Insurance Contracts ............................................... 53
3.13 Third Party Reinsurance Contracts ................................. 55
3.14 Material Contracts ................................................ 56
3.15 Real Property ..................................................... 57
3.16 Personal Property ................................................. 59
3.17 Technology and Intellectual Property .............................. 59
3.18 Excluded Assets ................................................... 60
3.19 Employee Benefit Plans ............................................ 60
3.20 Labor and Employment Matters ...................................... 61
3.21 Tax Matters ....................................................... 62
3.22 Brokerage and Financial Advisers .................................. 63
3.23 Disclosure ........................................................ 63
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYERS ............. 63
4.1 Corporate Existence and Power ..................................... 63
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4.2 Authority ......................................................... 64
4.3 Governmental Authorization ........................................ 64
4.4 Non-Contravention ................................................. 64
4.5 Financial Statements .............................................. 65
4.6 Litigation ........................................................ 65
4.7 Compliance with Laws .............................................. 66
4.8 Qualified Institutional Buyer ..................................... 66
4.9 Sufficient Funds .................................................. 66
4.10 Brokerage and Financial Advisers .................................. 66
ARTICLE 5 - COVENANTS ....................................................... 67
5.1 Conduct of Business ............................................... 67
5.2 Certain Transactions .............................................. 69
5.3 Investigations; Pre-Closing Access ................................ 69
5.4 Post-Closing Access ............................................... 70
5.5 Confidentiality ................................................... 71
5.6 Filings; Other Actions; Notifications ............................. 71
5.7 Expenses .......................................................... 72
5.8 Further Assurances ................................................ 72
5.9 Use of Names, Logos or Service Marks .............................. 73
5.10 Third Party Reinsurance Contracts ................................. 73
5.11 Certain Employee Matters .......................................... 74
5.12 Allocation of Purchase Price and Assumed Liabilities .............. 76
5.13 Certain Tax Matters ............................................... 77
5.14 Noncompetition; Nonsolicitation ................................... 78
5.15 Bidder Agreements ................................................. 79
5.16 Public Announcements .............................................. 79
5.17 Transition Services ............................................... 79
5.18 New York Amendment ................................................ 79
5.19 DAC Tax ........................................................... 80
5.20 Certain Product Tax Matters ....................................... 80
5.21 Updating Schedules ................................................ 81
5.22 Interim Appointment of Agents ..................................... 81
ARTICLE 6 - CONDITIONS TO CLOSING ........................................... 82
6.1 Conditions to Obligations of Each Party ........................... 82
6.2 Conditions to Obligations of Buyers ............................... 82
6.3 Conditions to Obligations of the Seller Parties ................... 83
ARTICLE 7 - SURVIVAL AND INDEMNIFICATION .................................... 84
7.1 Survival .......................................................... 84
7.2 Obligations of Fortis to Indemnify ................................ 84
7.3 Obligations of Parent and Buyers to Indemnify ..................... 85
7.4 Notice of Loss, Asserted Liability ................................ 86
7.5 Opportunity to Contest ............................................ 86
7.6 Limitations on Indemnification .................................... 87
7.7 Sole Remedy ....................................................... 88
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7.8 Certain Reductions; Subrogation Rights ............................ 88
7.9 Effect of Indemnification ......................................... 88
ARTICLE 8 - TERMINATION PRIOR TO CLOSING .................................... 88
8.1 Termination by Mutual Consent ..................................... 89
8.2 Termination by Either Fortis or Buyers ............................ 89
8.3 Termination by Fortis ............................................. 89
8.4 Termination by Buyers ............................................. 89
8.5 Effect of Termination and Abandonment ............................. 89
ARTICLE 9 - MISCELLANEOUS ................................................... 90
9.1 Entire Agreement; Third Party Beneficiaries ....................... 90
9.2 Amendments ........................................................ 90
9.3 Waivers ........................................................... 90
9.4 Assignment ........................................................ 91
9.5 Notices ........................................................... 91
9.6 Arbitration ....................................................... 92
9.7 Governing Law ..................................................... 93
9.8 Captions .......................................................... 93
9.9 Interpretation .................................................... 93
9.10 Severability ...................................................... 94
9.11 Counterparts ...................................................... 94
SCHEDULES
1.1 Buyer Key People
1.2 Insurance Contracts
1.3 Seller Key People
1.4 Woodbury Property
1.5 Mortgage File
1.6 Excluded Employees
2.4 12/31/99 Statement
2.6 Mortgage Pools
3.3 Seller Parties Governmental Consents
3.4 Non-Contravention
3.8 Absence of Certain Changes
3.9 Litigation
3.10 Compliance With Laws
3.11 Regulatory Filings
3.12 Insurance Matters
3.13 Third Party Reinsurance Contracts
3.14 Material Contracts
3.15 Real Property Leases
3.16 Personal Property
3.17 Intellectual Property
3.18 Excluded Assets
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3.19 Employee Benefit Plans
3.20 Employees
4.1 Buyer Qualifications to do Business
4.3 Buyer Governmental Consents
4.4 Buyer Non-Contravention
4.7 Buyer Permits
5.1 New Products
5.11 Severance
5.17 Term Sheet
6.1 Governmental Consents
EXHIBITS
1 Form of Administrative Services Agreement for FBIC and FFLIC
2 Form of Administrative Services Agreement for FIC and HNL
3 Form of License Agreement
4 Form of Reinsurance Agreement for FBIC and FFLIC
5 Form of Reinsurance Agreement for FIC and HNL
6 Form of Reinsurance Agreement for JALIC
7 Form of Trust Agreement for FBIC, FIC and HNL
8 Form of Trust Agreement for JALIC
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of January
25, 2001, is entered into by and among FORTIS, INC., a Nevada corporation
("Fortis"), FORTIS BENEFITS INSURANCE COMPANY, a Minnesota stock life insurance
company and a wholly owned indirect subsidiary of Fortis ("FBIC"), FORTIS
INSURANCE COMPANY, a Wisconsin stock life insurance company and a wholly owned
indirect subsidiary of Fortis ("FIC"), FIRST FORTIS LIFE INSURANCE COMPANY, a
New York stock life insurance company and a wholly owned direct subsidiary of
Fortis ("FFLIC"), HOUSTON NATIONAL LIFE INSURANCE COMPANY, a Texas stock life
insurance company and a wholly owned indirect subsidiary of Fortis ("HNL"), and
XXXX XXXXX LIFE INSURANCE COMPANY, a Minnesota stock life insurance company and
a wholly owned indirect subsidiary of Fortis ("JALIC") (FBIC, FIC, FFLIC, HNL
and JALIC are collectively the "Insurers"; Fortis, FBIC, FIC, FFLIC, HNL and
JALIC are collectively the "Seller Parties"), HARTFORD LIFE, INC., a Delaware
corporation ("Parent"), HARTFORD LIFE AND ANNUITY INSURANCE COMPANY, a
Connecticut stock life insurance company and a wholly owned indirect subsidiary
of Parent ("Hartford Annuity"), and HARTFORD LIFE INSURANCE COMPANY, a
Connecticut stock life insurance company and a wholly owned indirect subsidiary
of Parent ("Hartford Life") (each of Hartford Annuity and Hartford Life is a
"Buyer," and together they are the "Buyers"). Certain capitalized terms used
herein are defined in Section 1.1.
WHEREAS, the Seller Parties are engaged in the sale, marketing,
underwriting, issuance and administration of certain life insurance policies and
annuity contracts; and
WHEREAS, FBIC, FIC, HNL and JALIC desire to cede to Hartford Annuity,
and Hartford Annuity desires to reinsure, on a 100% indemnity reinsurance or
100% modified coinsurance basis, as provided herein, the Insurance Contracts of
FBIC, FIC, HNL and JALIC; and
WHEREAS, FFLIC desires to cede to Hartford Life, and Hartford Life
desires to reinsure, on a 100% indemnity reinsurance basis, the Insurance
Contracts of FFLIC; and
WHEREAS, the Seller Parties desire to sell and transfer to Buyers, and
Buyers desire to purchase and assume, certain assets and liabilities used in or
related to the operations of the Business, in addition to the Insurance
Contracts;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
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ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. The following terms shall have the respective meanings
set forth below throughout this Agreement:
"1940 ACT" means the Investment Company Act of 1940, as amended, and
the SEC's rules and regulations thereunder.
"90-DAY TREASURY RATE" means the annual yield rate, on the date to
which such 90-Day Treasury Rate relates, of actively traded U.S. Treasury
securities having a remaining duration to maturity of three months, as such rate
is published under "Treasury Constant Maturities" in Federal Reserve Statistical
Release H.15(519).
"12/31/99 STATEMENT" has the meaning set forth in Section 2.4(a).
"ACCRUED PAYABLES" means, with respect to the applicable Insurer, the
liabilities of the Business determined in accordance with Applicable SAP and
appropriately includable in line items 6, 7.1, 7.2, 7.3, 8, 9, 11.1, 11.2, 11.3,
12, 12A, 13 (but only to the extent of amounts shown on Exhibit 5, lines 3.12,
3.22, 3.32 and 7.3), 15, 18 and 19 (but only the suspense account balances in
such line 19) of the Liabilities, Surplus and Other Funds page of the NAIC
Annual Statement Blank or in comparable line items in successor NAIC annual
statement blanks.
"ADJUSTED STATUTORY LIABILITIES" means, with respect to the applicable
Insurer, (a) reserves (other than any amount of reserves for Litigation or other
Retained Liabilities) and other liabilities of the Business of such Insurer
determined in accordance with Applicable SAP and appropriately includable in
line items 1, 2, 3, 4.1, 4.2, 5, 6, 7.1, 7.2, 7.3, 8, 9, 10.1, 10.2, 10.3, 11.1,
11.2, 11.3, 12, 12A, 13 (but only to the extent of amounts shown on Exhibit 5,
lines 3.12, 3.22, 3.32 and 7.3), 13A, 15, 16 (but only to the extent of amounts
shown on Exhibit 2, Line 5, Column 2), 18 and 19 (but only the suspense account
balances on such line 19) of the Liabilities, Surplus and Other Funds page of
the NAIC Annual Statement Blank or in comparable line items in successor NAIC
annual statement blanks, plus or minus (b) IMR determined as set forth in the
definition of "IMR" herein.
"ADMINISTRATIVE SERVICES AGREEMENTS" means the Administrative Services
Agreements to be entered into at the Closing between (i) FBIC and Hartford
Annuity in substantially the form of EXHIBIT 1, (ii) FIC and Hartford Annuity in
substantially the form of EXHIBIT 2, (iii) FFLIC and Hartford Life in
substantially the form of EXHIBIT 1, (iv) HNL and Hartford Annuity in
substantially the form of EXHIBIT 2, and (v) JALIC and Hartford Annuity in
substantially the form of EXHIBIT 2, but reasonably adjusted to reflect the
modified coinsurance arrangement and approved by Fortis and Buyer, which
approval shall not be unreasonably withheld, conditioned or delayed.
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"AFFILIATE" means, with respect to any Person, at any relevant time,
any other Person controlling, controlled by or under common control with such
Person.
"AGENTS DEBIT BALANCES" means, with respect to the applicable Insurer,
the aggregate of all agents balances and advanced Commissions owed to such
Insurer with respect to the Insurance Contracts, determined in accordance with
Applicable SAP and appropriately includable on lines 2.1 and 0501 of Exhibit 13
of the NAIC Annual Statement Blank or in comparable line items in successor NAIC
annual statement blanks.
"AGGREGATE PURCHASE PRICE" means the aggregate of the Purchase Price
hereunder and the purchase price to be paid by HLAIC to Fortis pursuant to the
Fortis Advisers Stock Purchase Agreement.
"ALLOCABLE AMOUNT" has the meaning set forth in Section 5.12(b).
"ANCILLARY AGREEMENTS" means the Reinsurance Agreements, the
Administrative Services Agreements, the Trust Agreements, the JALIC Investment
Management Agreement, the Assignment and Assumption Agreement, the Xxxx of Sale,
the Intellectual Property Assignment, the Marketing Agreements, the License
Agreement, the Transition Services Agreement and the other agreements referenced
in or contemplated by the foregoing.
"APPLICABLE SAP" means the statutory accounting principles,
consistently applied, as prescribed or permitted by the insurance regulatory
authorities in the state of Minnesota with respect to FBIC and JALIC, by the
insurance regulatory authorities in the state of Wisconsin with respect to FIC,
by the insurance regulatory authorities in the state of New York with respect to
FFLIC, and by the insurance regulatory authorities in the state of Texas with
respect to HNL.
"ASSERTED LIABILITY" has the meaning set forth in Section 7.4.
"ASSET PRICE" has the meaning set forth in Section 2.2(b)(ii).
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and
Assumption Agreement to be entered into at the Closing among the Seller Parties
and Buyers in form and substance reasonably acceptable to Fortis and Buyers.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2.2(b)(i).
"BENEFIT PLANS" has the meaning set forth in Section 3.19(a).
"BIDDER AGREEMENTS" has the meaning set forth in Section 5.15.
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"XXXX OF SALE" means the Xxxx of Sale to be entered into at the Closing
among the Seller Parties and Buyers in form and substance reasonably acceptable
to Fortis and Buyers.
"BOOKS AND RECORDS" means the originals or copies of all customer
lists, policy information, Insurance Contract forms and rating plans and other
documents and filings required under applicable Laws, administrative records,
reinsurance records, claim records, sales records, underwriting records,
financial records, tax records and compliance records in the possession or
control of any of the Seller Parties and reasonably relating to the operation of
the Business or the Purchased Assets, including any database, magnetic or
optical media (to the extent not subject to licensing restrictions) and any
other form of recorded, computer generated or stored information, but excluding
(i) the Seller Parties' certificates of incorporation, bylaws, corporate seals,
licenses to do business, minute books and other corporate records relating to
corporation organization and capitalization; (ii) original Tax and corporate
accounting records relating to the Business; (iii) any records that are subject
to attorney-client privilege; and (iv) original records to be maintained by the
Seller Parties under applicable Law.
"BUSINESS" means the business of underwriting, issuing, marketing,
distributing and administering the Insurance Contracts and the other business
activities reasonably related thereto as currently conducted by the Seller
Parties, together with the business currently conducted by Fortis Advisers and
its Subsidiaries.
"BUSINESS DAY" means any day other than a Saturday, Sunday, a day on
which banking institutions in the States of New York and Connecticut are
permitted or obligated by Law to be closed, or a day on which the New York Stock
Exchange is closed for trading.
"BUYER" has the meaning set forth in the first paragraph of this
Agreement.
"BUYER EMPLOYEE" has the meaning set forth in Section 5.11(a).
"BUYER INDEMNITEES" has the meaning set forth in Section 7.2.
"BUYER KEY PEOPLE" means the individuals set forth in SCHEDULE 1.1.
"BUYER MATERIAL ADVERSE EFFECT" means an event, change or occurrence
that, individually or together with any other event, change or occurrence, has a
material adverse effect on (i) the financial condition, business, assets,
liabilities, properties or results of operations of Parent or Buyers, in any
case taken as a whole, or (ii) the ability of Parent or either Buyer to perform
its obligations under this Agreement or any Ancillary Agreement or to consummate
the transactions contemplated hereby and thereby, provided, however, that a
Buyer Material Adverse Effect shall not include the effect of any event, change
or occurrence arising out of or attributable to (1) conditions in the United
States or global economies or securities markets in general, (2) regulatory and
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legal conditions in each of the life insurance (including annuities) and mutual
fund industries generally, (3) changes in accounting principles applicable to
Parent or either Buyer to the extent required by Law, Applicable SAP or GAAP, or
(4) the transactions contemplated by this Agreement, the Ancillary Agreements or
the Fortis Advisers Stock Purchase Agreement, or the announcement thereof.
"BUYER'S OBJECTION NOTICE" has the meaning set forth in Section 2.5(b).
"CAUSE" has the meaning set forth in Section 5.11(b).
"CEDING COMMISSION" has the meaning set forth in Section 2.2(b)(ii).
"CHANGE IN CONTROL AGREEMENTS" has the meaning set forth in Section
5.11(g).
"CLAIMS NOTICE" has the meaning set forth in Section 7.4.
"CLOSING" means the consummation of the transactions contemplated by
this Agreement.
"CLOSING DATE" means (i) if the last of the conditions to Closing set
forth in Section 6.1 is satisfied or waived prior to the 15th day of a given
month, then the Closing Date shall be the first day of the month following the
month in which the last of the conditions was so satisfied or waived, or (ii) if
such satisfaction or waiver occurs or is granted after the 15th day of any given
month, then the Closing Date shall be the first day of the second month
following the month in which the last of the closing conditions is so satisfied
or waived; provided, however, that if such date is not a Business Day, the
Closing Date shall be the immediately succeeding Business Day; and provided
further, that the Closing may occur on such other date as the parties may agree
to in writing.
"CLOSING INVESTMENT STATEMENT" has the meaning set forth in Section
2.6(b).
"CLOSING STATEMENT" has the meaning set forth in Section 2.4(b).
"CODE" means the Internal Revenue Code of 1986, as amended. Any
citation to a provision of the Code includes a citation to any successor
provision.
"COMMERCIAL MORTGAGES" has the meaning set forth within the definition
of Investment Assets.
"COMMISSIONS" means all commissions, expense allowances, benefit
credits and other fees and compensation payable to producers, agents, brokers or
other such sales representatives.
"COMPETING BUSINESS" has the meaning set forth in Section 5.14(a).
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"CONDEMNATION PROCEEDING" means any proceeding in condemnation or
eminent domain or any written request for a conveyance in lieu thereof, or any
notice that such proceedings have been or will be commenced against any portion
of the Woodbury Property.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 5.5.
"CONSENT" means any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any Contract
or any applicable Law, Order or Permit.
"CONTEST NOTICE" has the meaning set forth in Section 7.5(b).
"CONTRACT" means any written or oral agreement, arrangement,
commitment, contract, indenture, lease, obligation, plan, understanding or
undertaking of any kind or character to which a party hereto is a party or that
is binding on any such party or its assets or business.
"CORPORATE BONDS" has the meaning set forth within the definition of
Investment Assets.
"DATA CENTER LEASE" means that certain Lease dated as of October 1,
2000, by and between FBIC and Fortis, pursuant to which Fortis leases from FBIC
the second floor of the office building located on the Woodbury Property.
"DEDUCTIBLE" has the meaning set forth in Section 7.6(a).
"DESIGNATED EMPLOYEES" has the meaning set forth in Section 3.7(ii).
"EMPLOYEE" means each individual who is employed by any of the Seller
Parties or their Affiliates (including each individual employed by Fortis
Advisers or Fortis Investors, but excluding those individuals specified in
SCHEDULE 1.6) and who spends substantially all of such individual's working
hours performing services for the Business, whether on a full-time or part-time
basis, and including such individuals who are on short-term or long-term
disability or leaves of absence.
"ENVIRONMENTAL LAWS" means any federal, state and local Laws and Orders
relating to the regulation or protection of the natural environment or to
releases or threatened releases of Hazardous Materials into the soil, land
surface or subsurface strata, surface waters (including navigable waters, ocean
waters, streams, ponds, drainage basins and wetlands), ground waters, drinking
water supply, stream sediments, ambient air (including indoor air) and any other
environmental medium or natural resource.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations thereunder.
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"ERISA AFFILIATE" has the meaning set forth in Section 3.19(d).
"EXCESS ACCRUED PAYABLES" means the amount, if any, by which the actual
aggregate amount of Accrued Payables of all Insurers exceeds the aggregate
amount of Accrued Payables of all Insurers included on the Post-Closing
Statement.
"EXCLUDED ASSETS" means those assets listed on SCHEDULE 3.18.
"EXCLUDED CONTRACTS" means those Contracts listed on SCHEDULE 3.18.
"EXISTING CONDITIONS" has the meaning set forth in Section 3.7(ii)(aa).
"EXTRA CONTRACTUAL OBLIGATIONS" means all claims, actions, suits,
liabilities, obligations or losses, other than Insurance Contracts Liabilities,
arising under the Insurance Contracts including, without limitation, obligations
or losses in excess of the contractual policy benefits of the applicable
Insurance Contract, any liability for fines, fees, penalties, punitive, special,
exemplary or other form of extra-contractual damages, which claims, actions,
suits, liabilities, obligations or losses arise from any act, error or omission,
whether or not intentional, negligent, in bad faith or otherwise relating to:
(i) the design, marketing, sale, underwriting, rating of or rates chargeable
under, issuance, cancellation or administration of the Insurance Contracts; (ii)
the investigation, defense, trial, settlement or handling of claims, benefits,
dividends or payments under the Insurance Contracts; or (iii) the failure to
pay, the delay in payment, or errors in calculating or administering the payment
of benefits, claims, dividends or any other amounts due or alleged to be due
under the Insurance Contracts.
"FAIR MARKET VALUE" has the meaning set forth in Section 2.6(e).
"FBIC" has the meaning set forth in the first paragraph of this
Agreement.
"FBIC SEPARATE ACCOUNTS" means, together (i) the FBIC Separate Account
C, which is a unit investment trust and is registered as an investment
management company under the 1940 Act, and (ii) the FBIC Separate Account D,
which is a unit investment trust and is registered as an investment management
company under the 1940 Act.
"FBIC SEPARATE ACCOUNT SURPLUS" means the aggregate surplus in the FBIC
Separate Accounts, appropriately includable in accordance with Applicable SAP on
line 19 of the Liabilities and Surplus page of the NAIC Annual Statement for
life and accident and health insurance companies -- association edition --
separate accounts, as prescribed by the NAIC, that was in effect for year-end
1999 filings.
"FFG BENEFIT PLANS" has the meaning set forth in Section 3.19(a).
"FFG INVESTMENT ASSETS" has the meaning set forth in Section 2.6(a).
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"FFLIC" has the meaning set forth in the first paragraph of this
Agreement.
"FFLIC SEPARATE ACCOUNT" means the FFLIC Separate Account A, which is a
unit investment trust and is registered as an investment management company
under the 1940 Act.
"FFLIC SEPARATE ACCOUNT SURPLUS" means the aggregate surplus in the
FFLIC Separate Account, appropriately includable in accordance with Applicable
SAP on line 19 of the Liabilities and Surplus page of the NAIC Annual Statement
for life and accident and health insurance companies -- association edition --
separate accounts, as prescribed by the NAIC, that was in effect for year-end
1999 filings.
"FIC" has the meaning set forth in the first paragraph of this
Agreement.
"FORTIS" has the meaning set forth in the first paragraph of this
Agreement.
"FORTIS ADVISERS" means Fortis Advisers, Inc., a Minnesota corporation
and a wholly owned direct subsidiary of Fortis.
"FORTIS ADVISERS STOCK PURCHASE AGREEMENT" means that certain Stock
Purchase Agreement of even date herewith between Fortis and HLAIC, pursuant to
which Fortis has agreed to sell to HLAIC, and HLAIC has agreed to purchase, 100%
of the issued and outstanding common stock of Fortis Advisers.
"FORTIS 401(k) PLAN" means the Fortis, Inc. Employees' Uniform Profit
Sharing Plan, as amended, or any successor plan thereto.
"FORTIS INVESTORS" means Fortis Investors, Inc., a Minnesota
corporation and a wholly owned direct subsidiary of Fortis Advisers.
"FORTIS PENSION PLAN" means the Fortis, Inc. Employees' Uniform
Retirement Plan, as amended, or any successor plan thereto.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GAAP FINANCIAL STATEMENTS" has the meaning set forth in Section
3.5(b).
"GENERAL ACCOUNT RESERVES" means, with respect to the applicable
Insurer, the amount of the reserves (other than any amount of reserves for
Litigation or other Retained Liabilities) of the Business of such Insurer
determined in accordance with Applicable SAP and appropriately includable in
line items 1, 2, 3, 4.1, 4.2, 5, 10.1, 10.2 and 10.3 of the Liabilities, Surplus
and Other Funds page of the NAIC Annual Statement Blank, or in comparable line
items in successor NAIC annual statement blanks.
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"GOVERNMENTAL AUTHORITY" means any federal, state, county, local,
foreign or other governmental or public agency, instrumentality, commission,
authority, self-regulatory organization, board or body, including, without
limitation, the SEC, NASD and any state insurance regulatory authority.
"GOVERNMENT BONDS" has the meaning set forth within the definition of
Investment Assets.
"HARTFORD ANNUITY" has the meaning set forth in the first paragraph of
this Agreement.
"HARTFORD LIFE" has the meaning set forth in the first paragraph of
this Agreement.
"HAZARDOUS MATERIALS" means any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic or a pollutant or a contaminant or otherwise
regulated under or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HIMCO" means Hartford Investment Management Company, a Delaware
corporation, an Affiliate of Parent, and a duly registered investment adviser
under the 1940 Act.
"HLAIC" means Hartford Life and Accident Insurance Company, a
Connecticut stock life insurance company and a direct wholly owned Subsidiary of
Parent.
"HNL" has the meaning set forth in the first paragraph of this
Agreement.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the regulations thereunder.
"IMR" means, with respect to the applicable Insurer (excluding JALIC)
as of the Closing Date an interest maintenance reserve amount computed as
follows:
(a) There shall be determined the amount for the Business (i)
that is appropriately includable on line 11.4 of the Liabilities, Surplus and
Other Funds page of the NAIC Annual Statement Blank or in a comparable line
item in successor NAIC annual statement blanks, (ii) that is computed
immediately prior to the Closing Date before taking into consideration the
effects of the transactions contemplated hereby, and (iii) that is determined
in accordance with generally accepted actuarial standards and Applicable SAP
(using the same accounting and actuarial methodologies, assumptions and
procedures, and the application thereof, as were used by the applicable
Insurer in
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determining such item in such Insurer's statutory financial statements as of
December 31, 1999, provided, however, that correction of an arithmetical, data
input, coding or similar error, each as mutually approved by Fortis and Buyers
(and, failing such mutual approval, as determined by the Umpire) shall not be
deemed a deviation from such accounting or actuarial methodologies,
assumptions or procedures).
(b) There shall be added to or subtracted from the amount
determined in subsection (a) immediately above all amounts that would be added
to or subtracted from such line 11.4 if the remaining portion of the
applicable Insurer's FFG Investment Assets equal in value to such Insurer's
Adjusted Statutory Liabilities as determined hereafter in subsections (c) and
(d) immediately below were transferred on the Closing Date to the applicable
Buyer, with all amounts being determined in the same manner as provided in
clause (iii) of subsection (a) immediately above. For purposes of the
determination of IMR, the value of the FFG Investment Assets shall be Fair
Market Value.
(c) The initial portion of the applicable Insurer's FFG
Investment Assets referred to in paragraph (b) shall be determined on or
before March 15, 2001 as follows:
(i) Fortis shall determine the Insurer's Adjusted
Statutory Liabilities (for this purpose, including only the
IMR determined pursuant to subsection (a) immediately above)
as of December 31, 2000, as reflected on the 12/31/00
Statement.
(ii) Fortis shall determine the Fair Market Value of
such Insurer's FFG Investment Assets (excluding cash and
short-term investments), listed asset by asset, as of December
31, 2000.
(iii) If such Fair Market Value is less than or equal
to the Insurer's Adjusted Statutory Liabilities as of December
31, 2000, then the IMR amount referred to in subsection (b)
shall be based on those assets that were listed at December
31, 2000 and that still remain at the Closing Date.
(iv) If such Fair Market Value is greater than the
Adjusted Statutory Liabilities, then the individual asset with
the greatest dollar IMR capital gain (or smallest dollar IMR
capital loss if there are no gains), and the individual asset
with the greatest dollar IMR capital loss (or smallest dollar
IMR capital gain if there are no losses) shall be removed by
Fortis from the list. Fortis will continue to remove on the
same basis two assets from such FFG Investment Assets until
the remaining Fair Market Value of the FFG Investment Assets
is equal to or smaller than the Adjusted Statutory Liabilities
of the Insurer as of December 31, 2000.
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16
(d) Any such FFG Investment Assets as selected pursuant to
subsection (c) that are disposed of in the ordinary course of business between
December 31, 2000 and the Closing Date shall be deleted from the remaining FFG
Investment Assets, and the FFG Investment Assets that remain with the applicable
Insurer shall be used to compute the deemed IMR referred to in subsection (b).
(e) The parties acknowledge and agree that all FFG Investment
Assets will not actually be transferred to Buyer, and that this computation of
IMR is based on a deemed transfer of such FFG Investment Assets.
(f) IMR for JALIC means the interest maintenance reserve
determined with respect to JALIC's Insurance Contracts in accordance with
Applicable SAP and appropriately includable in line item 11.4 of the
Liabilities, Surplus and Other Funds page of the NAIC Annual Statement Blank or
in comparable line items in successor NAIC annual statement blanks.
"INCOME TAX REGULATIONS" means the temporary or final regulations
issued under the Code. Any citation to a provision of the Income Tax Regulations
includes a reference to any successor regulatory provision.
"INDEMNIFIED PARTY" has the meaning set forth in Section 7.4.
"INDEMNIFYING PARTY" has the meaning set forth in Section 7.4.
"INSURANCE CONTRACTS" means only those contracts of insurance and
annuities of the Insurers described on SCHEDULE 1.2 that have been issued or
reinsured by one of the Insurers in connection with the Business and are in
force on the Closing Date, or are subject to being renewed or reinstated in
accordance with their terms on the Closing Date, together with all related
binders, slips and certificates (including applications therefor and all
supplements, endorsements and riders in connection therewith)
"INSURANCE CONTRACTS LIABILITIES" means all (i) liabilities of the
types for which amounts are included in the Adjusted Statutory Liabilities
arising under or with respect to the Insurance Contracts, regardless of whether
such liabilities arise before, on or after the Closing Date, and (ii) all Extra
Contractual Obligations that arise out of acts or omissions by Buyers or any of
their respective directors, officers, employees, Affiliates, agents or
representatives which acts or omissions occur (or, in the case of omissions,
fail to occur) at any time on or after the Closing Date.
"INSURERS" has the meaning set forth in the first paragraph of this
Agreement.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 3.17.
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"INTELLECTUAL PROPERTY ASSIGNMENT" means the Assignment and Assumption
Agreement for Intellectual Property to be entered into at the Closing among the
Seller Parties and Buyers in form and substance reasonably acceptable to Fortis
and Buyers.
"INTELLECTUAL PROPERTY LICENSES" has the meaning set forth in Section
3.17.
"INTERIM STATEMENT" has the meaning set forth in Section 2.4(a).
"INVESTMENT ASSETS" means investment assets of the Insurers that are
admitted assets under Applicable SAP and the insurance Laws of the applicable
Insurer's state of domicile and consisting of a combination of some or all of
the following types of investment assets: (i) bonds, debentures, notes or other
evidences of indebtedness issued, assumed or guaranteed by the United States of
America, any state, territory or possession thereof, any town, city or
municipality of any such state, the District of Columbia, or any agency or
instrumentality of any such governmental unit ("Government Bonds"); (ii) bonds,
debentures, notes or other evidences of indebtedness issued, assumed or
guaranteed by any solvent institution created or existing under the Laws of the
United States or Canada, other than Affiliates of Fortis ("Corporate Bonds");
(iii) securities or other instruments (excluding mutual funds) evidencing
interests in or rights to receive payments from specified pools of mortgages
("Mortgage-Backed Securities"); (iv) bonds, notes or other evidences of
indebtedness secured by first or second mortgages, deeds of trust or similar
consensual liens representing first or second liens upon real property used for
commercial (as opposed to residential) purposes, together with any and all title
policies, surveys, soil reports or site plans in Seller Parties' possession
("Commercial Mortgages"); and (v) cash and cash equivalents. Items (i) through
(iv) in this definition shall include any and all documents, agreements or
instruments securing or guaranteeing such indebtedness, or any other materials
of any kind in Seller Parties' possession, if any, that relate to the
indebtedness or the property secured by such indebtedness.
"IRS" means the United States Internal Revenue Service.
"JALIC" has the meaning set forth in the first paragraph of this
Agreement.
"JALIC DEPOSIT AMOUNT" has the meaning set forth in Section 2.3(a)(v).
"JALIC INVESTMENT MANAGEMENT AGREEMENT" means the Investment Management
Agreement to be entered into at the Closing among JALIC, Hartford Annuity and
HIMCO in a form consistent with the terms of the transactions contemplated by
this Agreement and approved by Fortis and Buyers, which approval shall not be
unreasonably withheld, conditioned or delayed.
"JALIC RESERVE ADJUSTMENT" has the meaning set forth in Section
2.2(b)(iii).
"KNOWLEDGE" shall be interpreted for the purposes of this Agreement as
follows: (i) a matter will be deemed to be within the "Knowledge of the Seller
Parties" if (A) such
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matter is actually known to any of the Seller Key People, or (B) in light of the
positions held by the Seller Key People, after reasonable inquiry, the matter
would reasonably be expected to be known by any of the Seller Key People; and
(ii) a matter will be deemed to be within the "Knowledge of Parent or Buyers" if
(A) such matter is actually known to any of the Buyer Key People, or (B) in
light of the positions held by the Buyer Key People, after reasonable inquiry,
the matter would reasonably be expected to be known by any of the Buyer Key
People.
"LAW" means any federal, state, local or foreign code, law, statute,
ordinance, regulation, rule, reporting or licensing requirement, policy,
guideline, administrative interpretation or other requirement of a Governmental
Authority (including those of the SEC, NASD, NAIC, any self-regulatory
organization or any state insurance department) applicable to the parties
hereto, or any of their respective Affiliates, properties, assets, officers,
directors, employees or agents, as the case may be.
"LICENSE AGREEMENT" means the License Agreement to be entered into at
the Closing among certain Affiliates of the Seller Parties and Buyers in
substantially the form of EXHIBIT 3.
"LICENSED INTELLECTUAL PROPERTY" has the meaning set forth in Section
3.17.
"LIEN" means any claim, charge, conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, security interest or other security arrangement,
on or with respect to any asset or property.
"LITIGATION" means any action, cause of action (whether at law or in
equity), arbitration, claim or complaint by any Person alleging potential
liability, wrongdoing or misdeed of another Person (other than claims for policy
benefits in the ordinary course of business), or any administrative or other
similar proceeding, criminal prosecution or investigation by any Governmental
Authority alleging potential liability, wrongdoing or misdeed of another Person.
"LOAN DOCUMENTS" has the meaning set forth in Section 3.7(ii).
"LOSS" means any action, claim, loss, liability, damage, deficiency,
cost, expense (including reasonable fees and expenses of attorneys, actuaries,
accountants and other consultants), interest or penalty.
"MARKETING AGREEMENTS" means the Marketing Agreements to be entered
into at the Closing between (i) FBIC and Hartford Annuity, and (ii) FFLIC and
Hartford Life, each in a form consistent with the terms of the transactions
contemplated by this Agreement and approved by Fortis and Buyers, which approval
shall not be unreasonably withheld, conditioned or delayed, and each providing,
among other things, that neither Insurer will be obligated to issue insurance
policies and annuity contracts pursuant thereto
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past the earlier of December 31, 2002 or the date upon which all such policies
and contracts issued by both Insurers constitutes $1,000,000,000 in annualized
Premiums.
"MATERIAL CONTRACTS" means, collectively, the Contracts described in
Section 3.14 together with the Personal Property Leases, the Real Property
Leases and the Third Party Reinsurance Contracts.
"MORTGAGE-BACKED SECURITIES" has the meaning set forth within the
definition of Investment Assets.
"MORTGAGE FILE" means, with respect to each Commercial Mortgage that is
part of the Transferred Investment Assets, the items set forth on SCHEDULE 1.5.
"MORTGAGE LOAN" has the meaning set forth in Section 3.7(ii).
"MORTGAGE LOAN ENVIRONMENTAL LAWS" has the meaning set forth in Section
3.7(ii)(aa).
"MORTGAGE LOAN SCHEDULE" has the meaning set forth in Section 3.7(ii).
"MORTGAGE LOAN TITLE POLICY" has the meaning set forth in Section
3.7(ii)(m).
"MORTGAGE POOL" has the meaning set forth in Section 2.6(a).
"NAIC" means the National Association of Insurance Commissioners.
"NAIC ANNUAL STATEMENT BLANK" means the form of annual statement for
life and accident and health insurance companies -- association edition, as
prescribed by the NAIC, that was in effect for year-end 1999 filings.
"NASD" means the National Association of Securities Dealers, Inc.,
including its Subsidiary, NASD Regulation, Inc.
"NET TRANSFER AMOUNT" means, with respect to an applicable Insurer,
Adjusted Statutory Liabilities minus Policy Loan Receivables, minus Premiums
Receivable, minus Reinsurance Recoverables, minus Agents Debit Balances and
minus Ceding Commission; and for FBIC only, minus any FBIC Separate Account
Surplus; and for FFLIC only, minus any FFLIC Separate Account Surplus.
"NY AMENDMENT DATE" has the meaning set forth in Section 5.18(c).
"NY DOI" has the meaning set forth in Section 5.18.
"ORDER" means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling or writ of any
federal, state,
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local or foreign or other court, arbitrator, mediator, tribunal or other
Governmental Authority.
"OWNED INTELLECTUAL PROPERTY" has the meaning set forth in Section
3.17.
"OWNED PERSONAL PROPERTY" has the meaning set forth in Section 3.16(a).
"PARENT" has the meaning set forth in the first paragraph of this
Agreement.
"PARENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4.5(b).
"PERMIT" means any license, permit, approval, registration,
authorization, qualification or filing with and under any federal, state, local
or foreign Law or with any Governmental Authority.
"PERMITTED EXCEPTION" has the meaning set forth in Section 3.7(ii)(l).
"PERMITTED LIEN" means, with respect to the Purchased Assets or the
Commercial Mortgages, (i) statutory liens for Taxes not yet due and payable and
for which appropriate reserves have been established in accordance with GAAP,
(ii) any minor imperfection of title that does not materially interfere with the
present use or continuation of such present use in the Business, (iii)
materialmen's or similar liens or obligations arising in the ordinary course of
business securing accrued obligations not yet due and payable and which,
individually or in the aggregate, would not be material to any of the Seller
Parties, (iv) purchase money Liens arising in the ordinary course of business
which, individually or in the aggregate, would not be material to any of the
Seller Parties, and (v) with respect to the Woodbury Real Property, (1) any
state of facts that the survey prepared by Xxxxx Land Surveying, LLC dated
November 10, 2000 would show, (2) any covenants, conditions and restrictions,
rights of way, easements and other matters either of public record or
specifically referred to in the Title Insurance Commitment, and (3) the Data
Center Lease.
"PERSON" means any individual, corporation, partnership, firm, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, governmental, judicial or regulatory body,
division, business unit or other entity.
"PERSONAL PROPERTY LEASES" has the meaning set forth in Section
3.16(b).
"POLICY LOAN RECEIVABLES" means, with respect to the applicable
Insurer, the aggregate principal and accrued interest thereon of all policy
loans with respect to the Insurance Contracts, determined in accordance with
Applicable SAP and appropriately includable on lines 5 and 17 of the Assets page
of the NAIC Annual Statement Blank or in comparable line items in successor NAIC
annual statement blanks.
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"POST-CLOSING STATEMENT" has the meaning set forth in Section 2.5(a).
"PREMIUMS" means premiums, consideration, deposits and similar receipts
with respect to the Insurance Contracts.
"PREMIUMS RECEIVABLE" means, with respect to the applicable Insurer,
the aggregate of all Premiums receivable (including due and deferred Premiums)
with respect to the Insurance Contracts, determined in accordance with
Applicable SAP and appropriately includable on lines 15 and 16 of the Assets
page of the NAIC Annual Statement Blank or in comparable line items in successor
NAIC annual statement blanks.
"PURCHASE PRICE" has the meaning set forth in Section 2.2(b)(ii).
"PURCHASED ASSETS" means all of the following:
(i) the Woodbury Property;
(ii) the Owned Personal Property;
(iii) the Owned Intellectual Property and all goodwill
associated therewith;
(iv) the Books and Records; and
(v) the Transferred Contracts.
"QUALIFIED CONTRACT" means an Insurance Contract issued in connection
with a plan intended to qualify for tax treatment under Section 401(a), 403(a),
403(b), 408 or 457 of the Code.
"REAL PROPERTY LEASES" has the meaning set forth in Section 3.15(b).
"REINSURANCE AGREEMENTS" means the Reinsurance Agreements between (i)
FBIC and Hartford Annuity in substantially the form of EXHIBIT 4, (ii) FIC and
Hartford Annuity in substantially the form of EXHIBIT 5, (iii) FFLIC and
Hartford Life in substantially the form of EXHIBIT 4, (iv) HNL and Hartford
Annuity in substantially the form of EXHIBIT 5, and (v) JALIC and Hartford
Annuity in substantially the form of EXHIBIT 6.
"REINSURANCE RECOVERABLES" means, with respect to the applicable
Insurer, the aggregate of all amounts recoverable from reinsurers with respect
to the Insurance Contracts, determined in accordance with Applicable SAP and
appropriately includable on lines 12.1, 12.2, 12.3 and 12.4 of the Assets page
of the NAIC Annual Statement Blank or in comparable line items in successor NAIC
annual statement blanks.
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"RETAINED LIABILITIES" means all liabilities or obligations of any
character or nature (whether known or unknown, absolute or contingent, disclosed
or undisclosed) of any of the Seller Parties that are not Assumed Liabilities.
By way of illustration but without limitation to or exclusion of any category of
Retained Liability not specifically enumerated herein, the Retained Liabilities
shall include any liability or obligation arising from any of the following: (a)
Premium taxes due in respect of Premiums paid prior to the Closing Date or on
account of the Premiums Receivable; (b) the Excluded Assets or Excluded
Contracts; (c) Litigation against a Seller Party with respect to the Business
that is pending on the Closing Date or that arises with respect to events
occurring prior to the Closing Date; (d) any Seller Extra Contractual
Obligations; and (e) any income Taxes of the Seller Parties resulting from the
transfer or assignment to Buyers of the Transferred Investment Assets, Net
Transfer Amount or Purchased Assets.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the SEC's rules and regulations thereunder.
"SELLER BENEFIT PLANS" has the meaning set forth in Section 3.19(a).
"SELLER EXTRA CONTRACTUAL OBLIGATIONS" means all Extra Contractual
Obligations that arise out of acts or omissions occurring (or, in the case of
omissions, failing to occur) (i) at any time prior to the Closing Date by any of
the Seller Parties, or any of their respective directors, officers, employees,
Affiliates, agents or representatives, or (ii) on or after the Closing Date by
any of the Seller Parties that constitute a breach of such Seller Party's
obligations under any of the Ancillary Agreements.
"SELLER INDEMNITEES" has the meaning set forth in Section 7.3.
"SELLER KEY PEOPLE" means the individuals set forth in SCHEDULE 1.3.
"SELLER MATERIAL ADVERSE EFFECT" means an event, change or occurrence
that, individually or together with any other event, change or occurrence, has a
material adverse effect on (i) the financial condition, business, assets,
liabilities, properties or results of operations of the Business, taken as a
whole, or (ii) the ability of any of the Seller Parties to perform their
obligations under this Agreement or any Ancillary Agreement or to consummate the
transactions contemplated hereby and thereby, provided, however, that a Seller
Material Adverse Effect shall not include the effect of any event, change or
occurrence arising out of or attributable to (1) conditions in the United States
or global economies or securities markets in general, (2) regulatory and legal
conditions in each of the life insurance (including annuities) and mutual fund
industries generally, (3) changes in accounting principles applicable to the
Business to the extent required by Law, Applicable SAP or GAAP, or (4) the
transactions contemplated by this Agreement, the Ancillary Agreements or the
Fortis Advisers Stock Purchase Agreement, or the announcement thereof.
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"SELLER PARTIES" has the meaning set forth in the first paragraph of
this Agreement.
"SEPARATE ACCOUNT RECEIVABLES" means with respect to FBIC, the
aggregate amount owed by the FBIC Separate Accounts to FBIC, and with respect to
FFLIC by the FFLIC Separate Account to FFLIC, in each case as determined in
accordance with Applicable SAP and appropriately includable on line 13A of the
Liabilities, Surplus and Other Funds page of the applicable Insurer's NAIC
Annual Statement Blank or in comparable lines in successor NAIC annual statement
blanks.
"SUBSIDIARY" means, with respect to any Person on a given date (i)
any other Person of which twenty-five percent (25%) or more of the voting power
of the equity securities or equity interests is owned directly or indirectly by
such Person and (ii) any other Person the accounts of which, by virtue of an
ownership interest in it by such Person would be consolidated, in accordance
with GAAP, with those of such Person in its financial statements as of the
applicable date.
"TAX" means any federal, state, local, foreign or other income,
premium, payroll, withholding, excise, sales, use, gains, transfer, real and
personal property, use and occupation, capital stock, franchise or other tax,
assessment or governmental charge in the nature of a tax (not including charges
in connection with the filings referred to in Section 5.6 hereof), including
interest and penalties thereon.
"TAX RETURNS" has the meaning set forth in Section 3.21(b).
"TERMINATION DATE" has the meaning set forth in Section 8.2
"THIRD PARTY CLAIM" has the meaning set forth in Section 7.5(a).
"THIRD PARTY CLAIMANT" has the meaning set forth in Section 7.5(a).
"THIRD PARTY REINSURANCE CONTRACTS" has the meaning set forth in
Section 3.13.
"TITLE INSURANCE COMMITMENT" means that certain Commitment for Title
Insurance for the Woodbury Property issued by Commonwealth Land Title Insurance
Company dated September 6, 2000.
"TRANSFERRED CONTRACTS" means the Material Contracts together with
any and all Contracts entered into after the date hereof in accordance with the
terms and conditions of Section 5.1(b)(i).
"TRANSFERRED INVESTMENT ASSETS" has the meaning set forth in Section
2.6(b).
"TRANSITION SERVICES AGREEMENT" has the meaning set forth in Section
5.17.
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"TRUST AGREEMENTS" means (a) the Trust Agreements to be entered into
at the Closing among a trustee to be selected by Hartford Annuity and reasonably
acceptable to Fortis and (i) FBIC and Hartford Annuity in substantially the form
of EXHIBIT 7, and (ii) FIC and Hartford Annuity in substantially the form of
EXHIBIT 7, and (iii) HNL and Hartford Annuity in substantially the form of
EXHIBIT 7; and (b) the Trust Agreement to be entered into at the Closing among
JALIC, Hartford Annuity and a trustee to be selected by Fortis and reasonably
acceptable to Hartford Annuity in substantially the form of EXHIBIT 8.
"TRUST RESERVES" means (i) with respect to each of FBIC and FFLIC,
the General Account Reserves less the Separate Account Receivables, the Policy
Loan Receivables, the Premiums Receivable, the Reinsurance Recoverables and the
Agents Debit Balances; (ii) with respect to each of FIC and HNL, the General
Account Reserves less the Policy Loan Receivables, the Premiums Receivable, the
Reinsurance Recoverables and the Agents Debit Balances; and (iii) with respect
to JALIC, the Adjusted Statutory Liabilities excluding IMR less the Policy Loan
Receivables, the Premiums Receivable, and the Reinsurance Recoverables.
"UMPIRE" has the meaning set forth in Section 9.6(a).
"WOODBURY PROPERTY" means all those certain plots, pieces and parcels
of land located in the City of Woodbury, Minnesota, as more particularly
described on SCHEDULE 1.4 (the "Land") together with (i) all building and other
improvements situated on the Land (the "Building"); (ii) all easements, rights
of way, reservations, privileges, appurtenances and other estates and rights of
the fee owner pertaining to the Land and the Building; (iii) all right title and
interest in and to any leases, all guarantees thereof and the security deposits
thereunder; (iv) all right, title and interest of the fee owner in and to all
strips and gores, all alleys adjoining the Land, and the land lying in the bed
of any street, road or avenue, opened or proposed, in front of or adjoining the
land to the center line thereof, and all right, title and interest of the fee
owner in and to any award made or to be made in lieu thereof and in and to any
unpaid award as of the Closing Date for any taking by condemnation or any
damages to the land or the Building by reason of a change of grade or any
street, road or avenue; and (v) all right, title and interest of the fee owner
in any Permits or approvals relating to the Land or the Buildings.
ARTICLE 2
ACQUISITION OF ASSETS AND ASSUMPTION OF LIABILITIES
2.1 CLOSING. The Closing shall take place on the Closing Date at
10:00 a.m. local time at the offices of Xxxxxx & Bird LLP, One Atlantic Center,
0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx, or such other time and place as
Buyers and Fortis may mutually agree. The transactions contemplated hereby shall
be deemed to have been consummated and become effective for all purposes as of
12:01 a.m. on the Closing Date.
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2.2 ASSETS, LIABILITIES AND PAYMENTS.
(a) Purchased Assets and Payments Owed by Insurers:
(i) At the Closing, the Seller Parties shall sell, assign,
transfer, convey and deliver to Buyers, and Buyers shall purchase and
accept from the Seller Parties, all of the Seller Parties' rights,
title and interests in and to the Purchased Assets, free and clear of
all Liens other than Permitted Liens.
(ii) Each of FBIC, FIC and HNL shall pay to Hartford
Annuity a reinsurance premium equal to such Insurer's Adjusted
Statutory Liabilities as of the Closing Date; FFLIC shall pay to
Hartford Life a reinsurance premium equal to FFLIC's Adjusted
Statutory Liabilities as of the Closing Date; and JALIC shall pay to
Hartford Annuity a reinsurance premium equal to JALIC's Trust
Reserves plus its IMR as of the Closing Date.
(b) Assumed Liabilities and Payments Owed by Buyers:
(i) At the Closing: (1) pursuant to and in accordance with
the terms of the applicable Reinsurance Agreements, Hartford Annuity
shall reinsure the Insurance Contracts Liabilities of FBIC, FIC and
HNL pursuant to 100% coinsurance, and shall reinsure the Insurance
Contracts Liabilities of JALIC pursuant to 100% modified coinsurance,
(2) pursuant to and in accordance with the terms of the applicable
Reinsurance Agreement, Hartford Life shall reinsure the Insurance
Contracts Liabilities of FFLIC pursuant to 100% coinsurance, and (3)
pursuant to the Assignment and Assumption Agreement, Buyers shall
assume all of the contractual liabilities and obligations of the
Seller Parties first arising on or after the Closing Date under the
express terms and conditions of the Transferred Contracts (items (1),
(2) and (3) being, collectively, the "Assumed Liabilities"). It is
understood and agreed by the parties that in no event shall Parent or
Buyers assume, or have any responsibility or obligation for, any
Retained Liabilities.
(ii) At the Closing, (1) each Buyer, as applicable, shall
pay to each Insurer, as applicable, a ceding commission in the amount
to be set forth in the respective Reinsurance Agreement (each the
applicable "Ceding Commission"), and (2) Buyers shall pay to the
Seller Parties a purchase price for the Purchased Assets (the "Asset
Price"), with the aggregate Ceding Commissions for all Insurers
together with the Asset Price being Seven Hundred Fifteen Million and
00/100 Dollars ($715,000,000) (the "Purchase Price").
(iii) In addition, Hartford Annuity shall pay (1) to JALIC
a modified coinsurance reserve adjustment equal to the amount of the
Trust Reserves of JALIC as of the Closing Date (the "JALIC Reserve
Adjustment"), and (2) to
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FBIC the amount of any FBIC Separate Account Surplus as of the
Closing Date; and Hartford Life shall pay to FFLIC the amount of any
FFLIC Separate Account Surplus as of the Closing Date.
2.3 TIMING AND FORM OF PAYMENTS; TRUST ACCOUNTS; INVESTMENT
MANAGEMENT.
(a) The reinsurance premiums owed by the Insurers pursuant to Section
2.2(a)(ii) above, and the Purchase Price and the other amounts owed by Buyers
pursuant to Section 2.2(b)(iii) above, shall be paid as follows:
(i) With respect to FBIC, the Net Transfer Amount as of
the Closing Date shall be paid by FBIC to Hartford Annuity if such
amount is positive (by means of transferring Investment Assets
selected in accordance with Section 2.6), and by Hartford Annuity to
FBIC in cash if such amount is negative. In addition, pursuant to the
applicable Reinsurance Agreement, FBIC shall assign to Hartford
Annuity all of FBIC's rights, title and interest as of the Closing
Date in and to the amounts received pursuant to FBIC's Policy Loan
Receivables, Premiums Receivable, Reinsurance Recoverables, Separate
Account Receivables and Agents Debit Balances. In addition, Hartford
Annuity shall deposit an aggregate amount equal to 100% of the Trust
Reserves for FBIC into a trust account for the benefit of FBIC, and
such trust account shall thereafter be maintained in accordance with
the applicable Trust Agreement.
(ii) With respect to FIC, the Net Transfer Amount as of
the Closing Date shall be paid by FIC to Hartford Annuity if such
amount is positive (by means of transferring Investment Assets
selected in accordance with Section 2.6), and by Hartford Annuity to
FIC in cash if such amount is negative. In addition, pursuant to the
applicable Reinsurance Agreement, FIC shall assign to Hartford
Annuity all of FIC's rights, title and interest as of the Closing
Date in and to the amounts received pursuant to FIC's Policy Loan
Receivables, Premiums Receivable, Reinsurance Recoverables and Agents
Debit Balances. In addition, Hartford Annuity shall deposit an
aggregate amount equal to 100% of the Trust Reserves for FIC into a
trust account for the benefit of FIC, and such trust account shall
thereafter be maintained in accordance with the applicable Trust
Agreement.
(iii) With respect to FFLIC, the Net Transfer Amount as of
the Closing Date shall be paid by FFLIC to Hartford Life if such
amount is positive (by means of transferring Investment Assets
selected in accordance with Section 2.6), and by Hartford Life to
FFLIC in cash if such amount is negative. In addition, pursuant to
the applicable Reinsurance Agreement, FFLIC shall assign to Hartford
Life all of FFLIC's rights, title and interest as of the Closing Date
in and to the amounts received pursuant to FFLIC's Policy Loan
Receivables, Premiums Receivable, Reinsurance Recoverables, Separate
Account Receivables and Agents Debit Balances.
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(iv) With respect to HNL, the Net Transfer Amount as of
the Closing Date shall be paid by HNL to Hartford Annuity if such
amount is positive (by means of transferring Investment Assets
selected in accordance with Section 2.6), and by Hartford Annuity to
HNL in cash if such amount is negative. In addition, pursuant to the
applicable Reinsurance Agreement, HNL shall assign to Hartford
Annuity all of HNL's rights, title and interest as of the Closing
Date in and to the amounts received pursuant to HNL's Policy Loan
Receivables, Premiums Receivable, Reinsurance Recoverables and Agents
Debit Balances. In addition, Hartford Annuity shall deposit an
aggregate amount equal to 100% of the Trust Reserves for HNL into a
trust account for the benefit of HNL, and such trust account shall
thereafter be maintained in accordance with the applicable Trust
Agreement.
(v) With respect to JALIC: (1) JALIC shall deposit an
amount (by means of transferring Investment Assets selected in
accordance with Section 2.6) equal to 100% of the Trust Reserves for
JALIC (the "JALIC Deposit Amount"), into a trust account, and such
trust account shall thereafter be maintained in accordance with the
applicable Trust Agreement; and (2) Hartford Annuity shall pay to
JALIC in cash the amount of the applicable Ceding Commission less the
amount of JALIC's IMR as of Closing. After Closing, collection of
JALIC's Policy Loan Receivables, Premiums Receivable, Reinsurance
Recoverables and Agents Debit Balances shall be for the benefit of
Hartford Annuity, pursuant to the applicable Reinsurance Agreement.
(vi) Buyers shall pay the Asset Price to the Seller
Parties in cash at the Closing, by means of a wire transfer of
immediately available funds.
(b) All of the payments, transfers and deposits described in this
Section 2.3 that are to be as of the Closing Date shall be made on the Closing
Date, with amounts determined by reference to the Closing Statement. Thereafter,
such amounts shall be subject to adjustment in accordance with the Post-Closing
Statement, as described in Section 2.5.
(c) On the Closing Date, all assignments and transfers of the
Purchased Assets shall be effected by the Xxxx of Sale, the Assignment and
Assumption Agreement, the Intellectual Property Assignment and such other
instruments of transfer as may be necessary (including, without limitation, a
limited warranty deed for the Woodbury Property) and as shall be reasonably
acceptable in form and substance to Fortis and Buyers. Notwithstanding anything
in this Agreement to the contrary, the Seller Parties will deliver the Books and
Records to Buyers as soon as reasonably practicable and, subject to the
provisions of Section 5.4, the Seller Parties shall be entitled to keep and
maintain copies of all Books and Records from and after the Closing and to have
access to the originals of the Books and Records in accordance with the terms
hereof.
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(d) Nothing contained in this Agreement shall be construed as an
attempt to agree to assign any Contract that, under applicable Law, is
non-assignable without the consent of the counterparty thereto, unless such
consent shall have been given. The parties shall use all commercially reasonable
efforts to obtain all such necessary consents prior to the Closing, and to the
extent any such necessary consent has not been obtained, the parties shall
continue their efforts to obtain such consent after the Closing. In order that
the full value of every such Contract that is included within the Purchased
Assets may be realized, Buyers shall be entitled to the benefits accruing after
the Closing Date of any such non-assigned Contract, and the Seller Parties shall
take all commercially reasonable actions to confer upon Buyers, or otherwise
obtain for Buyers, such benefits. Buyers, at their expense, shall perform all of
the Seller Parties' obligations due to be performed under any such non-assigned
Contract that is included among the Assumed Liabilities to the extent Buyers can
perform such obligations without violating the terms of such non-assigned
Contract; provided, however, Buyers' obligations to perform under any such
non-assigned Contract shall at all times be conditioned upon Buyers being
entitled to receive all amounts due and owing from the counterparty.
Notwithstanding anything in this Agreement to the contrary, and subject to the
terms and conditions of Section 5.10, Buyers shall pay any and all fees payable
to the counterparty under the applicable Contract that is required in order to
obtain any necessary consent to assign such Contract, and each party shall
otherwise pay all of its own expenses in obtaining such consents; provided,
however, that if Buyers would be required to pay any such fee to a counterparty
in order to obtain such a consent, at the election of Buyers, such Contract will
not be assigned to Buyers, but Buyers will pay all costs reasonably incurred by
the Seller Parties in order for the Seller Parties to provide to Buyers the
benefits of such Contract in accordance with the terms of this Section 2.3(d) if
so permitted by the terms of such Contract or to terminate such Contract; and
provided further, that if the counterparty to any Contract refuses to permit
assignment to Buyers under any circumstances, and the Seller Parties cannot
confer upon Buyers the benefits of such Contract in accordance with all of the
terms and conditions of this Section 2.3(d) without violating the terms of such
Contract, then such Contract shall not be a Transferred Contract and Buyers
shall not be liable for any costs to Seller Parties as otherwise required by
this Section 2.3(d).
(e) At Closing, Hartford Annuity, JALIC and HIMCO shall (with Parent
hereby agreeing to cause HIMCO to) enter into the JALIC Investment Management
Agreement, pursuant to which HIMCO shall perform investment management services
relating to the JALIC Deposit Amount.
2.4 INTERIM STATEMENTS; CLOSING STATEMENT.
(a) Attached hereto as SCHEDULE 2.4 is a statement setting forth the
amounts described in Sections 2.3(a)(i) through (v), in each case as of December
31, 1999 (the "12/31/99 Statement"). Not later than February 21, 2001 with
respect to December 31, 2000, and not later than forty-five calendar days after
the end of each subsequent
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calendar quarter that ends during the period from the date of this Agreement
through the Closing, Fortis shall deliver to Buyer a written statement, which
shall be in the same form as the 12/31/99 Statement, and which shall set forth
all of the information on the 12/31/99 Statement as of December 31, 2000 or such
calendar quarter end, as applicable (the "Interim Statement"). Along with each
Interim Statement, Fortis shall deliver a certification of a responsible
financial officer of Fortis that all items appearing on such Interim Statement
were: (i) determined in good faith and, to the best of such officer's knowledge,
do not contain errors in calculation, methodology or application; (ii) based on
the Books and Records of the Seller Parties; (iii) determined in accordance with
Applicable SAP; and (iv) prepared using the same accounting and actuarial
methodologies, assumptions and procedures, and the application thereof, that
Fortis utilized in preparing the 12/31/99 Statement, provided, however, that
correction of an arithmetical, data input, coding or similar error, each as
mutually approved by Fortis and Buyers (and, failing such mutual approval, as
determined by the Umpire), shall not be deemed a deviation from such accounting
or actuarial methodologies, assumptions or procedures.
(b) Not less than ten calendar days prior to the Closing Date, Fortis
shall deliver to Buyer a written statement (the "Closing Statement"), which
shall be in the same form as the 12/31/99 Statement, and which shall set forth
the amounts described in Sections 2.3(a)(i) through (v), in each case estimated
as of the Closing Date in the good faith estimation of Fortis. Along with the
Closing Statement, Fortis shall deliver a certification of a responsible
financial officer of Fortis that all items appearing on such Closing Statement
were: (i) determined in good faith and, to the best of such officer's knowledge,
do not contain errors in calculation, methodology or application; (ii) estimated
in good faith by Fortis as of ten calendar days prior the Closing Date; (iii)
based on the Books and Records of the Seller Parties; (iv) determined in
accordance with Applicable SAP; and (v) prepared using the same accounting and
actuarial methodologies, assumptions and procedures, and the application
thereof, that Fortis utilized in preparing the 12/31/99 Statement and any
Interim Statement, provided, however, that correction of an arithmetical, data
input, coding or similar error, each as mutually approved by Fortis and Buyers
(and, failing such mutual approval, as determined by the Umpire), shall not be
deemed a deviation from such accounting or actuarial methodologies, assumptions
or procedures. As part of Buyers' continuing rights to investigate and review
the Business as provided in Section 5.3(a), Fortis will provide to Buyers a copy
of each Insurer's statutory financial statements as of December 31, 2000
(audited for those Insurers who prepare such audited statements, and unaudited
for any other Insurers). At the request of Buyers, Fortis will use commercially
reasonable efforts to obtain the necessary approvals and to provide to Buyers
the accountants' and auditors' work papers related to such financial statements
or to any Interim Statement, if there are any such work papers and only to
extent such work papers relate to the Business.
(c) Fortis will cooperate with and provide reasonable additional
information to Buyers and their designated representatives to the extent that,
following Buyers' review of the Interim Statements or Closing Statement, Buyers
have questions or
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require clarification concerning the amounts set forth on such statements or the
calculation thereof.
2.5 POST-CLOSING STATEMENT.
(a) As soon as practicable, but in any event not later than the last
to occur of (i) sixty calendar days following the Closing Date or (ii) five
calendar days after Fortis' receipt of the Commercial Mortgages valuation
contemplated by Section 2.6(e)(ii)(2), Fortis shall deliver to Buyer a written
statement (the "Post-Closing Statement"), which shall set forth (1) all amounts
described in Sections 2.3(a)(i) through (v) determined as of the Closing Date in
the same form as the 12/31/99 Statement, any Interim Statements and the Closing
Statement, and (2) the Fair Market Values of all Transferred Investment Assets
for each Insurer, and the aggregate total thereof for such Insurer, valued in
accordance with Section 2.6 as of the Closing Date. The Post-Closing Statement
shall include reasonable detail supporting the calculations made therein. Along
with the Post-Closing Statement, Fortis shall deliver a certification of a
responsible financial officer of Fortis that all items appearing on such
Post-Closing Statement were: (i) determined in good faith and, to the best of
such officer's knowledge, do not contain errors in calculation, methodology or
application; (ii) based on the Books and Records of the Seller Parties; (iii)
determined in accordance with Applicable SAP; and (iv) prepared using the same
accounting and actuarial methodologies, assumptions and procedures, and the
application thereof, that Fortis utilized in preparing the 12/31/99 Statement,
any Interim Statement and the Closing Statement, provided, however, that
correction of an arithmetical, data input, coding or similar error, each as
mutually approved by Fortis and Buyers (and, failing such mutual approval, as
determined by the Umpire), shall not be deemed a deviation from such accounting
or actuarial methodologies, assumptions or procedures. Buyers shall provide such
assistance to Fortis as Fortis shall reasonably request in preparing the
Post-Closing Statement, including, without limitation, providing Fortis and its
designated representatives with access to all related books, records, personnel,
systems and reserving models, and all information regarding the allocation of
amounts with respect to the Business as of the Closing Date.
(b) Following Buyers' receipt of the Post-Closing Statement, Buyers
shall have thirty calendar days within which to review the Post-Closing
Statement, and during such period Fortis shall provide such assistance to Buyers
as Buyers shall reasonably request, including, without limitation, providing
Buyers and their designated representatives with access to all related books,
records, personnel, systems and reserving models. Buyers shall notify Fortis in
writing of any objections to the Post-Closing Statement within thirty calendar
days after Buyers' receipt thereof (the "Buyer's Objection Notice"), stating in
reasonable detail the basis for any and all such objections. If Fortis does not
receive such a Buyer's Objection Notice within such time period, the
Post-Closing Statement shall be deemed Final and Binding on the parties. For
purposes of this Agreement, "Final and Binding" shall mean that the aforesaid
determinations shall have the same preclusive effect for all purposes as if such
determinations had been
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embodied in a final judgment, no longer subject to appeal, entered by a court of
competent jurisdiction.
(c) If Buyers provide a Buyer's Objection Notice as set forth in
Section 2.5(b), Fortis shall then have thirty calendar days within which to
review the matters raised in the Buyer's Objection Notice, as well as any other
matters with respect to the amounts set forth in the Post-Closing Statement, and
Buyers shall provide such assistance to Fortis as Fortis shall reasonably
request, including, without limitation, providing Fortis and its designated
representatives with access to all related books, records, personnel, systems
and reserving models. At the end of such thirty-calendar-day review period for
Fortis, the parties shall negotiate in good faith for a period of up to twenty
calendar days to resolve all disputes relating to the Post-Closing Statement;
provided, however, that if such disputes are not resolved within such
twenty-calendar-day period, either party may elect to submit any remaining
disputes to arbitration as provided in Section 9.6.
(d) Within five Business Days following approval of the Post-Closing
Statement, whether by negotiation of the parties, a Final and Binding
arbitration determination or because Buyers do not submit a Buyer's Objection
Notice in accordance with the terms of Section 2.5(b):
(i) the parties shall pay each other and/or deposit into
the applicable trust any adjustments necessary in order that the
parties shall have paid exactly those amounts described in Sections
2.3(a)(i) through (v); and
(ii) the parties shall pay each other and/or deposit into
the applicable trust any adjustments necessary in order that the
Insurers shall have transferred and/or deposited exactly the
aggregate Fair Market Value of their Transferred Investment Assets as
of the Closing Date.
Any payment required by this Section 2.5(d) shall be paid in cash and shall be
accompanied by interest thereon from the Closing Date through the date of
payment at an annual rate equal to the 90-Day Treasury Rate in effect on the
Closing Date.
(e) Notwithstanding anything in this Agreement to the contrary, if
the parties shall reach resolution on the adjustments described in Section
2.5(d)(i) for all Insurers but not reach resolution on the adjustments described
in Section 2.5(d)(ii) for all Insurers, or if the parties shall reach resolution
on the adjustments described in Section 2.5(d)(ii) for all Insurers, but not
reach resolution on the adjustments described in Section 2.5(d)(i) for all
Insurers, the parties shall make the applicable payments required by Section
2.5(d) with respect to the group of amounts (i.e., the Section 2.5(d)(i) amounts
or the Section 2.5(d)(ii) amounts) that has been resolved, while continuing to
work towards a resolution of the remaining payments. For the avoidance of doubt,
no payment shall be required under Section 2.5(d)(i) until all adjustments for
all Insurers have been resolved regarding such Section 2.5(d)(i), and no payment
shall be required under Section
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2.5(d)(ii) until all adjustments for all Insurers have been resolved regarding
such Section 2.5(d)(ii).
(f) All items appearing on the 12/31/99 Statement, any Interim
Statement, the Closing Statement and the Post-Closing Statement shall be
determined in accordance with generally accepted actuarial standards and
Applicable SAP and using the same accounting and actuarial methodologies,
assumptions and procedures and the application thereof as were used by the
Insurers, as applicable, in determining such items in such Insurers' statutory
financial statements as of December 31, 1999, provided, however, that correction
of an arithmetical, data input, coding or similar error, each as mutually
approved by Fortis and Buyers (and, failing such mutual approval, as determined
by the Umpire), shall not be deemed a deviation from such accounting or
actuarial methodologies, assumptions or procedures. Without limitation to the
resolution of other disputes concerning other amounts on the Post-Closing
Statement, the resolution of any dispute between the parties with respect to the
amount of General Account Reserves as set forth on the Post-Closing Statement
shall consider any matters raised by Fortis with respect to overages in the
General Account Reserves, as well as any matters raised by Buyers with respect
to deficiencies therein, and Fortis shall not be liable for any deficiency in
the General Account Reserves as of the Closing Date, except to the extent that
the aggregate amount of the General Account Reserves as of the Closing Date is
not determined in accordance with generally accepted actuarial standards and
Applicable SAP, using the same accounting and actuarial methodologies,
assumptions and procedures, and the application thereof, as were used by the
Insurers, as applicable, in determining such items in such Insurers' statutory
financial statements as of December 31, 1999, except for items that were treated
differently for presentation purposes, provided, however, that correction of an
arithmetical, data input, coding or similar error, each as mutually approved by
Fortis and Buyers (and, failing such mutual approval, as determined by the
Umpire), shall not be deemed a deviation from such accounting or actuarial
methodologies, assumptions or procedures.
(g) Parent and Buyers acknowledge that no Seller Party or any
Affiliate, representative or adviser thereof makes or has made any
representation or warranty to Parent or Buyers except as expressly set forth in
this Agreement. In particular, except as expressly set forth in this Agreement,
no such Person makes or has made any representation or warranty to Parent or
Buyers with respect to (i) any information set forth in the Confidential
Information Memorandum, dated October 2000, distributed by Credit Suisse First
Boston (formerly Xxxxxxxxx Xxxxxx Xxxxxxxx Securities, Inc.) in connection with
the proposed sale of the Business, or (ii) any financial projection or forecast
relating to the Business. With respect to any such projection or forecast
delivered to Parent or Buyers by or on behalf of the Seller Parties, except as
expressly set forth in this Agreement, Parent and Buyers acknowledge that (1)
there are uncertainties inherent in attempting to make such projections and
forecasts, (2) Parent and Buyers are familiar with such uncertainties, (3)
Parent and Buyers are taking full responsibility for making their own evaluation
of the adequacy and accuracy of such projections and forecasts so furnished to
them, and (4) neither Parent nor either Buyer nor any of their
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Affiliates shall have any claim against any Seller Party with respect to any
such projections or forecasts other than a claim for fraud or bad faith.
(h) Notwithstanding anything in this Agreement to the contrary, the
parties agree that the following adjustments shall be made to the 12/31/00
Statement, any Interim Statements, the Closing Statement and the Post-Closing
Statement, as applicable:
(i) The 12/31/00 Statement will reflect that FBIC reduced
its General Account Reserves during the calendar year 2000 by
approximately Seventeen Million Five Hundred Thousand and 00/100
Dollars ($17,500,000) due to a recalculation resulting from the
migration of variable universal life Insurance Contracts from the
Pascal system to the Triton system. The parties agree that FBIC's
General Account Reserves as of the Closing Date shall be computed in
accordance with the Triton system, and that the sum of $17,500,000
shall be added back to FBIC's General Account Reserves for purposes
of determining the Net Transfer Amount for FBIC as of the Closing
Date.
(ii) The 12/31/00 Statement will reflect that FBIC
decreased its General Account Reserves during the calendar year 2000
by approximately Twelve Million Four Hundred Thousand and 00/100
Dollars ($12,400,000) due to correction of a coding error relating to
variable annuity Insurance Contracts. The parties agree that the
amount of such decrease is an acceptable change in the General
Account Reserves for purposes of determining the Net Transfer Amount
for FBIC as of the Closing Date.
(iii) To the extent that HNL increases the amount of its
General Account Reserves effective as of any time prior to the
Closing Date in connection with cash flow testing, the amount of such
increase will be subtracted from HNL's General Account Reserves for
purposes of determining the Net Transfer Amount for HNL as of the
Closing Date.
(iv) With respect to those Insurance Contracts identified
at item (c) on SCHEDULE 3.12, which are participating policies under
which FBIC is obligated to pay dividends (the "Par Policies"), the
Net Transfer Amount will be increased by the amount (that will not be
less than zero) that equals the net unrealized GAAP gains and losses
appropriately allocable to the Par Policies as of the Closing Date.
As of September 30, 2000, such amount was $1,951,000.
2.6 IDENTIFICATION AND VALUATION OF INVESTMENT ASSETS.
(a) (i) Prior to the date hereof, Fortis has made
available to Buyers a list of all Investment Assets currently owned
by each Insurer and maintained specifically with respect to such
Insurer's General Account Reserves (the "FFG Investment Assets"). In
addition, SCHEDULE 2.6 hereto lists all Commercial Mortgages
presently owned by each of FBIC and FIC that are part of such
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Insurer's FFG Investment Assets (such Commercial Mortgages being each
such Insurer's "Mortgage Pool").
(ii) Not later than forty-five calendar days after the
date of this Agreement, Buyer shall deliver to Fortis a written
schedule showing those Commercial Mortgages from the Mortgage Pool
for each of FIC and FBIC that such Insurer will transfer to Buyer on
the Closing Date as part of the Net Transfer Amount for such Insurer
(assuming such amount is positive). Until the date that is fifteen
calendar days before the Closing Date, Buyers shall have the right to
change such schedule by providing written notice to Fortis that
Buyers desire to remove a specified Commercial Mortgage from the
schedule and substitute in its place a different Commercial Mortgage
from the applicable Mortgage Pool. Buyers shall be entitled to
exercise such right of substitution for any number of the Commercial
Mortgages, so long as Buyers comply with the terms and conditions set
forth in Section 2.6(c).
(iii) Until the date that is thirty calendar days before
the Closing Date, Fortis shall have the right to remove a Commercial
Mortgage from the applicable Mortgage Pool by providing written
notice thereof to Buyers; provided that Fortis may exercise such
right of removal (1) only with respect to a Commercial Mortgage that
Fortis determines could reasonably be likely to be in breach of a
representation or warranty set forth in Section 3.7; and (2) with
respect to the lesser of (y) ten percent (10%) of the aggregate loans
in each Insurer's Mortgage Pool or (z) Twenty Million and 00/100
dollars ($20,000,000) of Commercial Mortgages in the aggregate for
both FBIC and FIC, in each case determined on the basis of the Fair
Market Value of each Commercial Mortgage. In the event that Fortis
removes a Commercial Mortgage from a Mortgage Pool as permitted
herein, Buyers shall select another Commercial Mortgage from the
applicable Mortgage Pool as a replacement therefor; provided,
however, that Buyers shall notify Fortis of such selection not later
than fifteen calendar days before the Closing Date; and provided
further, that Buyers shall not be obligated to select such
replacement if the remaining Commercial Mortgages selected by Buyers
satisfy the terms and conditions set forth in Section 2.6(c).
Notwithstanding the foregoing, if Fortis determines to remove a
Commercial Mortgage from the applicable Mortgage Pool in accordance
with this subsection (iii), Buyers shall have the right to elect to
keep such Commercial Mortgage in such Mortgage Pool if Buyers waive
in writing at or prior to Closing such obligations and liabilities of
Fortis with respect to any costs, expenses or other Losses resulting
from such Commercial Mortgage on such terms and conditions as may be
agreed to by the parties.
(iv) Upon Buyers' determination of all Commercial
Mortgages that will be part of the Transferred Investment Assets,
which must occur not less than fifteen calendar days before the
Closing, Fortis shall thereupon prepare and
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deliver to Buyer as soon as practicable, but not later than the
Closing, a further detailed Mortgage Loan Schedule as described on
SCHEDULE 2.6.
(v) The Fair Market Value of each such selected Commercial
Mortgage shall initially be determined as of December 31, 2000
(subject to subsequent revaluation as provided herein), and the
aggregate Fair Market Value of such selected Commercial Mortgages for
each Insurer shall be equal to the lesser of (1) 20% of the
applicable Net Transfer Amount as shown on the 12/31/99 Statement, or
(2) the percentage of Commercial Mortgages owned by such Insurer
within its aggregate FFG Investment Assets as of December 31, 2000.
(b) Not more than five calendar days after Buyers have received from
Fortis the Closing Statement, Buyers shall provide to Fortis a written statement
(the "Closing Investment Statement") identifying those FFG Investment Assets of
each of FIC, FBIC, FFLIC, HNL and JALIC (in addition to the selected Commercial
Mortgages of FIC and FBIC) that such Insurer will transfer or deposit as part of
its Net Transfer Amount (assuming such amount is positive) or JALIC Deposit
Amount, as the case may be. The Fair Market Value of each such selected FFG
Investment Asset shall initially be determined as of the most recent month-end
prior to the date of the Closing Investment Statement (subject to subsequent
revaluation as provided herein), and the aggregate Fair Market Value of all such
selected FFG Investment Assets for each Insurer shall be the amount necessary so
that such amount (including for the Commercial Mortgages selected pursuant to
Section 2.6(a) as applicable), equals the applicable Net Transfer Amount or
JALIC Deposit Amount as shown on the Closing Statement, applying the terms and
conditions set forth in Section 2.6(c). All FFG Investment Assets selected by
Buyers, including Commercial Mortgages, shall be referred to as the "Transferred
Investment Assets."
(c) Buyers' selection of the Transferred Investment Assets shall be
subject to all of the following:
(i) The percentage of each Investment Asset type selected
by Buyers with respect to each Insurer, determined by reference to
Fair Market Value, must be as equal as possible to the percentage of
such Investment Asset type owned by that Insurer within its aggregate
FFG Investment Assets; provided, however, that (1) Hartford Annuity
shall not be required to select more than twenty percent (20%) of the
Net Transfer Amount for either FIC or FBIC, in the form of Commercial
Mortgages, and (2) Hartford Annuity shall not be required to select
more than sixty-five percent (65%) of the Net Transfer Amount for
either FIC or FBIC, or more than sixty-five percent (65%) of the
JALIC Deposit Amount, in the form of Corporate Bonds.
(ii) The Commercial Mortgages selected by Hartford Annuity
from each of FIC and FBIC shall be selected only from such Insurer's
Mortgage Pool.
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In the event that a Commercial Mortgage selected by Hartford Annuity
as described in Section 2.6(a) is repaid or otherwise not owned
immediately prior to the Closing by FIC and FBIC, as the case may be,
Hartford Annuity shall be entitled to select another Commercial
Mortgage from the applicable Mortgage Pool or receive cash in lieu
thereof.
(iii) For the avoidance of doubt, the Transferred
Investment Assets shall not include (1) any type of asset not
included within the definition of Investment Asset, (2) any
Investment Asset that is not an FFG Investment Asset, (3) any
Commercial Mortgages from JALIC, FFLIC or HNL, and (4) any investment
in mutual funds or equity securities.
(iv) No Insurer shall be required to subdivide an
individual Investment Asset.
(v) If, as a result of the percentage limitations
described in (i) immediately above, or as a result of an Insurer's
total asset portfolio relating to its General Account Reserves
including types of assets not included within the definition of
Investment Assets (such as equity interests in real property), it is
not possible for Buyers to select enough FFG Investment Assets to
equal the applicable Net Transfer Amount or JALIC Deposit Amount, any
shortfall will be added in the form of cash so that the aggregate
Transferred Investment Assets equals the aggregate of the Net
Transfer Amounts for FIC, FBIC, FFLIC and HNL and the JALIC Deposit
Amount.
(d) From the date hereof through the Closing Date, (i) each Insurer
shall be entitled to make changes in its FFG Investment Assets in the ordinary
course of business consistent with past practice, (ii) each Insurer shall
provide to Buyers within ten Business Days after the end of each calendar month
a list of such Insurer's FFG Investment Assets, including the Fair Market Value
of each such asset as of the immediately preceding month end, and (iii) Buyers
shall be entitled to perform reasonable due diligence with respect to each such
Insurer's FFG Investment Assets at Buyers' expense, provided that such due
diligence is performed upon reasonable terms not disruptive to the operations of
the Seller Parties.
(e) Each Transferred Investment Asset shall be valued at its "Fair
Market Value," which, as of any valuation date, shall be determined as follows:
(i) The Fair Market Value of each Government Bond,
Corporate Bond and Mortgage-Backed Security shall be the fair market
value ascribed thereto by Hub Data Inc. Notwithstanding the
foregoing, if either Fortis or a Buyer believes in its reasonable
judgment and good faith that a Fair Market Value for any individual
Government Bond, Corporate Bond or Mortgage-Backed Security different
from the one provided by Hub Data, Inc. is appropriate, such party
will request a fair market value for such Investment Asset from each
of three
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independent and nationally recognized brokers, and the median fair
market value assigned to such Investment Asset by such brokers shall
be the Fair Market Value of such Investment Asset for purposes of
this Agreement; provided, however, that if such party is unable to
find three such brokers who will provide a fair market value for the
particular Investment Asset, such party will obtain such a fair
market value from two such brokers and the Fair Market Value will be
the average of the two values provided by such brokers; and,
provided, further, that if such party is unable to find more than one
such broker who will provide a fair market value for the particular
Investment Asset, the Fair Market Value of that Investment Asset
shall be the value assigned by Hub Data, Inc.
(ii) The Fair Market Value of each Commercial Mortgage
shall be determined as follows:
(1) For purposes of preparing the Closing Investment
Statement:
(x) Fortis shall rate each
Commercial Mortgage either 1 (excellent
property with excellent cash flow), 2 (good
property and good cash flow), 3 (property or
cash flow is weak, potential decline in income
but principal is secure), or 4 (possible loss
of income and principal), depending upon a
physical inspection of the mortgaged property
and an annual summary of key financial
information provided by the applicable mortgage
correspondent (including Fortis Advisers, for
loans serviced internally).
(y) The Fair Market Value of each
Commercial Mortgage shall be the sum of (A) the
total of the payments of principal and interest
under the loan documents for such Commercial
Mortgage and (B) the outstanding balance for
such Commercial Mortgage at its maturity, all
as discounted by the rate for the U.S. Treasury
security with a maturity closest to the
weighted average life of such Commercial
Mortgage, plus a basis-point spread to
approximate credit risk, as follows:
Basis Point Spread Over
Assigned Rating Applicable U.S. Treasury Rate
1 200 basis points
2 230 basis points
3 285 basis points
(z) The Mortgage Pools shall not
include any Commercial Mortgages rated 4.
(2) For purposes of preparing the Post-Closing Statement,
Fortis and Hartford Annuity shall mutually select an independent
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nationally recognized broker who shall determine the Fair Market
Value of each Commercial Mortgage included within the Transferred
Investment Assets. Such broker shall be instructed to deliver its
valuation opinion within thirty calendar days of being engaged by the
parties, and such broker's determination of Fair Market Value shall
be final and binding on the parties. Such broker shall be deemed
engaged by both parties, its valuation opinion shall be addressed and
delivered to both parties, and the costs of such broker shall be paid
one-half by Fortis and one-half by Hartford Annuity. The parties
shall select such broker at the time of Closing, but such selection
shall not be a condition to Closing. In the event that the parties
fail to agree upon a broker in accordance with this Section
2.6(e)(ii)(2) within five Business Days after the Closing, then on
the eleventh Business Day after Closing, each party shall submit to
the other party the names of two independent nationally recognized
brokers, and the selection of one such broker from among the four
shall be made by random drawing.
(iii) The Fair Market Value of cash and cash equivalents
shall be face value.
(iv) The Fair Market Value of each Transferred Investment
Asset shall take into account, where applicable, all investment
income due and accrued, and all unearned investment income, thereon.
(v) The Fair Market Value of the FFG Investment Assets
included in the JALIC Deposit Amount shall be the book value of such
assets as determined in accordance with Applicable SAP, plus where
applicable, all investment income due and accrued, and all unearned
investment income, thereon.
(f) On the Closing Date: (i) the cash portion, if any, of the
Transferred Investment Assets shall be transferred by wire transfer of
immediately available funds, and (ii) all other Transferred Investment Assets
shall be transferred by such instruments of transfer or book entry transfer, as
appropriate, as are reasonably acceptable to Fortis and Buyers.
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2.7 PRORATIONS. The following prorations relating to the Purchased
Assets will be made as soon as practicable after the Closing Date, with the
applicable Seller Party liable to the extent such items relate to any time
period prior to the Closing Date, and Buyers liable to the extent such items
relate to periods on or after the Closing Date: (i) personal property, real
estate, occupancy and other similar Taxes, if any, on or with respect to the
Purchased Assets; (ii) the amount of sewer rents and charges for water,
telephone, electricity and other utilities; (iii) any amount under a Transferred
Contract that has been prepaid as of the Closing Date; and (iv) any and all
other items typically prorated and related to the operation of the Woodbury
Property, including rents, unpaid expenses under Contracts relating to such
property, and other such items.
2.8 CLOSING DELIVERIES; CERTAIN OBLIGATIONS OF PARENT AND FORTIS.
(a) At the Closing, the Seller Parties shall execute, deliver to
Buyers and/or deposit (as appropriate) the following:
(i) the payments and deposit required by the Seller
Parties as described in Sections 2.3(a)(i) through (v), including the
Transferred Investment Assets;
(ii) the Reinsurance Agreements;
(iii) the Administrative Services Agreements;
(iv) the Trust Agreements;
(v) the JALIC Investment Management Agreement;
(vi) the Assignment and Assumption Agreement;
(vii) the Xxxx of Sale;
(viii) the Intellectual Property Assignment;
(ix) the Transition Services Agreement;
(x) with respect to the Woodbury Property, a limited
warranty deed, all transfer declarations or other instruments
required in order to record conveyances under applicable Minnesota
Law, a FIRPTA statement, an assignment and assumption of all related
Contracts, Permits and approvals, and all other appropriate documents
required by Commonwealth Land Title Insurance in Schedule B, Section
1 of the Title Insurance Commitment, including gap undertakings if
needed;
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(xi) at the Seller Parties' expense, an Owner's ALTA 1992
Title Insurance Policy in the amount of Seventeen Million Five
Hundred Thousand and 00/100 Dollars ($17,500,000), with the Closing
Date as its effective date, showing title in either Buyer (as
designated by Parent at least fifteen calendar days before Closing)
and showing no unmet Schedule B Section 1 requirements and only those
Schedule B Section 2 exceptions showing on the Title Insurance
Commitment;
(xii) with respect to only those Commercial Mortgages that
are part of the Transferred Investment Assets:
(1) delivery of each note evidencing
indebtedness secured by a Commercial Mortgage, endorsed by
allonge (without recourse, representation or warranty of
any nature or kind whatsoever, except as provided in this
Agreement) to the applicable Buyer;
(2) delivery of a recordable assignment for
each mortgage, trust deed, assignment of rents or other
instrument of record relating to a Commercial Mortgage;
(3) delivery of all documents contained in each
Mortgage File;
(4) any documents reasonably required by a
title insurer to issue endorsements to existing loan
policies insuring the applicable Buyer (or its designee)
as the holder of the mortgage or trust deed and insuring
the priority of the mortgage or trust deed over all liens
and encumbrances other than liens and encumbrances listed
in Schedule B of the original policies;
(5) letter of direction from the applicable
Insurer advising the borrower under each such Commercial
Mortgage to commence making monthly mortgage payments to
the applicable Buyer after a date certain;
(6) UCC-3 Financing Statement assignments;
(7) delivery of any escrows on deposit with the
applicable Insurer;
(8) delivery of termination letters to any loan
servicers as may be requested by Buyers; and
(9) delivery of an updated Mortgage Loan
Schedule with respect to such Commercial Mortgages, with
information as set forth in SCHEDULE 2.6.
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(xiii) evidence of compliance with the requirements of the
HSR Act;
(xiv) evidence of receipt of all Consents identified on
SCHEDULE 6.1 that are also identified on SCHEDULE 3.3;
(xv) the License Agreement;
(xvi) the Marketing Agreements;
(xvii) a certificate of an executive officer of Fortis,
dated the Closing Date, confirming that (A) the person signing such
certificate is familiar with the provisions of this Agreement and (B)
the conditions specified in Section 6.2(a) have been satisfied;
(xviii) all deliveries required of Fortis at a closing of
the transactions contemplated by the Fortis Advisers Stock Purchase
Agreement; and
(xix) any other closing deliveries contemplated by this
Agreement.
(b) At the Closing, Buyers shall execute, deliver to the Seller
Parties and/or deposit (as appropriate) the following:
(i) the Asset Price;
(ii) the payments and deposits required by Buyers as
described in Sections 2.3(a)(i) through (v);
(iii) the Reinsurance Agreements;
(iv) the Administrative Services Agreements;
(v) the Trust Agreements;
(vi) the JALIC Investment Management Agreement;
(vii) the Assignment and Assumption Agreement;
(viii) the Xxxx of Sale;
(ix) the Intellectual Property Assignment;
(x) the Transition Services Agreement;
(xi) evidence of compliance with the requirements of the
HSR Act;
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(xii) evidence of receipt of all Consents identified on
SCHEDULE 6.1 that are also identified on SCHEDULE 4.3;
(xiii) the License Agreement;
(xiv) the Marketing Agreements;
(xv) a certificate of an executive officer of each Buyer,
dated the Closing Date, confirming that (A) the person signing such
certificate is familiar with the provisions of this Agreement and (B)
the conditions specified in Section 6.3(a) have been satisfied;
(xvi) all deliveries required of HLAIC at a closing of the
transactions contemplated by the Fortis Advisers Stock Purchase
Agreement; and
(xvii) any other Closing deliveries contemplated by this
Agreement.
(c) Parent shall cause each Buyer to perform all of its
covenants and agreements under this Agreement, including, without limitation,
the obligations of Buyers under this Article 2, and Parent shall cause HLAIC to
perform all of its covenants and agreements under the Fortis Advisers Stock
Purchase Agreement, and Parent shall be liable to the Seller Parties for any
failure of Buyers or HLAIC to so perform.
(d) Fortis shall cause each of the Insurers to perform all of
its respective covenants and agreements under this Agreement, including, without
limitation, the obligations of the Insurers under this Article 2, and Fortis
shall be liable to Buyers for any failure of an Insurer to so perform.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties hereby represent and warrant to Buyers as follows
(it being understood that each Insurer hereby makes only those representations
and warranties that specifically relate to it):
3.1 CORPORATE EXISTENCE AND POWER. Fortis is a corporation duly
incorporated, validly existing and in good standing under the Laws of Nevada and
has all corporate powers required to own, lease and operate all of its
properties and assets and to carry on its business as now conducted. Each of the
Insurers is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers required to own, lease and operate all of its properties and
assets and to carry on its business as now conducted. Each of the Insurers is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where such qualification is necessary, except for those
jurisdictions where
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failure to be so qualified, individually or in the aggregate, could not
reasonably be likely to have a Seller Material Adverse Effect.
3.2 AUTHORITY. Each of the Seller Parties has all requisite power and
authority to execute and deliver, and to perform its respective obligations
under, this Agreement and under each of the Ancillary Agreements to be executed
by it. The execution, delivery and performance by each Seller Party of this
Agreement and the Ancillary Agreements to be executed by it have been duly
authorized by all necessary corporate action on the part of such Seller Party.
This Agreement has been duly executed and delivered by each Seller Party, and on
the Closing Date the Ancillary Agreements executed by each Seller Party will be
duly executed and delivered by such party, as appropriate, and, subject to the
due execution and delivery by the other parties to such agreements, this
Agreement and the Ancillary Agreements executed by the Seller Parties will, upon
due execution and delivery, be valid and binding obligations of the Seller
Parties, enforceable against the Seller Parties in accordance with their
respective terms, except as (i) the enforceability hereof may be limited by
bankruptcy, insolvency, rehabilitation, receivership, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and (ii)
the availability of equitable remedies may be limited by equitable principles of
general applicability.
3.3 GOVERNMENTAL AUTHORIZATION. Except as may be required under the HSR
Act and except for required Consents of and filings with applicable insurance
regulatory authorities as set forth in SCHEDULE 3.3, the execution, delivery and
performance by the Seller Parties of this Agreement and the Ancillary Agreements
to which any of them is a party and the consummation of the transactions
contemplated hereby and thereby in accordance with their respective terms do not
require any of the Seller Parties to obtain any consent, approval or action of,
make any filing with, or give any notice to, any Governmental Authority, except
for such consents, approvals, actions, filings or notices the failure of which
to obtain, make or give, as the case may be, could not, individually or in the
aggregate, reasonably be likely to have a Seller Material Adverse Effect.
3.4 NON-CONTRAVENTION. Except as set forth on SCHEDULE 3.4, the
execution, delivery and performance by the Seller Parties of this Agreement and
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby in accordance with their respective terms and conditions will
not (a) violate any provision of the charter, bylaws or any other organizational
document of any of the Seller Parties, (b) violate, conflict with, result in the
breach of or default under (or with notice, lapse of time, or both would result
in such a breach or default), result in any modification of the effect of,
provide the other contracting party the right to terminate or materially amend,
require the other contracting party to receive notice of or consent to the
assignment or continuation of, or cause the acceleration of rights or
obligations under, any Third Party Reinsurance Agreement or Material Contract to
which any of the Seller Parties may be bound or to which any of their respective
assets or properties may be subject, except for such violations, conflicts,
breaches or modifications that could not, individually or in the aggregate,
reasonably be likely to have a Seller Material Adverse Effect, (c) violate any
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Order against or binding upon any of the Seller Parties in connection with the
Business, (d) violate any agreement with, or condition imposed by, any
Governmental Authority specifically upon any of the Seller Parties with respect
to the Business, (e) subject to the requirements referred to in Section 3.3
hereof, violate any Law of any jurisdiction, except for such violations that
could not, individually or in the aggregate, reasonably be likely to have a
Seller Material Adverse Effect or (f) result in a breach or violation of any of
the terms or conditions of, constitute a default under, or otherwise cause an
impairment or a revocation of, any Permit related to the Business, except for
such breaches, violations, defaults, impairments or revocations that could not,
individually or in the aggregate, reasonably be likely to have a Seller Material
Adverse Effect.
3.5 FINANCIAL STATEMENTS.
(a) Prior to the date hereof, Fortis has made available to
Buyer true, correct and complete copies of (i) the Annual Statement of each of
the Insurers as filed with applicable state insurance regulatory authorities for
the years ended December 31, 1997, 1998 and 1999, and (ii) the Quarterly
Statement of each of the Insurers as filed with applicable state insurance
regulatory authorities for the quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000. Each such Annual Statement and Quarterly Statement complied
in all material respects with all applicable Laws when so filed and was timely
filed with all required Governmental Authorities. No material deficiencies have
been asserted by any Governmental Authority with respect to any Annual Statement
or any Quarterly Statement referred to in (i) and (ii) of this Section 3.5(a).
Each statutory financial statement of an Insurer contained in any such Annual
Statement (which are audited for all Insurers except FFLIC) or Quarterly
Statement fairly presents, in accordance with Applicable SAP, the financial
condition of such Insurer and such Insurer's results of operations and cash
flows for and during the respective periods covered by such financial statements
and such Insurer's admitted assets, liabilities and capital and surplus as of
the dates of such financial statements; provided, however, that the financial
statements contained in the Quarterly Statements lack footnotes and other
presentation items and are subject to normal year-end adjustments (none of which
footnotes, presentation items or adjustments could, alone or in the aggregate,
reasonably be likely to have a Seller Material Adverse Effect). All statutory
reserves reflected in such Annual Statements and Quarterly Statements relating
to the Insurance Contracts were determined in all material respects in
accordance with Applicable SAP and generally accepted actuarial standards,
consistently applied. With respect to the Insurance Contracts, the Insurers do
not use any deviations from Applicable SAP or generally accepted actuarial
standards that have been specifically approved for such Insurers by the
insurance departments of their respective states of domicile (typically referred
to as "permitted practices"), except as disclosed in the footnotes to the
Insurers' Annual Statements.
(b) Prior to the date hereof, Fortis has made available to
Buyers true, correct and complete copies of (i) the audited GAAP balance sheets,
income statements and statements of cash flows of FBIC as of and for the fiscal
years ended December 00,
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0000 xxx 0000, (xx) the audited GAAP balance sheets, income statements and
statements of cash flows of FFLIC as of and for the fiscal years ended December
31, 1998 and 1999, and (iii) the audited GAAP balance sheets, income statements
and statements of cash flows of Fortis and its subsidiaries on a consolidated
basis as of and for the fiscal years ended December 31, 1998 and 1999
(collectively, the "GAAP Financial Statements"). The GAAP Financial Statements
were prepared in accordance with GAAP and present fairly in all material
respects the financial positions of the applicable entities as of the dates
indicated and the results of their operations for the periods then ended.
(c) The 12/31/99 Statement was, and any Interim Statements,
the Closing Statement and the Post-Closing Statement will be, prepared in good
faith by Fortis for the purpose of the sale of the Business and based on the
Books and Records of the Seller Parties, including the Insurers' periodic
financial statements that were or will be prepared in accordance with Applicable
SAP, and such statements do and will fairly present the Adjusted Statutory
Liabilities, including but not limited to the Accrued Payables, and Net Transfer
Amounts as of the date of the relevant statement . All items included on the
12/31/99 Statement were, and all items included on any Interim Statements, the
Closing Statement and the Post-Closing Statement will be, determined in
accordance with generally accepted actuarial standards and Applicable SAP using
the same accounting and actuarial methodologies, assumptions and procedures, and
the application thereof, as were used by the Insurers, as applicable, in
determining such items in such Insurers' statutory financial statements as of
December 31, 1999, except for items that were treated differently for
presentation purposes, provided, however, that correction of an arithmetical,
data input, coding or similar error, each as mutually approved by Fortis and
Buyers (and, failing such mutual approval, as determined by the Umpire), shall
not be deemed a deviation from such accounting or actuarial methodologies,
assumptions or procedures.
3.6 SEPARATE ACCOUNTS.
(a) Each of the FBIC Separate Accounts and FFLIC Separate
Account is duly and validly established, maintained and operated in all material
respects under applicable Laws, and the assets of such Separate Accounts are not
chargeable with liabilities arising out of any other business that Fortis or any
of its Affiliates may conduct. Each of the FBIC Separate Accounts and FFLIC
Separate Account is a unit investment trust and is duly registered as an
investment company under the 1940 Act. Except as listed on SCHEDULE 3.6, each of
the FBIC Separate Accounts and FFLIC Separate Account is and since January 1,
1998 has been operated in compliance with the 1940 Act in all material respects,
and each of FBIC and FFLIC, respectively, has filed all reports and amendments
of its registration statement required to be filed, and has been granted all
exemptive relief necessary for the operations of the FBIC Separate Accounts and
FFLIC Separate Accounts, respectively. The Insurance Contracts under which the
assets of the FBIC Separate Accounts and FFLIC Separate Account are held are
duly and validly issued and were sold pursuant to an effective registration
statement under the Securities Act and any applicable state securities Laws, and
each such registration statement is
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currently in effect to the extent necessary to allow FBIC and FFLIC to receive
contributions under such Insurance Contracts. Each of FBIC and FFLIC has filed
each prospectus and statement of additional information, as amended or
supplemented, under which the assets of the FBIC Separate Accounts and FFLIC
Separate Account are held that are required to be filed, and each such
prospectus and statement of additional information, as of its respective mailing
date or date of use, complied in all material respects with applicable
securities Laws.
(b) Prior to the date hereof, Fortis has made available to
Buyer true, correct and complete copies of the Annual Statements of the FBIC
Separate Accounts and the FFLIC Separate Account as filed with applicable state
insurance regulatory authorities for the years ended December 31, 1997, 1998 and
1999. Each such Annual Statement complied in all material respects with all
applicable Laws when so filed and was timely filed with all required
Governmental Authorities. No material deficiencies have been asserted by any
Governmental Authority with respect to any such Annual Statement. Each statutory
financial statement of the FBIC Separate Accounts and the FFLIC Separate Account
contained in any such Annual Statement fairly presents, in accordance with
Applicable SAP, the financial condition of the applicable FBIC Separate Accounts
and FFLIC Separate Account and such Separate Accounts' summary of operations and
surplus account for and during the respective periods covered by such financial
statements.
3.7 INVESTMENT ASSETS.
(i) The FFG Investment Assets owned by each Insurer are
admitted assets for such Insurer under the applicable insurance Laws of such
Insurer's state of domicile. Except with respect to Commercial Mortgages, which
are the subject of (ii) immediately below, each Insurer owns good and marketable
title to its FFG Investment Assets, free and clear of any and all Liens. None of
the Transferred Investment Assets is in default of payment of principal or
interest or dividends or is materially impaired.
(ii) The term "Mortgage Loan" as used in this Section 3.7(ii)
and in SCHEDULES 1.5 AND 2.6 shall mean a "Commercial Mortgage." The term
"Mortgage Loan Schedule" as used in this Section 3.7(ii) shall mean SCHEDULE
2.6, and as such Schedule is updated at Closing to reflect only the Mortgage
Loans selected by Buyer as part of the Transferred Investment Assets, and as
supplemented as required by Schedule 2.6 for each of the Mortgage Loans that is
part of the Transferred Investment Assets. The term "Seller" as used in this
Section 3.7(ii) and in SCHEDULES 1.5 AND 2.6 shall mean either FBIC or FIC, as
applicable. The term "Buyer" as used in this Section 3.7(ii) and in SCHEDULES
1.5 AND 2.6 shall mean Hartford Annuity. The term "Loan Documents," with respect
to any Mortgage Loan, shall mean the documents described in items (i) through
(viii), (x) through (xiii), (xvi) through (xviii), (xx) and (xxii) on SCHEDULE
1.5. All references in this Section 3.7(ii) and in SCHEDULE 2.6 to the "Seller's
Knowledge" or words of similar import shall refer only to the actual knowledge
of Xxxxx X. Xxxxxxxxxxx, Xxxxx X. Xxxxx and Xxxx X. Xxxxxxx (the "Designated
Employees") and shall not be
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construed to refer to the knowledge of any other officer, director, shareholder,
employee, agent or representative of Seller, or any Affiliate of any of the
foregoing, or to impose or have imposed upon the Designated Employees any duty
to investigate the matters to which such Knowledge, or the absence thereof,
pertains, including, but not limited to, the contents of the files, documents
and materials made available to or disclosed to Buyer or the contents of files
maintained by the Designated Employees. There shall be no personal liability on
the part of the Designated Employees arising out of any representations or
warranties made herein. With respect to the Commercial Mortgages that are
included in the Mortgage Pools for FBIC and FIC as of the date of this Agreement
(except to the extent a representation or warranty set forth below applies only
to the time at and after the Closing Date), and with respect to the Commercial
Mortgages that are part of the Transferred Investment Assets as of the Closing
Date:
(a) Mortgage Loan Schedule. The information set forth with
respect to each Mortgage Loan on the Mortgage Loan Schedule is true and
correct in all material respects.
(b) Title. Immediately prior to the sale, transfer and
assignment to the Buyer, each Mortgage Note and related Mortgage was
not subject to an assignment by Seller (other than to the Buyer) or
pledge by Seller, and Seller was the sole owner of, each Mortgage Loan.
(c) Authority to Assign. The Seller has full right, power and
authority to sell, assign and transfer the Mortgage Loans to Buyer.
Except as set forth in Section 3.3 hereof, no governmental or
regulatory approval or consent is required of Seller to transfer the
Mortgage Loans and no bulk sale law applies to Seller's transfer of the
Mortgage Loans. To Seller's Knowledge, and except for any provision
requiring written notice to the Borrower, the Loan Documents contain no
provision limiting the right or ability of the holder of the Mortgage
Loan to assign, transfer and convey the Mortgage Loan to any other
person or entity.
(d) No Other Security Interests. The Seller has validly and
effectively conveyed to Buyer all legal and beneficial interest of the
"lender" in and to the Mortgage Loans (excluding only the rights of the
mortgage correspondents as servicing agents, which rights are being
terminated by Seller upon the transfer of the Mortgage Loans to Buyer
by Seller) free and clear of any and all liens, claims, pledges,
charges, encumbrances or any ownership, participation or security
interest of any nature in favor of any other person or encumbering the
interest of the "lender" in such Mortgage Loan.
(e) Enforceability. Seller has provided to Buyer as part of
the Mortgage Files all of the Loan Documents, including, but not
limited to, the Mortgage Note, related Mortgage, any Guaranty, any
Assignment of Leases and Rents, any Security Agreement, any Escrow or
Reserve Agreement, any chattel mortgage, each instrument executed in
connection therewith and all other documents evidencing,
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securing, guaranteeing, insuring or otherwise executed and delivered to
Lender in connection with or relating to such Mortgage Loan. Seller has
received no written claim that any, and, to Seller's Knowledge, no
material Loan Documents have not been duly and properly executed by the
parties thereto, or are not genuine and or are not the legal, valid and
binding obligation of the maker thereof, enforceable in accordance with
its terms without offset, defense or counterclaim, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law) and
subject to such supplemental qualifications as may be set forth in any
opinion of counsel contained in the Mortgage Files executed by any
counsel to a Borrower (provided that such qualifications are not
unreasonable or unsupportable under the applicable law relative to such
Mortgage Loan), in any material part so as to render the rights and
remedies of the holder thereof inadequate for the ultimate practical
realization against the Mortgaged Property of the benefits of the
security intended to be provided thereby.
(f) Assignment of Leases and Rents. Seller has provided to
Buyer as part of the Mortgage Files the Mortgage File with respect to
each Mortgage Loan, which contains an Assignment of Leases and Rents
either as a separate instrument or incorporated into the related
Mortgage. Seller has the full right to assign the Assignment of Leases
and Rents and the lien created thereby to the Buyer. No person other
than the Mortgagor owns any interest in any payments due under such
lease that is superior to or of equal priority with the Mortgagee's
interest therein.
(g) Assignments and Endorsements. Each Mortgage Note is
properly endorsed by Seller in blank or to Buyer or its designee and
each such endorsement or allonge of Seller is genuine. Each assignment
of Mortgage, Mortgage Note endorsement or allonge, any related
reassignment of Assignment of Leases or Rents, and assignment of any
other agreement executed in connection with such Mortgage Loan, from
the Seller to the Buyer, has been duly authorized, executed and
delivered by the Seller, and validly and effectively conveys Seller's
interest therein to Buyer and constitutes a legal, valid and binding
assignment enforceable against the Seller, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, liquidation,
receivership, moratorium or other Laws relating to or affecting
creditors' rights generally or by general principles of equity
(regardless of whether such enforcement is considered in a proceeding
in equity or at law). Each assignment of Mortgage and any related
reassignments of Assignment of Leases or Rents, if any, is in
recordable form; provided, however, that in the event any such
assignment is found to not be in recordable form, Seller's sole
obligation shall be to re-execute such assignment in such form as is
recordable (with no substantive modification thereto).
(h) No Modification. Except to the extent disclosed in the
Mortgage Loan Schedule, or except to the extent that there is a
document is in the Mortgage
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File, neither the Mortgage Loan nor any Loan Document has been
modified, altered, satisfied, canceled, subordinated, impaired, waived,
altered, satisfied or rescinded in any material respect by the holder
of the Mortgage Loan in whole or in part nor has any instrument been
executed by the holder of the Mortgage Loan that would cause or result
in the foregoing.
(i) No Release. Except to the extent disclosed in the Mortgage
Loan Schedule, or except to the extent that there is a document is in
the Mortgage File, no Mortgagor or guarantor has been released in whole
or in part from their respective obligations in any material respect in
any writing executed by Seller except to the extent disclosed in the
Mortgage Loan Schedule or to the extent that such document is in the
Mortgage File. Except to the extent disclosed in the Mortgage Loan
Schedule, or except to the extent that there is a document is in the
Mortgage File, neither the Seller nor any prior holder of any Mortgage
Loan has released the Mortgaged Property in whole or in part from the
lien of the Mortgage or executed any instrument that would effect any
such release. The terms of the related Mortgage do not provide for
release of any material portion of the Mortgaged Property from the lien
of the Mortgage in any manner that would materially and adversely
affect the value of the Mortgage Loan or materially interfere with the
security intended to be provided by such Mortgage, except upon payment
in full of all obligations under the Mortgage or in the case of a
partial release upon a payment of principal in an amount equal to or in
excess of the allocated loan amount.
(j) Mechanics' Liens. There are no mechanics' or similar liens
or claims filed for work, labor or material and there are no rights
outstanding that under applicable law could give rise to such a lien,
affecting the related Mortgaged Property which are or may be superior
to, equal or coordinate with the lien of the related Mortgage arising
prior to the origination date of a Mortgage Loan, except those which
are insured against by a lender's title insurance policy; and as to any
arising after the origination date of a Mortgage Loan, to Seller's
Knowledge, no such liens, claims or rights currently encumber or could
(based on current circumstances) arise against any Mortgage Property,
except as set forth in the Mortgage File.
(k) Condition of Mortgaged Property; Condemnation; Casualty.
Seller has provided to Buyer as part of the Mortgage Files all of the
reports in Seller's possession relating to each Mortgaged Property and
the status of repair and condition of such Mortgaged Property. Except
as set forth on the Mortgage Loan Schedule, Seller has received no
written notice of any, and to Seller's Knowledge there is no,
proceeding pending or threatened, seeking the total or partial
condemnation, appropriation or recapture of such Mortgaged Property,
excluding any notices of proceedings which have been completed and as
to which the proceeds have been disbursed to the restoration of the
Property, the reduction of the Mortgage Loan balance or otherwise as
permitted by the Loan Documents, which documentation is set forth in
the Mortgage Files. Except as set forth on the
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Mortgage Loan Schedule, Seller has received no written notice of any,
and to Seller's Knowledge there is no, material casualty loss (in
excess of $50,000) in respect of the Mortgaged Property which has not
been repaired.
(l) First Lien Mortgage. Except as set forth in the Mortgage
Schedule, Seller has received no written notice, nor, to Seller's
Knowledge, does Seller have any knowledge, that any Mortgage is not a
legal, valid and enforceable first lien on the related Mortgaged
Property, including all buildings thereon and fixtures attached
thereto, subject only to (a) the lien of current real property taxes,
ground rents, water charges, sewer rents and assessments not yet due
and payable, (b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record specifically referred to
in the title insurance policy, and (c) other matters to which like
properties are commonly subject (each of the matters described in
clauses (a), (b), and (c), a "Permitted Exception").
(m) Title Insurance. Seller has provided to Buyer with respect
to each Mortgaged Property the ALTA lender's or mortgagee's title
insurance policy ("Mortgage Loan Title Policy"), or its equivalent as
adopted in the applicable jurisdiction insuring the Seller, its
successors and assigns. The Seller and its successors or assigns (or
its predecessors in interest) are the only named insureds of such
Policy; to Seller's Knowledge, such Mortgage Loan Title Policy is
freely assignable to the Buyer without the consent of, or any notice
to, the insurer, is in full force and effect and will, immediately
following the assignment of the Mortgage to the Buyer or its designee,
inure to the benefit of the Buyer or its designee as mortgagee of
record; to Seller's Knowledge, no claims have been made under such
Mortgage Loan title Policy, excluding any claims which have been
completed and as to which the claim has been resolved, which
documentation is set forth in the Mortgage Files, and all premiums
thereon have been paid. Except as set forth in the Mortgage File, the
Seller, and to Seller's knowledge no prior holder of a Mortgage, has
done anything, by act or omission, and the Seller has no knowledge of
any matter, which would impair or diminish the coverage of such
Mortgage Loan Title Policy.
(n) Disclosure. The Seller knows no fact which has not been
disclosed which adversely affects the Mortgagor, the Mortgaged
Property, the Mortgage Loans or the Seller.
(o) Proceeds Fully Disbursed. The proceeds of each Mortgage
Loan have been fully disbursed (except in those cases where the full
amount of the Mortgage Loan has been funded but a portion thereof is
being held in escrow pending the satisfaction of certain conditions
with respect to the related Mortgaged Property) as and to the extent
set forth on the Mortgage Loan Schedule. There is no obligation for
future advances under any Mortgage Loan except as and to the extent set
forth in the Mortgage Loan Schedule (exclusive of any obligations of
Seller upon foreclosure or otherwise assuming obligations as owner of
the Mortgaged
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Property or as a mortgagee in possession) and the Seller covenants that
it will not make any future advances under any Mortgage Loan to the
related Mortgagor so long as this Agreement is in effect. Any and all
requirements under each Mortgage Loan in connection with the completion
of any on-site or off-site improvements for which Seller was holding
escrowed funds for disbursement for such purpose, which requirements
were to have been complied with on or before the Closing Date, have
been complied with or Seller has received documentation evidencing such
compliance, or any such funds so escrowed have not been released, all
as and to the extent set forth in the Mortgage Files.
(p) Licenses and Authorizations. Seller has provided to Buyer
in the Mortgage Files any copies held by Seller of any licenses,
permits and other authorizations issued to the Mortgagor and operator
of each Mortgaged Property. To Seller's Knowledge, no Mortgagor fails
to hold, or is unable to obtain, such licenses, permits and other
authorizations required to be held by the Mortgagor in connection with
the operation of each Mortgaged Property, to any extent which would
interfere in any material respect with the operation of the Mortgaged
Property or the ability of the Mortgagor to repay the Mortgage Loan.
(q) Property Inspection. The Seller has inspected or caused
(through mortgage correspondents) to be inspected each Mortgaged
Property within the past 24 months.
(r) Payments; No Contingent Interest or Negative Amortization.
Each Mortgage Loan provides for monthly payments of principal and
interest due on the first day of each month, except as otherwise set
forth in the Mortgage File.
(s) Whole Loan. Each Mortgage Loan is a whole loan and, except
as set forth on the Mortgage Loan Schedule, not a participation
interest in the Mortgage Loan, and no other party holds a participation
interest in the Mortgage Loan and the Mortgagee under the Loan
Documents does not own and is not entitled to any equity participation,
contingent or additional interest in the Mortgagor or Mortgaged
Property, except only the rights of the mortgage correspondents as
servicing agents, which rights are being terminated by Seller upon the
transfer of the Mortgage Loans to Buyer by Seller.
(t) Applicable Laws. All federal, state or local laws, rules,
regulations and other requirements, including, without limitation,
usury, truth-in-lending, real estate settlement procedures, equal
credit opportunity or disclosure laws, applicable to each Mortgage Loan
and the applicable lender or holder thereof have been satisfied or
complied with as of the date of its origination in all material
respects.
(u) Taxes. Seller has provided to Buyer Seller's Mortgage
Files and all notices, if any, received by Seller of the non-payment of
any taxes, governmental assessments, water charges, sewer rents, ground
rents or other similar charges with
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respect to the related Mortgaged Property that prior to the Closing
Date became due and payable in respect of such Mortgaged Property, or
that are or may become a lien of equal or higher priority than the lien
of the Mortgage, and, to Seller's Knowledge, all such items have been
paid except as set forth on the Mortgage Loan Schedule or an escrow of
funds in an amount sufficient to cover such payments has been
established.
(v) Escrow Deposits. All impound and escrow deposits and
payments required by the Mortgage Loan are in the possession, or under
the control, of the Seller or its servicer and, as of the date of the
most recent report regarding collections of such amounts, and except as
otherwise set forth in the Mortgage Loan Schedule, all amounts required
to be deposited by the applicable Mortgagor under the related Loan
Documents have been deposited and there are no deficiencies in
connection therewith.
(w) Qualification. To the extent required by applicable law,
Seller and any other applicable lender or holder thereof was authorized
to transact and do business in the jurisdiction in which each related
Mortgaged Property is located at all times when it held the Mortgage
Loan.
(x) Hazard Insurance. Seller has provided to Buyer with
respect to each Mortgaged Property and all improvements Seller's
records with respect to any and all insurance. To Seller's Knowledge,
all premiums on such insurance policies required to be paid as of the
date of origination of the applicable Mortgage Loan have been paid;
except as set forth in the Mortgage Loan Schedule, no written notice to
the Mortgagee of reduction in coverage, termination or cancellation has
been received which is currently outstanding (and has not be resolved
by the obtaining of replacement coverages); each Mortgage obligates the
related Mortgagor to maintain all insurance as set forth in the
applicable Loan Documents and, at such Mortgagor's failure to do so
authorizes the Mortgagee to obtain and maintain such insurance at the
Mortgagor's expense and to seek reimbursement therefor from such
Mortgagor. Each Mortgage provides in accordance with the terms of the
applicable Mortgage and subject to the terms thereof that any material
insurance proceeds and condemnation awards are applied either to the
repair or restoration of the related Mortgaged Property, with the
Mortgagee or a trustee appointed by it having the right to hold and
disburse such proceeds or awards as the repair progresses, or to the
payment of principal, accrued interest and any other amounts due under
the Mortgage Loan.
(y) No Default or Delinquency (Except as Disclosed). There is
no monetary default, breach, violation or event of acceleration
existing under the related Loan Documents with respect to the payments
due under the Notes prior to January 1, 2001, except as otherwise
disclosed to Buyer on the Mortgage Loan Schedule. Except as set forth
in the Mortgage Loan Schedule, Seller has neither sent nor received
written notice of any material non-monetary default, breach,
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violation or event of acceleration existing under the related Loan
Documents except those which have been cured to Seller's satisfaction.
To Seller's Knowledge, and except as set forth in the Mortgage Loan
Schedule, Seller has received no written notice of any event which,
with the passage of time or the giving of notice, or both, and the
expiration of any grace or cure period, would constitute a default
except those which have been cured to Seller's satisfaction, nor,
except as set forth in the Mortgage File, has Seller waived in writing,
such a default, breach, violation or event of acceleration. No person
other than the holder of the Mortgage Loan (or a trustee on behalf of
the holder) may declare an event of default or accelerate the maturity
of the debt under any Loan Document. No foreclosure action or other
form of enforcement has been threatened or commenced with respect to
any Mortgage and no notice of default has been filed, except with
respect to actions, enforcements and notices which have since been
cured as set forth in the Mortgage Files.
(z) No Bankruptcy. To Seller's Knowledge, Seller has not
received written notice that any Mortgagor is currently a debtor or
defendant in any state or federal bankruptcy or insolvency proceeding
or has entered into and is currently in any proceeding or case seeking
reorganization, liquidation, dissolution, arrangements or winding up or
the readjustment of its debts or any similar relief under any law
relating to bankruptcy, insolvency reorganization, liquidation,
dissolution, arrangement or winding up, and, to Seller's Knowledge, no
Mortgagor is a debtor or defendant as aforesaid.
(aa) Environmental Matters. Seller has provided to Buyer with
respect to each Mortgaged Property, except as set forth on the Mortgage
Loan Schedule, any environmental report obtained by Seller. Seller has
received no written notice from any governmental agency or authority
that the Mortgaged Property is in violation of any applicable federal,
state and local environmental laws, ordinances, orders, directives,
published policies and regulations ("Mortgage Loan Environmental Laws")
in any material respects, and, to Seller's Knowledge, there are no
material violations of Mortgage Loan Environmental Laws with respect to
the Mortgaged Property, except for those conditions (the "Existing
Conditions") that were remediated in all material respects prior to the
date of origination of the Mortgage Loan, or for which an operations
and maintenance plan or similar covenants with the Mortgagor is in
effect, or with respect to which a hold-back or other escrow of funds
not less than the costs of such remediation as estimated in such
environmental report (or update) has been created to be held by the
Seller or its servicer until such remediation has been completed,
existing at the time of any origination of the Mortgage Loans or in any
updated environmental report received by Seller subsequent thereto,
which would impair in any significant respect the ability of the
Mortgagor to obtain replacement financing for such Mortgaged Property.
The Seller has not taken any action which would cause the related
Mortgaged Property to violate Mortgage Loan Environmental Laws
pertaining to Hazardous Materials.
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(bb) Appraisal. Seller has provided to Buyer with respect to
each Mortgaged Property any appraisal of the related Mortgaged
Property. To the Seller's Knowledge, the appraiser had no interest,
direct or indirect, in the Mortgaged Property or in any loan made on
the security thereof, and the compensation of the appraiser is not
affected by the approval or disapproval of the Mortgage Loan, and the
appraisal and appraiser both satisfy the applicable requirements of
governmental authorities and the regulations promulgated thereunder,
all in effect on the date the Mortgage Loan was originated, to the
extent applicable to the Seller.
(cc) Compliance with Law. To Seller's Knowledge, no Mortgaged
Property is in such non-compliance with applicable laws as would
interfere in any material respect with the operation of the Mortgaged
Property or the ability of the Mortgagor to repay the Mortgage Loan.
(dd) No Defense to Payment. Except as set forth on the
Mortgage Loan Schedule, Seller has no written notice of, and, to
Seller's Knowledge, there is no, currently outstanding and exercisable
(with respect to any action taken to date by Seller) right of
rescission, offset, abatement, diminution, defense or counterclaim to
the Mortgage Loan (including the defense of usury or the violation of
any applicable disclosure or consumer credit laws), nor will the
operation of any of the terms of the Mortgage Note or the Mortgage in
accordance therewith, or the lawful exercise of any rights thereunder
and in accordance therewith, render the Mortgage Note or the Mortgage
unenforceable in whole or in any material part so as to render the
rights and remedies of the holder thereof inadequate for the ultimate
practical realization against the Mortgaged Property of the benefits of
the security intended to be provided thereby, or subject to any right
of rescission, offset, abatement, diminution, defense or counterclaim
(including the defense of usury or the violation of any applicable
disclosure or consumer credit laws), except in any such case as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally or by the application of general principles of equity
(regardless of whether such enforcement is considered in a proceeding
in equity or at law), and, except as set forth on the Mortgage Files,
no such right of rescission, offset, abatement, diminution, defense or
counterclaim has been asserted with respect to any Mortgage Loan.
(ee) Mortgages Secured by Deeds of Trust. To Seller's
Knowledge, in the case of any Mortgage which is a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the deed of
trust or has been substituted in accordance with applicable law or the
holder of the Mortgage has the right to substitute in accordance with
applicable law, and no fees or expenses are, or will become, payable to
the trustee under the deed of trust in such capacity, except as set
forth in the Loan Documents and Mortgage File in connection with a
trustee's sale after default by the Mortgagor or in connection with the
release of the Mortgaged
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Property or related security for the Mortgage Loan following the
payment of the Mortgage Loan in full.
(ff) Leases. Seller has delivered to the Buyer any schedule of
leases or rent rolls with respect to each Mortgaged Property as set
forth in the Mortgage Files. To Seller's Knowledge, Seller does not
know that any such current schedule or rent rolls are inaccurate as of
the date made.
(gg) Other Collateral. Each Mortgage Note is not secured by
any collateral except the lien of the related Mortgage and the Loan
Documents and is not secured by any collateral (including any mortgage)
not being conveyed to the Buyer.
(hh) Cross-Collateralization. No Mortgaged Property secures
any other mortgage loan or obligation not represented by the related
Mortgage Note, except as otherwise set forth in the Mortgage Loan
Schedule, and no Mortgage Loan is cross-defaulted with any other
mortgage loan or obligation nor, except as set forth on the Mortgage
Loan Schedule, does any Mortgaged Property secure another mortgage loan
or obligation unless such other mortgage loan is also a Purchased
Mortgage Loan.
(ii) Legal Compliance; Origination. No fraudulent acts were
committed by Seller during the origination of such Mortgage Loan and
the origination, servicing and collection practices of Seller with
respect to each such Mortgage Loan have complied in all material
respects with all requirements of applicable federal, state and local
law, rules and regulations (including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity and disclosure). Seller has
received no written notice that any other party has committed any
fraudulent acts during the origination of such Mortgage Loan, or that
the origination, servicing and collection practices of Seller's agents
with respect to each such Mortgage Loan have not complied in all
material respects with all requirements of applicable federal, state
and local law, rules and regulations (including, without limitation,
usury, truth-in-lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity and disclosure), nor, to
Seller's Knowledge, has any other party committed any such fraudulent
acts or have such actions not complied.
(jj) No Proceedings. As of the date of origination and, to the
Seller's Knowledge, as of the Closing Date, except as set forth in the
Mortgage Loan Schedule, Seller has received no written notice and, to
Seller's Knowledge, Seller has no knowledge, of any pending or
threatened action, suit, proceeding, arbitration or governmental
investigation against any Mortgage Loan, Mortgagor or the related
Mortgaged Property, an adverse outcome of which would materially affect
either title to the Mortgage Loan or the validity or enforceability of
the related Mortgage or that might materially and adversely affect the
value of the Mortgaged Property as
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security for the Mortgage Loan or the use for which the Mortgaged
Property was intended or the Mortgagor's performance under the related
Loan Documents or the Mortgage Loan holder.
(kk) U.S. Borrower and Property. To Seller's Knowledge, except
as set forth on the Mortgage Loan Schedule or Mortgage File, each
Mortgagor is a United States Person organized under the laws of a state
or commonwealth of the United States. Each Mortgaged Property is
located in a state or commonwealth of the United States, the District
of Columbia or Puerto Rico.
(ll) Servicing. To Seller's Knowledge, the servicing and
collection practices used by the Seller with respect to the Mortgage
Loans have been legal and meet customary servicing standards utilized
by prudent commercial and multifamily mortgage servicers. No other
person has, has been granted or conveyed the right to service the
Mortgage Loans or to receive any consideration in connection therewith,
except for the mortgage correspondents currently serving as servicing
agents, which rights as servicing agents are being terminated by Seller
upon the transfer of the Mortgage Loans to Buyer by Seller.
(mm) Ground Leases. Except as set forth in the Mortgage Loan
Schedule, the Mortgage Loan is not secured by a leasehold estate.
(nn) Adjustable Rate Loans. Except as shown on the Mortgage
Loan Schedule, no Mortgage Loan that has an adjustable interest rate is
convertible by the Mortgagor into a fixed rate loan and no fixed rate
loan is convertible by the Mortgagor into an adjustable rate loan.
(oo) SMMEA Qualification. To Seller's Knowledge, each Mortgage
Loan was originated by a savings and loan association, savings bank,
commercial bank, credit union, insurance company, or similar
institution which is supervised and examined by a federal or state
authority, or by a Mortgagee approved by the Secretary of Housing and
Urban Development pursuant to Sections 203 and 211 of the National
Housing Act.
3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3.8, or
except as expressly contemplated or required by this Agreement, since December
31, 1999, there has not occurred with respect to the Business:
(a) any amendment, termination, waiver or lapse of, or other
failure to preserve, any material Permit;
(b) any sale, transfer or conveyance of any asset of a Seller
Party used exclusively in or having a material importance to the Business having
a fair market value in the reasonable estimation of Fortis more than $5,000 per
item except in the ordinary course of business consistent with past practice;
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(c) any amendment, termination or entering into by any Seller
Party as ceding or assuming reinsurer of any reinsurance, coinsurance or other
similar Contract, other than in the ordinary course of business consistent with
past practice;
(d) any payment, discharge or satisfaction by any Seller Party
of any material Lien or liability other than in the ordinary course of business
consistent with past practice;
(e) any work stoppage, strike, labor difficulty or union
organizational campaign;
(f) any amendment of, any failure by any Seller Party to
perform all of its obligations under, any default under, or any termination of
(other than on the stated expiration date) of, any Contract of the type
described in Section 3.14(a)(i) through (viii), except in the ordinary course of
business consistent with past practice;
(g) any material change in the accounting, actuarial, pricing,
underwriting, reserving, sales, marketing or agency principles, practices,
methods or policies employed with respect to the Business, except as required by
Law, GAAP, Applicable SAP, guidelines issued by the SEC or its accounting staff,
or guidelines issued by the NAIC; or
(h) any event, occurrence or condition of any character that
has had, or to the Knowledge of the Seller Parties might reasonably be expected
to have, individually or in the aggregate, a Seller Material Adverse Effect.
3.9 LITIGATION. Except as set forth on SCHEDULE 3.9:
(a) none of the Seller Parties is a party to any pending or,
to the Knowledge of the Seller Parties, threatened Litigation with respect to
the Business or the Purchased Assets;
(b) there are no outstanding Orders binding upon any of the
Seller Parties with respect to the Business or upon the Purchased Assets;
(c) there are no pending or, to the Knowledge of the Seller
Parties, threatened investigations regarding the Business by any Governmental
Authority; and
(d) there is no Litigation pending or, to the Knowledge of the
Seller Parties, threatened against the Seller Parties, there are no outstanding
Orders binding upon the Seller Parties, and there are no pending or, to the
Knowledge of the Seller Parties, threatened investigations of the Seller Parties
by any Governmental Authority, in each case that is reasonably likely to have a
Seller Material Adverse Effect.
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3.10 COMPLIANCE WITH LAWS.
(a) Except as set forth on SCHEDULE 3.10, each of the Seller
Parties is in compliance in all material respects with all applicable Laws
relating to the Business. No Seller Party has received any written notice
alleging any violation of any such applicable Law by such Seller Party that
could, individually or in the aggregate, reasonably be likely to have a Seller
Material Adverse Effect.
(b) SCHEDULE 3.10 lists all jurisdictions in which the
Insurers are licensed to issue the Insurance Contracts and the lines of business
which each Insurer is authorized to transact in each such jurisdiction. Each
Insurer has been duly authorized by the relevant state insurance regulatory
authorities to issue the Insurance Contracts that it is currently writing, and
was duly authorized to issue the Insurance Contracts that it is not currently
writing at the time such Insurance Contracts were issued, in the respective
states in which it conducts the Business, except for authorizations the failure
of which to have could not, individually or in the aggregate, reasonably be
likely to have a Seller Material Adverse Effect. Except as set forth on SCHEDULE
3.10, each Seller Party has all other Permits necessary to conduct the Business
in the manner and in the areas in which the Business is presently being
conducted and to perform their obligations under this Agreement and the
Ancillary Agreements and all such Permits are valid and in full force and
effect, except where the failure to have such a Permit could not, individually
or in the aggregate, reasonably be likely to have a Seller Material Adverse
Effect. Except as set forth on SCHEDULE 3.10, no Insurer is operating under any
formal or informal agreement or understanding with the licensing authority of
any state that restricts its authority to do business or requires any Insurer to
take, or refrain from taking, any action, in each case with respect to the
Business.
(c) This Section 3.10 is not applicable to compliance with
applicable insurance Laws (to the extent that such compliance is covered by
Section 3.12), to compliance with ERISA and other Laws related to employment
(which is covered by Sections 3.19 and 3.20), or to compliance with
Environmental Laws (which is covered by Section 3.15(c)).
3.11 REGULATORY FILINGS. Except as listed on SCHEDULE 3.11, the Seller
Parties have filed all reports, statements, documents, registrations, filings or
submissions required to be filed with any Governmental Authority to the extent
they relate to the Business, except where the failure to make such filings could
not, individually or in the aggregate, reasonably be likely to have a Seller
Material Adverse Effect. Except as listed on SCHEDULE 3.11, all such
registrations, filings and submissions were in compliance in all material
respects with applicable Law when filed or as amended or supplemented, and no
material deficiencies that remain unsatisfied have been asserted by any
Governmental Authority with respect to such registrations, filings or
submissions.
3.12 INSURANCE CONTRACTS.
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(a) The forms of Insurance Contracts available for issuance by
the Insurers, and to the extent practicable the states in which such forms are
authorized for issuance, on the date hereof are listed on SCHEDULE 1.2. All
Insurance Contracts as now in force are in all material respects, to the extent
required under applicable Law, on forms (including any actuarial memoranda or
supporting documentation) and with Premium rates that have been approved by
applicable insurance regulatory authorities or that have been filed and not
objected to by such authorities within the period provided for objection, and
such forms and Premium rates comply in all respects with the insurance Laws
applicable thereto, except where the failure to have such approval or
non-objection or the failure to so comply could not, individually or in the
aggregate, reasonably be likely to have a Seller Material Adverse Effect.
(b) At the time any Insurer paid Commissions to any broker,
agent, producer or similar sales representative within the past thirty-six
months in connection with the sale of Insurance Contracts, each such broker,
agent, producer or other sales representative was duly licensed as an insurance
broker, agent, producer or sales representative (for the type of business sold
by such broker, agent, producer or sales representative) in the particular
jurisdiction in which such broker, agent, producer or sales representative sold
such business for such Insurer, and no such broker, agent, producer or sales
representative violated any federal, state, local or foreign Law applicable to
the Business, except in all cases under this Section 3.12(b) where the failure
to be so licensed or any such violation could not, individually or in the
aggregate, reasonably be likely to have a Seller Material Adverse Effect.
(c) Except as set forth on SCHEDULE 3.12, no Insurance
Contract entitles the holder thereof or any other Person to receive dividends,
distributions or other benefits based on the revenues or earnings of any of the
Insurers.
(d) Except as set forth on SCHEDULE 3.12, there are no
contracts, agreements, commitments or arrangements to which any Seller Party is
a party, or which is binding upon any Seller Party, that restrict the right of
any Seller Party to change the crediting rates and other non-guaranteed elements
under the Insurance Contracts, other than pursuant to the terms of the Insurance
Contracts.
(e) All Insurance Contracts were issued in conformity in all
material respects with the applicable Insurer's underwriting standards. With
respect to the Insurance Contracts that are reinsured or retroceded in whole or
in part, such Insurance Contracts conform in all material respects to the
standards agreed to with reinsurers in the related reinsurance, retrocession or
other similar Contracts other than such deviations that are immaterial
individually or in the aggregate.
(f) Fortis has made available to Buyers all material
correspondence with respect to the Business between any Seller Party and any
Governmental Authority, including, but not limited to, all state insurance
regulatory authorities regarding any material violation of Laws within the last
two years.
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(g) Except as set forth on SCHEDULE 3.12, to the Knowledge of
the Seller Parties:
(i) to the extent that any Insurer is legally responsible
therefor, (A) the terms of each Qualified Contract and the
administration and operation thereof and of any plan or arrangement
funded in whole or in part through any such Qualified Contract comply,
and at all relevant times have complied, in all material respects with
the applicable provisions of the Code and ERISA and (to the extent such
plan is intended by the Insurance Contract holder to limit fiduciary
responsibility in accordance with section 404(c) of ERISA) comply, and
at all relevant times have complied, in all material respects with all
applicable requirements for limiting fiduciary responsibility under
section 404(c) of ERISA; (B) contributions or payments to each such
Qualified Contract that are intended to be nontaxable are not taxable;
and (C) plan or contract loans made under such Qualified Contracts were
neither prohibited transactions nor taxable when made or at any time
thereafter, except with respect to taxable defaults in repayment of
such plan or contracts loans; and
(ii) no Insurer is legally responsible for testing,
determining or otherwise ensuring compliance under Sections 401(a),
401(k), 401(m), 403(a), 403(b), 408, 415 and 457 of the Code or
otherwise administering or providing administrative services of any
nature to any plan or arrangement funded in whole or in part through
any such Qualified Contract.
3.13 THIRD PARTY REINSURANCE CONTRACTS. SCHEDULE 3.13 lists all
agreements pursuant to which any Insurer cedes or retrocedes risks assumed under
the Insurance Contracts (the "Third Party Reinsurance Contracts"). All of the
Third Party Reinsurance Contracts are in full force and effect and valid and
binding upon the Insurers (to the extent a party thereto) and, to the Knowledge
of the Seller Parties, upon each of the other parties thereto, and none of the
Insurers and, to the Knowledge of the Seller Parties, none of the other parties
to the Third Party Reinsurance Contracts, is in material default under, and no
event has occurred which, with the passage of time or giving of notice or both,
would result in any of the Insurers or, to the Knowledge of the Seller Parties,
any of the other parties to the Third Party Reinsurance Contracts, being in
material default under, any of the terms of the Third Party Reinsurance
Contracts. Except as set forth on SCHEDULE 3.13, none of the Insurers has
received any written notice of the initiation of bankruptcy, liquidation,
receivership, insolvency or similar proceedings with respect to any other party
to a Third Party Reinsurance Contract. Except as set forth on SCHEDULE 3.13,
none of the Insurers has been prohibited under Applicable SAP or applicable
insurance Laws from taking financial statement credit for the reinsurance
provided by the Third Party Reinsurance Contracts and there are no Reinsurance
Recoverables more than thirty days past due. Except as set forth on SCHEDULE
3.13, none of the Third Party Reinsurance Contracts (i) requires the consent of
any other party thereto in order to be
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legally assigned to Buyer or (ii) provides the other party thereto with any
contractual rights upon the Closing of the transactions contemplated by this
Agreement.
3.14 MATERIAL CONTRACTS.
(a) SCHEDULE 3.14 lists all Contracts (other than the
Insurance Contracts, the Real Property Leases, the Personal Property Leases and
the Third Party Reinsurance Contracts) pursuant to which any of the Seller
Parties has any rights or benefits or undertakes any obligations or liabilities
with respect to the Business in each case that:
(i) have a duration of six months or more and are not
terminable without penalty upon 180 days or less prior written notice
by any party, other than Contracts with representatives, sales agents
or other producers, and other than Contracts that could not reasonably
be expected to require any party thereto to pay $50,000 or more in any
twelve-month period;
(ii) require or could reasonably be expected to require any
party thereto to pay $250,000 or more in any twelve month period, or
$1,000,000 or more in the aggregate, other than Contracts with
representatives, sales agents or other producers;
(iii) require or could require any severance or retention
payments to Employees by Parent or Buyers after the Closing Date, other
than Contracts that could not reasonably be expected to require any
party thereto to pay $50,000 or more in any twelve-month period;
(iv) provide for any of the Insurers to cede or reinsure any
of the contractual obligations under any of the Insurance Contracts;
(v) relate to any distribution or other agreements with
managing general agents, brokers, agents or other producers or affinity
organizations, or relate to any services or other agreements with third
party administrators, with respect to the Insurance Contracts that
require the payment by any Insurer of more than $250,000 in any
calendar year;
(vi) contain any restrictive covenant or confidentiality or
secrecy agreement (other than agreements relating solely to information
about a customer's business or services provided to the customer by any
of the Seller Parties), or exclusivity clause or obligation;
(vii) constitute the Intellectual Property Licenses; or
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(viii) is a "material contract" (as defined in Item 601(b)(10)
of Regulation S-K promulgated pursuant to the Securities Act of 1933,
as amended) of a Seller Party.
(b) SCHEDULE 3.14 also lists, to the Knowledge of the Seller
Parties, all Contracts pursuant to which any of the Seller Parties has any
rights or benefits or undertakes any obligations or liabilities with respect to
the Business, in each case that was not required to be disclosed pursuant to
subsection (a) immediately above.
(c) To the extent that Material Contracts are evidenced by
documents, true, correct and complete copies thereof have been delivered or made
available to Buyers. Except as set forth in SCHEDULE 3.14 or as described in
Section 5.10: (i) all of the Material Contracts are in full force and effect and
are valid, binding and enforceable upon the Seller Parties (to the extent a
party thereto) and, to the Knowledge of the Seller Parties, upon each of the
other parties thereto, and to the Knowledge of the Seller Parties and subject to
obtaining any required consents of the counterparties thereto will continue to
be following Closing, and none of the Seller Parties and, to the Knowledge of
the Seller Parties, none of the other parties to the Material Contracts is in
material default under, and no event has occurred which, with the passage of
time or giving of notice or both, would result in any of the Seller Parties or,
to the Knowledge of the Seller Parties, any of the other parties to the Material
Contracts being in material default under, any of the terms of the Material
Contracts, and (ii) none of the Transferred Contracts requires the consent of
any other party thereto in order to be legally assigned to Buyer.
(d) Except as set forth in SCHEDULE 3.14, true, correct and
complete copies of the forms of all Contracts with representatives, sales agents
or other producers have been delivered or made available to Buyers. Except as
set forth in SCHEDULE 3.14, there are no other agreements providing for the
compensation or indemnification of representatives, sales agents or other
producers in connection with the Business or the provision of financing (whether
in form of contract loans or otherwise) to representatives, sales agents or
other producers. Each of the Contracts with representatives, sales agents and
other producers is valid, binding and in full force and effect in accordance
with its terms, except to the extent that any failure of any such agreement to
be valid, binding and in full force and effect could not, individually or in the
aggregate, reasonably be likely to have a Seller Material Adverse Effect. To the
Knowledge of the Seller Parties, no representative, sales agent or other
producer is in default in any material respect with respect to any such
Contract.
3.15 REAL PROPERTY.
(a) The Woodbury Property is the only parcel of real property
owned by any of the Seller Parties and used primarily in the Business. FBIC has
good, marketable and insurable fee simple title to the Woodbury Property, free
and clear of all Liens other than Permitted Liens. The Woodbury Property
conforms to and complies with all applicable Laws, including, without
limitation, those relating to zoning, fire,
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health, building, handicapped persons, sanitation, use and occupancy, other than
any noncompliance that, individually or in the aggregate, when combined with the
effect of any other items of breach or noncompliance by the Seller Parties
described in this Section 3.15, would not have a Seller Material Adverse Effect.
FBIC has obtained all material Permits required for the Woodbury Property, all
of which are currently in full force and effect. Except as set forth on SCHEDULE
3.15, no portion of the Woodbury Property is currently subject to any
Condemnation Proceeding, and, to the Knowledge of the Seller Parties, no
Condemnation Proceeding has been commenced, instituted or threatened against any
portion of the Woodbury Property.
(b) SCHEDULE 3.15 lists all leases, subleases or other
agreements or occupancy rights pursuant to which any of the Seller Parties
leases real property that is used primarily in the Business (collectively, the
"Real Property Leases"). The relevant Seller Party has a good and valid
leasehold interest with respect to the real property leased pursuant to each of
such Real Property Leases, free and clear of all Liens (other than Permitted
Liens). The Seller Parties' use of the premises demised under the Real Property
Leases is in compliance with all zoning, fire, health, building, handicapped
persons, sanitation, use, occupancy and other applicable Laws, except to the
extent that such non-compliance, when combined with the effect of any other item
of noncompliance by the Seller Parties described in this Section 3.15, could not
reasonably be likely to result in a Seller Material Adverse Effect and none of
the Seller Parties has received any citation, subpoena, summons or other written
notice from any Governmental Authority alleging any such non-compliance.
(c) Except as set forth on SCHEDULE 3.15, none of the Seller
Parties has prepared, commissioned or otherwise possesses any reports or
inspections relating to any analysis of compliance with Environmental Laws or
any reports or inspections relating to soil, construction, engineering or other
similar matters, with respect to the Woodbury Property or any real property
leased pursuant to the Real Property Leases. Except as would not individually or
in the aggregate have a Seller Material Adverse Effect, with respect to the
Business: (a) each Seller Party is in compliance with all applicable
Environmental Laws; (b) the Seller Parties have all material Permits required
under any applicable Environmental Laws and are in compliance with their
respective requirements; (c) there are no pending or, to the Knowledge of the
Seller Parties, threatened claims under, or written notification of any
violation of, Environmental Laws against any of the Seller Parties or, to the
Knowledge of the Seller Parties, otherwise affecting the Woodbury Property or
the Real Property Leases; and (d) there has been no production, release or
storage on or from the Woodbury Property of any Hazardous Material by the Seller
Parties or any previous owner of such property, or any other activity that could
reasonably be likely to violate applicable Environmental Laws. None of the
Seller Parties has received any notice of any violation of Environmental Laws
with respect to the Woodbury Property or of any pending investigation or inquiry
by any Governmental Authority, nor to the Knowledge of the Seller Parties has
there been any violation of Environmental Laws with respect to the Woodbury
Property.
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3.16 PERSONAL PROPERTY.
(a) SCHEDULE 3.16 lists all items of tangible personal
property having a fair market value in the reasonable estimation of Fortis of
more than $5,000 per item (other than Excluded Assets) that is owned by any of
the Seller Parties and used exclusively in or has a material importance to the
Business (collectively, the "Owned Personal Property"). The relevant Seller
Party has good, valid and marketable title to each item of Owned Personal
Property, free and clear of all Liens (other than Permitted Liens).
(b) SCHEDULE 3.16 contains a list of all leases pursuant to
which any of the Seller Parties leases any tangible personal property for use
exclusively in or having a material importance to the Business having a fair
market value in the reasonable estimation of Fortis of more than $5,000 per item
(the "Personal Property Leases"). The relevant Seller Party has a good and valid
leasehold interest with respect to each item of tangible personal property
leased pursuant to such Personal Property Leases, free and clear of all Liens
(other than Permitted Liens).
(c) Except as disclosed on SCHEDULE 3.16, and except for the
Excluded Assets, the Owned Personal Property and the personal property subject
to the Personal Property Leases constitute all of the material tangible personal
property required to conduct the Business as currently conducted.
3.17 TECHNOLOGY AND INTELLECTUAL PROPERTY. SCHEDULE 3.17 lists all
copyrights, patents, computer software (other than computer software with
license fees of $1,000 or less per copy), trademarks, logos, service marks,
trade names, service names, Internet domain names and applications and
registrations therefor owned or licensed by any Seller Party and used
exclusively in or having material importance to the Business (collectively with
all trade secrets and other proprietary rights or processes used exclusively in
or having material importance to the Business, the "Intellectual Property").
SCHEDULE 3.17 also sets forth whether each such item of Intellectual Property is
owned (the "Owned Intellectual Property") or licensed (the "Licensed
Intellectual Property") by a Seller Party. Except as set forth on SCHEDULE 3.17,
at least one of the Seller Parties has: (i) the right to use each item of the
Owned Intellectual Property, free and clear of any royalty or other similar
payment obligations, claims of infringement or alleged infringement or other
Lien (other than any Permitted Lien) of any kind; (ii) the right to use the
Licensed Intellectual Property, which right, to the Knowledge of the Seller
Parties, is free and clear of material claims of infringement or alleged
infringement or other material Lien of any kind (other than any Permitted Lien),
except for costs, charges, fees or other payments required under the terms of
the licenses, contracts or agreements governing the Licensed Intellectual
Property; and (iii) the right to assign to Buyers each item of Owned
Intellectual Property and each license, contract or agreement governing the
Licensed Intellectual Property (the "Intellectual Property Licenses"). Except
for the Excluded Assets and Excluded Contracts, the Intellectual Property
includes all copyrights, patents, computer software, trademarks, logos, service
marks, trade names, service names, Internet domain names and trade secrets or
other proprietary rights or
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processes necessary to conduct the Business as now being conducted. To the
Knowledge of the Seller Parties, no third party has misappropriated or is
violating or infringing any of the Intellectual Property.
3.18 EXCLUDED ASSETS. Except for those assets and Contracts listed on
SCHEDULE 3.18, which are not part of the Purchased Assets, the Purchased Assets
include all material properties, assets and Contracts utilized by the Seller
Parties in the conduct of the Business as presently conducted.
3.19 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 3.19 lists all pension, retirement, profit
sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, all other written
employee programs, all medical, vision, dental or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, whether or not subject to ERISA, currently providing benefits to any of
the current or former employees of Seller Parties engaged in the Business or any
of the current or former employees of Fortis Advisers or any of its Subsidiaries
and/or their respective dependents or to which any of the Seller Parties or
their Affiliates contributes or has any obligation to contribute on behalf of
any of such current or former employees and/or their dependents (collectively,
the "Benefit Plans"). SCHEDULE 3.19 indicates which of such Benefit Plans cover
solely the Employees (collectively, the "FFG Benefit Plans"), and which of such
Benefit Plans cover employees of the Seller Parties and their Affiliates in
addition to the Employees (collectively, the "Seller Benefit Plans"). There are
no FFG Benefit Plans, written or oral, except as are included on SCHEDULE 3.19.
(b) To the Knowledge of the Seller Parties, all of the Benefit
Plans and, to the extent applicable, the related trusts, comply in all material
respects with and have been administered in substantial compliance with all
applicable state or federal securities Laws, the terms of such Benefit Plans,
and all other applicable Laws. No Seller Party has received any written notice
from any Governmental Authority questioning or challenging such compliance.
(c) There are no claims or legal proceedings pending involving
any Benefit Plan, other than routine claims for benefits.
(d) All contributions (including all employer contributions
and employee reduction contributions) required to be made prior to the Closing
Date under the terms of any Benefit Plan (including, without limitation, a plan
that is subject to Code Section 412 or ERISA Section 302) have or will be timely
made and there is no lien under Code Section 412(n). All contributions for any
period ending before the Closing Date that are not yet due have been made to
each such Benefit Plan or accrued in accordance with the past custom and
practice of the Seller Parties and their Affiliates. All premiums required to be
paid pursuant to a Benefit Plan under ERISA Section 4006 have
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been paid by Fortis or any entity that is considered a single employer with
Fortis under ERISA Section 4001 and Code Section 414 ("ERISA Affiliate"). Each
Benefit Plan that is subject to Section 412 of the Code or ERISA Section 302 is
fully funded using the actuarial assumptions utilized by such plan to determine
funding on an ongoing basis. Neither Fortis nor any of its ERISA Affiliates has
contributed to or been obligated to contribute to a "multiemployer plan" within
the meaning of Section 3(37) of ERISA.
(e) Except as set forth on SCHEDULE 3.19 or as required by
applicable Law, no Benefit Plan provides welfare benefits (as defined in Section
3(1) of ERISA) beyond termination of employment.
(f) No Benefit Plan that is a defined benefit pension plan
(other than any Multiemployer Plan) has been completely or partially terminated
or been the subject of a reportable event as defined in Section 4043(b) of
ERISA. No proceeding by the PBGC to terminate any such Benefit Plan has been
instituted or, to the Knowledge of any of the Seller Parties, threatened.
(g) None of the Seller Parties or their Affiliates has
incurred, and none of the Seller Parties or their Affiliates has any reason to
expect that any of the Seller Parties or their Affiliates will incur, any
liability to the PBGC (other than with respect to PBGC premium payments not yet
due) or otherwise under Title IV of ERISA (including any withdrawal liability as
defined in ERISA Section 4201).
(h) Except as provided in Section 5.11 or SCHEDULE 5.11,
neither the Closing nor any of the other transactions contemplated by this
Agreement will: (i) entitle any Buyer Employee to severance pay; (ii) accelerate
the time of payment or vesting or trigger any payment or funding (through a
grantor trust or otherwise) of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the
Benefit Plans; or (iii) result in any breach or violation of, or a default
under, any of the Benefit Plans.
3.20 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 3.20 lists all Employees of
the Business as of the date set forth thereon. Except as disclosed on SCHEDULE
3.20 or pursuant to the terms of the Benefit Plans, the employment of all
Employees is terminable at will by the Seller Parties, without any penalty or
severance obligation. Except as set forth in SCHEDULE 3.20, (i) no Seller Party
is a party to any union agreement or collective bargaining agreement or work
rules or practices agreed to with any labor organization or employee association
applicable to Employees and no attempt to organize any of the Employees has been
made or is pending, (ii) since January 1, 1998, no Seller Party has had any
Equal Employment Opportunity Commission charges or other claims of employment
discrimination made against them by any Employee, (iii) since January 1, 1998,
no state wage and hour department investigations have been made of any Seller
Party with respect to Employees, (iv) since January 1, 1998, there has not been
any labor dispute, other than routine individual grievances, or any activity or
proceeding by a labor union or representative thereof to organize any Employees,
or any lockouts, strikes,
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slowdowns or work stoppages against or affecting any of the Seller Parties with
respect to the Business, or any threats thereof by or with respect to any
Employees, and (v) no unfair labor practice charge or complaint against any
Seller Party is pending before the National Labor Relations Board or any similar
Governmental Authority with respect to Employees.
3.21 TAX MATTERS.
(a) Except for inaccuracies the effect of which could not
individually or in the aggregate reasonably be likely to have a Seller Material
Adverse Effect:
(i) the assets of the FBIC Separate Accounts and the FFLIC
Separate Account are, and with respect to all periods not closed by the
applicable statute of limitation have been, adequately diversified at
all times within the meaning of Section 817(h) of the Code;
(ii) all Insurance Contracts identified as life insurance
policies for purposes of this Agreement issued after December 31, 1984
comply with the requirements of Section 7702 of the Code;
(iii) all Insurance Contracts identified as annuities for
purposes of this Agreement that were issued after January 15, 1985, to
the extent that Section 72(s) applies to such Insurance Contracts,
contain the provisions necessary for such Insurance Contracts to be
treated as annuities under Section 72(s)(1);
(iv) each Insurance Contract identified as a life insurance
policy for purposes of this Agreement that was issued before January 1,
1985 (1) complies with the requirements of Section 7702 of the Code to
the extent applicable to such Insurance Contract, or (2) to the extent
Section 7702 of the Code is inapplicable to such Insurance Contract and
such Insurance Contract is a flexible premium contract within the
meaning of Section 101(f) of the Code, complies with the requirements
of such Section 101(f) to the extent applicable to such Insurance
Contract;
(v) the holders of any Insurance Contract that constitutes a
"modified endowment contract" under Section 7702A of the Code have been
notified of the state and federal tax consequences of such Insurance
Contract;
(vi) to the Knowledge of the Seller Parties, there are no
"hold harmless," tax sharing, indemnification, or similar arrangements
regarding the Tax qualification or treatment of any Insurance
Contracts;
(vii) each Insurer is or is treated for all federal income Tax
purposes as the owner of the assets underlying each variable Insurance
Contract issued, entered into, or sold by such Insurer; and
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(viii) each Insurer has complied in all material respects with
all applicable reporting, withholding and disclosure requirements under
the Code, ERISA and other applicable Law, including those regarding
distributions, with respect to the Insurance Contracts and has reported
the distributions under such contracts in accordance with Sections 72,
7702 and 7702A of the Code.
(b) All Tax, estimated Tax and information reports, returns
and related documents (collectively, the "Tax Returns") required to be filed by
the Seller Parties with respect to the Purchased Assets or the Business have
been timely filed, and all such Tax Returns are complete and correct in all
material respects. All federal, state, local, foreign, estimated and other Taxes
owed by the Seller Parties with respect to the Business or the Purchased Assets
have been timely paid.
3.22 BROKERAGE AND FINANCIAL ADVISERS. No broker, finder or financial
adviser has acted directly or indirectly as such for, or is entitled to any
compensation from, any of the Seller Parties in connection with this Agreement
or the transactions contemplated hereby, except Credit Suisse First Boston,
whose fees for services rendered in connection therewith will be paid by the
Seller Parties.
3.23 DISCLOSURE. No redacted information contained in management
letters, audit reports or other documents made available to Buyers or their
representatives by the Seller Parties prior to the date hereof relates, in any
material respect, to the Business or the transactions contemplated by this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYERS
Parent and Buyers hereby represent and warrant to the Seller Parties as
follows(it being understood that each Buyer hereby makes only those
representations and warranties that specifically relate to it):
4.1 CORPORATE EXISTENCE AND POWER. Parent is a corporation duly
incorporated, validly existing and in good standing under the Laws of Delaware
and has all corporate powers required to own, lease and operate all of its
properties and assets and to carry on its business as now conducted. Each Buyer
is a corporation duly incorporated, validly existing and in good standing under
the Laws of Connecticut and has all corporate powers required to own, lease and
operate all of its properties and assets and to carry on its business as now
conducted. Parent and each Buyer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified, individually or in the aggregate, could not reasonably be likely
to have a Buyer Material Adverse Effect.
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4.2 AUTHORITY. Parent and each Buyer has all requisite power and
authority to execute and deliver, and to perform its respective obligations
under, this Agreement and under each of the Ancillary Agreements to be executed
by it. The execution, delivery and performance by Parent and each Buyer of this
Agreement and the Ancillary Agreements to be executed by it have been duly
authorized by all necessary corporate action on the part of Parent or such
Buyer, respectively. This Agreement has been duly executed and delivered by
Parent and each Buyer, and on the Closing Date the Ancillary Agreements executed
by Parent and each Buyer will be duly executed and delivered by such party, as
appropriate, and, subject to the due execution and delivery by the other parties
to such agreements, this Agreement and the Ancillary Agreements executed by
Parent and Buyers will, upon due execution and delivery, be valid and binding
obligations of Parent and Buyers, respectively, enforceable against Parent and
Buyers in accordance with their respective terms, except as (i) the
enforceability hereof may be limited by bankruptcy, insolvency, rehabilitation,
receivership, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
4.3 GOVERNMENTAL AUTHORIZATION. Except as may be required under the HSR
Act and except for required Consents of and filings with applicable insurance
regulatory authorities as set forth in SCHEDULE 4.3, the execution, delivery and
performance by Parent and Buyers of this Agreement and the Ancillary Agreements
to which any of them is a party and the consummation of the transactions
contemplated hereby and thereby in accordance with their respective terms do not
require Parent or either Buyer to obtain any consent, approval or action of,
make any filing with, or give any notice to, any Governmental Authority, except
for such consents, approvals, actions, filings or notices the failure of which
to obtain, make or give, as the case may be, could not, individually or in the
aggregate, reasonably be likely to have a Buyer Material Adverse Effect.
4.4 NON-CONTRAVENTION. Except as set forth on SCHEDULE 4.4 hereto, the
execution, delivery and performance by Parent and Buyers of this Agreement and
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby in accordance with their respective terms and conditions will
not (a) violate any provision of the charter, bylaws or any other organizational
document of Parent or either Buyer, (b) violate, conflict with, result in the
breach of or default under (or with notice, lapse of time, or both would result
in such a breach or default), result in any modification of the effect of,
provide the other contracting party the right to terminate or materially amend,
require the other contracting party to receive notice of or consent to the
assignment or continuation of, or cause the acceleration of rights or
obligations under, any material Contract to which Parent or either Buyer may be
bound or to which any of their respective assets or properties may be subject,
except for such violations, conflicts, breaches or modifications that could not,
individually or in the aggregate, reasonably be likely to have a Buyer Material
Adverse Effect, (c) violate any Order against or binding upon Parent or either
Buyer, (d) violate any agreement with, or condition imposed by, any Governmental
Authority upon Parent or either Buyer, (e) subject to the requirements
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referred to in Section 4.3 hereof, violate any Law of any jurisdiction, except
for such violations that could not, individually or in the aggregate, reasonably
be likely to have a Buyer Material Adverse Effect or (f) result in a breach or
violation of any of the terms or conditions of, constitute a default under, or
otherwise cause an impairment or a revocation of, any Permit, except for such
breaches, violations, defaults, impairments or revocations that could not,
individually or in the aggregate, reasonably be likely to have a Buyer Material
Adverse Effect.
4.5 FINANCIAL STATEMENTS.
(a) Prior to the date hereof, Buyers have made available to
Fortis true, correct and complete copies of (i) the Annual Statement of each
Buyer as filed with such Buyer's domiciliary state insurance regulatory
authority for the years ended December 31, 1997, 1998 and 1999, and (ii) the
Quarterly Statement of each Buyer as filed with such Buyer's domiciliary state
insurance regulatory authority for the quarters ended March 31, 2000, June 30,
2000 and September 30, 2000. Each such Annual Statement and Quarterly Statement
complied in all material respects with all applicable Laws when so filed and was
timely filed with all required Governmental Authorities. No material
deficiencies have been asserted by any Governmental Authority with respect to
any Annual Statement or any Quarterly Statement referred to in (i) and (ii) of
this Section 4.5(a). Each statutory financial statement of such Buyer contained
in any such Annual Statement or Quarterly Statement fairly presents, in
accordance with applicable statutory accounting principles, the financial
condition of such Buyer and such Buyer's results of operations and cash flows
for and during the respective periods covered by such financial statements and
such Buyer's admitted assets, liabilities and capital and surplus as of the
dates of such financial statements; provided, however, that the financial
statements contained in the Quarterly Statements lack footnotes and other
presentation items and are subject to normal year-end adjustments (none of which
footnotes, presentation items or adjustments could, alone or in the aggregate,
reasonably be likely to have a Buyer Material Adverse Effect).
(b) Prior to the date hereof, Parent has made available to
Fortis true, correct and complete copies of (i) the audited GAAP balance sheet
of Parent and its subsidiaries on a consolidated basis as of December 31, 1999
and the related statement of income for the twelve months then ended, and (ii)
the unaudited GAAP balance sheet of Parent and its subsidiaries on a
consolidated basis as of September 30, 2000 and the related statements of income
and cash flows for the nine months then ended (collectively, the "Parent
Financial Statements"). The Parent Financial Statements were prepared in
accordance with GAAP and present fairly in all material respects the financial
position of Parent as of the dates indicated and the results of its operations
for the periods then ended; provided, however, that the unaudited September 30,
2000 statements lack footnotes and other presentation items and are subject to
normal year-end adjustments.
4.6 LITIGATION. There is no Litigation pending or, to the Knowledge of
Parent or Buyers, threatened against Parent or Buyers, there are no outstanding
Orders
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binding upon Parent or Buyers, and there are no pending or, to the Knowledge of
Parent or Buyers, threatened investigations of Parent or either Buyer by any
Governmental Authority, in each case that is reasonably likely to have a Buyer
Material Adverse Effect.
4.7 COMPLIANCE WITH LAWS.
(a) Except as could not reasonably be likely to have a Buyer
Material Adverse Effect, Parent and each Buyer is in compliance in all respects
with all applicable Laws. Neither Parent nor either Buyer has received any
written notice alleging any such violation of applicable Law that could,
individually or in the aggregate, reasonably be likely to have a Buyer Material
Adverse Effect.
(b) Except as listed on SCHEDULE 4.7 hereto, Parent and Buyers
have all Permits necessary to perform their obligations under this Agreement and
the Ancillary Agreements, and all such Permits are valid and in full force and
effect, except where the failure to obtain such a Permit could not, individually
or in the aggregate, reasonably be likely to have a Buyer Material Adverse
Effect. Without limiting the generality of the foregoing, Buyers have on the
date hereof, and will have on the Closing Date, all Permits necessary to
reinsure the Insurance Contracts, to conduct the Business as presently
conducted, and to enable the Insurers to obtain full financial credit in all
relevant jurisdictions for the ceded reinsurance.
4.8 QUALIFIED INSTITUTIONAL BUYER. Each Buyer is a "qualified
institutional buyer" within the meaning of Rule 144A promulgated under the
Securities Act. Each Buyer hereby acknowledges that the Seller Parties may be
relying, with respect to the transfer of Investment Assets, on the exemption
from the registration provisions of the Securities Act provided by Rule 144A.
4.9 SUFFICIENT FUNDS. Buyers will have at Closing sufficient funds
available (through existing credit arrangements or otherwise) to pay the
Purchase Price and to pay all fees and expenses related to the transactions
contemplated hereby.
4.10 BROKERAGE AND FINANCIAL ADVISERS. No broker, finder or financial
adviser has acted directly or indirectly as such for, or is entitled to any
compensation from, Parent or either Buyer in connection with this Agreement or
the transactions contemplated hereby, except Bear, Xxxxxxx & Co., Inc., whose
fees for services rendered in connection therewith will be paid by Parent.
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ARTICLE 5
COVENANTS
5.1 CONDUCT OF BUSINESS.
(a) Prior to the earlier of the Closing Date or termination of
this Agreement, except as expressly provided in this Agreement, without the
prior written consent of Buyers (which consent shall not be unreasonably
withheld, conditioned or delayed), each Seller Party shall (i) in all material
respects operate the Business as presently operated and only in the ordinary
course and consistent with past practice, (ii) use commercially reasonable
efforts to preserve the value of the Business and (iii) use commercially
reasonable efforts to preserve its relationships with and the goodwill of its
agents, brokers, customers, suppliers, employees and other Persons having
business dealings with such Seller Party.
(b) Without limiting the generality of Section 5.1(a), and
except as otherwise expressly provided in this Agreement, prior to the earlier
of the Closing Date or termination of this Agreement, no Seller Party shall,
without the prior written consent of Buyers (which consent shall not be
unreasonably withheld, conditioned or delayed):
(i) enter into, terminate or fail to renew any contract that
would constitute a Transferred Contract, other than in the ordinary
course of business consistent with past practice;
(ii) acquire, dispose of, lease, assign or encumber any asset
that would constitute a Purchased Asset if owned by any Seller Party at
Closing, other than acquisitions, dispositions, leases, assignments or
encumbrances in the ordinary course of the Business;
(iii) enter into, adopt or (except as may be required by
applicable Law or the terms of any such arrangement) modify or
terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other
employment agreement or employee benefit agreement, trust, plan, fund
or other arrangement for the benefit or welfare of any Employee, or
amend any such arrangement as it relates to Employees (except for
changes in compensation payable to any Employee that is a merit or
tenure increase or bonus and in each case granted in the ordinary
course of business and considering past practice), except for any such
actions that will not be or become obligations of Parent or Buyers;
provided, however, that Fortis will provide notice to, and consult
with, Buyers in advance of taking any action permitted by this
subsection (iii);
(iv) change any of the accounting or underwriting principles,
practices, methods or policies (including but not limited to any
reserving methods, practices
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or policies) employed with respect to the Business, except as may be
required by Law, GAAP, Applicable SAP, guidelines issued by the SEC or
its accounting staff, or guidelines issued by the NAIC;
(v) enter into or terminate any reinsurance Contract relating
to the Business, other than renewals of existing reinsurance Contracts
in the ordinary course of business consistent with past practice;
(vi) modify or revise in any manner materially adverse to the
Business any Material Contract, except as required by applicable Law;
(vii) take or cause to be taken any action that would result
in the FBIC Separate Accounts or FFLIC Separate Account being managed
other than in the ordinary course consistent with past practice in all
material respects; provided, however, that FBIC and FFLIC shall be
entitled to withdraw from the FBIC Separate Accounts and FFLIC Separate
Account, respectively, prior to Closing some or all of the FBIC
Separate Account Surplus and FFLIC Separate Account Surplus,
respectively;
(viii) pay, discharge, compromise or satisfy any claims,
liabilities or obligations associated with the Business other than the
payment, discharge, compromise or satisfaction of claims, liabilities
or obligations in the ordinary course of business consistent with past
practice, and other than such matters that would be Retained
Liabilities;
(ix) increase the Commissions or benefits of any agents,
brokers, producers or other sales representatives for the Business,
except in any case (1) as may be required under the terms of the
applicable Seller Party's contractual relationship with any such
Person, or (2) in the ordinary course of business consistent with past
practice;
(x) enter into any new lease of the Woodbury Property, except
on terms and conditions acceptable to Buyers exercisable in their
reasonable discretion;
(xi) launch, market, issue or agree to issue any new products
that are similar to the Insurance Contracts or make material
modifications or additions to the terms and conditions of the Insurance
Contracts, except as described on SCHEDULE 5.1;
(xii) acquire any Commercial Mortgage that would be an FFG
Investment Asset;
(xiii) transfer FFG Investment Assets (other than cash or cash
equivalents) among or between the investment portfolio maintained by
each
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Insurer for such Insurer's General Account Reserves of the Business and
(1) any other investment portfolio maintained by such Insurer for its
other lines of business, or (2) any investment portfolio maintained by
any Affiliate of such Insurer; or
(xiv) agree in writing or otherwise to take any of the actions
described above in this Section 5.1(b).
(c) Prior to Closing, each Seller Party shall notify Buyers as
promptly as practicable of any event or transaction that could reasonably be
likely to have a Seller Material Adverse Effect, and Parent and Buyers shall
notify Fortis as promptly as practicable of any event or transaction that could
reasonably be likely to have a Buyer Material Adverse Effect.
5.2 CERTAIN TRANSACTIONS. From the date of this Agreement through the
earlier of the Closing Date or termination of this Agreement, neither the Seller
Parties nor any of their respective officers, employees, representatives or
agents will, directly or indirectly, solicit, encourage or initiate any
negotiations or discussions with, or provide any information to, or otherwise
cooperate in any other manner with, any Person or group (other than Parent and
Buyers and their respective Affiliates and representatives) concerning any
direct or indirect sale or other disposition of the Business.
5.3 INVESTIGATIONS; PRE-CLOSING ACCESS.
(a) Prior to the earlier of the Closing Date or termination of
this Agreement, Parent and Buyers shall be entitled, through their employees and
representatives, to make such investigation of the assets, liabilities, business
and operations of the Business and the Seller Parties, and such examination of
the Books and Records, as Parent and Buyers may reasonably request. Any
investigation, examination or interview by Parent or Buyers of the Seller
Parties' employees and agents, or access pursuant to any of the provisions of
this Section 5.3(a), shall be conducted or occur at reasonable times upon
reasonable prior notice, with the Seller Parties entitled to have a
representative present during any direct contact between Parent or Buyers or
their respective representatives and any employee or agent of the Seller
Parties.
(b) Prior to the earlier of the Closing Date or termination of
this Agreement, the Seller Parties shall be entitled, through their employees
and representatives, to make such investigation of the assets, liabilities,
business and operations of Buyers as the Seller Parties may reasonably request.
Any such investigation or examination shall be conducted at reasonable times
upon reasonable prior notice, with Buyers entitled to have a representative
present during any direct contact between any of the Seller Parties or their
respective representatives and any employee or agent of Buyers.
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(c) Prior to the earlier of the Closing Date or termination of
this Agreement, each of Fortis and Buyers shall (i) provide the other party with
access to individuals reasonably specified by such other party to plan the
transition of the Business to Buyers, (ii) designate certain individuals
(subject to the other party's reasonable approval) to serve as members of a
Fortis/Buyer transition team and cause such individuals to devote reasonable
time to transition matters, (iii) devote reasonable resources to transition
matters, (iv) cooperate with Buyers in connection with their filing of policy
and contract forms to enable Buyers to issue policies and contracts
substantially similar to those included in the Business, (v) consult with Buyers
regarding the Seller Parties' development work pertaining to systems, products,
distribution and customer and producer services, and (vi) cooperate with Buyers
in their development work pertaining to systems, products, distribution and
customer and producer services.
(d) Notwithstanding any other provision of this Section 5.3,
the parties shall cooperate in implementing the provisions of this Section 5.3
in good faith with the objective of not unreasonably preventing or interfering
with the Seller Parties' ability to comply with Section 5.1.
5.4 POST-CLOSING ACCESS.
(a) Following the Closing Date, the Seller Parties shall (i)
allow Buyers, upon reasonable prior notice and during regular business hours,
through their employees and representatives, the right, at Buyers' expense, to
examine and make copies of any books and records retained by the Seller Parties
(including, without limitation, licenses to do business, corporate records,
original Tax and corporate accounting records relating to the Business and other
original records to be maintained by Seller Parties under applicable Law), to
the extent they relate to the Business, for any reasonable business purpose
related to the discharge of Insurance Contracts Liabilities or the
administration of the Business, including the preparation or examination of
Buyers' Tax Returns, regulatory filings and financial statements and the conduct
of any litigation, arbitration or other dispute resolution, whether pending or
threatened, concerning the conduct of the Business prior to the Closing Date or
related to this Agreement or the Ancillary Agreements, and (ii) maintain such
books and records for Buyers' examination and copying, subject to the Seller
Parties' ordinary course document retention policies. Access to such books and
records shall be at Buyers' expense and may not unreasonably interfere with the
Seller Parties' or any successor company's business operations.
(b) Following the Closing Date, Parent and Buyers shall (i)
allow the Seller Parties, upon reasonable prior notice and during regular
business hours, through their employees and representatives, the right, at the
Seller Parties' expense, to examine and make copies of any books and
records(including, without limitation, licenses to do business, corporate
records, original Tax and corporate accounting records relating to the Business
and other original records to be maintained by Parent and Buyers under
applicable Law), to the extent they relate to the Business, for any reasonable
business purpose, including the preparation or examination of Tax Returns,
regulatory filings and
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financial statements and the conduct of any litigation, arbitration or other
dispute resolution whether pending or threatened, concerning the conduct of the
Business prior to the Closing Date or related to this Agreement or the Ancillary
Agreements, and (ii) maintain such books and records for the Seller Parties'
examination and copying, subject to Buyers' ordinary course document retention
policies. Access to such books and records shall be at the Seller Parties'
expense and may not unreasonably interfere with Buyers' or any successor
company's business operations.
5.5 CONFIDENTIALITY. Each party hereto (with the Seller Parties, on the
one hand, and Parent and Buyers, on the other hand, considered to be one party
for purposes of this Section 5.5) will, will cause its Affiliates to, and will
use commercially reasonable efforts to cause its and their representatives to,
hold, in strict confidence from any other Person, all Confidential Information
of the other party, unless (i) compelled to disclose by judicial or
administrative process (including in connection with obtaining the necessary
Consents of Governmental Authorities required for consummation of the
transactions contemplated hereby) or by other requirements of Law or (ii)
disclosed in an action or proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder. For purposes of this
Agreement, "Confidential Information" means all documents and information
concerning a party or any of its Affiliates furnished before or after execution
of this Agreement by such party or such party's representatives in connection
with this Agreement, the due diligence related thereto or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party, (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential, or (d)
independently developed by the receiving party without use of the Confidential
Information; provided that following the Closing the foregoing restrictions will
not apply to Parent's or Buyers' use of documents and information concerning the
Business furnished by a Seller Party hereunder; and provided, further, that
nothing contained herein shall supersede or in any way affect any provision in
any Ancillary Agreement restricting the use of Confidential Information or other
documents or information by any party hereto on or after the Closing Date. In
the event the transactions contemplated hereby are not consummated, upon the
request of the other party, each party hereto will, and will cause its
Affiliates and their respective representatives to, promptly return all copies
of Confidential Information furnished by the other party in connection with this
Agreement or the transactions contemplated hereby and destroy all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such Confidential Information
or its representatives.
5.6 FILINGS; OTHER ACTIONS; NOTIFICATIONS. On and prior to the Closing
Date, the parties hereto shall cooperate with each other and use (and shall
cause their respective Affiliates to so cooperate and use) commercially
reasonable efforts to do or cause to be
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done all things necessary, proper or advisable on its or their part under this
Agreement and applicable Law to consummate and make effective the transactions
contemplated by this Agreement and the Ancillary Agreements as soon as
practicable, including, without limitation, preparing and filing as promptly as
practicable all documentation to effect all necessary notices, reports and other
filings and obtaining all necessary Consents. On and prior to the Closing Date,
the parties hereto each shall keep the other parties apprised of the status of
matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with true, correct and complete copies
of all filings with, and all notices or other communications received by a party
or any of its Affiliates from, any third party or Governmental Authority with
respect to the transactions contemplated by this Agreement. The Seller Parties
shall notify Parent and Buyers promptly of any event, condition or circumstance
known to the Seller Parties occurring from the date hereof through the Closing
Date that would constitute a violation or breach of this Agreement by any Seller
Party, and Parent and Buyers shall notify Fortis promptly of any event,
condition or circumstance known to Parent or Buyers occurring from the date
hereof through the Closing Date that would constitute a violation or breach of
this Agreement by Parent or either Buyer. Without limiting the generality of the
foregoing, each party agrees (i) to provide to the other parties, and consult
with such other parties regarding, a copy of any initial filing that such party
proposes to send to an insurance regulatory authority in order to seek consent
or approval for the transactions contemplated hereby, provided that the parties
receiving any such copy shall respond on a timely basis, and the party preparing
such filing shall not be restricted from making such filing as required by
applicable Law or as otherwise appropriate in the reasonable judgment of such
party; (ii) to use commercially reasonable efforts to provide joint notices of
the transactions contemplated hereby to those Governmental Authorities whose
consents or approvals will be sought for Closing; and (iii) to permit the other
parties, to the extent practicable, to participate reasonably in any meetings
with such Governmental Authorities.
5.7 EXPENSES. Except as otherwise specifically provided in this
Agreement, the parties to this Agreement shall bear their respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel, investment bankers, actuaries and
accountants; provided, however, that Parent or Buyers shall pay the cost of the
filing fees in connection with all filings by any of the parties hereto under
the HSR Act or under any applicable state insurance Laws with respect to the
transactions contemplated hereby, and all fees and Taxes required in connection
with transferring the Woodbury Property to Buyers.
5.8 FURTHER ASSURANCES. On and after the Closing Date, the Seller
Parties (as reasonably requested from time to time by Buyers) and Parent and
Buyers (as reasonably requested from time to time by a Seller Party) shall take
all reasonably appropriate action and execute any additional documents,
instruments or conveyances of any kind (not containing additional
representations and warranties) that may be reasonably necessary to carry out
any of the provisions of this Agreement or the Ancillary Agreements, including,
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without limitation, (i) putting Buyers in full possession, enjoyment and
operating control of the Purchased Assets and the Business and (ii) giving
effect to the assumption of Assumed Liabilities by Buyers as contemplated
hereby.
5.9 USE OF NAMES, LOGOS OR SERVICE MARKS. Except as expressly provided
in the Ancillary Agreements, and subject in any case to the terms thereof,
neither Parent, Buyers nor any of their Affiliates shall use the names,
trademarks, logos or service marks of Fortis or any of its Affiliates in any way
or manner not specifically authorized in writing by Fortis.
5.10 THIRD PARTY REINSURANCE CONTRACTS. Prior to Closing, FBIC and FIC,
as applicable, and Hartford Annuity shall use commercially reasonable efforts to
novate and assign to Hartford Annuity at Closing the rights and obligations of
such Insurers under the Third Party Reinsurance Contracts, provided that (i) in
the discretion of the applicable Insurer and subject to applicable Law, each
such assignment shall include a provision that transfers the reinsurance
coverage back to the applicable Insurer in the event that the applicable
Reinsurance Agreement is cancelled for any reason, (ii) none of the Third Party
Reinsurance Contracts applicable to JALIC's Insurance Contracts shall be
assigned to Hartford Annuity; and (iii) Hartford Annuity shall pay any and all
fees required to be paid to the counterparties to such Third Party Reinsurance
Contracts to obtain such assignments; provided further that, if Hartford Annuity
would be required to pay any such fee to a counterparty for such an assignment,
and with respect to any Third Party Reinsurance Contract that provides
reinsurance for the minimum guaranteed death benefits under the variable annuity
contracts that are part of the Insurance Contracts (regardless of whether the
counterparty to such Third Party Reinsurance Contract requires a fee for such
assignment), at the election of Hartford Annuity, such Third Party Reinsurance
Contract shall not be assigned to Hartford Annuity. In the event that any of the
Third Party Reinsurance Contracts is not assigned to Hartford Annuity in
accordance with the terms and conditions of this Section 5.10, the applicable
Insurer and Hartford Annuity shall take such actions from and after Closing as
are necessary to place Hartford Annuity in the same net economic position as if
such Third Party Reinsurance Contract had been assigned to Hartford Annuity, on
the same terms and provisions as provided in Section 2.3(d).
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5.11 CERTAIN EMPLOYEE MATTERS.
(a) Parent shall, or shall cause one of its Affiliates to,
offer to employ all of the Employees and, effective as of the Closing Date,
employ all Employees who accept such offers. Each such offer of employment by
Parent or its designated Affiliate shall be for a position: (i) that is
consistent with the nature of such individual's position as an Employee, (ii)
with a salary or other current cash compensation at a level comparable to what
the individual received as an Employee immediately prior to Closing, and (iii)
with benefits comparable to other employees of Parent and its Affiliates (not
including Planco, Incorporated) with similar duties. Fortis shall not, directly
or indirectly, take any action designed or intended to influence an individual's
decision to accept such offer. Each Employee who accepts such an offer by Parent
or its designated Affiliate shall be referred to as a "Buyer Employee." If
Parent or its designated Affiliate terminates any Buyer Employee's employment
without Cause within twelve months after the Closing Date, Parent shall, or
shall cause its designated Affiliate to, pay to such Buyer Employee at least the
amount of severance pay and additional benefits described on SCHEDULE 5.11 and,
for such purpose, giving each Buyer Employee credit for such Buyer Employee's
prior service with the Seller Parties or any Affiliate thereof (including any
amount of service credit given to a Buyer Employee by the Seller Parties or
their Affiliates for periods of time prior to such Buyer Employee's becoming
employed by the Seller Parties or their Affiliates). Any Employee (including any
individual employed by Fortis Advisers or Fortis Investors) who does not accept
such offer of employment by Parent or its designated Affiliate shall either, in
the discretion of Fortis, remain an employee of the Seller Parties or one of
their Affiliates, or be severed from employment with the Seller Parties and
their Affiliates, and in each instance the Seller Parties shall be responsible
for all costs associated with such continued employment. Notwithstanding the
foregoing, in the event that Parent or one of its Affiliates, within twelve
months after the Closing Date, hires an Employee who is severed from employment
with the Seller Parties and their Affiliates as described in the immediately
preceding sentence, Parent shall, or shall cause one of its Affiliates to,
reimburse the applicable Seller Party or Affiliate for the amount of cash
severance pay actually paid by such Seller Party or Affiliate to such Employee
in connection with such severance.
(b) "Cause" for purposes of this Section 5.11 shall mean any
of the following: the Buyer Employee (i) is convicted of, pleads guilty or nolo
contendre to, or confesses to any felony involving moral turpitude or any act of
fraud, misappropriation or embezzlement; (ii) engages in willful or gross
misconduct as reasonably determined by Parent or any of its Affiliates; (iii)
fails to comply in any material way with written policies, directives or conduct
standards of Parent or its designated Affiliate; (iv) is under the influence of
drugs or alcohol while conducting the business of Parent or any of its
Affiliates and his or her conduct damages or is injurious to Parent or its
Affiliates; or (v) fails to perform satisfactorily the duties and
responsibilities of his or her position as reasonably determined by Parent or
its designated Affiliate.
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(c) Except as otherwise specifically provided in this
Agreement, Parent or its designated Affiliate shall assume liability for all
salary, Commissions and other compensation and benefits of any kind earned on
and after the Closing Date by all Buyer Employees, including, without
limitation, under the FFG Benefit Plans. Except as otherwise specifically
provided in this Agreement, the Seller Parties shall be solely responsible for
and retain all liabilities that have accrued before the Closing Date under the
Benefit Plans with respect to all current and former employees of Seller Parties
engaged in the Business and all current and former employees of Fortis Advisers
and any of its Subsidiaries. For purposes of this Section 5.11(c), a claim for
reimbursement of a medical or dental expense shall be deemed to have accrued as
of the date the service or treatment giving rise to the expense was rendered.
Fortis will, at its or one of its Affiliate's expense, cause (i) all employer
matching contributions to be made to the accounts of all Buyer Employees under
the Fortis 401(k) Plan for that portion of the 2001 plan year during which such
Buyer Employee was eligible to receive an employer matching contribution without
regard to any requirement that the Buyer Employees be employed on any particular
date or earn any minimum number of hours of service to receive such
contribution, and (ii) all Buyer Employees to be paid for all accrued but unused
vacation time as of the Closing Date, except in each case where such crediting
would violate applicable Laws or require, under applicable Laws, Fortis to
increase benefits for other employees.
(d) Except as otherwise specifically provided in this Section
5.11, Parent shall, or shall cause its designated Affiliate to, take all actions
necessary to ensure that each Buyer Employee shall be eligible to participate in
all employee benefit plans, programs, policies and arrangements of Parent or its
Affiliates (except for defined benefit pension plans) on the same basis as
similarly situated employees of Parent and its Affiliates effective as of the
Closing Date. With respect to defined benefit pension plans, Parent shall, or
shall cause its designated Affiliate to, take all actions necessary to ensure
that each Buyer Employee credited with service to Seller Parties or their
Affiliates prior to January 1, 2001 under the Fortis Pension Plan shall be
eligible to participate in the Hartford Fire Insurance Company Retirement Plan
for U.S. Employees on the same basis as similarly situated employees of Parent
and its Affiliates hired prior to January 1, 2001, and that each other Buyer
Employee shall be entitled to participate in the Hartford Cash Balance Plan on
the same basis as similarly situated employees of Parent and its Affiliates
hired on or after January 1, 2001. For purposes of such benefit plans, programs,
policies and arrangements, Parent or such Affiliate thereof shall treat the
prior service of such Buyer Employees with the Seller Parties or their
Affiliates (including any amount of service credit given to a Buyer Employee by
the Seller Parties or their Affiliates for periods of time prior to such Buyer
Employee's becoming employed by the Seller Parties or their Affiliates) as
service rendered to Parent or Parent's Affiliates for purposes of eligibility,
vesting and benefit accruals thereunder, except where such service crediting
would violate applicable Laws or require Parent or its Affiliate, under
applicable Laws, to increase benefits for its other employees; provided,
however, that such prior service need not be credited for purposes of benefit
accrual under any defined benefit pension plan of Parent or its Affiliates or
any service awards.
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(e) Parent shall, or shall cause its designated Affiliate to,
take all actions necessary to ensure that no Buyer Employee (or eligible
dependent) who elects to be covered under any medical, dental or disability
insurance plan of Parent or its Affiliates shall be excluded from coverage under
such plan on the basis of a pre-existing condition that was not also excluded
under the applicable medical, dental or disability insurance plan of the Seller
Parties. To the extent that a Buyer Employee has satisfied in whole or in part
any annual deductible or paid any out-of-pocket or co-payment expenses under a
medical or dental insurance plan of the Seller Parties for a plan year and
records of such payments are available from the medical, dental or disability
provider, such individual shall be credited therefor under the corresponding
provisions of the corresponding plan of Parent or its Affiliates in which such
individual participates after the Closing Date.
(f) Parent shall, or shall cause its designated Affiliate to,
take all actions necessary to ensure that a tax-qualified retirement plan
maintained by Parent or an Affiliate shall, at the request of a Buyer Employee,
accept a rollover of such Buyer Employee's accrued benefit under the Fortis
Pension Plan and/or account under the Fortis 401(k) Plan, including any related
promissory note evidencing a participant loan that is outstanding under the
Fortis 401(k) Plan as of the Closing Date.
(g) Parent shall, or shall cause its designated Affiliate to,
assume and honor, and cause its Affiliates after the Closing (including Fortis
Advisers and Fortis Investors) to honor, all Change in Control Agreements
applicable to Buyer Employees. For purposes of this Agreement, "Change in
Control Agreements" means collectively the change in control severance
agreements and retention bonus agreements and plans listed as items 1 through 7,
21 through 40, and 51 through 54 on SCHEDULE 3.14 hereto; provided, however,
that with respect to each retention bonus agreement listed as items 51, 52, 53
and 54 on SCHEDULE 3.14, the parties agree that Fortis shall reimburse Parent or
its Affiliate, as the case may be, for one-half of the amount paid by Parent or
such Affiliate to the Buyer Employee pursuant to the terms of such retention
bonus agreement.
(h) Fortis shall cause all Buyer Employees to be fully vested
as of the Closing Date in their accrued benefits and accounts under the Fortis
401(k) Plan and the Fortis Pension Plan, except where such service crediting
would violate applicable Laws or require, under applicable Laws, Fortis to
increase benefits of other employees.
5.12 ALLOCATION OF PURCHASE PRICE AND ASSUMED LIABILITIES.
(a) The amount of the Ceding Commission for each Insurer shall
be allocated to the value of the insurance in-force with respect to the
Insurance Contracts reinsured under the applicable Reinsurance Agreement.
(b) The Seller Parties, Parent and Buyers agree (i) to
allocate the Asset Price, the Assumed Liabilities, and all other capitalizable
costs incurred in connection
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with the transactions described herein (collectively, the "Allocable Amount")
among the Purchased Assets in accordance with this Section 5.12 for Tax and
statutory accounting purposes (giving effect to appropriate differences between
Tax and Applicable SAP reserves and appropriate allocation of ceding
commissions), and (ii) that with respect to the allocation of the Allocable
Amount for any Tax or statutory accounting purpose, to all use the same
allocation for such purpose.
(c) The Allocable Amount shall be allocated among the
Purchased Assets using the allocation method prescribed in Income Tax Regulation
Section 1.1060-1T. For purposes of Section 1060 of the Code, the Seller Parties
and Buyer shall file asset acquisition statements on Form 8594 (or any
replacement or successor form) reflecting such allocation at the time, in the
manner, and under the procedures described in such provision of the Income Tax
Regulations.
(d) As soon as practicable after the Closing Date, Buyers
shall prepare a schedule reflecting the allocation of the Allocable Amount under
Section 5.12(c) hereof (including a separate calculation of Buyers'
capitalizable costs) in the manner described in Income Tax Regulations Section
1.1060-1T and shall submit it to Fortis. If, within twenty Business Days of
Fortis' receipt of such schedule, Fortis shall not have objected in writing to
the determination of the Allocable Amount or to such allocation, the allocation
shall be used by the Seller Parties and Buyers for purposes of Form 8594 (and
any replacement or successor form) and all other federal income Tax purposes.
If, within ten Business Days of any objection in writing to the determination of
the Allocable Amount or to such allocation, Fortis and Buyers shall not have
agreed in writing to the allocation, any disputed aspects of the determination
of the Allocable Amount and any disputes with respect to such allocation shall
be resolved by arbitration in accordance with Section 9.6 hereof.
(e) The Seller Parties, on the one hand, and Parent and
Buyers, on the other hand, shall not take any position before any Governmental
Authority or otherwise (including in any Tax return) with respect to any Taxes
inconsistent with this Section 5.12 unless and to the extent required to do so
pursuant to a determination (as defined in Section 1313(a) of the Code or any
similar provision of state, local or foreign applicable Law).
5.13 CERTAIN TAX MATTERS. All sales or transfer taxes, including
without limitation sales or gross receipts taxes, use taxes, document recording
fees, securities transfer taxes, property transfer taxes, or motor vehicle
excise taxes, arising out of or in connection with the consummation of the
transactions contemplated hereby, if any, shall be paid by Buyers. After
Closing, Buyers and the Seller Parties shall provide to each other, at the
expense of the requesting party, such assistance as may reasonably be requested
by either of them in connection with the preparation of any Tax return, any
audit or other examination by any Governmental Authority, or any judicial or
administrative proceedings relating to liability for such Taxes, and each will
retain and provide the requesting party with any records or information that may
be relevant to any
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of the foregoing. The obligations of the parties described in the previous
sentence shall expire on the later of (x) the date upon which the liability to
which any such Tax return, audit, examination or proceeding may relate is barred
by all applicable statutes of limitation (including any extension thereof by
agreement) and (y) the date upon which any claim for refund or credit related to
such Tax return, audit, examination or proceeding is barred by all applicable
statutes of limitation (including any extension thereof by agreement).
5.14 NONCOMPETITION; NONSOLICITATION.
(a) For a period of two years after the Closing Date, (i)
neither Fortis nor any of its Subsidiaries shall engage anywhere in the United
States in the business of marketing, selling, distributing, issuing or
administering variable life insurance policies or variable annuity contracts (a
"Competing Business"), and (ii) no other Affiliate of Fortis shall engage
anywhere in the United States in a Competing Business using the name "Fortis" or
any derivation thereof; provided, however, that if Fortis or any of its
Subsidiaries or other Affiliates acquires by merger, stock purchase, asset
purchase or other form of business combination or acquisition a Person that is
already engaged in a Competing Business, this Section 5.14(a) shall not be
violated if the aggregate of the annual GAAP revenues from such acquired
Competing Business, together with the amount of net deposit funds of such
Competing Business deposited into variable product accounts for such year,
represent 35% or less of the total annual GAAP revenues and net deposit funds
for such year of the acquired Person, or if Fortis or the relevant acquiring
Subsidiary or Affiliate divests such acquired Competing Business within eighteen
months of acquiring it.
(b) For a period of two years after the Closing Date, neither
Fortis nor any of its Subsidiaries or other Affiliates shall solicit to employ
any Buyer Employee; provided, however, that this Section 5.14(b) shall not be
violated if Fortis or any of its Subsidiaries or other Affiliates employs a
Buyer Employee who (i) is no longer employed by Parent or its Affiliates, (ii)
responds to any advertisement that is not specifically directed to employees of
Parent or its Affiliates, or (iii) is referred to Fortis or its Subsidiaries or
other Affiliates by a search firm, employment agency or other similar entity
that has not been instructed by Fortis or its Subsidiaries or other Affiliates
to solicit the employees of Parent or its Affiliates.
(c) For a period of ten years after the Closing Date, neither
Fortis nor any of its Subsidiaries or other Affiliates shall directly or
indirectly through any third party, including without limitation, any agents or
producers, systematically target or solicit, through any medium, the owners or
holders of any Insurance Contract for the purpose of replacing the Insurance
Contracts with comparable insurance products issued by Fortis or any of its
Subsidiaries or other Affiliates; provided, however, that such replacements of
less than two percent (2%) of the aggregate number of Insurance Contracts shall
not be deemed a violation of this Section 5.14(c).
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(d) The restrictions in this Section 5.14 shall apply to each
Seller Party following any acquisition (whether by merger, stock purchase, asset
purchase or other form of business combination) of any of the Seller Parties by
any Person on or after the date hereof.
5.15 BIDDER AGREEMENTS. From the date hereof to the Closing, Fortis
shall use commercially reasonable efforts to enforce its rights under all
effective agreements entered into between Fortis and any proposed buyer with
respect to the potential acquisition of the Business (the "Bidder Agreements").
Immediately following the Closing, Fortis shall assign each of the Bidder
Agreements to Parent.
5.16 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, no party hereto
shall make, or shall permit its Affiliates or their respective representatives
to make, any press release or other public disclosure concerning this Agreement
or the transactions contemplated hereby without the prior consent of the other
parties (which consent shall not be unreasonably withheld, conditioned or
delayed), except that such disclosure may be made after reasonable notice to the
other parties hereto: (i) if required by applicable Law or the rules of any
securities exchange, (ii) to any Governmental Authority having jurisdiction over
the disclosing party, (iii) to the NAIC, the NASD or any nationally recognized
ratings agency that requests access to such information, (iv) in order for the
parties to comply with their obligations hereunder, or (v) if a default by the
other party hereto (Parent and Buyers, on the one hand, and the Seller Parties,
on the other hand, each being a party for this purpose) has occurred under this
Agreement to the extent reasonable for the non-defaulting party to enforce its
rights and remedies hereunder.
5.17 TRANSITION SERVICES. The parties hereto agree to negotiate in good
faith for the execution prior to or in connection with the Closing a transition
services agreement (the "Transition Services Agreement"), which shall provide
for each of the parties to perform on an interim basis reasonable and customary
services for the other party in order to facilitate the orderly transition of
the Business to Buyers, including without limitation the matters described on
SCHEDULE 5.17. Such transition services agreement will include, among other
provisions, a provision that the recipient of such services shall pay the
provider of such services: (a) all reasonable out-of-pocket expenses incurred by
the provider in providing such services, (b) a proportionate and reasonable
share of the provider's corporate overhead allocable to providing such services
computed, as of any date, in accordance with the provider's current charge-back
methodologies used generally by the provider for its own internal allocation
purposes, (c) all employment related costs reasonably incurred by the provider
in providing such service (to the extent not included in item (b) above),
computed, as of any date, in accordance with the provider's current charge-back
methodologies used generally by the provider for its own internal allocation
purposes, and (d) any sales or use taxes charged, assessed or incurred by the
provider directly in connection with providing such services.
5.18 NEW YORK AMENDMENT. Notwithstanding Section 6.1(b), the parties
agree that if all of the conditions to Closing as set forth in Article 6 are
satisfied or
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waived, except that the parties have not obtained the necessary approval of the
transactions contemplated hereby from the Superintendent of Insurance of the
State of New York (the "NY DOI"), the parties will proceed with Closing in
accordance with the terms of this Agreement, subject to the following
adjustments:
(a) The Reinsurance Agreement to be entered into between
Hartford Life and FFLIC on the Closing Date will be amended to reflect a cession
of the maximum amount of liabilities permissible under the insurance Laws of the
state of New York in the absence of approval of the NY DOI.
(b) The Adjusted Statutory Liabilities of FFLIC shall reflect
the percentage of cession actually made to Hartford Life under the Reinsurance
Agreement between FFLIC and Hartford Life.
(c) For a period of up to eighteen months after the Closing
Date, the parties shall use all commercially reasonable efforts to obtain the
approval of the NY DOI for a 100% cession of FFLIC's Insurance Contracts
Liabilities to Hartford Life. On a date (the "NY Amendment Date") that is not
more than three Business Days after the parties have obtained such required
approval from the NY DOI, Hartford Life and FFLIC shall execute and deliver an
amendment to the Reinsurance Agreement between FFLIC and Hartford Life providing
for 100% reinsurance by Hartford Life of the risks under such Reinsurance
Agreement.
(d) On the NY Amendment Date, the parties shall make whatever
adjustments are appropriate with respect to FFLIC to cause the parties to be in
the same economic position as if FFLIC had ceded 100% of its Insurance Contracts
Liabilities on the Closing Date.
5.19 DAC TAX. The Insurers and Buyers agree to make the election
contemplated by Income Tax Regulation Section 1.848(2)(g)(8) to ignore the
general deductions limitation in accordance with the terms, conditions and
procedures contained in the Reinsurance Agreements.
5.20 CERTAIN PRODUCT TAX MATTERS. From and after the date of this
Agreement and continuing after the Closing Date, each Insurer, as appropriate,
shall notify the holder of any Insurance Contract that constitutes a "modified
endowment contract" under Section 7702A of the Code (if such holder has not
previously been so notified and if such holder is identified to the Insurer on
or before eighteen months after the Closing Date) of the state and federal tax
consequences of such Insurance Contract, and such Insurer shall provide such
options as the Insurer may select to resolve such Insurer's liability to such
holder, all at such Insurer's expense. Buyers shall cooperate with the Insurers
from and after the Closing Date in connection with such Insurer's undertakings
and shall provide such services to or for the Insurers as the Insurers may
reasonably request, including, without limitation, using commercially reasonable
efforts to obtain such relief as the Insurers' shall reasonably require
(including obtaining a
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waiver from, or entering into a settlement or closing agreement with, the IRS or
the affected Insurance Contract holder) to the extent such relief relates to
non-compliance by Insurers prior to the Closing Date with any product tax
requirement or limitation contained in Sections 72, 101(f), 817(h), 7702 and
7702A of the Code regarding any Insurance Contract identified in such request or
requested by Buyers within eighteen months of the Closing Date, and such Insurer
shall be responsible for all costs, expenses and liabilities of such
non-compliance. As consideration for the Buyers' providing such services, the
Insurers shall pay to the Buyers: (i) all reasonable out-of-pocket expenses
incurred by the Buyers in providing such services, (ii) a proportionate and
reasonable share of the Buyers' corporate overhead allocable to providing such
services computed, as of any date, in accordance with the Buyers' current
charge-back methodologies used generally by the Buyers for their own internal
allocation purposes, (iii) all employment related costs reasonably incurred by
the Buyers in providing such services (to the extent not included in item (ii)
above), computed, as of any date, in accordance with the Buyers' current
charge-back methodologies used generally by the Buyers for their own internal
allocation purposes, and (iv) any sales or use taxes charged, assessed or
incurred by the Buyers directly in connection with providing such services.
5.21 UPDATING SCHEDULES. In connection with the Closing, Buyers and the
Seller Parties will promptly supplement or amend the various disclosure
Schedules to this Agreement to reflect any matter that, if existing, occurring
or known on the date hereof, should have been so disclosed or that is necessary
to correct any information in such Schedules that was or has been rendered
inaccurate thereby; provided, however, that for purposes of determining the
rights and obligations of the parties under this Agreement, any such
supplemental or amended disclosure by any party shall not be deemed to have been
disclosed as of the date hereof, to constitute a part of, or an amendment or
supplement to, such party's Schedules, or to cure any breach or inaccuracy of a
representation or warranty, unless so agreed to in writing by the other party;
and provided, further, that such supplemental or amended disclosures by a party
shall not entitle the other party to refuse to consummate the transactions
contemplated hereby unless such supplemental or amended disclosures,
individually or in the aggregate, disclose a failure of the disclosing party to
satisfy the condition to Closing specified in Section 6.2(a) or 6.3(a), as
applicable. This Section 5.21 shall not apply to SCHEDULE 2.6, which may be
amended or supplemented in accordance with Section 2.6.
5.22 INTERIM APPOINTMENT OF AGENTS. After the date of this Agreement,
at Buyers' request, the parties will cooperate on the development and
implementation of a plan whereby representatives, producers and other agents of
FBIC and FFLIC may be appointed by Buyers prior to the Closing Date to sell
Buyer's life insurance and annuity products, with Buyer's life insurance and
annuity products being included on any "preferred product" list of FBIC and
FFLIC, with the objective of such plan being to assist Buyers in a smooth and
orderly transition of product sales from the Insurers to the Buyers after
Closing without undue disruption to or diminution of the product sales of
Insurers before the Closing Date. Without limiting the generality of the
foregoing, each of FBIC and FFLIC shall use commercially reasonable efforts to
assist Buyers in
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appointing such agents as Buyers may reasonably request, provided that the costs
of such appointments are paid by Buyers and such assistance by the Insurers does
not unreasonably interfere with or disrupt the business of such Insurers. In
addition, prior to the Closing Date, Buyers shall not offer or pay to any such
representative, producer or other agent so appointed by Buyers any convention
credits or deferred or other compensation for selling Buyers' products, other
than the ordinary course commissions paid by Buyers generally.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each party to consummate the transactions contemplated hereby are subject to
the fulfillment prior to or at Closing of the following conditions, unless
waived by Buyers and Fortis in writing:
(a) No Law or Order shall be in effect that prohibits or
enjoins the consummation of the transactions contemplated hereby.
(b) Each of the Consents from Governmental Authorities listed
on SCHEDULE 6.1 shall be in full force and effect and shall have been obtained
on terms and conditions that would not result in the imposition on Buyers, their
Affiliates or their business, or on the Seller Parties, their Affiliates or
their business, of material costs, material liabilities or material restrictions
that are not consented to by the burdened party.
(c) The applicable waiting period under the HSR Act, including
all extensions thereof, shall have expired or been terminated.
(d) All conditions to closing under the Fortis Advisers Stock
Purchase Agreement shall have been satisfied or waived (other than conditions
with respect to actions the respective parties thereto will take at the Closing
itself).
6.2 CONDITIONS TO OBLIGATIONS OF BUYERS. The obligations of Buyers to
consummate the transactions contemplated hereby are subject to the fulfillment
prior to or at Closing of the following conditions, unless waived by Buyers in
writing:
(a) (i) All of the covenants and obligations that the Seller
Parties are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively) and each of those covenants
and obligations (considered individually) shall have been duly performed and
complied with in all material respects, (ii) each of the Seller Parties'
representations and warranties contained in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as if made
on the Closing Date (except as to any representation or warranty that
specifically relates to an earlier date), provided that no breaches of
representations and warranties shall be deemed to excuse Buyers' obligations to
consummate the transactions
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contemplated hereby unless, individually or in the aggregate, such breaches
could reasonably be likely to result in a Seller Material Adverse Effect
(ignoring, for this purpose, any materiality or material adverse effect
qualifications to such representations and warranties), and (iii) Buyers shall
have received a certificate signed by a duly elected officer of each Seller
Party to the effect that the foregoing conditions have been satisfied.
(b) Buyers shall have received from each of the Seller Parties
certified copies of the resolutions duly adopted by their respective boards of
directors approving the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby.
(c) Buyers shall have received the closing deliveries listed
in Section 2.8(a) hereof.
(d) There shall not have occurred and be continuing a Seller
Material Adverse Effect.
6.3 CONDITIONS TO OBLIGATIONS OF THE SELLER PARTIES. The obligations of
the Seller Parties to consummate the transactions contemplated hereby are
subject to the fulfillment prior to or at Closing of the following conditions,
unless waived by Fortis in writing:
(a) (i) All of the covenants and obligations that Parent and
each Buyer are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively) and each of those covenants
and obligations (considered individually) shall have been duly performed and
complied with in all material respects, (ii) Parent's and each Buyer's
representations and warranties contained in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as if made
on the Closing Date (except as to any representation or warranty that
specifically relates to an earlier date), provided that no breaches of
representations and warranties shall be deemed to excuse the Seller Parties'
obligations to consummate the transactions contemplated hereby unless,
individually or in the aggregate, such breaches could reasonably be likely to
result in a Buyer Material Adverse Effect (ignoring, for this purpose, any
materiality or material adverse effect qualifications to such representations
and warranties), and (iii) Fortis shall have received a certificate signed by a
duly elected officer of Parent and each Buyer to the effect that the foregoing
conditions have been satisfied.
(b) Fortis shall have received from Parent and each Buyer
certified copies of the resolutions duly adopted by their respective boards of
directors approving the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby.
(c) The Seller Parties shall have received the closing
deliveries listed in Section 2.8(b) hereof.
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(d) There shall not have occurred and be continuing a Buyer
Material Adverse Effect.
ARTICLE 7
SURVIVAL AND INDEMNIFICATION
7.1 SURVIVAL. The representations, warranties, covenants and agreements
made or undertaken by the parties in this Agreement shall survive the Closing;
provided, however, that the representations and warranties in Articles 3 and 4,
and the Seller Parties' obligations in Section 7.2(e), shall survive for a
period of eighteen months following the Closing Date (other than the
representations and warranties in Section 3.21, which shall terminate upon the
expiration of the applicable statute of limitations with respect to the Tax
liabilities in question, after giving effect to any extensions or waivers
thereof); and provided, further, that the covenants and agreements contained in
Sections 5.2, 5.3 and 5.6 shall not survive the Closing Date.
7.2 OBLIGATIONS OF FORTIS TO INDEMNIFY. Subject to the limitations set
forth in this Article 7, from and after the Closing Date, Fortis, and each
Insurer to the extent described below in this Section 7.2, shall indemnify
Parent, Buyers and their Affiliates (and their respective directors, officers,
employees, successors and permitted assigns) (collectively, the "Buyer
Indemnitees") for all Losses asserted against, imposed upon or incurred by any
Buyer Indemnitee resulting from, arising out of, based upon or otherwise in
respect of any of the following:
(a) any breach of or inaccuracy in any representation or
warranty of any Seller Party contained in Article 3 of this Agreement;
(b) any breach of any covenant or agreement made or to be
performed by any Seller Party pursuant to this Agreement;
(c) any breach of any covenant or agreement made or to be
performed by any Seller Party pursuant to the Ancillary Agreements;
(d) any Retained Liabilities;
(e) any Excess Accrued Payables; or
(f) the reasonable costs to the Buyer Indemnitees of enforcing
this indemnity against any Seller Party.
The obligations of each Insurer under this Article 7 shall be only for Losses
relating to such Insurer's breaches or liabilities or the enforcement of this
indemnity against such Insurer, and no Insurer shall be liable for any Losses
relating to the breaches or liabilities of any other Seller Party or the
enforcement of this indemnity against any other Seller
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Party. Fortis shall be liable for any indemnification claim against any of the
Seller Parties, but in no event shall this Section 7.2 be deemed to permit a
Buyer Indemnitee to collect from Fortis and an Insurer more than the amount of
an actual Loss to which such Buyer Indemnitee may be entitled. In the event that
Fortis makes any payment to a Buyer Indemnitee pursuant to this Section 7.2 that
results from an Insurer having breached a representation, warranty, covenant or
agreement of such Insurer under this Agreement or any of the Ancillary
Agreements, Fortis shall be entitled to seek reimbursement from such Insurer in
Fortis' discretion.
7.3 OBLIGATIONS OF PARENT AND BUYERS TO INDEMNIFY. Subject to the
limitations contained in this Article 7, from and after the Closing Date,
Parent, and each Buyer to the extent described below in this Section 7.3, shall
indemnify the Seller Parties and their Affiliates (and their respective
directors, officers, employees, successors and permitted assigns) (collectively,
the "Seller Indemnitees") for all Losses asserted against, imposed upon or
incurred by any Seller Indemnitee resulting from, arising out of, based upon or
otherwise in respect of any of the following:
(a) any breach of or inaccuracy in any representation or
warranty of Parent or either Buyer contained in Article 4 of this Agreement;
(b) any breach of any covenant or agreement made or to be
performed by Parent or either Buyer pursuant to this Agreement;
(c) any breach of any covenant or agreement made or to be
performed by Parent or either Buyer pursuant to the Ancillary Agreements;
(d) any Assumed Liability; or
(e) the reasonable costs to the Seller Indemnitees of
enforcing this indemnity against Parent or either Buyer.
The obligations of each Buyer under this Article 7 shall be only for Losses
relating to such Buyer's breaches or liabilities or the enforcement of this
indemnity against such Buyer, and neither Buyer shall be liable for any Losses
relating to the breaches or liabilities of the other Buyer or Parent or the
enforcement of this indemnity against the other Buyer or Parent. Parent shall be
liable for any indemnification claim against Parent or either Buyer, but in no
event shall this Section 7.3 be deemed to permit a Seller Indemnitee to collect
from Parent and a Buyer more than the amount of an actual Loss to which such
Seller Indemnitee may be entitled. In the event that Parent makes any payment to
a Seller Indemnitee pursuant to this Section 7.3 that results from a Buyer
having breached a representation, warranty, covenant or agreement of such Buyer
under this Agreement or any of the Ancillary Agreements, Parent shall be
entitled to seek reimbursement from such Buyer in Parent's discretion.
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7.4 NOTICE OF LOSS, ASSERTED LIABILITY. As promptly as practicable
after (a) becoming aware of circumstances that have resulted in a Loss for which
a party entitled to indemnification pursuant to Section 7.2 or Section 7.3
intends to seek indemnification under such Section (the "Indemnified Party") or
(b) receipt by the Indemnified Party of written notice of any demand, claim or
circumstances which, with the lapse of time, the giving of notice or both, would
give rise to a claim or the commencement of any litigation that may result in a
Loss (an "Asserted Liability"), the Indemnified Party shall give notice thereof
(the "Claims Notice") to any other party obligated to provide indemnification
pursuant to Section 7.2 or Section 7.3 (the "Indemnifying Party"). The Claims
Notice shall describe the Loss or the Asserted Liability in reasonable detail
and shall indicate the amount (estimated, if necessary) of the Loss or Asserted
Liability that has been or may be suffered by the Indemnified Party. If a Claims
Notice is not provided within the time required by the first sentence of this
Section 7.4, the Indemnified Party nonetheless shall be entitled to
indemnification by the Indemnifying Party except to the extent that the
Indemnifying Party is actually prejudiced by such late receipt of the Claims
Notice.
7.5 OPPORTUNITY TO CONTEST.
(a) If an Indemnified Party asserts, or may in the future seek
to assert, a claim for indemnification hereunder because of a claim or demand
made, or an action, proceeding or investigation instituted, by any Person not a
party to this Agreement (a "Third Party Claimant") that may result in a Loss
with respect to which the Indemnified Party would be entitled to indemnification
pursuant to this Article 7 (a "Third Party Claim"), the Indemnified Party shall
deliver to the Indemnifying Party a Claims Notice with respect thereto, which
Claims Notice shall, in accordance with the provisions of Section 7.4, be
delivered as promptly as practicable after such Third Party Claim is actually
known to the Indemnified Party. Failure to deliver a Claims Notice with respect
to a claim in a timely manner as specified in the preceding sentence shall not
be deemed a waiver of the Indemnified Party's right to indemnification hereunder
for Losses in connection with such claim, but the amount of reimbursement to
which the Indemnified Party is entitled shall be reduced by the amount, if any,
by which the Indemnified Party's Losses would have been less had such Claims
Notice been timely delivered.
(b) The Indemnifying Party shall have the right, upon written
notice to the Indemnified Party (the "Contest Notice"), to investigate, contest,
defend or settle any Third Party Claim that may result in a Loss with respect to
which the Indemnified Party is entitled to indemnification pursuant to this
Article 7; provided, that the Indemnified Party may, at its option and at its
own expense, participate in the investigation, contesting, defense or settlement
of any such Third Party Claim through representatives and counsel of its own
choosing; and, provided further, that the Indemnifying Party shall not settle
any Third Party Claim unless (i) such settlement is on exclusively monetary
terms and provides a complete release of, or dismissal with prejudice of, all
claims against any Indemnified Party potentially affected by such Third Party
Claim for all matters that were or could have been asserted in connection with
such claim, or (ii) the
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Indemnified Party shall have consented to the terms of such settlement, which
consent shall not unreasonably be withheld, conditioned or delayed. If requested
by the Indemnifying Party, the Indemnified Party will, at the expense of the
Indemnifying Party, cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim against the Third Party
Claimant, or any cross-complaint against any Person (other than the Indemnified
Party or its Affiliates). Unless and until the Indemnifying Party elects to
defend the Third Party Claim, the Indemnified Party shall have the right, at its
option and at the Indemnifying Party's expense, to do so in such manner as it
deems appropriate; provided, however, that the Indemnified Party shall not
settle or compromise any Third Party Claim for which it seeks indemnification
hereunder without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld, conditioned or delayed).
(c) The Indemnifying Party shall be entitled to participate in
(but not to control) the defense of any Third Party Claim that it has elected
not to defend with its own counsel and at its own expense.
(d) Except as provided in the first sentence of Section
7.5(b), the Indemnifying Party shall bear all costs of defending any Third Party
Claim and shall indemnify the Indemnified Party for all costs, fees and expenses
incurred in connection with defending such Third Party Claim.
(e) The parties shall make available to each other all
relevant information in their possession relating to any Third Party Claim
(except to the extent that such action would result in a loss of attorney-client
privilege) and shall cooperate with each other in the defense thereof.
7.6 LIMITATIONS ON INDEMNIFICATION.
(a) Neither Parent and Buyers, on the one hand, nor the Seller
Parties, on the other hand, shall be required to make any indemnification
payment under this Agreement with respect to a Loss pursuant to Section 7.3(a)
or Section 7.2(a), respectively, of this Agreement except to the extent the
amount of such Loss, when aggregated with all other such Losses and with all
Losses for which such party has indemnification liability under Section 10.3(a)
or Section 10.2(a), as applicable, of the Fortis Advisers Stock Purchase
Agreement, shall exceed one percent (1%) of the Aggregate Purchase Price (the
"Deductible"), and then only for the amount by which such aggregate Losses
exceed the amount of the Deductible; provided, however, that any indemnification
claims for Losses that HLAIC may have pursuant to Section 3.6, 5.2, 5.4(b) or
5.13 of the Fortis Advisers Stock Purchase Agreement shall not be subject to the
Deductible or the limitation set forth in Section 7.6(b); and provided further
that, for the sole purpose of identifying breaches of representations or
warranties that give rise to Losses that will be counted for satisfying the
Deductible, any materiality or material adverse effect qualifications to such
representation and warranty shall be ignored. For the
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avoidance of doubt, once aggregate Losses have accumulated in an amount that
satisfies the Deductible applicable to an Indemnifying Party, any
indemnification claims for breaches of representations and warranties paid by
such Indemnifying Party shall be determined with regard for all materiality and
material adverse effect qualifications to the applicable representations and
warranties.
(b) Neither Parent and Buyers, on the one hand, nor the Seller
Parties, on the other hand, shall be required to make indemnification payments
with respect to a Loss pursuant to Section 7.3(a) or Section 7.2(a),
respectively, of this Agreement, or pursuant to Section 10.3(a) or Section
10.2(a), respectively, of the Fortis Advisers Stock Purchase Agreement, in the
aggregate exceeding fifty percent (50%) of the Aggregate Purchase Price.
(c) No party otherwise entitled to indemnification under this
Agreement shall be indemnified pursuant to this Agreement to the extent that
such party's Losses are increased or extended by the willful misconduct,
violation of applicable Law or bad faith of such party.
7.7 SOLE REMEDY. After the Closing, each party's sole and exclusive
remedy for any breach of this Agreement by any other party shall be the
provisions in Sections 7.2 and 7.3, respectively; provided, however, that
nothing set forth in this Article 7 shall be deemed to prohibit or limit any
party's right at any time on or after the Closing Date, to seek injunctive or
equitable relief for the failure of any other party to perform any covenant or
agreement contained herein or to seek other relief based upon fraud or
intentional misrepresentation.
7.8 CERTAIN REDUCTIONS; SUBROGATION RIGHTS. All indemnification
payments payable hereunder shall be reduced by the amount of insurance proceeds
received by, or any Tax benefits inuring to the benefit of, the Indemnified
Party as a result of the Loss for which the Indemnified Party is seeking
indemnification. In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Article 7, the Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party with respect to the Loss to which such indemnification
relates; provided, however, that the Indemnifying Party shall only be subrogated
to the extent of any amount paid by it pursuant to this Article 7 in connection
with such Loss.
7.9 EFFECT OF INDEMNIFICATION. Any indemnity payment made hereunder
shall be treated by the parties as an adjustment to the Purchase Price to the
extent permissible under applicable Laws.
ARTICLE 8
TERMINATION PRIOR TO CLOSING
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8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to the
Closing Date by mutual written consent of Fortis and Buyers by action of their
respective boards of directors.
8.2 TERMINATION BY EITHER FORTIS OR BUYERS. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the board of directors of either Fortis or Buyers (i) if the Closing shall
not have occurred by July 1, 2001, (provided, however, that if all conditions to
Closing have been satisfied or waived on or before July 1, 2001, other than
obtaining any required Consents from Governmental Authorities as listed on
SCHEDULE 6.1, such date shall be extended past July 1, 2001 for up to two
additional months to September 1, 2001, at the request of either Fortis or
Buyers) (the "Termination Date"); (ii) if any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the transactions contemplated
by this Agreement shall become final and non-appealable; or (iii) if the Fortis
Advisers Stock Purchase Agreement is terminated in accordance with its terms;
provided, that the right to terminate this Agreement pursuant to clause (i)
above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the occurrence of the failure of the transactions
contemplated by this Agreement to be consummated.
8.3 TERMINATION BY FORTIS. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing Date
by action of the board of directors of Fortis if there has been a material
breach by Parent or Buyers of any representation, warranty, covenant or
agreement contained in this Agreement that, together with all such breaches,
would prevent any of the conditions set forth in Article 6 from being satisfied
(other than by waiver) prior to the Termination Date and that is not curable or,
if curable, is not cured within twenty Business Days after written notice of
such breach is given by Fortis to Parent and Buyers.
8.4 TERMINATION BY BUYERS. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing Date
by action of the board of directors of Buyers if there has been a material
breach by any Seller Party of any representation, warranty, covenant or
agreement contained in this Agreement that, together with all such breaches,
would prevent any of the conditions set forth in Article 6 from being satisfied
(other than by waiver) prior to the Termination Date and that is not curable or,
if curable, is not cured within twenty Business Days after written notice of
such breach is given by Buyers to Fortis.
8.5 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and the abandonment of the transactions pursuant to this
Article 8, this Agreement shall become void and of no effect with no liability
on the part of any party hereto (or of any of its respective Affiliates or
representatives); provided, however, except as otherwise provided herein, no
such termination shall relieve any party hereto of any liability or damages
resulting from any breach of this Agreement.
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ARTICLE 9
MISCELLANEOUS
9.1 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. Except as otherwise
expressly provided herein, this Agreement (including the Schedules and Exhibits
hereto) constitutes the entire agreement between the parties with respect to the
transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement,
expressed or implied, is intended to confer upon any Person, other than the
parties or their respective successors and permitted assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
9.2 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by all parties.
9.3 WAIVERS.
(a) Prior to or at the Closing, Parent and Buyers shall have
the right to waive any default in the performance of any term of this Agreement
by any Seller Party, to waive or extend the time for the compliance or
fulfillment by any of the Seller Parties of any or all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of Parent and Buyers under this Agreement, except any condition
that, if not satisfied, would result in the violation of any applicable Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Parent.
(b) Prior to or at the Closing, the Seller Parties shall have
the right to waive any default in the performance of any term of this Agreement
by Parent or Buyers, to waive or extend the time for the compliance or
fulfillment by Parent or Buyers of any or all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of the Seller Parties under this Agreement, except any condition
that, if not satisfied, would result in the violation of any applicable Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Fortis.
(c) The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
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(d) Notification pursuant to Section 5.6 of a breach by a
party to this Agreement shall not constitute a waiver of such breach.
9.4 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party hereto (whether by
operation of Law or otherwise), in whole or in part, without the prior written
consent of the other party; provided, however, that a Buyer may assign its
rights and obligations under this Agreement, in whole or in part, to any wholly
owned subsidiary of Parent that has aggregate statutory capital and surplus at
least equal to the aggregate statutory capital and surplus of such Buyer without
obtaining the prior written consent of the Seller Parties, and provided further
that (i) such Buyer gives the Seller Parties notice of such assignment, (ii) any
such assignment shall not delay the Closing or materially increase the cost to
the Seller Parties of consummating the transactions contemplated hereby, and
(iii) any such assignment shall not relieve Parent of its obligations hereunder
(including, without limitation, the obligation to cause such Buyer or its
permitted assignee to enter into the Ancillary Agreements). Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and permitted
assigns.
9.5 NOTICES. All notices or other communications that are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by certified mail postage pre-paid, or by courier or
overnight carrier, to the Persons at the addresses set forth below (or at such
other address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
Any Seller Party: Fortis, Inc.
One Chase Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
With copy to counsel Xxxxxx & Bird LLP
(which shall not 0000 Xxxx Xxxxxxxxx Xxxxxx
constitute notice): Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
Parent or a Buyer: Hartford Life, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
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Fax: 000-000-0000
Phone: 000-000-0000
With copy to counsel Lord, Bissell & Brook
(which shall not 000 X. XxXxxxx Xxxxxx
constitute notice): Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Fax: 000-000-0000
Phone: 000-000-0000
9.6 ARBITRATION.
(a) Any dispute submitted to arbitration pursuant to Section
2.5 or Section 5.12(d) shall be submitted for decision to a single arbitrator
(the "Umpire") who is an independent accountant or actuary and who has not, and
whose firm has not, provided material services to either party within the three
years immediately preceding the date of the notice requesting arbitration.
Notice requesting arbitration, as well as all other notices required or
permitted under this Section 9.6, must be in writing and sent in accordance with
Section 9.5. For purposes of this Section 9.6, Parent and Buyers shall be
considered one party, and the Seller Parties shall be considered one party.
(b) The parties shall undertake in good faith to agree on the
Umpire. If the parties cannot so agree within thirty calendar days after either
party has given the notice of arbitration as provided above, either party may
request the American Arbitration Association in New York City to designate an
Umpire with the qualifications set forth above, who shall preside over the
arbitration.
(c) The arbitration shall be conducted expeditiously and
confidentially in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as such rules shall be in effect on the date
of delivery of the notice requesting arbitration, except to the extent such
rules are inconsistent with the express provisions of this Section 9.6.
(d) Within thirty calendar days after notice of appointment of
the Umpire, the Umpire shall commence the arbitration, and the Umpire and the
parties hereto shall use commercially reasonable efforts to conclude the
arbitration hearings with such thirty-day period. The Umpire shall be relieved
of all judicial formality and shall not be bound by the strict rules of
procedure and evidence, provided, however, that each party shall be entitled to
reasonable discovery in preparing its evidence and arguments. The Umpire shall
determine where the arbitration shall take place. Insofar as the Umpire looks to
substantive Law, the Law of Minnesota shall govern. The decision of the Umpire
when rendered in writing shall be final and binding. The Umpire is empowered to
grant interim relief as he or she may deem appropriate.
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(e) The Umpire shall render his or her decision, which shall
be in writing and state the reasons therefor, within thirty calendar days
following the termination of hearings. Judgment upon the award may be entered in
any court having jurisdiction thereof. Each party shall jointly and equally bear
with the other party the cost of the Umpire. The remaining costs of the
arbitration shall be allocated by the Umpire. The Umpire may, at his or her
discretion, award such further costs and expenses as he or she considers
appropriate, including but not limited to interest and attorneys' fees. The
Umpire shall not award punitive damages under any circumstances.
9.7 GOVERNING LAW.
(a) Notwithstanding the place where this Agreement may be
executed by any of the parties, the parties expressly agree that this Agreement
shall in all respects be governed by, and construed in accordance with, the Laws
of the State of Minnesota, without regard for any conflicts of laws principles.
Each party hereby irrevocably submits in any suit, action or proceeding arising
out of or related to this Agreement or any other instrument, document or
agreement executed or delivered in connection herewith and the transactions
contemplated hereby and thereby, whether arising in contract, tort, equity or
otherwise, to the exclusive jurisdiction of any state or federal court located
in the State of Minnesota and waives any and all objections to jurisdiction that
it may have under the applicable Laws of the United States or of any state.
(b) The parties agree that money damages would not be a
sufficient remedy for any breach or alleged breach of Section 5.2, 5.5 or 5.14
of this Agreement or Section 4.4 of the Administrative Services Agreements and,
that in addition to all other remedies that may be available to a non-breaching
party, such non-breaching party shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach. Each party
hereby agrees to waive any requirement for the securing or posting of any bond
in connection with such remedy.
9.8 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement. All references
herein to articles, sections, Exhibits and Schedules shall be deemed references
to such parts of this Agreement, unless the context shall otherwise require.
9.9 INTERPRETATION.
(a) Notwithstanding anything in this Agreement to the
contrary, no term or condition of this Agreement shall be construed to
supersede, restrict or otherwise limit any term or condition set forth in the
Ancillary Agreements.
(b) The parties acknowledge and agree that, except as
specifically provided in Sections 2.5 and 5.12(d), they may pursue judicial
remedies at Law or equity in the event of a dispute with respect to the
interpretation or construction of this Agreement.
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(c) For purposes of this Agreement, the words "hereof,"
"herein," "hereby" and other words of similar import refer to this Agreement as
a whole unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Whenever the singular is used herein, the same
shall include the plural, and whenever the plural is used herein, the same shall
include the singular, where appropriate. All dollar references in this Agreement
are to the currency of the United States.
(d) No uncertainty or ambiguity herein shall be construed or
resolved against any party, whether under any rule of construction or otherwise.
No party to this Agreement shall be considered the draftsman. The parties
acknowledge and agree that this Agreement has been reviewed, negotiated and
accepted by all parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
9.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first above written.
FORTIS, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
FORTIS BENEFITS INSURANCE COMPANY
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
FORTIS INSURANCE COMPANY
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
FIRST FORTIS LIFE INSURANCE COMPANY
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
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HOUSTON NATIONAL LIFE INSURANCE COMPANY
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
XXXX XXXXX LIFE INSURANCE COMPANY
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
HARTFORD LIFE, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
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HARTFORD LIFE INSURANCE COMPANY
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
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