1
ASSET PURCHASE AND SALE AGREEMENT
By and Between
XXXX XXXXX LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated November 29, 1996
TABLE OF CONTENTS
PAGE
ARTICLE 1 - PURCHASE AND SALE OF ASSETS; CLOSING 2
1.1. Closing 2
1.2. Transfer of Assets 3
1.3. Ceding Commission; Payment 5
1.4. Closing Deliveries 9
1.5. Additional Closing Deliveries 12
1.6. Post Closing Adjustments 12
ARTICLE 2 - ASSUMPTION OF LIABILITIES AND OBLIGATIONS 15
2.1. Assumption of Seller Liabilities 15
2.2. Guaranty Fund Assessments 15
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF SELLER 18
3.1. Organization, Standing and Authority of Seller 18
3.2. Authorization 18
3.3. Actions and Proceedings 19
3.4. No Conflict or Violation 19
3.5. Consents and Approvals 20
3.6. Brokerage and Financial Advisers 21
3.7. Compliance With Laws 21
3.8. Annuity Contracts 21
3.9. Permits, Licenses and Franchises 24
3.10. Regulatory Filings 25
3.11. Reinsurance 26
3.12. Absence of Certain Changes or Events 26
3.13. Assigned Contracts 28
3.14. Intellectual Property 29
3.15. Purchased Assets 29
3.16. Statutory Financial Statements 30
3.17. Reserves 31
3.18. Threats of Cancellation 32
3.19. Credited Rates 33
3.20. Related Agreements 33
3.21. Third Party Administration Agreements 33
3.22. Mortgage Loans 34
3.23. No Waiver of Defenses 40
3.24. Agent Balances 41
3.25. GAAP Financial Statements 41
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASER 42
4.1. Organization and Standing 42
4.2. Authorization 42
4.3. Actions and Proceedings 43
4.4. No Conflict or Violation 43
4.5. Consents and Approvals 44
4.6. Brokerage and Financial Advisers 44
4.7. GAAP Financial Statements 45
4.8. Statutory Financial Statements 45
4.9. Rating 46
ARTICLE 5 - PRE-CLOSING COVENANTS 47
5.1. Conduct of Business 47
5.2. Certain Transactions 50
5.3. Investigations 50
5.4. HSR Act Filings 51
5.5. Consents and Reasonable Efforts 51
5.6. Representations and Warranties 52
5.7. Computer Software and Other Intellectual Property 53
5.8. Financial Statements and Reports 53
5.9. Termination of Certain Reinsurance Arrangements 54
5.10. Woodland Hills Option 54
5.11. Oxford Put 54
5.12. Marketing Agreement 55
ARTICLE 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF
PURCHASER TO CLOSE 55
ARTICLE 7 - CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
TO CLOSE 58
ARTICLE 8 - POST-CLOSING COVENANTS 61
8.1. Continued Access and Cooperation 61
8.2. Further Assurances 63
8.3. Expenses 63
8.4. Employee Plans 64
8.5. Non-Discriminatory Treatment of Policyholders 65
8.6. Repayment of Agent Balances 65
8.7. No Inducement to Replace; Non-Twisting; Non-
Churning; Non-Competition 66
8.8. Preferred Stock Divided Repayment 70
8.9. Policyholder Consents 70
8.10. Current Report on Form 8-K 71
ARTICLE 9 - TERMINATION; SURVIVAL 71
9.1. Termination of Agreement 71
9.2. Effect of Termination 73
ARTICLE 10 - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 73
10.1. Survival of Representations 73
10.2. Indemnification by Purchaser 74
10.3. Indemnification by Seller 76
10.4. Indemnification Procedure 78
ARTICLE 11 - PUBLICITY AND CONFIDENTIALITY 82
11.1. Publicity 82
11.2. Confidentiality 83
ARTICLE 12 - MISCELLANEOUS 84
12.1. Notices 84
12.2. Entire Agreement 86
12.3. Amendments 87
12.4. Waivers 88
12.5. Governing Law 88
12.6. Binding Effect; Assignment; Third Party
Beneficiaries 89
12.7. Severability 89
12.8. Headings 90
12.9. Counterparts 90
12.10.Arbitration 90
SIGNATURES 92
ANNEX A - Definitions
EXHIBITS -
A - Indemnity Reinsurance Agreement
B - Assumption Reinsurance Agreement
C - Trust Agreement
D - Transition Services Agreement
E - Administrative Services Agreement
F - Assignment and Assumption Agreement
G - License Agreement
H - Xxxx of Sale
I - Opinion of Seller's Counsel
J - Opinion of Purchaser's Counsel
K - Loan Documentation
L - Terms of Marketing Agreement
SCHEDULES -
1.2(a)(i) - Closing Date Portfolio Securities
1.2(a)(ii) - Policy Loans
1.2(a)(iii) - Additional Assets
1.2(d)(i) - Assigned Contracts
1.2(d)(ii) - Licensing Restrictions
3.3 - Actions and Proceedings
3.4 - Certain Matters
3.5 - Consents and Approvals
3.7 - Compliance
3.8(a) - Annuity Contract Forms
3.8(b) - Annuity Contracts
3.8(c) - Certain Commission Contracts
3.8(e) - Contested Benefits
3.8(h) - Known Agent Violations
3.9(a) - Licensed Jurisdictions
3.9(b) - Permit Exceptions
3.10 - Regulatory Filings
3.11 - Reinsurance Agreements
3.12 - Certain Changes or Events
3.13 - Other Necessary Contracts
3.14 - Intellectual Property
3.17(a) - Reserve Liabilities
3.17(b) - Reserve Exceptions
3.18 - Threats of Cancellation
3.20 - Related Agreements
3.21 - Third Party Administration Agreements
3.22(a) - Mortgage Loans
3.22(b) - Participations
3.22(d) - Waivers, Amendments & Releases
3.22(f) - Missing Original Notes
3.22(l) - Tax Delinquencies
3.24 - Agent Balances
4.3 - Purchaser's Litigation
4.4 - Purchaser's Certain Matters
4.5 - Purchaser's Consents and Approvals
Excluded Transactions
ASSET PURCHASE AND SALE AGREEMENT
ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") dated
November 29, 1996 by and between Xxxx Xxxxx Life Insurance Company,
a Minnesota corporation ("Seller"), and SunAmerica Life Insurance
Company, an Arizona corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is engaged, among other businesses, in the
business of selling and administering annuity policies and related
activities in the United States other than in the State of New York
(the "Annuity Business");
WHEREAS, Xxxx Xxxxx Life Insurance Company of New York, a New
York corporation ("JANY"), is engaged in the business of selling
and administering annuity, life and health related insurance
policies and related activities solely in the State of New York;
WHEREAS, Seller owns or holds certain assets used or held for
use in the Annuity Business and owns all of the outstanding capital
stock of JANY (the "JANY Stock"); and
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser
wishes to acquire from Seller, certain of the assets of Seller used
in the conduct of the Annuity Business pursuant to the terms and
conditions set forth in this Agreement and the JANY Stock pursuant
to the terms and conditions set forth in a Stock Purchase and Sale
Agreement between Seller and Purchaser dated concurrently herewith
(the "JANY Stock Purchase Agreement").
NOW, THEREFORE, in consideration of the premises,
representations and warranties and the mutual covenants and
agreements contained herein and other good, valuable and
sufficient consideration, the receipt of which is hereby acknowledged,
Seller and Purchaser (collectively, the "Parties" and, sometimes
individually, a "Party"), intending to be legally bound, hereby
agree as follows.
The capitalized terms used in this Agreement and not defined
herein shall have the meanings specified in Annex A attached
hereto. Unless the context otherwise requires, such capitalized
terms shall include the singular and plural and the conjunctive and
disjunctive forms of the terms defined.
ARTICLE 1
PURCHASE AND SALE OF ASSETS; CLOSING
Section 1.1. Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at 10:00 a.m.
local time at the offices of Xxxxxx Xxxx & Xxxxxx LLP, 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other time and place as
Purchaser and Seller may mutually agree in writing, on the last
business day of the month in which the satisfaction of all
conditions set forth in Articles 6 and 7 hereof concerning the
Parties' respective obligations to consummate the transactions
contemplated herein occurs or such other date as Seller and
Purchaser may mutually agree in writing (the "Closing Date") and,
subject to completion, shall be deemed to have been consummated and
become effective for all purposes as of 11:59 p.m. on the Closing
Date.
Section 1.2. Transfer of Assets.
(a) Subject to the terms and conditions set forth
herein, at the Closing, Seller shall sell, assign, transfer, convey
and deliver to Purchaser as a reinsurance premium, and Purchaser
shall purchase and accept from Seller, all of Seller's right, title
and interest in and to the following assets, with such changes
therein, additions thereto and deletions therefrom as may occur
from the date hereof through the Closing as permitted or required
pursuant to the terms hereof or otherwise agreed to by the Parties
in writing (collectively, the "Reinsurance Premium"):
(i) the Closing Date Portfolio Securities,
including the Accrued and Unpaid Investment Income
thereon and all documentation related thereto.
(ii) all of Seller's right and interest to receive
principal and interest paid on policy loans under the
Annuity Contracts (with the exception of any policy loans
listed in Schedule 1.2(a)(iii)) (the "Policy Loans")
outstanding after the Closing Date. The Policy Loans
outstanding as of September 21, 1996 are listed on
Schedule 1.2(a)(ii) attached hereto. An estimate of all
Policy Loans outstanding on the Closing Ledger Date will
be set forth in an updated Schedule 1.2(a)(ii) to be
delivered by Seller to Purchaser at the Closing.
Schedule 1.2(a)(ii) includes with respect to each Policy
Loan outstanding on September 21, 1996, and will include
with respect to each Policy Loan set forth on the updated
Schedule 1.2(a)(ii) to be delivered on the Closing Date,
the policy number, balance and form and contract number.
(iii) those additional assets listed on Schedule
1.2(a)(iii) attached hereto.
(iv) cash in the amounts required to be paid
pursuant to Sections 1.2(c) hereof, with respect to
Rejected Mortgages, and 1.3(d)(i) hereof, with respect to
excess Reserve Liabilities.
(b) On the Closing Date, delivery of the Closing Date
Portfolio Securities shall be made by transfer to the trust account
(the "Trust") established pursuant to the Trust Agreement. The
cash portion of the Reinsurance Premium shall be transferred to the
Trust by wire transfer of immediately available funds. Securities,
cash equivalents, mortgage loans and other assets included among
the Closing Date Portfolio Securities shall be transferred by such
instruments of transfer as are acceptable to the Trustee and
reasonably acceptable to Purchaser. The gross amount of the cash
payment wired by Seller shall be reduced by an amount equal to one
day's interest on such gross amount at an interest rate equal to
the three month LIBOR rate in effect on the Business Day preceding
the Closing Date plus 25 basis points.
(c) Notwithstanding anything contained in this Section
1.2 to the contrary, Purchaser shall have the right not to purchase
up to $50,000,000 Book Value of (i) mortgages or (ii) mortgage
related private placements which comprise a portion of the October
21 Portfolio Securities (the "Rejected Mortgages"), and such
Rejected Mortgages shall not be sold, assigned, transferred,
conveyed or delivered to Purchaser hereunder; provided, however,
that upon written notice by Purchaser to Seller delivered not less
than 10 days prior to the Closing specifying such Rejected
Mortgages, Seller shall deliver cash to the Trust, as part of the
Reinsurance Premium, in an amount equal to the Book Value of the
Rejected Mortgages.
(d) At the Closing, Seller shall assign, transfer,
convey and deliver to Purchaser, and Purchaser shall accept from
Seller, the following:
(i) Seller's rights including all claims arising
under the contracts and license agreements listed on
Schedule 1.2(d)(i) attached hereto (the "Assigned
Contracts"); and
(ii) originals or copies of all customer lists,
policy information, Seller's Annuity Contract forms and
rating plans, disclosure and other documents and filings
required under applicable Laws, and all claim, sales,
underwriting, financial, accounting, tax, business,
marketing and compliance records in the possession or
control of Seller ("control" for the purposes of this
Section 1.2(d)(ii) being defined as the ability to cause
delivery to Seller) and relating to the Annuity Business,
including, without limitation, any database, magnetic or
optical media (to the extent not subject to the licensing
restrictions listed on Schedule 1.2(d)(ii) attached
hereto) and any other form of recorded, computer
generated or stored information or process, but excluding
any such records that both (A) are, and would upon
transfer cease to be, subject to the attorney-client
privilege and (B) do not relate to the Purchased Assets
or Assumed Liabilities (collectively, the "Books and
Records").
(e) Seller and Purchaser agree that for tax purposes,
the fair market value of the Closing Date Portfolio Securities
shall be the GAAP book values used by Purchaser to reflect the
Closing Date Portfolio Securities on its Financial Statements on
the Closing Date.
Section 1.3. Ceding Commission; Payment.
(a) In consideration for the sale, assignment, transfer,
conveyance and delivery of the Reinsurance Premium to Purchaser by
Seller in accordance with and upon the terms and
conditions set forth in this Agreement, on the Closing Date Purchaser
shall pay to Seller One Hundred Eight Million Fifty Thousand Dollars
($108,050,000) in cash, subject to adjustment as provided in
Section 1.3(c) below (the "Closing Date Ceding Commission").
Purchaser shall pay the Closing Date Ceding Commission to Seller on
the Closing Date by wire transfer of immediately available funds to
such bank account as Seller shall designate to Purchaser in writing
at least three Business Days prior to the Closing Date. Payment of
the Closing Date Ceding Commission shall be accompanied by (i) an
amount in cash equal to the Accrued and Unpaid Investment Income as
set forth on the Estimated Closing Date Statement and (ii) any
payments required to be made as a reduction in the Reinsurance
Premium pursuant to Section 1.3(d)(ii) hereof. The gross amount of
the cash payment wired to Seller pursuant to this Section 1.3(a)
shall be reduced by an amount equal to one day's interest on such
gross amount at an interest rate equal to the three month LIBOR
rate in effect on the Business Day preceding the Closing Date plus
25 basis points.
(b) On the Closing Date, Seller shall deliver to the
Purchaser a statement (the "Estimated Closing Date Statement") of
Seller's good faith estimate as of the Closing Date unless
otherwise noted below of (i) all Reserve Liabilities (ii) the
Policy Loan Balance, (iii) the Book Value of all Closing Date
Portfolio Securities, (iv) all JANY Reserve Liabilities (as defined
in the JANY Stock Purchase Agreement), (v) the Accrued and Unpaid
Investment Income, (vi) the gross amount on a tax lot by tax lot
basis of any realized capital gain ("Capital Gain") or capital loss
("Capital Loss") on the disposition of any June 21 Portfolio
Securities between June 21, 1996 and the Closing Date, (vii) the
Adjusted Capital and Surplus of JANY and (viii) the amount of cash
flows applicable to the Combined Reserve Liabilities from the
Closing Ledger Date through Closing Date (the "Net Cash Flows").
The Estimated Closing Date Statement shall be prepared in a manner
consistent with the calculation of such items as of June 21, 1996.
Such calculations are reflected in Schedules 1.2(a)(i) (Closing
Date Portfolio Securities), 1.2(a)(ii) (Policy Loans) and 3.17
(Reserve Liabilities) attached hereto and have been prepared in
accordance with SAP.
(c) The Closing Date Ceding Commission shall be
adjusted as follows (using the calculations set forth on the
Estimated Closing Date Statement for this purpose):
(i) To the extent Combined Reserve Liabilities as
set forth on the Estimated Closing Date Statement, as
adjusted below, are less than $5,013,914,419 ("Expected
Reserves"), the Closing Date Ceding Commission shall be
reduced by an amount equal to (i) (A) the amount by which
the Expected Reserves exceed the Combined Reserve
Liabilities divided by (B) the Expected Reserves
multiplied by (ii) the difference between $240,000,000
and the Adjusted Capital and Surplus of JANY. For
purposes of this Section 1.3(c)(i), Combined Reserve
Liabilities shall be adjusted for the Net Cash Flows
applicable to the Combined Reserves not included in such
reserves from the Closing Ledger Date through the Closing
Date.
(ii) The Closing Date Ceding Commission will be
adjusted by interest at a rate of 2% per annum on the net
cash flows applicable to the Combined Reserves not
included in such reserves from the Closing Ledger Date
through the Closing Date.
(iii) The Closing Date Ceding Commission shall
be (A) reduced by any Capital Gains realized with respect
to the June 21 Portfolio Securities between June 21, 1996
and the Closing Date and (B) increased by any Capital
Losses realized with respect to the June 21 Portfolio
Securities between June 21, 1996 and the Closing Date.
For purposes of this Section 1.3(c)(iii), Capital Gains
and Capital Losses shall be deemed to include, without
limitation, any gain or loss resulting from any sale,
pre-payment, maturity or similar event affecting a June
21 Portfolio Security, but shall be deemed to exclude
Capital Gains or Capital Losses with respect to Excluded
Transactions.
(d) As of the Closing Date, the Reinsurance Premium
shall be adjusted as follows (using the calculations set forth on
the Estimated Closing Date Statement):
(i) To the extent Reserve Liabilities exceed the
sum of (A) the Book Value of the Closing Date Portfolio
Securities, (B) any cash deposited in the Trust pursuant
to Section 1.2(c) hereof and (C) the Policy Loan Balance,
Seller shall deliver to Purchaser at Closing by transfer
to the Trust cash equal to such deficiency. The amount
of any such cash payment shall be made by wire transfer
of immediately available funds, and the gross amount
thereof shall be reduced by an amount equal to one day's
interest on such gross amount at an interest rate equal
to the three month LIBOR rate in effect on the Business
Day preceding the Closing Date plus 25 basis points.
(ii) To the extent the sum of (A) the Book
Value of the Closing Date Portfolio Securities, (B) any
cash deposited pursuant to Section 1.2(c) hereof and
(C) the Policy Loan Balance exceeds Reserve Liabilities,
Purchaser shall deliver to Seller cash equal to said
excess.
Section 1.4. Closing Deliveries.
(a) At the Closing, Seller shall execute and deliver or
cause to be executed and delivered to Purchaser the following:
(i) the Indemnity Reinsurance Agreement between
Seller and Purchaser substantially in the form of Exhibit
A attached hereto (the "Indemnity Reinsurance
Agreement");
(ii) the Assumption Reinsurance Agreement
between Seller and Purchaser substantially in the form of
Exhibit B attached hereto (the "Assumption Reinsurance
Agreement");
(iii) the Trust Agreement among Seller,
Purchaser and Bankers Trust Company of California, N.A.,
in its capacity as trustee thereunder (the "Trustee"),
substantially in the form of Exhibit C attached hereto
(the "Trust Agreement");
(iv) the Transition Services Agreement between
Seller and Purchaser substantially in the form of Exhibit
D attached hereto (the "Transition Services Agreement");
(v) the Administrative Services Agreement between
Seller and Purchaser substantially in the form of Exhibit
E attached hereto (the "Administrative Services
Agreement");
(vi) the Assignment and Assumption Agreement
between Seller and Purchaser substantially in the form of
Exhibit F attached hereto (the "Assignment and Assumption
Agreement");
(vii) the License Agreement between Seller and
Purchaser substantially in the form of Exhibit G attached
hereto (the "License Agreement");
(viii) the Xxxx of Sale between Seller and
Purchaser substantially in the form of Exhibit H attached
hereto (the "Xxxx of Sale");
(ix) the opinion of counsel to Seller,
substantially in the form of Exhibit I attached hereto
("Seller's Opinion");
(x) the Reinsurance Premium pursuant to Section 1.2
hereof;
(xi) the Assigned Contracts;
(xii) the Books and Records;
(xiii) a certificate of an executive officer of
Seller, dated the Closing Date, representing and
warranting to the effect that (A) the person signing such
certificate is familiar with the provisions of this
Agreement and (B) the conditions specified in Article 6
of this Agreement have been satisfied;
(xiv) written consents to assignments, where
necessary, from all applicable parties relating to the
Third Party Administration Agreements; and
(xv) such other documents as may be necessary
or advisable in Purchaser's reasonable judgment to vest
in Purchaser all of Seller's rights, title and interest
in and to the (i) assets transferred as the Reinsurance
Premium, (ii)
the Assigned Contracts and (iii) the Books and Records
(clauses (i), (ii) and (iii), collectively the
"Purchased Assets") and the Assumed Liabilities.
The Indemnity Reinsurance Agreement, the Assumption Reinsurance
Agreement, the Transition Services Agreement, the Administrative
Services Agreement, the Xxxx of Sale, the Assignment and Assumption
Agreement, the Trust Agreement and the License Agreement are
referred to collectively herein as the "Ancillary Agreements."
(b) At the Closing, Purchaser shall execute and deliver
or cause to be executed and delivered to Seller the following:
(i) the Indemnity Reinsurance Agreement;
(ii) the Assumption Reinsurance Agreement;
(iii) the Trust Agreement;
(iv) the Transition Services Agreement;
(v) the Administrative Services Agreement;
(vi) the Assignment and Assumption Agreement;
(vii) the License Agreement;
(viii) the opinion of counsel to Purchaser,
substantially in the form of Exhibit J hereto
("Purchaser's Opinion");
(ix) a certificate of an executive officer of
Purchaser, dated the Closing Date, representing and
warranting to the effect that (A) the person signing such
certificate is familiar with the provisions of this
Agreement and (B) the conditions specified in Article 7
of this Agreement have been satisfied;
(x) such other documents as may be necessary or
advisable in Seller's reasonable judgment to consummate
the transactions contemplated hereby; and
(xi) the Closing Date Ceding Commission.
Section 1.5. Additional Closing Deliveries. In addition to
the transactions and deliveries contemplated above, at the Closing
each of the agreements between or among JANY and Seller or any
Affiliates of Seller will be terminated (other than the Transition
Services Agreement to be entered into pursuant to the JANY Stock
Purchase Agreement).
Section 1.6. Post Closing Adjustments.
(a) No later than 60 days after the Closing Date,
Seller shall prepare and deliver to Purchaser a statement (the
"Final Closing Date Statement") that sets forth the actual
financial data as of the Closing Date required to be estimated in
the Estimated Closing Date Statement. The Final Closing Date
Statement shall be prepared in a manner consistent with the
Estimated Closing Date Statement and shall be accompanied by a copy
of all documents used in the preparation thereof. The Final
Closing Date Statement and the calculations and information set
forth therein shall be reviewed and certified by a Fellow of the
Society of Actuaries who is also a Member of the American Academy
of Actuaries (an FSA and MAAA) familiar with the business of Seller
and in particular the Annuity Business. The Final Closing Date
Statement shall be binding on Purchaser unless Purchaser delivers
to Seller within 60 days after its receipt of the Final Closing
Date Statement from Seller written notice of disagreement
specifying in reasonable detail the nature and extent of the
disagreement.
(b) If Purchaser and Seller are unable to resolve any
disagreement with respect to the Final Closing Date Statement
within 30 days after Seller receives a timely notice
of disagreement, the items of disagreement alone shall be referred for
final determination to the U.S. national office of Price Waterhouse
or, if such firm is unable or unwilling to make such final
determination, to such other independent accounting firm as the
Parties shall mutually designate. The firm making such
determination is referred to herein as the "Independent Party." The
Final Closing Date Statement shall be deemed to be binding on
Purchaser and Seller upon the earlier to occur of (i) Purchaser's
failure to deliver to Seller a notice of disagreement within 30
days after its receipt of the Final Closing Date Statement prepared
by Seller, (ii) resolution of any disagreement by mutual agreement
of the Parties after a timely notice of disagreement has been
delivered to Seller or (iii) notification by the Independent Party
of its final determination of the items of disagreement submitted
to it. The fees and disbursements of the Independent Party shall
be borne equally, one-half by Purchaser and one-half by Seller.
(c) The Closing Date Ceding Commission, including the
adjustments set forth in Section 1.3(c) hereof, shall be
recalculated based on the actual financial information set forth in
the Final Closing Date Statement, which will establish the "Final
Ceding Commission." If the Final Ceding Commission is greater than
the Closing Date Ceding Commission, Purchaser will pay to Seller an
amount equal to the difference between the Final Ceding Commission
and the Closing Date Ceding Commission. If the Final Ceding
Commission is less than the Closing Date Ceding Commission, Seller
shall pay to Purchaser an amount equal to the difference between
the Final Ceding Commission and the Closing Date Ceding Commission.
(d) A Reinsurance Premium adjustment shall be made as
follows using the calculations set forth on the Final Closing Date
Statement):
(i) If the Final Closing Net Assets are less than
the amount of the Reserve Liabilities, Seller shall
deliver cash to the Trustee in an amount equal to such
difference for deposit in the Trust.
(ii) If the Final Closing Net Assets are
greater than the amount of the Reserve Liabilities,
Purchaser and Seller shall cause the Trustee to pay cash
to Seller in an amount equal to such excess, as
contemplated by the Trust Agreement.
(e) An adjustment with respect to the Accrued but
Unpaid Investment Income will be made as follows (using the
calculations set forth on the Final Closing Date Statement):
(i) If the Accrued but Unpaid Investment Income is
greater than Accrued but Unpaid Investment Income set
forth on the Estimated Closing Date Statement, Purchaser
shall pay cash to Seller in an amount equal to such
excess.
(ii) If the Accrued but Unpaid Investment
Income is less than Accrued but Unpaid Investment Income
set forth on the Estimated Closing Date Statement, Seller
shall pay cash to Purchaser in an amount equal to such
difference.
(f) All amounts paid under this Section 1.6 shall be
paid in cash in immediately available funds within 10 days after
receipt by Purchaser of a binding Final Closing Date Statement with
interest calculated at a rate equal to the three month LIBOR rate
plus 25 basis points on the amount due from the Closing Date
through but not including the date on which such amount is actually
paid.
ARTICLE 2
ASSUMPTION OF LIABILITIES AND OBLIGATIONS
Section 2.1. Assumption of Seller Liabilities. On the
Closing Date, Purchaser shall assume (a) pursuant to the Indemnity
Reinsurance Agreement, as between Seller and Purchaser, any and all
Insurance Liabilities and Other Liabilities of Seller arising out
of or with respect to each Annuity Contract pending its Novation
(as contemplated by Section 2.4 of the Assumption Reinsurance
Agreement); (b) pursuant to the Assumption Reinsurance Agreement,
any and all Insurance Liabilities and Other Liabilities of Seller
arising out of or with respect to each Annuity Contract from and
after its Novation (as contemplated by Section 2.4 of the
Assumption Reinsurance Agreement); and (c) pursuant to the
Assignment and Assumption Agreement, all contractual liabilities
and obligations of Seller relating to the period after the Closing
Date under the Assigned Contracts. The liabilities referred to in
the preceding clauses (a) through (c) are herein referred to as the
"Assumed Liabilities." Purchaser is not assuming any liabilities
or obligations of any nature whatsoever, fixed or contingent, known
or unknown, other than the Assumed Liabilities.
Section 2.2. Guaranty Fund Assessments.
(a) Purchaser shall pay or reimburse Seller for 100% of
all guaranty fund assessments (or any other assessment of a state
entity formed to protect policyholders against failure of an
insurer to perform its contractual obligations due to impairment or
insolvency, including but not limited to assessments of the
Colorado Life and Health Insurance Protection Association and the
Wisconsin Insurance Security Fund) ("Guaranty Fund Assessments")
payable by Seller and included in Other Liabilities.
(b) On or before the Closing Date, Seller shall deliver
to Purchaser a report of annuity premiums written by state as
reported to the National Organization of Life & Health Guaranty
Associates ("NOLHGA") for 1993, 1994 and 1995. Seller shall
deliver to Purchaser copies of reports for 1996 and each subsequent
year when filed with NOLHGA until Purchaser determines that it no
longer needs such reports. With respect to each report of
premiums, Seller shall prepare a schedule allocating premiums
between the Annuity Contracts and other annuities issued by Seller
on a state-by-state basis for the time period covered by the report
of premiums and Seller shall deliver same to Purchaser (prior to
the Closing Date, with respect to the reports for 1993, 1994 and
1995). Seller shall deliver to Purchaser a copy of any notice
(including but not limited to a notice of assessment) that Seller
receives relating to any insolvency which occurs on or after the
Closing Date.
(c) With respect to each notice of assessment by the
fund of a state delivered to Purchaser by Seller, Seller shall
prepare a schedule showing the allocation of such assessment
between the Seller and the Purchaser. Subject to Section 2.2(d)
below, Purchaser shall pay its share of such assessment within 30
days after its receipt of the notice of assessment and the
schedules contemplated by this paragraph.
(d) Each notice and schedule delivered to Purchaser
pursuant to Section 2.2(c) hereof shall be binding on Purchaser
unless Purchaser notifies Seller of any disagreement, specifying in
reasonable detail the nature and extent of the disagreement. If
Purchaser and Seller are unable to resolve any disagreement with
respect to any assessment within 30 days after Seller receives a
timely notice of disagreement, the items of disagreement alone
shall be referred for final determination to the U.S. national
office of Price Waterhouse or, if such firm is unable or
unwilling to make such final determination, to such other independent
accounting firm as the Parties shall mutually designate. The firm
making such determination is referred to herein as the "Independent
Party." Each assessment shall be deemed to be binding on Purchaser
and Seller upon the earlier to occur of (i) Purchaser's failure to
deliver to Seller a notice of disagreement within 30 days after its
receipt of the assessment and related schedules prepared by Seller,
(ii) resolution of any disagreement by mutual agreement of the
Parties after a timely notice of disagreement has been delivered to
Seller or (iii) notification by the Independent Party of its final
determination of the items of disagreement submitted to it. The
fees and disbursements of the Independent Party shall be borne
equally, one-half by Purchaser and one-half by Seller.
(e) Except as provided in Section 3.4 of the Indemnity
Reinsurance Agreement, to the extent Seller realizes a credit
against any premium tax payable by it as a result of any Guaranty
Fund Assessment paid by Purchaser pursuant to this Section 2.2, it
shall pay to Purchaser an amount equal to such credit within 30
days after the date for filing of the annual premium tax return for
such state. For purposes of this Section 2.2, Seller will be
deemed to realize a credit for Guaranty Fund Assessments paid by
Purchaser pursuant to this Section 2.2 if and when the premium tax
payable by Seller calculated without giving effect to available
credits for Guaranty Fund Assessments paid by Purchaser pursuant to
this Section 2.2 (but applying all other credits and debits
available to Seller in such manner as Seller elects in its sole
discretion, except that guaranty fund credits atttributable to
Guaranty Fund Assessments paid by Purchaser will be deemed utilized
first against premium taxes paid by Purchaser under Section 3.4 of
the Indemnity Reinsurance Agreement) is greater than the premium
tax payable
by Seller giving effect to such credit, and the amount
of such credit realized shall be deemed to equal such difference;
provided, however, that in the event of a merger, only Seller
credits shall be taken into account. Purchaser's right to the
benefit of any credit shall be determined first under Section 3.5
of the Indemnity Reinsurance Agreement and then under this Section
2.2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 3.1. Organization, Standing and Authority of Seller.
Seller is a corporation duly organized as a capital stock life and
health insurance company, validly existing and in good standing
under the Laws of the State of Minnesota. Seller has all corporate
power and authority necessary or required by Law to engage in the
conduct of the Annuity Business as currently conducted by it.
Section 3.2. Authorization. Seller has all corporate power
and authority necessary to execute, deliver and perform its
obligations under this Agreement and under each of the Ancillary
Agreements to be executed by it. Seller is duly licensed,
qualified or admitted to do business and is in good standing in all
jurisdictions in which it is required to be so qualified, licensed
or admitted to do business by the Laws thereof, including, without
limitation in each jurisdiction in which Annuity Contracts have
been issued, except where the failure to so qualify, be admitted or
licensed, individually or in the aggregate, is not reasonably
likely to have a Material Adverse Effect. The execution and
delivery by Seller of this Agreement and the Ancillary Agreements
to be executed by it, and the performance by Seller of its
obligations
under such agreements, have been duly authorized by all
necessary corporate and shareholder actions on the part of Seller.
This Agreement and each of the Ancillary Agreements executed by
Seller, when executed by all of the parties thereto, will
constitute a valid and binding obligation of Seller enforceable
against Seller in accordance with its terms, except insofar as
enforceability may be limited by bankruptcy, insolvency, moratorium
or other Laws which may affect creditors' rights and remedies
generally and by principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
Section 3.3. Actions and Proceedings. Except as disclosed
on Schedule 3.3 attached hereto, (a) there are no outstanding
Orders by or with any court, arbitrator or Governmental Entity
before which Seller or any of its material Affiliates is or was a
party that, (i) relate to the Annuity Business or the Purchased
Assets or (ii) individually or in the aggregate, have a Material
Adverse Effect and (b) there are no Actions pending or, to the
knowledge of Seller, threatened against Seller or any of its
material Affiliates (i) related to the Annuity Business or to which
any of the Purchased Assets is subject that seeks monetary damages
in excess of $100,000 individually or $500,000 in the aggregate or
seeks an unspecified amount of damages, (ii) that seeks injunctive
or similar relief or (iii) which would, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.4. No Conflict or Violation. Except as disclosed
on Schedule 3.4 attached hereto, the execution, delivery and
performance by Seller of this Agreement and the Ancillary
Agreements to which it is a party in accordance with the respective
terms and conditions hereof and thereof do not and will not (a)
violate any provision of the charter or by-laws of Seller, as
amended to date, (b) violate, constitute a default under or result
in the breach, cancellation or
termination of, accelerate the performance required under, or result in
the creation of any lien, claim, restriction, charge or encumbrance or
other defect of title ("Liens") upon any of the assets of Seller or any
of the Purchased Assets pursuant to, any mortgage, deed of trust,
guaranty, note, indenture, bond, lease, agreement or other instrument
to which Seller is a party or by or to which it or any of such assets or
the Purchased Assets may be bound, (c) violate any Order of any court,
arbitrator or Governmental Entity against, or binding upon, or any
agreement with, or condition imposed by, any court, arbitrator or
Governmental Entity binding upon Seller, such assets or any of the
Purchased Assets, (d) violate any Law or (e) result in the breach
or violation of any of the terms or conditions of, constitute a
default under, or otherwise cause an impairment or revocation of,
any license, permit, order, approval, registration, authorization,
qualification or filing with or under any Law or Governmental
Entity (collectively, "Permits") related to the Annuity Business,
except for Liens, violations, breaches or defaults with respect to
assets of Seller other than the Purchased Assets that, individually
or in the aggregate, do not have a Material Adverse Effect.
Section 3.5. Consents and Approvals. Except as required
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and rules and regulations thereunder (the "HSR Act") or as
set forth on Schedule 3.5 attached hereto, no consent, approval,
exemption or authorization is required to be obtained from, no
notice is required to be given to and no filing is required to be
made with any third party (including, without limitation,
Governmental Entities of competent jurisdiction) by Seller in order
(a) for this Agreement, each of the Ancillary Agreements and each
of the Assigned Contracts to which Seller will be a party to
constitute a valid and binding obligation of Seller, (b) to
authorize or permit the consummation
of the transactions contemplated hereby by Seller or (c) to prevent
the termination of any material right, privilege, franchise, Permit
or agreement related to the Annuity Business or to prevent any material
loss related to the Annuity Business.
Section 3.6. Brokerage and Financial Advisers. No broker,
finder or financial adviser has acted directly or indirectly as
such for, or is entitled to any compensation from, Seller in
connection with this Agreement or the transactions contemplated
hereby, except CS First Boston, whose fees for services rendered in
connection with such transactions will be paid by Seller.
Section 3.7. Compliance With Laws. Except as disclosed in
Schedule 3.7 attached hereto, Seller is not in material violation
of any Law or any Order of any court, arbitrator or Governmental
Entity pertaining to the Annuity Business.
Section 3.8. Annuity Contracts. The forms of all policies
and endorsements utilized for all Annuity Contracts in effect on
the date of this Agreement are listed and described on Schedule
3.8(a) attached hereto. All Annuity Contracts in effect on October
21, 1996 are listed and described on Schedule 3.8(b) attached
hereto. All Annuity Contracts in effect on the Closing Ledger Date
will be set forth in an updated Schedule 3.8(b) delivered to
Purchaser at the Closing. Schedule 3.8(b) includes with respect to
each Annuity Contract in effect on October 21, 1996 and will
include with respect to each Annuity Contract in effect on the
Closing Ledger Date, the policy number, policyholder name, form,
plan code and account balance. Schedule 3.8(b) attached hereto also
sets forth statutory reserves by plan code with respect to the
Annuity Contracts as of September 21, 1996 and the updated Schedule
3.8(b) will set forth such information with respect to the Annuity
Contracts as of the date of such Schedule set forth above. All
Annuity Contracts are in all respects, to the extent required under
applicable Laws,
on forms approved by applicable insurance regulatory authorities or
which have been filed and not objected to by such authorities within
the period provided for objection, and such forms comply in all
material respects and have been administered in all material respects
in accordance with applicable Laws. Without limiting the foregoing:
(a) Seller has offered and sold each Annuity Contract
in compliance with all applicable Laws (it being acknowledged that
no representation is made with respect to independent agents of
Seller except as provided in Section 3.8(h) hereof) and all of
Seller's registrations, filings or submissions made by it with
respect to the Annuity Contracts with any Governmental Entity were
in material compliance with applicable Laws when filed.
(b) The transactions contemplated by this Agreement
will not affect the validity and binding character of any Annuity
Contract entered into or issued by Seller or render any admitted
assets of Seller non-admitted under applicable Laws up to and
including the Closing Date.
(c) Except as set forth in Schedule 3.8(c) attached
hereto, and except in accordance with customary insurance industry
practice, (i) Seller is not liable to pay commissions upon the
renewal of any Annuity Contract nor (ii) is it a party to any
agreement providing for the third-party collection of annuity
premiums payable to Seller by any other Person which commissions or
premiums exceed $100,000 in the aggregate.
(d) All Annuity Contracts (including all Policy Loans
related thereto and the policy loans identified on Schedule
1.2(a)(iii) attached hereto) are in full force and effect and are
legal, valid and binding obligations of Seller, and to the
knowledge of Seller the other parties thereto, and are enforceable
against Seller, and to the knowledge of Seller the other parties
thereto, in accordance with their respective terms, except to the
extent that enforcement thereof may be limited by or subject to
applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar Laws of general application
relating to or affecting creditors' rights and to general equity
principles (other than equitable rescission rights).
(e) All Annuity Contract benefits payable by Seller,
and to the knowledge of Seller, by any other Person that is a party
to or bound by any reinsurance, coinsurance or other similar
contract with Seller, have been paid in accordance with the terms
of the Annuity Contracts under which they arose, except for such
benefits for which there is, in the reasonable opinion of Seller,
a reasonable basis to contest and all such contested benefits have
been disclosed in Schedule 3.8(e) attached hereto.
(f) No outstanding Annuity Contract issued, reinsured
or underwritten by Seller entitles the holder thereof or any other
Person to receive dividends, distributions or other benefits based
on the revenues or earnings of Seller or any other Person.
(g) The underwriting standards utilized and ratings
applied by Seller and, to the knowledge of Seller, by any other
Person that is a party to or bound by any reinsurance, coinsurance
or other similar contract with Seller conform in all respects to
industry accepted practices and to the standards and ratings
required pursuant to the terms of the respective reinsurance,
coinsurance or other similar contracts.
(h) To the knowledge of Seller, each producer who
wrote, sold or produced any portion of the Annuity Business for
Seller was duly licensed as an insurance agent (for the type of
business written, sold or produced by such producer) in the
particular jurisdiction in which such producer wrote, sold or
produced such business. Except as otherwise provided in
Schedule 3.8(h) attached hereto, to the knowledge of Seller, no
insurance agent who wrote, sold or produced any portion of the Annuity
Business for Seller violated in any material respect any terms or
provisions of any Law, except such violations as have been (i)
cured, (ii) resolved through agreements with applicable
Governmental Entities or (iii) are barred by an applicable statute
of limitations.
(i) The treatment under the Internal Revenue Code of
1986, as amended, and any successor thereto (the "Code") of all
Annuity Contracts is no less favorable to the Policyholder thereof
than the treatment under the Code for which such Annuity Contracts
were intended to qualify at the time of their issuance, except for
any failure to qualify for such treatment that results from (i)
changes to the Code, regulations, pronouncements, announcements or
guidance issued in connection with the treatment of the contracts
under the Code which were enacted (or have an effective date) after
the Closing Date, (ii) amendments, modifications, supplements,
riders, endorsements or revisions to the Annuity Contracts after
the Closing Date or (iii) changes in the manner in which the
Annuity Contracts are administered after the Closing Date.
Section 3.9. Permits, Licenses and Franchises. Schedule 3.9
attached hereto lists all jurisdictions in which Seller is licensed
to issue the Annuity Contracts and each Annuity Contract form
utilized in the respective jurisdictions. Seller has been duly
authorized by all relevant Governmental Entities to issue the
Annuity Contracts that it is currently writing, and was duly
authorized to issue the Annuity Contracts that it is not currently
writing at the time such Annuity Contracts were issued, in each of
the respective jurisdictions in which it conducts the Annuity
Business. Except as set forth on Schedule 3.9 attached hereto,
Seller has all Permits necessary
to conduct the Annuity Business as currently conducted by Seller.
All of the Permits are in full force and effect and Seller has not
received notice from any Governmental Entity of its intention to
revoke or not renew any Permit, except for such failures to have
Permits in full force and effect, revocations, non-renewals and other
events which do not and will not, individually or in the aggregate,
have a Material Adverse Effect.
Section 3.10. Regulatory Filings. Seller has made available
for inspection by Purchaser all material registrations, filings and
submissions made by Seller with any Governmental Entity and final
financial and market conduct reports of examinations with respect
to Seller issued by any such Governmental Entity along with copies
of Seller's responses thereto to the extent that such
registrations, filings, submissions and reports relate to the
Annuity Business and were made or issued on or subsequent to
January 1, 1993. Except as listed on Schedule 3.10 attached
hereto, Seller has filed all material reports, statements,
documents, registrations, filings or submissions (including without
limitation any sales, marketing or advertising material) required
to be filed by it with any Governmental Entity to the extent the
same relate to the Annuity Business. Except as listed on Schedule
3.10 attached hereto, (a) no material deficiencies have been
asserted by any such Governmental Entity with respect to such
registrations, filings or submissions that have not been satisfied;
(b) such registrations, filings or submissions were in material
compliance with applicable Law when filed; (c) since December 31,
1994, Seller has not submitted any written response with respect to
material comments related to the Annuity Business from any
Governmental Entity concerning such registrations, filings,
submissions or reports of examination; (d) since December 31, 1992,
no fine or penalty has been imposed on Seller by any Governmental
Entity specifically with respect to the Annuity Business; and (e) no
deposits have been made by Seller with, or at the direction of,
any Governmental Entity with respect to the Annuity Business which
were not shown in the most recent Annual Statement of Seller.
Section 3.11. Reinsurance. Schedule 3.11 sets forth all
reinsurance or co-insurance agreements (together with all other
agreements related thereto) related to the Annuity Contracts to
which Seller is a party and all such contracts, arrangements,
treaties, understandings and agreements under which Seller has any
obligation to cede or assume insurance. All such agreements are
valid and binding against Seller and, to the knowledge of Seller,
the other parties thereto, and are in full force and effect in
accordance with their terms and conform in all material respects to
all applicable Laws and neither Seller, nor to the knowledge of
Seller, any other party thereto is in material default under any
such agreement. Except as otherwise provided on Schedule 3.11, no
party to any such agreement has audited Seller with respect
thereto.
Section 3.12. Absence of Certain Changes or Events. Except
as disclosed on Schedule 3.12 attached hereto or except as
expressly contemplated or required by this Agreement, since
December 31, 1995, (a) with respect to Seller's Annuity Business,
Seller has not, except in the ordinary course of the Annuity
Business consistent with past practice, (I) engaged in any material
transaction, (II) entered into any material agreement or (III)
waived or released any material right or obligation and (b) except
as disclosed on Schedule 3.12 attached hereto, there has not been,
occurred or arisen in connection with Seller's Annuity Business:
(i) any work stoppage, strike, labor difficulty or
union organizational campaign (in process or threatened)
at or affecting Seller's Annuity Business;
(ii) any payment, discharge or satisfaction by
Seller of any material Lien or liability other than
material Liens or liabilities that were paid, discharged
or satisfied in the ordinary course of business and
consistent with past practice;
(iii) any sale, transfer or conveyance of any
investments or other assets of Seller related to the
Annuity Business with an individual Book Value in excess
of $100,000 or an aggregate Book Value in excess of
$10,000,000, except in the ordinary course of business
and consistent with past practice;
(iv) any amendment, termination, waiver,
disposal or lapse of, or other failure to preserve, any
material license, Permit or other form of authorization
of Seller;
(v) any amendment of, or any failure by Seller to
perform all of its obligations under, or any default
under, or any waiver of any right under, or any
termination (other than on the stated expiration date)
of, any contract that involves or reasonably would
involve the annual expenditure or receipt by Seller of
more than $100,000 except for actions taken with respect
to Annuity Contracts in force (including, without
limitation, reinsurance thereon) in the ordinary course
of business and consistent with past practice;
(vi) any termination, amendment or entering
into by Seller as ceding or assuming insurer of any
reinsurance, coinsurance or other similar contract or any
trust agreement or security agreement related thereto
except as disclosed in Schedule 3.11 attached hereto or
contemplated hereby;
(vii) any Lien created on or in any of the
Purchased Assets or assumed by Seller with respect to any
of such assets, which Lien relates to liabilities
individually or in the aggregate exceeding $100,000 (but
excluding Liens arising through securities lending in the
ordinary course of Seller's business);
(viii) any material change in any underwriting,
actuarial, investment, financial reporting, marketing or
accounting practice or policy followed by Seller related
to the Annuity Business, or in any assumption underlying
such a practice or policy, or in any method of
calculating any bad debt, contingency, or other reserve
for financial reporting or any other accounting purposes
related to the Annuity Business other than as required by
GAAP, SAP or applicable Law.
(ix) any contract or agreement, written or
oral, to take any of the actions set forth in clauses (i)
through (viii) of this Section 3.12.
Section 3.13. Assigned Contracts. Each of the Assigned
Contracts is valid and binding against Seller and, to the knowledge
of Seller, each other party thereto, and in full force and effect
according to its terms and is freely assignable to Purchaser
pursuant to this Agreement and the Assignment and Assumption
Agreement without notice to or consent of any person or entity,
other than as specified on Schedule 3.5 attached hereto. Other
than as set forth on Schedule 3.13 attached hereto, except for the
Assigned Contracts, there are no contracts of Seller necessary to
the Annuity Business as currently conducted by Seller. Neither
Seller nor, to Seller's knowledge, any other party to any Assigned
Contract is in violation, breach or default in any material respect
with respect to any such Assigned Contract.
Section 3.14. Intellectual Property. Schedule 3.14 attached
hereto sets forth a list of all computer software programs and
other intellectual property used by Seller that Seller reasonably
believes to be necessary to conduct the Annuity Business as
currently being conducted. Schedule 3.14 attached hereto also sets
forth whether each such computer software program is (i) owned by
Seller or (ii) licensed by Seller. Schedule 3.14 attached hereto
sets forth each licensing agreement pursuant to which Seller has
the right to use such licensed software. To the knowledge of
Seller, Seller is not in conflict with or in violation or
infringement of any rights, asserted or otherwise, of any other
Person with respect to any such software and other intellectual
property, nor has Seller received any notice of any such conflict,
violation or infringement. Seller has the non-exclusive right to
use all such licensed software and other intellectual property and
will have the right to use such software after the Closing Date to
the extent necessary to provide administration services under the
Transition Services Agreement and the Transition Services Agreement
contemplated by the JANY Stock Purchase Agreement so long as the
services provided thereunder do not substantively change from the
administration currently conducted by Seller. Schedule 3.14
attached hereto sets forth the amounts paid by Seller since
December 31, 1995 for use of the licensed software.
Section 3.15. Purchased Assets. Seller has good and
marketable title to all assets included within the Purchased Assets
(other than cash and the Assigned Contracts), free of any Lien,
except to the extent the Annuity Contracts are subject to a
reinsurance, coinsurance or similar agreement as set forth on
Schedule 3.11 attached hereto. As of June 21, 1996, the June 21
Portfolio Securities in the aggregate had a Book Value equal to the
amount set forth on
Schedule 1.2(a)(i) attached hereto and an aggregate gross book
annual effective yield (before reduction for third party mortgage
servicing costs) of at least 8.18%.
Section 3.16. Statutory Financial Statements. Seller has
previously delivered to Purchaser true, complete and correct copies
of the audited statements of admitted assets, liabilities and
capital and surplus (statutory basis) of Seller as of December 31,
1993, 1994 and 1995, and the related summaries of operations,
statements of capital and surplus and cash flow (statutory basis)
for the years then ended, together with the notes related thereto.
Seller has previously delivered to Purchaser true, complete and
correct copies of the Annual Statements of Seller as filed with the
Department of Commerce, State of Minnesota for the years ended
December 31, 1993, 1994 and 1995, together with all attachments,
exhibits and schedules thereto and all affirmations and
certifications filed therewith applicable to the Annuity Business
and the actuarial opinions applicable to the Annuity Business for
such years. Seller has previously made available to Purchaser for
review (without the right to remove or make copies) all auditors'
work papers related to the Annuity Business and related to the
foregoing audited financial information. Seller has previously
delivered to Purchaser true, complete and correct copies of the
Quarterly Statements of Seller as filed with the Department of
Commerce, State of Minnesota for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996, together with all
attachments, exhibits and schedules thereto and all affirmations
and certifications filed therewith applicable to the Annuity
Business. Each such Annual Statement and Quarterly Statement
complied in all material respects with all applicable Laws when so
filed and was timely filed with all required Governmental Entities.
No material deficiencies have been asserted or are otherwise known
by Seller with respect thereto. Each such financial
statement (and the exhibits and schedules relating thereto), including
without limitation each statement of assets, liabilities, surplus
and other funds (statutory basis) of Seller and each of the
summaries of operations, statements of capital and surplus and cash
flow (statutory basis) contained in the respective financial
statement was prepared in accordance with SAP applied on a
consistent basis (except for changes, if any, disclosed therein)
and each such Annual Statement and Quarterly Statement fairly
presents (in accordance with SAP) the financial condition of Seller
as of the respective dates thereof, and its results of operations
or cash flows, as the case may be, for and during the respective
periods covered thereby (provided the Quarterly Statements are
subject to normal year end adjustments and lack footnotes and other
presentation items). There were no material liabilities affecting
Seller as of December 31, 1995 required in accordance with SAP to
be reflected or disclosed in the Annual Statement for the period
then ended, or as of March 31, 1996, June 30, 1996 or September 30,
1996 required in accordance with SAP to be reflected or disclosed
in the Quarterly Statement for the period then ended, which are not
so reflected or disclosed therein. Seller has not prepared any
GAAP financial statements with respect to the Annuity Business.
Section 3.17. Reserves. The Reserve Liabilities as of June
30, 1996 and September 21, 1996 have been calculated in the manner
reflected on Schedule 3.17(a) attached hereto. Except as set forth
in Schedule 3.17(b) attached hereto, all reserves with respect to
Annuity Contracts as established or reflected, and all other
provisions made for policy and contract claims with respect to
Annuity Contracts (calculated gross of reinsurance applicable to
London Life Reinsurance Company pursuant to the agreement dated
October 1, 1996 and Lincoln National Reassurance Company pursuant
to the agreement dated December 31, 1991 and, at a
minimum, to be calculated to include 66-2/3% of the additional
reserves (or such greater amount of reserves as have actually been
posted), solely due to compliance with Actuarial Guideline 33, for
policies issued on or prior to December 21, 1994, and 100% of such
additional reserves (or such greater amount of reserves as have
actually been posted) for policies issued subsequent to December 21, 1994)
(collectively, "Reserve Liabilities"), in the respective Annual and
Quarterly Statements were determined in accordance with SAP and
generally recognized actuarial methods and standards, consistently
applied, were fairly stated in accordance with sound actuarial
principles, using prescribed morbidity and mortality tables and
interest rates that are in accordance with the nature of the
benefits specified in the related Annuity Contracts of Seller, and
such Reserve Liabilities and other provisions met the applicable
requirements of the insurance Laws and regulations of the State of
Minnesota. Without limitation of the foregoing sentence, to
Seller's knowledge, adequate provision for all Reserve Liabilities
has been made to cover the total amount of all reasonably
anticipated matured and unmatured benefits, claims and other
liabilities under all Annuity Contracts.
Section 3.18. Threats of Cancellation. Except as set forth
in Schedule 3.18 attached hereto, since December 31, 1995 through
the date of this Agreement, no Policyholder, group of Policyholder
Affiliates, or Persons writing, selling or producing, either
directly or through reinsurance assumed, insurance business that
individually or in the aggregate for each such Policyholder, group
or Person, respectively, accounted for (i) 5% or more of the annual
premium or annuity income (as determined in accordance with SAP) or
(ii) 1% of account values of Seller's and JANY's Annuity Business,
taken as a whole, in each case at or for the 12 month
period then ended, has terminated or, to the knowledge of Seller,
threatened to terminate its relationship with Seller.
Section 3.19. Credited Rates. Seller has complied and is in
compliance with all applicable contract provisions and Laws
associated with credited interest rates related to the Annuity
Contracts.
Section 3.20. Related Agreements. Each of the Related
Agreements is similar in all material respects to one of the forms
set forth on Schedule 3.20 attached hereto. Seller knows of no
Related Agreements other than those listed in Schedule 3.20
attached hereto concerning commissions payable on the Annuity
Contracts. Seller is not in breach of any of the Related
Agreements, and to the knowledge of Seller, none of the other
parties to the Related Agreements is in breach thereof.
Section 3.21. Third Party Administration Agreements.
Schedule 3.21 attached hereto lists all third party administration
agreements relating to the Annuity Contracts, regardless of whether
Seller is receiving or providing services (the "Third Party
Administration Agreements"). The Third Party Administration
Agreements are valid and binding obligations of Seller, enforceable
against Seller in accordance with their terms, and to Seller's
knowledge, are valid and binding obligations of the other parties
thereto, enforceable against such other parties in accordance with
their terms. Seller is not in breach of any of such Third Party
Administration Agreements and, to the knowledge of Seller, none of
the other parties to such Third Party Administration Agreements is
in breach thereof.
Section 3.22. Mortgage Loans.
(a) Except as set forth on Schedule 3.22(a) attached
hereto, Seller is the holder of a first lien position on the
Mortgage Loans free and clear of any other Liens, except for with
respect to the Mortgaged Property or the mortgage related thereto
(a) the lien of current real property taxes and assessments, ground
rents, personal property taxes, water rates, water frontage charges
and/or meter charges, sewer taxes or rents and other similar
charges or assessments, in each case not yet due and payable, (b)
covenants, conditions and restrictions, rights of way, easements
and other matters of public record of a type acceptable to lending
institutions generally or specifically referred to in the title
insurance policy or title opinion issued in connection with the
original loan made with respect to the Mortgaged Property, (c)
mechanics' or similar liens or claims for work, labor and
materials, (d) zoning and other land use restrictions and
ordinances, including, without limitation, landmark, historic and
wetland designations, (e) rights of tenants under leases or other
rights of tenants or rights of other occupants of the premises with
or without the legal right to do so, (f) any state of facts an
accurate survey would show with respect to the Mortgaged Property,
(g) the failure of the premises to comply with applicable occupancy
Law or municipal violations of record, (h) in the case where the
Mortgaged Property is a condominium unit, the lien of a condominium
association on such Mortgaged Property for unpaid maintenance or
common expense assessments not yet due and payable, (i) littoral or
riparian rights, if any, (j) any right, title or interest in any
minerals, mineral rights or related matters including but not
limited to oil, gas, coal and other hydrocarbons whether or not
shown by the public records and (l) the lien of any secondary
financing, in each case, which do not materially impair the
Mortgage Loan ("Permitted
Mortgage Liens"). As of the date specified therein, the (i) loan
number, (ii) loan class, (iii) lien priority, (iv) borrower's name,
(v) property address, (vi) outstanding principal amount, (vii) book
value, (viii) delinquency status, (ix) status code, (x) current
interest rate (or the method of calculating same), (xi) service fee
rate, (xii) net interest rate, (xiii) maturity date and (xiv)
percentage owned by Seller for each Mortgage Loan are materially as
set forth in the Mortgage Loan Schedule. Except as set forth on
Schedule 3.22(a) attached hereto, the proceeds of each Mortgage Loan
have been fully disbursed and there are no future or additional advances
to be made with respect to any Mortgage Loans. Except as set forth
on Schedule 3.22(a) attached hereto, no Mortgage Loan has been
delinquent for a period of more than 30 days within the last 12 months
in the payment of any principal or interest thereon. Each Mortgage
Loan is a permitted investment for Minnesota life insurers under applicable
Law.
(b) With respect to each Mortgage Loan and any and all
Loan Documents relating thereto, to Seller's knowledge (i) each of
such Mortgage Loans and Loan Documents are the legal, valid, and
binding obligation of the mortgagor, obligor or the guarantor, as
applicable, and each is enforceable in accordance with its terms,
except as enforcement thereof may be limited by applicable
bankruptcy or insolvency Laws, provided that in this case, Seller
may rely upon borrower's closing counsel's opinion letter if
originated by Seller, or upon representations and warranties given
to Seller by another financial institution or entity if purchased
by Seller, or in the absence of either, without due inquiry or
investigation by Seller so long as Purchaser is assigned the
benefits of such opinions, representations or warranties, (ii) none
of such Mortgage Loans or Loan Documents is the subject of any
agreement, contract or other arrangement (other than this
Agreement) pursuant to which any interest in any Mortgage
Loan or any payment due under any Mortgage Loan or with respect to any
Mortgage Property has been or is intended to be sold, used as
collateral, transferred to or otherwise disposed of to any Person
or Persons by the original lender, subject to the participatory
interests of other lenders or investors as are set forth on
Schedule 3.22(b) attached hereto.
(c) With respect to each Mortgage Loan and any and all
Loan Documents relating thereto, the mortgagor does not have a
valid defense to the payment in full of such Mortgage Loan that
arises from applicable Laws and such Mortgage Loan is not subject
to any right of rescission, set-off, abatement, diminution or
counterclaim, except in any case as such right or defense may be
provided by bankruptcy, insolvency, reorganization or other similar
Laws affecting the enforcement of creditors' rights generally and
by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(d) None of the terms of any Loan Documents relating to
any Mortgage Loan have been waived, amended or modified in any
respect, except as set forth on the Mortgage Loan Schedule and
except for such waivers, amendments and modifications as do not
adversely affect (i) any mortgagor's, obligor's or guarantor's
obligation to pay principal, interest or other sums required
(including the timing of such payments) to be paid under such Loan
Documents, (ii) Seller's Liens against the Mortgage Property
securing the Mortgage Loan or (iii) the enforceability in a timely
manner of such Liens. Except as set forth in the Mortgage Loan
Schedule, no Mortgage Loan has been satisfied, subordinated or
rescinded, in whole or in part, except (i) upon full payment of the
underlying loan or, in the case of a partial release, in connection
with the receipt of an independent third party MAI self-contained
appraisal evidencing that there is sufficient collateral (which for
this purposes shall mean no more than
80% loan to value) remaining with respect to such Mortgage Loan or
(ii) as a result of a final judgment or its equivalent of a condemnation
or eminent domain proceeding which does not materially impair the
Mortgaged Property or Mortgage Loan. Except as set forth on Schedule
3.22(d) attached hereto, no mortgagor, obligor nor any guarantor listed
on the Mortgage Loan Schedule in respect of any Mortgage Loan has been
released, in whole or in part except in accordance with the terms
of the Note and Mortgage, except in the case of a partial release
either (i) as a result of a written loan modification or assumption
agreement or (ii) if, prior to the release of any mortgagor,
obligor or guarantor, a determination was made by Seller that (a)
such mortgagor, obligor or guarantor was insolvent or deemed to
have a lack of ability to make any material contribution with
respect to the outstanding Mortgage Loan debt and (b) that the
remaining mortgagor, obligor or guarantor was able to repay the
outstanding Mortgage Loan debt, in either case such that the
release of any mortgagor, obligor or guarantor would not have a
material adverse impact on the repayment of the Mortgage Loan.
(e) None of the Mortgage Loans are cross-collateralized
with any other mortgage loan except for another Mortgage Loan other
than a cross-collateralization which does not have a material
adverse impact on the repayment of the Mortgage Loan.
(f) The Mortgage File with respect to each Mortgage
Loan contains all of the Loan Documents relating to each such
Mortgage Loan, including, but not limited to, all documents
described on Exhibit K and all such documents are true, complete
and correct copies of the documents they purport to be. Except as
set forth on Schedule 3.22(f) attached hereto, the Mortgage Loan
Files contain the original promissory notes and/or other evidence of
indebtedness (including all amendments thereto) and the originals
of all credit enhancements, if any, as applicable.
(g) With regard to the Mortgaged Property relating to
any Mortgage Loan, to the knowledge of Seller no material amount of
Hazardous Substances has been disposed of or identified on, under
or at such Mortgaged Property the presence of which is either in
violation of Law or would, under applicable Laws require (or permit
any Governmental Entity to require) removal or remediation of such
Hazardous Substance, except to the extent that removal or
remediation has occurred or will occur prior to the Closing Date
and except as would not materially affect the Mortgaged Property or
the repayment of the Mortgaged Loan.
(h) To the knowledge of Seller, there is no pending or
threatened condemnation proceeding affecting any Mortgaged
Property, or any part thereof, which could have an adverse effect
upon the current use of such Mortgaged Property.
(i) To the knowledge of Seller, there is no pending or
threatened Action relating to such Mortgage Loan affecting the
Mortgaged Property relating to such Mortgage Loan which would have
a material and adverse effect upon such Mortgage Loan.
(j) Seller has received no written notice (i) of any
material violation of any Law which is a direct result of the
maintenance, operation, occupancy, or use of any of the Mortgaged
Property related to such Mortgage Loan, in its present manner such
that the violation would materially adversely affect the operation,
occupancy or other use of such Mortgaged Property and (ii) that any
material Permits and approvals required by Governmental Entities
having jurisdiction over the operation of such Mortgaged Property
in its present manner have not been performed, issued or paid for
or are not in full force and effect.
(k) With respect to each Mortgage Loan, (i) each
Mortgage is covered by a title insurance policy or where customary
an opinion of title from a law firm in such jurisdiction insuring
or opining that the Mortgage creates the first priority Lien it
purports to create and that the Mortgage is not subject to any
defect or encumbrance except Permitted Mortgage Liens, (ii) no
claims have been made by Seller or, to Seller's knowledge, any
other Person under any title policy relating to any Mortgage Loan,
(iii) there has been no act or omission by Seller, or to Seller's
knowledge, any party holding an interest in any title policy
(including without limitation any failure to pay the premiums
therefor) that creates sufficient grounds for the defense by the
title insurer of any claims by the insured or that otherwise limits
the title insurer's liability under any title policy relating to
any Mortgage Loan and (iv) there has been no act or omission by
Seller, or to Seller's knowledge, any party holding an interest in
any title policy that has caused a subordination of the priority of
any Lien as insured under any title policy relating to any Mortgage
Loan. Seller is the insured under any title policy relating to any
Mortgage Loan, either by name, endorsement or by virtue of being
the successor to the original named insured lender. Seller is
either the sole insured or a participant insured in those Mortgage
Loans in which the Seller does not hold 100% of the first Lien.
(l) There are no delinquent real estate taxes in
respect of any Mortgage Property except as set forth on the
Mortgage Loan Schedule or any deficiency in any obligor's
obligations to pay amounts into escrow (other than in the case of
escrows where property taxes have been increased in the past 12
months).
(m) If upon origination the Mortgaged Property relating
to such Mortgage Loan was in an area identified in the Federal
Register by the Federal Emergency Management
Agency as having special flood hazards (and the flood insurance
described below is available), a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administrator, if available, is in effect with a generally acceptable
insurance carrier, in an amount representing coverage not less than the
lesser of (i) the unpaid principal balance of such Mortgage Loan,
(ii) the full insurable value of such Mortgaged Property or (iii)
the maximum amount of insurance available under the Flood Disaster
Protection Act of 1973.
(n) A hazard insurance policy with a standard mortgagee
clause is in effect with respect to each Mortgage Loan (other than
a Mortgage Loan secured solely by unimproved land), in an amount
representing coverage not less than the lesser of (i) the unpaid
principal balance of such Mortgage Loan or (ii) the full insurable
value of the Mortgaged Property relating to such Mortgage Loan.
(o) With respect to any Mortgage Loan that is secured
in whole or in part by the interest of a borrower as a lessee under
a ground lease of a Mortgaged Property, such ground lease has an
original term (including any extension options set forth therein)
which extends not less than five years beyond the maturity date of
the related Mortgage Loan.
(p) All servicing contracts related to the Mortgage
Loans originated by Seller are terminable at the election of Seller
at termination fees that are no greater than customary termination
fees paid in accordance with industry practice.
Section 3.23. No Waiver of Defenses. Seller has not waived
any defenses, claims or Actions which would have been available to
Seller under the Annuity Contracts or the Related Agreements.
Section 3.24. Agent Balances. Schedule 3.24 attached hereto
sets forth all producers with respect to the Annuity Contracts
having a balance owed by such producer to Seller for fees and
commissions relating to the Annuity Contracts and the nature and
amount of such balance.
Section 3.25. GAAP Financial Statements. On or prior to the
date hereof, Seller has delivered to Purchaser true, correct and
complete copies of (a) the audited consolidated balance sheets of
Xxxx Xxxxx Financial Corporation ("Xxxx Xxxxx") and its
subsidiaries as of December 31, 1995 and 1994, prepared in
accordance with GAAP, together with the notes thereon and the
related report of Price Waterhouse the independent certified public
accountant of Xxxx Xxxxx, and (b) the audited consolidated
statements of income, stockholders' equity and cash flows of Xxxx
Xxxxx and its subsidiaries for the years ended December 31, 1995,
1994 and 1993 prepared in accordance with GAAP, together with the
notes thereon and the related report of Price Waterhouse
(collectively, the "Xxxx Xxxxx Financial Statements"). Seller has
delivered to Purchaser true, correct and complete copies of the
consolidated balance sheets, and the related consolidated
statements of income, stockholders' equity and cash flows of Xxxx
Xxxxx and its subsidiaries for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996, prepared in accordance with
GAAP (the "Interim Xxxx Xxxxx Financial Statements"). The Xxxx
Xxxxx Financial Statements and the Interim Xxxx Xxxxx Financial
Statements are based on the books and records of Xxxx Xxxxx and its
subsidiaries and have been prepared in accordance with GAAP
consistently applied (except in the case of the Interim Xxxx Xxxxx
Financial Statements for normal year end adjustments). The Xxxx
Xxxxx Financial Statements have been, audited by Price Waterhouse.
The Xxxx Xxxxx Financial Statements and the Interim Xxxx Xxxxx
Financial Statements fairly present in all material respects the
consolidated financial position and results
of operations of Xxxx Xxxxx and its subsidiaries as of the dates
and for the periods indicated therein.
For purposes of this Article 3, references to the knowledge of
Seller means, after reasonable inquiry, the actual knowledge of
officers of Seller having the title of Senior Vice President or
higher.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1. Organization and Standing. Purchaser is a
corporation duly organized and validly existing under the Laws of
the State of Arizona. Purchaser has all corporate power and
authority necessary or required by Law to own, lease and operate
its assets, properties and business and to carry on the operations
of its business as currently conducted by it.
Section 4.2. Authorization. Purchaser has all corporate
power and authority necessary to execute, deliver and perform its
obligations under this Agreement and under each of the Ancillary
Agreements to be executed by it. Purchaser is duly licensed,
qualified or admitted to do business and is in good standing in all
jurisdictions in which it is required to be so qualified, licensed
or admitted to do business by the Laws thereof, except where the
failure to so qualify, be admitted or licensed, individually or in
the aggregate is not reasonably likely to have a Material Adverse
Affect on Purchaser. The execution and delivery by Purchaser of
this Agreement and the Ancillary Agreements to be executed by it,
and the performance by
Purchaser of its obligations under such agreements, have been duly
authorized by all necessary corporate and shareholder actions on
the part of Purchaser. This Agreement and each of the Ancillary
Agreements executed by Purchaser, when executed by all of the
parties thereto, will constitute a valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, moratorium or other Laws which may affect creditors' rights
and remedies generally and by principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
Section 4.3. Actions and Proceedings. Except as disclosed
on Schedule 4.3 attached hereto, (a) there are no outstanding
Orders by or with any court, arbitrator or Governmental Entity
before which Purchaser or any of its material Affiliates is or was
a party that, individually or in the aggregate, have a Material
Adverse Effect on Purchaser, and (b) there are no Actions pending
or, to Purchaser's knowledge, threatened against Purchaser or any
of its material Affiliates which would, individually or in the
aggregate, have a Material Adverse Effect on Purchaser.
Section 4.4. No Conflict or Violation. Except as disclosed
on Schedule 4.4 attached hereto, the execution, delivery and
performance by Purchaser of this Agreement and the Ancillary
Agreements to which it is a party in accordance with the respective
terms and conditions hereof and thereof do not and will not (a)
violate any provision of the charter, by-laws or other
organizational document of Purchaser, in each case, as amended to
date, (b) violate, constitute a default under, or result in the
breach, cancellation or termination of, accelerate the performance
required under, or result in the creation of any Lien upon any of the
assets of Purchaser, pursuant to, any mortgage, deed of trust,
guaranty, note, indenture, bond, lease, agreement or other
instrument to which Purchaser is a party or by or to which it or
any of its assets may be bound, (c) violate any Order of any court,
arbitrator or Governmental Entity against, or binding upon, or any
agreement with, or condition imposed by, any court, arbitrator or
Governmental Entity binding upon Purchaser or any of its assets,
(d) violate any Law or (e) result in the breach of any of the terms
or conditions of, constitute a default under, or otherwise cause an
impairment or revocation of, any Permit necessary for Purchaser to
conduct the Annuity Business.
Section 4.5. Consents and Approvals. Except as required
under the HSR Act or as set forth on Schedule 4.5 attached hereto,
no consent, approval, exemption or authorization is required to be
obtained from, no notice is required to be given to and no filing
is required to be made with any third party (including, without
limitation, Governmental Entities of competent jurisdiction) by
Purchaser in order (a) for this Agreement, each of the Ancillary
Agreements and each of the Assigned Contracts to which Purchaser
will be a party to constitute a valid and binding obligation of
Purchaser, (b) to authorize or permit the consummation of the
transactions contemplated hereby by Purchaser or (c) to authorize
or permit Purchaser to conduct the Annuity Business after the
Closing.
Section 4.6. Brokerage and Financial Advisers. No broker,
finder or financial adviser has acted directly or indirectly as
such for, or is entitled to any compensation from, Purchaser in
connection with this Agreement or the transactions contemplated
hereby, except Xxxxxxx Sachs & Company, whose fees for services
rendered in connection with such transactions will be paid by
Purchaser.
Section 4.7. GAAP Financial Statements. On or prior to the
date hereof, Purchaser has delivered to Seller true, correct and
complete copies of (a) the audited consolidated balance sheets of
SunAmerica Inc. ("SunAmerica") and its subsidiaries as of December
31, 1995 and 1994, prepared in accordance with GAAP, together with
the notes thereon and the related report of Price Waterhouse, the
independent certified public accountant of SunAmerica, and (b) the
audited consolidated statements of income, stockholders' equity and
cash flows of SunAmerica and its subsidiaries for the years ended
December 31, 1995, 1994 and 1993 prepared in accordance with GAAP,
together with the notes thereon and the related report of Price
Waterhouse (collectively, the "SunAmerica Financial Statements").
Purchaser has delivered to Seller true, correct and complete copies
of the consolidated balance sheets, and the related consolidated
statements of income, stockholders' equity and cash flows of
SunAmerica and its subsidiaries for the quarters ended March 31,
1996 and June 30, 1996, prepared in accordance with GAAP (the
"Interim SunAmerica Financial Statements"). The SunAmerica
Financial Statements and the Interim SunAmerica Financial
Statements are based on the books and records of SunAmerica and its
subsidiaries, and the SunAmerica Financial Statements have been
prepared in accordance with GAAP consistently applied, audited by
Price Waterhouse and fairly present in all material respects the
consolidated financial position and results of operations of
SunAmerica and its subsidiaries as of the dates and for the periods
indicated therein.
Section 4.8. Statutory Financial Statements. Purchaser has
furnished to Seller true, complete and correct copies of the Annual
Statements of Purchaser as filed with the Arizona Department of
Insurance for the years ended December 31, 1995, 1994 and 1993,
together with all attachments, exhibits and schedules thereto and
all affirmations and certifications filed
therewith and applicable actuarial opinions for such years. Purchaser
has furnished to Seller true, complete and correct copies of the Quarterly
Statements of Purchaser as filed with the Arizona Department of
Insurance for the quarters ended March 31, 1996 and June 30, 1996,
together with all attachments, exhibits and schedules thereto and
all affirmations and certifications filed therewith and no further
amendments thereto are being considered. Each such Annual
Statement and Quarterly Statement complied in all material respects
with all applicable Laws when so filed and were timely filed with
all required Governmental Entities. No material deficiencies have
been asserted or are otherwise known by Purchaser with respect
thereto. Each such Annual Statement and Quarterly Statement was
prepared in accordance with SAP applied on a consistent basis
(except for changes, if any, disclosed therein) and fairly presents
(in accordance with SAP) the financial condition of Purchaser as of
the respective dates thereof or its results of operations or cash
flows, as the case may be, for and during the respective periods
covered thereby (provided the Quarterly Statements are subject to
normal year end adjustments and lack footnotes and other
presentation items). There were no material liabilities affecting
Purchaser as of December 31, 1995 required in accordance with SAP
to be reflected or disclosed in the Annual Statement for the period
then ended, or as of March 31, 1996 or June 30, 1996 required in
accordance with SAP to be disclosed in the Quarterly Statement for
the period then ended, which are not so reflected or disclosed
therein.
Section 4.9. Rating. As of the date hereof, the Standard &
Poor's Corporation Claims - Paying Ability Rating of Purchaser is
AA- and the Xxxxx'x Investor Service, Inc. Financial Strength
rating of Purchaser is A2. Purchaser's A.M. Best & Co. rating is
A+ (superior) and its Duff & Xxxxxx rating is AA.
For purposes of this Article 4, references to the knowledge of
Purchaser means, after reasonable inquiry, the actual knowledge of
officers of Purchaser having the title of Senior Vice President or
higher.
ARTICLE 5
PRE-CLOSING COVENANTS
Section 5.1. Conduct of Business.
(a) Prior to the Closing, Seller shall, unless Seller
shall receive the prior written consent of Purchaser:
(i) operate the Annuity Business as presently
operated and only in the ordinary course and consistent
with past practice (including but not limited to past
underwriting standards and investment philosophies)
subject however to such changes as may be required by
changes in applicable Laws or contemplated by this
Agreement ; and
(ii) use commercially reasonable efforts to
preserve its relationship with and the goodwill of its
brokers, customers, suppliers, employees and other
Persons having business dealings with Seller in
connection with the Annuity Business.
(b) Without limiting the generality of the foregoing,
Seller will:
(i) use commercially reasonable efforts to maintain
in full force and effect all material contracts,
documents and arrangements related to the Annuity
Business, to continue all current marketing and selling
programs relating to the
Annuity Business in accordance with its current marketing plan,
to process Annuity Contracts consistent with past practice,
and to maintain each rating classification assigned to Seller
as of the date hereof by insurance rating agencies.
(ii) cause the Books and Records to be
maintained in the usual manner and consistent with past
practice and not permit a material change in any
underwriting, investment, actuarial, financial reporting
or accounting practice or policy of Seller or in any
assumption underlying such a practice or policy, or in
any method of calculating any bad debt, contingency or
other reserve for financial reporting purposes (including
without limitation any practice, policy, assumption or
method relating to or affecting the determination of
Annuity Contracts in force, premium or investment income,
Reserve Liabilities or operating ratios with respect to
expenses, losses or lapses) except as may be required by
a change in GAAP, SAP or Law.
(iii) (A) cause all Reserve Liabilities with
respect to Annuity Contracts established or reflected in
the Books and Records of Seller to be (1) established or
reflected on a basis consistent with those Reserve
Liabilities and reserving methods followed by Seller in
the preparation of its December 31, 1995 Annual Statement
filed with the Department of Commerce, State of Minnesota
and (2) adequate to cover the total amount of all
reasonably anticipated matured and unmatured benefits,
dividends, losses, claims, expenses and other liabilities
of Seller under all Annuity Contracts pursuant to which
Seller has or will have any liability (including without
limitation any liability arising under or as a result of
any reinsurance, coinsurance or other similar contract);
and (B) continue to own assets that qualify as legal
reserve assets under all applicable Laws in an amount at
least equal to its Reserve Liabilities.
(iv) continue to comply with all Laws
applicable to its Annuity Business, operations or
affairs.
(c) Unless otherwise provided in this Agreement,
without the approval of Purchaser, which approval shall not be
unreasonably withheld, from and after the date hereof until the
Closing, Seller will refrain from:
(i) selling or otherwise transferring, assigning,
disposing of, granting or permitting to exist any Lien
on, any October 21 Portfolio Securities;
(ii) increasing the rates of compensation
(including bonuses) payable or to become payable to any
officer, employee, agent, independent contractor or
consultant of Seller in connection with the Annuity
Business other than in the ordinary course of business,
consistent with past practice;
(iii) except in the ordinary course of business
consistent with past practice, incurring any obligation,
liability or indebtedness, incurring any extraordinary
losses, or disposing of, canceling, waiving or permitting
to lapse any rights of material value relating to or
affecting the Annuity Business;
(iv) changing in any material respect its
accounting principles or practices (including, without
limitation, any changes in depreciation or amortization
policies or rates or any changes in any assumptions
underlying any
method of calculating reserves) other than as required by
a change in GAAP, SAP or Law;
(v) except as disclosed herein, entering into or
amending or terminating any transaction or contract
related to the Annuity Business that could reasonably be
expected to have a Material Adverse Effect;
(vi) except in the ordinary course of business
consistent with past practice, terminating, amending or
executing any material reinsurance, coinsurance or other
similar contract, as ceding or assuming insurer related
to the Annuity Contracts, except as contemplated by
Section 5.9 hereof; or
(vii) entering into any contract or agreement to
do any of the foregoing.
Section 5.2. Certain Transactions. Except as contemplated
by the reinsurance agreements listed on Schedule 3.11 attached
hereto, from the date of this Agreement through the Closing,
neither Seller nor any of its directors or officers will (and
Seller shall cause its investment bankers and legal counsel not to)
solicit, encourage, initiate or engage in any negotiations or
discussions with, or provide any information to, or otherwise
cooperate in any other manner with, any Person or group (other than
Purchaser and its Affiliates) concerning any coinsurance,
reinsurance, replacement, sale or other disposition, directly or
indirectly, of the Annuity Business.
Section 5.3. Investigations. From the date hereof through
the Closing Date, Purchaser shall be entitled, through its
employees, counsel, actuaries and other Representatives, to make
such investigation of the assets, liabilities, business and
operations of the Annuity Business, and such examination of the
Books and Records, as Purchaser may reasonably request, including,
without limitation, for the purpose of investigating the financial
condition, service quality and operations of Seller. Any
investigation, examination or interview by Purchaser of employees
of Seller shall be conducted at reasonable times upon reasonable
prior notice; and each of the Parties and its officers, employees
and Representatives, including, without limitation, counsel,
investment bankers and independent public accountants, shall
cooperate with the other's employees and Representatives, as the
case may be, in connection with such review and examination;
provided, however, that such examination shall not be deemed a
waiver by Purchaser of any of its rights with respect to the
representations and warranties of Seller.
Section 5.4. HSR Act Filings. Seller and Purchaser shall,
as promptly as practicable, file, or cause to be filed,
Notification and Report Forms under the HSR Act with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") in
connection with the transactions contemplated by this Agreement,
the Ancillary Agreements and the other agreements contemplated
hereby and thereby, and will use their respective reasonable
efforts to respond as promptly as practicable to all inquiries
received from the FTC or the Antitrust Division for additional
information or documentation and to cause the waiting periods under
the HSR Act to terminate or expire at the earliest possible date.
Seller and Purchaser will each furnish to the other such necessary
information and reasonable assistance as the other may request in
connection with its preparation of necessary filings or submissions
to any government or regulatory agency, including, without
limitation, any filings necessary under the provisions of the HSR
Act.
Section 5.5. Consents and Reasonable Efforts. Seller and
Purchaser shall cooperate and use their commercially reasonable
efforts to obtain all consents, approvals and agreements
of, and to give and make all notices and filings with, any Governmental
Entities, necessary to authorize, approve or permit the
consummation of the transactions contemplated by this Agreement,
the Ancillary Agreements and the other agreements contemplated
hereby and thereby. Seller shall use its commercially reasonable
efforts to obtain all approvals and consents to the transactions
contemplated by this Agreement and the Ancillary Agreements as set
forth on Schedule 3.5 attached hereto. Purchaser will use its
commercially reasonable efforts to obtain all approvals and
consents to the transactions contemplated by this Agreement and the
Ancillary Agreements as set forth on Schedule 4.5 attached hereto.
Without limiting the foregoing, Purchaser will permit
Representatives of Seller to participate in the meeting at which
the transactions contemplated by this Agreement are presented to
the Arizona Department of Insurance for approval.
Section 5.6. Representations and Warranties. From the date
hereof through the Closing Date, (a) Seller shall use its
reasonable efforts to conduct its affairs in such a manner so that,
except as otherwise contemplated or permitted by this Agreement,
the representations and warranties contained in Article 3 shall
continue to be true, complete and correct in all material respects
on and as of the Closing Date as if made on and as of the Closing
Date, (b) Purchaser shall use its reasonable efforts to conduct its
affairs in such a manner so that, except as otherwise contemplated
or permitted by this Agreement, the representations and warranties
as to Purchaser contained in Article 4 shall continue to be true
and correct in all material respects on and as of the Closing Date
as if made on and as of the Closing Date, (c) Seller shall notify
Purchaser promptly of any event, condition or circumstance known to
Seller occurring from the date hereof through the Closing Date that
would constitute a violation or breach of this
Agreement by Seller and (d) Purchaser shall notify Seller promptly
of any event, condition or circumstance known to Purchaser occurring
from the date hereof through the Closing Date that would constitute a
violation or breach of this Agreement by Purchaser.
Section 5.7. Computer Software and Other Intellectual
Property. With respect to software and other intellectual property
listed on Schedule 3.14 attached hereto that is licensed to Seller,
but which is not freely assignable by Seller to Purchaser, Seller
will use its best efforts to cooperate with Purchaser, upon
Purchaser's request, to obtain at Purchaser's sole cost and expense
from the licensors of such software and other intellectual property
the right for Purchaser to operate such software and other
intellectual property.
Section 5.8. Financial Statements and Reports.
(a) At the time of filing with the Department of
Commerce, State of Minnesota, Seller will deliver to the Purchaser
true and complete copies of each Annual Statement and Quarterly
Statement filed after the date hereof and on or prior to the
Closing Date.
(b) From and after the date hereof and through the
Closing Date, Seller shall continue to prepare in the ordinary
course of business consistent with past practice and shall deliver,
as soon as available, to Purchaser, true and complete copies of
customarily prepared internal management information reports
(including financial statements, reports and analyses prepared by
or for Seller) prepared by Seller related to the Annuity Business,
including without limitation normal internal reports which Seller
prepares (such as those reflecting weekly net production,
surrenders, head count and claims and monthly cash flow and
operations expense) but excluding any statements, reports or
analyses prepared in connection with any analyses of
the transaction contemplated in this Agreement. Without limiting the
foregoing, Seller will provide to Purchaser weekly a list of the
October 21 Portfolio Securities held by Seller, which reflects the
Market Value and Book Value thereof (monthly) and any changes from
the immediately preceding week (weekly), including, without
limitation, weekly maturities, prepayments, sales, redemptions or
similar events.
Section 5.9. Termination of Certain Reinsurance
Arrangements. Prior to the Closing, Seller will terminate the
Coinsurance Agreement effective October 1, 1996 between Seller and
London Life Reinsurance Company and recapture of the annuity
portion of the Coinsurance Agreement effective December 31, 1991
with Lincoln National Reassurance Company. Seller shall be
responsible for payment of the recapture fees payable thereunder
and, under no circumstances shall Purchaser be responsible for any
costs or fees of any type in connection with the termination of
such agreements.
Section 5.10. Woodland Hills Option. Seller hereby grants to
Purchaser an option to assume Seller's rights and obligations with
respect to Seller's equipment and facilities located at 00000
Xxxxxx Xxxxxx Xxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000, subject to
appropriate lessor consent, on the same financial terms currently
available to Seller and on such other terms as Purchaser and Seller
shall mutually agree; provided, however, such option shall result
in no costs to Seller or any ongoing liability to Seller.
Section 5.11. Oxford Put. In the event Purchaser does not
obtain the consent of Oxford Life Insurance Company to the
assignment of the Coinsurance Agreement dated January 31, 1990
between Seller and Oxford Life Insurance Company and the related
trust agreement (the "Oxford Agreement") on or prior to the 15th
Business Day preceding the Closing Date, it will
on such Business Day notify Purchaser of the failure to obtain such
consent and (i) the Annuity Contracts subject to the Oxford Agreement
(the "Oxford Annuity Contracts") shall be excluded from the Annuity
Contracts to be assumed by Purchaser at the Closing (ii) the policy
loans with respect to the Oxford Annuity Contracts will not be
included in the Policy Loans, (iii) the reserve liabilities with respect
to the Oxford Annuity Contracts will not be included in Reserve
Liabilities and (iv) the Oxford Agreement shall not be included as
an Assigned Contract (the "Oxford Put"). If the Oxford Put is
implemented, at Purchaser's election, the Parties will execute and
deliver at the Closing an administration services agreement on
terms substantially similar to those of the Administrative Services
Agreement, provided that the compensation will be structured to
provide a pass-through to Purchaser of the compensation payable to
Seller pursuant to the Oxford Agreement with respect to the Oxford
Annuity Contracts. In addition, all references to Oxford Life
Insurance Company, the Oxford Agreement and the Oxford Annuity
Contracts in the Schedules to this Agreement shall be deemed
deleted.
Section 5.12. Marketing Agreement. The Parties will
negotiate in good faith towards a marketing agreement, containing
among other things, the terms set forth on Exhibit N attached
hereto and such other terms and conditions as may be mutually
acceptable to the Parties.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligations of Purchaser to consummate the
transactions contemplated hereby are, unless waived by Purchaser in
accordance with Section 12.4 hereof, subject to the fulfillment, at
or before the Closing, of each of the following conditions:
(i) No Law or Order of a court, arbitrator or
Governmental Entity of competent jurisdiction shall be in
effect which prohibits, restricts or enjoins, and no
Action shall be pending or threatened which seeks to
prohibit, restrict, enjoin, nullify, seek material
damages with respect to or otherwise materially adversely
affect, the consummation of the transactions contemplated
by this Agreement.
(ii) The applicable waiting period under the
HSR Act, including all extensions thereof, shall have
expired or been terminated and Purchaser shall have been
furnished with appropriate evidence, reasonably
satisfactory to it, of such expiration or termination.
(iii) All Permits, consents and waivers required
from all Governmental Entities legally required to
consummate the Closing and to perform this Agreement and
each of the Ancillary Agreements and to consummate the
transactions contemplated herein and thereby shall have
been obtained and shall be in full force and effect and
Purchaser shall have been furnished with appropriate
evidence, reasonably satisfactory to it, of the granting
of such Permits, consents and waivers; provided, however,
that this condition shall be deemed satisfied with
respect to approvals of the transactions contemplated by
the Assumption Reinsurance Agreement by state insurance
regulators, upon receipt of the required Permits,
consents and waivers from the Minnesota Department of
Commerce and the Arizona Department of Insurance.
(iv) All necessary consents to the transactions
contemplated by this Agreement and the Ancillary
Agreements shall have been obtained, including, without
limitation, those listed on Schedule 3.5 attached hereto.
(v) Except for such changes as may be permitted or
required pursuant to the terms hereof, the
representations and warranties of Seller set forth in
Article 3 hereof shall be true and correct in all
material respects on and as of the Closing with the same
effect as though such representations and warranties had
been made on and as of the Closing, except that any such
representations and warranties that are given as of a
specified date and relate solely to a specified date or
period shall be true and correct only as of such date or
period.
(vi) Seller shall have performed and complied
with all covenants and agreements required to be
performed or complied with by Seller under this Agreement
prior to or concurrently with the Closing in all material
respects.
(vii) Purchaser shall have received all
certificates and other documents required to be delivered
to Purchaser at or before the Closing pursuant to this
Agreement duly executed by all necessary Persons (other
than Purchaser).
(viii) Purchaser shall have received the Closing
deliveries described in Section 1.4 hereof.
(ix) Purchaser and Seller shall have previously
or concurrently closed the transactions contemplated by
the JANY Stock Purchase Agreement.
(x) The Combined Reserve Liabilities as of the
Closing shall be at least $4,813,357,842 [96% of the
aggregate of such reserve liabilities as at June 21,
1996]; provided, however, that if the Oxford Put has been
exercised, the Reserve Liabilities with respect to the
Oxford Annuity Contracts will be included in Combined
Reserve Liabilities for the purpose of this calculation.
(xi) Since December 31, 1995, there shall not
have occurred any event or events or state of facts that
individually or in the aggregate has or could reasonably
be expected to have a Material Adverse Effect; provided,
however, that for purposes of this subclause (xi), events
or facts which affect the insurance or annuity industry
generally (e.g., a change in general economic or market
conditions, a change in tax Law or a change in insurance
Law), shall not be included in determining whether a
Material Adverse Effect has occurred.
(xii) The Closing Date Portfolio Securities
tendered by Seller to the Trust pursuant to Section
1.2(b) hereof and any other assets therein (to the extent
such assets would be admitted assets if held by Purchaser
outside of the Trust) shall qualify as admitted assets of
Purchaser in Arizona for purposes of SAP and Purchaser
shall have received regulatory confirmation thereof from
the Arizona Department of Insurance.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
The obligations of Seller to consummate the transactions
contemplated hereby are, unless waived by Seller in accordance with
Section 12.4 hereof, subject to the fulfillment, at or before the
Closing, of each of the following conditions:
(i) No Law or Order of a court, arbitrator or
Governmental Entity of competent jurisdiction shall be in
effect which prohibits, restricts or enjoins, and no
Action shall be pending or threatened which seeks to
prohibit, restrict, enjoin, nullify, seek material
damages with respect to or otherwise materially adversely
affect, the consummation of the transactions contemplated
by this Agreement.
(ii) The applicable waiting period under the
HSR Act, including all extensions thereof, shall have
expired or been terminated and Seller shall have been
furnished with appropriate evidence, reasonably
satisfactory to it, of such expiration or termination.
(iii) All Permits, consents and waivers required
from all Governmental Entities legally required to
consummate the Closing and to perform this Agreement and
each of the Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby shall have
been obtained and shall be in full force and effect and
Seller shall have been furnished with appropriate
evidence, reasonably satisfactory to it, of the granting
of such Permits, consents and waivers; provided, however,
that this condition shall be deemed satisfied with
respect to approvals of the transactions contemplated by
the Assumption Reinsurance Agreement by state insurance
regulators, upon receipt of the required Permits,
consents and waivers from the Minnesota Department of
Commerce and the Arizona Department of Insurance.
(iv) All necessary consents to the transactions
contemplated by this Agreement, the Assigned Contracts
and each of the Ancillary Agreements shall
have been obtained, including, without limitation, those
listed on Schedule 4.5 attached hereto.
(v) Except for changes as may be permitted or
required pursuant to the terms hereof, the
representations and warranties of Purchaser set forth in
Article 4 hereof shall be true and correct in all
material respects on and as of the Closing with the same
effect as though such representations and warranties had
been made on and as of the Closing, except that any such
representations and warranties that are given as of a
specified date and relate solely to a specified date or
period shall be true and correct only as of such date or
period.
(vi) Purchaser shall have performed and
complied with all covenants and agreements required to be
performed or complied with by Purchaser under this
Agreement prior to or concurrently with the Closing in
all material respects.
(vii) Seller shall have received all
certificates and other documents required to be delivered
to Seller at or before the Closing pursuant to this
Agreement duly executed by all necessary Persons (other
than Seller).
(viii) Seller shall have received the Closing
deliveries described in Sections 1.3 and 1.4 hereof.
(ix) Purchaser and Seller shall have previously
or concurrently closed the transactions contemplated by
the JANY Stock Purchase Agreement.
(x) Since December 31, 1995, there shall not have
occurred any event or events or state of facts that
individually or in the aggregate has or could reasonably
be expected to have a Material Adverse Effect on
Purchaser; provided,
however, that for purposes of this subclause (x), events or
facts which affect the insurance or annuity industry generally
(e.g., a change in general economic or market conditions, a
change in tax Law or a change in insurance Law), shall not
be included in determining whether a Material Adverse Effect on
Purchaser has occurred.
ARTICLE 8
POST-CLOSING COVENANTS
Section 8.1. Continued Access and Cooperation.
(a) Following the Closing Date, Seller shall (i) allow
Purchaser, upon reasonable prior notice and during regular business
hours, through its employees and other Representatives, at
Purchaser's expense to examine and make copies of any books and
records retained by Seller within its possession or control
("control" for the purposes of this Section 8.1(a) being defined as
the ability to cause delivery to Seller or access by Purchaser) and
furnish Purchaser with such financial and reporting data and other
information with respect to the Annuity Contacts, the Third Party
Administration Agreements, Assigned Contracts and the Related
Agreements as Purchaser may from time to time reasonably request,
to the extent they relate to the Annuity Business, for any
reasonable business purpose, including, without limitation, the
preparation or examination of Tax Returns, regulatory filings and
financial statements and the conduct of any Action, whether pending
or threatened, concerning the conduct of the Annuity Business prior
to the Closing Date at Seller's offices or other facilities or
properties and (ii) maintain such books and records for Purchaser's
examination and copying.
Access to such books and records shall be at Purchaser's expense and
may not unreasonably interfere with Seller's or any successor
company's business operations and Purchaser shall reimburse Seller for
all reasonable out-of-pocket expenses incurred by Seller in copying
such records. Seller shall retain such books and records for a period
of at least seven years (extended by a period equal to any extension
of the statute of limitations with respect to tax matters with respect
to which such books and records are necessary and of which Purchaser
shall notify Seller), after which time such books and records shall
be delivered to Purchaser. Purchaser shall not copy or remove from
Seller's premises the accountant's work papers made available to
Purchaser and its Representatives.
(b) Following the Closing Date, Purchaser shall (i)
allow Seller, upon reasonable prior notice and during regular
business hours, through its employees and other Representatives, at
Seller's expense to examine and make copies of the Books and
Records transferred to Purchaser at the Closing for any reasonable
business purpose, including, without limitation, the preparation or
examination of Tax Returns, regulatory filings and financial
statements and the conduct of any Action or the conduct of any
regulatory, contract holder, participant or other dispute
resolution, whether pending or threatened, at Purchaser's offices
or other facilities or properties and (ii) maintain such Books and
Records for Seller's examination and copying. Access to such Books
and Records shall be at Seller's expense and may not unreasonably
interfere with Purchaser's or any successor company's business
operations and Seller shall reimburse Purchaser for all reasonable
out-of-pocket expenses incurred by Purchaser in copying such
records. Purchaser shall retain any such Books and Records for a
period of at least seven years (extended by a period equal to any
extension of the statute of limitations with
respect to tax matters with respect to which such Books and Records
are necessary and of which Seller shall notify Purchaser).
Section 8.2. Further Assurances.
(a) Upon the terms and subject to the conditions herein
provided, each of Seller and Purchaser shall use all commercially
reasonable efforts to take or cause to be taken, all actions or do,
or cause to be done, all things or execute or cause to be executed
any documents necessary, proper or advisable under applicable Laws
to consummate and make effective the transactions contemplated by
this Agreement, the Ancillary Agreements and the other agreements
contemplated hereby and thereby.
(b) On and after the Closing Date, Seller and Purchaser
shall take all commercially reasonable action and execute any
additional documents, instruments or conveyances of any kind (not
containing additional representations and warranties) and give all
notices and obtain all consents, approvals and Orders of
Governmental Entities and other third parties which may be
necessary to carry out any of the provisions hereof, including,
without limitation, putting Purchaser in full possession and
operating control of the Purchased Assets and the Annuity Business
it is assuming pursuant to this Agreement and the Ancillary
Agreements.
Section 8.3. Expenses. Except as otherwise specifically
provided in this Agreement and the respective Ancillary Agreements,
the Parties shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this
Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby, including, without limitation, all
fees and expenses of their respective Representatives; provided,
however, that Purchaser shall bear (a) the cost of the filing fees
in connection with the filings with the FTC and the Antitrust
Division under the HSR Act with respect to the transactions
contemplated hereby (which expense shall be borne equally by Seller
and Purchaser if separate filings are required with respect to the
transactions contemplated by this Agreement and the transactions
contemplated by the Stock Purchase Agreement) and (b) the actual
out-of-pocket costs of providing policyholder notices in order to
implement the Assumption Reinsurance Agreement in accordance with
its terms.
Section 8.4. Employee Plans. Purchaser will provide to any
employee of Seller or its Affiliates who on or after the Closing
Date, at the sole discretion of Purchaser, becomes an employee of
Purchaser or its Affiliates (an "Ex-Employee") with such
compensation and benefits as are currently being provided to
Purchaser's employees of similar rank and tenure level. Nothing in
this Section 8.4 shall be construed as requiring the Purchaser to
(i) employ any of Seller's employees or (ii) provide any Ex-
Employee with such compensation or employee benefits as such Ex-
Employee had previously received from Seller or its Affiliates or
(iii) provide any former employee of Seller who is not an Ex-
Employee with any severance benefits. Any Ex-Employee actually
employed by Purchaser may request that assets held by Seller in
Seller's 401(k) Plan on behalf of such Ex-Employee will be
transferred as soon as practicable after the Service Transfer Date
to the trustees of a qualified plan maintained by Purchaser or its
Affiliate (if permitted) or retained in Seller's 401(k) Plan
(subject to the rights of Ex-Employees with respect thereto). Each
request will be honored by Seller if Seller, in its sole
discretion, determines that such transfer complies with applicable
Law. Any such assets transferred will be transferred in accordance
with the provisions of Purchaser's and Seller's 401(k) Plan.
Section 8.5. Non-Discriminatory Treatment of Policyholders.
Except as otherwise provided in the Indemnity Reinsurance
Agreement, from and after the Closing Date Purchaser shall use all
commercially reasonable efforts to provide, at all times and from
time to time, to the Policyholders under the Annuity Contracts
crediting rates and renewal rates and standards of policyholder
service and administration which are no less than those provided to
other policyholders of annuity contracts issued, coinsured or
reinsured by Purchaser or its Affiliates with respect to policies
of a similar type and nature (including without limitation factors
such as issue date, actual and anticipated lapse rates and
surrender charge periods and other relevant features and market
conditions) as the Annuity Contracts. Purchaser will use
commercially reasonable efforts to include a provision
substantially similar to this Section 8.5 in any agreement for the
sale, transfer or bulk reinsurance of all or substantially all of
the Annuity Contracts.
Section 8.6. Repayment of Agent Balances. Within 10 days
after the Closing Date, Seller shall deliver to Purchaser a
schedule setting forth those producers with respect to the Annuity
Contracts having a balance owed by such producers to Seller for
fees or commissions relating to the Annuity Contracts, the amount
and nature of such balances, the specific Annuity Contracts to
which they relate, the dates such balances were incurred and all
other information required by Purchaser to facilitate the recovery
by Purchaser of such amounts. From and after the Closing until the
Service Transfer Date, if at any time any producer identified on
such schedule becomes entitled to a payment from Purchaser in
connection with the sale of an Annuity Contract, such payment shall
be first applied to reduce the amount of such balance and shall be
paid by Purchaser to Seller (in accordance with Purchaser's normal
payment cycle).
Purchaser shall provide Seller with a quarterly report of all such
payments and balances pursuant to this Section 8.6.
Section 8.7. No Inducement to Replace; Non-Twisting; Non-
Churning; Non-Competition.
(a) In partial consideration of the payment of the
Final Ceding Commission, the Parties agree that, for a period of
seven years after the Closing (the "Restricted Period"), neither
Seller nor any of its present or future Affiliates shall carry on
or engage in, directly or indirectly, the business of selling or
administering annuity contracts (a "Competing Business") in any
county or city in which the Annuity Business has been conducted) or
in New York State, where JANY is engaged in the business of selling
and administering annuity contracts) or where Purchaser or its
Affiliates conduct a similar business after the Closing Date.
(b) Notwithstanding the provisions of Section 8.7(a)
hereof, during the Restricted Period, Seller and Houston National
Life Insurance Company ("Houston") may (A) market, underwrite and
sell directly or indirectly (i) policies of Houston and (ii) single
premium immediate annuities of the Seller and (B) assume annually
up to $200,000,000 of deferred annuities; provided, however, that
(I) the aggregate of any sales made in accordance with (A) above
shall not exceed $50,000,000 annually and (II) any assumptions made
pursuant to (B) above shall not exceed $200,000,000 annually;
provided further, however, that the Purchaser must consent in
writing to all assumptions made pursuant to (B) above which in the
aggregate will exceed $100,000,000 annually, such consent not to be
unreasonably withheld; and provided further, however, that the
sales and assumptions set forth in (i) and (ii) above shall be
limited in amount to the minimum amount and extent reasonably
necessary to (x) assure Houston
and Seller each maintains its qualification as a life insurance
company for federal income tax purposes and (y) to enable Houston
and Seller to maintain their licenses as life insurance companies in
the states in which they are licensed to do business. Clause (B)
above shall not permit Seller, whether individually or in concert
with others, to re-enter the Annuity Business. With respect to the
assumption of deferred annuities by Seller or Houston pursuant to
clause (B) of this Section 8.7(b) during the Restricted Period,
Seller shall, and shall cause Houston to, offer to Purchaser the
right to provide such annuities, provided Purchaser is able to
provide such annuities on terms no less favorable in the aggregate
to Seller or Houston, as the case may be, than those available from
independent third parties. Purchaser shall have a period of 30 days
to respond to each such offer. Notwithstanding the provisions of Section
8.7(a) hereof, (i) Seller may administer (A) the annuity contracts
excluded from the definition of "Annuity Contracts" by the last
sentence thereof, (B) direct written annuity contracts of Aristar
Life Insurance Company pursuant to that service agreement between
Seller and Aristar Life Insurance Company dated October 29, 1987
and (C) annuity contracts of Houston and Seller issued pursuant to
the foregoing provisions of this 8.7(b), and (ii) Seller may market
annuity products issued by unaffiliated third parties.
(c) Notwithstanding the provisions of Section 8.7(a)
hereof, during the Restricted Period, Seller or its Affiliates may
acquire after the Closing an entity or business engaged in a
Competing Business if not more than 50% of the gross revenues,
computed in accordance with statutory accounting principles for
insurance companies or GAAP for other companies, of such entity or
business (for the fiscal year of such entity or business
immediately preceding such acquisition) are derived from a
Competing Business, provided that promptly
upon consummation of such acquisition, Seller or its Affiliate, as
the case may be, shall provide to Purchaser an opportunity to negotiate
to acquire such Competing Business (and Seller or such Affiliate will
negotiate such sale to Purchaser in good faith) and, provided,
further, if such Competing Business is not acquired by Purchaser,
Seller shall not, and shall not permit any of its Affiliates to,
expand the Competing Business through the sale of any annuity
product and shall hold such business as a liquidating "closed
block." Notwithstanding the foregoing, in no event shall the name
"Xxxx Xxxxx" or any derivation thereof, be used in connection with
such Competing Business.
(d) The provisions of Section 8.7(a) hereof shall not
apply to any Person who becomes an Affiliate of Seller after the
Closing Date by virtue of an acquisition of an ownership interest
in Seller or any Affiliate of Seller, if such Person was engaged in
the business of selling, issuing or administering annuity contracts
in the United States of America immediately prior to such
acquisition, and such new Affiliate's only relationship with Seller
and its Affiliates related to such Competing Business arises solely
as a result of such ownership interest. Notwithstanding the
foregoing, in no event (i) shall the name "Xxxx Xxxxx" or any
derivation thereof be used in connection with such business or (ii)
shall Seller or its controlled Affiliates market their own annuity
products. Furthermore, during the four-year period after the
Closing Date, not more than 50% of the annuity products sold or
marketed by Seller or its controlled Affiliates may be annuity
products of such Competing Business, such New Affiliate or its
Affiliates.
(e) Seller will refrain and will cause its present and
future Affiliates, Subsidiaries and employees to refrain from
causing or attempting to cause, influence or induce (or assisting
any other Person in causing or attempting to cause, influence or
induce) (i) any
Policyholder to replace or terminate any Annuity Contract issued,
reinsured, underwritten, or sold by Seller, in whole or in part, with
products of Seller or any other Person at any time; (ii) any reinsurer
to terminate or reduce any reinsurance, coinsurance, or other similar
contract, or sever a relationship, with Purchaser at any time relating
to annuity contracts; or (iii) any agent (including without limitation any
insurance agent) to resign or sever or reduce a relationship with
Purchaser at any time relating to annuity contracts. Seller will
not participate as principal or agent in any transfer involving a
"Section 1035" exchange or replacement of any Annuity Contract.
(f) Seller acknowledges that the covenants of Seller
set forth in this Section 8.7 are an essential element of this
Agreement and that, but for the agreement of Seller to comply with
these covenants, Purchaser would not have entered into this
Agreement. Seller acknowledges that each of the covenants of
Seller set forth in this Section 8.7 constitutes an independent
covenant and shall not be affected by performance or nonperformance
of any other provision of this Agreement by Purchaser.
(g) Seller recognizes and agrees that a breach by
Seller or any of its Affiliates of any provision of this Section
8.7 could cause irreparable harm to Purchaser, that Purchaser's
remedies at law in the event of such breach or threatened breach
could be inadequate, and that, accordingly, in the event of such
breach or threatened breach, Purchaser shall be authorized to seek
a restraining order or injunction or both against Seller or any
such Affiliate, in addition to any other rights and remedies which
are available to Purchaser.
(h) If the provisions of this Section 8.7 are more
restrictive, as to duration, geographic limitations or scope, than
permitted by the Laws of any jurisdiction in which
Purchaser seeks enforcement hereof, it shall be limited to the
extent required to permit enforcement under such Laws. In particular,
the parties intend that, to the extent appropriate to permit the
enforcement hereof, the covenants contained in this Section 8.7 shall be
construed as a series of separate and divisible covenants, one for
each county and city in which the Annuity Business has been carried
on and in which Purchaser conducts a similar business after the
Closing Date. Except for geographic coverage, each such separate
covenant shall be deemed identical in all respects. If, in any
judicial proceeding, a court shall refuse to enforce any of the
separate covenants deemed included in this section, then such
unenforceable covenant shall be deemed reformed or eliminated for
the purpose of those proceedings to the extent necessary to permit
the remaining separate covenants to be enforced.
Section 8.8. Preferred Stock Divided Repayment. Within 30
days after receipt by Purchaser, Purchaser shall remit to Seller,
by wire transfer of immediately available funds, the portion of any
dividend or dividends undeclared as of the Closing Date received by
Purchaser after the Closing Date on preferred stock (or similar
instrument) included in the Closing Date Portfolio Securities which
relate to the period up to and including the Closing Date. Each
such payment shall be accompanied by interest calculated at a rate
equal to the three month LIBOR rate plus 25 basis points on the
amount of such payment from the date receipt by the Company through
the date on which such amount is actually paid.
Section 8.9. Policyholder Consents. Promptly after the
Closing, Purchaser shall (i) distribute to policyholders of Annuity
Contracts notice of the transactions reflected herein and (ii) use
commercially reasonable efforts to obtain Novations of all Annuity
Contracts (as contemplated by Section 2.4 of the Assumption
Reinsurance Agreement). Seller shall provide,
at Purchaser's expense, such assistance as Purchaser reasonably
requests with respect to Purchaser's performance of the preceding sentence.
Section 8.10. Current Report on Form 8-K. Seller will
cooperate with Purchaser, at Seller's expense, in SunAmerica's
preparation of a Current Report on Form 8-K prepared in connection
with the transactions contemplated hereby; provided, however, that
notwithstanding anything else contained in this Section 8.10,
Purchaser shall bear any and all costs and expenses incurred by
Seller's independent accountants in connection with their
preparation of the GAAP financial statements of the Annuity
Business. Purchaser shall use reasonable efforts to provide Seller
and Seller's counsel with an opportunity to review references to
Seller contained in such filing.
ARTICLE 9
TERMINATION; SURVIVAL
Section 9.1. Termination of Agreement. Notwithstanding
anything contained herein to the contrary, this Agreement may be
terminated:
(a) at any time prior to the Closing, by mutual written
consent of Seller and Purchaser;
(b) by written notice by Purchaser to Seller if there
has been a material breach by Seller of any of the representations,
warranties, agreements or covenants of Seller set forth herein
which is not subject to cure prior to the Closing, or a failure of
any other condition not subject to cure prior to the Closing to
which the obligations of Purchaser are subject;
(c) by written notice by Seller to Purchaser if there
has been a material breach by Purchaser of any of the
representations, warranties, agreements or covenants of Purchaser
set forth herein which is not subject to cure prior to the Closing,
or a failure of any other condition not subject to cure prior to
the Closing to which the obligations of Seller are subject;
(d) at any time after April 30, 1997 (the "Termination
Date") and prior to the Closing, by Purchaser by written notice to
Seller, if (A) the Closing shall not have been consummated on or
before the Termination Date and (B) the failure to consummate the
Closing on or before the Termination Date did not result from the
failure by Purchaser to perform or comply with any covenant or
agreement contained in this Agreement required to be performed or
complied with prior to the Closing by Purchaser;
(e) at any time after the Termination Date and prior to
the Closing, by Seller by written notice to Purchaser, if (i) the
Closing shall not have been consummated on or before the
Termination Date and (ii) the failure to consummate the Closing on
or before the Termination Date did not result from the failure by
Seller to perform or comply with any covenant or agreement
contained in this Agreement required to be performed or complied
with prior to the Closing by Seller; or
(f) subject to Section 8.2 hereof, by written notice to
Purchaser or Seller to the other, at any time after a Governmental
Entity having jurisdiction over Purchaser or Seller has notified
such Party that it will not provide an approval, consent or Order
necessary for the terminating Party to consummate the transactions
contemplated by this Agreement or the
Ancillary Agreements and the Parties cannot subsequently procure
such approval, consent or Order using their respective commercially
reasonable efforts.
Section 9.2. Effect of Termination. In the event that this
Agreement shall be terminated pursuant to Section 9.1, all further
obligations of the Parties under this Agreement shall terminate
without further liability of either Party to the other; provided
that the obligations of the Parties contained in Section 8.3
(Expenses), Article 11 (Confidentiality) and Article 12
(Miscellaneous) shall survive any such termination. A termination
under Section 9.1 shall not relieve any Party of any liability for
a breach of, or for any misrepresentation under, this Agreement, or
be deemed to constitute a waiver of any available remedy (including
specific performance if available) for any such breach or
misrepresentation.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 10.1. Survival of Representations. (a) The
representations and warranties of Purchaser set forth in Article 4
hereof shall survive the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby for a period of 21 months following the Closing
Date; provided, however, that the representations contained in
Sections 4.1 (Organization, Standing and Authority of Seller), and
4.2 (Authorization) shall survive until the expiration of all
applicable statutes of limitations (including all periods of
extension, whether automatic or permissive).
(b) The representations and warranties of Seller set
forth in Article 3 hereof shall survive the execution, delivery and
performance of this Agreement and the consummation
of the transactions contemplated hereby for a period of 21 months
following the Closing Date; provided, however, that the
representations contained in Sections 3.1 (Organization, Standing
and Authority of Seller), 3.2 (Authorization), 3.8 (Annuity
Contracts) (paragraph (i) only) and 3.15 (Purchased Assets) shall
survive until the expiration of all applicable statutes of
limitations (including all periods of extension, whether automatic
or permissive) and the representations and warranties contained in
Section 3.22 (Mortgage Loans) (paragraph (g) only) will survive
until the fifth anniversary of the Closing Date.
(c) No Action may be commenced by any Person with
respect to any claim arising out of or relating to such warranties
or representations after the expiration of the period for which
such representations and warranties shall survive pursuant to this
Section 10.1 (the "Applicable Survival Period"); provided, however,
that, subject to this Article 10, any Person shall have the right
to commence a suit, action or proceeding after the expiration of
the Applicable Survival Period with respect to claims arising out
of or relating to such representations and warranties which shall
have been asserted by such Person under Section 10.4 hereof before
the expiration of the Applicable Survival Period.
Section 10.2. Indemnification by Purchaser.
(a) Subject to Sections 10.1, the following provisions
of this Section 10.2 and 10.4 hereof, Purchaser shall indemnify
Seller and its Affiliates (collectively, the "Seller Group") for,
and shall hold it harmless from, any and all damages, claims,
suits, actions, causes of action, proceedings, investigations,
losses, liabilities, assessments, judgments, deficiencies and
expenses (including, without limitation, reasonable legal,
accounting and other professional expenses) ("Liabilities")
asserted against or incurred or sustained by the Seller Group relating
to, associated with or arising out of (i) any breach by Purchaser of
any covenant or agreement contained in this Agreement applicable to
Purchaser, (ii) any breach by Purchaser of any of the warranties or
representations of Purchaser set forth in Article 4 of this Agreement,
(iii) any of the Assumed Liabilities or (iv) the conduct of the Annuity
Business by Purchaser or the ownership, leasing or use of the Purchased
Assets by Purchaser during the period after the Closing; provided,
however, that notwithstanding anything contained in this Section 10.2(a)
to the contrary, Purchaser shall not be obligated hereunder to
indemnify the Seller Group for, or to hold the Seller Group harmless
from, any Liabilities under this Section 10.2(a) to the extent that
Seller is obligated to indemnify Purchaser in respect of the same
Liabilities pursuant to Section 10.3 hereof.
(b) The Seller Group shall be entitled to
indemnification under Section 10.2(a)(ii) hereof only when the
aggregate amount of all Liabilities with respect to which the
Seller Group would otherwise be entitled to indemnification under
Section 10.2(a)(ii) hereof and Sections 9.2(a)(ii) and 9.2(b) under
the JANY Stock Purchase Agreement exceed $1.5 million. In addition,
as soon as practicable after such Liabilities exceed $1.5 million,
Purchaser shall pay to Seller $750,000. In no event shall the
amount payable by Purchaser and its Affiliates to the Seller Group
pursuant to Section 10.2(a)(ii) hereof and Sections 9.2(a)(ii) and
9.2(b) of the JANY Stock Purchase Agreement exceed $240,000,000.
(c) If any event shall occur or circumstance shall
exist which would otherwise entitle the Seller Group to
indemnification hereunder, Liabilities shall be deemed reduced to
the extent of any proceeds (other than (i) proceeds from
self-insurance and (ii) proceeds under experience-rated insurance
policies the premiums for which would be increased by reason of the
filing of a claim thereunder with respect to such Liability)
actually recovered, net of the cost of such recovery, by the Seller
Group from any third party (including, without limitation, any
insurance company) with respect thereto. In furtherance of the
immediately preceding sentence, Seller agrees to, and to cause its
Affiliates to, (i) in good faith, diligently seek recovery, at its
or their own expense, all such proceeds from all third parties with
respect to all Liabilities with respect to which it or they make or
may make a claim for indemnification hereunder and (ii) keep
Purchaser fully and promptly informed of all material matters
related thereto.
(d) To the extent that the undertakings set forth in
Section 10.2(a) hereof may be unenforceable, Purchaser shall
contribute the maximum amount that it is permitted to contribute
under applicable Law to the payment and satisfaction of all
Liabilities incurred by the Seller Group.
Section 10.3. Indemnification by Seller.
(a) Subject to Sections 10.1, the following provisions
of this Section 10.3 and 10.4 hereof, Seller shall indemnify
Purchaser and its Affiliates (collectively, the "Purchaser Group")
for, and shall hold it harmless from, any and all Liabilities
asserted against or incurred or sustained by Purchaser Group
relating to, associated with or arising out of: (i) any breach by
Seller of any covenant or agreement contained in this Agreement by
Seller, (ii) any breach by Seller of any of the warranties or
representations set forth in Article 3 of this Agreement (other
than Section 3.22(g) hereof), (iii) any Excluded Liability or Extra
Contractual Obligation or (iv) any Liability related to the Annuity
Contracts or the Annuity Business, or the ownership, leasing or use
of the Purchased Assets prior to the Closing Date, regardless of
whether at the time of the Closing such Liabilities were (A)
foreseen or unforeseen, (B) known or unknown,
(C) existing or arose in the future, (D) fixed or contingent, (E)
matured or unmatured, (F) asserted before or after the Closing Date or
(G) reflected in any of the Schedules attached hereto, other than Assumed
Liabilities.
(b) Subject to Section 10.1, the following provisions
of this Section 10.3 and 10.4 hereof, Seller shall indemnify the
Purchaser Group for, and shall hold it harmless from, (i) one-half
of any and all Liabilities up to an aggregate of $3,000,000 (i.e.,
$1.5 million of the first $3.0 million)and (ii) any and all
Liabilities in excess of $3,000,000 asserted against or incurred or
sustained by the Purchaser Group relating to, associated with or
arising out of any breach of the representations and warranties of
Seller set forth in Section 3.22(g) hereof and Sections 2.32(g) and
2.18(b) of the JANY Stock Purchase Agreement (without giving effect
to the knowledge and materiality qualifiers set forth therein).
(c) The Purchaser Group shall be entitled to
indemnification under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and
9.3(a)(iii) under the JANY Stock Purchase Agreement, only when the
aggregate amount of all Liabilities with respect to which the
Purchaser Group would otherwise be entitled to indemnification
under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii)
under the JANY Stock Purchase Agreement exceed $1.5 million. In
addition, as soon as practicable after such Liabilities exceeds
$1.5 million, Seller shall pay to Purchaser $750,000. In no event
shall the amount payable by Seller and its Affiliates to the
Purchaser Group pursuant to Section 10.3(a)(ii) hereof and
9.3(a)(ii) and 9.3(a)(iii) under the JANY Stock Purchase Agreement
exceeds $240,000,000.
(d) If any event shall occur or circumstance shall
exist which would otherwise entitle the Purchaser Group to
indemnification hereunder, Liabilities shall be deemed reduced
to the extent of any proceeds (other than (i) proceeds from
self-insurance and (ii) proceeds under experience-rated insurance
policies the premiums for which would be increased by reason of the
filing of a claim thereunder with respect to such Liability)
actually recovered, net of the cost of such recovery, by the
Purchaser Group from any third party (including, without
limitation, any insurance company) with respect thereto. In
furtherance of the immediately preceding sentence, Purchaser agrees
to, and to cause its Affiliates to, (i) in good faith, diligently
seek recovery, at its or their own expense, all such proceeds from
all third parties with respect to all Liabilities with respect to
which it or they make or may make a claim for indemnification
hereunder and (ii) keep Seller fully and promptly informed of all
material matters related thereto.
(e) To the extent that the undertakings set forth in
Section 10.3(a) hereof may be unenforceable, Seller shall
contribute the maximum amount that it is permitted to contribute
under applicable Law to the payment and satisfaction of all
Liabilities incurred by the Purchaser Group.
Section 10.4. Indemnification Procedure.
(a) Within a reasonable time after obtaining knowledge
thereof, a Person who may be entitled to indemnification hereunder
(the "Indemnitee") shall promptly give the Party who may be
obligated to provide such indemnification (the "Indemnitor")
written notice of any Liability which the Indemnitee has determined
has given or could give rise to a claim for indemnification
hereunder (a "Notice of Claim"); provided, however, no failure or
delay in giving any such Notice of Claim shall relieve the
Indemnitor of its obligations except, and only to the extent, that
it is prejudiced thereby. A Notice of Claim shall specify in
reasonable detail the nature and all known particulars related to
a Liability. The Indemnitor shall perform its
indemnification obligations in respect of a Liability described in a
Notice of Claim under Sections 10.2 or 10.3 hereof, as the case may be,
within 30 days after the Indemnitor shall have received such Notice
of Claim.
(b) The Indemnitor shall inform the Indemnitee promptly
after the Indemnitor has made a good faith determination, based on
the facts alleged in such Notice of Claim or which have otherwise
become known to the Indemnitor, either that the Indemnitor
acknowledges that it has an indemnification obligation hereunder in
respect of such Liability or that the Indemnitor has made a good
faith determination that it has no indemnification obligation
hereunder in respect of such Liability. If the Indemnitor fails to
perform its obligations under this Section 10.4, or if the
Indemnitor shall have informed the Indemnitee in writing in that
the Indemnitor does not have an indemnification obligation
hereunder in respect of such Liability, then the Indemnitee shall
have the right, but not the obligation, to take the actions which
the Indemnitor would have had the right to take in connection with
the performance of such obligations and, if the Indemnitee is
entitled to indemnification hereunder in respect of the event or
circumstance as to which the Indemnitee takes such actions, then
the Indemnitor shall, in addition to indemnifying Indemnitee for
the Liability, indemnify the Indemnitee for all of the legal,
accounting and other costs, fees and expenses reasonably and
actually incurred in connection therewith.
(c) The Indemnitor shall have the right and obligation,
in good faith and at its own cost and expense, to cure, remediate,
mitigate, remedy or otherwise handle any event or circumstance
which gives rise to a Liability in respect of which a Notice of
Claim has been given (including events and circumstances which can
be cured, remediated, mitigated or
remedied through the expenditure of money and events and circumstances
which give rise to a Liability which can be measured in terms of money),
regardless of the nature of such Liability. Such right and obligation shall
include, without limitation, (i) the right to investigate any such
event or circumstance, and (ii) the right to defend, contest or
otherwise oppose any third party claim, demand, suit, action or
proceeding related to such event or circumstance with legal counsel
selected by it. The exercise of such right and performance of
such obligation shall not constitute an admission or agreement by
Indemnitor that it has an indemnification obligation hereunder in
respect of such Liability. If the Indemnitor proposes to settle or
compromise any such third party action, demand, claim, suit or
proceeding, the Indemnitor shall give written notice to that effect
(together with a statement in reasonable detail of the terms and
conditions of such settlement or compromise) to the Indemnitee a
reasonable time prior to effecting such settlement or compromise.
(d) The Indemnitee shall have the right, but not the
obligation, to participate, at its own cost and expense, in the
defense, contest or other opposition of any such third party claim,
demand, suit, action or proceeding through legal counsel selected
by it and shall have the right, but not the obligation, to assert
any and all cross-claims or counterclaims which it may have. So
long as the Indemnitor is in good faith performing its obligations
under this Section 10.4, the Indemnitee shall (i) at Indemnitor's
cost and expense, cooperate in all reasonable ways with, make its
and its Affiliates' relevant files and records available for
inspection and copying by, make its and its Affiliates' employees
reasonably available to and otherwise render reasonable assistance
to the Indemnitor upon request and (ii) not compromise or settle
any such claim, demand, suit, action or proceeding without the
prior written consent of the Indemnitor.
The Indemnitee shall have the right (i) to object to the settlement
or compromise of any such third party action, demand, claim, suit
or proceeding whereupon if such settlement is solely a cash settlement
(A) the Indemnitee will assume the defense, contest or other opposition
of any such third party action, demand, claim, suit or proceeding for
its own account and as if it were the Indemnitor and (B) the Indemnitor
shall be released from any and all liability with respect to any such third
party action, demand, claim, suit or proceeding to the extent that
such liability exceeds the liability which the Indemnitor would
have had in respect of such a settlement or compromise, or (ii) to
assume, at any time by giving written notice to that effect to the
Indemnitor, the cure, mitigation, remediation, remedy or other
handling of such event or circumstance and the defense, contest or
other opposition of any such third party action, demand, claim,
suit or proceeding for its own account whereupon the Indemnitor
shall be released from any and all liability with respect to such
event or circumstance and such third party action, demand, claim,
suit or proceeding.
(e) After the Closing, each Party shall take all
commercially reasonable actions which may be necessary to enable
the other Party to exercise its rights and perform its obligations
under this Section 10.4.
(f) Notwithstanding anything contained herein to the
contrary, each Party shall use, and shall cause its Affiliates to
use, commercially reasonable efforts to mitigate any and all
damages, losses, liabilities, costs and expenses in respect of
which it may be entitled to indemnification hereunder.
ARTICLE 11
PUBLICITY AND CONFIDENTIALITY
Section 11.1. Publicity. Neither Party, shall or shall
permit its Affiliates to, issue any publicity, release or
announcement concerning the execution and delivery of this
Agreement, the provisions hereof or the transactions contemplated
hereby without the prior written approval of the form and content
of such publicity, release or announcement by the other; provided,
however, that no such approval shall be required when such
publicity, release or announcement is required by (i) applicable
Law, (ii) applicable rules or regulations of, or any listing
agreement with, a national or foreign stock exchange or the
Automated Quotation System maintained by the National Association
of Securities Dealers, Inc. or (iii) any Order of any court,
arbitrator or Governmental Entity of competent jurisdiction; and,
provided further, that, prior to issuing any publicity, release or
announcement without such prior written approval, the Party issuing
or whose Affiliate is issuing such publicity, release or
announcement shall have given reasonable prior notice to the other
Party of such intended issuance and, if requested by the other
Party, shall have used reasonable efforts at such other Party's
cost and expense to obtain a protective order or similar protection
for the benefit of the other Party. In addition, with the prior
written consent of the Parties, not to be unreasonably withheld, CS
First Boston and Xxxxxxx Xxxxx & Company each may cause to be
published such tombstone advertisements with respect to the
transactions contemplated by this Agreement as it shall deem
appropriate. Nothing contained herein shall prevent the
communication of information with any Governmental Entity or any
agency or other organization which rates the financial solvency or
claims-paying ability of Seller or Purchaser, including without
limitation, A.M. Best Company, Inc., Duff & Xxxxxx, Standard
& Poor's Corporation and Xxxxx'x Investors Services, Inc. or state
insurance departments or other regulatory bodies.
Section 11.2. Confidentiality.
(a) All data, reports, records and other information of
any kind received by a Party or its Affiliates or Representatives
(such Party being hereinafter referred to as the "Receiving Party")
from the other Party or its Affiliates or Representatives (such
other Party being hereinafter referred to as the "Delivering
Party") under this Agreement or in connection with the transactions
contemplated hereby shall be treated as confidential (collectively,
"Confidential Information"). Except as otherwise provided herein,
the Receiving Party shall not use (and shall not permit its
Affiliates or Representatives to use) Confidential Information for
its own (or their own) benefit and shall use commercially
reasonable efforts (and shall cause its Affiliates, directors,
officers and employees to use commercially reasonable efforts) to
maintain the confidentiality of Confidential Information. If the
Receiving Party or any of its Affiliates or Representatives is
required to disclose Confidential Information by or to any court,
arbitrator or Governmental Entity of competent jurisdiction, the
Receiving Party shall, prior to such disclosure, promptly notify
the Delivering Party of such requirement and all particulars
related to such requirement. The Delivering Party shall have the
right, at its own cost and expense, to object to such disclosure
and to seek confidential treatment of any Confidential Information
to be so disclosed on such terms as it shall determine.
(b) The restrictions set forth in Section 11.2(a)
hereof shall not apply to the use or disclosure of Confidential
Information to the extent, but only to the extent, (i) permitted or
required pursuant to any other agreement between or among the
Parties or their respective
Affiliates or Representatives, (ii) necessary by a Party or its
Affiliates in connection with exercising its or their rights or
performing its or their duties or obligations under this Agreement,
the Ancillary Agreements or the other agreements described in clause
(i) of this sentence, (iii) contemplated by the last two sentences
of Section 11.2(a) hereof or (iv) that the Receiving Party can
demonstrate such Confidential Information (A) is or becomes generally
available to the public through no fault or neglect of the Receiving
Party, (B) is received in good faith on a non-confidential basis from
a third party who discloses such Confidential Information without
violating any obligations of secrecy or confidentiality, (C) is
independently developed after the time of receipt as shown by dated written
records or (D) was already possessed at the time of receipt as
shown by prior dated written records.
(c) For the purposes of this Section 11.2,
(i) information which is specific shall not be deemed to be within
an exception set forth in Section 11.2(b) hereof merely because it
is embraced by general information which is within such an
exception and (ii) a combination of information shall not be deemed
to be within an exception set forth in Section 11.2(b) hereof
merely because individual aspects of such combination are within
such an exception unless the combination of information itself, its
principle of operation and its value or advantages are within such
an exception.
ARTICLE 12
MISCELLANEOUS
Section 12.1. Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be
delivered personally (by courier or otherwise), sent
by certified, registered or express mail, postage prepaid and return
receipt requested, or transmitted by facsimile (with a copy of such
notice or other communication and a confirmation of transmission sent by
certified, registered or express mail, postage prepaid and return
receipt requested no later than the close of business on the next
business day following such transmission) and shall be addressed as
follows:
when Purchaser is to be notified:
SunAmerica Life Insurance Company
0 XxxXxxxxxx Xxxxxx, Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
SunAmerica Life Insurance Company
0 XxxXxxxxxx Xxxxxx, Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Controller
Facsimile No.: (000) 000-0000
and
O'Melveny & Xxxxx
1999 Avenue of the Stars
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
when Seller is to be notified:
Xxxx Xxxxx Life Insurance Company
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
With copies to:
Xxxx Xxxxx Financial Corporation
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
Xxxxxx Xxxx & Xxxxxx LLP
Two Stamford Plaza
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxx X. Xxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
A Party may, by notice given in accordance with this Section 12.1
to the other Party, designate another address or Person to which
notices required or permitted to be given pursuant to this
Agreement shall thereafter be transmitted. Each notice transmitted
in the manner described in this Section 12.1 shall be deemed to
have been given, received and become effective for all purposes at
the time it shall have been (i) delivered to the addressee as
indicated by the return receipt (if transmitted by mail),
transmitted to the addressee (if transmitted by facsimile and
subject to delivery of the mailed copy thereof) or the affidavit of
the messenger (if transmitted by personal delivery) or (ii)
presented for delivery to the addressee as so indicated during
normal business hours, if such delivery shall have been refused for
any reason.
Section 12.2. Entire Agreement. This Agreement (including
the Ancillary Agreements, the other agreements contemplated hereby
and thereby, the JANY Stock Purchase Agreement, the Annex, the
Exhibits and the Schedules attached hereto (the "Transaction
Agreements")) contains the entire agreement and understanding
between the Parties with respect to the subject matter hereof and
cancels and supersedes all of the previous or contemporaneous
agreements, representations, warranties and understandings, whether
written or oral, by or between the
Parties with respect to the subject matter hereof. Except for the
representations and warranties expressly set forth in the Transaction
Agreements, Purchaser disclaims reliance upon (i) any representations,
warranties or guarantees (whether express or implied and whether
oral or written) by Seller, JANY or any of their Affiliates or any
of their respective Affiliates' Representatives (including, without
limitation, any projections of future sales, revenues, expenses or
earnings and any statements regarding the prospects of the Annuity
Business as presently conducted by Seller) or (ii) any other
information with respect to the Annuity Business, the Purchased
Assets, Seller, JANY or their industry provided by or on behalf of
them. Nothing contained in any document or instrument of
conveyance, transfer, assignment or delivery executed or delivered
at the Closing pursuant to this Agreement shall amend, extend,
modify, renew or alter in any manner any representation, warranty,
covenant, agreement or indemnity contained herein. Nothing
contained in the Transaction Agreements or in any of the Schedules
hereto or thereto or in any of the other agreement contemplated
hereby or thereby shall constitute or be interpreted or construed
as an admission by any Party or any of its Affiliates of liability
to third parties, whether under Laws or otherwise, or as an
admission that any Party or any of its Affiliates are in violation
of or have ever violated any Law.
Section 12.3. Amendments. No addition to, and no
cancellation, renewal, extension, modification or amendment of or
approval under, this Agreement shall be binding upon a Party unless
such addition, cancellation, renewal, extension, modification,
amendment or approval is set forth in a written instrument which
states that it adds to, amends, cancels, renews or extends this
Agreement or grants an approval hereunder and which is executed and
delivered on behalf of each Party by an officer of, or attorney-in-
fact for, such Party.
Section 12.4. Waivers. No waiver of any provision of this
Agreement shall be binding upon a Party unless such waiver is
expressly set forth in a written instrument which is executed and
delivered on behalf of such Party by an officer of, or attorney-in-
fact for such Party. Such waiver shall be effective only to the
extent specifically set forth in such written instrument. Neither
the exercise (from time to time or at any time) nor the delay or
failure (at any time or for any period of time) to exercise any
right, power or remedy shall operate as a waiver of, the right to
exercise, or impair, limit or restrict the exercise of part of any
Party of any such right, power or remedy any other right, power or
remedy at any time and from time to time thereafter. No waiver of
any right, power or remedy of a Party shall be deemed to be a
waiver of any other right, power or remedy of such Party or shall,
except to the extent so waived, impair, limit or restrict the
exercise of such right, power or remedy.
Section 12.5. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF. Each Party consents and submits to the
non-exclusive personal jurisdiction of any federal court in the
State of Delaware in respect of any proceeding for the sole purpose
of injunctive relief or to enforce an arbitration award under
Section 12.10 hereof. Each Party consents to service of process
upon it with respect to any such proceeding by registered mail,
return receipt requested, and by any other means permitted by
applicable Laws. Each Party waives any objection that it may now
or hereafter have to the laying of venue of any such proceeding in
federal court in the State of Delaware and any claim that it may
now or hereafter have that any such proceeding in any such court
has been brought in an inconvenient forum.
Section 12.6. Binding Effect; Assignment; Third Party
Beneficiaries. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and
permitted assigns. Neither Seller nor Purchaser shall assign any
of its rights or delegate any of its duties hereunder, (in whole or
in part and by operation of law or otherwise) without the prior
written consent of the other Party hereto, except that Purchaser
may assign its rights and obligations under this Agreement to any
of its Affiliates provided Purchaser shall remain liable for its
obligations hereunder notwithstanding such assignment. Any
assignment of rights or delegation of duties under this Agreement
by a Party without the prior written consent of the other Party, if
such consent is required hereby, shall be void. No Person
(including, without limitation, any employee of a Party) shall be,
or be deemed to be, a third party beneficiary of this Agreement.
Section 12.7. Severability. If any provision of this
Agreement shall hereafter be held to be invalid, unenforceable or
illegal, in whole or in part, in any jurisdiction under any
circumstances for any reason, (i) such provision shall be reformed
to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the
Parties as expressed in, and the benefits to the Parties provided
by, this Agreement or (ii) if such provision cannot be so reformed,
such provision shall be severed from this Agreement and an
equitable adjustment shall be made to this Agreement (including,
without limitation, addition of necessary further provisions to
this Agreement) so as to give effect to the intent as so expressed
and the benefits so provided. Such holding shall not affect or
impair the validity, enforceability or legality of such provision
in any other jurisdiction or under any other
circumstances. Neither such holding nor such reformation or severance
shall affect or impair the legality, validity or enforceability of
any other provision of this Agreement.
Section 12.8. Headings. The headings in this Agreement have
been inserted for convenience of reference only, and shall not be
considered a part of this Agreement and shall not limit, modify or
affect in any way the meaning or interpretation of this Agreement.
Section 12.9. Counterparts. This Agreement may be executed
by the parties in any number of counterparts, each of which when so
executed and delivered shall constitute an original instrument, but
all such counterparts shall together constitute one and the same
instrument. This Agreement shall become effective and be deemed to
have been executed and delivered by all of the Parties at such time
as counterparts shall have been executed and delivered by both of
the Parties, regardless of whether each of the Parties has executed
the same counterpart. It shall not be necessary when making proof
of this Agreement to account for any counterparts other than a
sufficient number of counterparts which, when taken together,
contain signatures of both of the Parties.
Section 12.10. Arbitration. The Parties acknowledge and
agree that the transactions contemplated herein substantially
affect and impact interstate commerce. Therefore, all disputes or
differences between Seller and Purchaser arising under or which are
related to this Agreement (other than proceedings for the sole
purpose of injunctive relief) upon which an amicable understanding
cannot be reached within 30 days shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except as hereinafter provided, and
judgment upon the award entered by the Arbitrators (as defined
below) may be entered in any court having jurisdiction thereof.
The Arbitrators provided for herein shall
construe this Agreement in light of the prevailing custom and practices
for acquisition transactions of a similar nature. The "Arbitrators"
shall consist of one neutral arbitrator (or as provided below, three
neutral arbitrators). The Parties agree that the arbitration, if
implemented under this Agreement, shall be held at a site selected
by the Arbitrators. The Parties agree to arbitrate within 90 days
following the transmittal of written demand of either Party to
arbitrate any dispute arbitrable under this Agreement. The Parties
will in good faith, within 15 days following notice of written
demand to arbitrate attempt to agree on a single Arbitrator. If
the Parties cannot within 15 days thereafter agree on a single
arbitrator, each of the Parties shall appoint an Arbitrator,
notifying the other Party of the name and address of such
Arbitrator. The Arbitrators appointed by each Party shall agree
upon and appoint a third neutral Arbitrator. If either Party shall
fail to appoint an Arbitrator as herein provided, or should the two
Arbitrators so named fail to select the third Arbitrator within 30
days after their appointment, then, in either event, the President
of the American Arbitration Association or its successor shall
appoint such second and/or third Arbitrator. A decision of a
majority of the Arbitrators shall be final and binding and there
shall be no appeal therefrom. The Arbitrators shall within 45 days
after the final hearing enter an award and the award shall be
supported by a written opinion. The fees of the Arbitrators and
the direct costs of the arbitration shall be shared equally by the
Parties; all other costs of the respective Parties, including
without limitation fees and expenses of the respective Party's
attorneys, witnesses, and discovery shall be paid by the respective
Party, except to the extent that the Arbitrators otherwise direct
based on the equities of the situation. The arbitration shall be
held in New York, New York, unless otherwise agreed between the
Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first written above.
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ XXX X. XXXXXXX
_________________________________
Name: Xxx X. Xxxxxxx
Title: Executive Vice President
XXXX XXXXX LIFE INSURANCE COMPANY
By: /s/ XXXXXXX X. XXXXXXX
___________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, President & C.E.O.
ANNEX A
The following terms are defined in the following Sections.
DEFINED TERM SECTION
Administrative Services Agreement 1.5
Agreement Introduction
Ancillary Agreements 1.5
Annuity Business Introduction
Antitrust Division 5.4
Applicable Survival Period 10.1
Assigned Contracts 1.2
Assignment and Assumption Agreement 1.5
Assumed Liabilities 2.1
Assumption Reinsurance Agreement 1.5
Xxxx of Sale 1.5
Books and Records 1.2
Capital Loss 1.3
Capital Gain 1.3
Ceding Commission 1.3
Closing Date Adjustments 1.3
Closing Date Ceding Commission 1.3
Closing 1.1
Closing Date 1.1
Code 3.8
Competing Business 8.7
Confidential Information 11.2(a)
Continuing Employees 8.4
Delivering Party 11.2(a)
Dividend Declaration Date 8.8
Estimated Closing Date Statement 1.3
Excluded Transactions 1.3
Final Closing Adjustments 1.7
Final Closing Date Statement 1.7
FTC 5.4
Houston 8.7
HSR Act 3.5
Indemnitee 10.4(a)
Indemnitor 10.4(a)
Indemnity Reinsurance Agreement 1.5
Independent Party 1.7
Interim Xxxx Xxxxx Financial Statements 3.25
Interim SunAmerica Financial Statements 4.7
JANY Stock Purchase Agreement Introduction
JANY Stock Introduction
JANY Introduction
Xxxx Xxxxx 3.25
Liabilities 10.2(a)
License Agreement 1.5
Liens 3.4
Net Cash Flows 1.3(c)(i)
NOLHGA 2.2
Notice of Claim 10.4(a)
Oxford Agreement 5.11
Oxford Annuity Contracts 5.11
Oxford Put 5.11
Parties Introduction
Party Introduction
Permits 3.4
Permitted Mortgage Liens 3.22
Policy Loans 1.2
Portfolio Securities 1.2
Purchased Assets 1.2
Purchaser Introduction
Purchaser Financial Statements 4.7
Purchaser Group 10.3(a)
Purchaser's Opinion 1.5
Receiving Party 11.2(a)
Reinsurance Premium 1.2
Rejected Mortgage 1.2
Reserve Liabilities 3.17
Restricted Period 8.7
Seller Introduction
Seller Group 10.2(a)
Seller's Opinion 1.5
SunAmerica 4.7
SunAmerica Financial Statements 4.7
Termination Date 9.1
Third Party Administration Agreements 3.25
Transition Services Agreement 1.5
Transaction Agreements 12.2
Trust Agreement 1.5
Trustee 1.5
"Accrued and Unpaid Investment Income" means the aggregate
accrued but unpaid interest through and including the Closing Date
on bonds, mortgages and other interest bearing instruments included
in the Closing Date Portfolio Securities plus accrued but unpaid
interest through and including the Closing Date on any and all
Policy Loans related to the Policy Loan Balance plus declared but
unpaid dividends on Preferred Stock.
"Action" means any action, claim, complaint, cause of action,
arbitration, petition, investigation, suit or administrative or
other proceeding, whether civil or criminal, at law or in equity,
before any court, arbitrator or Governmental Entity.
"Adjusted Capital and Surplus of JANY" means, as of the
Closing Date, capital and surplus plus asset valuation reserves of
JANY as shown on lines 38, 11.4 and 24.1 of page 3 of the 1995
Annual Statement of JANY, calculated as of the Closing Date in a
manner consistent with such calculation at year end.
"Affiliate" shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or
is under common control with the Person specified. For purposes of
this definition, "control" (and its derivative terms "controlled,"
"controls," etc.) shall mean the power and right to direct the
management and policies of another Person, whether by ownership of
voting securities, the ability to elect a majority of the board of
directors or other managing board or committee, management
contract, or otherwise.
"Annuity Contracts" means all policies described on Schedule
3.8(a) attached hereto. Annuity Contracts as used in this Agreement
is intended to refer to all single premium deferred annuity
policies, flexible premium deferred annuity policies, single
premium immediate annuity policies, supplementary contracts and
guaranteed investment contracts included in the Annuity Business
which are in-force as of the Closing Ledger Date, as well as any
riders providing for other supplemental benefits, and all
supplements, endorsements, riders and ancillary agreements in
connection therewith and specifically includes without limitation
(i) all lapsed Annuity Contracts that are reinstated and (ii) any
supplemental benefits arising out of the Annuity Contracts.
Notwithstanding anything to the contrary in this Agreement,
"Annuity Contracts" shall not include (i) any policy for which the
reserves or applicable premiums are not actually transferred to
Purchaser, (ii) any policy not described in Schedule 3.8(b)
attached hereto, (iii) Annuity Contracts issued on or prior to
April 1, 1978, (iv) single premium immediate annuities and
supplementary contracts involving life contingencies, (v) universal
life flexible premium deferred annuity riders, (vi) annuity
policies assumed by Seller from Aristar Life Insurance Company and
(vii) if the Oxford Put is implemented pursuant to Section 5.10
hereof, the Oxford Annuity Contracts. For purposes of the
representations and warranties of Seller set forth in Article 3
hereof, the term "Annuity Contracts" shall be deemed to include
policies described on Schedule 3.8(a) attached hereto sold after
the Closing Ledger Date and on or prior to the Closing Date or
which terminated after the Closing Ledger Date and on or prior to
the Closing Date.
"Book Value" means book value computed in accordance with SAP,
without marking to market and without including Accrued and Unpaid
Investment Income.
"Business Day" means any day on which banks and other
financial institutions are not required to be closed pursuant to
applicable Laws in any of New York, New York, Los Angeles,
California and Miami, Florida.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act.
"Closing Date Portfolio Securities" means the cash,
securities, mortgage loans and other assets of Seller identified on
Schedule 1.2(a)(i) attached hereto (which Schedule also sets forth
the Book Value of each such asset as of October 21, 1996) (the
"October 21 Portfolio Securities"), (i) less the Rejected
Mortgages, (ii) less any such assets which have been sold before
the Closing Date with the approval of Purchaser in accordance with
Section 5.1(c)(i) hereof, (iii) less any October 21 Portfolio
Securities that have matured or been redeemed in accordance with
their terms between October 21, 1996 and the Closing Date.
"Closing Ledger Date" means the 21st day of the month in which
the Closing occurs or, if such day is not a Business Day, on the
next preceding Business Day.
"Combined Reserve Liabilities" means the Reserve Liabilities
for Annuity Contracts plus all reserves with respect to JANY's
Insurance Contracts (as defined in the JANY Stock Purchase
Agreement), in the aggregate.
"Commercially reasonable efforts" when used with respect to
any Party, means the reasonable efforts of such Party without the
requirement that such Party incur any extraordinary out-of-pocket
expenses, incur any other unanticipated burden or commence or
pursue any action, suit or proceeding.
"Environmental Laws" means any Law pertaining to health,
industrial hygiene or the environmental condition on or under any
property including, without limitation, CERCLA and the Toxic
Substance Control Act, and the rules and regulations thereunder.
"Excluded Liabilities" means (i) all liability for premium
taxes arising on account of premiums paid on or prior to the
Closing Ledger Date with respect to the Annuity Contracts, (ii) all
liability for commission payments and other fees or compensation
payable with respect to the Annuity Contracts to or for the benefit
of brokers and agents and other distribution sources, to the extent
that such amounts are based on premiums paid on or prior to the
Closing Ledger Date, (iii) trailer commissions (which are based
upon account values) accruable on or prior to the Closing Ledger
Date and (iv) all Guaranty Fund Assessments imposed as a result of
a conservatorship or other insolvency proceeding commenced on or
prior to the Closing Date with respect to the Annuity Contracts.
"Excluded Transactions" means with respect to the June 21
Portfolio Securities the sale or assignment of such Portfolio
Securities which resulted in (i) $1,174,000 of capital losses on
bonds, (ii) $1,072,000 in capital gains on bonds, (iii) $3,107,000
of losses due to mortgage write
downs and sales, and (iv) $161,000 of gains on mortgage prepayments,
as set forth on the Schedule attached hereto entitled "Excluded
Transactions."
"Execution Date" means the date of this Agreement.
"Extra Contractual Obligations" means all liabilities (i) for
compensatory, consequential, exemplary, punitive or similar damages
which directly relate to any alleged or actual act, error,
omission, fraud or misrepresentation by Seller, any of its
Affiliates or any of its or its Affiliates' officers or employees,
whether intentional or otherwise, prior to the Closing Date, or
(ii) from any actual or alleged reckless conduct or bad faith by
Seller, any of its Affiliates or any of its or its Affiliates'
officers or employees in connection with Seller's handling of any
claim under any of the Annuity Contracts or in connection with the
issuance, offer, sale, delivery, cancellation or administration by
Seller or any of its Affiliates or any of its or its Affiliates'
officers or employees of any of the Annuity Contracts or (iii) in
connection with any acceleration of the benefits under the Annuity
Contracts or any claims for the present value of the Annuity
Contracts, in either case, in connection with rehabilitation,
liquidation, receivership or other similar proceedings filed
against Seller.
"Final Closing Net Assets" means the sum of (i) the Book Value
of the Closing Date Portfolio Securities as of the Closing Date as
set forth on the Final Closing Date Statement, (ii) any cash
deposited in the Trust pursuant to Section 1.2(c) hereof and (iii)
the Policy Loan Balance as set forth on the Final Closing Date
Statement, which sum will be (x) increased by any amount paid by
Seller pursuant to Section 1.3(d)(i) hereof or (y) decreased by the
amount paid by Purchaser pursuant to Section 1.3(d)(ii) hereof.
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time, consistently applied
throughout the specified period and in the immediately prior
comparable period.
"Governmental Entity" means any agency, administrative
division or department (or administrative subdivision), commission,
regulatory authority (including without limitation any insurance
regulatory authority), taxing or administrative authority, court or
other judicial body, legislature of the government of the United
States or any state, city, municipality, county, town, district or
other political subdivision thereof or any state, city,
municipality, county, town, district or other political subdivision
thereof or any quasi-governmental entity, including, without
limitation, the employees or agents thereof.
"Hazardous Substance" means (i) any and all substances defined
as "hazardous substances," "extremely hazardous substances," "toxic
substances," "hazardous waste," "hazardous materials" or
"infectious waste" for purposes of CERCLA or any other
Environmental Law and (ii) any petroleum or petroleum-based
products.
"Insurance Liabilities" means only the contractual liabilities
and obligations of Seller arising under the Annuity Contracts, as
evidenced by the written policy forms and riders, and
no other liabilities whatsoever. Without limiting the foregoing,
Insurance Liabilities shall not include Excluded Liabilities or any
Extra Contractual Obligations.
"June 21 Portfolio Securities" means the cash, securities,
mortgage loans and other assets identified on Schedule 1.2(a)(i) as
of June 21, 1996.
"Laws" means any and all federal, state or local statutes,
laws, ordinances, rules and regulations.
"Loan Documents" means the Mortgage Note, the Mortgage and any
and all other agreements, certificates, documents or instruments in
Seller's possession or under its control relating to the
origination, closing and modification of a Mortgage Loan, including
without limitation any related assignment of rents, security
agreement, UCC financing statement, guaranty, letter of credit,
pledge agreement, loan agreement or other instrument creating a
security interest in, and Lien upon, real and/or personal property.
"Market Value" means (i) with respect to any publicly traded
security, the last reported sales price on the business day
immediately preceding the date on which such valuation is being
made, (ii) with respect to other (private) securities, the value
estimated using publicly quoted market prices for similar
securities, as identified by Seller, increased by 30 basis points
and (iii) with respect to mortgages, the GAAP book value per
Seller's financial statements.
"Material Adverse Effect" means any change, effect, event or
occurrence that has, or is reasonably likely to have, individually
or in the aggregate, a material adverse impact on (i) the assets,
business, financial position or results of operations of the
Annuity Business, the Annuity Contracts or the Purchased Assets or
(ii) the ability of Seller to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements;
provided that "Material Adverse Effect" shall be deemed to exclude
the impact of (i) changes in Laws, or interpretations thereof by
any Governmental Entity, relating to or affecting the Annuity
Business and (ii) changes in GAAP or SAP.
"Material Adverse Effect on Purchaser" means any change,
effect, event or occurrence that has, or is reasonably likely to
have, individually or in the aggregate, a material adverse impact
on (i) the business, financial position or results of operations of
Purchaser (either before or after the Closing and the closing under
the JANY Stock Purchase Agreement) or (ii) the ability of Purchaser
to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements; provided that "Material Adverse Effect on
Purchaser" shall be deemed to exclude the impact of (i) changes in
Laws or interpretations thereof by any Governmental Entity relating
to or affecting the business of Purchaser and (ii) changes in GAAP
or SAP.
"Mortgage" means the mortgage, deed of trust or other
instrument (and all modifications thereto) creating a lien on real
property described therein or on the tenant's interest under a
ground lease of real property described therein, in either case
securing a Mortgage Note.
"Mortgage Loan" means any individual mortgage loan that is
identified on the Mortgage Loan Schedule.
"Mortgage Loan Principal Balance" means, with respect to any
Mortgage Loan, the unpaid principal balance as of the date
specified in the Mortgage Loan Schedule.
"Mortgage Loan Schedule" means the list of Mortgage Loans
subject to this Agreement and identified on Schedule 3.22(a)
attached hereto, which schedule sets forth the following
information with respect to each Mortgage Loan as of the date
specified therein.
(i) the Mortgage Loan numbers;
(ii) the name of the mortgagor and the name or address
of the Mortgaged Property;
(iii) the Mortgage Loan Principal Balance;
(iv) lien priority of the Mortgage;
(v) the maturity date; and
(vi) the current interest rate.
(vii) the Mortgage Loan Status (current, litigation,
bankruptcy, tax plans, etc.).
"Mortgage Note" means the note or other evidence of the
indebtedness under a Mortgage Loan.
"Mortgaged Property" means the land and improvements that
secure a Mortgage, which in the case of a leasehold mortgage shall
mean the tenant's interest in the real property underlying the
ground lease or, where the context so requires, the real property
underlying the ground lease.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Other Liabilities" means (i) all liability for premium taxes
arising on account of premiums paid to Purchaser with respect to
the Annuity Contracts after the Closing Ledger Date, (ii) all
liability for commission payments and other fees or compensation
payable with respect to the Annuity Contracts to or for the benefit
of brokers and agents and other distribution sources, to the extent
that such amounts are based on premiums paid to Purchaser after the
Closing Ledger Date, (iii) trailer commissions (which are based
upon account values) accruable after the Closing Ledger Date and
(iv) all Guaranty Fund Assessments imposed as a result of
conservatorship or other insolvency proceedings commenced
subsequent to the Closing Date with respect to the Annuity
Contracts.
"Person" shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company,
proprietorship, trust, union, association, court, tribunal, agency,
government, department, commission, self-regulatory organization,
arbitrator, board, bureau, instrumentality, or other entity,
enterprise, authority, or business organization.
"Policyholders" means, as applicable, the beneficiaries under,
or policyholders with respect to, or owners of, the Annuity
Contracts, or any other Person entitled to payment with respect to
the Annuity Contracts.
"Policy Loan Balance" means the aggregate outstanding
principal amount of all Policy Loans as of a date of calculation
(other than the Policy Loans associated with the Oxford Annuity
Contracts in the event the Oxford Put is implemented).
"Qualified Investments" means (A) readily marketable direct
obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed
by the full faith and credit of the Government of the United
States; (B) demand deposits with (1) any commercial bank that is a
member of the Federal Reserve System, the parent of which issues
commercial paper rated at least "P-1" (or the then equivalent
grade) by Moody's and "A-1" (or the then equivalent grade) by S&P,
is organized under the Laws of the United States or any State
thereof and is rated "TBW-1" or the equivalent or better by Thomson
BankWatch or any other nationally recognized agency or, (2) a
United States branch or agency of any commercial bank organized
under the Laws of any Organization for Economic Cooperation and
Development member country (as of the Execution Date of this
Agreement) which is rated "TBW-1" or the equivalent or better by
Thomson BankWatch or other internationally recognized agency; (C)
commercial paper issued by any corporation rated at least P-1 or
the then equivalent grade by Moody's and A-1 or the then equivalent
grade by S&P; (D) money market mutual funds (i) whose portfolio is
comprised solely of (1) marketable direct obligations of the United
States government or its agencies, and/or (2) bank or corporate
obligations which individually meet the rating criteria stipulated
in (B) or (C) above, (ii) whose total net assets exceed $1 billion
and (iii) where the Seller's investment in such fund is limited to
an amount not exceeding 10% of such fund's assets; or (E) such
other assets as the Party receiving such Qualified Investments may
expressly approve in writing.
"Related Agreements" means the agreements providing for the
payment of commissions relating to the Annuity Contracts.
"Representatives" means, with respect to any Person, such
person's Affiliates, subsidiaries, shareholders, directors,
partners, joint ventures, officers, employees, agents,
representatives, producers, independent contractors, consultants,
lenders, brokers, finders, investment bankers, financial advisors,
attorneys and accountants. Seller's Representatives
include without limitation CS First Boston. Purchaser's Representatives
include without limitation Xxxxxxx Sachs & Company.
"Service Transfer Date" means the date which is nine months
from the Closing Date, unless an earlier date is agreed to in
writing by Seller and Purchaser.
"SAP" means the statutory accounting principals and practices,
as in effect from time to time, required or permitted for life
insurance companies by applicable Laws of the National Association
of Insurance Commissioners and the insurance regulatory authority
in the state in which the company in question is domiciled,
consistently applied throughout the specified period and in the
immediately prior comparable period.
"Taxes" shall mean all taxes, charges, fees, levies, or other
similar assessments, including, without limitation, income, gross
receipts, ad valorem, premium, excise, real property, personal
property, windfall profit, sales, use, transfer, licensing,
withholding, employment, payroll, and franchise taxes imposed by
any Governmental Entity; and such term shall include any interest
(through the date of payment), penalties, assessments, or additions
to tax resulting from, attributable to, or incurred in connection
with any such tax or any contest or dispute thereof.
"Tax Returns" shall mean returns, declarations, statements,
reports, schedules, forms and information returns and any amended
Tax Return required to be supplied to a taxing authority in respect
of or relating to Taxes.
