<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): March 31, 1997
JOHN ALDEN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11396 59-2847012
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) Identification No.)
7300 Corporate Center Drive, Miami, Florida 33126-1223
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 715-3767
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JOHN ALDEN FINANCIAL CORPORATION
FORM 8-K
TABLE OF CONTENTS
<TABLE>
<S> <C>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS 1
ITEM 5. OTHER EVENTS 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS 2
SIGNATURE 5
</TABLE>
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 31, 1997, John Alden Life Insurance Company ("JALIC"), a
subsidiary of John Alden Financial Corporation (the "Company"), sold its
Annuity Operations to SunAmerica Life Insurance Company ("SunAmerica"). The
transaction included the sale of all of the common stock of John Alden Life
Insurance Company of New York ("JANY"), a wholly-owned subsidiary of JALIC,
pursuant to the Stock Purchase and Sale Agreement dated November 29, 1996 by
and between JALIC and SunAmerica. Pursuant to the Asset Purchase and Sale
Agreement dated November 29, 1996 by and between JALIC and SunAmerica and the
Indemnity Reinsurance Agreement dated March 31, 1997 by and between JALIC
and SunAmerica, JALIC coinsured substantially all of its annuity business to
SunAmerica on an indemnity basis. Under the Trust Agreement dated March 31,
1997 by and among SunAmerica, as Grantor, JALIC, as Beneficiary, and Bankers
Trust Company, as Trustee, SunAmerica is required to maintain assets in trust
for the benefit of JALIC. The parties have agreed to transition the business
to an assumption basis pursuant to the Assumption Reinsurance Agreement dated
as of March 31, 1997 by and between JALIC and SunAmerica. In certain states,
the transition to an assumption basis is subject to policyholder approval. To
the extent that such transition does not take place with respect to any
particular policy, the policy will remain reinsured on an indemnity basis. A
substantial portion of the transition to an assumption basis is expected to be
completed within two years. The Company and SunAmerica have no material
relationships other than those described in this Current Report on Form 8-K.
SunAmerica has informed the Company that SunAmerica is a diversified
financial services company specializing in retirement savings and investment
products and services and is rated "A+ (Superior)" by A.M. Best and Company.
SunAmerica is incorporated in Arizona, and its executive offices are located at
1 SunAmerica Center, Los Angeles, California 90067-6022.
As consideration for the Annuity Operations, SunAmerica paid JALIC
approximately $238 million, which was determined through arms-length
negotiations. The consideration represents an approximately $161 million
premium paid to acquire the business and approximately $77 million of adjusted
capital and surplus of JANY. It does not include any capital and surplus used
to support the annuity business in JALIC, which will remain in JALIC. The
Company's available capital was enhanced by both the after-tax gain generated
from the transaction and by the release of the net capital previously allocated
to support the annuity business. The Company intends to use a portion of this
available capital to strengthen its healthcare operations, after which it
estimates there will be approximately $175 million to $200 million of capital
available for other uses. Subject to applicable regulatory approvals, this
additional capital may be used to repurchase common stock, pay dividends, pay
down debt and, to a lesser extent, for general corporate purposes.
As a result of this sale and the previously announced proposed sale of
its Western Diversified Group (the principal subsidiaries of the Company that
market credit life and disability and retail service warranty coverage), on
March 31, 1997 the Company recorded a net deferred gain of approximately $45
million. This amount is net of transaction expenses, taxes, goodwill and other
adjustments relating to these transactions including among other things an
adjustment to reduce the carrying value of the Western Diversified Group to its
estimated net realizable value. The net deferred gain will be recognized as
income as SunAmerica completes the assumption of policyholder liabilities. The
Company expects to begin recognizing the net deferred gain in 1997 and to earn
the majority of the gain by December 31, 1998.
In connection with the transaction described in this Current Report on Form
8-K, JALIC and SunAmerica have entered into various servicing agreements.
Under the Transition Services Agreement dated March 31, 1997 between JALIC and
SunAmerica and the Transition Services Agreement dated March 31, 1997
between JALIC and JANY, the Company will provide certain administrative services
related to the business sold to SunAmerica for a period of up to nine months,
until the policies are transferred to SunAmerica's systems. Pursuant to the
Interim Servicing Agreement dated as of March 31, 1997 between John Alden Asset
1
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Management Company ("JAAMCO"), a wholly-owned subsidiary of the Company,
SunAmerica and JANY, JAAMCO will provide mortgage servicing to SunAmerica and
JANY on an ongoing basis. Such agreement is terminable by SunAmerica and JANY
upon written notice to JAAMCO. Under the Marketing Agreement dated March 28,
1997 by and between SunAmerica and NSM Sales Corporation ("NSM"), a
wholly-owned subsidiary of the Company, NSM will market certain fixed annuity
products for SunAmerica. The parties have also entered into the
Administrative Services Agreement dated March 31, 1997 between JALIC and
SunAmerica, whereby SunAmerica will provide administrative services to JALIC
related to the small number of annuity policies retained by JALIC.
ITEM 5. OTHER EVENTS
On December 2, 1996, the Company issued a News Release filed herewith as
Exhibit 99.1 which is incorporated herein by reference.
On March 31, 1997, the Company issued a News Release filed herewith as Exhibit
99.2 which is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Not Applicable.
(B) PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma balance sheet as of December 31, 1996 has
been prepared by the Company based upon available information and assumptions
deemed appropriate to reflect the sale and reinsurance arrangement described in
Item 2. Such balance sheet reflects the financial position of the Company as
reported and as adjusted as though the sale of the Annuity Operations had been
consummated at December 31, 1996 and the net assets of the Annuity Operations
and the Western Diversified Group were reclassified as net assets held for
sale. As there was no effect to income (loss) from continuing operations for
the years ended December 31, 1996, 1995 and 1994 as set forth in the financial
statements included in the Company's Annual Report on Form 10-K ("Form 10-K"),
pro forma income statements are not presented.
This unaudited pro forma balance sheet is not necessarily indicative of what
the actual financial position of the Company would have been had the sale
occurred on December 31, 1996, nor does it indicate the future financial
position of the Company. Actual amounts will vary from the amounts shown in the
pro forma balance sheet.
The unaudited pro forma balance sheet should be read in conjunction with the
Company's historical consolidated financial statements and notes thereto
included in the Company's Form 10-K for the year ended December 31, 1996.
2
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JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Adjustments
-----------------------------------
Sale of JALIC
As Reported JANY (1) Coinsurance
------------- -------------- -----------------
<S> <C> <C> <C>
Assets:
Debt securities .............................................. $ 4,298,649 $ (1,119,476) $ (2,219,648) (2)
Equity securities ............................................ 82,098 (81,663) (2)
Mortgage loans ............................................... 1,449,242 (237,105) (1,062,402) (2)
Investment in real estate .................................... 39,903
Real estate owned ............................................ 11,483
Policy loans and other notes receivable ...................... 75,186 (8,937) (23,892) (2)
Short-term investments ....................................... 6,371
-------------- -------------- ---------------
Total invested assets ................................... 5,962,932 (1,365,518) (3,387,605)
Cash and cash equivalents .................................... 167,511 84,917 (188,063) (3)
Accrued investment income .................................... 65,727 (16,072) (34,772) (4)
Deferred policy acquisition costs............................. 239,622 (37,714) (149,095) (5)
Property and equipment, net................................... 69,856 (149)
Reinsurance receivables ...................................... 204,379 (11,967)
Investment deposits recoverable .............................. 766,286 (25,520) (724,177) (6)
Net assets held for sale .....................................
Other assets ................................................. 194,936 (26,305) (56,322) (7)
-------------- -------------- ---------------
Total assets .......................................... $ 7,671,249 $ (1,398,328) $ (4,540,034)
============== ============== ===============
Liabilities, redeemable securities and stockholders' equity:
Liabilities:
Contract holder liabilities................................. $ 6,887,632 $ (1,422,382) $ (4,562,351) (8)
Short-term debt ............................................ 25,000
Accounts payable and other liabilities...................... 120,888 (1,911) 16,382 (9)
Funds payable under reinsurance treaties.................... 77,331 669 (19,321) (10)
Net deferred gain........................................... 31,455 31,028 (11)
Long-term debt ............................................. 76,500
-------------- -------------- ---------------
Total liabilities ..................................... 7,187,351 (1,392,169) (4,534,262)
-------------- -------------- ---------------
Redeemable securities......................................... 18,687
Stockholders' equity:
Common stock ............................................. 250
Paid-in capital........................................... 181,863
Net unrealized gain on investments, net of income taxes... 26,977 (6,159) (5,772) (12)
Retained earnings......................................... 268,109
Redemption value of common stock in excess of cost........ (2,669)
Unearned compensation .................................... (643)
Treasury stock, at cost .................................. (8,676)
-------------- -------------- ---------------
Total stockholders' equity ............................ 465,211 (6,159) (5,772)
-------------- -------------- ---------------
Total liabilities, redeemable securities and
stockholders' equity ................................ $ 7,671,249 $ (1,398,328) $ (4,540,034)
============== ============== ===============
<CAPTION>
Adjustments
-------------------
WD Group
Proposed Sale (13) Pro Forma
------------------- ---------------
<S> <C> <C>
Assets:
Debt securities............................................... $ (104,190) $ 855,335
Equity securities............................................. (396) 39
Mortgage loans................................................ 149,735
Investment in real estate..................................... 39,903
Real estate owned............................................. 11,483
Policy loans and other notes receivable....................... (7,303) 35,054
Short-term investments........................................ (2,128) 4,243
--------------- ---------------
Total invested assets.................................... (114,017) 1,095,792
Cash and cash equivalents..................................... (25,796) 38,569
Accrued investment income..................................... (3,392) 11,491
Deferred policy acquisition costs............................. (16,570) 36,243
Property and equipment, net................................... (37) 69,670
Reinsurance receivables....................................... (83,582) 108,830
Investment deposits recoverable............................... 16,589
Net assets held for sale...................................... 44,985 44,985 (14)
Other assets.................................................. (19,118) 93,191
--------------- ---------------
Total assets........................................... $ (217,527) $ 1,515,360
=============== ===============
Liabilities, redeemable securities and stockholders' equity:
Liabilities:
Contract holder liabilities................................. $ (146,877) $ 756,022
Short-term debt............................................. 25,000
Accounts payable and other liabilities...................... (17,910) 117,449
Funds payable under reinsurance treaties.................... (35,279) 23,400
Net deferred gain........................................... (17,461) 45,022
Long-term debt.............................................. 76,500
--------------- ---------------
Total liabilities ..................................... (217,527) 1,043,393
--------------- ---------------
Redeemable securities......................................... 18,687
Stockholders' equity:
Common stock.............................................. 250
Paid-in capital........................................... 181,863
Net unrealized gain on investments, net of income taxes... 15,046
Retained earnings......................................... 268,109
Redemption value of common stock in excess of cost........ (2,669)
Unearned compensation..................................... (643)
Treasury stock, at cost................................... (8,676)
--------------- ---------------
Total stockholders' equity............................. - 453,280
--------------- ---------------
Total liabilities, redeemable securities and
stockholders' equity................................. $ (217,527) $ 1,515,360
=============== ===============
</TABLE>
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(1) Reflects the sale of JANY to SunAmerica for $131.0 million, net of
expenses of $2.5 million. Proceeds of $131.0 million less cash and
cash equivalents of $46.1 million transferred to SunAmerica comprise
the net cash and cash equivalents increase of $84.9 million.
After-tax gain of $31.5 million is reflected as part of the deferred
gain.
(2) Reflects the transfer of JALIC's invested assets attributable to the
Annuity Operations to SunAmerica.
(3) Proceeds of $107.3 million from coinsurance of JALIC less cash and cash
equivalents of $295.4 million transferred to SunAmerica.
(4) Reflects the accrued investment income collected at closing from
SunAmerica.
(5) Reflects the write-off of deferred acquisition costs relating to
coinsurance of JALIC.
(6) Reflects transfer of investment contract deposits recoverable assigned to
SunAmerica.
(7) Primarily reflects the write-off of unamortized goodwill attributable to
the Annuity Operations and the tax liability related to the
coinsurance transaction.
(8) Reflects ceding of JALIC annuity reserves.
(9) Primarily reflects costs incurred in connection with the sale.
(10) Primarily reflects funds held released as the result of policy loans
transferred to SunAmerica.
(11) Deferred gain, net of income taxes.
(12) Reflects the reversal of unrealized gains on available-for-sale debt
securities and preferred stocks transferred to SunAmerica under the
coinsurance agreement.
(13) Reflects the net assets held for sale of the Western Diversified Group
adjusted to estimated net realizable value.
(14) Net assets held for sale is comprised of the following:
Investment deposits recoverable on JALIC coinsurance. $ 4,562,351
JALIC annuity contract holder liabilities............ (4,562,351)
Net assets held for sale of Western Diversified Group 44,985
-------------
Net assets held for sale............................. $ 44,985
=============
3
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(C) The following is a list of all Exhibits filed as part of this
Report:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
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10.1 Stock Purchase and Sale Agreement by and between John Alden Life Insurance Company
("JALIC") and SunAmerica Life Insurance Company ("SunAmerica") dated November 29, 1996.
10.2 Asset Purchase and Sale Agreement by and between JALIC and SunAmerica dated November 29,
1996.
10.3 Indemnity Reinsurance Agreement by and between JALIC and SunAmerica dated as of March
31, 1997.
10.4 Assumption Reinsurance Agreement dated as of March 31, 1997 by and between JALIC and
SunAmerica.
10.5 Trust Agreement by and among SunAmerica as Grantor and JALIC as Beneficiary and Bankers
Trust Company as Trustee dated March 31, 1997.
10.6 Transition Services Agreement between JALIC and SunAmerica dated March 31, 1997.
10.7 Transition Services Agreement between JALIC and John Alden Life Insurance Company of New
York ("JANY") dated March 31, 1997.
10.8 Administrative Services Agreement between JALIC and SunAmerica dated March 31, 1997.
10.9 Interim Servicing Agreement between John Alden Asset Management Company, SunAmerica
and JANY dated as of March 31, 1997.
10.10 Asset Repurchase Agreement by and between JALIC and SunAmerica dated March 31, 1997.
10.11 Marketing Agreement dated March 28, 1997 by and between SunAmerica and NSM Sales
Corporation.
10.12 Amendment No. 1 dated March 31, 1997 to the Stock Purchase and Sale Agreement dated
November 29, 1996 by and between JALIC and SunAmerica.
10.13 Amendment No. 1 dated March 31, 1997 to the Asset Purchase and Sale Agreement dated
November 29, 1996 by and between JALIC and SunAmerica.
10.14 Amendment No. 1 to Marketing Agreement between SunAmerica and NSM Sales Corporation.
99.1 News Release of the registrant dated December 2, 1996.
99.2 News Release of the registrant dated March 31, 1997.
</TABLE>
4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOHN ALDEN FINANCIAL CORPORATION
/s/ Scott L. Stanton
----------------------------------------------------
Scott L. Stanton
Senior Vice President and Chief Financial Officer
Dated: April 15, 1997
5
<PAGE> 1
STOCK PURCHASE AND SALE AGREEMENT
By and Between
JOHN ALDEN LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated November 29, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1 - PURCHASE AND SALE OF STOCK; CLOSING................................................................. 2
1.1. Closing...................................................................................... 2
1.2. Purchase and Sale of JANY Stock.............................................................. 2
1.3. Closing Deliveries........................................................................... 3
1.4. Additional Closing Deliveries................................................................ 4
1.5. Settlement of Intercompany Obligations....................................................... 4
1.6. Disputes..................................................................................... 6
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF SELLER............................................................ 6
2.1. Organization, Standing and Authority of Seller............................................... 6
2.2. Authorization................................................................................ 7
2.3. Actions and Proceedings...................................................................... 7
2.4. No Conflict or Violation..................................................................... 8
2.5. Consents and Approvals....................................................................... 8
2.6. Brokerage and Financial Advisers............................................................. 9
2.7. Compliance With Laws......................................................................... 9
2.8. Insurance Contracts.......................................................................... 9
2.9. Permits, Licenses and Franchises............................................................. 12
2.10. Regulatory Filings........................................................................... 13
2.11. Reinsurance.................................................................................. 14
2.12. Absence of Certain Changes or Events......................................................... 14
2.13. Computer Software and Other Intellectual Property............................................ 17
2.14. Contracts.................................................................................... 18
2.15. Statutory Financial Statements............................................................... 20
2.16. JANY Capital Stock........................................................................... 22
2.17. Tax Matters.................................................................................. 22
2.18. Real Property................................................................................ 24
2.19. Owned Properties............................................................................. 25
2.20. Pension and Other Employee Plans............................................................. 26
2.21. Labor Matters................................................................................ 29
2.22. Banks........................................................................................ 29
2.23. Reserves..................................................................................... 30
2.24. Books and Records............................................................................ 31
2.25. Threats of Cancellation...................................................................... 31
2.26. Operations Insurance......................................................................... 31
2.27. Intercompany Liabilities..................................................................... 32
2.28. Employee Loans............................................................................... 32
2.29. Credited Rates............................................................................... 32
2.30. Related Agreements........................................................................... 32
2.31. Third Party Administration Agreements........................................................ 33
</TABLE>
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TABLE OF CONTENTS
(cont'd)
<TABLE>
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PAGE
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2.32. Mortgage Loans............................................................................... 33
2.33. No Waiver of Defenses........................................................................ 39
2.34. GAAP Financial Statements.................................................................... 39
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 40
3.1. Organization and Standing.................................................................... 41
3.2. Authorization................................................................................ 41
3.3. Actions and Proceedings...................................................................... 41
3.4. No Conflict or Violation..................................................................... 42
3.5. Consents and Approvals....................................................................... 42
3.6. Brokerage and Financial Advisers............................................................. 43
3.7. GAAP Financial Statements.................................................................... 43
3.8. Statutory Financial Statements............................................................... 44
3.9. Rating....................................................................................... 45
3.10. Investment Intent and Acknowledgement........................................................ 45
ARTICLE 4 - PRE-CLOSING COVENANTS............................................................................... 46
4.1. Conduct of Business.......................................................................... 46
4.2. Certain Transactions......................................................................... 50
4.3. Investigations............................................................................... 51
4.4. HSR Act Filings.............................................................................. 51
4.5. Consents and Reasonable Efforts.............................................................. 52
4.6. Representations and Warranties............................................................... 52
4.7. Financial Statements and Reports............................................................. 53
4.8. Transfer Real Estate Owned................................................................... 54
4.9. Stay-on Bonus................................................................................ 54
ARTICLE 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
TO CLOSE............................................................................... 56
ARTICLE 7 - POST-CLOSING COVENANTS.............................................................................. 59
7.1. Continued Access and Cooperation............................................................. 59
7.2. Further Assurances........................................................................... 60
7.3. Expenses..................................................................................... 61
7.4. Tax Indemnification and Other Tax Matters.................................................... 61
7.5. Employee Plans............................................................................... 70
7.6. Non-Discriminatory Treatment of Policyholders................................................ 71
7.7. Change of Name............................................................................... 71
ARTICLE 8 - TERMINATION; SURVIVAL............................................................................... 72
</TABLE>
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TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
PAGE
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8.1. Termination of Agreement..................................................................... 72
8.2. Effect of Termination........................................................................ 73
ARTICLE 9 - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION........................................................ 74
9.1. Survival of Representations.................................................................. 74
9.2. Indemnification by Purchaser and JANY........................................................ 75
9.3. Indemnification by Seller.................................................................... 77
9.4. Indemnification Procedure.................................................................... 79
ARTICLE 10 - PUBLICITY AND CONFIDENTIALITY...................................................................... 82
10.1. Publicity.................................................................................... 82
10.2. Confidentiality.............................................................................. 83
ARTICLE 11 - MISCELLANEOUS...................................................................................... 85
11.1. Notices...................................................................................... 85
11.2. Entire Agreement............................................................................. 87
11.3. Amendments................................................................................... 88
11.4. Waivers...................................................................................... 88
11.5. Governing Law................................................................................ 88
11.6. Binding Effect; Assignment; Third Party Beneficiaries........................................ 89
11.7. Severability................................................................................. 89
11.8. Headings..................................................................................... 90
11.9. Counterparts................................................................................. 90
11.10. Arbitration.................................................................................... 90
SIGNATURES ......................................................................................................92
</TABLE>
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TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ANNEX A - Definitions
EXHIBITS
A - Transition Services Agreement
B - Opinion of Seller's Counsel
C - Opinion of Purchaser's Counsel
D - Loan Documentation
</TABLE>
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SCHEDULES
<TABLE>
<CAPTION>
<S> <C> <C>
2.3 - Actions and Proceedings
2.4 - Certain Matters - Conflicts
2.5 - Consents and Approvals
2.7 - Compliance
2.8(a) - Insurance Contract Forms
2.8(b) - In Force Insurance Contracts
2.8(c) - Certain Commissions Contracts
2.8(e) - Contested Benefits
2.8(f) - Distributions and Other Benefits
2.8(h) - Known Agent Violations
2.8(f) - Distributions and Other Benefits
2.9 - Permit Exceptions
2.10 - Regulatory Filings
2.11 - Reinsurance Agreements
2.12 - Certain Changes or Events
2.13 - Intellectual Property
2.14 - Contracts
2.17 - Tax Matters
2.18 - Real Property
2.20 - Pension and Other Employee Plans
2.22 - Bank Accounts
2.23(a) - Reserve Liabilities
2.23(b) - Reserve Exceptions
2.25 - Threats of Cancellation
2.26 - Operations Insurance
2.27 - Intercompany Liabilities
2.28 - Employee Loans
2.30 - Related Agreements
2.31 - Third Party Administration Agreements
2.32(a) - Mortgage Loans
2.32(b) - Participation
2.32(d) - Waivers, Amendments and Releases Mortgage Loans
2.32(f) - Missing Original Notes
2.32(l) - Tax Delinquencies
3.3 - Purchaser's Actions and Proceedings
3.4 - Purchaser's Conflicts or Violations
3.5 - Purchaser's Consents and Approvals
</TABLE>
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STOCK PURCHASE AND SALE AGREEMENT
STOCK PURCHASE AND SALE AGREEMENT (the "Agreement") dated November 29,
1996 by and between John Alden 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, John Alden Life Insurance Company of New York, a New York
corporation (along with any business or predecessor company acquired by it,
"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 (the "Insurance Business");
WHEREAS, Seller 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, all of the JANY Stock pursuant to the terms and conditions
set forth in this Agreement and certain other assets of Seller pursuant to the
terms and conditions set forth in the Asset Purchase and Sale Agreement dated
concurrently herewith between Seller and Purchaser (the "Asset 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
<PAGE> 8
(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 STOCK; 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 Kelley Drye & Warren LLP, 101 Park Avenue, New York, New York, 10178, 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 5 and 6 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. Purchase and Sale of JANY Stock.
Subject to the terms and conditions set forth herein, at the
Closing, Seller shall sell, assign and deliver to Purchaser, and Purchaser shall
purchase and accept from Seller, all of Seller's right, title and interest in
and to the JANY Stock. In consideration for the sale, assignment and delivery of
the JANY Stock, at the Closing Purchaser shall pay to Seller a
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purchase price of One Hundred Thirty Two Million Dollars ($132,000,000) (the
"Purchase Price"). Purchaser shall pay the Purchase Price to Seller on the
Closing Date by wire transfer of immediately available funds to such bank
account as Seller shall designate to Purchaser at least three business days
prior to the Closing Date. The amount of the cash payment wired to Seller shall
be reduced by an amount equal to one day's interest at an interest rate equal to
the three month LIBOR rate in effect on the day preceding the Closing Date plus
25 basis points.
Section 1.3. Closing Deliveries.
(a) At the Closing, Seller shall or shall cause JANY to
deliver to Purchaser the following:
(i) the certificates representing the JANY Stock duly
endorsed in blank or accompanied by stock transfer powers in proper
form duly endorsed in blank, together with all necessary stock transfer
stamps affixed thereto and such other instruments as shall reasonably
be required by Purchaser to transfer to Purchaser all rights, title and
interest in the JANY stock;
(ii) all minutes and minute books of JANY;
(iii) all stock transfer books and stock ledgers of
JANY;
(iv) all blank certificates for shares of capital
stock of JANY;
(v) resignations of all directors and officers of
JANY serving in office immediately prior to the Closing;
(vi) the opinion of counsel to Seller and JANY,
substantially in the form of Exhibit B attached hereto ("Seller's
Opinion"); and
(vii) a certificate of an executive officer of
Seller, dated the Closing Date, representing and warranting to the
effect that (A) the officer signing such
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certificate is familiar with the provisions of this Agreement and (B)
the conditions specified in Article 4 of this Agreement have been
satisfied.
(b) At the Closing, Purchaser shall deliver to Seller the
following:
(i) the opinions of counsel to Purchaser,
substantially in the form of Exhibit C attached hereto ("Purchaser's
Opinion");
(ii) 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 5 of this Agreement have been satisfied;
(iii) written consents to assignments, where
necessary from all applicable parties relating to the Third Party
Administration Agreements; and
(iv) the Purchase Price.
Section 1.4. Additional Closing Deliveries. In addition to the
transactions and deliveries contemplated above, the following acts or
transactions will occur at the Closing:
(a) Seller and Purchaser will enter into a Transition Services
Agreement substantially in the form of Exhibit A attached hereto (the
"Transition Services Agreement"); and
(b) all of the agreements between or among (i) JANY and Seller
or (ii) JANY and any Affiliates of Seller will be terminated.
Section 1.5. Settlement of Intercompany Obligations.
(a) At least five days prior to the Closing, Seller will
estimate and cause to be paid by or to Seller or its Affiliates and JANY, as the
case may be, in cash, all obligations accrued through the Closing on JANY's
books and records payable by or to JANY from or to
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Seller and its Affiliates, which payments shall have been incurred in the
ordinary course of business on a basis consistent with past practice, except
that Seller shall not allocate to JANY any portion of any bonuses for any Person
who is not an employee of JANY. Seller shall deliver to Purchaser a reasonably
detailed description of all such payments at least five days prior to the
Closing.
(b) Seller shall prepare and deliver to Purchaser on or before
the 60th day after the Closing Date a reconciliation statement of the estimated
obligations paid by or to Seller and its Affiliates by or to JANY pursuant to
Section 1.5(a) hereof and the actual amount of the amount of such obligations
(other than as provided in Section 7.4(d) hereof) (the "Reconciliation
Statement"). If the total actual amount of such obligations is less than the
estimated amount paid to Seller or its Affiliates by JANY pursuant to Section
1.5(a) hereof, Seller shall pay to JANY in cash an amount equal to such
difference, together with interest from the Closing Date through the date of
payment at the rate per annum equal to the three month LIBOR rate in effect on
the date of payment plus 25 basis points. Such payment shall accompany the
reconciliation statement. If the actual total amount and revised estimate of
such obligations exceeds the estimated amount paid to Seller or its Affiliates
by JANY pursuant to Section 1.5(a) hereof, Purchaser shall pay, or cause JANY to
pay, to Seller or its Affiliates, as the case may be, within 10 days after
delivery of such statement cash in an amount equal to such excess, together with
interest from the Closing Date through the date of such payment at the rate per
annum equal to the three month LIBOR rate in effect on the date of payment plus
25 basis points. After the date hereof, JANY will not enter into any contract
or, except as required by this Agreement or any contract listed on Schedule 2.27
attached hereto, engage in any transaction with Seller or any Affiliate of
Seller.
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Section 1.6. Disputes. If Purchaser and Seller are unable to resolve
any disagreement with respect to the Reconciliation 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 Reconciliation 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 Reconciliation 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.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 2.1. 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. JANY is a corporation duly organized, validly existing and in good
standing in the State of New York. JANY has all corporate power and authority
necessary or required by Law to engage in the conduct of the Insurance Business
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as currently conducted by it. Seller has furnished Purchaser with true and
correct copies of the Articles of Incorporation and By-laws of JANY, along with
all amendments thereto.
Section 2.2. Authorization. Seller has all corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and the Transition Services Agreement. The execution and delivery by
Seller of this Agreement and the Transition Services Agreement, and the
performance by Seller and JANY of its obligations hereunder and thereunder, have
been duly authorized by all necessary corporate and shareholder actions on the
part of Seller and JANY. This Agreement and the Transition Services Agreement,
when executed by all of the parties thereto, will each 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 2.3. Actions and Proceedings.
(a) Except as disclosed on Schedule 2.3 attached hereto, there
are no outstanding Orders by or with any court, arbitrator or Governmental
Entity before which Seller or any of its material Affiliates or JANY is or was a
party.
(b) Except as set forth on Schedule 2.3 attached hereto, there
are no Actions pending or, to the knowledge of Seller, threatened either by or
against JANY, Seller with respect to JANY or any of JANY's properties or assets
which (i) seeks monetary damages exceeding $50,000 individually or $500,000 in
the aggregate or an unspecified amount of damages, (ii) seeks any injunction or
similar relief or (iii) would, individually or in the aggregate, have a Material
Adverse Effect.
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(c) There are no Actions presently pending or, to the
knowledge of Seller, threatened, and there are no final Orders presently
outstanding which pertain to any of the JANY Stock.
Section 2.4. No Conflict or Violation. Except as disclosed on Schedule
2.4 attached hereto, the execution, delivery and performance by Seller of this
Agreement and the Transition Services Agreement in accordance with the
respective terms and conditions hereof and thereof do not and will not (a)
violate or constitute a default under any provision of the charter or by-laws of
Seller or JANY, in each case, as amended to date, (b) violate 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 the JANY Stock or any of the
material properties or assets of JANY pursuant to, any mortgage, deed of trust,
guaranty, note, indenture, bond, lease, agreement or other instrument to which
either of Seller or JANY is a party or by or to which it or any of the assets of
JANY 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 Governmental Entity binding upon Seller or JANY or any
of such properties or assets of JANY, (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
Insurance Business.
Section 2.5. Consents and Approvals. Except as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and rules and
regulations thereunder (the "HSR Act") or as set forth on Schedule 2.5 attached
hereto, no consent, approval, exemption
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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
or JANY in order (a) for this Agreement and the Transition Services Agreement to
constitute a valid and binding obligation of Seller, (b) to authorize or permit
the consummation of the transactions contemplated hereby by Seller and JANY or
(c) to prevent the termination of any material right, privilege, franchise,
license, permit or agreement of JANY or to prevent any material loss to JANY.
Section 2.6. 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 or JANY 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 2.7. Compliance With Laws. Except as disclosed in Schedule 2.7
attached hereto, neither Seller nor JANY is in material violation of any Law or
any Order of any court, arbitrator or Governmental Entity pertaining to JANY or
any of its assets.
Section 2.8. Insurance Contracts. The forms of all policies and
endorsements utilized for the In Force Insurance Contracts of JANY are described
on Schedule 2.8(a) attached hereto. All In Force Insurance Contracts in effect
on October 21, 1996 or September 21, 1996, (as indicated in such Schedule) are
listed in Schedule 2.8(b) attached hereto. All In Force Insurance Contracts in
effect on Closing Ledger Date will be set forth in an updated Schedule 2.8(b)
delivered to Purchaser at the Closing. Schedule 2.8(b) includes (and the updated
Schedule 2.8(b) will include) with respect to each In Force Insurance Contract
the policy number, policyholder name, form, plan code and account balance. All
In Force Insurance Contracts are in all
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respects, to the extent required under applicable Law, 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 Law. Without limiting the
foregoing:
(a) JANY has offered and sold each Insurance Contract in
compliance with all applicable Laws (it being acknowledged that no
representation is made with respect to compliance by independent agents of JANY
except as provided in Section 2.8(h) hereof) and all of Seller's registrations,
filings or submissions made by it with respect to the Insurance Contracts with
any Governmental Entity were in material compliance with applicable Laws when
filed.
(b) The transactions contemplated by this Agreement will not
materially affect the validity and binding character of any Insurance Contract
entered into or issued by JANY or render any admitted assets of JANY
non-admitted under the applicable Laws up to and including the Closing Date.
(c) Except as set forth in Schedule 2.8(c) attached hereto,
and except in accordance with customary insurance industry practice, (i) JANY is
not liable to pay commissions upon the renewal of any insurance policy nor (ii)
is it a party to any agreement providing for the third-party collection of
annuity or insurance premiums payable to JANY by any other Person, which
commissions or premiums exceed $100,000 in the aggregate.
(d) All In Force Insurance Contracts are in full force and
effect and are legal, valid and binding obligations of JANY, and to the
knowledge of Seller each other party thereto, and are enforceable against JANY,
and to the knowledge of Seller each other party thereto, in accordance with
their respective terms, except to the extent that enforcement thereof may be
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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 Insurance Contract benefits payable by JANY 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 JANY have been paid in
accordance with the terms of the Insurance Contracts under which they arose,
except for such benefits for which there is, in the reasonable opinion of Seller
or JANY, a reasonable basis to contest and all such contested benefits have been
disclosed in Schedule 2.8(e) attached hereto.
(f) Except as set forth on Schedule 2.8(f) attached hereto, no
In Force Insurance Contract issued, reinsured or underwritten by JANY entitles
the holder thereof or any other Person to receive dividends, distributions or
other benefits based on the revenues or earnings of JANY or any other Person.
(g) The underwriting standards utilized and ratings applied by
JANY 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 JANY
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 business for JANY 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 2.8(h) attached hereto, to the
knowledge of Seller, no insurance agent who wrote, produced or sold any portion
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of the business of JANY 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 Insurance Contracts is no
less favorable to the Policyholder thereof than the treatment under the Code for
which such Insurance 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
Insurance Contracts after the Closing Date or (iii) changes in the manner in
which the Insurance Contracts are administered after the Closing Date.
Section 2.9. Permits, Licenses and Franchises. JANY is licensed to
issue life and health related insurance policies only in the State of New York.
JANY has been duly authorized by the New York Department of Insurance to issue
the Insurance Contracts that it is currently writing, and was duly authorized to
issue the Insurance Contracts that it is not currently writing at the time such
Insurance Contracts were issued. Except as set forth on Schedule 2.9 attached
hereto, JANY has all Permits necessary to conduct the Insurance Business as
currently conducted by JANY. Neither the ownership of its property or assets nor
the business conducted by JANY requires the qualification, registration, license
or admission in any jurisdiction outside the State of New York, except where the
failure to be so qualified, registered, licensed or admitted, individually or in
the aggregate, would not have a Material Adverse Effect. All of the Permits
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are in full force and effect and JANY 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 2.10. Regulatory Filings. Seller has made available for
inspection by Purchaser all material registrations, filings and submissions made
by JANY with any Governmental Entity and final financial and market conduct
reports of examinations with respect to JANY issued by any such Governmental
Entity along with copies of JANY's or Seller's responses thereto made or issued
on or subsequent to January 1, 1993. Except as listed on Schedule 2.10 attached
hereto, JANY has filed all material reports, statements, documents,
registrations, filings or submissions (including without limitation any
marketing, advertising or sales material) required to be filed by it with any
Governmental Entity. Except as listed on Schedule 2.10 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, neither
Seller nor JANY has submitted any written response with respect to material
comments from any Governmental Entity concerning such filings, registrations,
submissions or reports of examination; (d) since December 31, 1992, no fine or
penalty has been imposed on JANY (or on Seller with respect to JANY) by any
Governmental Entity; and (e) no deposits have been made by JANY (or by Seller
with respect to JANY) with, or at the direction of, any Governmental Entity
which were not shown in the most recent Annual Statement of JANY.
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Section 2.11. Reinsurance. Schedule 2.11 sets forth all reinsurance or
co-insurance agreements (together with all other agreements related thereto) to
which JANY is a party related to the Insurance Contracts, and all such
contracts, arrangements, treaties, understandings and agreements under which
JANY has any obligation to cede or assume insurance. All such agreements are
valid and binding against JANY 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 JANY nor, to
Seller's knowledge, any other party thereto is in material default under any
such agreement. Except as otherwise provided on Schedule 2.11 attached hereto,
no party to any such agreement has audited Seller with respect thereto.
Section 2.12. Absence of Certain Changes or Events. Except as disclosed
on Schedule 2.12 attached hereto or except as expressly contemplated or required
by this Agreement, since December 31, 1995, (a) JANY has not, except in the
ordinary course of business, consistent with past practice, (i) engaged in any
material transaction, (ii) entered into any material agreement, (iii) waived or
released any material right or obligation or (iv) incurred any indebtedness for
borrowed money and (b) except as disclosed on Schedule 2.12 attached hereto,
there has not been, occurred or arisen:
(i) any declaration, setting aside, or payment of any
dividend or other distribution in respect of the capital stock of JANY,
or any direct or indirect redemption, purchase or other acquisition by
JANY of any such stock or of any interest in or right to acquire any
such stock;
(ii) any issuance, sale or disposition by JANY of any
debenture, note, stock or other security issued by JANY, or any
material modification or amendment of
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any right of the holder of any outstanding debenture, note, capital
stock or other security issued by JANY.
(iii) any Lien created on any of the assets of JANY
or assumed by JANY 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 JANY's business);
(iv) any prepayment of any liabilities (other than
pursuant to any Insurance Contract) individually or in the aggregate
exceeding $100,000;
(v) any liability involving the borrowing of money by
JANY individually or in the aggregate exceeding $100,000;
(vi) any damage, destruction or loss (whether or not
covered by insurance) affecting any of the assets of JANY which damage,
destruction or loss individually or in the aggregate exceeds $100,000;
(vii) any work stoppage, strike, labor difficulty or
union organizational campaign (in process or threatened) at or
affecting JANY;
(viii) any payment, discharge or satisfaction by JANY
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;
(ix) any sale, transfer or conveyance of any
investments or other assets of JANY with an individual Book Value in
excess of $100,000, except in the ordinary course of business and
consistent with past practice;
(x) any amendment, termination, waiver, disposal or
lapse of, or other failure to preserve, any material license, Permit or
other form of authorization of JANY;
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(xi) any amendment of, or any failure by JANY 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 JANY of more than $100,000
except for actions taken with respect to Insurance Contracts
(including, without limitation, reinsurance thereon) in the ordinary
course of business and consistent with past practice;
(xii) any amendment of the articles or certificate of
incorporation or by-laws of JANY;
(xiii) any termination, amendment or entering into by
JANY as ceding or assuming insurer of any reinsurance, coinsurance or
other similar contract or any trust agreement or security agreement
related thereto, except as contemplated hereby;
(xiv) any transaction or arrangement under which JANY
paid, loaned or advanced any amount to or in respect of, or sold,
transferred, or leased any of its assets or any services to (i) any
officer or director of Seller, JANY or any Affiliate of Seller, (ii)
any Affiliate of Seller or JANY, or (iii) any business or other Person
in which Seller, JANY, any such officer or director, or any Affiliate
of Seller or JANY has any material interest, except transactions or
arrangements not exceeding $100,000 in the aggregate which are
consistent with past practice;
(xv) any material change in any underwriting,
actuarial, investment, financial reporting, marketing or accounting
practice or policy followed by JANY, 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
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purposes other than as required by GAAP, SAP or applicable Law and
consistent with past practice;
(xvi) any expenditure or commitment for additions to
property, plant, equipment or other tangible or intangible capital
assets of JANY which exceed $100,000 in the aggregate;
(xvii) any accruals or payments by Seller or JANY or
employer contributions under any employee benefit plan in respect of
employees of JANY, other than those in accordance with the terms of
such plans and consistent with past practice;
(xviii) any increase in compensation outside the
ordinary course; or
(xix) any contract or agreement, written or oral, to
take any of the actions set forth in the preceding clauses (i) through
(xviii) of this Section 2.12.
Section 2.13. Computer Software and Other Intellectual Property.
Schedule 2.13 attached hereto sets forth a list of all computer software
programs and other intellectual property used by JANY that Seller reasonably
believes to be necessary to conduct the Insurance Business as currently being
conducted. Schedule 2.13 attached hereto also sets forth whether each such
computer software program is (i) owned by JANY or licensed by JANY and (ii) the
title of each licensing agreement pursuant to which JANY has the right to use
such licensed software. Schedule 2.13 attached hereto sets forth each licensing
agreement pursuant to which Seller has the right to use such licensed software.
To the knowledge of Seller, JANY is not in conflict with or in violation or
infringement of any rights, asserted or otherwise, of any other Person with
respect to any owned software or licensed software or other intellectual
property, nor has Seller received any notice of any such conflict, violation or
infringement. JANY has the non-exclusive right to use all such licensed software
and other intellectual property.
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Section 2.14. Contracts.
(a) Schedule 2.14 lists and briefly describes (including the
parties to and the date and subject matter of) each and every contract,
agreement, lease, license, commitment or arrangement to which JANY is a party or
which is binding upon JANY, except only for those specifically listed in
Schedules 2.8(b), 2.8(c), 2.8(f), 2.11, 2.12, 2.13, 2.18, 2.26, 2.27, 2.30,
2.31, 2.32(a) or 2.32(d) attached hereto, attached hereto or those which may be
terminated by JANY without penalty or having a value to or imposing an
obligation upon JANY not in excess of $100,000 in the aggregate annually.
(b) Schedule 2.14 hereto also identifies each contract in
force entered into by JANY in connection with or related to JANY's business and
operations within the following categories:
(i) all agency or consultation contracts other than
contracts terminable without penalty or other liability (other than
liabilities previously accrued thereunder) upon 90 days' or less
notice;
(ii) all contracts with any Person containing any
provision limiting the ability of JANY to engage in any business or to
compete with or to obtain products or services from any Person or, to
the knowledge of Seller, limiting the ability of any Person to compete
with or to provide products or services to JANY;
(iii) all direct or indirect guarantees of any
obligation of JANY, or contracts for the provision for credit support
to JANY with respect to obligations to third parties, by Seller or any
of its Affiliates;
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(iv) all contracts relating to the future disposition
or acquisition by JANY of any assets or of any interest in any business
enterprise (other than contracts entered into in the ordinary course of
business and consistent with past practice);
(v) all outstanding proxies, powers of attorney or
similar delegations of authority (other than delegations of authority
for the service of process pursuant to applicable insurance or
corporate laws and other than such proxies, powers of attorney or
similar delegations of authority entered into or made in the ordinary
course of business and consistent with past practice);
(vi) all contracts for the provision of
administrative, managerial or other services by or for JANY to or from
any other Person;
(vii) all partnerships, joint ventures,
profit-sharing or similar contracts;
(viii) all contracts relating to the borrowing of
money by JANY or to the direct or indirect guarantee by JANY of any
obligation for borrowed money in excess, individually or in the
aggregate, of $100,000 in respect of indebtedness of any other Person,
including without limitation any contract relating to (i) the
maintenance of compensating balances that are not terminable by JANY
without penalty or other liability upon not more than 60 calendar days'
notice, (ii) any line of credit or similar facility, (iii) the payment
for property, products, or services of any other Person even if such
property, products or services have not yet been conveyed, delivered or
rendered or (iv) the obligation to take-or-pay, keep-well, make-whole
or maintain surplus or earnings levels or perform other financial
ratios or requirements; and
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(ix) all leases or subleases of real property used in
the business, operations or affairs of JANY, and all other leases,
subleases, or rental or use contracts for which JANY is liable.
(c) Except as set forth on Schedule 2.14 attached hereto, each
of the contracts listed on Schedule 2.14 is in full force and effect and is
legal, valid and binding on JANY and to Seller's knowledge the other parties
thereto, and is enforceable against JANY and to Seller's knowledge the other
parties thereto in accordance with its 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). Neither JANY nor, to
Seller's knowledge, any other party to such contract is in material violation,
breach or default of any such contract. There have been delivered or made
available to Purchaser true and complete copies of all of the contracts set
forth in Schedule 2.14 attached hereto.
Section 2.15. 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 JANY as filed with the New York Department of
Insurance, 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 and the actuarial opinions for such years. Seller
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has previously made available to Purchaser for review (without the right to
remove or make copies) all auditors' work papers related to the foregoing
audited financial information. Seller has previously delivered to Purchaser
true, complete and correct copies of the Quarterly Statements of JANY as filed
with the New York Department of Insurance, for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996, together with all exhibits and
schedules thereto. 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 JANY 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 JANY 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. JANY has not prepared any GAAP financial statements.
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Section 2.16. JANY Capital Stock.
(a) The authorized capital stock of JANY consists of 360,000
shares of common stock, $20 par value per share, all of which shares have been
validly issued and are fully paid and are outstanding and, subject to any
liability imposed by Section 630 of the New York Business Corporation Law,
non-assessable. All such shares were issued in compliance with applicable Laws.
Such shares are all of the shares of JANY Stock. Except for this Agreement,
there are no outstanding subscriptions, options, warrants, rights, convertible
or exchangeable securities, agreements or commitments which obligate or require
Seller or JANY to issue or sell any shares of capital stock of JANY. JANY has no
subsidiaries and does not control, directly or indirectly, any other Person.
JANY is not a party to any joint venture or partnership arrangement and does not
own or control any interest in any other Person except in connection with JANY's
portfolio investments.
(b) The JANY Stock is owned beneficially and of record by
Seller free and clear of all Liens. Upon consummation of the transactions
contemplated hereby, good and valid title and interest in and to the JANY Stock
shall have been sold, assigned and delivered to Purchaser free and clear of all
Liens.
Section 2.17. Tax Matters.
(a) Except as set forth on Schedule 2.17 attached hereto, all
Tax Returns, required to be filed with respect to JANY have been timely filed
for all years and periods for which such Tax Returns were due (taking into
account all filing date extensions), all Taxes due and payable for the periods
covered by such Tax Returns have been duly and timely paid, there are no
outstanding waivers or extensions of statutes of limitation with respect to any
Taxes required to be shown on any such Tax Return, and all required estimated
payments of Taxes
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sufficient to avoid any penalties for underpayment have been made, and, to the
knowledge of Seller, there are no material misstatements contained in any such
Tax Return. To the knowledge of Seller, since December 31, 1995, JANY has not
incurred any liability with respect to any Taxes, except in the ordinary course
of the Insurance Business. Except as set forth in Schedule 2.17 attached hereto,
there are no presently pending or, to the knowledge of Seller, threatened audits
or assessments by any federal, state or local taxing authority involving
material issues which pertain to JANY or any of the material properties owned by
JANY. There are no Liens with respect to Taxes (except for Liens with respect to
real property Taxes not yet delinquent) upon any of the assets and properties of
JANY. All federal income Taxes owed by the affiliated group referred to in
Section 2.17(g) hereof have been paid for each taxable period during which JANY
was a member of such group, other than any unpaid Taxes that, if required to be
paid, would not have a Material Adverse Effect.
(b) With respect to any period through September 30, 1996 for
which Tax Returns have not yet been filed, or for which Taxes are not yet due or
owing, JANY has made due and sufficient current accruals for such Taxes in
accordance with SAP and GAAP, and such current accruals through such date are
duly and fully provided for in the financial statements of JANY for the period
then ended.
(c) The federal and state income and state premium Tax Returns
of JANY have not been audited or examined by the relevant Governmental Entity,
and the statute of limitations for the federal and state income and premium Tax
Returns for all periods through the respective years specified in Schedule 2.17
attached hereto has expired. Seller has previously delivered to the Purchaser
copies, which are true and complete in all material respects, of each of (i) the
most recent audit reports relating to the federal and state income and state
premium
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Taxes due from JANY for the last three taxable years and (ii) the federal and
state income and state premium Tax Returns filed by JANY for each of the last
three taxable years, and Seller has made available to Purchaser for inspection
true and correct copies of such Tax Returns (insofar as such returns relate to
JANY) filed by any affiliated, combined or consolidated group of which JANY was
then a member.
(d) No audit or other proceeding by any Governmental Entity is
pending or, to the knowledge of Seller, threatened with respect to any Taxes due
from JANY or any Tax Return filed by or relating to JANY. To the knowledge of
Seller, no assessment of Tax has been formally proposed by any Governmental
Entity, orally or in writing, against JANY.
(e) JANY is not a party to, is not bound by and has no
obligation under, any tax sharing contract and, to the knowledge of Seller, JANY
does not have any liability for indemnification of third parties with respect to
Taxes or liabilities for Taxes as a transferee.
(f) The insurance reserves set forth in the federal income Tax
Returns filed by or on behalf of JANY have been determined in all material
respects in accordance with section 807 or 846 of the Code, as applicable, and
will be so determined in the federal income Tax Return to be filed on behalf of
JANY for the period ending on the Closing Date.
(g) JANY is (and will continue to be on the Closing Date) a
member of the affiliated group that files consolidated federal income Tax
Returns with Seller.
Section 2.18. Real Property.
(a) Schedule 2.18 attached hereto identifies all real property
which is owned by or leased to JANY other than interests arising under any
Mortgage (the "Real Property"). JANY owns good and indefeasible title to, or has
a valid leasehold interest in, free and clear of all Liens, all such Real
Property currently used in the conduct of its business or of a type
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required to be disclosed in Schedule A of an Annual Statement if owned by JANY.
No improvement on any such Real Property owned by JANY encroaches upon any real
property of any other Person and there are no physical, mechanical or structural
defects therein. JANY owns, leases or has a valid right under contract or
otherwise to use adequate means of ingress and egress to, from and over all Real
Property. JANY has not granted any rights of occupancy with respect to the Real
Property leased by it.
(b) (i) Neither JANY nor, to the knowledge of Seller, any
other Person has used any of the Real Property for the storage, treatment,
generation, transportation, manufacture, processing, handling, production,
distribution, deposit, burial, use, or disposal of any Hazardous Substance which
has created or might create any liability of owners or occupants of the Real
Property under, or which would require reporting to a Governmental Entity
pursuant to, Environmental Laws; (ii) JANY has no liability arising out of or
resulting from a release of any Hazardous Substance on or from any Real
Property; (iii) JANY has complied in all material respects with all applicable
Environmental Laws relating to the Real Property and the business, activities
and processing conducted thereon; (iv) no asbestos or PCB's are contained in or
stored on the Real Property or the improvements thereon; (v) no radon gas is
contained in any of such improvements; and (vi) there are no storage tanks
located in, on or under the Real Property.
Section 2.19. Owned Properties. JANY is the sole and exclusive owner
of, and has good and marketable title to, all of the properties and assets owned
by it, free and clear of all Liens other than:
(i) those reflected in the June 30, 1996 interim
statutory financial statements of JANY, including, without limitation,
obligations with respect to the Insurance Contracts;
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(ii) liens for taxes, charges and assessments imposed
by any taxing authority which are not yet due and payable or which are
being contested in good faith by appropriate proceedings;
(iii) mechanics', suppliers', installment sales and
similar liens for services rendered or materials furnished, the charges
for which are not yet due and payable or which are being contested in
good faith by appropriate proceedings, and purchase money security
interests and similar security interests for goods purchased by JANY;
(iv) in the case of the Real Property and equipment,
defects or imperfections in title, liens, claims, easements or rights,
restrictions and encumbrances which do not materially interfere with
the use of such properties as presently used by JANY or the conduct of
the Insurance Business as presently conducted by JANY; and
(v) Liens arising through securities lending in the
ordinary course of JANY's business.
Section 2.20. Pension and Other Employee Plans. Schedule 2.20 attached
hereto lists all benefit plans and, without duplication, all employee benefit
plans and collective bargaining, employment or severance agreements or other
similar arrangements to which JANY is a party or by which it is bound, legally
or otherwise, including without limitation (i) any profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, severance, welfare or incentive plan, agreement or
arrangement, (ii) any plan, agreement or arrangement providing for "fringe
benefits" or perquisites to employees, officers, directors or agents, including
but not limited to benefits relating to JANY's automobiles, clubs, vacation,
child care, parenting, sabbatical, sick leave, medical, dental, hospitalization,
life
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insurance and other types of insurance, (iii) any employment agreement, or (iv)
any other "employee benefit plan" within the meaning of ERISA). Seller has
delivered to Purchaser true and complete copies of all current governing
documents and summary plan descriptions with respect to such plans, agreements
and arrangements, or summary descriptions of any such plans, agreements or
arrangements not otherwise in writing. JANY is in compliance with the applicable
provisions of ERISA (as amended through the date of this Agreement), the
regulations and other published regulatory authorities thereunder, and all other
laws applicable with respect to all benefit plans. JANY has performed all of its
obligations under all benefit plans. To the knowledge of Seller, there are no
Actions (other than routine claims for benefits) pending or threatened against
such benefit plans of their assets, or arising out of such benefit plans, and,
to the knowledge of Seller, no facts exist which could give rise to any such
Actions. Other than as indicated on Schedule 2.20 attached hereto:
(a) JANY neither maintains, sponsors nor contributes to any
program or arrangement covering employees of JANY that is an "employee pension
benefit plan," an "employee welfare benefit plan," or a "multi-employer plan" as
such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"), or any other incentive or benefit arrangement ("Non-ERISA Plans");
(b) No ERISA Plan (or any trust created thereunder) has
engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
which could subject the Purchaser or JANY to any tax penalty on prohibited
transactions and which has not adequately been corrected;
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(c) Each ERISA Plan is in compliance with all material
reporting, disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan;
(d) Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code Section 401(a), stating that such ERISA Plan is qualified thereunder;
(e) No ERISA Plan subject to Title IV of ERISA has been
terminated;
(f) No ERISA Plan has incurred any "accumulated funding
deficiency" as such term is defined in Section 302 of ERISA and Section 412 of
the Code (whether or not waived);
(g) No liability to the Pension Benefit Guaranty Corporation
(the "PBGC"), other than for premiums, has been incurred with respect to any
ERISA Plan;
(h) No proceeding or other action has been initiated by the
PBGC to terminate any ERISA Plan, nor has written notice been given by the PBGC
of an intention to commence or seek the commencement of any such proceeding or
actions; and
(i) JANY has not, within the last six years before the
Closing, completely or partially withdrawn from a "multi-employer plan" covering
its employees.
(j) Each ERISA plan has been duly authorized by the Board of
Directors of JANY. Each such plan is qualified in form and operation under
Section 401(a) of the Code and each trust under each such plan is exempt from
tax under Section 501(a) of the Code. No event has occurred that will or could
give rise to disqualification or loss of tax-exempt status of any such plan or
trust under such sections. No event has occurred that will or could subject any
such plans to tax under Section 511 of the Code. No nonexempt prohibited
transaction (within the meaning of Section 4975 of the Code) or
party-in-interest transaction (within the meaning of Section 406 of ERISA) has
occurred with respect to any of such plans.
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(k) Seller has delivered to Purchaser for each such plan
copies of the following documents: (i) the Form 5500 filed in each of the three
most recent plan years, including but not limited to all schedules thereto and
financial statements with attached opinions of independent accountants, (ii) the
most recent determination letter from the IRS, (iii) the consolidated statement
of assets and liabilities of such plan as of its most recent valuation date, and
(iv) the statement of changes in fund balance and in financial position or the
statement of changes in net assets available for benefits under such plan for
the most recently ended plan year. The financial statements so delivered fairly
present the financial condition and the results of operations of each of such
plans as of such dates, or for such periods in accordance with GAAP.
(l) All group health plans of JANY and any ERISA affiliate
have been operated in compliance with the group health plan continuation
coverage requirements of Section 4980B of the Code to the extent such
requirements are applicable.
(m) There has been no act or omission by JANY or any ERISA
affiliate that has given rise to or may give rise to fines, penalties, taxes, or
related charges under Section 502(c) or (l) or Section 4071 or ERISA or Chapter
43 of the Code.
Section 2.21. Labor Matters. JANY is not a party to any representation
or collective bargaining agreement with any employees of JANY. There is no
strike, slowdown, picketing, work stoppage, labor trouble or other similar event
in which employees of JANY are participating or, to the knowledge of Seller,
have threatened to participate.
Section 2.22. Banks. Schedule 2.22 attached hereto sets forth (a) the
name, location and account number of each bank, trust company, securities broker
and other financial institution at which JANY maintains an account, safe deposit
box, lock box or vault or maintains a banking,
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custodial, trading or other similar relationship and (b) the name of each
individual authorized by JANY to effect transactions with respect to such
account, safe deposit box, lock box or vault.
Section 2.23. Reserves. Except as set forth in Schedule 2.23 attached
hereto, all reserves with respect to Insurance Contracts as established or
reflected, and all other provisions made for policy and contract claims with
respect to Insurance Contracts (collectively, "JANY 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 Insurance
Contracts of JANY, and such JANY Reserve Liabilities and other provisions met
the applicable requirements of the insurance laws and regulations of the State
of New York. The JANY Reserve Liabilities as of October 21, 1996 have been
calculated in the manner set forth on Schedule 2.23 attached hereto. Without
limitation of the foregoing sentence, to Seller's knowledge, adequate provision
for all JANY Reserve Liabilities has been made to cover the total amount of all
reasonably anticipated matured and unmatured benefits, claims and other
liabilities under all Insurance Contracts. JANY owns assets that qualify as
legal reserve assets under applicable Laws in an amount at least equal to all
such JANY Reserve Liabilities. Except as described in Schedule 2.23(b) attached
hereto, all reserves and accrued liabilities for estimated losses, settlements,
costs and expenses from pending suits, actions and proceedings included in
JANY's most recent Quarterly Financial Statements filed with the New York
Department of Insurance were determined in accordance with Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board.
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Section 2.24. Books and Records. The minute books of JANY contain a
true and complete record in all material respects of all corporate actions taken
at all meetings and by all written consents in lieu of meetings of JANY's
stockholder and Board of Directors and all committees thereof. The stock record
books of JANY reflect accurately all transactions in its capital stock. The
books, files, reports, documents, plans and operating records of, or maintained
by Seller or JANY, and all other data in the possession or control of Seller and
of JANY and primarily relating to or otherwise reasonably required for the
operation of JANY's business have been maintained in all material respects in
accordance with all applicable Laws.
Section 2.25. Threats of Cancellation. Except as set forth in Schedule
2.25 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 and JANY, 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 JANY.
Section 2.26. Operations Insurance. Schedule 2.26 attached hereto lists
all casualty, liability, property and other similar insurance contracts that
insure the business, operations or affairs of JANY or affect or relate to the
ownership, use or operations of any of JANY's assets (including, without
limitation, the names of the insurers and the type of coverage thereof) and (a)
that have been issued to JANY or (b) that are held by Seller or by any Affiliate
of Seller
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(other than JANY) for the benefit of JANY. All such insurance policies shall
terminate as of the Closing Date.
Section 2.27. Intercompany Liabilities. Except as reflected in the
Annual or Quarterly Financial Statements of JANY filed with the New York
Department of Insurance, or disclosed in Schedule 2.27 attached hereto, there
are no liabilities, contracts or commitments between JANY on the one hand, and
Seller or any Affiliate of Seller, on the other. Except as disclosed in Schedule
2.27 attached hereto, during the period from June 30, 1996 to the date hereof,
no such intercompany liabilities have been paid and no settlements of such
intercompany liabilities have been made except intercompany liabilities that
have been paid or settled on a basis consistent with the JANY's past practice or
as provided in Section 2.12(xiv).
Section 2.28. Employee Loans. All loans issued by JANY to any officer,
director or employee of Seller or JANY are set forth on Schedule 2.28 attached
hereto. Except as set forth on Schedule 2.28 attached hereto, all such loans
were issued in accordance with commercially reasonable underwriting standards
and there is no default on any such loan.
Section 2.29. Credited Rates. JANY has complied and is in compliance
with all applicable contract provisions and Laws associated with credited
interest rates related to the Insurance Contracts.
Section 2.30. Related Agreements. Each of the Related Agreements is
similar in all material respects to one of the forms set forth on Schedule 2.30
attached hereto. Neither Seller nor JANY knows of any Related Agreements other
than those that gave rise to the commissions listed in Schedule 2.30 attached
hereto concerning commissions payable on the Insurance Contracts. JANY 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.
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Section 2.31. Third Party Administration Agreements. Schedule 2.31
attached hereto lists all third party administration agreements to which JANY is
a party (the "Third Party Administration Agreements"). The Third Party
Administration Agreements are valid and binding obligations of JANY, enforceable
against JANY in accordance with their terms, and to JANY's knowledge, are valid
and binding obligations of the other parties thereto, enforceable against such
other parties in accordance with their terms. JANY 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 2.32. Mortgage Loans.
(a) Except as set forth on Schedule 2.32(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
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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 hydrocarbon whether or not shown by the public records and, (k) 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 JANY for each Mortgage Loan
are materially as set forth in the Mortgage Loan Schedule. Except as set forth
on Schedule 2.32(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 2.32(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
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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 2.32(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
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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 2.32(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
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documents described on Exhibit D and all such documents are true, complete and
correct copies of the documents they purport to be. Except as set forth on
Schedule 2.32(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
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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) Except as set forth on Schedule 2.32(l) attached hereto,
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).
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(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) All servicing contracts related to the Mortgage Loans
originated by JANY are terminable at the election of JANY at termination fees
that are no greater than customary termination fees paid in accordance with
industry practice.
Section 2.33. No Waiver of Defenses. JANY has not waived any defenses,
claims or Actions which would have been available to JANY under the Insurance
Contracts or the Related Agreements.
Section 2.34. GAAP Financial Statements. On or prior to the date
hereof, JANY has delivered to Purchaser true, correct and complete copies of (a)
the audited consolidated balance sheets of John Alden Financial Corporation
("John Alden") and its subsidiaries as of December 31, 1995 and 1994, prepared
in accordance with GAAP, together with the notes thereon and the
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related report of Price Waterhouse the independent certified public accountant
of John Alden, and (b) the audited consolidated statements of income,
stockholders' equity and cash flows of John Alden 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 "John Alden Financial Statements"). JANY 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 John Alden and its subsidiaries for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996, prepared in accordance with GAAP (the
"Interim John Alden Financial Statements"). The John Alden Financial Statements
and the Interim John Alden Financial Statements are based on the books and
records of John Alden and its subsidiaries and have been prepared in accordance
with GAAP consistently applied (except in the case of the Interim John Alden
Financial Statements for normal year end adjustments). The John Alden Financial
Statements have been audited by Price Waterhouse. The John Alden Financial
Statements and the Interim John Alden Financial Statements fairly present in all
material respects the consolidated financial position and results of operations
of John Alden and its subsidiaries as of the dates and for the periods indicated
therein.
For purposes of this Article 2, references to the knowledge of Seller
means, after reasonable inquiry, the actual knowledge of the officers of Seller
having the title of Senior Vice President or higher.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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Purchaser hereby represents and warrants to Seller as follows:
Section 3.1. 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 3.2. Authorization. Purchaser has all corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement. 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
performance by Purchaser of its obligations hereunder, have been duly authorized
by all necessary corporate and shareholder actions on the part of Purchaser.
This Agreement, when executed by the Parties, 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 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 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
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Affiliates which, if adversely determined, would, individually or in the
aggregate, have a Material Adverse Effect on Purchaser.
Section 3.4. No Conflict or Violation. Except as disclosed on Schedule
3.4 attached hereto, the execution, delivery and performance by Purchaser of
this Agreement in accordance with the terms and conditions hereof 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 such 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 related to Purchaser's
business.
Section 3.5. Consents and Approvals. Except as required under 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 Purchaser in order (a) for this Agreement and the Transition
Services Agreement 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
business of JANY after the Closing.
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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, Purchaser in connection with this Agreement or the
transactions contemplated hereby, except Goldman Sachs & Company, whose fees for
services rendered in connection with such transactions will be paid by
Purchaser.
Section 3.7. 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 Purchaser Financial Statements"). The
SunAmerica Financial Statements and the Interim Purchaser 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.
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Section 3.8. 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 reflected or disclosed in the
Quarterly Statement for the period then ended, which are not so reflected or
disclosed therein.
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Section 3.9. Rating. As of the date hereof, the Standard & Poor's
Corporation Claims - Paying Ability Rating of Purchaser is AA- and the Moody's
Investor Service, Inc. Financial Strength rating of Purchaser is A2. Purchaser's
A.M. Best & Co. rating is A+ (superior) and its Duff & Phelps rating is AA.
Section 3.10. Investment Intent and Acknowledgement. Purchaser is
purchasing the JANY Stock for its own account and not with a view toward, or for
resale in connection with, any distribution thereof. Purchaser acknowledges that
it and its representatives and advisors have had the opportunity to ask
questions of and receive answers from Seller, JANY and their representatives to
the extent that Purchaser and its representatives and advisors have deemed
necessary and appropriate and to review all written documentation and other
information requested by them, for the purpose of evaluating JANY, the purchase
of the JANY Stock and the transactions contemplated by this Agreement, the
Ancillary Agreements and the agreements contemplated hereby and thereby. In
entering into this Agreement and in purchasing the JANY Stock, Purchaser has
relied solely upon its own due diligence, its knowledge of the industry in which
the Insurance Business is conducted and the representations and warranties of
Seller expressly set forth in this Agreement, and not upon any other
representations, warranties or statements of any kind; provided, however, that
such diligence and knowledge shall not be deemed a waiver by Purchaser of any of
its rights with respect to the representations and warranties of Seller.
For purposes of this Article 3, 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.
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ARTICLE 4
PRE-CLOSING COVENANTS
Section 4.1. Conduct of Business.
(a) Prior to the Closing, Seller shall, and shall cause JANY
to, unless Seller shall receive the prior written consent of Purchaser:
(i) operate the business of JANY 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 and/or JANY in connection with its business.
(b) Without limiting the generality of the foregoing, Seller
will or will cause JANY to:
(i) use commercially reasonable efforts to (A)
maintain all licenses, qualifications and authorizations necessary for
JANY to do business in the State of New York, (B) maintain in full
force and effect all material contracts, documents and arrangements set
forth in Schedule 2.14 hereof, (C) maintain all of JANY's material
assets and properties in good working order and condition, ordinary
wear and tear excepted, (D) continue all current marketing and selling
programs relating to JANY's business in accordance with its current
marketing plan and (E) maintain each rating classification assigned to
JANY as of the date hereof by insurance rating agencies.
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(ii) cause the books and records of JANY 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 JANY
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 insurance or annuities in force, premium or investment
income, JANY 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) prepare and file all Tax Returns required
to be filed by JANY prior to or on the Closing Date and (B) pay all
Taxes indicated on such Tax Returns or otherwise due and payable prior
to or on the Closing Date, unless such Taxes are being contested in
good faith and adequate reserves have been established on the books and
records of JANY.
(iv) (A) cause all JANY Reserve Liabilities with
respect to Insurance Contracts established or reflected in the books
and records of JANY to be (1) established or reflected on a basis
consistent with those JANY Reserve Liabilities and reserving methods
followed by JANY in the preparation of its December 31, 1995 Annual
Statement filed with the New York Department of Insurance and (2)
adequate to cover the total amount of all reasonably anticipated
matured and unmatured benefits, dividends, losses, claims, expenses and
other liabilities of JANY under all Insurance Contracts pursuant to
which JANY has or will have any liability (including without limitation
any liability arising under or as a result of any reinsurance,
coinsurance or other similar
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contract); and (B) cause JANY to continue to own assets that qualify as
legal reserve assets under all applicable Laws in an amount at least
equal to the JANY Reserve Liabilities.
(v) use commercially reasonable efforts to maintain
in full force and effect until the Closing substantially the same
levels of coverage for JANY as the insurance afforded under the
contracts listed in Schedule 2.26 attached hereto and cooperate with
Purchaser, at Purchaser's cost and expense, to obtain additional or
carry-on insurance with respect to JANY after the Closing. Any and all
benefits under the contracts listed in Schedule 2.26 attached hereto
paid or payable prior to the Closing with respect to the business,
operations, affairs or assets and properties of JANY shall be paid or
payable to JANY.
(vi) cause JANY to continue to administer the
Insurance Contracts (including surrenders) in the ordinary course,
consistent with past practice.
(vii) cause JANY to continue to comply with all Laws
applicable to its business, operations or affairs, except for such
failures to comply as would not, individually or in the aggregate, have
a Material Adverse Effect.
(viii) cause JANY to invest current and future cash
assets in high grade public corporate bonds (NAIC 1 or 2) designated by
Purchaser on the first Business Day of each week or, if Purchaser does
not make such a designation, in Qualified Investments and provide
Purchaser with weekly reports showing the above investments in the form
prepared by JANY in the ordinary course of its business.
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(c) Unless otherwise provided in this Agreement, Seller will
prevent JANY, without the approval of Purchaser, which approval shall not be
unreasonably withheld, from and after the date hereof until the Closing, from:
(i) selling, assigning, transferring, mortgaging,
pledging, leasing, granting or permitting to exist any Lien on or
otherwise disposing of any assets which are material to JANY's
business, taken as a whole, as presently conducted, other than with
respect to investment and portfolio assets in the ordinary course of
business, consistent with past practice;
(ii) increasing the rates of compensation (including
bonuses) payable or to become payable to any officer, employee, agent,
independent contractor or consultant of JANY;
(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;
(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 that could
reasonably be expected to have a Material Adverse Effect;
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(vi) splitting, combining, redeeming, repurchasing or
reclassifying the capital stock of JANY or declaring, setting aside,
making or paying any dividend or other distribution in respect of the
capital stock of JANY;
(vii) issuing or selling (or agreeing to issue or
sell) any note, debenture, stock, or other security or any options,
warrants, conversion or other rights to purchase any such securities or
any securities convertible into or exchangeable for such securities or
granting, or agreeing to grant, any such options;
(viii) amending the articles of incorporation or
bylaws or other charter or organizational documents of JANY;
(ix) 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 Insurance Contracts;
(x) settling any intercompany account or obligations
between Seller (or any of its Affiliates) and JANY; or
(xi) entering into any contract or agreement to do
any of the foregoing;
Section 4.2. Certain Transactions. From the date of this Agreement
through the Closing, neither Seller, JANY nor any of their respective directors
or officers will (nor will Seller permit its investment bankers or legal counsel
to) solicit, encourage, engage in or initiate any negotiations or discussions
with, or provide any information to, or otherwise cooperate in any other manner
with, any Person or group (other than Purchaser and its Affiliates) concerning
any sale, coinsurance, reinsurance, replacement or other disposition, directly
or indirectly of the business of JANY or JANY's capital stock (except in the
case of coinsurance or reinsurance, for performance of obligations under the
reinsurance agreements listed on Schedule 2.11).
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Section 4.3. Investigations. From the date hereof through the Closing
Date, Purchaser shall be entitled, through its counsel, actuaries and other
employees and Representatives, to make such investigation of the assets,
liabilities, business and operations of JANY, and such examination of the books
and records of JANY, as Purchaser may reasonably request, including, without
limitation, for the purpose of investigating the financial condition, service
quality and operations of JANY. Any investigation, examination or interview by
Purchaser of employees of Seller and JANY 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 4.4. 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 and the other
agreements contemplated hereby, 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
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to any government or regulatory agency, including, without limitation, any
filings necessary under the provisions of the HSR Act.
Section 4.5. Consents and Reasonable Efforts. Seller and Purchaser
shall, and Seller will cause JANY to, 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 and the other agreements contemplated hereby.
Seller shall, and Seller will cause JANY to, use its commercially reasonable
efforts to obtain all approvals and consents to the transactions contemplated by
this Agreement as set forth on Schedule 2.5 attached hereto. Purchaser will use
its commercially reasonable efforts to obtain all approvals and consents to the
transactions contemplated by this Agreement as set forth on Schedule 3.5
attached hereto, if any. In addition, if required by the New York Department of
Insurance as a condition to consummation of the transactions contemplated
hereby, Purchaser shall cause JANY to be merged at or after the Closing with
another insurance company Affiliate of Purchaser.
Section 4.6. Representations and Warranties. From the date hereof
through the Closing Date, (a) Seller shall use its reasonable efforts to conduct
its affairs, and to cause JANY 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 2 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 3 shall continue to be true
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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 4.7. Financial Statements and Reports.
(a) At the time of filing with the New York Department of
Insurance, Seller will deliver to the Purchaser true and complete copies of each
Annual Statement and Quarterly Statement filed by JANY after the date hereof and
on or prior to the Closing.
(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 or JANY) prepared by or for Seller and as relate to
any of the business, operations, or affairs of JANY, including without
limitation normal internal reports which Seller or JANY 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 portfolio securities held by Seller,
which reflects the market value and book value thereof
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(monthly) and any changes from the immediately preceding week (weekly),
including without limitation, weekly maturities, prepayments, sales, redemptions
or similar events.
Section 4.8. Transfer Real Estate Owned. On or prior to the Closing
Date, Seller shall cause JANY to transfer to Seller or its Affiliates all real
estate owned (excluding leasehold interests) by JANY (on an as is-where is
basis, with no representations or warranties) in exchange for a cash payment by
Seller to JANY equal to the book value of such real estate owned on the date of
exchange.
Section 4.9. Stay-on Bonus. Seller, and not JANY, will pay any stay-on
bonus to JANY employees announced on or before the Closing Date.
ARTICLE 5
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
11.4 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
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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 the Transition Services Agreement 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.
(iv) All necessary consents to the transactions
contemplated by this Agreement and the Transition Services Agreement
shall have been obtained including, without limitation, those listed on
Schedule 2.5 attached hereto, if any.
(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 2 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.
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(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 1.3 hereof.
(ix) The transactions contemplated by this Agreement
shall have been approved by the New York Insurance Department.
(x) Purchaser and Seller shall have previously or
concurrently closed the transactions contemplated by the Asset Purchase
Agreement.
(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.
ARTICLE 6
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 11.4 hereof,
subject to the fulfillment, at or before the Closing, of each of the following
conditions:
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(i) No Law or Order of a court, arbitrator or
Governmental Entity of competent jurisdiction shall be in effect which
prohibits, restricts or enjoins, and no Action shall be pending or
threatened which seeks to prohibit, restrict, enjoin, nullify, seek
material damages with respect to or otherwise materially adversely
affect, the consummation of the transactions contemplated by this
Agreement.
(ii) The applicable waiting period under the HSR Act,
including all extensions thereof, shall have expired or been terminated
and Seller shall have been furnished with appropriate evidence,
reasonably satisfactory to it, of such expiration or termination.
(iii) All Permits, consents and waivers required from
all Governmental Entities legally required to consummate the Closing
and to perform this Agreement and the Transition Services Agreement 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.
(iv) All necessary consents to the transactions
contemplated by this Agreement and the Transition Services Agreement
shall have been obtained, including, without limitation, those listed
on Schedule 3.5 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 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
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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 and JANY).
(viii) Seller shall have received the Closing
deliveries described in Sections 1.3 and 1.4 hereof.
(ix) The transaction contemplated by this Agreement
shall have been approved by the New York Insurance Department.
(x) Purchaser and Seller shall have previously or
concurrently closed the transactions contemplated by the Asset Purchase
Agreement.
(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 on Purchaser; 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
on Purchaser has occurred.
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ARTICLE 7
POST-CLOSING COVENANTS
Section 7.1. 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 purpose of this Section 8.1(a) being
defined as the ability to cause delivery to Seller or access by Purchaser), to
the extent they relate to JANY or the Insurance 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 JANY or the
Insurance 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.
(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 of
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JANY for any reasonable business purpose relating to Seller's prior ownership of
JANY, 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 books
and records. Purchaser 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 Seller shall notify Purchaser).
Section 7.2. 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 Transition Services 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
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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 JANY.
Section 7.3. Expenses. Except as otherwise specifically provided in
this Agreement and the Transition Services Agreement, the Parties shall bear
their respective expenses incurred in connection with the preparation, execution
and performance of this Agreement, the Transition Services Agreement 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 JALIC Asset Purchase Agreement), and (b) the cost of obtaining required
insurance regulatory approvals (other than any approvals that relate solely to
Seller), from regulatory authorities.
Section 7.4. Tax Indemnification and Other Tax Matters.
(a) Seller shall be liable for, shall pay to the relevant Tax
Authorities, and shall indemnify and hold JANY and Purchaser harmless against,
(i) all Taxes that relate to (A) with respect to any taxable period that
commences prior to the Closing Date, but ends on or after the Closing Date, the
portion of the taxable period that commences on the first day of such taxable
period and continues up to and including the Closing Date (the "Pre-Closing
Straddle Period"), and (B) any other taxable period ending on or before the
Closing Date, (ii) any Tax liability arising under Treasury Regulation section
1.1502-6 or equivalent state law provision as a result of JANY being included in
a consolidated, combined or unitary federal or state income
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or franchise Tax Return prior to the Closing Date, (iii) federal income and
state Taxes required to be paid by or on behalf of JANY as a result of the
Section 338(h)(10) Election (and any equivalent state law election) (as herein
defined), if made pursuant to Section 7.4(g) hereof, (iv) any Tax liability
arising as a result of JANY ceasing to be a member of the affiliated group of
Seller for purposes of Section 1504 of the Code and (v) Taxes incurred by
Purchaser or JANY as a result of a breach of a representation by Seller set
forth in Section 2.17 hereof or a failure on the part of Seller to comply with
the covenants and undertakings set forth in this Section 7.4, including Seller's
covenant to join in making the Section 338(h)(10) Election, if so directed by
Purchaser pursuant to Section 7.4(g) hereof, provided that such failure does not
result from any act or omission on the part of Purchaser or, after the Closing
Date, JANY. The federal income Taxes described in Section 7.4(a)(iii) above
shall be calculated by comparing (x) JANY's actual liability for federal income
Taxes for the taxable period in which the "deemed asset sale" resulting from the
Section 338(h)(10) Election is reported to (y) the liability for federal income
Taxes that JANY would have had for such period had the Section 338(h)(10)
Election not been made. The state Taxes described in Section 7.4(a)(iii) above
shall mean JANY's actual liability for state income or other Taxes payable to
the State of New York or any other state or local Tax jurisdiction arising from
the "deemed asset sale" or other consequences resulting from the Section
338(h)(10) Election (and any state law equivalent or any election that is deemed
to result from the filing of the Section 338 (h)(10) Election).
(b) Except as provided in Section 7.4(a) or Section 9.4
hereof, Purchaser and JANY shall be liable for, shall pay to the appropriate Tax
Authorities, and shall hold Seller harmless against all Taxes that relate to (i)
with respect to any taxable period that commences prior to the Closing Date but
ends after the Closing Date, the portion of the taxable period that
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commences on the first day after the Closing Date and continues up to and
including the last day of such taxable period (the "Post-Closing Straddle
Period") and (ii) any taxable period that begins after the Closing Date.
(c) Whenever it is necessary for purposes of this Section 7.4
to determine the liability for Taxes of JANY for a taxable period that begins
before and ends after the Closing Date, the determination shall be made by
assuming that JANY had a taxable year which ended at the close of business on
the Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis (such as the deduction for depreciation) shall be
apportioned on a time basis.
(d) Except to the extent provided in this Section 7.4(d),
JANY's participation under the tax allocation agreement among the Houston
National Life Insurance Company consolidated group ("Tax Allocation Agreement")
shall be terminated as of the Closing Date. After the date hereof, JANY shall
continue to make Tax payments to Seller pursuant to the Tax Allocation Agreement
("Tax Allocation Payments") and appropriate estimated tax payments to the State
of New York in respect of taxable periods described in Section 7.4(a)(i) above;
provided, however, the computation of such payments shall not take into account
(and Seller shall indemnify JANY against) any Taxes described in Section 7.4(a)
(ii), (iii), (iv) and (v) above. At the time a consolidated federal income Tax
Return that includes JANY for a taxable period described in Section 7.4(a)(i)
hereof is filed, (i) Purchaser shall pay (or cause JANY to pay) to Seller the
amount by which (x) the amount of Tax to be reported on such Tax Return that
pertains to JANY, exclusive of any Taxes described in Section 7.4(a) (ii),
(iii), (iv) and (v) above ("JANY's Adjusted Tax Return Liability") exceeds (y)
the total Tax Allocation Payments previously made by JANY in respect of the
taxable period covered by such Tax Return
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("JANY's Total Tax Allocation Payments"), and (ii) Seller shall pay to Purchaser
or JANY the amount by which JANY's Total Tax Allocation Payments exceeds JANY's
Adjusted Tax Return Liability, as well as any other amounts required to be paid
to JANY pursuant to the Tax Allocation Agreement with respect to the taxable
period covered by the Tax Return. At the time any state or local Tax Return of
JANY is filed that pertains to a taxable period described in Section 7.4(a)(i)
hereof or that covers Taxes described in Section 7.4(a)(iii) hereof, Seller
shall pay to Purchaser or JANY so much of the Tax liability of JANY to be
reported on such Tax Return that relates to Taxes described in Section
7.4(a)(ii), (iii) and (v) hereof. Any payments required to be made by Seller or
Purchaser pursuant to the preceding two sentences shall also include interest,
if any, commencing on the due date (without extensions) of the Tax Return in
question at an annual rate equal to the one year LIBOR rate in effect on such
due date plus 25 basis points. Any disputes regarding the calculation of any
payments required to be made pursuant to this Section 7.4(d) shall be resolved
pursuant to the procedure set forth in Section 1.6 above. Except for the
payments permitted or required to be made by Purchaser or JANY pursuant to this
Section 7.4(d), nothing contained herein shall in any way affect Seller's
indemnification obligations pursuant to Section 7.4(a) hereof, including with
respect to any subsequently determined deficiencies in Tax arising in respect of
any Tax Return covering a period described in Section 7.4(a)(i) hereof.
(e) In the event that Seller or JANY is or becomes entitled to
or receives any refund of Taxes attributable to JANY in respect of the
Pre-Closing Straddle Period or any other taxable period ending on or prior to
the Closing Date, (i) Purchaser, JANY and Seller shall cooperate with each other
and take all reasonable actions necessary to obtain such refund and (ii) the
amount thereof plus any interest related thereto, shall be (A) the property of
(and paid
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over to) Seller (but net of any Taxes imposed on JANY with respect thereto) if
it relates to a Tax period or portion thereof ending on or before June 30, 1996
and was not reflected as an asset or used to reduce the accrual for Taxes, on
the Financial Statement for the period ended June 30, 1996, and (B) JANY in all
other cases.
(f) (i) Seller shall prepare and timely file (or provide to
Purchaser for filing, if applicable) all Tax Returns required or permitted by
applicable Law to be filed by JANY (or by Seller on its behalf) with respect to
periods ending on or before the Closing Date. Seller shall cause JANY to close
its books as of the Closing Date in compliance with the requirements of Treasury
Regulation 1.1502-76(b) and any similar state or local Law. If the Closing Date
shall not occur at the end of a calendar month, Seller, with Purchaser's written
consent, which will not be unreasonably withheld, shall be permitted to ratably
allocate the calendar month's items of income and expense in accordance with
Regulation Section 1.1502-76(b)(2)(iii). Purchaser and JANY shall (A) cooperate
with Seller for the purpose of making any election under applicable Law to
permit JANY to file any short period Tax Return for the taxable period ending on
the Closing Date and (B) provide access to all relevant books and records for
purposes of preparing such Tax Returns. Unless otherwise required by applicable
Law and disclosed in writing to Purchaser by Seller in advance of the filing of
the relevant Tax Return, any Tax Return to be prepared by Seller pursuant to
this Section 7.4(f) shall be prepared on a basis consistent with past practice
and shall not be prepared in a manner calculated to accelerate or defer any
income or deductions into any taxable period in order to achieve a result
favorable to Seller and detrimental to Purchaser as a result of the transactions
contemplated by this Agreement. Purchaser shall be given the opportunity to
review any such Tax Return not less than 30 days prior to the due date for the
filing of such return with the relevant Governmental
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Entity, and Seller shall consult with Purchaser in good faith with respect to
any issues that Purchaser may have regarding such Tax Return. Purchaser shall
have the right to approve (which approval will not be unreasonably withheld) any
position taken in such Tax Return that affects Purchaser's or JANY's liability
for Tax Allocation Payments or estimated Tax payments pursuant to Section 7.4(d)
hereof or Taxes described in Section 7.4(b) hereof. Unless required by
applicable Law, Seller shall not file an amended Tax Return for JANY without
Purchaser's consent if such amendment would cause or increase JANY's liability
for any Taxes described in Section 7.4(b) hereof.
(ii) Purchaser shall file or cause to be filed when
due all Tax Returns with respect to Taxes that are required to be filed by or
with respect to JANY for taxable years or periods ending after the Closing Date.
With respect to any such Tax Return that covers a Pre-Closing Straddle Period, a
copy of such Tax Return shall, to the extent permitted by applicable law, be
prepared on a basis consistent with past practices of JANY and shall be provided
to Seller within 30 days prior to the due date (including extensions) for the
filing thereof. Seller shall have the right to approve (which approval shall not
be unreasonably withheld) such Tax Return to the extent it would require an
indemnification payment by Seller pursuant to Section 7.4(a) hereof. Unless
required by applicable law, Purchaser shall not file an amended Tax Return for
JANY without Seller's written consent if such amendment would cause or increase
Seller's indemnification obligations pursuant to Section 7.4(a) hereof.
(g) At Purchaser's request, Seller will join with Purchaser in
making a timely election pursuant to Section 338(h)(10) of the Code (the
"338(h)(10) Election"), and any equivalent election in any state or states that
Purchaser may designate, with respect to the purchase and sale of JANY Stock
contemplated by this Agreement. For purposes of determining
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the "deemed sales price", as defined in Regulation Section 1.338(h)(10)-(f) for
purposes of this Section 7.4(g), the liabilities of JANY shall be equal to the
amount of such liabilities for Federal income tax purposes as of the Closing
Date. Purchaser shall have the initial responsibility for the timely preparation
of IRS Form 8023-A, and all supporting statements, schedules, and required
information applicable thereto (including an allocation of the purchase price to
the assets of JANY), and such Form 8023-A, statements, schedules, and
information (the "Form 8023-A Package") shall be submitted to Seller for its
review no later than 120 days after the Closing Date. Within 30 days after the
receipt by Seller of the Form 8023-A Package, Seller shall notify Purchaser of
any objections or proposed changes. If Seller has no objections or proposed
changes or if Purchaser and Seller agree on the resolution of all objections or
proposed changes, Purchaser and Seller shall promptly file Form 8023-A and the
relevant attachments with the IRS via certified mail with return receipt
requested. As soon as practicable thereafter, Purchaser and Seller shall furnish
to each other a photocopy of such certificate of mailing and return receipt. If
Seller and Purchaser shall fail to reach an agreement with respect to any
objection or proposed change within 180 days following the Closing Date, then
any disputed objection(s) or proposed change(s) shall be submitted for
resolution to the national offices of Price Waterhouse LLP or, if such firm
refuses or is unable to undertake such matter, such other public accounting firm
as Purchaser and Seller shall mutually agree (the "Resolution Accountant").
Purchaser and Seller shall use reasonable efforts to cause a report of the
Resolution Accountant to be rendered within 10 Business Days of its appointment,
and the Resolution Accountant's determination as to the appropriateness and
extent of changes (if any) to the Form 8023-A Package shall be final and
binding. The fees and disbursements of the Resolution Accountant's with respect
to making such determination shall be borne one-half by
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Seller and one-half by Purchaser. Promptly after such determination, Purchaser
and Seller shall file Form 8023-A and the relevant attachments with the IRS in
accordance with the procedure described above. Purchaser and Seller agree to
file their respective tax returns, reports and forms, including IRS Form 8023-A,
in a manner consistent with the finalized Form 8023-A Package.
(h) Purchaser or JANY shall promptly (i) notify Seller of the
commencement of any claim, audit, examination or other proposed change or
adjustment by any Governmental Entity concerning any Taxes for which Seller may
be responsible under Section 7.4(a) hereof (a "Tax Claim") and (ii) furnish
Seller with copies of any correspondence received from any Governmental Entity
in connection with such Tax Claim. Seller shall promptly (i) notify Purchaser or
JANY of the commencement of any claim, audit, examination or other proposed
change or adjustment by any Governmental Entity concerning any Tax for which
Purchaser or JANY may be responsible under Section 7.4(b) hereof and (ii)
furnish Purchaser or the JANY with copies of any correspondence received from
any Governmental Entity in connection with such claim. Notwithstanding the
foregoing, no failure or delay in giving any notice described above shall
relieve Seller of its obligations under this Section 7.4 except, and only to the
extent, that it is prejudiced thereby.
(i) At its election, Seller may contest or settle any Tax
Claim in any legally permissible manner at its sole cost and expense and, upon
Seller's payment of such Taxes to the relevant Governmental Entity, may sue for
a refund thereof. Seller shall control all correspondence, responses and
proceedings related to any such contest or refund suit, and may pursue or forego
any administrative proceedings, appeals or litigation in respect of such Tax
Claim. Purchaser and JANY, as appropriate, will cooperate fully, provide access
to all books
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and records, and will take all lawful action in connection with such contest or
refund suit as Seller may reasonably request. Seller shall keep Purchaser and
JANY, as appropriate, regularly apprised of the progress of any such contest or
refund suit. In the event that such contest or refund suit may reasonably be
expected to increase materially the liability of JANY for Taxes described in
Section 7.4(b) hereof, or increase JANY's obligation to make payments pursuant
to Section 7.4(d) hereof dealing with tax sharing agreements, if any hereof,
Seller shall consult with Purchaser in good faith as to any considerations that
Purchaser may have regarding such contest or refund suit. If, during the course
of an audit, the IRS proposes an adjustment to the purchase price allocation
reflected in the Form 8023-A Package as ultimately approved by Seller or
determined by the Resolution Accountant pursuant to Section 7.4(g) hereof,
Seller shall (i) use its reasonable best efforts to defend in good faith such
purchase price allocation in the course of the audit, (ii) keep Purchaser
apprised of the progress of the audit, (iii) give Purchaser and JANY an
opportunity to participate, at their own expense, in contesting the proposed
adjustment to the purchase price allocation and (iv) obtain Purchaser's approval
of any proposed settlement of the issues, which approval shall not be
unreasonably withheld.
(j) In the event that Seller does not elect to contest a Tax
Claim pursuant to Section 7.4(i) hereof, Purchaser or JANY may (but shall not be
required to) contest such claim for the account of Seller, in which case (i)
Seller shall have the right to review and approve in advance any correspondence
or responses sent to any Governmental Entity by or on behalf of the JANY with
respect to any Tax Claim and to participate in any subsequent administrative
proceedings, appeals and litigation, if any, and (ii) Purchaser and JANY, as
appropriate, shall provide access to all relevant books and records. Purchaser
and JANY, as appropriate, shall keep Seller regularly apprised of the progress
of any such contest, proceedings, appeals or
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litigation. In the event that Purchaser or JANY elects to contest such claim,
Purchaser and JANY shall indemnify and hold harmless Seller for any Tax
liability in excess of the amount of the Tax liability that would have arisen
under the settlement that Seller was willing to accept and which Seller has
disclosed to Purchaser and JANY in writing in advance of such election.
(k) In the event that, for any tax period ending after the
Closing Date, JANY recognizes a loss or becomes entitled to a credit that may be
carried back to a taxable period of JANY during which it was included in
Seller's consolidated federal income Tax Return or any combined or unitary Tax
Return that includes Seller or its Affiliates, such carryback shall be made only
with Seller's written consent; provided that Seller shall consent to such
carryback, shall cooperate in the filing of any required returns or claims for
refund and shall pay Purchaser any Tax refund received or the amount of
reduction in Taxes so obtained (net of any tax or other cost incurred by Seller
in connection therewith) if Seller, in its reasonable discretion, determines
that permitting such carryback or filing such returns or claims will not
materially adversely affect Seller or its Affiliates.
Section 7.5. Employee Plans. With respect to the John Alden Retirement
Plan of Seller (the "Pension Plan") and the John Alden Employee Savings
Incentive Plan of Seller (the "401(k) Plan"), Purchaser and Seller agree as
follows:
(a) Pension Plan. Effective as of the Closing, JANY employees
with accrued benefits under the Seller's Pension Plan will be offered, subject
to any required spousal consent rules, the right to receive the value of such
accrued benefits in a lump sum.
(b) 401(k) Plan. Assets held by Seller in Seller's 401(k) Plan
on behalf of all Employees, at each such Employee's option, will be transferred
as soon as practicable after the Closing to the trustees of a qualified plan
maintained by Purchaser or its Affiliates (if permitted)
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or retained in Seller's 401(k) Plan (subject to rights of Employees with respect
thereto). Any assets transferred will be transferred in accordance with the
provisions of Seller's and Purchaser's 401(k) Plans.
Section 7.6. Non-Discriminatory Treatment of Policyholders. Except as
otherwise provided in the Indemnity Reinsurance Agreement between Seller and
Purchaser dated concurrently herewith, from and after the Closing Date Purchaser
shall use all commercially reasonable efforts to cause JANY to provide, at all
times and from time to time, to the Policyholders under the Insurance Contracts
crediting rates and renewal rates and standards of policyholder service and
administration which are no less than those provided to other policyholders of
insurance or annuity contracts issued, coinsured or reinsured by Purchaser or
its Affiliates 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
Insurance Contracts. Purchaser will use commercially reasonable efforts to
include a provision substantially similar to this Section 7.6 in any agreement
for the sale, transfer or bulk reinsurance of all or substantially all of the
Insurance Contracts.
Section 7.7. Change of Name. Purchaser will use commercially reasonable
efforts to cause the name of JANY to be changed prior to December 31, 1997 to a
name that does not include the phrase "John" or "Alden" or any variant thereof
or any name substantially similar to John Alden. As soon as practicable after
obtaining the approval of the New York Department of Insurance to a change of
name, the policies sold under the "John Alden" name shall be endorsed with the
new name of JANY. Seller hereby grants to Purchaser a license to use the "John
Alden" name: (i) until such time as the name change has been approved; and (ii)
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thereafter, but only for the limited purpose of referring to JANY as being
formerly known under its prior name.
ARTICLE 8
TERMINATION; SURVIVAL
Section 8.1. Termination of Agreement. Notwithstanding anything
contained herein to the contrary, this Agreement may be terminated:
(a) or 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;
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(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 7.2 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 8.2. Effect of Termination. In the event that this Agreement
shall be terminated pursuant to Section 8.1, 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 7.3 (Expenses), Article 10 (Confidentiality) and Article 11
(Miscellaneous) shall survive any such termination. A termination under Section
8.1 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.
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ARTICLE 9
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 9.1. Survival of Representations.
(a) The representations and warranties of Purchaser 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 Section 3.1 (Organization, Standing and Authority
of Purchaser), and 3.2 (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 2 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 2.1 (Organization, Standing and Authority
of JANY and Seller), 2.2 (Authorization), 2.16 (JANY Capital Stock), 2.17 (Tax
Matters) and 2.21 (Pension and Other Employee Plans) shall survive until the
expiration of all applicable statutes of limitations (including all periods of
extension, whether automatic or permissive), and Sections 2.18 (Real Property)
(paragraph (b) only) and 2.32 (Mortgages) (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 9.1 (the "Applicable Survival Period");
provided, however, that, subject to this Article 9, any Person
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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 9.4 hereof before the expiration of the
Applicable Survival Period.
Section 9.2. Indemnification by Purchaser and JANY.
(a) Subject to Sections 7.4, 9.1, the following provisions of
this Section 9.2 and 9.4 hereof, Purchaser shall indemnify Seller and its
Affiliates (other than JANY after the Closing) (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 by Purchaser
or (ii) any breach by Purchaser of any of the warranties or representations of
Purchaser set forth in Article 3 of this Agreement.
(b) From and after the Closing, JANY shall indemnify each
member of the Seller Group for, and hold the Seller Group harmless from, any and
all Liabilities of any kind or nature asserted against or incurred or sustained
by any or all of the members of the Seller Group arising out of, related to or
associated with the Insurance Business or JANY, regardless of whether at the
time of 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) reflected in any of the Schedules attached hereto or
(G) relate to or are associated with events occurring or circumstances existing
before or after the Closing; provided,
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however, that notwithstanding anything contained in this Section 9.2(b) to the
contrary, JANY shall not be obligated hereunder to indemnify the Seller Group
for, or to hold the Seller Group harmless from, any Liabilities under this
Section 9.2(b) to the extent that Seller is obligated to indemnify Purchaser in
respect of the same Liabilities pursuant to Section 9.3 hereof (or would be
obligated to indemnify Purchaser if (i) the limitation on representations or
warranties under Section 9.1, or (ii) the dollar limitations on indemnification
set forth in Section 9.2(c) hereof did not apply).
(c) The Seller Group shall be entitled to indemnification
under Section 9.2(a)(ii) and 9.2(b), only when the aggregate amount of all
Liabilities with respect to which the Seller Group would otherwise be entitled
to indemnification under Sections 9.2(a)(ii) and 9.2(b) hereof and Section
10.2(a)(ii) of the Asset 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 (including JANY) to the Seller Group pursuant to Section
9.2(a)(ii) and 9.2(b) hereof and Section 10.2(a)(ii) of the Asset Purchase
Agreement exceed $240,000,000.
(d) 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 or expense) 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
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seek recovery, at its or their own expense, of 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.
(e) To the extent that the undertakings set forth in Section
9.2(a) and (b) 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 9.3. Indemnification by Seller.
(a) Subject to Sections 7.4, 9.1, the following provisions of
this Section 9.3, and 9.4 hereof, Seller shall indemnify Purchaser and its
Affiliates (including JANY after the Closing) (collectively, the "Purchaser
Group") for, and shall hold them harmless from, any and all Liabilities asserted
against or incurred or sustained by Purchaser 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 2 of this Agreement (other than Sections
2.18(b) and 2.32(g) hereof), (iii) any Extra Contractual Obligations, (iv) any
Vanishing Premium Liabilities; provided, however, that Seller shall not be
required to provide the indemnification with respect to Vanishing Premium
Liabilities related to any In Force Insurance Contract if Purchaser reduces the
dividend scale applicable to such Insurance Contract or (v) the Insurance
Contracts issued by JANY without Permits as identified on Schedule 2.9 attached
hereto.
(b) Subject to Section 9.1, the following provisions of this
Section 9.3 and 9.4 hereof, Seller shall indemnify the Purchaser Group for, and
shall hold it harmless from, (i) one-
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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 of such Liabilities) 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 Sections 2.18(b) and
2.32(g) hereof and Section 3.22(g) of the Asset 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 9.3(a)(ii), 9.3(a)(iii) and 9.3(a)(iv) hereof only when the
aggregate amount of all Liabilities with respect to which the Purchaser Group
would otherwise be entitled to indemnification under Sections 9.3(a)(ii),
9.3(a)(iii) and 9.3(a)(v) hereof and Section 10.3(a)(ii) of the Asset Purchase
Agreement exceeds $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 Sections 9.3(a)(ii), 9.3(a)(iii) and 9.3(a)(v) hereof and
Section 10.3(a)(ii) of the Asset 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
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its or their own expense, of 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
9.3(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 9.4. 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 9.2 or 9.3 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
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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 9.4 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
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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 9.4, 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
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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, Purchaser shall and shall cause JANY to
take all commercially reasonable actions which may be necessary to enable Seller
to exercise its rights and perform its obligations under this Section 9.4.
(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 10
PUBLICITY AND CONFIDENTIALITY
Section 10.1. 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
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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 own 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 Goldman Sachs & 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, Purchaser or JANY, including without
limitation, A.M. Best Company, Inc., Duff & Phelps, Standard & Poor's
Corporation and Moody's Investors Services, Inc. or state insurance departments
or other regulatory bodies.
Section 10.2. 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
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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 10.2(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 Transition Services Agreement or the other agreements
described in clause (i) of this sentence, (iii) contemplated by the last two
sentences of Section 10.2(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 10.2, (i) information
which is specific shall not be deemed to be within an exception set forth in
Section 10.2(b) hereof merely because it is embraced by general information
which is within such an exception and (ii) a combination
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of information shall not be deemed to be within an exception set forth in
Section 10.2(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 11
MISCELLANEOUS
Section 11.1. 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
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Attention: General Counsel
Facsimile No.: (310) 772-6574
with a copy to:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Attention: Controller
Facsimile No.: (310) 772-6684
and
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O'Melveny & Myers
1999 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attention: Robert D. Haymer, Esq.
Facsimile No.: (310) 246-6779
when Seller is to be notified:
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, Florida 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
with copies to:
John Alden Financial Corporation
7300 Corporate Center Drive
Miami, Florida 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1497
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Jay R. Schifferli, Esq.
Facsimile No.: (203) 327-2669
A Party may, by notice given in accordance with this Section 11.1 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
11.1 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
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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 11.2. Entire Agreement. This Agreement (including the
Transition Services Agreement, the Asset Purchase Agreement, the other
agreements contemplated hereby and thereby, 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 or their respective Affiliates' Representatives (including, without
limitation, any projections of future sales, revenues, expenses or earnings and
any statements regarding the prospects of the Insurance Business as presently
conducted by JANY) or (ii) any other information with respect to the Insurance
Business, Seller, JANY, their respective assets and properties 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 attached hereto or thereto or in any 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 any
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Law or otherwise, or as an admission that any Party or any of its Affiliates are
in violation of or have ever violated any such Law.
Section 11.3. 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 11.4. 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 11.5. 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
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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
11.10 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 11.6. 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 all of 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 11.7. 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)
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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 11.8. 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 11.9. 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 11.10. 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
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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,
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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/ Jay S. Wintraub
-------------------------------------
Name: Jay S. Wintraub
Title: Executive Vice President
JOHN ALDEN LIFE INSURANCE COMPANY
By: /s/ Glendon E. Johnson
-------------------------------------
Name: Glendon E. Johnson
Title: Chief Executive Officer
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ANNEX A
The following terms are defined in the following Sections.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
Agreement Introduction
Ancillary Agreements 3.10
Antitrust Division 4.4
Applicable Purchaser Survival Period 9.1
Arbitrators 11.10
Asset Purchase Agreement Introduction
Books and Records 1.5
Closing 1.1
Closing Date 1.1
Code 2.9
Confidential Information 10.2
Deemed Asset Sale 7.4
Delivering Party 10.2
ERISA 2.20
ERISA Plans 2.20
401K Plan 7.5
Form 8023-A Package 7.4
FTC 4.4
Houston 7.4
HSR Act 2.5
Indemnitee 9.4
Indemnitor 9.4
Insurance Business Introduction
Interim John Alden Financial Statements 2.34
Interim Purchaser Financial Statements 3.7
JANY's Adjusted Tax Return Liability 7.4
JANY Employee 7.5
JANY Reserve Liabilities 2.23
JANY Stock Introduction
JANY Introduction
John Alden 2.34
John Alden Financial Statements 2.34
knowledge 2.3
Liabilities 9.2
Liens 2.4
Notice of Claim 9.4
Parties Introduction
Party Introduction
Pension Benefit Guaranty Corporation 2.20
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Pension Plan 7.5
Permits 2.5
Pre-Closing Straddle Period 7.4
Post-Closing Straddle Period 7.4
Purchase Price 1.2
Purchaser Introduction
Purchaser Financial Statements 3.7
Purchaser Group 9.3
Purchaser's Opinion 1.3
Real Property 2.18
Receiving Party 10.2
Resolution Accountant 7.4
Seller Introduction
Seller Group 9.2
Seller's Opinion 1.3
Tax Allocation Agreement 7.4
Tax Allocation Payments 7.4
Tax Claim 7.4
Termination Date 8.1
Third Party Administration Agreements 2.31
Transition Services Agreement 1.4
Transaction Agreements 1.2
</TABLE>
"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.
"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.
"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.
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<PAGE> 101
"Closing Ledger Date" means the 21st day of the month in which the
Closing occurs or, if such day is not a Business Day, the next preceding
Business Day.
"Combined Reserve Liabilities" means the Reserve Liabilities for JALIC
Annuity Contracts plus all reserves with respect to JANY's insurance contracts,
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 Insurance Contracts, (ii) all liability for commission payments
and other fees or compensation payable with respect to the Insurance 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 (or any other assessment from a state entity formed to protect
policyholders against failure of an insurer to perform its contractual
obligations) imposed as a result of a conservatorship or other insolvency
proceeding commenced on or prior to the Closing Date with respect to the
Insurance Contracts.
"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 or 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, or 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 Insurance 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 Insurance
Contracts.
"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,
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legislature of the government of the United States or any state, city,
municipality, county, town, district or other political subdivision thereof on
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.
"In Force Insurance Contracts" means the Insurance Contracts in effect
on the date hereof, and as of the Closing Date, as the case may be.
"Insurance Contracts" means all annuity and other policies and
supplementary contracts, 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 Insurance Contracts subject to reinstatement and (ii) any supplemental
benefits arising out of the Insurance Contracts.
"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.
"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 JANY or (ii) the ability of Seller or JANY to
consummate the transactions contemplated by this Agreement and the Transition
Services Agreement; 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 Insurance 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 (and after giving effect to the Closing,
together with JANY) or (ii) the ability of Purchaser to consummate the
transactions contemplated by this Agreement and the Transition Services
Agreement; 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.
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<PAGE> 103
"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 Schedule" means the list of Mortgage Loans subject to
this Agreement and identified on Schedule 2.32(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.
"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 Insurance Contracts, or any
other Person entitled to payment with respect to the Insurance Contracts.
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<PAGE> 104
"Related Agreements" means the agreements providing for the payment of
commissions relating to the Insurance Contracts as listed in Schedule 2.30.
"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 Goldman Sachs & Company.
"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.
"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, as the case may be, 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.
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"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.
"Vanishing Premium Liabilities" means any Liabilities arising out of or
connected with a claim that an Insurance Contract which utilizes dividends,
credited interest or other earnings to reduce the premium was sold based on a
premium and earnings illustration or representation that was allegedly or
actually fraudulent or misleading.
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Exhibit D
LOAN DOCUMENTATION
With respect to each Mortgage Loan, Seller has in its possession each
of the following items:
1. A summary of the terms of the Loan as presented to and approved by
Seller's loan committee.
2. An original promissory note (or a certified copy thereof) executed
by the borrower or its agent endorsed in favor of Seller showing the
Participant's respective interests therein.
3. An original recorded deed of trust or mortgage executed by the
borrower or its agent with applicable exhibits and riders.
4. An original policy of lender's title insurance and applicable
endorsements.
5. Evidence of the current Hazard Insurance Policy.
6. Evidence of current Flood Insurance, if applicable.
7. An original commitment letter to borrower, if available.
8. A certificate of occupancy, if available.
9. Credit report(s) with respect to the borrower prepared by Seller or
at Seller's request, if available.
10. Financial statements of the borrower current as of the date of the
Mortgage Loan application, executed by the borrower disclosing the ability to
repay the Mortgage Loan if applicable, and any updates thereof.
11. Franchise agreements, if applicable.
12. Partnership agreements, if applicable.
13. Current rent rolls if available in Seller's files.
14. An appraisal prepared for Seller executed prior to the approval of
the Mortgage Loan application by persons duly appointed and qualified as
appraisers by Seller's board of directors which appraisal discloses the market
value of the Mortgaged Property, containing sufficient information regarding the
Mortgaged Property to substantiate the appraisal.
15. Any and all documentation evidencing release of any part of the
pledged collateral, showing portion released, the consideration paid and the
approval obtained.
<PAGE> 1
ASSET PURCHASE AND SALE AGREEMENT
By and Between
JOHN ALDEN LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated November 29, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
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
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
PAGE
<S> <C>
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
</TABLE>
ii
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TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
PAGE
<S> <C>
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
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(cont'd)
PAGE
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 - Bill of Sale
I - Opinion of Seller's Counsel
J - Opinion of Purchaser's Counsel
K - Loan Documentation
L - Terms of Marketing Agreement
iv
<PAGE> 6
TABLE OF CONTENTS
SCHEDULES -
1.2(a)(i) - Closing Date Portfolio Securities
1.2(a)(ii) - Policy Loans
1.2(a)(iii) - Additional Assets
1.2(d)(i) - Assigned Contracts
1.2(d)(ii) - Licensing Restrictions
3.3 - Actions and Proceedings
3.4 - Certain Matters
3.5 - Consents and Approvals
3.7 - Compliance
3.8(a) - Annuity Contract Forms
3.8(b) - Annuity Contracts
3.8(c) - Certain Commission Contracts
3.8(e) - Contested Benefits
3.8(h) - Known Agent Violations
3.9(a) - Licensed Jurisdictions
3.9(b) - Permit Exceptions
3.10 - Regulatory Filings
3.11 - Reinsurance Agreements
3.12 - Certain Changes or Events
3.13 - Other Necessary Contracts
3.14 - Intellectual Property
3.17(a) - Reserve Liabilities
3.17(b) - Reserve Exceptions
3.18 - Threats of Cancellation
3.20 - Related Agreements
3.21 - Third Party Administration Agreements
3.22(a) - Mortgage Loans
3.22(b) - Participations
3.22(d) - Waivers, Amendments & Releases
3.22(f) - Missing Original Notes
3.22(l) - Tax Delinquencies
3.24 - Agent Balances
4.3 - Purchaser's Litigation
4.4 - Purchaser's Certain Matters
4.5 - Purchaser's Consents and Approvals
Excluded Transactions
v
<PAGE> 7
ASSET PURCHASE AND SALE AGREEMENT
ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") dated November 29,
1996 by and between John Alden 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, John Alden 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
<PAGE> 8
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 Kelley Drye & Warren LLP, 101 Park Avenue, New York, New York 10178, or such
other time and place as Purchaser and Seller may mutually agree in writing, on
the last business day of the month in which the satisfaction of all conditions
set forth in Articles 6 and 7 hereof concerning the Parties' respective
obligations to consummate the transactions contemplated herein occurs or such
other date as Seller and Purchaser may mutually agree in writing (the "Closing
Date") and, subject to completion, shall be deemed to have been consummated and
become effective for all purposes as of 11:59 p.m. on the Closing Date.
Section 1.2. Transfer of Assets.
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(a) Subject to the terms and conditions set forth herein, at
the Closing, Seller shall sell, assign, transfer, convey and deliver to
Purchaser as a reinsurance premium, and Purchaser shall purchase and accept from
Seller, all of Seller's right, title and interest in and to the following
assets, with such changes therein, additions thereto and deletions therefrom as
may occur from the date hereof through the Closing as permitted or required
pursuant to the terms hereof or otherwise agreed to by the Parties in writing
(collectively, the "Reinsurance Premium"):
(i) the Closing Date Portfolio Securities, including
the Accrued and Unpaid Investment Income thereon and all
documentation related thereto.
(ii) all of Seller's right and interest to receive
principal and interest paid on policy loans under the Annuity
Contracts (with the exception of any policy loans listed in
Schedule 1.2(a)(iii)) (the "Policy Loans") outstanding after
the Closing Date. The Policy Loans outstanding as of September
21, 1996 are listed on Schedule 1.2(a)(ii) attached hereto. An
estimate of all Policy Loans outstanding on the Closing Ledger
Date will be set forth in an updated Schedule 1.2(a)(ii) to be
delivered by Seller to Purchaser at the Closing. Schedule
1.2(a)(ii) includes with respect to each Policy Loan
outstanding on September 21, 1996, and will include with
respect to each Policy Loan set forth on the updated Schedule
1.2(a)(ii) to be delivered on the Closing Date, the policy
number, balance and form and contract number.
(iii) those additional assets listed on Schedule
1.2(a)(iii) attached hereto.
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(iv) cash in the amounts required to be paid
pursuant to Sections 1.2(c) hereof, with respect to Rejected
Mortgages, and 1.3(d)(i) hereof, with respect to excess
Reserve Liabilities.
(b) On the Closing Date, delivery of the Closing Date
Portfolio Securities shall be made by transfer to the trust account (the
"Trust") established pursuant to the Trust Agreement. The cash portion of the
Reinsurance Premium shall be transferred to the Trust by wire transfer of
immediately available funds. Securities, cash equivalents, mortgage loans and
other assets included among the Closing Date Portfolio Securities shall be
transferred by such instruments of transfer as are acceptable to the Trustee and
reasonably acceptable to Purchaser. The gross amount of the cash payment wired
by Seller shall be reduced by an amount equal to one day's interest on such
gross amount at an interest rate equal to the three month LIBOR rate in effect
on the Business Day preceding the Closing Date plus 25 basis points.
(c) Notwithstanding anything contained in this Section 1.2 to
the contrary, Purchaser shall have the right not to purchase up to $50,000,000
Book Value of (i) mortgages or (ii) mortgage related private placements which
comprise a portion of the October 21 Portfolio Securities (the "Rejected
Mortgages"), and such Rejected Mortgages shall not be sold, assigned,
transferred, conveyed or delivered to Purchaser hereunder; provided, however,
that upon written notice by Purchaser to Seller delivered not less than 10 days
prior to the Closing specifying such Rejected Mortgages, Seller shall deliver
cash to the Trust, as part of the Reinsurance Premium, in an amount equal to the
Book Value of the Rejected Mortgages.
(d) At the Closing, Seller shall assign, transfer, convey and
deliver to Purchaser, and Purchaser shall accept from Seller, the following:
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(i) Seller's rights including all claims arising
under the contracts and license agreements listed on Schedule
1.2(d)(i) attached hereto (the "Assigned Contracts"); and
(ii) originals or copies of all customer lists,
policy information, Seller's Annuity Contract forms and rating
plans, disclosure and other documents and filings required
under applicable Laws, and all claim, sales, underwriting,
financial, accounting, tax, business, marketing and compliance
records in the possession or control of Seller ("control" for
the purposes of this Section 1.2(d)(ii) being defined as the
ability to cause delivery to Seller) and relating to the
Annuity Business, including, without limitation, any database,
magnetic or optical media (to the extent not subject to the
licensing restrictions listed on Schedule 1.2(d)(ii) attached
hereto) and any other form of recorded, computer generated or
stored information or process, but excluding any such records
that both (A) are, and would upon transfer cease to be,
subject to the attorney-client privilege and (B) do not relate
to the Purchased Assets or Assumed Liabilities (collectively,
the "Books and Records").
(e) Seller and Purchaser agree that for tax purposes, the fair
market value of the Closing Date Portfolio Securities shall be the GAAP book
values used by Purchaser to reflect the Closing Date Portfolio Securities on its
Financial Statements on the Closing Date.
Section 1.3. Ceding Commission; Payment.
(a) In consideration for the sale, assignment, transfer,
conveyance and delivery of the Reinsurance Premium to Purchaser by Seller in
accordance with and upon the terms and
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conditions set forth in this Agreement, on the Closing Date Purchaser shall pay
to Seller One Hundred Eight Million Fifty Thousand Dollars ($108,050,000) in
cash, subject to adjustment as provided in Section 1.3(c) below (the "Closing
Date Ceding Commission"). Purchaser shall pay the Closing Date Ceding Commission
to Seller on the Closing Date by wire transfer of immediately available funds to
such bank account as Seller shall designate to Purchaser in writing at least
three Business Days prior to the Closing Date. Payment of the Closing Date
Ceding Commission shall be accompanied by (i) an amount in cash equal to the
Accrued and Unpaid Investment Income as set forth on the Estimated Closing Date
Statement and (ii) any payments required to be made as a reduction in the
Reinsurance Premium pursuant to Section 1.3(d)(ii) hereof. The gross amount of
the cash payment wired to Seller pursuant to this Section 1.3(a) shall be
reduced by an amount equal to one day's interest on such gross amount at an
interest rate equal to the three month LIBOR rate in effect on the Business Day
preceding the Closing Date plus 25 basis points.
(b) On the Closing Date, Seller shall deliver to the Purchaser
a statement (the "Estimated Closing Date Statement") of Seller's good faith
estimate as of the Closing Date unless otherwise noted below of (i) all Reserve
Liabilities (ii) the Policy Loan Balance, (iii) the Book Value of all Closing
Date Portfolio Securities, (iv) all JANY Reserve Liabilities (as defined in the
JANY Stock Purchase Agreement), (v) the Accrued and Unpaid Investment Income,
(vi) the gross amount on a tax lot by tax lot basis of any realized capital gain
("Capital Gain") or capital loss ("Capital Loss") on the disposition of any June
21 Portfolio Securities between June 21, 1996 and the Closing Date, (vii) the
Adjusted Capital and Surplus of JANY and (viii) the amount of cash flows
applicable to the Combined Reserve Liabilities from the
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Closing Ledger Date through Closing Date (the "Net Cash Flows"). The Estimated
Closing Date Statement shall be prepared in a manner consistent with the
calculation of such items as of June 21, 1996. Such calculations are reflected
in Schedules 1.2(a)(i) (Closing Date Portfolio Securities), 1.2(a)(ii) (Policy
Loans) and 3.17 (Reserve Liabilities) attached hereto and have been prepared in
accordance with SAP.
(c) The Closing Date Ceding Commission shall be adjusted as
follows (using the calculations set forth on the Estimated Closing Date
Statement for this purpose):
(i) To the extent Combined Reserve Liabilities as
set forth on the Estimated Closing Date Statement, as adjusted
below, are less than $5,013,914,419 ("Expected Reserves"), the
Closing Date Ceding Commission shall be reduced by an amount
equal to (i) (A) the amount by which the Expected Reserves
exceed the Combined Reserve Liabilities divided by (B) the
Expected Reserves multiplied by (ii) the difference between
$240,000,000 and the Adjusted Capital and Surplus of JANY. For
purposes of this Section 1.3(c)(i), Combined Reserve
Liabilities shall be adjusted for the Net Cash Flows
applicable to the Combined Reserves not included in such
reserves from the Closing Ledger Date through the Closing
Date.
(ii) The Closing Date Ceding Commission will be
adjusted by interest at a rate of 2% per annum on the net cash
flows applicable to the Combined Reserves not included in such
reserves from the Closing Ledger Date through the Closing
Date.
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(iii) The Closing Date Ceding Commission shall be
(A) reduced by any Capital Gains realized with respect to the
June 21 Portfolio Securities between June 21, 1996 and the
Closing Date and (B) increased by any Capital Losses realized
with respect to the June 21 Portfolio Securities between June
21, 1996 and the Closing Date. For purposes of this Section
1.3(c)(iii), Capital Gains and Capital Losses shall be deemed
to include, without limitation, any gain or loss resulting
from any sale, pre-payment, maturity or similar event
affecting a June 21 Portfolio Security, but shall be deemed to
exclude Capital Gains or Capital Losses with respect to
Excluded Transactions.
(d) As of the Closing Date, the Reinsurance Premium shall be
adjusted as follows (using the calculations set forth on the Estimated Closing
Date Statement):
(i) To the extent Reserve Liabilities exceed the sum
of (A) the Book Value of the Closing Date Portfolio
Securities, (B) any cash deposited in the Trust pursuant to
Section 1.2(c) hereof and (C) the Policy Loan Balance, Seller
shall deliver to Purchaser at Closing by transfer to the Trust
cash equal to such deficiency. The amount of any such cash
payment shall be made by wire transfer of immediately
available funds, and the gross amount thereof shall be reduced
by an amount equal to one day's interest on such gross amount
at an interest rate equal to the three month LIBOR rate in
effect on the Business Day preceding the Closing Date plus 25
basis points.
(ii) To the extent the sum of (A) the Book Value of
the Closing Date Portfolio Securities, (B) any cash deposited
pursuant to Section 1.2(c) hereof and
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<PAGE> 15
(C) the Policy Loan Balance exceeds Reserve Liabilities,
Purchaser shall deliver to Seller cash equal to said excess.
Section 1.4. Closing Deliveries.
(a) At the Closing, Seller shall execute and deliver or cause
to be executed and delivered to Purchaser the following:
(i) the Indemnity Reinsurance Agreement between
Seller and Purchaser substantially in the form of Exhibit A
attached hereto (the "Indemnity Reinsurance Agreement");
(ii) the Assumption Reinsurance Agreement between
Seller and Purchaser substantially in the form of Exhibit B
attached hereto (the "Assumption Reinsurance Agreement");
(iii) the Trust Agreement among Seller, Purchaser
and Bankers Trust Company of California, N.A., in its capacity
as trustee thereunder (the "Trustee"), substantially in the
form of Exhibit C attached hereto (the "Trust Agreement");
(iv) the Transition Services Agreement between
Seller and Purchaser substantially in the form of Exhibit D
attached hereto (the "Transition Services Agreement");
(v) the Administrative Services Agreement between
Seller and Purchaser substantially in the form of Exhibit E
attached hereto (the "Administrative Services Agreement");
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(vi) the Assignment and Assumption Agreement between
Seller and Purchaser substantially in the form of Exhibit F
attached hereto (the "Assignment and Assumption Agreement");
(vii) the License Agreement between Seller and
Purchaser substantially in the form of Exhibit G attached
hereto (the "License Agreement");
(viii) the Bill of Sale between Seller and Purchaser
substantially in the form of Exhibit H attached hereto (the
"Bill of Sale");
(ix) the opinion of counsel to Seller, substantially
in the form of Exhibit I attached hereto ("Seller's Opinion");
(x) the Reinsurance Premium pursuant to Section 1.2
hereof;
(xi) the Assigned Contracts;
(xii) the Books and Records;
(xiii) a certificate of an executive officer of
Seller, dated the Closing Date, representing and warranting to
the effect that (A) the person signing such certificate is
familiar with the provisions of this Agreement and (B) the
conditions specified in Article 6 of this Agreement have been
satisfied;
(xiv) written consents to assignments, where
necessary, from all applicable parties relating to the Third
Party Administration Agreements; and
(xv) such other documents as may be necessary or
advisable in Purchaser's reasonable judgment to vest in
Purchaser all of Seller's rights, title and interest in and to
the (i) assets transferred as the Reinsurance Premium, (ii)
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the Assigned Contracts and (iii) the Books and Records
(clauses (i), (ii) and (iii), collectively the "Purchased
Assets") and the Assumed Liabilities.
The Indemnity Reinsurance Agreement, the Assumption Reinsurance Agreement, the
Transition Services Agreement, the Administrative Services Agreement, the Bill
of Sale, the Assignment and Assumption Agreement, the Trust Agreement and the
License Agreement are referred to collectively herein as the "Ancillary
Agreements."
(b) At the Closing, Purchaser shall execute and deliver or
cause to be executed and delivered to Seller the following:
(i) the Indemnity Reinsurance Agreement;
(ii) the Assumption Reinsurance Agreement;
(iii) the Trust Agreement;
(iv) the Transition Services Agreement;
(v) the Administrative Services Agreement;
(vi) the Assignment and Assumption Agreement;
(vii) the License Agreement;
(viii) the opinion of counsel to Purchaser,
substantially in the form of Exhibit J hereto ("Purchaser's
Opinion");
(ix) a certificate of an executive officer of
Purchaser, dated the Closing Date, representing and warranting
to the effect that (A) the person signing such certificate is
familiar with the provisions of this Agreement and (B) the
conditions specified in Article 7 of this Agreement have been
satisfied;
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(x) such other documents as may be necessary or
advisable in Seller's reasonable judgment to consummate the
transactions contemplated hereby; and
(xi) the Closing Date Ceding Commission.
Section 1.5. Additional Closing Deliveries. In addition to the
transactions and deliveries contemplated above, at the Closing each of the
agreements between or among JANY and Seller or any Affiliates of Seller will be
terminated (other than the Transition Services Agreement to be entered into
pursuant to the JANY Stock Purchase Agreement).
Section 1.6. Post Closing Adjustments.
(a) No later than 60 days after the Closing Date, Seller shall
prepare and deliver to Purchaser a statement (the "Final Closing Date
Statement") that sets forth the actual financial data as of the Closing Date
required to be estimated in the Estimated Closing Date Statement. The Final
Closing Date Statement shall be prepared in a manner consistent with the
Estimated Closing Date Statement and shall be accompanied by a copy of all
documents used in the preparation thereof. The Final Closing Date Statement and
the calculations and information set forth therein shall be reviewed and
certified by a Fellow of the Society of Actuaries who is also a Member of the
American Academy of Actuaries (an FSA and MAAA) familiar with the business of
Seller and in particular the Annuity Business. The Final Closing Date Statement
shall be binding on Purchaser unless Purchaser delivers to Seller within 60 days
after its receipt of the Final Closing Date Statement from Seller written notice
of disagreement specifying in reasonable detail the nature and extent of the
disagreement.
(b) If Purchaser and Seller are unable to resolve any
disagreement with respect to the Final Closing Date Statement within 30 days
after Seller receives a timely notice
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of disagreement, the items of disagreement alone shall be referred for final
determination to the U.S. national office of Price Waterhouse or, if such firm
is unable or unwilling to make such final determination, to such other
independent accounting firm as the Parties shall mutually designate. The firm
making such determination is referred to herein as the "Independent Party." The
Final Closing Date Statement shall be deemed to be binding on Purchaser and
Seller upon the earlier to occur of (i) Purchaser's failure to deliver to Seller
a notice of disagreement within 30 days after its receipt of the Final Closing
Date Statement prepared by Seller, (ii) resolution of any disagreement by mutual
agreement of the Parties after a timely notice of disagreement has been
delivered to Seller or (iii) notification by the Independent Party of its final
determination of the items of disagreement submitted to it. The fees and
disbursements of the Independent Party shall be borne equally, one-half by
Purchaser and one-half by Seller.
(c) The Closing Date Ceding Commission, including the
adjustments set forth in Section 1.3(c) hereof, shall be recalculated based on
the actual financial information set forth in the Final Closing Date Statement,
which will establish the "Final Ceding Commission." If the Final Ceding
Commission is greater than the Closing Date Ceding Commission, Purchaser will
pay to Seller an amount equal to the difference between the Final Ceding
Commission and the Closing Date Ceding Commission. If the Final Ceding
Commission is less than the Closing Date Ceding Commission, Seller shall pay to
Purchaser an amount equal to the difference between the Final Ceding Commission
and the Closing Date Ceding Commission.
(d) A Reinsurance Premium adjustment shall be made as follows
using the calculations set forth on the Final Closing Date Statement):
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(i) If the Final Closing Net Assets are less than
the amount of the Reserve Liabilities, Seller shall deliver
cash to the Trustee in an amount equal to such difference for
deposit in the Trust.
(ii) If the Final Closing Net Assets are greater
than the amount of the Reserve Liabilities, Purchaser and
Seller shall cause the Trustee to pay cash to Seller in an
amount equal to such excess, as contemplated by the Trust
Agreement.
(e) An adjustment with respect to the Accrued but Unpaid
Investment Income will be made as follows (using the calculations set forth on
the Final Closing Date Statement):
(i) If the Accrued but Unpaid Investment Income is
greater than Accrued but Unpaid Investment Income set forth on
the Estimated Closing Date Statement, Purchaser shall pay cash
to Seller in an amount equal to such excess.
(ii) If the Accrued but Unpaid Investment Income is
less than Accrued but Unpaid Investment Income set forth on
the Estimated Closing Date Statement, Seller shall pay cash to
Purchaser in an amount equal to such difference.
(f) All amounts paid under this Section 1.6 shall be paid in
cash in immediately available funds within 10 days after receipt by Purchaser of
a binding Final Closing Date Statement with interest calculated at a rate equal
to the three month LIBOR rate plus 25 basis points on the amount due from the
Closing Date through but not including the date on which such amount is actually
paid.
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ARTICLE 2
ASSUMPTION OF LIABILITIES AND OBLIGATIONS
Section 2.1. Assumption of Seller Liabilities. On the Closing Date,
Purchaser shall assume (a) pursuant to the Indemnity Reinsurance Agreement, as
between Seller and Purchaser, any and all Insurance Liabilities and Other
Liabilities of Seller arising out of or with respect to each Annuity Contract
pending its Novation (as contemplated by Section 2.4 of the Assumption
Reinsurance Agreement); (b) pursuant to the Assumption Reinsurance Agreement,
any and all Insurance Liabilities and Other Liabilities of Seller arising out of
or with respect to each Annuity Contract from and after its Novation (as
contemplated by Section 2.4 of the Assumption Reinsurance Agreement); and (c)
pursuant to the Assignment and Assumption Agreement, all contractual liabilities
and obligations of Seller relating to the period after the Closing Date under
the Assigned Contracts. The liabilities referred to in the preceding clauses (a)
through (c) are herein referred to as the "Assumed Liabilities." Purchaser is
not assuming any liabilities or obligations of any nature whatsoever, fixed or
contingent, known or unknown, other than the Assumed Liabilities.
Section 2.2. Guaranty Fund Assessments.
(a) Purchaser shall pay or reimburse Seller for 100% of all
guaranty fund assessments (or any other assessment of a state entity formed to
protect policyholders against failure of an insurer to perform its contractual
obligations due to impairment or insolvency, including but not limited to
assessments of the Colorado Life and Health Insurance Protection Association and
the Wisconsin Insurance Security Fund) ("Guaranty Fund Assessments") payable by
Seller and included in Other Liabilities.
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(b) On or before the Closing Date, Seller shall deliver to
Purchaser a report of annuity premiums written by state as reported to the
National Organization of Life & Health Guaranty Associates ("NOLHGA") for 1993,
1994 and 1995. Seller shall deliver to Purchaser copies of reports for 1996 and
each subsequent year when filed with NOLHGA until Purchaser determines that it
no longer needs such reports. With respect to each report of premiums, Seller
shall prepare a schedule allocating premiums between the Annuity Contracts and
other annuities issued by Seller on a state-by-state basis for the time period
covered by the report of premiums and Seller shall deliver same to Purchaser
(prior to the Closing Date, with respect to the reports for 1993, 1994 and
1995). Seller shall deliver to Purchaser a copy of any notice (including but not
limited to a notice of assessment) that Seller receives relating to any
insolvency which occurs on or after the Closing Date.
(c) With respect to each notice of assessment by the fund of a
state delivered to Purchaser by Seller, Seller shall prepare a schedule showing
the allocation of such assessment between the Seller and the Purchaser. Subject
to Section 2.2(d) below, Purchaser shall pay its share of such assessment within
30 days after its receipt of the notice of assessment and the schedules
contemplated by this paragraph.
(d) Each notice and schedule delivered to Purchaser pursuant
to Section 2.2(c) hereof shall be binding on Purchaser unless Purchaser notifies
Seller of any disagreement, specifying in reasonable detail the nature and
extent of the disagreement. If Purchaser and Seller are unable to resolve any
disagreement with respect to any assessment within 30 days after Seller receives
a timely notice of disagreement, the items of disagreement alone shall be
referred for final determination to the U.S. national office of Price Waterhouse
or, if such firm is unable or
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unwilling to make such final determination, to such other independent accounting
firm as the Parties shall mutually designate. The firm making such determination
is referred to herein as the "Independent Party." Each assessment shall be
deemed to be binding on Purchaser and Seller upon the earlier to occur of (i)
Purchaser's failure to deliver to Seller a notice of disagreement within 30 days
after its receipt of the assessment and related schedules prepared by Seller,
(ii) resolution of any disagreement by mutual agreement of the Parties after a
timely notice of disagreement has been delivered to Seller or (iii) notification
by the Independent Party of its final determination of the items of disagreement
submitted to it. The fees and disbursements of the Independent Party shall be
borne equally, one-half by Purchaser and one-half by Seller.
(e) Except as provided in Section 3.4 of the Indemnity
Reinsurance Agreement, to the extent Seller realizes a credit against any
premium tax payable by it as a result of any Guaranty Fund Assessment paid by
Purchaser pursuant to this Section 2.2, it shall pay to Purchaser an amount
equal to such credit within 30 days after the date for filing of the annual
premium tax return for such state. For purposes of this Section 2.2, Seller will
be deemed to realize a credit for Guaranty Fund Assessments paid by Purchaser
pursuant to this Section 2.2 if and when the premium tax payable by Seller
calculated without giving effect to available credits for Guaranty Fund
Assessments paid by Purchaser pursuant to this Section 2.2 (but applying all
other credits and debits available to Seller in such manner as Seller elects in
its sole discretion, except that guaranty fund credits atttributable to Guaranty
Fund Assessments paid by Purchaser will be deemed utilized first against premium
taxes paid by Purchaser under Section 3.4 of the Indemnity Reinsurance
Agreement) is greater than the premium tax payable
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<PAGE> 24
by Seller giving effect to such credit, and the amount of such credit realized
shall be deemed to equal such difference; provided, however, that in the event
of a merger, only Seller credits shall be taken into account. Purchaser's right
to the benefit of any credit shall be determined first under Section 3.5 of the
Indemnity Reinsurance Agreement and then under this Section 2.2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 3.1. Organization, Standing and Authority of Seller. Seller is
a corporation duly organized as a capital stock life and health insurance
company, validly existing and in good standing under the Laws of the State of
Minnesota. Seller has all corporate power and authority necessary or required by
Law to engage in the conduct of the Annuity Business as currently conducted by
it.
Section 3.2. Authorization. Seller has all corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and under each of the Ancillary Agreements to be executed by it.
Seller is duly licensed, qualified or admitted to do business and is in good
standing in all jurisdictions in which it is required to be so qualified,
licensed or admitted to do business by the Laws thereof, including, without
limitation in each jurisdiction in which Annuity Contracts have been issued,
except where the failure to so qualify, be admitted or licensed, individually or
in the aggregate, is not reasonably likely to have a Material Adverse Effect.
The execution and delivery by Seller of this Agreement and the Ancillary
Agreements to be executed by it, and the performance by Seller of its
obligations
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under such agreements, have been duly authorized by all necessary corporate and
shareholder actions on the part of Seller. This Agreement and each of the
Ancillary Agreements executed by Seller, when executed by all of the parties
thereto, will constitute a valid and binding obligation of Seller enforceable
against Seller in accordance with its terms, except insofar as enforceability
may be limited by bankruptcy, insolvency, moratorium or other Laws which may
affect creditors' rights and remedies generally and by principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
Section 3.3. Actions and Proceedings. Except as disclosed on Schedule
3.3 attached hereto, (a) there are no outstanding Orders by or with any court,
arbitrator or Governmental Entity before which Seller or any of its material
Affiliates is or was a party that, (i) relate to the Annuity Business or the
Purchased Assets or (ii) individually or in the aggregate, have a Material
Adverse Effect and (b) there are no Actions pending or, to the knowledge of
Seller, threatened against Seller or any of its material Affiliates (i) related
to the Annuity Business or to which any of the Purchased Assets is subject that
seeks monetary damages in excess of $100,000 individually or $500,000 in the
aggregate or seeks an unspecified amount of damages, (ii) that seeks injunctive
or similar relief or (iii) which would, individually or in the aggregate, have a
Material Adverse Effect.
Section 3.4. No Conflict or Violation. Except as disclosed on Schedule
3.4 attached hereto, the execution, delivery and performance by Seller of this
Agreement and the Ancillary Agreements to which it is a party in accordance with
the respective terms and conditions hereof and thereof do not and will not (a)
violate any provision of the charter or by-laws of Seller, as amended to date,
(b) violate, constitute a default under or result in the breach, cancellation or
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termination of, accelerate the performance required under, or result in the
creation of any lien, claim, restriction, charge or encumbrance or other defect
of title ("Liens") upon any of the assets of Seller or any of the Purchased
Assets pursuant to, any mortgage, deed of trust, guaranty, note, indenture,
bond, lease, agreement or other instrument to which Seller is a party or by or
to which it or any of such assets or the Purchased Assets may be bound, (c)
violate any Order of any court, arbitrator or Governmental Entity against, or
binding upon, or any agreement with, or condition imposed by, any court,
arbitrator or Governmental Entity binding upon Seller, such assets or any of the
Purchased Assets, (d) violate any Law or (e) result in the breach or violation
of any of the terms or conditions of, constitute a default under, or otherwise
cause an impairment or revocation of, any license, permit, order, approval,
registration, authorization, qualification or filing with or under any Law or
Governmental Entity (collectively, "Permits") related to the Annuity Business,
except for Liens, violations, breaches or defaults with respect to assets of
Seller other than the Purchased Assets that, individually or in the aggregate,
do not have a Material Adverse Effect.
Section 3.5. Consents and Approvals. Except as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and rules and
regulations thereunder (the "HSR Act") or as set forth on Schedule 3.5 attached
hereto, no consent, approval, exemption or authorization is required to be
obtained from, no notice is required to be given to and no filing is required to
be made with any third party (including, without limitation, Governmental
Entities of competent jurisdiction) by Seller in order (a) for this Agreement,
each of the Ancillary Agreements and each of the Assigned Contracts to which
Seller will be a party to constitute a valid and binding obligation of Seller,
(b) to authorize or permit the consummation
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of the transactions contemplated hereby by Seller or (c) to prevent the
termination of any material right, privilege, franchise, Permit or agreement
related to the Annuity Business or to prevent any material loss related to the
Annuity Business.
Section 3.6. Brokerage and Financial Advisers. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, Seller in connection with this Agreement or the
transactions contemplated hereby, except CS First Boston, whose fees for
services rendered in connection with such transactions will be paid by Seller.
Section 3.7. Compliance With Laws. Except as disclosed in Schedule 3.7
attached hereto, Seller is not in material violation of any Law or any Order of
any court, arbitrator or Governmental Entity pertaining to the Annuity Business.
Section 3.8. Annuity Contracts. The forms of all policies and
endorsements utilized for all Annuity Contracts in effect on the date of this
Agreement are listed and described on Schedule 3.8(a) attached hereto. All
Annuity Contracts in effect on October 21, 1996 are listed and described on
Schedule 3.8(b) attached hereto. All Annuity Contracts in effect on the Closing
Ledger Date will be set forth in an updated Schedule 3.8(b) delivered to
Purchaser at the Closing. Schedule 3.8(b) includes with respect to each Annuity
Contract in effect on October 21, 1996 and will include with respect to each
Annuity Contract in effect on the Closing Ledger Date, the policy number,
policyholder name, form, plan code and account balance. Schedule 3.8(b) attached
hereto also sets forth statutory reserves by plan code with respect to the
Annuity Contracts as of September 21, 1996 and the updated Schedule 3.8(b) will
set forth such information with respect to the Annuity Contracts as of the date
of such Schedule set forth above. All Annuity Contracts are in all respects, to
the extent required under applicable Laws,
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on forms approved by applicable insurance regulatory authorities or which have
been filed and not objected to by such authorities within the period provided
for objection, and such forms comply in all material respects and have been
administered in all material respects in accordance with applicable Laws.
Without limiting the foregoing:
(a) Seller has offered and sold each Annuity Contract in
compliance with all applicable Laws (it being acknowledged that no
representation is made with respect to independent agents of Seller except as
provided in Section 3.8(h) hereof) and all of Seller's registrations, filings or
submissions made by it with respect to the Annuity Contracts with any
Governmental Entity were in material compliance with applicable Laws when filed.
(b) The transactions contemplated by this Agreement will not
affect the validity and binding character of any Annuity Contract entered into
or issued by Seller or render any admitted assets of Seller non-admitted under
applicable Laws up to and including the Closing Date.
(c) Except as set forth in Schedule 3.8(c) attached hereto,
and except in accordance with customary insurance industry practice, (i) Seller
is not liable to pay commissions upon the renewal of any Annuity Contract nor
(ii) is it a party to any agreement providing for the third-party collection of
annuity premiums payable to Seller by any other Person which commissions or
premiums exceed $100,000 in the aggregate.
(d) All Annuity Contracts (including all Policy Loans related
thereto and the policy loans identified on Schedule 1.2(a)(iii) attached hereto)
are in full force and effect and are legal, valid and binding obligations of
Seller, and to the knowledge of Seller the other parties thereto, and are
enforceable against Seller, and to the knowledge of Seller the other parties
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thereto, in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by or subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of
general application relating to or affecting creditors' rights and to general
equity principles (other than equitable rescission rights).
(e) All Annuity Contract benefits payable by Seller, and to
the knowledge of Seller, by any other Person that is a party to or bound by any
reinsurance, coinsurance or other similar contract with Seller, have been paid
in accordance with the terms of the Annuity Contracts under which they arose,
except for such benefits for which there is, in the reasonable opinion of
Seller, a reasonable basis to contest and all such contested benefits have been
disclosed in Schedule 3.8(e) attached hereto.
(f) No outstanding Annuity Contract issued, reinsured or
underwritten by Seller entitles the holder thereof or any other Person to
receive dividends, distributions or other benefits based on the revenues or
earnings of Seller or any other Person.
(g) The underwriting standards utilized and ratings applied by
Seller and, to the knowledge of Seller, by any other Person that is a party to
or bound by any reinsurance, coinsurance or other similar contract with Seller
conform in all respects to industry accepted practices and to the standards and
ratings required pursuant to the terms of the respective reinsurance,
coinsurance or other similar contracts.
(h) To the knowledge of Seller, each producer who wrote, sold
or produced any portion of the Annuity Business for Seller was duly licensed as
an insurance agent (for the type of business written, sold or produced by such
producer) in the particular jurisdiction in which such producer wrote, sold or
produced such business. Except as otherwise provided in
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Schedule 3.8(h) attached hereto, to the knowledge of Seller, no insurance agent
who wrote, sold or produced any portion of the Annuity Business for Seller
violated in any material respect any terms or provisions of any Law, except such
violations as have been (i) cured, (ii) resolved through agreements with
applicable Governmental Entities or (iii) are barred by an applicable statute of
limitations.
(i) The treatment under the Internal Revenue Code of 1986, as
amended, and any successor thereto (the "Code") of all Annuity Contracts is no
less favorable to the Policyholder thereof than the treatment under the Code for
which such Annuity Contracts were intended to qualify at the time of their
issuance, except for any failure to qualify for such treatment that results from
(i) changes to the Code, regulations, pronouncements, announcements or guidance
issued in connection with the treatment of the contracts under the Code which
were enacted (or have an effective date) after the Closing Date, (ii)
amendments, modifications, supplements, riders, endorsements or revisions to the
Annuity Contracts after the Closing Date or (iii) changes in the manner in which
the Annuity Contracts are administered after the Closing Date.
Section 3.9. Permits, Licenses and Franchises. Schedule 3.9 attached
hereto lists all jurisdictions in which Seller is licensed to issue the Annuity
Contracts and each Annuity Contract form utilized in the respective
jurisdictions. Seller has been duly authorized by all relevant Governmental
Entities to issue the Annuity Contracts that it is currently writing, and was
duly authorized to issue the Annuity Contracts that it is not currently writing
at the time such Annuity Contracts were issued, in each of the respective
jurisdictions in which it conducts the Annuity Business. Except as set forth on
Schedule 3.9 attached hereto, Seller has all Permits necessary
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to conduct the Annuity Business as currently conducted by Seller. All of the
Permits are in full force and effect and Seller has not received notice from any
Governmental Entity of its intention to revoke or not renew any Permit, except
for such failures to have Permits in full force and effect, revocations,
non-renewals and other events which do not and will not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.10. Regulatory Filings. Seller has made available for
inspection by Purchaser all material registrations, filings and submissions made
by Seller with any Governmental Entity and final financial and market conduct
reports of examinations with respect to Seller issued by any such Governmental
Entity along with copies of Seller's responses thereto to the extent that such
registrations, filings, submissions and reports relate to the Annuity Business
and were made or issued on or subsequent to January 1, 1993. Except as listed on
Schedule 3.10 attached hereto, Seller has filed all material reports,
statements, documents, registrations, filings or submissions (including without
limitation any sales, marketing or advertising material) required to be filed by
it with any Governmental Entity to the extent the same relate to the Annuity
Business. Except as listed on Schedule 3.10 attached hereto, (a) no material
deficiencies have been asserted by any such Governmental Entity with respect to
such registrations, filings or submissions that have not been satisfied; (b)
such registrations, filings or submissions were in material compliance with
applicable Law when filed; (c) since December 31, 1994, Seller has not submitted
any written response with respect to material comments related to the Annuity
Business from any Governmental Entity concerning such registrations, filings,
submissions or reports of examination; (d) since December 31, 1992, no fine or
penalty has been imposed on Seller by any Governmental Entity specifically with
respect to the Annuity Business; and (e) no
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deposits have been made by Seller with, or at the direction of, any Governmental
Entity with respect to the Annuity Business which were not shown in the most
recent Annual Statement of Seller.
Section 3.11. Reinsurance. Schedule 3.11 sets forth all reinsurance or
co-insurance agreements (together with all other agreements related thereto)
related to the Annuity Contracts to which Seller is a party and all such
contracts, arrangements, treaties, understandings and agreements under which
Seller has any obligation to cede or assume insurance. All such agreements are
valid and binding against Seller and, to the knowledge of Seller, the other
parties thereto, and are in full force and effect in accordance with their terms
and conform in all material respects to all applicable Laws and neither Seller,
nor to the knowledge of Seller, any other party thereto is in material default
under any such agreement. Except as otherwise provided on Schedule 3.11, no
party to any such agreement has audited Seller with respect thereto.
Section 3.12. Absence of Certain Changes or Events. Except as disclosed
on Schedule 3.12 attached hereto or except as expressly contemplated or required
by this Agreement, since December 31, 1995, (a) with respect to Seller's Annuity
Business, Seller has not, except in the ordinary course of the Annuity Business
consistent with past practice, (I) engaged in any material transaction, (II)
entered into any material agreement or (III) waived or released any material
right or obligation and (b) except as disclosed on Schedule 3.12 attached
hereto, there has not been, occurred or arisen in connection with Seller's
Annuity Business:
(i) any work stoppage, strike, labor difficulty or
union organizational campaign (in process or threatened) at or
affecting Seller's Annuity Business;
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(ii) any payment, discharge or satisfaction by
Seller of any material Lien or liability other than material
Liens or liabilities that were paid, discharged or satisfied
in the ordinary course of business and consistent with past
practice;
(iii) any sale, transfer or conveyance of any
investments or other assets of Seller related to the Annuity
Business with an individual Book Value in excess of $100,000
or an aggregate Book Value in excess of $10,000,000, except in
the ordinary course of business and consistent with past
practice;
(iv) any amendment, termination, waiver, disposal or
lapse of, or other failure to preserve, any material license,
Permit or other form of authorization of Seller;
(v) any amendment of, or any failure by Seller to
perform all of its obligations under, or any default under, or
any waiver of any right under, or any termination (other than
on the stated expiration date) of, any contract that involves
or reasonably would involve the annual expenditure or receipt
by Seller of more than $100,000 except for actions taken with
respect to Annuity Contracts in force (including, without
limitation, reinsurance thereon) in the ordinary course of
business and consistent with past practice;
(vi) any termination, amendment or entering into by
Seller as ceding or assuming insurer of any reinsurance,
coinsurance or other similar contract or any trust agreement
or security agreement related thereto except as disclosed in
Schedule 3.11 attached hereto or contemplated hereby;
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(vii) any Lien created on or in any of the Purchased
Assets or assumed by Seller with respect to any of such
assets, which Lien relates to liabilities individually or in
the aggregate exceeding $100,000 (but excluding Liens arising
through securities lending in the ordinary course of Seller's
business);
(viii) any material change in any underwriting,
actuarial, investment, financial reporting, marketing or
accounting practice or policy followed by Seller related to
the Annuity Business, or in any assumption underlying such a
practice or policy, or in any method of calculating any bad
debt, contingency, or other reserve for financial reporting or
any other accounting purposes related to the Annuity Business
other than as required by GAAP, SAP or applicable Law.
(ix) any contract or agreement, written or oral, to
take any of the actions set forth in clauses (i) through
(viii) of this Section 3.12.
Section 3.13. Assigned Contracts. Each of the Assigned Contracts is
valid and binding against Seller and, to the knowledge of Seller, each other
party thereto, and in full force and effect according to its terms and is freely
assignable to Purchaser pursuant to this Agreement and the Assignment and
Assumption Agreement without notice to or consent of any person or entity, other
than as specified on Schedule 3.5 attached hereto. Other than as set forth on
Schedule 3.13 attached hereto, except for the Assigned Contracts, there are no
contracts of Seller necessary to the Annuity Business as currently conducted by
Seller. Neither Seller nor, to Seller's knowledge, any other party to any
Assigned Contract is in violation, breach or default in any material respect
with respect to any such Assigned Contract.
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Section 3.14. Intellectual Property. Schedule 3.14 attached hereto sets
forth a list of all computer software programs and other intellectual property
used by Seller that Seller reasonably believes to be necessary to conduct the
Annuity Business as currently being conducted. Schedule 3.14 attached hereto
also sets forth whether each such computer software program is (i) owned by
Seller or (ii) licensed by Seller. Schedule 3.14 attached hereto sets forth each
licensing agreement pursuant to which Seller has the right to use such licensed
software. To the knowledge of Seller, Seller is not in conflict with or in
violation or infringement of any rights, asserted or otherwise, of any other
Person with respect to any such software and other intellectual property, nor
has Seller received any notice of any such conflict, violation or infringement.
Seller has the non-exclusive right to use all such licensed software and other
intellectual property and will have the right to use such software after the
Closing Date to the extent necessary to provide administration services under
the Transition Services Agreement and the Transition Services Agreement
contemplated by the JANY Stock Purchase Agreement so long as the services
provided thereunder do not substantively change from the administration
currently conducted by Seller. Schedule 3.14 attached hereto sets forth the
amounts paid by Seller since December 31, 1995 for use of the licensed software.
Section 3.15. Purchased Assets. Seller has good and marketable title to
all assets included within the Purchased Assets (other than cash and the
Assigned Contracts), free of any Lien, except to the extent the Annuity
Contracts are subject to a reinsurance, coinsurance or similar agreement as set
forth on Schedule 3.11 attached hereto. As of June 21, 1996, the June 21
Portfolio Securities in the aggregate had a Book Value equal to the amount set
forth on
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Schedule 1.2(a)(i) attached hereto and an aggregate gross book annual effective
yield (before reduction for third party mortgage servicing costs) of at least
8.18%.
Section 3.16. Statutory Financial Statements. Seller has previously
delivered to Purchaser true, complete and correct copies of the audited
statements of admitted assets, liabilities and capital and surplus (statutory
basis) of Seller as of December 31, 1993, 1994 and 1995, and the related
summaries of operations, statements of capital and surplus and cash flow
(statutory basis) for the years then ended, together with the notes related
thereto. Seller has previously delivered to Purchaser true, complete and correct
copies of the Annual Statements of Seller as filed with the Department of
Commerce, State of Minnesota for the years ended December 31, 1993, 1994 and
1995, together with all attachments, exhibits and schedules thereto and all
affirmations and certifications filed therewith applicable to the Annuity
Business and the actuarial opinions applicable to the Annuity Business for such
years. Seller has previously made available to Purchaser for review (without the
right to remove or make copies) all auditors' work papers related to the Annuity
Business and related to the foregoing audited financial information. Seller has
previously delivered to Purchaser true, complete and correct copies of the
Quarterly Statements of Seller as filed with the Department of Commerce, State
of Minnesota for the quarters ended March 31, 1996, June 30, 1996 and September
30, 1996, together with all attachments, exhibits and schedules thereto and all
affirmations and certifications filed therewith applicable to the Annuity
Business. Each such Annual Statement and Quarterly Statement complied in all
material respects with all applicable Laws when so filed and was timely filed
with all required Governmental Entities. No material deficiencies have been
asserted or are otherwise known by Seller with respect thereto. Each such
financial
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statement (and the exhibits and schedules relating thereto), including without
limitation each statement of assets, liabilities, surplus and other funds
(statutory basis) of Seller and each of the summaries of operations, statements
of capital and surplus and cash flow (statutory basis) contained in the
respective financial statement was prepared in accordance with SAP applied on a
consistent basis (except for changes, if any, disclosed therein) and each such
Annual Statement and Quarterly Statement fairly presents (in accordance with
SAP) the financial condition of Seller as of the respective dates thereof, and
its results of operations or cash flows, as the case may be, for and during the
respective periods covered thereby (provided the Quarterly Statements are
subject to normal year end adjustments and lack footnotes and other presentation
items). There were no material liabilities affecting Seller as of December 31,
1995 required in accordance with SAP to be reflected or disclosed in the Annual
Statement for the period then ended, or as of March 31, 1996, June 30, 1996 or
September 30, 1996 required in accordance with SAP to be reflected or disclosed
in the Quarterly Statement for the period then ended, which are not so reflected
or disclosed therein. Seller has not prepared any GAAP financial statements with
respect to the Annuity Business.
Section 3.17. Reserves. The Reserve Liabilities as of June 30, 1996 and
September 21, 1996 have been calculated in the manner reflected on Schedule
3.17(a) attached hereto. Except as set forth in Schedule 3.17(b) attached
hereto, all reserves with respect to Annuity Contracts as established or
reflected, and all other provisions made for policy and contract claims with
respect to Annuity Contracts (calculated gross of reinsurance applicable to
London Life Reinsurance Company pursuant to the agreement dated October 1, 1996
and Lincoln National Reassurance Company pursuant to the agreement dated
December 31, 1991 and, at a
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minimum, to be calculated to include 66-2/3% of the additional reserves (or such
greater amount of reserves as have actually been posted), solely due to
compliance with Actuarial Guideline 33, for policies issued on or prior to
December 21, 1994, and 100% of such additional reserves (or such greater amount
of reserves as have actually been posted) for policies issued subsequent to
December 21, 1994) (collectively, "Reserve Liabilities"), in the respective
Annual and Quarterly Statements were determined in accordance with SAP and
generally recognized actuarial methods and standards, consistently applied, were
fairly stated in accordance with sound actuarial principles, using prescribed
morbidity and mortality tables and interest rates that are in accordance with
the nature of the benefits specified in the related Annuity Contracts of Seller,
and such Reserve Liabilities and other provisions met the applicable
requirements of the insurance Laws and regulations of the State of Minnesota.
Without limitation of the foregoing sentence, to Seller's knowledge, adequate
provision for all Reserve Liabilities has been made to cover the total amount of
all reasonably anticipated matured and unmatured benefits, claims and other
liabilities under all Annuity Contracts.
Section 3.18. Threats of Cancellation. Except as set forth in Schedule
3.18 attached hereto, since December 31, 1995 through the date of this
Agreement, no Policyholder, group of Policyholder Affiliates, or Persons
writing, selling or producing, either directly or through reinsurance assumed,
insurance business that individually or in the aggregate for each such
Policyholder, group or Person, respectively, accounted for (i) 5% or more of the
annual premium or annuity income (as determined in accordance with SAP) or (ii)
1% of account values of Seller's and JANY's Annuity Business, taken as a whole,
in each case at or for the 12 month
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period then ended, has terminated or, to the knowledge of Seller, threatened to
terminate its relationship with Seller.
Section 3.19. Credited Rates. Seller has complied and is in compliance
with all applicable contract provisions and Laws associated with credited
interest rates related to the Annuity Contracts.
Section 3.20. Related Agreements. Each of the Related Agreements is
similar in all material respects to one of the forms set forth on Schedule 3.20
attached hereto. Seller knows of no Related Agreements other than those listed
in Schedule 3.20 attached hereto concerning commissions payable on the Annuity
Contracts. Seller is not in breach of any of the Related Agreements, and to the
knowledge of Seller, none of the other parties to the Related Agreements is in
breach thereof.
Section 3.21. Third Party Administration Agreements. Schedule 3.21
attached hereto lists all third party administration agreements relating to the
Annuity Contracts, regardless of whether Seller is receiving or providing
services (the "Third Party Administration Agreements"). The Third Party
Administration Agreements are valid and binding obligations of Seller,
enforceable against Seller in accordance with their terms, and to Seller's
knowledge, are valid and binding obligations of the other parties thereto,
enforceable against such other parties in accordance with their terms. Seller is
not in breach of any of such Third Party Administration Agreements and, to the
knowledge of Seller, none of the other parties to such Third Party
Administration Agreements is in breach thereof.
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Section 3.22. Mortgage Loans.
(a) Except as set forth on Schedule 3.22(a) attached hereto,
Seller is the holder of a first lien position on the Mortgage Loans free and
clear of any other Liens, except for with respect to the Mortgaged Property or
the mortgage related thereto (a) the lien of current real property taxes and
assessments, ground rents, personal property taxes, water rates, water frontage
charges and/or meter charges, sewer taxes or rents and other similar charges or
assessments, in each case not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record of a
type acceptable to lending institutions generally or specifically referred to in
the title insurance policy or title opinion issued in connection with the
original loan made with respect to the Mortgaged Property, (c) mechanics' or
similar liens or claims for work, labor and materials, (d) zoning and other land
use restrictions and ordinances, including, without limitation, landmark,
historic and wetland designations, (e) rights of tenants under leases or other
rights of tenants or rights of other occupants of the premises with or without
the legal right to do so, (f) any state of facts an accurate survey would show
with respect to the Mortgaged Property, (g) the failure of the premises to
comply with applicable occupancy Law or municipal violations of record, (h) in
the case where the Mortgaged Property is a condominium unit, the lien of a
condominium association on such Mortgaged Property for unpaid maintenance or
common expense assessments not yet due and payable, (i) littoral or riparian
rights, if any, (j) any right, title or interest in any minerals, mineral rights
or related matters including but not limited to oil, gas, coal and other
hydrocarbons whether or not shown by the public records and (l) the lien of any
secondary financing, in each case, which do not materially impair the Mortgage
Loan ("Permitted
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Mortgage Liens"). As of the date specified therein, the (i) loan number, (ii)
loan class, (iii) lien priority, (iv) borrower's name, (v) property address,
(vi) outstanding principal amount, (vii) book value, (viii) delinquency status,
(ix) status code, (x) current interest rate (or the method of calculating same),
(xi) service fee rate, (xii) net interest rate, (xiii) maturity date and (xiv)
percentage owned by Seller for each Mortgage Loan are materially as set forth in
the Mortgage Loan Schedule. Except as set forth on Schedule 3.22(a) attached
hereto, the proceeds of each Mortgage Loan have been fully disbursed and there
are no future or additional advances to be made with respect to any Mortgage
Loans. Except as set forth on Schedule 3.22(a) attached hereto, no Mortgage Loan
has been delinquent for a period of more than 30 days within the last 12 months
in the payment of any principal or interest thereon. Each Mortgage Loan is a
permitted investment for Minnesota life insurers under applicable Law.
(b) With respect to each Mortgage Loan and any and all Loan
Documents relating thereto, to Seller's knowledge (i) each of such Mortgage
Loans and Loan Documents are the legal, valid, and binding obligation of the
mortgagor, obligor or the guarantor, as applicable, and each is enforceable in
accordance with its terms, except as enforcement thereof may be limited by
applicable bankruptcy or insolvency Laws, provided that in this case, Seller may
rely upon borrower's closing counsel's opinion letter if originated by Seller,
or upon representations and warranties given to Seller by another financial
institution or entity if purchased by Seller, or in the absence of either,
without due inquiry or investigation by Seller so long as Purchaser is assigned
the benefits of such opinions, representations or warranties, (ii) none of such
Mortgage Loans or Loan Documents is the subject of any agreement, contract or
other arrangement (other than this Agreement) pursuant to which any interest in
any Mortgage
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Loan or any payment due under any Mortgage Loan or with respect to any Mortgage
Property has been or is intended to be sold, used as collateral, transferred to
or otherwise disposed of to any Person or Persons by the original lender,
subject to the participatory interests of other lenders or investors as are set
forth on Schedule 3.22(b) attached hereto.
(c) With respect to each Mortgage Loan and any and all Loan
Documents relating thereto, the mortgagor does not have a valid defense to the
payment in full of such Mortgage Loan that arises from applicable Laws and such
Mortgage Loan is not subject to any right of rescission, set-off, abatement,
diminution or counterclaim, except in any case as such right or defense may be
provided by bankruptcy, insolvency, reorganization or other similar Laws
affecting the enforcement of creditors' rights generally and by general equity
principles (regardless of whether such enforcement is considered in a proceeding
in equity or at law).
(d) None of the terms of any Loan Documents relating to any
Mortgage Loan have been waived, amended or modified in any respect, except as
set forth on the Mortgage Loan Schedule and except for such waivers, amendments
and modifications as do not adversely affect (i) any mortgagor's, obligor's or
guarantor's obligation to pay principal, interest or other sums required
(including the timing of such payments) to be paid under such Loan Documents,
(ii) Seller's Liens against the Mortgage Property securing the Mortgage Loan or
(iii) the enforceability in a timely manner of such Liens. Except as set forth
in the Mortgage Loan Schedule, no Mortgage Loan has been satisfied, subordinated
or rescinded, in whole or in part, except (i) upon full payment of the
underlying loan or, in the case of a partial release, in connection with the
receipt of an independent third party MAI self-contained appraisal evidencing
that there is sufficient collateral (which for this purposes shall mean no more
than
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80% loan to value) remaining with respect to such Mortgage Loan or (ii) as a
result of a final judgment or its equivalent of a condemnation or eminent domain
proceeding which does not materially impair the Mortgaged Property or Mortgage
Loan. Except as set forth on Schedule 3.22(d) attached hereto, no mortgagor,
obligor nor any guarantor listed on the Mortgage Loan Schedule in respect of any
Mortgage Loan has been released, in whole or in part except in accordance with
the terms of the Note and Mortgage, except in the case of a partial release
either (i) as a result of a written loan modification or assumption agreement or
(ii) if, prior to the release of any mortgagor, obligor or guarantor, a
determination was made by Seller that (a) such mortgagor, obligor or guarantor
was insolvent or deemed to have a lack of ability to make any material
contribution with respect to the outstanding Mortgage Loan debt and (b) that the
remaining mortgagor, obligor or guarantor was able to repay the outstanding
Mortgage Loan debt, in either case such that the release of any mortgagor,
obligor or guarantor would not have a material adverse impact on the repayment
of the Mortgage Loan.
(e) None of the Mortgage Loans are cross-collateralized with
any other mortgage loan except for another Mortgage Loan other than a
cross-collateralization which does not have a material adverse impact on the
repayment of the Mortgage Loan.
(f) The Mortgage File with respect to each Mortgage Loan
contains all of the Loan Documents relating to each such Mortgage Loan,
including, but not limited to, all documents described on Exhibit K and all such
documents are true, complete and correct copies of the documents they purport to
be. Except as set forth on Schedule 3.22(f) attached hereto, the Mortgage Loan
Files contain the original promissory notes and/or other evidence of
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indebtedness (including all amendments thereto) and the originals of all credit
enhancements, if any, as applicable.
(g) With regard to the Mortgaged Property relating to any
Mortgage Loan, to the knowledge of Seller no material amount of Hazardous
Substances has been disposed of or identified on, under or at such Mortgaged
Property the presence of which is either in violation of Law or would, under
applicable Laws require (or permit any Governmental Entity to require) removal
or remediation of such Hazardous Substance, except to the extent that removal or
remediation has occurred or will occur prior to the Closing Date and except as
would not materially affect the Mortgaged Property or the repayment of the
Mortgaged Loan.
(h) To the knowledge of Seller, there is no pending or
threatened condemnation proceeding affecting any Mortgaged Property, or any part
thereof, which could have an adverse effect upon the current use of such
Mortgaged Property.
(i) To the knowledge of Seller, there is no pending or
threatened Action relating to such Mortgage Loan affecting the Mortgaged
Property relating to such Mortgage Loan which would have a material and adverse
effect upon such Mortgage Loan.
(j) Seller has received no written notice (i) of any material
violation of any Law which is a direct result of the maintenance, operation,
occupancy, or use of any of the Mortgaged Property related to such Mortgage
Loan, in its present manner such that the violation would materially adversely
affect the operation, occupancy or other use of such Mortgaged Property and (ii)
that any material Permits and approvals required by Governmental Entities having
jurisdiction over the operation of such Mortgaged Property in its present manner
have not been performed, issued or paid for or are not in full force and effect.
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(k) With respect to each Mortgage Loan, (i) each Mortgage is
covered by a title insurance policy or where customary an opinion of title from
a law firm in such jurisdiction insuring or opining that the Mortgage creates
the first priority Lien it purports to create and that the Mortgage is not
subject to any defect or encumbrance except Permitted Mortgage Liens, (ii) no
claims have been made by Seller or, to Seller's knowledge, any other Person
under any title policy relating to any Mortgage Loan, (iii) there has been no
act or omission by Seller, or to Seller's knowledge, any party holding an
interest in any title policy (including without limitation any failure to pay
the premiums therefor) that creates sufficient grounds for the defense by the
title insurer of any claims by the insured or that otherwise limits the title
insurer's liability under any title policy relating to any Mortgage Loan and
(iv) there has been no act or omission by Seller, or to Seller's knowledge, any
party holding an interest in any title policy that has caused a subordination of
the priority of any Lien as insured under any title policy relating to any
Mortgage Loan. Seller is the insured under any title policy relating to any
Mortgage Loan, either by name, endorsement or by virtue of being the successor
to the original named insured lender. Seller is either the sole insured or a
participant insured in those Mortgage Loans in which the Seller does not hold
100% of the first Lien.
(l) There are no delinquent real estate taxes in respect of
any Mortgage Property except as set forth on the Mortgage Loan Schedule or any
deficiency in any obligor's obligations to pay amounts into escrow (other than
in the case of escrows where property taxes have been increased in the past 12
months).
(m) If upon origination the Mortgaged Property relating to
such Mortgage Loan was in an area identified in the Federal Register by the
Federal Emergency Management
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Agency as having special flood hazards (and the flood insurance described below
is available), a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administrator, if available, is in effect
with a generally acceptable insurance carrier, in an amount representing
coverage not less than the lesser of (i) the unpaid principal balance of such
Mortgage Loan, (ii) the full insurable value of such Mortgaged Property or (iii)
the maximum amount of insurance available under the Flood Disaster Protection
Act of 1973.
(n) A hazard insurance policy with a standard mortgagee clause
is in effect with respect to each Mortgage Loan (other than a Mortgage Loan
secured solely by unimproved land), in an amount representing coverage not less
than the lesser of (i) the unpaid principal balance of such Mortgage Loan or
(ii) the full insurable value of the Mortgaged Property relating to such
Mortgage Loan.
(o) With respect to any Mortgage Loan that is secured in whole
or in part by the interest of a borrower as a lessee under a ground lease of a
Mortgaged Property, such ground lease has an original term (including any
extension options set forth therein) which extends not less than five years
beyond the maturity date of the related Mortgage Loan.
(p) All servicing contracts related to the Mortgage Loans
originated by Seller are terminable at the election of Seller at termination
fees that are no greater than customary termination fees paid in accordance with
industry practice.
Section 3.23. No Waiver of Defenses. Seller has not waived any
defenses, claims or Actions which would have been available to Seller under the
Annuity Contracts or the Related Agreements.
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Section 3.24. Agent Balances. Schedule 3.24 attached hereto sets forth
all producers with respect to the Annuity Contracts having a balance owed by
such producer to Seller for fees and commissions relating to the Annuity
Contracts and the nature and amount of such balance.
Section 3.25. GAAP Financial Statements. On or prior to the date
hereof, Seller has delivered to Purchaser true, correct and complete copies of
(a) the audited consolidated balance sheets of John Alden Financial Corporation
("John Alden") 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 John Alden,
and (b) the audited consolidated statements of income, stockholders' equity and
cash flows of John Alden 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 "John
Alden 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 John
Alden and its subsidiaries for the quarters ended March 31, 1996, June 30, 1996
and September 30, 1996, prepared in accordance with GAAP (the "Interim John
Alden Financial Statements"). The John Alden Financial Statements and the
Interim John Alden Financial Statements are based on the books and records of
John Alden and its subsidiaries and have been prepared in accordance with GAAP
consistently applied (except in the case of the Interim John Alden Financial
Statements for normal year end adjustments). The John Alden Financial Statements
have been, audited by Price Waterhouse. The John Alden Financial Statements and
the Interim John Alden Financial Statements fairly present in all material
respects the consolidated financial position and results
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<PAGE> 48
of operations of John Alden and its subsidiaries as of the dates and for the
periods indicated therein.
For purposes of this Article 3, references to the knowledge of Seller
means, after reasonable inquiry, the actual knowledge of officers of Seller
having the title of Senior Vice President or higher.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1. Organization and Standing. Purchaser is a corporation duly
organized and validly existing under the Laws of the State of Arizona. Purchaser
has all corporate power and authority necessary or required by Law to own, lease
and operate its assets, properties and business and to carry on the operations
of its business as currently conducted by it.
Section 4.2. Authorization. Purchaser has all corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and under each of the Ancillary Agreements to be executed by it.
Purchaser is duly licensed, qualified or admitted to do business and is in good
standing in all jurisdictions in which it is required to be so qualified,
licensed or admitted to do business by the Laws thereof, except where the
failure to so qualify, be admitted or licensed, individually or in the aggregate
is not reasonably likely to have a Material Adverse Affect on Purchaser. The
execution and delivery by Purchaser of this Agreement and the Ancillary
Agreements to be executed by it, and the performance by
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<PAGE> 49
Purchaser of its obligations under such agreements, have been duly authorized by
all necessary corporate and shareholder actions on the part of Purchaser. This
Agreement and each of the Ancillary Agreements executed by Purchaser, when
executed by all of the parties thereto, will constitute a valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, moratorium or other Laws which may affect creditors' rights and
remedies generally and by principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
Section 4.3. Actions and Proceedings. Except as disclosed on Schedule
4.3 attached hereto, (a) there are no outstanding Orders by or with any court,
arbitrator or Governmental Entity before which Purchaser or any of its material
Affiliates is or was a party that, individually or in the aggregate, have a
Material Adverse Effect on Purchaser, and (b) there are no Actions pending or,
to Purchaser's knowledge, threatened against Purchaser or any of its material
Affiliates which would, individually or in the aggregate, have a Material
Adverse Effect on Purchaser.
Section 4.4. No Conflict or Violation. Except as disclosed on Schedule
4.4 attached hereto, the execution, delivery and performance by Purchaser of
this Agreement and the Ancillary Agreements to which it is a party in accordance
with the respective terms and conditions hereof and thereof do not and will not
(a) violate any provision of the charter, by-laws or other organizational
document of Purchaser, in each case, as amended to date, (b) violate, constitute
a default under, or result in the breach, cancellation or termination of,
accelerate the performance required under, or result in the creation of any Lien
upon any of the
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assets of Purchaser, pursuant to, any mortgage, deed of trust, guaranty, note,
indenture, bond, lease, agreement or other instrument to which Purchaser is a
party or by or to which it or any of its assets may be bound, (c) violate any
Order of any court, arbitrator or Governmental Entity against, or binding upon,
or any agreement with, or condition imposed by, any court, arbitrator or
Governmental Entity binding upon Purchaser or any of its assets, (d) violate any
Law or (e) result in the breach of any of the terms or conditions of, constitute
a default under, or otherwise cause an impairment or revocation of, any Permit
necessary for Purchaser to conduct the Annuity Business.
Section 4.5. Consents and Approvals. Except as required under the HSR
Act or as set forth on Schedule 4.5 attached hereto, no consent, approval,
exemption or authorization is required to be obtained from, no notice is
required to be given to and no filing is required to be made with any third
party (including, without limitation, Governmental Entities of competent
jurisdiction) by Purchaser in order (a) for this Agreement, each of the
Ancillary Agreements and each of the Assigned Contracts to which Purchaser will
be a party to constitute a valid and binding obligation of Purchaser, (b) to
authorize or permit the consummation of the transactions contemplated hereby by
Purchaser or (c) to authorize or permit Purchaser to conduct the Annuity
Business after the Closing.
Section 4.6. Brokerage and Financial Advisers. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, Purchaser in connection with this Agreement or the
transactions contemplated hereby, except Goldman Sachs & Company, whose fees for
services rendered in connection with such transactions will be paid by
Purchaser.
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Section 4.7. GAAP Financial Statements. On or prior to the date hereof,
Purchaser has delivered to Seller true, correct and complete copies of (a) the
audited consolidated balance sheets of SunAmerica Inc. ("SunAmerica") and its
subsidiaries as of December 31, 1995 and 1994, prepared in accordance with GAAP,
together with the notes thereon and the related report of Price Waterhouse, the
independent certified public accountant of SunAmerica, and (b) the audited
consolidated statements of income, stockholders' equity and cash flows of
SunAmerica and its subsidiaries for the years ended December 31, 1995, 1994 and
1993 prepared in accordance with GAAP, together with the notes thereon and the
related report of Price Waterhouse (collectively, the "SunAmerica Financial
Statements"). Purchaser has delivered to Seller true, correct and complete
copies of the consolidated balance sheets, and the related consolidated
statements of income, stockholders' equity and cash flows of SunAmerica and its
subsidiaries for the quarters ended March 31, 1996 and June 30, 1996, prepared
in accordance with GAAP (the "Interim SunAmerica Financial Statements"). The
SunAmerica Financial Statements and the Interim SunAmerica Financial Statements
are based on the books and records of SunAmerica and its subsidiaries, and the
SunAmerica Financial Statements have been prepared in accordance with GAAP
consistently applied, audited by Price Waterhouse and fairly present in all
material respects the consolidated financial position and results of operations
of SunAmerica and its subsidiaries as of the dates and for the periods indicated
therein.
Section 4.8. Statutory Financial Statements. Purchaser has furnished to
Seller true, complete and correct copies of the Annual Statements of Purchaser
as filed with the Arizona Department of Insurance for the years ended December
31, 1995, 1994 and 1993, together with all attachments, exhibits and schedules
thereto and all affirmations and certifications filed
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<PAGE> 52
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 Moody's
Investor Service, Inc. Financial Strength rating of Purchaser is A2. Purchaser's
A.M. Best & Co. rating is A+ (superior) and its Duff & Phelps rating is AA.
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For purposes of this Article 4, references to the knowledge of
Purchaser means, after reasonable inquiry, the actual knowledge of officers of
Purchaser having the title of Senior Vice President or higher.
ARTICLE 5
PRE-CLOSING COVENANTS
Section 5.1. Conduct of Business.
(a) Prior to the Closing, Seller shall, unless Seller shall
receive the prior written consent of Purchaser:
(i) operate the Annuity Business as presently
operated and only in the ordinary course and consistent with
past practice (including but not limited to past underwriting
standards and investment philosophies) subject however to such
changes as may be required by changes in applicable Laws or
contemplated by this Agreement ; and
(ii) use commercially reasonable efforts to preserve
its relationship with and the goodwill of its brokers,
customers, suppliers, employees and other Persons having
business dealings with Seller in connection with the Annuity
Business.
(b) Without limiting the generality of the foregoing, Seller
will:
(i) use commercially reasonable efforts to maintain
in full force and effect all material contracts, documents and
arrangements related to the Annuity Business, to continue all
current marketing and selling programs relating to the
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Annuity Business in accordance with its current marketing
plan, to process Annuity Contracts consistent with past
practice, and to maintain each rating classification assigned
to Seller as of the date hereof by insurance rating agencies.
(ii) cause the Books and Records to be maintained in
the usual manner and consistent with past practice and not
permit a material change in any underwriting, investment,
actuarial, financial reporting or accounting practice or
policy of Seller or in any assumption underlying such a
practice or policy, or in any method of calculating any bad
debt, contingency or other reserve for financial reporting
purposes (including without limitation any practice, policy,
assumption or method relating to or affecting the
determination of Annuity Contracts in force, premium or
investment income, Reserve Liabilities or operating ratios
with respect to expenses, losses or lapses) except as may be
required by a change in GAAP, SAP or Law.
(iii) (A) cause all Reserve Liabilities with respect
to Annuity Contracts established or reflected in the Books and
Records of Seller to be (1) established or reflected on a
basis consistent with those Reserve Liabilities and reserving
methods followed by Seller in the preparation of its December
31, 1995 Annual Statement filed with the Department of
Commerce, State of Minnesota and (2) adequate to cover the
total amount of all reasonably anticipated matured and
unmatured benefits, dividends, losses, claims, expenses and
other liabilities of Seller under all Annuity Contracts
pursuant to which Seller has or will have any liability
(including without limitation any liability arising under or
as a result of
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any reinsurance, coinsurance or other similar contract); and
(B) continue to own assets that qualify as legal reserve
assets under all applicable Laws in an amount at least equal
to its Reserve Liabilities.
(iv) continue to comply with all Laws applicable to
its Annuity Business, operations or affairs.
(c) Unless otherwise provided in this Agreement, without the
approval of Purchaser, which approval shall not be unreasonably withheld, from
and after the date hereof until the Closing, Seller will refrain from:
(i) selling or otherwise transferring, assigning,
disposing of, granting or permitting to exist any Lien on, any
October 21 Portfolio Securities;
(ii) increasing the rates of compensation (including
bonuses) payable or to become payable to any officer,
employee, agent, independent contractor or consultant of
Seller in connection with the Annuity Business other than in
the ordinary course of business, consistent with past
practice;
(iii) except in the ordinary course of business
consistent with past practice, incurring any obligation,
liability or indebtedness, incurring any extraordinary losses,
or disposing of, canceling, waiving or permitting to lapse any
rights of material value relating to or affecting the Annuity
Business;
(iv) changing in any material respect its accounting
principles or practices (including, without limitation, any
changes in depreciation or amortization policies or rates or
any changes in any assumptions underlying any
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method of calculating reserves) other than as required by a
change in GAAP, SAP or Law;
(v) except as disclosed herein, entering into or
amending or terminating any transaction or contract related to
the Annuity Business that could reasonably be expected to have
a Material Adverse Effect;
(vi) except in the ordinary course of business
consistent with past practice, terminating, amending or
executing any material reinsurance, coinsurance or other
similar contract, as ceding or assuming insurer related to the
Annuity Contracts, except as contemplated by Section 5.9
hereof; or
(vii) entering into any contract or agreement to do
any of the foregoing.
Section 5.2. Certain Transactions. Except as contemplated by the
reinsurance agreements listed on Schedule 3.11 attached hereto, from the date of
this Agreement through the Closing, neither Seller nor any of its directors or
officers will (and Seller shall cause its investment bankers and legal counsel
not to) solicit, encourage, initiate or engage in any negotiations or
discussions with, or provide any information to, or otherwise cooperate in any
other manner with, any Person or group (other than Purchaser and its Affiliates)
concerning any coinsurance, reinsurance, replacement, sale or other disposition,
directly or indirectly, of the Annuity Business.
Section 5.3. Investigations. From the date hereof through the Closing
Date, Purchaser shall be entitled, through its employees, counsel, actuaries and
other Representatives, to make such investigation of the assets, liabilities,
business and operations of the Annuity Business, and such examination of the
Books and Records, as Purchaser may reasonably request, including,
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without limitation, for the purpose of investigating the financial condition,
service quality and operations of Seller. Any investigation, examination or
interview by Purchaser of employees of Seller shall be conducted at reasonable
times upon reasonable prior notice; and each of the Parties and its officers,
employees and Representatives, including, without limitation, counsel,
investment bankers and independent public accountants, shall cooperate with the
other's employees and Representatives, as the case may be, in connection with
such review and examination; provided, however, that such examination shall not
be deemed a waiver by Purchaser of any of its rights with respect to the
representations and warranties of Seller.
Section 5.4. HSR Act Filings. Seller and Purchaser shall, as promptly
as practicable, file, or cause to be filed, Notification and Report Forms under
the HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
in connection with the transactions contemplated by this Agreement, the
Ancillary Agreements and the other agreements contemplated hereby and thereby,
and will use their respective reasonable efforts to respond as promptly as
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation and to cause the waiting periods under
the HSR Act to terminate or expire at the earliest possible date. Seller and
Purchaser will each furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of necessary filings or submissions to any government or regulatory
agency, including, without limitation, any filings necessary under the
provisions of the HSR Act.
Section 5.5. Consents and Reasonable Efforts. Seller and Purchaser
shall cooperate and use their commercially reasonable efforts to obtain all
consents, approvals and agreements
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of, and to give and make all notices and filings with, any Governmental
Entities, necessary to authorize, approve or permit the consummation of the
transactions contemplated by this Agreement, the Ancillary Agreements and the
other agreements contemplated hereby and thereby. Seller shall use its
commercially reasonable efforts to obtain all approvals and consents to the
transactions contemplated by this Agreement and the Ancillary Agreements as set
forth on Schedule 3.5 attached hereto. Purchaser will use its commercially
reasonable efforts to obtain all approvals and consents to the transactions
contemplated by this Agreement and the Ancillary Agreements as set forth on
Schedule 4.5 attached hereto. Without limiting the foregoing, Purchaser will
permit Representatives of Seller to participate in the meeting at which the
transactions contemplated by this Agreement are presented to the Arizona
Department of Insurance for approval.
Section 5.6. Representations and Warranties. From the date hereof
through the Closing Date, (a) Seller shall use its reasonable efforts to conduct
its affairs in such a manner so that, except as otherwise contemplated or
permitted by this Agreement, the representations and warranties contained in
Article 3 shall continue to be true, complete and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date,
(b) Purchaser shall use its reasonable efforts to conduct its affairs in such a
manner so that, except as otherwise contemplated or permitted by this Agreement,
the representations and warranties as to Purchaser contained in Article 4 shall
continue to be true and correct in all material respects on and as of the
Closing Date as if made on and as of the Closing Date, (c) Seller shall notify
Purchaser promptly of any event, condition or circumstance known to Seller
occurring from the date hereof through the Closing Date that would constitute a
violation or breach of this
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Agreement by Seller and (d) Purchaser shall notify Seller promptly of any event,
condition or circumstance known to Purchaser occurring from the date hereof
through the Closing Date that would constitute a violation or breach of this
Agreement by Purchaser.
Section 5.7. Computer Software and Other Intellectual Property. With
respect to software and other intellectual property listed on Schedule 3.14
attached hereto that is licensed to Seller, but which is not freely assignable
by Seller to Purchaser, Seller will use its best efforts to cooperate with
Purchaser, upon Purchaser's request, to obtain at Purchaser's sole cost and
expense from the licensors of such software and other intellectual property the
right for Purchaser to operate such software and other intellectual property.
Section 5.8. Financial Statements and Reports.
(a) At the time of filing with the Department of Commerce,
State of Minnesota, Seller will deliver to the Purchaser true and complete
copies of each Annual Statement and Quarterly Statement filed after the date
hereof and on or prior to the Closing Date.
(b) From and after the date hereof and through the Closing
Date, Seller shall continue to prepare in the ordinary course of business
consistent with past practice and shall deliver, as soon as available, to
Purchaser, true and complete copies of customarily prepared internal management
information reports (including financial statements, reports and analyses
prepared by or for Seller) prepared by Seller related to the Annuity Business,
including without limitation normal internal reports which Seller prepares (such
as those reflecting weekly net production, surrenders, head count and claims and
monthly cash flow and operations expense) but excluding any statements, reports
or analyses prepared in connection with any analyses of
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the transaction contemplated in this Agreement. Without limiting the foregoing,
Seller will provide to Purchaser weekly a list of the October 21 Portfolio
Securities held by Seller, which reflects the Market Value and Book Value
thereof (monthly) and any changes from the immediately preceding week (weekly),
including, without limitation, weekly maturities, prepayments, sales,
redemptions or similar events.
Section 5.9. Termination of Certain Reinsurance Arrangements. Prior to
the Closing, Seller will terminate the Coinsurance Agreement effective October
1, 1996 between Seller and London Life Reinsurance Company and recapture of the
annuity portion of the Coinsurance Agreement effective December 31, 1991 with
Lincoln National Reassurance Company. Seller shall be responsible for payment of
the recapture fees payable thereunder and, under no circumstances shall
Purchaser be responsible for any costs or fees of any type in connection with
the termination of such agreements.
Section 5.10. Woodland Hills Option. Seller hereby grants to Purchaser
an option to assume Seller's rights and obligations with respect to Seller's
equipment and facilities located at 20950 Warner Center Lane, Woodland Hills,
California 91367, subject to appropriate lessor consent, on the same financial
terms currently available to Seller and on such other terms as Purchaser and
Seller shall mutually agree; provided, however, such option shall result in no
costs to Seller or any ongoing liability to Seller.
Section 5.11. Oxford Put. In the event Purchaser does not obtain the
consent of Oxford Life Insurance Company to the assignment of the Coinsurance
Agreement dated January 31, 1990 between Seller and Oxford Life Insurance
Company and the related trust agreement (the "Oxford Agreement") on or prior to
the 15th Business Day preceding the Closing Date, it will
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on such Business Day notify Purchaser of the failure to obtain such consent and
(i) the Annuity Contracts subject to the Oxford Agreement (the "Oxford Annuity
Contracts") shall be excluded from the Annuity Contracts to be assumed by
Purchaser at the Closing (ii) the policy loans with respect to the Oxford
Annuity Contracts will not be included in the Policy Loans, (iii) the reserve
liabilities with respect to the Oxford Annuity Contracts will not be included in
Reserve Liabilities and (iv) the Oxford Agreement shall not be included as an
Assigned Contract (the "Oxford Put"). If the Oxford Put is implemented, at
Purchaser's election, the Parties will execute and deliver at the Closing an
administration services agreement on terms substantially similar to those of the
Administrative Services Agreement, provided that the compensation will be
structured to provide a pass-through to Purchaser of the compensation payable to
Seller pursuant to the Oxford Agreement with respect to the Oxford Annuity
Contracts. In addition, all references to Oxford Life Insurance Company, the
Oxford Agreement and the Oxford Annuity Contracts in the Schedules to this
Agreement shall be deemed deleted.
Section 5.12. Marketing Agreement. The Parties will negotiate in good
faith towards a marketing agreement, containing among other things, the terms
set forth on Exhibit N attached hereto and such other terms and conditions as
may be mutually acceptable to the Parties.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligations of Purchaser to consummate the transactions
contemplated hereby are, unless waived by Purchaser in accordance with Section
12.4 hereof, subject to the fulfillment, at or before the Closing, of each of
the following conditions:
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(i) No Law or Order of a court, arbitrator or
Governmental Entity of competent jurisdiction shall be in
effect which prohibits, restricts or enjoins, and no Action
shall be pending or threatened which seeks to prohibit,
restrict, enjoin, nullify, seek material damages with respect
to or otherwise materially adversely affect, the consummation
of the transactions contemplated by this Agreement.
(ii) The applicable waiting period under the HSR
Act, including all extensions thereof, shall have expired or
been terminated and Purchaser shall have been furnished with
appropriate evidence, reasonably satisfactory to it, of such
expiration or termination.
(iii) All Permits, consents and waivers required
from all Governmental Entities legally required to consummate
the Closing and to perform this Agreement and each of the
Ancillary Agreements and to consummate the transactions
contemplated herein and thereby shall have been obtained and
shall be in full force and effect and Purchaser shall have
been furnished with appropriate evidence, reasonably
satisfactory to it, of the granting of such Permits, consents
and waivers; provided, however, that this condition shall be
deemed satisfied with respect to approvals of the transactions
contemplated by the Assumption Reinsurance Agreement by state
insurance regulators, upon receipt of the required Permits,
consents and waivers from the Minnesota Department of Commerce
and the Arizona Department of Insurance.
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(iv) All necessary consents to the transactions
contemplated by this Agreement and the Ancillary Agreements
shall have been obtained, including, without limitation, those
listed on Schedule 3.5 attached hereto.
(v) Except for such changes as may be permitted or
required pursuant to the terms hereof, the representations and
warranties of Seller set forth in Article 3 hereof shall be
true and correct in all material respects on and as of the
Closing with the same effect as though such representations
and warranties had been made on and as of the Closing, except
that any such representations and warranties that are given as
of a specified date and relate solely to a specified date or
period shall be true and correct only as of such date or
period.
(vi) Seller shall have performed and complied with
all covenants and agreements required to be performed or
complied with by Seller under this Agreement prior to or
concurrently with the Closing in all material respects.
(vii) Purchaser shall have received all certificates
and other documents required to be delivered to Purchaser at
or before the Closing pursuant to this Agreement duly executed
by all necessary Persons (other than Purchaser).
(viii) Purchaser shall have received the Closing
deliveries described in Section 1.4 hereof.
(ix) Purchaser and Seller shall have previously or
concurrently closed the transactions contemplated by the JANY
Stock Purchase Agreement.
(x) The Combined Reserve Liabilities as of the
Closing shall be at least $4,813,357,842 [96% of the aggregate
of such reserve liabilities as at June 21,
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1996]; provided, however, that if the Oxford Put has been
exercised, the Reserve Liabilities with respect to the Oxford
Annuity Contracts will be included in Combined Reserve
Liabilities for the purpose of this calculation.
(xi) Since December 31, 1995, there shall not have
occurred any event or events or state of facts that
individually or in the aggregate has or could reasonably be
expected to have a Material Adverse Effect; provided, however,
that for purposes of this subclause (xi), events or facts
which affect the insurance or annuity industry generally
(e.g., a change in general economic or market conditions, a
change in tax Law or a change in insurance Law), shall not be
included in determining whether a Material Adverse Effect has
occurred.
(xii) The Closing Date Portfolio Securities tendered
by Seller to the Trust pursuant to Section 1.2(b) hereof and
any other assets therein (to the extent such assets would be
admitted assets if held by Purchaser outside of the Trust)
shall qualify as admitted assets of Purchaser in Arizona for
purposes of SAP and Purchaser shall have received regulatory
confirmation thereof from the Arizona Department of Insurance.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
The obligations of Seller to consummate the transactions contemplated
hereby are, unless waived by Seller in accordance with Section 12.4 hereof,
subject to the fulfillment, at or before the Closing, of each of the following
conditions:
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(i) No Law or Order of a court, arbitrator or
Governmental Entity of competent jurisdiction shall be in
effect which prohibits, restricts or enjoins, and no Action
shall be pending or threatened which seeks to prohibit,
restrict, enjoin, nullify, seek material damages with respect
to or otherwise materially adversely affect, the consummation
of the transactions contemplated by this Agreement.
(ii) The applicable waiting period under the HSR
Act, including all extensions thereof, shall have expired or
been terminated and Seller shall have been furnished with
appropriate evidence, reasonably satisfactory to it, of such
expiration or termination.
(iii) All Permits, consents and waivers required
from all Governmental Entities legally required to consummate
the Closing and to perform this Agreement and each of the
Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby shall have been obtained and
shall be in full force and effect and Seller shall have been
furnished with appropriate evidence, reasonably satisfactory
to it, of the granting of such Permits, consents and waivers;
provided, however, that this condition shall be deemed
satisfied with respect to approvals of the transactions
contemplated by the Assumption Reinsurance Agreement by state
insurance regulators, upon receipt of the required Permits,
consents and waivers from the Minnesota Department of Commerce
and the Arizona Department of Insurance.
(iv) All necessary consents to the transactions
contemplated by this Agreement, the Assigned Contracts and
each of the Ancillary Agreements shall
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have been obtained, including, without limitation, those
listed on Schedule 4.5 attached hereto.
(v) Except for changes as may be permitted or
required pursuant to the terms hereof, the representations and
warranties of Purchaser set forth in Article 4 hereof shall be
true and correct in all material respects on and as of the
Closing with the same effect as though such representations
and warranties had been made on and as of the Closing, except
that any such representations and warranties that are given as
of a specified date and relate solely to a specified date or
period shall be true and correct only as of such date or
period.
(vi) Purchaser shall have performed and complied
with all covenants and agreements required to be performed or
complied with by Purchaser under this Agreement prior to or
concurrently with the Closing in all material respects.
(vii) Seller shall have received all certificates
and other documents required to be delivered to Seller at or
before the Closing pursuant to this Agreement duly executed by
all necessary Persons (other than Seller).
(viii) Seller shall have received the Closing
deliveries described in Sections 1.3 and 1.4 hereof.
(ix) Purchaser and Seller shall have previously or
concurrently closed the transactions contemplated by the JANY
Stock Purchase Agreement.
(x) Since December 31, 1995, there shall not have
occurred any event or events or state of facts that
individually or in the aggregate has or could reasonably be
expected to have a Material Adverse Effect on Purchaser;
provided,
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however, that for purposes of this subclause (x), events or
facts which affect the insurance or annuity industry generally
(e.g., a change in general economic or market conditions, a
change in tax Law or a change in insurance Law), shall not be
included in determining whether a Material Adverse Effect on
Purchaser has occurred.
ARTICLE 8
POST-CLOSING COVENANTS
Section 8.1. Continued Access and Cooperation.
(a) Following the Closing Date, Seller shall (i) allow
Purchaser, upon reasonable prior notice and during regular business hours,
through its employees and other Representatives, at Purchaser's expense to
examine and make copies of any books and records retained by Seller within its
possession or control ("control" for the purposes of this Section 8.1(a) being
defined as the ability to cause delivery to Seller or access by Purchaser) and
furnish Purchaser with such financial and reporting data and other information
with respect to the Annuity Contacts, the Third Party Administration Agreements,
Assigned Contracts and the Related Agreements as Purchaser may from time to time
reasonably request, to the extent they relate to the Annuity Business, for any
reasonable business purpose, including, without limitation, the preparation or
examination of Tax Returns, regulatory filings and financial statements and the
conduct of any Action, whether pending or threatened, concerning the conduct of
the Annuity Business prior to the Closing Date at Seller's offices or other
facilities or properties and (ii) maintain such books and records for
Purchaser's examination and copying.
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Access to such books and records shall be at Purchaser's expense and may not
unreasonably interfere with Seller's or any successor company's business
operations and Purchaser shall reimburse Seller for all reasonable out-of-pocket
expenses incurred by Seller in copying such records. Seller shall retain such
books and records for a period of at least seven years (extended by a period
equal to any extension of the statute of limitations with respect to tax matters
with respect to which such books and records are necessary and of which
Purchaser shall notify Seller), after which time such books and records shall be
delivered to Purchaser. Purchaser shall not copy or remove from Seller's
premises the accountant's work papers made available to Purchaser and its
Representatives.
(b) Following the Closing Date, Purchaser shall (i) allow
Seller, upon reasonable prior notice and during regular business hours, through
its employees and other Representatives, at Seller's expense to examine and make
copies of the Books and Records transferred to Purchaser at the Closing for any
reasonable business purpose, including, without limitation, the preparation or
examination of Tax Returns, regulatory filings and financial statements and the
conduct of any Action or the conduct of any regulatory, contract holder,
participant or other dispute resolution, whether pending or threatened, at
Purchaser's offices or other facilities or properties and (ii) maintain such
Books and Records for Seller's examination and copying. Access to such Books and
Records shall be at Seller's expense and may not unreasonably interfere with
Purchaser's or any successor company's business operations and Seller shall
reimburse Purchaser for all reasonable out-of-pocket expenses incurred by
Purchaser in copying such records. Purchaser shall retain any such Books and
Records for a period of at least seven years (extended by a period equal to any
extension of the statute of limitations with
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respect to tax matters with respect to which such Books and Records are
necessary and of which Seller shall notify Purchaser).
Section 8.2. Further Assurances.
(a) Upon the terms and subject to the conditions herein
provided, each of Seller and Purchaser shall use all commercially reasonable
efforts to take or cause to be taken, all actions or do, or cause to be done,
all things or execute or cause to be executed any documents necessary, proper or
advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, the Ancillary Agreements and the
other agreements contemplated hereby and thereby.
(b) On and after the Closing Date, Seller and Purchaser shall
take all commercially reasonable action and execute any additional documents,
instruments or conveyances of any kind (not containing additional
representations and warranties) and give all notices and obtain all consents,
approvals and Orders of Governmental Entities and other third parties which may
be necessary to carry out any of the provisions hereof, including, without
limitation, putting Purchaser in full possession and operating control of the
Purchased Assets and the Annuity Business it is assuming pursuant to this
Agreement and the Ancillary Agreements.
Section 8.3. Expenses. Except as otherwise specifically provided in
this Agreement and the respective Ancillary Agreements, the Parties shall bear
their respective expenses incurred in connection with the preparation, execution
and performance of this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby, including, without limitation, all fees and
expenses of their respective Representatives; provided, however, that Purchaser
shall bear (a) the cost of the filing fees in connection with the filings with
the FTC and the Antitrust
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Division under the HSR Act with respect to the transactions contemplated hereby
(which expense shall be borne equally by Seller and Purchaser if separate
filings are required with respect to the transactions contemplated by this
Agreement and the transactions contemplated by the Stock Purchase Agreement) and
(b) the actual out-of-pocket costs of providing policyholder notices in order to
implement the Assumption Reinsurance Agreement in accordance with its terms.
Section 8.4. Employee Plans. Purchaser will provide to any employee of
Seller or its Affiliates who on or after the Closing Date, at the sole
discretion of Purchaser, becomes an employee of Purchaser or its Affiliates (an
"Ex-Employee") with such compensation and benefits as are currently being
provided to Purchaser's employees of similar rank and tenure level. Nothing in
this Section 8.4 shall be construed as requiring the Purchaser to (i) employ any
of Seller's employees or (ii) provide any Ex-Employee with such compensation or
employee benefits as such Ex-Employee had previously received from Seller or its
Affiliates or (iii) provide any former employee of Seller who is not an
Ex-Employee with any severance benefits. Any Ex-Employee actually employed by
Purchaser may request that assets held by Seller in Seller's 401(k) Plan on
behalf of such Ex-Employee will be transferred as soon as practicable after the
Service Transfer Date to the trustees of a qualified plan maintained by
Purchaser or its Affiliate (if permitted) or retained in Seller's 401(k) Plan
(subject to the rights of Ex-Employees with respect thereto). Each request will
be honored by Seller if Seller, in its sole discretion, determines that such
transfer complies with applicable Law. Any such assets transferred will be
transferred in accordance with the provisions of Purchaser's and Seller's 401(k)
Plan.
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Section 8.5. Non-Discriminatory Treatment of Policyholders. Except as
otherwise provided in the Indemnity Reinsurance Agreement, from and after the
Closing Date Purchaser shall use all commercially reasonable efforts to provide,
at all times and from time to time, to the Policyholders under the Annuity
Contracts crediting rates and renewal rates and standards of policyholder
service and administration which are no less than those provided to other
policyholders of annuity contracts issued, coinsured or reinsured by Purchaser
or its Affiliates with respect to policies of a similar type and nature
(including without limitation factors such as issue date, actual and anticipated
lapse rates and surrender charge periods and other relevant features and market
conditions) as the Annuity Contracts. Purchaser will use commercially reasonable
efforts to include a provision substantially similar to this Section 8.5 in any
agreement for the sale, transfer or bulk reinsurance of all or substantially all
of the Annuity Contracts.
Section 8.6. Repayment of Agent Balances. Within 10 days after the
Closing Date, Seller shall deliver to Purchaser a schedule setting forth those
producers with respect to the Annuity Contracts having a balance owed by such
producers to Seller for fees or commissions relating to the Annuity Contracts,
the amount and nature of such balances, the specific Annuity Contracts to which
they relate, the dates such balances were incurred and all other information
required by Purchaser to facilitate the recovery by Purchaser of such amounts.
From and after the Closing until the Service Transfer Date, if at any time any
producer identified on such schedule becomes entitled to a payment from
Purchaser in connection with the sale of an Annuity Contract, such payment shall
be first applied to reduce the amount of such balance and shall be paid by
Purchaser to Seller (in accordance with Purchaser's normal payment cycle).
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Purchaser shall provide Seller with a quarterly report of all such payments and
balances pursuant to this Section 8.6.
Section 8.7. No Inducement to Replace; Non-Twisting; Non-Churning; Non-
Competition.
(a) In partial consideration of the payment of the Final
Ceding Commission, the Parties agree that, for a period of seven years after the
Closing (the "Restricted Period"), neither Seller nor any of its present or
future Affiliates shall carry on or engage in, directly or indirectly, the
business of selling or administering annuity contracts (a "Competing Business")
in any county or city in which the Annuity Business has been conducted) or in
New York State, where JANY is engaged in the business of selling and
administering annuity contracts) or where Purchaser or its Affiliates conduct a
similar business after the Closing Date.
(b) Notwithstanding the provisions of Section 8.7(a) hereof,
during the Restricted Period, Seller and Houston National Life Insurance Company
("Houston") may (A) market, underwrite and sell directly or indirectly (i)
policies of Houston and (ii) single premium immediate annuities of the Seller
and (B) assume annually up to $200,000,000 of deferred annuities; provided,
however, that (I) the aggregate of any sales made in accordance with (A) above
shall not exceed $50,000,000 annually and (II) any assumptions made pursuant to
(B) above shall not exceed $200,000,000 annually; provided further, however,
that the Purchaser must consent in writing to all assumptions made pursuant to
(B) above which in the aggregate will exceed $100,000,000 annually, such consent
not to be unreasonably withheld; and provided further, however, that the sales
and assumptions set forth in (i) and (ii) above shall be limited in amount to
the minimum amount and extent reasonably necessary to (x) assure Houston
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and Seller each maintains its qualification as a life insurance company for
federal income tax purposes and (y) to enable Houston and Seller to maintain
their licenses as life insurance companies in the states in which they are
licensed to do business. Clause (B) above shall not permit Seller, whether
individually or in concert with others, to re-enter the Annuity Business. With
respect to the assumption of deferred annuities by Seller or Houston pursuant to
clause (B) of this Section 8.7(b) during the Restricted Period, Seller shall,
and shall cause Houston to, offer to Purchaser the right to provide such
annuities, provided Purchaser is able to provide such annuities on terms no less
favorable in the aggregate to Seller or Houston, as the case may be, than those
available from independent third parties. Purchaser shall have a period of 30
days to respond to each such offer. Notwithstanding the provisions of Section
8.7(a) hereof, (i) Seller may administer (A) the annuity contracts excluded from
the definition of "Annuity Contracts" by the last sentence thereof, (B) direct
written annuity contracts of Aristar Life Insurance Company pursuant to that
service agreement between Seller and Aristar Life Insurance Company dated
October 29, 1987 and (C) annuity contracts of Houston and Seller issued pursuant
to the foregoing provisions of this 8.7(b), and (ii) Seller may market annuity
products issued by unaffiliated third parties.
(c) Notwithstanding the provisions of Section 8.7(a) hereof,
during the Restricted Period, Seller or its Affiliates may acquire after the
Closing an entity or business engaged in a Competing Business if not more than
50% of the gross revenues, computed in accordance with statutory accounting
principles for insurance companies or GAAP for other companies, of such entity
or business (for the fiscal year of such entity or business immediately
preceding such acquisition) are derived from a Competing Business, provided that
promptly
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upon consummation of such acquisition, Seller or its Affiliate, as the case may
be, shall provide to Purchaser an opportunity to negotiate to acquire such
Competing Business (and Seller or such Affiliate will negotiate such sale to
Purchaser in good faith) and, provided, further, if such Competing Business is
not acquired by Purchaser, Seller shall not, and shall not permit any of its
Affiliates to, expand the Competing Business through the sale of any annuity
product and shall hold such business as a liquidating "closed block."
Notwithstanding the foregoing, in no event shall the name "John Alden" 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 "John Alden" or any derivation thereof be used in connection with such
business or (ii) shall Seller or its controlled Affiliates market their own
annuity products. Furthermore, during the four-year period after the Closing
Date, not more than 50% of the annuity products sold or marketed by Seller or
its controlled Affiliates may be annuity products of such Competing Business,
such New Affiliate or its Affiliates.
(e) Seller will refrain and will cause its present and future
Affiliates, Subsidiaries and employees to refrain from causing or attempting to
cause, influence or induce (or assisting any other Person in causing or
attempting to cause, influence or induce) (i) any
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Policyholder to replace or terminate any Annuity Contract issued, reinsured,
underwritten, or sold by Seller, in whole or in part, with products of Seller or
any other Person at any time; (ii) any reinsurer to terminate or reduce any
reinsurance, coinsurance, or other similar contract, or sever a relationship,
with Purchaser at any time relating to annuity contracts; or (iii) any agent
(including without limitation any insurance agent) to resign or sever or reduce
a relationship with Purchaser at any time relating to annuity contracts. Seller
will not participate as principal or agent in any transfer involving a "Section
1035" exchange or replacement of any Annuity Contract.
(f) Seller acknowledges that the covenants of Seller set forth
in this Section 8.7 are an essential element of this Agreement and that, but for
the agreement of Seller to comply with these covenants, Purchaser would not have
entered into this Agreement. Seller acknowledges that each of the covenants of
Seller set forth in this Section 8.7 constitutes an independent covenant and
shall not be affected by performance or nonperformance of any other provision of
this Agreement by Purchaser.
(g) Seller recognizes and agrees that a breach by Seller or
any of its Affiliates of any provision of this Section 8.7 could cause
irreparable harm to Purchaser, that Purchaser's remedies at law in the event of
such breach or threatened breach could be inadequate, and that, accordingly, in
the event of such breach or threatened breach, Purchaser shall be authorized to
seek a restraining order or injunction or both against Seller or any such
Affiliate, in addition to any other rights and remedies which are available to
Purchaser.
(h) If the provisions of this Section 8.7 are more
restrictive, as to duration, geographic limitations or scope, than permitted by
the Laws of any jurisdiction in which
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Purchaser seeks enforcement hereof, it shall be limited to the extent required
to permit enforcement under such Laws. In particular, the parties intend that,
to the extent appropriate to permit the enforcement hereof, the covenants
contained in this Section 8.7 shall be construed as a series of separate and
divisible covenants, one for each county and city in which the Annuity Business
has been carried on and in which Purchaser conducts a similar business after the
Closing Date. Except for geographic coverage, each such separate covenant shall
be deemed identical in all respects. If, in any judicial proceeding, a court
shall refuse to enforce any of the separate covenants deemed included in this
section, then such unenforceable covenant shall be deemed reformed or eliminated
for the purpose of those proceedings to the extent necessary to permit the
remaining separate covenants to be enforced.
Section 8.8. Preferred Stock Divided Repayment. Within 30 days after
receipt by Purchaser, Purchaser shall remit to Seller, by wire transfer of
immediately available funds, the portion of any dividend or dividends undeclared
as of the Closing Date received by Purchaser after the Closing Date on preferred
stock (or similar instrument) included in the Closing Date Portfolio Securities
which relate to the period up to and including the Closing Date. Each such
payment shall be accompanied by interest calculated at a rate equal to the three
month LIBOR rate plus 25 basis points on the amount of such payment from the
date receipt by the Company through the date on which such amount is actually
paid.
Section 8.9. Policyholder Consents. Promptly after the
Closing, Purchaser shall (i) distribute to policyholders of Annuity Contracts
notice of the transactions reflected herein and (ii) use commercially reasonable
efforts to obtain Novations of all Annuity Contracts (as contemplated by Section
2.4 of the Assumption Reinsurance Agreement). Seller shall provide,
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at Purchaser's expense, such assistance as Purchaser reasonably requests with
respect to Purchaser's performance of the preceding sentence.
Section 8.10. Current Report on Form 8-K. Seller will cooperate with
Purchaser, at Seller's expense, in SunAmerica's preparation of a Current Report
on Form 8-K prepared in connection with the transactions contemplated hereby;
provided, however, that notwithstanding anything else contained in this Section
8.10, Purchaser shall bear any and all costs and expenses incurred by Seller's
independent accountants in connection with their preparation of the GAAP
financial statements of the Annuity Business. Purchaser shall use reasonable
efforts to provide Seller and Seller's counsel with an opportunity to review
references to Seller contained in such filing.
ARTICLE 9
TERMINATION; SURVIVAL
Section 9.1. Termination of Agreement. Notwithstanding anything
contained herein to the contrary, this Agreement may be terminated:
(a) at any time prior to the Closing, by mutual written
consent of Seller and Purchaser;
(b) by written notice by Purchaser to Seller if there has been
a material breach by Seller of any of the representations, warranties,
agreements or covenants of Seller set forth herein which is not subject to cure
prior to the Closing, or a failure of any other condition not subject to cure
prior to the Closing to which the obligations of Purchaser are subject;
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(c) by written notice by Seller to Purchaser if there has been
a material breach by Purchaser of any of the representations, warranties,
agreements or covenants of Purchaser set forth herein which is not subject to
cure prior to the Closing, or a failure of any other condition not subject to
cure prior to the Closing to which the obligations of Seller are subject;
(d) at any time after April 30, 1997 (the "Termination Date")
and prior to the Closing, by Purchaser by written notice to Seller, if (A) the
Closing shall not have been consummated on or before the Termination Date and
(B) the failure to consummate the Closing on or before the Termination Date did
not result from the failure by Purchaser to perform or comply with any covenant
or agreement contained in this Agreement required to be performed or complied
with prior to the Closing by Purchaser;
(e) at any time after the Termination Date and prior to the
Closing, by Seller by written notice to Purchaser, if (i) the Closing shall not
have been consummated on or before the Termination Date and (ii) the failure to
consummate the Closing on or before the Termination Date did not result from the
failure by Seller to perform or comply with any covenant or agreement contained
in this Agreement required to be performed or complied with prior to the Closing
by Seller; or
(f) subject to Section 8.2 hereof, by written notice to
Purchaser or Seller to the other, at any time after a Governmental Entity having
jurisdiction over Purchaser or Seller has notified such Party that it will not
provide an approval, consent or Order necessary for the terminating Party to
consummate the transactions contemplated by this Agreement or the
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Ancillary Agreements and the Parties cannot subsequently procure such approval,
consent or Order using their respective commercially reasonable efforts.
Section 9.2. Effect of Termination. In the event that this Agreement
shall be terminated pursuant to Section 9.1, all further obligations of the
Parties under this Agreement shall terminate without further liability of either
Party to the other; provided that the obligations of the Parties contained in
Section 8.3 (Expenses), Article 11 (Confidentiality) and Article 12
(Miscellaneous) shall survive any such termination. A termination under Section
9.1 shall not relieve any Party of any liability for a breach of, or for any
misrepresentation under, this Agreement, or be deemed to constitute a waiver of
any available remedy (including specific performance if available) for any such
breach or misrepresentation.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 10.1. Survival of Representations. (a) The representations and
warranties of Purchaser set forth in Article 4 hereof shall survive the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby for a period of 21 months following the
Closing Date; provided, however, that the representations contained in Sections
4.1 (Organization, Standing and Authority of Seller), and 4.2 (Authorization)
shall survive until the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive).
(b) The representations and warranties of Seller set forth in
Article 3 hereof shall survive the execution, delivery and performance of this
Agreement and the consummation
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of the transactions contemplated hereby for a period of 21 months following the
Closing Date; provided, however, that the representations contained in Sections
3.1 (Organization, Standing and Authority of Seller), 3.2 (Authorization), 3.8
(Annuity Contracts) (paragraph (i) only) and 3.15 (Purchased Assets) shall
survive until the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive) and the
representations and warranties contained in Section 3.22 (Mortgage Loans)
(paragraph (g) only) will survive until the fifth anniversary of the Closing
Date
(c) No Action may be commenced by any Person with respect to
any claim arising out of or relating to such warranties or representations after
the expiration of the period for which such representations and warranties shall
survive pursuant to this Section 10.1 (the "Applicable Survival Period");
provided, however, that, subject to this Article 10, any Person shall have the
right to commence a suit, action or proceeding after the expiration of the
Applicable Survival Period with respect to claims arising out of or relating to
such representations and warranties which shall have been asserted by such
Person under Section 10.4 hereof before the expiration of the Applicable
Survival Period.
Section 10.2. Indemnification by Purchaser.
(a) Subject to Sections 10.1, the following provisions of this
Section 10.2 and 10.4 hereof, Purchaser shall indemnify Seller and its
Affiliates (collectively, the "Seller Group") for, and shall hold it harmless
from, any and all damages, claims, suits, actions, causes of action,
proceedings, investigations, losses, liabilities, assessments, judgments,
deficiencies and expenses (including, without limitation, reasonable legal,
accounting and other professional expenses) ("Liabilities") asserted against or
incurred or sustained by the Seller Group relating
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to, associated with or arising out of (i) any breach by Purchaser of any
covenant or agreement contained in this Agreement applicable to Purchaser, (ii)
any breach by Purchaser of any of the warranties or representations of Purchaser
set forth in Article 4 of this Agreement, (iii) any of the Assumed Liabilities
or (iv) the conduct of the Annuity Business by Purchaser or the ownership,
leasing or use of the Purchased Assets by Purchaser during the period after the
Closing; provided, however, that notwithstanding anything contained in this
Section 10.2(a) to the contrary, Purchaser shall not be obligated hereunder to
indemnify the Seller Group for, or to hold the Seller Group harmless from, any
Liabilities under this Section 10.2(a) to the extent that Seller is obligated to
indemnify Purchaser in respect of the same Liabilities pursuant to Section 10.3
hereof.
(b) The Seller Group shall be entitled to indemnification
under Section 10.2(a)(ii) hereof only when the aggregate amount of all
Liabilities with respect to which the Seller Group would otherwise be entitled
to indemnification under Section 10.2(a)(ii) hereof and Sections 9.2(a)(ii) and
9.2(b) under the JANY Stock Purchase Agreement exceed $1.5 million. In addition,
as soon as practicable after such Liabilities exceed $1.5 million, Purchaser
shall pay to Seller $750,000. In no event shall the amount payable by Purchaser
and its Affiliates to the Seller Group pursuant to Section 10.2(a)(ii) hereof
and Sections 9.2(a)(ii) and 9.2(b) of the JANY Stock Purchase Agreement exceed
$240,000,000.
(c) If any event shall occur or circumstance shall exist which
would otherwise entitle the Seller Group to indemnification hereunder,
Liabilities shall be deemed reduced to the extent of any proceeds (other than
(i) proceeds from self-insurance and (ii) proceeds under experience-rated
insurance policies the premiums for which would be increased by reason of the
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filing of a claim thereunder with respect to such Liability) actually recovered,
net of the cost of such recovery, by the Seller Group from any third party
(including, without limitation, any insurance company) with respect thereto. In
furtherance of the immediately preceding sentence, Seller agrees to, and to
cause its Affiliates to, (i) in good faith, diligently seek recovery, at its or
their own expense, all such proceeds from all third parties with respect to all
Liabilities with respect to which it or they make or may make a claim for
indemnification hereunder and (ii) keep Purchaser fully and promptly informed of
all material matters related thereto.
(d) To the extent that the undertakings set forth in Section
10.2(a) hereof may be unenforceable, Purchaser shall contribute the maximum
amount that it is permitted to contribute under applicable Law to the payment
and satisfaction of all Liabilities incurred by the Seller Group.
Section 10.3. Indemnification by Seller.
(a) Subject to Sections 10.1, the following provisions of this
Section 10.3 and 10.4 hereof, Seller shall indemnify Purchaser and its
Affiliates (collectively, the "Purchaser Group") for, and shall hold it harmless
from, any and all Liabilities asserted against or incurred or sustained by
Purchaser Group relating to, associated with or arising out of: (i) any breach
by Seller of any covenant or agreement contained in this Agreement by Seller,
(ii) any breach by Seller of any of the warranties or representations set forth
in Article 3 of this Agreement (other than Section 3.22(g) hereof), (iii) any
Excluded Liability or Extra Contractual Obligation or (iv) any Liability related
to the Annuity Contracts or the Annuity Business, or the ownership, leasing or
use of the Purchased Assets prior to the Closing Date, regardless of whether at
the time of the Closing such Liabilities were (A) foreseen or unforeseen, (B)
known or unknown,
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(C) existing or arose in the future, (D) fixed or contingent, (E) matured or
unmatured, (F) asserted before or after the Closing Date or (G) reflected in any
of the Schedules attached hereto, other than Assumed Liabilities.
(b) Subject to Section 10.1, the following provisions of this
Section 10.3 and 10.4 hereof, Seller shall indemnify the Purchaser Group for,
and shall hold it harmless from, (i) one-half of any and all Liabilities up to
an aggregate of $3,000,000 (i.e., $1.5 million of the first $3.0 million)and
(ii) any and all Liabilities in excess of $3,000,000 asserted against or
incurred or sustained by the Purchaser Group relating to, associated with or
arising out of any breach of the representations and warranties of Seller set
forth in Section 3.22(g) hereof and Sections 2.32(g) and 2.18(b) of the JANY
Stock Purchase Agreement (without giving effect to the knowledge and materiality
qualifiers set forth therein).
(c) The Purchaser Group shall be entitled to indemnification
under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii) under the JANY
Stock Purchase Agreement, only when the aggregate amount of all Liabilities with
respect to which the Purchaser Group would otherwise be entitled to
indemnification under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii)
under the JANY Stock Purchase Agreement exceed $1.5 million. In addition, as
soon as practicable after such Liabilities exceeds $1.5 million, Seller shall
pay to Purchaser $750,000. In no event shall the amount payable by Seller and
its Affiliates to the Purchaser Group pursuant to Section 10.3(a)(ii) hereof and
9.3(a)(ii) and 9.3(a)(iii) under the JANY Stock Purchase Agreement exceeds
$240,000,000.
(d) If any event shall occur or circumstance shall exist which
would otherwise entitle the Purchaser Group to indemnification hereunder,
Liabilities shall be deemed reduced
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to the extent of any proceeds (other than (i) proceeds from self-insurance and
(ii) proceeds under experience-rated insurance policies the premiums for which
would be increased by reason of the filing of a claim thereunder with respect to
such Liability) actually recovered, net of the cost of such recovery, by the
Purchaser Group from any third party (including, without limitation, any
insurance company) with respect thereto. In furtherance of the immediately
preceding sentence, Purchaser agrees to, and to cause its Affiliates to, (i) in
good faith, diligently seek recovery, at its or their own expense, all such
proceeds from all third parties with respect to all Liabilities with respect to
which it or they make or may make a claim for indemnification hereunder and (ii)
keep Seller fully and promptly informed of all material matters related thereto.
(e) To the extent that the undertakings set forth in Section
10.3(a) hereof may be unenforceable, Seller shall contribute the maximum amount
that it is permitted to contribute under applicable Law to the payment and
satisfaction of all Liabilities incurred by the Purchaser Group.
Section 10.4. Indemnification Procedure.
(a) Within a reasonable time after obtaining knowledge
thereof, a Person who may be entitled to indemnification hereunder (the
"Indemnitee") shall promptly give the Party who may be obligated to provide such
indemnification (the "Indemnitor") written notice of any Liability which the
Indemnitee has determined has given or could give rise to a claim for
indemnification hereunder (a "Notice of Claim"); provided, however, no failure
or delay in giving any such Notice of Claim shall relieve the Indemnitor of its
obligations except, and only to the extent, that it is prejudiced thereby. A
Notice of Claim shall specify in reasonable detail the nature and all known
particulars related to a Liability. The Indemnitor shall perform its
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indemnification obligations in respect of a Liability described in a Notice of
Claim under Sections 10.2 or 10.3 hereof, as the case may be, within 30 days
after the Indemnitor shall have received such Notice of Claim.
(b) The Indemnitor shall inform the Indemnitee promptly after
the Indemnitor has made a good faith determination, based on the facts alleged
in such Notice of Claim or which have otherwise become known to the Indemnitor,
either that the Indemnitor acknowledges that it has an indemnification
obligation hereunder in respect of such Liability or that the Indemnitor has
made a good faith determination that it has no indemnification obligation
hereunder in respect of such Liability. If the Indemnitor fails to perform its
obligations under this Section 10.4, or if the Indemnitor shall have informed
the Indemnitee in writing in that the Indemnitor does not have an
indemnification obligation hereunder in respect of such Liability, then the
Indemnitee shall have the right, but not the obligation, to take the actions
which the Indemnitor would have had the right to take in connection with the
performance of such obligations and, if the Indemnitee is entitled to
indemnification hereunder in respect of the event or circumstance as to which
the Indemnitee takes such actions, then the Indemnitor shall, in addition to
indemnifying Indemnitee for the Liability, indemnify the Indemnitee for all of
the legal, accounting and other costs, fees and expenses reasonably and actually
incurred in connection therewith.
(c) The Indemnitor shall have the right and obligation, in
good faith and at its own cost and expense, to cure, remediate, mitigate, remedy
or otherwise handle any event or circumstance which gives rise to a Liability in
respect of which a Notice of Claim has been given (including events and
circumstances which can be cured, remediated, mitigated or
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remedied through the expenditure of money and events and circumstances which
give rise to a Liability which can be measured in terms of money), regardless of
the nature of such Liability. Such right and obligation shall include, without
limitation, (i) the right to investigate any such event or circumstance, and
(ii) the right to defend, contest or otherwise oppose any third party claim,
demand, suit, action or proceeding related to such event or circumstance with
legal counsel selected by it. The exercise of such right and performance of such
obligation shall not constitute an admission or agreement by Indemnitor that it
has an indemnification obligation hereunder in respect of such Liability. If the
Indemnitor proposes to settle or compromise any such third party action, demand,
claim, suit or proceeding, the Indemnitor shall give written notice to that
effect (together with a statement in reasonable detail of the terms and
conditions of such settlement or compromise) to the Indemnitee a reasonable time
prior to effecting such settlement or compromise.
(d) The Indemnitee shall have the right, but not the
obligation, to participate, at its own cost and expense, in the defense, contest
or other opposition of any such third party claim, demand, suit, action or
proceeding through legal counsel selected by it and shall have the right, but
not the obligation, to assert any and all cross-claims or counterclaims which it
may have. So long as the Indemnitor is in good faith performing its obligations
under this Section 10.4, the Indemnitee shall (i) at Indemnitor's cost and
expense, cooperate in all reasonable ways with, make its and its Affiliates'
relevant files and records available for inspection and copying by, make its and
its Affiliates' employees reasonably available to and otherwise render
reasonable assistance to the Indemnitor upon request and (ii) not compromise or
settle any such claim, demand, suit, action or proceeding without the prior
written consent of the Indemnitor.
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The Indemnitee shall have the right (i) to object to the settlement or
compromise of any such third party action, demand, claim, suit or proceeding
whereupon if such settlement is solely a cash settlement (A) the Indemnitee will
assume the defense, contest or other opposition of any such third party action,
demand, claim, suit or proceeding for its own account and as if it were the
Indemnitor and (B) the Indemnitor shall be released from any and all liability
with respect to any such third party action, demand, claim, suit or proceeding
to the extent that such liability exceeds the liability which the Indemnitor
would have had in respect of such a settlement or compromise, or (ii) to assume,
at any time by giving written notice to that effect to the Indemnitor, the cure,
mitigation, remediation, remedy or other handling of such event or circumstance
and the defense, contest or other opposition of any such third party action,
demand, claim, suit or proceeding for its own account whereupon the Indemnitor
shall be released from any and all liability with respect to such event or
circumstance and such third party action, demand, claim, suit or proceeding.
(e) After the Closing, each Party shall take all commercially
reasonable actions which may be necessary to enable the other Party to exercise
its rights and perform its obligations under this Section 10.4.
(f) Notwithstanding anything contained herein to the contrary,
each Party shall use, and shall cause its Affiliates to use, commercially
reasonable efforts to mitigate any and all damages, losses, liabilities, costs
and expenses in respect of which it may be entitled to indemnification
hereunder.
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ARTICLE 11
PUBLICITY AND CONFIDENTIALITY
Section 11.1. Publicity. Neither Party, shall or shall permit its
Affiliates to, issue any publicity, release or announcement concerning the
execution and delivery of this Agreement, the provisions hereof or the
transactions contemplated hereby without the prior written approval of the form
and content of such publicity, release or announcement by the other; provided,
however, that no such approval shall be required when such publicity, release or
announcement is required by (i) applicable Law, (ii) applicable rules or
regulations of, or any listing agreement with, a national or foreign stock
exchange or the Automated Quotation System maintained by the National
Association of Securities Dealers, Inc. or (iii) any Order of any court,
arbitrator or Governmental Entity of competent jurisdiction; and, provided
further, that, prior to issuing any publicity, release or announcement without
such prior written approval, the Party issuing or whose Affiliate is issuing
such publicity, release or announcement shall have given reasonable prior notice
to the other Party of such intended issuance and, if requested by the other
Party, shall have used reasonable efforts at such other Party's cost and expense
to obtain a protective order or similar protection for the benefit of the other
Party. In addition, with the prior written consent of the Parties, not to be
unreasonably withheld, CS First Boston and Goldman Sachs & 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 & Phelps, Standard
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& Poor's Corporation and Moody's Investors Services, Inc. or state insurance
departments or other regulatory bodies.
Section 11.2. Confidentiality.
(a) All data, reports, records and other information of any
kind received by a Party or its Affiliates or Representatives (such Party being
hereinafter referred to as the "Receiving Party") from the other Party or its
Affiliates or Representatives (such other Party being hereinafter referred to as
the "Delivering Party") under this Agreement or in connection with the
transactions contemplated hereby shall be treated as confidential (collectively,
"Confidential Information"). Except as otherwise provided herein, the Receiving
Party shall not use (and shall not permit its Affiliates or Representatives to
use) Confidential Information for its own (or their own) benefit and shall use
commercially reasonable efforts (and shall cause its Affiliates, directors,
officers and employees to use commercially reasonable efforts) to maintain the
confidentiality of Confidential Information. If the Receiving Party or any of
its Affiliates or Representatives is required to disclose Confidential
Information by or to any court, arbitrator or Governmental Entity of competent
jurisdiction, the Receiving Party shall, prior to such disclosure, promptly
notify the Delivering Party of such requirement and all particulars related to
such requirement. The Delivering Party shall have the right, at its own cost and
expense, to object to such disclosure and to seek confidential treatment of any
Confidential Information to be so disclosed on such terms as it shall determine.
(b) The restrictions set forth in Section 11.2(a) hereof shall
not apply to the use or disclosure of Confidential Information to the extent,
but only to the extent, (i) permitted or required pursuant to any other
agreement between or among the Parties or their respective
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Affiliates or Representatives, (ii) necessary by a Party or its Affiliates in
connection with exercising its or their rights or performing its or their duties
or obligations under this Agreement, the Ancillary Agreements or the other
agreements described in clause (i) of this sentence, (iii) contemplated by the
last two sentences of Section 11.2(a) hereof or (iv) that the Receiving Party
can demonstrate such Confidential Information (A) is or becomes generally
available to the public through no fault or neglect of the Receiving Party, (B)
is received in good faith on a non-confidential basis from a third party who
discloses such Confidential Information without violating any obligations of
secrecy or confidentiality, (C) is independently developed after the time of
receipt as shown by dated written records or (D) was already possessed at the
time of receipt as shown by prior dated written records.
(c) For the purposes of this Section 11.2, (i) information
which is specific shall not be deemed to be within an exception set forth in
Section 11.2(b) hereof merely because it is embraced by general information
which is within such an exception and (ii) a combination of information shall
not be deemed to be within an exception set forth in Section 11.2(b) hereof
merely because individual aspects of such combination are within such an
exception unless the combination of information itself, its principle of
operation and its value or advantages are within such an exception.
ARTICLE 12
MISCELLANEOUS
Section 12.1. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally (by
courier or otherwise), sent
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by certified, registered or express mail, postage prepaid and return receipt
requested, or transmitted by facsimile (with a copy of such notice or other
communication and a confirmation of transmission sent by certified, registered
or express mail, postage prepaid and return receipt requested no later than the
close of business on the next business day following such transmission) and
shall be addressed as follows:
when Purchaser is to be notified:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Attention: General Counsel
Facsimile No.: (310) 772-6574
with a copy to:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Attention: Controller
Facsimile No.: (310) 772-6684
and
O'Melveny & Myers
1999 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attention: Robert D. Haymer, Esq.
Facsimile No.: (310) 246-6779
when Seller is to be notified:
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, Florida 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
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With copies to:
John Alden Financial Corporation
7300 Corporate Center Drive
Miami, Florida 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1497
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Jay R. Schifferli, Esq.
Facsimile No.: (203) 327-2669
A Party may, by notice given in accordance with this Section 12.1 to the other
Party, designate another address or Person to which notices required or
permitted to be given pursuant to this Agreement shall thereafter be
transmitted. Each notice transmitted in the manner described in this Section
12.1 shall be deemed to have been given, received and become effective for all
purposes at the time it shall have been (i) delivered to the addressee as
indicated by the return receipt (if transmitted by mail), transmitted to the
addressee (if transmitted by facsimile and subject to delivery of the mailed
copy thereof) or the affidavit of the messenger (if transmitted by personal
delivery) or (ii) presented for delivery to the addressee as so indicated during
normal business hours, if such delivery shall have been refused for any reason.
Section 12.2. Entire Agreement. This Agreement (including the Ancillary
Agreements, the other agreements contemplated hereby and thereby, the JANY Stock
Purchase Agreement, the Annex, the Exhibits and the Schedules attached hereto
(the "Transaction Agreements")) contains the entire agreement and understanding
between the Parties with respect to the subject matter hereof and cancels and
supersedes all of the previous or contemporaneous agreements, representations,
warranties and understandings, whether written or oral, by or between the
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Parties with respect to the subject matter hereof. Except for the
representations and warranties expressly set forth in the Transaction
Agreements, Purchaser disclaims reliance upon (i) any representations,
warranties or guarantees (whether express or implied and whether oral or
written) by Seller, JANY or any of their Affiliates or any of their respective
Affiliates' Representatives (including, without limitation, any projections of
future sales, revenues, expenses or earnings and any statements regarding the
prospects of the Annuity Business as presently conducted by Seller) or (ii) any
other information with respect to the Annuity Business, the Purchased Assets,
Seller, JANY or their industry provided by or on behalf of them. Nothing
contained in any document or instrument of conveyance, transfer, assignment or
delivery executed or delivered at the Closing pursuant to this Agreement shall
amend, extend, modify, renew or alter in any manner any representation,
warranty, covenant, agreement or indemnity contained herein. Nothing contained
in the Transaction Agreements or in any of the Schedules hereto or thereto or in
any of the other agreement contemplated hereby or thereby shall constitute or be
interpreted or construed as an admission by any Party or any of its Affiliates
of liability to third parties, whether under Laws or otherwise, or as an
admission that any Party or any of its Affiliates are in violation of or have
ever violated any Law.
Section 12.3. Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of or approval under, this Agreement shall
be binding upon a Party unless such addition, cancellation, renewal, extension,
modification, amendment or approval is set forth in a written instrument which
states that it adds to, amends, cancels, renews or extends this Agreement or
grants an approval hereunder and which is executed and delivered on behalf of
each Party by an officer of, or attorney-in-fact for, such Party.
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Section 12.4. Waivers. No waiver of any provision of this Agreement
shall be binding upon a Party unless such waiver is expressly set forth in a
written instrument which is executed and delivered on behalf of such Party by an
officer of, or attorney-in-fact for such Party. Such waiver shall be effective
only to the extent specifically set forth in such written instrument. Neither
the exercise (from time to time or at any time) nor the delay or failure (at any
time or for any period of time) to exercise any right, power or remedy shall
operate as a waiver of, the right to exercise, or impair, limit or restrict the
exercise of part of any Party of any such right, power or remedy any other
right, power or remedy at any time and from time to time thereafter. No waiver
of any right, power or remedy of a Party shall be deemed to be a waiver of any
other right, power or remedy of such Party or shall, except to the extent so
waived, impair, limit or restrict the exercise of such right, power or remedy.
Section 12.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Each Party consents and
submits to the non-exclusive personal jurisdiction of any federal court in the
State of Delaware in respect of any proceeding for the sole purpose of
injunctive relief or to enforce an arbitration award under Section 12.10 hereof.
Each Party consents to service of process upon it with respect to any such
proceeding by registered mail, return receipt requested, and by any other means
permitted by applicable Laws. Each Party waives any objection that it may now or
hereafter have to the laying of venue of any such proceeding in federal court in
the State of Delaware and any claim that it may now or hereafter have that any
such proceeding in any such court has been brought in an inconvenient forum.
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Section 12.6. Binding Effect; Assignment; Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns. Neither Seller nor Purchaser
shall assign any of its rights or delegate any of its duties hereunder, (in
whole or in part and by operation of law or otherwise) without the prior written
consent of the other Party hereto, except that Purchaser may assign its rights
and obligations under this Agreement to any of its Affiliates provided Purchaser
shall remain liable for its obligations hereunder notwithstanding such
assignment. Any assignment of rights or delegation of duties under this
Agreement by a Party without the prior written consent of the other Party, if
such consent is required hereby, shall be void. No Person (including, without
limitation, any employee of a Party) shall be, or be deemed to be, a third party
beneficiary of this Agreement.
Section 12.7. Severability. If any provision of this Agreement shall
hereafter be held to be invalid, unenforceable or illegal, in whole or in part,
in any jurisdiction under any circumstances for any reason, (i) such provision
shall be reformed to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the Parties as
expressed in, and the benefits to the Parties provided by, this Agreement or
(ii) if such provision cannot be so reformed, such provision shall be severed
from this Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to this
Agreement) so as to give effect to the intent as so expressed and the benefits
so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other
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circumstances. Neither such holding nor such reformation or severance shall
affect or impair the legality, validity or enforceability of any other provision
of this Agreement.
Section 12.8. Headings. The headings in this Agreement have been
inserted for convenience of reference only, and shall not be considered a part
of this Agreement and shall not limit, modify or affect in any way the meaning
or interpretation of this Agreement.
Section 12.9. Counterparts. This Agreement may be executed by the
parties in any number of counterparts, each of which when so executed and
delivered shall constitute an original instrument, but all such counterparts
shall together constitute one and the same instrument. This Agreement shall
become effective and be deemed to have been executed and delivered by all of the
Parties at such time as counterparts shall have been executed and delivered by
both of the Parties, regardless of whether each of the Parties has executed the
same counterpart. It shall not be necessary when making proof of this Agreement
to account for any counterparts other than a sufficient number of counterparts
which, when taken together, contain signatures of both of the Parties.
Section 12.10. Arbitration. The Parties acknowledge and agree that the
transactions contemplated herein substantially affect and impact interstate
commerce. Therefore, all disputes or differences between Seller and Purchaser
arising under or which are related to this Agreement (other than proceedings for
the sole purpose of injunctive relief) upon which an amicable understanding
cannot be reached within 30 days shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
except as hereinafter provided, and judgment upon the award entered by the
Arbitrators (as defined below) may be entered in any court having jurisdiction
thereof. The Arbitrators provided for herein shall
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construe this Agreement in light of the prevailing custom and practices for
acquisition transactions of a similar nature. The "Arbitrators" shall consist of
one neutral arbitrator (or as provided below, three neutral arbitrators). The
Parties agree that the arbitration, if implemented under this Agreement, shall
be held at a site selected by the Arbitrators. The Parties agree to arbitrate
within 90 days following the transmittal of written demand of either Party to
arbitrate any dispute arbitrable under this Agreement. The Parties will in good
faith, within 15 days following notice of written demand to arbitrate attempt to
agree on a single Arbitrator. If the Parties cannot within 15 days thereafter
agree on a single arbitrator, each of the Parties shall appoint an Arbitrator,
notifying the other Party of the name and address of such Arbitrator. The
Arbitrators appointed by each Party shall agree upon and appoint a third neutral
Arbitrator. If either Party shall fail to appoint an Arbitrator as herein
provided, or should the two Arbitrators so named fail to select the third
Arbitrator within 30 days after their appointment, then, in either event, the
President of the American Arbitration Association or its successor shall appoint
such second and/or third Arbitrator. A decision of a majority of the Arbitrators
shall be final and binding and there shall be no appeal therefrom. The
Arbitrators shall within 45 days after the final hearing enter an award and the
award shall be supported by a written opinion. The fees of the Arbitrators and
the direct costs of the arbitration shall be shared equally by the Parties; all
other costs of the respective Parties, including without limitation fees and
expenses of the respective Party's attorneys, witnesses, and discovery shall be
paid by the respective Party, except to the extent that the Arbitrators
otherwise direct based on the equities of the situation. The arbitration shall
be held in New York, New York, unless otherwise agreed between the Parties.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ Jay S. Wintraub
--------------------------------
Name: Jay S. Wintraub
Title: Executive Vice President
JOHN ALDEN LIFE INSURANCE COMPANY
By: /s/ Glendon E. Johnson
--------------------------------
Name: Glendon E. Johnson
Title: Chief Executive Officer
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ANNEX A
The following terms are defined in the following Sections.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
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
Bill 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 John Alden Financial Statements 3.25
</TABLE>
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<PAGE> 100
<TABLE>
<S> <C>
Interim SunAmerica Financial Statements 4.7
JANY Stock Purchase Agreement Introduction
JANY Stock Introduction
JANY Introduction
John Alden 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
</TABLE>
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"Accrued and Unpaid Investment Income" means the aggregate accrued but
unpaid interest through and including the Closing Date on bonds, mortgages and
other interest bearing instruments included in the Closing Date Portfolio
Securities plus accrued but unpaid interest through and including the Closing
Date on any and all Policy Loans related to the Policy Loan Balance plus
declared but unpaid dividends on Preferred Stock.
"Action" means any action, claim, complaint, cause of action,
arbitration, petition, investigation, suit or administrative or other
proceeding, whether civil or criminal, at law or in equity, before any court,
arbitrator or Governmental Entity.
"Adjusted Capital and Surplus of JANY" means, as of the Closing Date,
capital and surplus plus asset valuation reserves of JANY as shown on lines 38,
11.4 and 24.1 of page 3 of the 1995 Annual Statement of JANY, calculated as of
the Closing Date in a manner consistent with such calculation at year end.
"Affiliate" shall mean any Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified. For purposes of this definition, "control"
(and its derivative terms "controlled," "controls," etc.) shall mean the power
and right to direct the management and policies of another Person, whether by
ownership of voting securities, the ability to elect a majority of the board of
directors or other managing board or committee, management contract, or
otherwise.
"Annuity Contracts" means all policies described on Schedule 3.8(a)
attached hereto. Annuity Contracts as used in this Agreement is intended to
refer to all single premium deferred annuity policies, flexible premium deferred
annuity policies, single premium immediate annuity policies, supplementary
contracts and guaranteed investment contracts included in the Annuity Business
which are in-force as of the Closing Ledger Date, as well as any riders
providing for other supplemental benefits, and all supplements, endorsements,
riders and ancillary agreements in connection therewith and specifically
includes without limitation (i) all lapsed Annuity Contracts that are reinstated
and (ii) any supplemental benefits arising out of the Annuity Contracts.
Notwithstanding anything to the contrary in this Agreement, "Annuity Contracts"
shall not include (i) any policy for which the reserves or applicable premiums
are not actually transferred to Purchaser, (ii) any policy not described in
Schedule 3.8(b) attached hereto, (iii) Annuity Contracts issued on or prior to
April 1, 1978, (iv) single premium immediate annuities and supplementary
contracts involving life contingencies, (v) universal life flexible premium
deferred annuity riders, (vi) annuity policies assumed by Seller from Aristar
Life Insurance Company and (vii) if the Oxford Put is implemented pursuant to
Section 5.10 hereof, the Oxford Annuity Contracts. For purposes of the
representations and warranties of Seller set forth in Article 3 hereof, the term
"Annuity Contracts" shall be deemed to include policies described on Schedule
3.8(a) attached hereto sold after the Closing Ledger Date and on or prior to the
Closing Date or which terminated after the Closing Ledger Date and on or prior
to the Closing Date.
"Book Value" means book value computed in accordance with SAP, without
marking to market and without including Accrued and Unpaid Investment Income.
3
<PAGE> 102
"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
4
<PAGE> 103
downs and sales, and (iv) $161,000 of gains on mortgage prepayments, as set
forth on the Schedule attached hereto entitled "Excluded Transactions."
"Execution Date" means the date of this Agreement.
"Extra Contractual Obligations" means all liabilities (i) for
compensatory, consequential, exemplary, punitive or similar damages which
directly relate to any alleged or actual act, error, omission, fraud or
misrepresentation by Seller, any of its Affiliates or any of its or its
Affiliates' officers or employees, whether intentional or otherwise, prior to
the Closing Date, or (ii) from any actual or alleged reckless conduct or bad
faith by Seller, any of its Affiliates or any of its or its Affiliates' officers
or employees in connection with Seller's handling of any claim under any of the
Annuity Contracts or in connection with the issuance, offer, sale, delivery,
cancellation or administration by Seller or any of its Affiliates or any of its
or its Affiliates' officers or employees of any of the Annuity Contracts or
(iii) in connection with any acceleration of the benefits under the Annuity
Contracts or any claims for the present value of the Annuity Contracts, in
either case, in connection with rehabilitation, liquidation, receivership or
other similar proceedings filed against Seller.
"Final Closing Net Assets" means the sum of (i) the Book Value of the
Closing Date Portfolio Securities as of the Closing Date as set forth on the
Final Closing Date Statement, (ii) any cash deposited in the Trust pursuant to
Section 1.2(c) hereof and (iii) the Policy Loan Balance as set forth on the
Final Closing Date Statement, which sum will be (x) increased by any amount paid
by Seller pursuant to Section 1.3(d)(i) hereof or (y) decreased by the amount
paid by Purchaser pursuant to Section 1.3(d)(ii) hereof.
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time, consistently applied throughout the
specified period and in the immediately prior comparable period.
"Governmental Entity" means any agency, administrative division or
department (or administrative subdivision), commission, regulatory authority
(including without limitation any insurance regulatory authority), taxing or
administrative authority, court or other judicial body, legislature of the
government of the United States or any state, city, municipality, county, town,
district or other political subdivision thereof or any state, city,
municipality, county, town, district or other political subdivision thereof or
any quasi-governmental entity, including, without limitation, the employees or
agents thereof.
"Hazardous Substance" means (i) any and all substances defined as
"hazardous substances," "extremely hazardous substances," "toxic substances,"
"hazardous waste," "hazardous materials" or "infectious waste" for purposes of
CERCLA or any other Environmental Law and (ii) any petroleum or petroleum-based
products.
"Insurance Liabilities" means only the contractual liabilities and
obligations of Seller arising under the Annuity Contracts, as evidenced by the
written policy forms and riders, and
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<PAGE> 104
no other liabilities whatsoever. Without limiting the foregoing, Insurance
Liabilities shall not include Excluded Liabilities or any Extra Contractual
Obligations.
"June 21 Portfolio Securities" means the cash, securities, mortgage
loans and other assets identified on Schedule 1.2(a)(i) as of June 21, 1996.
"Laws" means any and all federal, state or local statutes, laws,
ordinances, rules and regulations.
"Loan Documents" means the Mortgage Note, the Mortgage and any and all
other agreements, certificates, documents or instruments in Seller's possession
or under its control relating to the origination, closing and modification of a
Mortgage Loan, including without limitation any related assignment of rents,
security agreement, UCC financing statement, guaranty, letter of credit, pledge
agreement, loan agreement or other instrument creating a security interest in,
and Lien upon, real and/or personal property.
"Market Value" means (i) with respect to any publicly traded security,
the last reported sales price on the business day immediately preceding the date
on which such valuation is being made, (ii) with respect to other (private)
securities, the value estimated using publicly quoted market prices for similar
securities, as identified by Seller, increased by 30 basis points and (iii) with
respect to mortgages, the GAAP book value per Seller's financial statements.
"Material Adverse Effect" means any change, effect, event or occurrence
that has, or is reasonably likely to have, individually or in the aggregate, a
material adverse impact on (i) the assets, business, financial position or
results of operations of the Annuity Business, the Annuity Contracts or the
Purchased Assets or (ii) the ability of Seller to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements; provided that
"Material Adverse Effect" shall be deemed to exclude the impact of (i) changes
in Laws, or interpretations thereof by any Governmental Entity, relating to or
affecting the Annuity Business and (ii) changes in GAAP or SAP.
"Material Adverse Effect on Purchaser" means any change, effect, event
or occurrence that has, or is reasonably likely to have, individually or in the
aggregate, a material adverse impact on (i) the business, financial position or
results of operations of Purchaser (either before or after the Closing and the
closing under the JANY Stock Purchase Agreement) or (ii) the ability of
Purchaser to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements; provided that "Material Adverse Effect on Purchaser" shall
be deemed to exclude the impact of (i) changes in Laws or interpretations
thereof by any Governmental Entity relating to or affecting the business of
Purchaser and (ii) changes in GAAP or SAP.
"Mortgage" means the mortgage, deed of trust or other instrument (and
all modifications thereto) creating a lien on real property described therein or
on the tenant's interest under a ground lease of real property described
therein, in either case securing a Mortgage Note.
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<PAGE> 105
"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
7
<PAGE> 106
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
8
<PAGE> 107
include without limitation CS First Boston. Purchaser's Representatives
include without limitation Goldman Sachs & Company.
"Service Transfer Date" means the date which is nine months from the
Closing Date, unless an earlier date is agreed to in writing by Seller and
Purchaser.
"SAP" means the statutory accounting principals and practices, as in
effect from time to time, required or permitted for life insurance companies by
applicable Laws of the National Association of Insurance Commissioners and the
insurance regulatory authority in the state in which the company in question is
domiciled, consistently applied throughout the specified period and in the
immediately prior comparable period.
"Taxes" shall mean all taxes, charges, fees, levies, or other similar
assessments, including, without limitation, income, gross receipts, ad valorem,
premium, excise, real property, personal property, windfall profit, sales, use,
transfer, licensing, withholding, employment, payroll, and franchise taxes
imposed by any Governmental Entity; and such term shall include any interest
(through the date of payment), penalties, assessments, or additions to tax
resulting from, attributable to, or incurred in connection with any such tax or
any contest or dispute thereof.
"Tax Returns" shall mean returns, declarations, statements, reports,
schedules, forms and information returns and any amended Tax Return required to
be supplied to a taxing authority in respect of or relating to Taxes.
9
<PAGE> 108
EXHIBIT K
Loan Documentation
With respect to each Mortgage Loan, Seller has in its possession each
of the following items:
1. A summary of the terms of the Loan as presented to and approved by
Seller's loan committee.
2. An original promissory note (or a certified copy thereof) executed
by the borrower or its agent endorsed in favor of Seller showing the
Participant's respective interests therein.
3. An original recorded deed of trust or mortgage executed by the
borrower or its agent with applicable exhibits and riders.
4. An original policy of lender's title insurance and applicable
endorsements.
5. Evidence of the current Hazard Insurance Policy.
6. Evidence of current Flood Insurance, if applicable.
7. An original commitment letter to borrower, if available.
8. A certificate of occupancy, if available.
9. Credit report(s) with respect to the borrower prepared by Seller or
at Seller's request, if available.
10. Financial statements of the borrower current as of the date of the
Mortgage Loan application, executed by the borrower disclosing the ability to
repay the Mortgage Loan if applicable, and any updates thereof.
11. Franchise agreements, if applicable.
12. Partnership agreements, if applicable.
13. Current rent rolls if available in Seller's files.
14. An appraisal prepared for Seller executed prior to the approval of
the Mortgage Loan application by persons duly appointed and qualified as
appraisers by Seller's board of directors which appraisal discloses the market
value of the Mortgaged Property, containing sufficient information regarding the
Mortgaged Property to substantiate the appraisal.
15. Any and all documentation evidencing release of any part of the
pledged collateral, showing portion released, the consideration paid and the
approval obtained.
<PAGE> 109
Exhibit L
Marketing Agreement Terms
The Marketing Agreement will contain, among other things, the following
terms and such other terms and conditions as may be mutually acceptable to the
Parties:
a. John Alden shall market the following investment products of
SunAmerica and its Affiliates:
- SunAmerica's market value adjusted products
- S&P Index Annuity
- at least four current John Alden products selected by John
Alden that SunAmerica will refile and sell under its own name.
b. John Alden shall continue (through the date of termination of
the Transition Services Agreement) to make John Alden products
available to their marketing organization. Any product sales
after closing of these products will be reinsured through
SunAmerica.
c. The terms and conditions of the agreement between John Alden
and SunAmerica shall be no less favorable to SunAmerica than
the terms and conditions of the agreement between John Alden
and North Star Marketing relating to annuity products and
between any other firms that market their annuity products
through NorthStar.
d. John Alden and NorthStar will position the SunAmerica products
it is marketing in a position no less prominent than other
products it markets.
e. The agreements shall have a three year term with customary
termination provisions.
Except with respect to the agreement to negotiate in good faith towards
a marketing agreement, this Exhibit N is not intended to, and does not,
constitute a complete statement of, or a legally binding or enforceable
agreement or commitment on the part of Seller or Purchaser with respect to, the
matters described herein and Seller and Purchaser agree not to assert any
argument to the contrary. A marketing agreement will arise only as a result of
the negotiation, execution and delivery of formal written agreements containing
terms and conditions satisfactory to the Parties.
<PAGE> 1
Execution Copy
INDEMNITY REINSURANCE AGREEMENT
By and Between
JOHN ALDEN LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated as of March 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 - REINSURANCE COVERAGE....................................................................... 4
Section 1.1. Annuity Contracts........................................................ 4
Section 1.2. Additional Policies...................................................... 4
Section 1.3. Coverage................................................................. 5
Section 1.4. Effectiveness............................................................ 5
Section 1.5. Duration................................................................. 5
ARTICLE 2 - PAYMENTS BY REINSURED...................................................................... 6
Section 2.1. Initial Reinsurance Premium.............................................. 6
Section 2.2. Reinsurance Premiums..................................................... 6
Section 2.3. Policy Loan Payments..................................................... 6
ARTICLE 3 - PAYMENTS BY REINSURER...................................................................... 7
Section 3.1. Initial Policy Expense Allowance
and Other Payments....................................................... 7
Section 3.2. Policy and Administrative Services....................................... 7
Section 3.3. Benefits and Other Payments.............................................. 8
Section 3.4. Premium Taxes............................................................ 8
ARTICLE 4 - SETTLEMENT AND OFFSET...................................................................... 9
Section 4.1. Settlement............................................................... 9
Section 4.2. Offset................................................................... 9
ARTICLE 5 - TERMS OF REINSURANCE....................................................................... 10
Section 5.1. Administration of Policies............................................... 10
Section 5.2. Reports.................................................................. 10
Section 5.3. Tax Treatment............................................................ 11
Section 5.4. DAC Tax Reimbursement.................................................... 11
Section 5.5. Reserves................................................................. 13
Section 5.6. Crediting Rates.......................................................... 14
Section 5.7. Third Party Reinsurance.................................................. 15
ARTICLE 6 - ERRORS..................................................................................... 16
ARTICLE 7 - INSPECTION
Section 7.1. Books and Records........................................................ 16
ARTICLE 8 - INSOLVENCY................................................................................. 18
ARTICLE 9 - TRUST...................................................................................... 20
Section 9.1. Maintenance of Trust..................................................... 20
Section 9.2. Endorsement of Trust Assets.............................................. 23
Section 9.3. Investment of Trust Assets............................................... 23
Section 9.4. Fees..................................................................... 24
Section 9.5. Withdrawal By Reinsured.................................................. 24
Section 9.6. Withdrawal by Reinsurer.................................................. 25
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
Section 9.7. Return................................................................... 25
Section 9.8. Interest................................................................. 25
Section 9.9. Termination of Trust Account............................................. 25
ARTICLE 10 - DURATION; TERMINATION..................................................................... 25
Section 10.1. Duration................................................................. 25
Section 10.2. Termination.............................................................. 26
ARTICLE 11 - MISCELLANEOUS............................................................................. 26
Section 11.1. Notices.................................................................. 26
Section 11.2. Integration.............................................................. 28
Section 11.3. Amendments............................................................... 29
Section 11.4. Waivers.................................................................. 30
Section 11.5. Governing Law............................................................ 30
Section 11.6. Arbitration.............................................................. 31
Section 11.7. Binding Effect; Assignment; Third
Party Beneficiaries...................................................... 33
Section 11.8. Severability............................................................. 34
Section 11.9. Headings................................................................. 34
Section 11.10. Counterparts............................................................. 35
Section 11.11. Errors and Omissions..................................................... 35
</TABLE>
ii
<PAGE> 4
SCHEDULES:
<TABLE>
<S> <C>
1.2 - Additional Annuity Product Forms
1.3 - Endorsement
5.3 - Section 1.848-2(g)(8) Election
9.1(b) - Method of Calculation
</TABLE>
iii
<PAGE> 5
INDEMNITY REINSURANCE AGREEMENT
INDEMNITY REINSURANCE AGREEMENT (the "Agreement") dated as of
March 31, 1997 by and between John Alden Life Insurance Company, a Minnesota
corporation (collectively with its permitted successors and assigns
"Reinsured"), and SunAmerica Life Insurance Company, an Arizona corporation
("Reinsurer").
WITNESSETH:
WHEREAS, Reinsured is engaged in, among other businesses, the
business of selling, issuing and administering annuity policies and related
activities in the United States other than the State of New York (the "Annuity
Business");
WHEREAS, Reinsurer is engaged, among other businesses, in the
business of selling, issuing and administering annuity policies and related
activities in certain states of the United States;
WHEREAS, Reinsured and Reinsurer are parties to an Asset
Purchase and Sale Agreement dated as of November 29, 1996, as amended by
Amendment No. 1 dated as of March 31, 1997, and as may subsequently be amended
from time to time (as amended, the "Asset Purchase Agreement"), which provides
for the transfer to Reinsurer of certain assets used or held for use in the
Annuity Business (all capitalized terms used herein and not otherwise defined
shall have the meanings ascribed
<PAGE> 6
thereto in the Asset Purchase Agreement, except that for purposes of the terms
"Insurance Liabilities," "Other Liabilities," "Excluded Liabilities," and "Extra
Contractual Liabilities," the words "Annuity Contracts" shall be replaced with
the term "Policies");
WHEREAS, the Asset Purchase Agreement contemplates that
Reinsurer will reinsure the Insurance Liabilities and Other Liabilities arising
under the Annuity Contracts and Additional Policies (as defined below) on a
coinsurance basis under the terms and conditions set forth herein until the
direct assumption by Reinsurer of the Insurance Liabilities and Other
Liabilities under the Annuity Contracts and Additional Policies (other than
those Annuity Contracts and Additional Policies reinsured under the RSL
Agreements, which Annuity Contracts and Additional Policies shall not be assumed
by Novation by Reinsurer but shall only by ceded to Reinsurer on a coinsurance
basis) (the "Policies") on a novation basis as provided in an Assumption
Reinsurance Agreement between Reinsured and Reinsurer dated concurrently
herewith (the "Assumption Reinsurance Agreement");
WHEREAS, Reinsured desires that after the termination of the
Transition Services Agreement, defined herein, Reinsurer, as agent for
Reinsured, perform all administrative functions on behalf of Reinsured with
respect to the Policies, and Reinsurer has agreed to provide such
2
<PAGE> 7
services pursuant to the terms of an administrative services agreement being
entered into concurrently herewith by and between Reinsured and Reinsurer (the
"Administrative Services Agreement"). Reinsured shall perform the administrative
services for the Initial Policies insured hereunder pursuant to the terms of a
Transition Services Agreement being entered into concurrently herewith by and
between Reinsured and Reinsurer (the "Transition Services Agreement").
WHEREAS, concurrently herewith Reinsured, Reinsurer and
Bankers Trust Company, are entering into a trust agreement (the "Trust
Agreement") with respect to certain assets related to the obligations being
reinsured hereunder; and
WHEREAS, it is a condition to the obligations of the parties
under the Asset Purchase Agreement that Reinsured and Reinsurer enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the Asset Purchase
Agreement, and other good, valuable and sufficient consideration, the receipt
and sufficiency of which are hereby acknowledged, Reinsurer and Reinsured
(collectively, the "Parties" and, sometimes individually a "Party"), intending
to be legally bound, hereby agree as follows:
3
<PAGE> 8
ARTICLE 1 - REINSURANCE COVERAGE
Section 1.1. Annuity Contracts. The Annuity Contracts are hereby
reinsured by Reinsurer on the terms set forth herein.
Section 1.2. Additional Policies. The annuity policies issued by the
Reinsured (i) which become effective after the Ledger Cut-Off Date, which shall
be defined as the 21st of the month in which the Effective Date (as defined
below) occurs or the previous Business Day if the 21st is not a Business Day,
but on or prior to the Effective Date, or (ii) through the services of Reinsured
under the Transition Services Agreement which become effective after the
Effective Date and which, in either case, are written on forms of the Annuity
Contracts identified on Schedule 1.2 attached hereto (the "Additional Policies"
and, together with the Annuity Contracts, the "Policies") shall be reinsured
with the Reinsurer automatically on the terms set forth herein. To the extent
permitted by law, each Additional Policy issued after the Effective Date and
under the Transition Services Agreement shall be issued together with an
endorsement (substantially in the form attached hereto as Schedule 1.3)
providing for its automatic assumption by Reinsurer under the Assumption
Reinsurance Agreement upon receipt by Reinsurer of policy form approval from the
applicable regulatory body or bodies for an annuity contract form substantially
similar to the form of
4
<PAGE> 9
such Additional Policy. In the event such an endorsement is not permitted by
law, or has not been approved prior to the issuance of an Additional Policy,
Reinsured shall obtain an acknowledgement by the insured of the intent of
Reinsured to cede such Policy, on an assumption basis, to Reinsurer.
Section 1.3. Coverage. The reinsurance under this Agreement shall cover
100% of the Insurance Liabilities and Other Liabilities, but shall not include
any other liabilities or obligations of any nature whatsoever, fixed or
contingent, known or unknown, and shall be subject to the terms and conditions
set forth herein. Without limiting the foregoing, the reinsurance under this
Agreement shall not include the Extra Contractual Obligations or the Excluded
Liabilities.
Section 1.4. Effectiveness. The effective date of this Agreement shall
be 11:59 p.m. on the Closing Date (the "Effective Date").
Section 1.5. Duration. The reinsurance under this Agreement with
respect to any Policy shall be maintained in force without reduction so long as
the liability of Reinsured under such Policy reinsured hereunder remains in
force without reduction; provided, however, that this Agreement shall terminate
as to each Policy on the respective effective date of the Novation of such
Policy (as contemplated by Section 2.4 of the Assumption Reinsurance Agreement).
To the extent Reinsurer is unable for any reason to assume by novation any
5
<PAGE> 10
Annuity Contract, Reinsurer shall continue to reinsure such Annuity Contract, on
an indemnity basis, in accordance with the terms and conditions of this
Agreement.
ARTICLE 2 - PAYMENTS BY REINSURED
Section 2.1. Initial Reinsurance Premium. Concurrently with the
delivery of this Agreement, Reinsured shall deliver to Reinsurer as an initial
reinsurance premium the assets which comprise the Reinsurance Premium, the book
value of which is equal to the Reserve Liabilities. The Reinsurance Premium
shall be determined pursuant to Section 1.2(a) of the Asset Purchase Agreement,
and as adjusted pursuant to Section 1.6(d) of the Asset Purchase Agreement.
Section 2.2. Reinsurance Premiums. As further consideration for the
indemnity reinsurance of the Insurance Liabilities and the assumption of the
Other Liabilities, Reinsurer shall be entitled to all premiums and other amounts
payable after the Ledger Cut-Off Date with respect to the Policies. Reinsurer
shall collect and retain such amounts as agent for Reinsured pursuant to the
Administrative Services Agreement. Reinsured shall pay to Reinsurer any such
amounts actually received by Reinsured.
Section 2.3. Policy Loan Payments. Reinsurer shall be entitled to the
policy loan repayments after the Ledger Cut- Off Date attributable to the
Policies, irrespective of whether
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such repayments are made in cash, take the form of a reduction in cash surrender
values or death benefits paid, or otherwise. In addition, Reinsurer shall be
entitled to the policy loan interest paid after the Ledger Cut-Off Date with
respect to the Policies, regardless of whether such policy loan interest is
collected in cash or by collateralization. Reinsurer shall collect and retain
such amounts as agent for Reinsured pursuant to the Administrative Services
Agreement. Reinsured shall pay to Reinsurer any such amounts actually collected
by Reinsured.
ARTICLE 3 - PAYMENTS BY REINSURER
Section 3.1. Initial Policy Expense Allowance and Other Payments.
Reinsurer shall pay Reinsured an initial policy expense allowance equal to the
Closing Date Ceding Commission determined pursuant to Section 1.3(a), of the
Asset Purchase Agreement, as adjusted pursuant to Sections 1.3(c) and 1.6(c) of
the Asset Purchase Agreement. In addition to the initial policy expense
allowance, Reinsurer shall pay Reinsured an amount in cash equal to the Accrued
and Unpaid Investment Income determined pursuant to Sections 1.3(a) and 1.3(b)
of the Asset Purchase Agreement.
Section 3.2. Policy and Administrative Services. Reinsurer shall
provide services under the Administrative Services Agreement.
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Section 3.3. Benefits and Other Payments. The Reinsurer shall reimburse
Reinsured for all Insurance Liabilities and Other Liabilities paid by Reinsured
after the Ledger Cut-Off Date with respect to the Policies.
Section 3.4. Premium Taxes. Reinsurer shall reimburse Reinsured for the
payment by Reinsured of all premium taxes that constitute Other Liabilities paid
by Reinsured on account of premiums and other considerations received by
Reinsured on the Policies, on the basis specified herein. For each calendar year
the Reinsurer shall reimburse such premium tax payments, with respect to each
state, on an annual basis, within 30 days after receipt of Reinsured's premium
tax return for such year and a billing for Reinsurer's share of such premium
taxes paid. Reinsurer's share shall be determined on the basis of each such
state's tax rate for Policy premiums multiplied by the premiums received in such
state during the annual period. The Reinsurer's share shall be reduced (but not
below zero) by any guaranty fund credits relating to guaranty fund contributions
paid to Reinsured pursuant to Section 2.2 of the Asset Purchase Agreement in
such year or years prior to such year. Any such guaranty credits utilized as a
reduction of the premium tax reimbursement will reduce any reimbursement to
Reinsurer under Section 2.2(e) of the Asset Purchase Agreement on a
dollar-for-dollar basis for credits actually utilized.
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ARTICLE 4 - SETTLEMENT AND OFFSET
Section 4.1. Settlement. All amounts due to be paid to either the
Reinsurer or the Reinsured or to be paid into or removed from the Trust Account
established pursuant to Article 9 hereof shall be determined on a net basis as
of the last day of the calendar month to which such payment is attributable. All
such amounts will be due and accrued as of such date. Payment shall be based
upon the report delivered by Reinsurer pursuant to Section 5.2 hereof. If, based
upon such report, it is determined that Reinsurer owes a payment to Reinsured or
the Trustee, such payment shall be made at the time such report is delivered to
Reinsured. If based upon such report it is determined that Reinsured owes a
payment to Reinsurer, such payment shall be made within 15 days after delivery
of such report. All such payments shall be made in cash. If based upon such
report it is determined that Reinsurer is entitled to remove Assets from the
Trust Account (as those terms are defined in the Trust Agreement), it may do so
in accordance with the terms of the Trust Agreement.
Section 4.2. Offset. Any debts or credits, matured or unmatured,
liquidated or unliquidated, regardless of when they arose or were incurred, in
favor of or against either Reinsured or Reinsurer with respect to this Agreement
are deemed mutual debts or credits, as the case may be, and shall be set off,
and only the balance shall be allowed or paid.
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ARTICLE 5 - TERMS OF REINSURANCE
Section 5.1. Administration of Policies. Pursuant to the Transition
Services Agreement, Reinsured shall be responsible for the administration and
service of the Policies reinsured hereunder. The parties acknowledge that
Reinsured has concurrently herewith delegated effective on the date of the
termination of the Transition Services Agreement such responsibilities to
Reinsurer pursuant to the Administrative Services Agreement, and the parties
each consent to such delegation.
Section 5.2. Reports. (a) For the duration of this Agreement, the
Reinsurer shall provide the Reinsured with a monthly accounting (the "Monthly
Accounting") relating to the Policies no later than ten (10) Business Days
following the end of each related calendar month. The Monthly Accounting shall
contain such information as is set forth in Schedule 1.5 of the Administrative
Services Agreement, including a statement of any income received in connection
with the Policies. Such Schedule 1.5 shall also include a statement of monthly
reserves for GAAP and SAP. The first Monthly Accounting shall be provided to the
Reinsured no later than forty-five (45) Business Days after the date hereof and
the final Monthly Accounting shall be provided to the Reinsured no later than
ten (10) Business Days after the termination of this Agreement.
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<PAGE> 15
(b) For the duration of this Agreement, the Reinsurer shall
prepare quarterly statements of cash flow transaction data (within ten (10)
Business Days after the end of a calendar quarter) and annual financial
statement data (within thirty-five (35) calendar days after the end of the
fiscal year), for inclusion in Reinsured's applicable financial statements
(except for statements of cash flow testing and actuarial memorandum which shall
be delivered on or before March 1 of each calendar year).
Section 5.3. Tax Treatment. If the Policies include for U.S. federal
income tax purposes Specified Insurance Contracts pursuant to Section 848 of the
Internal Revenue Code of 1986, as amended, the Parties agree, with respect to
this Agreement, to make the election provided in Section 1.848- 2(g)(8) of the
regulations issued under Section 848. The specifics of this election are set
forth on Schedule 5.3 attached hereto.
Section 5.4. DAC Tax Reimbursement. In regards to the Policies
reinsured hereunder, Reinsurer shall calculate and pay to Reinsured annually:
[(a)-(b)]x[1+i(.73)]
where: "a" is equal to .95127% of the net consideration
(as defined under Treasury Regulation 1.848-2(f)
and adjusted as herein provided) (the "Net
Consideration") which arises under this Agreement
and is attributable to specified insurance
contracts that is included in the net premiums of
Reinsured. Such net consideration shall be
expressed as a positive amount. Reinsurer shall
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<PAGE> 16
deduct such net consideration from its net premiums, thereby expressing
such net consideration as a negative amount.
Note: .95127%=(35%)(1.75%)\(100%-35%-.6125%) where 35% is the highest corporate
federal income tax rate specified in Section 11 of the Code (the "Tax Rate"),
1.75% is the applicable percentage under Section 848 of the Code (the
"Applicable Percentage") for determining specified policy acquisition expenses,
and .6125% is (35%)(1.75%). The factors used in the above formula will be
modified in order to produce the same economic effect in the event there is a
future change in the Tax Rate, the Applicable Percentage or the definition of
net consideration.
"b" is equal to the sum of the following:
(i) 5% of "a" for the current calendar year
(ii) 10% of "a" for each of the 9 preceding
calendar years, plus
(iii) 5% of "a" for the 10th preceding calendar
year.
"i" is equal to the 5-year U.S. Treasury Bill rate
on December 31 of the year for which the
reimbursement relates. Such rate is expressed as a
decimal (e.g. 4% shall be expressed as .04)
For purposes of this Section 5.4, net consideration shall be determined
without regard to (i) the Initial Reinsurance Premium pursuant to Section 2.1
hereof, (ii) the Initial Policy Expense Allowance and other payments pursuant to
Section 3.1 hereof, (iii) the initial reinsurance of the Insurance Liabilities
and Other Liabilities by the Reinsurer under this Agreement, (iv) any deemed
transfer of assets from Reinsurer to Reinsured upon the termination or
conversion of any Policy to assumption reinsurance pursuant to the Assumption
Reinsurance Agreement, (v) the amount of premiums
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<PAGE> 17
or other consideration collected from Policyholders and transferred to Reinsurer
under Section 2.2 hereof, or deemed so transferred for purposes of determining
net consideration under this Section 5.4, and (vi) any DAC Tax Reimbursement.
In the event that the amount determined by the formula
[(a)-(b)]x[1+i(.73)] is negative, a payment of the absolute value of such amount
will be made by Reinsured to Reinsurer.
Payments for DAC Tax Reimbursement will continue to be made after
termination of this Agreement unless the parties agree to alternative settlement
at the time of termination.
It is understood and agreed that this method of determining DAC Tax
Reimbursement will be modified to produce the same economic effect in the event
that Section 848 of the Code is amended in the future or in the event that
regulations issued pursuant to Section 848 of the Code are amended.
The payment required to be made under this section shall be payable by
no later than ten (10) business days after May 15, the date by which information
concerning DAC Tax Reimbursement must be provided under Section 5.4.
Section 5.5. Reserves. With respect to the Policies, Reinsurer agrees
to establish and maintain as a net liability on its statutory statements a
reserve not less than the aggregate statutory reserves and claim reserves
calculated in a manner on a consistent basis with Reinsured's practices (which
calculation excludes any reserves for liabilities
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<PAGE> 18
coinsured under any of the Reinsurance Agreements referred to in Section 5.7);
provided, however, that Reinsurer may make such changes therein as required by a
change in Law or rules, regulations and administrative practice of the
Department of Insurance of any state in which the Reinsurer does business
regarding the manner for calculating Statutory Reserves, or if required to
comply with Reinsurer's state of domicile or to comply with Reinsurer's current
practices (such reserves, the "Statutory Reserves"). In such event, Reinsurer
shall establish and maintain the Statutory Reserves in accordance with statutory
insurance accounting principles prescribed or permitted and in accordance with
sound actuarial principles. It is the purpose and intent of this section that
both Reinsurer and Reinsured shall cooperate with each other in complying with
any required change in methodology for computation of Statutory Reserves that
may be required by the insurance regulatory authorities for the states in which
Reinsured conducts its business. Except as and to the extent any such change may
be required by applicable law or Reinsurer's state of domicile Reinsurer shall
not make any changes to the basis or methodology of calculating the Statutory
Reserves with respect to the Policies without prior written notification to
Reinsured.
Section 5.6. Crediting Rates. Reinsured shall set crediting rates with
respect to Policies from and after the
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<PAGE> 19
Effective Date as directed by Reinsurer. Reinsurer shall set comparable
crediting rates with respect to annuity policies not reinsured hereunder.
Reinsurer shall set rates permitted by the terms of the Policies and meeting the
requirements of applicable statutes and regulations.
Section 5.7. Third Party Reinsurance. As of the Effective Date, the
assignment and novation to Reinsurer of the reinsurance agreements and related
agreements between Reinsured and all third party reinsurers, as set forth on
Schedule 5.1 to the Assumption Reinsurance Agreement, related to the Annuity
Contracts naming Reinsurer as a direct party to each such agreement with respect
to the rights of the Reinsured and Insurance Liabilities and Other Liabilities
has been obtained. The collectability of reinsurance payable to Reinsurer under
such agreements shall be at the sole risk and for the account of Reinsurer. Any
payments by such third party reinsurers in respect of the Annuity Contracts with
respect to obligations accrued on or prior to the Ledger Cutoff Date, made by
Reinsured on or prior to the Ledger Cut-off Date and reinsured under such third
party reinsurance shall be for the account of Reinsured. This will include, but
not be limited to, claims, expense or other allowances and premium tax
reimbursements which relate to activity pertaining to periods before the
Effective Date.
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ARTICLE 6 - ERRORS
If either Reinsured or Reinsurer shall fail to perform an obligation
under this Agreement and such failure shall be the result of an error on the
part of Reinsured or Reinsurer, such error shall be corrected by restoring both
Reinsured and Reinsurer to the positions they would have occupied had such error
not occurred. For purposes of this Article 6, an "error" is a clerical mistake
made inadvertently and excludes error of judgment and all other forms of error.
ARTICLE 7 - INSPECTION
Section 7.1. Books and Records.
(a) Following the Effective Date, Reinsured shall (i) allow
Reinsurer, upon reasonable prior notice and during regular business hours,
through its employees and Representatives, at Reinsurer's expense the right to
examine and make copies of any books and records retained by Reinsured within
its possession or control ("control" for the purposes of this Section 7.1(a)
being defined as the ability to cause delivery to the Reinsured or access to the
Reinsurer) and furnish the Reinsurer with such financial and reporting data and
other information with respect to the Policies, as the Reinsurer may from time
to time reasonably request, to the extent they relate to the Policies, for any
reasonable business purpose, including, without limitation, the
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<PAGE> 21
preparation or examination of tax returns, regulatory filings and financial
statements and the conduct of any Action, whether pending or threatened,
concerning the Policies prior to the Effective Date at Reinsured's offices or
other facilities or properties and (ii) maintain such books and records for the
Reinsurer's examination and copying. Access to such books and records shall be
at the Reinsurer's expense, may not unreasonably interfere with Reinsured's or
any successor company's business operations and Reinsurer shall reimburse
Reinsured for all reasonable out-of-pocket expenses incurred by Reinsured in
copying such books and records. Reinsured 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 Reinsurer shall
notify Reinsured), after which time such books and records shall be delivered to
Reinsurer. Reinsurer shall not copy or remove from Reinsured's premises the
accountant's work papers made available to Reinsurer and its representatives.
(b) Following the Effective Date, Reinsurer shall (i) allow Reinsured,
upon reasonable prior notice and during regular business hours, through its
employees and other Representatives, at Reinsured's expense to examine and make
copies of the books and records transferred to Reinsurer as of
17
<PAGE> 22
the Effective Date for any reasonable business purpose, including, without
limitation, the preparation and 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 Reinsurer's offices or other facilities or properties
and (ii) maintain such books and records for Reinsured's examination and
copying. Access to such books and records shall be at Reinsured's expense and
may not unreasonably interfere with Reinsurer's or any successor company's
business operations and Reinsured shall reimburse Reinsurer for all reasonable
out-of-pocket expenses incurred by Reinsurer in copying such records. Reinsurer
shall retain any 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 Reinsured shall notify Reinsurer).
ARTICLE 8 - INSOLVENCY
(a) In the event of the insolvency of Reinsured and the
appointment of a conservator, liquidator or statutory successor of Reinsured,
reinsurance shall be payable immediately upon demand to such conservator,
liquidator or statutory successor, with reasonable provision for
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<PAGE> 23
verification before payment, on the basis of claims allowed against Reinsured by
any court of competent jurisdiction or by the conservator, liquidator or
statutory successor of Reinsured without diminution because of the insolvency of
Reinsured or because such conservator, liquidator or statutory successor has
failed to pay all or a portion of any claims.
(b) In the event of the insolvency of Reinsured, the
conservator, liquidator or statutory successor of Reinsured shall give Reinsurer
written notice of the pendency of a claim on a Policy within a reasonable time
after such claim is filed in the insolvency proceeding. During the pendency of
any such claim, Reinsurer may investigate such claim and interpose in the name
of Reinsured (or of its conservator, liquidator or statutory successor), but at
its own expense, in the proceeding where such claim is to be adjudicated, any
defense which Reinsurer may deem available to Reinsured or its conservator,
liquidator or statutory successor.
(c) The expense thus incurred by Reinsurer shall be
chargeable, subject to court approval, against Reinsured as part of the expense
of liquidation to the extent of a proportionate share of the benefit which may
accrue to Reinsured solely as a result of the defense undertaken by Reinsurer.
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ARTICLE 9 - TRUST
Section 9.1. Maintenance of Trust.
(a) On the Effective Date, Reinsurer and Reinsured shall enter
into the Trust Agreement and establish a Trust Account for the benefit of the
holders of the Policies and of Reinsured. At the end of each calendar month
ending before the second anniversary of the Effective Date, the Market Value (as
defined below) of Assets held in the Trust Account plus an amount equal to the
principal amount of the policy loans under the Policies, excluding the Withheld
Policy Loans (defined below) (together the "Asset Value") shall equal or exceed
80% of the Trust Statutory Reserves (as defined below). "Withheld Policy Loans"
shall mean those policy loans which (i) are held as funds withheld for Lincoln
National Reinsurance Company, Ltd. and are not Assets of the Trust Account or
(ii) have been transferred to Oxford Life Insurance Company ("Oxford") pursuant
to the Reinsurance Agreement by and between John Alden Life Insurance Company
and Oxford dated January 1, 1989 to the extent such policy loans are assets of
Oxford. At the end of each calendar month subsequent to such two-year period,
the Asset Value of the Trust Account shall equal or exceed 100% of the Trust
Statutory Reserves; "Statutory Reserves" shall have the meaning set forth in
Section 5.5 hereof and Trust Statutory Reserves shall equal the Statutory
Reserves less the Statutory Reserves with
20
<PAGE> 25
respect to Annuity Contracts and Additional Policies reinsured under the RSL
Agreements. Notwithstanding the foregoing, the Trust Statutory Reserves may be
reduced, on or after the first day of each month, by an amount equal to the
Statutory Reserves on any Policies with a Novation Date (as defined in Section
2.4 of the Assumption Reinsurance Agreement) as of that first day of such month.
(b) Reinsurer shall deliver to Reinsured within fifteen
business days after the end of each calendar month a listing of the assets held
in the Trust Account and the Market Value thereof calculated at the close of
business of such month. To the extent the Asset Value is less than the
percentage of Trust Statutory Reserves required pursuant to Section 9.1(a)
hereof as of the end of such calendar month, as evidenced by the reports
delivered pursuant to Section 5.2(a) hereof, Reinsurer shall promptly (and, in
any event, within three business days) deposit assets into the Trust Account so
that the Asset Value as of the end of such calendar month together with such
deposit is equal to at least the percentage of Trust Statutory Reserves required
pursuant to Section 9.1(a).
Reinsurer shall deliver to reinsured within fifteen days after
the end of each calendar month a listing of the assets held in the Trust Account
and the Market Value thereof calculated at the close of business of such month,
which
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<PAGE> 26
calculation methods are described in Schedule 9.1(b) hereof, as amended in
writing from time to time. "Market Value" means market value calculated in
accordance with the methodology utilized by Reinsurer from time to time in
connection with the preparation of its GAAP financial statements; provided,
however, that, with respect to mortgages, if any, Market Value shall mean the
GAAP book value balance of mortgage loans as provided on an aggregate basis by
each loan servicer.
(c) Reinsurer shall have the right to withdraw from the Trust Account
(i) an amount equal to the Accrued and Unpaid Investment Income calculated in
accordance with Section 1.3(b) of the Asset Purchase Agreement and (ii) any
amounts payable by it with respect to the adjustment to the Closing Date Ceding
Commission as provided in Section 1.3(d)(ii) of the Asset Purchase Agreement. As
of any date, Reinsurer may, in accordance with the procedures specified in the
Trust Agreement, withdraw assets from the Trust Account (1) to establish and
replenish the Controlled Disbursement Account established pursuant to the
Transition Services Agreement only to the extent required to make payment for
item (2) immediately following; (2) to pay death benefits, annuity benefits,
benefits paid pursuant to supplementary contracts, net surrender or partial
withdrawals or other benefits or payments or return of premiums on the Policies
(net of reinsurance payable by third party reinsurers as described in
22
<PAGE> 27
Section 5.7 hereof); (3) to reflect the reduction of Statutory Reserves by
reason of the effectiveness of a Novation (as contemplated by Section 2.4 of the
Assumption Reinsurance Agreement) with respect to Policies. If, subsequent to
the second anniversary of the Effective Date, the Asset Value exceeds the
percentage of Trust Statutory Reserves required pursuant to Section 9.1(a)
hereof as of the end of such calendar month, Reinsurer shall be entitled to
withdraw assets from the Trust Account provided the Asset Value after taking
into account such withdrawal is at least equal to the percentage of Trust
Statutory Reserves required pursuant to Section 9.1(a) hereof as of the end of
such calendar month.
Section 9.2. Endorsement of Trust Assets. Prior to depositing assets
with the trustee, Reinsurer shall execute assignments or endorsements in blank
or transfer legal title to the trustee of all shares, obligations or any other
assets requiring assignments, in order that the trustee, may whenever necessary
negotiate any such assets without consent or signature from Reinsurer or any
other entity.
Section 9.3. Investment of Trust Assets. The Reinsurer shall be
responsible for the investment decisions as to the investment, reinvestment and
substitution of the Assets in the Trust Account. Reinsurer may, in its
discretion, leave the assets invested in the Trust Account in the manner as
first deposited in the Trust Account. Except as set forth in the
23
<PAGE> 28
foregoing sentence, the Reinsurer may reinvest or substitute the Assets in the
Trust Account any time and from time to time, so long as (i) it does so in a
manner consistent with Reinsurer's investment policies for its own investment
portfolio, as such policies are in effect at the time investment instructions
are given, except that the percentage of assets representing mortgages or
mortgage-related assets may vary from the corresponding percentages of mortgages
or mortgage-related assets in the Reinsurer's own account and (ii) the fair
market value of substituted Assets, if any, shall not be less than the fair
market value of the Assets withdrawn.
Section 9.4. Fees. Except as provided in Section 6.4 of the Trust
Agreement, Reinsurer shall pay all trustee/custodial fees and expenses for the
Trust Account.
Section 9.5. Withdrawal By Reinsured. Notwithstanding any other
provision of this Agreement, Reinsured or any successor by operation of law of
Reinsured, including without limitation any liquidator, rehabilitator, receiver
or conservator of Reinsured, may draw upon such Trust Account in accordance with
the terms of the Trust Agreement, with such amounts drawn to be applied without
diminution because of the insolvency of Reinsured or Reinsurer to reimburse
Reinsured for all Insurance Liabilities and Other Liabilities paid by Reinsured
after the Ledger Cut-off Date with respect to the
24
<PAGE> 29
Policies to the extent not paid by Reinsurer when due under the Policy or
applicable Laws.
Section 9.6. Withdrawal by Reinsurer. Reinsurer shall have the right to
withdraw Assets from the Trust Account in accordance with Section 9.1 hereof and
the terms of the Trust Agreement.
Section 9.7. Return. Reinsured agrees to return to Reinsurer any
amounts drawn on such Trust Account which are in excess of the actual amounts
required for the purposes of Section 9.5 above.
Section 9.8. Interest. Reinsured agrees to pay Reinsurer interest at
the one month London Interbank Offered Rate on the amounts returned pursuant to
Section 9.7 above.
Section 9.9. Termination of Trust Account. The Trust Account shall
terminate at any time that the Trust Statutory Reserves as shown on any
quarterly statutory report are less than $75 million. In accordance with the
requirements of the Trust Agreement, Reinsurer shall sign a termination
certificate and shall deliver such certificate to the Trustee.
ARTICLE 10 - DURATION; TERMINATION
Section 10.1. Duration. Except as otherwise provided in Section 1.5
hereof, this Agreement shall be unlimited in duration.
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<PAGE> 30
Section 10.2. Termination. The termination of this Agreement or of the
reinsurance in effect under this Agreement shall not extend to or affect any of
the rights or obligations of Reinsured and Reinsurer applicable to any period
prior to the effective date of such termination. In the event that, subsequent
to the termination of this Agreement, an adjustment is made necessary with
respect to any accounting hereunder, a supplementary accounting shall take
place. Any amount owed to either Party by reason of such supplementary
accounting shall be paid by the other Party promptly upon the completion
thereof.
ARTICLE 11 - MISCELLANEOUS
Section 11.1. Notices. Any notice or other communication required or
permitted hereunder 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 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:
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<PAGE> 31
when Reinsurer is to be notified:
SunAmerica Life Insurance Company
1 SunAmerica, Century City
Los Angeles, California 90067-6022
Attention: General Counsel
Facsimile No.: (310) 772-6574
with a copy to:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Attention: Controller
Facsimile No.: (310) 772-6684
and
O'Melveny & Myers
1995 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attn: Robert D. Haymer, Esq.
Facsimile No.: (310) 772-6684
and
Barger & Wolen LLP
515 S. Flower Street
34th Floor
Los Angeles, California 90071
Attn: S. Stuart Soldate, Esq.
Facsimile No. (213) 614-7399
when Reinsured is to be notified:
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, Florida 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: William W. Rosenblatt, Esq.
Facsimile No.: (212) 259-6333
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<PAGE> 32
A Party may, by notice given in accordance with this Section 11.1 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
11.1 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 a 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 11.2. Integration. This Agreement (including the Exhibits and
the Schedules attached hereto), along with the Asset Purchase Agreement
including the Ancillary Agreements and the other agreements contemplated hereby
and thereby, and the Annex, the Exhibits and the Schedules attached thereto (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
28
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written or oral, by or between the Parties with respect to the subject matter
hereof. 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 any 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 any Laws or otherwise, or as an admission that any Party
or any of its Affiliates are in violation of or have ever violated any Laws. In
the event of any conflict between this Agreement and the Asset Purchase
Agreement, the Asset Purchase Agreement shall control. In the event of any
ambiguity (or inconsistency with the Asset Purchase Agreement) in this Agreement
such ambiguity or inconsistency shall be resolved by reference to the Asset
Purchase Agreement.
Section 11.3. 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,
29
<PAGE> 34
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 11.4. 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 or 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 11.5. 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 OF THEREOF. Each Party consents
and
30
<PAGE> 35
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 11.6 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 11.6. Arbitration. The Parties acknowledge and agree that the
transactions contemplated herein substantially affect and impact interstate
commerce. Therefore, all disputes or differences between Reinsured and Reinsurer
arising under or which are related to this Agreement (except for any proceeding
for the sole purpose of injunctive relief or to enforce an arbitration award as
set forth in Section 11.5 above) upon which an amicable understanding cannot be
reached within thirty (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
31
<PAGE> 36
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 ninety
(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 fifteen (15) days following notice of written demand to arbitrate
attempt to agree on a single Arbitrator. If the Parties cannot within fifteen
(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 thirty (30) days of 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
32
<PAGE> 37
there shall be no appeal therefrom. The Arbitrators shall within forty-five (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.
Section 11.7. 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 Reinsured nor
Reinsurer 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 Reinsurer may
assign its rights and obligations under this Agreement to any of its Affiliates
provided Reinsurer 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
33
<PAGE> 38
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 11.8. 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 11.9. Headings. The headings in this Agreement have been
inserted for convenience of reference only, and
34
<PAGE> 39
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 11.10. 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 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 11.11. Errors and Omissions. Inadvertent delays, errors or
omissions made by either Reinsured or Reinsurer in connection with this
Agreement or any transaction hereunder shall not relieve the other party from
any liability which would have attached to such party had such delay, error or
omission not occurred, provided that the party causing such delay error or
omission rectifies the same as soon as possible after its discovery thereof.
35
<PAGE> 40
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
SUNAMERICA LIFE INSURANCE
COMPANY
By: /s/ James W. Rowan
------------------------------
Name: James W. Rowan
Title: Senior Vice President
JOHN ALDEN LIFE INSURANCE
COMPANY
By: /s/ Scott L. Stanton
------------------------------
Name: Scott L. Stanton
Title: Senior Vice President
and Chief Financial
Officer
36
<PAGE> 41
SCHEDULE 1.2
Additional Annuity Product Forms*
<TABLE>
<CAPTION>
Name Form Type Distribution
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advantage Plus J-5750 SPDA Broker
Employee Annuity J-8027-C Flex JALIC
Bonus Asset Growth J-5628-P Flex Bank
Premier Flex J-5820 Flex Bank
Fl Pilgrim J-5825 Flex Bank
Fl Pilgrim Plus J-5840 Flex Bank
Fl Without Bonus J-5850 Flex Bank
Premier Flex Plus J-5880 Flex Bank
Pioneer Fee for Service J-5723 Flex Broker
All Purpose J-5615 Flex Broker
All Purpose Plus J-5765 Flex Broker
Six Flex J-5770 Flex Broker
Income Advantage J-5805 Flex Broker
Immediate Annuity J-1035 SPIA Bank/Broker
Bonus Asset-Group J-5621-C Flex Bank
Puritan Plus J-5905 Flex Broker
</TABLE>
* Product forms on which new policies have been issued in
1996.
37
<PAGE> 42
SCHEDULE 1.3
ENDORSEMENT
Contract issued to:
Effective Date of Rider:
Attached to and forming art of Contract No. _____
(herein called the "Contract")
issued by
JOHN ALDEN LIFE INSURANCE COMPANY
(herein called "John Alden")
The Contract will be assumed by SUNAMERICA LIFE INSURANCE
COMPANY (herein called "SunAmerica") shortly after it receives approval for its
annuity contract policy form in the State of ______ and obtains any other
required regulatory approvals for such assumption. Thereafter SunAmerica will be
the insurer and promptly after the effectiveness of such assumption it will
issue a Certificate of Assumption in the form attached hereto.
In the event that SunAmerica does not obtain all such
approvals, John Alden will remain as the insurer and the Contract will remain
with John Alden.
Nothing herein contained shall be held to vary, alter, waive
or extend any of the terms, conditions, provisions, agreements or limitations of
the Contract other than as above stated.
38
<PAGE> 43
IN WITNESS WHEREOF, John Alden and SunAmerica have each
executed this endorsement.
JOHN ALDEN LIFE INSURANCE
COMPANY
- ---------------------- -------------------------
Secretary President
SUNAMERICA LIFE INSURANCE
COMPANY
- ---------------------- -------------------------
Secretary President
39
<PAGE> 44
SCHEDULE 5.3
Section 1.848-2(g)(8) Election
Reinsured and Reinsurer agree to the following pursuant to Section 1.848-2(g)(8)
of the Income Tax Regulations issued under Section 848 of the Internal Revenue
Code of 1986 (hereinafter "Section 1.848-2(g)(8).")
1. The Party with net positive consideration for this Agreement
for any taxable year beginning with the taxable year
prescribed in paragraph 4 below will capitalize specified
policy acquisition expenses with respect to this Agreement
without regard to the general deduction limitation.
2. The Parties agree to exchange information
pertaining to the amount of net consideration under
this Agreement to ensure consistency. This will be
accomplished as follows:
(a) Reinsured shall submit to Reinsurer by the
fifteenth day of May in each year its calculation of
the net consideration for the preceding calendar
year. Such calculation will be accompanied by a
statement signed by an officer of Reinsured stating
that Reinsured will report such net consideration in
its tax return for the preceding calendar year.
(b) Reinsurer may contest such calculation by providing
an alternative calculation to Reinsured in writing
within 30 days after Reinsurer's receipt of
Reinsured's calculation. If Reinsurer does not so
notify Reinsured, Reinsurer will report the net
consideration as determined by Reinsured in
40
<PAGE> 45
Reinsurer's tax return for the previous calendar
year.
(c) If Reinsurer contests Reinsured's calculation
of the net consideration, the Parties will act
in good faith to reach an agreement as to the
current amount within 30 days after the date
Reinsurer submits its alternative calculation.
If Reinsured and Reinsurer reach agreement on
an amount of net consideration, each Party
shall report such amount in their respective
tax returns for the preceding calendar year.
3. This election shall be effective for 1997 and all
subsequent taxable years for which the Indemnity
Reinsurance Agreement remains in effect.
41
<PAGE> 46
SCHEDULE 9.1(b)
Reinsurer prices certain publicly-traded securities through the SunGard
securities system, which as of the date of this Schedule contracts for pricing
of securities through Interactive Data Corp, subject to verification by
Reinsurer against broker quotes. Privately placed securities are priced via
broker quotes. Securities not priced through either of the above methods are
priced by Reinsurer by comparison to reasonably comparable securities, as
determined in its discretion.
42
<PAGE> 1
Execution Copy
ASSUMPTION REINSURANCE AGREEMENT
By and Between
JOHN ALDEN LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated as of March 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
ASSUMPTION; INDEMNIFICATION............................................................................ -3-
ARTICLE 2
NOTICES; ASSUMPTION CERTIFICATES; NOVATIONS............................................................ -4-
2.1 Policyholder Consent Required........................................................ -4-
2.2 Policyholder Consent Not Required.................................................... -5-
2.3 Compliance of Forms.................................................................. -6-
2.4 Effective Date of Novation........................................................... -6-
2.5 Costs of Compliance.................................................................. -8-
ARTICLE 3
APPROVALS.............................................................................................. -8-
Section 3.1 Regulatory Approvals............................................... -8-
ARTICLE 4
TRANSFER OF POLICY LIABILITIES......................................................................... -9-
Section 4.1 Novation........................................................... -9-
Section 4.2 Effect of Novation................................................. -9-
Section 4.3 Forwarding of Premiums and Other
Payments by Reinsured.............................................. -10-
ARTICLE 5
EFFECT ON EXISTING REINSURANCE......................................................................... -12-
ARTICLE 6
FURTHER ASSURANCES..................................................................................... -13-
Section 6.1 Further Assurances................................................. -13-
ARTICLE 7
RECORDS AND ACCOUNTING................................................................................. -13-
Section 7.1 Books and Records.................................................. -13-
ARTICLE 8
RESERVED............................................................................................... -15-
ARTICLE 9
MISCELLANEOUS.......................................................................................... -15-
Section 9.1 Notices............................................................ -15-
Section 9.2 Integration........................................................ -17-
Section 9.3 Amendments......................................................... -19-
Section 9.4 Waivers............................................................ -19-
Section 9.5 Governing Law...................................................... -20-
Section 9.6 Arbitration........................................................ -20-
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 9.7 Binding Effect; Assignment; Third
Party Beneficiaries............................................... -22-
Section 9.8 Severability...................................................... -23-
Section 9.9 Headings.......................................................... -24-
Section 9.10 Counterparts...................................................... -24-
Section 9.11 Errors and Omissions.............................................. -25-
</TABLE>
ii
<PAGE> 4
SCHEDULES: Schedule 5.1 - Reinsurance Agreements
EXHIBITS:
Exhibit A - Notice of Transfer
Exhibit B - Assumption Certificate
iii
<PAGE> 5
ASSUMPTION REINSURANCE AGREEMENT
ASSUMPTION REINSURANCE AGREEMENT (the "Agreement") dated as of March
31, 1997 (the "Closing Date"), by and between John Alden Life Insurance Company,
a Minnesota corporation ("Ceding Company"), and SunAmerica Life Insurance
Company, an Arizona corporation ("Reinsurer").
WHEREAS, Ceding Company is engaged in, among other businesses, the
business of selling, issuing and administering annuity policies and related
activities in the United States other than the State of New York (the "Annuity
Business");
WHEREAS, Reinsurer is engaged in, among other businesses, the business
of selling, issuing and administering annuity policies and related activities in
certain states of the United States;
WHEREAS, Ceding Company and Reinsurer are parties to an Asset Purchase
and Sale Agreement dated as of November 29, 1996 as amended by Amendment No. 1
dated as of March 31, 1997, and as may be subsequently amended from time to time
(as amended, the "Asset Purchase Agreement"), which provides for the transfer to
Reinsurer of certain assets used in the Annuity Business (all capitalized terms
used herein and not otherwise defined shall have the meanings ascribed thereto
in the Asset Purchase Agreement, except that for purposes of the terms
"Insurance Liabilities," "Other Liabilities" and "Extra Contractual
Obligations," the words "Annuity Contracts" shall be replaced with the term
"Policies");
<PAGE> 6
WHEREAS, the Asset Purchase Agreement contemplates that Reinsurer will
reinsure the Insurance Liabilities of Ceding Company arising under the Annuity
Contracts on the terms and conditions set forth herein and in the Indemnity
Reinsurance Agreement;
WHEREAS, pursuant to an Indemnity Reinsurance Agreement, Ceding Company
has ceded on a coinsurance basis Ceding Company's Insurance Liabilities and
Other Liabilities arising under the Annuity Contracts after the Closing Date and
under the Additional Policies (as defined in the Indemnity Reinsurance
Agreement) on the terms and conditions set forth therein pending assumption of
the Annuity Contracts and Additional Policies (other than those Annuity
Contracts and Additional Policies reinsured under the RSL Agreements, which
Annuity Contracts and Additional Policies shall not be assumed by Novation by
Reinsurer but shall only be ceded to Reinsurer on a coinsurance basis) (the
"Policies") as contemplated in this Agreement.
WHEREAS, on the Novation Date (as defined herein), Ceding Company
desires to assign and transfer the rights and Insurance Liabilities of the
Policies to Reinsurer on an assumption reinsurance basis on the terms and
conditions set forth herein.
2
<PAGE> 7
WHEREAS, Reinsurer desires to assume the rights and Insurance
Liabilities of the Policies on the terms and conditions set forth herein; and
WHEREAS, it is a condition to the obligations of the parties under the
Asset Purchase Agreement that Ceding Company and Reinsurer enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good, valuable and
sufficient consideration including the consideration provided by the Asset
Purchase Agreement, the receipt and sufficiency of which are hereby
acknowledged, Reinsurer and Ceding Company (collectively, the "Parties" and,
sometimes individually a "Party"), intending to be legally bound, hereby agree
as follows:
ARTICLE 1
ASSUMPTION; INDEMNIFICATION
Ceding Company hereby agrees to sell, cede and convey all of its right,
title and interest in and to the Policies to Reinsurer, and Reinsurer, subject
to the terms and conditions set forth herein, hereby agrees to accept and
reinsure, on an assumption basis, all (100%) of the Insurance Liabilities and
the Other Liabilities, but no other liabilities or obligations of any nature
whatsoever, fixed or contingent, known or unknown. Without limiting the
foregoing, Reinsurer shall not
3
<PAGE> 8
accept and reinsure the Excluded Liabilities or Extra Contractual Obligations
arising out of or with respect to the Policies.
Ceding Company will indemnify and hold harmless the Reinsurer in
accordance with the terms of the Asset Purchase Agreement against all
liabilities other than the Insurance Liabilities and the Other Liabilities.
ARTICLE 2
NOTICES; ASSUMPTION CERTIFICATES; NOVATIONS
Section 2.1 Policyholder Consent Required. The provisions of this
Section 2.1 shall apply in those states in which the consent of the holder of a
Policy (each, a "Policyholder") is required for the assumption of the Policies
by the Reinsurer.
(a) Policyholder Notice. Promptly following the receipt of all
required regulatory approvals in a particular state (or promptly after the
Closing Date with respect to those states in which regulatory approval is not
required), Reinsurer shall prepare for mailing to each holder of an Annuity
Contract or Additional Policy which did not have an assumption endorsement
attached when issued in each such state an option letter, including a rejection
form, substantially in the form of Exhibit A attached hereto (the "Policyholder
Notices").
4
<PAGE> 9
Reinsurer will use its best efforts to distribute such
Policyholder Notices promptly to each such Policyholder. Each Policyholder
Notice shall be dated the date upon which it is mailed. Reinsurer shall use
commercially reasonable efforts to obtain the consent of each such Policyholder
to the assumption by Reinsurer of the Policyholder's Policy. Ceding Company
shall provide such assistance to Reinsurer as Reinsurer shall reasonably request
in order to obtain such consents.
(b) Certificate of Assumption. The Reinsurer shall also
prepare and mail a certificate of assumption substantially in the form of
Exhibit B attached hereto (the "Certificate of Assumption") to Policyholders
resident in states which require the mailing of a separate Certificate of
Assumption. Such certificates may be mailed separately or together with the
Policyholder Notice at the option of the Reinsurer, but subject to any
applicable regulatory requirements.
Section 2.2 Policyholder Consent Not Required. In those states in which
the consent of a Policyholder is not required for this assumption of the
Policies by the Reinsurer, Reinsurer shall prepare and mail to each such
Policyholder a Certificate of Assumption. The Certificate of Assumption shall be
mailed promptly following the receipt of any regulatory approval required with
respect to such certificate
5
<PAGE> 10
(or immediately following the Closing Date if no such approval is required).
Reinsurer will use its commercially reasonable efforts to distribute such
Certificates of Assumption promptly to each such Policyholder.
Section 2.3 Compliance of Forms. Notwithstanding the form of Exhibit A
and Exhibit B referred to in this Article 2. Ceding Company and Reinsurer agree
that such exhibits will be modified for use in the various states to the extent
required to comply with local regulatory requirements or as agreed to by Ceding
Company and Reinsurer.
Section 2.4 Effective Date of Novation. Unless a rejection of
assumption has been received from a Policyholder, a Policy assumed by Reinsurer
pursuant to this Agreement shall be deemed to have effected a Novation as
follows (each, a "Novated Contract"):
(a) With respect to those states which have enacted the
Assumption Reinsurance Model Act promulgated by the National
Association of Insurance Commissioners (the "Model Act"), unless
expressly rejected before the date of deemed Novation as provided
herein, an Annuity Contract will be deemed to have been novated upon
the earlier to occur of (i) the first day of the month immediately
following the date that the Policyholder's consent to such Novation
arrives at the Reinsurer's administrative office, or (ii) the first day
of the month
6
<PAGE> 11
immediately following the second anniversary of the date on which the
Policyholder Notice was mailed to such Policyholder (the "Second
Anniversary"), unless a second notice is required to be mailed, in
which case the date of Novation will be the first day of the month
immediately following the Second Anniversary. Notwithstanding the above
sentence, no Novation shall be effective prior to the earliest date
specified by the Reinsurer for Novation in such state; provided,
however, that Reinsurer shall use commercially reasonable efforts to
obtain Novations.
(b) With respect to those states which have not enacted the
Model Act but which otherwise impose advance notice or consent
requirements, a Policy will be deemed to have been novated upon the
earliest date specified in the Policyholder Notice. Notwithstanding the
above sentence, no Novation shall be effective prior to the earliest
date specified by the Reinsurer for Novation in such state; provided,
however, that Reinsurer shall use commercially reasonable efforts to
obtain Novations.
(c) With respect to those states which do not require express
acceptance of the assumption by a Policyholder or where advance notice
of the assumption is not otherwise required, the Novation will be
deemed
7
<PAGE> 12
effective as of the date specified in the mailing of the
Certificate of Assumption.
(d) As used herein, a Novation is the substitution of
Reinsurer for Ceding Company as obligor with respect to a Policy and
the release of Ceding Company as obligor on such Policy (but only with
respect to the Insurance Liabilities), with the effects set forth in
Section 4.2 hereof.
The effective date of Novation with respect to a particular
Policy as provided above shall be deemed the "Novation Date" with respect to
such contract.
Section 2.5 Costs of Compliance. The costs and expenses of compliance
with this Article 2 will be borne by Reinsurer, including out of pocket expenses
incurred by Ceding Company in the provision of assistance at the request of
Reinsurer.
ARTICLE 3
APPROVALS
Section 3.1 Regulatory Approvals. Reinsurer shall diligently pursue and
use its commercially reasonable efforts to obtain necessary regulatory approval
in all applicable states to the transactions contemplated hereby (other than any
approvals that relate solely to Ceding Company, which Ceding Company shall use
its commercially reasonable efforts to obtain). Ceding Company shall provide
such assistance to
8
<PAGE> 13
Reinsurer as Reinsurer shall reasonably request in order to obtain such
approvals. Reinsurer shall bear the cost of obtaining required insurance
regulatory approvals, consents and orders (other than any approvals that relate
solely to Ceding Company) necessary to permit Ceding Company and Reinsurer to
execute, deliver and perform this Agreement.
ARTICLE 4
TRANSFER OF POLICY LIABILITIES
Section 4.1 Novation. Notwithstanding any provision of this Agreement
to the contrary, in the event that a Policy defined herein as a Novated Contract
is determined by an applicable regulatory authority or by judicial decision (in
either case, following the exhaustion of all rights of appeal) to be not novated
from Ceding Company to Reinsurer, such Policy shall for all purposes of this
Agreement be deemed retroactive to the respective effective dates of Novation to
not have been assumed by Reinsurer and the holder of such Policy shall have no
direct right of action against Reinsurer with respect to such Policy. Reinsurer
may prepare a new form of policyholder notice and certificate of assumption
believed by Reinsurer to be sufficient to obtain a Novation of any Policies
judicially determined to be not novated and may deliver same to all
policyholders of such Policies.
Section 4.2 Effect of Novation. Subject to this Section 4.2, Reinsurer
shall be the successor to Ceding
9
<PAGE> 14
Company under the Novated Contracts as if the Novated Contracts were direct
obligations originally issued by Reinsurer. Subject to this Section 4.2,
Reinsurer shall be substituted in the place and stead of Ceding Company, and
each holder of a Novated Contract shall be entitled to disregard Ceding Company
as a party thereto and treat Reinsurer as if it had been originally obligated
thereunder. On or after the effective date of such Novation, the holders of
Novated Contracts shall have the right to file claims arising under the Novated
Contracts directly with Reinsurer and shall have a direct right of action
against Reinsurer for the Insurance Liabilities. Reinsurer hereby consents to be
subject to direct action taken by any such holders under a Novated Contract with
respect to the Insurance Liabilities. Reinsurer accepts and assumes the Novated
Contracts subject to any and all defenses, setoffs and counterclaims to which
Ceding Company would be entitled with respect to Insurance Liabilities, it being
expressly understood and agreed by the Parties that no such defenses, setoffs or
counterclaims are waived by the execution of this Agreement or the consummation
of the transactions contemplated hereby and that Reinsurer shall be fully
subrogated to all such defenses, setoffs and counterclaims.
Section 4.3 Forwarding of Premiums and Other Payments by Reinsured.
Premiums due or paid with respect to the
10
<PAGE> 15
Novated Contracts on and after the relevant Novation Date, and any loan
repayments (and interest payments thereon) made on the Novated Contracts on and
after the relevant Novation Date, shall be the sole property of Reinsurer. From
and after the relevant Novation Date, all holders under the Novated Contracts
shall pay all premiums and make any loan repayments (and interest payments
thereon) on their Policies directly to Reinsurer. All such payments received by
Ceding Company related to Novated Contracts after the relevant Novation Date
shall be delivered to Reinsurer, together with information, if available,
regarding the payor, nature of payment, policy number and period with respect to
which the payment relates. Reinsurer will assume all obligations to administer
the Novated Contracts.
Ceding Company agrees that, after the respective Novation
Dates of the Novated Contracts, it will forward to Reinsurer immediately upon
receipt all notices and other written communications received by it relating to
Novated Contracts (including, without limitation, all inquiries or complaints
from state insurance regulators, agents, brokers and policyholders and all
notices of claims, suits and actions for which it receives service of process).
11
<PAGE> 16
ARTICLE 5
EFFECT ON EXISTING REINSURANCE
Schedule 5.1 sets forth all reinsurance or co-insurance agreements
(together with all other agreements related thereto) related to the Annuity
Contracts to which Ceding Company is a party and all such contracts,
arrangements, treaties, understandings and agreements under which Ceding Company
has any obligation to cede or assume insurance (the "Reinsurance Agreements").
As of the Closing Date, the assignment and Novation to Reinsurer of the
reinsurance agreements and related agreements between Ceding Company and all
third party reinsurers related to the Annuity Contracts naming Reinsurer as a
direct party to each such agreement with respect to rights of the Ceding Company
and the Insurance Liabilities and Other Liabilities has been obtained. The
collectability of reinsurance payable to Reinsurer under the Reinsurance
Agreements shall be at the sole risk and for the account of Reinsurer.
Notwithstanding the foregoing, nothing contained herein is intended to require
Reinsurer to assume by Novation the Annuity Contracts and Additional Policies
reinsured under the RSL Agreements, which Annuity Contracts and Additional
Policies shall be ceded to Reinsurer on a coinsurance basis only.
12
<PAGE> 17
ARTICLE 6
FURTHER ASSURANCES
Section 6.1 Further Assurances. From time to time after the date
hereof, without further consideration, each Party shall execute and deliver such
other instruments of assumption, conveyance, assignment, transfer and delivery,
and take such other action as the other Party reasonably requests, in order to
more effectively accomplish the Novation of the Policies contemplated herein.
ARTICLE 7
RECORDS AND ACCOUNTING
Section 7.1 Books and Records.
(a) Following the Closing Date, Ceding Company shall (i) allow
Reinsurer, upon reasonable prior notice and during regular business hours,
through its employees and Representatives (as defined in the Asset Purchase
Agreement), at Reinsurer's expense to examine and make copies of any books and
records retained by Ceding Company within its possession or control ("control"
for the purposes of this Section 7.1(a) being defined as the ability to cause
delivery to Ceding Company or access to Reinsurer) and furnish Reinsurer with
such financial and reporting data and other information with respect to the
Policies as Reinsurer may from time to time reasonably request, to the extent
they relate to the Annuity Business, for any reasonable business purpose,
including,
13
<PAGE> 18
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 Annuity Business at Ceding Company's offices or
other facilities or properties and (ii) maintain such books and records for
Reinsurer's examination and copying. Access to such books and records shall be
at Reinsurer's expense, may not unreasonably interfere with Ceding Company's or
any successor company's business operations and Reinsurer shall reimburse Ceding
Company for all reasonable out-of-pocket expenses incurred by Ceding Company in
copying such records. Ceding Company 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 Reinsurer shall notify Ceding
Company), after which time such books and records shall be delivered to
Reinsurer. Reinsurer shall not copy or remove from Ceding Company's premises the
accountant's work papers made available to Reinsurer and its Representatives.
(b) Following the Closing Date, Reinsurer shall (i) allow
Ceding Company, upon reasonable prior notice and during regular business hours,
through its employees and other Representatives, at Ceding Company's expense to
examine and make copies of the books and records transferred to Reinsurer
14
<PAGE> 19
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 Reinsurer's offices or other facilities or properties
and (ii) maintain such books and records for Ceding Company's examination and
copying. Access to such books and records shall be at Ceding Company's expense
and may not unreasonably interfere with Reinsurer's or any successor company's
business operations and Ceding Company shall reimburse Reinsurer for all
reasonable out-of-pocket expenses incurred by Reinsurer in copying such records.
Reinsurer 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 Ceding Company shall notify Reinsurer).
ARTICLE 8
RESERVED
ARTICLE 9
MISCELLANEOUS
Section 9.1 Notices. Any notice or other communication required or
permitted hereunder shall be
15
<PAGE> 20
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 a 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 Reinsurer is to be notified:
SunAmerica Life Insurance Company
1 SunAmerica, Century City
Los Angeles, California 90067-6022
Attention: General Counsel
Facsimile No.: (310) 772-6574
with copies to:
SunAmerica Life Insurance Company
1 SunAmerica, Century City
Los Angeles, California 90067-6022
Attention: Controller
Facsimile No.: (310) 772-6684
O'Melveny & Myers
1995 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attention: Robert D. Haymer, Esq.
Facsimile No.: (310) 772-6684
Barger & Wolen LLP
515 S. Flower Street
34th Floor
Los Angeles, California 90071
Attention: S. Stuart Soldate, Esq.
Facsimile No.: (213) 614-7399
16
<PAGE> 21
when Ceding Company is to be notified:
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, Florida 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: William W. Rosenblatt, Esq.
Facsimile No.: (212) 259-6333
A Party may, by notice given in accordance with this Section 9.1 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 9.1
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 9.2 Integration. This Agreement (including the Exhibits and the
Schedules attached hereto), along with
17
<PAGE> 22
the JANY Stock Purchase Agreement, the Asset Purchase Agreement including the
Ancillary Agreements and other agreements contemplated hereby and thereby, the
Annex, the Exhibits and the Schedules attached thereto (as each defined therein)
(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. 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 any other agreements 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 any Laws, or as an
admission that any Party or any of its Affiliates are in violation of or have
ever violated any Laws. In the event of any conflict between this Agreement and
the Asset Purchase Agreement, the Asset Purchase Agreement shall control. In the
event of any ambiguity (or inconsistency with the Asset Purchase Agreement) in
this
18
<PAGE> 23
Agreement, such ambiguity or inconsistency shall be resolved by reference to the
Asset Purchase Agreement.
Section 9.3 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 9.4 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 on the part of any Party of any such right, power or remedy or any
other right, power or remedy at any time and from time to time thereafter.
19
<PAGE> 24
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 9.5 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 OF 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 9.6 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 9.6 Arbitration. The Parties acknowledge and agree that the
transactions contemplated herein, as well as the issuance of and payment of
claims relating to the Annuity Contracts that are the subject of this Agreement,
substantially affect and impact interstate commerce.
20
<PAGE> 25
Therefore, all disputes or differences between Ceding Company and Reinsurer
arising under or which are related to this Agreement (other than proceedings for
the sole purpose of injunctive relief or to enforce an arbitration award set
forth in Section 9.5 above) upon which an amicable understanding cannot be
reached within thirty (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 ninety (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 fifteen (15) days following notice of written demand to arbitrate attempt
to agree on a single Arbitrator. If the Parties cannot within fifteen (15) days
thereafter agree on a single arbitrator, each of the Parties shall appoint an
21
<PAGE> 26
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 thirty (30) days of 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 forty-five (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.
Section 9.7 Binding Effect; Assignment; Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors
22
<PAGE> 27
and permitted assigns. Neither Ceding Company nor Reinsurer 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 Reinsurer may assign its rights and obligations under
this Agreement to any of its Affiliates provided Reinsurer shall remain liable
for its obligations hereunder notwithstanding such assignment; and provided
further that this Section 9.7 shall not limit the right of Reinsurer to reinsure
or coinsure Novated Contracts or to cause such Novated Contracts to be novated
to another insurer. 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 9.8 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
23
<PAGE> 28
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 9.9 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 9.10 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 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
24
<PAGE> 29
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 9.11 Errors and Omissions. Inadvertent delays, errors or
omissions made by either Ceding Company or Reinsurer in connection with this
Agreement or any transaction hereunder shall not relieve the other party from
any liability which would have attached to such party had such delay, error or
omission not occurred, provided that the party causing such delay error or
omission rectifies the same as soon as possible after its discovery thereof.
25
<PAGE> 30
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
REINSURER: SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ James W. Rowan
-------------------------
Name: James W. Rowan
-------------------------
Title: Senior Vice President
-------------------------
CEDING COMPANY: JOHN ALDEN LIFE INSURANCE COMPANY
By: /s/ Scott L. Stanton
-------------------------
Name: Scott L. Stanton
-------------------------
Title: Senior Vice President
-------------------------
26
<PAGE> 31
Schedule 5.1
Reinsurance Agreements
JALIC Reinsurance: all ceded
1. Indemnity Reinsurance Agreement between John
Alden Life Insurance Company and Aristar Life
Insurance Company, effective October 28, 1987.
2. Coinsurance Agreement between John Alden Life
Insurance Company and Lincoln National
Reinsurance Company Ltd., effective September
30, 1995.
- Trust Agreement among Lincoln National
Reinsurance Company Limited, John Alden
Life Insurance Company and The Chase
Manhattan Bank, N.A., effective as of
October 9, 1995.
3. Indemnity Coinsurance Agreement between John
Alden Life Insurance Company and Oxford Life
Insurance Company, effective January 1, 1989.
- Trust Agreement among Oxford Life
Insurance Company, John Alden Life Insurance
Company and The Chase Manhattan Bank, N.A.,
dated February 13, 1990.
4. Coinsurance Agreement between John Alden Life
Insurance Company and Reliance Standard Life
Insurance Company, effective June 30, 1990.
(Annuity Contracts and Additional Policies
reinsured under the RSL Agreements shall not
be assumed by Novation by Reinsurer but shall
only be ceded to Reinsurer on a coinsurance
basis.)
- Trust Agreement among Reliance Standard
Life Insurance Company, John Alden Life
Insurance Company and CTC Illinois Trust
Company, dated July 9, 1990.
5. Coinsurance Agreement between John Alden Life
Insurance Company and Reliance Standard Life
Insurance Company, effective October 31, 1990.
27
<PAGE> 32
(Annuity Contracts and Additional Policies reinsured
under the RSL Agreements shall not be assumed by
Novation by Reinsurer but shall only be ceded to
Reinsurer on a coinsurance basis.)
- Trust Agreement among Reliance Standard
Life Insurance Company, John Alden Life
Insurance Company and CTC Illinois Trust
Company, dated October 30, 1990.
28
<PAGE> 33
EXHIBIT A
JOHN ALDEN LIFE INSURANCE COMPANY
SUNAMERICA LIFE INSURANCE COMPANY
__________, 1997
Dear Policyholder:
This notifies you of an agreement reached between JOHN ALDEN
LIFE INSURANCE COMPANY ("John Alden") and SUNAMERICA LIFE INSURANCE COMPANY
("SunAmerica") for the assumption of your annuity contract __________ by
SunAmerica. SunAmerica will become your insurer and will assume all of the
rights, obligations and liabilities of John Alden under your coverage. This
assumption will be effective as of 12:01 a.m., Eastern Time, on __________,
1997.
The assumption has been approved by the Insurance Department
of the State of Minnesota and the Insurance Department of the State of Arizona,
the insurance departments of the domiciliary states of John Alden and
SunAmerica.
To introduce you to SunAmerica, attached is a summary of
essential information about SunAmerica.
You have the following options with regard to the assumption
of your contract:
Option 1. Accept the transfer of your contract from
John Alden to SunAmerica.
Option 2. Reject the proposed transfer of your
contract from John Alden to SunAmerica. If
you choose this option, John Alden will
remain as your insurer and you will have no
rights to claim any payments from
SunAmerica.
If you wish to choose option 1, simply do not return the
Rejection Form and you will automatically be deemed to have accepted this option
upon the expiration of thirty (30) days from the date of this Notice. You should
then attach the enclosed Certificate of Assumption to your contract.
If you wish to choose option 2, you must complete the enclosed
Rejection Form, sign it and return it within
1
<PAGE> 34
thirty (30) days of the date of this Notice, along with the enclosed Certificate
of Assumption.
Except for the substitution of SunAmerica for John Alden as
your insurer, your rights under your contract will not change as a result of the
assumption of your contract.
If you have any questions about the assumption of your contact
or about SunAmerica, please feel free to call ( ) _________. Written inquiries
may be mailed to:
SunAmerica Life Insurance Company
(address)
Sincerely,
JOHN ALDEN LIFE INSURANCE COMPANY
--------------------------------
By:
SUNAMERICA LIFE INSURANCE COMPANY
--------------------------------
By:
2
<PAGE> 35
REJECTION FORM
To: JOHN ALDEN LIFE INSURANCE COMPANY
[address]
Re: ANNUITY CONTRACT NUMBER __________ ("Contract")
I reject the proposed transfer of my Contract from John Alden Life
Insurance Company to SunAmerica Life Insurance Company. Enclosed is the
Certificate of Assumption that
was sent to me.
DATE:____________ ____________________________
POLICYHOLDER SIGNATURE
_____________________________
PRINT OR TYPE NAME
3
<PAGE> 36
[For use with all Option Letters]
INFORMATION SUMMARY
[Description of SunAmerica]
4
<PAGE> 37
EXHIBIT B
ASSUMPTION CERTIFICATE
[Contract Number]
Effective Date: ________________, 1996
This is to certify that SunAmerica Life Insurance Company ("SunAmerica)
has assumed responsibility for your annuity insurance policy and the attached
riders, if any, issued by John Alden Life Insurance Company ("John Alden").
All provisions of such policy remain in full force and effect; except
that from and after the Effective Date all references in your policy to John
Alden are changed to SunAmerica and SunAmerica shall have all rights and will
perform all the obligations contained in such policy.
All inquiries and future correspondence should be directed to
SunAmerica at the address listed above.
This certificate becomes a part of your policy and should be attached
thereto.
IN WITNESS WHEREOF, SUNAMERICA LIFE INSURANCE COMPANY has executed this
Assumption Certificate at its Administrative Office in _______________ as of its
Effective Date.
SUNAMERICA LIFE INSURANCE COMPANY
By:
-------------------------------
5
<PAGE> 1
EXECUTION COPY
TRUST AGREEMENT
By and Among
SUNAMERICA LIFE INSURANCE COMPANY
as Grantor,
JOHN ALDEN LIFE INSURANCE COMPANY
as Beneficiary,
and
BANKERS TRUST COMPANY
as Trustee
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ............................................................................................... 1
ARTICLE 1. DEPOSIT OF ASSETS TO THE TRUST ACCOUNT...................................................... 3
ARTICLE 2. WITHDRAWAL AND SUBSTITUTION OF ASSETS OF
THE TRUST ACCOUNT ........................................................................ 3
ARTICLE 3. REDEMPTION AND INVESTMENT OF ASSETS......................................................... 7
ARTICLE 4. RIGHT TO VOTE ASSETS........................................................................ 9
ARTICLE 5. ADDITIONAL RIGHTS AND DUTIES OF THE
TRUSTEE .................................................................................. 9
ARTICLE 6. THE TRUSTEE'S COMPENSATION, EXPENSES
AND INDEMNIFICATION ...................................................................... 12
ARTICLE 7. RESIGNATION OR REMOVAL OF THE TRUSTEE....................................................... 13
ARTICLE 8. TERMINATION OF THE TRUST ACCOUNT............................................................ 15
ARTICLE 9. MISCELLANEOUS............................................................................... 15
Section 9.1. Notices..................................................................... 15
Section 9.2. Portfolio Inspection........................................................ 17
Section 9.3. Entire Agreement............................................................ 18
Section 9.4. Amendments.................................................................. 19
Section 9.5. Waivers..................................................................... 19
Section 9.6. Governing Law............................................................... 20
Section 9.7. Arbitration................................................................. 20
Section 9.8. Binding Effect; Assignment;
Third Party Beneficiaries ................................................. 23
Section 9.9. Severability................................................................ 24
Section 9.10. Headings.................................................................... 24
Section 9.11. Counterparts................................................................ 25
Section 9.12. Errors and Omissions........................................................ 25
Section 9.13. Certain Definitions......................................................... 25
SIGNATURES..............................................................................................28
</TABLE>
i
<PAGE> 3
TRUST AGREEMENT
TRUST AGREEMENT, dated as of March 31, 1997 (the "Agreement"), among
SunAmerica Life Insurance Company, an Arizona corporation (the "Grantor"), John
Alden Life Insurance Company, a Minnesota corporation (a "Beneficiary," as
defined in Section 9.11 hereof) and Bankers Trust Company, a banking corporation
organized and existing under the laws of the State of New York (the "Trustee")
(collectively, the "Parties" and sometimes individually a "Party").
WITNESSETH:
WHEREAS, the Beneficiary and the Grantor have entered into an Asset
Purchase and Sale Agreement dated as of November 29, 1996, as has been and as
may be amended from time to time (the "Asset Purchase Agreement"), pursuant to
which the Grantor has agreed to enter into an Indemnity Reinsurance Agreement
with Beneficiary pursuant to which it would transfer assets in the amount
specified in the Asset Purchase Agreement to a trust account established
pursuant to this Agreement (all capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Asset Purchase
Agreement, except for purposes of the terms "Insurance Liabilities," "Other
Liabilities," "Excluded Liabilities," and "Extra-Contractual Obligations," the
words "Annuity Contracts" shall be replaced with the term "Policies");
WHEREAS, pursuant to the Indemnity Reinsurance Agreement being entered
into concurrently herewith by the Grantor and the Beneficiary (the "Indemnity
Reinsurance Agreement"), the
<PAGE> 4
Grantor has agreed to deposit additional assets in such trust account, if
necessary;
WHEREAS, the Grantor desires to establish a trust account hereunder for
the benefit of the Beneficiary to assure that the Beneficiary will have access
to sufficient assets in the event that the Grantor becomes unable to meet its
obligations to the Beneficiary under the Indemnity Reinsurance Agreement; and
WHEREAS, the Trustee (1) is a member of the Federal Reserve System (2)
is organized under the laws of the United States or a state thereof, (3) is
regulated, supervised, and examined by United States federal authorities or
authorities of a state of the United States having regulatory authority over
banks and trust companies, (4) is not the Parent, a Subsidiary or an Affiliate
(as such terms are defined in Section 9.10 hereof) of the Grantor or the
Beneficiary, and (5) has been granted authority to operate with fiduciary
powers.
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 and sufficiency of
which are hereby acknowledged, the Parties, intending to be legally bound,
hereby agree as follows:
2
<PAGE> 5
ARTICLE 1. DEPOSIT OF ASSETS TO THE TRUST ACCOUNT
Section 1.1. The Grantor hereby establishes a trust account
(the "Trust Account") with the Trustee upon the terms and conditions set forth
herein. The assets held in the Trust Account shall be subject to withdrawal by
the Beneficiary and the Grantor as provided herein.
Section 1.2. The Grantor shall transfer, or cause to be
transferred, assets to the Trustee for initial deposit to the Trust Account, and
may from time to time transfer to the Trustee for deposit to the Trust Account
other assets (all such assets actually received in the Trust Account are herein
referred to individually as an "Asset" and collectively as the "Assets"). All
income from Assets shall be deemed to be part of the Trust Account. All Assets
in the Trust Account shall be held by the Trustee at the Trustee's office in the
United States.
Section 1.3. All payments of interest, dividends and other
income actually received in respect of Assets shall be deposited by the Trustee
in the Trust Account.
ARTICLE 2. WITHDRAWAL AND SUBSTITUTION OF ASSETS OF
THE TRUST ACCOUNT
Section 2.1. Withdrawal by Beneficiary. (a) Withdrawals from
the Trust Account may be made by or at the direction of the Beneficiary at any
time and from time to time only for the purposes permitted by Section 9.5 of the
3
<PAGE> 6
Indemnity Reinsurance Agreement and solely after compliance with the procedures
set forth in this Section 2.1.
(b) Before submitting a request to the Trustee to withdraw
funds from the Trust Account, the Beneficiary shall take the following actions:
(i) Notify the Grantor in writing of the specific
benefits or other amounts (the "Claim") it believes
the Grantor has not paid to a Policyholder with
respect to any Insurance Liability, including without
limitation, the Policyholder's name, address,
contract number and, if known, a social security
number, the basis upon which the Beneficiary believes
the benefits are owed, and any correspondence from
the policyholder with respect to such Claim (the
"Claim Notice").
(ii) If, within four (4) Business Days after receipt of
the Claim Notice, Grantor has not provided the
Beneficiary with reasonable evidence that Grantor has
paid the Claim, then Beneficiary shall have the right
to retain the services of a "Big 6" accounting firm
(the "Designated Accounting Firm") which will review
the Claim for four (4) Business Days and
4
<PAGE> 7
provide a written determination to both Parties as to
whether Grantor is obligated to pay the Claim.
(iii) If the Designated Accounting Firm determines that the
Claim is an Insurance Liability payable by Grantor
and has not been paid, the Beneficiary shall be
entitled to pay the policyholder the amounts
specified in the Claim.
(c) Following payment of a Claim, the Beneficiary shall
present to the Trustee a certificate substantially in the form of Exhibit A
hereto, signed by its Chief Executive Officer, Chief Financial Officer, General
Counsel or the Senior Vice President of Accounting, which shall be accompanied
by a certificate executed by a partner of the Designated Accounting Firm that
states (X) that the Grantor was obligated to pay the Claim and failed to do so,
and (Y) that Beneficiary has provided reasonable evidence to the Designated
Accounting Firm that Beneficiary has paid the Claim (the "Beneficiary Withdrawal
Request").
(d) Upon receipt of the Beneficiary Withdrawal Request,
Trustee shall immediately forward a copy of the Beneficiary Withdrawal Request,
together with all attachments thereto, to the Grantor and transfer to the
Beneficiary or its designee (i) all right, title and interest in any readily
marketable Assets identified by the Beneficiary, or if none are identified, cash
or any readily marketable Assets, in each
5
<PAGE> 8
case in an amount equal to the Claim identified in the Beneficiary Withdrawal
Request, and (ii) custody thereof. The Trustee shall be fully protected in
relying upon any Beneficiary Withdrawal Request which meets the requirement of
Section 2.1(c) hereof.
(e) The costs of any Designated Accounting Firm retained by
the Beneficiary pursuant to Section 2.1(b) shall be borne by the Party adjudged
to be incorrect.
Section 2.2. Withdrawals by Grantor. (a) Withdrawals from the
Trust Account may be made by or at the direction of the Grantor at any time or
from time to time for the purposes permitted in Section 9.1 of the Indemnity
Reinsurance Agreement upon presentation to the Trustee of a certificate
substantially in the form of Exhibit B hereto (the "Grantor Withdrawal
Request"), signed by a duly authorized officer of the Grantor, which states the
amount to be withdrawn (the "Withdrawn Amount"). Upon receipt of the Grantor
Withdrawal Request, the Trustee shall immediately transfer to the Grantor (i)
all right, title and interest in the Assets identified by the Grantor, or if
none are identified, cash or readily marketable Assets, in each case in an
amount equal to the Withdrawal Amount identified in the Grantor Withdrawal
Request, and (ii) custody thereof. No statements or documents other than the
Grantor Withdrawal Request need be presented by the Grantor in order to withdraw
or direct the withdrawal of Assets, except that the Grantor may be required by
the Trustee to acknowledge receipt of
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<PAGE> 9
withdrawn Assets. The Trustee shall be fully protected in relying upon any
Grantor Withdrawal Request which meets the requirements of this Section 2.2(a).
(b) If the Beneficiary reasonably believes that the Grantor
has withdrawn funds from the Trust Account in violation of Section 9.1 of the
Indemnity Reinsurance Agreement, it may retain a Designated Accounting Firm to
audit any such withdrawal. If the Designated Accounting Firm determines that all
or any portion of such withdrawal was made in violation of Section 9.1 of the
Indemnity Reinsurance Agreement, it shall execute a certificate that sets forth
the amount that was withdrawn inappropriately and the basis therefor (the
"Withdrawal Dispute Certificate").
(c) Within five (5) days after receipt of a Withdrawal Dispute
Certificate, Grantor shall redeposit the amount designated in the certificate,
together with interest thereon at the one month London Interbank Offered rate.
(d) The costs of any Designated Accounting Firm retained by
the Beneficiary shall be borne (i) by the Beneficiary if the Designated
Accounting Firm determines that the amount to be paid is $1,000,000 or less, and
(ii) by the Grantor if the Designated Accounting Firm determines that the amount
to be paid is more than $1,000,000.
Section 2.3. The Grantor may substitute Assets in the Trust
Account in accordance with Section 9.3 of the Indemnity Reinsurance Agreement.
The Trustee shall be fully protected in relying upon any direction of the
Grantor to
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<PAGE> 10
accept a substitution of assets and shall have no duty to determine whether the
requirements of Section 9.3 of the Indemnity Reinsurance Agreement have been
satisfied.
ARTICLE 3. REDEMPTION AND INVESTMENT OF ASSETS
Section 3.1. The Trustee shall surrender for payment all
maturing Assets and all Assets called for redemption and deposit the proceeds of
such to the Trust Account.
Section 3.2. The responsibility for directing the Trustee to
invest and reinvest the Assets shall be that of the Grantor and/or its
designated agent and, unless and until directed by the Grantor or such
designated agent, the Trustee shall not be required to take any action with
respect to the investment or reinvestment of the Assets. The Trustee shall
invest and reinvest the Assets or any part thereof in, and accept in
substitution therefor, such Authorized Investments as the Grantor or its
designated agent shall direct by electronic on-line communication or in writing.
The Grantor and its designated agent may, from time to time, provide Trustee
with written directions regarding the order in which Assets will be delivered to
the Grantor or the Beneficiary in connection with withdrawals pursuant to
Section 2.1 hereof.
Section 3.3. Trustee shall have no responsibility for trading
the Assets in the Trust Account. The Grantor or its designated agent shall have
the authority to issue orders for the purchase, sale, exchange or other
acquisition or disposition of Assets directly to brokers, dealers or issuers.
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<PAGE> 11
Trustee shall be responsible for settling trades made by the Grantor. Trustee
shall follow the instructions and directions of the Grantor or its designated
agent regarding the settlement of trades.
Section 3.4. The Grantor or its designated agent shall
promptly notify the Trustee (no later than 12:00 noon New York City time on each
Settlement Date) of the issuance of each order for the purchase or sale of an
Asset and shall direct the broker, dealer or issuer to confirm the execution of
each order by advice to Trustee. Such notification shall be authority for
Trustee to pay for securities purchased against receipt thereof and to deliver
securities sold against payment thereof, as the case may be. Trustee is
authorized, in its discretion, to enter into an agreement with the Grantor to
use the Depository Trust Company's Institutional Delivery System for trade
confirmation and settlement.
Section 3.5. Trustee shall promptly forward a copy of any
notice, statement or report that it is required under this Agreement to provide
to Grantor or its designated agent.
ARTICLE 4. RIGHT TO VOTE ASSETS
The Trustee shall forward all annual and interim
stockholder reports and all proxies and proxy materials relating to the Assets
in the Trust Account to the Grantor. The Grantor shall have the full and
unqualified right to vote any Assets in the Trust Account.
9
<PAGE> 12
ARTICLE 5. ADDITIONAL RIGHTS AND DUTIES OF THE TRUSTEE
Section 5.1. Except as otherwise provided in Section 2.1(d)
hereof, the Trustee shall notify the Grantor and the Beneficiary in writing
within ten (10) days following each deposit to, or withdrawal from, the Trust
Account.
Section 5.2. Before accepting any asset for deposit to the
Trust Account, the Trustee shall determine that such asset is in such form that
the Beneficiary or the Trustee upon direction by the Beneficiary whenever
necessary may negotiate such asset without consent or signature from the Grantor
or any Person or entity other than the Trustee in accordance with the terms of
this Agreement.
Section 5.3. The Trustee shall receive all Assets and cause
them to be held in safekeeping.
Section 5.4. The Trustee shall accept and open all mail
directed to the Grantor or the Beneficiary in care of the Trustee.
Section 5.5. The Trustee shall furnish to the Grantor and the
Beneficiary a statement of all Assets in the Trust Account as of the inception
of the Trust Account and as of the end of each calendar month thereafter. Such
statements shall be furnished within five business days after the end of the
month.
Section 5.6. Upon the request of the Grantor or the
Beneficiary and at their sole cost and expense, the Trustee shall promptly
permit the Grantor or the Beneficiary, their respective agents, employees or
independent auditors to
10
<PAGE> 13
examine, audit, excerpt, transcribe and copy, during the Trustee's normal
business hours, any books, documents, papers and records relating to the Trust
Account or the Assets. Trustee shall also furnish the Grantor on line electronic
review of the Trust Account and furnish the Beneficiary review pursuant to and
in accordance with Section 9.2 hereof.
Section 5.7. Except as otherwise provided in Section 2.1(c)
hereof, the Trustee is authorized to follow and rely upon all instructions given
by officers named in incumbency certificates furnished to the Trustee from time
to time by the Grantor and the Beneficiary, respectively, and by
attorneys-in-fact acting under written authority furnished to the Trustee by the
Grantor or the Beneficiary, including, without limitation, instructions given by
letter, facsimile transmission, telegram, teletype, cablegram or electronic
media, if the Trustee believes such instructions to be genuine and to have been
signed, sent or presented by the proper Party or Parties. Except as otherwise
provided in Section 2.1(c) hereof, the Trustee shall not incur any liability to
anyone resulting from actions taken by the Trustee in reliance in good faith on
such instructions. The Trustee shall not incur any liability in executing
instructions (i) from an attorney-in-fact prior to receipt by it of notice of
the revocation of the written authority of the attorney-in-fact or (ii) from any
officer of the Grantor or the Beneficiary named in an incumbency certificate
delivered hereunder prior to receipt by it or a more current certificate.
11
<PAGE> 14
Section 5.8. The duties and obligations of the Trustee shall
only be such as are specifically set forth in this Agreement, as it may from
time to time be amended, and no implied duties or obligations shall be read into
this Agreement against the Trustee. The Trustee shall only be liable for breach
of this Agreement and direct and proximate losses due to its own gross
negligence, willful misconduct or lack of good faith.
Section 5.9. No provision of this Agreement shall require the
Trustee to take any action which, in the Trustee's reasonable judgment, would
result in any violation of this Agreement or any provision of law.
Section 5.10. The Trustee may confer with counsel of its own
choice in relation to matters arising under this Agreement and shall have full
and complete authorization and protection from the other Parties hereunder for
any action taken or suffered by it under this Agreement or under any transaction
contemplated hereby in good faith and in accordance with the advice of such
counsel.
Section 5.11. No Person other than the Beneficiary or the
Grantor may require an accounting or bring any action against the Trustee with
respect to this Agreement or its actions as Trustee.
12
<PAGE> 15
ARTICLE 6. THE TRUSTEE'S COMPENSATION, EXPENSES
AND INDEMNIFICATION
Section 6.1. Trustee shall be entitled to receive from the
Grantor as compensation for its services under this Agreement, a fee as agreed
upon in writing by the Grantor, which may from time to time be amended.
Section 6.2. Trustee shall be entitled to receive from Grantor
payment of or reimbursement for all of the Trustee's actual out-of-pocket
expenses and disbursements in connection with its duties under this Agreement
(including reasonable attorney('s) fees and expenses), except any such expense
or disbursement as may arise from the Trustee's gross negligence, willful
misconduct or lack of good faith, and except as provided in Section 6.4 hereof.
Section 6.3. No Assets shall be (i) withdrawn from the Trust
Account or (ii) used in any manner for paying compensation to, or reimbursement
or indemnification of, the Trustee.
Section 6.4. The Grantor hereby agrees to indemnify the
Trustee for, and hold it harmless against, any loss, liability, costs or
expenses (including reasonable attorney('s) fees and expenses) incurred by the
Trustee arising out of or in connection with the performance of its obligations
in accordance with the provisions of this Agreement, including any loss,
liability, costs or expenses arising out of or in connection with the status of
the Trustee and its nominee as the holder of record of the Assets;
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<PAGE> 16
provided, however, that Trustee shall not be entitled to any indemnification
hereunder with respect to any loss, liability, costs or expenses resulting from
the Trustee's breach of this Agreement (including any breach of its fiduciary or
other obligations as Trustee) or any gross negligence, willful misconduct or
lack of good faith on the part of the Trustee; and provided further that the
Beneficiary (and not the Grantor) shall indemnify Trustee for any costs or
expenses (including, without limitation, attorney('s) fees and expenses)
incurred in connection with any dispute between Grantor and Beneficiary with
respect to which Grantor is determined to be the prevailing party. The Grantor
and the Beneficiary hereby acknowledge that the foregoing indemnities shall
survive the resignation of the Trustee or the termination of this Agreement.
ARTICLE 7. RESIGNATION OR REMOVAL OF THE TRUSTEE
Section 7.1. The Trustee may resign at any time for
any reason upon delivery of a written notice of resignation, effective not less
than 90 days after receipt of the notice by the Beneficiary and Grantor.
Section 7.2. The Trustee may be removed by the Grantor at any
time for any reason by delivery to the Trustee and the Beneficiary of a written
notice of removal, effective not less than 90 days after receipt of such notice
by the Trustee and the Beneficiary.
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<PAGE> 17
Section 7.3. The foregoing notwithstanding, no such
resignation by the Trustee or removal of the Trustee shall be effective until a
successor trustee has been duly appointed and approved by the Beneficiary and
the Grantor and all Assets in the Trust Account have been duly transferred to
the new trustee.
Section 7.4. Upon such resignation by the Trustee or such
removal of the Trustee, the successor trustee shall succeed to and become vested
with all the rights, powers, privileges and duties of the Trustee, and the
Trustee shall be discharged from any future duties and obligations under this
Agreement.
Section 7.5. In the event of the inability of a successor
Trustee to be named or qualify within a reasonable time following the
resignation or removal of the Trustee, the Trustee shall have the right, upon
notice to the parties, to deposit the Assets with a court of competent
jurisdiction in the State of New York, whereupon, it shall submit a final report
of all Assets delivered and be relieved of all further responsibilities under
this Agreement.
ARTICLE 8. TERMINATION OF THE TRUST ACCOUNT
Section 8.1. This Agreement shall be terminated upon the
Trustee's receipt of a certificate substantially in the form of Exhibit C hereto
(the "Termination Certificate") signed by a duly authorized officer of the
Grantor executed in accordance with Section 9.9 of the Indemnity Reinsurance
Agreement or, other than in accordance with such Section 9.9,
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<PAGE> 18
executed by both the Grantor and the Beneficiary. Within 10 days of the
termination of this Agreement, the Trustee shall transfer, pay over and deliver
to the Grantor all right, title and interest in the remaining Assets of the
Trust Account in exchange for a written receipt from the Grantor. Unless
terminated as provided above in this Section 8.1, this Agreement shall remain in
effect for so long as there are Assets remaining in the Trust Account.
ARTICLE 9. MISCELLANEOUS
Section 9.1. 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 Grantor is to be notified:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Attn: General Counsel
Facsimile No.: (310) 772-6574
with a copy to:
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<PAGE> 19
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Attn: Controller
Facsimile No.: (310) 772-6684
O'Melveny & Myers
1999 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attn: Robert D. Haymer, Esq.
Facsimile No.: (310) 246-6779
Barger & Wolen LLP
515 S. Flower Street
34th Floor
Los Angeles, California 90071
Attn: S. Stuart Soldate, Esq.
Facsimile No. (213) 614-7399
When Beneficiary is to be notified:
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, Florida 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
with copies to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: William W. Rosenblatt, Esq.
Facsimile No.: (212) 259-6333
When the Trustee is to be notified:
Bankers Trust Company
Four Albany Street
10th Floor
New York, NY 10006
Attn: Corporate Trust & Agency Group
Ms. Karla Leanffor
Facsimile No.: (212) 250-6439
A Party may, by notice given in accordance with this Section 9.1 to the other
Party, designate another address or Person to which notices required or
permitted to be given pursuant to
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<PAGE> 20
this Agreement shall thereafter be transmitted. Each notice transmitted in the
manner described in this Section 9.1 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 9.2. Portfolio Inspection. The Beneficiary shall be
provided, at its own expense, the ability to review, but not alter or give
instruction with respect to the portfolio of the Trust by electronic on-line
communication.
Section 9.3. Entire Agreement. This Agreement (including
Schedules attached hereto) contains the entire agreement and understanding
between the Parties with respect to the subject matter hereof. Nothing contained
in this Agreement 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 any Laws or otherwise, or as an admission that any Party or any of
its Affiliates are in violation of or have ever violated any Laws.
In the event of any conflict between this Agreement and the
Asset Purchase Agreement as to the rights or
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<PAGE> 21
obligations or Grantor or Beneficiary (but not with respect to the rights or
obligations of Trustee), the Asset Purchase Agreement shall control. In the
event of any ambiguity in this Agreement as to the rights or obligations of
Grantor or Beneficiary (but not as to the rights or obligations of Trustee) such
ambiguity shall be resolved by reference to the Asset Purchase Agreement.
Section 9.4. 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 9.5. 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
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<PAGE> 22
impair, limit or restrict the exercise on the part of any Party of any such
right, power or remedy or 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 9.6. 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 9.7
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 9.7. Arbitration. The Parties acknowledge and agree
that the transactions contemplated herein substantially affect and impact
interstate commerce.
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Therefore, all disputes or differences between two or among three of the Parties
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 thirty (30) days shall be settled by the parties to the
dispute (the "Disputing Parties") 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 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 in New York, New York, unless
otherwise agreed to by the Parties. The Parties agree to arbitrate within ninety
(90) days following the transmittal of written demand of any Disputing Party to
arbitrate any dispute arbitrable under this Agreement. The Disputing Parties
will in good faith, within fifteen (15) days following notice of written demand
to arbitrate, attempt to agree on a single Arbitrator. If the Disputing Parties
cannot within fifteen (15) days thereafter agree on a single arbitrator, the
Parties' Arbitrators shall be chosen as follows:
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<PAGE> 24
(a) In a dispute between two Disputing Parties, there shall be
three (3) Arbitrators. Each of the Disputing Parties shall choose one
Arbitrator. The third Arbitrator shall be chosen by the other two Arbitrators
within thirty (30) days after they have been appointed. If the two Arbitrators
cannot agree upon a third Arbitrator, each Arbitrator shall nominate, within
three (3) days of such failure to agree, three (3) persons of whom the other
shall reject two. The third Arbitrator shall then be chosen by drawing lots
within twenty-four (24) hours of determination of the two candidates. If any
Disputing Party fails to choose an Arbitrator within thirty (30) days after
receiving the written request of the other Disputing Party to do so, the other
Disputing Party shall choose both Arbitrators, who shall choose the third
Arbitrator.
(b) In a dispute among three Disputing Parties, there shall be
five (5) Arbitrators, except as otherwise provided herein. Each of the Disputing
Parties shall choose one Arbitrator. The remaining two Arbitrators shall be
chosen by the unanimous vote of the other three Arbitrators within thirty (30)
days after they have been appointed. If the three Arbitrators cannot agree upon
a fourth and/or a fifth Arbitrator, each Arbitrator shall nominate, within three
(3) days of such failure to agree, three (3) persons of whom each of the others
shall reject one. The fourth and/or fifth Arbitrator shall then be chosen by
drawing lots within twenty-four (24) hours of determination of the three (3)
candidates.
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<PAGE> 25
If any one Disputing Party fails to choose an Arbitrator within thirty (30) days
after receiving the written request of the another Disputing Party to do so,
then the Arbitrator will be decided by a panel of three (3) Arbitrators pursuant
to Paragraph 9.7(a) above. If any two Disputing Parties fail to choose an
Arbitrator within thirty (30) days after receiving the written request of the
other Disputing Party to do so, then such latter Disputing Party shall choose
two Arbitrators, who shall choose a 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 award
compensatory damages only, not consequential or punitive damages. The
Arbitrators shall within forty-five (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 Disputing Parties; all other costs of the respective Disputing Parties,
including without limitation fees and expenses of the respective Disputing
Party's attorneys, witnesses, and discovery shall be paid by the respective
Disputing Party, except to the extent that the Arbitrators otherwise direct
based on the equities of the situation.
Section 9.8. 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 the
Grantor nor the
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<PAGE> 26
Beneficiary 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 Grantor may
assign its rights and obligations under this Agreement to any of its Affiliates,
provided that Grantor 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 9.9. 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
24
<PAGE> 27
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 9.10. 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 9.11. 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 9.12. Errors and Omissions. Inadvertent delays, errors
or omissions made by either the Grantor or the Beneficiary in connection with
this Agreement or any transaction hereunder shall not relieve the other party
from
25
<PAGE> 28
any liability which would have attached to such party had such delay, error or
omission not occurred, provided that the party causing such delay error or
omission rectifies the same as soon as possible after its discovery thereof.
Section 9.13. Certain Definitions. Except as the context shall
otherwise require, the following terms shall have the following meanings for all
purposes of this Agreement (the definitions to be applicable to both the
singular and the plural form of each term defined if both such forms of such
term are used in this Agreement):
(a) The term "Affiliate" with respect to any corporation
shall mean a corporation which directly, or
indirectly through one or more intermediaries,
controls or is controlled by, or is under common
control with, such corporation. The term "control"
(including the related terms "controlled by" and
"under common control with") shall mean the
ownership, directly or indirectly, of more than fifty
percent (50%) of the voting stock of a corporation.
(b) In addition to the entity designated as "Beneficiary"
in the introductory paragraph of this Agreement, the
term "Beneficiary" shall also include any successor
by operation of law of the Beneficiary named in the
introductory paragraph. If a court of law appoints a
successor in interest to the named Beneficiary, then
the named Beneficiary includes and is limited to the
court appointed domiciliary receiver
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<PAGE> 29
(including conservator, rehabilitator or liquidator).
(c) The term "business day" shall mean any day on which
the offices of the Trustee are open for business.
(d) The term "Person" shall mean and include an
individual, a corporation, a partnership, an
association, a trust, an unincorporated organization
or a government or political subdivision thereof.
(e) The term "Parent" shall mean an institution that,
directly or indirectly, controls another institution.
Section 9.14. Documentation to be Provided to Trustee. Grantor
has provided or shall provide Trustee with copies of the Asset Purchase
Agreement and the Indemnity Reinsurance Agreement.
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<PAGE> 30
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized.
SUNAMERICA LIFE INSURANCE
COMPANY,
As Grantor
By: /s/ James W. Rowan
-------------------------------------
Name: James W. Rowan
Title: SVP
JOHN ALDEN LIFE INSURANCE COMPANY,
As Beneficiary
By: /s/ Scott L. Stanton
-------------------------------------
Name: Scott L. Stanton
Title: SVP & CFO
BANKERS TRUST COMPANY,
As Trustee
By: /s/ Marie C. Rasch
-------------------------------------
Name: Marie C. Rasch
Title: Vice President
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Exhibit A
BENEFICIARY WITHDRAWAL REQUEST
The undersigned, the [insert position]* of John Alden Life
Insurance Company ("John Alden"), does hereby certify that, pursuant to Section
2.1 of the Trust Agreement (as defined below) established by SunAmerica for the
benefit of John Alden pursuant to the Trust Agreement dated as of March 31, 1997
entered into by and among John Alden, SunAmerica Life Insurance Company
("SunAmerica") and Bankers Trust Company (the "Trust Agreement"):
(1) John Alden has paid the Policyholder(s) identified
[below/on the attached schedule] with respect to the following claim(s):
<TABLE>
<CAPTION>
Policyholder Address Contract Social Security Claim Type of
Name Number Number Amount Claim**
<S> <C> <C> <C> <C> <C>
</TABLE>
(2) Attached hereto is a certificate executed by a partner of
a "Big 6" Accounting Firm stating that SunAmerica was obligated to pay the
claim(s) identified hereon, and John Alden has provided reasonable evidence to
such Accounting Firm that John Alden has paid such Claim(s).
This Beneficiary Withdrawal Request is within the meaning of
Section 2.1(c) of the Trust Agreement.
Dated: _______________ _________________________
Name:
Title:
* Chief Executive Officer, Chief Financial Officer, General Counsel or
Senior Vice President of Accounting
** E.g., surrender, withdrawal, other benefit or type of payment
<PAGE> 32
Exhibit B
GRANTOR WITHDRAWAL REQUEST
The undersigned, the [insert position] and a duly authorized
officer of SunAmerica Life Insurance Company ("SunAmerica"), does hereby certify
that, pursuant to Section 2.2 of the Trust Agreement dated as of March 31, 1997
among SunAmerica, John Alden Life Insurance Company, and Bankers Trust Company
(the "Trust Agreement"), SunAmerica is entitled to withdraw from the Trust
Account established pursuant to the Trust Agreement $[ ] (the "Withdrawal
Amount").
SunAmerica requests payment of the Withdrawal Amount [in cash]
[by transfer to it of all right, title and interest in, and custody of, the
Assets identified in Exhibit attached hereto or readily marketable Assets].
This Grantor Withdrawal Request is within the meaning of
Section 2.2(a) of the Trust Agreement. All capitalized terms used herein without
definition shall have the meanings given them in the Trust Agreement.
Dated:_______________________ ___________________________________
Name:
Title:
<PAGE> 33
Exhibit C
TERMINATION CERTIFICATE
The undersigned, the [insert position] and a duly
authorized officer of SunAmerica Life Insurance Company ("SunAmerica")
does hereby certify that:
(1) this Certificate is a "Termination Certificate" within the
meaning of Section 8.1 of the Trust Agreement dated as of [_______ __, 1996]
entered into by and among John Alden Life Insurance Company ("John Alden"),
SunAmerica and Bankers Trust Company, as Trustee; and
(2) the Statutory Reserves (as such term is defined in the
Indemnity Reinsurance Agreement by and between Sun America and John Alden) as
shown on SunAmerica's Quarterly Report for the quarter ended ______________ (a
true and correct copy of which is attached hereto) are less than $75 million.
Dated: __________ _________________________
Name:
Title:
<PAGE> 1
EXECUTION COPY
TRANSITION SERVICES AGREEMENT
Between
JOHN ALDEN LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated: March 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 APPOINTMENT OF JALIC; SERVICES AND AUTHORITY.................................................. 2
1.1 Engagement........................................................................... 2
1.2 General Description of the Services.................................................. 2
1.3 Performance by Affiliates............................................................ 3
1.4 Controlled Disbursement and Income Accounts.......................................... 3
1.5 Monthly Accounting................................................................... 4
1.6 Maintenance of Books and Records..................................................... 4
1.7 Claims-Payment Instructions.......................................................... 6
1.8 Complaint-Handling Procedure......................................................... 6
1.9 Filings.............................................................................. 7
ARTICLE 2 COMPENSATION; PAYMENT......................................................................... 7
2.1 Fee.................................................................................. 7
2.2 Invoice; Payment..................................................................... 7
2.3 Disputes............................................................................. 7
ARTICLE 3 TRANSITION PERIOD............................................................................. 9
ARTICLE 4 NO HIRE....................................................................................... 9
ARTICLE 5 TERM AND TERMINATION.......................................................................... 10
5.1 Term................................................................................. 10
5.2 Termination for Breach............................................................... 10
5.3 Termination for Receivership......................................................... 10
ARTICLE 6 REPRESENTATIONS............................................................................... 11
ARTICLE 7 INDEPENDENT CONTRACTOR........................................................................ 11
ARTICLE 8 FORCE MAJEURE................................................................................. 11
ARTICLE 9 HOLD HARMLESS................................................................................. 12
ARTICLE 10 MISCELLANEOUS................................................................................. 13
10.1 Notices.............................................................................. 13
10.2 Entire Agreement..................................................................... 15
10.3 Amendments........................................................................... 15
10.4 Waivers.............................................................................. 16
10.5 Governing Law........................................................................ 16
10.6 Arbitration.......................................................................... 17
10.7 Certain Definitions.................................................................. 18
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.8 Binding Effect; Assignment; Third Party Beneficiaries................................ 18
10.9 Severability......................................................................... 18
10.10 Headings............................................................................. 19
10.11 Counterparts......................................................................... 19
10.12 Further Assurances................................................................... 19
</TABLE>
SCHEDULES:
Schedule 1.1 - Services
Schedule 2.1 - Compensation of JALIC
ii
<PAGE> 4
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT (the "Agreement") dated March 31, 1997
(the "Effective Date") between John Alden Life Insurance Company, a Minnesota
corporation ("JALIC"), and SunAmerica Life Insurance Company, an Arizona
Corporation (the "Company").
WHEREAS, pursuant to an Asset Purchase and Sale Agreement dated
November 29, 1996 (the "Asset Purchase Agreement") between JALIC and the
Company, JALIC is selling to the Company certain assets used in JALIC's business
of issuing, selling and administering annuity policies and related activities in
the United States other than the State of New York;
WHEREAS, pursuant to an Indemnity Reinsurance Agreement between JALIC
and the Company dated concurrently herewith (the "Indemnity Reinsurance
Agreement") JALIC has ceded on a 100% coinsurance basis all of JALIC's Insurance
Liabilities arising under the Annuity Contracts and Additional Policies (as
defined in the Indemnity Reinsurance Agreement); after the Closing Date pending
assumption of the Annuity Contracts and the Additional Policies as contemplated
in the Assumption Reinsurance Agreement between JALIC and the Company dated
concurrently herewith (the "Assumption Reinsurance Agreement");
WHEREAS, certain of the Annuity Contracts and Additional Policies may
become a Novated Contract (as defined in the Assumption Reinsurance Agreement;
the Annuity Contracts, the Additional Policies and the Novated Contracts are
hereinafter referred to as the "Policies") prior to their transition to the
Company and/or their conversion from JALIC's administration system to the
Company's administration system; and
<PAGE> 5
WHEREAS, the Company desires JALIC to provide to the Company on an
interim basis technical and administrative services, assistance and support with
respect to the Policies.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good, valuable and
sufficient consideration including the consideration provided hereunder, the
receipt of which is hereby acknowledged, the Company and JALIC (collectively,
the "Parties" and, sometimes individually a "Party"), intending to be legally
bound, hereby agree as follows:
ARTICLE 1
APPOINTMENT OF JALIC; SERVICES AND AUTHORITY
1.1 Engagement. The Company hereby engages JALIC to perform and provide
the technical and administrative service, assistance and support functions
described in Schedule 1.1 attached hereto (the "Services"). JALIC hereby accepts
such appointment.
1.2 General Description of the Services. The purpose of this Agreement
is to set forth the terms upon which JALIC shall provide to the Company the
Services on an interim basis in order to permit the Company the opportunity to
obtain alternative sources of supply of the Services. In general, the Services
shall be consistent with the comparable services provided by JALIC with respect
to the Policies immediately prior to the date hereof; provided, however that the
Company shall have the discretion to require JALIC to make such changes to such
Services, at the Company's sole cost and expense, as the Company deems necessary
to be provided in a manner that is reasonable and consistent with the current
prevailing standards of the life insurance industry or applicable Law.
1.3 Performance by Affiliates. The Parties recognize that the Services
may include services which, by their nature, are more effectively to be provided
by Affiliates of JALIC.
2
<PAGE> 6
Subject to the next sentence of this Section 1.3, JALIC shall, to the extent
required in order for its Affiliates to provide such Services, cause its
Affiliates to provide such Services hereunder as if such Affiliates were
themselves parties hereto. In connection with the provision of such Services,
JALIC's Affiliates shall be entitled, as if such Affiliates were themselves
parties hereto, to the benefits of (i) the limitations on liability set forth
herein and (ii) the limitations on the obligation to provide Services set forth
herein.
1.4 Controlled Disbursement and Income Accounts. (a) JALIC shall
establish a controlled disbursement account or accounts (the "Controlled
Disbursement Account") for purposes of making any and all payments to
Policyholders in the performance of the Services by JALIC hereunder, including,
but not limited to, all items set forth in Section 3.3 of the Indemnity
Reinsurance Agreement. The Controlled Disbursement Account shall be funded by
the Company during the term of this Agreement in a fashion which will enable
JALIC to make all such payments to Policyholders on a timely basis consistent
with applicable Law and, to the extent not inconsistent with applicable Laws,
the standards for timely payment used by JALIC immediately prior to the date
hereof. The Company shall be entitled, to the extent permitted by Section 2.1(b)
of the Trust Agreement, dated concurrently herewith, by and among the Company,
JALIC and Bankers Trust Company, to withdraw funds from the Trust in order to
fund the Controlled Disbursement Account.
(b) JALIC shall establish an income account (the "Income
Account") for purposes of collecting all income received by JALIC with respect
to Policies including, but not limited to, premiums received and investment
income. JALIC shall promptly deposit all such received income into the Income
Account. The balance of the Income Account shall be reflected on the Monthly
Accounting provided under Section 1.5 below.
3
<PAGE> 7
1.5 Monthly Accounting. For the Term (as defined in Article 3), JALIC
shall provide the Company with a monthly accounting for the period beginning on
the 22nd day of the previous month and ending on the 21st day of such month (the
"Monthly Accounting") relating to the Policies no later than ten (10) Business
Days following the end of the related calendar month. The Monthly Accounting
will contain such information as is set forth on Schedule 1.5 hereto, including
the amount of any income deposited in the Income Account and the amount of any
Fees. Schedule 1.5 shall also include a statement of monthly reserves for GAAP
and SAP. The first Monthly Accounting shall be provided to the Company no later
than forty-five (45) days after the date hereof and the final Monthly Accounting
shall be provided to the Company no later than ten (10) Business Days after the
expiration of the Term. If any Monthly Accounting reflects a balance due the
Company, JALIC shall pay such balance, in cash, contemporaneously with the
delivery of the Monthly Accounting to the Company. If the Monthly Accounting
reflects a balance due to JALIC, the Company shall pay such balance, in cash, to
JALIC within 10 Business Days after receiving the Monthly Accounting.
1.6 Maintenance of Books and Records. (a) For the Term, JALIC shall
maintain books and records of all transactions pertaining to the Policies,
including, but not limited to, any disbursement requests submitted in respect of
the Policies and any documents relating thereto, any material communications
relating to any Policy, any material communication concerning any Policy with
any regulatory authority, complaint logs and all data used by JALIC in the
performance of services required under this Agreement. These books and records
shall be maintained, in all material respects, in accordance with any and all
applicable Laws. All such books and records pertaining to a Policy shall be the
property of the Company. JALIC shall (i) allow the Company, upon reasonable
prior notice and during regular business hours, through its
4
<PAGE> 8
employees and other Representatives, at the Company's expense to examine and
make copies of any books and records retained by JALIC within its possession or
control (which for purposes of this section shall be defined as the ability to
cause delivery to the Company or access by the Company) and furnish the Company
with such financial and reporting data and other information with respect to the
Policies, the Third Party Administration Agreements, Assigned Contracts and the
Related Agreements as the Company may from time to time reasonably request, to
the extent they relate to the Policies, 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, at JALIC's offices of other facilities or
properties and (ii) maintain such books and records for the Company's
examination and copying. Access to such books and records shall be at the
Company's expense, may not unreasonably interfere with JALIC's or any successor
company's business operations and the Company shall reimburse JALIC for all
reasonable out-of-pocket expenses incurred by JALIC in copying such records.
Except for such books and records as may be required or permitted to be
maintained by JALIC pursuant to the Asset Purchase Agreement, upon expiration of
the Term, JALIC shall deliver to the Company all books and records pertaining to
the Policies.
(b) JALIC shall back up and maintain its computer files used
in the performance of the Services hereunder in the same manner that JALIC
backed up and maintained its computer files relating to Policies prior to the
date hereof.
(c) JALIC shall maintain facilities and procedures for
safekeeping all records used in the performance of Services under this Agreement
of the same kind used to safekeep JALIC'S own Records.
5
<PAGE> 9
(d) Each Party and its Representatives may audit and review
the other's records relating to the Services provided hereunder during
reasonable business hours and upon reasonable advance notice; provided, however,
that such audit or review may be postponed during any such period if it will be
unreasonably disruptive to the Party being audited or reviewed.
1.7 Claims-Payment Instructions. JALIC at its own cost will perform
during the Term claims administration and processing of the Policies, including,
without limitation, review, investigation, adjustment, settlement, defense and
payment of claims, special investigation and anti-fraud compliance, and
preparation of any report required by regulatory authorities concerning the
foregoing Services and will, in connection with such claims administration,
retain, at its sole discretion and cost, any outside investigation firms,
adjusters, attorneys or other professionals that the Company deems necessary in
the adjustment of such claims. In regards to payment of claims regarding the
Policies, JALIC shall be entitled to rely on the express, written contractual
terms of the Policies. If a claim is presented in respect of a Policy that JALIC
in good faith disputes, JALIC shall consult with the Company before paying such
claims. If, after such consultation, JALIC and the Company disagree as how to
resolve a claim, JALIC shall follow the instruction of the Company and JALIC
shall be held harmless and fully indemnified in following such instructions of
the Company.
1.8 Complaint-Handling Procedure. The Parties will cooperate with each
other in providing information necessary to respond to any inquiries and
complaints concerning the Policies. JALIC shall answer all inquiries and
complaints received by it concerning any Policy. All inquiries and complaints
concerning the Policies received by the Company with respect to a Policy shall
be immediately forwarded by facsimile or overnight mail to a contact person
6
<PAGE> 10
designated by JALIC for reply. Initially such contact person shall be Milford L.
Middelstaedt. JALIC shall be solely responsible for maintaining any complaint
files, complaint registers or other reports of any kind, which are required to
be maintained under applicable Laws. JALIC shall also be responsible for
preparing and submitting any other complaint filings as required by applicable
laws.
1.9 Filings. JALIC shall handle all compliance and regulatory matters
relating to the administration of Policies, including monitoring changes in
applicable Laws, implementing the appropriate and necessary changes to forms and
rates as required by applicable Laws, filing and refiling forms and rates as
required by applicable Laws, and preparing and filing all reports and other
filings required by applicable Laws. JALIC shall use its reasonable efforts to
provide copies of all reports and filings with respect to a Policy required to
be made with any governmental entity to the Company.
ARTICLE 2
COMPENSATION; PAYMENT
2.1 Fee. In consideration of the performance and provision of the
Services and in consideration of the other obligations of JALIC to the Company
hereunder, the Company shall pay to JALIC a fee determined in accordance with
Schedule 2.1 attached hereto (a "Fee").
2.2 Invoice; Payment. The Fee shall be set forth in the Monthly
Accounting and shall be settled in accordance with Section 1.5 hereof. The
Monthly Accounting shall be delivered to the Controller of the Company and
accompanied by a certification from a senior financial officer of JALIC
certifying the policy count and accuracy of the calculations of the Fee.
2.3 Disputes. (a) If within 90 days following the end of the Term, the
Company notifies JALIC that it questions all or any part of any of the Fees paid
hereunder, JALIC shall,
7
<PAGE> 11
at the request of the Company, provide to the Company within 30 days after
receipt of such request a written explanation, which explanation shall be signed
and certified by a senior financial officer of JALIC, explaining the matter or
matters in question in reasonable detail sufficient to permit the Company to
verify the accuracy of such Fee. Pending receipt and review of such explanation,
the Company shall pay the full amount of any balance set forth on such Monthly
Accounting to JALIC when due. Upon receipt of such explanation, the Company
shall have 60 days in which to deliver to JALIC a written notice of disagreement
specifying in reasonable detail the nature and extent of the disagreement.
(b) If the Company and JALIC are unable to resolve any
disagreement with respect to the Fee within 30 days after JALIC 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 LLP 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 Fee shall be deemed to be binding on the Company and JALIC upon the earlier
to occur of (i) the Company's failure to deliver to JALIC a notice of
disagreement within 30 days after its receipt of such written explanation
prepared by JALIC, (ii) resolution of any disagreement by mutual agreement of
the Parties after a timely notice of disagreement has been delivered to JALIC,
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 JALIC and one-half by the
Company. If pursuant to this Section 2.3, it is ultimately determined that JALIC
owes the Company any amount, JALIC shall pay such amount to the Company in cash
within 10 days of such determination along with interest calculated at a rate
8
<PAGE> 12
equal to the three month LIBOR rate plus 25 basis points on the amount due from
the date on which the Company paid or settled the Fee which is the subject of
the dispute.
ARTICLE 3
TRANSITION PERIOD
Subject to Article 5 hereof, the Company agrees to engage JALIC for the
provision of the Services for a period of nine months (the "Term"). The Term may
be extended or reduced by mutual written agreement of the Parties.
ARTICLE 4
NO HIRE
4.1 Without the prior written consent of JALIC, during the Term of this
Agreement and for a period of two years thereafter the Company shall not
directly or indirectly solicit any employee of JALIC to leave the employ of
JALIC, and without the prior written consent of JALIC the Company shall not
knowingly hire any person who was an employee of JALIC during the 180 days
preceding the date of hire of such person by the Company. Notwithstanding the
foregoing, the Company may directly or indirectly solicit for employment any
employee of JALIC whose primary business location is not in Miami, Florida at
any time and may hire any such employee any time after all Policies of said site
outside of Miami, Florida have been transitioned to the Company and/or converted
onto the Company's administration system (an "Off-site Transition"); provided,
however, that the Company shall give JALIC at least 65 days prior written notice
of such Off-site Transition.
4.2 Without the prior written consent of the Company, during the Term
and for a period of two years thereafter JALIC shall not directly or indirectly
solicit any employee of the Company to leave the employ of the Company, and
without the prior written consent of the
9
<PAGE> 13
Company, JALIC shall not hire any person who was an employee of the Company
during the 180 days preceding the date of hire of such person by JALIC.
ARTICLE 5
TERM AND TERMINATION
5.1 Term. Unless sooner terminated pursuant to the provisions of this
Article 5, this Agreement shall remain in effect until the end of the Term;
provided, however, that this Agreement shall terminate with respect to each
Policy that has been transitioned to the Company and/or converted over to the
Company's administration system.
5.2 Termination for Breach. In the event of a breach by either Party of
any obligation of any provision of this Agreement, the non-breaching Party shall
give written notice of breach to the breaching Party, detailing the nature of
such breach in sufficient detail to allow the breaching party to cure, if cure
is possible. If such breach is not cured by the breaching Party within 15 days
after such notice of breach, then the non-breaching Party may terminate this
Agreement by giving notice of termination to the breaching Party. Such
termination shall be effective on notice of termination by the non-breaching
Party to the breaching Party.
5.3 Termination for Receivership. In the event of a receivership or
insolvency of either Party, this Agreement may be terminated immediately by the
other Party upon written notice.
5.4 Termination Upon Notice. The Company may terminate this Agreement
for any reason after the first 25 days of the Term upon the giving of 65 days
prior written notice to JALIC in accordance with Section 10.1 hereof.
10
<PAGE> 14
ARTICLE 6
REPRESENTATIONS
THERE ARE NO REPRESENTATIONS OR WARRANTIES BY JALIC OR ITS
AFFILIATES WITH RESPECT TO THE SERVICES, EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, THE ASSET PURCHASE AGREEMENT AND THE ANCILLARY AGREEMENTS. NO
REPRESENTATION OR WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW,
INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE AS TO THE SERVICES.
ARTICLE 7
INDEPENDENT CONTRACTOR
JALIC and its Affiliates shall be independent contractors to the
Company and its Affiliates with respect to the performance of the Services
hereunder. Nothing contained in this Agreement shall make JALIC, its Affiliates
or their employees the employees of the Company.
ARTICLE 8
FORCE MAJEURE
JALIC and its affiliates shall not be liable for its or their failure
to perform hereunder to the extent that such performance is made impracticable,
delayed or prevented, in whole or in part, due to any acts of God; fires; wars;
Laws or Orders, whether valid or invalid (including, without limitation,
requisitions, allocations and price adjustment restrictions) or inability to
obtain or unavoidable delay in obtaining necessary power. JALIC and its
affiliates shall use commercially reasonable efforts (which shall be
substantially similar to those used by JALIC immediately prior to the date
hereof) to minimize the likelihood of any damage, loss of data,
11
<PAGE> 15
delay or error resulting from such occurrence beyond its or their control. If
JALIC or its affiliates fails to perform hereunder as a result of any occurrence
described in the preceding sentence, JALIC shall (i) give written notice to that
effect to Company within 10 days after such occurrence together with a statement
setting forth reasonably full particulars concerning such occurrence and (ii)
during the period any Service required to be provided hereunder cannot be
provided as a result of such occurrence, use reasonable efforts to remedy such
occurrence. To the extent required by any such occurrence, the performance by
JALIC or its Affiliates hereunder shall be suspended during the continuance of
any such occurrence and this Agreement shall otherwise remain unaffected (except
for the Company's obligation to pay the Fees, which shall also be suspended). If
such occurrence is remedied during the time that any Service affected by such
occurrence is required to be provided under this Agreement, JALIC or its
Affiliates shall promptly notify Company and any such suspension shall end.
ARTICLE 9
HOLD HARMLESS
The Company shall indemnify and hold JALIC and each of its Affiliates
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 JALIC or any of its Affiliates relating to, associated
with or arising out of providing the Services hereunder, except to the extent
such Liabilities resulted from the negligence, bad faith or willful misconduct
of JALIC or its Affiliates. JALIC shall indemnify and hold the Company and its
Affiliates harmless from any and all Liabilities directly arising from JALIC's
or its Affiliates breach of any provision of this Agreement, including acts of
12
<PAGE> 16
negligence, bad faith or willful misconduct by JALIC or its Affiliates in
providing the Services. The indemnification provisions under this Article 9
shall survive the Term for all Liabilities arising from omissions or acts
committed during the Term.
ARTICLE 10
MISCELLANEOUS
10.1 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 the Company is to be notified:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, CA 90067-6022
Attention: General Counsel
Facsimile No.: (310) 772-6574
With a copy to:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, CA 90067-6022
Attention: Controller
Facsimile No.: (310) 772-6684
13
<PAGE> 17
and
O'Melveny & Myers
1999 Avenue of the Stars
Suite 700
Los Angeles, CA 90067
Attention: Robert D. Haymer, Esq.
Facsimile No.: (310) 246-6779
when JALIC is to be notified:
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, FL 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
With copies to:
John Alden Financial Corporation
7300 Corporate Center Drive
Miami, FL 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1497
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
Attention: William W. Rosenblatt, Esq.
Facsimile No.: (212) 259-6333
A Party may, by notice given in accordance with this Section 10.1 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
10.1 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
14
<PAGE> 18
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.
10.2 Entire Agreement. This Agreement (including the Schedules attached
hereto), the Asset Purchase Agreement (including the Ancillary Agreements and
the Annex, Exhibits and Schedules attached thereto), the Assumption Reinsurance
Agreement and the Indemnity Reinsurance Agreement contain 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. Nothing contained
in this Agreement or any of the Schedules hereto 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 any Laws or otherwise, or as an
admission that any Party or any of its Affiliates are in violation of or have
ever violated any such Laws. Notwithstanding anything contained in this Section
10.2 to the contrary, any inconsistencies between this Agreement and the
Indemnity Reinsurance Agreement shall be governed by the terms of the Indemnity
Reinsurance Agreement. In the event of any conflict between this Agreement, the
Indemnity Reinsurance Agreement and the Asset Purchase Agreement as to the
rights or obligations of JALIC or the Company, the Asset Purchase Agreement
shall control. In the event of any ambiguity in this Agreement as to the rights
or obligations of JALIC or the Company, the Asset Purchase Agreement shall
control.
10.3 Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of, or approvals 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
15
<PAGE> 19
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.
10.4 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 by, 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.
10.5 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
ITS PRINCIPLES OF CONFLICTS OF LAWS. 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 10.6 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
16
<PAGE> 20
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.
10.6 Arbitration. The Parties acknowledge and agree that the
transactions contemplated herein substantially affect and impact interstate
commerce. Therefore, all disputes or differences between JALIC and the Company
arising under or which are related to this Agreement 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 transactions of a
similar nature in the insurance industry. 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
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<PAGE> 21
majority of the Arbitrators shall be final and binding and there shall be no
appeal therefrom. The Arbitrators shall within 45 days after the last 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.
10.7 Certain Definitions. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Asset Purchase
Agreement.
10.8 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. Except as otherwise provided
herein, neither JALIC nor the Company 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. Any
other 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.
10.9 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
18
<PAGE> 22
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.
10.10 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.
10.11 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.
10.12 Further Assurances. Subject to the provisions of this Agreement,
JALIC and the Company will use their commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws
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<PAGE> 23
to provide the Services required herein. With regard to any matters not
expressly stated herein, the Parties agree to furnish such information, to
execute such additional documents, and to cooperate with each other as may be
reasonably necessary to carry out the purposes of this Agreement, in accordance
with industry practice for transactions of this kind. If either Party becomes
aware that any Action has been or is about to be initiated with respect to the
Policies, or any other matter reasonably related thereto, it shall inform the
other Party as soon as practicable. The Parties agree to cooperate in furnishing
to each other any files or other information needed by the other to respond to
any Action or threatened Action.
IN WITNESS WHEREOF, the Parties have executed this Agreement.
JOHN ALDEN LIFE INSURANCE COMPANY
By: /s/ Scott L. Stanton
-------------------------------------
Title: Senior Vice President and CFO
----------------------------------
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ James W. Rowan
-------------------------------------
Title: Senior Vice President
----------------------------------
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<PAGE> 24
Schedule 1.1
SERVICES
I. UNDERWRITING SERVICES
Underwriting Services with respect to each new Additional Policy shall
consist of those services and only those services JALIC would customarily render
had JALIC written such Additional Policies for its own account. The manner and
means for providing such services shall be left to JALIC's discretion; provided,
however, if JALIC is not providing Services consistent with the current
prevailing standards of the life insurance industry, that the services shall be
consistent with the comparable services provided by JALIC with respect to the
Policies prior to the date hereof; and further provided, however, that the
Company shall have the discretion to require JALIC to make such changes to such
Services, at the Company's sole cost and expense (in accordance with item III
below), as the Company deems necessary to be provided in a manner that is
reasonable and consistent with the current prevailing standards of the life
insurance industry.
II. ADMINISTRATIVE SERVICES
Administrative Services with respect to the Policies not yet
transitioned to the Company as conducted by JALIC shall consist of those
services, and only those services, JALIC would customarily render had JALIC
retained the Policies (other than an enhancement to any system or otherwise with
regard to the provision of the Services) provided, however that, if JALIC is not
providing Services consistent with the current prevailing standards of the life
insurance industry, the Company shall have the discretion to require JALIC to
make such changes to such Services, at the Company's sole cost and expense (in
accordance with item III below), as the Company deems necessary to be provided
in a manner that is reasonable and consistent with the current prevailing
standards of the life insurance industry. Such services shall include:
(a) all Policyholder services relating to the Policies including but
not limited to the following:
1. Billing and collection of premiums;
2. Payment of claims;
3. Handling of Policyholder service requests, inquiries
and complaints under the Policies;
4. Preparation of quarterly financial statement data
(within ten business days after the end of a calendar
quarter) and annual financial statement data (within
thirty calendar days after the end of the fiscal
year), for inclusion in the Company's applicable
financial statements;
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5. Administration of any agreements providing for the
payment of commissions relating to the Policies;
6. Provision of the Monthly Accounting pursuant to
Section 1.5;
7. Payment of agent commissions due and payable;
8. Underwriting and issuing any Additional Policies;
9. Preparation and mailing of quarterly and annual
statements to policyholders;
10. Relevant information to the Company regarding renewal
interest rates for Policies;
11. Provision of such other policyholder services on the
Policies as are reasonably required or requested by
the Company which have customarily been provided in
the past by JALIC; and
12. Implement any changes in the credited rates.
(b) All services performed by JALIC's or its Affiliate's employees
providing legal, compliance, actuarial, accounting, treasury, human resources
and data processing, including the preparation of financial and other relevant
reports but excluding any Services which would require payments to Persons other
than JALIC's or its Affiliate's employees, unless such payments are made to
other Persons who presently and regularly provide such services in the ordinary
course to JALIC; and
(c) JALIC shall assist the Company in obtaining consents from third
party licensors, if any, of the software set forth on Schedule 3.14 of the Asset
Purchase Agreement which is necessary for the transitioning of the Policies (the
cost of which shall be at the Company's sole cost and expense).
(d) The Parties acknowledge that (i) rate renewals shall be made no
more frequently than once per quarter, and (ii) no credited rate adjustments
with regard to any Policy shall be made during the 60 days prior to the
transitioning to the Company or the converting of such Policy to the Company's
administrative system. Subject to the terms of the Indemnity Reinsurance
Agreement, the Company shall have the sole and absolute discretion in setting
(i) the commissions rates for new and renewal Policies, subject to the terms and
conditions of the relevant commission agreements (including any notice
provisions contained therein) and (ii) the initial credited rates on Policies
after the Effective Date and any changes to the renewal credited rate on
Policies in force after the Effective Date.
III. EXTRAORDINARY SERVICES
Upon request of the Company and subject to the provisions of Section
1.2 of this Agreement, JALIC shall use commercially reasonable efforts to
provide to the extent readily available such additional services as the Company
may reasonably request. Such services to the extent readily available shall
consist of any services not covered by item I or II of this Schedule 1.1
including, without limitation, (i) all services provided in connection with the
changing by the Company of the commission rates for new and renewal Policies,
(ii) the enhancement of
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Services offered pursuant to items I and II above and (iii) to the extent JALIC
incurs any out-of-pocket or incremental cost or expense with respect thereto,
services provided in connection with the assumption of Policies, including,
without limitation, mailing assumption certificates in connection with the
assumption of the Policies.
IV. MORTGAGE SERVICING
JALIC shall provide such servicing with respect to Mortgage Loans in
which JALIC has acted as servicer immediately prior to the date hereof
consistent and comparable with the servicing provided by JALIC with respect to
such Mortgage Loans immediately prior to the date hereof. The Company and JALIC
shall simultaneously herewith enter into an Interim Servicing Agreement
regarding the servicing of mortgage loans.
V. TRANSITIONING SERVICES
JALIC shall cooperate with the Company and use commercially
reasonable efforts to effect an orderly transition to the Company and/or
conversion onto the Company's administrative system of the Policies as rapidly
and as smoothly as possible, and to do, or cause to be done, all things
necessary, proper or advisable in connection therewith. JALIC shall provide the
Company with copies of all databases, files, programs, job streams, accounting
and other records and information regarding the Policies and the service and
administration of the Policies when requested by the Company in machine readable
form reasonably acceptable to the Company. JALIC shall also provide the Company
upon request current information regarding production volume and policyholder
complaints and reasonable access, to all offices and other facilities and
properties of JALIC concerning the Policies and the administration thereof.
Services to be provided in connection with such transition and/or conversion
shall include, but not be limited to the following: providing the Company remote
and on-site access to JALIC's computers, providing mainframe to mainframe
connections between JALIC and the Company, providing technical support regarding
the Policies and the computer hardware and software systems and providing the
Company access to appropriate JALIC personnel.
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<PAGE> 27
Schedule 2.1
COMPENSATION OF JALIC
<TABLE>
<CAPTION>
<S> <C>
For Underwriting Services: $80 per Policy issued during such month for
(Schedule 1.1 - Item I) which JALIC provided underwriting services;
provided that with respect to the first
calendar month with respect to which
compensation is being calculated contracts
issued after March 21, 1997 and prior to the
beginning of such month shall be deemed as
having been issued in such first month. In
addition, the payment for underwriting
services contemplated by this clause shall be
payable only with respect to policies issued
during the term of the Transition Services
Agreement.
For Administrative Services: $4 multiplied by the average number of
(Schedule 1.1 - Item II) Policies administered by JALIC in force
during such month, which average shall be
based upon the mean number of contracts in
force at the end and at the beginning of each
fiscal month of JALIC (a fiscal month being
the period beginning on the 22nd day of the
calendar month preceding the calendar month
with respect to which the calculation of
compensation is being made and ending on the
21st day of the calendar month with respect
to which the calculation of compensation is
being made), adjusted for significant
transfers occurring during such month.
For Extraordinary Services: Direct costs, being 150% of the daily or
(Schedule 1.1 - Item III) hourly salary or wages per day for the
persons performing services not covered
above, which services are provided during the
month with respect to which the calculation
of compensation is being made, plus any
actual out-of-pocket expenses incurred by
JALIC in performing such services.
For Mortgage Servicing: Compensation is provided in the Interim
(Schedule 1.1 - Item IV) Servicing Agreement.
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
<S> <C>
For Transitioning Services: If JALIC incurs any reasonable direct,
(Schedule 1.1 - Item V) out-of- pocket or incremental costs or
expenses, including, but not limited to, the
payment of reasonable overtime for JALIC
employees, the hiring of temporary employees
or the retention of employees whose
employment would otherwise have been
terminated (and the Company has been
consulted with regard thereto prior to such
intended termination), in providing any of
the Transitioning Services, JALIC shall be
reimbursed for such costs and expenses. For
all Transitioning Services in which no such
costs or expenses are incurred by JALIC,
there will be a charge for such Transitioning
Services.
</TABLE>
ii
<PAGE> 1
EXECUTION COPY
TRANSITION SERVICES AGREEMENT
Between
JOHN ALDEN LIFE INSURANCE COMPANY
and
JOHN ALDEN LIFE INSURANCE COMPANY OF NEW YORK
Dated: March 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 APPOINTMENT OF JALIC; SERVICES AND AUTHORITY.................................................. 2
1.1 Engagement........................................................................... 2
1.2 General Description of the Services.................................................. 2
1.3 Performance by Affiliates............................................................ 2
1.4 Financial Services................................................................... 3
1.5 Maintenance of Books and Records..................................................... 3
1.6 Claims-Payment Instructions.......................................................... 4
1.7 Complaint-Handling Procedure......................................................... 4
1.8 Filings.............................................................................. 4
ARTICLE 2 COMPENSATION; PAYMENT......................................................................... 5
2.1 Fee.................................................................................. 5
2.2 Invoice; Payment..................................................................... 5
2.3 Disputes............................................................................. 5
ARTICLE 3 TRANSITION PERIOD............................................................................. 6
ARTICLE 4 INTENTIONALLY DELETED......................................................................... 6
ARTICLE 5 TERM AND TERMINATION.......................................................................... 7
5.1 Term................................................................................. 7
5.2 Termination for Breach............................................................... 7
5.3 Termination for Receivership......................................................... 7
5.4 Termination Upon Notice.............................................................. 7
5.5 Automatic Termination................................................................ 7
ARTICLE 6 REPRESENTATIONS............................................................................... 8
ARTICLE 7 INDEPENDENT CONTRACTOR........................................................................ 8
ARTICLE 8 FORCE MAJEURE................................................................................. 8
ARTICLE 9 HOLD HARMLESS................................................................................. 9
ARTICLE 10 MISCELLANEOUS................................................................................. 10
10.1 Notices.............................................................................. 10
10.2 Entire Agreement..................................................................... 12
10.3 Amendments........................................................................... 12
10.4 Waivers.............................................................................. 13
10.5 Governing Law........................................................................ 13
10.6 Arbitration.......................................................................... 14
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.7 Certain Definitions.................................................................. 15
10.8 Binding Effect; Assignment; Third Party Beneficiaries................................ 15
10.9 Severability......................................................................... 15
10.10 Headings............................................................................. 16
10.11 Counterparts......................................................................... 16
10.12 Further Assurances................................................................... 16
</TABLE>
SCHEDULES:
Schedule 1.1 - Services
Schedule 2.1 - Compensation of JALIC
ii
<PAGE> 4
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT (the "Agreement") dated March 31, 1997
(the "Effective Date") between John Alden Life Insurance Company, a Minnesota
corporation ("JALIC"), and John Alden Life Insurance Company of New York, a New
York corporation (the "Company").
WHEREAS, the Company is engaged in the business of issuing, selling and
administering annuity, life and health related insurance policies and related
activities solely in the State of New York;
WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated as of
November 29, 1996 (the "Stock Purchase Agreement") between JALIC and SunAmerica
Life Insurance Company, an Arizona corporation ("SunAmerica"), JALIC is selling
to SunAmerica all of the issued and outstanding capital stock of the Company;
WHEREAS, the Company desires that JALIC provide to the Company on an
interim basis technical and administrative services, assistance and support with
respect to the In Force Insurance Contracts (hereinafter referred to as
"Policies").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good, valuable and
sufficient consideration including the consideration provided hereunder, the
receipt of which is hereby acknowledged, the Company and JALIC (collectively,
the "Parties" and, sometimes individually a "Party"), intending to be legally
bound, hereby agree as follows:
<PAGE> 5
ARTICLE 1
APPOINTMENT OF JALIC; SERVICES AND AUTHORITY
1.1 Engagement. The Company hereby engages JALIC to perform and provide
the technical and administrative service, assistance and support functions
described in Schedule 1.1 attached hereto (the "Services"). JALIC hereby accepts
such appointment.
1.2 General Description of the Services. The purpose of this Agreement
is to set forth the terms upon which JALIC shall provide to the Company the
Services on an interim basis in order to permit the Company the opportunity to
obtain alternative sources of supply of the Services. In general, the Services
shall be consistent with, and limited to, the comparable services provided by
JALIC with respect to the Policies immediately prior to the date hereof;
provided, however that the Company shall have the discretion to require JALIC to
make such changes to such Services, at the Company's sole cost and expense, as
the Company deems necessary to be provided in a manner that is reasonable and
consistent with the current prevailing standards of the life insurance industry
or applicable Law.
1.3 Performance by Affiliates. The Parties recognize that the Services
may include services which, by their nature, are more effectively to be provided
by Affiliates of JALIC. Subject to the next sentence of this Section 1.3, JALIC
shall, to the extent required in order for its Affiliates to provide such
Services, cause its Affiliates to provide such Services hereunder as if such
Affiliates were themselves parties hereto. In connection with the provision of
such Services, JALIC's Affiliates shall be entitled, as if such Affiliates were
themselves parties hereto, to the benefits of (i) the limitations on liability
set forth herein and (ii) the limitations on the obligation to provide Services
set forth herein.
2
<PAGE> 6
1.4 Financial Services. For the Term (as defined in Article 3), upon
the reasonable request of the Company, JALIC shall provide such accounting
services as JALIC previously provided to the Company immediately prior to the
date hereof in the ordinary course.
1.5 Maintenance of Books and Records. (a) For the Term, JALIC shall
assist the Company in maintaining books and records of all transactions
pertaining to the Policies, as JALIC previously provided to the Company
immediately prior to the date hereof in the ordinary course. These books and
records, to the extent maintained by JALIC, shall be maintained, in all material
respects, in accordance with any and all applicable Laws. All such books and
records pertaining to a Policy shall be the property of the Company. JALIC shall
(i) allow the Company, upon reasonable prior notice and during regular business
hours, through its employees and other Representatives, at the Company's expense
to examine and make copies of any books and records pertaining to the Policies
retained by JALIC within its possession or control (which for purposes of this
section shall be defined as the ability to cause delivery to the Company or
access by the Company) 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 Company, at JALIC's offices of other facilities or
properties and (ii) maintain such books and records for the Company's
examination and copying. Access to such books and records shall be at the
Company's expense, may not unreasonably interfere with JALIC's or any successor
company's business operations and the Company shall reimburse JALIC for all
reasonable out-of-pocket expenses incurred by JALIC in copying such records.
Except for such books and records as may be required or permitted to be
maintained by JALIC pursuant to the Stock Purchase
3
<PAGE> 7
Agreement, upon expiration of the Term, JALIC shall deliver to the Company all
books and records pertaining to the Policies.
(b) JALIC shall back up and maintain the computer files used
by JALIC in Miami, Florida in the performance of the Services hereunder in the
same manner that JALIC backed up and maintained such computer files relating to
Policies prior to the date hereof.
(c) JALIC shall maintain facilities and procedures for
safekeeping all records used in the performance of Services under this Agreement
of the same kind used to safekeep JALIC'S own Records.
(d) Each Party and its Representatives may audit and review
the other's records relating to the Services provided hereunder during
reasonable business hours and upon reasonable advance notice; provided, however,
that such audit or review may be postponed during any such period if it will be
unreasonably disruptive to the Party being audited or reviewed.
1.6 Claims-Payment Instructions. JALIC will provide systems support in
the processing of claims as JALIC previously provided to the Company immediately
prior to the date hereof in the ordinary course.
1.7 Complaint-Handling Procedure. The Parties will cooperate with each
other in providing information necessary to respond to any inquiries and
complaints concerning the Policies as JALIC previously provided to the Company
immediately prior to the date hereof in the ordinary course.
1.8 Filings. To the extent JALIC has previously provided such service
to the Company immediately prior to the date hereof in the ordinary course,
JALIC shall handle all compliance and regulatory matters relating to the
administration of Policies, including monitoring
4
<PAGE> 8
changes in applicable Laws, implementing the appropriate and necessary changes
to forms and rates as required by applicable Laws, filing and refiling forms and
rates as required by applicable Laws, and preparing and filing all reports and
other filings required by applicable Laws. JALIC shall use its reasonable
efforts to provide copies of all reports and filings with respect to a Policy
required to be made with any governmental entity to the Company.
ARTICLE 2
COMPENSATION; PAYMENT
2.1 Fee. The Company shall pay to JALIC a fee for each Service
determined in accordance with Schedule 2.1 attached hereto (a "Fee").
2.2 Invoice; Payment. JALIC shall invoice the Company for the Fees at
such intervals as JALIC may deem appropriate, but not more frequently than
monthly. Payment of each such invoice shall be made by wire transfer to JALIC
within 5 days after receipt by the Company of such invoice.
2.3 Disputes. (a) If within 90 days following the end of the Term, the
Company notifies JALIC that it questions all or any part of any of the Fees paid
hereunder, JALIC shall, at the request of the Company, provide to the Company
within 30 days after receipt of such request a written explanation, which
explanation shall be signed and certified by a senior financial officer of
JALIC, explaining the matter or matters in question in reasonable detail
sufficient to permit the Company to verify the accuracy of such Fee. Pending
receipt and review of such explanation, the Company shall pay the full amount of
any balance set forth on such Monthly Accounting to JALIC when due. Upon receipt
of such explanation, the Company shall have 60 days in which to deliver to JALIC
a written notice of disagreement specifying in reasonable detail the nature and
extent of the disagreement.
5
<PAGE> 9
(b) If the Company and JALIC are unable to resolve any
disagreement with respect to the Fee within 30 days after JALIC 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 LLP 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 Fee shall be deemed to be binding on the Company and JALIC upon the earlier
to occur of (i) the Company's failure to deliver to JALIC a notice of
disagreement within 30 days after its receipt of such written explanation
prepared by JALIC, (ii) resolution of any disagreement by mutual agreement of
the Parties after a timely notice of disagreement has been delivered to JALIC,
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 JALIC and one-half by the
Company. If pursuant to this Section 2.3, it is ultimately determined that JALIC
owes the Company any amount, JALIC shall pay such amount to the Company in cash
within 10 days of such determination along with interest calculated at a rate
equal to the three month LIBOR rate plus 25 basis points on the amount due from
the date on which the Company paid or settled the Fee which is the subject of
the dispute.
ARTICLE 3
TRANSITION PERIOD
Subject to Article 5 hereof, the Company agrees to engage JALIC for the
provision of the Services for a period of nine months (the "Term"). The Term may
be extended or reduced by mutual written agreement of the Parties.
6
<PAGE> 10
ARTICLE 4
INTENTIONALLY DELETED
ARTICLE 5
TERM AND TERMINATION
5.1 Term. Unless sooner terminated pursuant to the provisions of this
Article 5, this Agreement shall remain in effect until the end of the Term;
provided, however, that this Agreement shall terminate with respect to each
Policy that has been transitioned to the Company and/or converted over to the
Company's administration system.
5.2 Termination for Breach. In the event of a breach by either Party of
any obligation of any provision of this Agreement, the non-breaching Party shall
give written notice of breach to the breaching Party, detailing the nature of
such breach in sufficient detail to allow the breaching party to cure, if cure
is possible. If such breach is not cured by the breaching Party within 15 days
after such notice of breach, then the non-breaching Party may terminate this
Agreement by giving notice of termination to the breaching Party. Such
termination shall be effective on notice of termination by the non-breaching
Party to the breaching Party.
5.3 Termination for Receivership. In the event of a receivership or
insolvency of either Party, this Agreement may be terminated immediately by the
other Party upon written notice.
5.4 Termination Upon Notice. The Company may terminate this Agreement
for any reason after the first 30 days of the Term upon the giving of 30 days
prior written notice to JALIC in accordance with Section 10.1 hereof.
7
<PAGE> 11
5.5 Automatic Termination. This Agreement shall terminate upon
termination of the Transition Services Agreement, dated concurrently herewith,
between SunAmerica and JALIC.
ARTICLE 6
REPRESENTATIONS
THERE ARE NO REPRESENTATIONS OR WARRANTIES BY JALIC OR ITS AFFILIATES
WITH RESPECT TO THE SERVICES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
THE STOCK PURCHASE AGREEMENT AND THE ANCILLARY AGREEMENTS. NO REPRESENTATION OR
WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW, INCLUDING, WITHOUT
LIMITATION, WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE AS TO THE SERVICES.
ARTICLE 7
INDEPENDENT CONTRACTOR
JALIC and its Affiliates shall be independent contractors to the
Company and its Affiliates with respect to the performance of the Services
hereunder. Nothing contained in this Agreement shall make JALIC, its Affiliates
or their employees the employees of SunAmerica or the Company.
ARTICLE 8
FORCE MAJEURE
JALIC and its Affiliates shall not be liable for its or their failure
to perform hereunder to the extent that such performance is made impracticable,
delayed or prevented, in whole or in part, due to any acts of God; fires; wars;
Laws or Orders, whether valid or invalid (including, without limitation,
requisitions, allocations and price adjustment restrictions) or inability to
8
<PAGE> 12
obtain or unavoidable delay in obtaining necessary power. JALIC and its
Affiliates shall use commercially reasonable efforts (which shall be
substantially similar to those used by JALIC immediately prior to the date
hereof) to minimize the likelihood of any damage, loss of data, delay or error
resulting from such occurrence beyond its or their control. If JALIC or its
Affiliates fails to perform hereunder as a result of any occurrence described in
the preceding sentence, JALIC shall (i) give written notice to that effect to
Company within 10 days after such occurrence together with a statement setting
forth reasonably full particulars concerning such occurrence and (ii) during the
period any Service required to be provided hereunder cannot be provided as a
result of such occurrence, use reasonable efforts to remedy such occurrence. To
the extent required by any such occurrence, the performance by JALIC or its
Affiliates hereunder shall be suspended during the continuance of any such
occurrence and this Agreement shall otherwise remain unaffected (except for the
Company's obligation to pay the Fees, which shall also be suspended). If such
occurrence is remedied during the time that any Service affected by such
occurrence is required to be provided under this Agreement, JALIC or its
Affiliates shall promptly notify the Company and any such suspension shall end.
ARTICLE 9
HOLD HARMLESS
The Company shall indemnify and hold JALIC and each of its Affiliates
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 JALIC or any of its Affiliates relating to, associated
with or arising out of providing the Services hereunder, except to the extent
such Liabilities resulted from the
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<PAGE> 13
negligence, bad faith or willful misconduct of JALIC or its Affiliates. JALIC
shall indemnify and hold the Company and its Affiliates harmless from any and
all Liabilities directly arising from JALIC's or its Affiliates breach of any
provision of this Agreement, including acts of negligence, bad faith or willful
misconduct by JALIC or its Affiliates in providing the Services. The
indemnification provisions under this Article 9 shall survive the Term for all
Liabilities arising from omissions or acts committed during the Term.
ARTICLE 10
MISCELLANEOUS
10.1 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 the Company is to be notified:
John Alden Life Insurance Company of New York
c/o SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, CA 90067-6022
Attention: General Counsel
Facsimile No.: (310) 772-6574
With a copy to:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, CA 90067-6022
Attention: Controller
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<PAGE> 14
Facsimile No.: (310) 772-6684
and
O'Melveny & Myers
1999 Avenue of the Stars
Suite 700
Los Angeles, CA 90067
Attention: Robert D. Haymer, Esq.
Facsimile No.: (310) 246-6779
when JALIC is to be notified:
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, FL 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
With copies to:
John Alden Financial Corporation
7300 Corporate Center Drive
Miami, FL 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1497
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
Attention: William W. Rosenblatt, Esq.
Facsimile No.: (212) 259-6333
A Party may, by notice given in accordance with this Section 10.1 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
10.1 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
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<PAGE> 15
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.
10.2 Entire Agreement. This Agreement (including the Schedules attached
hereto) and the Stock Purchase Agreement (including the Ancillary Agreements and
the Annex, Exhibits and Schedules attached thereto) contain 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. Nothing contained
in this Agreement or any of the Schedules hereto 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 any Laws or otherwise, or as an
admission that any Party or any of its Affiliates are in violation of or have
ever violated any such Laws. In the event of any conflict between this Agreement
and the Stock Purchase Agreement as to the rights or obligations of JALIC or the
Company, the Stock Purchase Agreement shall control. In the event of any
ambiguity in this Agreement as to the rights or obligations of JALIC or the
Company, the Stock Purchase Agreement shall control.
10.3 Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of, or approvals under, this Agreement
shall be binding upon a Party unless such addition, cancellation, renewal,
extension, modification, amendment or approval is set forth in a written
instrument which states that it adds to, amends, cancels, renews or extends this
Agreement or grants an approval hereunder and which is executed and delivered on
behalf of each Party by an officer of, or attorney-in-fact for, such Party.
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<PAGE> 16
10.4 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 by, 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.
10.5 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
ITS CONFLICTS OF LAWS. 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 10.6 hereof. Each Party consents to service of
process upon it with respect to any such proceeding by registered mail, return
receipt requested, and by any other means permitted by applicable Laws. Each
Party waives any objection that it may now or hereafter have to the laying of
venue of any such proceeding in federal court in the State of Delaware and any
claim that it may now or hereafter have that any such proceeding in any such
court has been brought in an inconvenient forum.
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<PAGE> 17
10.6 Arbitration. The Parties acknowledge and agree that the
transactions contemplated herein substantially affect and impact interstate
commerce. Therefore, all disputes or differences between JALIC and the Company
arising under or which are related to this Agreement 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 transactions of a
similar nature in the insurance industry. 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 last hearing enter an award and the
award shall
14
<PAGE> 18
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.
10.7 Certain Definitions. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Stock Purchase
Agreement.
10.8 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. Except as otherwise provided
herein, neither JALIC nor the Company 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. Any
other 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.
10.9 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
15
<PAGE> 19
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.
10.10 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.
10.11 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.
10.12 Further Assurances. Subject to the provisions of this Agreement,
JALIC and the Company will use their commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to provide the Services
required herein. With regard to any matters not expressly stated herein, the
Parties agree to furnish such information, to execute such additional documents,
and to
16
<PAGE> 20
cooperate with each other as may be reasonably necessary to carry out the
purposes of this Agreement, in accordance with industry practice for
transactions of this kind. If either Party becomes aware that any Action has
been or is about to be initiated with respect to the Policies, or any other
matter reasonably related thereto, it shall inform the other Party as soon as
practicable. The Parties agree to cooperate in furnishing to each other any
files or other information needed by the other to respond to any Action or
threatened Action.
IN WITNESS WHEREOF, the Parties have executed this Agreement.
JOHN ALDEN LIFE INSURANCE COMPANY
By:s/ Scott L. Stanton
-------------------------------------
Title: Senior Vice President and CFO
----------------------------------
JOHN ALDEN LIFE INSURANCE COMPANY
OF NEW YORK
By:s/ James W. Rowan
-------------------------------------
Title: Senior Vice President
----------------------------------
17
<PAGE> 21
Schedule 1.1
SERVICES
I. ADMINISTRATIVE SERVICES
Administrative Services with respect to the Policies as conducted by
JALIC shall consist of those services, and only those services, JALIC had
previously rendered for the Company in the ordinary course immediately prior to
the date hereof with respect to the Policies; provided, however that, if JALIC
is not providing Services consistent with the current prevailing standards of
the life insurance industry, the Company shall have the discretion to require
JALIC to make such changes to such Services, at the Company's sole cost and
expense (in accordance with item II below), as the Company deems necessary to be
provided in a manner that is reasonable and consistent with the current
prevailing standards of the life insurance industry. Such services shall
include, but only to the extent such Services were previously provided to the
Company immediately prior to the date hereof:
(a) assistance with all Policyholder services relating to the Policies
including but not limited to the following:
1. Billing and collection of premiums;
2. Payment of claims;
3. Handling of Policyholder service requests, inquiries
and complaints under the Policies;
4. Upon reasonable request, preparation of quarterly
financial statement data (within ten business days
after the end of a calendar quarter) and annual
financial statement data (within thirty calendar days
after the end of the fiscal year), for inclusion in
the Company's applicable financial statements;
5. Administration of any agreements providing for the
payment of commissions relating to the Policies;
6. Provision of financial services pursuant to Section
1.4;
7. Payment of agent commissions due and payable;
8. Underwriting and issuing any Policies;
9. Preparation and mailing of quarterly and annual
statements to policyholders;
10. Relevant information to the Company regarding renewal
interest rates for Policies;
11. Provision of such other policyholder services on the
Policies as are reasonably required or requested by
the Company which have customarily been provided in
the past by JALIC; and
12. Implement any changes in the credited rates.
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(b) All services performed by JALIC's or its Affiliate's employees
providing legal, compliance, actuarial, accounting, treasury, human resources
and data processing, including the preparation of financial and other relevant
reports but excluding any Services which would require payments to Persons other
than JALIC's or its Affiliate's employees, unless such payments are made to
other Persons who presently and regularly provide such services in the ordinary
course to JALIC; and
(c) JALIC shall assist the Company in obtaining consents from third
party licensors, if any, of the software set forth on Schedule 3.14 of the Asset
Purchase Agreement which is necessary for the transitioning of the Policies (the
cost of which shall be at the Company's sole cost and expense).
II. EXTRAORDINARY SERVICES
Upon request of the Company and subject to the provisions of Section
1.2 of this Agreement, JALIC shall use commercially reasonable efforts to
provide to the extent readily available such additional services as the Company
may reasonably request. Such services to the extent readily available shall
consist of any services not covered by item I of this Schedule 1.1 including,
without limitation, (i) underwriting any annuity product which is not
substantially similar to a Policy and (ii) the enhancement of Services offered
pursuant to item I above.
III. TRANSITIONING SERVICES
JALIC shall cooperate with the Company and use commercially reasonable
efforts to effect an orderly transition to the Company and/or conversion onto
the Company's administrative system of the Policies as rapidly and as smoothly
as possible, and to do, or cause to be done, all things necessary, proper or
advisable in connection therewith. To the extent JALIC maintains the following
for the Company, JALIC shall provide the Company with copies of all databases,
files, programs, job streams, accounting and other records and information
regarding the Policies and the service and administration of the Policies when
requested by the Company in machine readable form reasonably acceptable to the
Company. Services to be provided in connection with such transition and/or
conversion shall include, but not be limited to the following: providing the
Company remote and on-site access to JALIC's computers, providing mainframe to
mainframe connections between JALIC and the Company, providing technical support
regarding the Policies and the computer hardware and software systems, to the
extent JALIC has previously provided such technical support to the Company
immediately prior to the date hereof in the ordinary course, and providing the
Company access to appropriate JALIC personnel.
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Schedule 2.1
COMPENSATION OF JALIC
<TABLE>
<CAPTION>
<S> <C>
For Administrative Services: $4 multiplied by the average number of
(Schedule 1.1 - Item I) Policies administered by JALIC in force
during such month, which average shall be
based upon the mean number of contracts in
force at the end and at the beginning of each
fiscal month of JALIC (a fiscal month being
the period beginning on the 22nd day of the
calendar month preceding the calendar month
with respect to which the calculation of
compensation is being made and ending on the
21st day of the calendar month with respect
to which the calculation of compensation is
being made), adjusted for significant
transfers occurring during such month.
For Extraordinary Services: Direct costs, being 150% of the daily or
(Schedule 1.1 - Item II) hourly salary or wages per day for the
persons performing services not covered
above, which services are provided during the
month with respect to which the calculation
of compensation is being made, plus any
actual out-of-pocket expenses incurred by
JALIC in performing such services.
For Transitioning Services: If JALIC incurs any reasonable direct,
(Schedule 1.1 - Item III) out-of- pocket or incremental costs or
expenses, including, but not limited to, the
payment of reasonable overtime for JALIC
employees, the hiring of temporary employees
or the retention of employees whose
employment would otherwise have been
terminated (and the Company has been
consulted with regard thereto prior to such
intended termination), in providing any of
the Transitioning Services, JALIC shall be
reimbursed for such costs and expenses. For
all Transitioning Services in which no such
costs or expenses are incurred by JALIC,
there will be a charge for such Transitioning
Services.
</TABLE>
i
<PAGE> 1
EXECUTION COPY
ADMINISTRATIVE SERVICES AGREEMENT
Between
JOHN ALDEN LIFE INSURANCE COMPANY
and
SUNAMERICA LIFE INSURANCE COMPANY
Dated: March 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 APPOINTMENT OF THE COMPANY; SERVICES AND AUTHORITY............................................ 2
1.1 Engagement........................................................................... 2
1.2 General Description of the Services.................................................. 2
1.3 Performance by Affiliates............................................................ 3
1.4 Controlled Disbursement Account...................................................... 3
1.5 Monthly Accounting. ................................................................. 3
1.6 Maintenance of Books and Records..................................................... 3
1.7 Novation Report...................................................................... 5
1.8 Claims-Payment Instructions.......................................................... 5
1.9 Complaint-Handling Procedure......................................................... 5
1.10 Filings.............................................................................. 6
ARTICLE 2 COMPENSATION; PAYMENT......................................................................... 6
ARTICLE 3 TERM AND TERMINATION.......................................................................... 6
3.1 Term................................................................................. 6
3.2 Termination for Breach............................................................... 7
3.3 Termination for Receivership......................................................... 7
3.4 Other Termination Events............................................................. 7
ARTICLE 4 REPRESENTATIONS............................................................................... 7
ARTICLE 5 INDEPENDENT CONTRACTOR........................................................................ 8
ARTICLE 6 INTENTIONALLY DELETED......................................................................... 8
ARTICLE 7 FORCE MAJEURE................................................................................. 8
ARTICLE 8 HOLD HARMLESS................................................................................. 9
ARTICLE 9 MISCELLANEOUS................................................................................. 10
9.1 Notices.............................................................................. 10
9.2 Entire Agreement..................................................................... 12
9.3 Amendments........................................................................... 13
9.4 Waivers.............................................................................. 13
9.5 Governing Law........................................................................ 13
9.6 Arbitration.......................................................................... 14
9.7 Certain Definitions.................................................................. 15
9.8 Binding Effect; Assignment; Third Party Beneficiaries................................ 15
9.9 Severability......................................................................... 16
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
9.10 Headings............................................................................. 16
9.11 Counterparts......................................................................... 16
9.12 Further Assurances................................................................... 17
</TABLE>
SCHEDULES:
Schedule 1.1 - Services
ii
<PAGE> 4
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") dated March 31,
1997 (the "Effective Date") between John Alden Life Insurance Company, a
Minnesota corporation ("JALIC"), and SunAmerica Life Insurance Company, an
Arizona corporation (the "Company").
WHEREAS, pursuant to an Asset Purchase and Sale Agreement dated as of
November 29, 1996 (the "Asset Purchase Agreement") between the Company and
JALIC, JALIC is selling to the Company certain assets used in JALIC's business
of issuing, selling and administering annuity policies and related activities in
the United States other than the State of New York;
WHEREAS, pursuant to an Indemnity Reinsurance Agreement between the
Company and JALIC dated concurrently herewith (the "Indemnity Reinsurance
Agreement") JALIC has ceded on a 100% coinsurance basis all of JALIC's Insurance
Liabilities arising under the Annuity Contracts and Additional Policies (as
defined in the Indemnity Reinsurance Agreement; the Additional Policies together
with the Annuity Contracts are hereinafter referred to as "Policies") after the
Closing Date pending assumption of the Policies as contemplated in the
Assumption Reinsurance Agreement between the Company and JALIC dated
concurrently herewith; and
WHEREAS, JALIC desires that the Company provide to JALIC administrative
services, with respect to the Policies.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good, valuable and
sufficient consideration including the consideration provided hereunder, the
receipt of which is hereby acknowledged, JALIC and the
<PAGE> 5
Company (collectively, the "Parties" and, sometimes individually a "Party"),
intending to be legally bound, hereby agree as follows:
ARTICLE 1
APPOINTMENT OF THE COMPANY; SERVICES AND AUTHORITY
1.1 Engagement. For the term of the Agreement, JALIC hereby engages the
Company to perform and provide the technical and administrative service,
assistance and support functions described in Schedule 1.1 attached hereto (the
"Services"). The Company hereby accepts such appointment.
1.2 General Description of the Services. The purpose of this Agreement
is to set forth the terms upon which the Company shall provide to JALIC the
Services. The Company shall provide the Services in a manner consistent with the
then current prevailing standards of the life insurance industry. Services that
are consistent with (i) the Company's past practices and (ii) the Company's
current prevailing standards with regard to administering its own annuity
policies which are similar to the Policies shall be conclusively deemed
consistent with industry standards; provided, however, that the Company shall
have the discretion to make such changes to such practices that the Company
reasonably deems appropriate, so long as such Services continue to be provided
in a manner consistent with (i) the current prevailing standards of the life
insurance industry and (ii) the current standards of the Company with regard to
administering its own annuity policies similar to the Policies.
1.3 Performance by Affiliates. The Parties recognize that the Services
may include services which, by their nature, are more effectively to be provided
by Affiliates of the Company or to Affiliates of JALIC. Subject to the next
sentence of this Section 1.3, the Company shall, to the extent required in order
for its Affiliates to provide such Services, cause
2
<PAGE> 6
its Affiliates to provide such Services hereunder as if such Affiliates were
themselves parties hereto. In connection with the provision of such Services,
the Company's Affiliates shall be entitled, as if such Affiliates were
themselves parties hereto, to the benefits of (i) the limitations on liability
set forth herein and (ii) the limitations on the obligation to provide Services
set forth herein.
1.4 Accounts. (a) The Company shall establish and fund on a timely
basis a bank account (which need not be a segregated account) for purposes of
making any and all payments to holders of Policies in the performance of the
Services by the Company hereunder, including, but not limited to, all items set
forth in Section 3.3 of the Indemnity Reinsurance Agreement.
(b) JALIC shall cooperate with the Company in any reasonable
arrangement which will allow the Company to deposit checks made payable to JALIC
in a Company bank account.
1.5 Monthly Accounting. For the term of this Agreement, the Company
shall provide JALIC with a monthly accounting (the "Monthly Accounting")
relating to the Policies no later than ten (10) Business Days following the end
of each calendar month. The Monthly Accounting shall contain such information
relating to such cash flow transactions as are set forth on Schedule 1.5 hereto,
including a statement of income received in connection with the Policies. Such
Schedule 1.5 shall also include a statement of monthly reserves for GAAP and
SAP. The first Monthly Accounting shall be provided to JALIC no later than
forty-five (45) Business Days after the date hereof and the final Monthly
Accounting shall be provided to JALIC no later than ten (10) Business Days after
the termination of this Agreement.
1.6 Maintenance of Books and Records. (a) For the duration of this
Agreement, the Company shall maintain books and records of all transactions
pertaining to the Policies,
3
<PAGE> 7
including, but not limited to, any disbursement requests submitted in respect of
the Policies and any documents relating thereto, any material communications
relating to any Policy, any material communication with any regulatory
authority, complaint logs and all data used by the Company in the performance of
services required under this Agreement. These books and records shall be
maintained, in all material respects, in accordance with any and all applicable
Laws. All such books and records pertaining to a Policy shall be the property of
the Company. The Company shall (i) allow JALIC, upon reasonable prior notice and
during regular business hours, through its employees and other Representatives,
at JALIC's expense to examine and make copies of such books and records 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 the
Company's offices or other facilities or properties and (ii) maintain such books
and records for JALIC's examination and copying. Access to such books and
records shall be at JALIC's expense and may not unreasonably interfere with the
Company's or any successor company's business operations and JALIC shall
reimburse the Company for all reasonable out-of-pocket expenses incurred by the
Company in copying such records. Upon termination of this Agreement, all books
and records pertaining to Policies for which there has been no Novation (as
defined in the Assumption Reinsurance Agreement) shall be delivered promptly to
JALIC or such other Person as JALIC shall designate in writing.
(b) The Company shall back up and maintain its computer files
used in the performance of the Services hereunder in the same manner that the
Company presently backs up and maintains its existing computer files relating to
annuity policies.
4
<PAGE> 8
(c) The Company shall maintain facilities and procedures for
safekeeping all records used in the performance of services under this Agreement
of the same kind used to safekeep the Company's own records.
(d) Each Party and its representatives may audit and review
the other's records relating to the Services provided hereunder during
reasonable business hours and upon reasonable advance notice; provided, however,
that such audit or review may be postponed during any such period if it will be
unreasonably disruptive to the Party being audited or reviewed.
1.7 Novation Report. Within 10 business days after the end of each
month during the term of this Agreement, beginning with the month in which the
first Novation of a Policy occurs, the Company shall provide to JALIC a report
indicating all Policies that have been the subject of a Novation by the Company
during the prior month.
1.8 Claims-Payment Instructions. The Company at its own cost will
perform during the term of this Agreement claims administration and processing
of the Policies, including, without limitation, review, investigation,
adjustment, settlement, defense and payment of claims, special investigation and
anti-fraud compliance, and preparation of any report required by regulatory
authorities concerning the foregoing services and will, in connection with such
claims administration, retain, at its sole discretion and cost, any outside
investigation firms, adjusters, attorneys or other professionals that the
Company deems necessary in the adjustment of such claims. In regards to payment
of claims regarding the Policies, the Company shall be entitled to rely on the
express written contractual terms of the Policies and other books and records
provided by JALIC.
5
<PAGE> 9
1.9 Complaint-Handling Procedure. The Parties will cooperate with each
other in providing information necessary to respond to any inquiries and
complaints concerning the Policies. The Company shall answer all inquiries and
complaints received by it concerning a Policy. All inquiries and complaints
concerning the Policies received by JALIC with respect to a Policy transitioned
to the Company or converted to the Company's administrative system shall be
immediately forwarded by facsimile or overnight mail to a contact person
designated by the Company for reply. Initially, such contact person shall be
James W. Rowan. Upon answering such inquiries or complaints, the Company will
furnish JALIC with a copy of the complaint file. JALIC shall be solely
responsible for maintaining any complaint files, complaint registers or other
reports of any kind, which are required to be maintained under applicable Laws.
JALIC shall also be responsible for preparing and submitting any other complaint
filings as required by applicable Laws.
1.10 Filings. The Company shall handle all compliance and regulatory
matters relating to the administration of a Policy, including monitoring changes
in applicable laws, implementing the appropriate and necessary changes to forms
and rates as required by applicable Laws, filing and refiling forms and rates as
required by applicable Laws, and preparing and filing all reports and other
filings required by applicable Laws. The Company shall use its reasonable
efforts to provide copies of all reports and filings with respect to a Policy
required to be made with any governmental entity to JALIC.
6
<PAGE> 10
ARTICLE 2
COMPENSATION; PAYMENT
There shall be no fee payable to the Company for Services provided to
JALIC hereunder.
ARTICLE 3
TERM AND TERMINATION
3.1 Term. This Agreement shall commence upon the first Policy or
Policies being transitioned to the Company or converted onto the Company's
administrative system and shall continue with respect to Policies until such
time as all of the liabilities under the Policies have been satisfied or a
Novation has occurred or unless earlier terminated pursuant to Sections 3.2, 3.3
or 3.4 below and shall terminate as to each Policy on the effective date of the
Novation of such Policy pursuant to the Assumption Reinsurance Agreement. Upon
any termination of this Agreement pursuant to Sections 3.2, 3.3 or 3.4 below,
the Services performed by the Company shall be assumed by JALIC or JALIC's
designee. In such event of termination, the Company shall cooperate in the
transfer of services and the applicable books and records maintained by the
Company pursuant to Section 1.6 hereof to JALIC or JALIC's designee, so that
JALIC or its designee will be able to perform the Services required under this
Agreement following termination of this Agreement.
3.2 Termination for Breach. In the event of a breach by either Party of
any obligation of any provision of this Agreement, the non-breaching Party shall
give written notice of breach to the breaching Party detailing the nature of
such breach in sufficient detail to allow the breaching party to cure, if cure
is possible. If a material breach of any material obligation is not cured by the
breaching Party within 30 days after such notice of breach, then the non-
7
<PAGE> 11
breaching Party may terminate this Agreement by giving notice of termination to
the breaching Party. Such termination shall be effective on notice of
termination by the non-breaching Party to the breaching Party.
3.3 Termination for Receivership. In the event of a receivership or
insolvency of either Party, this Agreement may be terminated immediately by the
other Party upon written notice.
3.4 Other Termination Events. This Agreement may be terminated at any
time upon the mutual written consent of the Parties hereto, which writing shall
state the effective date of termination.
ARTICLE 4
REPRESENTATIONS
THERE ARE NO REPRESENTATIONS OR WARRANTIES BY THE COMPANY OR
ITS AFFILIATES WITH RESPECT TO THE SERVICES, EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, THE ASSET PURCHASE AGREEMENT AND THE ANCILLARY AGREEMENTS. NO
REPRESENTATION OR WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW,
INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE AS TO THE SERVICES.
8
<PAGE> 12
ARTICLE 5
INDEPENDENT CONTRACTOR
The Company and its Affiliates shall be independent contractors to
JALIC and its Affiliates with respect to the performance of the Services
hereunder. Nothing contained in this Agreement shall make the Company, its
Affiliates or their employees the employees of JALIC.
ARTICLE 6
INTENTIONALLY DELETED
ARTICLE 7
FORCE MAJEURE
The Company and its Affiliates shall not be liable for its or their
failure to perform hereunder to the extent that such performance is made
impracticable, delayed or prevented, in whole or in part, due to any acts of
God; fires; wars; Laws or Orders, whether valid or invalid (including, without
limitation, requisitions, allocations and price adjustment restrictions); or
inability to obtain or unavoidable delay in obtaining necessary power. The
Company and its Affiliates shall use commercially reasonable efforts (which
shall be substantially similar to those used by the Company immediately prior to
the date hereof) to minimize the likelihood of any damage, loss of data, delay
or error resulting from such occurrence beyond its or their control. If the
Company or its Affiliates fails to perform hereunder as a result of any
occurrence described in the preceding sentence, the Company shall (i) give
written notice to that effect to JALIC within 10 days after such occurrence
together with a statement setting forth reasonably full particulars concerning
such occurrence and (ii) during the period any Service required to be
9
<PAGE> 13
provided hereunder cannot be provided as a result of such occurrence, use
reasonable efforts to remedy such occurrence. To the extent required by any such
occurrence, the performance by the Company or its Affiliates hereunder shall be
suspended during the continuance of any such occurrence and this Agreement shall
otherwise remain unaffected. If such occurrence is remedied during the time that
any Service affected by such occurrence is required to be provided under this
Agreement, the Company or its Affiliates shall promptly notify JALIC and any
such suspension shall end.
ARTICLE 8
HOLD HARMLESS
The Company shall indemnify and hold JALIC and each of its Affiliates
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") directly arising
from the Company's or its Affiliates breach of any provision of this Agreement,
including any act of negligence, bad faith or willful misconduct of the Company
in providing the Services. The indemnification provisions under this Article 8
shall survive the term of this agreement for all Liabilities arising from
omissions or acts committed during such term.
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<PAGE> 14
ARTICLE 9
MISCELLANEOUS
9.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally (by courier or
otherwise), or 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 JALIC is to be notified:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, CA 90067-6022
Attention: General Counsel
Facsimile No.: (310) 772-6574
With a copy to:
SunAmerica Life Insurance Company
1 SunAmerica Center, Century City
Los Angeles, CA 90067-6022
Attention: Controller
Facsimile No.: (310) 772-6684
and
O'Melveny & Myers
1999 Avenue of the Stars
Suite 700
Los Angeles, CA 90067
Attention: Robert D. Haymer, Esq.
Facsimile No.: (310) 246-6779
when the Company is to be notified:
11
<PAGE> 15
John Alden Life Insurance Company
7300 Corporate Center Drive
Miami, FL 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1342
With copies to:
John Alden Financial Corporation
7300 Corporate Center Drive
Miami, FL 33126-1223
Attention: General Counsel
Facsimile No.: (305) 715-1497
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
Attention: William W. Rosenblatt, Esq.
Facsimile No.: (212) 259-6333
A Party may, by notice given in accordance with this Section 9.1 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 9.1
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) (ii) presented for delivery to the addressee as so indicated during
normal business hours, if such delivery shall have been refused for any reason.
9.2 Entire Agreement. This Agreement (including the Schedules attached
hereto), the Asset Purchase Agreement (including the Ancillary Agreements and
the Annex, Exhibits and Schedules attached hereto), the Assumption Reinsurance
Agreement and the Indemnity Reinsurance Agreement contain the entire agreement
and understanding between the Parties with
12
<PAGE> 16
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. Nothing contained in this Agreement or any of the
Schedules hereto 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 any Laws or ordinances or otherwise, or as an admission that any Party or
any of its Affiliates are in violation of or have ever violated any such Laws.
Notwithstanding anything contained in this Section 9.2 to the contrary, any
inconsistencies between this Agreement and the Indemnity Reinsurance Agreement
shall be governed by the terms of the Indemnity Reinsurance Agreement. In the
event of any conflict between this Agreement, the Indemnity Reinsurance
Agreement and the Asset Purchase Agreement as to the rights or obligations of
JALIC or the Company, the Asset Purchase Agreement shall control. In the event
of any ambiguity in this Agreement as to the rights or obligations of JALIC or
the Company, the Asset Purchase Agreement shall control.
9.3 Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of, or approvals 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 grant 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.
9.4 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
13
<PAGE> 17
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 by, 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.
9.5 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 ITS
PRINCIPLES OF CONFLICTS OF LAWS. 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 9.6 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.
9.6 Arbitration. The Parties acknowledge and agree that the
transactions contemplated herein substantially affect and impact interstate
commerce. Therefore, all disputes or differences between JALIC and the Company
arising under or which are related to this Agreement upon which an amicable
understanding cannot be reached within 30 days shall be settled by arbitration
14
<PAGE> 18
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 transactions of a
similar nature in the insurance industry. 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 last 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
15
<PAGE> 19
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.
9.7 Certain Definitions. Capitalized terms used herein without
definition shall have the meaning ascribed to them in the Asset Purchase
Agreement.
9.8 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. Except as otherwise provided
in this Agreement, neither the Company nor JALIC 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,
which consent shall not be unreasonably withheld. Any other 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. Notwithstanding the foregoing, the Company may subcontract all or part of
the Services hereunder to a third party without JALIC's consent. No Person
(including, without limitation, any employee of a Party) shall be, or be deemed
to be, a third party beneficiary of this Agreement.
9.9 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
16
<PAGE> 20
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.
9.10 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.
9.11 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.
9.12 Further Assurances. Subject to the provisions of this Agreement,
JALIC and the Company will use their commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to provide the Services
required herein. With regard to any matters not expressly stated herein, the
Parties to this Agreement agree to furnish such information, to execute such
additional documents, and to cooperate with each other as may be reasonably
necessary to carry out the purposes of this Agreement, in accordance with
industry practice for transactions of this kind.
17
<PAGE> 21
If either Party becomes aware that any Action has been or is about to be
initiated with respect to the Policies, or any other matter reasonably related
thereto, it shall inform the other Party as soon as practicable. The Parties
agree to cooperate in furnishing to each other any files or other information
needed by the other to respond to any Action or threatened Action.
IN WITNESS WHEREOF, the parties have executed this Agreement.
JOHN ALDEN LIFE INSURANCE COMPANY
By: /s/ Scott L. Stanton
-------------------------------
Title: Senior Vice President and CFO
-------------------------------
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ James W. Rowan
-------------------------------
Title: Senior Vice President
-------------------------------
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Schedule 1.1
SERVICES
Services with respect to the Policies transitioned to the Company as
conducted by the Company shall consist of those services, and only those
services, the Company or its Affiliates customarily renders for its own annuity
policies. Such Services shall include:
(a) all Policyholder services including but not limited to the
following:
1. Billing and collection of premiums;
2. Payment of claims;
3. Handling of Policyholder service requests, inquiries and
complaints under the Policies;
4. Preparation of quarterly statements of cash flow
transaction data (within ten Business Days after the
end of a calendar quarter) and annual financial
statement data (within thirty-five calendar days
after the end of the fiscal year), for inclusion in
JALIC's applicable financial statements (except for
statements of cash flow testing and actuarial
memorandum which shall be delivered on or before
March 1 of each calendar year);
5. Administration of any agreements providing for the payment of
commissions relating to the Policies;
6. Provision of the Monthly Accounting pursuant to Section 1.5;
7. Payment of agent commissions due and payable;
8. Provision of data on reimbursement of premium taxes and
provision of data on net DAC taxes, sales taxes, value added
taxes or any other taxes on receipts due and payable;
9. Preparation and mailing of quarterly or annual statements to
policyholders; and
10. Provision of such other Policyholder services on the
Policies as are reasonably required or which have
been previously provided by the Company or its
Affiliates with respect to its own annuity policies
with respect to its annuity policies which are
similar to the Policies.
(b) All other services performed by or for the Company or its
Affiliates with respect to its own annuity polices similar to the Policies,
including the providing of legal, compliance, actuarial, accounting, treasury,
human resources and data processing services.
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- -------------------------------------------------------------------------------
JOHN ALDEN ASSET MANAGEMENT COMPANY
INTERIM SERVICER
AND
SUNAMERICA LIFE INSURANCE COMPANY
AND JOHN ALDEN LIFE INSURANCE COMPANY OF NEW YORK
(COLLECTIVELY, THE "OWNER")
INTERIM SERVICING AGREEMENT
DATED AS OF MARCH 31, 1997
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS......................................................................................1
AGREEMENT.................................................................................................1
BUSINESS DAY..............................................................................................1
CERTIFICATE ACCOUNT.......................................................................................1
CORPORATE OFFICE..........................................................................................1
DETERMINATION DATE........................................................................................2
DUE DATE .................................................................................................2
DUE PERIOD................................................................................................2
ESCROW ACCOUNT............................................................................................2
ESCROW PAYMENTS...........................................................................................2
EVENT OF DEFAULT..........................................................................................2
FIRST REMITTANCE DATE.....................................................................................2
INTERIM SERVICER..........................................................................................2
INTERIM SERVICING FEE.....................................................................................2
MATURITY DATE.............................................................................................2
MONTHLY PAYMENT...........................................................................................2
MORTGAGE .................................................................................................2
MORTGAGE FILE.............................................................................................2
MORTGAGE LOANS............................................................................................2
MORTGAGE LOAN SCHEDULE....................................................................................3
MORTGAGE NOTE.............................................................................................3
MORTGAGED PROPERTY........................................................................................3
MORTGAGOR.................................................................................................3
PERSON .................................................................................................3
RECORD DATE...............................................................................................3
REMITTANCE DATE...........................................................................................3
SERVICERS.................................................................................................3
SERVICING ACCOUNTS........................................................................................3
SERVICING AGREEMENTS......................................................................................3
SERVICING FEE.............................................................................................3
SERVICERS' REMITTANCE DATE................................................................................3
ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS...................................................3
SECTION 2.01. Interim Servicer to Act as Interim Servicer..............................................3
SECTION 2.02. Servicing Agreements Between the Owner and the Servicers; Enforcement of Other
Agreements...............................................................................4
SECTION 2.03. Liability of the Interim Servicer........................................................4
SECTION 2.04. Collection of Certain Mortgage Loan Payments.............................................4
SECTION 2.05. Servicing Accounts.......................................................................4
SECTION 2.06. Establishment of Certificate Account; Deposits in Certificate Account....................4
SECTION 2.07. Permitted Withdrawals From the Certificate Account.......................................5
SECTION 2.08. Establishment of Escrow Account; Deposits in Escrow Account..............................5
SECTION 2.09. Permitted Withdrawals From Escrow Accounts...............................................6
SECTION 2.10. Payment of Taxes and Insurance...........................................................6
SECTION 2.11. Maintenance of Hazard Insurance..........................................................6
SECTION 2.12. Delinquent Payments on Mortgage Loans....................................................6
SECTION 2.13. Servicing Compensation...................................................................6
SECTION 2.14. Records; Access to Certain Documentation and Information Regarding the
Mortgage Loans...........................................................................6
SECTION 2.15. Satisfaction of Mortgages................................................................7
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 2.16. Limitation of Servicer's Authority.......................................................7
SECTION 2.17. Fidelity Bond and Errors Omissions.......................................................7
ARTICLE III PAYMENTS; STATEMENTS AND REPORTS.................................................................8
SECTION 3.01. Distributions............................................................................8
SECTION 3.02. Statements to the Owner..................................................................8
ARTICLE IV LIABILITY OF THE INTERIM SERVICER................................................................9
SECTION 4.01. Limitation on Liability of the Interim Servicer and Others...............................9
SECTION 4.02. Indemnification..........................................................................9
ARTICLE V DEFAULT..........................................................................................9
SECTION 5.01. Events of Default........................................................................9
ARTICLE VI TERMINATION.................................................................................... 10
SECTION 6.01. Termination............................................................................ 10
ARTICLE VII MISCELLANEOUS PROVISIONS....................................................................... 11
SECTION 7.01. Amendment.............................................................................. 11
SECTION 7.02. Governing Law.......................................................................... 11
SECTION 7.03. Reports; Notices....................................................................... 11
SECTION 7.04. Severability of Provisions............................................................. 11
SECTION 7.05. No Partnership......................................................................... 11
SECTION 7.06. Execution; Successors and Assigns...................................................... 11
SECTION 7.07. Attorney's Fees........................................................................ 11
SECTION 7.08. Entire Agreement....................................................................... 12
SECTION 7.09. Headings............................................................................... 12
</TABLE>
EXHIBITS
Exhibit A Schedule of Mortgage Loans
Exhibit One Certificate Account Letter Agreement
Exhibit Two Escrow Account Letter Agreement
Exhibit Three Permitted Investments
ii
<PAGE> 4
This Interim Servicing Agreement relating to the interim servicing of
Mortgage Loans identified on Schedule A hereto is effective as of March 31,
1997, is executed between John Alden Asset Management Company having an office
at 7300 Corporate Center Drive, Miami, Florida 33126-1223 (hereinafter referred
to as the "Interim Servicer"), SunAmerica Life Insurance Company, having an
office at 1 SunAmerica Center, 38th Floor, Los Angeles, California 90067-6022
("SunAmerica"), and John Alden Life Insurance Company of New York, having an
office at 1 SunAmerica Center, 38th Floor, Los Angeles, California 90067-6022
("JANY," and together with "SunAmerica," hereinafter referred to as the
"Owner").
RECITALS
WHEREAS, the Owner is the owner of certain mortgage loans (the
"Mortgage Loans") evidenced by a bond and/or promissory note (the "Notes") and
secured by a deed of trust or mortgage on commercial real property (the
"Mortgages"), which Mortgage Loans are described in Schedule A annexed hereto;
and
WHEREAS, the Interim Servicer shall act on behalf of Owner in order to
service the Mortgage Loans as an Interim Servicer and to act as a master
servicer for any Mortgage Loan or Mortgage Loans serviced under a third party
servicing agreement in existence prior to the date hereof.
WHEREAS, the Owner and the Interim Servicer have agreed that Interim
Servicer shall undertake to service the Mortgage Loans for Owner;
NOW THEREFORE, in consideration of the promises and the mutual premises
and the recitals set forth above which are made a contractual part hereof and
hereinafter contained and the payment of One Dollar ($1.00) by each of the
parties to the other in hand paid, receipt whereof is hereby acknowledged, it is
mutually covenanted and agreed as follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
ACCEPTED SERVICING PRACTICES: As defined in Section 2.01 of this
Agreement.
AGREEMENT: This Interim Servicing Agreement, including all exhibits
hereto, and all amendments hereof and supplements hereto.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking or savings and loan institutions are authorized or
obligated by law or executive order to be closed in the State of Florida.
CERTIFICATE ACCOUNT: The trust accounts established and maintained
pursuant to Section 2.07 of this Agreement.
CORPORATE OFFICE: The principal office of the Interim Servicer in the
State of Florida at which at any particular time its corporate business shall be
administered, which office at the date of the execution of this instrument is
located at 7300 Corporate Center Drive, Miami, Florida 33126.
CUT-OFF DATE: March 31, 1997
<PAGE> 5
DETERMINATION DATE: The last day (or if such day is not a Business Day,
the Business Day immediately preceding such last day) of each month.
DUE DATE: The day of the month on which each Monthly Payment is due on
a Mortgage Loan, exclusive of any days of grace.
DUE PERIOD: With respect to each Remittance Date, the applicable Due
Period shall be the period beginning on the first day of the month preceding the
month of the Remittance Date, and ending on the last day of the month preceding
the Remittance Date.
ESCROW ACCOUNT: The separate account or accounts created and maintained
pursuant to Section 2.08 of this Agreement.
ESCROW PAYMENTS: The amounts constituting ground rents, taxes,
assessments, water rates, mortgage insurance premiums, fire and hazard insurance
premiums and other payments required to be escrowed by the Mortgagor with the
Mortgagee pursuant to any Mortgage Loan and this Agreement.
EVENT OF DEFAULT: Any one of the conditions or circumstances enumerated
in Article V of this Agreement.
FIRST REMITTANCE DATE: April 5, 1997, or if such day is not a Business
Day, the first Business Day immediately following; provided however, that the
funds remitted to Owner on the First Remittance Date shall include all payments
collected by Interim Servicer under the Mortgage Loans between March 21, 1997
and March 31, 1997.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan to the extent such proceeds are
applied to the restoration of the related Mortgaged Property or released to the
related Mortgagor in accordance with Accepted Servicing Practices.
INTERIM SERVICER: John Alden Asset Management Company or its successors
or assigns.
INTERIM SERVICING FEE: Monthly compensation with respect to each
Mortgage Note being serviced under this Agreement in an amount to be deducted by
the Interim Servicer from the Monthly Payment made with respect to such Mortgage
Note in an amount as set forth in Section 2.13. The obligation of the Owner to
pay the Interim Servicing Fee with respect to each Mortgage Note is limited to,
and payable solely from, the Monthly Payment of the specific Mortgage Note as to
which the entire amount of the Monthly Payment (excluding late fees or penalty
charges which are or may become due) has been made and collected by the Interim
Servicer, and may only be deducted by the Interim Servicer after the entire
amount of a regular Monthly Payment (excluding late fees or penalty charges
which are or may become due) for such month with respect to such Mortgage Note
has been received, and deposited, by the Interim Servicer into the Certificate
Account.
MATURITY DATE: The date on which each Mortgage Note, pursuant to its
terms, shall mature such date being set forth on the Mortgage Loan Schedule.
MONTHLY PAYMENT: The scheduled monthly payment of principal and
interest on a Mortgage Loan which is payable by a Mortgagor under the related
Mortgage Note.
MORTGAGE: The mortgage, deed of trust, deed to secure debt, or other
instrument creating a first lien on or first priority ownership interest in an
estate in fee simple in real property securing a Mortgage Note.
MORTGAGE FILE: The contents of each Mortgage File pertaining to a
particular Mortgage Loan.
MORTGAGE LOANS: Such of the mortgage loans identified in Schedule A
hereto.
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MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached hereto
as Schedule A, such schedule identifying each Mortgage Loan by city and state of
the Mortgaged Property, the servicer code and the name of the Mortgagor and
setting forth as to each Mortgage Loan the type, its principal balance as of the
close of business on the Cut-off Date (after deducting any payment of principal
due on or before such date), loan number and borrower's name.
MORTGAGE NOTE: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
MORTGAGED PROPERTY: The property securing a Mortgage Note.
MORTGAGOR: The obligor on a Mortgage Note.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
RECORD DATE: The close of business of the last Business Day of the
month preceding the month of the related Remittance Date.
REMITTANCE DATE: The 5th day of every consecutive month, beginning on
the First Remittance Date, or if such 5th day is not on a Business Day, the
first Business Day thereafter.
SERVICERS: The various Servicers which currently service the Mortgage
Loans pursuant to Servicing Agreements.
SERVICING ACCOUNTS: The account or accounts established pursuant to
Section 2.06 of this Agreement.
SERVICING AGREEMENTS: Various Servicing Agreements between the Owner
and Servicers providing terms for the servicing of particular Mortgage Loans.
SERVICING FEE: The Servicing Fee payable to the Servicer shall be fee
as set forth in the respective Servicing Agreement.
SERVICERS' REMITTANCE DATE: The Business Day prior to each Remittance
Date or as otherwise may be provided in the Servicing Agreements.
ARTICLE II
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 2.01. Interim Servicer to Act as Interim Servicer. Acting
itself or through the Servicers as provided in Section 2.02, the Interim
Servicer shall service and administer the Mortgage Loans on the Owner's behalf,
in accordance with this Agreement and the Mortgage Loans which such services
shall consist of collecting and remitting collected funds consisting of all
amounts due and owing under the Mortgage Loans including without limitation
principal, interest, taxes and insurance with regard to each Mortgage Loan and
providing periodic reports and other information to Owner as provided elsewhere
herein. In carrying out its duties, the Interim Servicer shall exercise the same
care it customarily employs and exercises in servicing and administering
Mortgage Loans for its own account which shall be consistent with accepted
mortgage servicing practices of prudent lending institutions with regard to the
services being performed hereunder ("Accepted Servicing Practices"). The Interim
Servicer, in its sole discretion, may and is hereby authorized to perform any of
its servicing responsibilities through such servicing institutions or
organizations, with which it has, prior to the date hereof, executed contracts
to perform servicing duties on its behalf with respect to the Mortgage Loans or
any particular Mortgage Loan, and such designee shall have all
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the rights and powers of the Interim Servicer with respect to such Mortgage
Loans under this Agreement to the extent provided in any Servicing Agreement,
but the Interim Servicer shall not thereby be released from any of its
obligations in this Agreement. Notwithstanding the foregoing, the Interim
Servicer shall not enter into any agreements subsequent to the date hereof with
a servicing institution or organization to perform any of its services
hereunder.
The Owner shall furnish the Interim Servicer with any powers of
attorney and other documents necessary or appropriate to enable the Interim
Servicer or its designee to carry out its servicing and administrative duties
hereunder.
SECTION 2.02. Servicing Agreements Between the Owner and the Servicers;
Enforcement of Other Agreements.
(a) The Owner is a party to the Servicing Agreements with the Servicers
for the servicing and administration of the Mortgage Loans.
(b) As part of its servicing activities hereunder, the Interim
Servicer, for the benefit of the Owner, shall use Accepted Servicing Practices
to enforce the obligations of the Servicers under the Servicing Agreements,
including, without limitation, any obligation to remit amounts in the Servicing
Accounts to the Interim Servicer for deposit into the Certificate Account on
each Servicers' Remittance Date and to have the Servicers make advances in
respect of delinquent payments if so required. In addition, Interim Servicer
shall forward to Owner reports or other information received by Interim Servicer
from Servicers with respect to any Mortgage Loan.
SECTION 2.03. Liability of the Interim Servicer. Except where
explicitly stated otherwise, the Interim Servicer's responsibility as Interim
Servicer shall be limited to using commercially reasonable efforts to enforce
the terms of the Servicing Agreements. The Interim Servicer shall not be liable
for any action or failure to act on the part of any of the Servicers but shall
remain responsible for the servicing of the Mortgage Loans. The Interim Servicer
shall be entitled to enter into any agreements with the Servicers, for
indemnification of the Interim Servicer by such Person and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
SECTION 2.04. Collection of Certain Mortgage Loan Payments. The Interim
Servicer shall use commercially reasonable efforts to cause the Servicers to
collect all payments called for under the terms and provisions of the Mortgage
Loans in accordance with Accepted Servicing Practices.
SECTION 2.05. Servicing Accounts. Pursuant to the Servicing Agreements,
each Servicer shall be required to establish and maintain one or more Servicing
Accounts (collectively, the "Servicing Accounts"). The Servicer is required to
deposit into the Servicing Account all funds received by them with respect to
the Mortgage Loans less any amount which the Servicers are permitted to retain
pursuant to the Servicing Agreements. On each Servicer Remittance Date, the
Servicer is required to remit from the Servicing Account to the Interim Servicer
the scheduled servicer remittance plus all other amounts with respect to the
Mortgage Loans deposited by the Servicer into the Servicing Account as of the
Servicer Remittance Date which amount shall be deposited by the Interim Servicer
into the Certificate Account.
SECTION 2.06. Establishment of Certificate Account; Deposits in
Certificate Account. The Interim Servicer shall segregate and hold all funds
collected and received pursuant to each Mortgage Loan separate and apart from
any of its own funds and general assets and shall establish and maintain one or
more Certificate Accounts, which shall be trust accounts (collectively, the
"Certificate Account"), titled the "John Alden Asset Management Company, as
Interim Servicer in trust for JANY Commercial Mortgage Loans", the "John Alden
Asset Management Company, as Interim Servicer in trust for JANY Residential
Mortgage Loans" , the "John Alden Asset Management Company, as Interim Servicer
in trust for SunAmerica Life Commercial Mortgage Loans" and the "John Alden
Asset Management Company, as Interim Servicer in trust for SunAmerica Life
Residential Mortgage Loans", respectively. Such Certificate Accounts shall be
established with an investment grade bank. The Certificate Account shall be
insured by the Federal Deposit Insurance Corporation. The creation of any
Certificate Account shall be evidenced
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by a letter agreement in the form of Exhibit One hereto. A copy of such letter
agreement shall be furnished to the Owner. The Interim Servicer shall not close
or move the Certificate Account without the prior written consent of the Owner.
The Interim Servicer shall deposit in the Certificate Account upon
receipt, net of the Interim Servicing Fees, and retain therein the following
payments and collections received by it subsequent to the Cut-off Date (other
than in respect of principal and interest on the Mortgage Loans due on or before
the Cut-off Date) all funds collected by the Interim Servicer in connection with
the Mortgage Loans (other than amounts to be deposited in the Escrow Accounts)
including without limitation:
(i) all payments on account of principal, including
principal prepayments on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage
Loans;
(iii) all proceeds received by the Interim Servicer under
any title, hazard or other insurance policy, other
than proceeds to be held in the Escrow Account and
applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance
with the Interim Servicer's normal servicing
procedures; and
(iv) all awards or settlements in respect of condemnation
proceedings or eminent domain affecting any Mortgaged
Property which are not released to the Mortgagor in
accordance with the Interim Servicer's normal
servicing procedures.
SECTION 2.07. Permitted Withdrawals From the Certificate Account. The
Interim Servicer may, from time to time, withdraw funds from the Certificate
Account for the following purposes:
(i) to make payments to the Owner in the amounts and in
the manner provided for in Section 3.01 of this
Agreement;
(ii) to reimburse itself for unpaid Interim Servicing
Fees; or
(iii) to clear and terminate the Certificate Account upon
the termination of this Agreement.
SECTION 2.08. Establishment of Escrow Account; Deposits in Escrow
Account. (a) On direct serviced loans, the Interim Servicer shall segregate and
hold all funds collected and received pursuant to each Mortgage Loan which
constitute Escrow Payments separate and apart from any of its own funds and
general assets and shall establish and maintain a JANY commercial-mortgage loan
escrow account, a JANY residential-mortgage loan escrow account, a SunAmerica
commercial-mortgage loan escrow account and a SunAmerica residential-mortgage
loan escrow account (collectively, the "Escrow Accounts"), which shall be trust
accounts, titled "John Alden Asset Management Company, as Interim Servicer in
trust for JANY Commercial Mortgage Loans", the "John Alden Asset Management
Company, as Interim Servicer in trust for JANY Residential Mortgage Loans" , the
"John Alden Asset Management Company, as Interim Servicer in trust for
SunAmerica Life Commercial Mortgage Loans" and the "John Alden Asset Management
Company, as Interim Servicer in trust for SunAmerica Life Residential Mortgage
Loans", respectively. The Escrow Accounts shall be established with an
investment grade commercial bank. The Escrow Accounts shall be insured by the
Federal Deposit Insurance Corporation. The creation of any Escrow Accounts shall
be evidenced by a letter agreement in the form of Exhibit "Two" hereto. A copy
of such certification or letter agreement shall be furnished to the Owner. The
Interim Servicer shall not close or move the Escrow Accounts without the prior
written consent of the Owner.
The Interim Servicer, on direct serviced loans, shall deposit in the
Escrow Accounts upon receipt, and retain therein: (i) all Escrow Payments
collected on account of the Mortgage Loans, for the purpose of effecting timely
payment of any such items as required under the terms of this Agreement, and
(ii) all amounts representing proceeds
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of any hazard insurance policy which are to be applied to the restoration or
repair of any Mortgaged Property. The Interim Servicer shall make withdrawals
therefrom only in accordance with Section 2.09 hereof.
(b) The Interim Servicer may invest all or a portion of the funds in
the Escrow Accounts in interest bearing accounts. The Interim Servicer shall
receive as additional compensation all income and gain realized from any such
interest bearing accounts. If any principal losses are incurred in respect of
any such interest bearing accounts, the Interim Servicer shall reimburse and
restore to the Escrow Accounts the amount of any such principal losses out of
the Interim Servicer's own funds immediately as realized. Notwithstanding the
foregoing, the Interim Servicer's right to invest funds in the Escrow Accounts
shall in no way limit the rights of the Interim Servicer to be compensated for
its services as provided in this Agreement.
SECTION 2.09. Permitted Withdrawals From Escrow Accounts. On direct
serviced Mortgage Loans withdrawals from the Escrow Accounts established under
Section 2.08 may be made by the Interim Servicer as the case may be, only (a) to
effect timely payments of ground rents, taxes, assessments, water rates,
mortgage insurance premiums, fire and hazard insurance premiums or other items
constituting Escrow Payments for the related Mortgage Loan, (b) to refund to any
Mortgagor any funds found to be in excess of the amounts required under the
terms of the related Mortgage Loan, (c) for transfer to the Certificate Account
in accordance with the terms of the related Mortgage Loan, (d) for application
to restoration or repair of the Mortgaged Property, (e) to pay to the Mortgagor,
to the extent required by law, any interest paid on the funds deposited in the
Escrow Accounts, or (f) to clear and terminate the Escrow Accounts upon the
termination of this Agreement.
SECTION 2.10. Payment of Taxes and Insurance. On direct serviced
Mortgage Loans, the Interim Servicer shall maintain accurate records reflecting
the status of, taxes and hazard insurance coverage and shall obtain, from time
to time, all bills for the of such charges. To the extent that a Mortgage does
not provide for Escrow s, the Interim Servicer shall use commercially reasonable
efforts in accordance with Accepted Servicing Practices to determine that any
such payments are made by the Mortgagor at the time they first become due. The
Interim Servicer shall make reasonable efforts in accordance with Accepted
Servicing Practices to cause any Servicer to maintain records concerning real
estate taxes and insurance premiums.
SECTION 2.11. Maintenance of Hazard Insurance. The Interim Servicer
shall use its reasonable efforts in accordance with Accepted Servicing Practices
to cause each Servicer to maintain for each Mortgage Loan fire and hazard
insurance with extended coverage customary in the area where the Mortgaged
Property is located, in an amount which is at least equal to the outstanding
principal balance owing on the Mortgage Loan or the full insurable value of the
improvements securing the Mortgage Loan, whichever is less. For direct serviced
loans, Interim Servicer will use its reasonable efforts in accordance with
Accepted Servicing Practices to cause Mortgagors to carry the above described
insurance.
SECTION 2.12. Delinquent Payments on Mortgage Loans. In the event that
any payment due under any Mortgage Loan is not paid when the same becomes due
and payable and such failure continues beyond any applicable grace period, the
Interim Servicer shall notify the Owner of such failure on the monthly
remittance report. The Interim Servicer shall have no obligation to foreclose
upon or otherwise take title, in the name of the Owner, to Mortgaged Property
for any Mortgage Loan which is in default. Also, the Interim Servicer shall have
no obligation to advance to the Owner any defaulted payments of principal and
interest with respect to any such defaulted Mortgage Loans.
SECTION 2.13. Servicing Compensation. As compensation for its services
hereunder, the Interim Servicer shall be entitled to withdraw from the
Certificate Account or otherwise deduct from each Monthly Payment on a Mortgage
Loan an Interim Servicing Fee which shall be 1/8% per loan annualized and
collected monthly for each Mortgage Loan being serviced hereunder for the first
ninety days of servicing and thereafter 1/4% per loan annualized and collected
monthly for each Mortgage Loan being serviced hereunder from the Certificate
Account from the payments on account of the specified Mortgage Loan as provided
for in this Agreement but only in the manner contemplated in the definition of
Interim Servicing Fee.
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SECTION 2.14. Records; Access to Certain Documentation and Information
Regarding the Mortgage Loans.
(a) The Interim Servicer shall maintain records with respect to each
Mortgage Loan which shall be clearly marked to show either SunAmerica or JANY as
the owner of the Mortgage Loan, whether the Mortgage Loan is a residential
Mortgage Loan or a commercial Mortgage Loan, the address of the mortgaged
premises, and the name and address of the current Mortgagor. The Interim
Servicer shall also maintain a file of legal notices, correspondence, forms,
reports and notes of conversations with the Mortgagor and its representatives
relating to the Mortgage Loans received on or after March 31, 1997.
(b) The Interim Servicer shall provide access to the Owner to examine
and audit the Mortgage Files and other books, records or information of the
Interim Servicer with respect to this Agreement and the Mortgage Loans, such
access to be afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Interim Servicer designated by it at
all times. All such Mortgage Files and other books, records, or information with
respect to the Mortgage Loans shall at all times be the property of the Owner.
SECTION 2.15. Satisfaction of Mortgages. Upon the payment in full of
any Mortgage Loan, or the receipt by the Servicers or Interim Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Interim Servicer shall contact the Owner to procure, with
respect to the mortgage, which secured the Mortgage Note, a satisfaction or
release of the Mortgage covering the property.
SECTION 2.16. Limitation of Servicer's Authority.
(a) The Interim Servicer shall not, at any time, waive or consent to a
postponement of compliance on the part of any Mortgagor with any material term
or provision of any Note or Mortgage or in any other manner grant a material
indulgence to any Mortgagor without prior approval by the Owner.
(b) The Interim Servicer shall not, at any time, take any action with
respect to any existing or proposed lease or tenancy affecting any Mortgaged
Property or waive or consent to a postponement of compliance on the part of any
tenant with any material term or provision of its lease or in any other manner
grant a material indulgence to a tenant under a lease, without prior approval of
the Owner.
(c) Owner reserves to itself the right to accept prepayments, in whole
or in part, of a Mortgage Loan whether or not any such prepayments are permitted
under the terms of the Mortgage Loan documents, and in connection therewith to
waive any prepayment charge, premium or penalty required by the Mortgage Loan
documents. Any such prepayment charge, premium or penalty actually collected by
the Interim Servicer shall be deposited in the Certificate Account and remitted
to the Owner.
SECTION 2.17. Fidelity Bond and Errors Omissions.
The Interim Servicer agrees to obtain and maintain at its expense and
shall keep in full force and effect throughout the term of this Agreement, a
blanket fidelity bond and an errors and omissions insurance policy covering its
officers and employees and other persons acting on its behalf in connection with
the servicing activities hereunder. The amount of coverage shall be at least
equal to the coverage that prudent mortgage loan servicers having servicing
portfolios of a similar size. In the event that any such bond or policy ceases
to be in effect, the Interim Servicer agrees to obtain a comparable replacement
bond or policy with equivalent coverage. No provision of this Section 2.17 shall
operate to diminish or restrict or otherwise impair the Interim Servicer's
responsibilities and obligations set forth in this Agreement. The Interim
Servicer shall use commercially reasonable efforts in accordance with Accepted
Servicing Practices to cause the Servicers to maintain comparable coverage as
provided by this Section 2.17.
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ARTICLE III
PAYMENTS; STATEMENTS AND REPORTS
SECTION 3.01. Distributions.
(a) On each Remittance Date, the Interim Servicer shall distribute to
the Owner, from the funds on deposit in the Certificate Account, an amount equal
to the cash held on deposit in the Certificate Account as of the close of
business on the Determination Date, minus amounts due, reimbursable and or
payable to the Interim Servicer for Interim Servicing Fees on such Determination
Date.
(b) All distributions made to the Owner on each Remittance Date shall
be made by four separate wire transfers of immediately available funds
representing distributions relating to JANY-owned commercial Mortgage Loans,
JANY-owned residential Mortgage Loans, SunAmerica-owned residential Mortgage
Loans and SumAmerica-owned commercial Mortgage Loans in accordance with written
wiring instructions to be provided to the Interim Servicer by Owner.
(c) Any and all payments including, without limitation, principal,
interest, taxes and insurance relating to a Mortgage Loan described on Schedule
A hereto, collected by the Interim Servicer after the termination of this
Agreement with respect to a particular Mortgage Loan or Mortgage Loans, shall be
remitted to Owner, or its designee at the written direction of Owner, on the
15th and 25th days of the months in which such payments are received. Interim
Servicer shall not be entitled to Interim Servicing Fees in connection with any
such payments collected.
SECTION 3.02. Statements to the Owner. Upon each Remittance Date, the
Interim Servicer will furnish to the Owner a statement representing
distributions relating to JANY-owned commercial Mortgage Loans, JANY- owned
residential Mortgage Loans, SunAmerica-owned Residential Mortgage Loans and
SumAmerica-owned Commercial Mortgage Loans setting forth the following
information with respect to each such Mortgage Loan;
(i) the amount of such remittance allocable to principal
(including a separate breakdown of any principal
prepayments, including the date of such prepayment,
and any prepayment penalties or premiums, if any);
(ii) the amount of such distribution allocable to
interest;
(iii) the amount of servicing compensation withheld by the
Interim Servicer during the Due Period;
(iv) the principal balance of each Mortgage Loan and all
of the Mortgage Loans at the close of business on the
applicable Determination Date after giving effect to
payments received on the Mortgage Loans;
(v) the number and aggregate principal balances of each
Mortgage Loan and the Mortgage Loans delinquent (a)
30 days, (b) 60 days, and (c) 90 days or more; and
(vi) any statement, report or other information received
from Servicers relating to the Mortgage Loans.
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ARTICLE IV
LIABILITY OF THE INTERIM SERVICER
SECTION 4.01. Limitation on Liability of the Interim Servicer and
Others. The Interim Servicer and any director, officer, employee or agent of the
Interim Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. The Interim
Servicer shall have no obligation to appear with respect to, prosecute or defend
any legal action which is not incidental to the Interim Servicer's obligations,
representations, covenants, duties, warranties or representations made, assumed,
or imposed by, or on it, under this Agreement, or otherwise to service the
Mortgage Loans in accordance with this Agreement.
SECTION 4.02. Indemnification. The Interim Servicer shall indemnify the
Owner and hold the Owner harmless against any and all claims, penalties, fines,
reasonable legal fees and related costs and expenses and any other reasonable
fees and expenses that Owner may sustain as a result of the failure of the
Interim Servicer to perform its duties in accordance with the terms of this
Agreement. The Owner shall indemnify the Interim Servicer and hold the Interim
Servicer harmless against any and all claims, penalties, fines, reasonable legal
fees and related costs and expenses and any other reasonable fees and expenses
that the Interim Servicer may sustain as a result of its action pursuant to the
terms hereunder other than such claims, penalties, fines, reasonable legal fees
and related costs and expenses and any other reasonable fees and expenses that
the Interim Servicer may sustain as a result of the failure of the Interim
Servicer to perform its duties in accordance with the terms of this Agreement.
ARTICLE V
DEFAULT
SECTION 5.01. Events of Default. In case one or more of the following
Events of Default by the Interim Servicer shall occur and be continuing, that is
to say:
(i) any failure by the Interim Servicer to distribute to
the Owner any required to be made under the terms of
this Agreement within three (3) days of its due date;
or
(ii) any failure on the part of the Interim Servicer duly
to observe or perform in any material respect any
other of the covenants or agreements on the part of
the Interim Servicer in this Agreement, which remains
unremedied for a period of thirty (30) days after the
date on which written notice of such failure,
requiring the same to be remedied, shall have been
given to the Interim Servicer by the Owner; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the
appointment of a conservator or receiver or
liquidation in any insolvency, readjustment or debt
marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the
Interim Servicer and such decree or order shall have
remained in force undischarged or unstayed for a
period of thirty (30) days; or
(iv) the Interim Servicer shall consent to the appointment
of a conservator or receiver or liquidator or
liquidating committee in any insolvency, readjustment
of debt, marshalling of assets and liabilities
voluntary liquidation or similar proceedings of or
relating to the Interim Servicer or of or relating to
all or substantially all of its property; or
(v) the Interim Servicer shall admit in writing its
inability to pay its debts generally as they become
due, file a petition to take advantage of any
applicable insolvency or
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reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend of
its obligations.
then, and in each and every such case, in addition to whatever rights the
Interim Servicer or the Owner may have at law or in equity to damages, including
injunctive relief and specific performance, the Owner, by notice in writing to
the Interim Servicer may terminate all of the rights and obligations of the
Interim Servicer as Servicer of the Mortgage Loans under this Agreement, as a
result of such Event of Default, but without prejudice to any rights it may
have. On or after the receipt by the Interim Servicer of such written notice,
all authority and power of the Interim Servicer under this Agreement, whether
with respect to the Mortgage Loans or otherwise, shall pass to and be vested in
the successor Servicer appointed by the Owner pursuant to and under this
Section, the successor servicer is hereby authorized and empowered to execute
and deliver, on behalf of the Interim Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination. The Interim Servicer agrees to cooperate with the Owner
and any successor servicer in effecting the termination of the Interim
Servicer's responsibilities, and rights hereunder and shall promptly provide the
successor servicer all documents and records reasonably requested by it to
enable it to assume the Interim Servicer's functions hereunder and shall
promptly also transfer to the successor servicer all amounts which then have
been or should have been deposited in the Certificate Account by the Interim
Servicer or which are thereafter received with respect to the Mortgage Loans.
ARTICLE VI
TERMINATION
SECTION 6.01. Termination. (a) During the first sixty days after the
execution of this Agreement, the Owner as of right may terminate this Agreement
as to all or any number of the Mortgage Loans, with or without cause, upon
written notice to the Interim Servicer, which notice shall be given no later
than thirty (30) days prior to the effective date of such termination.
Thereafter, the Owner as of right may terminate this Agreement as to all or any
number of the Mortgage Loans, with or without cause, upon written notice to the
Interim Servicer, which notice shall be given no later than ten (10) days prior
to the effective date of such termination.
(b) In the event that notice of termination of this Agreement is given,
the Interim Servicer covenants that all funds, documents, mortgage servicing
files, books, papers and accounts relating to the Mortgage Loans shall, at the
option of the Owner, immediately upon receipt of notice of termination, be
submitted to the control of the Owner or the Owner's designee and that, on the
date of termination, they will be transferred to the Owner or the Owner's
designee, without prejudice to the rights, if any, of either party against the
other. Any breach of this covenant shall be restrainable by injunction.
(c) From and after the effective date of termination of this Agreement
pursuant to any provision of this Agreement, the Interim Servicer shall be
relieved of further responsibility in connection with servicing the Mortgage
Loans except as provided in Section 3.01(c) hereof which Section survives
termination of this Agreement. The Interim Servicer forthwith upon such
termination (i) shall pay over to the Owner or its designee all monies collected
and held by it pursuant to this Agreement or pursuant to any agreement, letter
or arrangement relating to the Mortgage Loans less any unpaid Interim Servicing
Fees and expenses due the Interim Servicer pursuant to this Agreement, (ii)
shall deliver to the Owner a full accounting, including a statement showing the
payments collected by it and a statement of monies held in trust by it for the
payment of taxes, insurance premiums or other charges with respect to the
Mortgage Loans, and (iii) otherwise use its best efforts to effect the orderly
and efficient transfer of servicing to a new servicer selected by the Owner, or
the Owner.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01. Amendment. This Agreement may be amended from time to time
only by the mutual consent of the Interim Servicer and the Owner.
SECTION 7.02. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 7.03. Reports; Notices. Unless requested not to do so by Owner,
the Interim Servicer will furnish Owner with copies of all communications sent
to or received from Mortgagors with respect to a Mortgage Loan concerning
refinancing, subordinate financing, transfers of mortgaged premises or
prepayment. In addition, the Interim Servicer shall provide to Owner such
periodic, special or other reports or information, whether or not specifically
provided for in this Agreement as Owner shall reasonably request and which the
Interim Servicer prepares and keeps in the ordinary course of its business or
which may be generated by the Interim Servicer's data processing system without
special programming or computer time. Any data and reports requested by Owner
which are not kept by the Interim Servicer in the ordinary course of its
business or which cannot be generated by the Interim Servicer's data processing
system without special programming or computer time, shall be provided to Owner
on request at Owner's cost and expense provided such request does not materially
disrupt the Interim Servicer's normal business activities.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by registered mail to (i) in the case of the Interim Servicer, 7300 Corporate
Center Drive, Miami, Florida 33126, Attention: General Counsel or such other
address as may hereafter be furnished to the Owner in writing by the Interim
Servicer with a duplicate copy to Servicing Manager, and (ii) in the case of the
Owner, SunAmerica Life Insurance Company, 1 SunAmerica Center, Century City, Los
Angeles, California 90067-6022, or such other address as may hereafter be
furnished to the Interim Servicer in writing by the Owner. Any notice required
or permitted to be mailed shall be given by first class mail, postage prepaid,
at the address shown above. Any notice mailed or transmitted within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the addressee receives such notice, provided, however,
that any demand, notice or communication to or upon the Interim Servicer shall
not be effective until received.
SECTION 7.04. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions of
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the rights of the
holders thereof.
SECTION 7.05. No Partnership. Nothing herein contained shall be deemed
or construed to create a co-partnership or joint venture between the parties
hereto.
SECTION 7.06. Execution; Successors and Assigns. This Agreement may be
executed in one or more counterparts and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement. This Agreement shall inure to the benefit of and be binding upon all
parties hereto, and their respective successors and assigns.
SECTION 7.07. Attorney's Fees. In the event any party hereto brings an
action to interpret or enforce any of the provisions of the Agreement, the party
against whom judgement is rendered in such action shall be liable to the others
for reimbursement of their costs, expenses and reasonable attorney's fees,
including such costs, expenses and fees as may be incurred on appeal.
11
<PAGE> 15
SECTION 7.08. Entire Agreement. The Agreement constitutes the entire
agreement between the parties regarding the interim servicing of Mortgage Loans
and shall supersede any prior or contemporaneous writings or oral agreements
with respect to the transactions contemplated hereby.
SECTION 7.09. Headings. Section headings are for reference only, and
shall not affect the interpretation or meaning of any provision of the
Agreement.
12
<PAGE> 16
IN WITNESS WHEREOF, the Interim Servicer and the Owner have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
JOHN ALDEN ASSET MANAGEMENT COMPANY
as Interim Servicer
By: /s/Scott L. Stanton
------------------------------------
Title: Senior Vice President and Chief
Financial Officer
SUNAMERICA LIFE INSURANCE COMPANY
as Owner
By: /s/Susan L. Harris
------------------------------------
Title: Senior Vice President
JOHN ALDEN LIFE INSURANCE COMPANY OF NEW
YORK
as Owner
By: /s/Susan L. Harris
------------------------------------
Title: Senior Vice President
13
<PAGE> 17
STATE OF NEW YORK)
COUNTY OF NEW YORK)
On this 31st day of March, 1997, before me, a notary public in and for
said State, personally appeared Scott L. Stanton personally known to me on the
basis of satisfactory evidence) to be the person who executed the within
instrument as Senior Vice President and Chief Financial Officer on behalf of
John Alden Asset Management Company, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this Certificate first above written.
------------------------------
NOTARY PUBLIC
In and for the State of New York
14
<PAGE> 18
STATE OF NEW YORK)
COUNTY OF NEW YORK)
On this 31st day of March, 1997, before me, a notary public in and for said
State, personally appeared Susan L. Harris personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person who executed the
within instrument as Senior Vice President on behalf of SunAmerica Life
Insurance Company, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this Certificate first above written.
------------------------------
NOTARY PUBLIC
In and for the State of New York
15
<PAGE> 19
STATE OF NEW YORK)
COUNTY OF NEW YORK)
On this 31st day of March, 1997, before me, a notary public in and for said
State, personally appeared Susan L. Harris personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person who executed the
within instrument as Senior Vice President on behalf of John Alden Life
Insurance Company of New York, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this Certificate first above written.
------------------------------
NOTARY PUBLIC
In and for the State of New York
16
<PAGE> 20
EXHIBIT ONE
CERTIFICATE ACCOUNT LETTER AGREEMENT
[FORM FOR SUNAMERICA]
______________, 19___
To:______________________________
______________________________
______________________________
(the "Depository")
As "Interim Servicer" under the Interim Servicing Agreement, dated as of
March 31, 1997 (the "Agreement"), we hereby authorize and request you to
establish an account, as a Certificate Account pursuant to Section 2.06 of the
Agreement, to be designated as "John Alden Asset Management Company, as Interim
Servicer, in trust for SunAmerica Life Insurance Company." All deposits in the
account shall be subject to withdrawal therefrom by order signed by the Interim
Servicer. You may refuse any deposit which would result in violation of the
requirement that the account be fully insured as described below. This letter is
submitted to you in duplicate. Please execute and return one original to us.
______________________________
By: __________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number _________________,
at the office of the depository indicated above, and agrees to honor withdrawals
on such account as provided above. The account will be insured by the Bank
Insurance Fund, or the Savings Association Insurance Fund.
________________________________
(name of Depository)
By______________________________
1
<PAGE> 21
EXHIBIT ONE
CERTIFICATE ACCOUNT LETTER AGREEMENT
[FORM FOR JANY]
______________, 19___
To:______________________________
______________________________
______________________________
(the "Depository")
As "Interim Servicer" under the Interim Servicing Agreement, dated as of
March 31, 1997 (the "Agreement"), we hereby authorize and request you to
establish an account, as a Certificate Account pursuant to Section 2.06 of the
Agreement, to be designated as "John Alden Asset Management Company, as Interim
Servicer, in trust for John Alden Life Insurance Company of New York." All
deposits in the account shall be subject to withdrawal therefrom by order signed
by the Interim Servicer. You may refuse any deposit which would result in
violation of the requirement that the account be fully insured as described
below. This letter is submitted to you in duplicate. Please execute and return
one original to us.
______________________________
By: __________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number _________________,
at the office of the depository indicated above, and agrees to honor withdrawals
on such account as provided above. The account will be insured by the Federal
Deposit Insurance Corporation.
________________________________
(name of Depository)
By______________________________
2
<PAGE> 22
EXHIBIT TWO
ESCROW ACCOUNT LETTER AGREEMENT
_____________, 19___
To:_________________________
_________________________
_________________________
(the "Depository")
As "Interim Servicer" under the Interim Servicing Agreement, dated as of
March 31, 1997 (the "Agreement"), we hereby authorize and request you to
establish an account, as an Escrow Account pursuant to Section 2.08 of the
Agreement, to be designated as "John Alden Asset Management Company, as Interim
Servicer, in trust for SunAmerica Life Insurance Company. All deposits in the
account shall be subject to withdrawal therefrom by order signed by the Company.
You may refuse any deposit which would result in violation of the requirement
that the account be fully insured as described below. This letter is submitted
to you in duplicate. Please execute and return one original to us.
______________________________
By: __________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number _________________,
at the office of the depository indicated above, and agrees to honor withdrawals
on such account as provided above. The account will be insured by the Federal
Deposit Insurance Corporation.
_______________________________
(name of Depository)
By: ___________________________
1
<PAGE> 1
ASSET REPURCHASE AGREEMENT
This Asset Repurchase Agreement (the "Agreement") is entered
into as of March 31, 1997 by and between John Alden Life Insurance Company, a
Minnesota corporation ("Seller"), and SunAmerica Life Insurance Company, an
Arizona corporation ("Purchaser").
Reference is made to the Asset Purchase and Sale Agreement
dated as of November 29, 1996 by and between Seller and Purchaser (the "Asset
Purchase Agreement") and the Stock Purchase and Sale Agreement dated as of
November 29, 1996 by and between Seller and Purchaser (the "Stock Agreement").
The Asset Purchase Agreement and the Stock Agreement are referred to herein as
the "1996 Agreements". All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed thereto in the 1996
Agreements.
WHEREAS, in connection with the transactions contemplated by
the 1996 Agreements, Purchaser desires to have, and Seller desires to grant, the
option to require Seller to repurchase certain of the assets transferred, sold
or assigned by Seller to Purchaser under the Asset Purchase Agreement or owned
by JANY for cash.
WHEREAS, Schedule A (which Schedule includes commercial and
residential loans held by Seller or JANY) sets forth Mortgage Loans to be
acquired by Purchaser under the Asset Purchase Agreement or which are Mortgage
Loans under the Stock Purchase Agreement, which, due to the lack of or defects
in the documentation required pursuant to the 1996 Agreements, are not
acceptable to Purchaser ("Schedule A Mortgage Loans"). Such lack of or defects
in documentation shall constitute a Put Event (as defined below) unless cured as
provided herein.
NOW THEREFORE, in consideration of the premises and agreements
contained herein and other good, valuable and sufficient consideration, the
receipt of which is hereby acknowledged, Seller and Purchaser, intending to be
legally bound, hereby agree as follows:
Section 1.1 In the event that Purchaser determines that a Put
Event shall be existing at the end of the Cure Period (as defined below) with
respect to a Schedule A Mortgage Loan (each a "Rejected Asset"), Purchaser shall
have the right to require Seller to repurchase for cash the Rejected Asset on a
rescission basis (the amount of the cash purchase price being
<PAGE> 2
the Book Value on the Closing Date of the Rejected Asset plus interest for the
Cure Period calculated at the three month LIBOR rate in effect on the Business
Day preceding the Closing Date plus 100 basis points, from the Closing Date to
the date of repurchase, less any payments received in respect of the Rejected
Asset by Purchaser (which payments shall be retained by Purchaser) during the
Cure Period. The "Cure Period" shall mean the period beginning on the Closing
Date and ending on (i) July 31, 1997 in the case of all Schedule A Mortgage
Loans with respect to which the subject property is located outside of the
States of New York, Connecticut, New Jersey and the District of Columbia, and
(ii) September 30, 1997 in the case of Schedule A Mortgage Loans with respect to
which the subject property is located in the States of New York, Connecticut,
New Jersey or the District of Columbia.
The repurchases contemplated by the paragraph immediately
above shall be effected in accordance with the procedures set forth in Sections
1.2 and 1.3 below ("Asset Put Election").
One or more of the lack of or defects in documentation listed
on Schedule A hereto, if not cured by Seller to the reasonable satisfaction of
Purchaser on or prior to the second Business Day prior to the end of the Cure
Period, constitutes a "Put Event" with respect to the related Schedule A
Mortgage Loan.
Section 1.2 Purchaser may make an Asset Put Election with
respect to any Schedule A Mortgage Loan by giving Seller notice of such Asset
Put Election (a "Put Notice") within five (5) Business Days after the end of the
Cure Period. The Put Notice shall identify the Rejected Asset and certify the
Put Event as to each Rejected Asset upon which its rejection is based. The Put
Notice shall also include the amount of cash Purchaser expects to receive as the
repurchase price calculated in accordance with Section 1.1.
Section 1.3 Within ten (10) Business Days of the end of the
Cure Period, Seller shall transfer to Purchaser as to each Rejected Asset cash
in an amount calculated in accordance with Section 1.1 hereof. Purchaser shall
simultaneously reconvey the Rejected Assets to Seller by appropriate transfer
documents, but without warranty or representation by Purchaser except that
Purchaser shall represent that it has not sold, assigned, transferred, modified
or hypothecated such Rejected Assets to any other party or taken any action that
materially and adversely affects the rights of the holder of such Rejected
Assets without Seller's prior written consent, which consent shall not be
unreasonably withheld.
Section 1.4. Attached as Schedule C is a listing of various
Mortgage Loans. The Mortgage Loans on Schedule C are
2
<PAGE> 3
referred to herein as the "Schedule C Mortgage Loans". The parties have
identified certain minor issues with respect to the documentation relating to
the Schedule C Mortgage Loans, as noted on Schedule C. Seller, at its sole cost
and expense, will use its commercially reasonable efforts to promptly resolving
the identified problems with respect to the Schedule C Mortgage Loans (including
any Mortgage Loans listed on Schedule B that duplicate the Mortgage Loans listed
on Schedule A with respect to any problems on Schedule C) in addition to
resolving the lack of or defects in documentation with respect to the Schedule A
Mortgage Loans. Such efforts shall include retention of the employees listed on
Schedule B, and at the request of Purchaser retention of a third party
contractor reasonably acceptable to Seller and at Seller's sole cost and expense
to aid in the resolution process.
Section 1.5. Seller's obligations under this Agreement are in
addition to its obligations under the 1996 Agreements, as amended, and do not
constitute a waiver by Purchaser of any of its rights or remedies under the 1996
Agreements. Without limiting the generality of the foregoing, Seller's
obligations hereunder are not subject to the "basket" provisions in Section
10.3(b) or (c) of the Asset Purchase Agreement or Section 9.3(b) or (c) of the
Stock Agreement.
Section 1.6. All representations and warranties set forth in
the 1996 Agreements will survive the execution of this Agreement pursuant to the
terms of the 1996 Agreements, notwithstanding any knowledge that Purchaser has
with respect to any of the Mortgage Loans that are the subject of this Agreement
and or the 1996 Agreements or its examination of any related documentation.
Section 1.7 The provisions in Article 12 (Miscellaneous) of
the Asset Purchase Agreement shall be incorporated herein as though set forth in
this Agreement in their entirety.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
JOHN ALDEN LIFE INSURANCE COMPANY
By: /s/Scott L. Stanton
------------------------------------
Name: Scott L. Stanton
Title: Senior Vice President and
Chief Financial Officer
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/James W. Rowan
------------------------------------
Name: James W. Rowan
Title: Senior Vice President
4
<PAGE> 1
Exhibit 10.11
MARKETING AGREEMENT
This Marketing Agreement (the "Agreement") dated March 28, 1997, is by and
between SunAmerica Life Insurance Company (the "Company") and NSM Sales
Corporation ("NSM").
I. Appointment. NSM is appointed to promote the Company and its annuity
policies described on Schedule 1 and Schedule 2 (collectively the "Fee
Schedules"), attached hereto and incorporated herein by reference (the
"Policies"), to qualified agents recruited by NSM to solicit and procure
applications for the Policies. This appointment is limited to those
jurisdictions in which the Company and NSM are both licensed as required
by prevailing regulatory requirements and in which the Policies identified
on the Fee Schedules have been approved for sale. Except as provided in
Section V below, this appointment is not exclusive and the Company
reserves the right to appoint other agents in the same territory.
II. Duties and Responsibilities of NSM. NSM understands and agrees that its
responsibilities under this Agreement include the following:
A. NSM will recommend for appointment appropriately licensed individuals
or entities (each an "Agent" to solicit sales of Policies issued by
the Company. NSM is responsible for collecting the information
required by the Company to investigate the character, work experience
and background of any proposed Agent prior to appointment by the
Company. No Agent may act on behalf of the Company until properly
appointed by the Company. The Company reserves the right to refuse to
appoint any proposed Agent and to terminate the appointment of any
Agent, with or without cause, at any time. NSM may assume that each
Agent will be properly appointed by the Company within 10 days of
receiving the appropriate and necessary information, unless the
Company notifies it otherwise.
B. NSM shall use reasonable efforts to supervise and monitor the Agent
force and will instruct the Agent force to act in a manner which
complies with all applicable federal, state and local laws and
regulations and all Company rules and procedures. NSM shall
immediately notify the Company of any known act or omission of any
Agent that may violate any federal, state or local law or regulation
or any Company rule or procedure, will instruct such Agent to remedy
such violation and will recommend to the Company that such Agent be
terminated if NSM deems termination appropriate.
C. NSM may not use the Company service marks or logos except as approved
by the Company in writing.
D. Except where permitted by and in full compliance with applicable law
or regulation, NSM and its Agents may not pay or allow any rebate of
premium or commission, directly or indirectly, or, share any
commission with any person or entity not licensed and appointed to
represent the Company.
E. NSM will forward to the Company, within 2 business days of receipt,
any papers or notice served upon or sent to NSM in connection with any
regulatory or legal proceeding, hearing, action or policyholder
complaint filed against or involving the Company or any Policy issued
by the Company.
<PAGE> 2
F. If any Agent is a federal or state chartered bank, thrift or savings
and loan institution (collectively, "Bank") or will be marketing any
Policies on the premises of any Bank, NSM shall instruct each such
Agent to comply and cause Bank to comply with the Interagency
Statement on Retail Sales of Nondeposit Investment Products (Board
of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency,
and Office of Thrift Supervision, February 14, 1994) and any
additional or subsequent release from any agency or regulatory body
with authority over such entities, which is designed to provide
governance to financial institutions in connection with the sale of
nondeposit investment products on the premises of such institutions.
Such compliance to include, without limitation, ensuring that all
sales materials used by such Agent are in compliance with all
applicable requirements of federal and state banking laws.
G. NSM will arrange for or provide training to the Agents to become
familiar with the Policies, including provision of all necessary
training materials; provide marketing support for the Agents in the
distribution of the Policies; provide ongoing service support for
the Agents as it relates to the Policies; and provide assistance to
the Company in resolving any disputes between the Company and any
Agent.
H. NSM is responsible for all funds relating to the Company business
received by NSM and shall ensure that such funds are remitted to the
Company. NSM is not authorized to collect cash on behalf of the
Company and all checks relating to the Company business shall be
made payable to the Company. If NSM receives money in any form for
or on account of the Company, such money shall constitute trust
funds for the Company and shall be remitted immediately to the
Company.
I. NSM will promptly deliver all Policy applications it receives to the
Company. NSM shall, and shall instruct its Agents to, follow the
instructions on the application with the highest degree of care and
comply with the Company's underwriting and administrative
guidelines, policies and procedures. Neither NSM nor its Agents are
authorized to alter or waive any question or answer on any
application for insurance or any provision of any Policy issued by
the Company. The Company reserves the right, in the Company's sole
discretion, to refuse to process any application, to reject any
application or to cancel any Policy and refund any premium, in whole
or in part. NSM shall and shall instruct its Agents to promptly
return to the Company any Policy that is not delivered to the
customer or which is otherwise returned by the customer during any
"free look" period.
J. During the term of this Agreement and for (1) year thereafter, NSM
will not actively solicit or recruit for employment any employee of
the Company or any affiliate of the Company who had been employed in
a marketing or marketing support capacity during the one-year period
immediately preceding the proposed date of employment. A pattern of
frequently employing such individuals will be deemed to be
conclusive proof of active recruitment.
III. Duties and Obligations of the Company. The Company understands and
agrees that its responsibilities under this Agreement include the
following:
A. The Company will promptly file for approval in all states, except
New York, the policies identified on Schedule 1 (the "Exclusive
Policies") and will make the Exclusive Policies available to NSM in
accordance with the terms of this Agreement. The Company will use
its best efforts to obtain regulatory approval to sell the Exclusive
Policies in every state except
2
<PAGE> 3
New York promptly as possible. Additionally, the Company will make
available to NSM for marketing policies identified on Schedule 2.
B. The Company will extend every reasonable effort to support NSM in its
marketing of the Policies.
C. The Company will apprise NSM of any applicable laws or regulations
with which NSM or the Agents are obligated to comply which become
effective after the date of this Agreement.
D. During the term of this Agreement and unless this Agreement is
terminated for cause (as defined in Section VIII below), for a period
of one year after termination, the Company and its affiliates will
(i) keep confidential the list of Agents appointed through NSM (the
"NSM Agent List"); and (ii) not actively market, for purposes of
selling the Policies, to any Agent who submitted business through NSM
in the two years prior to termination of the Agreement. If the
Agreement is terminated for cause (as defined in Section VIII below)
or, if on the date of termination NSM no longer has the exclusive
rights to sell the Exclusive Policies due to its failure to meet the
minimum sales levels as set forth in Section V.A. of the Agreement,
for a period of six months, the Company and its affiliates will (i)
keep confidential the NSM Agent List; and (ii) will not actively
market, for purposes of selling the Policies, to any Agent who
submitted business through NSM in the two years prior to termination
of the Agreement. Notwithstanding the above, if an Agent submits an
application for a Policy after the Agreement is terminated, either
directly (and neither the Company nor any affiliate of the Company
has directly marketed to such Agent) or through a marketing company,
managing general agent, general agency arrangement or otherwise
(provided such marketing company, managing general agent or general
agency arrangement has not utilized the NSM Agent List to recruit
such agent), the Company is not prohibited from accepting and
processing such business. NSM shall not be entitled to any fee
payment for such business.
E. During the term of this Agreement and for (1) year thereafter, the
Company will not actively solicit or recruit for employment any
employee of NSM or any affiliate of NSM who had been employed in a
marketing or marketing support capacity during the one-year period
immediately preceding the proposed date of employment. A pattern of
frequently employing such individuals will be deemed to be conclusive
proof of active recruitment.
IV. Sales and Promotional Materials.
A. The Company will develop and provide all "consumer" sales and
promotional material for use in marketing the Policies which, in its
discretion, it deems appropriate; provided, however, such material
will include a separate and fully descriptive brochure for each
Policy. In addition, the Company will develop software applications
for use in marketing the Exclusive Policies. NSM shall be responsible
for the creation of any other sales and promotional material it
desires to use in the marketing of the Policies, including all
expenses associated with the creation of such sales and promotional
materials; provided, however, that every piece of sales and
promotional material must be approved by the Company prior to the use
of such materials in accordance with Section IV, C, below. The
Company shall be responsible for delivering all sales and promotional
materials it creates to NSM in such quantities as NSM requires. NSM
shall be responsible for storing all sales and promotional materials
and for fulfilling requests from Agents for copies of the same.
3
<PAGE> 4
B. For purposes of this section "sales and promotional material"
includes, without limitation, any of the following that refer to the
Company or any Policy: advertisements (such as material published or
designed for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape or
electronic display, signs or billboards or other public media), sales
literature (any written communication distributed or made generally
available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), marketing literature or software used in the
recruitment of Agents, educational or training materials or other
communications distributed or made generally available to some or all
Agents or employees or otherwise used in marketing the Policies.
C. The Company retains the full right to approve or disapprove any piece
of sales or promotional material. All sales and promotional material
must be submitted to the Company for approval at least five (5)
business days prior to use. The Company will be deemed to have
approved any sales or promotional material submitted to the Company
in writing unless it notifies NSM, in writing, of its disapproval or
required changes within the five (5) business day review period;
provided, however, that if approval or submission of any sales or
promotional material by any state regulatory agency is required prior
to use, no sales or promotional material may be used before
compliance with such obligation. Fifteen copies of each final piece
of sales or promotional material must be submitted to the address
below within 14 business days of its use, together with information
regarding the extent and time period of its use. All sales and
promotional materials must be submitted to the Company pursuant to
this Section IV to the following address: (or to such other address
of which the Company notifies NSM in writing):
SunAmerica Marketing, Inc.
1 SunAmerica Center
Los Angeles, California 90067-6022
Attention: Gail Wright
V. Exclusivity Rights and Obligations.
A. The Company and NSM agree that NSM shall be given the exclusive right
to market the Exclusive Policies listed on Schedule 1 to
appropriately licensed independent insurance agents. No other
products will be subject to the exclusivity rights and obligations of
this Section V. In order for NSM to retain this exclusive right, NSM
must meet the following minimum sales levels of the Exclusive
Policies (inclusive of all sales by Agents) by the end of the
applicable period (the Company fiscal year is the period from October
1 through September 30):
4
<PAGE> 5
<TABLE>
<CAPTION>
Minimum Sales Levels*
(by total premium based on sales
Sales Period of the Exclusive Policies only)
------------ --------------------------------
<S> <C>
4/1/97 - 9/30/97 $100,000,000
Company Fiscal Year 1998 $350,000,000
Company Fiscal Year 1999 $400,000,000
Thereafter A number to be agreed upon by the parties
</TABLE>
* Sales figures include the sale of the All Purpose Plus and Income
Advantage products underwritten by John Alden Life Insurance Company
during any period the Exclusive Policies are not being underwritten by
the Company.
If NSM fails to meet the minimum sales levels in any given period, the
Company may terminate the exclusivity rights granted to NSM as set forth
above.
B. NSM agrees that it will not market any annuity product not issued by the
Company which is substantially similar to the Exclusive Policies. If NSM
wants to market an annuity issued by an insurer other than the Company,
it will provide the Company, or an affiliate of the Company, the first
opportunity to make available to NSM such annuity for marketing, (the
"Additional Product"). The Company will promptly review any proposal by
NSM for an Additional Product. If the Company does not make available to
NSM the Additional Product and NSM desires to market the Additional
Product (to be underwritten by a different insurer), the parties will
negotiate in good faith to determine whether the Additional Product is
substantially similar to either of the Exclusive Policies, taking into
consideration such features as the interest rate guarantee period and
crediting rate structure, surrender charge period and bonus interest rate
structure. If NSM markets an annuity product of another insurer which is
substantially similar to the Exclusive Policies, the Company will no
longer be bound by the provisions of this Section V if NSM markets the
Additional Product.
C. NSM will submit to the Company by July 31* of each year a sales plan
which identifies NSM's sales objectives and marketing plans for the
Company's ensuing fiscal year.
VI. Agent Recruitment.
A. Each Agent recruited by NSM must be appointed by the Company and must
execute an Agent's Agreement in the form provided by the Company. NSM may
not modify the form of Agent's Agreement or preliminary data sheet in any
manner. The Company will pay all appointment fees associated with the
appointment of such Agents.
B. If NSM recruits an Agent who has an existing contractual or business
relationship with the Company or any affiliate of the Company as of April
1, 1997, then NSM shall be entitled to compensation only with respect to
premiums received and accepted by the Company with respect to the
Exclusive Policies, unless the Agent is released from its existing agency
relationship and thereafter submits business through NSM.
5
<PAGE> 6
VII. Compensation.
A. As full compensation for services performed by NSM under this
Agreement, the Company shall pay NSM pursuant to the Fee Schedules
(as they may be modified from time to time) based upon premiums
received and accepted by the Company for Policies issued upon
applications submitted either directly by NSM or by Agents recruited
by NSM.
B. The Company reserves the right to amend Schedule 2 to add or delete
product which either become available or which the Company is no
longer underwriting at any time by giving written notice of such
modification to NSM. Such amended Schedule shall be incorporated
into this Agreement as if attached hereto.
C. In no event shall the Company be liable for the payment of any fee
or commission with respect to any solicitation made, in whole or in
part, by any person not appropriately licensed and appointed by the
Company prior to the commencement of such solicitation. Commissions
shall be payable only on premiums actually received by the Company
for Policies issued, delivered and accepted by the Company.
D. If any Policy is returned to the Company pursuant to a "free look"
provision, the full fee and commission paid by the Company will be
unearned and NSM shall return such unearned fee to the Company upon
demand or, in the absence of such demand or failure of NSM or return
such unearned fee, the unearned fee will be charged back to NSM. The
Company shall demand that the respective Agent return the unearned
commission and shall use best efforts, including the use of a
collection agency, to recover such funds from the Agent; provided,
however, if the Company uses a collection agency, the costs
associated therewith will be split equally between the Company and
NSM. If, despite using its best efforts for one year, the Company
remains unable to recover such funds from the Agent, the Company may
recover the original amount of such unearned commission from NSM. In
the event that the Company returns all or a part of any premium
received on any Policy predicated upon the negligence or other error
of NSM or its Agents (other than under circumstances pursuant to
which the Policy owner is obligated to pay a surrender charge to the
Company) or if premiums received are not good funds, NSM shall
promptly repay to the Company all or any corresponding part of the
unearned fee received by NSM on account of such Policy.
E. If any premium is returned by the Company as set forth above, the
full fee and commission paid by the Company will be unearned and NSM
shall return such unearned fee to the Company upon demand or, in the
absence of such demand or failure of NSM or return such unearned
fee, the unearned fee will be charged back to NSM. The Company shall
demand that the respective Agent return the unearned commission and
shall use best efforts, including the use of a collection agency, to
recover such funds from the Agent; provided, however, if the Company
uses a collection agency, the costs associated therewith will be
split equally between the Company and NSM. If, despite using its
best efforts for one year, the Company remains unable to recover
such funds from the Agent, the Company may recover the original
amount of such unearned commission from NSM.
F. Compensation on any Policy renewal, change, exchange, conversion, or
any situation not specifically provided for in the Fee Schedules
shall be paid according to the Company's guidelines and practices.
6
<PAGE> 7
G. The Company shall provide a fee statement to NSM for each pay period.
Such statements shall be grouped by NSM "Annuity Specialist" and
shall be considered complete and accurate unless NSM provides the
Company with written notice specifying any errors or objections
within 60 days from the date of the statement.
VIII. Termination.
A. The term of this Agreement shall be for one year and will be renewed
automatically unless either party hereto provides the other with
notice of its intent not to renew at least 90 days prior to the date
of renewal. NSM shall continue to receive fee payments in accordance
with the terms of Schedule 1 and Schedule 2 on all additional premium
received after non-renewal for Policies written during the term of
this Agreement.
B. Both NSM and the Company have the right at any time to terminate this
Agreement, without stating any cause, by mailing to the other party a
notice of termination. The notice of termination shall be effective
upon 180 days from the date notice is sent. Any termination shall be
without prejudice to any application submitted by NSM prior to notice
of termination becoming effective unless NSM requests that the
processing of any application be discontinued. If the Company or NSM
terminates the Agreement pursuant to this provision, NSM shall
continue to receive fee payments in accordance with the terms of
Schedule 1 and Schedule 2 on all additional premium received for
Policies written during the term of this Agreement.
C. This Agreement shall automatically terminate "for cause" upon (1) the
dissolution or the transfer of control of NSM or the Company, other
than transfer of control to an affiliate; or (2) the filing for
protection under any state or federal Bankruptcy law by NSM, the
insolvency of NSM, or the filing of any petition in bankruptcy or
receivership against NSM; or (3) a material breach of this Agreement;
or (4) misapplication, misdirection or misappropriation by NSM of
funds or property of the Company or funds received by NSM from policy
owners as premiums for the issuance of a Company Policy or additional
premiums to be applied to an existing Policy; or (5) receipt by the
Company of excessive policy owner complaints relating to NSM's
performance and or service of policy owner issues; or (6) the Company
making the Exclusive Policies available to any marketing agency or
agent other than through NSM; or (7) NSM marketing any product which
is substantially similar to the Exclusive Policies. Upon termination
by the Company of this Agreement for any of the reasons specified
above, NSM will not be entitled to further fee payments. If NSM
terminates this Agreement for any of the reasons specified above, NSM
shall continue to receive fee payments in accordance with the terms
of Schedule 1 and Schedule 2 on all additional premium received for
Policies written during the term of this Agreement.
D. Upon termination of this Agreement, NSM shall (i) promptly return any
and all materials furnished by the Company, including, but not
limited to, all manuals, forms, computer software not purchased by
NSM, promotional materials, supplies and customer records and (ii)
not represent itself as an authorized marketing company of the
Company or as having any affiliation with the Company.
E. Termination of this Agreement shall not release either party from any
liability that is incurred prior to the termination of this
Agreement.
7
<PAGE> 8
F. Upon termination of this Agreement, NSM shall not and shall advise the
Agents to not solicit, induce or attempt to solicit or induce any
policyholder to relinquish or replace any policy issued by the Company
or any affiliate of the Company. Furthermore, NSM shall not sell or
transfer to any third party any customer list containing the names of
any policyholders. NSM and the Company agree that the customer
information is a proprietary trade secret of the Company and the Company
will protect this right to the fullest extent permitted by law. NSM
explicitly agrees that it will not disclose and it shall advise the
Agents to not disclose this information to any competitor of the
Company. NSM acknowledges and agrees that this provision may be enforced
by an action for an injunction, as well as or in addition to any action
for damages.
G. The Company may communicate directly with any Policy holder at any time
for purposes of servicing a Policy or to attempt to conserve business.
IX. Indemnification.
A. NSM shall be responsible to the Company for all acts and omissions of
NSM and any employee of NSM. NSM shall indemnify the Company and hold it
harmless from and against any loss, expense, cost (including reasonable
attorneys' fees and expenses), cause of action and/or damage, resulting
or arising from the acts and/or omissions, including any breach of this
Agreement, of NSM and any employee in fulfilling its obligations and
responsibilities under this Agreement. This provision shall survive the
termination of this Agreement. In addition to and without limiting the
above, NSM shall indemnify the Company and hold it harmless from and
against any loss, expense, cost (including reasonable attorneys' fees
and expenses), cause of action and/or damage resulting or arising from
the act and/or omission of any Agent of which NSM should have known had
NSM fulfilled its obligations under Section II B. of this Agreement.
B. The Company shall be responsible to NSM for all acts and omissions of
the Company and any employee of the Company. The Company shall indemnify
NSM and hold it harmless from and against any loss, expense, cost
(including reasonable attorney's fees and expenses), cause of action
and/or damage, resulting or arising from the acts and/or omissions,
including any breach of this Agreement, of the Company or any employee
of the Company in fulfilling its obligations and responsibilities under
this Agreement. This provision shall survive the termination of this
Agreement.
X. General Provisions.
A. All data, information and materials ("Confidential Materials") supplied
by any of the parties under this Agreement or otherwise, shall be kept
in confidence and shall not be disclosed or disseminated to any third
parties without the prior written consent of the furnishing party except
in conformity to any requirements of state or federal law. No party
shall use the Confidential Materials for any purpose other than to
fulfill the terms of this Agreement except in conformity to any
requirements of state or federal law. Confidential Information shall not
include (i) any information that is or becomes generally available to
the public, other than as a result of a breach of this Agreement, or (b)
any information that is lawfully obtained from a third party with a
right to disclose such information, or (c) any information that each
party either possessed prior to the effective date of this Agreement or
independently developed at any time. Upon termination of this Agreement
for any reason, the parties shall immediately cease
8
<PAGE> 9
their use of and return all Confidential Materials to the furnishing
party without the retention of any copies.
B. Nothing in this Agreement shall be construed as creating a relationship
of either employee and employer or partnership between NSM or any Agent
and the Company. NSM is an independent contractor and has no authority
except that which is expressly set forth in this Agreement.
C. This Agreement, including any exhibits or addendums hereto and the Fee
Schedules, constitutes the entire agreement and supersedes all previous
agreements, both verbal and written, if any, between NSM and the Company
with respect to the subject matter hereof.
D. This Agreement shall be binding upon and inure to the benefit of NSM
and the Company and their respective successors and assigns; provided,
however that neither this Agreement nor any rights or obligations under
this Agreement, may be assigned or delegated by either NSM or the
Company, except by the Company as to affiliates and subsidiaries of the
Company, without the prior written consent of the other.
E. In the event that any term or provision of this Agreement is held to be
invalid or in conflict with any law or regulation, the validity of the
remaining provisions of this Agreement shall not be affected.
F. The failure of the Company to enforce or insist upon strict compliance
with any provision of this Agreement shall not constitute a waiver of
the right to enforce or insist upon strict compliance with any such
provision in the future.
G. Except as otherwise provided for herein, the terms of this Agreement
may be modified only in a writing executed by both parties.
H. Subject to the provisions of Sections IV, all notices pertaining to
this Agreement shall be valid when given at the address set forth on the
signature page hereof, unless prior written notice is received that
notices should be sent to an alternative address: Any notice by
certified mail shall be deemed to have been given three (3) days after
the date of mailing and any notice personally delivered shall be deemed
to have been given when received.
I. Where a party has reserved rights under this Agreement or where a
party's consent is required, each such party have the right to exercise
its sole discretion.
J. This Agreement shall be construed under the laws of the State of
California.
9
<PAGE> 10
K. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which shall constitute
one and the same instrument.
NSM SALES CORPORATION
By: /s/ Mark Cogen
-------------------------------------
Mark Cogen, Senior Vice President
5500 Glendon Court
Dublin, Ohio 43016
Attention: Gary F. Kadlec, President
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ Joe Tumbler
-------------------------------------
Joe Tumbler, Executive Vice President
1 SunAmerica Center
Los Angeles, California 90067-6022
Attention: Susan L. Harris,
Senior Vice President and General Counsel-Corporate Affairs
10
<PAGE> 11
SCHEDULE 1
This Schedule I is attached to and made a part of that certain Marketing
Agreement (the "Agreement") by and between SunAmerica Life Insurance Company
(the "Company") and NSM Sales Corporation ("NSM"), dated as of March 28, 1997.
Capitalized terms are used as defined in the Agreement.
The Company shall pay, as the compensation specified in Section VII of the
Agreement, the fees set forth below:
<TABLE>
<CAPTION>
Fee Payable to NSM as a
Product Name Percentage of Premiums Collected
<S> <C>
Income Advantage 1.15%
(Form # SA-918C)
Plus Annuity
(Form # SA-916C) 1.15%
</TABLE>
FEES ARE PAID ON PREMIUMS COLLECTED DURING THE FIRST FOUR POLICY YEARS ONLY
As to any Policy which is surrendered in the first policy year, the
compensation paid by the Company will be unearned as set forth below and shall
be charged back to NSM as set forth below:
(1) Within the first 6 months from Policy issuance - 100% of the
compensation.
(2) 6 months to 1 year from Policy issuance - 50% of the compensation.
Schedule 1
Page 1 of 1
<PAGE> 12
Schedule 2
This Schedule 2 is attached to and made a part of that certain Marketing
Agreement (the "Agreement") by and between SunAmerica Life Insurance Company
(the "Company") and NSM Sales Corporation ("NSM"), dated as of March 28, 1997.
Capitalized terms are used as defined in the Agreement.
The Company shall pay, as the compensation specified in Section VII of the
Agreement, the fees set forth below, which is the total compensation that the
Company will pay on business submitted through NSM, any Agent or any agency
directly appointed by the Company as a result of such agent's or agency's
relationship with NSM and to the extent any portion of such compensation is
payable directly to an Agent or others, the fee payable to NSM will be
correspondingly reduced.
<TABLE>
<CAPTION>
Fee Payable as a MAximum Commission Payable to Agent as
Product Name Percentage of Premiums Collected A Percentage of Premium Collected
- ----------------------------------- -------------------------------- --------------------------------------
<S> <C> <C>
SINGLE PREMIUM IMMEDIATE ANNUITY
5-Year 3.50 3.00
6-9 Year 4.00 3.50
10 Year Plus/Life 4.50 4.00
<CAPTION>
<S> <C> <C> <C> <C>
STERLING SELECT PLUS
(Flexible Premium Deferred Annuity) Issue Age Issue Age Issue Age Issue Age
0-80 81-85 0-80 81-85
5.50 2.50 5.00 2.00
STERLING SELECT/STERLING SELECT II Issue Age Issue Age Issue Age Issue Age
(Single Premium Deferred Annuity) 0-80 81-85 0-80 81-85
3-Year Maturity 2.75 2.50 2.25 2.00
5-Year Maturity 4.75 2.50 4.25 2.00
7-Year Maturity 5.50 2.50 5.00 2.00
10-Year Maturity 5.50 2.50 5.00 2.00
Renewal Commission/3-Year Maturity* 2.50 2.50 2.00 2.00
INDEXAMERICA
Issue Age Issue Age Issue Age Issue Age
0-80 81-85 0-80 81-85
5.50 3.50 5.00 3.00
</TABLE>
Schedule 2
Page 1 of 2
<PAGE> 13
* A renewal fee based on account value on the third anniversary will be paid if
a 3-Year Maturity Sterling Select Single Premium Deferred Annuity is renewed
with 30 days after the end of the initial 3 year term. The renewal commission
will be paid 60 days after the end of the initial term if the policy is renewed
into a 3,5,7, or 10-Year Sterling Select Single Premium Deferred Annuity. No
renewal commission is paid on renewals of the 5,7, or 10-Year Sterling Select
Single Premium Deferred Annuity. As to any Policy which is surrendered in the
first policy year, the compensation paid by the Company will be unearned as set
forth below and shall be charged back to NSM as set forth below:
(1) Within the first 6 months from the Policy issuance - 100% of the
compensation.
(2) 6 months to 1 year from Policy issuance - 50% of the compensation.
Schedule 2
Page 2 of 2
<PAGE> 1
AMENDMENT NO. 1
TO THE
STOCK PURCHASE AND SALE AGREEMENT
DATED NOVEMBER 29, 1996
BY AND BETWEEN
JOHN ALDEN LIFE INSURANCE COMPANY
AND
SUNAMERICA LIFE INSURANCE COMPANY
This Amendment is made and entered into as of this 31st day of
March, 1997, and is hereby made a part of and incorporated into the Stock
Purchase and Sale Agreement dated November 29, 1996 (the "Agreement") by and
between John Alden Life Insurance Company, a Minnesota stock insurance company
("Seller"), and SunAmerica Life Insurance Company, an Arizona stock insurance
company ("Purchaser"). Capitalized terms used herein and not otherwise defined
shall have the respective meaning ascribed thereto in the Agreement.
WHEREAS, JALIC and SunAmerica have entered into the Agreement; and
WHEREAS, JALIC and SunAmerica desire to amend the Agreement in the
manner hereinafter set forth.
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that:
1. Purchase Price Adjustment. The second sentence of Section 1.2
shall be deleted in its entirety and replaced with the following sentence:
"In consideration for the sale, assignment and delivery of the JANY
Stock, at the Closing Purchaser shall pay to Seller a purchase price of One
Hundred Thirty One Million Dollars ($131,000,000) (the "Purchase Price").
2. Schedules. The Schedules to the Agreement set forth below shall
be amended to include, restate or delete, as the case may be, as set forth
below. The representations, warranties and indemnification contained in the
Agreement shall in no way be affected by any such amendment, restatement or
deletion of any Schedule.
a. Schedule 2.8(a) Schedule 2.8(a) shall be amended to include: (i)
under the heading "Contract Forms for JANY - Health" reference to Student Health
Policy, HSR-
<PAGE> 2
50; (ii) under the heading "Contract Forms for JANY - ARMS" reference to
Preferred Excess Loss Insurance Policy, N-1133 and Standard Excess Loss
Insurance Policy, N-1071; (iii) under the heading "Contract Forms for JANY -
Annuities" reference to (a) SPIA (Lottery), N-1500, (b) SPIA, N-1030-P, (c)
Flex, N-2347-P(3/94), (d) Flex, N-2347-P(3/94)(Q) and (e) SPDA, N-2370-P(4/94).
In addition, Schedule 2.8(a) shall be amended to include under the
heading "JANY ENDORSEMENTS - Life" the following endorsements:
American Crown/JANY Endorsement M195
Amendment to Application N-0126-A-4
Aviation Exclusion Rider N-2048-E
Declaration of Continued Insurability N-5112A-1
Schedule 2.8(a) shall be amended to include under the heading "JANY
ENDORSEMENTS - Long Term Care" the following endorsements:
Policy Change Endorsement E1295
Notice to Buyer N-D-107-NY
Sticker - Non-Qualified Policy NY-1350-O 8/96
Schedule 2.8(a) shall be amended to include a new heading "JANY
ENDORSEMENTS - ARMS - Excess Loss" the following endorsements:
Endorsement - Excess Loss N-1133-E
Endorsement - Active at Work N-1133-E.AW
Endorsement - Monthly Cumulative N-1133-E.MCA
Endorsement - Pre-Existing
Conditions N-1133-E.PE
Endorsement - Terminal Liability N-1133-E.TL
Further, Schedule 2.8(a) shall be amended to include under the
heading "Annuities" the following contracts:
SPIA Lottery Endorsement N-1500-E1
Restricted Ownership Endorsement N-1004-E
TSA Contract Loan Request
& Agreement NY-1064-5 3/88
Amendment to Application NY-1216-0 12/89
IRA Endorsement IRA 1
Annuity Tables Endorsement N-2350-P
SPDA IRA Endorsement N-2363-E
TSA Endorsement N-0816-E(11/96)
Endorsement M195
Deposit & Annuity Operations 8700
2
<PAGE> 3
b. Schedule 2.8(f) Schedule 2.8(f) shall be amended to add the
following sentence to the description of the Reinsurance Agreement between John
Alden Life Insurance Company of New York and Heritage Reinsurance Company, Ltd.
(now Lincoln Reinsurance Company, Ltd.) effective January 1, 1995:
"This Reinsurance Agreement was assigned by Lincoln Reinsurance
Company, Ltd. to Lincoln National Reinsurance Company (Barbados) Limited on
December 31, 1996.
c. Schedule 2.11. Schedule 2.11 (1) shall be amended to add the
following sentence to the description of the Modified Coinsurance Agreement
between John Alden Life Insurance Company of New York and Heritage Reinsurance
Company, Ltd. (now Lincoln Reinsurance Company, Ltd.) effective January 1, 1995:
"This Reinsurance Agreement was assigned by Lincoln Reinsurance
Company, Ltd. to Lincoln National Reinsurance Company (Barbados) Limited on
December 31, 1996.
The HMO Reinsurance Agreements between John Alden Life Insurance
Company and the third parties listed in Schedule 2.11 (2) have been non-renewed.
The First Catastrophe Excess of Loss Reinsurance Agreement and
Second Catastrophe Excess of Loss Reinsurance Agreement described in Schedule
2.11 (3) and (4), respectively, shall be terminated effective June 30, 1997.
The business ceded by John Alden Life Insurance Company of New York
under the Administrative Services Agreement described in Schedule 2.11 (11) and
each of the agreements listed in Schedule 2.11 (12), (13) and (14) has been
non-renewed.
d. Schedule 2.13. Schedule 2.13 shall be amended to include under
the heading "JALIC-JANY owned software can be licensed" reference to "ULP -
Universal Life Policy Pages System (JANY Owned)." The reference to "BA Brokers
Ally System (JANY Owned)" which appears under the heading "License from Third
Parties - will need to negotiate with vendors" shall be deleted as there is no
need to negotiate with vendor.
e. Schedule 2.22. Schedule 2.22 shall be amended such that under the
heading "General and Annuity Accounts - Annuity Via ACH Authorization" reference
to George Carvajel - Cash Management Team Leader shall be deleted and replace by
Mattie Garvin - Cash Management Accountant II.
3
<PAGE> 4
In addition, Schedule 2.22 shall be amended to delete under the
heading "JANY Bank Accounts Transaction Authorization List - Investment"
reference to the following accounts (as they are closed).
89922400 JANY General D
89922101 JANY General Trade 1 D
89922403 JANY Spread D
89922404 JANY Spread Trade 1 D
The same heading shall include reference to the following account:
89922442 JANY Individual Life D
f. Schedule 2.23. Schedule A-1 hereto shall be added to Schedule
2.23.
g. Schedule 2.30. Schedule A-2 hereto shall be added to Schedule
2.30.
h. Schedule 2.32(l). The first page of Schedule 2.32(l) shall be
deleted in its entirety and replace with Schedule A-3 hereto. In addition,
Schedule A-4 hereto shall be added to Schedule 2.32(l).
3. Headings. The headings in this Amendment have been inserted for
convenience of reference only, and shall not be considered a part of this
Amendment and shall not limit, modify or affect in any way the meaning or
interpretation of this Amendment.
4. Counterparts. This Amendment may be executed 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 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 parties.
5. Miscellaneous. All other terms and conditions of the Agreement
shall remain unchanged and the Agreement shall remain in full force and effect.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first written above.
JOHN ALDEN LIFE INSURANCE COMPANY
By /s/Scott L. Stanton
----------------------------------
Name: Scott L. Stanton
Title: Senior Vice President and
Chief Financial Officer
SUNAMERICA LIFE INSURANCE COMPANY
By /s/James W. Rowan
----------------------------------
Name: James W. Rowan
Title: Senior Vice President
5
<PAGE> 6
SCHEDULE A-1
Schedule 2.23(c)
(Reserving Practices)
The parties to the Stock Purchase and Sale Agreement acknowledge and
agree that JANY's past and current use of curtate CARVM factors to determine
reserves does not breach or in any way violate the representations and
warranties made by Seller in Section 2.23. Notwithstanding the foregoing, Seller
represents and warrants to Purchaser (and Section 2.23 is amended to include
such representation and warranty) that if JANY had used continuous CARVM factors
to determine reserves at December 31, 1996, such reserves would not have been
more than $6.7 million more than JANY's actual reserves at December 31, 1996
(which were determined in accordance with curtate CARVM factors).
6
<PAGE> 1
AMENDMENT NO. 1
TO THE
ASSET PURCHASE AND SALE AGREEMENT
DATED NOVEMBER 29, 1996
BY AND BETWEEN
JOHN ALDEN LIFE INSURANCE COMPANY
AND
SUNAMERICA LIFE INSURANCE COMPANY
This Amendment is made and entered into as of this 31st day of
March, 1997, and is hereby made a part of and incorporated into the Asset
Purchase and Sale Agreement dated November 29, 1996 (the "Agreement") by and
between John Alden Life Insurance Company, a Minnesota stock insurance company
("Seller"), and SunAmerica Life Insurance Company, an Arizona stock insurance
company ("Purchaser"). Capitalized terms used herein and not otherwise defined
shall have the respective meaning ascribed thereto in the Agreement.
WHEREAS, JALIC and SunAmerica have entered into the Agreement;
and
WHEREAS, JALIC and SunAmerica desire to amend the Agreement in
the manner hereinafter set forth.
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree that:
1. Closing Date Portfolio Securities.
(a) JALIC/Oxford Mortgage Loans. Schedule 1.2(a)(i) to
the Agreement is hereby amended to delete any and all references to the
JALIC/Oxford Mortgage Loans.
(b) Waters Edge Mortgage. Schedules 1.2(a)(i) to the
Agreement is hereby amended to delete any and all references to the Waters Edge
Group Mortgage.
(c) State Insurance Deposits. Schedule 1.2(a)(i) hereto
is hereby amended to delete any and all references to the State Insurance
Deposits.
In addition to cash otherwise to be delivered pursuant to
Section 1.2(a)(iv) of the Agreement, the parties hereto further agree that (i)
if, at Closing, the Book Value of the State Insurance Deposits is greater than
the Market Value, then Purchaser shall deliver to Seller cash in an amount
equal to the difference between the Book Value and
<PAGE> 2
Market Value of the State Insurance Deposits and (ii) if, at Closing, the Book
Value of the State Insurance Deposits is less than the Market Value, then
Seller shall deliver to Purchaser cash in an amount equal to the difference
between the Book Value and Market Value of the State Insurance Deposits. An
estimate of such amount shall be included on the Estimated Closing Date
Statement and paid by the appropriate party at the Closing. The difference
between the amount so estimated and the actual amount based on Book Value and
Market Value at Closing shall be included on the Post Closing Date Statement
and paid as a post closing adjustment in accordance with Section 1.6.
2. Put Value Increase. The parties hereto hereby agree
that the Pooled Mortgage Loans and the Marconi Mortgage shall not be sold,
assigned or transferred by Seller to Purchaser. The Pooled Mortgage Loans and
the Marconi Mortgage shall be included in the Rejected Mortgages. In
connection therewith, Section 1.2(c) shall be deleted and restated to read, in
its entirety, as follows:
"Notwithstanding anything contained in this section 1.2 to the
contrary, Purchaser shall have the right not to purchase up to $64,150,000 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 Closing specifying such Rejected Mortgages, Seller shall deliver to
the Trust, as part of the Reinsurance Premium, an amount equal to the Book
Value of the Rejected Mortgages. Rejected Mortgages shall include the Pooled
Mortgage Loans and the Marconi Mortgage."
3. Restriction on Put Mortgages. Seller hereby agrees
that it shall not sell, transfer, convey or otherwise assign to Oxford Life
Insurance Company any Mortgage or Mortgages which are included in the Rejected
Mortgages.
4. Assets Transferred to Trust Account and Purchaser .
Section 1.2(b) is hereby amended and restated in its entirety as follows:
"On the Closing Date, delivery of the Closing Date Portfolio
Securities (other than the following: (i) the Mortgage Loans identified on
Schedule A-1 hereto and (ii) the private placement instruments identified on
Schedule A-2 hereto) 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 by Seller to the Trust by wire
transfer of immediately available funds. Securities, cash equivalents 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
2
<PAGE> 3
three month LIBOR rate in effect on the Business Day preceding the Closing Date
plus 25 basis points.
In addition, on the Closing Date, delivery of the Mortgage
Loans identified on Schedule A-1 hereto and the private placement instruments
identified on Schedule A-2 hereto shall be made by transfer to the Purchaser.
Such assets shall be transferred by such instruments of transfer as are
commercially necessary to effect the transfer.
In addition, on the Closing Date, delivery of cash, publicly
traded investment grade bonds and/or treasuries, which will cause the Trust to
continue to meet the terms of Purchaser's investment policies, with an
aggregate Book Value on Purchaser's books equal to the total of (i) and (ii),
less (iii), where (i) is Seller's Book Value on the Closing Date of those
Mortgage Loans identified on Schedule A-1 hereto, (ii) is Seller's Book Value
on the Closing Date of the private placement instruments identified on Schedule
A-2 hereto, and (iii) is the Statutory Reserves with respect to the Annuity
Contracts and Additional Policies reinsured under the RSL Agreements, shall be
made by Purchaser to the Trust. Such delivery by Purchaser shall be made by
such instruments of transfer as are acceptable to the Trustee and reasonably
acceptable to Seller."
5. "Annuity Contract" Definition. The third sentence of
the definition of "Annuity Contract" as set forth in Annex A is amended to and
restated in its entirety to read as follows:
"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 which are not ceded to
Oxford Life Insurance Company or Lincoln National Reinsurance Company Limited,
(v) universal life flexible premium deferred annuity riders, and (vi) annuity
policies assumed by Seller from Aristar Life Insurance Company. "
6. Recapture. Schedule 3.11 to the Agreement is hereby
amended to delete any and all references to the RSL 1 Jr. Agreement.
7. Payments Received After Closing. Section 8.1 is
hereby amended to add new Section 8.1(c) to read as follows:
"(c) Following the Closing Date, if Seller receives
any interest, dividends, return of principal or other payments with respect to
any Closing Date Portfolio Securities, Purchaser shall at all times be the
owner of any such payments, Seller shall hold such payments for the benefit of
Purchaser, and Seller shall promptly, remit such payment to Purchaser. Seller
shall use commercially reasonable efforts to remit such payments to Purchaser
no later than two business days after receipt by Seller.
3
<PAGE> 4
If any such payment is not remitted by Seller to Purchaser within two business
days after receipt thereof by Seller, Seller shall remit such payment to
Purchaser at the time Seller makes settlement payments to Purchaser pursuant to
Section 4.1 of the Indemnity Reinsurance Agreement with interest calculated at
a rate equal to the three month LIBOR rate plus 25 basis points on the amount
due from the date of receipt by Seller but not including the date on which such
amount is actually paid to Purchaser. "
8. Policyholder Consents. The first sentence of
Section 8.9 shall be amended and restated in its entirety to read as follows:
"Promptly after the Closing, Purchaser shall (i) distribute
to policyholders of Annuity Contracts (other than Contracts reinsured under the
RSL Agreements) notice of the transactions reflected herein and (ii) use
commercially reasonable efforts to obtain Novations of all Annuity Contracts
(other than Contracts reinsured under the RSL Agreements) (as contemplated by
Section 2.4 of the Assumption Reinsurance Agreement)."
9. Additional Definitions. The following
definitions are hereby added to Annex A of the agreement.
"JALIC/Oxford Mortgage Loans" means that pool of
conventional mortgage loans owned by the Seller and Oxford Life Insurance
Company on a 50/50 pari passu basis pursuant to that Participation and
Servicing Agreement Series A 1990 dated as of February 14, 1990, and identified
on Schedule A-3 attached hereto.
"Marconi Mortgage" means and that certain Mortgage Loan
identified as loan number 900656, referred to by Seller as the Marconi
Mortgage.
"Pooled Mortgage Loans" means collectively, the pooled
mortgage loans held by Seller under (i) that certain Sale and Servicing
Agreement dated as of May 18, 1989 by and between Morsemere Federal Savings
Bank, Originator, Company, and Initial Class B Certificateholder and Purchaser,
as Initial Class A Certificateholder, (ii) that certain Participation and
Servicing Agreement dated as of May 26, 1988 by and between Ensign Bank,
F.S.B., as seller, servicer and purchaser of the subordinated certificate and
Drexel Burnham Lambert MRP Inc., as initial purchaser of the senior
certificates, (iii) that certain Representations, Warranties, Purchase and
Participation Agreement dated and effective as of June 30, 1988 by and among
Seller, as purchaser and initial Class A Certificateholder, Investors Florida
Savings Bank and IFS Service Corporation, and (iv) that certain Servicing
Agreement dated as of December 1, 1992 by and among Seller, Federal Deposit
Insurance Corporation, as receiver for Mechanics and Farmers Savings Bank,
F.S.B., Citytrust, a Connecticut bank and trust company, and John Alden Asset
Management Company, as Servicer, and identified on Schedule A-4 attached
hereto.
"RSL 1 Jr. Agreement" means that certain Coinsurance
Agreement effective January 1, 1989 by and between Seller and Reliance Standard
Life Insurance Company.
4
<PAGE> 5
"RSL Agreements" means collectively, (i) that Coinsurance
Agreement effective June 30, 1990 by and between Seller and Reliance Standard
Life Insurance Company and (ii) that Coinsurance Agreement effective October
31, 1990 by and between Seller and Reliance Standard Life Insurance Company.
"State Insurance Deposits" means all instruments held on
deposit for the benefit of policyholders by state insurance departments on
behalf of Seller and identified on Schedule A-5.
"Statutory Reserves" means a reserve not less than the
aggregate statutory reserves and claims reserves calculated in a manner and on
a consistent basis with Seller's past practices.
"Waters Edge Group Mortgage" means and that certain
Mortgage Loan identified as loan number 7140, referred to by Seller as the
Waters Edge Group Mortgage.
10. Recording Costs. The costs of recordation in
connection with the transfer of any of the Closing Date Portfolio Securities,
including, without limitation, recording costs and fees of a title company to
record any documents in connection with the transfer of Closing Date Portfolio
Securities shall be borne equally by the Seller and the Purchaser. Recording
costs excludes, without limitation, any fees or costs for title policies or
endorsements to title policies and title searches in connection therewith.
11. Changes in Schedules. To the extent set forth
below, the Schedules to the Agreement shall be amended to include, restate or
delete the following information, as the case may be, provided that the
representations, warranties and indemnification contained in the Agreement
shall in no way be affected by any such amendment, restatement or deletion of
any Schedules:
a. Schedule 3.3 Schedule 3.3 shall be revised by Schedule
A-6 hereto.
b. Schedule 3.8(a) The information contained in
Schedule 3.8(a) under the heading "JOHN ALDEN LIFE INSURANCE COMPANY Annuities
In-Force" shall be amended to: (i) change the form name of form # J-1035-P to
"SPIA": (ii) add form number J-5905-P to form name "Flex", (iii) add the word
"(Oregon)" after the form names for the form numbers J-8014-P and J-8013-C.
The information contained in Schedule 3.8(a) under the
heading "JOHN ALDEN LIFE INSURANCE COMPANY Forms Approved in 1996" shall be
amended to
5
<PAGE> 6
include the following information:
Forms Approved in 1997
LTC Waiver Endorsement Pennsylvania
J-0748-E(PA)
TSA Endorsement Alaska, Arizona, Arkansas,
J-O816-E(1/97) California, Colorado, Georgia, Idaho,
Kansas, Kentucky, Maine, Michigan,
Mississippi, New Hampshire, Oklahoma,
South Carolina, Tennessee, Wyoming
TSA Endorsement Alaska, Arizona, Arkansas,
J-O817-E(1/97) California, Colorado, Georgia, Idaho,
Indiana, Kentucky, Maine, Michigan,
Minnesota, Mississippi, Missouri, New
Hampshire, Oklahoma, South Carolina,
Tennessee, Texas, Virginia, Wyoming
The information contained in Schedule 3.8(a) under the heading
"Approved JALIC Annuity Endorsements (Standard & State Specific)" shall be
amended to include "Tax Sheltered Annuity Endorsement, J-0816-E(1/97)," "Tax
Sheltered Annuity Endorsement, J-0817-E(1/97)," "Tax Sheltered Annuity
Endorsement, J-0817-E(1/97)(PA)," and "Endorsement - Long Term Care Facility
Waiver, J-0748-E(PA)." And form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively.
c. Schedule 3.9 Schedule 3.9(a) shall be amended so as
to replace the lists of policy forms for Indiana, Iowa, Utah and Wisconsin with
the lists attached hereto as Schedule A-7 hereto.
In addition, the following changes to Schedule 3.9(a) shall
also be made:
- - the list of John Alden Life Endorsement Approvals for Alaska shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA
Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Arizona shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA
Endorsement," form number J-0817-E(1/97)
6
<PAGE> 7
- - the list of John Alden Life Endorsement Approvals for California shall
be amended such the form "Individual Retirement Annuity Rider," form
number J-0710-E(9/88) shall be deleted in its entirety and form numbers
J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and
J-0691-E, respectively, and the list shall include forms "TSA
Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form
number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Georgia shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA
Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Idaho shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA
Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Indiana shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include form "TSA Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Kansas shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include form "TSA Endorsement," form number J-0816-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Kentucky shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA
Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Maryland shall be
amended to delete in its entirety reference to form "Individual
Retirement Annuity Rider," J-0710-E (9/88) and form numbers
J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and
J-0691-E, respectively
- - the list of John Alden Life Endorsement Approvals for Minnesota shall
be amended to delete in its entirety reference to form "Individual
Retirement Annuity Rider," J-0710-E (9/88) and form numbers
J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and
J-0691-E, respectively
7
<PAGE> 8
- - the list of John Alden Life Endorsement Approvals for Missouri shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include form "TSA Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Pennsylvania
shall be restated in its entirety by Schedule A-8 hereto
- - the list of John Alden Life Endorsement Approvals for Oklahoma shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA
Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Oregon shall be
amended to delete in its entirety reference to the forms "Individual
Retirement Annuity Rider," form number J-0710-E, and "Individual
Retirement Annuity Rider, form number J-0710-E(9/88) and form numbers
J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and
J-0691-E, respectively,
- - the list of John Alden Life Endorsement Approvals for South Carolina
shall be amended to delete in its entirety reference to the forms
"Individual Retirement Annuity Rider," form number J-0710-E, and
"Individual Retirement Annuity Rider, form number J-0710-E(9/88) and
form numbers J-O614-E(7/86) and J-0619-E shall be restated as
J-0617(7/86) and J-0691-E, respectively, and the list shall include
form "TSA Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Tennessee shall
be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively, and the list shall
include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA
Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Texas shall be
amended to delete in its entirety reference to the forms "Individual
Retirement Annuity Rider," form number J-0710-E, and "Individual
Retirement Annuity Rider, form number J-0710-E(9/88) and form numbers
J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and
J-0691-E, respectively, and the list shall include form "TSA
Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Washington shall
be amended to delete in its entirety reference to the forms "Individual
Retirement Annuity Rider," form number J-0710-E, and "Individual
Retirement Annuity
8
<PAGE> 9
Rider, form number J-0710-E(9/88) and form numbers J-O614-E(7/86) and
J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively
- - the list of John Alden Life Endorsement Approvals for West Virginia
shall be amended to delete in its entirety reference to the form
"Individual Retirement Annuity Rider," form number J-0710-E, and form
numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86)
and J-0691-E, respectively
- - the list of John Alden Life Endorsement Approvals for Virginia shall be
amended such that form numbers J-O614-E(7/86) and J-0619-E shall be
restated as J-0617(7/86) and J-0691-E, respectively and the list shall
include form "TSA Endorsement," form number J-0817-E(1/97)
- - the list of John Alden Life Endorsement Approvals for Utah shall be
amended to delete in its entirety reference to the form "Individual
Retirement Annuity Rider," form number J-0710-E, and form numbers
J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and
J-0691-E, respectively
c. Schedule 3.11 Schedule 3.11 shall be deleted and replaced
by Schedule A-9 hereto.
d. Schedule 3.20 Number 24 to Schedule 3.20, "General Agent
Agreement by and between John Alden Life Insurance Company and Progressive
Financial effective October 29, 1993" shall be deleted as such agreement was
terminated February 8, 1997.
e. Schedule 3.22(a) Schedule 3.22(a) shall be deleted and
replaced by Schedule A-10 hereto.
f. Schedule 3.22(l) Schedule 3.22(l) shall be deleted and
replaced by Schedule A-11 hereto.
g. Schedule 3.24 Schedule 3.24 shall be deleted and replaced
by Schedule A-12 hereto.
12. Marketing Agreement. From and after the Ledger
Cut-Off Date (as defined in the Indemnity Reinsurance Agreement) through and
including the date of termination of the Transition Services Agreement, Seller
shall continue to underwrite and make its annuity products available for sale
and marketed through NSM Sales Corporation. Any annuity contracts issued by
Seller during such period shall be deemed to be Additional Policies (as defined
in the Indemnity Reinsurance Agreement) and automatically reinsured with the
Purchaser as provided in the Indemnity Reinsurance Agreement.
9
<PAGE> 10
13. Additional Ancillary Agreement. The last page of
Section 1.4(a) is amended to include within the definition of "Ancillary
Agreements" that certain Asset Repurchase Agreement by and between Seller and
Purchaser dated as of March 31, 1997.
14. Headings. The headings in this Amendment have been
inserted for convenience of reference only, and shall not be considered a part
of this Amendment and shall not limit, modify or affect in any way the meaning
or interpretation of this Amendment.
15. Counterparts. This Amendment may be executed 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 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 parties.
16. Miscellaneous. All other terms and conditions of the
Agreement shall remain unchanged and the Agreement shall remain in full force
and effect.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first written above.
JOHN ALDEN LIFE INSURANCE COMPANY
By /s/ SCOTT L. STANTON
-------------------------------------
Name: Scott L. Stanton
Title: SVP & CEO
SUNAMERICA LIFE INSURANCE COMPANY
By /s/ SUSAN L. HARRIS
-------------------------------------
Name: Susan L. Harris
Title: Secretary
(Amendment to the Asset Purchase Agreement)
<PAGE> 1
Exhibit 10.14
AMENDMENT NO. 1 TO MARKETING AGREEMENT
DATED MARCH 28, 1997
BETWEEN
SUNAMERICA LIFE INSURANCE COMPANY ("COMPANY")
AND
NSM SALES CORPORATION ("NSM")
WHEREAS, both parties desire to amend Section V (Exclusivity Rights and
Obligations) in the above-referenced Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is acknowledged, the parties, intending to be legally bound, agree as
follows:
1. The last sentence of Paragraph A, Section V is amended to read:
If NSM fails to meet the minimum sales levels in any
given period, the Company may terminate the exclusivity
rights granted to NSM as set forth above; provided,
however, if on July 15, 1997, the Company is unable, for
whatever reason, to issue the Exclusive Policies in the
Company's name and on the Company's data processing
systems in those states that collectively accounted for
70% of NSM's 1996 sales of the corresponding John Alden
Life Insurance Company annuity products, the minimum
sales level for the period of April 1, 1997 to
September 30, 1997 will be waived by the Company.
This amendment shall become effective on March 28, 1997.
All other terms and provisions and conditions of said Marketing Agreement shall
remain in full force and effect.
SunAmerica Life Insurance Company NSM Sales Corporation
By: /s/ Illegible Signature By: /s/ Anne V. Wardlow
------------------------------- -----------------------------
Title: Executive Vice President Title: Senior Vice-President
--------------------------- --------------------------
<PAGE> 1
EXHIBIT 99.1
[JOHN ALDEN FINANCIAL CORPORATION LOGO]
NEWS RELEASE
================================================================================
For Immediate Release Contact: Mark Schoder
(305) 715-3767
JOHN ALDEN ANNOUNCES DEFINITIVE AGREEMENT TO SELL ANNUITY OPERATIONS
PRODUCES $175-$200 MILLION OF AVAILABLE CAPITAL
MIAMI, FL, DECEMBER 2, 1996 -- John Alden Financial Corporation (NYSE: JA)
announced today that it has entered into a definitive agreement to sell
substantially all of its annuity business to SunAmerica, Inc. (NYSE:SAI). The
transaction includes the sale of all of the common stock of John Alden Life
Insurance Company of New York (JANY) and the reinsurance of the annuity block of
John Alden Life Insurance Company (JALIC). This reinsurance will initially be on
an indemnity basis and will transition to an assumption basis as soon as
practical. Most of the transition to an assumption basis is expected to be
completed within two years. This transaction is contingent upon regulatory
approvals and is expected to close by the end the first quarter of 1997. On
November 14, the Company announced that it had entered into a non-binding letter
of intent regarding these operations with SunAmerica.
The total purchase price is approximately $240 million. This represents
approximately $169 million paid to acquire the business and $71 million of
adjusted capital and surplus in JANY as of September 30, 1996. It does not
include any capital used to support the annuity business in JALIC. The Company's
available capital will be enhanced by both the after-tax income generated from
the transaction and by the release of the capital previously allocated to
support the annuity business. The Company intends to use a portion of this
available capital to strengthen its healthcare operations, after which it
estimates there will be approximately $175 to $200 million of capital available
for other uses. This additional capital will be used primarily to repurchase
common stock, pay down debt and, to a lesser extent, for general corporate
purposes.
As a result of this sale of its annuity business and the Company's previously
announced intention to sell its Credit operations, the Company expects to
record a net deferred gain of approximately $45 million. This amount is net of
transaction expenses, taxes, goodwill and other adjustments relating to these
transactions. The net deferred gain will be recognized as income as SunAmerica
completes the assumption of policyholder liabilities. The Company expects to
begin recognizing the gain in 1997 and to earn the majority of the gain in 1998.
"We made a decision earlier this year to focus the Company's resources
exclusively on our healthcare lines," said Glendon E. Johnson, Chairman of the
Board, Chief Executive Officer and President. "In doing this, we significantly
enhance the potential for the future success of these operations. As a result
of this decision, we have realized the value of our annuity operations. This
annuity transaction is being done to benefit all of the parties involved --
shareholders, policyholders and agents. SunAmerica has earned an outstanding
industry reputation and holds very high industry ratings."
* * * * *
-More-
<PAGE> 2
[JOHN ALDEN LOGO] Page 2
Dec., 1996
John Alden Financial Corporation is an insurance holding company that, through
its subsidiaries, is principally engaged in providing group health insurance,
managed care and other health-related risk management services and products.
SunAmerica, Inc. is a financial services company that specializes in retirement
savings products and services.
FOR MORE INFORMATION
Fax-on Demand - Call (800) 656-2580 for access to all of John Alden's 1996 news
releases.
Internet Address - Visit John Alden's site on the Internet at
http://www.jalden.com.
E-Mail - Contact us at [email protected] to ask questions or request
materials.
###
<PAGE> 1
EXHIBIT 99.2
[JOHN ALDEN FINANCIAL CORPORATION LOGO]
NEWS RELEASE
===============================================================================
For Immediate Release Investor Relations Contact: Mark Schoder
(305) 715-3767
Media Relations Contact: Christina Wells
(305) 715-3162
JOHN ALDEN CLOSES SALE OF ANNUITY BUSINESS AND RESTRUCTURES OPERATIONS
MIAMI, FL, MARCH 31, 1997 -- John Alden Financial Corporation (NYSE: JA)
reported today that the sale of its annuity business to SunAmerica Inc. has
closed. The transaction includes the sale of all of the common stock of John
Alden Life Insurance Company of New York and the reinsurance of substantially
all of the annuity business of John Alden Life Insurance Company.
Related to the sale of the Company's annuity operations, its proposed sale of
its credit operations, and the anticipated reduction in group health premiums,
the Company reviewed its workforce level and the structure of its operations,
including overhead functions. As a result of this review, the Company will
reduce its workforce by approximately 725 employees during 1997. Of this
amount, approximately 250 positions are directly employed in discontinued
operations, which include the Company's annuity and credit operations. Charges
associated with these eliminations are included in the $45 million net deferred
gain previously announced.
The remaining 475 positions represent approximately 20% of the full-time
workforce of the Company's continuing operations, which include its group
health business and Alden Risk Management Services. Accordingly, John Alden
will take an after-tax charge of approximately $15 million in the first quarter
relating to its continuing operations. In addition, the Company will not fill
an estimated 100 open positions in these operations.
"Decisions like this are the most difficult to make, but this is a necessary
step in successfully positioning this Company for the future," said Glendon E.
Johnson, Chairman of the Board, Chief Executive Officer and President. "While
it will be challenging for us to reduce our expenses in line with the
anticipated reduction in premium, we are committed to maintaining a competitive
expense ratio on a long-term basis."
* * * * *
John Alden Financial Corporation is an insurance holding company that, through
its subsidiaries, is principally engaged in providing group health insurance,
managed care and other health-related risk management products and services.
SunAmerica Inc. is a diversified financial services company specializing in
retirement savings and investment products and services.
FOR MORE INFORMATION
Fax-on-Demand - Call (800) 656-2580 for a complete menu of John Alden news
releases.
Internet Address - Visit John Alden's site on the Internet at
http://www.jalden.com.
E-Mail - Contact us at [email protected] to ask questions or request material.
