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Exhibit 10
EXECUTION VERSION
STOCK PURCHASE AGREEMENT
BY AND
AMONG
SAFECO CORPORATION,
GENERAL AMERICA CORPORATION,
WHITE MOUNTAINS INSURANCE GROUP, LTD.
AND
OCCUM
ACQUISITION CORP.
dated as of
March 15, 2004
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of March 15, 2004 (this
"AGREEMENT"), is by and among Safeco
Corporation, a Washington corporation
("SELLER"), General America Corporation
("GAC"), a Washington corporation and a
wholly owned subsidiary of Seller, White
Mountains Insurance Group, Ltd., a
company existing under the laws of Bermuda
("PARENT"), and Occum Acquisition
Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("BUYER").
WHEREAS, Seller operates on a nationwide basis in segments of
the
insurance industry and other financial
services-related businesses, including,
through those certain direct and indirect
Subsidiaries of Seller identified on
SCHEDULE A (each such person, an "ACQUIRED
COMPANY"), the provision of
individual and group insurance products,
annuity products, mutual funds and
investment advisory services;
WHEREAS, Buyer desires to purchase (directly or indirectly) all of
the
issued and outstanding capital stock of the
Acquired Companies as of the Closing
Date (collectively, the "SHARES") for the
consideration and subject to the terms
and conditions set forth in this
Agreement.
NOW THEREFORE, in consideration of the representations,
warranties,
covenants and agreements contained herein,
and intending to be legally bound
hereby, the parties hereto agree as
follows:
ARTICLE I.
PURCHASE AND SALE OF THE SHARES
SECTION 1.1
PURCHASE
AND SALE OF SHARES. At the Closing, on the terms
and subject to the conditions set forth in
this Agreement, Seller shall, and,
with respect to the stock of SIS, shall
cause GAC to, sell, assign, transfer,
convey and deliver to Buyer, and Buyer
hereby agrees to purchase, all of the
Shares, free and clear of all Liens.
SECTION 1.2
CLOSING.
Subject to the provisions of Article VI, the
closing of the purchases and sales
contemplated by this Agreement (the
"CLOSING") shall take place in Seattle, WA
at the offices of Seller at 10:00
a.m. Pacific time on the later of (i) June
30, 2004 and (ii) the last day of the
month after the date on which each of the
conditions set forth in Article V
(other than conditions that are satisfied
by the delivery of documents or the
payment of money at the Closing) have been
satisfied or waived by the party or
parties entitled to the benefit of such
conditions (or if such day is not a
Business Day, on the next succeeding
Business Day); PROVIDED, that solely for
purposes of the parties' respective
accounting, the Closing shall be deemed to
have occurred at 12:01 a.m. on the first
day of the following month, or at such
other place, at such other time or on such
other date as Parent and Seller may
mutually agree. The date on which the
Closing actually occurs is hereinafter
referred to as the "CLOSING DATE." Subject
to the provisions of Article VI, a
party's failure to consummate the purchases
and sales provided for in this
Agreement on the date and time and at the
place determined pursuant to this
Section 1.2 will not result in the
termination of this Agreement and will not
relieve any party of any obligation under
this Agreement.
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SECTION 1.3
CLOSING
OBLIGATIONS.
(a)
At the Closing, Seller shall, or with respect to SIS, cause
GAC to, deliver
to Buyer:
(i)
certificates representing the Shares of the Acquired
Companies that are direct subsidiaries of Seller and GAC, duly
endorsed (or accompanied by duly executed stock powers) in
proper
form for transfer of such Shares, with appropriate transfer
stamps,
if any, affixed, to Buyer;
(ii) a
Transition Services Agreement, substantially in
the form attached hereto as EXHIBIT A (the "TRANSITION SERVICES
AGREEMENT");
(iii) an
Intellectual Property License from Seller to
Buyer, substantially in the form attached hereto as EXHIBIT B
(the
"BUYER INTELLECTUAL PROPERTY LICENSE");
(iv) a
Transitional Trademark License, substantially in
the form attached hereto as EXHIBIT C (the "TRANSITIONAL
TRADEMARK
LICENSE");
(v)
a Lease Agreement for the Redmond, WA campus
facility, substantially in the form attached hereto as EXHIBIT
D
(the "LEASE AGREEMENT"); and
(vi) a
copy of each new Investment Company Advisory
Agreement (or, where permitted, approval of the continuation of
the
existing Investment Company Advisory Agreement) described in
Section
4.9(b)(i)(B)(x).
(b)
At the Closing, Buyer shall, and Parent shall cause Buyer
to, deliver to
Seller, including for the benefit of GAC with respect to
SIS:
(i)
$1,350,000,000 (the "CLOSING CONSIDERATION") by wire
transfer of immediately available funds to an account designated
by
Seller in writing at least two (2) Business Days' prior to the
Closing Date, subject to the post-Closing purchase price
adjustment
pursuant to Section 1.4 hereof;
(ii) the
Transition Services Agreement;
(iii) the
Transitional Trademark License; and
(iv) the
Lease Agreement (the documents described in
clauses (ii)-(iv) along with this Agreement and the Buyer
Intellectual Property License, being referred to collectively as
the
"TRANSACTION DOCUMENTS").
SECTION 1.4
POST-CLOSING ADJUSTMENT.
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(a)
As soon as practicable following the Closing, Seller shall
prepare or cause
to be prepared audited financial statements (including
balance sheets
and statements of income and the requisite footnotes
thereto) of the
Insurance Subsidiaries as of and for the six months ended
June 30, 2004
(the "JUNE FINANCIAL STATEMENTS"). The June Financial
Statements (i)
shall be prepared in accordance with SAP (which for purposes
of this SECTION
1.4 only shall include the Agreed Accounting Policies)
consistently
applied in accordance with the accounting policies and
practices
(including with respect to assumptions, estimations methodology
and actuarial
methodology) used to prepare the Insurance Subsidiary
Statements as of
December 31, 2003 (the "DECEMBER FINANCIAL STATEMENTS")
and (ii) shall
be audited by Ernst & Young LLP in accordance with
generally
accepted
auditing standards in the United States ("GAAS"). For the
avoidance of
doubt, certain of the accounting policies and practices used
to prepare the
December Financial Statements and to be used to prepare the
June Financial
Statements are set forth on Schedule 1.4 attached hereto
(such policies
and practices, the "AGREED ACCOUNTING POLICIES"). No later
than forty-five
(45) days following the Closing, Seller shall cause a copy
of the June
Financial Statements to be delivered to Buyer, along with an
unqualified
executed audit opinion of Ernst & Young LLP substantially
in
the form
attached hereto as Exhibit 1.4 stating that (i) the June
Financial
Statements were
prepared in accordance with SAP and (ii) the June Financial
Statements were
audited by Ernst & Young LLP in accordance with GAAS.
(b)
Buyer shall have forty-five (45) days following delivery of
the June
Financial Statements (the "OBJECTION PERIOD") to provide
written
notice to Seller
(the "OBJECTION NOTICE") of any good faith objection to
any portion of
the June Financial Statements (and the June Adjusted
Statutory Book
Value calculated therefrom), which objection shall be set
forth with
reasonable detail in such Objection Notice. Unless Buyer timely
delivers an
Objection Notice before the expiration of the Objection Period,
the June
Financial Statements (and the June Adjusted Statutory Book
Value
calculated
therefrom) shall be deemed to have been accepted and approved
by
Buyer and shall
thereafter be final and binding upon Buyer for purposes of
any post-closing
adjustment set forth in this Section 1.4 (and any amounts
to be paid
pursuant to Section 1.4(f) hereof shall thereupon be paid). In
addition, to the
extent any portion of the June Financial Statements or of
the calculation
of the June Adjusted Statutory Book Value shall not be
expressly
objected to in the Objection Notice, such matters shall be
deemed
to have been
accepted and approved by Buyer and shall be final and binding
upon Buyer for
purposes hereof. If Buyer timely delivers an Objection
Notice before
the expiration of the Objection Period, then those aspects of
the June
Financial Statements objected to in the Objection Notice shall
not
thereafter be
final and binding until resolved in accordance with this
Section 1.4.
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(c)
Following receipt of any Objection Notice, Seller and Buyer
shall discuss in
good faith the applicable objections set forth therein for
a period of
thirty (30) days thereafter and shall, during such period,
attempt to
resolve the matter or matters in dispute by mutual written
agreement. If
the parties reach such an agreement, such agreement shall be
confirmed in
writing and the June Financial Statements shall be revised to
reflect such
agreement (or the parties shall otherwise agree to reflect
such agreement
in a written memorandum of adjustment (an "ADJUSTMENT
MEMORANDUM")),
which agreement (and the (i) June Financial Statements, as
so revised,
including the June Adjusted Statutory Book Value calculated
therefrom or
(ii) Adjustment Memorandum, as applicable) shall thereafter be
final and
binding upon Seller and Buyer for purposes of any post-closing
adjustment set
forth in this Section 1.4 (and any amounts to be paid
pursuant to
Section 1.4(f) hereof shall thereupon be paid).
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(d)
If the parties are unable to reach a mutual agreement in
accordance with
Section 1.4(c) hereof during the thirty (30) day period
referred to
therein, then Seller and Buyer shall jointly select a qualified
partner (with
fifteen (15) or more years of life insurance accounting
experience) of
either Deloitte & Touche LLP or KPMG LLP (the "ACCOUNTING
EXPERT"), who,
acting as an expert and not as an arbitrator, shall resolve
those matters
still in dispute with respect to the June Financial
Statements and
the June Adjusted Statutory Book Value calculated therefrom.
If the parties
fail to agree on an Accounting Expert within five (5)
Business Days
after the expiration of the thirty (30) day period, either
party may
request the American Arbitration Association to appoint such an
Accounting
Expert (or a qualified partner (with fifteen (15) or more years
of life
insurance accounting experience) of another accounting firm if
both
accounting firms
decline to or are disqualified from accepting the
dispute), and
such appointment shall be conclusive and binding upon the
parties. The
Accounting Expert's resolution of the matters in dispute,
including any
adjustments to the June Financial Statements (or the June
Adjusted
Statutory Book Value calculated therefrom) made by the
Accounting
Expert, shall be
made by a detailed writing and shall be final and binding
on Seller and
Buyer (and any amounts to be paid pursuant to Section 1.4(f)
hereof shall
thereupon be paid). Within twenty (20) days of the appointment
of the
Accounting Expert, each party shall deliver a written
presentation
of its position
to the Accounting Expert and the other party, and the
parties will
then have ten (10) days to prepare a written response to the
other party's
presentation. The Accounting Expert may also request written
responses from
the parties to specific questions at any time, which shall
be delivered to
the Accounting Expert and the other party. The Accounting
Expert shall
make a determination as soon as practicable and in any event
within sixty
(60) days (or such other time as the parties shall agree in
writing) after
its engagement. Notwithstanding anything set forth in this
Section 1.4(d),
the scope of any dispute to be resolved by the Accounting
Expert pursuant
to this Section 1.4(d) shall be limited to whether the June
Financial
Statements were prepared in accordance with SAP (including the
Agreed
Accounting Policies), consistently applied with their application
as
of December 31,
2003, or whether there were mathematical errors in the June
Financial
Statements or the calculation of the June Adjusted Statutory
Book
Value, and,
except for the foregoing matters, the Accounting Expert shall
not and is not
to make any further determination. In resolving any disputed
item, the
Accounting Expert may not assign a value to any particular item
greater than the greatest value
for such item claimed by Seller or Buyer or
less than the
smallest value for such item claimed by Seller or Buyer, in
each case as
presented to the Accounting Expert. Seller and Buyer agree to
fully cooperate
with each other and with the Accounting Expert to resolve
any dispute.
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(e)
Seller and Buyer agree that judgment may be entered to give
effect to the
determination of the Accounting Expert in any court having
jurisdiction
over the party against which such determination is to be
enforced.
Notwithstanding any other provision of this Agreement to the
contrary, the
procedure set forth in this Section 1.4 shall be each party's
exclusive remedy
against the other party to this Agreement with respect to
any disputes
relating to an adjustment to the Closing Consideration;
PROVIDED,
HOWEVER, that, except as provided in this sentence and in
Section
7.3(d), Seller
and GAC acknowledge that neither the decision of the
Accounting
Expert, if any, nor Parent and Buyer's acceptance of the final
and binding June
Financial Statements shall in any way limit or otherwise
affect Parent
and Buyer's rights to make any claim for breach of any
representation,
warranty or covenant of Seller or GAC under this Agreement,
or in Parent and
Buyer's right to indemnification for any such breach under
Article VII.
(f)
If the June Adjusted Statutory Book Value as calculated from
the final and
binding June Financial Statements: (i) is greater than the
Target Statutory
Book Value, then Buyer shall pay to Seller the amount by
which the June
Adjusted Statutory Book Value exceeds the Target Statutory
Book Value; or
(ii) is less than the Target Statutory Book Value, then
Seller shall pay
to Buyer the amount by which the June Adjusted Statutory
Book Value is
less than the Target Statutory Book Value (the amount of
either such
adjustment, a "POST-CLOSING ADJUSTMENT AMOUNT"). The "PURCHASE
PRICE" shall
equal the Closing Consideration plus the Post-Closing
Adjustment
Amount, if payable by Buyer, or minus the Post-Closing
Adjustment
Amount, if payable by Seller. Buyer and Seller acknowledge that
for purposes of
the procedures set forth in this Section 1.4 only, the
calculation of
June Adjusted Statutory Book Value will be made subject to
the provisions
of Section 4.15.
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(g)
Any Post-Closing Adjustment Amount payable by Seller
pursuant to this
Section 1.4 shall be paid promptly by Seller, but in no
event later than
ten (10) Business Days following the final and binding
determination of
such Post-Closing Adjustment Amount (as determined by the
Accounting
Expert). Any Post-Closing Adjustment Amount payable by Buyer
pursuant to this
Section 1.4, shall be paid promptly by Buyer, but in no
event later than
ten (10) Business Days following the final and binding
determination of
such Post-Closing Adjustment Amount (as determined by the
Accounting
Expert); PROVIDED, HOWEVER, that if any Post-Closing Adjustment
Amount payable
by Buyer pursuant to this Section 1.4 shall be an amount
greater than $20
million (the "INITIAL ADJUSTMENT AMOUNT"), then Buyer
shall (i) pay
the Initial Adjustment Amount to Seller within ten (10)
Business Days
following the final and binding determination of such
Post-Closing
Adjustment Amount (as determined by the Accounting Expert) and
(ii) shall issue
to Seller a note (the "ADJUSTMENT NOTE") in the amount of
the excess of
such Post-Closing Adjustment Amount over the Initial
Adjustment
Amount, payable by Parent upon the earlier to occur of (A) the
second Business
Day after the date when it becomes permissible under
applicable Law
for Buyer to cause any Insurance Subsidiary to make a
dividend to
Buyer in the amount of such excess (and Buyer agrees to use its
commercially
reasonable efforts to facilitate the making of such dividend
as promptly as
practicable) and (B) the first Business Day after the
twelve-month
anniversary of the date that is 90 days after the Closing
Date. Payment by
either party of (i) any Post-Closing Adjustment Amount or
(ii) the
principal of any Adjustment Note shall in each case be made in
immediately
available funds via wire transfer to an account designated by
the party
entitled to receive such payment in writing, and shall in each
case be paid
together with interest thereon, at a rate per annum equal to
the "Prime Rate"
(as reported from time to time in THE WALL STREET JOURNAL)
plus 200 basis
points, calculated on the basis of the actual number of days
elapsed divided
by 365, from and including the Closing Date to but
excluding the
date of payment.
(h)
All fees and expenses of Seller relating to the matters
described in
this Section 1.4, including the preparation and delivery of
the June
Financial Statements and the fees of Ernst & Young LLP and
Milliman, shall
be borne by Seller, and all fees and expenses of Buyer
relating to the
matters described in this Section 1.4 shall be borne by
Buyer.
Notwithstanding the foregoing, in the event any dispute is
submitted
to the
Accounting Expert for resolution as provided in Section 1.4(d)
hereof, the fees
and expenses of the Accounting Expert (and any arbitrator
appointing such
expert, if applicable) shall be borne equally by Seller and
Buyer.
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(i)
Following the Closing, Buyer shall not take any action with
respect to the
accounting books and records of the Acquired Companies and
their
Subsidiaries on which the June Financial Statements or the
calculation of
June Adjusted Statutory Book Value is to be based that is
not consistent
with the past practices of the Acquired Companies (including
the Agreed
Accounting Policies) and would affect the June Financial
Statements or
the calculation of June Adjusted Statutory Book Value.
Without limiting
the generality of the foregoing, no changes shall be made
in the methodology for
establishing any reserve or other account existing
as of the date
of the balance sheet included within the June Financial
Statements
(including with respect to assumptions, estimations methodology
and actuarial
methodology) that would affect the June Financial Statements
or the
calculation of June Adjusted Statutory Book Value.
SECTION 1.5
CLOSING
COSTS; TRANSFER TAXES AND FEES. Except as otherwise
provided in this Section 1.5, Buyer and
Seller shall each bear 50% of the cost
of (a) all documentary, sales, use, stamp
and transfer Taxes and any other Taxes
or fees imposed by reason of the transfer
of the Shares (and any deficiency,
interest or penalty asserted with respect
thereto) ("TRANSFER TAXES") and filing
any associated Tax Returns and (b) all
recording, filing, title and registration
fees or other charges in connection with or
as a direct result of the transfer
of the Shares. Buyer shall bear all
Transfer Taxes resulting solely from the
fact that Parent is a foreign entity and
all costs (including those costs
relating to insurance regulatory approvals)
of applying for new Required
Licenses and obtaining the transfer of
existing Required Licenses which may be
lawfully transferred.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
OF SELLER AND GAC
Except as set forth in the disclosure letter delivered by Seller
to
Buyer (the "SELLER DISCLOSURE LETTER")
(PROVIDED, that the listing of an item in
one part of the Seller Disclosure Letter
shall be deemed to be a listing in each
part of the Seller Disclosure Letter and to
apply to any other representation
and warranty of Seller and GAC in this
Agreement to which its relevance is
reasonably apparent on its face), each of
Seller and GAC represents and warrants
to Buyer as of the date of this Agreement
and, unless such representations and
warranties address a matter only as of a
certain date, as of the Closing Date as
follows:
SECTION 2.1
ORGANIZATION. Each of Seller, GAC and the Acquired Companies
has been duly organized and is validly
existing and in good standing under the
laws of the jurisdiction of its
incorporation or organization and has all
requisite corporate power and authority to
own, lease and operate its properties
and to carry on its business as now being
conducted. Each of the Acquired
Companies is duly qualified to do business
and is in good standing in each
jurisdiction in which the property owned,
leased or operated by it, the sale of
insurance or the nature of the business
conducted by it makes such qualification
necessary, except for such failures to be
so duly qualified and in good standing
that, individually or in the aggregate,
would not reasonably be expected to
result in a Material Adverse Effect on the
Acquired Companies.
SECTION 2.2
CAPITALIZATION.
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(a)
The capitalization of each Acquired Company is set forth on
Part 2.2(a) of
the Seller Disclosure Letter, and there are no equity
securities
issued and outstanding of any Acquired Company except as so set
forth on Part
2.2(a) of the Seller Disclosure Letter. All of the Shares are
owned of record
by Seller, GAC or an Acquired Company.
(b)
All of the outstanding equity securities of each Acquired
Company have
been duly authorized and are validly issued, fully paid and
nonassessable.
None of the Shares have been issued in violation of, and
none of the
Shares are subject to, any purchase option, call, right of
first refusal,
preemptive, subscription or similar rights under any
provision of
Law, the Constituent Documents of Seller or any subsidiary of
Seller or any
Contract or Other Agreement.
(c)
The Acquired Companies have no preferred stock, voting
common stock,
non-voting common stock, or other shares of capital stock
reserved for or
otherwise subject to issuance under existing plans or
contractual
commitments. The Acquired Companies do not have any outstanding
bonds,
debentures, notes or other debt obligations, or any outstanding
warrants or
options for the purchase of any class of equity security, the
holders of which
have the right to vote or which are convertible into or
exercisable for
securities having the right to vote with the holders of the
Shares on any
matter.
(d)
There are no outstanding purchase rights, warrants, options,
rights, phantom
stock rights, agreements, convertible or exchangeable
securities or
other Contracts or Other Agreements relating to the issuance,
sale, voting,
rescission, redemption or transfer of any equity securities
or other
securities of any Acquired Company.
(e)
None of the Acquired Companies owns, directly or indirectly,
any capital
stock of or other equity interests in any corporation,
partnership or
other Person (other than investments held in the Investment
Portfolio in
accordance with the Investment Guidelines) and none of the
Acquired
Companies is a member of or participant in any partnership or
joint venture
other than as may be permitted by the Investment Guidelines.
(f) Prior to the
execution of this Agreement, Seller (i) has
delivered to
Buyer true and complete copies of the Constituent Documents,
each as amended
to date, of each of the Acquired Companies and (ii) has
made available
to Buyer true and complete copies of the stock certificate
and transfer
books and the minute books of each of the Acquired Companies.
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SECTION 2.3
AUTHORIZATION; BINDING AGREEMENT. Each of Seller and GAC has
all requisite corporate power and authority
to execute and deliver this
Agreement and the other Transaction
Documents to which each is a party, to
perform its obligations hereunder and
thereunder and to consummate the
transactions contemplated hereby and
thereby. The execution, delivery and
performance of this Agreement and the other
Transaction Documents to which each
is a party and the consummation of the
transactions contemplated hereby and
thereby have been duly and validly
authorized by all necessary corporate action
on the part of each of Seller and GAC. This
Agreement has been duly and validly
executed and delivered by each of Seller
and GAC and (assuming the accuracy of
the representations and warranties in
Section 3.2) constitutes a legally valid
and binding agreement of each of Seller,
and GAC enforceable against each of
Seller and GAC in accordance with its
terms, subject to (i) the effect of any
applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws
relating to or affecting creditors' rights
and remedies generally, and (ii) the
effect of equitable principles (regardless
of whether enforceability is
considered in a proceeding in equity or at
law).
SECTION 2.4
NONCONTRAVENTION. Neither the execution and delivery of this
Agreement and the other Transaction
Documents nor the consummation of the
transactions contemplated hereby and
thereby will conflict with or result in any
breach of any provision of, or require any
consent or approval (other than
consents and approvals described in Section
2.5 below) under or constitute (with
or without notice or lapse of time or both)
a violation or default (or give rise
to any right of termination, cancellation
or acceleration or to loss of a
material benefit) under, or result in the
creation of any Lien upon the property
or assets of any Acquired Company under,
any of the terms, conditions or
provisions of (i) the Constituent Documents
of Seller, GAC or any Acquired
Company, (ii) any note, bond, mortgage,
indenture, deed of trust, license,
lease, contract, commitment, agreement,
arrangement or other instrument or
obligation (collectively, "CONTRACTS OR
OTHER AGREEMENTS") to which Seller, GAC
or any Acquired Company is a party or by
which any of them or any portion of
their properties or assets may be bound or
(iii) any Law or Order applicable to
Seller, GAC, any Acquired Company or any
portion of their properties or assets
or any Registered Investment Company or
Registered Separate Account, other than
in the case of foregoing clauses (ii) and
(iii), any such items that,
individually or in the aggregate, would not
reasonably be expected to result in
a Material Adverse Effect on the Acquired
Companies.
SECTION 2.5
APPROVALS.
No license, permit, consent, approval, order,
certificate, authorization, declarations of
or filing with any Governmental
Entity on the part of Seller, GAC or any
Acquired Company that has not been
obtained or made is required in connection
with the execution or delivery by
Seller or GAC of this Agreement or the
other Transaction Documents or the
consummation by Seller and GAC of the
transactions contemplated hereby and
thereby, other than (a) filings and other
applicable requirements under the
Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR
ACT"), (b) approvals, filings and/or
notices required under any applicable state
or federal banking laws or any applicable
state or federal laws related to the
sale or operation of insurance, investment
companies, investment advisers or
broker-dealers set forth in Part 2.5 of the
Seller Disclosure Schedule, or (c)
consents, approvals, authorizations,
declarations or filings that, if not
obtained or made, would not reasonably be
expected to result in a Material
Adverse Effect on the Acquired Companies,
or prevent Seller or GAC from
consummating the transactions contemplated
hereby.
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SECTION 2.6
FINANCIAL
STATEMENTS. (a) Attached as Part 2.6(a) of the
Seller Disclosure Letter are (i) the
unaudited combined financial statements
(consisting of balance sheets and
statements of income) as of and for the year
ended December 31, 2003 of the Acquired
Companies that are not Insurance
Subsidiaries and (ii) the audited financial
statements (consisting of balance
sheets, statements of income and statements
of cash flows), including the
related footnotes, as of and for the year
ended December 31, 2003 of each of the
Acquired Companies listed on Part
2.6(a)(ii) of the Seller Disclosure Letter
(collectively, the financial statements
described in clauses (i) and (ii), the
"NON-INSURANCE FINANCIAL STATEMENTS"). The
Non-Insurance Financial Statements
were derived from the same data and
prepared using the same methodologies as
were used in the annual audited GAAP
financial statements of Seller included in
the Seller's filings under the Exchange
Act, and fairly present in all material
respects (except, in the case of the
Non-Insurance Financial Statements
described in clause (i) above, for the
absence of footnotes) the financial
condition of the Acquired Companies that
are not Insurance Subsidiaries as of
the respective dates thereof and the
results of operations of the Acquired
Companies that are not Insurance
Subsidiaries for the respective periods then
ended.
(b) The Acquired Companies that are not Insurance Subsidiaries
do
not have any liabilities or obligations of
any nature (whether accrued,
absolute, contingent, unasserted or
otherwise) required by GAAP to be reflected
on a balance sheet or in the notes thereto,
except (i) as disclosed, reflected
or reserved against in the balance sheet
included in the Non-Insurance Financial
Statements and (ii) for ordinary course
liabilities and obligations incurred in
the ordinary course of the business of the
Acquired Companies that are not
Insurance Subsidiaries consistent with past
practice since December 31, 2003 and
not in violation of this Agreement. This
representation and warranty shall not
be deemed to be breached as a result of any
change in GAAP or Law after the date
of this Agreement.
SECTION 2.7
CERTAIN
SUBSIDIARIES.
(a)
INSURANCE SUBSIDIARIES.
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(i)
Part 2.7(a)(i) of the Seller Disclosure Letter sets
forth the name of each Acquired Company that is an insurance
company
(collectively, the "INSURANCE SUBSIDIARIES"). Each of the
Insurance
Subsidiaries is (i) duly licensed or authorized in all material
respects as an insurance company in its jurisdiction of
incorporation, (ii) duly licensed or authorized in all material
respects to carry on an insurance business in each other
jurisdiction where it is required to be so licensed or
authorized,
and (iii) duly licensed or authorized in all material respects
in
its jurisdiction of incorporation and each other applicable
jurisdiction to issue the Life & Annuity Contracts that it
is
currently writing, and was duly licensed or authorized in all
material respects to issue the Life & Annuity Contracts that
it
wrote at the time such Life & Annuity Contracts were issued
and
otherwise to conduct its insurance and variable products
business,
as required by Law. Seller, GAC and the Insurance Subsidiaries
have
made all required filings under applicable Law regulating the
business and products of insurance, except where the failure to
file, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on the Acquired
Companies. Part 2.7(a)(i) of the Seller Disclosure Letter sets
forth
the states where Seller, GAC and the Insurance Subsidiaries are
domiciled or "commercially domiciled" for insurance regulatory
purposes. Seller has previously delivered to Parent true and
complete copies of all examination reports of insurance
departments
and any insurance regulatory authorities received by any
Insurance
Subsidiary since January 1, 2001.
(ii) With
respect to each Insurance Subsidiary, each such
Insurance Subsidiary's audited Insurance Subsidiary Statements as
of
and for the year ended December 31, 2003 are attached as Part
2.7(a)(ii) of the Seller Disclosure Letter. Such Insurance
Subsidiary Statements present (and, with respect to any
Insurance
Subsidiary Statement for any quarter after December 31, 2003,
and
prior to the Closing, will present) fairly in all material
respects,
on a consistent basis and in accordance with the statutory
accounting practices prescribed or permitted by the appropriate
regulatory agencies of the jurisdiction in which such Insurance
Subsidiary is domiciled ("SAP"), the financial position at the
date
of each such statement and results of each such Insurance
Subsidiary's operations for each such referenced period.
SCHEDULE 1.4 sets forth certain of the accounting policies and
practices (including with respect to assumptions, estimations
methodology and actuarial methodology) used by Seller to prepare
the
December Financial Statements. No material deficiency has been
asserted in writing by any Governmental Entity with respect to
any
Insurance Subsidiary Statements that has not been addressed to
the
satisfaction of such Governmental Entity. Except as indicated
therein, all assets that are reflected as admitted assets on
the
Insurance Subsidiary Statements comply in all material respects
with
all applicable Laws regulating the business and products of
insurance with respect to admitted assets, as applicable, and
the
amounts of capital reflected on the Insurance Subsidiary
Statement
of each Insurance Subsidiary are sufficient in nature and amount
to
meet all requirements of applicable Law. The Insurance
Subsidiary
Statements comply in all material respects with all applicable
Law.
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(iii) All
reserves for policyholder liabilities reflected
on the balance sheets of the Insurance Subsidiary Statements as
of
December 31, 2003, (A) were determined in accordance with
actuarial
standards of practice, consistently applied, (B) were based on
actuarial assumptions that were reasonable in relation to the
relevant policy and contract provisions and (C) are in
compliance
with SAP in all material respects (it being understood by Parent
and
Buyer that in making the representations and warranties in this
Section 2.7(a)(iii) Seller and GAC are not representing and
warranting that the reserves referred to therein or the assets
supporting such reserves have been or will be sufficient or
adequate
for the purposes for which they were established or that
reinsurance
recoverables taken into account in determining the amount of
such
reserves will be collectible). The Insurance Subsidiaries do
not
have any liabilities or obligations of any nature (whether
accrued,
absolute, contingent, unasserted or otherwise) required by SAP to
be
reflected on a balance sheet or in the notes thereto, except (i)
as
disclosed, reflected or reserved against in the balance sheets
included in the Insurance Subsidiary Statements, and (ii) for
ordinary course
liabilities and obligations incurred in the ordinary
course of business and consistent with past practice since
December
31, 2003 and not in violation of this Agreement (it being
understood
by Parent and Buyer that in making the representations and
warranties in this Section 2.7(a)(iii) Seller and GAC are not
representing and warranting that the reserves referred to therein
or
the assets supporting such reserves have been or will be
sufficient
or adequate for the purposes for which they were established or
that
reinsurance recoverables taken into account in determining the
amount of such reserves will be collectible).
(iv)
Since
January 1, 2001, each Insurance Subsidiary has
had procedures and programs which are reasonably designed to
provide
assurance that its respective agents and employees are in
material
compliance with Law, including without limitation, advertising,
licensing and sales practices laws, regulations, directives,
bulletins and opinions of governmental authorities. Seller has
no
knowledge of any material noncompliance with such procedures
and
programs.
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(v)
Each of the Life & Annuity Contracts has been
marketed and sold by the Insurance Subsidiaries and, to the
knowledge of Seller, marketed and sold by the independent agents
of
the Insurance Subsidiaries, in each case, in compliance in all
material respects with applicable Law of the respective
jurisdiction
in which such Life & Annuity Contracts have been sold,
including (i)
all applicable prohibitions against "redlining" or withdrawal
of
business lines, (ii) all applicable requirements relating to
the
disclosure of the nature of insurance products as policies of
insurance, (iii) all applicable requirements relating to
insurance
product projections and illustrations, (iv) all applicable
prohibitions against discrimination based on factors relating
to
race, gender, national origin or similar distinctions, (v) all
applicable prohibitions against "churning," or other improper
replacement practices, (vi) all applicable prohibitions against
"vanishing premium," premium offsets or other under-funding of
life
insurance policies, (vii) all applicable requirements relating
to
"Holocaust victims" and (viii) all other requirements or
prohibitions relating to unfair trade practices under
applicable
Law. Each of the Insurance Subsidiaries has provided notice and
disclosure, to the extent such notice and disclosure is required
by
applicable Law, to prospective insureds of situations, if any,
in
which premiums are charged (or policy charges are imposed) from
the
date of issue of a Life & Annuity Contract, notwithstanding
that
coverage begins at a later date.
(vi) Since
January 1, 2001, each Insurance Subsidiary has
maintained records which in all material respects accurately
reflect
transactions in reasonable detail, and accounting controls,
policies
and procedures reasonably designed to ensure that such
transactions
are
recorded in a manner which permits the preparation of financial
statements in accordance with GAAP and applicable statutory
accounting requirements.
(vii) Seller has
delivered to Buyer a true and correct
copy of the Investment Guidelines, and since January 1, 2002
the
Investment Portfolio has been invested in compliance in all
material
respects with the Investment Guidelines, as in effect at the
time
any such investment was made.
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(b)
BROKER/DEALER SUBSIDIARIES. Part 2.7(b) of the Seller
Disclosure
Letter sets forth the name of each Acquired Company that is
registered as a
broker or dealer (collectively, the "BROKER/DEALER
SUBSIDIARIES").
Except as would not reasonably be expected to result in,
individually or
in the aggregate, a Material Adverse Effect on the Acquired
Companies, (i)
each of the Acquired Companies and each of its respective
employees that
is required, in order to conduct its business as it is now
conducted, to be
registered, licensed or qualified as a broker-dealer under
the Exchange Act
or, in the case of any employees, is otherwise required to
be registered,
licensed or qualified under the Exchange Act or NASD
Regulations
(which for this purpose shall include the NASD's Membership and
Registration
Rules (Rules 1000-1140)) is so registered, licensed or
qualified (and
has been so registered, licensed or qualified at all times
since January 1,
1999 it has been required under applicable Law to be so
registered,
licensed or qualified), (ii) each Broker/Dealer Subsidiary is a
member
organization in good standing of the NASD, Inc. ("NASD"),
securities
exchanges,
commodities exchanges, boards of trade, clearing organizations,
trade
organizations and such other Governmental Entities and
organizations
in which its
membership is required in order to conduct its business as it
is now
conducted, (iii) each Broker/Dealer Subsidiary has timely filed
all
registrations,
declarations, reports, notices, forms or other filings
required to be
filed with the SEC, NASD, the New York Stock Exchange or any
other
Governmental Entity and all fees and assessments due and payable
in
connection
therewith have been paid, (iv) since the later of its inception
or January 1,
2002, each Broker/Dealer Subsidiary has had net capital (as
such term is
defined in Rule 15c3-1 of the Exchange Act) that satisfies the
minimum net
capital requirements of the Exchange Act and of the laws of any
jurisdiction in
which such Broker/Dealer Subsidiary conducts business, and
(v) no
Broker/Dealer Subsidiary is, nor is any "associated person" of
any
Broker/Dealer
Subsidiary, subject to a "statutory disqualification" (as
such terms are
defined in the Exchange Act) or subject to a
disqualification
that would be a basis for censure, limitations on the
activities,
functions or operations of, or suspension or revocation of the
registration of
such Broker/Dealer Subsidiary as a broker-dealer, under the
Exchange Act
and, to the knowledge of Seller and GAC, there is no
proceeding or
investigation pending by any Governmental Entity or
self-regulatory
organization that is reasonably likely to result in any
such censure,
limitations, suspension or revocation.
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(c)
INVESTMENT ADVISER. Part 2.7(c) of the Seller Disclosure
Letter sets
forth the name of each Acquired Company that is registered as
an "investment
adviser" under the Investment Advisers Act (an "INVESTMENT
ADVISER
SUBSIDIARY"). Except as would not reasonably be expected to
result
in, individually
or in the aggregate, a Material Adverse Effect on the
Acquired
Companies, (i) each of the Acquired Companies and each of its
employees that
is required, in order to conduct its business as it is now
conducted, to be
registered, licensed or qualified as an investment adviser
under the
Investment Advisers Act is so registered, licensed or qualified
(and has been so
registered, licensed or qualified at all times since
January 1, 1999
it has been required under applicable Law to be so
registered,
licensed or qualified), (ii) each "investment adviser
representative"
(as defined in the Investment Advisers Act) of an
Investment
Adviser Subsidiary, if any, who is required to be registered as
such is so
registered (and has been so registered, licensed or qualified
at
all times since
January 1, 1999 it has been required under applicable Law
to be so
registered, licensed or qualified), (iii) each Investment
Adviser
Subsidiary has
timely filed all registrations, declarations, reports,
notices, forms
or other filings required to be filed with the SEC or any
other
Governmental Entity (the "SEC DOCUMENTS"), and as of their
respective
dates, the SEC
Documents of each Investment Adviser Subsidiary complied in
all respects
with the requirements of applicable Law (including the
Securities
Laws), and all fees and assessments due and payable in
connection
therewith have been paid, (iv) no Investment Adviser Subsidiary
or any Person
"associated" (as such term is defined in the Investment
Advisers Act)
with any Investment Adviser Subsidiary has been convicted of
any crime or is
subject to any disqualification that would be a basis for
denial,
suspension, or revocation of registration of an investment
adviser
under Section
203(e) of the Investment Advisers Act or Rule 206(4)-4(b)
thereunder and,
to the knowledge of Seller, there is no proceeding or
investigation
pending by any Governmental Entity or self-regulatory
organization
that is reasonably likely to result in any such denial,
suspension or
revocation, (v) in the conduct of its business with respect
to employee
benefit plans subject to Title I of ERISA ("ERISA PLANS"), none
of the Acquired
Companies have (A) breached any applicable fiduciary duty
under Part 4 of
Title I of ERISA which would subject it to liability under
Sections 405 or
409 of ERISA, (B) engaged in a "prohibited transaction"
within the
meaning of Section 406 of ERISA or Section 4975 of the Code
which would
subject it to liability or taxes under Sections 409 or 502 of
ERISA or Section
4975 of the Code or (C) engaged in any conduct that could
constitute a
crime or violation listed in Section 411 of ERISA that could
preclude such
Person from providing services to any ERISA Plan, and (vi)
each Investment
Adviser Subsidiary and each of its predecessors, if any,
has at all times
rendered investment advisory services to investment
advisory
clients, including the Clients, in compliance with all
applicable
requirements as
to portfolio composition and portfolio management including
the terms of any
and all applicable investment advisory agreements, written
instructions
from such investment advisory clients, the organizational
documents of
such investment advisory clients, prospectuses, board of
director or
trustee directives and applicable Law.
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(d)
Except as would not reasonably be expected to result in,
individually or
in the aggregate, a Material Adverse Effect on the Acquired
Companies, no
Investment Adviser Subsidiary has taken any action that would
(x) prevent any
of the Registered Investment Companies (other than a
Registered
Separate Account) from qualifying as a "regulated investment
company", within
the meaning of Section 851 of the Code, (y) cause any
Client account
which is subject to ERISA to fail to comply with the
applicable
requirements of ERISA or (z) otherwise be inconsistent with any
of the
Investment Adviser Subsidiaries' prospectus and other offering,
advertising and
marketing materials. The Seller has previously delivered to
the Buyer a
complete copy of each SEC Document filed by each Investment
Adviser
Subsidiary from January 1, 2001 through the date hereof
(including
a composite Form
ADV as in effect on the date hereof).
(e)
Each Acquired Company that acts as an investment adviser or
distributor to a
Registered Investment Company has adopted a formal code of
ethics and a
written policy regarding insider trading, a complete and
accurate copy of
each of which has been delivered to Parent and each of
which
substantially complies with Law. The policies of each
Investment
Adviser
Subsidiary with respect to avoiding conflicts of interest are
as
set forth in its
most recent Form ADV thereof, as amended, copies of which
have been
delivered to Parent, and there have been no material violations
or allegations
of violations of such policies that have occurred or been
made that have
not been addressed in accordance with these procedures.
(f)
Each Investment Adviser Subsidiary has at all times
maintained books
and records which accurately reflect transactions in
reasonable
detail, and accounting controls, policies and procedures
reasonably
designed to ensure that such transactions are (i) executed in
accordance with
its management's general or specific authorization, as
applicable, and
(ii) recorded in a manner which permits the preparation of
financial
statements in accordance with GAAP and applicable regulatory
accounting
requirements and other account and financial data, including
performance
results, in accordance with applicable regulatory requirements,
and the
documentation pertaining thereto is retained, protected and
duplicated in
accordance with all applicable regulatory requirements,
including the
Investment Advisers Act and the Investment Company Act.
SECTION 2.8
ABSENCE OF
CERTAIN CHANGES OR EVENTS. Since December 31,
2003, the Acquired Companies have conducted
their respective businesses only in
the ordinary course consistent with past
practice (except in connection with the
transactions contemplated hereby) and have
used commercially reasonable efforts
to preserve intact the business
organization of the Acquired Companies and to
maintain satisfactory relationships with
the customers, suppliers and employees
and others with which the Acquired
Companies have business relationships and,
without limiting the generality of the
foregoing:
(a)
There have been no changes, effects, events, occurrences or
developments
which, individually or in the aggregate, have had or would
reasonably be
expected to result in a Material Adverse Effect on the
Acquired
Companies.
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(b)
None of the Acquired Companies has sold, assigned,
transferred or
conveyed any Proprietary Right.
(c)
Except as otherwise contemplated by this Agreement or as
required to
ensure that any Plan is maintained in compliance with
applicable Law
or to comply with any Contract or Other Agreement regarding
Business
Employees or Plan entered into prior to the date hereof
(complete
and accurate
copies of which have been heretofore delivered to Buyer), none
of the Acquired
Companies has (A) adopted, entered into, terminated or
amended any
collective bargaining agreement or Plan or any Contract or
Other Agreement
with respect to any current or former employees of an
Acquired Company
or any Bank Channel Employee, (B) increased in any manner
the
compensation, bonus or fringe or other benefits of, or paid any
bonus
of any kind or
amount whatsoever to, any current or former Business
Employee, except
for any planned salary increases and payment of bonuses,
each as
described in Part 2.8(c) of the Seller Disclosure Letter, (C)
paid
any benefit or
amount not required under any Plan or Contract or Other
Agreement as in
effect on the date of this Agreement, other than as
contemplated in
the foregoing clause (B), (D) except in the ordinary course
of business
consistent with past practice, granted or paid any severance or
termination pay
or increase in any manner the severance or termination pay
of any current
or former employees of an Acquired Company or any Bank
Channel
Employee, (E) granted any awards under any bonus, incentive,
performance or
other Plan, Contract or Other Agreement or otherwise, other
than as
contemplated in the foregoing clause (B), (F) taken any action
to
fund or in any
other way secure the payment of compensation or benefits
under any Plan
or Contract or Other Agreement, (G) taken any action to
accelerate the
vesting or payment of any compensation or benefit under any
Plan or Contract
or Other Agreement or (H) materially changed any actuarial
or other
assumption used to calculate funding obligations with respect
to
any Acquired
Company Plan or changed the manner in which contributions to
any Acquired
Company Plan are made or the basis on which such contributions
are
determined.
(d)
No Acquired Company has effected any amendment or
modification to
its Constituent Documents.
(e)
None of the Acquired Companies has made any material change
in its fiscal
year, accounting methods or principles used for GAAP or
statutory
reporting purposes, except for changes which are required by
Law,
SAP or GAAP of
all enterprises in the same business.
(f)
Except in the ordinary course of business consistent with
past practice,
no Acquired Company has made any material change, and
neither Seller,
GAC nor any Acquired Company has permitted any of the
Insurance
Subsidiaries to make any material change, in its underwriting
or
claims
management practices, pricing practices, reserving practices,
reinsurance
practices, marketing practices or investment policies or
practices or
Investment Guidelines, except in each case as required by Law.
(g)
None of the Acquired Companies has made any new material Tax
election or any
settlement or compromise of any material income Tax
liability.
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(h)
No Acquired Company has revalued any properties or assets,
including
writing off notes or accounts receivable, other than in the
ordinary course
of the business of the applicable Acquired Company, or as
required by
applicable Law, SAP or GAAP.
(i)
The investments of the Acquired Companies have been
maintained, and
no sales or other dispositions of investments have been
effected, other
than in accordance with the Investment Guidelines and in
the ordinary
course of business.
(j)
The Seller has not taken or failed to take any action or
permitted any
Acquired Company to take or fail to take any action, in each
case for the
purpose of either (i) shifting statutory income or surplus
from the period
following June 30, 2004 to the period preceding June 30,
2004 or (ii)
increasing statutory income or surplus with the intent of
increasing the
June Adjusted Statutory Book Value or increasing the Closing
Consideration to
the detriment of Buyer and Parent; PROVIDED, HOWEVER, that
Parent and Buyer
agree that any action taken by Seller, to the extent
necessary to
ensure that an independent auditor's opinion will be
unqualified
after an issue as to ability to give an unqualified opinion is
raised by such
auditor, shall not be deemed to be a breach of this Section
2.8(j).
(k)
No Acquired Company has launched or introduced any material
new product or
service.
SECTION 2.9
LITIGATION, JUDGMENTS, NO DEFAULT, ETC. There is no suit,
action or proceeding (collectively,
"PROCEEDING") pending or, to the knowledge
of Seller, threatened in writing since
January 1, 2001, to which any of the
Acquired Companies or any Registered
Investment Company or Registered Separate
Account is a party and which (i) relate to
or involve a claim for specified
damages of more than $1,000,000, (ii)
relate to or involve any class action
claims, (iii) seek any material injunctive
relief or (iv) would reasonably be
expected to give rise to any legal
restraint on or prohibition against the
transactions contemplated by this
Agreement. There is no Proceeding or claim by
any of the Acquired Companies pending, or
which the Seller or a Subsidiary
intends to initiate on behalf of any
Acquired Company, against any other Person.
To the knowledge of Seller, there is no
pending or threatened investigation of
any of the Acquired Companies or any
Registered Investment Company or Registered
Separate Account by any Governmental
Entity. To the knowledge of Seller, there
is no judgment, decree, injunction
(preliminary or otherwise), rule or order
(collectively "ORDERS") of any arbitrator
or Governmental Entity outstanding
against any of the Acquired Companies, any
Registered Investment Company or any
Registered Separate Account.
SECTION 2.10
COMPLIANCE;
MATERIAL CONTRACTS.
(a)
No Acquired Company is in violation, breach or default of
any term,
condition or provision of its Constituent Documents.
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(b)
None of the Acquired Companies or, to the knowledge of
Seller, any
other party thereto, is in violation of or in breach or default
under (nor, to
the knowledge of Seller, does there exist any condition
which upon the
passage of time or the giving of notice or both would cause
such a violation
of or breach or default under) any Material Contract (as
defined below)
to which any Acquired Company is a party or by which any of
them or any
portion of their respective properties or other assets may be
bound, except
for violations, breaches or defaults that, individually or in
the aggregate,
would not reasonably be expected to result in a Material
Adverse Effect
on the Acquired Companies. Other than Related Contracts,
none of the
Acquired Companies has entered into any Contract or Other
Agreement with
any Affiliate of the Seller (other than another Acquired
Company) that is
in effect. Part 2.10(b) of the Seller Disclosure Letter
sets forth a
true and complete list of each Contract or Other Agreement
(other than a
Life and Annuity Contract or Related Contract entered into in
the ordinary
course of business) to which any Acquired Company is a party,
or by which any
of them or any portion of their respective properties or
other assets may
be bound, and that is of a nature described below in this
Section 2.10(b)
(each, a "MATERIAL CONTRACT"):
(i)
an employment contract (whether oral or written)
that has an aggregate future liability in excess of $100,000 and
is
not terminable by such Acquired Company by notice of not more
than
60 days for a cost of less than $50,000;
(ii) a
Contract or Other Agreement (x) containing a
provision limiting the ability of any Acquired Company to engage
in
any line of insurance
or asset management in any geographical area
or to compete with any Person, or (y) providing for "exclusivity"
as
a result of which any Acquired Company is restricted with respect
to
distribution and marketing;
(iii) a (A)
management, service, consulting or other
similar type of contract or (B) advertising agreement or
arrangement, in any such case which has an aggregate future
liability to any person (other than another Acquired Company)
in
excess of $250,000 and is not terminable by such Acquired Company
by
notice of not more than 60 days for a cost of less than
$125,000;
(iv) a
material license, option or other agreement
relating in whole or in part to any Proprietary Rights described
in
Section 2.14 (including any license or other agreement under
which
any Acquired Company is licensee or licensor of any such
Proprietary
Right);
(v)
a Contract or Other Agreement under which any
Acquired Company has borrowed any money from, or issued any
note,
bond, debenture or other evidence of indebtedness to, any Person,
or
any other note, bond, debenture or other evidence of
indebtedness
issued to any Person, in any such case which, individually, is
in
excess of $1,000,000;
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(vi) a
Contract or Other Agreement under which (A) any
Person has directly or indirectly guaranteed indebtedness,
liabilities or obligations of such Acquired Company or (B) any
Acquired Company has directly or indirectly guaranteed
indebtedness,
liabilities or obligations of any Person (in each case other
than
endorsements for the purpose of collection in the ordinary course
of
business), in any such case which, individually, is in excess
of
$1,000,000;
(vii) a Contract
or Other Agreement under which such
Acquired Company has made any advance, loan, extension of credit
or
capital contribution to, or other investment in, any Person, in
any
such case which, individually, is in excess of $1,000,000;
(viii) a Contract or
Other Agreement providing for
indemnification outside of the ordinary course of business of
any
Person with respect to liabilities relating to any current or
former
business of any Acquired Company or any predecessor to an
Acquired
Company;
(ix) a
Contract or Other Agreement with any Person (other
than an Acquired Company) to which a Broker/Dealer Subsidiary is
a
party and pursuant to which such Broker/Dealer Subsidiary acts as
a
placement agent for securities;
(x)
a Contract or Other Agreement by or to which any
Acquired Company or any of an Acquired Companies' assets or
business
is bound or subject which has an aggregate future liability to
any
Person (other than another Acquired Company) in excess of
$1,000,000
and is not terminable by such Acquired Company by notice of not
more
than 60 days for a cost of less than $500,000;
(xi) a
Contract or Other Agreement preventing the
solicitation for employment of third parties by the applicable
Acquired Company;
(xii) a
"standstill" Contract or Other Agreement
prohibiting an Acquired Company from acquiring the assets or
securities of any person;
(xiii) a partnership,
joint venture, shareholders or other
similar Contract or Other Agreement with any Person; or
(xiv) a Contract
or Other Agreement relating to the future
disposition or acquisition of any investment in any person or of
any
interest in any business enterprise (other than the disposition
or
acquisition of investments in the ordinary course of the business
of
the applicable Acquired Company, including the disposition or
acquisition of investments forming part of the Investment
Portfolio), or requiring an Acquired Company to purchase any
security (other than the disposition or acquisition of
investments
in the ordinary course of business of the applicable Acquired
Company, including the disposition or acquisition of
investments
forming part of the Investment Portfolio).
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SECTION 2.11
FINDERS AND
INVESTMENT BANKERS. Neither Seller nor any
Acquired Company nor any of their
respective officers, directors or Affiliates
has employed any investment banker,
financial advisor, broker or finder in
connection with the transactions
contemplated by this Agreement, except for
Goldman, Sachs & Co. ("GOLDMAN SACHS")
and Milliman USA, Inc. ("MILLIMAN"), or
incurred any liability for any investment
banking, business consultancy,
financial advisory, brokerage or finders'
fees or commissions in connection with
the transactions contemplated hereby,
except for fees payable to Goldman Sachs
and Milliman, all of which fees have been
or will be paid by Seller in
accordance with the agreements between
Seller and Goldman Sachs and Seller and
Milliman.
SECTION 2.12
COLLECTIVE
BARGAINING AGREEMENTS. No Acquired Company is a
party to or subject to any collective
bargaining agreement with any labor union.
To the knowledge of Seller, no union
organization campaign is in progress with
respect to the Business Employees. There
are no labor controversies pending or,
to the knowledge of Seller, threatened in
writing against any Acquired Company
which, individually or in the aggregate,
would reasonably be expected to result
in a Material Adverse Effect on the
Acquired Companies. There are not any
pending charges against Seller (relating to
any of the Acquired Companies, any
of their current or former employees or the
Bank Channel Employees), any
Acquired Company or any current or former
employees of Seller or any Acquired
Company by any Governmental Entity
responsible for the prevention of unlawful
employment practices, and none of Seller or
any Acquired Company has received
written communication during the past three
years of the intent of any
Governmental Entity responsible for the
enforcement of labor or employment laws
to conduct an investigation of or affecting
any Acquired Company and, to the
knowledge of Seller, no such investigation
is in progress.
SECTION 2.13
INSURANCE.
Seller carries insurance with respect to the
Acquired Companies with insurers that, to
the knowledge of Seller, are solvent,
in amount and types of coverage which are
customary in the industry and against
risks and losses which are usually insured
against by persons holding or
operating similar properties and similar
businesses. Except as would not
reasonably be expected to result,
individually or in the aggregate, in a
Material Adverse Effect on the Acquired
Companies, all such policies are in full
force and effect, all premiums due and
payable thereon have been paid (other
than retroactive or retrospective premium
adjustments that are not yet, but may
be, required to be paid with respect to any
period ending prior to the Closing
Date), and no notice of cancellation or
termination has been received with
respect to any such policy which has not
been replaced on substantially similar
terms prior to the date of such
cancellation. To the knowledge of Seller, the
business of the Acquired Companies has been
conducted in a manner so as to
conform in all material respects to all
applicable provisions of such insurance
policies. No material claims have been
asserted under any of such insurance
policies or relating to the properties,
assets or operations of the Acquired
Companies since January 1, 2002.
SECTION 2.14
PROPRIETARY
RIGHTS.
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(a)
The Acquired Company Proprietary Rights, together with the
intellectual
property being licensed under each of the Transitional
Trademark
License, the Buyer Intellectual Property License and the IP
Side
Letters, will
immediately after the Closing be sufficient to conduct the
business of the
Acquired Companies as it is now being conducted. Part
2.14(a) of the
Seller Disclosure Letter sets forth a true and complete list
of all material
unregistered and unpatented Acquired Company Proprietary
Rights. With
respect to all Acquired Company Proprietary Rights that are
registered or
subject to an application for registration in the United
States, Part
2.14(a) of the Seller Disclosure Letter sets forth a list of
all registered
Acquired Company Proprietary Rights and a list of all
jurisdictions in
which such Proprietary Rights are registered or
registrations
applied for and all registration and application numbers. All
the material
Acquired Company Proprietary Rights have been duly registered
in, filed in or
issued by the appropriate Governmental Entity where such
registration, filing
or issuance is necessary for the conduct of the
business of the
Acquired Companies as it is presently conducted. The
Acquired
Companies are the owners of, and, to the knowledge of Seller,
have
the right to
use, execute, reproduce, display, perform, modify, enhance,
distribute,
prepare derivative works of and sublicense, without payment to
any other
Person, all the Acquired Company Proprietary Rights, and the
consummation of
the transactions contemplated hereby does not and will not
conflict with,
alter or impair any such rights, and since January 1, 2002
neither Seller
nor any Acquired Company has received any written
communication
from any Person asserting any ownership interest in any
Acquired Company Proprietary
Rights. Neither Seller nor any Acquired
Company has
granted any license of any kind relating to any Acquired
Company
Proprietary Rights (other than to an Acquired Company).
(b)
To the knowledge of Seller, the operations of the Acquired
Companies do not
violate, conflict with or infringe and, to the knowledge
of Seller, since
January 1, 2002, no Person has asserted in writing to the
Acquired
Companies that such operations violate, conflict with or
infringe
any patents,
copyrights or trademarks owned by any third party. To the
knowledge of
Seller, there are no third parties whose operations infringe
nor has anyone
asserted in writing that such operations conflict with or
infringe, any Acquired
Company Proprietary Rights.
SECTION 2.15
COMPLIANCE WITH
LAW. The businesses of the Acquired
Companies have been conducted in compliance
with all Laws applicable to the
Acquired Companies, except for instances of
non-compliance which would not
reasonably be expected to have,
individually or in the aggregate, a Material
Adverse Effect on the Acquired Companies.
None of the Acquired Companies or any
Registered Investment Company or Registered
Separate Account has received any
written notice of any alleged violation of
Law from a Governmental Entity since
January 1, 2002 (other than written notices
which have been cured or otherwise
remedied), and there are no pending or, to
the knowledge of Seller, threatened
hearings or investigations with respect to
any such violation. To the knowledge
of the Seller, there is no unresolved
violation or exception by any Governmental
Entity with respect to any report or
statement relating to any examination of
any Acquired Company or any Registered
Investment Company or Registered Separate
Account. This Section 2.15 does not relate
to matters covered by Section 2.17,
Section 2.18, Section 2.19 or Section
2.20.
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SECTION 2.16
REAL
PROPERTY.
(a)
Each of the Acquired Companies has good, clear and
marketable fee
title to the real property listed on Part 2.16(a) of the
Seller
Disclosure Letter, free and clear of all Liens except (i) taxes
not
yet due and (ii)
such imperfections or irregularities of title or other
Liens as do not
and would not reasonably be expected to materially affect
the use of the
real property subject thereto or affected thereby or
otherwise
materially impair business operations at such properties.
(b)
Part 2.16(b) of the Seller Disclosure Letter sets forth the
address of each
material parcel of property leased or subleased by an
Acquired Company
(each, a "LEASED PROPERTY"), and a true and complete list
of all leases for each
such Leased Property (each, a "LEASE") (including
the date and
name of the parties to such Lease). With respect to each of
the Leases:
(i)
such Lease is valid and in full force and effect;
(ii) to
the knowledge of Seller, the transactions
contemplated in this Agreement do not require the consent of
any
other party to a Lease, an assignment of Lease or a sublease;
(iii) to the
knowledge of Seller, (A) the Acquired Company
or any other party to the Lease is not in breach or default
under
such Lease, and (B) no event has occurred or circumstance
exists
which, with the delivery of notice, the passage of time or
both,
would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such
Lease;
(iv) to
the knowledge of Seller, the Acquired Company has
not subleased, licensed or otherwise granted anyone the right to
use
or occupy such Leased Property or any portion thereof; and
(v)
to the knowledge of Seller, the Acquired Company has
not collaterally assigned or granted any other security interest
in
such Lease or any interest therein.
(c)
The Leased Properties comprise all of the real property used
in the business
of the Acquired Companies as currently conducted.
SECTION 2.17
LICENSES AND
PERMITS.
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(a)
Except as otherwise expressly addressed in Section 2.7, the
Acquired
Companies and each Registered Investment Company and Registered
Separate Account have obtained,
and are and have at all times since January
1, 2002 been in
compliance in all respects with, all necessary licenses,
permits,
consents, approvals, orders, certificates, authorizations,
declarations and
filings required by all Governmental Entities for the
conduct of the
businesses and operations of the Acquired Companies as now
conducted
(collectively, the "REQUIRED LICENSES"), except where the
failure
to have obtained
or complied with any such Required Licenses, individually
or in the
aggregate, would not reasonably be expected to result in a
Material Adverse
Effect on the Acquired Companies.
(b)
Part 2.17(b) of the Seller Disclosure Letter sets forth a
list of all
Required Licenses. Since January 1, 2002, Seller has not
received written
notice of any Proceedings relating to the revocation or
modification of
any Required Licenses the loss of which, individually or in
the aggregate,
would reasonably be expected to result in a Material Adverse
Effect on the
Acquired Companies. To the knowledge of Seller, and except
for the
"relicensing" requirements in the states identified on Part
2.17(b)
of the Seller
Disclosure Letter and any similar requirements in other
states that may
be triggered by the change in control of the Insurance
Subsidiaries but
do not require the approval of any Governmental Entity
sooner than 90
days following the Closing, none of the Required Licenses
will be subject to suspension,
modification, revocation or nonrenewal as a
result of the
execution and delivery of this Agreement or the other
Transaction
Documents or the consummation of the transactions contemplated
hereby or
thereby.
SECTION 2.18
ENVIRONMENTAL
MATTERS. Except for such matters that,
individually or in the aggregate, would not
reasonably be expected to result in
a Material Adverse Effect on the Acquired
Companies:
(a)
each of the Acquired Companies is, and has been, in
compliance with all Environmental Laws, and
none of the Acquired Companies has
received any communication that alleges
that any of the Acquired Companies are
in violation of, or have liability under,
any Environmental Law;
(b) each of the
Acquired Companies has obtained and is in
compliance with all Environmental Permits
necessary for its operations as
currently conducted;
(c)
there are no Environmental Claims pending or, to the
knowledge of Seller, threatened in writing,
against any of the Acquired
Companies;
(d)
there have been no releases of any Hazardous Material that
would reasonably be expected to form the
basis of any Environmental Claim
against any of the Acquired Companies or
against any Person whose liabilities
for such Environmental Claims any of the
Acquired Companies have, or may have,
retained or assumed, either contractually
or by operation of law; and
(e)
(i) none of the Acquired Companies has retained or assumed,
either contractually or by operation of
law, any liabilities or obligations that
could reasonably be
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expected to form the basis of any
Environmental Claim against any of the
Acquired Companies and (ii) to the
knowledge of Seller, no Environmental Claims
are pending against any Person whose
liabilities for such Environmental Claims
any of the Acquired Companies have, or may
have, retained or assumed, either
contractually or by operation of law.
SECTION 2.19 TAX RETURNS AND TAX
PAYMENTS.
(a)
Seller has timely filed all U.S. federal income Tax Returns
and Combined
Returns and each of the Acquired Companies has timely filed
all other Tax
Returns required to be filed by them for taxable periods
prior to the
Closing Date, except, as to such Tax Returns, to the extent
that any failure
to have filed, individually or in the aggregate, would not
reasonably be
expected to result in a Material Adverse Effect on the
Acquired
Companies, and all such Tax Returns were true and correct in
all
material
respects. Seller and the Acquired Companies have paid all Taxes
shown to be due
on such Tax Returns and all other Taxes otherwise due,
except to the
extent that any failure so to pay, individually or in the
aggregate, would
not reasonably be expected to result in a Material Adverse
Effect on the
Acquired Companies. The unpaid Taxes of the Acquired
Companies (i)
did not, as of December 31, 2003, exceed the reserve for Tax
liability set
forth on the face of the December 31, 2003 balance sheet
included within
the December Financial Statements and the December 31, 2003
combined balance
sheet included within the Non-Insurance Financial
Statements and
(ii) will not exceed such reserve as adjusted for operations
through the
Closing Date, except to the extent that any failure to reserve,
individually or
in the aggregate, would not reasonably be expected to
result in a
Material Adverse Effect on the Acquired Companies. Subject to
Section 4.8(c),
the reserve for Tax liability will be prepared in
accordance with
the past custom and practice of the Acquired Companies in
filing their Tax
Returns. The reserve for Taxes for federal income Taxes
and state income
Taxes for Combined Returns on the December 31, 2003
balance sheet
included within the December Financial Statements and the
December 31,
2003 combined balance sheet included within the Non-Insurance
Financial
Statements will be settled prior to the Closing Date pursuant
to
Section 4.13 or
otherwise.
(b)
No claim for unpaid Taxes in writing by a Tax authority has
been asserted
against Seller or any Acquired Company and no written notice
of audit by a
Tax authority has been received by Seller, which, if resolved
unfavorably,
individually or in the aggregate, would reasonably be expected
to result in a
Material Adverse Effect on the Acquired Companies. No audit
or examination
of any Acquired Company is being conducted by a Tax
authority,
which, if resolved unfavorably, individually or in the
aggregate, would
reasonably be expected to result in a Material Adverse
Effect on the
Acquired Companies. No extension of the statute of
limitations is
in effect on the assessment of any Taxes of the Acquired
Companies. None
of the Acquired Companies is or has been during any year
for which the
applicable statute of limitations with respect to the payment
of federal
income Taxes has not yet expired, a member of an affiliated
group of
corporations within the meaning of Section 1504 of the Code
other
than an
affiliated group the common parent of which is or was Seller or
has
any liability
resulting from Taxes of any Person other than the Acquired
Companies under
Treasury Regulation Section 1.1502-6 (or any similar
provision of
state, local or foreign Law).
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(c)
Seller is not a "foreign person" within the meaning of
Section 1445 of
the Code.
(d)
Each of the Acquired Companies has complied with all
applicable laws
relating to the payment and withholding of Taxes (i)
pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar
provisions under
any state, local or foreign laws) and (ii) with respect to
any Policy under
Sections 3405, 6047(a) and 6047(d)(1)(B) of the Code or
similar
provisions under any state, local or foreign laws, except to
the
extent that any
failure to have paid or withheld, individually or in the
aggregate, would
not reasonably be expected to result in a Material Adverse
Effect on the
Acquired Companies and has, within the time and manner
prescribed by
law, withheld from and paid over to the proper authorities
all amounts
required to be so withheld and paid over under applicable laws.
(e)
None of the Acquired Companies shall be required to include
in a Tax period
ending after the Closing Date taxable income attributable
to income that
accrued in a prior Tax period but was not recognized in any
prior Tax period
as a result of the installment method of accounting, the
long-term
contract method of accounting, the cash method of accounting or
Section 481 of
the Code or comparable provisions of state, local or foreign
Tax law.
(f)
No material liens for Taxes exist with respect to any of the
assets or
properties of the Acquired Companies except for statutory liens
for Taxes not
yet due or payable.
(g)
Each deficiency resulting from any closed audit or
examination
relating to Taxes of the Seller and the Acquired Companies has
been timely
paid, except to the extent that any failure to have paid,
individually or
in the aggregate, would not reasonably be expected to
result in a
Material Adverse Effect on the Acquired Companies.
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(h)
Except as otherwise provided in this Section 2.19(h), each
reserve item
with respect to the Insurance Subsidiaries, in all material
respects, was
determined correctly in accordance with the requirements of
Sections 807,
811 and 846 of the Code for any tax returns in which any of
them were
included for the taxable periods ended December 31, 2001 and
December 31,
2002, has been consistently and correctly applied with respect
to the filing of
all tax returns including any of them for all taxable
years for which
the applicable statute of limitations has not expired, and
will be
consistently and correctly applied with respect to the filing
of
any tax returns
in which any of them will be included for the taxable
period ended
December 31, 2003 and the taxable period from January 1, 2004
through the
Closing Date when such tax returns are filed (it being
understood by
Parent and Buyer that in making the representations and
warranties in
this Section 2.19(h), Seller and GAC are not representing and
warranting that
the reserves referred to therein or the assets supporting
such reserves
have been or will be sufficient or adequate for the purpose
for which they were
established or that reinsurance receivables taken into
account in
determining the amount of such reserves will be collectible).
No
representation
or warranty is made in this Section 2.19(h) with respect to
reserve items in
connection with the implementation of 2001 CSO reserving
methodology.
(i)
No Insurance Subsidiary has agreed, or is required to make,
any adjustment
under Section 807(f) of the Code.
(j)
Each Insurance Subsidiary is and has been taxable as a life
insurance
company within the meaning of Section 816 of the Code for the
taxable period
ending on or including the Closing date and for all prior
taxable periods
for which the statute of limitations has not expired.
(k)
Set forth on Part 2.19(k) of the Seller Disclosure Letter is
the
policyholders surplus account and the shareholders surplus account
(as
defined in
Section 815 of the Code) for each Insurance Subsidiary as of
December 31, 2002 as
reported on Seller's consolidated federal income Tax
Return for the
taxable year ending on December 31, 2002, which surplus
accounts were
materially correct as of the date such Tax Returns was filed.
(l)
All tax sharing agreements to which the Acquired Companies
are parties or
by which the Acquired Companies are bound will be terminated
before closing.
None of the Acquired Companies is party to or bound by any
written, tax
indemnity obligation.
SECTION 2.20
EMPLOYEE BENEFIT
PLANS.
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(a)
Part 2.20(a)(i) of the Seller Disclosure Letter sets forth a
true and correct
list of each bonus, pension, profit sharing, deferred
compensation,
incentive compensation, stock ownership, stock purchase,
stock
appreciation, restricted stock, stock option, phantom stock,
performance,
retirement, thrift, savings, stock bonus, cafeteria, paid time
off, perquisite,
fringe benefit, vacation, severance, termination,
retention,
change of control, disability, death benefit, hospitalization,
medical or other
welfare benefit or other plan, program, arrangement or
understanding,
whether oral or written, formal or informal, funded or
unfunded
(whether or not legally binding), including, without
limitation,
each "employee
pension benefit plan" (as defined in Section 3(2) of ERISA,
whether or not
subject to ERISA) (a "PENSION PLAN") and "employee welfare
benefit plan"
(as defined in Section 3(1) of ERISA, whether or not subject
to ERISA) (a
"WELFARE PLAN"), whether or not subject to the United States
law, in each
case maintained or contributed to, or required to be
maintained or
contributed to, by Seller or any of its Subsidiaries or any
other person or
entity that, together with Seller, is or was treated as a
single employer
under Section 414(b), (c), (m) or (o) of the Code (each,
together with
Seller, a "COMMONLY CONTROLLED ENTITY") providing
compensation or
benefits to any current or former employees of an Acquired
Company or any
Bank Channel Employee (each such plan, a "PLAN" and,
collectively,
the "PLANS") that is a material Plan, other than the Acquired
Company Plans.
Part 2.20(a)(ii) of the Seller Disclosure Letter sets forth
a true and
correct list of each Acquired Company Plan. With respect to
each
Acquired Company
Plan and other material Plan, Seller has delivered to
Parent complete
and correct copies of such Plan (or a description of such
Plan if not
written). To the extent applicable to an Acquired Company Plan,
Seller has
delivered to Buyer complete and correct copies of all trust
agreements,
insurance contracts or other funding agreements or
arrangements,
the three most recent actuarial and trust reports, the three
most recent Form
5500s required to have been filed with the IRS and all
schedules
thereto, the most recent IRS determination letter, all current
summary plan
descriptions, and any and all amendments to any such document.
To the knowledge
of Seller, each item described in the immediately
preceding
sentence was as of its date and is true and correct in all
material
respects.
(b)
Each Plan intended to be qualified under Section 401(a) of
the Code, and
the trust (if any) forming a part thereof, has received a
favorable
determination letter from the IRS with respect to all tax law
changes through
the Economic Growth and Tax Relief Reconciliation Act of
2001 as to its
qualification under the Code and to the effect that each
such trust is
exempt from taxation under Section 501(a) of the Code. No
such
determination letter has been revoked, and, to the knowledge of
Seller,
revocation has not been threatened. No event has occurred and
no
circumstances
exist that would (i) be reasonably likely to adversely affect
(x) such
qualification or tax-exempt status in form or operation or (y)
the
tax-qualification of such Plan, or (ii) materially increase its
cost or
require security
under Section 307 of ERISA.
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(c)
Each of the Acquired Company Plans has been operated and
administered in
compliance in all material respects with its terms. Each
Acquired Company
and all the Acquired Company Plans are in compliance in
all material
respects with the applicable provisions of ERISA, the Code and
all other Applicable Laws.
All contributions required to be made to any
Acquired Company
Plan have been timely made or properly accrued on the
Non-Insurance
Financial Statements or the Insurance Subsidiary Statements.
There are no
pending or, to the knowledge of Seller, threatened
investigations
by any Governmental Entity, termination proceedings or other
claims (except
routine claims for benefits payable under the Plans) by or
on behalf of any
employee or beneficiary under any Acquired Company Plan,
or otherwise
involving any such Acquired Company Plan or the assets of any
Acquired Company
Plan and there are not any facts or circumstances that
could give rise
to any material liability in the event of any such
investigation, claim
or proceeding. All reports, returns and similar
documents with
respect to the Acquired Company Plans required to be filed
with any
Governmental Entity or distributed to any Acquired Company Plan
participant have
been duly and timely filed or distributed and all reports,
returns and
similar documents actually filed or distributed were true and
correct in all
material respects.
(d)
Except as expressly provided in Section 4.6, with respect to
any Plan (other than
any Acquired Company Plan), there is no liability
which could
reasonably be expected to become a liability of Parent, Buyer
and its
Subsidiaries (including the Acquired Companies) following the
Closing. No
Commonly Controlled Entity has (i) engaged in a transaction
described in
Section 4069 of ERISA that could subject Parent, Buyer or any
of its
Subsidiaries (including each Acquired Company) to liability at
any
time after the
date hereof or (ii) acted in a manner that could, or failed
to act so as to,
result in material fines, penalties, taxes or related
charges under
(x) Section 502(c), (i) or (1) of ERISA, (y) Section 4071 of
ERISA or (z)
Chapter 43 of the Code.
(e)
No amount or other entitlement or economic benefit that
could be
received (whether in cash or property or the vesting of
property)
as a result of
the execution or delivery of this Agreement or any of the
transactions
contemplated by this Agreement (alone or in combination with
any other event,
including termination of employment) by any current or
former employees
of an Acquired Company or any Bank Channel Employee who is
a "disqualified
individual" (as such term is defined in Treasury Regulation
Section
1.280G-1) under any Plan or Contract or Other Agreement or
otherwise would
be characterized as an "excess parachute payment" (as such
term is defined
in Section 280G(b)(1) of the Code) and no such disqualified
individual is
entitled to receive any additional payment from an Acquired
Company in the
event that the excise tax required by Section 4999(a) of the
Code is
imposed.
(f)
No Acquired Company Plan (i) is subject to Title IV or Part
3 of Title I of
ERISA or Section 412 of the Code or (ii) is a multiemployer
plan as defined
in Section 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN"),
and no employee
benefit plan (that would be treated as an Acquired Company
Plan if it were
still in existence) described in the immediately preceding
clause (i) or
(ii) has been terminated within the six years prior to the
date hereof, the
liabilities of which have not been satisfied in full.
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(g)
With respect to each Plan that is subject to Title IV or
Part 3 of Title
I of ERISA or Section 412 of the Code: (i) no reportable
event (within
the meaning of Section 4043 of ERISA, other than an event for
which the
reporting requirements have been waived by regulations) has
occurred in the
six (6) years prior to the date hereof or is expected to
occur on or
prior to the Closing; (ii) there has been no application for
waiver and has
been no accumulated funding deficiency (within the meaning
of Section 302
of ERISA or Section 412 of the Code), whether or not waived,
as of the most
recently ended plan year of such Plan; (iii) no Commonly
Controlled
Entity has been required to provide security under Section
401(a)(29) of
the Code; (iv) all premiums (and interest charges and
penalties for
late payment, if applicable) have been paid when due to the
Pension Benefit
Guaranty Corporation ("PBGC"); and (v) no filing has been
made with the PBGC and
no proceeding has been commenced by the PBGC to
terminate any
Plan and no condition exists which could constitute grounds
for the
termination of any such Plan by the PBGC.
(h)
No Acquired Company has any unsatisfied actual or contingent
liability under
Title IV of ERISA for any employee benefit plan that is not
a Plan.
(i)
No "prohibited transaction" (as defined in Section 4975 of
the Code or
Section 406 of ERISA) has occurred that involves the assets of
any Acquired
Company Plan that could subject any Acquired Company or any of
its
Subsidiaries, any of their employees, or, to the knowledge of
Seller, a
trustee,
administrator or other fiduciary of any trust created under any
Acquired Company
Plan to the tax or sanctions on prohibited transactions
imposed by
Section 4975 of the Code or Title I of ERISA; no Acquired
Company or any
of its Subsidiaries, any of their employees, or, to the
knowledge of
Seller, a trustee, administrator or other fiduciary of any
Acquired Company
Plan or any agent of any of the foregoing has engaged in
any transaction
or acted in a manner that could, or has failed to act so as
to, subject any
Acquired Company or any of its Subsidiaries, any of their
employees or any
trustee, administrator or other fiduciary to any liability
for breach of
fiduciary duty under ERISA or any other applicable Law.
(j)
No Acquired Company Plan that is a Welfare Plan provides
benefits after
termination of employment except where the cost thereof is
borne entirely
by the former employee (or his or her eligible dependents or
beneficiaries)
or as required by Section 4980B(f) of the Code or any
similar
statute.
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(k)
No current or former employee of any Acquired Company or any
Bank Channel
Employees will be entitled to any additional compensation,
severance or
other benefits or any acceleration of the time of payment or
vesting of any
compensation or benefits under any Plan or Contract or Other
Agreement as a
result of the transactions contemplated hereby (alone or in
combination with
any other event) or any compensation or benefits under any
Plan or Contract
or Other Agreement the value of which will be calculated
on the basis of
any of the transactions contemplated hereby (alone or in
combination with
any other event), except as expressly provided in this
Agreement. The
execution and delivery of this Agreement and the other
Transaction
Documents and the consummation of the transactions contemplated
hereby and
thereby (alone or in combination with any other event) and
compliance with the
provisions of this Agreement and the other Transaction
Documents do not
and will not require the funding (whether through a
grantor trust or
otherwise) of, or increase the cost of, any Plan or
Contract and
Other Agreement or any other employment arrangement.
(l)
No Acquired Company has any material liability or
obligations,
including under or on account of a Plan or Contract or Other
Agreement,
arising out of the hiring of persons to provide services and
treating such
persons as consultants or independent contractors and not as
employees.
SECTION 2.21
INVESTMENT
ADVISORY ACTIVITIES.
(a)
ADVISORY AGREEMENTS, INVESTMENT COMPANIES AND OTHER CLIENTS.
(i)
Part 2.21(a)(i) of the Seller Disclosure Letter sets
forth a list, as of December 31, 2003, of each Client with an
account of greater than $1,000,000 of each Investment Advisor
Subsidiary and shows for each such Client the aggregate amount
of
assets under management with Safeco Asset Management Company as
of
such date.
(ii)
Seller has previously delivered to Parent copies of
each Advisory Agreement with any of the Clients listed on Part
2.21(a)(i) of the Seller Disclosure Letter, such Advisory
Agreements
being referred to herein as the "CLIENT CONTRACTS"; provided
that,
for purposes of clauses (iii) and (iv) below, "Client
Contracts"
shall include all Advisory Agreements, regardless of the size of
any
related account. Since January 1, 2003, none of the Investment
Adviser Subsidiaries has received and none is aware of any
written
demands or formal requests for reductions in the fee rates,
waivers
of fees or other reductions in the amounts payable under the
Client
Contracts.
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(iii) Each
Client Contract and any subsequent renewal has
been duly authorized, executed and delivered by the Investment
Adviser Subsidiary party thereto and, to the knowledge of
Seller,
each other party thereto, and is a valid and legally binding
agreement, enforceable against such Investment Adviser
Subsidiary
and, to the knowledge of Seller, each other party thereto,
subject
to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or
affecting
creditors' rights and remedies generally, and (ii) the effect
of
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(iv) Each
Investment Adviser Subsidiary and, to the
knowledge of Seller, each other party thereto, is in
substantial
compliance with the terms of each Client Contract to which it is
a
party, and is not in default under any of the terms of any such
Client Contract, except where such default would not reasonably
be
expected to result in, individually or in the aggregate, a
Material
Adverse
Effect on the Acquired Companies; there does not exist under
any Client Contract any event or condition that, after notice
or
lapse of time or both, would constitute an event of default
thereunder on the part of the Investment Adviser Subsidiary in
question, or, to the knowledge of Seller, any other party
thereto,
except, in each case, where such event or condition would not
reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect on the Acquired Companies.
(b)
REGISTERED INVESTMENT COMPANIES.
(i)
Each Registered Investment Company is, and at all
times required under the Securities Laws has been, duly
registered
with the SEC as an investment company under the Investment
Company
Act. Since January 1, 1999, each Registered Investment Company
has
continuously been (A) in substantial compliance with (w) the
terms
and conditions of its Constituent Documents, (x) the Securities
Laws
and the rules and regulations promulgated thereunder, (y) its
investment policies and investment restrictions set forth in
its
registration statement as from time to time in effect and (z)
the
laws of its jurisdiction of formation and of each jurisdiction
in
which shares of such Registered Investment Company have been
offered
for sale or sold, and (B) duly registered or licensed and in
good
standing under the laws of each jurisdiction in which
qualification
is necessary. Without limiting the generality of the foregoing,
each
Registered Investment Company has maintained its records in
compliance in all material respects with each of the Investment
Company Act, the Investment Advisers Act and the rules of the
National Association of Securities Dealers, Inc., including
records
necessary to substantiate the performance of the Registered
Investment Company set forth in such Registered Investment
Company's
registration statements as from time to time in effect. There are
no
special restrictions, consent judgments or SEC or judicial orders
on
or against or with regard to any Registered Investment Company
in
effect, except for exemptive orders issued pursuant to Section
6(c)
of the Investment Company Act listed on Part 2.21(b)(i) of the
Seller Disclosure Letter.
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(ii)
Seller has delivered to Parent copies of the audited
financial statements for each of the Registered Investment
Companies
for their fiscal year ending in 2002, and will deliver to
Parent
copies of any interim financial statements (whether quarterly,
semi-annual or annual) prepared in the ordinary course for
periods
ending after the date hereof and before the Closing Date
promptly
upon such financial statements becoming available (the
"INVESTMENT
COMPANY FINANCIAL STATEMENTS"). Each Investment Company
Financial
Statement is consistent with the books and records of such
Registered Investment Company, and has been prepared in
accordance
with GAAP applied on a consistent basis throughout the periods
presented in such Investment Company Financial Statement,
subject,
in the case of interim unaudited Investment Company Financial
Statements, only to normal recurring year-end adjustments. The
minute books of each Registered Investment Company accurately
record
all material corporate action taken by its shareholders and
trustees
and committees and true, correct and complete copies of such
documents with respect to meetings occurring after January 1,
2001,
have been delivered to Buyer.
(iii) (A) Seller
has delivered to Parent copies of each
Advisory Agreement in effect on the date hereof between Safeco
Asset
Management Company and each Registered Investment Company; (B)
each
such Advisory Agreement and any subsequent renewal has been
duly
authorized, executed and delivered by Safeco Asset Management
Company, and, to the knowledge of Seller, the Registered
Investment
Company party thereto; and is a valid and legally binding
agreement,
enforceable against Safeco Asset Management Company and, to the
knowledge of Seller, each other party thereto (subject to (i)
the
effect of any applicable bankruptcy, insolvency,
reorganization,
moratorium and similar laws relating to or affecting creditors'
rights and remedies generally, and (ii) the effect of equitable
principles (regardless of whether enforceability is considered in
a
proceeding in equity or at law)); and (C) in the case of each
Advisory Agreement with a Registered Investment Company has
been
adopted in compliance with Section 15 of the Investment Company
Act,
and if applicable, Rule 12b-1 thereunder.
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(iv) Each
current prospectus (which term, as used in this
Agreement, shall include any related statement of additional
information), as amended or supplemented, relating to each
Registered Investment Company has been delivered to Parent.
Each
Registered Investment Company has timely filed all
prospectuses,
annual information forms, registration statements, proxy
statements,
financial statements, notices on Form 24f-2, other forms,
reports,
sales literature and advertising materials and any other
documents
required to be filed with any Governmental Entity, and any
amendments thereto (the "FUND REPORTS"), and has timely paid
all
fees and interest required to be paid in connection therewith.
The
Fund Reports (i) have been prepared in accordance with the
requirements of applicable Law, and (ii) did not at the time
they
were filed, and with respect to any prospectus, proxy
statement,
sales literature or advertising material, did not during the
period
of its authorized use, contain any untrue statement of a
material
fact or omit to state a material fact required to be stated
therein
or necessary in order to make the statements therein, in the
light
of the circumstances under which they were or are made, not
misleading.
(v)
None of the Advisory Agreements between a Registered
Investment Company or any of its Subsidiaries and Safeco Asset
Management Company contains any undertaking by such entity to
cap
fees or to reimburse any or all fees thereunder except, as of
the
date hereof, as may be disclosed in the applicable Investment
Company Financial Statements.
(vi) Part
2.21(b)(vi) of the Seller Disclosure Letter
sets forth all of the investment advisory agreements,
sub-advisory
agreements and distribution or underwriting contracts or plans
adopted pursuant to Rule 12b-1 under the Investment Company Act
(a
"12b-1 PLAN") or arrangements for the payment of service fees
(as
such term is defined in Rule 2830 of the NASD Conduct Rules),
and
all administrative services and other services agreements, if
any
(collectively, the "FUND AGREEMENTS"), to which any Registered
Investment Company is a party and which are in effect on the date
of
this Agreement. True, correct and complete copies of the Fund
Agreements have been delivered to Parent prior to the date
hereof.
As to each Registered Investment Company (other than any
Registered
Separate Account that is not a management investment company),
there
has been in full force and effect an investment advisory
agreement
and a distribution or underwriting agreement at all times since
inception of such Registered Investment Company. Each Fund
Agreement
was duly approved in accordance with the applicable provisions
of
the Investment Company Act and all payments due since December
31,
2002 under each distribution or principal underwriting agreement
to
which any Registered Investment Company is a party have been made
in
compliance with the related 12b-1 Plan; and the operation of
each
such 12b-1 Plan complies with Rule 12b-1 under the Investment
Company Act.
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(vii) Each of
the Registered Investment Companies has
issued its shares, units or other interests and operated in
compliance in all material respects with its investment
objectives
and policies and with Law, including Section 17 of the
Investment
Company Act; and each Board of a Registered Investment Company
has
been established and operates in conformity with the
requirements
and restrictions of Sections 9, 10 and 16 of the Investment
Company
Act. All shares of each Registered Investment Company have been
duly
authorized, are validly issued, fully-paid and non-assessable
and
have been sold in compliance with the Securities Act. With
respect
to each
Registered Investment Company, all registration or
qualification statements or notices of offering to sell or
sales
under which shares of such Registered Investment Company have
been
sold have, at all times when such registration statement,
qualification statement or notice has been effective, complied
in
all material respects with the requirements of the Investment
Company Act, the Securities Act and any other applicable Law then
in
effect. No stop order suspending the effectiveness of any such
registration or qualification statement or notice has been
issued
and no proceedings for that purpose have been instituted or, to
the
knowledge of Seller, are contemplated with respect to any
Registered
Investment Company.
(viii) As of the
Closing Date, each Investment Company
Board of a Registered Investment Company having such a Board
has
taken such action required to be taken to approve new Advisory
Agreements with Safeco Asset Management Company and to
constitute
itself in each case so as to comply with the provisions of
Section
15 of the Investment Company Act and Rule 12b-1 thereunder.
(ix)
Except as contemplated by Sections 4.9 and 4.10, no
further action of the Investment Company Board of any
Registered
Investment Company having such a Board or of the shareholders of
any
such Registered Investment Company is required in connection
with
the transactions contemplated by this Agreement.
(x)
Each of (1) the proxy solicitation materials to be
distributed to the shareholders of any Registered Investment
Company
in connection with the approvals described in Sections 4.9 and
4.10
and (2) the materials provided to the Boards of any Registered
Investment Companies in connection with the approvals of the
Board
resolutions have provided and will provide all information
necessary
in order to make the disclosure of information therein satisfy
the
requirements of Section 14 of the Exchange Act, Sections 15 and
20
of the Investment Company Act and the rules and regulations
thereunder and such materials and information (except to the
extent
supplied by Parent or its Affiliates) will be complete in all
respects and will not contain (at the time such materials or
information are distributed, filed or provided, as the case may
be)
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they
were
made, not misleading or necessary to correct any statement or
any
earlier communication with respect to the solicitation of a
proxy
for the same meeting or subject matter which has become false
or
misleading.
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(xi) As of
the date hereof, no exemptive orders or no
action letters from any Governmental Entity have been obtained,
nor
are any requests pending therefor, with respect to any
Registered
Investment Company under any of the Securities Laws except for
exemptive orders issued pursuant to Section 6(c) of the
Investment
Company Act for regular operations in the ordinary course of
business listed on Part 2.21(b)(xi) of the Seller Disclosure
Letter.
(xii) No
Acquired Company nor any of their Subsidiaries or
Affiliates has any express or implied understanding or
arrangement
which would impose an unfair burden on any of the Registered
Investment Companies or would in any way violate Section 15(f)
of
the Investment Company Act as a result of the transactions set
forth
in Section 1.1.
(xiii) Neither the
Seller nor any "affiliated person" (as
defined in the Investment Company Act) of the Seller or any
Registered Investment Company receives or is entitled to receive
any
compensation directly or indirectly (i) from any Person in
connection with the purchase or sale of securities or other
property
to, from or on behalf of any Registered Investment Company,
other
than bona fide ordinary compensation as principal underwriter
for
such Registered Investment Company or as broker in connection
with
the purchase or sale of securities in compliance with Section
17(e)
of the Investment Company Act or (ii) from any Registered
Investment
Company or its security holders for other than bona fide
investment
advisory, administrative or other services. Disclosure of any
such
compensation arrangements has been made in the registration
statement of each Registered Investment Company filed with the
SEC
to the extent such disclosure is required by applicable Law.
(xiv) Since the
dates of the most recent audited financial
statements included in the Investment Company Financial
Statements
of each Registered Investment Company, such Registered
Investment
Company has not, except for such actions expressly required
under
this Agreement to be taken in connection with the transactions
contemplated hereby:
(1) declared, set
aside, made or paid any dividend
or other distribution in respect of its equity
interests or otherwise purchased or redeemed,
directly or indirectly, any of its equity interests,
except in the ordinary course of its business;
(2) adopted, or
amended in any material respect,
any deferred compensation or other plan, agreement,
trust, fund or arrangement for the benefit of any
trustees;
(3) amended its
Constituent Documents;
(4) changed in any
material respect its accounting
practices, policies or principles, except as may be
required under applicable Law or GAAP; or
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(5) operated its
business in any manner other than
in the ordinary course.
(xv) Each
Registered Investment Company has in full force
and effect such insurance and fidelity bonds as may be required
by
the Investment Company Act. Part 2.21(b)(xv) of the Seller
Disclosure Letter sets forth all policies of insurance in
effect
with each Registered Investment Company and with each
Investment
Adviser Subsidiary relating to the Asset Management Business,
and
true and correct copies of such policies of insurance have
previously been delivered to Parent.
(xvi)
Notwithstanding any other provision in this
Agreement to the contrary, Sections 2.21(b)(xvii) through
2.21(b)(xx) contain the only representations that Seller makes
with
respect to the Tax treatment of any Registered Investment
Company
and each such representation is subject to the dispute rights
of
Section 4.10(f).
(xvii) All Tax Returns
of each Registered Investment
Company that are required to be filed by it for taxable periods
ending on or prior to the Closing Date (with due regard to any
extensions) have been duly and timely filed. All such Tax
Returns
are true, correct and complete in all material respects. All
Taxes
of any Registered Investment Company for any Pre-Closing Tax
Period
have been duly and timely paid in full (or adequate provision
for
such has been made in its financial statements in accordance
with
GAAP).
(xviii) Each Registered Investment Company has complied with
all laws relating to the payment and withholding of Taxes and
has,
within the time and the manner prescribed by law, paid over to
the
proper taxing authorities all amounts required to be so withheld
and
paid over.
(xix) Each
Registered Investment Company that has elected
to be a "regulated investment company" pursuant to Section
851(b)(1)
of the Code has satisfied the relevant requirements of the Code
for
all taxable years, or parts thereof, of such Registered
Investment
Company ending on or prior to the Closing Date as to its status as
a
regulated investment company as defined in Section 851 of the
Code.
Neither Seller, any Affiliate of Seller nor, to the knowledge
of
Seller, any Registered Investment Company or any other agent of
any
Registered Investment Company has received any notice or other
communication from any Governmental Entity relating to or
affecting
any Registered Investment Company's compliance with any of
these
relevant requirements.
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(xx) With
respect to each Registered Investment Company,
to the knowledge of Seller, no claims have been or are being
asserted by any Governmental Entity with respect to any Taxes
and
there are no threatened claims for Taxes. None of the
Registered
Investment Companies has ever entered into a closing agreement
pursuant to Section 7121 of the Code or otherwise. There has
not
been any audit by any Governmental Entity of any Tax period of
any
Registered Investment Company, and, to the knowledge of Seller,
no
such audit is in progress and no Registered Investment Company
has
been notified by any Governmental Entity that any such audit is
contemplated or pending. Except with respect to any extension
granted pursuant to Internal Revenue Service Form 7004 (or any
predecessor), no extension of time with respect to any date on
which
a Tax Return was or is to be filed by any Registered Investment
Company is in force, and no waiver or agreement by any
Registered
Investment Company is in force for the extension of time for
the
assessment or payment of any Taxes.
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(xxi) No
Registered Investment Company, Investment Adviser
Subsidiary, or Broker/Dealer Subsidiary (including any officer,
director, or employee of any of them) has entered into, or
acquiesced in, any agreement, arrangement or understanding to
permit
any person to engage in improper "market timing" or "late
trading"
activity (as such terms are commonly used in the securities
industry) with respect to any Registered Investment Company or
Separate Account. No Registered Investment Company, Investment
Adviser Subsidiary, or Broker/Dealer Subsidiary (including any
officer, director, or employee of any of them) has agreed to
waive,
modify, or otherwise not to enforce, any limitation or
requirement
in the then-current prospectus or statement of additional
information or other constituent documents of a Registered
Investment Company or Separate Account, the effect of which
waiver,
modification, or failure to enforce would be to permit or
facilitate
improper "market timing" or "late trading" activities with
respect
to such Registered Investment Company or Separate Account. No
access
person (as such term is defined in Rule 17j-1 under the
Investment
Company Act) of any Registered Investment Company or employee of
any
Investment Adviser Subsidiary or Broker/Dealer Subsidiary has
engaged in any improper "market timing" or improper "late
trading"
activities with respect to any Registered Investment Company or
Separate Account. Each Registered Investment Company has
established
procedures (i) to prevent patterns of transactions characteristic
of
improper "market timing" strategies, (ii) regarding the
fair-value
pricing and determination of the net asset value ("NAV") of
fund
shares in connection with purchase and redemption orders by
investors in each Registered Investment Company (including
policies
and procedures to deter improper "late trading"), (iii) to
prevent
the improper or illegal disclosure of its portfolio holdings to
any
person and to prevent disclosure of its portfolio holdings in a
manner that might reasonably be expected to facilitate improper
market timing activities in respect of its shares or other
improper
or illegal activities in respect of it and (iv) reasonably
designed
to monitor and ensure that investors obtain the proper
"breakpoint"
discount with respect to purchases of shares of each Registered
Investment Company with front-end sales loads (collectively,
the
procedures described in clauses (i)-(iv), the "RIC
PROCEDURES").
Each Investment Adviser Subsidiary and each Registered
Investment
Company is and has at all times since January 1, 2003 been in
compliance in all material respects with all such procedures.
No
Investment Adviser Subsidiary, Registered Investment Company or
Broker/Dealer Subsidiary has acted, directly or indirectly, to
facilitate purchase and redemption orders for fund shares
received
after the NAV has been determined for a particular day at that
day's
NAV, nor is any Investment Adviser Subsidiary, Registered
Investment
Company or Broker/Dealer Subsidiary aware of such activities
occurring in connection with the operations of any Registered
Investment Company, except with respect to the Safeco Resource
Series Trust, as permitted by NEW YORK LIFE FUND, INC., SEC
no-action letter published May 6, 1971 and as provided for in
the
Participation Agreements filed with the SEC as exhibits to
registration statements (which in each case requires that the
beneficial owner of any fund shares shall have provided the
relevant
purchase or sale order
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or instruction to the relevant intermediary prior to the time as
of
which such NAV is determined for the day in question). The
parties
agree that, in the event that any Governmental Entity asserts in
any
context, or any other Person asserts in a Proceeding, that any
specified activity prior to the Closing constituted or might
have
constituted improper "market timing" or improper "late
trading,"
then for the purposes of determining whether any of the
representations in this Section 2.21(b)(xxi) has been breached,
as
between the parties the activity in question will be assumed to
have
constituted improper "market timing" or "late trading," as the
case
may be, regardless of whether Seller believes that the activity
in
question was in fact improper or constituted "market timing" or
"late trading" activity.
(xxii) Each Registered
Investment Company has at all times
disclosed in its prospectus and statement of additional
information
to the extent required by applicable Law, any and all
arrangements
in place between each Investment Adviser Subsidiary or
Registered
Investment Company and a financial intermediary pursuant to which
a
financial intermediary is compensated, directly or indirectly,
by
such entity or an affiliate of such entity, with cash payments
or
other incentives in connection with its sale of shares of the
Registered Investment Company. Such arrangements are and at all
times have been in compliance in all material respects with
applicable Law (including the Securities Act, the Investment
Advisers Act, the Investment Company Act, ERISA and the NASD
Regulations).
(xxiii) Each Investment Advisory Subsidiary has selected
broker-dealers to execute portfolio transactions for each
Registered
Investment Company in accordance with the policies of each such
Registered Investment Company disclosed in each such Registered
Investment Company's registration statement and applicable
requirements to seek best execution consistent with the Conduct
Rules of the NASD.
(xxiv) Each Investment
Adviser Subsidiary and each
Registered Investment Company has at all times disclosed in its
prospectus and statement of additional information to the
extent
required by applicable Law, any and all arrangements under
which
products or services other than execution of securities
transactions
are obtained by either entity from or through a broker-dealer
in
exchange for the direction by the Investment Adviser Subsidiary
of
client brokerage transactions to the broker-dealer. Such
arrangements are and at all times have been in compliance in
all
material respects with applicable Law (including but not limited
to
the Securities Act, the Investment Advisers Act, the Investment
Company Act, ERISA and the NASD Regulations).
SECTION 2.22
INSURANCE
PRACTICES.
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(a)
Except as otherwise, individually or in the aggregate, would
not reasonably
be expected to result in, a Material Adverse Effect on the
Acquired
Companies, all policies, binders, slips, certificates, annuity
contracts and
participation agreements and other agreements of insurance,
whether
individual or group, that are in effect (including all
applications,
supplements, endorsements, riders and ancillary agreements in
connection
therewith) and that have been issued by the Insurance
Subsidiaries and
any and all marketing materials, are, to the extent
required under
Law, on forms approved by applicable insurance regulatory
authorities
which have been filed and not objected to by such authorities
within the
period provided for objection (the "COMPANY FORMS"). The
Company
Forms comply in
all material respects with the insurance statutes,
regulations and
rules applicable thereto and, as to premium rates
established by
Seller or any Insurance Subsidiary which are required to be
filed with or
approved by insurance regulatory authorities, the rates have
been so filed or
approved, the premiums charged conform thereto and such
premiums comply
in all material respects with the insurance statutes,
regulations and
rules applicable thereto.
(b)
To the knowledge of the Seller, at the time any Insurance
Subsidiary paid
commissions to any broker or agent since January 1, 2001 in
connection with
the sale of Life & Annuity Contracts, each such broker or
agent was duly
licensed as an insurance broker (for the type of business
sold by such
broker) or agent in the particular jurisdiction in which such
broker or agent
sold such business for any Insurance Subsidiary. To the
knowledge of
Seller, since January 1, 1999 no such broker or agent violated
(or with or
without notice or lapse of time or both would have violated) in
any material
respect any Law or any other requirement of any Governmental
Entity or
arbitrator applicable to the sale or servicing of Life &
Annuity
Contracts.
Neither the manner in which any Insurance Subsidiary
compensates
any Person
involved in the sale or servicing of Life & Annuity
Contracts
that is not
registered as a broker-dealer or insurance agent, as
applicable, nor,
to the knowledge of the Seller, the conduct of any such
Person, renders
such Person a broker-dealer or insurance agent under any
applicable
federal or state law, and the manner in which any Insurance
Subsidiary
compensates each Person involved in the sale or servicing of
Life &
Annuity Contracts is in compliance in all material respects with
all
applicable
Law.
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(c)
Notwithstanding any other provision in this Agreement to the
contrary,
Section 2.22(c) contains the only representations with r
