-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VpQtFLiygAjTpKHuHlYshds3EerxgRX8G4EM5PSiPyZE5midtO9m8bmoPBVO7XJb IPh9gn06ezgadXGYo78gfg== 0000950133-97-001353.txt : 19970416 0000950133-97-001353.hdr.sgml : 19970416 ACCESSION NUMBER: 0000950133-97-001353 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19970331 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970415 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALDEN JOHN FINANCIAL CORP CENTRAL INDEX KEY: 0000822079 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 592840712 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11396 FILM NUMBER: 97581591 BUSINESS ADDRESS: STREET 1: 7300 CORPORATE CTR DR CITY: MIAMI STATE: FL ZIP: 33126-1223 BUSINESS PHONE: 3057153767 MAIL ADDRESS: STREET 1: 7300 CORPORATE CENTER DRIVE CITY: MIAMI STATE: FL ZIP: 33126-1223 8-K 1 FORM 8-K FOR PERIOD ENDED 3/31/97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported): March 31, 1997 JOHN ALDEN FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-11396 59-2847012 (State or other jurisdiction (Commission (IRS Employer of incorporation or organization) File Number) Identification No.) 7300 Corporate Center Drive, Miami, Florida 33126-1223 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (305) 715-3767 2 JOHN ALDEN FINANCIAL CORPORATION FORM 8-K TABLE OF CONTENTS ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS 1 ITEM 5. OTHER EVENTS 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS 2 SIGNATURE 5
3 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On March 31, 1997, John Alden Life Insurance Company ("JALIC"), a subsidiary of John Alden Financial Corporation (the "Company"), sold its Annuity Operations to SunAmerica Life Insurance Company ("SunAmerica"). The transaction included the sale of all of the common stock of John Alden Life Insurance Company of New York ("JANY"), a wholly-owned subsidiary of JALIC, pursuant to the Stock Purchase and Sale Agreement dated November 29, 1996 by and between JALIC and SunAmerica. Pursuant to the Asset Purchase and Sale Agreement dated November 29, 1996 by and between JALIC and SunAmerica and the Indemnity Reinsurance Agreement dated March 31, 1997 by and between JALIC and SunAmerica, JALIC coinsured substantially all of its annuity business to SunAmerica on an indemnity basis. Under the Trust Agreement dated March 31, 1997 by and among SunAmerica, as Grantor, JALIC, as Beneficiary, and Bankers Trust Company, as Trustee, SunAmerica is required to maintain assets in trust for the benefit of JALIC. The parties have agreed to transition the business to an assumption basis pursuant to the Assumption Reinsurance Agreement dated as of March 31, 1997 by and between JALIC and SunAmerica. In certain states, the transition to an assumption basis is subject to policyholder approval. To the extent that such transition does not take place with respect to any particular policy, the policy will remain reinsured on an indemnity basis. A substantial portion of the transition to an assumption basis is expected to be completed within two years. The Company and SunAmerica have no material relationships other than those described in this Current Report on Form 8-K. SunAmerica has informed the Company that SunAmerica is a diversified financial services company specializing in retirement savings and investment products and services and is rated "A+ (Superior)" by A.M. Best and Company. SunAmerica is incorporated in Arizona, and its executive offices are located at 1 SunAmerica Center, Los Angeles, California 90067-6022. As consideration for the Annuity Operations, SunAmerica paid JALIC approximately $238 million, which was determined through arms-length negotiations. The consideration represents an approximately $161 million premium paid to acquire the business and approximately $77 million of adjusted capital and surplus of JANY. It does not include any capital and surplus used to support the annuity business in JALIC, which will remain in JALIC. The Company's available capital was enhanced by both the after-tax gain generated from the transaction and by the release of the net capital previously allocated to support the annuity business. The Company intends to use a portion of this available capital to strengthen its healthcare operations, after which it estimates there will be approximately $175 million to $200 million of capital available for other uses. Subject to applicable regulatory approvals, this additional capital may be used to repurchase common stock, pay dividends, pay down debt and, to a lesser extent, for general corporate purposes. As a result of this sale and the previously announced proposed sale of its Western Diversified Group (the principal subsidiaries of the Company that market credit life and disability and retail service warranty coverage), on March 31, 1997 the Company recorded a net deferred gain of approximately $45 million. This amount is net of transaction expenses, taxes, goodwill and other adjustments relating to these transactions including among other things an adjustment to reduce the carrying value of the Western Diversified Group to its estimated net realizable value. The net deferred gain will be recognized as income as SunAmerica completes the assumption of policyholder liabilities. The Company expects to begin recognizing the net deferred gain in 1997 and to earn the majority of the gain by December 31, 1998. In connection with the transaction described in this Current Report on Form 8-K, JALIC and SunAmerica have entered into various servicing agreements. Under the Transition Services Agreement dated March 31, 1997 between JALIC and SunAmerica and the Transition Services Agreement dated March 31, 1997 between JALIC and JANY, the Company will provide certain administrative services related to the business sold to SunAmerica for a period of up to nine months, until the policies are transferred to SunAmerica's systems. Pursuant to the Interim Servicing Agreement dated as of March 31, 1997 between John Alden Asset 1 4 Management Company ("JAAMCO"), a wholly-owned subsidiary of the Company, SunAmerica and JANY, JAAMCO will provide mortgage servicing to SunAmerica and JANY on an ongoing basis. Such agreement is terminable by SunAmerica and JANY upon written notice to JAAMCO. Under the Marketing Agreement dated March 28, 1997 by and between SunAmerica and NSM Sales Corporation ("NSM"), a wholly-owned subsidiary of the Company, NSM will market certain fixed annuity products for SunAmerica. The parties have also entered into the Administrative Services Agreement dated March 31, 1997 between JALIC and SunAmerica, whereby SunAmerica will provide administrative services to JALIC related to the small number of annuity policies retained by JALIC. ITEM 5. OTHER EVENTS On December 2, 1996, the Company issued a News Release filed herewith as Exhibit 99.1 which is incorporated herein by reference. On March 31, 1997, the Company issued a News Release filed herewith as Exhibit 99.2 which is incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED Not Applicable. (B) PRO FORMA FINANCIAL INFORMATION The accompanying unaudited pro forma balance sheet as of December 31, 1996 has been prepared by the Company based upon available information and assumptions deemed appropriate to reflect the sale and reinsurance arrangement described in Item 2. Such balance sheet reflects the financial position of the Company as reported and as adjusted as though the sale of the Annuity Operations had been consummated at December 31, 1996 and the net assets of the Annuity Operations and the Western Diversified Group were reclassified as net assets held for sale. As there was no effect to income (loss) from continuing operations for the years ended December 31, 1996, 1995 and 1994 as set forth in the financial statements included in the Company's Annual Report on Form 10-K ("Form 10-K"), pro forma income statements are not presented. This unaudited pro forma balance sheet is not necessarily indicative of what the actual financial position of the Company would have been had the sale occurred on December 31, 1996, nor does it indicate the future financial position of the Company. Actual amounts will vary from the amounts shown in the pro forma balance sheet. The unaudited pro forma balance sheet should be read in conjunction with the Company's historical consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 1996. 2 5 JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 (Unaudited) (Dollars in thousands)
Adjustments ----------------------------------- Sale of JALIC As Reported JANY (1) Coinsurance ------------- -------------- ----------------- Assets: Debt securities .............................................. $ 4,298,649 $ (1,119,476) $ (2,219,648) (2) Equity securities ............................................ 82,098 (81,663) (2) Mortgage loans ............................................... 1,449,242 (237,105) (1,062,402) (2) Investment in real estate .................................... 39,903 Real estate owned ............................................ 11,483 Policy loans and other notes receivable ...................... 75,186 (8,937) (23,892) (2) Short-term investments ....................................... 6,371 -------------- -------------- --------------- Total invested assets ................................... 5,962,932 (1,365,518) (3,387,605) Cash and cash equivalents .................................... 167,511 84,917 (188,063) (3) Accrued investment income .................................... 65,727 (16,072) (34,772) (4) Deferred policy acquisition costs............................. 239,622 (37,714) (149,095) (5) Property and equipment, net................................... 69,856 (149) Reinsurance receivables ...................................... 204,379 (11,967) Investment deposits recoverable .............................. 766,286 (25,520) (724,177) (6) Net assets held for sale ..................................... Other assets ................................................. 194,936 (26,305) (56,322) (7) -------------- -------------- --------------- Total assets .......................................... $ 7,671,249 $ (1,398,328) $ (4,540,034) ============== ============== =============== Liabilities, redeemable securities and stockholders' equity: Liabilities: Contract holder liabilities................................. $ 6,887,632 $ (1,422,382) $ (4,562,351) (8) Short-term debt ............................................ 25,000 Accounts payable and other liabilities...................... 120,888 (1,911) 16,382 (9) Funds payable under reinsurance treaties.................... 77,331 669 (19,321) (10) Net deferred gain........................................... 31,455 31,028 (11) Long-term debt ............................................. 76,500 -------------- -------------- --------------- Total liabilities ..................................... 7,187,351 (1,392,169) (4,534,262) -------------- -------------- --------------- Redeemable securities......................................... 18,687 Stockholders' equity: Common stock ............................................. 250 Paid-in capital........................................... 181,863 Net unrealized gain on investments, net of income taxes... 26,977 (6,159) (5,772) (12) Retained earnings......................................... 268,109 Redemption value of common stock in excess of cost........ (2,669) Unearned compensation .................................... (643) Treasury stock, at cost .................................. (8,676) -------------- -------------- --------------- Total stockholders' equity ............................ 465,211 (6,159) (5,772) -------------- -------------- --------------- Total liabilities, redeemable securities and stockholders' equity ................................ $ 7,671,249 $ (1,398,328) $ (4,540,034) ============== ============== =============== Adjustments ------------------- WD Group Proposed Sale (13) Pro Forma ------------------- --------------- Assets: Debt securities............................................... $ (104,190) $ 855,335 Equity securities............................................. (396) 39 Mortgage loans................................................ 149,735 Investment in real estate..................................... 39,903 Real estate owned............................................. 11,483 Policy loans and other notes receivable....................... (7,303) 35,054 Short-term investments........................................ (2,128) 4,243 --------------- --------------- Total invested assets.................................... (114,017) 1,095,792 Cash and cash equivalents..................................... (25,796) 38,569 Accrued investment income..................................... (3,392) 11,491 Deferred policy acquisition costs............................. (16,570) 36,243 Property and equipment, net................................... (37) 69,670 Reinsurance receivables....................................... (83,582) 108,830 Investment deposits recoverable............................... 16,589 Net assets held for sale...................................... 44,985 44,985 (14) Other assets.................................................. (19,118) 93,191 --------------- --------------- Total assets........................................... $ (217,527) $ 1,515,360 =============== =============== Liabilities, redeemable securities and stockholders' equity: Liabilities: Contract holder liabilities................................. $ (146,877) $ 756,022 Short-term debt............................................. 25,000 Accounts payable and other liabilities...................... (17,910) 117,449 Funds payable under reinsurance treaties.................... (35,279) 23,400 Net deferred gain........................................... (17,461) 45,022 Long-term debt.............................................. 76,500 --------------- --------------- Total liabilities ..................................... (217,527) 1,043,393 --------------- --------------- Redeemable securities......................................... 18,687 Stockholders' equity: Common stock.............................................. 250 Paid-in capital........................................... 181,863 Net unrealized gain on investments, net of income taxes... 15,046 Retained earnings......................................... 268,109 Redemption value of common stock in excess of cost........ (2,669) Unearned compensation..................................... (643) Treasury stock, at cost................................... (8,676) --------------- --------------- Total stockholders' equity............................. - 453,280 --------------- --------------- Total liabilities, redeemable securities and stockholders' equity................................. $ (217,527) $ 1,515,360 =============== ===============
- ---------------------- (1) Reflects the sale of JANY to SunAmerica for $131.0 million, net of expenses of $2.5 million. Proceeds of $131.0 million less cash and cash equivalents of $46.1 million transferred to SunAmerica comprise the net cash and cash equivalents increase of $84.9 million. After-tax gain of $31.5 million is reflected as part of the deferred gain. (2) Reflects the transfer of JALIC's invested assets attributable to the Annuity Operations to SunAmerica. (3) Proceeds of $107.3 million from coinsurance of JALIC less cash and cash equivalents of $295.4 million transferred to SunAmerica. (4) Reflects the accrued investment income collected at closing from SunAmerica. (5) Reflects the write-off of deferred acquisition costs relating to coinsurance of JALIC. (6) Reflects transfer of investment contract deposits recoverable assigned to SunAmerica. (7) Primarily reflects the write-off of unamortized goodwill attributable to the Annuity Operations and the tax liability related to the coinsurance transaction. (8) Reflects ceding of JALIC annuity reserves. (9) Primarily reflects costs incurred in connection with the sale. (10) Primarily reflects funds held released as the result of policy loans transferred to SunAmerica. (11) Deferred gain, net of income taxes. (12) Reflects the reversal of unrealized gains on available-for-sale debt securities and preferred stocks transferred to SunAmerica under the coinsurance agreement. (13) Reflects the net assets held for sale of the Western Diversified Group adjusted to estimated net realizable value. (14) Net assets held for sale is comprised of the following: Investment deposits recoverable on JALIC coinsurance. $ 4,562,351 JALIC annuity contract holder liabilities............ (4,562,351) Net assets held for sale of Western Diversified Group 44,985 ------------- Net assets held for sale............................. $ 44,985 ============= 3 6 (C) The following is a list of all Exhibits filed as part of this Report:
Exhibit Number Exhibit ------ ------- 10.1 Stock Purchase and Sale Agreement by and between John Alden Life Insurance Company ("JALIC") and SunAmerica Life Insurance Company ("SunAmerica") dated November 29, 1996. 10.2 Asset Purchase and Sale Agreement by and between JALIC and SunAmerica dated November 29, 1996. 10.3 Indemnity Reinsurance Agreement by and between JALIC and SunAmerica dated as of March 31, 1997. 10.4 Assumption Reinsurance Agreement dated as of March 31, 1997 by and between JALIC and SunAmerica. 10.5 Trust Agreement by and among SunAmerica as Grantor and JALIC as Beneficiary and Bankers Trust Company as Trustee dated March 31, 1997. 10.6 Transition Services Agreement between JALIC and SunAmerica dated March 31, 1997. 10.7 Transition Services Agreement between JALIC and John Alden Life Insurance Company of New York ("JANY") dated March 31, 1997. 10.8 Administrative Services Agreement between JALIC and SunAmerica dated March 31, 1997. 10.9 Interim Servicing Agreement between John Alden Asset Management Company, SunAmerica and JANY dated as of March 31, 1997. 10.10 Asset Repurchase Agreement by and between JALIC and SunAmerica dated March 31, 1997. 10.11 Marketing Agreement dated March 28, 1997 by and between SunAmerica and NSM Sales Corporation. 10.12 Amendment No. 1 dated March 31, 1997 to the Stock Purchase and Sale Agreement dated November 29, 1996 by and between JALIC and SunAmerica. 10.13 Amendment No. 1 dated March 31, 1997 to the Asset Purchase and Sale Agreement dated November 29, 1996 by and between JALIC and SunAmerica. 10.14 Amendment No. 1 to Marketing Agreement between SunAmerica and NSM Sales Corporation. 99.1 News Release of the registrant dated December 2, 1996. 99.2 News Release of the registrant dated March 31, 1997.
4 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHN ALDEN FINANCIAL CORPORATION /s/ Scott L. Stanton ---------------------------------------------------- Scott L. Stanton Senior Vice President and Chief Financial Officer Dated: April 15, 1997 5 EX-10.1 2 STOCK PURCHASE AGREEMENT DATED 11/29/96 1 STOCK PURCHASE AND SALE AGREEMENT By and Between JOHN ALDEN LIFE INSURANCE COMPANY and SUNAMERICA LIFE INSURANCE COMPANY Dated November 29, 1996 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 - PURCHASE AND SALE OF STOCK; CLOSING................................................................. 2 1.1. Closing...................................................................................... 2 1.2. Purchase and Sale of JANY Stock.............................................................. 2 1.3. Closing Deliveries........................................................................... 3 1.4. Additional Closing Deliveries................................................................ 4 1.5. Settlement of Intercompany Obligations....................................................... 4 1.6. Disputes..................................................................................... 6 ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF SELLER............................................................ 6 2.1. Organization, Standing and Authority of Seller............................................... 6 2.2. Authorization................................................................................ 7 2.3. Actions and Proceedings...................................................................... 7 2.4. No Conflict or Violation..................................................................... 8 2.5. Consents and Approvals....................................................................... 8 2.6. Brokerage and Financial Advisers............................................................. 9 2.7. Compliance With Laws......................................................................... 9 2.8. Insurance Contracts.......................................................................... 9 2.9. Permits, Licenses and Franchises............................................................. 12 2.10. Regulatory Filings........................................................................... 13 2.11. Reinsurance.................................................................................. 14 2.12. Absence of Certain Changes or Events......................................................... 14 2.13. Computer Software and Other Intellectual Property............................................ 17 2.14. Contracts.................................................................................... 18 2.15. Statutory Financial Statements............................................................... 20 2.16. JANY Capital Stock........................................................................... 22 2.17. Tax Matters.................................................................................. 22 2.18. Real Property................................................................................ 24 2.19. Owned Properties............................................................................. 25 2.20. Pension and Other Employee Plans............................................................. 26 2.21. Labor Matters................................................................................ 29 2.22. Banks........................................................................................ 29 2.23. Reserves..................................................................................... 30 2.24. Books and Records............................................................................ 31 2.25. Threats of Cancellation...................................................................... 31 2.26. Operations Insurance......................................................................... 31 2.27. Intercompany Liabilities..................................................................... 32 2.28. Employee Loans............................................................................... 32 2.29. Credited Rates............................................................................... 32 2.30. Related Agreements........................................................................... 32 2.31. Third Party Administration Agreements........................................................ 33
-i- 3 TABLE OF CONTENTS (cont'd)
PAGE ---- 2.32. Mortgage Loans............................................................................... 33 2.33. No Waiver of Defenses........................................................................ 39 2.34. GAAP Financial Statements.................................................................... 39 ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 40 3.1. Organization and Standing.................................................................... 41 3.2. Authorization................................................................................ 41 3.3. Actions and Proceedings...................................................................... 41 3.4. No Conflict or Violation..................................................................... 42 3.5. Consents and Approvals....................................................................... 42 3.6. Brokerage and Financial Advisers............................................................. 43 3.7. GAAP Financial Statements.................................................................... 43 3.8. Statutory Financial Statements............................................................... 44 3.9. Rating....................................................................................... 45 3.10. Investment Intent and Acknowledgement........................................................ 45 ARTICLE 4 - PRE-CLOSING COVENANTS............................................................................... 46 4.1. Conduct of Business.......................................................................... 46 4.2. Certain Transactions......................................................................... 50 4.3. Investigations............................................................................... 51 4.4. HSR Act Filings.............................................................................. 51 4.5. Consents and Reasonable Efforts.............................................................. 52 4.6. Representations and Warranties............................................................... 52 4.7. Financial Statements and Reports............................................................. 53 4.8. Transfer Real Estate Owned................................................................... 54 4.9. Stay-on Bonus................................................................................ 54 ARTICLE 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE............................................................................... 56 ARTICLE 7 - POST-CLOSING COVENANTS.............................................................................. 59 7.1. Continued Access and Cooperation............................................................. 59 7.2. Further Assurances........................................................................... 60 7.3. Expenses..................................................................................... 61 7.4. Tax Indemnification and Other Tax Matters.................................................... 61 7.5. Employee Plans............................................................................... 70 7.6. Non-Discriminatory Treatment of Policyholders................................................ 71 7.7. Change of Name............................................................................... 71 ARTICLE 8 - TERMINATION; SURVIVAL............................................................................... 72
-ii- 4 TABLE OF CONTENTS (cont'd)
PAGE ---- 8.1. Termination of Agreement..................................................................... 72 8.2. Effect of Termination........................................................................ 73 ARTICLE 9 - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION........................................................ 74 9.1. Survival of Representations.................................................................. 74 9.2. Indemnification by Purchaser and JANY........................................................ 75 9.3. Indemnification by Seller.................................................................... 77 9.4. Indemnification Procedure.................................................................... 79 ARTICLE 10 - PUBLICITY AND CONFIDENTIALITY...................................................................... 82 10.1. Publicity.................................................................................... 82 10.2. Confidentiality.............................................................................. 83 ARTICLE 11 - MISCELLANEOUS...................................................................................... 85 11.1. Notices...................................................................................... 85 11.2. Entire Agreement............................................................................. 87 11.3. Amendments................................................................................... 88 11.4. Waivers...................................................................................... 88 11.5. Governing Law................................................................................ 88 11.6. Binding Effect; Assignment; Third Party Beneficiaries........................................ 89 11.7. Severability................................................................................. 89 11.8. Headings..................................................................................... 90 11.9. Counterparts................................................................................. 90 11.10. Arbitration.................................................................................... 90 SIGNATURES ......................................................................................................92
-iii- 5 TABLE OF CONTENTS (cont'd)
PAGE ---- ANNEX A - Definitions EXHIBITS A - Transition Services Agreement B - Opinion of Seller's Counsel C - Opinion of Purchaser's Counsel D - Loan Documentation
-iv- 6 SCHEDULES
2.3 - Actions and Proceedings 2.4 - Certain Matters - Conflicts 2.5 - Consents and Approvals 2.7 - Compliance 2.8(a) - Insurance Contract Forms 2.8(b) - In Force Insurance Contracts 2.8(c) - Certain Commissions Contracts 2.8(e) - Contested Benefits 2.8(f) - Distributions and Other Benefits 2.8(h) - Known Agent Violations 2.8(f) - Distributions and Other Benefits 2.9 - Permit Exceptions 2.10 - Regulatory Filings 2.11 - Reinsurance Agreements 2.12 - Certain Changes or Events 2.13 - Intellectual Property 2.14 - Contracts 2.17 - Tax Matters 2.18 - Real Property 2.20 - Pension and Other Employee Plans 2.22 - Bank Accounts 2.23(a) - Reserve Liabilities 2.23(b) - Reserve Exceptions 2.25 - Threats of Cancellation 2.26 - Operations Insurance 2.27 - Intercompany Liabilities 2.28 - Employee Loans 2.30 - Related Agreements 2.31 - Third Party Administration Agreements 2.32(a) - Mortgage Loans 2.32(b) - Participation 2.32(d) - Waivers, Amendments and Releases Mortgage Loans 2.32(f) - Missing Original Notes 2.32(l) - Tax Delinquencies 3.3 - Purchaser's Actions and Proceedings 3.4 - Purchaser's Conflicts or Violations 3.5 - Purchaser's Consents and Approvals
-v- 7 STOCK PURCHASE AND SALE AGREEMENT STOCK PURCHASE AND SALE AGREEMENT (the "Agreement") dated November 29, 1996 by and between John Alden Life Insurance Company, a Minnesota corporation ("Seller"), and SunAmerica Life Insurance Company, an Arizona corporation ("Purchaser"). W I T N E S S E T H: WHEREAS, John Alden Life Insurance Company of New York, a New York corporation (along with any business or predecessor company acquired by it, "JANY"), is engaged in the business of selling and administering annuity, life and health related insurance policies and related activities solely in the State of New York (the "Insurance Business"); WHEREAS, Seller owns all of the outstanding capital stock of JANY (the "JANY Stock"); and WHEREAS, Seller wishes to sell to Purchaser, and Purchaser wishes to acquire from Seller, all of the JANY Stock pursuant to the terms and conditions set forth in this Agreement and certain other assets of Seller pursuant to the terms and conditions set forth in the Asset Purchase and Sale Agreement dated concurrently herewith between Seller and Purchaser (the "Asset Purchase Agreement"). NOW, THEREFORE, in consideration of the premises, representations and warranties and the mutual covenants and agreements contained herein and other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, Seller and Purchaser 8 (collectively, the "Parties" and, sometimes individually, a "Party"), intending to be legally bound, hereby agree as follows. The capitalized terms used in this Agreement and not defined herein shall have the meanings specified in Annex A attached hereto. Unless the context otherwise requires, such capitalized terms shall include the singular and plural and the conjunctive and disjunctive forms of the terms defined. ARTICLE 1 PURCHASE AND SALE OF STOCK; CLOSING Section 1.1. Closing. The closing of the transactions contemplated hereby (the "Closing") shall take place at 10:00 a.m. local time, at the offices of Kelley Drye & Warren LLP, 101 Park Avenue, New York, New York, 10178, or such other time and place as Purchaser and Seller may mutually agree in writing, on the last business day of the month in which the satisfaction of all conditions set forth in Articles 5 and 6 hereof concerning the Parties' respective obligations to consummate the transactions contemplated herein occurs or such other date as Seller and Purchaser may mutually agree in writing (the "Closing Date") and, subject to completion, shall be deemed to have been consummated and become effective for all purposes as of 11:59 p.m. on the Closing Date. Section 1.2. Purchase and Sale of JANY Stock. Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell, assign and deliver to Purchaser, and Purchaser shall purchase and accept from Seller, all of Seller's right, title and interest in and to the JANY Stock. In consideration for the sale, assignment and delivery of the JANY Stock, at the Closing Purchaser shall pay to Seller a -2- 9 purchase price of One Hundred Thirty Two Million Dollars ($132,000,000) (the "Purchase Price"). Purchaser shall pay the Purchase Price to Seller on the Closing Date by wire transfer of immediately available funds to such bank account as Seller shall designate to Purchaser at least three business days prior to the Closing Date. The amount of the cash payment wired to Seller shall be reduced by an amount equal to one day's interest at an interest rate equal to the three month LIBOR rate in effect on the day preceding the Closing Date plus 25 basis points. Section 1.3. Closing Deliveries. (a) At the Closing, Seller shall or shall cause JANY to deliver to Purchaser the following: (i) the certificates representing the JANY Stock duly endorsed in blank or accompanied by stock transfer powers in proper form duly endorsed in blank, together with all necessary stock transfer stamps affixed thereto and such other instruments as shall reasonably be required by Purchaser to transfer to Purchaser all rights, title and interest in the JANY stock; (ii) all minutes and minute books of JANY; (iii) all stock transfer books and stock ledgers of JANY; (iv) all blank certificates for shares of capital stock of JANY; (v) resignations of all directors and officers of JANY serving in office immediately prior to the Closing; (vi) the opinion of counsel to Seller and JANY, substantially in the form of Exhibit B attached hereto ("Seller's Opinion"); and (vii) a certificate of an executive officer of Seller, dated the Closing Date, representing and warranting to the effect that (A) the officer signing such -3- 10 certificate is familiar with the provisions of this Agreement and (B) the conditions specified in Article 4 of this Agreement have been satisfied. (b) At the Closing, Purchaser shall deliver to Seller the following: (i) the opinions of counsel to Purchaser, substantially in the form of Exhibit C attached hereto ("Purchaser's Opinion"); (ii) a certificate of an executive officer of Purchaser, dated the Closing Date, representing and warranting to the effect that (A) the Person signing such certificate is familiar with the provisions of this Agreement and (B) the conditions specified in Article 5 of this Agreement have been satisfied; (iii) written consents to assignments, where necessary from all applicable parties relating to the Third Party Administration Agreements; and (iv) the Purchase Price. Section 1.4. Additional Closing Deliveries. In addition to the transactions and deliveries contemplated above, the following acts or transactions will occur at the Closing: (a) Seller and Purchaser will enter into a Transition Services Agreement substantially in the form of Exhibit A attached hereto (the "Transition Services Agreement"); and (b) all of the agreements between or among (i) JANY and Seller or (ii) JANY and any Affiliates of Seller will be terminated. Section 1.5. Settlement of Intercompany Obligations. (a) At least five days prior to the Closing, Seller will estimate and cause to be paid by or to Seller or its Affiliates and JANY, as the case may be, in cash, all obligations accrued through the Closing on JANY's books and records payable by or to JANY from or to -4- 11 Seller and its Affiliates, which payments shall have been incurred in the ordinary course of business on a basis consistent with past practice, except that Seller shall not allocate to JANY any portion of any bonuses for any Person who is not an employee of JANY. Seller shall deliver to Purchaser a reasonably detailed description of all such payments at least five days prior to the Closing. (b) Seller shall prepare and deliver to Purchaser on or before the 60th day after the Closing Date a reconciliation statement of the estimated obligations paid by or to Seller and its Affiliates by or to JANY pursuant to Section 1.5(a) hereof and the actual amount of the amount of such obligations (other than as provided in Section 7.4(d) hereof) (the "Reconciliation Statement"). If the total actual amount of such obligations is less than the estimated amount paid to Seller or its Affiliates by JANY pursuant to Section 1.5(a) hereof, Seller shall pay to JANY in cash an amount equal to such difference, together with interest from the Closing Date through the date of payment at the rate per annum equal to the three month LIBOR rate in effect on the date of payment plus 25 basis points. Such payment shall accompany the reconciliation statement. If the actual total amount and revised estimate of such obligations exceeds the estimated amount paid to Seller or its Affiliates by JANY pursuant to Section 1.5(a) hereof, Purchaser shall pay, or cause JANY to pay, to Seller or its Affiliates, as the case may be, within 10 days after delivery of such statement cash in an amount equal to such excess, together with interest from the Closing Date through the date of such payment at the rate per annum equal to the three month LIBOR rate in effect on the date of payment plus 25 basis points. After the date hereof, JANY will not enter into any contract or, except as required by this Agreement or any contract listed on Schedule 2.27 attached hereto, engage in any transaction with Seller or any Affiliate of Seller. -5- 12 Section 1.6. Disputes. If Purchaser and Seller are unable to resolve any disagreement with respect to the Reconciliation Statement within 30 days after Seller receives a timely notice of disagreement, the items of disagreement alone shall be referred for final determination to the U.S. national office of Price Waterhouse or, if such firm is unable or unwilling to make such final determination, to such other independent accounting firm as the Parties shall mutually designate. The firm making such determination is referred to herein as the "Independent Party." The Reconciliation Statement shall be deemed to be binding on Purchaser and Seller upon the earlier to occur of (i) Purchaser's failure to deliver to Seller a notice of disagreement within 30 days after its receipt of the Reconciliation Statement prepared by Seller, (ii) resolution of any disagreement by mutual agreement of the Parties after a timely notice of disagreement has been delivered to Seller or (iii) notification by the Independent Party of its final determination of the items of disagreement submitted to it. The fees and disbursements of the Independent Party shall be borne equally, one-half by Purchaser and one-half by Seller. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Purchaser as follows: Section 2.1. Organization, Standing and Authority of Seller. Seller is a corporation duly organized as a capital stock life and health insurance company, validly existing and in good standing under the Laws of the State of Minnesota. JANY is a corporation duly organized, validly existing and in good standing in the State of New York. JANY has all corporate power and authority necessary or required by Law to engage in the conduct of the Insurance Business -6- 13 as currently conducted by it. Seller has furnished Purchaser with true and correct copies of the Articles of Incorporation and By-laws of JANY, along with all amendments thereto. Section 2.2. Authorization. Seller has all corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and the Transition Services Agreement. The execution and delivery by Seller of this Agreement and the Transition Services Agreement, and the performance by Seller and JANY of its obligations hereunder and thereunder, have been duly authorized by all necessary corporate and shareholder actions on the part of Seller and JANY. This Agreement and the Transition Services Agreement, when executed by all of the parties thereto, will each constitute a valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other Laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). Section 2.3. Actions and Proceedings. (a) Except as disclosed on Schedule 2.3 attached hereto, there are no outstanding Orders by or with any court, arbitrator or Governmental Entity before which Seller or any of its material Affiliates or JANY is or was a party. (b) Except as set forth on Schedule 2.3 attached hereto, there are no Actions pending or, to the knowledge of Seller, threatened either by or against JANY, Seller with respect to JANY or any of JANY's properties or assets which (i) seeks monetary damages exceeding $50,000 individually or $500,000 in the aggregate or an unspecified amount of damages, (ii) seeks any injunction or similar relief or (iii) would, individually or in the aggregate, have a Material Adverse Effect. -7- 14 (c) There are no Actions presently pending or, to the knowledge of Seller, threatened, and there are no final Orders presently outstanding which pertain to any of the JANY Stock. Section 2.4. No Conflict or Violation. Except as disclosed on Schedule 2.4 attached hereto, the execution, delivery and performance by Seller of this Agreement and the Transition Services Agreement in accordance with the respective terms and conditions hereof and thereof do not and will not (a) violate or constitute a default under any provision of the charter or by-laws of Seller or JANY, in each case, as amended to date, (b) violate or result in the breach, cancellation or termination of, accelerate the performance required under, or result in the creation of any lien, claim, restriction, charge or encumbrance or other defect of title ("Liens") upon the JANY Stock or any of the material properties or assets of JANY pursuant to, any mortgage, deed of trust, guaranty, note, indenture, bond, lease, agreement or other instrument to which either of Seller or JANY is a party or by or to which it or any of the assets of JANY may be bound, (c) violate any Order of any court, arbitrator or Governmental Entity against, or binding upon, or any agreement with, or condition imposed by, any Governmental Entity binding upon Seller or JANY or any of such properties or assets of JANY, (d) violate any Law or (e) result in the breach or violation of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment or revocation of, any license, permit, order, approval, registration, authorization, qualification or filing with or under any Law or Governmental Entity (collectively, "Permits") related to the Insurance Business. Section 2.5. Consents and Approvals. Except as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and rules and regulations thereunder (the "HSR Act") or as set forth on Schedule 2.5 attached hereto, no consent, approval, exemption -8- 15 or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, Governmental Entities of competent jurisdiction) by Seller or JANY in order (a) for this Agreement and the Transition Services Agreement to constitute a valid and binding obligation of Seller, (b) to authorize or permit the consummation of the transactions contemplated hereby by Seller and JANY or (c) to prevent the termination of any material right, privilege, franchise, license, permit or agreement of JANY or to prevent any material loss to JANY. Section 2.6. Brokerage and Financial Advisers. No broker, finder or financial adviser has acted directly or indirectly as such for, or is entitled to any compensation from, Seller or JANY in connection with this Agreement or the transactions contemplated hereby, except CS First Boston, whose fees for services rendered in connection with such transactions will be paid by Seller. Section 2.7. Compliance With Laws. Except as disclosed in Schedule 2.7 attached hereto, neither Seller nor JANY is in material violation of any Law or any Order of any court, arbitrator or Governmental Entity pertaining to JANY or any of its assets. Section 2.8. Insurance Contracts. The forms of all policies and endorsements utilized for the In Force Insurance Contracts of JANY are described on Schedule 2.8(a) attached hereto. All In Force Insurance Contracts in effect on October 21, 1996 or September 21, 1996, (as indicated in such Schedule) are listed in Schedule 2.8(b) attached hereto. All In Force Insurance Contracts in effect on Closing Ledger Date will be set forth in an updated Schedule 2.8(b) delivered to Purchaser at the Closing. Schedule 2.8(b) includes (and the updated Schedule 2.8(b) will include) with respect to each In Force Insurance Contract the policy number, policyholder name, form, plan code and account balance. All In Force Insurance Contracts are in all -9- 16 respects, to the extent required under applicable Law, on forms approved by applicable insurance regulatory authorities or which have been filed and not objected to by such authorities within the period provided for objection, and such forms comply in all material respects and have been administered in all material respects in accordance with applicable Law. Without limiting the foregoing: (a) JANY has offered and sold each Insurance Contract in compliance with all applicable Laws (it being acknowledged that no representation is made with respect to compliance by independent agents of JANY except as provided in Section 2.8(h) hereof) and all of Seller's registrations, filings or submissions made by it with respect to the Insurance Contracts with any Governmental Entity were in material compliance with applicable Laws when filed. (b) The transactions contemplated by this Agreement will not materially affect the validity and binding character of any Insurance Contract entered into or issued by JANY or render any admitted assets of JANY non-admitted under the applicable Laws up to and including the Closing Date. (c) Except as set forth in Schedule 2.8(c) attached hereto, and except in accordance with customary insurance industry practice, (i) JANY is not liable to pay commissions upon the renewal of any insurance policy nor (ii) is it a party to any agreement providing for the third-party collection of annuity or insurance premiums payable to JANY by any other Person, which commissions or premiums exceed $100,000 in the aggregate. (d) All In Force Insurance Contracts are in full force and effect and are legal, valid and binding obligations of JANY, and to the knowledge of Seller each other party thereto, and are enforceable against JANY, and to the knowledge of Seller each other party thereto, in accordance with their respective terms, except to the extent that enforcement thereof may be -10- 17 limited by or subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general application relating to or affecting creditors' rights and to general equity principles (other than equitable rescission rights). (e) All Insurance Contract benefits payable by JANY and, to the knowledge of Seller, by any other Person that is a party to or bound by any reinsurance, coinsurance or other similar contract with JANY have been paid in accordance with the terms of the Insurance Contracts under which they arose, except for such benefits for which there is, in the reasonable opinion of Seller or JANY, a reasonable basis to contest and all such contested benefits have been disclosed in Schedule 2.8(e) attached hereto. (f) Except as set forth on Schedule 2.8(f) attached hereto, no In Force Insurance Contract issued, reinsured or underwritten by JANY entitles the holder thereof or any other Person to receive dividends, distributions or other benefits based on the revenues or earnings of JANY or any other Person. (g) The underwriting standards utilized and ratings applied by JANY and, to the knowledge of Seller, by any other Person that is a party to or bound by any reinsurance, coinsurance or other similar contract with JANY conform in all respects to industry accepted practices and to the standards and ratings required pursuant to the terms of the respective reinsurance, coinsurance or other similar contracts. (h) To the knowledge of Seller, each producer who wrote, sold or produced business for JANY was duly licensed as an insurance agent (for the type of business written, sold or produced by such producer) in the particular jurisdiction in which such producer wrote, sold or produced such business. Except as otherwise provided in Schedule 2.8(h) attached hereto, to the knowledge of Seller, no insurance agent who wrote, produced or sold any portion -11- 18 of the business of JANY for Seller violated in any material respect any terms or provisions of any Law, except such violations as have been (i) cured, (ii) resolved through agreements with applicable Governmental Entities or (iii) are barred by an applicable statute of limitations. (i) The treatment under the Internal Revenue Code of 1986, as amended, and any successor thereto (the "Code") of all Insurance Contracts is no less favorable to the Policyholder thereof than the treatment under the Code for which such Insurance Contracts were intended to qualify at the time of their issuance, except for any failure to qualify for such treatment that results from (i) changes to the Code, regulations, pronouncements, announcements or guidance issued in connection with the treatment of the contracts under the Code which were enacted (or have an effective date) after the Closing Date, (ii) amendments, modifications, supplements, riders, endorsements or revisions to the Insurance Contracts after the Closing Date or (iii) changes in the manner in which the Insurance Contracts are administered after the Closing Date. Section 2.9. Permits, Licenses and Franchises. JANY is licensed to issue life and health related insurance policies only in the State of New York. JANY has been duly authorized by the New York Department of Insurance to issue the Insurance Contracts that it is currently writing, and was duly authorized to issue the Insurance Contracts that it is not currently writing at the time such Insurance Contracts were issued. Except as set forth on Schedule 2.9 attached hereto, JANY has all Permits necessary to conduct the Insurance Business as currently conducted by JANY. Neither the ownership of its property or assets nor the business conducted by JANY requires the qualification, registration, license or admission in any jurisdiction outside the State of New York, except where the failure to be so qualified, registered, licensed or admitted, individually or in the aggregate, would not have a Material Adverse Effect. All of the Permits -12- 19 are in full force and effect and JANY has not received notice from any Governmental Entity of its intention to revoke or not renew any Permit, except for such failures to have Permits in full force and effect, revocations, non-renewals and other events which do not and will not, individually or in the aggregate, have a Material Adverse Effect. Section 2.10. Regulatory Filings. Seller has made available for inspection by Purchaser all material registrations, filings and submissions made by JANY with any Governmental Entity and final financial and market conduct reports of examinations with respect to JANY issued by any such Governmental Entity along with copies of JANY's or Seller's responses thereto made or issued on or subsequent to January 1, 1993. Except as listed on Schedule 2.10 attached hereto, JANY has filed all material reports, statements, documents, registrations, filings or submissions (including without limitation any marketing, advertising or sales material) required to be filed by it with any Governmental Entity. Except as listed on Schedule 2.10 attached hereto, (a) no material deficiencies have been asserted by any such Governmental Entity with respect to such registrations, filings or submissions that have not been satisfied; (b) such registrations, filings or submissions were in material compliance with applicable Law when filed; (c) since December 31, 1994, neither Seller nor JANY has submitted any written response with respect to material comments from any Governmental Entity concerning such filings, registrations, submissions or reports of examination; (d) since December 31, 1992, no fine or penalty has been imposed on JANY (or on Seller with respect to JANY) by any Governmental Entity; and (e) no deposits have been made by JANY (or by Seller with respect to JANY) with, or at the direction of, any Governmental Entity which were not shown in the most recent Annual Statement of JANY. -13- 20 Section 2.11. Reinsurance. Schedule 2.11 sets forth all reinsurance or co-insurance agreements (together with all other agreements related thereto) to which JANY is a party related to the Insurance Contracts, and all such contracts, arrangements, treaties, understandings and agreements under which JANY has any obligation to cede or assume insurance. All such agreements are valid and binding against JANY and, to the knowledge of Seller the other parties thereto, and are in full force and effect in accordance with their terms and conform in all material respects to all applicable Laws and neither JANY nor, to Seller's knowledge, any other party thereto is in material default under any such agreement. Except as otherwise provided on Schedule 2.11 attached hereto, no party to any such agreement has audited Seller with respect thereto. Section 2.12. Absence of Certain Changes or Events. Except as disclosed on Schedule 2.12 attached hereto or except as expressly contemplated or required by this Agreement, since December 31, 1995, (a) JANY has not, except in the ordinary course of business, consistent with past practice, (i) engaged in any material transaction, (ii) entered into any material agreement, (iii) waived or released any material right or obligation or (iv) incurred any indebtedness for borrowed money and (b) except as disclosed on Schedule 2.12 attached hereto, there has not been, occurred or arisen: (i) any declaration, setting aside, or payment of any dividend or other distribution in respect of the capital stock of JANY, or any direct or indirect redemption, purchase or other acquisition by JANY of any such stock or of any interest in or right to acquire any such stock; (ii) any issuance, sale or disposition by JANY of any debenture, note, stock or other security issued by JANY, or any material modification or amendment of -14- 21 any right of the holder of any outstanding debenture, note, capital stock or other security issued by JANY. (iii) any Lien created on any of the assets of JANY or assumed by JANY with respect to any of such assets which Lien relates to liabilities individually or in the aggregate exceeding $100,000 (but excluding Liens arising through securities lending in the ordinary course of JANY's business); (iv) any prepayment of any liabilities (other than pursuant to any Insurance Contract) individually or in the aggregate exceeding $100,000; (v) any liability involving the borrowing of money by JANY individually or in the aggregate exceeding $100,000; (vi) any damage, destruction or loss (whether or not covered by insurance) affecting any of the assets of JANY which damage, destruction or loss individually or in the aggregate exceeds $100,000; (vii) any work stoppage, strike, labor difficulty or union organizational campaign (in process or threatened) at or affecting JANY; (viii) any payment, discharge or satisfaction by JANY of any material Lien or liability other than material Liens or liabilities that were paid, discharged or satisfied in the ordinary course of business and consistent with past practice; (ix) any sale, transfer or conveyance of any investments or other assets of JANY with an individual Book Value in excess of $100,000, except in the ordinary course of business and consistent with past practice; (x) any amendment, termination, waiver, disposal or lapse of, or other failure to preserve, any material license, Permit or other form of authorization of JANY; -15- 22 (xi) any amendment of, or any failure by JANY to perform all of its obligations under, or any default under, or any waiver of any right under, or any termination (other than on the stated expiration date) of, any contract that involves or reasonably would involve the annual expenditure or receipt by JANY of more than $100,000 except for actions taken with respect to Insurance Contracts (including, without limitation, reinsurance thereon) in the ordinary course of business and consistent with past practice; (xii) any amendment of the articles or certificate of incorporation or by-laws of JANY; (xiii) any termination, amendment or entering into by JANY as ceding or assuming insurer of any reinsurance, coinsurance or other similar contract or any trust agreement or security agreement related thereto, except as contemplated hereby; (xiv) any transaction or arrangement under which JANY paid, loaned or advanced any amount to or in respect of, or sold, transferred, or leased any of its assets or any services to (i) any officer or director of Seller, JANY or any Affiliate of Seller, (ii) any Affiliate of Seller or JANY, or (iii) any business or other Person in which Seller, JANY, any such officer or director, or any Affiliate of Seller or JANY has any material interest, except transactions or arrangements not exceeding $100,000 in the aggregate which are consistent with past practice; (xv) any material change in any underwriting, actuarial, investment, financial reporting, marketing or accounting practice or policy followed by JANY, or in any assumption underlying such a practice or policy, or in any method of calculating any bad debt, contingency or other reserve for financial reporting or any other accounting -16- 23 purposes other than as required by GAAP, SAP or applicable Law and consistent with past practice; (xvi) any expenditure or commitment for additions to property, plant, equipment or other tangible or intangible capital assets of JANY which exceed $100,000 in the aggregate; (xvii) any accruals or payments by Seller or JANY or employer contributions under any employee benefit plan in respect of employees of JANY, other than those in accordance with the terms of such plans and consistent with past practice; (xviii) any increase in compensation outside the ordinary course; or (xix) any contract or agreement, written or oral, to take any of the actions set forth in the preceding clauses (i) through (xviii) of this Section 2.12. Section 2.13. Computer Software and Other Intellectual Property. Schedule 2.13 attached hereto sets forth a list of all computer software programs and other intellectual property used by JANY that Seller reasonably believes to be necessary to conduct the Insurance Business as currently being conducted. Schedule 2.13 attached hereto also sets forth whether each such computer software program is (i) owned by JANY or licensed by JANY and (ii) the title of each licensing agreement pursuant to which JANY has the right to use such licensed software. Schedule 2.13 attached hereto sets forth each licensing agreement pursuant to which Seller has the right to use such licensed software. To the knowledge of Seller, JANY is not in conflict with or in violation or infringement of any rights, asserted or otherwise, of any other Person with respect to any owned software or licensed software or other intellectual property, nor has Seller received any notice of any such conflict, violation or infringement. JANY has the non-exclusive right to use all such licensed software and other intellectual property. -17- 24 Section 2.14. Contracts. (a) Schedule 2.14 lists and briefly describes (including the parties to and the date and subject matter of) each and every contract, agreement, lease, license, commitment or arrangement to which JANY is a party or which is binding upon JANY, except only for those specifically listed in Schedules 2.8(b), 2.8(c), 2.8(f), 2.11, 2.12, 2.13, 2.18, 2.26, 2.27, 2.30, 2.31, 2.32(a) or 2.32(d) attached hereto, attached hereto or those which may be terminated by JANY without penalty or having a value to or imposing an obligation upon JANY not in excess of $100,000 in the aggregate annually. (b) Schedule 2.14 hereto also identifies each contract in force entered into by JANY in connection with or related to JANY's business and operations within the following categories: (i) all agency or consultation contracts other than contracts terminable without penalty or other liability (other than liabilities previously accrued thereunder) upon 90 days' or less notice; (ii) all contracts with any Person containing any provision limiting the ability of JANY to engage in any business or to compete with or to obtain products or services from any Person or, to the knowledge of Seller, limiting the ability of any Person to compete with or to provide products or services to JANY; (iii) all direct or indirect guarantees of any obligation of JANY, or contracts for the provision for credit support to JANY with respect to obligations to third parties, by Seller or any of its Affiliates; -18- 25 (iv) all contracts relating to the future disposition or acquisition by JANY of any assets or of any interest in any business enterprise (other than contracts entered into in the ordinary course of business and consistent with past practice); (v) all outstanding proxies, powers of attorney or similar delegations of authority (other than delegations of authority for the service of process pursuant to applicable insurance or corporate laws and other than such proxies, powers of attorney or similar delegations of authority entered into or made in the ordinary course of business and consistent with past practice); (vi) all contracts for the provision of administrative, managerial or other services by or for JANY to or from any other Person; (vii) all partnerships, joint ventures, profit-sharing or similar contracts; (viii) all contracts relating to the borrowing of money by JANY or to the direct or indirect guarantee by JANY of any obligation for borrowed money in excess, individually or in the aggregate, of $100,000 in respect of indebtedness of any other Person, including without limitation any contract relating to (i) the maintenance of compensating balances that are not terminable by JANY without penalty or other liability upon not more than 60 calendar days' notice, (ii) any line of credit or similar facility, (iii) the payment for property, products, or services of any other Person even if such property, products or services have not yet been conveyed, delivered or rendered or (iv) the obligation to take-or-pay, keep-well, make-whole or maintain surplus or earnings levels or perform other financial ratios or requirements; and -19- 26 (ix) all leases or subleases of real property used in the business, operations or affairs of JANY, and all other leases, subleases, or rental or use contracts for which JANY is liable. (c) Except as set forth on Schedule 2.14 attached hereto, each of the contracts listed on Schedule 2.14 is in full force and effect and is legal, valid and binding on JANY and to Seller's knowledge the other parties thereto, and is enforceable against JANY and to Seller's knowledge the other parties thereto in accordance with its terms, except to the extent that enforcement thereof may be limited by or subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general application relating to or affecting creditors' rights and to general equity principles (other than equitable rescission rights). Neither JANY nor, to Seller's knowledge, any other party to such contract is in material violation, breach or default of any such contract. There have been delivered or made available to Purchaser true and complete copies of all of the contracts set forth in Schedule 2.14 attached hereto. Section 2.15. Statutory Financial Statements. Seller has previously delivered to Purchaser true, complete and correct copies of the audited statements of admitted assets, liabilities and capital and surplus (statutory basis) of Seller as of December 31, 1993, 1994, and 1995, and the related summaries of operations, statements of capital and surplus and cash flow (statutory basis) for the years then ended, together with the notes related thereto. Seller has previously delivered to Purchaser true, complete and correct copies of the Annual Statements of JANY as filed with the New York Department of Insurance, for the years ended December 31, 1993, 1994 and 1995, together with all attachments, exhibits and schedules thereto and all affirmations and certifications filed therewith and the actuarial opinions for such years. Seller -20- 27 has previously made available to Purchaser for review (without the right to remove or make copies) all auditors' work papers related to the foregoing audited financial information. Seller has previously delivered to Purchaser true, complete and correct copies of the Quarterly Statements of JANY as filed with the New York Department of Insurance, for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, together with all exhibits and schedules thereto. Each such Annual Statement and Quarterly Statement complied in all material respects with all applicable Laws when so filed and was timely filed with all required Governmental Entities. No material deficiencies have been asserted or are otherwise known by Seller with respect thereto. Each such financial statement (and the exhibits and schedules relating thereto), including without limitation each statement of assets, liabilities, surplus and other funds (statutory basis) of Seller and each of the summaries of operations, statements of capital and surplus and cash flow (statutory basis) contained in the respective financial statement was prepared in accordance with SAP applied on a consistent basis (except for changes, if any, disclosed therein) and each such Annual Statement and Quarterly Statement fairly presents (in accordance with SAP) the financial condition of JANY as of the respective dates thereof, and its results of operations or cash flows, as the case may be, for and during the respective periods covered thereby (provided the Quarterly Statements are subject to normal year end adjustments and lack footnotes and other presentation items). There were no material liabilities affecting JANY as of December 31, 1995 required in accordance with SAP to be reflected or disclosed in the Annual Statement for the period then ended, or as of March 31, 1996, June 30, 1996 or September 30, 1996 required in accordance with SAP to be reflected or disclosed in the Quarterly Statement for the period then ended, which are not so reflected or disclosed therein. JANY has not prepared any GAAP financial statements. -21- 28 Section 2.16. JANY Capital Stock. (a) The authorized capital stock of JANY consists of 360,000 shares of common stock, $20 par value per share, all of which shares have been validly issued and are fully paid and are outstanding and, subject to any liability imposed by Section 630 of the New York Business Corporation Law, non-assessable. All such shares were issued in compliance with applicable Laws. Such shares are all of the shares of JANY Stock. Except for this Agreement, there are no outstanding subscriptions, options, warrants, rights, convertible or exchangeable securities, agreements or commitments which obligate or require Seller or JANY to issue or sell any shares of capital stock of JANY. JANY has no subsidiaries and does not control, directly or indirectly, any other Person. JANY is not a party to any joint venture or partnership arrangement and does not own or control any interest in any other Person except in connection with JANY's portfolio investments. (b) The JANY Stock is owned beneficially and of record by Seller free and clear of all Liens. Upon consummation of the transactions contemplated hereby, good and valid title and interest in and to the JANY Stock shall have been sold, assigned and delivered to Purchaser free and clear of all Liens. Section 2.17. Tax Matters. (a) Except as set forth on Schedule 2.17 attached hereto, all Tax Returns, required to be filed with respect to JANY have been timely filed for all years and periods for which such Tax Returns were due (taking into account all filing date extensions), all Taxes due and payable for the periods covered by such Tax Returns have been duly and timely paid, there are no outstanding waivers or extensions of statutes of limitation with respect to any Taxes required to be shown on any such Tax Return, and all required estimated payments of Taxes -22- 29 sufficient to avoid any penalties for underpayment have been made, and, to the knowledge of Seller, there are no material misstatements contained in any such Tax Return. To the knowledge of Seller, since December 31, 1995, JANY has not incurred any liability with respect to any Taxes, except in the ordinary course of the Insurance Business. Except as set forth in Schedule 2.17 attached hereto, there are no presently pending or, to the knowledge of Seller, threatened audits or assessments by any federal, state or local taxing authority involving material issues which pertain to JANY or any of the material properties owned by JANY. There are no Liens with respect to Taxes (except for Liens with respect to real property Taxes not yet delinquent) upon any of the assets and properties of JANY. All federal income Taxes owed by the affiliated group referred to in Section 2.17(g) hereof have been paid for each taxable period during which JANY was a member of such group, other than any unpaid Taxes that, if required to be paid, would not have a Material Adverse Effect. (b) With respect to any period through September 30, 1996 for which Tax Returns have not yet been filed, or for which Taxes are not yet due or owing, JANY has made due and sufficient current accruals for such Taxes in accordance with SAP and GAAP, and such current accruals through such date are duly and fully provided for in the financial statements of JANY for the period then ended. (c) The federal and state income and state premium Tax Returns of JANY have not been audited or examined by the relevant Governmental Entity, and the statute of limitations for the federal and state income and premium Tax Returns for all periods through the respective years specified in Schedule 2.17 attached hereto has expired. Seller has previously delivered to the Purchaser copies, which are true and complete in all material respects, of each of (i) the most recent audit reports relating to the federal and state income and state premium -23- 30 Taxes due from JANY for the last three taxable years and (ii) the federal and state income and state premium Tax Returns filed by JANY for each of the last three taxable years, and Seller has made available to Purchaser for inspection true and correct copies of such Tax Returns (insofar as such returns relate to JANY) filed by any affiliated, combined or consolidated group of which JANY was then a member. (d) No audit or other proceeding by any Governmental Entity is pending or, to the knowledge of Seller, threatened with respect to any Taxes due from JANY or any Tax Return filed by or relating to JANY. To the knowledge of Seller, no assessment of Tax has been formally proposed by any Governmental Entity, orally or in writing, against JANY. (e) JANY is not a party to, is not bound by and has no obligation under, any tax sharing contract and, to the knowledge of Seller, JANY does not have any liability for indemnification of third parties with respect to Taxes or liabilities for Taxes as a transferee. (f) The insurance reserves set forth in the federal income Tax Returns filed by or on behalf of JANY have been determined in all material respects in accordance with section 807 or 846 of the Code, as applicable, and will be so determined in the federal income Tax Return to be filed on behalf of JANY for the period ending on the Closing Date. (g) JANY is (and will continue to be on the Closing Date) a member of the affiliated group that files consolidated federal income Tax Returns with Seller. Section 2.18. Real Property. (a) Schedule 2.18 attached hereto identifies all real property which is owned by or leased to JANY other than interests arising under any Mortgage (the "Real Property"). JANY owns good and indefeasible title to, or has a valid leasehold interest in, free and clear of all Liens, all such Real Property currently used in the conduct of its business or of a type -24- 31 required to be disclosed in Schedule A of an Annual Statement if owned by JANY. No improvement on any such Real Property owned by JANY encroaches upon any real property of any other Person and there are no physical, mechanical or structural defects therein. JANY owns, leases or has a valid right under contract or otherwise to use adequate means of ingress and egress to, from and over all Real Property. JANY has not granted any rights of occupancy with respect to the Real Property leased by it. (b) (i) Neither JANY nor, to the knowledge of Seller, any other Person has used any of the Real Property for the storage, treatment, generation, transportation, manufacture, processing, handling, production, distribution, deposit, burial, use, or disposal of any Hazardous Substance which has created or might create any liability of owners or occupants of the Real Property under, or which would require reporting to a Governmental Entity pursuant to, Environmental Laws; (ii) JANY has no liability arising out of or resulting from a release of any Hazardous Substance on or from any Real Property; (iii) JANY has complied in all material respects with all applicable Environmental Laws relating to the Real Property and the business, activities and processing conducted thereon; (iv) no asbestos or PCB's are contained in or stored on the Real Property or the improvements thereon; (v) no radon gas is contained in any of such improvements; and (vi) there are no storage tanks located in, on or under the Real Property. Section 2.19. Owned Properties. JANY is the sole and exclusive owner of, and has good and marketable title to, all of the properties and assets owned by it, free and clear of all Liens other than: (i) those reflected in the June 30, 1996 interim statutory financial statements of JANY, including, without limitation, obligations with respect to the Insurance Contracts; -25- 32 (ii) liens for taxes, charges and assessments imposed by any taxing authority which are not yet due and payable or which are being contested in good faith by appropriate proceedings; (iii) mechanics', suppliers', installment sales and similar liens for services rendered or materials furnished, the charges for which are not yet due and payable or which are being contested in good faith by appropriate proceedings, and purchase money security interests and similar security interests for goods purchased by JANY; (iv) in the case of the Real Property and equipment, defects or imperfections in title, liens, claims, easements or rights, restrictions and encumbrances which do not materially interfere with the use of such properties as presently used by JANY or the conduct of the Insurance Business as presently conducted by JANY; and (v) Liens arising through securities lending in the ordinary course of JANY's business. Section 2.20. Pension and Other Employee Plans. Schedule 2.20 attached hereto lists all benefit plans and, without duplication, all employee benefit plans and collective bargaining, employment or severance agreements or other similar arrangements to which JANY is a party or by which it is bound, legally or otherwise, including without limitation (i) any profit-sharing, deferred compensation, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, severance, welfare or incentive plan, agreement or arrangement, (ii) any plan, agreement or arrangement providing for "fringe benefits" or perquisites to employees, officers, directors or agents, including but not limited to benefits relating to JANY's automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life -26- 33 insurance and other types of insurance, (iii) any employment agreement, or (iv) any other "employee benefit plan" within the meaning of ERISA). Seller has delivered to Purchaser true and complete copies of all current governing documents and summary plan descriptions with respect to such plans, agreements and arrangements, or summary descriptions of any such plans, agreements or arrangements not otherwise in writing. JANY is in compliance with the applicable provisions of ERISA (as amended through the date of this Agreement), the regulations and other published regulatory authorities thereunder, and all other laws applicable with respect to all benefit plans. JANY has performed all of its obligations under all benefit plans. To the knowledge of Seller, there are no Actions (other than routine claims for benefits) pending or threatened against such benefit plans of their assets, or arising out of such benefit plans, and, to the knowledge of Seller, no facts exist which could give rise to any such Actions. Other than as indicated on Schedule 2.20 attached hereto: (a) JANY neither maintains, sponsors nor contributes to any program or arrangement covering employees of JANY that is an "employee pension benefit plan," an "employee welfare benefit plan," or a "multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans"), or any other incentive or benefit arrangement ("Non-ERISA Plans"); (b) No ERISA Plan (or any trust created thereunder) has engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), which could subject the Purchaser or JANY to any tax penalty on prohibited transactions and which has not adequately been corrected; -27- 34 (c) Each ERISA Plan is in compliance with all material reporting, disclosure and other requirements of the Code and ERISA as they relate to any such ERISA Plan; (d) Determination letters have been received from the Internal Revenue Service with respect to each ERISA Plan which is intended to comply with Code Section 401(a), stating that such ERISA Plan is qualified thereunder; (e) No ERISA Plan subject to Title IV of ERISA has been terminated; (f) No ERISA Plan has incurred any "accumulated funding deficiency" as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether or not waived); (g) No liability to the Pension Benefit Guaranty Corporation (the "PBGC"), other than for premiums, has been incurred with respect to any ERISA Plan; (h) No proceeding or other action has been initiated by the PBGC to terminate any ERISA Plan, nor has written notice been given by the PBGC of an intention to commence or seek the commencement of any such proceeding or actions; and (i) JANY has not, within the last six years before the Closing, completely or partially withdrawn from a "multi-employer plan" covering its employees. (j) Each ERISA plan has been duly authorized by the Board of Directors of JANY. Each such plan is qualified in form and operation under Section 401(a) of the Code and each trust under each such plan is exempt from tax under Section 501(a) of the Code. No event has occurred that will or could give rise to disqualification or loss of tax-exempt status of any such plan or trust under such sections. No event has occurred that will or could subject any such plans to tax under Section 511 of the Code. No nonexempt prohibited transaction (within the meaning of Section 4975 of the Code) or party-in-interest transaction (within the meaning of Section 406 of ERISA) has occurred with respect to any of such plans. -28- 35 (k) Seller has delivered to Purchaser for each such plan copies of the following documents: (i) the Form 5500 filed in each of the three most recent plan years, including but not limited to all schedules thereto and financial statements with attached opinions of independent accountants, (ii) the most recent determination letter from the IRS, (iii) the consolidated statement of assets and liabilities of such plan as of its most recent valuation date, and (iv) the statement of changes in fund balance and in financial position or the statement of changes in net assets available for benefits under such plan for the most recently ended plan year. The financial statements so delivered fairly present the financial condition and the results of operations of each of such plans as of such dates, or for such periods in accordance with GAAP. (l) All group health plans of JANY and any ERISA affiliate have been operated in compliance with the group health plan continuation coverage requirements of Section 4980B of the Code to the extent such requirements are applicable. (m) There has been no act or omission by JANY or any ERISA affiliate that has given rise to or may give rise to fines, penalties, taxes, or related charges under Section 502(c) or (l) or Section 4071 or ERISA or Chapter 43 of the Code. Section 2.21. Labor Matters. JANY is not a party to any representation or collective bargaining agreement with any employees of JANY. There is no strike, slowdown, picketing, work stoppage, labor trouble or other similar event in which employees of JANY are participating or, to the knowledge of Seller, have threatened to participate. Section 2.22. Banks. Schedule 2.22 attached hereto sets forth (a) the name, location and account number of each bank, trust company, securities broker and other financial institution at which JANY maintains an account, safe deposit box, lock box or vault or maintains a banking, -29- 36 custodial, trading or other similar relationship and (b) the name of each individual authorized by JANY to effect transactions with respect to such account, safe deposit box, lock box or vault. Section 2.23. Reserves. Except as set forth in Schedule 2.23 attached hereto, all reserves with respect to Insurance Contracts as established or reflected, and all other provisions made for policy and contract claims with respect to Insurance Contracts (collectively, "JANY Reserve Liabilities"), in the respective Annual and Quarterly Statements were determined in accordance with SAP and generally recognized actuarial methods and standards, consistently applied, were fairly stated in accordance with sound actuarial principles, using prescribed morbidity and mortality tables and interest rates that are in accordance with the nature of the benefits specified in the related Insurance Contracts of JANY, and such JANY Reserve Liabilities and other provisions met the applicable requirements of the insurance laws and regulations of the State of New York. The JANY Reserve Liabilities as of October 21, 1996 have been calculated in the manner set forth on Schedule 2.23 attached hereto. Without limitation of the foregoing sentence, to Seller's knowledge, adequate provision for all JANY Reserve Liabilities has been made to cover the total amount of all reasonably anticipated matured and unmatured benefits, claims and other liabilities under all Insurance Contracts. JANY owns assets that qualify as legal reserve assets under applicable Laws in an amount at least equal to all such JANY Reserve Liabilities. Except as described in Schedule 2.23(b) attached hereto, all reserves and accrued liabilities for estimated losses, settlements, costs and expenses from pending suits, actions and proceedings included in JANY's most recent Quarterly Financial Statements filed with the New York Department of Insurance were determined in accordance with Statement of Financial Accounting Standards No. 5 issued by the Financial Accounting Standards Board. -30- 37 Section 2.24. Books and Records. The minute books of JANY contain a true and complete record in all material respects of all corporate actions taken at all meetings and by all written consents in lieu of meetings of JANY's stockholder and Board of Directors and all committees thereof. The stock record books of JANY reflect accurately all transactions in its capital stock. The books, files, reports, documents, plans and operating records of, or maintained by Seller or JANY, and all other data in the possession or control of Seller and of JANY and primarily relating to or otherwise reasonably required for the operation of JANY's business have been maintained in all material respects in accordance with all applicable Laws. Section 2.25. Threats of Cancellation. Except as set forth in Schedule 2.25 attached hereto, since December 31, 1995 through the date of this Agreement, no Policyholder, group of Policyholder Affiliates, or Persons writing, selling or producing, either directly or through reinsurance assumed, insurance business that individually or in the aggregate for each such Policyholder, group or Person, respectively, accounted for (i) 5% or more of the annual premium or annuity income (as determined in accordance with SAP) or (ii) 1% of account values of Seller and JANY, taken as a whole, in each case at or for the 12 month period then ended, has terminated or, to the knowledge of Seller, threatened to terminate its relationship with JANY. Section 2.26. Operations Insurance. Schedule 2.26 attached hereto lists all casualty, liability, property and other similar insurance contracts that insure the business, operations or affairs of JANY or affect or relate to the ownership, use or operations of any of JANY's assets (including, without limitation, the names of the insurers and the type of coverage thereof) and (a) that have been issued to JANY or (b) that are held by Seller or by any Affiliate of Seller -31- 38 (other than JANY) for the benefit of JANY. All such insurance policies shall terminate as of the Closing Date. Section 2.27. Intercompany Liabilities. Except as reflected in the Annual or Quarterly Financial Statements of JANY filed with the New York Department of Insurance, or disclosed in Schedule 2.27 attached hereto, there are no liabilities, contracts or commitments between JANY on the one hand, and Seller or any Affiliate of Seller, on the other. Except as disclosed in Schedule 2.27 attached hereto, during the period from June 30, 1996 to the date hereof, no such intercompany liabilities have been paid and no settlements of such intercompany liabilities have been made except intercompany liabilities that have been paid or settled on a basis consistent with the JANY's past practice or as provided in Section 2.12(xiv). Section 2.28. Employee Loans. All loans issued by JANY to any officer, director or employee of Seller or JANY are set forth on Schedule 2.28 attached hereto. Except as set forth on Schedule 2.28 attached hereto, all such loans were issued in accordance with commercially reasonable underwriting standards and there is no default on any such loan. Section 2.29. Credited Rates. JANY has complied and is in compliance with all applicable contract provisions and Laws associated with credited interest rates related to the Insurance Contracts. Section 2.30. Related Agreements. Each of the Related Agreements is similar in all material respects to one of the forms set forth on Schedule 2.30 attached hereto. Neither Seller nor JANY knows of any Related Agreements other than those that gave rise to the commissions listed in Schedule 2.30 attached hereto concerning commissions payable on the Insurance Contracts. JANY is not in breach of any of the Related Agreements and, to the knowledge of Seller, none of the other parties to the Related Agreements is in breach thereof. -32- 39 Section 2.31. Third Party Administration Agreements. Schedule 2.31 attached hereto lists all third party administration agreements to which JANY is a party (the "Third Party Administration Agreements"). The Third Party Administration Agreements are valid and binding obligations of JANY, enforceable against JANY in accordance with their terms, and to JANY's knowledge, are valid and binding obligations of the other parties thereto, enforceable against such other parties in accordance with their terms. JANY is not in breach of any of such Third Party Administration Agreements and, to the knowledge of Seller, none of the other parties to such Third Party Administration Agreements is in breach thereof. Section 2.32. Mortgage Loans. (a) Except as set forth on Schedule 2.32(a) attached hereto, Seller is the holder of a first lien position on the Mortgage Loans free and clear of any other Liens, except for with respect to the Mortgaged Property or the mortgage related thereto (a) the lien of current real property taxes and assessments, ground rents, personal property taxes, water rates, water frontage charges and/or meter charges, sewer taxes or rents and other similar charges or assessments, in each case not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record of a type acceptable to lending institutions generally or specifically referred to in the title insurance policy or title opinion issued in connection with the original loan made with respect to the Mortgaged Property, (c) mechanics' or similar liens or claims for work, labor and materials, (d) zoning and other land use restrictions and ordinances, including, without limitation, landmark, historic and wetland designations, (e) rights of tenants under leases or other rights of tenants or rights of other occupants of the premises with or without the legal right to do so, (f) any state of facts an accurate survey would show with respect to the Mortgaged Property, (g) the failure of the -33- 40 premises to comply with applicable occupancy Law or municipal violations of record, (h) in the case where the Mortgaged Property is a condominium unit, the lien of a condominium association on such Mortgaged Property for unpaid maintenance or common expense assessments not yet due and payable, (i) littoral or riparian rights, if any, (j) any right, title or interest in any minerals, mineral rights or related matters including but not limited to oil, gas, coal and other hydrocarbon whether or not shown by the public records and, (k) the lien of any secondary financing in each case, which do not materially impair the Mortgage Loan ("Permitted Mortgage Liens"). As of the date specified therein, the (i) loan number, (ii) loan class, (iii) lien priority, (iv) borrower's name, (v) property address, (vi) outstanding principal amount, (vii) book value, (viii) delinquency status, (ix) status code, (x) current interest rate (or the method of calculating same), (xi) service fee rate, (xii) net interest rate, (xiii) maturity date and (xiv) percentage owned by JANY for each Mortgage Loan are materially as set forth in the Mortgage Loan Schedule. Except as set forth on Schedule 2.32(a) attached hereto, the proceeds of each Mortgage Loan have been fully disbursed and there are no future or additional advances to be made with respect to any Mortgage Loans. Except as set forth on Schedule 2.32(a) attached hereto, no Mortgage Loan has been delinquent for a period of more than 30 days within the last 12 months in the payment of any principal or interest thereon. Each Mortgage Loan is a permitted investment for Minnesota life insurers under applicable Law. (b) With respect to each Mortgage Loan and any and all Loan Documents relating thereto, to Seller's knowledge (i) each of such Mortgage Loans and Loan Documents are the legal, valid, and binding obligation of the mortgagor, obligor or the guarantor, as applicable, and each is enforceable in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy or insolvency Laws, provided that in this case, Seller -34- 41 may rely upon borrower's closing counsel's opinion letter if originated by Seller, or upon representations and warranties given to Seller by another financial institution or entity if purchased by Seller, or in the absence of either, without due inquiry or investigation by Seller so long as Purchaser is assigned the benefits of such opinions, representations or warranties, (ii) none of such Mortgage Loans or Loan Documents is the subject of any agreement, contract or other arrangement (other than this Agreement) pursuant to which any interest in any Mortgage Loan or any payment due under any Mortgage Loan or with respect to any Mortgage Property has been or is intended to be sold, used as collateral, transferred to or otherwise disposed of to any Person or Persons by the original lender, subject to the participatory interests of other lenders or investors as are set forth on Schedule 2.32(b) attached hereto. (c) With respect to each Mortgage Loan and any and all Loan Documents relating thereto, the mortgagor does not have a valid defense to the payment in full of such Mortgage Loan that arises from applicable Laws and such Mortgage Loan is not subject to any right of rescission, set-off, abatement, diminution or counterclaim, except in any case as such right or defense may be provided by bankruptcy, insolvency, reorganization or other similar Laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law). (d) None of the terms of any Loan Documents relating to any Mortgage Loan have been waived, amended or modified in any respect, except as set forth on the Mortgage Loan Schedule and except for such waivers, amendments and modifications as do not adversely affect (i) any mortgagor's, obligor's or guarantor's obligation to pay principal, interest or other sums required (including the timing of such payments) to be paid under such Loan Documents, (ii) Seller's Liens against the Mortgage Property securing the Mortgage Loan or (iii) the -35- 42 enforceability in a timely manner of such Liens. Except as set forth in the Mortgage Loan Schedule, no Mortgage Loan has been satisfied, subordinated or rescinded, in whole or in part except (i) upon full payment of the underlying loan or, in the case of a partial release, in connection with the receipt of an independent third party MAI self-contained appraisal evidencing that there is sufficient collateral (which for this purposes shall mean no more than 80% loan to value) remaining with respect to such Mortgage Loan or (ii) as a result of a final judgment or its equivalent of a condemnation or eminent domain proceeding which does not materially impair the Mortgaged Property or Mortgage Loan. Except as set forth on Schedule 2.32(d) attached hereto, no mortgagor, obligor nor any guarantor listed on the Mortgage Loan Schedule in respect of any Mortgage Loan has been released, in whole or in part except in accordance with the terms of the Note and Mortgage except in the case of a partial release either (i) as a result of a written loan modification or assumption agreement or (ii) if, prior to the release of any mortgagor, obligor or guarantor, a determination was made by Seller that (A) such mortgagor, obligor or guarantor was insolvent or deemed to have a lack of ability to make any material contribution with respect to the outstanding Mortgage Loan debt and (B) that the remaining mortgagor, obligor or guarantor was able to repay the outstanding Mortgage Loan debt, in either case such that the release of any mortgagor, obligor or guarantor would not have a material adverse impact on the repayment of the Mortgage Loan. (e) None of the Mortgage Loans are cross-collateralized with any other mortgage loan except for another Mortgage Loan other than a cross-collateralization which does not have a material adverse impact on the repayment of the Mortgage Loan. (f) The Mortgage File with respect to each Mortgage Loan contains all of the Loan Documents relating to each such Mortgage Loan, including, but not limited to, all -36- 43 documents described on Exhibit D and all such documents are true, complete and correct copies of the documents they purport to be. Except as set forth on Schedule 2.32(f) attached hereto, the Mortgage Loan Files contain the original promissory notes and/or other evidence of indebtedness (including all amendments thereto) and the originals of all credit enhancements, if any, as applicable. (g) With regard to the Mortgaged Property relating to any Mortgage Loan, to the knowledge of Seller no material amount of Hazardous Substances has been disposed of or identified on, under or at such Mortgaged Property the presence of which is either in violation of Law or would, under applicable Laws, require (or permit any Governmental Entity to require) removal or remediation of such Hazardous Substance, except to the extent that removal or remediation has occurred or will occur prior to the Closing Date and except as would not materially affect the Mortgaged Property or the repayment of the Mortgaged Loan. (h) To the knowledge of Seller, there is no pending or threatened condemnation proceeding affecting any Mortgaged Property, or any part thereof, which could have an adverse effect upon the current use of such Mortgaged Property. (i) To the knowledge of Seller, there is no pending or threatened Action relating to such Mortgage Loan affecting the Mortgaged Property relating to such Mortgage Loan which would have a material and adverse effect upon such Mortgage Loan. (j) Seller has received no written notice (i) of any material violation of any Law which is a direct result of the maintenance, operation, occupancy, or use of any of the Mortgaged Property related to such Mortgage Loan, in its present manner such that the violation would materially adversely affect the operation, occupancy or other use of such Mortgaged Property and (ii) that any material Permits and approvals required by Governmental Entities -37- 44 having jurisdiction over the operation of such Mortgaged Property in its present manner have not been performed, issued or paid for or are not in full force and effect. (k) With respect to each Mortgage Loan, (i) each Mortgage is covered by a title insurance policy or where customary an opinion of title from a law firm in such jurisdiction, insuring or opining that the Mortgage creates the first priority Lien it purports to create and that the Mortgage is not subject to any defect or encumbrance except Permitted Mortgage Liens, (ii) no claims have been made by Seller or, to Seller's knowledge, any other Person under any title policy relating to any Mortgage Loan, (iii) there has been no act or omission by Seller, or to Seller's knowledge, any party holding an interest in any title policy (including without limitation any failure to pay the premiums therefor) that creates sufficient grounds for the defense by the title insurer of any claims by the insured or that otherwise limits the title insurer's liability under any title policy relating to any Mortgage Loan and (iv) there has been no act or omission by Seller, or to Seller's knowledge, any party holding an interest in any title policy that has caused a subordination of the priority of any Lien as insured under any title policy relating to any Mortgage Loan. Seller is the insured under any title policy relating to any Mortgage Loan, either by name, endorsement or by virtue of being the successor to the original named insured lender. Seller is either the sole insured or a participant insured in those Mortgage Loans in which the Seller does not hold 100% of the first Lien. (l) Except as set forth on Schedule 2.32(l) attached hereto, there are no delinquent real estate taxes in respect of any Mortgage Property except as set forth on the Mortgage Loan Schedule or any deficiency in any obligor's obligations to pay amounts into escrow (other than in the case of escrows where property taxes have been increased in the past 12 months). -38- 45 (m) If upon origination the Mortgaged Property relating to such Mortgage Loan was in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and the flood insurance described below is available), a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administrator, if available, is in effect with a generally acceptable insurance carrier, in an amount representing coverage not less than the lesser of (i) the unpaid principal balance of such Mortgage Loan, (ii) the full insurable value of such Mortgaged Property or (iii) the maximum amount of insurance available under the Flood Disaster Protection Act of 1973. (n) A hazard insurance policy with a standard mortgagee clause is in effect with respect to each Mortgage Loan (other than a Mortgage Loan secured solely by unimproved land), in an amount representing coverage not less than the lesser of (i) the unpaid principal balance of such Mortgage Loan or (ii) the full insurable value of the Mortgaged Property relating to such Mortgage Loan. (o) All servicing contracts related to the Mortgage Loans originated by JANY are terminable at the election of JANY at termination fees that are no greater than customary termination fees paid in accordance with industry practice. Section 2.33. No Waiver of Defenses. JANY has not waived any defenses, claims or Actions which would have been available to JANY under the Insurance Contracts or the Related Agreements. Section 2.34. GAAP Financial Statements. On or prior to the date hereof, JANY has delivered to Purchaser true, correct and complete copies of (a) the audited consolidated balance sheets of John Alden Financial Corporation ("John Alden") and its subsidiaries as of December 31, 1995 and 1994, prepared in accordance with GAAP, together with the notes thereon and the -39- 46 related report of Price Waterhouse the independent certified public accountant of John Alden, and (b) the audited consolidated statements of income, stockholders' equity and cash flows of John Alden and its subsidiaries for the years ended December 31, 1995, 1994 and 1993 prepared in accordance with GAAP, together with the notes thereon and the related report of Price Waterhouse (collectively, the "John Alden Financial Statements"). JANY has delivered to Purchaser true, correct and complete copies of the consolidated balance sheets, and the related consolidated statements of income, stockholders' equity and cash flows of John Alden and its subsidiaries for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, prepared in accordance with GAAP (the "Interim John Alden Financial Statements"). The John Alden Financial Statements and the Interim John Alden Financial Statements are based on the books and records of John Alden and its subsidiaries and have been prepared in accordance with GAAP consistently applied (except in the case of the Interim John Alden Financial Statements for normal year end adjustments). The John Alden Financial Statements have been audited by Price Waterhouse. The John Alden Financial Statements and the Interim John Alden Financial Statements fairly present in all material respects the consolidated financial position and results of operations of John Alden and its subsidiaries as of the dates and for the periods indicated therein. For purposes of this Article 2, references to the knowledge of Seller means, after reasonable inquiry, the actual knowledge of the officers of Seller having the title of Senior Vice President or higher. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER -40- 47 Purchaser hereby represents and warrants to Seller as follows: Section 3.1. Organization and Standing. Purchaser is a corporation duly organized and validly existing under the Laws of the State of Arizona. Purchaser has all corporate power and authority necessary or required by Law to own, lease and operate its assets, properties and business and to carry on the operations of its business as currently conducted by it. Section 3.2. Authorization. Purchaser has all corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement. Purchaser is duly licensed, qualified or admitted to do business and is in good standing in all jurisdictions in which it is required to be so qualified, licensed or admitted to do business by the Laws thereof, except where the failure to so qualify, be admitted or licensed, individually or in the aggregate is not reasonably likely to have a Material Adverse Affect on Purchaser. The execution and delivery by Purchaser of this Agreement, and the performance by Purchaser of its obligations hereunder, have been duly authorized by all necessary corporate and shareholder actions on the part of Purchaser. This Agreement, when executed by the Parties, will constitute a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other Laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). Section 3.3. Actions and Proceedings. Except as disclosed on Schedule 3.3 attached hereto, (a) there are no outstanding Orders by or with any court, arbitrator or Governmental Entity before which Purchaser or any of its material Affiliates is or was a party that, individually or in the aggregate, have a Material Adverse Effect on Purchaser, and (b) there are no Actions pending or, to Purchaser's knowledge, threatened against Purchaser or any of its material -41- 48 Affiliates which, if adversely determined, would, individually or in the aggregate, have a Material Adverse Effect on Purchaser. Section 3.4. No Conflict or Violation. Except as disclosed on Schedule 3.4 attached hereto, the execution, delivery and performance by Purchaser of this Agreement in accordance with the terms and conditions hereof do not and will not (a) violate any provision of the charter, by-laws or other organizational document of Purchaser, in each case, as amended to date, (b) violate, constitute a default under, or result in the breach, cancellation or termination of, accelerate the performance required under, or result in the creation of any Lien upon any of the assets of Purchaser, pursuant to, any mortgage, deed of trust, guaranty, note, indenture, bond, lease, agreement or other instrument to which Purchaser is a party or by or to which it or any of its assets may be bound, (c) violate any Order of any court, arbitrator or Governmental Entity against, or binding upon, or any agreement with, or condition imposed by, any court, arbitrator or Governmental Entity binding upon Purchaser or any of such assets, (d) violate any Law or (e) result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment or revocation of, any Permit related to Purchaser's business. Section 3.5. Consents and Approvals. Except as required under the HSR Act or as set forth on Schedule 3.5 attached hereto, no consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, Governmental Entities of competent jurisdiction) by Purchaser in order (a) for this Agreement and the Transition Services Agreement to constitute a valid and binding obligation of Purchaser, (b) to authorize or permit the consummation of the transactions contemplated hereby by Purchaser or (c) to authorize or permit Purchaser to conduct the business of JANY after the Closing. -42- 49 Section 3.6. Brokerage and Financial Advisers. No broker, finder or financial adviser has acted directly or indirectly as such for, or is entitled to any compensation from, Purchaser in connection with this Agreement or the transactions contemplated hereby, except Goldman Sachs & Company, whose fees for services rendered in connection with such transactions will be paid by Purchaser. Section 3.7. GAAP Financial Statements. On or prior to the date hereof, Purchaser has delivered to Seller true, correct and complete copies of (a) the audited consolidated balance sheets of SunAmerica Inc. ("SunAmerica") and its subsidiaries as of December 31, 1995 and 1994, prepared in accordance with GAAP, together with the notes thereon and the related report of Price Waterhouse, the independent certified public accountant of SunAmerica, and (b) the audited consolidated statements of income, stockholders' equity and cash flows of SunAmerica and its subsidiaries for the years ended December 31, 1995, 1994 and 1993, prepared in accordance with GAAP, together with the notes thereon and the related report of Price Waterhouse (collectively, the "SunAmerica Financial Statements"). Purchaser has delivered to Seller true, correct and complete copies of the consolidated balance sheets, and the related consolidated statements of income, stockholders' equity and cash flows of SunAmerica and its subsidiaries for the quarters ended March 31, 1996 and June 30, 1996, prepared in accordance with GAAP (the "Interim Purchaser Financial Statements"). The SunAmerica Financial Statements and the Interim Purchaser Financial Statements are based on the books and records of SunAmerica and its subsidiaries, and the SunAmerica Financial Statements have been prepared in accordance with GAAP consistently applied, audited by Price Waterhouse and fairly present in all material respects the consolidated financial position and results of operations of SunAmerica and its subsidiaries as of the dates and for the periods indicated therein. -43- 50 Section 3.8. Statutory Financial Statements. Purchaser has furnished to Seller true, complete and correct copies of the Annual Statements of Purchaser as filed with the Arizona Department of Insurance for the years ended December 31, 1995, 1994 and 1993, together with all attachments, exhibits and schedules thereto and all affirmations and certifications filed therewith and applicable actuarial opinions for such years. Purchaser has furnished to Seller true, complete and correct copies of the Quarterly Statements of Purchaser as filed with the Arizona Department of Insurance for the quarters ended March 31, 1996 and June 30, 1996, together with all attachments, exhibits and schedules thereto and all affirmations and certifications filed therewith and no further amendments thereto are being considered. Each such Annual Statement and Quarterly Statement complied in all material respects with all applicable Laws when so filed and were timely filed with all required Governmental Entities. No material deficiencies have been asserted or are otherwise known by Purchaser with respect thereto. Each such Annual Statement and Quarterly Statement was prepared in accordance with SAP applied on a consistent basis (except for changes, if any, disclosed therein) and fairly presents (in accordance with SAP) the financial condition of Purchaser as of the respective dates thereof or its results of operations or cash flows, as the case may be, for and during the respective periods covered thereby, (provided the Quarterly Statements are subject to normal year end adjustments and lack footnotes and other presentation items). There were no material liabilities affecting Purchaser as of December 31, 1995 required in accordance with SAP to be reflected or disclosed in the Annual Statement for the period then ended, or as of March 31, 1996 or June 30, 1996 required in accordance with SAP to be reflected or disclosed in the Quarterly Statement for the period then ended, which are not so reflected or disclosed therein. -44- 51 Section 3.9. Rating. As of the date hereof, the Standard & Poor's Corporation Claims - Paying Ability Rating of Purchaser is AA- and the Moody's Investor Service, Inc. Financial Strength rating of Purchaser is A2. Purchaser's A.M. Best & Co. rating is A+ (superior) and its Duff & Phelps rating is AA. Section 3.10. Investment Intent and Acknowledgement. Purchaser is purchasing the JANY Stock for its own account and not with a view toward, or for resale in connection with, any distribution thereof. Purchaser acknowledges that it and its representatives and advisors have had the opportunity to ask questions of and receive answers from Seller, JANY and their representatives to the extent that Purchaser and its representatives and advisors have deemed necessary and appropriate and to review all written documentation and other information requested by them, for the purpose of evaluating JANY, the purchase of the JANY Stock and the transactions contemplated by this Agreement, the Ancillary Agreements and the agreements contemplated hereby and thereby. In entering into this Agreement and in purchasing the JANY Stock, Purchaser has relied solely upon its own due diligence, its knowledge of the industry in which the Insurance Business is conducted and the representations and warranties of Seller expressly set forth in this Agreement, and not upon any other representations, warranties or statements of any kind; provided, however, that such diligence and knowledge shall not be deemed a waiver by Purchaser of any of its rights with respect to the representations and warranties of Seller. For purposes of this Article 3, references to the knowledge of Purchaser means, after reasonable inquiry, the actual knowledge of officers of Purchaser having the title of Senior Vice President or higher. -45- 52 ARTICLE 4 PRE-CLOSING COVENANTS Section 4.1. Conduct of Business. (a) Prior to the Closing, Seller shall, and shall cause JANY to, unless Seller shall receive the prior written consent of Purchaser: (i) operate the business of JANY as presently operated and only in the ordinary course and consistent with past practice (including but not limited to past underwriting standards and investment philosophies) subject however to such changes as may be required by changes in applicable Laws or contemplated by this Agreement; and (ii) use commercially reasonable efforts to preserve its relationship with and the goodwill of its brokers, customers, suppliers, employees and other Persons having business dealings with Seller and/or JANY in connection with its business. (b) Without limiting the generality of the foregoing, Seller will or will cause JANY to: (i) use commercially reasonable efforts to (A) maintain all licenses, qualifications and authorizations necessary for JANY to do business in the State of New York, (B) maintain in full force and effect all material contracts, documents and arrangements set forth in Schedule 2.14 hereof, (C) maintain all of JANY's material assets and properties in good working order and condition, ordinary wear and tear excepted, (D) continue all current marketing and selling programs relating to JANY's business in accordance with its current marketing plan and (E) maintain each rating classification assigned to JANY as of the date hereof by insurance rating agencies. -46- 53 (ii) cause the books and records of JANY to be maintained in the usual manner and consistent with past practice and not permit a material change in any underwriting, investment, actuarial, financial reporting or accounting practice or policy of JANY or in any assumption underlying such a practice or policy, or in any method of calculating any bad debt, contingency or other reserve for financial reporting purposes (including without limitation any practice, policy, assumption or method relating to or affecting the determination of insurance or annuities in force, premium or investment income, JANY Reserve Liabilities or operating ratios with respect to expenses, losses or lapses) except as may be required by a change in GAAP, SAP or Law. (iii) (A) prepare and file all Tax Returns required to be filed by JANY prior to or on the Closing Date and (B) pay all Taxes indicated on such Tax Returns or otherwise due and payable prior to or on the Closing Date, unless such Taxes are being contested in good faith and adequate reserves have been established on the books and records of JANY. (iv) (A) cause all JANY Reserve Liabilities with respect to Insurance Contracts established or reflected in the books and records of JANY to be (1) established or reflected on a basis consistent with those JANY Reserve Liabilities and reserving methods followed by JANY in the preparation of its December 31, 1995 Annual Statement filed with the New York Department of Insurance and (2) adequate to cover the total amount of all reasonably anticipated matured and unmatured benefits, dividends, losses, claims, expenses and other liabilities of JANY under all Insurance Contracts pursuant to which JANY has or will have any liability (including without limitation any liability arising under or as a result of any reinsurance, coinsurance or other similar -47- 54 contract); and (B) cause JANY to continue to own assets that qualify as legal reserve assets under all applicable Laws in an amount at least equal to the JANY Reserve Liabilities. (v) use commercially reasonable efforts to maintain in full force and effect until the Closing substantially the same levels of coverage for JANY as the insurance afforded under the contracts listed in Schedule 2.26 attached hereto and cooperate with Purchaser, at Purchaser's cost and expense, to obtain additional or carry-on insurance with respect to JANY after the Closing. Any and all benefits under the contracts listed in Schedule 2.26 attached hereto paid or payable prior to the Closing with respect to the business, operations, affairs or assets and properties of JANY shall be paid or payable to JANY. (vi) cause JANY to continue to administer the Insurance Contracts (including surrenders) in the ordinary course, consistent with past practice. (vii) cause JANY to continue to comply with all Laws applicable to its business, operations or affairs, except for such failures to comply as would not, individually or in the aggregate, have a Material Adverse Effect. (viii) cause JANY to invest current and future cash assets in high grade public corporate bonds (NAIC 1 or 2) designated by Purchaser on the first Business Day of each week or, if Purchaser does not make such a designation, in Qualified Investments and provide Purchaser with weekly reports showing the above investments in the form prepared by JANY in the ordinary course of its business. -48- 55 (c) Unless otherwise provided in this Agreement, Seller will prevent JANY, without the approval of Purchaser, which approval shall not be unreasonably withheld, from and after the date hereof until the Closing, from: (i) selling, assigning, transferring, mortgaging, pledging, leasing, granting or permitting to exist any Lien on or otherwise disposing of any assets which are material to JANY's business, taken as a whole, as presently conducted, other than with respect to investment and portfolio assets in the ordinary course of business, consistent with past practice; (ii) increasing the rates of compensation (including bonuses) payable or to become payable to any officer, employee, agent, independent contractor or consultant of JANY; (iii) except in the ordinary course of business consistent with past practice, incurring any obligation, liability or indebtedness, incurring any extraordinary losses, or disposing of, canceling, waiving or permitting to lapse any rights of material value; (iv) changing in any material respect its accounting principles or practices (including, without limitation, any changes in depreciation or amortization policies or rates or any changes in any assumptions underlying any method of calculating reserves) other than as required by a change in GAAP, SAP or Law; (v) except as disclosed herein, entering into or amending or terminating any transaction or contract that could reasonably be expected to have a Material Adverse Effect; -49- 56 (vi) splitting, combining, redeeming, repurchasing or reclassifying the capital stock of JANY or declaring, setting aside, making or paying any dividend or other distribution in respect of the capital stock of JANY; (vii) issuing or selling (or agreeing to issue or sell) any note, debenture, stock, or other security or any options, warrants, conversion or other rights to purchase any such securities or any securities convertible into or exchangeable for such securities or granting, or agreeing to grant, any such options; (viii) amending the articles of incorporation or bylaws or other charter or organizational documents of JANY; (ix) except in the ordinary course of business consistent with past practice, terminating, amending or executing any material reinsurance, coinsurance or other similar contract, as ceding or assuming insurer related to the Insurance Contracts; (x) settling any intercompany account or obligations between Seller (or any of its Affiliates) and JANY; or (xi) entering into any contract or agreement to do any of the foregoing; Section 4.2. Certain Transactions. From the date of this Agreement through the Closing, neither Seller, JANY nor any of their respective directors or officers will (nor will Seller permit its investment bankers or legal counsel to) solicit, encourage, engage in or initiate any negotiations or discussions with, or provide any information to, or otherwise cooperate in any other manner with, any Person or group (other than Purchaser and its Affiliates) concerning any sale, coinsurance, reinsurance, replacement or other disposition, directly or indirectly of the business of JANY or JANY's capital stock (except in the case of coinsurance or reinsurance, for performance of obligations under the reinsurance agreements listed on Schedule 2.11). -50- 57 Section 4.3. Investigations. From the date hereof through the Closing Date, Purchaser shall be entitled, through its counsel, actuaries and other employees and Representatives, to make such investigation of the assets, liabilities, business and operations of JANY, and such examination of the books and records of JANY, as Purchaser may reasonably request, including, without limitation, for the purpose of investigating the financial condition, service quality and operations of JANY. Any investigation, examination or interview by Purchaser of employees of Seller and JANY shall be conducted at reasonable times upon reasonable prior notice; and each of the Parties and its officers, employees and representatives, including, without limitation, counsel, investment bankers and independent public accountants, shall cooperate with the other's employees and representatives, as the case may be, in connection with such review and examination; provided, however, that such examination shall not be deemed a waiver by Purchaser of any of its rights with respect to the representations and warranties of Seller. Section 4.4. HSR Act Filings. Seller and Purchaser shall, as promptly as practicable, file, or cause to be filed, Notification and Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice (the "Antitrust Division") in connection with the transactions contemplated by this Agreement and the other agreements contemplated hereby, and will use their respective reasonable efforts to respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date. Seller and Purchaser will each furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of necessary filings or submissions -51- 58 to any government or regulatory agency, including, without limitation, any filings necessary under the provisions of the HSR Act. Section 4.5. Consents and Reasonable Efforts. Seller and Purchaser shall, and Seller will cause JANY to, cooperate and use their commercially reasonable efforts to obtain all consents, approvals and agreements of, and to give and make all notices and filings with, any Governmental Entities, necessary to authorize, approve or permit the consummation of the transactions contemplated by this Agreement and the other agreements contemplated hereby. Seller shall, and Seller will cause JANY to, use its commercially reasonable efforts to obtain all approvals and consents to the transactions contemplated by this Agreement as set forth on Schedule 2.5 attached hereto. Purchaser will use its commercially reasonable efforts to obtain all approvals and consents to the transactions contemplated by this Agreement as set forth on Schedule 3.5 attached hereto, if any. In addition, if required by the New York Department of Insurance as a condition to consummation of the transactions contemplated hereby, Purchaser shall cause JANY to be merged at or after the Closing with another insurance company Affiliate of Purchaser. Section 4.6. Representations and Warranties. From the date hereof through the Closing Date, (a) Seller shall use its reasonable efforts to conduct its affairs, and to cause JANY to conduct its affairs, in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties contained in Article 2 shall continue to be true, complete and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, (b) Purchaser shall use its reasonable efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties as to Purchaser contained in Article 3 shall continue to be true -52- 59 and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, (c) Seller shall notify Purchaser promptly of any event, condition or circumstance known to Seller occurring from the date hereof through the Closing Date that would constitute a violation or breach of this Agreement by Seller and (d) Purchaser shall notify Seller promptly of any event, condition or circumstance known to Purchaser occurring from the date hereof through the Closing Date that would constitute a violation or breach of this Agreement by Purchaser. Section 4.7. Financial Statements and Reports. (a) At the time of filing with the New York Department of Insurance, Seller will deliver to the Purchaser true and complete copies of each Annual Statement and Quarterly Statement filed by JANY after the date hereof and on or prior to the Closing. (b) From and after the date hereof and through the Closing Date, Seller shall continue to prepare in the ordinary course of business consistent with past practice and shall deliver, as soon as available, to Purchaser, true and complete copies of customarily prepared internal management information reports (including financial statements, reports, and analyses prepared by or for Seller or JANY) prepared by or for Seller and as relate to any of the business, operations, or affairs of JANY, including without limitation normal internal reports which Seller or JANY prepares (such as those reflecting weekly net production, surrenders, head count and claims and monthly cash flow and operations expense) but excluding any statements, reports or analyses prepared in connection with any analyses of the transaction contemplated in this Agreement. Without limiting the foregoing, Seller will provide to Purchaser weekly a list of the portfolio securities held by Seller, which reflects the market value and book value thereof -53- 60 (monthly) and any changes from the immediately preceding week (weekly), including without limitation, weekly maturities, prepayments, sales, redemptions or similar events. Section 4.8. Transfer Real Estate Owned. On or prior to the Closing Date, Seller shall cause JANY to transfer to Seller or its Affiliates all real estate owned (excluding leasehold interests) by JANY (on an as is-where is basis, with no representations or warranties) in exchange for a cash payment by Seller to JANY equal to the book value of such real estate owned on the date of exchange. Section 4.9. Stay-on Bonus. Seller, and not JANY, will pay any stay-on bonus to JANY employees announced on or before the Closing Date. ARTICLE 5 CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER TO CLOSE The obligations of Purchaser to consummate the transactions contemplated hereby are, unless waived by Purchaser in accordance with Section 11.4 hereof, subject to the fulfillment, at or before the Closing, of each of the following conditions: (i) No Law or Order of a court, arbitrator or Governmental Entity of competent jurisdiction shall be in effect which prohibits, restricts or enjoins, and no Action shall be pending or threatened which seeks to prohibit, restrict, enjoin, nullify, seek material damages with respect to or otherwise materially adversely affect, the consummation of the transactions contemplated by this Agreement. (ii) The applicable waiting period under the HSR Act, including all extensions thereof, shall have expired or been terminated and Purchaser shall have been -54- 61 furnished with appropriate evidence, reasonably satisfactory to it, of such expiration or termination. (iii) All Permits, consents and waivers required from all Governmental Entities legally required to consummate the Closing and to perform this Agreement and the Transition Services Agreement and to consummate the transactions contemplated herein and thereby shall have been obtained and shall be in full force and effect and Purchaser shall have been furnished with appropriate evidence, reasonably satisfactory to it, of the granting of such Permits, consents and waivers. (iv) All necessary consents to the transactions contemplated by this Agreement and the Transition Services Agreement shall have been obtained including, without limitation, those listed on Schedule 2.5 attached hereto, if any. (v) Except for such changes as may be permitted or required pursuant to the terms hereof, the representations and warranties of Seller set forth in Article 2 hereof shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing, except that any such representations and warranties that are given as of a specified date and relate solely to a specified date or period shall be true and correct only as of such date or period. (vi) Seller shall have performed and complied with all covenants and agreements required to be performed or complied with by Seller under this Agreement prior to or concurrently with the Closing in all material respects. -55- 62 (vii) Purchaser shall have received all certificates and other documents required to be delivered to Purchaser at or before the Closing pursuant to this Agreement duly executed by all necessary Persons (other than Purchaser). (viii) Purchaser shall have received the Closing deliveries described in Section 1.3 hereof. (ix) The transactions contemplated by this Agreement shall have been approved by the New York Insurance Department. (x) Purchaser and Seller shall have previously or concurrently closed the transactions contemplated by the Asset Purchase Agreement. (xi) Since December 31, 1995, there shall not have occurred any event or events or state of facts that individually or in the aggregate has or could reasonably be expected to have a Material Adverse Effect; provided, however, that for purposes of this subclause (xi), events or facts which affect the insurance or annuity industry generally (e.g., a change in general economic or market conditions, a change in tax Law or a change in insurance Law), shall not be included in determining whether a Material Adverse Effect has occurred. ARTICLE 6 CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE The obligations of Seller to consummate the transactions contemplated hereby are, unless waived by Seller in accordance with Section 11.4 hereof, subject to the fulfillment, at or before the Closing, of each of the following conditions: -56- 63 (i) No Law or Order of a court, arbitrator or Governmental Entity of competent jurisdiction shall be in effect which prohibits, restricts or enjoins, and no Action shall be pending or threatened which seeks to prohibit, restrict, enjoin, nullify, seek material damages with respect to or otherwise materially adversely affect, the consummation of the transactions contemplated by this Agreement. (ii) The applicable waiting period under the HSR Act, including all extensions thereof, shall have expired or been terminated and Seller shall have been furnished with appropriate evidence, reasonably satisfactory to it, of such expiration or termination. (iii) All Permits, consents and waivers required from all Governmental Entities legally required to consummate the Closing and to perform this Agreement and the Transition Services Agreement and to consummate the transactions contemplated hereby and thereby shall have been obtained and shall be in full force and effect and Seller shall have been furnished with appropriate evidence, reasonably satisfactory to it, of the granting of such Permits, consents and waivers. (iv) All necessary consents to the transactions contemplated by this Agreement and the Transition Services Agreement shall have been obtained, including, without limitation, those listed on Schedule 3.5 attached hereto. (v) Except for changes as may be permitted or required pursuant to the terms hereof, the representations and warranties of Purchaser set forth in Article 3 hereof shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing, except that any such representations and warranties that are given as of a -57- 64 specified date and relate solely to a specified date or period shall be true and correct only as of such date or period. (vi) Purchaser shall have performed and complied with all covenants and agreements required to be performed or complied with by Purchaser under this Agreement prior to or concurrently with the Closing in all material respects. (vii) Seller shall have received all certificates and other documents required to be delivered to Seller at or before the Closing pursuant to this Agreement duly executed by all necessary Persons (other than Seller and JANY). (viii) Seller shall have received the Closing deliveries described in Sections 1.3 and 1.4 hereof. (ix) The transaction contemplated by this Agreement shall have been approved by the New York Insurance Department. (x) Purchaser and Seller shall have previously or concurrently closed the transactions contemplated by the Asset Purchase Agreement. (xi) Since December 31, 1995 there shall not have occurred any event or events or state of facts that individually or in the aggregate has or could reasonably be expected to have a Material Adverse Effect on Purchaser; provided, however, that for purposes of this subclause (xi), events or facts which affect the insurance or annuity industry generally (e.g., a change in general economic or market conditions, a change in tax Law or a change in insurance Law), shall not be included in determining whether a Material Adverse Effect on Purchaser has occurred. -58- 65 ARTICLE 7 POST-CLOSING COVENANTS Section 7.1. Continued Access and Cooperation. (a) Following the Closing Date, Seller shall (i) allow Purchaser, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at Purchaser's expense, to examine and make copies of any books and records retained by Seller within its possession or control ("control" for the purpose of this Section 8.1(a) being defined as the ability to cause delivery to Seller or access by Purchaser), to the extent they relate to JANY or the Insurance Business, for any reasonable business purpose, including, without limitation, the preparation or examination of Tax Returns, regulatory filings and financial statements and the conduct of any Action, whether pending or threatened, concerning the conduct of JANY or the Insurance Business prior to the Closing Date at Seller's offices or other facilities or properties and (ii) maintain such books and records for Purchaser's examination and copying. Access to such books and records shall be at Purchaser's expense and may not unreasonably interfere with Seller's or any successor company's business operations and Purchaser shall reimburse Seller for all reasonable out-of-pocket expenses incurred by Seller in copying such records. Seller shall retain such books and records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with respect to tax matters with respect to which such books and records are necessary and of which Purchaser shall notify Seller), after which time such books and records shall be delivered to Purchaser. (b) Following the Closing Date, Purchaser shall (i) allow Seller, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at Seller's expense, to examine and make copies of the books and records of -59- 66 JANY for any reasonable business purpose relating to Seller's prior ownership of JANY, including, without limitation, the preparation or examination of Tax Returns, regulatory filings and financial statements and the conduct of any Action or the conduct of any regulatory, contract holder, participant or other dispute resolution whether pending or threatened at Purchaser's offices or other facilities or properties, and (ii) maintain such books and records for Seller's examination and copying. Access to such books and records shall be at Seller's expense and may not unreasonably interfere with Purchaser's or any successor company's business operations and Seller shall reimburse Purchaser for all reasonable out-of-pocket expenses incurred by Purchaser in copying such books and records. Purchaser shall retain such books and records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with respect to tax matters with respect to which such books and records are necessary and of which Seller shall notify Purchaser). Section 7.2. Further Assurances. (a) Upon the terms and subject to the conditions herein provided, each of Seller and Purchaser shall use all commercially reasonable efforts to take or cause to be taken, all actions or do, or cause to be done, all things or execute or cause to be executed any documents necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement, the Transition Services Agreements and the other agreements contemplated hereby and thereby. (b) On and after the Closing Date, Seller and Purchaser shall take all commercially reasonable action and execute any additional documents, instruments or conveyances of any kind (not containing additional representations and warranties) and give all notices and obtain all consents, approvals and Orders of Governmental Entities and other third -60- 67 parties which may be necessary to carry out any of the provisions hereof, including, without limitation, putting Purchaser in full possession and operating control of JANY. Section 7.3. Expenses. Except as otherwise specifically provided in this Agreement and the Transition Services Agreement, the Parties shall bear their respective expenses incurred in connection with the preparation, execution and performance of this Agreement, the Transition Services Agreement and the transactions contemplated hereby and thereby, including, without limitation, all fees and expenses of their respective Representatives; provided, however, that Purchaser shall bear (a) the cost of the filing fees in connection with the filings with the FTC and the Antitrust Division under the HSR Act with respect to the transactions contemplated hereby (which expense shall be borne equally by Seller and Purchaser if separate filings are required with respect to the transactions contemplated by this Agreement and the transactions contemplated by the JALIC Asset Purchase Agreement), and (b) the cost of obtaining required insurance regulatory approvals (other than any approvals that relate solely to Seller), from regulatory authorities. Section 7.4. Tax Indemnification and Other Tax Matters. (a) Seller shall be liable for, shall pay to the relevant Tax Authorities, and shall indemnify and hold JANY and Purchaser harmless against, (i) all Taxes that relate to (A) with respect to any taxable period that commences prior to the Closing Date, but ends on or after the Closing Date, the portion of the taxable period that commences on the first day of such taxable period and continues up to and including the Closing Date (the "Pre-Closing Straddle Period"), and (B) any other taxable period ending on or before the Closing Date, (ii) any Tax liability arising under Treasury Regulation section 1.1502-6 or equivalent state law provision as a result of JANY being included in a consolidated, combined or unitary federal or state income -61- 68 or franchise Tax Return prior to the Closing Date, (iii) federal income and state Taxes required to be paid by or on behalf of JANY as a result of the Section 338(h)(10) Election (and any equivalent state law election) (as herein defined), if made pursuant to Section 7.4(g) hereof, (iv) any Tax liability arising as a result of JANY ceasing to be a member of the affiliated group of Seller for purposes of Section 1504 of the Code and (v) Taxes incurred by Purchaser or JANY as a result of a breach of a representation by Seller set forth in Section 2.17 hereof or a failure on the part of Seller to comply with the covenants and undertakings set forth in this Section 7.4, including Seller's covenant to join in making the Section 338(h)(10) Election, if so directed by Purchaser pursuant to Section 7.4(g) hereof, provided that such failure does not result from any act or omission on the part of Purchaser or, after the Closing Date, JANY. The federal income Taxes described in Section 7.4(a)(iii) above shall be calculated by comparing (x) JANY's actual liability for federal income Taxes for the taxable period in which the "deemed asset sale" resulting from the Section 338(h)(10) Election is reported to (y) the liability for federal income Taxes that JANY would have had for such period had the Section 338(h)(10) Election not been made. The state Taxes described in Section 7.4(a)(iii) above shall mean JANY's actual liability for state income or other Taxes payable to the State of New York or any other state or local Tax jurisdiction arising from the "deemed asset sale" or other consequences resulting from the Section 338(h)(10) Election (and any state law equivalent or any election that is deemed to result from the filing of the Section 338 (h)(10) Election). (b) Except as provided in Section 7.4(a) or Section 9.4 hereof, Purchaser and JANY shall be liable for, shall pay to the appropriate Tax Authorities, and shall hold Seller harmless against all Taxes that relate to (i) with respect to any taxable period that commences prior to the Closing Date but ends after the Closing Date, the portion of the taxable period that -62- 69 commences on the first day after the Closing Date and continues up to and including the last day of such taxable period (the "Post-Closing Straddle Period") and (ii) any taxable period that begins after the Closing Date. (c) Whenever it is necessary for purposes of this Section 7.4 to determine the liability for Taxes of JANY for a taxable period that begins before and ends after the Closing Date, the determination shall be made by assuming that JANY had a taxable year which ended at the close of business on the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis (such as the deduction for depreciation) shall be apportioned on a time basis. (d) Except to the extent provided in this Section 7.4(d), JANY's participation under the tax allocation agreement among the Houston National Life Insurance Company consolidated group ("Tax Allocation Agreement") shall be terminated as of the Closing Date. After the date hereof, JANY shall continue to make Tax payments to Seller pursuant to the Tax Allocation Agreement ("Tax Allocation Payments") and appropriate estimated tax payments to the State of New York in respect of taxable periods described in Section 7.4(a)(i) above; provided, however, the computation of such payments shall not take into account (and Seller shall indemnify JANY against) any Taxes described in Section 7.4(a) (ii), (iii), (iv) and (v) above. At the time a consolidated federal income Tax Return that includes JANY for a taxable period described in Section 7.4(a)(i) hereof is filed, (i) Purchaser shall pay (or cause JANY to pay) to Seller the amount by which (x) the amount of Tax to be reported on such Tax Return that pertains to JANY, exclusive of any Taxes described in Section 7.4(a) (ii), (iii), (iv) and (v) above ("JANY's Adjusted Tax Return Liability") exceeds (y) the total Tax Allocation Payments previously made by JANY in respect of the taxable period covered by such Tax Return -63- 70 ("JANY's Total Tax Allocation Payments"), and (ii) Seller shall pay to Purchaser or JANY the amount by which JANY's Total Tax Allocation Payments exceeds JANY's Adjusted Tax Return Liability, as well as any other amounts required to be paid to JANY pursuant to the Tax Allocation Agreement with respect to the taxable period covered by the Tax Return. At the time any state or local Tax Return of JANY is filed that pertains to a taxable period described in Section 7.4(a)(i) hereof or that covers Taxes described in Section 7.4(a)(iii) hereof, Seller shall pay to Purchaser or JANY so much of the Tax liability of JANY to be reported on such Tax Return that relates to Taxes described in Section 7.4(a)(ii), (iii) and (v) hereof. Any payments required to be made by Seller or Purchaser pursuant to the preceding two sentences shall also include interest, if any, commencing on the due date (without extensions) of the Tax Return in question at an annual rate equal to the one year LIBOR rate in effect on such due date plus 25 basis points. Any disputes regarding the calculation of any payments required to be made pursuant to this Section 7.4(d) shall be resolved pursuant to the procedure set forth in Section 1.6 above. Except for the payments permitted or required to be made by Purchaser or JANY pursuant to this Section 7.4(d), nothing contained herein shall in any way affect Seller's indemnification obligations pursuant to Section 7.4(a) hereof, including with respect to any subsequently determined deficiencies in Tax arising in respect of any Tax Return covering a period described in Section 7.4(a)(i) hereof. (e) In the event that Seller or JANY is or becomes entitled to or receives any refund of Taxes attributable to JANY in respect of the Pre-Closing Straddle Period or any other taxable period ending on or prior to the Closing Date, (i) Purchaser, JANY and Seller shall cooperate with each other and take all reasonable actions necessary to obtain such refund and (ii) the amount thereof plus any interest related thereto, shall be (A) the property of (and paid -64- 71 over to) Seller (but net of any Taxes imposed on JANY with respect thereto) if it relates to a Tax period or portion thereof ending on or before June 30, 1996 and was not reflected as an asset or used to reduce the accrual for Taxes, on the Financial Statement for the period ended June 30, 1996, and (B) JANY in all other cases. (f) (i) Seller shall prepare and timely file (or provide to Purchaser for filing, if applicable) all Tax Returns required or permitted by applicable Law to be filed by JANY (or by Seller on its behalf) with respect to periods ending on or before the Closing Date. Seller shall cause JANY to close its books as of the Closing Date in compliance with the requirements of Treasury Regulation 1.1502-76(b) and any similar state or local Law. If the Closing Date shall not occur at the end of a calendar month, Seller, with Purchaser's written consent, which will not be unreasonably withheld, shall be permitted to ratably allocate the calendar month's items of income and expense in accordance with Regulation Section 1.1502-76(b)(2)(iii). Purchaser and JANY shall (A) cooperate with Seller for the purpose of making any election under applicable Law to permit JANY to file any short period Tax Return for the taxable period ending on the Closing Date and (B) provide access to all relevant books and records for purposes of preparing such Tax Returns. Unless otherwise required by applicable Law and disclosed in writing to Purchaser by Seller in advance of the filing of the relevant Tax Return, any Tax Return to be prepared by Seller pursuant to this Section 7.4(f) shall be prepared on a basis consistent with past practice and shall not be prepared in a manner calculated to accelerate or defer any income or deductions into any taxable period in order to achieve a result favorable to Seller and detrimental to Purchaser as a result of the transactions contemplated by this Agreement. Purchaser shall be given the opportunity to review any such Tax Return not less than 30 days prior to the due date for the filing of such return with the relevant Governmental -65- 72 Entity, and Seller shall consult with Purchaser in good faith with respect to any issues that Purchaser may have regarding such Tax Return. Purchaser shall have the right to approve (which approval will not be unreasonably withheld) any position taken in such Tax Return that affects Purchaser's or JANY's liability for Tax Allocation Payments or estimated Tax payments pursuant to Section 7.4(d) hereof or Taxes described in Section 7.4(b) hereof. Unless required by applicable Law, Seller shall not file an amended Tax Return for JANY without Purchaser's consent if such amendment would cause or increase JANY's liability for any Taxes described in Section 7.4(b) hereof. (ii) Purchaser shall file or cause to be filed when due all Tax Returns with respect to Taxes that are required to be filed by or with respect to JANY for taxable years or periods ending after the Closing Date. With respect to any such Tax Return that covers a Pre-Closing Straddle Period, a copy of such Tax Return shall, to the extent permitted by applicable law, be prepared on a basis consistent with past practices of JANY and shall be provided to Seller within 30 days prior to the due date (including extensions) for the filing thereof. Seller shall have the right to approve (which approval shall not be unreasonably withheld) such Tax Return to the extent it would require an indemnification payment by Seller pursuant to Section 7.4(a) hereof. Unless required by applicable law, Purchaser shall not file an amended Tax Return for JANY without Seller's written consent if such amendment would cause or increase Seller's indemnification obligations pursuant to Section 7.4(a) hereof. (g) At Purchaser's request, Seller will join with Purchaser in making a timely election pursuant to Section 338(h)(10) of the Code (the "338(h)(10) Election"), and any equivalent election in any state or states that Purchaser may designate, with respect to the purchase and sale of JANY Stock contemplated by this Agreement. For purposes of determining -66- 73 the "deemed sales price", as defined in Regulation Section 1.338(h)(10)-(f) for purposes of this Section 7.4(g), the liabilities of JANY shall be equal to the amount of such liabilities for Federal income tax purposes as of the Closing Date. Purchaser shall have the initial responsibility for the timely preparation of IRS Form 8023-A, and all supporting statements, schedules, and required information applicable thereto (including an allocation of the purchase price to the assets of JANY), and such Form 8023-A, statements, schedules, and information (the "Form 8023-A Package") shall be submitted to Seller for its review no later than 120 days after the Closing Date. Within 30 days after the receipt by Seller of the Form 8023-A Package, Seller shall notify Purchaser of any objections or proposed changes. If Seller has no objections or proposed changes or if Purchaser and Seller agree on the resolution of all objections or proposed changes, Purchaser and Seller shall promptly file Form 8023-A and the relevant attachments with the IRS via certified mail with return receipt requested. As soon as practicable thereafter, Purchaser and Seller shall furnish to each other a photocopy of such certificate of mailing and return receipt. If Seller and Purchaser shall fail to reach an agreement with respect to any objection or proposed change within 180 days following the Closing Date, then any disputed objection(s) or proposed change(s) shall be submitted for resolution to the national offices of Price Waterhouse LLP or, if such firm refuses or is unable to undertake such matter, such other public accounting firm as Purchaser and Seller shall mutually agree (the "Resolution Accountant"). Purchaser and Seller shall use reasonable efforts to cause a report of the Resolution Accountant to be rendered within 10 Business Days of its appointment, and the Resolution Accountant's determination as to the appropriateness and extent of changes (if any) to the Form 8023-A Package shall be final and binding. The fees and disbursements of the Resolution Accountant's with respect to making such determination shall be borne one-half by -67- 74 Seller and one-half by Purchaser. Promptly after such determination, Purchaser and Seller shall file Form 8023-A and the relevant attachments with the IRS in accordance with the procedure described above. Purchaser and Seller agree to file their respective tax returns, reports and forms, including IRS Form 8023-A, in a manner consistent with the finalized Form 8023-A Package. (h) Purchaser or JANY shall promptly (i) notify Seller of the commencement of any claim, audit, examination or other proposed change or adjustment by any Governmental Entity concerning any Taxes for which Seller may be responsible under Section 7.4(a) hereof (a "Tax Claim") and (ii) furnish Seller with copies of any correspondence received from any Governmental Entity in connection with such Tax Claim. Seller shall promptly (i) notify Purchaser or JANY of the commencement of any claim, audit, examination or other proposed change or adjustment by any Governmental Entity concerning any Tax for which Purchaser or JANY may be responsible under Section 7.4(b) hereof and (ii) furnish Purchaser or the JANY with copies of any correspondence received from any Governmental Entity in connection with such claim. Notwithstanding the foregoing, no failure or delay in giving any notice described above shall relieve Seller of its obligations under this Section 7.4 except, and only to the extent, that it is prejudiced thereby. (i) At its election, Seller may contest or settle any Tax Claim in any legally permissible manner at its sole cost and expense and, upon Seller's payment of such Taxes to the relevant Governmental Entity, may sue for a refund thereof. Seller shall control all correspondence, responses and proceedings related to any such contest or refund suit, and may pursue or forego any administrative proceedings, appeals or litigation in respect of such Tax Claim. Purchaser and JANY, as appropriate, will cooperate fully, provide access to all books -68- 75 and records, and will take all lawful action in connection with such contest or refund suit as Seller may reasonably request. Seller shall keep Purchaser and JANY, as appropriate, regularly apprised of the progress of any such contest or refund suit. In the event that such contest or refund suit may reasonably be expected to increase materially the liability of JANY for Taxes described in Section 7.4(b) hereof, or increase JANY's obligation to make payments pursuant to Section 7.4(d) hereof dealing with tax sharing agreements, if any hereof, Seller shall consult with Purchaser in good faith as to any considerations that Purchaser may have regarding such contest or refund suit. If, during the course of an audit, the IRS proposes an adjustment to the purchase price allocation reflected in the Form 8023-A Package as ultimately approved by Seller or determined by the Resolution Accountant pursuant to Section 7.4(g) hereof, Seller shall (i) use its reasonable best efforts to defend in good faith such purchase price allocation in the course of the audit, (ii) keep Purchaser apprised of the progress of the audit, (iii) give Purchaser and JANY an opportunity to participate, at their own expense, in contesting the proposed adjustment to the purchase price allocation and (iv) obtain Purchaser's approval of any proposed settlement of the issues, which approval shall not be unreasonably withheld. (j) In the event that Seller does not elect to contest a Tax Claim pursuant to Section 7.4(i) hereof, Purchaser or JANY may (but shall not be required to) contest such claim for the account of Seller, in which case (i) Seller shall have the right to review and approve in advance any correspondence or responses sent to any Governmental Entity by or on behalf of the JANY with respect to any Tax Claim and to participate in any subsequent administrative proceedings, appeals and litigation, if any, and (ii) Purchaser and JANY, as appropriate, shall provide access to all relevant books and records. Purchaser and JANY, as appropriate, shall keep Seller regularly apprised of the progress of any such contest, proceedings, appeals or -69- 76 litigation. In the event that Purchaser or JANY elects to contest such claim, Purchaser and JANY shall indemnify and hold harmless Seller for any Tax liability in excess of the amount of the Tax liability that would have arisen under the settlement that Seller was willing to accept and which Seller has disclosed to Purchaser and JANY in writing in advance of such election. (k) In the event that, for any tax period ending after the Closing Date, JANY recognizes a loss or becomes entitled to a credit that may be carried back to a taxable period of JANY during which it was included in Seller's consolidated federal income Tax Return or any combined or unitary Tax Return that includes Seller or its Affiliates, such carryback shall be made only with Seller's written consent; provided that Seller shall consent to such carryback, shall cooperate in the filing of any required returns or claims for refund and shall pay Purchaser any Tax refund received or the amount of reduction in Taxes so obtained (net of any tax or other cost incurred by Seller in connection therewith) if Seller, in its reasonable discretion, determines that permitting such carryback or filing such returns or claims will not materially adversely affect Seller or its Affiliates. Section 7.5. Employee Plans. With respect to the John Alden Retirement Plan of Seller (the "Pension Plan") and the John Alden Employee Savings Incentive Plan of Seller (the "401(k) Plan"), Purchaser and Seller agree as follows: (a) Pension Plan. Effective as of the Closing, JANY employees with accrued benefits under the Seller's Pension Plan will be offered, subject to any required spousal consent rules, the right to receive the value of such accrued benefits in a lump sum. (b) 401(k) Plan. Assets held by Seller in Seller's 401(k) Plan on behalf of all Employees, at each such Employee's option, will be transferred as soon as practicable after the Closing to the trustees of a qualified plan maintained by Purchaser or its Affiliates (if permitted) -70- 77 or retained in Seller's 401(k) Plan (subject to rights of Employees with respect thereto). Any assets transferred will be transferred in accordance with the provisions of Seller's and Purchaser's 401(k) Plans. Section 7.6. Non-Discriminatory Treatment of Policyholders. Except as otherwise provided in the Indemnity Reinsurance Agreement between Seller and Purchaser dated concurrently herewith, from and after the Closing Date Purchaser shall use all commercially reasonable efforts to cause JANY to provide, at all times and from time to time, to the Policyholders under the Insurance Contracts crediting rates and renewal rates and standards of policyholder service and administration which are no less than those provided to other policyholders of insurance or annuity contracts issued, coinsured or reinsured by Purchaser or its Affiliates of a similar type and nature (including without limitation factors such as issue date, actual and anticipated lapse rates and surrender charge periods and other relevant features and market conditions) as the Insurance Contracts. Purchaser will use commercially reasonable efforts to include a provision substantially similar to this Section 7.6 in any agreement for the sale, transfer or bulk reinsurance of all or substantially all of the Insurance Contracts. Section 7.7. Change of Name. Purchaser will use commercially reasonable efforts to cause the name of JANY to be changed prior to December 31, 1997 to a name that does not include the phrase "John" or "Alden" or any variant thereof or any name substantially similar to John Alden. As soon as practicable after obtaining the approval of the New York Department of Insurance to a change of name, the policies sold under the "John Alden" name shall be endorsed with the new name of JANY. Seller hereby grants to Purchaser a license to use the "John Alden" name: (i) until such time as the name change has been approved; and (ii) -71- 78 thereafter, but only for the limited purpose of referring to JANY as being formerly known under its prior name. ARTICLE 8 TERMINATION; SURVIVAL Section 8.1. Termination of Agreement. Notwithstanding anything contained herein to the contrary, this Agreement may be terminated: (a) or at any time prior to the Closing, by mutual written consent of Seller and Purchaser; (b) by written notice by Purchaser to Seller if there has been a material breach by Seller of any of the representations, warranties, agreements or covenants of Seller set forth herein which is not subject to cure prior to the Closing, or a failure of any other condition not subject to cure prior to the Closing to which the obligations of Purchaser are subject; (c) by written notice by Seller to Purchaser if there has been a material breach by Purchaser of any of the representations, warranties, agreements or covenants of Purchaser set forth herein which is not subject to cure prior to the Closing, or a failure of any other condition not subject to cure prior to the Closing to which the obligations of Seller are subject; (d) at any time after April 30, 1997 (the "Termination Date") and prior to the Closing, by Purchaser by written notice to Seller, if (A) the Closing shall not have been consummated on or before the Termination Date and (B) the failure to consummate the Closing on or before the Termination Date did not result from the failure by Purchaser to perform or comply with any covenant or agreement contained in this Agreement required to be performed or complied with prior to the Closing by Purchaser; -72- 79 (e) at any time after the Termination Date and prior to the Closing, by Seller by written notice to Purchaser, if (i) the Closing shall not have been consummated on or before the Termination Date and (ii) the failure to consummate the Closing on or before the Termination Date did not result from the failure by Seller to perform or comply with any covenant or agreement contained in this Agreement required to be performed or complied with prior to the Closing by Seller; or (f) subject to Section 7.2 hereof, by written notice to Purchaser or Seller to the other, at any time after a Governmental Entity having jurisdiction over Purchaser or Seller has notified such Party that it will not provide an approval, consent or Order necessary for the terminating Party to consummate the transactions contemplated by this Agreement or the Ancillary Agreements and the Parties cannot subsequently procure such approval, consent or Order using their respective commercially reasonable efforts. Section 8.2. Effect of Termination. In the event that this Agreement shall be terminated pursuant to Section 8.1, all further obligations of the parties under this Agreement shall terminate without further liability of either Party to the other; provided that the obligations of the parties contained in Section 7.3 (Expenses), Article 10 (Confidentiality) and Article 11 (Miscellaneous) shall survive any such termination. A termination under Section 8.1 shall not relieve any Party of any liability for a breach of, or for any misrepresentation under, this Agreement, or be deemed to constitute a waiver of any available remedy (including specific performance if available) for any such breach or misrepresentation. -73- 80 ARTICLE 9 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION Section 9.1. Survival of Representations. (a) The representations and warranties of Purchaser set forth in Article 3 hereof shall survive the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby for a period of 21 months following the Closing Date; provided, however, that the representations contained in Section 3.1 (Organization, Standing and Authority of Purchaser), and 3.2 (Authorization) shall survive until the expiration of all applicable statutes of limitations (including all periods of extension, whether automatic or permissive). (b) The representations and warranties of Seller set forth in Article 2 hereof shall survive the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby for a period of 21 months following the Closing Date; provided, however, that the representations contained in Sections 2.1 (Organization, Standing and Authority of JANY and Seller), 2.2 (Authorization), 2.16 (JANY Capital Stock), 2.17 (Tax Matters) and 2.21 (Pension and Other Employee Plans) shall survive until the expiration of all applicable statutes of limitations (including all periods of extension, whether automatic or permissive), and Sections 2.18 (Real Property) (paragraph (b) only) and 2.32 (Mortgages) (paragraph (g) only) will survive until the fifth anniversary of the Closing Date. (c) No Action may be commenced by any Person with respect to any claim arising out of or relating to such warranties or representations after the expiration of the period for which such representations and warranties shall survive pursuant to this Section 9.1 (the "Applicable Survival Period"); provided, however, that, subject to this Article 9, any Person -74- 81 shall have the right to commence a suit, action or proceeding after the expiration of the Applicable Survival Period with respect to claims arising out of or relating to such representations and warranties which shall have been asserted by such Person under Section 9.4 hereof before the expiration of the Applicable Survival Period. Section 9.2. Indemnification by Purchaser and JANY. (a) Subject to Sections 7.4, 9.1, the following provisions of this Section 9.2 and 9.4 hereof, Purchaser shall indemnify Seller and its Affiliates (other than JANY after the Closing) (collectively, the "Seller Group") for, and shall hold it harmless from, any and all damages, claims, suits, actions, causes of action, proceedings, investigations, losses, liabilities, assessments, judgments, deficiencies and expenses (including, without limitation, reasonable legal, accounting and other professional expenses) ("Liabilities") asserted against or incurred or sustained by the Seller Group relating to, associated with or arising out of (i) any breach by Purchaser of any covenant or agreement contained in this Agreement by Purchaser or (ii) any breach by Purchaser of any of the warranties or representations of Purchaser set forth in Article 3 of this Agreement. (b) From and after the Closing, JANY shall indemnify each member of the Seller Group for, and hold the Seller Group harmless from, any and all Liabilities of any kind or nature asserted against or incurred or sustained by any or all of the members of the Seller Group arising out of, related to or associated with the Insurance Business or JANY, regardless of whether at the time of Closing such Liabilities were (A) foreseen or unforeseen, (B) known or unknown, (C) existing or arose in the future, (D) fixed or contingent, (E) matured or unmatured, (F) reflected in any of the Schedules attached hereto or (G) relate to or are associated with events occurring or circumstances existing before or after the Closing; provided, -75- 82 however, that notwithstanding anything contained in this Section 9.2(b) to the contrary, JANY shall not be obligated hereunder to indemnify the Seller Group for, or to hold the Seller Group harmless from, any Liabilities under this Section 9.2(b) to the extent that Seller is obligated to indemnify Purchaser in respect of the same Liabilities pursuant to Section 9.3 hereof (or would be obligated to indemnify Purchaser if (i) the limitation on representations or warranties under Section 9.1, or (ii) the dollar limitations on indemnification set forth in Section 9.2(c) hereof did not apply). (c) The Seller Group shall be entitled to indemnification under Section 9.2(a)(ii) and 9.2(b), only when the aggregate amount of all Liabilities with respect to which the Seller Group would otherwise be entitled to indemnification under Sections 9.2(a)(ii) and 9.2(b) hereof and Section 10.2(a)(ii) of the Asset Purchase Agreement exceed $1.5 million. In addition, as soon as practicable after such Liabilities exceed $1.5 million, Purchaser shall pay to Seller $750,000. In no event shall the amount payable by Purchaser and its Affiliates (including JANY) to the Seller Group pursuant to Section 9.2(a)(ii) and 9.2(b) hereof and Section 10.2(a)(ii) of the Asset Purchase Agreement exceed $240,000,000. (d) If any event shall occur or circumstance shall exist which would otherwise entitle the Seller Group to indemnification hereunder, Liabilities shall be deemed reduced to the extent of any proceeds (other than (i) proceeds from self-insurance and (ii) proceeds under experience-rated insurance policies the premiums for which would be increased by reason of the filing of a claim thereunder with respect to such Liability or expense) actually recovered, net of the cost of such recovery, by the Seller Group from any third party (including, without limitation, any insurance company) with respect thereto. In furtherance of the immediately preceding sentence, Seller agrees to, and to cause its Affiliates to, (i) in good faith, diligently -76- 83 seek recovery, at its or their own expense, of all such proceeds from all third parties with respect to all Liabilities with respect to which it or they make or may make a claim for indemnification hereunder and (ii) keep Purchaser fully and promptly informed of all material matters related thereto. (e) To the extent that the undertakings set forth in Section 9.2(a) and (b) hereof may be unenforceable, Purchaser shall contribute the maximum amount that it is permitted to contribute under applicable Law to the payment and satisfaction of all Liabilities incurred by the Seller Group. Section 9.3. Indemnification by Seller. (a) Subject to Sections 7.4, 9.1, the following provisions of this Section 9.3, and 9.4 hereof, Seller shall indemnify Purchaser and its Affiliates (including JANY after the Closing) (collectively, the "Purchaser Group") for, and shall hold them harmless from, any and all Liabilities asserted against or incurred or sustained by Purchaser relating to, associated with or arising out of: (i) any breach by Seller of any covenant or agreement contained in this Agreement by Seller, (ii) any breach by Seller of any of the warranties or representations set forth in Article 2 of this Agreement (other than Sections 2.18(b) and 2.32(g) hereof), (iii) any Extra Contractual Obligations, (iv) any Vanishing Premium Liabilities; provided, however, that Seller shall not be required to provide the indemnification with respect to Vanishing Premium Liabilities related to any In Force Insurance Contract if Purchaser reduces the dividend scale applicable to such Insurance Contract or (v) the Insurance Contracts issued by JANY without Permits as identified on Schedule 2.9 attached hereto. (b) Subject to Section 9.1, the following provisions of this Section 9.3 and 9.4 hereof, Seller shall indemnify the Purchaser Group for, and shall hold it harmless from, (i) one- -77- 84 half of any and all Liabilities up to an aggregate of $3,000,000 (i.e., $1.5 million of the first $3.0 million of such Liabilities) and (ii) any and all Liabilities in excess of $3,000,000 asserted against or incurred or sustained by the Purchaser Group relating to, associated with or arising out of any breach of the representations and warranties of Seller set forth in Sections 2.18(b) and 2.32(g) hereof and Section 3.22(g) of the Asset Purchase Agreement (without giving effect to the knowledge and materiality qualifiers set forth therein). (c) The Purchaser Group shall be entitled to indemnification under Section 9.3(a)(ii), 9.3(a)(iii) and 9.3(a)(iv) hereof only when the aggregate amount of all Liabilities with respect to which the Purchaser Group would otherwise be entitled to indemnification under Sections 9.3(a)(ii), 9.3(a)(iii) and 9.3(a)(v) hereof and Section 10.3(a)(ii) of the Asset Purchase Agreement exceeds $1.5 million. In addition, as soon as practicable after such Liabilities exceeds $1.5 million, Seller shall pay to Purchaser $750,000. In no event shall the amount payable by Seller and its Affiliates to the Purchaser Group pursuant to Sections 9.3(a)(ii), 9.3(a)(iii) and 9.3(a)(v) hereof and Section 10.3(a)(ii) of the Asset Purchase Agreement exceeds $240,000,000. (d) If any event shall occur or circumstance shall exist which would otherwise entitle the Purchaser Group to indemnification hereunder, Liabilities shall be deemed reduced to the extent of any proceeds (other than (i) proceeds from self-insurance and (ii) proceeds under experience-rated insurance policies the premiums for which would be increased by reason of the filing of a claim thereunder with respect to such Liability) actually recovered, net of the cost of such recovery, by the Purchaser Group from any third party (including, without limitation, any insurance company) with respect thereto. In furtherance of the immediately preceding sentence, Purchaser agrees to, and to cause its Affiliates to, (i) in good faith, diligently seek recovery, at -78- 85 its or their own expense, of all such proceeds from all third parties with respect to all Liabilities with respect to which it or they make or may make a claim for indemnification hereunder and (ii) keep Seller fully and promptly informed of all material matters related thereto. (e) To the extent that the undertakings set forth in Section 9.3(a) hereof may be unenforceable, Seller shall contribute the maximum amount that it is permitted to contribute under applicable Law to the payment and satisfaction of all Liabilities incurred by the Purchaser Group. Section 9.4. Indemnification Procedure. (a) Within a reasonable time after obtaining knowledge thereof, a Person who may be entitled to indemnification hereunder (the "Indemnitee") shall promptly give the Party who may be obligated to provide such indemnification (the "Indemnitor") written notice of any Liability which the Indemnitee has determined has given or could give rise to a claim for indemnification hereunder (a "Notice of Claim"); provided, however, no failure or delay in giving any such Notice of Claim shall relieve the Indemnitor of its obligations except, and only to the extent, that it is prejudiced thereby. A Notice of Claim shall specify in reasonable detail the nature and all known particulars related to a Liability. The Indemnitor shall perform its indemnification obligations in respect of a Liability described in a Notice of Claim under Sections 9.2 or 9.3 hereof, as the case may be, within 30 days after the Indemnitor shall have received such Notice of Claim. (b) The Indemnitor shall inform the Indemnitee promptly after the Indemnitor has made a good faith determination, based on the facts alleged in such Notice of Claim or which have otherwise become known to the Indemnitor, either that the Indemnitor acknowledges that it has an indemnification obligation hereunder in respect of such Liability or that the -79- 86 Indemnitor has made a good faith determination that it has no indemnification obligation hereunder in respect of such Liability. If the Indemnitor fails to perform its obligations under this Section 9.4 or if the Indemnitor shall have informed the Indemnitee in writing in that the Indemnitor does not have an indemnification obligation hereunder in respect of such Liability, then the Indemnitee shall have the right, but not the obligation, to take the actions which the Indemnitor would have had the right to take in connection with the performance of such obligations and, if the Indemnitee is entitled to indemnification hereunder in respect of the event or circumstance as to which the Indemnitee takes such actions, then the Indemnitor shall, in addition to indemnifying Indemnitee for the Liability, indemnify the Indemnitee for all of the legal, accounting and other costs, fees and expenses reasonably and actually incurred in connection therewith. (c) The Indemnitor shall have the right and obligation, in good faith and at its own cost and expense, to cure, remediate, mitigate, remedy or otherwise handle any event or circumstance which gives rise to a Liability in respect of which a Notice of Claim has been given (including events and circumstances which can be cured, remediated, mitigated or remedied through the expenditure of money and events and circumstances which give rise to a Liability which can be measured in terms of money), regardless of the nature of such Liability. Such right and obligation shall include, without limitation, (i) the right to investigate any such event or circumstance, and (ii) the right to defend, contest or otherwise oppose any third party claim, demand, suit, action or proceeding related to such event or circumstance with legal counsel selected by it. The exercise of such right and performance of such obligation shall not constitute an admission or agreement by Indemnitor that it has an indemnification obligation hereunder in respect of such Liability. If the Indemnitor proposes to settle or compromise any -80- 87 such third party action, demand, claim, suit or proceeding, the Indemnitor shall give written notice to that effect (together with a statement in reasonable detail of the terms and conditions of such settlement or compromise) to the Indemnitee a reasonable time prior to effecting such settlement or compromise. (d) The Indemnitee shall have the right, but not the obligation, to participate, at its own cost and expense, in the defense, contest or other opposition of any such third party claim, demand, suit, action or proceeding through legal counsel selected by it and shall have the right, but not the obligation, to assert any and all cross-claims or counterclaims which it may have. So long as the Indemnitor is in good faith performing its obligations under this Section 9.4, the Indemnitee shall (i) at Indemnitor's cost and expense, cooperate in all reasonable ways with, make its and its Affiliates' relevant files and records available for inspection and copying by, make its and its Affiliates' employees reasonably available to and otherwise render reasonable assistance to the Indemnitor upon request and (ii) not compromise or settle any such claim, demand, suit, action or proceeding without the prior written consent of the Indemnitor. The Indemnitee shall have the right (i) to object to the settlement or compromise of any such third party action, demand, claim, suit or proceeding whereupon if such settlement is solely a cash settlement (A) the Indemnitee will assume the defense, contest or other opposition of any such third party action, demand, claim, suit or proceeding for its own account and as if it were the Indemnitor and (B) the Indemnitor shall be released from any and all liability with respect to any such third party action, demand, claim, suit or proceeding to the extent that such liability exceeds the liability which the Indemnitor would have had in respect of such a settlement or compromise, or (ii) to assume, at any time by giving written notice to that effect to the Indemnitor, the cure, mitigation, remediation, remedy or other handling of such event or -81- 88 circumstance and the defense, contest or other opposition of any such third party action, demand, claim, suit or proceeding for its own account whereupon the Indemnitor shall be released from any and all liability with respect to such event or circumstance and such third party action, demand, claim, suit or proceeding. (e) After the Closing, Purchaser shall and shall cause JANY to take all commercially reasonable actions which may be necessary to enable Seller to exercise its rights and perform its obligations under this Section 9.4. (f) Notwithstanding anything contained herein to the contrary, each Party shall use, and shall cause its Affiliates to use, commercially reasonable efforts to mitigate any and all damages, losses, liabilities, costs and expenses in respect of which it may be entitled to indemnification hereunder. ARTICLE 10 PUBLICITY AND CONFIDENTIALITY Section 10.1. Publicity. Neither Party shall or shall permit its Affiliates to issue any publicity, release or announcement concerning the execution and delivery of this Agreement, the provisions hereof or the transactions contemplated hereby without the prior written approval of the form and content of such publicity, release or announcement by the other; provided, however, that no such approval shall be required when such publicity, release or announcement is required by (i) applicable Law, (ii) applicable rules or regulations of, or any listing agreement with, a national or foreign stock exchange or the Automated Quotation System maintained by the National Association of Securities Dealers, Inc. or (iii) any Order of any court, arbitrator or Governmental Entity of competent jurisdiction; and, provided further, that, prior to issuing -82- 89 any publicity, release or announcement without such prior written approval, the Party issuing or whose Affiliate is issuing such publicity, release or announcement shall have given reasonable prior notice to the other Party of such intended issuance and, if requested by the other Party, shall have used reasonable efforts at such other Party's own cost and expense to obtain a protective order or similar protection for the benefit of the other Party. In addition, with the prior written consent of the Parties, not to be unreasonably withheld, CS First Boston and Goldman Sachs & Company each may cause to be published such tombstone advertisements with respect to the transactions contemplated by this Agreement as it shall deem appropriate. Nothing contained herein shall prevent the communication of information with any Governmental Entity or any agency or other organization which rates the financial solvency or claims-paying ability of Seller, Purchaser or JANY, including without limitation, A.M. Best Company, Inc., Duff & Phelps, Standard & Poor's Corporation and Moody's Investors Services, Inc. or state insurance departments or other regulatory bodies. Section 10.2. Confidentiality. (a) All data, reports, records and other information of any kind received by a Party or its Affiliates or Representatives (such Party being hereinafter referred to as the "Receiving Party") from the other Party or its Affiliates or Representatives, (such other Party being hereinafter referred to as the "Delivering Party") under this Agreement or in connection with the transactions contemplated hereby shall be treated as confidential (collectively, "Confidential Information"). Except as otherwise provided herein, the Receiving Party shall not use (and shall not permit its Affiliates, or Representatives to use) Confidential Information for its own (or their own) benefit and shall use commercially reasonable efforts (and shall cause its Affiliates, directors, officers and employees to use commercially reasonable efforts) to maintain -83- 90 the confidentiality of Confidential Information. If the Receiving Party or any of its Affiliates or Representatives is required to disclose Confidential Information by or to any court, arbitrator or Governmental Entity of competent jurisdiction, the Receiving Party shall, prior to such disclosure, promptly notify the Delivering Party of such requirement and all particulars related to such requirement. The Delivering Party shall have the right, at its own cost and expense, to object to such disclosure and to seek confidential treatment of any Confidential Information to be so disclosed on such terms as it shall determine. (b) The restrictions set forth in Section 10.2(a) hereof shall not apply to the use or disclosure of Confidential Information to the extent, but only to the extent, (i) permitted or required pursuant to any other agreement between or among the Parties or their respective Affiliates or Representatives, (ii) necessary by a Party or its Affiliates in connection with exercising its or their rights or performing its or their duties or obligations under this Agreement, the Transition Services Agreement or the other agreements described in clause (i) of this sentence, (iii) contemplated by the last two sentences of Section 10.2(a) hereof or (iv) that the Receiving Party can demonstrate such Confidential Information (A) is or becomes generally available to the public through no fault or neglect of the Receiving Party, (B) is received in good faith on a non-confidential basis from a third party who discloses such Confidential Information without violating any obligations of secrecy or confidentiality, (C) is independently developed after the time of receipt as shown by dated written records or (D) was already possessed at the time of receipt as shown by prior dated written records. (c) For the purposes of this Section 10.2, (i) information which is specific shall not be deemed to be within an exception set forth in Section 10.2(b) hereof merely because it is embraced by general information which is within such an exception and (ii) a combination -84- 91 of information shall not be deemed to be within an exception set forth in Section 10.2(b) hereof merely because individual aspects of such combination are within such an exception unless the combination of information itself, its principle of operation and its value or advantages are within such an exception. ARTICLE 11 MISCELLANEOUS Section 11.1. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), sent by certified, registered or express mail, postage prepaid and return receipt requested or transmitted by facsimile (with a copy of such notice or other communication and a confirmation of transmission sent by certified, registered or express mail, postage prepaid and return receipt requested no later than the close of business on the next business day following such transmission), and shall be addressed as follows: when Purchaser is to be notified: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Attention: General Counsel Facsimile No.: (310) 772-6574 with a copy to: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Attention: Controller Facsimile No.: (310) 772-6684 and -85- 92 O'Melveny & Myers 1999 Avenue of the Stars Suite 700 Los Angeles, California 90067 Attention: Robert D. Haymer, Esq. Facsimile No.: (310) 246-6779 when Seller is to be notified: John Alden Life Insurance Company 7300 Corporate Center Drive Miami, Florida 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 with copies to: John Alden Financial Corporation 7300 Corporate Center Drive Miami, Florida 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1497 Kelley Drye & Warren LLP Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901 Attention: Jay R. Schifferli, Esq. Facsimile No.: (203) 327-2669 A Party may, by notice given in accordance with this Section 11.1 to the other Party, designate another address or Person to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 11.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and subject to delivery of the mailed copy thereof) or the affidavit of the messenger (if transmitted -86- 93 by personal delivery) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. Section 11.2. Entire Agreement. This Agreement (including the Transition Services Agreement, the Asset Purchase Agreement, the other agreements contemplated hereby and thereby, the Annex, the Exhibits and the Schedules attached hereto (the "Transaction Agreements")) contains the entire agreement and understanding between the Parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous agreements, representations, warranties and understandings, whether written or oral, by or between the Parties with respect to the subject matter hereof. Except for the representations and warranties expressly set forth in the Transaction Agreements, Purchaser disclaims reliance upon (i) any representations, warranties or guarantees (whether express or implied and whether oral or written) by Seller, JANY or any of their Affiliates or any of their or their respective Affiliates' Representatives (including, without limitation, any projections of future sales, revenues, expenses or earnings and any statements regarding the prospects of the Insurance Business as presently conducted by JANY) or (ii) any other information with respect to the Insurance Business, Seller, JANY, their respective assets and properties or their industry provided by or on behalf of them. Nothing contained in any document or instrument of conveyance, transfer, assignment or delivery executed or delivered at the Closing pursuant to this Agreement shall amend, extend, modify, renew or alter in any manner any representation, warranty, covenant, agreement or indemnity contained herein. Nothing contained in the Transaction Agreements or in any of the Schedules attached hereto or thereto or in any other agreement contemplated hereby or thereby shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates of liability to third parties, whether under any -87- 94 Law or otherwise, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any such Law. Section 11.3. Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of, or approval under this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment or approval is set forth in a written instrument which states that it adds to, amends, cancels, renews or extends this Agreement or grants an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. Section 11.4. Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or impair, limit or restrict the exercise of part of any Party of any such right, power or remedy any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. Section 11.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Each Party consents and submits to the non-exclusive personal jurisdiction of any -88- 95 federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 11.10 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. Section 11.6. Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Seller nor Purchaser shall assign any of its rights or delegate any of its duties hereunder (in whole or in part and by operation of law or otherwise) without the prior written consent of the other Party hereto except that Purchaser may assign its rights and obligations under this Agreement to any of its Affiliates provided Purchaser shall remain liable for all of its obligations hereunder notwithstanding such assignment. Any assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such consent is required hereby, shall be void. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. Section 11.7. Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) -89- 96 if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. Section 11.8. Headings. The headings in this Agreement have been inserted for convenience of reference only, and shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. Section 11.9. Counterparts. This Agreement may be executed by the parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. Section 11.10. Arbitration. The Parties acknowledge and agree that the transactions contemplated herein substantially affect and impact interstate commerce. Therefore, all disputes or differences between Seller and Purchaser arising under or which are related to this Agreement (other than proceedings for the sole purpose of injunctive relief) upon which an amicable -90- 97 understanding cannot be reached within 30 days shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court having jurisdiction thereof. The Arbitrators provided for herein shall construe this Agreement in light of the prevailing custom and practices for acquisition transactions of a similar nature. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held at a site selected by the Arbitrators. The Parties agree to arbitrate within 90 days following the transmittal of written demand of either Party to arbitrate any dispute arbitrable under this Agreement. The Parties will in good faith, within 15 days following notice of written demand to arbitrate attempt to agree on a single Arbitrator. If the Parties cannot within 15 days thereafter agree on a single arbitrator, each of the Parties shall appoint an Arbitrator, notifying the other Party of the name and address of such Arbitrator. The Arbitrators appointed by each Party shall agree upon and appoint a third neutral Arbitrator. If either Party shall fail to appoint an Arbitrator as herein provided, or should the two Arbitrators so named fail to select the third Arbitrator within 30 days after their appointment, then, in either event, the President of the American Arbitration Association or its successor shall appoint such second and/or third Arbitrator. A decision of a majority of the Arbitrators shall be final and binding and there shall be no appeal therefrom. The Arbitrators shall within 45 days after the final hearing enter an award and the award shall be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Parties; all other costs of the respective Parties, including without limitation fees and expenses of the respective Party's attorneys, witnesses, and discovery shall be paid by the respective Party, -91- 98 except to the extent that the Arbitrators otherwise direct based on the equities of the situation. The arbitration shall be held in New York, New York, unless otherwise agreed between the Parties. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. SUNAMERICA LIFE INSURANCE COMPANY By: /s/ Jay S. Wintraub ------------------------------------- Name: Jay S. Wintraub Title: Executive Vice President JOHN ALDEN LIFE INSURANCE COMPANY By: /s/ Glendon E. Johnson ------------------------------------- Name: Glendon E. Johnson Title: Chief Executive Officer -92- 99 ANNEX A The following terms are defined in the following Sections.
DEFINED TERM SECTION - ------------ ------- Agreement Introduction Ancillary Agreements 3.10 Antitrust Division 4.4 Applicable Purchaser Survival Period 9.1 Arbitrators 11.10 Asset Purchase Agreement Introduction Books and Records 1.5 Closing 1.1 Closing Date 1.1 Code 2.9 Confidential Information 10.2 Deemed Asset Sale 7.4 Delivering Party 10.2 ERISA 2.20 ERISA Plans 2.20 401K Plan 7.5 Form 8023-A Package 7.4 FTC 4.4 Houston 7.4 HSR Act 2.5 Indemnitee 9.4 Indemnitor 9.4 Insurance Business Introduction Interim John Alden Financial Statements 2.34 Interim Purchaser Financial Statements 3.7 JANY's Adjusted Tax Return Liability 7.4 JANY Employee 7.5 JANY Reserve Liabilities 2.23 JANY Stock Introduction JANY Introduction John Alden 2.34 John Alden Financial Statements 2.34 knowledge 2.3 Liabilities 9.2 Liens 2.4 Notice of Claim 9.4 Parties Introduction Party Introduction Pension Benefit Guaranty Corporation 2.20
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Pension Plan 7.5 Permits 2.5 Pre-Closing Straddle Period 7.4 Post-Closing Straddle Period 7.4 Purchase Price 1.2 Purchaser Introduction Purchaser Financial Statements 3.7 Purchaser Group 9.3 Purchaser's Opinion 1.3 Real Property 2.18 Receiving Party 10.2 Resolution Accountant 7.4 Seller Introduction Seller Group 9.2 Seller's Opinion 1.3 Tax Allocation Agreement 7.4 Tax Allocation Payments 7.4 Tax Claim 7.4 Termination Date 8.1 Third Party Administration Agreements 2.31 Transition Services Agreement 1.4 Transaction Agreements 1.2
"Action" means any action, claim, complaint, cause of action, arbitration, petition, investigation, suit or administrative or other proceeding, whether civil or criminal, at law or in equity, before any court, arbitrator or Governmental Entity. "Affiliate" shall mean any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Person specified. For purposes of this definition, "control" (and its derivative terms "controlled," "controls," etc.) shall mean the power and right to direct the management and policies of another Person, whether by ownership of voting securities, the ability to elect a majority of the board of directors or other managing board or committee, management contract, or otherwise. "Book Value" means book value computed in accordance with SAP, without marking to market and without including Accrued and Unpaid Investment Income. "Business Day" means any day on which banks and other financial institutions are not required to be closed pursuant to applicable Laws in any of New York, New York, Los Angeles, California and Miami, Florida. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act. -2- 101 "Closing Ledger Date" means the 21st day of the month in which the Closing occurs or, if such day is not a Business Day, the next preceding Business Day. "Combined Reserve Liabilities" means the Reserve Liabilities for JALIC Annuity Contracts plus all reserves with respect to JANY's insurance contracts, in the aggregate. "Commercially reasonable efforts" when used with respect to any Party, means the reasonable efforts of such Party without the requirement that such Party incur any extraordinary out-of-pocket expenses, incur any other unanticipated burden or commence or pursue any action, suit or proceeding. "Environmental Laws" means any Law pertaining to health, industrial hygiene or the environmental condition on or under any property including, without limitation, CERCLA and the Toxic Substance Control Act, and the rules and regulations thereunder. "Excluded Liabilities" means (i) all liability for premium taxes arising on account of premiums paid on or prior to the Closing Ledger Date with respect to the Insurance Contracts, (ii) all liability for commission payments and other fees or compensation payable with respect to the Insurance Contracts to or for the benefit of brokers and agents and other distribution sources, to the extent that such amounts are based on premiums paid on or prior to the Closing Ledger Date, (iii) trailer commissions (which are based upon account values) accruable on or prior to the Closing Ledger Date, and (iv) all guaranty fund assessments (or any other assessment from a state entity formed to protect policyholders against failure of an insurer to perform its contractual obligations) imposed as a result of a conservatorship or other insolvency proceeding commenced on or prior to the Closing Date with respect to the Insurance Contracts. "Execution Date" means the date of this Agreement. "Extra Contractual Obligations" means all liabilities (i) for compensatory, consequential, exemplary, punitive or similar damages which directly relate to any alleged or actual act, error, omission, fraud or misrepresentation by Seller or any of its Affiliates or any of its or its Affiliates' officers or employees, whether intentional or otherwise, prior to the Closing Date, or (ii) from any actual or alleged reckless conduct or bad faith by Seller, or any of its Affiliates or any of its or its Affiliates' officers or employees, in connection with Seller's handling of any claim under any of the Insurance Contracts or in connection with the issuance, offer, sale, delivery, cancellation or administration by Seller or any of its Affiliates or any of its or its Affiliates' officers or employees of any of the Insurance Contracts. "GAAP" shall mean United States generally accepted accounting principles as in effect from time to time, consistently applied throughout the specified period and in the immediately prior comparable period. "Governmental Entity" means any agency, administrative division or department (or administrative subdivision), commission, regulatory authority (including without limitation any insurance regulatory authority), taxing or administrative authority, court or other judicial body, -3- 102 legislature of the government of the United States or any state, city, municipality, county, town, district or other political subdivision thereof on any state, city, municipality, county, town, district or other political subdivision thereof or any quasi-governmental entity, including, without limitation, the employees or agents thereof. "Hazardous Substance" means (i) any and all substances defined as "hazardous substances," "extremely hazardous substances," "toxic substances," "hazardous waste," "hazardous materials" or "infectious waste" for purposes of CERCLA or any other Environmental Law and (ii) any petroleum or petroleum-based products. "In Force Insurance Contracts" means the Insurance Contracts in effect on the date hereof, and as of the Closing Date, as the case may be. "Insurance Contracts" means all annuity and other policies and supplementary contracts, as well as any riders providing for other supplemental benefits, and all supplements, endorsements, riders and ancillary agreements in connection therewith, and specifically includes without limitation (i) all lapsed Insurance Contracts subject to reinstatement and (ii) any supplemental benefits arising out of the Insurance Contracts. "Laws" means any and all federal, state or local statutes, laws, ordinances, rules and regulations. "Loan Documents" means the Mortgage Note, the Mortgage and any and all other agreements, certificates, documents or instruments in Seller's possession or under its control relating to the origination, closing and modification of a Mortgage Loan, including without limitation any related assignment of rents, security agreement, UCC financing statement, guaranty, letter of credit, pledge agreement, loan agreement or other instrument creating a security interest in, and Lien upon, real and/or personal property. "Material Adverse Effect" means any change, effect, event or occurrence that has, or is reasonably likely to have, individually or in the aggregate, a material adverse impact on (i) the assets, business, financial position or results of operations of JANY or (ii) the ability of Seller or JANY to consummate the transactions contemplated by this Agreement and the Transition Services Agreement; provided that "Material Adverse Effect" shall be deemed to exclude the impact of (i) changes in Laws or interpretations thereof by any Governmental Entity relating to or affecting the Insurance Business and (ii) changes in GAAP or SAP. "Material Adverse Effect on Purchaser" means any change, effect, event or occurrence that has, or is reasonably likely to have, individually or in the aggregate, a material adverse impact on (i) the business, financial position or results of operations of Purchaser (and after giving effect to the Closing, together with JANY) or (ii) the ability of Purchaser to consummate the transactions contemplated by this Agreement and the Transition Services Agreement; provided that "Material Adverse Effect on Purchaser" shall be deemed to exclude the impact of (i) changes in Laws or interpretations thereof by any Governmental entity relating to or affecting the business of Purchaser and (ii) changes in GAAP or SAP. -4- 103 "Mortgage" means the mortgage, deed of trust or other instrument (and all modifications thereto) creating a Lien on real property described therein or on the tenant's interest under a ground lease of real property described therein, in either case securing a Mortgage Note. "Mortgage Loan" means any individual mortgage loan that is identified on the Mortgage Loan Schedule. "Mortgage Loan Schedule" means the list of Mortgage Loans subject to this Agreement and identified on Schedule 2.32(a) attached hereto, which schedule sets forth the following information with respect to each Mortgage Loan as of the date specified therein. (i) the Mortgage Loan numbers; (ii) the name of the mortgagor and the name or address of the Mortgaged Property; (iii) the Mortgage Loan Principal Balance; (iv) lien priority of the Mortgage; (v) the maturity date; and (vi) the current interest rate. (vii) the Mortgage Loan Status (current, litigation, bankruptcy, tax plans, etc.). "Mortgage Note" means the note or other evidence of the indebtedness under a Mortgage Loan. "Mortgaged Property" means the land and improvements that secure a Mortgage, which in the case of a leasehold mortgage shall mean the tenant's interest in the real property underlying the ground lease or, where the context so requires, the real property underlying the ground lease. "Order" means any decree, injunction, judgment, order, ruling, assessment or writ. "Person" shall mean any natural person, corporation, general partnership, limited partnership, limited liability company,proprietorship, trust, union, association, court, tribunal, agency, government, department, commission, self-regulatory organization, arbitrator, board, bureau, instrumentality, or other entity, enterprise, authority, or business organization. "Policyholders" means, as applicable, the beneficiaries under, or policyholders with- respect to, or owners of, the Insurance Contracts, or any other Person entitled to payment with respect to the Insurance Contracts. -5- 104 "Related Agreements" means the agreements providing for the payment of commissions relating to the Insurance Contracts as listed in Schedule 2.30. "Representatives" means, with respect to any Person, such person's Affiliates, subsidiaries, shareholders, directors, partners, joint ventures, officers, employees, agents, representatives, producers, independent contractors, consultants, lenders, brokers, finders, investment bankers, financial advisors, attorneys and accountants. Seller's Representatives include without limitation CS First Boston. Purchaser's Representatives include without limitation Goldman Sachs & Company. "Qualified Investments" means (A) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States; (B) demand deposits with (1) any commercial bank that is a member of the Federal Reserve System, the parent of which issues commercial paper rated at least "P-1" (or the then equivalent grade) by Moody's and "A-1" (or the then equivalent grade) by S&P, is organized under the Laws of the United States or any State thereof and is rated "TBW-1" or the equivalent or better by Thomson BankWatch or any other nationally recognized agency or, (2) a United States branch or agency of any commercial bank organized under the Laws of any Organization for Economic Cooperation and Development member country (as of the Execution Date of this Agreement) which is rated "TBW-1" or the equivalent or better by Thomson BankWatch or other internationally recognized agency; (C) commercial paper issued by any corporation rated at least P-1 or the then equivalent grade by Moody's and A-1 or the then equivalent grade by S&P; (D) money market mutual funds (i) whose portfolio is comprised solely of (1) marketable direct obligations of the United States government or its agencies, and/or (2) bank or corporate obligations which individually meet the rating criteria stipulated in (B) or (C) above, (ii) whose total net assets exceed $1 billion and (iii) where the Seller's investment in such fund is limited to an amount not exceeding 10% of such fund's assets; or (E) such other assets as the Party receiving such Qualified Investments may expressly approve in writing. "SAP" means the statutory accounting principals and practices, as in effect from time to time, required or permitted for life insurance companies by applicable Laws of the National Association of Insurance Commissioners and the insurance regulatory authority in the state in which the company in question is domiciled, as the case may be, consistently applied throughout the specified period and in the immediately prior comparable period "Taxes" shall mean all taxes, charges, fees, levies, or other similar assessments, including, without limitation, income, gross receipts, ad valorem, premium, excise, real property, personal property, windfall profit, sales, use, transfer, licensing, withholding, employment, payroll, and franchise taxes imposed by any Governmental Entity; and such term shall include any interest (through the date of payment), penalties, assessments, or additions to tax resulting from, attributable to, or incurred in connection with any such tax or any contest or dispute thereof. -6- 105 "Tax Returns" shall mean returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax Return required to be supplied to a taxing authority in respect of or relating to Taxes. "Vanishing Premium Liabilities" means any Liabilities arising out of or connected with a claim that an Insurance Contract which utilizes dividends, credited interest or other earnings to reduce the premium was sold based on a premium and earnings illustration or representation that was allegedly or actually fraudulent or misleading. -7- 106 Exhibit D LOAN DOCUMENTATION With respect to each Mortgage Loan, Seller has in its possession each of the following items: 1. A summary of the terms of the Loan as presented to and approved by Seller's loan committee. 2. An original promissory note (or a certified copy thereof) executed by the borrower or its agent endorsed in favor of Seller showing the Participant's respective interests therein. 3. An original recorded deed of trust or mortgage executed by the borrower or its agent with applicable exhibits and riders. 4. An original policy of lender's title insurance and applicable endorsements. 5. Evidence of the current Hazard Insurance Policy. 6. Evidence of current Flood Insurance, if applicable. 7. An original commitment letter to borrower, if available. 8. A certificate of occupancy, if available. 9. Credit report(s) with respect to the borrower prepared by Seller or at Seller's request, if available. 10. Financial statements of the borrower current as of the date of the Mortgage Loan application, executed by the borrower disclosing the ability to repay the Mortgage Loan if applicable, and any updates thereof. 11. Franchise agreements, if applicable. 12. Partnership agreements, if applicable. 13. Current rent rolls if available in Seller's files. 14. An appraisal prepared for Seller executed prior to the approval of the Mortgage Loan application by persons duly appointed and qualified as appraisers by Seller's board of directors which appraisal discloses the market value of the Mortgaged Property, containing sufficient information regarding the Mortgaged Property to substantiate the appraisal. 15. Any and all documentation evidencing release of any part of the pledged collateral, showing portion released, the consideration paid and the approval obtained. EX-10.2 3 ASSET PURCHASE AGREEMENT DATED 11/29/96 1 ASSET PURCHASE AND SALE AGREEMENT By and Between JOHN ALDEN LIFE INSURANCE COMPANY and SUNAMERICA LIFE INSURANCE COMPANY Dated November 29, 1996 2 TABLE OF CONTENTS
PAGE ARTICLE 1 - PURCHASE AND SALE OF ASSETS; CLOSING................................................................ 2 1.1. Closing...................................................................................... 2 1.2. Transfer of Assets........................................................................... 3 1.3. Ceding Commission; Payment................................................................... 5 1.4. Closing Deliveries........................................................................... 9 1.5. Additional Closing Deliveries................................................................ 12 1.6. Post Closing Adjustments..................................................................... 12 ARTICLE 2 - ASSUMPTION OF LIABILITIES AND OBLIGATIONS........................................................... 15 2.1. Assumption of Seller Liabilities............................................................. 15 2.2. Guaranty Fund Assessments.................................................................... 15 ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF SELLER............................................................ 18 3.1. Organization, Standing and Authority of Seller............................................... 18 3.2. Authorization................................................................................ 18 3.3. Actions and Proceedings...................................................................... 19 3.4. No Conflict or Violation..................................................................... 19 3.5. Consents and Approvals....................................................................... 20 3.6. Brokerage and Financial Advisers............................................................. 21 3.7. Compliance With Laws......................................................................... 21 3.8. Annuity Contracts............................................................................ 21 3.9. Permits, Licenses and Franchises............................................................. 24 3.10. Regulatory Filings........................................................................... 25 3.11. Reinsurance.................................................................................. 26 3.12. Absence of Certain Changes or Events......................................................... 26 3.13. Assigned Contracts........................................................................... 28 3.14. Intellectual Property........................................................................ 29 3.15. Purchased Assets............................................................................. 29 3.16. Statutory Financial Statements............................................................... 30 3.17. Reserves..................................................................................... 31 3.18. Threats of Cancellation...................................................................... 32 3.19. Credited Rates............................................................................... 33 3.20. Related Agreements........................................................................... 33 3.21. Third Party Administration Agreements........................................................ 33 3.22. Mortgage Loans............................................................................... 34 3.23. No Waiver of Defenses........................................................................ 40 3.24. Agent Balances............................................................................... 41 3.25. GAAP Financial Statements.................................................................... 41
i 3 TABLE OF CONTENTS (cont'd)
PAGE ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 42 4.1. Organization and Standing.................................................................... 42 4.2. Authorization................................................................................ 42 4.3. Actions and Proceedings...................................................................... 43 4.4. No Conflict or Violation..................................................................... 43 4.5. Consents and Approvals....................................................................... 44 4.6. Brokerage and Financial Advisers............................................................. 44 4.7. GAAP Financial Statements.................................................................... 45 4.8. Statutory Financial Statements............................................................... 45 4.9. Rating....................................................................................... 46 ARTICLE 5 - PRE-CLOSING COVENANTS............................................................................... 47 5.1. Conduct of Business.......................................................................... 47 5.2. Certain Transactions......................................................................... 50 5.3. Investigations............................................................................... 50 5.4. HSR Act Filings.............................................................................. 51 5.5. Consents and Reasonable Efforts.............................................................. 51 5.6. Representations and Warranties............................................................... 52 5.7. Computer Software and Other Intellectual Property............................................ 53 5.8. Financial Statements and Reports............................................................. 53 5.9. Termination of Certain Reinsurance Arrangements.............................................. 54 5.10. Woodland Hills Option........................................................................ 54 5.11. Oxford Put................................................................................... 54 5.12. Marketing Agreement.......................................................................... 55 ARTICLE 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER TO CLOSE.......................................................................................... 55 ARTICLE 7 - CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE.......................................................................................... 58 ARTICLE 8 - POST-CLOSING COVENANTS.............................................................................. 61 8.1. Continued Access and Cooperation............................................................. 61 8.2. Further Assurances........................................................................... 63 8.3. Expenses..................................................................................... 63 8.4. Employee Plans............................................................................... 64 8.5. Non-Discriminatory Treatment of Policyholders................................................ 65 8.6. Repayment of Agent Balances.................................................................. 65
ii 4 TABLE OF CONTENTS (cont'd)
PAGE 8.7. No Inducement to Replace; Non-Twisting; Non-Churning; Non-Competition............................................................................. 66 8.8. Preferred Stock Divided Repayment............................................................ 70 8.9. Policyholder Consents........................................................................ 70 8.10. Current Report on Form 8-K................................................................... 71 ARTICLE 9 - TERMINATION; SURVIVAL............................................................................... 71 9.1. Termination of Agreement..................................................................... 71 9.2. Effect of Termination........................................................................ 73 ARTICLE 10 - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION....................................................... 73 10.1. Survival of Representations.................................................................. 73 10.2. Indemnification by Purchaser................................................................. 74 10.3. Indemnification by Seller.................................................................... 76 10.4. Indemnification Procedure.................................................................... 78 ARTICLE 11 - PUBLICITY AND CONFIDENTIALITY...................................................................... 82 11.1. Publicity.................................................................................... 82 11.2. Confidentiality.............................................................................. 83 ARTICLE 12 - MISCELLANEOUS...................................................................................... 84 12.1. Notices...................................................................................... 84 12.2. Entire Agreement............................................................................. 86 12.3. Amendments................................................................................... 87 12.4. Waivers...................................................................................... 88 12.5. Governing Law................................................................................ 88 12.6. Binding Effect; Assignment; Third Party Beneficiaries........................................ 89 12.7. Severability................................................................................. 89 12.8. Headings..................................................................................... 90 12.9. Counterparts................................................................................. 90 12.10. Arbitration.................................................................................. 90 SIGNATURES ..................................................................................................... 92
iii 5 TABLE OF CONTENTS (cont'd) PAGE ANNEX A - Definitions EXHIBITS - A - Indemnity Reinsurance Agreement B - Assumption Reinsurance Agreement C - Trust Agreement D - Transition Services Agreement E - Administrative Services Agreement F - Assignment and Assumption Agreement G - License Agreement H - Bill of Sale I - Opinion of Seller's Counsel J - Opinion of Purchaser's Counsel K - Loan Documentation L - Terms of Marketing Agreement iv 6 TABLE OF CONTENTS SCHEDULES - 1.2(a)(i) - Closing Date Portfolio Securities 1.2(a)(ii) - Policy Loans 1.2(a)(iii) - Additional Assets 1.2(d)(i) - Assigned Contracts 1.2(d)(ii) - Licensing Restrictions 3.3 - Actions and Proceedings 3.4 - Certain Matters 3.5 - Consents and Approvals 3.7 - Compliance 3.8(a) - Annuity Contract Forms 3.8(b) - Annuity Contracts 3.8(c) - Certain Commission Contracts 3.8(e) - Contested Benefits 3.8(h) - Known Agent Violations 3.9(a) - Licensed Jurisdictions 3.9(b) - Permit Exceptions 3.10 - Regulatory Filings 3.11 - Reinsurance Agreements 3.12 - Certain Changes or Events 3.13 - Other Necessary Contracts 3.14 - Intellectual Property 3.17(a) - Reserve Liabilities 3.17(b) - Reserve Exceptions 3.18 - Threats of Cancellation 3.20 - Related Agreements 3.21 - Third Party Administration Agreements 3.22(a) - Mortgage Loans 3.22(b) - Participations 3.22(d) - Waivers, Amendments & Releases 3.22(f) - Missing Original Notes 3.22(l) - Tax Delinquencies 3.24 - Agent Balances 4.3 - Purchaser's Litigation 4.4 - Purchaser's Certain Matters 4.5 - Purchaser's Consents and Approvals Excluded Transactions v 7 ASSET PURCHASE AND SALE AGREEMENT ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") dated November 29, 1996 by and between John Alden Life Insurance Company, a Minnesota corporation ("Seller"), and SunAmerica Life Insurance Company, an Arizona corporation ("Purchaser"). W I T N E S S E T H: WHEREAS, Seller is engaged, among other businesses, in the business of selling and administering annuity policies and related activities in the United States other than in the State of New York (the "Annuity Business"); WHEREAS, John Alden Life Insurance Company of New York, a New York corporation ("JANY"), is engaged in the business of selling and administering annuity, life and health related insurance policies and related activities solely in the State of New York; WHEREAS, Seller owns or holds certain assets used or held for use in the Annuity Business and owns all of the outstanding capital stock of JANY (the "JANY Stock"); and WHEREAS, Seller wishes to sell to Purchaser, and Purchaser wishes to acquire from Seller, certain of the assets of Seller used in the conduct of the Annuity Business pursuant to the terms and conditions set forth in this Agreement and the JANY Stock pursuant to the terms and conditions set forth in a Stock Purchase and Sale Agreement between Seller and Purchaser dated concurrently herewith (the "JANY Stock Purchase Agreement"). NOW, THEREFORE, in consideration of the premises, representations and warranties and the mutual covenants and agreements contained herein and other good, valuable and 8 sufficient consideration, the receipt of which is hereby acknowledged, Seller and Purchaser (collectively, the "Parties" and, sometimes individually, a "Party"), intending to be legally bound, hereby agree as follows. The capitalized terms used in this Agreement and not defined herein shall have the meanings specified in Annex A attached hereto. Unless the context otherwise requires, such capitalized terms shall include the singular and plural and the conjunctive and disjunctive forms of the terms defined. ARTICLE 1 PURCHASE AND SALE OF ASSETS; CLOSING Section 1.1. Closing. The closing of the transactions contemplated hereby (the "Closing") shall take place at 10:00 a.m. local time at the offices of Kelley Drye & Warren LLP, 101 Park Avenue, New York, New York 10178, or such other time and place as Purchaser and Seller may mutually agree in writing, on the last business day of the month in which the satisfaction of all conditions set forth in Articles 6 and 7 hereof concerning the Parties' respective obligations to consummate the transactions contemplated herein occurs or such other date as Seller and Purchaser may mutually agree in writing (the "Closing Date") and, subject to completion, shall be deemed to have been consummated and become effective for all purposes as of 11:59 p.m. on the Closing Date. Section 1.2. Transfer of Assets. 2 9 (a) Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Purchaser as a reinsurance premium, and Purchaser shall purchase and accept from Seller, all of Seller's right, title and interest in and to the following assets, with such changes therein, additions thereto and deletions therefrom as may occur from the date hereof through the Closing as permitted or required pursuant to the terms hereof or otherwise agreed to by the Parties in writing (collectively, the "Reinsurance Premium"): (i) the Closing Date Portfolio Securities, including the Accrued and Unpaid Investment Income thereon and all documentation related thereto. (ii) all of Seller's right and interest to receive principal and interest paid on policy loans under the Annuity Contracts (with the exception of any policy loans listed in Schedule 1.2(a)(iii)) (the "Policy Loans") outstanding after the Closing Date. The Policy Loans outstanding as of September 21, 1996 are listed on Schedule 1.2(a)(ii) attached hereto. An estimate of all Policy Loans outstanding on the Closing Ledger Date will be set forth in an updated Schedule 1.2(a)(ii) to be delivered by Seller to Purchaser at the Closing. Schedule 1.2(a)(ii) includes with respect to each Policy Loan outstanding on September 21, 1996, and will include with respect to each Policy Loan set forth on the updated Schedule 1.2(a)(ii) to be delivered on the Closing Date, the policy number, balance and form and contract number. (iii) those additional assets listed on Schedule 1.2(a)(iii) attached hereto. 3 10 (iv) cash in the amounts required to be paid pursuant to Sections 1.2(c) hereof, with respect to Rejected Mortgages, and 1.3(d)(i) hereof, with respect to excess Reserve Liabilities. (b) On the Closing Date, delivery of the Closing Date Portfolio Securities shall be made by transfer to the trust account (the "Trust") established pursuant to the Trust Agreement. The cash portion of the Reinsurance Premium shall be transferred to the Trust by wire transfer of immediately available funds. Securities, cash equivalents, mortgage loans and other assets included among the Closing Date Portfolio Securities shall be transferred by such instruments of transfer as are acceptable to the Trustee and reasonably acceptable to Purchaser. The gross amount of the cash payment wired by Seller shall be reduced by an amount equal to one day's interest on such gross amount at an interest rate equal to the three month LIBOR rate in effect on the Business Day preceding the Closing Date plus 25 basis points. (c) Notwithstanding anything contained in this Section 1.2 to the contrary, Purchaser shall have the right not to purchase up to $50,000,000 Book Value of (i) mortgages or (ii) mortgage related private placements which comprise a portion of the October 21 Portfolio Securities (the "Rejected Mortgages"), and such Rejected Mortgages shall not be sold, assigned, transferred, conveyed or delivered to Purchaser hereunder; provided, however, that upon written notice by Purchaser to Seller delivered not less than 10 days prior to the Closing specifying such Rejected Mortgages, Seller shall deliver cash to the Trust, as part of the Reinsurance Premium, in an amount equal to the Book Value of the Rejected Mortgages. (d) At the Closing, Seller shall assign, transfer, convey and deliver to Purchaser, and Purchaser shall accept from Seller, the following: 4 11 (i) Seller's rights including all claims arising under the contracts and license agreements listed on Schedule 1.2(d)(i) attached hereto (the "Assigned Contracts"); and (ii) originals or copies of all customer lists, policy information, Seller's Annuity Contract forms and rating plans, disclosure and other documents and filings required under applicable Laws, and all claim, sales, underwriting, financial, accounting, tax, business, marketing and compliance records in the possession or control of Seller ("control" for the purposes of this Section 1.2(d)(ii) being defined as the ability to cause delivery to Seller) and relating to the Annuity Business, including, without limitation, any database, magnetic or optical media (to the extent not subject to the licensing restrictions listed on Schedule 1.2(d)(ii) attached hereto) and any other form of recorded, computer generated or stored information or process, but excluding any such records that both (A) are, and would upon transfer cease to be, subject to the attorney-client privilege and (B) do not relate to the Purchased Assets or Assumed Liabilities (collectively, the "Books and Records"). (e) Seller and Purchaser agree that for tax purposes, the fair market value of the Closing Date Portfolio Securities shall be the GAAP book values used by Purchaser to reflect the Closing Date Portfolio Securities on its Financial Statements on the Closing Date. Section 1.3. Ceding Commission; Payment. (a) In consideration for the sale, assignment, transfer, conveyance and delivery of the Reinsurance Premium to Purchaser by Seller in accordance with and upon the terms and 5 12 conditions set forth in this Agreement, on the Closing Date Purchaser shall pay to Seller One Hundred Eight Million Fifty Thousand Dollars ($108,050,000) in cash, subject to adjustment as provided in Section 1.3(c) below (the "Closing Date Ceding Commission"). Purchaser shall pay the Closing Date Ceding Commission to Seller on the Closing Date by wire transfer of immediately available funds to such bank account as Seller shall designate to Purchaser in writing at least three Business Days prior to the Closing Date. Payment of the Closing Date Ceding Commission shall be accompanied by (i) an amount in cash equal to the Accrued and Unpaid Investment Income as set forth on the Estimated Closing Date Statement and (ii) any payments required to be made as a reduction in the Reinsurance Premium pursuant to Section 1.3(d)(ii) hereof. The gross amount of the cash payment wired to Seller pursuant to this Section 1.3(a) shall be reduced by an amount equal to one day's interest on such gross amount at an interest rate equal to the three month LIBOR rate in effect on the Business Day preceding the Closing Date plus 25 basis points. (b) On the Closing Date, Seller shall deliver to the Purchaser a statement (the "Estimated Closing Date Statement") of Seller's good faith estimate as of the Closing Date unless otherwise noted below of (i) all Reserve Liabilities (ii) the Policy Loan Balance, (iii) the Book Value of all Closing Date Portfolio Securities, (iv) all JANY Reserve Liabilities (as defined in the JANY Stock Purchase Agreement), (v) the Accrued and Unpaid Investment Income, (vi) the gross amount on a tax lot by tax lot basis of any realized capital gain ("Capital Gain") or capital loss ("Capital Loss") on the disposition of any June 21 Portfolio Securities between June 21, 1996 and the Closing Date, (vii) the Adjusted Capital and Surplus of JANY and (viii) the amount of cash flows applicable to the Combined Reserve Liabilities from the 6 13 Closing Ledger Date through Closing Date (the "Net Cash Flows"). The Estimated Closing Date Statement shall be prepared in a manner consistent with the calculation of such items as of June 21, 1996. Such calculations are reflected in Schedules 1.2(a)(i) (Closing Date Portfolio Securities), 1.2(a)(ii) (Policy Loans) and 3.17 (Reserve Liabilities) attached hereto and have been prepared in accordance with SAP. (c) The Closing Date Ceding Commission shall be adjusted as follows (using the calculations set forth on the Estimated Closing Date Statement for this purpose): (i) To the extent Combined Reserve Liabilities as set forth on the Estimated Closing Date Statement, as adjusted below, are less than $5,013,914,419 ("Expected Reserves"), the Closing Date Ceding Commission shall be reduced by an amount equal to (i) (A) the amount by which the Expected Reserves exceed the Combined Reserve Liabilities divided by (B) the Expected Reserves multiplied by (ii) the difference between $240,000,000 and the Adjusted Capital and Surplus of JANY. For purposes of this Section 1.3(c)(i), Combined Reserve Liabilities shall be adjusted for the Net Cash Flows applicable to the Combined Reserves not included in such reserves from the Closing Ledger Date through the Closing Date. (ii) The Closing Date Ceding Commission will be adjusted by interest at a rate of 2% per annum on the net cash flows applicable to the Combined Reserves not included in such reserves from the Closing Ledger Date through the Closing Date. 7 14 (iii) The Closing Date Ceding Commission shall be (A) reduced by any Capital Gains realized with respect to the June 21 Portfolio Securities between June 21, 1996 and the Closing Date and (B) increased by any Capital Losses realized with respect to the June 21 Portfolio Securities between June 21, 1996 and the Closing Date. For purposes of this Section 1.3(c)(iii), Capital Gains and Capital Losses shall be deemed to include, without limitation, any gain or loss resulting from any sale, pre-payment, maturity or similar event affecting a June 21 Portfolio Security, but shall be deemed to exclude Capital Gains or Capital Losses with respect to Excluded Transactions. (d) As of the Closing Date, the Reinsurance Premium shall be adjusted as follows (using the calculations set forth on the Estimated Closing Date Statement): (i) To the extent Reserve Liabilities exceed the sum of (A) the Book Value of the Closing Date Portfolio Securities, (B) any cash deposited in the Trust pursuant to Section 1.2(c) hereof and (C) the Policy Loan Balance, Seller shall deliver to Purchaser at Closing by transfer to the Trust cash equal to such deficiency. The amount of any such cash payment shall be made by wire transfer of immediately available funds, and the gross amount thereof shall be reduced by an amount equal to one day's interest on such gross amount at an interest rate equal to the three month LIBOR rate in effect on the Business Day preceding the Closing Date plus 25 basis points. (ii) To the extent the sum of (A) the Book Value of the Closing Date Portfolio Securities, (B) any cash deposited pursuant to Section 1.2(c) hereof and 8 15 (C) the Policy Loan Balance exceeds Reserve Liabilities, Purchaser shall deliver to Seller cash equal to said excess. Section 1.4. Closing Deliveries. (a) At the Closing, Seller shall execute and deliver or cause to be executed and delivered to Purchaser the following: (i) the Indemnity Reinsurance Agreement between Seller and Purchaser substantially in the form of Exhibit A attached hereto (the "Indemnity Reinsurance Agreement"); (ii) the Assumption Reinsurance Agreement between Seller and Purchaser substantially in the form of Exhibit B attached hereto (the "Assumption Reinsurance Agreement"); (iii) the Trust Agreement among Seller, Purchaser and Bankers Trust Company of California, N.A., in its capacity as trustee thereunder (the "Trustee"), substantially in the form of Exhibit C attached hereto (the "Trust Agreement"); (iv) the Transition Services Agreement between Seller and Purchaser substantially in the form of Exhibit D attached hereto (the "Transition Services Agreement"); (v) the Administrative Services Agreement between Seller and Purchaser substantially in the form of Exhibit E attached hereto (the "Administrative Services Agreement"); 9 16 (vi) the Assignment and Assumption Agreement between Seller and Purchaser substantially in the form of Exhibit F attached hereto (the "Assignment and Assumption Agreement"); (vii) the License Agreement between Seller and Purchaser substantially in the form of Exhibit G attached hereto (the "License Agreement"); (viii) the Bill of Sale between Seller and Purchaser substantially in the form of Exhibit H attached hereto (the "Bill of Sale"); (ix) the opinion of counsel to Seller, substantially in the form of Exhibit I attached hereto ("Seller's Opinion"); (x) the Reinsurance Premium pursuant to Section 1.2 hereof; (xi) the Assigned Contracts; (xii) the Books and Records; (xiii) a certificate of an executive officer of Seller, dated the Closing Date, representing and warranting to the effect that (A) the person signing such certificate is familiar with the provisions of this Agreement and (B) the conditions specified in Article 6 of this Agreement have been satisfied; (xiv) written consents to assignments, where necessary, from all applicable parties relating to the Third Party Administration Agreements; and (xv) such other documents as may be necessary or advisable in Purchaser's reasonable judgment to vest in Purchaser all of Seller's rights, title and interest in and to the (i) assets transferred as the Reinsurance Premium, (ii) 10 17 the Assigned Contracts and (iii) the Books and Records (clauses (i), (ii) and (iii), collectively the "Purchased Assets") and the Assumed Liabilities. The Indemnity Reinsurance Agreement, the Assumption Reinsurance Agreement, the Transition Services Agreement, the Administrative Services Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the Trust Agreement and the License Agreement are referred to collectively herein as the "Ancillary Agreements." (b) At the Closing, Purchaser shall execute and deliver or cause to be executed and delivered to Seller the following: (i) the Indemnity Reinsurance Agreement; (ii) the Assumption Reinsurance Agreement; (iii) the Trust Agreement; (iv) the Transition Services Agreement; (v) the Administrative Services Agreement; (vi) the Assignment and Assumption Agreement; (vii) the License Agreement; (viii) the opinion of counsel to Purchaser, substantially in the form of Exhibit J hereto ("Purchaser's Opinion"); (ix) a certificate of an executive officer of Purchaser, dated the Closing Date, representing and warranting to the effect that (A) the person signing such certificate is familiar with the provisions of this Agreement and (B) the conditions specified in Article 7 of this Agreement have been satisfied; 11 18 (x) such other documents as may be necessary or advisable in Seller's reasonable judgment to consummate the transactions contemplated hereby; and (xi) the Closing Date Ceding Commission. Section 1.5. Additional Closing Deliveries. In addition to the transactions and deliveries contemplated above, at the Closing each of the agreements between or among JANY and Seller or any Affiliates of Seller will be terminated (other than the Transition Services Agreement to be entered into pursuant to the JANY Stock Purchase Agreement). Section 1.6. Post Closing Adjustments. (a) No later than 60 days after the Closing Date, Seller shall prepare and deliver to Purchaser a statement (the "Final Closing Date Statement") that sets forth the actual financial data as of the Closing Date required to be estimated in the Estimated Closing Date Statement. The Final Closing Date Statement shall be prepared in a manner consistent with the Estimated Closing Date Statement and shall be accompanied by a copy of all documents used in the preparation thereof. The Final Closing Date Statement and the calculations and information set forth therein shall be reviewed and certified by a Fellow of the Society of Actuaries who is also a Member of the American Academy of Actuaries (an FSA and MAAA) familiar with the business of Seller and in particular the Annuity Business. The Final Closing Date Statement shall be binding on Purchaser unless Purchaser delivers to Seller within 60 days after its receipt of the Final Closing Date Statement from Seller written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement. (b) If Purchaser and Seller are unable to resolve any disagreement with respect to the Final Closing Date Statement within 30 days after Seller receives a timely notice 12 19 of disagreement, the items of disagreement alone shall be referred for final determination to the U.S. national office of Price Waterhouse or, if such firm is unable or unwilling to make such final determination, to such other independent accounting firm as the Parties shall mutually designate. The firm making such determination is referred to herein as the "Independent Party." The Final Closing Date Statement shall be deemed to be binding on Purchaser and Seller upon the earlier to occur of (i) Purchaser's failure to deliver to Seller a notice of disagreement within 30 days after its receipt of the Final Closing Date Statement prepared by Seller, (ii) resolution of any disagreement by mutual agreement of the Parties after a timely notice of disagreement has been delivered to Seller or (iii) notification by the Independent Party of its final determination of the items of disagreement submitted to it. The fees and disbursements of the Independent Party shall be borne equally, one-half by Purchaser and one-half by Seller. (c) The Closing Date Ceding Commission, including the adjustments set forth in Section 1.3(c) hereof, shall be recalculated based on the actual financial information set forth in the Final Closing Date Statement, which will establish the "Final Ceding Commission." If the Final Ceding Commission is greater than the Closing Date Ceding Commission, Purchaser will pay to Seller an amount equal to the difference between the Final Ceding Commission and the Closing Date Ceding Commission. If the Final Ceding Commission is less than the Closing Date Ceding Commission, Seller shall pay to Purchaser an amount equal to the difference between the Final Ceding Commission and the Closing Date Ceding Commission. (d) A Reinsurance Premium adjustment shall be made as follows using the calculations set forth on the Final Closing Date Statement): 13 20 (i) If the Final Closing Net Assets are less than the amount of the Reserve Liabilities, Seller shall deliver cash to the Trustee in an amount equal to such difference for deposit in the Trust. (ii) If the Final Closing Net Assets are greater than the amount of the Reserve Liabilities, Purchaser and Seller shall cause the Trustee to pay cash to Seller in an amount equal to such excess, as contemplated by the Trust Agreement. (e) An adjustment with respect to the Accrued but Unpaid Investment Income will be made as follows (using the calculations set forth on the Final Closing Date Statement): (i) If the Accrued but Unpaid Investment Income is greater than Accrued but Unpaid Investment Income set forth on the Estimated Closing Date Statement, Purchaser shall pay cash to Seller in an amount equal to such excess. (ii) If the Accrued but Unpaid Investment Income is less than Accrued but Unpaid Investment Income set forth on the Estimated Closing Date Statement, Seller shall pay cash to Purchaser in an amount equal to such difference. (f) All amounts paid under this Section 1.6 shall be paid in cash in immediately available funds within 10 days after receipt by Purchaser of a binding Final Closing Date Statement with interest calculated at a rate equal to the three month LIBOR rate plus 25 basis points on the amount due from the Closing Date through but not including the date on which such amount is actually paid. 14 21 ARTICLE 2 ASSUMPTION OF LIABILITIES AND OBLIGATIONS Section 2.1. Assumption of Seller Liabilities. On the Closing Date, Purchaser shall assume (a) pursuant to the Indemnity Reinsurance Agreement, as between Seller and Purchaser, any and all Insurance Liabilities and Other Liabilities of Seller arising out of or with respect to each Annuity Contract pending its Novation (as contemplated by Section 2.4 of the Assumption Reinsurance Agreement); (b) pursuant to the Assumption Reinsurance Agreement, any and all Insurance Liabilities and Other Liabilities of Seller arising out of or with respect to each Annuity Contract from and after its Novation (as contemplated by Section 2.4 of the Assumption Reinsurance Agreement); and (c) pursuant to the Assignment and Assumption Agreement, all contractual liabilities and obligations of Seller relating to the period after the Closing Date under the Assigned Contracts. The liabilities referred to in the preceding clauses (a) through (c) are herein referred to as the "Assumed Liabilities." Purchaser is not assuming any liabilities or obligations of any nature whatsoever, fixed or contingent, known or unknown, other than the Assumed Liabilities. Section 2.2. Guaranty Fund Assessments. (a) Purchaser shall pay or reimburse Seller for 100% of all guaranty fund assessments (or any other assessment of a state entity formed to protect policyholders against failure of an insurer to perform its contractual obligations due to impairment or insolvency, including but not limited to assessments of the Colorado Life and Health Insurance Protection Association and the Wisconsin Insurance Security Fund) ("Guaranty Fund Assessments") payable by Seller and included in Other Liabilities. 15 22 (b) On or before the Closing Date, Seller shall deliver to Purchaser a report of annuity premiums written by state as reported to the National Organization of Life & Health Guaranty Associates ("NOLHGA") for 1993, 1994 and 1995. Seller shall deliver to Purchaser copies of reports for 1996 and each subsequent year when filed with NOLHGA until Purchaser determines that it no longer needs such reports. With respect to each report of premiums, Seller shall prepare a schedule allocating premiums between the Annuity Contracts and other annuities issued by Seller on a state-by-state basis for the time period covered by the report of premiums and Seller shall deliver same to Purchaser (prior to the Closing Date, with respect to the reports for 1993, 1994 and 1995). Seller shall deliver to Purchaser a copy of any notice (including but not limited to a notice of assessment) that Seller receives relating to any insolvency which occurs on or after the Closing Date. (c) With respect to each notice of assessment by the fund of a state delivered to Purchaser by Seller, Seller shall prepare a schedule showing the allocation of such assessment between the Seller and the Purchaser. Subject to Section 2.2(d) below, Purchaser shall pay its share of such assessment within 30 days after its receipt of the notice of assessment and the schedules contemplated by this paragraph. (d) Each notice and schedule delivered to Purchaser pursuant to Section 2.2(c) hereof shall be binding on Purchaser unless Purchaser notifies Seller of any disagreement, specifying in reasonable detail the nature and extent of the disagreement. If Purchaser and Seller are unable to resolve any disagreement with respect to any assessment within 30 days after Seller receives a timely notice of disagreement, the items of disagreement alone shall be referred for final determination to the U.S. national office of Price Waterhouse or, if such firm is unable or 16 23 unwilling to make such final determination, to such other independent accounting firm as the Parties shall mutually designate. The firm making such determination is referred to herein as the "Independent Party." Each assessment shall be deemed to be binding on Purchaser and Seller upon the earlier to occur of (i) Purchaser's failure to deliver to Seller a notice of disagreement within 30 days after its receipt of the assessment and related schedules prepared by Seller, (ii) resolution of any disagreement by mutual agreement of the Parties after a timely notice of disagreement has been delivered to Seller or (iii) notification by the Independent Party of its final determination of the items of disagreement submitted to it. The fees and disbursements of the Independent Party shall be borne equally, one-half by Purchaser and one-half by Seller. (e) Except as provided in Section 3.4 of the Indemnity Reinsurance Agreement, to the extent Seller realizes a credit against any premium tax payable by it as a result of any Guaranty Fund Assessment paid by Purchaser pursuant to this Section 2.2, it shall pay to Purchaser an amount equal to such credit within 30 days after the date for filing of the annual premium tax return for such state. For purposes of this Section 2.2, Seller will be deemed to realize a credit for Guaranty Fund Assessments paid by Purchaser pursuant to this Section 2.2 if and when the premium tax payable by Seller calculated without giving effect to available credits for Guaranty Fund Assessments paid by Purchaser pursuant to this Section 2.2 (but applying all other credits and debits available to Seller in such manner as Seller elects in its sole discretion, except that guaranty fund credits atttributable to Guaranty Fund Assessments paid by Purchaser will be deemed utilized first against premium taxes paid by Purchaser under Section 3.4 of the Indemnity Reinsurance Agreement) is greater than the premium tax payable 17 24 by Seller giving effect to such credit, and the amount of such credit realized shall be deemed to equal such difference; provided, however, that in the event of a merger, only Seller credits shall be taken into account. Purchaser's right to the benefit of any credit shall be determined first under Section 3.5 of the Indemnity Reinsurance Agreement and then under this Section 2.2. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Purchaser as follows: Section 3.1. Organization, Standing and Authority of Seller. Seller is a corporation duly organized as a capital stock life and health insurance company, validly existing and in good standing under the Laws of the State of Minnesota. Seller has all corporate power and authority necessary or required by Law to engage in the conduct of the Annuity Business as currently conducted by it. Section 3.2. Authorization. Seller has all corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and under each of the Ancillary Agreements to be executed by it. Seller is duly licensed, qualified or admitted to do business and is in good standing in all jurisdictions in which it is required to be so qualified, licensed or admitted to do business by the Laws thereof, including, without limitation in each jurisdiction in which Annuity Contracts have been issued, except where the failure to so qualify, be admitted or licensed, individually or in the aggregate, is not reasonably likely to have a Material Adverse Effect. The execution and delivery by Seller of this Agreement and the Ancillary Agreements to be executed by it, and the performance by Seller of its obligations 18 25 under such agreements, have been duly authorized by all necessary corporate and shareholder actions on the part of Seller. This Agreement and each of the Ancillary Agreements executed by Seller, when executed by all of the parties thereto, will constitute a valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other Laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). Section 3.3. Actions and Proceedings. Except as disclosed on Schedule 3.3 attached hereto, (a) there are no outstanding Orders by or with any court, arbitrator or Governmental Entity before which Seller or any of its material Affiliates is or was a party that, (i) relate to the Annuity Business or the Purchased Assets or (ii) individually or in the aggregate, have a Material Adverse Effect and (b) there are no Actions pending or, to the knowledge of Seller, threatened against Seller or any of its material Affiliates (i) related to the Annuity Business or to which any of the Purchased Assets is subject that seeks monetary damages in excess of $100,000 individually or $500,000 in the aggregate or seeks an unspecified amount of damages, (ii) that seeks injunctive or similar relief or (iii) which would, individually or in the aggregate, have a Material Adverse Effect. Section 3.4. No Conflict or Violation. Except as disclosed on Schedule 3.4 attached hereto, the execution, delivery and performance by Seller of this Agreement and the Ancillary Agreements to which it is a party in accordance with the respective terms and conditions hereof and thereof do not and will not (a) violate any provision of the charter or by-laws of Seller, as amended to date, (b) violate, constitute a default under or result in the breach, cancellation or 19 26 termination of, accelerate the performance required under, or result in the creation of any lien, claim, restriction, charge or encumbrance or other defect of title ("Liens") upon any of the assets of Seller or any of the Purchased Assets pursuant to, any mortgage, deed of trust, guaranty, note, indenture, bond, lease, agreement or other instrument to which Seller is a party or by or to which it or any of such assets or the Purchased Assets may be bound, (c) violate any Order of any court, arbitrator or Governmental Entity against, or binding upon, or any agreement with, or condition imposed by, any court, arbitrator or Governmental Entity binding upon Seller, such assets or any of the Purchased Assets, (d) violate any Law or (e) result in the breach or violation of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment or revocation of, any license, permit, order, approval, registration, authorization, qualification or filing with or under any Law or Governmental Entity (collectively, "Permits") related to the Annuity Business, except for Liens, violations, breaches or defaults with respect to assets of Seller other than the Purchased Assets that, individually or in the aggregate, do not have a Material Adverse Effect. Section 3.5. Consents and Approvals. Except as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and rules and regulations thereunder (the "HSR Act") or as set forth on Schedule 3.5 attached hereto, no consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, Governmental Entities of competent jurisdiction) by Seller in order (a) for this Agreement, each of the Ancillary Agreements and each of the Assigned Contracts to which Seller will be a party to constitute a valid and binding obligation of Seller, (b) to authorize or permit the consummation 20 27 of the transactions contemplated hereby by Seller or (c) to prevent the termination of any material right, privilege, franchise, Permit or agreement related to the Annuity Business or to prevent any material loss related to the Annuity Business. Section 3.6. Brokerage and Financial Advisers. No broker, finder or financial adviser has acted directly or indirectly as such for, or is entitled to any compensation from, Seller in connection with this Agreement or the transactions contemplated hereby, except CS First Boston, whose fees for services rendered in connection with such transactions will be paid by Seller. Section 3.7. Compliance With Laws. Except as disclosed in Schedule 3.7 attached hereto, Seller is not in material violation of any Law or any Order of any court, arbitrator or Governmental Entity pertaining to the Annuity Business. Section 3.8. Annuity Contracts. The forms of all policies and endorsements utilized for all Annuity Contracts in effect on the date of this Agreement are listed and described on Schedule 3.8(a) attached hereto. All Annuity Contracts in effect on October 21, 1996 are listed and described on Schedule 3.8(b) attached hereto. All Annuity Contracts in effect on the Closing Ledger Date will be set forth in an updated Schedule 3.8(b) delivered to Purchaser at the Closing. Schedule 3.8(b) includes with respect to each Annuity Contract in effect on October 21, 1996 and will include with respect to each Annuity Contract in effect on the Closing Ledger Date, the policy number, policyholder name, form, plan code and account balance. Schedule 3.8(b) attached hereto also sets forth statutory reserves by plan code with respect to the Annuity Contracts as of September 21, 1996 and the updated Schedule 3.8(b) will set forth such information with respect to the Annuity Contracts as of the date of such Schedule set forth above. All Annuity Contracts are in all respects, to the extent required under applicable Laws, 21 28 on forms approved by applicable insurance regulatory authorities or which have been filed and not objected to by such authorities within the period provided for objection, and such forms comply in all material respects and have been administered in all material respects in accordance with applicable Laws. Without limiting the foregoing: (a) Seller has offered and sold each Annuity Contract in compliance with all applicable Laws (it being acknowledged that no representation is made with respect to independent agents of Seller except as provided in Section 3.8(h) hereof) and all of Seller's registrations, filings or submissions made by it with respect to the Annuity Contracts with any Governmental Entity were in material compliance with applicable Laws when filed. (b) The transactions contemplated by this Agreement will not affect the validity and binding character of any Annuity Contract entered into or issued by Seller or render any admitted assets of Seller non-admitted under applicable Laws up to and including the Closing Date. (c) Except as set forth in Schedule 3.8(c) attached hereto, and except in accordance with customary insurance industry practice, (i) Seller is not liable to pay commissions upon the renewal of any Annuity Contract nor (ii) is it a party to any agreement providing for the third-party collection of annuity premiums payable to Seller by any other Person which commissions or premiums exceed $100,000 in the aggregate. (d) All Annuity Contracts (including all Policy Loans related thereto and the policy loans identified on Schedule 1.2(a)(iii) attached hereto) are in full force and effect and are legal, valid and binding obligations of Seller, and to the knowledge of Seller the other parties thereto, and are enforceable against Seller, and to the knowledge of Seller the other parties 22 29 thereto, in accordance with their respective terms, except to the extent that enforcement thereof may be limited by or subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general application relating to or affecting creditors' rights and to general equity principles (other than equitable rescission rights). (e) All Annuity Contract benefits payable by Seller, and to the knowledge of Seller, by any other Person that is a party to or bound by any reinsurance, coinsurance or other similar contract with Seller, have been paid in accordance with the terms of the Annuity Contracts under which they arose, except for such benefits for which there is, in the reasonable opinion of Seller, a reasonable basis to contest and all such contested benefits have been disclosed in Schedule 3.8(e) attached hereto. (f) No outstanding Annuity Contract issued, reinsured or underwritten by Seller entitles the holder thereof or any other Person to receive dividends, distributions or other benefits based on the revenues or earnings of Seller or any other Person. (g) The underwriting standards utilized and ratings applied by Seller and, to the knowledge of Seller, by any other Person that is a party to or bound by any reinsurance, coinsurance or other similar contract with Seller conform in all respects to industry accepted practices and to the standards and ratings required pursuant to the terms of the respective reinsurance, coinsurance or other similar contracts. (h) To the knowledge of Seller, each producer who wrote, sold or produced any portion of the Annuity Business for Seller was duly licensed as an insurance agent (for the type of business written, sold or produced by such producer) in the particular jurisdiction in which such producer wrote, sold or produced such business. Except as otherwise provided in 23 30 Schedule 3.8(h) attached hereto, to the knowledge of Seller, no insurance agent who wrote, sold or produced any portion of the Annuity Business for Seller violated in any material respect any terms or provisions of any Law, except such violations as have been (i) cured, (ii) resolved through agreements with applicable Governmental Entities or (iii) are barred by an applicable statute of limitations. (i) The treatment under the Internal Revenue Code of 1986, as amended, and any successor thereto (the "Code") of all Annuity Contracts is no less favorable to the Policyholder thereof than the treatment under the Code for which such Annuity Contracts were intended to qualify at the time of their issuance, except for any failure to qualify for such treatment that results from (i) changes to the Code, regulations, pronouncements, announcements or guidance issued in connection with the treatment of the contracts under the Code which were enacted (or have an effective date) after the Closing Date, (ii) amendments, modifications, supplements, riders, endorsements or revisions to the Annuity Contracts after the Closing Date or (iii) changes in the manner in which the Annuity Contracts are administered after the Closing Date. Section 3.9. Permits, Licenses and Franchises. Schedule 3.9 attached hereto lists all jurisdictions in which Seller is licensed to issue the Annuity Contracts and each Annuity Contract form utilized in the respective jurisdictions. Seller has been duly authorized by all relevant Governmental Entities to issue the Annuity Contracts that it is currently writing, and was duly authorized to issue the Annuity Contracts that it is not currently writing at the time such Annuity Contracts were issued, in each of the respective jurisdictions in which it conducts the Annuity Business. Except as set forth on Schedule 3.9 attached hereto, Seller has all Permits necessary 24 31 to conduct the Annuity Business as currently conducted by Seller. All of the Permits are in full force and effect and Seller has not received notice from any Governmental Entity of its intention to revoke or not renew any Permit, except for such failures to have Permits in full force and effect, revocations, non-renewals and other events which do not and will not, individually or in the aggregate, have a Material Adverse Effect. Section 3.10. Regulatory Filings. Seller has made available for inspection by Purchaser all material registrations, filings and submissions made by Seller with any Governmental Entity and final financial and market conduct reports of examinations with respect to Seller issued by any such Governmental Entity along with copies of Seller's responses thereto to the extent that such registrations, filings, submissions and reports relate to the Annuity Business and were made or issued on or subsequent to January 1, 1993. Except as listed on Schedule 3.10 attached hereto, Seller has filed all material reports, statements, documents, registrations, filings or submissions (including without limitation any sales, marketing or advertising material) required to be filed by it with any Governmental Entity to the extent the same relate to the Annuity Business. Except as listed on Schedule 3.10 attached hereto, (a) no material deficiencies have been asserted by any such Governmental Entity with respect to such registrations, filings or submissions that have not been satisfied; (b) such registrations, filings or submissions were in material compliance with applicable Law when filed; (c) since December 31, 1994, Seller has not submitted any written response with respect to material comments related to the Annuity Business from any Governmental Entity concerning such registrations, filings, submissions or reports of examination; (d) since December 31, 1992, no fine or penalty has been imposed on Seller by any Governmental Entity specifically with respect to the Annuity Business; and (e) no 25 32 deposits have been made by Seller with, or at the direction of, any Governmental Entity with respect to the Annuity Business which were not shown in the most recent Annual Statement of Seller. Section 3.11. Reinsurance. Schedule 3.11 sets forth all reinsurance or co-insurance agreements (together with all other agreements related thereto) related to the Annuity Contracts to which Seller is a party and all such contracts, arrangements, treaties, understandings and agreements under which Seller has any obligation to cede or assume insurance. All such agreements are valid and binding against Seller and, to the knowledge of Seller, the other parties thereto, and are in full force and effect in accordance with their terms and conform in all material respects to all applicable Laws and neither Seller, nor to the knowledge of Seller, any other party thereto is in material default under any such agreement. Except as otherwise provided on Schedule 3.11, no party to any such agreement has audited Seller with respect thereto. Section 3.12. Absence of Certain Changes or Events. Except as disclosed on Schedule 3.12 attached hereto or except as expressly contemplated or required by this Agreement, since December 31, 1995, (a) with respect to Seller's Annuity Business, Seller has not, except in the ordinary course of the Annuity Business consistent with past practice, (I) engaged in any material transaction, (II) entered into any material agreement or (III) waived or released any material right or obligation and (b) except as disclosed on Schedule 3.12 attached hereto, there has not been, occurred or arisen in connection with Seller's Annuity Business: (i) any work stoppage, strike, labor difficulty or union organizational campaign (in process or threatened) at or affecting Seller's Annuity Business; 26 33 (ii) any payment, discharge or satisfaction by Seller of any material Lien or liability other than material Liens or liabilities that were paid, discharged or satisfied in the ordinary course of business and consistent with past practice; (iii) any sale, transfer or conveyance of any investments or other assets of Seller related to the Annuity Business with an individual Book Value in excess of $100,000 or an aggregate Book Value in excess of $10,000,000, except in the ordinary course of business and consistent with past practice; (iv) any amendment, termination, waiver, disposal or lapse of, or other failure to preserve, any material license, Permit or other form of authorization of Seller; (v) any amendment of, or any failure by Seller to perform all of its obligations under, or any default under, or any waiver of any right under, or any termination (other than on the stated expiration date) of, any contract that involves or reasonably would involve the annual expenditure or receipt by Seller of more than $100,000 except for actions taken with respect to Annuity Contracts in force (including, without limitation, reinsurance thereon) in the ordinary course of business and consistent with past practice; (vi) any termination, amendment or entering into by Seller as ceding or assuming insurer of any reinsurance, coinsurance or other similar contract or any trust agreement or security agreement related thereto except as disclosed in Schedule 3.11 attached hereto or contemplated hereby; 27 34 (vii) any Lien created on or in any of the Purchased Assets or assumed by Seller with respect to any of such assets, which Lien relates to liabilities individually or in the aggregate exceeding $100,000 (but excluding Liens arising through securities lending in the ordinary course of Seller's business); (viii) any material change in any underwriting, actuarial, investment, financial reporting, marketing or accounting practice or policy followed by Seller related to the Annuity Business, or in any assumption underlying such a practice or policy, or in any method of calculating any bad debt, contingency, or other reserve for financial reporting or any other accounting purposes related to the Annuity Business other than as required by GAAP, SAP or applicable Law. (ix) any contract or agreement, written or oral, to take any of the actions set forth in clauses (i) through (viii) of this Section 3.12. Section 3.13. Assigned Contracts. Each of the Assigned Contracts is valid and binding against Seller and, to the knowledge of Seller, each other party thereto, and in full force and effect according to its terms and is freely assignable to Purchaser pursuant to this Agreement and the Assignment and Assumption Agreement without notice to or consent of any person or entity, other than as specified on Schedule 3.5 attached hereto. Other than as set forth on Schedule 3.13 attached hereto, except for the Assigned Contracts, there are no contracts of Seller necessary to the Annuity Business as currently conducted by Seller. Neither Seller nor, to Seller's knowledge, any other party to any Assigned Contract is in violation, breach or default in any material respect with respect to any such Assigned Contract. 28 35 Section 3.14. Intellectual Property. Schedule 3.14 attached hereto sets forth a list of all computer software programs and other intellectual property used by Seller that Seller reasonably believes to be necessary to conduct the Annuity Business as currently being conducted. Schedule 3.14 attached hereto also sets forth whether each such computer software program is (i) owned by Seller or (ii) licensed by Seller. Schedule 3.14 attached hereto sets forth each licensing agreement pursuant to which Seller has the right to use such licensed software. To the knowledge of Seller, Seller is not in conflict with or in violation or infringement of any rights, asserted or otherwise, of any other Person with respect to any such software and other intellectual property, nor has Seller received any notice of any such conflict, violation or infringement. Seller has the non-exclusive right to use all such licensed software and other intellectual property and will have the right to use such software after the Closing Date to the extent necessary to provide administration services under the Transition Services Agreement and the Transition Services Agreement contemplated by the JANY Stock Purchase Agreement so long as the services provided thereunder do not substantively change from the administration currently conducted by Seller. Schedule 3.14 attached hereto sets forth the amounts paid by Seller since December 31, 1995 for use of the licensed software. Section 3.15. Purchased Assets. Seller has good and marketable title to all assets included within the Purchased Assets (other than cash and the Assigned Contracts), free of any Lien, except to the extent the Annuity Contracts are subject to a reinsurance, coinsurance or similar agreement as set forth on Schedule 3.11 attached hereto. As of June 21, 1996, the June 21 Portfolio Securities in the aggregate had a Book Value equal to the amount set forth on 29 36 Schedule 1.2(a)(i) attached hereto and an aggregate gross book annual effective yield (before reduction for third party mortgage servicing costs) of at least 8.18%. Section 3.16. Statutory Financial Statements. Seller has previously delivered to Purchaser true, complete and correct copies of the audited statements of admitted assets, liabilities and capital and surplus (statutory basis) of Seller as of December 31, 1993, 1994 and 1995, and the related summaries of operations, statements of capital and surplus and cash flow (statutory basis) for the years then ended, together with the notes related thereto. Seller has previously delivered to Purchaser true, complete and correct copies of the Annual Statements of Seller as filed with the Department of Commerce, State of Minnesota for the years ended December 31, 1993, 1994 and 1995, together with all attachments, exhibits and schedules thereto and all affirmations and certifications filed therewith applicable to the Annuity Business and the actuarial opinions applicable to the Annuity Business for such years. Seller has previously made available to Purchaser for review (without the right to remove or make copies) all auditors' work papers related to the Annuity Business and related to the foregoing audited financial information. Seller has previously delivered to Purchaser true, complete and correct copies of the Quarterly Statements of Seller as filed with the Department of Commerce, State of Minnesota for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, together with all attachments, exhibits and schedules thereto and all affirmations and certifications filed therewith applicable to the Annuity Business. Each such Annual Statement and Quarterly Statement complied in all material respects with all applicable Laws when so filed and was timely filed with all required Governmental Entities. No material deficiencies have been asserted or are otherwise known by Seller with respect thereto. Each such financial 30 37 statement (and the exhibits and schedules relating thereto), including without limitation each statement of assets, liabilities, surplus and other funds (statutory basis) of Seller and each of the summaries of operations, statements of capital and surplus and cash flow (statutory basis) contained in the respective financial statement was prepared in accordance with SAP applied on a consistent basis (except for changes, if any, disclosed therein) and each such Annual Statement and Quarterly Statement fairly presents (in accordance with SAP) the financial condition of Seller as of the respective dates thereof, and its results of operations or cash flows, as the case may be, for and during the respective periods covered thereby (provided the Quarterly Statements are subject to normal year end adjustments and lack footnotes and other presentation items). There were no material liabilities affecting Seller as of December 31, 1995 required in accordance with SAP to be reflected or disclosed in the Annual Statement for the period then ended, or as of March 31, 1996, June 30, 1996 or September 30, 1996 required in accordance with SAP to be reflected or disclosed in the Quarterly Statement for the period then ended, which are not so reflected or disclosed therein. Seller has not prepared any GAAP financial statements with respect to the Annuity Business. Section 3.17. Reserves. The Reserve Liabilities as of June 30, 1996 and September 21, 1996 have been calculated in the manner reflected on Schedule 3.17(a) attached hereto. Except as set forth in Schedule 3.17(b) attached hereto, all reserves with respect to Annuity Contracts as established or reflected, and all other provisions made for policy and contract claims with respect to Annuity Contracts (calculated gross of reinsurance applicable to London Life Reinsurance Company pursuant to the agreement dated October 1, 1996 and Lincoln National Reassurance Company pursuant to the agreement dated December 31, 1991 and, at a 31 38 minimum, to be calculated to include 66-2/3% of the additional reserves (or such greater amount of reserves as have actually been posted), solely due to compliance with Actuarial Guideline 33, for policies issued on or prior to December 21, 1994, and 100% of such additional reserves (or such greater amount of reserves as have actually been posted) for policies issued subsequent to December 21, 1994) (collectively, "Reserve Liabilities"), in the respective Annual and Quarterly Statements were determined in accordance with SAP and generally recognized actuarial methods and standards, consistently applied, were fairly stated in accordance with sound actuarial principles, using prescribed morbidity and mortality tables and interest rates that are in accordance with the nature of the benefits specified in the related Annuity Contracts of Seller, and such Reserve Liabilities and other provisions met the applicable requirements of the insurance Laws and regulations of the State of Minnesota. Without limitation of the foregoing sentence, to Seller's knowledge, adequate provision for all Reserve Liabilities has been made to cover the total amount of all reasonably anticipated matured and unmatured benefits, claims and other liabilities under all Annuity Contracts. Section 3.18. Threats of Cancellation. Except as set forth in Schedule 3.18 attached hereto, since December 31, 1995 through the date of this Agreement, no Policyholder, group of Policyholder Affiliates, or Persons writing, selling or producing, either directly or through reinsurance assumed, insurance business that individually or in the aggregate for each such Policyholder, group or Person, respectively, accounted for (i) 5% or more of the annual premium or annuity income (as determined in accordance with SAP) or (ii) 1% of account values of Seller's and JANY's Annuity Business, taken as a whole, in each case at or for the 12 month 32 39 period then ended, has terminated or, to the knowledge of Seller, threatened to terminate its relationship with Seller. Section 3.19. Credited Rates. Seller has complied and is in compliance with all applicable contract provisions and Laws associated with credited interest rates related to the Annuity Contracts. Section 3.20. Related Agreements. Each of the Related Agreements is similar in all material respects to one of the forms set forth on Schedule 3.20 attached hereto. Seller knows of no Related Agreements other than those listed in Schedule 3.20 attached hereto concerning commissions payable on the Annuity Contracts. Seller is not in breach of any of the Related Agreements, and to the knowledge of Seller, none of the other parties to the Related Agreements is in breach thereof. Section 3.21. Third Party Administration Agreements. Schedule 3.21 attached hereto lists all third party administration agreements relating to the Annuity Contracts, regardless of whether Seller is receiving or providing services (the "Third Party Administration Agreements"). The Third Party Administration Agreements are valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, and to Seller's knowledge, are valid and binding obligations of the other parties thereto, enforceable against such other parties in accordance with their terms. Seller is not in breach of any of such Third Party Administration Agreements and, to the knowledge of Seller, none of the other parties to such Third Party Administration Agreements is in breach thereof. 33 40 Section 3.22. Mortgage Loans. (a) Except as set forth on Schedule 3.22(a) attached hereto, Seller is the holder of a first lien position on the Mortgage Loans free and clear of any other Liens, except for with respect to the Mortgaged Property or the mortgage related thereto (a) the lien of current real property taxes and assessments, ground rents, personal property taxes, water rates, water frontage charges and/or meter charges, sewer taxes or rents and other similar charges or assessments, in each case not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record of a type acceptable to lending institutions generally or specifically referred to in the title insurance policy or title opinion issued in connection with the original loan made with respect to the Mortgaged Property, (c) mechanics' or similar liens or claims for work, labor and materials, (d) zoning and other land use restrictions and ordinances, including, without limitation, landmark, historic and wetland designations, (e) rights of tenants under leases or other rights of tenants or rights of other occupants of the premises with or without the legal right to do so, (f) any state of facts an accurate survey would show with respect to the Mortgaged Property, (g) the failure of the premises to comply with applicable occupancy Law or municipal violations of record, (h) in the case where the Mortgaged Property is a condominium unit, the lien of a condominium association on such Mortgaged Property for unpaid maintenance or common expense assessments not yet due and payable, (i) littoral or riparian rights, if any, (j) any right, title or interest in any minerals, mineral rights or related matters including but not limited to oil, gas, coal and other hydrocarbons whether or not shown by the public records and (l) the lien of any secondary financing, in each case, which do not materially impair the Mortgage Loan ("Permitted 34 41 Mortgage Liens"). As of the date specified therein, the (i) loan number, (ii) loan class, (iii) lien priority, (iv) borrower's name, (v) property address, (vi) outstanding principal amount, (vii) book value, (viii) delinquency status, (ix) status code, (x) current interest rate (or the method of calculating same), (xi) service fee rate, (xii) net interest rate, (xiii) maturity date and (xiv) percentage owned by Seller for each Mortgage Loan are materially as set forth in the Mortgage Loan Schedule. Except as set forth on Schedule 3.22(a) attached hereto, the proceeds of each Mortgage Loan have been fully disbursed and there are no future or additional advances to be made with respect to any Mortgage Loans. Except as set forth on Schedule 3.22(a) attached hereto, no Mortgage Loan has been delinquent for a period of more than 30 days within the last 12 months in the payment of any principal or interest thereon. Each Mortgage Loan is a permitted investment for Minnesota life insurers under applicable Law. (b) With respect to each Mortgage Loan and any and all Loan Documents relating thereto, to Seller's knowledge (i) each of such Mortgage Loans and Loan Documents are the legal, valid, and binding obligation of the mortgagor, obligor or the guarantor, as applicable, and each is enforceable in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy or insolvency Laws, provided that in this case, Seller may rely upon borrower's closing counsel's opinion letter if originated by Seller, or upon representations and warranties given to Seller by another financial institution or entity if purchased by Seller, or in the absence of either, without due inquiry or investigation by Seller so long as Purchaser is assigned the benefits of such opinions, representations or warranties, (ii) none of such Mortgage Loans or Loan Documents is the subject of any agreement, contract or other arrangement (other than this Agreement) pursuant to which any interest in any Mortgage 35 42 Loan or any payment due under any Mortgage Loan or with respect to any Mortgage Property has been or is intended to be sold, used as collateral, transferred to or otherwise disposed of to any Person or Persons by the original lender, subject to the participatory interests of other lenders or investors as are set forth on Schedule 3.22(b) attached hereto. (c) With respect to each Mortgage Loan and any and all Loan Documents relating thereto, the mortgagor does not have a valid defense to the payment in full of such Mortgage Loan that arises from applicable Laws and such Mortgage Loan is not subject to any right of rescission, set-off, abatement, diminution or counterclaim, except in any case as such right or defense may be provided by bankruptcy, insolvency, reorganization or other similar Laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law). (d) None of the terms of any Loan Documents relating to any Mortgage Loan have been waived, amended or modified in any respect, except as set forth on the Mortgage Loan Schedule and except for such waivers, amendments and modifications as do not adversely affect (i) any mortgagor's, obligor's or guarantor's obligation to pay principal, interest or other sums required (including the timing of such payments) to be paid under such Loan Documents, (ii) Seller's Liens against the Mortgage Property securing the Mortgage Loan or (iii) the enforceability in a timely manner of such Liens. Except as set forth in the Mortgage Loan Schedule, no Mortgage Loan has been satisfied, subordinated or rescinded, in whole or in part, except (i) upon full payment of the underlying loan or, in the case of a partial release, in connection with the receipt of an independent third party MAI self-contained appraisal evidencing that there is sufficient collateral (which for this purposes shall mean no more than 36 43 80% loan to value) remaining with respect to such Mortgage Loan or (ii) as a result of a final judgment or its equivalent of a condemnation or eminent domain proceeding which does not materially impair the Mortgaged Property or Mortgage Loan. Except as set forth on Schedule 3.22(d) attached hereto, no mortgagor, obligor nor any guarantor listed on the Mortgage Loan Schedule in respect of any Mortgage Loan has been released, in whole or in part except in accordance with the terms of the Note and Mortgage, except in the case of a partial release either (i) as a result of a written loan modification or assumption agreement or (ii) if, prior to the release of any mortgagor, obligor or guarantor, a determination was made by Seller that (a) such mortgagor, obligor or guarantor was insolvent or deemed to have a lack of ability to make any material contribution with respect to the outstanding Mortgage Loan debt and (b) that the remaining mortgagor, obligor or guarantor was able to repay the outstanding Mortgage Loan debt, in either case such that the release of any mortgagor, obligor or guarantor would not have a material adverse impact on the repayment of the Mortgage Loan. (e) None of the Mortgage Loans are cross-collateralized with any other mortgage loan except for another Mortgage Loan other than a cross-collateralization which does not have a material adverse impact on the repayment of the Mortgage Loan. (f) The Mortgage File with respect to each Mortgage Loan contains all of the Loan Documents relating to each such Mortgage Loan, including, but not limited to, all documents described on Exhibit K and all such documents are true, complete and correct copies of the documents they purport to be. Except as set forth on Schedule 3.22(f) attached hereto, the Mortgage Loan Files contain the original promissory notes and/or other evidence of 37 44 indebtedness (including all amendments thereto) and the originals of all credit enhancements, if any, as applicable. (g) With regard to the Mortgaged Property relating to any Mortgage Loan, to the knowledge of Seller no material amount of Hazardous Substances has been disposed of or identified on, under or at such Mortgaged Property the presence of which is either in violation of Law or would, under applicable Laws require (or permit any Governmental Entity to require) removal or remediation of such Hazardous Substance, except to the extent that removal or remediation has occurred or will occur prior to the Closing Date and except as would not materially affect the Mortgaged Property or the repayment of the Mortgaged Loan. (h) To the knowledge of Seller, there is no pending or threatened condemnation proceeding affecting any Mortgaged Property, or any part thereof, which could have an adverse effect upon the current use of such Mortgaged Property. (i) To the knowledge of Seller, there is no pending or threatened Action relating to such Mortgage Loan affecting the Mortgaged Property relating to such Mortgage Loan which would have a material and adverse effect upon such Mortgage Loan. (j) Seller has received no written notice (i) of any material violation of any Law which is a direct result of the maintenance, operation, occupancy, or use of any of the Mortgaged Property related to such Mortgage Loan, in its present manner such that the violation would materially adversely affect the operation, occupancy or other use of such Mortgaged Property and (ii) that any material Permits and approvals required by Governmental Entities having jurisdiction over the operation of such Mortgaged Property in its present manner have not been performed, issued or paid for or are not in full force and effect. 38 45 (k) With respect to each Mortgage Loan, (i) each Mortgage is covered by a title insurance policy or where customary an opinion of title from a law firm in such jurisdiction insuring or opining that the Mortgage creates the first priority Lien it purports to create and that the Mortgage is not subject to any defect or encumbrance except Permitted Mortgage Liens, (ii) no claims have been made by Seller or, to Seller's knowledge, any other Person under any title policy relating to any Mortgage Loan, (iii) there has been no act or omission by Seller, or to Seller's knowledge, any party holding an interest in any title policy (including without limitation any failure to pay the premiums therefor) that creates sufficient grounds for the defense by the title insurer of any claims by the insured or that otherwise limits the title insurer's liability under any title policy relating to any Mortgage Loan and (iv) there has been no act or omission by Seller, or to Seller's knowledge, any party holding an interest in any title policy that has caused a subordination of the priority of any Lien as insured under any title policy relating to any Mortgage Loan. Seller is the insured under any title policy relating to any Mortgage Loan, either by name, endorsement or by virtue of being the successor to the original named insured lender. Seller is either the sole insured or a participant insured in those Mortgage Loans in which the Seller does not hold 100% of the first Lien. (l) There are no delinquent real estate taxes in respect of any Mortgage Property except as set forth on the Mortgage Loan Schedule or any deficiency in any obligor's obligations to pay amounts into escrow (other than in the case of escrows where property taxes have been increased in the past 12 months). (m) If upon origination the Mortgaged Property relating to such Mortgage Loan was in an area identified in the Federal Register by the Federal Emergency Management 39 46 Agency as having special flood hazards (and the flood insurance described below is available), a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administrator, if available, is in effect with a generally acceptable insurance carrier, in an amount representing coverage not less than the lesser of (i) the unpaid principal balance of such Mortgage Loan, (ii) the full insurable value of such Mortgaged Property or (iii) the maximum amount of insurance available under the Flood Disaster Protection Act of 1973. (n) A hazard insurance policy with a standard mortgagee clause is in effect with respect to each Mortgage Loan (other than a Mortgage Loan secured solely by unimproved land), in an amount representing coverage not less than the lesser of (i) the unpaid principal balance of such Mortgage Loan or (ii) the full insurable value of the Mortgaged Property relating to such Mortgage Loan. (o) With respect to any Mortgage Loan that is secured in whole or in part by the interest of a borrower as a lessee under a ground lease of a Mortgaged Property, such ground lease has an original term (including any extension options set forth therein) which extends not less than five years beyond the maturity date of the related Mortgage Loan. (p) All servicing contracts related to the Mortgage Loans originated by Seller are terminable at the election of Seller at termination fees that are no greater than customary termination fees paid in accordance with industry practice. Section 3.23. No Waiver of Defenses. Seller has not waived any defenses, claims or Actions which would have been available to Seller under the Annuity Contracts or the Related Agreements. 40 47 Section 3.24. Agent Balances. Schedule 3.24 attached hereto sets forth all producers with respect to the Annuity Contracts having a balance owed by such producer to Seller for fees and commissions relating to the Annuity Contracts and the nature and amount of such balance. Section 3.25. GAAP Financial Statements. On or prior to the date hereof, Seller has delivered to Purchaser true, correct and complete copies of (a) the audited consolidated balance sheets of John Alden Financial Corporation ("John Alden") and its subsidiaries as of December 31, 1995 and 1994, prepared in accordance with GAAP, together with the notes thereon and the related report of Price Waterhouse the independent certified public accountant of John Alden, and (b) the audited consolidated statements of income, stockholders' equity and cash flows of John Alden and its subsidiaries for the years ended December 31, 1995, 1994 and 1993 prepared in accordance with GAAP, together with the notes thereon and the related report of Price Waterhouse (collectively, the "John Alden Financial Statements"). Seller has delivered to Purchaser true, correct and complete copies of the consolidated balance sheets, and the related consolidated statements of income, stockholders' equity and cash flows of John Alden and its subsidiaries for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, prepared in accordance with GAAP (the "Interim John Alden Financial Statements"). The John Alden Financial Statements and the Interim John Alden Financial Statements are based on the books and records of John Alden and its subsidiaries and have been prepared in accordance with GAAP consistently applied (except in the case of the Interim John Alden Financial Statements for normal year end adjustments). The John Alden Financial Statements have been, audited by Price Waterhouse. The John Alden Financial Statements and the Interim John Alden Financial Statements fairly present in all material respects the consolidated financial position and results 41 48 of operations of John Alden and its subsidiaries as of the dates and for the periods indicated therein. For purposes of this Article 3, references to the knowledge of Seller means, after reasonable inquiry, the actual knowledge of officers of Seller having the title of Senior Vice President or higher. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller as follows: Section 4.1. Organization and Standing. Purchaser is a corporation duly organized and validly existing under the Laws of the State of Arizona. Purchaser has all corporate power and authority necessary or required by Law to own, lease and operate its assets, properties and business and to carry on the operations of its business as currently conducted by it. Section 4.2. Authorization. Purchaser has all corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and under each of the Ancillary Agreements to be executed by it. Purchaser is duly licensed, qualified or admitted to do business and is in good standing in all jurisdictions in which it is required to be so qualified, licensed or admitted to do business by the Laws thereof, except where the failure to so qualify, be admitted or licensed, individually or in the aggregate is not reasonably likely to have a Material Adverse Affect on Purchaser. The execution and delivery by Purchaser of this Agreement and the Ancillary Agreements to be executed by it, and the performance by 42 49 Purchaser of its obligations under such agreements, have been duly authorized by all necessary corporate and shareholder actions on the part of Purchaser. This Agreement and each of the Ancillary Agreements executed by Purchaser, when executed by all of the parties thereto, will constitute a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other Laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). Section 4.3. Actions and Proceedings. Except as disclosed on Schedule 4.3 attached hereto, (a) there are no outstanding Orders by or with any court, arbitrator or Governmental Entity before which Purchaser or any of its material Affiliates is or was a party that, individually or in the aggregate, have a Material Adverse Effect on Purchaser, and (b) there are no Actions pending or, to Purchaser's knowledge, threatened against Purchaser or any of its material Affiliates which would, individually or in the aggregate, have a Material Adverse Effect on Purchaser. Section 4.4. No Conflict or Violation. Except as disclosed on Schedule 4.4 attached hereto, the execution, delivery and performance by Purchaser of this Agreement and the Ancillary Agreements to which it is a party in accordance with the respective terms and conditions hereof and thereof do not and will not (a) violate any provision of the charter, by-laws or other organizational document of Purchaser, in each case, as amended to date, (b) violate, constitute a default under, or result in the breach, cancellation or termination of, accelerate the performance required under, or result in the creation of any Lien upon any of the 43 50 assets of Purchaser, pursuant to, any mortgage, deed of trust, guaranty, note, indenture, bond, lease, agreement or other instrument to which Purchaser is a party or by or to which it or any of its assets may be bound, (c) violate any Order of any court, arbitrator or Governmental Entity against, or binding upon, or any agreement with, or condition imposed by, any court, arbitrator or Governmental Entity binding upon Purchaser or any of its assets, (d) violate any Law or (e) result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment or revocation of, any Permit necessary for Purchaser to conduct the Annuity Business. Section 4.5. Consents and Approvals. Except as required under the HSR Act or as set forth on Schedule 4.5 attached hereto, no consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, Governmental Entities of competent jurisdiction) by Purchaser in order (a) for this Agreement, each of the Ancillary Agreements and each of the Assigned Contracts to which Purchaser will be a party to constitute a valid and binding obligation of Purchaser, (b) to authorize or permit the consummation of the transactions contemplated hereby by Purchaser or (c) to authorize or permit Purchaser to conduct the Annuity Business after the Closing. Section 4.6. Brokerage and Financial Advisers. No broker, finder or financial adviser has acted directly or indirectly as such for, or is entitled to any compensation from, Purchaser in connection with this Agreement or the transactions contemplated hereby, except Goldman Sachs & Company, whose fees for services rendered in connection with such transactions will be paid by Purchaser. 44 51 Section 4.7. GAAP Financial Statements. On or prior to the date hereof, Purchaser has delivered to Seller true, correct and complete copies of (a) the audited consolidated balance sheets of SunAmerica Inc. ("SunAmerica") and its subsidiaries as of December 31, 1995 and 1994, prepared in accordance with GAAP, together with the notes thereon and the related report of Price Waterhouse, the independent certified public accountant of SunAmerica, and (b) the audited consolidated statements of income, stockholders' equity and cash flows of SunAmerica and its subsidiaries for the years ended December 31, 1995, 1994 and 1993 prepared in accordance with GAAP, together with the notes thereon and the related report of Price Waterhouse (collectively, the "SunAmerica Financial Statements"). Purchaser has delivered to Seller true, correct and complete copies of the consolidated balance sheets, and the related consolidated statements of income, stockholders' equity and cash flows of SunAmerica and its subsidiaries for the quarters ended March 31, 1996 and June 30, 1996, prepared in accordance with GAAP (the "Interim SunAmerica Financial Statements"). The SunAmerica Financial Statements and the Interim SunAmerica Financial Statements are based on the books and records of SunAmerica and its subsidiaries, and the SunAmerica Financial Statements have been prepared in accordance with GAAP consistently applied, audited by Price Waterhouse and fairly present in all material respects the consolidated financial position and results of operations of SunAmerica and its subsidiaries as of the dates and for the periods indicated therein. Section 4.8. Statutory Financial Statements. Purchaser has furnished to Seller true, complete and correct copies of the Annual Statements of Purchaser as filed with the Arizona Department of Insurance for the years ended December 31, 1995, 1994 and 1993, together with all attachments, exhibits and schedules thereto and all affirmations and certifications filed 45 52 therewith and applicable actuarial opinions for such years. Purchaser has furnished to Seller true, complete and correct copies of the Quarterly Statements of Purchaser as filed with the Arizona Department of Insurance for the quarters ended March 31, 1996 and June 30, 1996, together with all attachments, exhibits and schedules thereto and all affirmations and certifications filed therewith and no further amendments thereto are being considered. Each such Annual Statement and Quarterly Statement complied in all material respects with all applicable Laws when so filed and were timely filed with all required Governmental Entities. No material deficiencies have been asserted or are otherwise known by Purchaser with respect thereto. Each such Annual Statement and Quarterly Statement was prepared in accordance with SAP applied on a consistent basis (except for changes, if any, disclosed therein) and fairly presents (in accordance with SAP) the financial condition of Purchaser as of the respective dates thereof or its results of operations or cash flows, as the case may be, for and during the respective periods covered thereby (provided the Quarterly Statements are subject to normal year end adjustments and lack footnotes and other presentation items). There were no material liabilities affecting Purchaser as of December 31, 1995 required in accordance with SAP to be reflected or disclosed in the Annual Statement for the period then ended, or as of March 31, 1996 or June 30, 1996 required in accordance with SAP to be disclosed in the Quarterly Statement for the period then ended, which are not so reflected or disclosed therein. Section 4.9. Rating. As of the date hereof, the Standard & Poor's Corporation Claims - Paying Ability Rating of Purchaser is AA- and the Moody's Investor Service, Inc. Financial Strength rating of Purchaser is A2. Purchaser's A.M. Best & Co. rating is A+ (superior) and its Duff & Phelps rating is AA. 46 53 For purposes of this Article 4, references to the knowledge of Purchaser means, after reasonable inquiry, the actual knowledge of officers of Purchaser having the title of Senior Vice President or higher. ARTICLE 5 PRE-CLOSING COVENANTS Section 5.1. Conduct of Business. (a) Prior to the Closing, Seller shall, unless Seller shall receive the prior written consent of Purchaser: (i) operate the Annuity Business as presently operated and only in the ordinary course and consistent with past practice (including but not limited to past underwriting standards and investment philosophies) subject however to such changes as may be required by changes in applicable Laws or contemplated by this Agreement ; and (ii) use commercially reasonable efforts to preserve its relationship with and the goodwill of its brokers, customers, suppliers, employees and other Persons having business dealings with Seller in connection with the Annuity Business. (b) Without limiting the generality of the foregoing, Seller will: (i) use commercially reasonable efforts to maintain in full force and effect all material contracts, documents and arrangements related to the Annuity Business, to continue all current marketing and selling programs relating to the 47 54 Annuity Business in accordance with its current marketing plan, to process Annuity Contracts consistent with past practice, and to maintain each rating classification assigned to Seller as of the date hereof by insurance rating agencies. (ii) cause the Books and Records to be maintained in the usual manner and consistent with past practice and not permit a material change in any underwriting, investment, actuarial, financial reporting or accounting practice or policy of Seller or in any assumption underlying such a practice or policy, or in any method of calculating any bad debt, contingency or other reserve for financial reporting purposes (including without limitation any practice, policy, assumption or method relating to or affecting the determination of Annuity Contracts in force, premium or investment income, Reserve Liabilities or operating ratios with respect to expenses, losses or lapses) except as may be required by a change in GAAP, SAP or Law. (iii) (A) cause all Reserve Liabilities with respect to Annuity Contracts established or reflected in the Books and Records of Seller to be (1) established or reflected on a basis consistent with those Reserve Liabilities and reserving methods followed by Seller in the preparation of its December 31, 1995 Annual Statement filed with the Department of Commerce, State of Minnesota and (2) adequate to cover the total amount of all reasonably anticipated matured and unmatured benefits, dividends, losses, claims, expenses and other liabilities of Seller under all Annuity Contracts pursuant to which Seller has or will have any liability (including without limitation any liability arising under or as a result of 48 55 any reinsurance, coinsurance or other similar contract); and (B) continue to own assets that qualify as legal reserve assets under all applicable Laws in an amount at least equal to its Reserve Liabilities. (iv) continue to comply with all Laws applicable to its Annuity Business, operations or affairs. (c) Unless otherwise provided in this Agreement, without the approval of Purchaser, which approval shall not be unreasonably withheld, from and after the date hereof until the Closing, Seller will refrain from: (i) selling or otherwise transferring, assigning, disposing of, granting or permitting to exist any Lien on, any October 21 Portfolio Securities; (ii) increasing the rates of compensation (including bonuses) payable or to become payable to any officer, employee, agent, independent contractor or consultant of Seller in connection with the Annuity Business other than in the ordinary course of business, consistent with past practice; (iii) except in the ordinary course of business consistent with past practice, incurring any obligation, liability or indebtedness, incurring any extraordinary losses, or disposing of, canceling, waiving or permitting to lapse any rights of material value relating to or affecting the Annuity Business; (iv) changing in any material respect its accounting principles or practices (including, without limitation, any changes in depreciation or amortization policies or rates or any changes in any assumptions underlying any 49 56 method of calculating reserves) other than as required by a change in GAAP, SAP or Law; (v) except as disclosed herein, entering into or amending or terminating any transaction or contract related to the Annuity Business that could reasonably be expected to have a Material Adverse Effect; (vi) except in the ordinary course of business consistent with past practice, terminating, amending or executing any material reinsurance, coinsurance or other similar contract, as ceding or assuming insurer related to the Annuity Contracts, except as contemplated by Section 5.9 hereof; or (vii) entering into any contract or agreement to do any of the foregoing. Section 5.2. Certain Transactions. Except as contemplated by the reinsurance agreements listed on Schedule 3.11 attached hereto, from the date of this Agreement through the Closing, neither Seller nor any of its directors or officers will (and Seller shall cause its investment bankers and legal counsel not to) solicit, encourage, initiate or engage in any negotiations or discussions with, or provide any information to, or otherwise cooperate in any other manner with, any Person or group (other than Purchaser and its Affiliates) concerning any coinsurance, reinsurance, replacement, sale or other disposition, directly or indirectly, of the Annuity Business. Section 5.3. Investigations. From the date hereof through the Closing Date, Purchaser shall be entitled, through its employees, counsel, actuaries and other Representatives, to make such investigation of the assets, liabilities, business and operations of the Annuity Business, and such examination of the Books and Records, as Purchaser may reasonably request, including, 50 57 without limitation, for the purpose of investigating the financial condition, service quality and operations of Seller. Any investigation, examination or interview by Purchaser of employees of Seller shall be conducted at reasonable times upon reasonable prior notice; and each of the Parties and its officers, employees and Representatives, including, without limitation, counsel, investment bankers and independent public accountants, shall cooperate with the other's employees and Representatives, as the case may be, in connection with such review and examination; provided, however, that such examination shall not be deemed a waiver by Purchaser of any of its rights with respect to the representations and warranties of Seller. Section 5.4. HSR Act Filings. Seller and Purchaser shall, as promptly as practicable, file, or cause to be filed, Notification and Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice (the "Antitrust Division") in connection with the transactions contemplated by this Agreement, the Ancillary Agreements and the other agreements contemplated hereby and thereby, and will use their respective reasonable efforts to respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date. Seller and Purchaser will each furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of necessary filings or submissions to any government or regulatory agency, including, without limitation, any filings necessary under the provisions of the HSR Act. Section 5.5. Consents and Reasonable Efforts. Seller and Purchaser shall cooperate and use their commercially reasonable efforts to obtain all consents, approvals and agreements 51 58 of, and to give and make all notices and filings with, any Governmental Entities, necessary to authorize, approve or permit the consummation of the transactions contemplated by this Agreement, the Ancillary Agreements and the other agreements contemplated hereby and thereby. Seller shall use its commercially reasonable efforts to obtain all approvals and consents to the transactions contemplated by this Agreement and the Ancillary Agreements as set forth on Schedule 3.5 attached hereto. Purchaser will use its commercially reasonable efforts to obtain all approvals and consents to the transactions contemplated by this Agreement and the Ancillary Agreements as set forth on Schedule 4.5 attached hereto. Without limiting the foregoing, Purchaser will permit Representatives of Seller to participate in the meeting at which the transactions contemplated by this Agreement are presented to the Arizona Department of Insurance for approval. Section 5.6. Representations and Warranties. From the date hereof through the Closing Date, (a) Seller shall use its reasonable efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties contained in Article 3 shall continue to be true, complete and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, (b) Purchaser shall use its reasonable efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties as to Purchaser contained in Article 4 shall continue to be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date, (c) Seller shall notify Purchaser promptly of any event, condition or circumstance known to Seller occurring from the date hereof through the Closing Date that would constitute a violation or breach of this 52 59 Agreement by Seller and (d) Purchaser shall notify Seller promptly of any event, condition or circumstance known to Purchaser occurring from the date hereof through the Closing Date that would constitute a violation or breach of this Agreement by Purchaser. Section 5.7. Computer Software and Other Intellectual Property. With respect to software and other intellectual property listed on Schedule 3.14 attached hereto that is licensed to Seller, but which is not freely assignable by Seller to Purchaser, Seller will use its best efforts to cooperate with Purchaser, upon Purchaser's request, to obtain at Purchaser's sole cost and expense from the licensors of such software and other intellectual property the right for Purchaser to operate such software and other intellectual property. Section 5.8. Financial Statements and Reports. (a) At the time of filing with the Department of Commerce, State of Minnesota, Seller will deliver to the Purchaser true and complete copies of each Annual Statement and Quarterly Statement filed after the date hereof and on or prior to the Closing Date. (b) From and after the date hereof and through the Closing Date, Seller shall continue to prepare in the ordinary course of business consistent with past practice and shall deliver, as soon as available, to Purchaser, true and complete copies of customarily prepared internal management information reports (including financial statements, reports and analyses prepared by or for Seller) prepared by Seller related to the Annuity Business, including without limitation normal internal reports which Seller prepares (such as those reflecting weekly net production, surrenders, head count and claims and monthly cash flow and operations expense) but excluding any statements, reports or analyses prepared in connection with any analyses of 53 60 the transaction contemplated in this Agreement. Without limiting the foregoing, Seller will provide to Purchaser weekly a list of the October 21 Portfolio Securities held by Seller, which reflects the Market Value and Book Value thereof (monthly) and any changes from the immediately preceding week (weekly), including, without limitation, weekly maturities, prepayments, sales, redemptions or similar events. Section 5.9. Termination of Certain Reinsurance Arrangements. Prior to the Closing, Seller will terminate the Coinsurance Agreement effective October 1, 1996 between Seller and London Life Reinsurance Company and recapture of the annuity portion of the Coinsurance Agreement effective December 31, 1991 with Lincoln National Reassurance Company. Seller shall be responsible for payment of the recapture fees payable thereunder and, under no circumstances shall Purchaser be responsible for any costs or fees of any type in connection with the termination of such agreements. Section 5.10. Woodland Hills Option. Seller hereby grants to Purchaser an option to assume Seller's rights and obligations with respect to Seller's equipment and facilities located at 20950 Warner Center Lane, Woodland Hills, California 91367, subject to appropriate lessor consent, on the same financial terms currently available to Seller and on such other terms as Purchaser and Seller shall mutually agree; provided, however, such option shall result in no costs to Seller or any ongoing liability to Seller. Section 5.11. Oxford Put. In the event Purchaser does not obtain the consent of Oxford Life Insurance Company to the assignment of the Coinsurance Agreement dated January 31, 1990 between Seller and Oxford Life Insurance Company and the related trust agreement (the "Oxford Agreement") on or prior to the 15th Business Day preceding the Closing Date, it will 54 61 on such Business Day notify Purchaser of the failure to obtain such consent and (i) the Annuity Contracts subject to the Oxford Agreement (the "Oxford Annuity Contracts") shall be excluded from the Annuity Contracts to be assumed by Purchaser at the Closing (ii) the policy loans with respect to the Oxford Annuity Contracts will not be included in the Policy Loans, (iii) the reserve liabilities with respect to the Oxford Annuity Contracts will not be included in Reserve Liabilities and (iv) the Oxford Agreement shall not be included as an Assigned Contract (the "Oxford Put"). If the Oxford Put is implemented, at Purchaser's election, the Parties will execute and deliver at the Closing an administration services agreement on terms substantially similar to those of the Administrative Services Agreement, provided that the compensation will be structured to provide a pass-through to Purchaser of the compensation payable to Seller pursuant to the Oxford Agreement with respect to the Oxford Annuity Contracts. In addition, all references to Oxford Life Insurance Company, the Oxford Agreement and the Oxford Annuity Contracts in the Schedules to this Agreement shall be deemed deleted. Section 5.12. Marketing Agreement. The Parties will negotiate in good faith towards a marketing agreement, containing among other things, the terms set forth on Exhibit N attached hereto and such other terms and conditions as may be mutually acceptable to the Parties. ARTICLE 6 CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER TO CLOSE The obligations of Purchaser to consummate the transactions contemplated hereby are, unless waived by Purchaser in accordance with Section 12.4 hereof, subject to the fulfillment, at or before the Closing, of each of the following conditions: 55 62 (i) No Law or Order of a court, arbitrator or Governmental Entity of competent jurisdiction shall be in effect which prohibits, restricts or enjoins, and no Action shall be pending or threatened which seeks to prohibit, restrict, enjoin, nullify, seek material damages with respect to or otherwise materially adversely affect, the consummation of the transactions contemplated by this Agreement. (ii) The applicable waiting period under the HSR Act, including all extensions thereof, shall have expired or been terminated and Purchaser shall have been furnished with appropriate evidence, reasonably satisfactory to it, of such expiration or termination. (iii) All Permits, consents and waivers required from all Governmental Entities legally required to consummate the Closing and to perform this Agreement and each of the Ancillary Agreements and to consummate the transactions contemplated herein and thereby shall have been obtained and shall be in full force and effect and Purchaser shall have been furnished with appropriate evidence, reasonably satisfactory to it, of the granting of such Permits, consents and waivers; provided, however, that this condition shall be deemed satisfied with respect to approvals of the transactions contemplated by the Assumption Reinsurance Agreement by state insurance regulators, upon receipt of the required Permits, consents and waivers from the Minnesota Department of Commerce and the Arizona Department of Insurance. 56 63 (iv) All necessary consents to the transactions contemplated by this Agreement and the Ancillary Agreements shall have been obtained, including, without limitation, those listed on Schedule 3.5 attached hereto. (v) Except for such changes as may be permitted or required pursuant to the terms hereof, the representations and warranties of Seller set forth in Article 3 hereof shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing, except that any such representations and warranties that are given as of a specified date and relate solely to a specified date or period shall be true and correct only as of such date or period. (vi) Seller shall have performed and complied with all covenants and agreements required to be performed or complied with by Seller under this Agreement prior to or concurrently with the Closing in all material respects. (vii) Purchaser shall have received all certificates and other documents required to be delivered to Purchaser at or before the Closing pursuant to this Agreement duly executed by all necessary Persons (other than Purchaser). (viii) Purchaser shall have received the Closing deliveries described in Section 1.4 hereof. (ix) Purchaser and Seller shall have previously or concurrently closed the transactions contemplated by the JANY Stock Purchase Agreement. (x) The Combined Reserve Liabilities as of the Closing shall be at least $4,813,357,842 [96% of the aggregate of such reserve liabilities as at June 21, 57 64 1996]; provided, however, that if the Oxford Put has been exercised, the Reserve Liabilities with respect to the Oxford Annuity Contracts will be included in Combined Reserve Liabilities for the purpose of this calculation. (xi) Since December 31, 1995, there shall not have occurred any event or events or state of facts that individually or in the aggregate has or could reasonably be expected to have a Material Adverse Effect; provided, however, that for purposes of this subclause (xi), events or facts which affect the insurance or annuity industry generally (e.g., a change in general economic or market conditions, a change in tax Law or a change in insurance Law), shall not be included in determining whether a Material Adverse Effect has occurred. (xii) The Closing Date Portfolio Securities tendered by Seller to the Trust pursuant to Section 1.2(b) hereof and any other assets therein (to the extent such assets would be admitted assets if held by Purchaser outside of the Trust) shall qualify as admitted assets of Purchaser in Arizona for purposes of SAP and Purchaser shall have received regulatory confirmation thereof from the Arizona Department of Insurance. ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE The obligations of Seller to consummate the transactions contemplated hereby are, unless waived by Seller in accordance with Section 12.4 hereof, subject to the fulfillment, at or before the Closing, of each of the following conditions: 58 65 (i) No Law or Order of a court, arbitrator or Governmental Entity of competent jurisdiction shall be in effect which prohibits, restricts or enjoins, and no Action shall be pending or threatened which seeks to prohibit, restrict, enjoin, nullify, seek material damages with respect to or otherwise materially adversely affect, the consummation of the transactions contemplated by this Agreement. (ii) The applicable waiting period under the HSR Act, including all extensions thereof, shall have expired or been terminated and Seller shall have been furnished with appropriate evidence, reasonably satisfactory to it, of such expiration or termination. (iii) All Permits, consents and waivers required from all Governmental Entities legally required to consummate the Closing and to perform this Agreement and each of the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby shall have been obtained and shall be in full force and effect and Seller shall have been furnished with appropriate evidence, reasonably satisfactory to it, of the granting of such Permits, consents and waivers; provided, however, that this condition shall be deemed satisfied with respect to approvals of the transactions contemplated by the Assumption Reinsurance Agreement by state insurance regulators, upon receipt of the required Permits, consents and waivers from the Minnesota Department of Commerce and the Arizona Department of Insurance. (iv) All necessary consents to the transactions contemplated by this Agreement, the Assigned Contracts and each of the Ancillary Agreements shall 59 66 have been obtained, including, without limitation, those listed on Schedule 4.5 attached hereto. (v) Except for changes as may be permitted or required pursuant to the terms hereof, the representations and warranties of Purchaser set forth in Article 4 hereof shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing, except that any such representations and warranties that are given as of a specified date and relate solely to a specified date or period shall be true and correct only as of such date or period. (vi) Purchaser shall have performed and complied with all covenants and agreements required to be performed or complied with by Purchaser under this Agreement prior to or concurrently with the Closing in all material respects. (vii) Seller shall have received all certificates and other documents required to be delivered to Seller at or before the Closing pursuant to this Agreement duly executed by all necessary Persons (other than Seller). (viii) Seller shall have received the Closing deliveries described in Sections 1.3 and 1.4 hereof. (ix) Purchaser and Seller shall have previously or concurrently closed the transactions contemplated by the JANY Stock Purchase Agreement. (x) Since December 31, 1995, there shall not have occurred any event or events or state of facts that individually or in the aggregate has or could reasonably be expected to have a Material Adverse Effect on Purchaser; provided, 60 67 however, that for purposes of this subclause (x), events or facts which affect the insurance or annuity industry generally (e.g., a change in general economic or market conditions, a change in tax Law or a change in insurance Law), shall not be included in determining whether a Material Adverse Effect on Purchaser has occurred. ARTICLE 8 POST-CLOSING COVENANTS Section 8.1. Continued Access and Cooperation. (a) Following the Closing Date, Seller shall (i) allow Purchaser, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at Purchaser's expense to examine and make copies of any books and records retained by Seller within its possession or control ("control" for the purposes of this Section 8.1(a) being defined as the ability to cause delivery to Seller or access by Purchaser) and furnish Purchaser with such financial and reporting data and other information with respect to the Annuity Contacts, the Third Party Administration Agreements, Assigned Contracts and the Related Agreements as Purchaser may from time to time reasonably request, to the extent they relate to the Annuity Business, for any reasonable business purpose, including, without limitation, the preparation or examination of Tax Returns, regulatory filings and financial statements and the conduct of any Action, whether pending or threatened, concerning the conduct of the Annuity Business prior to the Closing Date at Seller's offices or other facilities or properties and (ii) maintain such books and records for Purchaser's examination and copying. 61 68 Access to such books and records shall be at Purchaser's expense and may not unreasonably interfere with Seller's or any successor company's business operations and Purchaser shall reimburse Seller for all reasonable out-of-pocket expenses incurred by Seller in copying such records. Seller shall retain such books and records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with respect to tax matters with respect to which such books and records are necessary and of which Purchaser shall notify Seller), after which time such books and records shall be delivered to Purchaser. Purchaser shall not copy or remove from Seller's premises the accountant's work papers made available to Purchaser and its Representatives. (b) Following the Closing Date, Purchaser shall (i) allow Seller, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at Seller's expense to examine and make copies of the Books and Records transferred to Purchaser at the Closing for any reasonable business purpose, including, without limitation, the preparation or examination of Tax Returns, regulatory filings and financial statements and the conduct of any Action or the conduct of any regulatory, contract holder, participant or other dispute resolution, whether pending or threatened, at Purchaser's offices or other facilities or properties and (ii) maintain such Books and Records for Seller's examination and copying. Access to such Books and Records shall be at Seller's expense and may not unreasonably interfere with Purchaser's or any successor company's business operations and Seller shall reimburse Purchaser for all reasonable out-of-pocket expenses incurred by Purchaser in copying such records. Purchaser shall retain any such Books and Records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with 62 69 respect to tax matters with respect to which such Books and Records are necessary and of which Seller shall notify Purchaser). Section 8.2. Further Assurances. (a) Upon the terms and subject to the conditions herein provided, each of Seller and Purchaser shall use all commercially reasonable efforts to take or cause to be taken, all actions or do, or cause to be done, all things or execute or cause to be executed any documents necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement, the Ancillary Agreements and the other agreements contemplated hereby and thereby. (b) On and after the Closing Date, Seller and Purchaser shall take all commercially reasonable action and execute any additional documents, instruments or conveyances of any kind (not containing additional representations and warranties) and give all notices and obtain all consents, approvals and Orders of Governmental Entities and other third parties which may be necessary to carry out any of the provisions hereof, including, without limitation, putting Purchaser in full possession and operating control of the Purchased Assets and the Annuity Business it is assuming pursuant to this Agreement and the Ancillary Agreements. Section 8.3. Expenses. Except as otherwise specifically provided in this Agreement and the respective Ancillary Agreements, the Parties shall bear their respective expenses incurred in connection with the preparation, execution and performance of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby, including, without limitation, all fees and expenses of their respective Representatives; provided, however, that Purchaser shall bear (a) the cost of the filing fees in connection with the filings with the FTC and the Antitrust 63 70 Division under the HSR Act with respect to the transactions contemplated hereby (which expense shall be borne equally by Seller and Purchaser if separate filings are required with respect to the transactions contemplated by this Agreement and the transactions contemplated by the Stock Purchase Agreement) and (b) the actual out-of-pocket costs of providing policyholder notices in order to implement the Assumption Reinsurance Agreement in accordance with its terms. Section 8.4. Employee Plans. Purchaser will provide to any employee of Seller or its Affiliates who on or after the Closing Date, at the sole discretion of Purchaser, becomes an employee of Purchaser or its Affiliates (an "Ex-Employee") with such compensation and benefits as are currently being provided to Purchaser's employees of similar rank and tenure level. Nothing in this Section 8.4 shall be construed as requiring the Purchaser to (i) employ any of Seller's employees or (ii) provide any Ex-Employee with such compensation or employee benefits as such Ex-Employee had previously received from Seller or its Affiliates or (iii) provide any former employee of Seller who is not an Ex-Employee with any severance benefits. Any Ex-Employee actually employed by Purchaser may request that assets held by Seller in Seller's 401(k) Plan on behalf of such Ex-Employee will be transferred as soon as practicable after the Service Transfer Date to the trustees of a qualified plan maintained by Purchaser or its Affiliate (if permitted) or retained in Seller's 401(k) Plan (subject to the rights of Ex-Employees with respect thereto). Each request will be honored by Seller if Seller, in its sole discretion, determines that such transfer complies with applicable Law. Any such assets transferred will be transferred in accordance with the provisions of Purchaser's and Seller's 401(k) Plan. 64 71 Section 8.5. Non-Discriminatory Treatment of Policyholders. Except as otherwise provided in the Indemnity Reinsurance Agreement, from and after the Closing Date Purchaser shall use all commercially reasonable efforts to provide, at all times and from time to time, to the Policyholders under the Annuity Contracts crediting rates and renewal rates and standards of policyholder service and administration which are no less than those provided to other policyholders of annuity contracts issued, coinsured or reinsured by Purchaser or its Affiliates with respect to policies of a similar type and nature (including without limitation factors such as issue date, actual and anticipated lapse rates and surrender charge periods and other relevant features and market conditions) as the Annuity Contracts. Purchaser will use commercially reasonable efforts to include a provision substantially similar to this Section 8.5 in any agreement for the sale, transfer or bulk reinsurance of all or substantially all of the Annuity Contracts. Section 8.6. Repayment of Agent Balances. Within 10 days after the Closing Date, Seller shall deliver to Purchaser a schedule setting forth those producers with respect to the Annuity Contracts having a balance owed by such producers to Seller for fees or commissions relating to the Annuity Contracts, the amount and nature of such balances, the specific Annuity Contracts to which they relate, the dates such balances were incurred and all other information required by Purchaser to facilitate the recovery by Purchaser of such amounts. From and after the Closing until the Service Transfer Date, if at any time any producer identified on such schedule becomes entitled to a payment from Purchaser in connection with the sale of an Annuity Contract, such payment shall be first applied to reduce the amount of such balance and shall be paid by Purchaser to Seller (in accordance with Purchaser's normal payment cycle). 65 72 Purchaser shall provide Seller with a quarterly report of all such payments and balances pursuant to this Section 8.6. Section 8.7. No Inducement to Replace; Non-Twisting; Non-Churning; Non- Competition. (a) In partial consideration of the payment of the Final Ceding Commission, the Parties agree that, for a period of seven years after the Closing (the "Restricted Period"), neither Seller nor any of its present or future Affiliates shall carry on or engage in, directly or indirectly, the business of selling or administering annuity contracts (a "Competing Business") in any county or city in which the Annuity Business has been conducted) or in New York State, where JANY is engaged in the business of selling and administering annuity contracts) or where Purchaser or its Affiliates conduct a similar business after the Closing Date. (b) Notwithstanding the provisions of Section 8.7(a) hereof, during the Restricted Period, Seller and Houston National Life Insurance Company ("Houston") may (A) market, underwrite and sell directly or indirectly (i) policies of Houston and (ii) single premium immediate annuities of the Seller and (B) assume annually up to $200,000,000 of deferred annuities; provided, however, that (I) the aggregate of any sales made in accordance with (A) above shall not exceed $50,000,000 annually and (II) any assumptions made pursuant to (B) above shall not exceed $200,000,000 annually; provided further, however, that the Purchaser must consent in writing to all assumptions made pursuant to (B) above which in the aggregate will exceed $100,000,000 annually, such consent not to be unreasonably withheld; and provided further, however, that the sales and assumptions set forth in (i) and (ii) above shall be limited in amount to the minimum amount and extent reasonably necessary to (x) assure Houston 66 73 and Seller each maintains its qualification as a life insurance company for federal income tax purposes and (y) to enable Houston and Seller to maintain their licenses as life insurance companies in the states in which they are licensed to do business. Clause (B) above shall not permit Seller, whether individually or in concert with others, to re-enter the Annuity Business. With respect to the assumption of deferred annuities by Seller or Houston pursuant to clause (B) of this Section 8.7(b) during the Restricted Period, Seller shall, and shall cause Houston to, offer to Purchaser the right to provide such annuities, provided Purchaser is able to provide such annuities on terms no less favorable in the aggregate to Seller or Houston, as the case may be, than those available from independent third parties. Purchaser shall have a period of 30 days to respond to each such offer. Notwithstanding the provisions of Section 8.7(a) hereof, (i) Seller may administer (A) the annuity contracts excluded from the definition of "Annuity Contracts" by the last sentence thereof, (B) direct written annuity contracts of Aristar Life Insurance Company pursuant to that service agreement between Seller and Aristar Life Insurance Company dated October 29, 1987 and (C) annuity contracts of Houston and Seller issued pursuant to the foregoing provisions of this 8.7(b), and (ii) Seller may market annuity products issued by unaffiliated third parties. (c) Notwithstanding the provisions of Section 8.7(a) hereof, during the Restricted Period, Seller or its Affiliates may acquire after the Closing an entity or business engaged in a Competing Business if not more than 50% of the gross revenues, computed in accordance with statutory accounting principles for insurance companies or GAAP for other companies, of such entity or business (for the fiscal year of such entity or business immediately preceding such acquisition) are derived from a Competing Business, provided that promptly 67 74 upon consummation of such acquisition, Seller or its Affiliate, as the case may be, shall provide to Purchaser an opportunity to negotiate to acquire such Competing Business (and Seller or such Affiliate will negotiate such sale to Purchaser in good faith) and, provided, further, if such Competing Business is not acquired by Purchaser, Seller shall not, and shall not permit any of its Affiliates to, expand the Competing Business through the sale of any annuity product and shall hold such business as a liquidating "closed block." Notwithstanding the foregoing, in no event shall the name "John Alden" or any derivation thereof, be used in connection with such Competing Business. (d) The provisions of Section 8.7(a) hereof shall not apply to any Person who becomes an Affiliate of Seller after the Closing Date by virtue of an acquisition of an ownership interest in Seller or any Affiliate of Seller, if such Person was engaged in the business of selling, issuing or administering annuity contracts in the United States of America immediately prior to such acquisition, and such new Affiliate's only relationship with Seller and its Affiliates related to such Competing Business arises solely as a result of such ownership interest. Notwithstanding the foregoing, in no event (i) shall the name "John Alden" or any derivation thereof be used in connection with such business or (ii) shall Seller or its controlled Affiliates market their own annuity products. Furthermore, during the four-year period after the Closing Date, not more than 50% of the annuity products sold or marketed by Seller or its controlled Affiliates may be annuity products of such Competing Business, such New Affiliate or its Affiliates. (e) Seller will refrain and will cause its present and future Affiliates, Subsidiaries and employees to refrain from causing or attempting to cause, influence or induce (or assisting any other Person in causing or attempting to cause, influence or induce) (i) any 68 75 Policyholder to replace or terminate any Annuity Contract issued, reinsured, underwritten, or sold by Seller, in whole or in part, with products of Seller or any other Person at any time; (ii) any reinsurer to terminate or reduce any reinsurance, coinsurance, or other similar contract, or sever a relationship, with Purchaser at any time relating to annuity contracts; or (iii) any agent (including without limitation any insurance agent) to resign or sever or reduce a relationship with Purchaser at any time relating to annuity contracts. Seller will not participate as principal or agent in any transfer involving a "Section 1035" exchange or replacement of any Annuity Contract. (f) Seller acknowledges that the covenants of Seller set forth in this Section 8.7 are an essential element of this Agreement and that, but for the agreement of Seller to comply with these covenants, Purchaser would not have entered into this Agreement. Seller acknowledges that each of the covenants of Seller set forth in this Section 8.7 constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement by Purchaser. (g) Seller recognizes and agrees that a breach by Seller or any of its Affiliates of any provision of this Section 8.7 could cause irreparable harm to Purchaser, that Purchaser's remedies at law in the event of such breach or threatened breach could be inadequate, and that, accordingly, in the event of such breach or threatened breach, Purchaser shall be authorized to seek a restraining order or injunction or both against Seller or any such Affiliate, in addition to any other rights and remedies which are available to Purchaser. (h) If the provisions of this Section 8.7 are more restrictive, as to duration, geographic limitations or scope, than permitted by the Laws of any jurisdiction in which 69 76 Purchaser seeks enforcement hereof, it shall be limited to the extent required to permit enforcement under such Laws. In particular, the parties intend that, to the extent appropriate to permit the enforcement hereof, the covenants contained in this Section 8.7 shall be construed as a series of separate and divisible covenants, one for each county and city in which the Annuity Business has been carried on and in which Purchaser conducts a similar business after the Closing Date. Except for geographic coverage, each such separate covenant shall be deemed identical in all respects. If, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants deemed included in this section, then such unenforceable covenant shall be deemed reformed or eliminated for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants to be enforced. Section 8.8. Preferred Stock Divided Repayment. Within 30 days after receipt by Purchaser, Purchaser shall remit to Seller, by wire transfer of immediately available funds, the portion of any dividend or dividends undeclared as of the Closing Date received by Purchaser after the Closing Date on preferred stock (or similar instrument) included in the Closing Date Portfolio Securities which relate to the period up to and including the Closing Date. Each such payment shall be accompanied by interest calculated at a rate equal to the three month LIBOR rate plus 25 basis points on the amount of such payment from the date receipt by the Company through the date on which such amount is actually paid. Section 8.9. Policyholder Consents. Promptly after the Closing, Purchaser shall (i) distribute to policyholders of Annuity Contracts notice of the transactions reflected herein and (ii) use commercially reasonable efforts to obtain Novations of all Annuity Contracts (as contemplated by Section 2.4 of the Assumption Reinsurance Agreement). Seller shall provide, 70 77 at Purchaser's expense, such assistance as Purchaser reasonably requests with respect to Purchaser's performance of the preceding sentence. Section 8.10. Current Report on Form 8-K. Seller will cooperate with Purchaser, at Seller's expense, in SunAmerica's preparation of a Current Report on Form 8-K prepared in connection with the transactions contemplated hereby; provided, however, that notwithstanding anything else contained in this Section 8.10, Purchaser shall bear any and all costs and expenses incurred by Seller's independent accountants in connection with their preparation of the GAAP financial statements of the Annuity Business. Purchaser shall use reasonable efforts to provide Seller and Seller's counsel with an opportunity to review references to Seller contained in such filing. ARTICLE 9 TERMINATION; SURVIVAL Section 9.1. Termination of Agreement. Notwithstanding anything contained herein to the contrary, this Agreement may be terminated: (a) at any time prior to the Closing, by mutual written consent of Seller and Purchaser; (b) by written notice by Purchaser to Seller if there has been a material breach by Seller of any of the representations, warranties, agreements or covenants of Seller set forth herein which is not subject to cure prior to the Closing, or a failure of any other condition not subject to cure prior to the Closing to which the obligations of Purchaser are subject; 71 78 (c) by written notice by Seller to Purchaser if there has been a material breach by Purchaser of any of the representations, warranties, agreements or covenants of Purchaser set forth herein which is not subject to cure prior to the Closing, or a failure of any other condition not subject to cure prior to the Closing to which the obligations of Seller are subject; (d) at any time after April 30, 1997 (the "Termination Date") and prior to the Closing, by Purchaser by written notice to Seller, if (A) the Closing shall not have been consummated on or before the Termination Date and (B) the failure to consummate the Closing on or before the Termination Date did not result from the failure by Purchaser to perform or comply with any covenant or agreement contained in this Agreement required to be performed or complied with prior to the Closing by Purchaser; (e) at any time after the Termination Date and prior to the Closing, by Seller by written notice to Purchaser, if (i) the Closing shall not have been consummated on or before the Termination Date and (ii) the failure to consummate the Closing on or before the Termination Date did not result from the failure by Seller to perform or comply with any covenant or agreement contained in this Agreement required to be performed or complied with prior to the Closing by Seller; or (f) subject to Section 8.2 hereof, by written notice to Purchaser or Seller to the other, at any time after a Governmental Entity having jurisdiction over Purchaser or Seller has notified such Party that it will not provide an approval, consent or Order necessary for the terminating Party to consummate the transactions contemplated by this Agreement or the 72 79 Ancillary Agreements and the Parties cannot subsequently procure such approval, consent or Order using their respective commercially reasonable efforts. Section 9.2. Effect of Termination. In the event that this Agreement shall be terminated pursuant to Section 9.1, all further obligations of the Parties under this Agreement shall terminate without further liability of either Party to the other; provided that the obligations of the Parties contained in Section 8.3 (Expenses), Article 11 (Confidentiality) and Article 12 (Miscellaneous) shall survive any such termination. A termination under Section 9.1 shall not relieve any Party of any liability for a breach of, or for any misrepresentation under, this Agreement, or be deemed to constitute a waiver of any available remedy (including specific performance if available) for any such breach or misrepresentation. ARTICLE 10 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION Section 10.1. Survival of Representations. (a) The representations and warranties of Purchaser set forth in Article 4 hereof shall survive the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby for a period of 21 months following the Closing Date; provided, however, that the representations contained in Sections 4.1 (Organization, Standing and Authority of Seller), and 4.2 (Authorization) shall survive until the expiration of all applicable statutes of limitations (including all periods of extension, whether automatic or permissive). (b) The representations and warranties of Seller set forth in Article 3 hereof shall survive the execution, delivery and performance of this Agreement and the consummation 73 80 of the transactions contemplated hereby for a period of 21 months following the Closing Date; provided, however, that the representations contained in Sections 3.1 (Organization, Standing and Authority of Seller), 3.2 (Authorization), 3.8 (Annuity Contracts) (paragraph (i) only) and 3.15 (Purchased Assets) shall survive until the expiration of all applicable statutes of limitations (including all periods of extension, whether automatic or permissive) and the representations and warranties contained in Section 3.22 (Mortgage Loans) (paragraph (g) only) will survive until the fifth anniversary of the Closing Date (c) No Action may be commenced by any Person with respect to any claim arising out of or relating to such warranties or representations after the expiration of the period for which such representations and warranties shall survive pursuant to this Section 10.1 (the "Applicable Survival Period"); provided, however, that, subject to this Article 10, any Person shall have the right to commence a suit, action or proceeding after the expiration of the Applicable Survival Period with respect to claims arising out of or relating to such representations and warranties which shall have been asserted by such Person under Section 10.4 hereof before the expiration of the Applicable Survival Period. Section 10.2. Indemnification by Purchaser. (a) Subject to Sections 10.1, the following provisions of this Section 10.2 and 10.4 hereof, Purchaser shall indemnify Seller and its Affiliates (collectively, the "Seller Group") for, and shall hold it harmless from, any and all damages, claims, suits, actions, causes of action, proceedings, investigations, losses, liabilities, assessments, judgments, deficiencies and expenses (including, without limitation, reasonable legal, accounting and other professional expenses) ("Liabilities") asserted against or incurred or sustained by the Seller Group relating 74 81 to, associated with or arising out of (i) any breach by Purchaser of any covenant or agreement contained in this Agreement applicable to Purchaser, (ii) any breach by Purchaser of any of the warranties or representations of Purchaser set forth in Article 4 of this Agreement, (iii) any of the Assumed Liabilities or (iv) the conduct of the Annuity Business by Purchaser or the ownership, leasing or use of the Purchased Assets by Purchaser during the period after the Closing; provided, however, that notwithstanding anything contained in this Section 10.2(a) to the contrary, Purchaser shall not be obligated hereunder to indemnify the Seller Group for, or to hold the Seller Group harmless from, any Liabilities under this Section 10.2(a) to the extent that Seller is obligated to indemnify Purchaser in respect of the same Liabilities pursuant to Section 10.3 hereof. (b) The Seller Group shall be entitled to indemnification under Section 10.2(a)(ii) hereof only when the aggregate amount of all Liabilities with respect to which the Seller Group would otherwise be entitled to indemnification under Section 10.2(a)(ii) hereof and Sections 9.2(a)(ii) and 9.2(b) under the JANY Stock Purchase Agreement exceed $1.5 million. In addition, as soon as practicable after such Liabilities exceed $1.5 million, Purchaser shall pay to Seller $750,000. In no event shall the amount payable by Purchaser and its Affiliates to the Seller Group pursuant to Section 10.2(a)(ii) hereof and Sections 9.2(a)(ii) and 9.2(b) of the JANY Stock Purchase Agreement exceed $240,000,000. (c) If any event shall occur or circumstance shall exist which would otherwise entitle the Seller Group to indemnification hereunder, Liabilities shall be deemed reduced to the extent of any proceeds (other than (i) proceeds from self-insurance and (ii) proceeds under experience-rated insurance policies the premiums for which would be increased by reason of the 75 82 filing of a claim thereunder with respect to such Liability) actually recovered, net of the cost of such recovery, by the Seller Group from any third party (including, without limitation, any insurance company) with respect thereto. In furtherance of the immediately preceding sentence, Seller agrees to, and to cause its Affiliates to, (i) in good faith, diligently seek recovery, at its or their own expense, all such proceeds from all third parties with respect to all Liabilities with respect to which it or they make or may make a claim for indemnification hereunder and (ii) keep Purchaser fully and promptly informed of all material matters related thereto. (d) To the extent that the undertakings set forth in Section 10.2(a) hereof may be unenforceable, Purchaser shall contribute the maximum amount that it is permitted to contribute under applicable Law to the payment and satisfaction of all Liabilities incurred by the Seller Group. Section 10.3. Indemnification by Seller. (a) Subject to Sections 10.1, the following provisions of this Section 10.3 and 10.4 hereof, Seller shall indemnify Purchaser and its Affiliates (collectively, the "Purchaser Group") for, and shall hold it harmless from, any and all Liabilities asserted against or incurred or sustained by Purchaser Group relating to, associated with or arising out of: (i) any breach by Seller of any covenant or agreement contained in this Agreement by Seller, (ii) any breach by Seller of any of the warranties or representations set forth in Article 3 of this Agreement (other than Section 3.22(g) hereof), (iii) any Excluded Liability or Extra Contractual Obligation or (iv) any Liability related to the Annuity Contracts or the Annuity Business, or the ownership, leasing or use of the Purchased Assets prior to the Closing Date, regardless of whether at the time of the Closing such Liabilities were (A) foreseen or unforeseen, (B) known or unknown, 76 83 (C) existing or arose in the future, (D) fixed or contingent, (E) matured or unmatured, (F) asserted before or after the Closing Date or (G) reflected in any of the Schedules attached hereto, other than Assumed Liabilities. (b) Subject to Section 10.1, the following provisions of this Section 10.3 and 10.4 hereof, Seller shall indemnify the Purchaser Group for, and shall hold it harmless from, (i) one-half of any and all Liabilities up to an aggregate of $3,000,000 (i.e., $1.5 million of the first $3.0 million)and (ii) any and all Liabilities in excess of $3,000,000 asserted against or incurred or sustained by the Purchaser Group relating to, associated with or arising out of any breach of the representations and warranties of Seller set forth in Section 3.22(g) hereof and Sections 2.32(g) and 2.18(b) of the JANY Stock Purchase Agreement (without giving effect to the knowledge and materiality qualifiers set forth therein). (c) The Purchaser Group shall be entitled to indemnification under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii) under the JANY Stock Purchase Agreement, only when the aggregate amount of all Liabilities with respect to which the Purchaser Group would otherwise be entitled to indemnification under Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii) under the JANY Stock Purchase Agreement exceed $1.5 million. In addition, as soon as practicable after such Liabilities exceeds $1.5 million, Seller shall pay to Purchaser $750,000. In no event shall the amount payable by Seller and its Affiliates to the Purchaser Group pursuant to Section 10.3(a)(ii) hereof and 9.3(a)(ii) and 9.3(a)(iii) under the JANY Stock Purchase Agreement exceeds $240,000,000. (d) If any event shall occur or circumstance shall exist which would otherwise entitle the Purchaser Group to indemnification hereunder, Liabilities shall be deemed reduced 77 84 to the extent of any proceeds (other than (i) proceeds from self-insurance and (ii) proceeds under experience-rated insurance policies the premiums for which would be increased by reason of the filing of a claim thereunder with respect to such Liability) actually recovered, net of the cost of such recovery, by the Purchaser Group from any third party (including, without limitation, any insurance company) with respect thereto. In furtherance of the immediately preceding sentence, Purchaser agrees to, and to cause its Affiliates to, (i) in good faith, diligently seek recovery, at its or their own expense, all such proceeds from all third parties with respect to all Liabilities with respect to which it or they make or may make a claim for indemnification hereunder and (ii) keep Seller fully and promptly informed of all material matters related thereto. (e) To the extent that the undertakings set forth in Section 10.3(a) hereof may be unenforceable, Seller shall contribute the maximum amount that it is permitted to contribute under applicable Law to the payment and satisfaction of all Liabilities incurred by the Purchaser Group. Section 10.4. Indemnification Procedure. (a) Within a reasonable time after obtaining knowledge thereof, a Person who may be entitled to indemnification hereunder (the "Indemnitee") shall promptly give the Party who may be obligated to provide such indemnification (the "Indemnitor") written notice of any Liability which the Indemnitee has determined has given or could give rise to a claim for indemnification hereunder (a "Notice of Claim"); provided, however, no failure or delay in giving any such Notice of Claim shall relieve the Indemnitor of its obligations except, and only to the extent, that it is prejudiced thereby. A Notice of Claim shall specify in reasonable detail the nature and all known particulars related to a Liability. The Indemnitor shall perform its 78 85 indemnification obligations in respect of a Liability described in a Notice of Claim under Sections 10.2 or 10.3 hereof, as the case may be, within 30 days after the Indemnitor shall have received such Notice of Claim. (b) The Indemnitor shall inform the Indemnitee promptly after the Indemnitor has made a good faith determination, based on the facts alleged in such Notice of Claim or which have otherwise become known to the Indemnitor, either that the Indemnitor acknowledges that it has an indemnification obligation hereunder in respect of such Liability or that the Indemnitor has made a good faith determination that it has no indemnification obligation hereunder in respect of such Liability. If the Indemnitor fails to perform its obligations under this Section 10.4, or if the Indemnitor shall have informed the Indemnitee in writing in that the Indemnitor does not have an indemnification obligation hereunder in respect of such Liability, then the Indemnitee shall have the right, but not the obligation, to take the actions which the Indemnitor would have had the right to take in connection with the performance of such obligations and, if the Indemnitee is entitled to indemnification hereunder in respect of the event or circumstance as to which the Indemnitee takes such actions, then the Indemnitor shall, in addition to indemnifying Indemnitee for the Liability, indemnify the Indemnitee for all of the legal, accounting and other costs, fees and expenses reasonably and actually incurred in connection therewith. (c) The Indemnitor shall have the right and obligation, in good faith and at its own cost and expense, to cure, remediate, mitigate, remedy or otherwise handle any event or circumstance which gives rise to a Liability in respect of which a Notice of Claim has been given (including events and circumstances which can be cured, remediated, mitigated or 79 86 remedied through the expenditure of money and events and circumstances which give rise to a Liability which can be measured in terms of money), regardless of the nature of such Liability. Such right and obligation shall include, without limitation, (i) the right to investigate any such event or circumstance, and (ii) the right to defend, contest or otherwise oppose any third party claim, demand, suit, action or proceeding related to such event or circumstance with legal counsel selected by it. The exercise of such right and performance of such obligation shall not constitute an admission or agreement by Indemnitor that it has an indemnification obligation hereunder in respect of such Liability. If the Indemnitor proposes to settle or compromise any such third party action, demand, claim, suit or proceeding, the Indemnitor shall give written notice to that effect (together with a statement in reasonable detail of the terms and conditions of such settlement or compromise) to the Indemnitee a reasonable time prior to effecting such settlement or compromise. (d) The Indemnitee shall have the right, but not the obligation, to participate, at its own cost and expense, in the defense, contest or other opposition of any such third party claim, demand, suit, action or proceeding through legal counsel selected by it and shall have the right, but not the obligation, to assert any and all cross-claims or counterclaims which it may have. So long as the Indemnitor is in good faith performing its obligations under this Section 10.4, the Indemnitee shall (i) at Indemnitor's cost and expense, cooperate in all reasonable ways with, make its and its Affiliates' relevant files and records available for inspection and copying by, make its and its Affiliates' employees reasonably available to and otherwise render reasonable assistance to the Indemnitor upon request and (ii) not compromise or settle any such claim, demand, suit, action or proceeding without the prior written consent of the Indemnitor. 80 87 The Indemnitee shall have the right (i) to object to the settlement or compromise of any such third party action, demand, claim, suit or proceeding whereupon if such settlement is solely a cash settlement (A) the Indemnitee will assume the defense, contest or other opposition of any such third party action, demand, claim, suit or proceeding for its own account and as if it were the Indemnitor and (B) the Indemnitor shall be released from any and all liability with respect to any such third party action, demand, claim, suit or proceeding to the extent that such liability exceeds the liability which the Indemnitor would have had in respect of such a settlement or compromise, or (ii) to assume, at any time by giving written notice to that effect to the Indemnitor, the cure, mitigation, remediation, remedy or other handling of such event or circumstance and the defense, contest or other opposition of any such third party action, demand, claim, suit or proceeding for its own account whereupon the Indemnitor shall be released from any and all liability with respect to such event or circumstance and such third party action, demand, claim, suit or proceeding. (e) After the Closing, each Party shall take all commercially reasonable actions which may be necessary to enable the other Party to exercise its rights and perform its obligations under this Section 10.4. (f) Notwithstanding anything contained herein to the contrary, each Party shall use, and shall cause its Affiliates to use, commercially reasonable efforts to mitigate any and all damages, losses, liabilities, costs and expenses in respect of which it may be entitled to indemnification hereunder. 81 88 ARTICLE 11 PUBLICITY AND CONFIDENTIALITY Section 11.1. Publicity. Neither Party, shall or shall permit its Affiliates to, issue any publicity, release or announcement concerning the execution and delivery of this Agreement, the provisions hereof or the transactions contemplated hereby without the prior written approval of the form and content of such publicity, release or announcement by the other; provided, however, that no such approval shall be required when such publicity, release or announcement is required by (i) applicable Law, (ii) applicable rules or regulations of, or any listing agreement with, a national or foreign stock exchange or the Automated Quotation System maintained by the National Association of Securities Dealers, Inc. or (iii) any Order of any court, arbitrator or Governmental Entity of competent jurisdiction; and, provided further, that, prior to issuing any publicity, release or announcement without such prior written approval, the Party issuing or whose Affiliate is issuing such publicity, release or announcement shall have given reasonable prior notice to the other Party of such intended issuance and, if requested by the other Party, shall have used reasonable efforts at such other Party's cost and expense to obtain a protective order or similar protection for the benefit of the other Party. In addition, with the prior written consent of the Parties, not to be unreasonably withheld, CS First Boston and Goldman Sachs & Company each may cause to be published such tombstone advertisements with respect to the transactions contemplated by this Agreement as it shall deem appropriate. Nothing contained herein shall prevent the communication of information with any Governmental Entity or any agency or other organization which rates the financial solvency or claims-paying ability of Seller or Purchaser, including without limitation, A.M. Best Company, Inc., Duff & Phelps, Standard 82 89 & Poor's Corporation and Moody's Investors Services, Inc. or state insurance departments or other regulatory bodies. Section 11.2. Confidentiality. (a) All data, reports, records and other information of any kind received by a Party or its Affiliates or Representatives (such Party being hereinafter referred to as the "Receiving Party") from the other Party or its Affiliates or Representatives (such other Party being hereinafter referred to as the "Delivering Party") under this Agreement or in connection with the transactions contemplated hereby shall be treated as confidential (collectively, "Confidential Information"). Except as otherwise provided herein, the Receiving Party shall not use (and shall not permit its Affiliates or Representatives to use) Confidential Information for its own (or their own) benefit and shall use commercially reasonable efforts (and shall cause its Affiliates, directors, officers and employees to use commercially reasonable efforts) to maintain the confidentiality of Confidential Information. If the Receiving Party or any of its Affiliates or Representatives is required to disclose Confidential Information by or to any court, arbitrator or Governmental Entity of competent jurisdiction, the Receiving Party shall, prior to such disclosure, promptly notify the Delivering Party of such requirement and all particulars related to such requirement. The Delivering Party shall have the right, at its own cost and expense, to object to such disclosure and to seek confidential treatment of any Confidential Information to be so disclosed on such terms as it shall determine. (b) The restrictions set forth in Section 11.2(a) hereof shall not apply to the use or disclosure of Confidential Information to the extent, but only to the extent, (i) permitted or required pursuant to any other agreement between or among the Parties or their respective 83 90 Affiliates or Representatives, (ii) necessary by a Party or its Affiliates in connection with exercising its or their rights or performing its or their duties or obligations under this Agreement, the Ancillary Agreements or the other agreements described in clause (i) of this sentence, (iii) contemplated by the last two sentences of Section 11.2(a) hereof or (iv) that the Receiving Party can demonstrate such Confidential Information (A) is or becomes generally available to the public through no fault or neglect of the Receiving Party, (B) is received in good faith on a non-confidential basis from a third party who discloses such Confidential Information without violating any obligations of secrecy or confidentiality, (C) is independently developed after the time of receipt as shown by dated written records or (D) was already possessed at the time of receipt as shown by prior dated written records. (c) For the purposes of this Section 11.2, (i) information which is specific shall not be deemed to be within an exception set forth in Section 11.2(b) hereof merely because it is embraced by general information which is within such an exception and (ii) a combination of information shall not be deemed to be within an exception set forth in Section 11.2(b) hereof merely because individual aspects of such combination are within such an exception unless the combination of information itself, its principle of operation and its value or advantages are within such an exception. ARTICLE 12 MISCELLANEOUS Section 12.1. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), sent 84 91 by certified, registered or express mail, postage prepaid and return receipt requested, or transmitted by facsimile (with a copy of such notice or other communication and a confirmation of transmission sent by certified, registered or express mail, postage prepaid and return receipt requested no later than the close of business on the next business day following such transmission) and shall be addressed as follows: when Purchaser is to be notified: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Attention: General Counsel Facsimile No.: (310) 772-6574 with a copy to: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Attention: Controller Facsimile No.: (310) 772-6684 and O'Melveny & Myers 1999 Avenue of the Stars Suite 700 Los Angeles, California 90067 Attention: Robert D. Haymer, Esq. Facsimile No.: (310) 246-6779 when Seller is to be notified: John Alden Life Insurance Company 7300 Corporate Center Drive Miami, Florida 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 85 92 With copies to: John Alden Financial Corporation 7300 Corporate Center Drive Miami, Florida 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1497 Kelley Drye & Warren LLP Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901 Attention: Jay R. Schifferli, Esq. Facsimile No.: (203) 327-2669 A Party may, by notice given in accordance with this Section 12.1 to the other Party, designate another address or Person to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 12.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and subject to delivery of the mailed copy thereof) or the affidavit of the messenger (if transmitted by personal delivery) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. Section 12.2. Entire Agreement. This Agreement (including the Ancillary Agreements, the other agreements contemplated hereby and thereby, the JANY Stock Purchase Agreement, the Annex, the Exhibits and the Schedules attached hereto (the "Transaction Agreements")) contains the entire agreement and understanding between the Parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous agreements, representations, warranties and understandings, whether written or oral, by or between the 86 93 Parties with respect to the subject matter hereof. Except for the representations and warranties expressly set forth in the Transaction Agreements, Purchaser disclaims reliance upon (i) any representations, warranties or guarantees (whether express or implied and whether oral or written) by Seller, JANY or any of their Affiliates or any of their respective Affiliates' Representatives (including, without limitation, any projections of future sales, revenues, expenses or earnings and any statements regarding the prospects of the Annuity Business as presently conducted by Seller) or (ii) any other information with respect to the Annuity Business, the Purchased Assets, Seller, JANY or their industry provided by or on behalf of them. Nothing contained in any document or instrument of conveyance, transfer, assignment or delivery executed or delivered at the Closing pursuant to this Agreement shall amend, extend, modify, renew or alter in any manner any representation, warranty, covenant, agreement or indemnity contained herein. Nothing contained in the Transaction Agreements or in any of the Schedules hereto or thereto or in any of the other agreement contemplated hereby or thereby shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates of liability to third parties, whether under Laws or otherwise, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any Law. Section 12.3. Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of or approval under, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment or approval is set forth in a written instrument which states that it adds to, amends, cancels, renews or extends this Agreement or grants an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. 87 94 Section 12.4. Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or impair, limit or restrict the exercise of part of any Party of any such right, power or remedy any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. Section 12.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Each Party consents and submits to the non-exclusive personal jurisdiction of any federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 12.10 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. 88 95 Section 12.6. Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Seller nor Purchaser shall assign any of its rights or delegate any of its duties hereunder, (in whole or in part and by operation of law or otherwise) without the prior written consent of the other Party hereto, except that Purchaser may assign its rights and obligations under this Agreement to any of its Affiliates provided Purchaser shall remain liable for its obligations hereunder notwithstanding such assignment. Any assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such consent is required hereby, shall be void. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. Section 12.7. Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other 89 96 circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. Section 12.8. Headings. The headings in this Agreement have been inserted for convenience of reference only, and shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. Section 12.9. Counterparts. This Agreement may be executed by the parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. Section 12.10. Arbitration. The Parties acknowledge and agree that the transactions contemplated herein substantially affect and impact interstate commerce. Therefore, all disputes or differences between Seller and Purchaser arising under or which are related to this Agreement (other than proceedings for the sole purpose of injunctive relief) upon which an amicable understanding cannot be reached within 30 days shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court having jurisdiction thereof. The Arbitrators provided for herein shall 90 97 construe this Agreement in light of the prevailing custom and practices for acquisition transactions of a similar nature. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held at a site selected by the Arbitrators. The Parties agree to arbitrate within 90 days following the transmittal of written demand of either Party to arbitrate any dispute arbitrable under this Agreement. The Parties will in good faith, within 15 days following notice of written demand to arbitrate attempt to agree on a single Arbitrator. If the Parties cannot within 15 days thereafter agree on a single arbitrator, each of the Parties shall appoint an Arbitrator, notifying the other Party of the name and address of such Arbitrator. The Arbitrators appointed by each Party shall agree upon and appoint a third neutral Arbitrator. If either Party shall fail to appoint an Arbitrator as herein provided, or should the two Arbitrators so named fail to select the third Arbitrator within 30 days after their appointment, then, in either event, the President of the American Arbitration Association or its successor shall appoint such second and/or third Arbitrator. A decision of a majority of the Arbitrators shall be final and binding and there shall be no appeal therefrom. The Arbitrators shall within 45 days after the final hearing enter an award and the award shall be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Parties; all other costs of the respective Parties, including without limitation fees and expenses of the respective Party's attorneys, witnesses, and discovery shall be paid by the respective Party, except to the extent that the Arbitrators otherwise direct based on the equities of the situation. The arbitration shall be held in New York, New York, unless otherwise agreed between the Parties. 91 98 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. SUNAMERICA LIFE INSURANCE COMPANY By: /s/ Jay S. Wintraub -------------------------------- Name: Jay S. Wintraub Title: Executive Vice President JOHN ALDEN LIFE INSURANCE COMPANY By: /s/ Glendon E. Johnson -------------------------------- Name: Glendon E. Johnson Title: Chief Executive Officer 92 99 ANNEX A The following terms are defined in the following Sections.
DEFINED TERM SECTION - ------------ ------- Administrative Services Agreement 1.5 Agreement Introduction Ancillary Agreements 1.5 Annuity Business Introduction Antitrust Division 5.4 Applicable Survival Period 10.1 Assigned Contracts 1.2 Assignment and Assumption Agreement 1.5 Assumed Liabilities 2.1 Assumption Reinsurance Agreement 1.5 Bill of Sale 1.5 Books and Records 1.2 Capital Loss 1.3 Capital Gain 1.3 Ceding Commission 1.3 Closing Date Adjustments 1.3 Closing Date Ceding Commission 1.3 Closing 1.1 Closing Date 1.1 Code 3.8 Competing Business 8.7 Confidential Information 11.2(a) Continuing Employees 8.4 Delivering Party 11.2(a) Dividend Declaration Date 8.8 Estimated Closing Date Statement 1.3 Excluded Transactions 1.3 Final Closing Adjustments 1.7 Final Closing Date Statement 1.7 FTC 5.4 Houston 8.7 HSR Act 3.5 Indemnitee 10.4(a) Indemnitor 10.4(a) Indemnity Reinsurance Agreement 1.5 Independent Party 1.7 Interim John Alden Financial Statements 3.25
1 100 Interim SunAmerica Financial Statements 4.7 JANY Stock Purchase Agreement Introduction JANY Stock Introduction JANY Introduction John Alden 3.25 Liabilities 10.2(a) License Agreement 1.5 Liens 3.4 Net Cash Flows 1.3(c)(i) NOLHGA 2.2 Notice of Claim 10.4(a) Oxford Agreement 5.11 Oxford Annuity Contracts 5.11 Oxford Put 5.11 Parties Introduction Party Introduction Permits 3.4 Permitted Mortgage Liens 3.22 Policy Loans 1.2 Portfolio Securities 1.2 Purchased Assets 1.2 Purchaser Introduction Purchaser Financial Statements 4.7 Purchaser Group 10.3(a) Purchaser's Opinion 1.5 Receiving Party 11.2(a) Reinsurance Premium 1.2 Rejected Mortgage 1.2 Reserve Liabilities 3.17 Restricted Period 8.7 Seller Introduction Seller Group 10.2(a) Seller's Opinion 1.5 SunAmerica 4.7 SunAmerica Financial Statements 4.7 Termination Date 9.1 Third Party Administration Agreements 3.25 Transition Services Agreement 1.5 Transaction Agreements 12.2 Trust Agreement 1.5 Trustee 1.5
2 101 "Accrued and Unpaid Investment Income" means the aggregate accrued but unpaid interest through and including the Closing Date on bonds, mortgages and other interest bearing instruments included in the Closing Date Portfolio Securities plus accrued but unpaid interest through and including the Closing Date on any and all Policy Loans related to the Policy Loan Balance plus declared but unpaid dividends on Preferred Stock. "Action" means any action, claim, complaint, cause of action, arbitration, petition, investigation, suit or administrative or other proceeding, whether civil or criminal, at law or in equity, before any court, arbitrator or Governmental Entity. "Adjusted Capital and Surplus of JANY" means, as of the Closing Date, capital and surplus plus asset valuation reserves of JANY as shown on lines 38, 11.4 and 24.1 of page 3 of the 1995 Annual Statement of JANY, calculated as of the Closing Date in a manner consistent with such calculation at year end. "Affiliate" shall mean any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Person specified. For purposes of this definition, "control" (and its derivative terms "controlled," "controls," etc.) shall mean the power and right to direct the management and policies of another Person, whether by ownership of voting securities, the ability to elect a majority of the board of directors or other managing board or committee, management contract, or otherwise. "Annuity Contracts" means all policies described on Schedule 3.8(a) attached hereto. Annuity Contracts as used in this Agreement is intended to refer to all single premium deferred annuity policies, flexible premium deferred annuity policies, single premium immediate annuity policies, supplementary contracts and guaranteed investment contracts included in the Annuity Business which are in-force as of the Closing Ledger Date, as well as any riders providing for other supplemental benefits, and all supplements, endorsements, riders and ancillary agreements in connection therewith and specifically includes without limitation (i) all lapsed Annuity Contracts that are reinstated and (ii) any supplemental benefits arising out of the Annuity Contracts. Notwithstanding anything to the contrary in this Agreement, "Annuity Contracts" shall not include (i) any policy for which the reserves or applicable premiums are not actually transferred to Purchaser, (ii) any policy not described in Schedule 3.8(b) attached hereto, (iii) Annuity Contracts issued on or prior to April 1, 1978, (iv) single premium immediate annuities and supplementary contracts involving life contingencies, (v) universal life flexible premium deferred annuity riders, (vi) annuity policies assumed by Seller from Aristar Life Insurance Company and (vii) if the Oxford Put is implemented pursuant to Section 5.10 hereof, the Oxford Annuity Contracts. For purposes of the representations and warranties of Seller set forth in Article 3 hereof, the term "Annuity Contracts" shall be deemed to include policies described on Schedule 3.8(a) attached hereto sold after the Closing Ledger Date and on or prior to the Closing Date or which terminated after the Closing Ledger Date and on or prior to the Closing Date. "Book Value" means book value computed in accordance with SAP, without marking to market and without including Accrued and Unpaid Investment Income. 3 102 "Business Day" means any day on which banks and other financial institutions are not required to be closed pursuant to applicable Laws in any of New York, New York, Los Angeles, California and Miami, Florida. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act. "Closing Date Portfolio Securities" means the cash, securities, mortgage loans and other assets of Seller identified on Schedule 1.2(a)(i) attached hereto (which Schedule also sets forth the Book Value of each such asset as of October 21, 1996) (the "October 21 Portfolio Securities"), (i) less the Rejected Mortgages, (ii) less any such assets which have been sold before the Closing Date with the approval of Purchaser in accordance with Section 5.1(c)(i) hereof, (iii) less any October 21 Portfolio Securities that have matured or been redeemed in accordance with their terms between October 21, 1996 and the Closing Date. "Closing Ledger Date" means the 21st day of the month in which the Closing occurs or, if such day is not a Business Day, on the next preceding Business Day. "Combined Reserve Liabilities" means the Reserve Liabilities for Annuity Contracts plus all reserves with respect to JANY's Insurance Contracts (as defined in the JANY Stock Purchase Agreement), in the aggregate. "Commercially reasonable efforts" when used with respect to any Party, means the reasonable efforts of such Party without the requirement that such Party incur any extraordinary out-of-pocket expenses, incur any other unanticipated burden or commence or pursue any action, suit or proceeding. "Environmental Laws" means any Law pertaining to health, industrial hygiene or the environmental condition on or under any property including, without limitation, CERCLA and the Toxic Substance Control Act, and the rules and regulations thereunder. "Excluded Liabilities" means (i) all liability for premium taxes arising on account of premiums paid on or prior to the Closing Ledger Date with respect to the Annuity Contracts, (ii) all liability for commission payments and other fees or compensation payable with respect to the Annuity Contracts to or for the benefit of brokers and agents and other distribution sources, to the extent that such amounts are based on premiums paid on or prior to the Closing Ledger Date, (iii) trailer commissions (which are based upon account values) accruable on or prior to the Closing Ledger Date and (iv) all Guaranty Fund Assessments imposed as a result of a conservatorship or other insolvency proceeding commenced on or prior to the Closing Date with respect to the Annuity Contracts. "Excluded Transactions" means with respect to the June 21 Portfolio Securities the sale or assignment of such Portfolio Securities which resulted in (i) $1,174,000 of capital losses on bonds, (ii) $1,072,000 in capital gains on bonds, (iii) $3,107,000 of losses due to mortgage write 4 103 downs and sales, and (iv) $161,000 of gains on mortgage prepayments, as set forth on the Schedule attached hereto entitled "Excluded Transactions." "Execution Date" means the date of this Agreement. "Extra Contractual Obligations" means all liabilities (i) for compensatory, consequential, exemplary, punitive or similar damages which directly relate to any alleged or actual act, error, omission, fraud or misrepresentation by Seller, any of its Affiliates or any of its or its Affiliates' officers or employees, whether intentional or otherwise, prior to the Closing Date, or (ii) from any actual or alleged reckless conduct or bad faith by Seller, any of its Affiliates or any of its or its Affiliates' officers or employees in connection with Seller's handling of any claim under any of the Annuity Contracts or in connection with the issuance, offer, sale, delivery, cancellation or administration by Seller or any of its Affiliates or any of its or its Affiliates' officers or employees of any of the Annuity Contracts or (iii) in connection with any acceleration of the benefits under the Annuity Contracts or any claims for the present value of the Annuity Contracts, in either case, in connection with rehabilitation, liquidation, receivership or other similar proceedings filed against Seller. "Final Closing Net Assets" means the sum of (i) the Book Value of the Closing Date Portfolio Securities as of the Closing Date as set forth on the Final Closing Date Statement, (ii) any cash deposited in the Trust pursuant to Section 1.2(c) hereof and (iii) the Policy Loan Balance as set forth on the Final Closing Date Statement, which sum will be (x) increased by any amount paid by Seller pursuant to Section 1.3(d)(i) hereof or (y) decreased by the amount paid by Purchaser pursuant to Section 1.3(d)(ii) hereof. "GAAP" shall mean United States generally accepted accounting principles as in effect from time to time, consistently applied throughout the specified period and in the immediately prior comparable period. "Governmental Entity" means any agency, administrative division or department (or administrative subdivision), commission, regulatory authority (including without limitation any insurance regulatory authority), taxing or administrative authority, court or other judicial body, legislature of the government of the United States or any state, city, municipality, county, town, district or other political subdivision thereof or any state, city, municipality, county, town, district or other political subdivision thereof or any quasi-governmental entity, including, without limitation, the employees or agents thereof. "Hazardous Substance" means (i) any and all substances defined as "hazardous substances," "extremely hazardous substances," "toxic substances," "hazardous waste," "hazardous materials" or "infectious waste" for purposes of CERCLA or any other Environmental Law and (ii) any petroleum or petroleum-based products. "Insurance Liabilities" means only the contractual liabilities and obligations of Seller arising under the Annuity Contracts, as evidenced by the written policy forms and riders, and 5 104 no other liabilities whatsoever. Without limiting the foregoing, Insurance Liabilities shall not include Excluded Liabilities or any Extra Contractual Obligations. "June 21 Portfolio Securities" means the cash, securities, mortgage loans and other assets identified on Schedule 1.2(a)(i) as of June 21, 1996. "Laws" means any and all federal, state or local statutes, laws, ordinances, rules and regulations. "Loan Documents" means the Mortgage Note, the Mortgage and any and all other agreements, certificates, documents or instruments in Seller's possession or under its control relating to the origination, closing and modification of a Mortgage Loan, including without limitation any related assignment of rents, security agreement, UCC financing statement, guaranty, letter of credit, pledge agreement, loan agreement or other instrument creating a security interest in, and Lien upon, real and/or personal property. "Market Value" means (i) with respect to any publicly traded security, the last reported sales price on the business day immediately preceding the date on which such valuation is being made, (ii) with respect to other (private) securities, the value estimated using publicly quoted market prices for similar securities, as identified by Seller, increased by 30 basis points and (iii) with respect to mortgages, the GAAP book value per Seller's financial statements. "Material Adverse Effect" means any change, effect, event or occurrence that has, or is reasonably likely to have, individually or in the aggregate, a material adverse impact on (i) the assets, business, financial position or results of operations of the Annuity Business, the Annuity Contracts or the Purchased Assets or (ii) the ability of Seller to consummate the transactions contemplated by this Agreement and the Ancillary Agreements; provided that "Material Adverse Effect" shall be deemed to exclude the impact of (i) changes in Laws, or interpretations thereof by any Governmental Entity, relating to or affecting the Annuity Business and (ii) changes in GAAP or SAP. "Material Adverse Effect on Purchaser" means any change, effect, event or occurrence that has, or is reasonably likely to have, individually or in the aggregate, a material adverse impact on (i) the business, financial position or results of operations of Purchaser (either before or after the Closing and the closing under the JANY Stock Purchase Agreement) or (ii) the ability of Purchaser to consummate the transactions contemplated by this Agreement and the Ancillary Agreements; provided that "Material Adverse Effect on Purchaser" shall be deemed to exclude the impact of (i) changes in Laws or interpretations thereof by any Governmental Entity relating to or affecting the business of Purchaser and (ii) changes in GAAP or SAP. "Mortgage" means the mortgage, deed of trust or other instrument (and all modifications thereto) creating a lien on real property described therein or on the tenant's interest under a ground lease of real property described therein, in either case securing a Mortgage Note. 6 105 "Mortgage Loan" means any individual mortgage loan that is identified on the Mortgage Loan Schedule. "Mortgage Loan Principal Balance" means, with respect to any Mortgage Loan, the unpaid principal balance as of the date specified in the Mortgage Loan Schedule. "Mortgage Loan Schedule" means the list of Mortgage Loans subject to this Agreement and identified on Schedule 3.22(a) attached hereto, which schedule sets forth the following information with respect to each Mortgage Loan as of the date specified therein. (i) the Mortgage Loan numbers; (ii) the name of the mortgagor and the name or address of the Mortgaged Property; (iii) the Mortgage Loan Principal Balance; (iv) lien priority of the Mortgage; (v) the maturity date; and (vi) the current interest rate. (vii) the Mortgage Loan Status (current, litigation, bankruptcy, tax plans, etc.). "Mortgage Note" means the note or other evidence of the indebtedness under a Mortgage Loan. "Mortgaged Property" means the land and improvements that secure a Mortgage, which in the case of a leasehold mortgage shall mean the tenant's interest in the real property underlying the ground lease or, where the context so requires, the real property underlying the ground lease. "Order" means any decree, injunction, judgment, order, ruling, assessment or writ. "Other Liabilities" means (i) all liability for premium taxes arising on account of premiums paid to Purchaser with respect to the Annuity Contracts after the Closing Ledger Date, (ii) all liability for commission payments and other fees or compensation payable with respect to the Annuity Contracts to or for the benefit of brokers and agents and other distribution sources, to the extent that such amounts are based on premiums paid to Purchaser after the Closing Ledger Date, (iii) trailer commissions (which are based upon account values) accruable after the Closing Ledger Date and (iv) all Guaranty Fund Assessments imposed as a result of 7 106 conservatorship or other insolvency proceedings commenced subsequent to the Closing Date with respect to the Annuity Contracts. "Person" shall mean any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, trust, union, association, court, tribunal, agency, government, department, commission, self-regulatory organization, arbitrator, board, bureau, instrumentality, or other entity, enterprise, authority, or business organization. "Policyholders" means, as applicable, the beneficiaries under, or policyholders with respect to, or owners of, the Annuity Contracts, or any other Person entitled to payment with respect to the Annuity Contracts. "Policy Loan Balance" means the aggregate outstanding principal amount of all Policy Loans as of a date of calculation (other than the Policy Loans associated with the Oxford Annuity Contracts in the event the Oxford Put is implemented). "Qualified Investments" means (A) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States; (B) demand deposits with (1) any commercial bank that is a member of the Federal Reserve System, the parent of which issues commercial paper rated at least "P-1" (or the then equivalent grade) by Moody's and "A-1" (or the then equivalent grade) by S&P, is organized under the Laws of the United States or any State thereof and is rated "TBW-1" or the equivalent or better by Thomson BankWatch or any other nationally recognized agency or, (2) a United States branch or agency of any commercial bank organized under the Laws of any Organization for Economic Cooperation and Development member country (as of the Execution Date of this Agreement) which is rated "TBW-1" or the equivalent or better by Thomson BankWatch or other internationally recognized agency; (C) commercial paper issued by any corporation rated at least P-1 or the then equivalent grade by Moody's and A-1 or the then equivalent grade by S&P; (D) money market mutual funds (i) whose portfolio is comprised solely of (1) marketable direct obligations of the United States government or its agencies, and/or (2) bank or corporate obligations which individually meet the rating criteria stipulated in (B) or (C) above, (ii) whose total net assets exceed $1 billion and (iii) where the Seller's investment in such fund is limited to an amount not exceeding 10% of such fund's assets; or (E) such other assets as the Party receiving such Qualified Investments may expressly approve in writing. "Related Agreements" means the agreements providing for the payment of commissions relating to the Annuity Contracts. "Representatives" means, with respect to any Person, such person's Affiliates, subsidiaries, shareholders, directors, partners, joint ventures, officers, employees, agents, representatives, producers, independent contractors, consultants, lenders, brokers, finders, investment bankers, financial advisors, attorneys and accountants. Seller's Representatives 8 107 include without limitation CS First Boston. Purchaser's Representatives include without limitation Goldman Sachs & Company. "Service Transfer Date" means the date which is nine months from the Closing Date, unless an earlier date is agreed to in writing by Seller and Purchaser. "SAP" means the statutory accounting principals and practices, as in effect from time to time, required or permitted for life insurance companies by applicable Laws of the National Association of Insurance Commissioners and the insurance regulatory authority in the state in which the company in question is domiciled, consistently applied throughout the specified period and in the immediately prior comparable period. "Taxes" shall mean all taxes, charges, fees, levies, or other similar assessments, including, without limitation, income, gross receipts, ad valorem, premium, excise, real property, personal property, windfall profit, sales, use, transfer, licensing, withholding, employment, payroll, and franchise taxes imposed by any Governmental Entity; and such term shall include any interest (through the date of payment), penalties, assessments, or additions to tax resulting from, attributable to, or incurred in connection with any such tax or any contest or dispute thereof. "Tax Returns" shall mean returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax Return required to be supplied to a taxing authority in respect of or relating to Taxes. 9 108 EXHIBIT K Loan Documentation With respect to each Mortgage Loan, Seller has in its possession each of the following items: 1. A summary of the terms of the Loan as presented to and approved by Seller's loan committee. 2. An original promissory note (or a certified copy thereof) executed by the borrower or its agent endorsed in favor of Seller showing the Participant's respective interests therein. 3. An original recorded deed of trust or mortgage executed by the borrower or its agent with applicable exhibits and riders. 4. An original policy of lender's title insurance and applicable endorsements. 5. Evidence of the current Hazard Insurance Policy. 6. Evidence of current Flood Insurance, if applicable. 7. An original commitment letter to borrower, if available. 8. A certificate of occupancy, if available. 9. Credit report(s) with respect to the borrower prepared by Seller or at Seller's request, if available. 10. Financial statements of the borrower current as of the date of the Mortgage Loan application, executed by the borrower disclosing the ability to repay the Mortgage Loan if applicable, and any updates thereof. 11. Franchise agreements, if applicable. 12. Partnership agreements, if applicable. 13. Current rent rolls if available in Seller's files. 14. An appraisal prepared for Seller executed prior to the approval of the Mortgage Loan application by persons duly appointed and qualified as appraisers by Seller's board of directors which appraisal discloses the market value of the Mortgaged Property, containing sufficient information regarding the Mortgaged Property to substantiate the appraisal. 15. Any and all documentation evidencing release of any part of the pledged collateral, showing portion released, the consideration paid and the approval obtained. 109 Exhibit L Marketing Agreement Terms The Marketing Agreement will contain, among other things, the following terms and such other terms and conditions as may be mutually acceptable to the Parties: a. John Alden shall market the following investment products of SunAmerica and its Affiliates: - SunAmerica's market value adjusted products - S&P Index Annuity - at least four current John Alden products selected by John Alden that SunAmerica will refile and sell under its own name. b. John Alden shall continue (through the date of termination of the Transition Services Agreement) to make John Alden products available to their marketing organization. Any product sales after closing of these products will be reinsured through SunAmerica. c. The terms and conditions of the agreement between John Alden and SunAmerica shall be no less favorable to SunAmerica than the terms and conditions of the agreement between John Alden and North Star Marketing relating to annuity products and between any other firms that market their annuity products through NorthStar. d. John Alden and NorthStar will position the SunAmerica products it is marketing in a position no less prominent than other products it markets. e. The agreements shall have a three year term with customary termination provisions. Except with respect to the agreement to negotiate in good faith towards a marketing agreement, this Exhibit N is not intended to, and does not, constitute a complete statement of, or a legally binding or enforceable agreement or commitment on the part of Seller or Purchaser with respect to, the matters described herein and Seller and Purchaser agree not to assert any argument to the contrary. A marketing agreement will arise only as a result of the negotiation, execution and delivery of formal written agreements containing terms and conditions satisfactory to the Parties. EX-10.3 4 INDEMNITY REINSURANCE AGREEMENT DATED 3/31/97 1 Execution Copy INDEMNITY REINSURANCE AGREEMENT By and Between JOHN ALDEN LIFE INSURANCE COMPANY and SUNAMERICA LIFE INSURANCE COMPANY Dated as of March 31, 1997 2 TABLE OF CONTENTS
Page ARTICLE 1 - REINSURANCE COVERAGE....................................................................... 4 Section 1.1. Annuity Contracts........................................................ 4 Section 1.2. Additional Policies...................................................... 4 Section 1.3. Coverage................................................................. 5 Section 1.4. Effectiveness............................................................ 5 Section 1.5. Duration................................................................. 5 ARTICLE 2 - PAYMENTS BY REINSURED...................................................................... 6 Section 2.1. Initial Reinsurance Premium.............................................. 6 Section 2.2. Reinsurance Premiums..................................................... 6 Section 2.3. Policy Loan Payments..................................................... 6 ARTICLE 3 - PAYMENTS BY REINSURER...................................................................... 7 Section 3.1. Initial Policy Expense Allowance and Other Payments....................................................... 7 Section 3.2. Policy and Administrative Services....................................... 7 Section 3.3. Benefits and Other Payments.............................................. 8 Section 3.4. Premium Taxes............................................................ 8 ARTICLE 4 - SETTLEMENT AND OFFSET...................................................................... 9 Section 4.1. Settlement............................................................... 9 Section 4.2. Offset................................................................... 9 ARTICLE 5 - TERMS OF REINSURANCE....................................................................... 10 Section 5.1. Administration of Policies............................................... 10 Section 5.2. Reports.................................................................. 10 Section 5.3. Tax Treatment............................................................ 11 Section 5.4. DAC Tax Reimbursement.................................................... 11 Section 5.5. Reserves................................................................. 13 Section 5.6. Crediting Rates.......................................................... 14 Section 5.7. Third Party Reinsurance.................................................. 15 ARTICLE 6 - ERRORS..................................................................................... 16 ARTICLE 7 - INSPECTION Section 7.1. Books and Records........................................................ 16 ARTICLE 8 - INSOLVENCY................................................................................. 18 ARTICLE 9 - TRUST...................................................................................... 20 Section 9.1. Maintenance of Trust..................................................... 20 Section 9.2. Endorsement of Trust Assets.............................................. 23 Section 9.3. Investment of Trust Assets............................................... 23 Section 9.4. Fees..................................................................... 24 Section 9.5. Withdrawal By Reinsured.................................................. 24 Section 9.6. Withdrawal by Reinsurer.................................................. 25
i 3
Page Section 9.7. Return................................................................... 25 Section 9.8. Interest................................................................. 25 Section 9.9. Termination of Trust Account............................................. 25 ARTICLE 10 - DURATION; TERMINATION..................................................................... 25 Section 10.1. Duration................................................................. 25 Section 10.2. Termination.............................................................. 26 ARTICLE 11 - MISCELLANEOUS............................................................................. 26 Section 11.1. Notices.................................................................. 26 Section 11.2. Integration.............................................................. 28 Section 11.3. Amendments............................................................... 29 Section 11.4. Waivers.................................................................. 30 Section 11.5. Governing Law............................................................ 30 Section 11.6. Arbitration.............................................................. 31 Section 11.7. Binding Effect; Assignment; Third Party Beneficiaries...................................................... 33 Section 11.8. Severability............................................................. 34 Section 11.9. Headings................................................................. 34 Section 11.10. Counterparts............................................................. 35 Section 11.11. Errors and Omissions..................................................... 35
ii 4 SCHEDULES: 1.2 - Additional Annuity Product Forms 1.3 - Endorsement 5.3 - Section 1.848-2(g)(8) Election 9.1(b) - Method of Calculation
iii 5 INDEMNITY REINSURANCE AGREEMENT INDEMNITY REINSURANCE AGREEMENT (the "Agreement") dated as of March 31, 1997 by and between John Alden Life Insurance Company, a Minnesota corporation (collectively with its permitted successors and assigns "Reinsured"), and SunAmerica Life Insurance Company, an Arizona corporation ("Reinsurer"). WITNESSETH: WHEREAS, Reinsured is engaged in, among other businesses, the business of selling, issuing and administering annuity policies and related activities in the United States other than the State of New York (the "Annuity Business"); WHEREAS, Reinsurer is engaged, among other businesses, in the business of selling, issuing and administering annuity policies and related activities in certain states of the United States; WHEREAS, Reinsured and Reinsurer are parties to an Asset Purchase and Sale Agreement dated as of November 29, 1996, as amended by Amendment No. 1 dated as of March 31, 1997, and as may subsequently be amended from time to time (as amended, the "Asset Purchase Agreement"), which provides for the transfer to Reinsurer of certain assets used or held for use in the Annuity Business (all capitalized terms used herein and not otherwise defined shall have the meanings ascribed 6 thereto in the Asset Purchase Agreement, except that for purposes of the terms "Insurance Liabilities," "Other Liabilities," "Excluded Liabilities," and "Extra Contractual Liabilities," the words "Annuity Contracts" shall be replaced with the term "Policies"); WHEREAS, the Asset Purchase Agreement contemplates that Reinsurer will reinsure the Insurance Liabilities and Other Liabilities arising under the Annuity Contracts and Additional Policies (as defined below) on a coinsurance basis under the terms and conditions set forth herein until the direct assumption by Reinsurer of the Insurance Liabilities and Other Liabilities under the Annuity Contracts and Additional Policies (other than those Annuity Contracts and Additional Policies reinsured under the RSL Agreements, which Annuity Contracts and Additional Policies shall not be assumed by Novation by Reinsurer but shall only by ceded to Reinsurer on a coinsurance basis) (the "Policies") on a novation basis as provided in an Assumption Reinsurance Agreement between Reinsured and Reinsurer dated concurrently herewith (the "Assumption Reinsurance Agreement"); WHEREAS, Reinsured desires that after the termination of the Transition Services Agreement, defined herein, Reinsurer, as agent for Reinsured, perform all administrative functions on behalf of Reinsured with respect to the Policies, and Reinsurer has agreed to provide such 2 7 services pursuant to the terms of an administrative services agreement being entered into concurrently herewith by and between Reinsured and Reinsurer (the "Administrative Services Agreement"). Reinsured shall perform the administrative services for the Initial Policies insured hereunder pursuant to the terms of a Transition Services Agreement being entered into concurrently herewith by and between Reinsured and Reinsurer (the "Transition Services Agreement"). WHEREAS, concurrently herewith Reinsured, Reinsurer and Bankers Trust Company, are entering into a trust agreement (the "Trust Agreement") with respect to certain assets related to the obligations being reinsured hereunder; and WHEREAS, it is a condition to the obligations of the parties under the Asset Purchase Agreement that Reinsured and Reinsurer enter into this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Asset Purchase Agreement, and other good, valuable and sufficient consideration, the receipt and sufficiency of which are hereby acknowledged, Reinsurer and Reinsured (collectively, the "Parties" and, sometimes individually a "Party"), intending to be legally bound, hereby agree as follows: 3 8 ARTICLE 1 - REINSURANCE COVERAGE Section 1.1. Annuity Contracts. The Annuity Contracts are hereby reinsured by Reinsurer on the terms set forth herein. Section 1.2. Additional Policies. The annuity policies issued by the Reinsured (i) which become effective after the Ledger Cut-Off Date, which shall be defined as the 21st of the month in which the Effective Date (as defined below) occurs or the previous Business Day if the 21st is not a Business Day, but on or prior to the Effective Date, or (ii) through the services of Reinsured under the Transition Services Agreement which become effective after the Effective Date and which, in either case, are written on forms of the Annuity Contracts identified on Schedule 1.2 attached hereto (the "Additional Policies" and, together with the Annuity Contracts, the "Policies") shall be reinsured with the Reinsurer automatically on the terms set forth herein. To the extent permitted by law, each Additional Policy issued after the Effective Date and under the Transition Services Agreement shall be issued together with an endorsement (substantially in the form attached hereto as Schedule 1.3) providing for its automatic assumption by Reinsurer under the Assumption Reinsurance Agreement upon receipt by Reinsurer of policy form approval from the applicable regulatory body or bodies for an annuity contract form substantially similar to the form of 4 9 such Additional Policy. In the event such an endorsement is not permitted by law, or has not been approved prior to the issuance of an Additional Policy, Reinsured shall obtain an acknowledgement by the insured of the intent of Reinsured to cede such Policy, on an assumption basis, to Reinsurer. Section 1.3. Coverage. The reinsurance under this Agreement shall cover 100% of the Insurance Liabilities and Other Liabilities, but shall not include any other liabilities or obligations of any nature whatsoever, fixed or contingent, known or unknown, and shall be subject to the terms and conditions set forth herein. Without limiting the foregoing, the reinsurance under this Agreement shall not include the Extra Contractual Obligations or the Excluded Liabilities. Section 1.4. Effectiveness. The effective date of this Agreement shall be 11:59 p.m. on the Closing Date (the "Effective Date"). Section 1.5. Duration. The reinsurance under this Agreement with respect to any Policy shall be maintained in force without reduction so long as the liability of Reinsured under such Policy reinsured hereunder remains in force without reduction; provided, however, that this Agreement shall terminate as to each Policy on the respective effective date of the Novation of such Policy (as contemplated by Section 2.4 of the Assumption Reinsurance Agreement). To the extent Reinsurer is unable for any reason to assume by novation any 5 10 Annuity Contract, Reinsurer shall continue to reinsure such Annuity Contract, on an indemnity basis, in accordance with the terms and conditions of this Agreement. ARTICLE 2 - PAYMENTS BY REINSURED Section 2.1. Initial Reinsurance Premium. Concurrently with the delivery of this Agreement, Reinsured shall deliver to Reinsurer as an initial reinsurance premium the assets which comprise the Reinsurance Premium, the book value of which is equal to the Reserve Liabilities. The Reinsurance Premium shall be determined pursuant to Section 1.2(a) of the Asset Purchase Agreement, and as adjusted pursuant to Section 1.6(d) of the Asset Purchase Agreement. Section 2.2. Reinsurance Premiums. As further consideration for the indemnity reinsurance of the Insurance Liabilities and the assumption of the Other Liabilities, Reinsurer shall be entitled to all premiums and other amounts payable after the Ledger Cut-Off Date with respect to the Policies. Reinsurer shall collect and retain such amounts as agent for Reinsured pursuant to the Administrative Services Agreement. Reinsured shall pay to Reinsurer any such amounts actually received by Reinsured. Section 2.3. Policy Loan Payments. Reinsurer shall be entitled to the policy loan repayments after the Ledger Cut- Off Date attributable to the Policies, irrespective of whether 6 11 such repayments are made in cash, take the form of a reduction in cash surrender values or death benefits paid, or otherwise. In addition, Reinsurer shall be entitled to the policy loan interest paid after the Ledger Cut-Off Date with respect to the Policies, regardless of whether such policy loan interest is collected in cash or by collateralization. Reinsurer shall collect and retain such amounts as agent for Reinsured pursuant to the Administrative Services Agreement. Reinsured shall pay to Reinsurer any such amounts actually collected by Reinsured. ARTICLE 3 - PAYMENTS BY REINSURER Section 3.1. Initial Policy Expense Allowance and Other Payments. Reinsurer shall pay Reinsured an initial policy expense allowance equal to the Closing Date Ceding Commission determined pursuant to Section 1.3(a), of the Asset Purchase Agreement, as adjusted pursuant to Sections 1.3(c) and 1.6(c) of the Asset Purchase Agreement. In addition to the initial policy expense allowance, Reinsurer shall pay Reinsured an amount in cash equal to the Accrued and Unpaid Investment Income determined pursuant to Sections 1.3(a) and 1.3(b) of the Asset Purchase Agreement. Section 3.2. Policy and Administrative Services. Reinsurer shall provide services under the Administrative Services Agreement. 7 12 Section 3.3. Benefits and Other Payments. The Reinsurer shall reimburse Reinsured for all Insurance Liabilities and Other Liabilities paid by Reinsured after the Ledger Cut-Off Date with respect to the Policies. Section 3.4. Premium Taxes. Reinsurer shall reimburse Reinsured for the payment by Reinsured of all premium taxes that constitute Other Liabilities paid by Reinsured on account of premiums and other considerations received by Reinsured on the Policies, on the basis specified herein. For each calendar year the Reinsurer shall reimburse such premium tax payments, with respect to each state, on an annual basis, within 30 days after receipt of Reinsured's premium tax return for such year and a billing for Reinsurer's share of such premium taxes paid. Reinsurer's share shall be determined on the basis of each such state's tax rate for Policy premiums multiplied by the premiums received in such state during the annual period. The Reinsurer's share shall be reduced (but not below zero) by any guaranty fund credits relating to guaranty fund contributions paid to Reinsured pursuant to Section 2.2 of the Asset Purchase Agreement in such year or years prior to such year. Any such guaranty credits utilized as a reduction of the premium tax reimbursement will reduce any reimbursement to Reinsurer under Section 2.2(e) of the Asset Purchase Agreement on a dollar-for-dollar basis for credits actually utilized. 8 13 ARTICLE 4 - SETTLEMENT AND OFFSET Section 4.1. Settlement. All amounts due to be paid to either the Reinsurer or the Reinsured or to be paid into or removed from the Trust Account established pursuant to Article 9 hereof shall be determined on a net basis as of the last day of the calendar month to which such payment is attributable. All such amounts will be due and accrued as of such date. Payment shall be based upon the report delivered by Reinsurer pursuant to Section 5.2 hereof. If, based upon such report, it is determined that Reinsurer owes a payment to Reinsured or the Trustee, such payment shall be made at the time such report is delivered to Reinsured. If based upon such report it is determined that Reinsured owes a payment to Reinsurer, such payment shall be made within 15 days after delivery of such report. All such payments shall be made in cash. If based upon such report it is determined that Reinsurer is entitled to remove Assets from the Trust Account (as those terms are defined in the Trust Agreement), it may do so in accordance with the terms of the Trust Agreement. Section 4.2. Offset. Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when they arose or were incurred, in favor of or against either Reinsured or Reinsurer with respect to this Agreement are deemed mutual debts or credits, as the case may be, and shall be set off, and only the balance shall be allowed or paid. 9 14 ARTICLE 5 - TERMS OF REINSURANCE Section 5.1. Administration of Policies. Pursuant to the Transition Services Agreement, Reinsured shall be responsible for the administration and service of the Policies reinsured hereunder. The parties acknowledge that Reinsured has concurrently herewith delegated effective on the date of the termination of the Transition Services Agreement such responsibilities to Reinsurer pursuant to the Administrative Services Agreement, and the parties each consent to such delegation. Section 5.2. Reports. (a) For the duration of this Agreement, the Reinsurer shall provide the Reinsured with a monthly accounting (the "Monthly Accounting") relating to the Policies no later than ten (10) Business Days following the end of each related calendar month. The Monthly Accounting shall contain such information as is set forth in Schedule 1.5 of the Administrative Services Agreement, including a statement of any income received in connection with the Policies. Such Schedule 1.5 shall also include a statement of monthly reserves for GAAP and SAP. The first Monthly Accounting shall be provided to the Reinsured no later than forty-five (45) Business Days after the date hereof and the final Monthly Accounting shall be provided to the Reinsured no later than ten (10) Business Days after the termination of this Agreement. 10 15 (b) For the duration of this Agreement, the Reinsurer shall prepare quarterly statements of cash flow transaction data (within ten (10) Business Days after the end of a calendar quarter) and annual financial statement data (within thirty-five (35) calendar days after the end of the fiscal year), for inclusion in Reinsured's applicable financial statements (except for statements of cash flow testing and actuarial memorandum which shall be delivered on or before March 1 of each calendar year). Section 5.3. Tax Treatment. If the Policies include for U.S. federal income tax purposes Specified Insurance Contracts pursuant to Section 848 of the Internal Revenue Code of 1986, as amended, the Parties agree, with respect to this Agreement, to make the election provided in Section 1.848- 2(g)(8) of the regulations issued under Section 848. The specifics of this election are set forth on Schedule 5.3 attached hereto. Section 5.4. DAC Tax Reimbursement. In regards to the Policies reinsured hereunder, Reinsurer shall calculate and pay to Reinsured annually: [(a)-(b)]x[1+i(.73)] where: "a" is equal to .95127% of the net consideration (as defined under Treasury Regulation 1.848-2(f) and adjusted as herein provided) (the "Net Consideration") which arises under this Agreement and is attributable to specified insurance contracts that is included in the net premiums of Reinsured. Such net consideration shall be expressed as a positive amount. Reinsurer shall 11 16 deduct such net consideration from its net premiums, thereby expressing such net consideration as a negative amount. Note: .95127%=(35%)(1.75%)\(100%-35%-.6125%) where 35% is the highest corporate federal income tax rate specified in Section 11 of the Code (the "Tax Rate"), 1.75% is the applicable percentage under Section 848 of the Code (the "Applicable Percentage") for determining specified policy acquisition expenses, and .6125% is (35%)(1.75%). The factors used in the above formula will be modified in order to produce the same economic effect in the event there is a future change in the Tax Rate, the Applicable Percentage or the definition of net consideration. "b" is equal to the sum of the following: (i) 5% of "a" for the current calendar year (ii) 10% of "a" for each of the 9 preceding calendar years, plus (iii) 5% of "a" for the 10th preceding calendar year. "i" is equal to the 5-year U.S. Treasury Bill rate on December 31 of the year for which the reimbursement relates. Such rate is expressed as a decimal (e.g. 4% shall be expressed as .04) For purposes of this Section 5.4, net consideration shall be determined without regard to (i) the Initial Reinsurance Premium pursuant to Section 2.1 hereof, (ii) the Initial Policy Expense Allowance and other payments pursuant to Section 3.1 hereof, (iii) the initial reinsurance of the Insurance Liabilities and Other Liabilities by the Reinsurer under this Agreement, (iv) any deemed transfer of assets from Reinsurer to Reinsured upon the termination or conversion of any Policy to assumption reinsurance pursuant to the Assumption Reinsurance Agreement, (v) the amount of premiums 12 17 or other consideration collected from Policyholders and transferred to Reinsurer under Section 2.2 hereof, or deemed so transferred for purposes of determining net consideration under this Section 5.4, and (vi) any DAC Tax Reimbursement. In the event that the amount determined by the formula [(a)-(b)]x[1+i(.73)] is negative, a payment of the absolute value of such amount will be made by Reinsured to Reinsurer. Payments for DAC Tax Reimbursement will continue to be made after termination of this Agreement unless the parties agree to alternative settlement at the time of termination. It is understood and agreed that this method of determining DAC Tax Reimbursement will be modified to produce the same economic effect in the event that Section 848 of the Code is amended in the future or in the event that regulations issued pursuant to Section 848 of the Code are amended. The payment required to be made under this section shall be payable by no later than ten (10) business days after May 15, the date by which information concerning DAC Tax Reimbursement must be provided under Section 5.4. Section 5.5. Reserves. With respect to the Policies, Reinsurer agrees to establish and maintain as a net liability on its statutory statements a reserve not less than the aggregate statutory reserves and claim reserves calculated in a manner on a consistent basis with Reinsured's practices (which calculation excludes any reserves for liabilities 13 18 coinsured under any of the Reinsurance Agreements referred to in Section 5.7); provided, however, that Reinsurer may make such changes therein as required by a change in Law or rules, regulations and administrative practice of the Department of Insurance of any state in which the Reinsurer does business regarding the manner for calculating Statutory Reserves, or if required to comply with Reinsurer's state of domicile or to comply with Reinsurer's current practices (such reserves, the "Statutory Reserves"). In such event, Reinsurer shall establish and maintain the Statutory Reserves in accordance with statutory insurance accounting principles prescribed or permitted and in accordance with sound actuarial principles. It is the purpose and intent of this section that both Reinsurer and Reinsured shall cooperate with each other in complying with any required change in methodology for computation of Statutory Reserves that may be required by the insurance regulatory authorities for the states in which Reinsured conducts its business. Except as and to the extent any such change may be required by applicable law or Reinsurer's state of domicile Reinsurer shall not make any changes to the basis or methodology of calculating the Statutory Reserves with respect to the Policies without prior written notification to Reinsured. Section 5.6. Crediting Rates. Reinsured shall set crediting rates with respect to Policies from and after the 14 19 Effective Date as directed by Reinsurer. Reinsurer shall set comparable crediting rates with respect to annuity policies not reinsured hereunder. Reinsurer shall set rates permitted by the terms of the Policies and meeting the requirements of applicable statutes and regulations. Section 5.7. Third Party Reinsurance. As of the Effective Date, the assignment and novation to Reinsurer of the reinsurance agreements and related agreements between Reinsured and all third party reinsurers, as set forth on Schedule 5.1 to the Assumption Reinsurance Agreement, related to the Annuity Contracts naming Reinsurer as a direct party to each such agreement with respect to the rights of the Reinsured and Insurance Liabilities and Other Liabilities has been obtained. The collectability of reinsurance payable to Reinsurer under such agreements shall be at the sole risk and for the account of Reinsurer. Any payments by such third party reinsurers in respect of the Annuity Contracts with respect to obligations accrued on or prior to the Ledger Cutoff Date, made by Reinsured on or prior to the Ledger Cut-off Date and reinsured under such third party reinsurance shall be for the account of Reinsured. This will include, but not be limited to, claims, expense or other allowances and premium tax reimbursements which relate to activity pertaining to periods before the Effective Date. 15 20 ARTICLE 6 - ERRORS If either Reinsured or Reinsurer shall fail to perform an obligation under this Agreement and such failure shall be the result of an error on the part of Reinsured or Reinsurer, such error shall be corrected by restoring both Reinsured and Reinsurer to the positions they would have occupied had such error not occurred. For purposes of this Article 6, an "error" is a clerical mistake made inadvertently and excludes error of judgment and all other forms of error. ARTICLE 7 - INSPECTION Section 7.1. Books and Records. (a) Following the Effective Date, Reinsured shall (i) allow Reinsurer, upon reasonable prior notice and during regular business hours, through its employees and Representatives, at Reinsurer's expense the right to examine and make copies of any books and records retained by Reinsured within its possession or control ("control" for the purposes of this Section 7.1(a) being defined as the ability to cause delivery to the Reinsured or access to the Reinsurer) and furnish the Reinsurer with such financial and reporting data and other information with respect to the Policies, as the Reinsurer may from time to time reasonably request, to the extent they relate to the Policies, for any reasonable business purpose, including, without limitation, the 16 21 preparation or examination of tax returns, regulatory filings and financial statements and the conduct of any Action, whether pending or threatened, concerning the Policies prior to the Effective Date at Reinsured's offices or other facilities or properties and (ii) maintain such books and records for the Reinsurer's examination and copying. Access to such books and records shall be at the Reinsurer's expense, may not unreasonably interfere with Reinsured's or any successor company's business operations and Reinsurer shall reimburse Reinsured for all reasonable out-of-pocket expenses incurred by Reinsured in copying such books and records. Reinsured shall retain such books and records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with respect to tax matters with respect to which such books and records are necessary and of which Reinsurer shall notify Reinsured), after which time such books and records shall be delivered to Reinsurer. Reinsurer shall not copy or remove from Reinsured's premises the accountant's work papers made available to Reinsurer and its representatives. (b) Following the Effective Date, Reinsurer shall (i) allow Reinsured, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at Reinsured's expense to examine and make copies of the books and records transferred to Reinsurer as of 17 22 the Effective Date for any reasonable business purpose, including, without limitation, the preparation and examination of tax returns, regulatory filings and financial statements and the conduct of any Action or the conduct of any regulatory, contract holder, participant or other dispute resolution, whether pending or threatened, at Reinsurer's offices or other facilities or properties and (ii) maintain such books and records for Reinsured's examination and copying. Access to such books and records shall be at Reinsured's expense and may not unreasonably interfere with Reinsurer's or any successor company's business operations and Reinsured shall reimburse Reinsurer for all reasonable out-of-pocket expenses incurred by Reinsurer in copying such records. Reinsurer shall retain any books and records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with respect to tax matters with respect to which such books and records are necessary and of which Reinsured shall notify Reinsurer). ARTICLE 8 - INSOLVENCY (a) In the event of the insolvency of Reinsured and the appointment of a conservator, liquidator or statutory successor of Reinsured, reinsurance shall be payable immediately upon demand to such conservator, liquidator or statutory successor, with reasonable provision for 18 23 verification before payment, on the basis of claims allowed against Reinsured by any court of competent jurisdiction or by the conservator, liquidator or statutory successor of Reinsured without diminution because of the insolvency of Reinsured or because such conservator, liquidator or statutory successor has failed to pay all or a portion of any claims. (b) In the event of the insolvency of Reinsured, the conservator, liquidator or statutory successor of Reinsured shall give Reinsurer written notice of the pendency of a claim on a Policy within a reasonable time after such claim is filed in the insolvency proceeding. During the pendency of any such claim, Reinsurer may investigate such claim and interpose in the name of Reinsured (or of its conservator, liquidator or statutory successor), but at its own expense, in the proceeding where such claim is to be adjudicated, any defense which Reinsurer may deem available to Reinsured or its conservator, liquidator or statutory successor. (c) The expense thus incurred by Reinsurer shall be chargeable, subject to court approval, against Reinsured as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to Reinsured solely as a result of the defense undertaken by Reinsurer. 19 24 ARTICLE 9 - TRUST Section 9.1. Maintenance of Trust. (a) On the Effective Date, Reinsurer and Reinsured shall enter into the Trust Agreement and establish a Trust Account for the benefit of the holders of the Policies and of Reinsured. At the end of each calendar month ending before the second anniversary of the Effective Date, the Market Value (as defined below) of Assets held in the Trust Account plus an amount equal to the principal amount of the policy loans under the Policies, excluding the Withheld Policy Loans (defined below) (together the "Asset Value") shall equal or exceed 80% of the Trust Statutory Reserves (as defined below). "Withheld Policy Loans" shall mean those policy loans which (i) are held as funds withheld for Lincoln National Reinsurance Company, Ltd. and are not Assets of the Trust Account or (ii) have been transferred to Oxford Life Insurance Company ("Oxford") pursuant to the Reinsurance Agreement by and between John Alden Life Insurance Company and Oxford dated January 1, 1989 to the extent such policy loans are assets of Oxford. At the end of each calendar month subsequent to such two-year period, the Asset Value of the Trust Account shall equal or exceed 100% of the Trust Statutory Reserves; "Statutory Reserves" shall have the meaning set forth in Section 5.5 hereof and Trust Statutory Reserves shall equal the Statutory Reserves less the Statutory Reserves with 20 25 respect to Annuity Contracts and Additional Policies reinsured under the RSL Agreements. Notwithstanding the foregoing, the Trust Statutory Reserves may be reduced, on or after the first day of each month, by an amount equal to the Statutory Reserves on any Policies with a Novation Date (as defined in Section 2.4 of the Assumption Reinsurance Agreement) as of that first day of such month. (b) Reinsurer shall deliver to Reinsured within fifteen business days after the end of each calendar month a listing of the assets held in the Trust Account and the Market Value thereof calculated at the close of business of such month. To the extent the Asset Value is less than the percentage of Trust Statutory Reserves required pursuant to Section 9.1(a) hereof as of the end of such calendar month, as evidenced by the reports delivered pursuant to Section 5.2(a) hereof, Reinsurer shall promptly (and, in any event, within three business days) deposit assets into the Trust Account so that the Asset Value as of the end of such calendar month together with such deposit is equal to at least the percentage of Trust Statutory Reserves required pursuant to Section 9.1(a). Reinsurer shall deliver to reinsured within fifteen days after the end of each calendar month a listing of the assets held in the Trust Account and the Market Value thereof calculated at the close of business of such month, which 21 26 calculation methods are described in Schedule 9.1(b) hereof, as amended in writing from time to time. "Market Value" means market value calculated in accordance with the methodology utilized by Reinsurer from time to time in connection with the preparation of its GAAP financial statements; provided, however, that, with respect to mortgages, if any, Market Value shall mean the GAAP book value balance of mortgage loans as provided on an aggregate basis by each loan servicer. (c) Reinsurer shall have the right to withdraw from the Trust Account (i) an amount equal to the Accrued and Unpaid Investment Income calculated in accordance with Section 1.3(b) of the Asset Purchase Agreement and (ii) any amounts payable by it with respect to the adjustment to the Closing Date Ceding Commission as provided in Section 1.3(d)(ii) of the Asset Purchase Agreement. As of any date, Reinsurer may, in accordance with the procedures specified in the Trust Agreement, withdraw assets from the Trust Account (1) to establish and replenish the Controlled Disbursement Account established pursuant to the Transition Services Agreement only to the extent required to make payment for item (2) immediately following; (2) to pay death benefits, annuity benefits, benefits paid pursuant to supplementary contracts, net surrender or partial withdrawals or other benefits or payments or return of premiums on the Policies (net of reinsurance payable by third party reinsurers as described in 22 27 Section 5.7 hereof); (3) to reflect the reduction of Statutory Reserves by reason of the effectiveness of a Novation (as contemplated by Section 2.4 of the Assumption Reinsurance Agreement) with respect to Policies. If, subsequent to the second anniversary of the Effective Date, the Asset Value exceeds the percentage of Trust Statutory Reserves required pursuant to Section 9.1(a) hereof as of the end of such calendar month, Reinsurer shall be entitled to withdraw assets from the Trust Account provided the Asset Value after taking into account such withdrawal is at least equal to the percentage of Trust Statutory Reserves required pursuant to Section 9.1(a) hereof as of the end of such calendar month. Section 9.2. Endorsement of Trust Assets. Prior to depositing assets with the trustee, Reinsurer shall execute assignments or endorsements in blank or transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the trustee, may whenever necessary negotiate any such assets without consent or signature from Reinsurer or any other entity. Section 9.3. Investment of Trust Assets. The Reinsurer shall be responsible for the investment decisions as to the investment, reinvestment and substitution of the Assets in the Trust Account. Reinsurer may, in its discretion, leave the assets invested in the Trust Account in the manner as first deposited in the Trust Account. Except as set forth in the 23 28 foregoing sentence, the Reinsurer may reinvest or substitute the Assets in the Trust Account any time and from time to time, so long as (i) it does so in a manner consistent with Reinsurer's investment policies for its own investment portfolio, as such policies are in effect at the time investment instructions are given, except that the percentage of assets representing mortgages or mortgage-related assets may vary from the corresponding percentages of mortgages or mortgage-related assets in the Reinsurer's own account and (ii) the fair market value of substituted Assets, if any, shall not be less than the fair market value of the Assets withdrawn. Section 9.4. Fees. Except as provided in Section 6.4 of the Trust Agreement, Reinsurer shall pay all trustee/custodial fees and expenses for the Trust Account. Section 9.5. Withdrawal By Reinsured. Notwithstanding any other provision of this Agreement, Reinsured or any successor by operation of law of Reinsured, including without limitation any liquidator, rehabilitator, receiver or conservator of Reinsured, may draw upon such Trust Account in accordance with the terms of the Trust Agreement, with such amounts drawn to be applied without diminution because of the insolvency of Reinsured or Reinsurer to reimburse Reinsured for all Insurance Liabilities and Other Liabilities paid by Reinsured after the Ledger Cut-off Date with respect to the 24 29 Policies to the extent not paid by Reinsurer when due under the Policy or applicable Laws. Section 9.6. Withdrawal by Reinsurer. Reinsurer shall have the right to withdraw Assets from the Trust Account in accordance with Section 9.1 hereof and the terms of the Trust Agreement. Section 9.7. Return. Reinsured agrees to return to Reinsurer any amounts drawn on such Trust Account which are in excess of the actual amounts required for the purposes of Section 9.5 above. Section 9.8. Interest. Reinsured agrees to pay Reinsurer interest at the one month London Interbank Offered Rate on the amounts returned pursuant to Section 9.7 above. Section 9.9. Termination of Trust Account. The Trust Account shall terminate at any time that the Trust Statutory Reserves as shown on any quarterly statutory report are less than $75 million. In accordance with the requirements of the Trust Agreement, Reinsurer shall sign a termination certificate and shall deliver such certificate to the Trustee. ARTICLE 10 - DURATION; TERMINATION Section 10.1. Duration. Except as otherwise provided in Section 1.5 hereof, this Agreement shall be unlimited in duration. 25 30 Section 10.2. Termination. The termination of this Agreement or of the reinsurance in effect under this Agreement shall not extend to or affect any of the rights or obligations of Reinsured and Reinsurer applicable to any period prior to the effective date of such termination. In the event that, subsequent to the termination of this Agreement, an adjustment is made necessary with respect to any accounting hereunder, a supplementary accounting shall take place. Any amount owed to either Party by reason of such supplementary accounting shall be paid by the other Party promptly upon the completion thereof. ARTICLE 11 - MISCELLANEOUS Section 11.1. Notices. Any notice or other communication required or permitted hereunder shall be delivered personally (by courier or otherwise), sent by certified, registered or express mail, postage prepaid and return receipt requested, or transmitted by facsimile, (with copy of such notice or other communication and a confirmation of transmission sent by certified, registered or express mail, postage prepaid and return receipt requested no later than the close of business on the next business day following such transmission), and shall be addressed as follows: 26 31 when Reinsurer is to be notified: SunAmerica Life Insurance Company 1 SunAmerica, Century City Los Angeles, California 90067-6022 Attention: General Counsel Facsimile No.: (310) 772-6574 with a copy to: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Attention: Controller Facsimile No.: (310) 772-6684 and O'Melveny & Myers 1995 Avenue of the Stars Suite 700 Los Angeles, California 90067 Attn: Robert D. Haymer, Esq. Facsimile No.: (310) 772-6684 and Barger & Wolen LLP 515 S. Flower Street 34th Floor Los Angeles, California 90071 Attn: S. Stuart Soldate, Esq. Facsimile No. (213) 614-7399 when Reinsured is to be notified: John Alden Life Insurance Company 7300 Corporate Center Drive Miami, Florida 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: William W. Rosenblatt, Esq. Facsimile No.: (212) 259-6333 27 32 A Party may, by notice given in accordance with this Section 11.1 to the other Party, designate another address or Person to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 11.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and subject to delivery of a mailed copy thereof) or the affidavit of the messenger (if transmitted by personal delivery) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. Section 11.2. Integration. This Agreement (including the Exhibits and the Schedules attached hereto), along with the Asset Purchase Agreement including the Ancillary Agreements and the other agreements contemplated hereby and thereby, and the Annex, the Exhibits and the Schedules attached thereto (the "Transaction Agreements"), contains the entire agreement and understanding between the Parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous agreements, Representations, warranties and understandings, whether 28 33 written or oral, by or between the Parties with respect to the subject matter hereof. Nothing contained in any document or instrument of conveyance, transfer, assignment or delivery executed or delivered at the Closing pursuant to this Agreement shall amend, extend, modify, renew or alter in any manner any representation, warranty, covenant, agreement or indemnity contained herein. Nothing contained in the Transaction Agreements or any other agreement contemplated hereby or thereby shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates of liability to third parties, whether under any Laws or otherwise, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any Laws. In the event of any conflict between this Agreement and the Asset Purchase Agreement, the Asset Purchase Agreement shall control. In the event of any ambiguity (or inconsistency with the Asset Purchase Agreement) in this Agreement such ambiguity or inconsistency shall be resolved by reference to the Asset Purchase Agreement. Section 11.3. Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of or approval under, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment or approval is set forth in a written instrument which states that it adds to, amends, cancels, 29 34 renews or extends this Agreement or grants an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. Section 11.4. Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or impair, limit or restrict the exercise of part of any Party of any such right, power or remedy or any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. Section 11.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS OF THEREOF. Each Party consents and 30 35 submits to the non-exclusive personal jurisdiction of any federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 11.6 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. Section 11.6. Arbitration. The Parties acknowledge and agree that the transactions contemplated herein substantially affect and impact interstate commerce. Therefore, all disputes or differences between Reinsured and Reinsurer arising under or which are related to this Agreement (except for any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award as set forth in Section 11.5 above) upon which an amicable understanding cannot be reached within thirty (30) days shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court 31 36 having jurisdiction thereof. The Arbitrators provided for herein shall construe this Agreement in light of the prevailing custom and practices for acquisition transactions of a similar nature. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held at a site selected by the Arbitrators. The Parties agree to arbitrate within ninety (90) days following the transmittal of written demand of either Party to arbitrate any dispute arbitrable under this Agreement. The Parties will in good faith, within fifteen (15) days following notice of written demand to arbitrate attempt to agree on a single Arbitrator. If the Parties cannot within fifteen (15) days thereafter agree on a single arbitrator, each of the Parties shall appoint an Arbitrator, notifying the other Party of the name and address of such Arbitrator. The Arbitrators appointed by each Party shall agree upon and appoint a third neutral Arbitrator. If either Party shall fail to appoint an Arbitrator as herein provided, or should the two Arbitrators so named fail to select the third Arbitrator within thirty (30) days of their appointment, then, in either event, the President of the American Arbitration Association or its successor shall appoint such second and/or third Arbitrator. A decision of a majority of the Arbitrators shall be final and binding and 32 37 there shall be no appeal therefrom. The Arbitrators shall within forty-five (45) days after the final hearing enter an award and the award shall be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Parties; all other costs of the respective Parties, including without limitation fees and expenses of the respective Party's attorneys, witnesses, and discovery shall be paid by the respective Party, except to the extent that the Arbitrators otherwise direct based on the equities of the situation. The arbitration shall be held in New York, New York unless otherwise agreed between the Parties. Section 11.7. Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Reinsured nor Reinsurer shall assign any of its rights or delegate any of its duties hereunder, (in whole or in part and by operation of law or otherwise) without the prior written consent of the other Party hereto, except that Reinsurer may assign its rights and obligations under this Agreement to any of its Affiliates provided Reinsurer shall remain liable for its obligations hereunder notwithstanding such assignment. Any assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such 33 38 consent is required hereby, shall be void. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. Section 11.8. Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. Section 11.9. Headings. The headings in this Agreement have been inserted for convenience of reference only, and 34 39 shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. Section 11.10. Counterparts. This Agreement may be executed by the parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. Section 11.11. Errors and Omissions. Inadvertent delays, errors or omissions made by either Reinsured or Reinsurer in connection with this Agreement or any transaction hereunder shall not relieve the other party from any liability which would have attached to such party had such delay, error or omission not occurred, provided that the party causing such delay error or omission rectifies the same as soon as possible after its discovery thereof. 35 40 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. SUNAMERICA LIFE INSURANCE COMPANY By: /s/ James W. Rowan ------------------------------ Name: James W. Rowan Title: Senior Vice President JOHN ALDEN LIFE INSURANCE COMPANY By: /s/ Scott L. Stanton ------------------------------ Name: Scott L. Stanton Title: Senior Vice President and Chief Financial Officer 36 41 SCHEDULE 1.2 Additional Annuity Product Forms*
Name Form Type Distribution - ---------------------------------------------------------------------------------------------------- Advantage Plus J-5750 SPDA Broker Employee Annuity J-8027-C Flex JALIC Bonus Asset Growth J-5628-P Flex Bank Premier Flex J-5820 Flex Bank Fl Pilgrim J-5825 Flex Bank Fl Pilgrim Plus J-5840 Flex Bank Fl Without Bonus J-5850 Flex Bank Premier Flex Plus J-5880 Flex Bank Pioneer Fee for Service J-5723 Flex Broker All Purpose J-5615 Flex Broker All Purpose Plus J-5765 Flex Broker Six Flex J-5770 Flex Broker Income Advantage J-5805 Flex Broker Immediate Annuity J-1035 SPIA Bank/Broker Bonus Asset-Group J-5621-C Flex Bank Puritan Plus J-5905 Flex Broker
* Product forms on which new policies have been issued in 1996. 37 42 SCHEDULE 1.3 ENDORSEMENT Contract issued to: Effective Date of Rider: Attached to and forming art of Contract No. _____ (herein called the "Contract") issued by JOHN ALDEN LIFE INSURANCE COMPANY (herein called "John Alden") The Contract will be assumed by SUNAMERICA LIFE INSURANCE COMPANY (herein called "SunAmerica") shortly after it receives approval for its annuity contract policy form in the State of ______ and obtains any other required regulatory approvals for such assumption. Thereafter SunAmerica will be the insurer and promptly after the effectiveness of such assumption it will issue a Certificate of Assumption in the form attached hereto. In the event that SunAmerica does not obtain all such approvals, John Alden will remain as the insurer and the Contract will remain with John Alden. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, provisions, agreements or limitations of the Contract other than as above stated. 38 43 IN WITNESS WHEREOF, John Alden and SunAmerica have each executed this endorsement. JOHN ALDEN LIFE INSURANCE COMPANY - ---------------------- ------------------------- Secretary President SUNAMERICA LIFE INSURANCE COMPANY - ---------------------- ------------------------- Secretary President 39 44 SCHEDULE 5.3 Section 1.848-2(g)(8) Election Reinsured and Reinsurer agree to the following pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations issued under Section 848 of the Internal Revenue Code of 1986 (hereinafter "Section 1.848-2(g)(8).") 1. The Party with net positive consideration for this Agreement for any taxable year beginning with the taxable year prescribed in paragraph 4 below will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deduction limitation. 2. The Parties agree to exchange information pertaining to the amount of net consideration under this Agreement to ensure consistency. This will be accomplished as follows: (a) Reinsured shall submit to Reinsurer by the fifteenth day of May in each year its calculation of the net consideration for the preceding calendar year. Such calculation will be accompanied by a statement signed by an officer of Reinsured stating that Reinsured will report such net consideration in its tax return for the preceding calendar year. (b) Reinsurer may contest such calculation by providing an alternative calculation to Reinsured in writing within 30 days after Reinsurer's receipt of Reinsured's calculation. If Reinsurer does not so notify Reinsured, Reinsurer will report the net consideration as determined by Reinsured in 40 45 Reinsurer's tax return for the previous calendar year. (c) If Reinsurer contests Reinsured's calculation of the net consideration, the Parties will act in good faith to reach an agreement as to the current amount within 30 days after the date Reinsurer submits its alternative calculation. If Reinsured and Reinsurer reach agreement on an amount of net consideration, each Party shall report such amount in their respective tax returns for the preceding calendar year. 3. This election shall be effective for 1997 and all subsequent taxable years for which the Indemnity Reinsurance Agreement remains in effect. 41 46 SCHEDULE 9.1(b) Reinsurer prices certain publicly-traded securities through the SunGard securities system, which as of the date of this Schedule contracts for pricing of securities through Interactive Data Corp, subject to verification by Reinsurer against broker quotes. Privately placed securities are priced via broker quotes. Securities not priced through either of the above methods are priced by Reinsurer by comparison to reasonably comparable securities, as determined in its discretion. 42 EX-10.4 5 ASSUMPTION REINSURANCE AGREEMENT DATED 3/31/97 1 Execution Copy ASSUMPTION REINSURANCE AGREEMENT By and Between JOHN ALDEN LIFE INSURANCE COMPANY and SUNAMERICA LIFE INSURANCE COMPANY Dated as of March 31, 1997 2 TABLE OF CONTENTS
Page ARTICLE 1 ASSUMPTION; INDEMNIFICATION............................................................................ -3- ARTICLE 2 NOTICES; ASSUMPTION CERTIFICATES; NOVATIONS............................................................ -4- 2.1 Policyholder Consent Required........................................................ -4- 2.2 Policyholder Consent Not Required.................................................... -5- 2.3 Compliance of Forms.................................................................. -6- 2.4 Effective Date of Novation........................................................... -6- 2.5 Costs of Compliance.................................................................. -8- ARTICLE 3 APPROVALS.............................................................................................. -8- Section 3.1 Regulatory Approvals............................................... -8- ARTICLE 4 TRANSFER OF POLICY LIABILITIES......................................................................... -9- Section 4.1 Novation........................................................... -9- Section 4.2 Effect of Novation................................................. -9- Section 4.3 Forwarding of Premiums and Other Payments by Reinsured.............................................. -10- ARTICLE 5 EFFECT ON EXISTING REINSURANCE......................................................................... -12- ARTICLE 6 FURTHER ASSURANCES..................................................................................... -13- Section 6.1 Further Assurances................................................. -13- ARTICLE 7 RECORDS AND ACCOUNTING................................................................................. -13- Section 7.1 Books and Records.................................................. -13- ARTICLE 8 RESERVED............................................................................................... -15- ARTICLE 9 MISCELLANEOUS.......................................................................................... -15- Section 9.1 Notices............................................................ -15- Section 9.2 Integration........................................................ -17- Section 9.3 Amendments......................................................... -19- Section 9.4 Waivers............................................................ -19- Section 9.5 Governing Law...................................................... -20- Section 9.6 Arbitration........................................................ -20-
i 3 Section 9.7 Binding Effect; Assignment; Third Party Beneficiaries............................................... -22- Section 9.8 Severability...................................................... -23- Section 9.9 Headings.......................................................... -24- Section 9.10 Counterparts...................................................... -24- Section 9.11 Errors and Omissions.............................................. -25-
ii 4 SCHEDULES: Schedule 5.1 - Reinsurance Agreements EXHIBITS: Exhibit A - Notice of Transfer Exhibit B - Assumption Certificate iii 5 ASSUMPTION REINSURANCE AGREEMENT ASSUMPTION REINSURANCE AGREEMENT (the "Agreement") dated as of March 31, 1997 (the "Closing Date"), by and between John Alden Life Insurance Company, a Minnesota corporation ("Ceding Company"), and SunAmerica Life Insurance Company, an Arizona corporation ("Reinsurer"). WHEREAS, Ceding Company is engaged in, among other businesses, the business of selling, issuing and administering annuity policies and related activities in the United States other than the State of New York (the "Annuity Business"); WHEREAS, Reinsurer is engaged in, among other businesses, the business of selling, issuing and administering annuity policies and related activities in certain states of the United States; WHEREAS, Ceding Company and Reinsurer are parties to an Asset Purchase and Sale Agreement dated as of November 29, 1996 as amended by Amendment No. 1 dated as of March 31, 1997, and as may be subsequently amended from time to time (as amended, the "Asset Purchase Agreement"), which provides for the transfer to Reinsurer of certain assets used in the Annuity Business (all capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Asset Purchase Agreement, except that for purposes of the terms "Insurance Liabilities," "Other Liabilities" and "Extra Contractual Obligations," the words "Annuity Contracts" shall be replaced with the term "Policies"); 6 WHEREAS, the Asset Purchase Agreement contemplates that Reinsurer will reinsure the Insurance Liabilities of Ceding Company arising under the Annuity Contracts on the terms and conditions set forth herein and in the Indemnity Reinsurance Agreement; WHEREAS, pursuant to an Indemnity Reinsurance Agreement, Ceding Company has ceded on a coinsurance basis Ceding Company's Insurance Liabilities and Other Liabilities arising under the Annuity Contracts after the Closing Date and under the Additional Policies (as defined in the Indemnity Reinsurance Agreement) on the terms and conditions set forth therein pending assumption of the Annuity Contracts and Additional Policies (other than those Annuity Contracts and Additional Policies reinsured under the RSL Agreements, which Annuity Contracts and Additional Policies shall not be assumed by Novation by Reinsurer but shall only be ceded to Reinsurer on a coinsurance basis) (the "Policies") as contemplated in this Agreement. WHEREAS, on the Novation Date (as defined herein), Ceding Company desires to assign and transfer the rights and Insurance Liabilities of the Policies to Reinsurer on an assumption reinsurance basis on the terms and conditions set forth herein. 2 7 WHEREAS, Reinsurer desires to assume the rights and Insurance Liabilities of the Policies on the terms and conditions set forth herein; and WHEREAS, it is a condition to the obligations of the parties under the Asset Purchase Agreement that Ceding Company and Reinsurer enter into this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good, valuable and sufficient consideration including the consideration provided by the Asset Purchase Agreement, the receipt and sufficiency of which are hereby acknowledged, Reinsurer and Ceding Company (collectively, the "Parties" and, sometimes individually a "Party"), intending to be legally bound, hereby agree as follows: ARTICLE 1 ASSUMPTION; INDEMNIFICATION Ceding Company hereby agrees to sell, cede and convey all of its right, title and interest in and to the Policies to Reinsurer, and Reinsurer, subject to the terms and conditions set forth herein, hereby agrees to accept and reinsure, on an assumption basis, all (100%) of the Insurance Liabilities and the Other Liabilities, but no other liabilities or obligations of any nature whatsoever, fixed or contingent, known or unknown. Without limiting the foregoing, Reinsurer shall not 3 8 accept and reinsure the Excluded Liabilities or Extra Contractual Obligations arising out of or with respect to the Policies. Ceding Company will indemnify and hold harmless the Reinsurer in accordance with the terms of the Asset Purchase Agreement against all liabilities other than the Insurance Liabilities and the Other Liabilities. ARTICLE 2 NOTICES; ASSUMPTION CERTIFICATES; NOVATIONS Section 2.1 Policyholder Consent Required. The provisions of this Section 2.1 shall apply in those states in which the consent of the holder of a Policy (each, a "Policyholder") is required for the assumption of the Policies by the Reinsurer. (a) Policyholder Notice. Promptly following the receipt of all required regulatory approvals in a particular state (or promptly after the Closing Date with respect to those states in which regulatory approval is not required), Reinsurer shall prepare for mailing to each holder of an Annuity Contract or Additional Policy which did not have an assumption endorsement attached when issued in each such state an option letter, including a rejection form, substantially in the form of Exhibit A attached hereto (the "Policyholder Notices"). 4 9 Reinsurer will use its best efforts to distribute such Policyholder Notices promptly to each such Policyholder. Each Policyholder Notice shall be dated the date upon which it is mailed. Reinsurer shall use commercially reasonable efforts to obtain the consent of each such Policyholder to the assumption by Reinsurer of the Policyholder's Policy. Ceding Company shall provide such assistance to Reinsurer as Reinsurer shall reasonably request in order to obtain such consents. (b) Certificate of Assumption. The Reinsurer shall also prepare and mail a certificate of assumption substantially in the form of Exhibit B attached hereto (the "Certificate of Assumption") to Policyholders resident in states which require the mailing of a separate Certificate of Assumption. Such certificates may be mailed separately or together with the Policyholder Notice at the option of the Reinsurer, but subject to any applicable regulatory requirements. Section 2.2 Policyholder Consent Not Required. In those states in which the consent of a Policyholder is not required for this assumption of the Policies by the Reinsurer, Reinsurer shall prepare and mail to each such Policyholder a Certificate of Assumption. The Certificate of Assumption shall be mailed promptly following the receipt of any regulatory approval required with respect to such certificate 5 10 (or immediately following the Closing Date if no such approval is required). Reinsurer will use its commercially reasonable efforts to distribute such Certificates of Assumption promptly to each such Policyholder. Section 2.3 Compliance of Forms. Notwithstanding the form of Exhibit A and Exhibit B referred to in this Article 2. Ceding Company and Reinsurer agree that such exhibits will be modified for use in the various states to the extent required to comply with local regulatory requirements or as agreed to by Ceding Company and Reinsurer. Section 2.4 Effective Date of Novation. Unless a rejection of assumption has been received from a Policyholder, a Policy assumed by Reinsurer pursuant to this Agreement shall be deemed to have effected a Novation as follows (each, a "Novated Contract"): (a) With respect to those states which have enacted the Assumption Reinsurance Model Act promulgated by the National Association of Insurance Commissioners (the "Model Act"), unless expressly rejected before the date of deemed Novation as provided herein, an Annuity Contract will be deemed to have been novated upon the earlier to occur of (i) the first day of the month immediately following the date that the Policyholder's consent to such Novation arrives at the Reinsurer's administrative office, or (ii) the first day of the month 6 11 immediately following the second anniversary of the date on which the Policyholder Notice was mailed to such Policyholder (the "Second Anniversary"), unless a second notice is required to be mailed, in which case the date of Novation will be the first day of the month immediately following the Second Anniversary. Notwithstanding the above sentence, no Novation shall be effective prior to the earliest date specified by the Reinsurer for Novation in such state; provided, however, that Reinsurer shall use commercially reasonable efforts to obtain Novations. (b) With respect to those states which have not enacted the Model Act but which otherwise impose advance notice or consent requirements, a Policy will be deemed to have been novated upon the earliest date specified in the Policyholder Notice. Notwithstanding the above sentence, no Novation shall be effective prior to the earliest date specified by the Reinsurer for Novation in such state; provided, however, that Reinsurer shall use commercially reasonable efforts to obtain Novations. (c) With respect to those states which do not require express acceptance of the assumption by a Policyholder or where advance notice of the assumption is not otherwise required, the Novation will be deemed 7 12 effective as of the date specified in the mailing of the Certificate of Assumption. (d) As used herein, a Novation is the substitution of Reinsurer for Ceding Company as obligor with respect to a Policy and the release of Ceding Company as obligor on such Policy (but only with respect to the Insurance Liabilities), with the effects set forth in Section 4.2 hereof. The effective date of Novation with respect to a particular Policy as provided above shall be deemed the "Novation Date" with respect to such contract. Section 2.5 Costs of Compliance. The costs and expenses of compliance with this Article 2 will be borne by Reinsurer, including out of pocket expenses incurred by Ceding Company in the provision of assistance at the request of Reinsurer. ARTICLE 3 APPROVALS Section 3.1 Regulatory Approvals. Reinsurer shall diligently pursue and use its commercially reasonable efforts to obtain necessary regulatory approval in all applicable states to the transactions contemplated hereby (other than any approvals that relate solely to Ceding Company, which Ceding Company shall use its commercially reasonable efforts to obtain). Ceding Company shall provide such assistance to 8 13 Reinsurer as Reinsurer shall reasonably request in order to obtain such approvals. Reinsurer shall bear the cost of obtaining required insurance regulatory approvals, consents and orders (other than any approvals that relate solely to Ceding Company) necessary to permit Ceding Company and Reinsurer to execute, deliver and perform this Agreement. ARTICLE 4 TRANSFER OF POLICY LIABILITIES Section 4.1 Novation. Notwithstanding any provision of this Agreement to the contrary, in the event that a Policy defined herein as a Novated Contract is determined by an applicable regulatory authority or by judicial decision (in either case, following the exhaustion of all rights of appeal) to be not novated from Ceding Company to Reinsurer, such Policy shall for all purposes of this Agreement be deemed retroactive to the respective effective dates of Novation to not have been assumed by Reinsurer and the holder of such Policy shall have no direct right of action against Reinsurer with respect to such Policy. Reinsurer may prepare a new form of policyholder notice and certificate of assumption believed by Reinsurer to be sufficient to obtain a Novation of any Policies judicially determined to be not novated and may deliver same to all policyholders of such Policies. Section 4.2 Effect of Novation. Subject to this Section 4.2, Reinsurer shall be the successor to Ceding 9 14 Company under the Novated Contracts as if the Novated Contracts were direct obligations originally issued by Reinsurer. Subject to this Section 4.2, Reinsurer shall be substituted in the place and stead of Ceding Company, and each holder of a Novated Contract shall be entitled to disregard Ceding Company as a party thereto and treat Reinsurer as if it had been originally obligated thereunder. On or after the effective date of such Novation, the holders of Novated Contracts shall have the right to file claims arising under the Novated Contracts directly with Reinsurer and shall have a direct right of action against Reinsurer for the Insurance Liabilities. Reinsurer hereby consents to be subject to direct action taken by any such holders under a Novated Contract with respect to the Insurance Liabilities. Reinsurer accepts and assumes the Novated Contracts subject to any and all defenses, setoffs and counterclaims to which Ceding Company would be entitled with respect to Insurance Liabilities, it being expressly understood and agreed by the Parties that no such defenses, setoffs or counterclaims are waived by the execution of this Agreement or the consummation of the transactions contemplated hereby and that Reinsurer shall be fully subrogated to all such defenses, setoffs and counterclaims. Section 4.3 Forwarding of Premiums and Other Payments by Reinsured. Premiums due or paid with respect to the 10 15 Novated Contracts on and after the relevant Novation Date, and any loan repayments (and interest payments thereon) made on the Novated Contracts on and after the relevant Novation Date, shall be the sole property of Reinsurer. From and after the relevant Novation Date, all holders under the Novated Contracts shall pay all premiums and make any loan repayments (and interest payments thereon) on their Policies directly to Reinsurer. All such payments received by Ceding Company related to Novated Contracts after the relevant Novation Date shall be delivered to Reinsurer, together with information, if available, regarding the payor, nature of payment, policy number and period with respect to which the payment relates. Reinsurer will assume all obligations to administer the Novated Contracts. Ceding Company agrees that, after the respective Novation Dates of the Novated Contracts, it will forward to Reinsurer immediately upon receipt all notices and other written communications received by it relating to Novated Contracts (including, without limitation, all inquiries or complaints from state insurance regulators, agents, brokers and policyholders and all notices of claims, suits and actions for which it receives service of process). 11 16 ARTICLE 5 EFFECT ON EXISTING REINSURANCE Schedule 5.1 sets forth all reinsurance or co-insurance agreements (together with all other agreements related thereto) related to the Annuity Contracts to which Ceding Company is a party and all such contracts, arrangements, treaties, understandings and agreements under which Ceding Company has any obligation to cede or assume insurance (the "Reinsurance Agreements"). As of the Closing Date, the assignment and Novation to Reinsurer of the reinsurance agreements and related agreements between Ceding Company and all third party reinsurers related to the Annuity Contracts naming Reinsurer as a direct party to each such agreement with respect to rights of the Ceding Company and the Insurance Liabilities and Other Liabilities has been obtained. The collectability of reinsurance payable to Reinsurer under the Reinsurance Agreements shall be at the sole risk and for the account of Reinsurer. Notwithstanding the foregoing, nothing contained herein is intended to require Reinsurer to assume by Novation the Annuity Contracts and Additional Policies reinsured under the RSL Agreements, which Annuity Contracts and Additional Policies shall be ceded to Reinsurer on a coinsurance basis only. 12 17 ARTICLE 6 FURTHER ASSURANCES Section 6.1 Further Assurances. From time to time after the date hereof, without further consideration, each Party shall execute and deliver such other instruments of assumption, conveyance, assignment, transfer and delivery, and take such other action as the other Party reasonably requests, in order to more effectively accomplish the Novation of the Policies contemplated herein. ARTICLE 7 RECORDS AND ACCOUNTING Section 7.1 Books and Records. (a) Following the Closing Date, Ceding Company shall (i) allow Reinsurer, upon reasonable prior notice and during regular business hours, through its employees and Representatives (as defined in the Asset Purchase Agreement), at Reinsurer's expense to examine and make copies of any books and records retained by Ceding Company within its possession or control ("control" for the purposes of this Section 7.1(a) being defined as the ability to cause delivery to Ceding Company or access to Reinsurer) and furnish Reinsurer with such financial and reporting data and other information with respect to the Policies as Reinsurer may from time to time reasonably request, to the extent they relate to the Annuity Business, for any reasonable business purpose, including, 13 18 without limitation, the preparation or examination of tax returns, regulatory filings and financial statements and the conduct of any Action, whether pending or threatened concerning the Annuity Business at Ceding Company's offices or other facilities or properties and (ii) maintain such books and records for Reinsurer's examination and copying. Access to such books and records shall be at Reinsurer's expense, may not unreasonably interfere with Ceding Company's or any successor company's business operations and Reinsurer shall reimburse Ceding Company for all reasonable out-of-pocket expenses incurred by Ceding Company in copying such records. Ceding Company shall retain such books and records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with respect to tax matters with respect to which such books and records are necessary and of which Reinsurer shall notify Ceding Company), after which time such books and records shall be delivered to Reinsurer. Reinsurer shall not copy or remove from Ceding Company's premises the accountant's work papers made available to Reinsurer and its Representatives. (b) Following the Closing Date, Reinsurer shall (i) allow Ceding Company, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at Ceding Company's expense to examine and make copies of the books and records transferred to Reinsurer 14 19 at the Closing for any reasonable business purpose, including, without limitation, the preparation or examination of tax returns, regulatory filings and financial statements and the conduct of any Action or the conduct of any regulatory, contract holder, participant or other dispute resolution, whether pending or threatened, at Reinsurer's offices or other facilities or properties and (ii) maintain such books and records for Ceding Company's examination and copying. Access to such books and records shall be at Ceding Company's expense and may not unreasonably interfere with Reinsurer's or any successor company's business operations and Ceding Company shall reimburse Reinsurer for all reasonable out-of-pocket expenses incurred by Reinsurer in copying such records. Reinsurer shall retain any such books and records for a period of at least seven years (extended by a period equal to any extension of the statute of limitations with respect to tax matters with respect to which such books and records are necessary and of which Ceding Company shall notify Reinsurer). ARTICLE 8 RESERVED ARTICLE 9 MISCELLANEOUS Section 9.1 Notices. Any notice or other communication required or permitted hereunder shall be 15 20 delivered personally (by courier or otherwise), sent by certified, registered or express mail, postage prepaid and return receipt requested, or transmitted by facsimile, (with a copy of such notice or other communication and a confirmation of a transmission sent by certified, registered or express mail, postage prepaid and return receipt requested no later than the close of business on the next business day following such transmission), and shall be addressed as follows: when Reinsurer is to be notified: SunAmerica Life Insurance Company 1 SunAmerica, Century City Los Angeles, California 90067-6022 Attention: General Counsel Facsimile No.: (310) 772-6574 with copies to: SunAmerica Life Insurance Company 1 SunAmerica, Century City Los Angeles, California 90067-6022 Attention: Controller Facsimile No.: (310) 772-6684 O'Melveny & Myers 1995 Avenue of the Stars Suite 700 Los Angeles, California 90067 Attention: Robert D. Haymer, Esq. Facsimile No.: (310) 772-6684 Barger & Wolen LLP 515 S. Flower Street 34th Floor Los Angeles, California 90071 Attention: S. Stuart Soldate, Esq. Facsimile No.: (213) 614-7399 16 21 when Ceding Company is to be notified: John Alden Life Insurance Company 7300 Corporate Center Drive Miami, Florida 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: William W. Rosenblatt, Esq. Facsimile No.: (212) 259-6333 A Party may, by notice given in accordance with this Section 9.1 to the other Party, designate another address or Person to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 9.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and subject to delivery of the mailed copy thereof) or the affidavit of the messenger (if transmitted by personal delivery) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. Section 9.2 Integration. This Agreement (including the Exhibits and the Schedules attached hereto), along with 17 22 the JANY Stock Purchase Agreement, the Asset Purchase Agreement including the Ancillary Agreements and other agreements contemplated hereby and thereby, the Annex, the Exhibits and the Schedules attached thereto (as each defined therein) (the "Transaction Agreements"), contains the entire agreement and understanding between the Parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous agreements, Representations, warranties and understandings, whether written or oral, by or between the Parties with respect to the subject matter hereof. Nothing contained in any document or instrument of conveyance, transfer, assignment or delivery executed or delivered at the Closing pursuant to this Agreement shall amend, extend, modify, renew or alter in any manner any representation, warranty, covenant, agreement or indemnity contained herein. Nothing contained in the Transaction Agreements or any other agreements contemplated hereby or thereby shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates, of liability to third parties, whether under any Laws, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any Laws. In the event of any conflict between this Agreement and the Asset Purchase Agreement, the Asset Purchase Agreement shall control. In the event of any ambiguity (or inconsistency with the Asset Purchase Agreement) in this 18 23 Agreement, such ambiguity or inconsistency shall be resolved by reference to the Asset Purchase Agreement. Section 9.3 Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of or approval under, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment or approval is set forth in a written instrument which states that it adds to, amends, cancels, renews or extends this Agreement or grants an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. Section 9.4 Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or impair, limit or restrict the exercise on the part of any Party of any such right, power or remedy or any other right, power or remedy at any time and from time to time thereafter. 19 24 No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. Section 9.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS OF THEREOF. Each Party consents and submits to the non-exclusive personal jurisdiction of any federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 9.6 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. Section 9.6 Arbitration. The Parties acknowledge and agree that the transactions contemplated herein, as well as the issuance of and payment of claims relating to the Annuity Contracts that are the subject of this Agreement, substantially affect and impact interstate commerce. 20 25 Therefore, all disputes or differences between Ceding Company and Reinsurer arising under or which are related to this Agreement (other than proceedings for the sole purpose of injunctive relief or to enforce an arbitration award set forth in Section 9.5 above) upon which an amicable understanding cannot be reached within thirty (30) days shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court having jurisdiction thereof. The Arbitrators provided for herein shall construe this Agreement in light of the prevailing custom and practices for acquisition transactions of a similar nature. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held at a site selected by the Arbitrators. The Parties agree to arbitrate within ninety (90) days following the transmittal of written demand of either Party to arbitrate any dispute arbitrable under this Agreement. The Parties will in good faith, within fifteen (15) days following notice of written demand to arbitrate attempt to agree on a single Arbitrator. If the Parties cannot within fifteen (15) days thereafter agree on a single arbitrator, each of the Parties shall appoint an 21 26 Arbitrator, notifying the other Party of the name and address of such Arbitrator. The Arbitrators appointed by each Party shall agree upon and appoint a third neutral Arbitrator. If either Party shall fail to appoint an Arbitrator as herein provided, or should the two Arbitrators so named fail to select the third Arbitrator within thirty (30) days of their appointment, then, in either event, the President of the American Arbitration Association or its successor shall appoint such second and/or third Arbitrator. A decision of a majority of the Arbitrators shall be final and binding and there shall be no appeal therefrom. The Arbitrators shall within forty-five (45) days after the final hearing enter an award and the award shall be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Parties; all other costs of the respective Parties, including without limitation fees and expenses of the respective Party's attorneys, witnesses, and discovery shall be paid by the respective Party, except to the extent that the Arbitrators otherwise direct based on the equities of the situation. The arbitration shall be held in New York, New York unless otherwise agreed between the Parties. Section 9.7 Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors 22 27 and permitted assigns. Neither Ceding Company nor Reinsurer shall assign any of its rights or delegate any of its duties hereunder, (in whole or in part and by operation of law or otherwise) without the prior written consent of the other Party hereto except that Reinsurer may assign its rights and obligations under this Agreement to any of its Affiliates provided Reinsurer shall remain liable for its obligations hereunder notwithstanding such assignment; and provided further that this Section 9.7 shall not limit the right of Reinsurer to reinsure or coinsure Novated Contracts or to cause such Novated Contracts to be novated to another insurer. Any assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such consent is required hereby, shall be void. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. Section 9.8 Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such 23 28 provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. Section 9.9 Headings. The headings in this Agreement have been inserted for convenience of reference only, and shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. Section 9.10 Counterparts. This Agreement may be executed by the parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the 24 29 same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. Section 9.11 Errors and Omissions. Inadvertent delays, errors or omissions made by either Ceding Company or Reinsurer in connection with this Agreement or any transaction hereunder shall not relieve the other party from any liability which would have attached to such party had such delay, error or omission not occurred, provided that the party causing such delay error or omission rectifies the same as soon as possible after its discovery thereof. 25 30 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. REINSURER: SUNAMERICA LIFE INSURANCE COMPANY By: /s/ James W. Rowan ------------------------- Name: James W. Rowan ------------------------- Title: Senior Vice President ------------------------- CEDING COMPANY: JOHN ALDEN LIFE INSURANCE COMPANY By: /s/ Scott L. Stanton ------------------------- Name: Scott L. Stanton ------------------------- Title: Senior Vice President ------------------------- 26 31 Schedule 5.1 Reinsurance Agreements JALIC Reinsurance: all ceded 1. Indemnity Reinsurance Agreement between John Alden Life Insurance Company and Aristar Life Insurance Company, effective October 28, 1987. 2. Coinsurance Agreement between John Alden Life Insurance Company and Lincoln National Reinsurance Company Ltd., effective September 30, 1995. - Trust Agreement among Lincoln National Reinsurance Company Limited, John Alden Life Insurance Company and The Chase Manhattan Bank, N.A., effective as of October 9, 1995. 3. Indemnity Coinsurance Agreement between John Alden Life Insurance Company and Oxford Life Insurance Company, effective January 1, 1989. - Trust Agreement among Oxford Life Insurance Company, John Alden Life Insurance Company and The Chase Manhattan Bank, N.A., dated February 13, 1990. 4. Coinsurance Agreement between John Alden Life Insurance Company and Reliance Standard Life Insurance Company, effective June 30, 1990. (Annuity Contracts and Additional Policies reinsured under the RSL Agreements shall not be assumed by Novation by Reinsurer but shall only be ceded to Reinsurer on a coinsurance basis.) - Trust Agreement among Reliance Standard Life Insurance Company, John Alden Life Insurance Company and CTC Illinois Trust Company, dated July 9, 1990. 5. Coinsurance Agreement between John Alden Life Insurance Company and Reliance Standard Life Insurance Company, effective October 31, 1990. 27 32 (Annuity Contracts and Additional Policies reinsured under the RSL Agreements shall not be assumed by Novation by Reinsurer but shall only be ceded to Reinsurer on a coinsurance basis.) - Trust Agreement among Reliance Standard Life Insurance Company, John Alden Life Insurance Company and CTC Illinois Trust Company, dated October 30, 1990. 28 33 EXHIBIT A JOHN ALDEN LIFE INSURANCE COMPANY SUNAMERICA LIFE INSURANCE COMPANY __________, 1997 Dear Policyholder: This notifies you of an agreement reached between JOHN ALDEN LIFE INSURANCE COMPANY ("John Alden") and SUNAMERICA LIFE INSURANCE COMPANY ("SunAmerica") for the assumption of your annuity contract __________ by SunAmerica. SunAmerica will become your insurer and will assume all of the rights, obligations and liabilities of John Alden under your coverage. This assumption will be effective as of 12:01 a.m., Eastern Time, on __________, 1997. The assumption has been approved by the Insurance Department of the State of Minnesota and the Insurance Department of the State of Arizona, the insurance departments of the domiciliary states of John Alden and SunAmerica. To introduce you to SunAmerica, attached is a summary of essential information about SunAmerica. You have the following options with regard to the assumption of your contract: Option 1. Accept the transfer of your contract from John Alden to SunAmerica. Option 2. Reject the proposed transfer of your contract from John Alden to SunAmerica. If you choose this option, John Alden will remain as your insurer and you will have no rights to claim any payments from SunAmerica. If you wish to choose option 1, simply do not return the Rejection Form and you will automatically be deemed to have accepted this option upon the expiration of thirty (30) days from the date of this Notice. You should then attach the enclosed Certificate of Assumption to your contract. If you wish to choose option 2, you must complete the enclosed Rejection Form, sign it and return it within 1 34 thirty (30) days of the date of this Notice, along with the enclosed Certificate of Assumption. Except for the substitution of SunAmerica for John Alden as your insurer, your rights under your contract will not change as a result of the assumption of your contract. If you have any questions about the assumption of your contact or about SunAmerica, please feel free to call ( ) _________. Written inquiries may be mailed to: SunAmerica Life Insurance Company (address) Sincerely, JOHN ALDEN LIFE INSURANCE COMPANY -------------------------------- By: SUNAMERICA LIFE INSURANCE COMPANY -------------------------------- By: 2 35 REJECTION FORM To: JOHN ALDEN LIFE INSURANCE COMPANY [address] Re: ANNUITY CONTRACT NUMBER __________ ("Contract") I reject the proposed transfer of my Contract from John Alden Life Insurance Company to SunAmerica Life Insurance Company. Enclosed is the Certificate of Assumption that was sent to me. DATE:____________ ____________________________ POLICYHOLDER SIGNATURE _____________________________ PRINT OR TYPE NAME 3 36 [For use with all Option Letters] INFORMATION SUMMARY [Description of SunAmerica] 4 37 EXHIBIT B ASSUMPTION CERTIFICATE [Contract Number] Effective Date: ________________, 1996 This is to certify that SunAmerica Life Insurance Company ("SunAmerica) has assumed responsibility for your annuity insurance policy and the attached riders, if any, issued by John Alden Life Insurance Company ("John Alden"). All provisions of such policy remain in full force and effect; except that from and after the Effective Date all references in your policy to John Alden are changed to SunAmerica and SunAmerica shall have all rights and will perform all the obligations contained in such policy. All inquiries and future correspondence should be directed to SunAmerica at the address listed above. This certificate becomes a part of your policy and should be attached thereto. IN WITNESS WHEREOF, SUNAMERICA LIFE INSURANCE COMPANY has executed this Assumption Certificate at its Administrative Office in _______________ as of its Effective Date. SUNAMERICA LIFE INSURANCE COMPANY By: ------------------------------- 5 EX-10.5 6 TRUST AGREEMENT DATED 3/31/97 1 EXECUTION COPY TRUST AGREEMENT By and Among SUNAMERICA LIFE INSURANCE COMPANY as Grantor, JOHN ALDEN LIFE INSURANCE COMPANY as Beneficiary, and BANKERS TRUST COMPANY as Trustee 2 TABLE OF CONTENTS
Page ---- RECITALS ............................................................................................... 1 ARTICLE 1. DEPOSIT OF ASSETS TO THE TRUST ACCOUNT...................................................... 3 ARTICLE 2. WITHDRAWAL AND SUBSTITUTION OF ASSETS OF THE TRUST ACCOUNT ........................................................................ 3 ARTICLE 3. REDEMPTION AND INVESTMENT OF ASSETS......................................................... 7 ARTICLE 4. RIGHT TO VOTE ASSETS........................................................................ 9 ARTICLE 5. ADDITIONAL RIGHTS AND DUTIES OF THE TRUSTEE .................................................................................. 9 ARTICLE 6. THE TRUSTEE'S COMPENSATION, EXPENSES AND INDEMNIFICATION ...................................................................... 12 ARTICLE 7. RESIGNATION OR REMOVAL OF THE TRUSTEE....................................................... 13 ARTICLE 8. TERMINATION OF THE TRUST ACCOUNT............................................................ 15 ARTICLE 9. MISCELLANEOUS............................................................................... 15 Section 9.1. Notices..................................................................... 15 Section 9.2. Portfolio Inspection........................................................ 17 Section 9.3. Entire Agreement............................................................ 18 Section 9.4. Amendments.................................................................. 19 Section 9.5. Waivers..................................................................... 19 Section 9.6. Governing Law............................................................... 20 Section 9.7. Arbitration................................................................. 20 Section 9.8. Binding Effect; Assignment; Third Party Beneficiaries ................................................. 23 Section 9.9. Severability................................................................ 24 Section 9.10. Headings.................................................................... 24 Section 9.11. Counterparts................................................................ 25 Section 9.12. Errors and Omissions........................................................ 25 Section 9.13. Certain Definitions......................................................... 25 SIGNATURES..............................................................................................28
i 3 TRUST AGREEMENT TRUST AGREEMENT, dated as of March 31, 1997 (the "Agreement"), among SunAmerica Life Insurance Company, an Arizona corporation (the "Grantor"), John Alden Life Insurance Company, a Minnesota corporation (a "Beneficiary," as defined in Section 9.11 hereof) and Bankers Trust Company, a banking corporation organized and existing under the laws of the State of New York (the "Trustee") (collectively, the "Parties" and sometimes individually a "Party"). WITNESSETH: WHEREAS, the Beneficiary and the Grantor have entered into an Asset Purchase and Sale Agreement dated as of November 29, 1996, as has been and as may be amended from time to time (the "Asset Purchase Agreement"), pursuant to which the Grantor has agreed to enter into an Indemnity Reinsurance Agreement with Beneficiary pursuant to which it would transfer assets in the amount specified in the Asset Purchase Agreement to a trust account established pursuant to this Agreement (all capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Asset Purchase Agreement, except for purposes of the terms "Insurance Liabilities," "Other Liabilities," "Excluded Liabilities," and "Extra-Contractual Obligations," the words "Annuity Contracts" shall be replaced with the term "Policies"); WHEREAS, pursuant to the Indemnity Reinsurance Agreement being entered into concurrently herewith by the Grantor and the Beneficiary (the "Indemnity Reinsurance Agreement"), the 4 Grantor has agreed to deposit additional assets in such trust account, if necessary; WHEREAS, the Grantor desires to establish a trust account hereunder for the benefit of the Beneficiary to assure that the Beneficiary will have access to sufficient assets in the event that the Grantor becomes unable to meet its obligations to the Beneficiary under the Indemnity Reinsurance Agreement; and WHEREAS, the Trustee (1) is a member of the Federal Reserve System (2) is organized under the laws of the United States or a state thereof, (3) is regulated, supervised, and examined by United States federal authorities or authorities of a state of the United States having regulatory authority over banks and trust companies, (4) is not the Parent, a Subsidiary or an Affiliate (as such terms are defined in Section 9.10 hereof) of the Grantor or the Beneficiary, and (5) has been granted authority to operate with fiduciary powers. NOW, THEREFORE, in consideration of the premises, representations and warranties and the mutual covenants and agreements contained herein and other good, valuable and sufficient consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows: 2 5 ARTICLE 1. DEPOSIT OF ASSETS TO THE TRUST ACCOUNT Section 1.1. The Grantor hereby establishes a trust account (the "Trust Account") with the Trustee upon the terms and conditions set forth herein. The assets held in the Trust Account shall be subject to withdrawal by the Beneficiary and the Grantor as provided herein. Section 1.2. The Grantor shall transfer, or cause to be transferred, assets to the Trustee for initial deposit to the Trust Account, and may from time to time transfer to the Trustee for deposit to the Trust Account other assets (all such assets actually received in the Trust Account are herein referred to individually as an "Asset" and collectively as the "Assets"). All income from Assets shall be deemed to be part of the Trust Account. All Assets in the Trust Account shall be held by the Trustee at the Trustee's office in the United States. Section 1.3. All payments of interest, dividends and other income actually received in respect of Assets shall be deposited by the Trustee in the Trust Account. ARTICLE 2. WITHDRAWAL AND SUBSTITUTION OF ASSETS OF THE TRUST ACCOUNT Section 2.1. Withdrawal by Beneficiary. (a) Withdrawals from the Trust Account may be made by or at the direction of the Beneficiary at any time and from time to time only for the purposes permitted by Section 9.5 of the 3 6 Indemnity Reinsurance Agreement and solely after compliance with the procedures set forth in this Section 2.1. (b) Before submitting a request to the Trustee to withdraw funds from the Trust Account, the Beneficiary shall take the following actions: (i) Notify the Grantor in writing of the specific benefits or other amounts (the "Claim") it believes the Grantor has not paid to a Policyholder with respect to any Insurance Liability, including without limitation, the Policyholder's name, address, contract number and, if known, a social security number, the basis upon which the Beneficiary believes the benefits are owed, and any correspondence from the policyholder with respect to such Claim (the "Claim Notice"). (ii) If, within four (4) Business Days after receipt of the Claim Notice, Grantor has not provided the Beneficiary with reasonable evidence that Grantor has paid the Claim, then Beneficiary shall have the right to retain the services of a "Big 6" accounting firm (the "Designated Accounting Firm") which will review the Claim for four (4) Business Days and 4 7 provide a written determination to both Parties as to whether Grantor is obligated to pay the Claim. (iii) If the Designated Accounting Firm determines that the Claim is an Insurance Liability payable by Grantor and has not been paid, the Beneficiary shall be entitled to pay the policyholder the amounts specified in the Claim. (c) Following payment of a Claim, the Beneficiary shall present to the Trustee a certificate substantially in the form of Exhibit A hereto, signed by its Chief Executive Officer, Chief Financial Officer, General Counsel or the Senior Vice President of Accounting, which shall be accompanied by a certificate executed by a partner of the Designated Accounting Firm that states (X) that the Grantor was obligated to pay the Claim and failed to do so, and (Y) that Beneficiary has provided reasonable evidence to the Designated Accounting Firm that Beneficiary has paid the Claim (the "Beneficiary Withdrawal Request"). (d) Upon receipt of the Beneficiary Withdrawal Request, Trustee shall immediately forward a copy of the Beneficiary Withdrawal Request, together with all attachments thereto, to the Grantor and transfer to the Beneficiary or its designee (i) all right, title and interest in any readily marketable Assets identified by the Beneficiary, or if none are identified, cash or any readily marketable Assets, in each 5 8 case in an amount equal to the Claim identified in the Beneficiary Withdrawal Request, and (ii) custody thereof. The Trustee shall be fully protected in relying upon any Beneficiary Withdrawal Request which meets the requirement of Section 2.1(c) hereof. (e) The costs of any Designated Accounting Firm retained by the Beneficiary pursuant to Section 2.1(b) shall be borne by the Party adjudged to be incorrect. Section 2.2. Withdrawals by Grantor. (a) Withdrawals from the Trust Account may be made by or at the direction of the Grantor at any time or from time to time for the purposes permitted in Section 9.1 of the Indemnity Reinsurance Agreement upon presentation to the Trustee of a certificate substantially in the form of Exhibit B hereto (the "Grantor Withdrawal Request"), signed by a duly authorized officer of the Grantor, which states the amount to be withdrawn (the "Withdrawn Amount"). Upon receipt of the Grantor Withdrawal Request, the Trustee shall immediately transfer to the Grantor (i) all right, title and interest in the Assets identified by the Grantor, or if none are identified, cash or readily marketable Assets, in each case in an amount equal to the Withdrawal Amount identified in the Grantor Withdrawal Request, and (ii) custody thereof. No statements or documents other than the Grantor Withdrawal Request need be presented by the Grantor in order to withdraw or direct the withdrawal of Assets, except that the Grantor may be required by the Trustee to acknowledge receipt of 6 9 withdrawn Assets. The Trustee shall be fully protected in relying upon any Grantor Withdrawal Request which meets the requirements of this Section 2.2(a). (b) If the Beneficiary reasonably believes that the Grantor has withdrawn funds from the Trust Account in violation of Section 9.1 of the Indemnity Reinsurance Agreement, it may retain a Designated Accounting Firm to audit any such withdrawal. If the Designated Accounting Firm determines that all or any portion of such withdrawal was made in violation of Section 9.1 of the Indemnity Reinsurance Agreement, it shall execute a certificate that sets forth the amount that was withdrawn inappropriately and the basis therefor (the "Withdrawal Dispute Certificate"). (c) Within five (5) days after receipt of a Withdrawal Dispute Certificate, Grantor shall redeposit the amount designated in the certificate, together with interest thereon at the one month London Interbank Offered rate. (d) The costs of any Designated Accounting Firm retained by the Beneficiary shall be borne (i) by the Beneficiary if the Designated Accounting Firm determines that the amount to be paid is $1,000,000 or less, and (ii) by the Grantor if the Designated Accounting Firm determines that the amount to be paid is more than $1,000,000. Section 2.3. The Grantor may substitute Assets in the Trust Account in accordance with Section 9.3 of the Indemnity Reinsurance Agreement. The Trustee shall be fully protected in relying upon any direction of the Grantor to 7 10 accept a substitution of assets and shall have no duty to determine whether the requirements of Section 9.3 of the Indemnity Reinsurance Agreement have been satisfied. ARTICLE 3. REDEMPTION AND INVESTMENT OF ASSETS Section 3.1. The Trustee shall surrender for payment all maturing Assets and all Assets called for redemption and deposit the proceeds of such to the Trust Account. Section 3.2. The responsibility for directing the Trustee to invest and reinvest the Assets shall be that of the Grantor and/or its designated agent and, unless and until directed by the Grantor or such designated agent, the Trustee shall not be required to take any action with respect to the investment or reinvestment of the Assets. The Trustee shall invest and reinvest the Assets or any part thereof in, and accept in substitution therefor, such Authorized Investments as the Grantor or its designated agent shall direct by electronic on-line communication or in writing. The Grantor and its designated agent may, from time to time, provide Trustee with written directions regarding the order in which Assets will be delivered to the Grantor or the Beneficiary in connection with withdrawals pursuant to Section 2.1 hereof. Section 3.3. Trustee shall have no responsibility for trading the Assets in the Trust Account. The Grantor or its designated agent shall have the authority to issue orders for the purchase, sale, exchange or other acquisition or disposition of Assets directly to brokers, dealers or issuers. 8 11 Trustee shall be responsible for settling trades made by the Grantor. Trustee shall follow the instructions and directions of the Grantor or its designated agent regarding the settlement of trades. Section 3.4. The Grantor or its designated agent shall promptly notify the Trustee (no later than 12:00 noon New York City time on each Settlement Date) of the issuance of each order for the purchase or sale of an Asset and shall direct the broker, dealer or issuer to confirm the execution of each order by advice to Trustee. Such notification shall be authority for Trustee to pay for securities purchased against receipt thereof and to deliver securities sold against payment thereof, as the case may be. Trustee is authorized, in its discretion, to enter into an agreement with the Grantor to use the Depository Trust Company's Institutional Delivery System for trade confirmation and settlement. Section 3.5. Trustee shall promptly forward a copy of any notice, statement or report that it is required under this Agreement to provide to Grantor or its designated agent. ARTICLE 4. RIGHT TO VOTE ASSETS The Trustee shall forward all annual and interim stockholder reports and all proxies and proxy materials relating to the Assets in the Trust Account to the Grantor. The Grantor shall have the full and unqualified right to vote any Assets in the Trust Account. 9 12 ARTICLE 5. ADDITIONAL RIGHTS AND DUTIES OF THE TRUSTEE Section 5.1. Except as otherwise provided in Section 2.1(d) hereof, the Trustee shall notify the Grantor and the Beneficiary in writing within ten (10) days following each deposit to, or withdrawal from, the Trust Account. Section 5.2. Before accepting any asset for deposit to the Trust Account, the Trustee shall determine that such asset is in such form that the Beneficiary or the Trustee upon direction by the Beneficiary whenever necessary may negotiate such asset without consent or signature from the Grantor or any Person or entity other than the Trustee in accordance with the terms of this Agreement. Section 5.3. The Trustee shall receive all Assets and cause them to be held in safekeeping. Section 5.4. The Trustee shall accept and open all mail directed to the Grantor or the Beneficiary in care of the Trustee. Section 5.5. The Trustee shall furnish to the Grantor and the Beneficiary a statement of all Assets in the Trust Account as of the inception of the Trust Account and as of the end of each calendar month thereafter. Such statements shall be furnished within five business days after the end of the month. Section 5.6. Upon the request of the Grantor or the Beneficiary and at their sole cost and expense, the Trustee shall promptly permit the Grantor or the Beneficiary, their respective agents, employees or independent auditors to 10 13 examine, audit, excerpt, transcribe and copy, during the Trustee's normal business hours, any books, documents, papers and records relating to the Trust Account or the Assets. Trustee shall also furnish the Grantor on line electronic review of the Trust Account and furnish the Beneficiary review pursuant to and in accordance with Section 9.2 hereof. Section 5.7. Except as otherwise provided in Section 2.1(c) hereof, the Trustee is authorized to follow and rely upon all instructions given by officers named in incumbency certificates furnished to the Trustee from time to time by the Grantor and the Beneficiary, respectively, and by attorneys-in-fact acting under written authority furnished to the Trustee by the Grantor or the Beneficiary, including, without limitation, instructions given by letter, facsimile transmission, telegram, teletype, cablegram or electronic media, if the Trustee believes such instructions to be genuine and to have been signed, sent or presented by the proper Party or Parties. Except as otherwise provided in Section 2.1(c) hereof, the Trustee shall not incur any liability to anyone resulting from actions taken by the Trustee in reliance in good faith on such instructions. The Trustee shall not incur any liability in executing instructions (i) from an attorney-in-fact prior to receipt by it of notice of the revocation of the written authority of the attorney-in-fact or (ii) from any officer of the Grantor or the Beneficiary named in an incumbency certificate delivered hereunder prior to receipt by it or a more current certificate. 11 14 Section 5.8. The duties and obligations of the Trustee shall only be such as are specifically set forth in this Agreement, as it may from time to time be amended, and no implied duties or obligations shall be read into this Agreement against the Trustee. The Trustee shall only be liable for breach of this Agreement and direct and proximate losses due to its own gross negligence, willful misconduct or lack of good faith. Section 5.9. No provision of this Agreement shall require the Trustee to take any action which, in the Trustee's reasonable judgment, would result in any violation of this Agreement or any provision of law. Section 5.10. The Trustee may confer with counsel of its own choice in relation to matters arising under this Agreement and shall have full and complete authorization and protection from the other Parties hereunder for any action taken or suffered by it under this Agreement or under any transaction contemplated hereby in good faith and in accordance with the advice of such counsel. Section 5.11. No Person other than the Beneficiary or the Grantor may require an accounting or bring any action against the Trustee with respect to this Agreement or its actions as Trustee. 12 15 ARTICLE 6. THE TRUSTEE'S COMPENSATION, EXPENSES AND INDEMNIFICATION Section 6.1. Trustee shall be entitled to receive from the Grantor as compensation for its services under this Agreement, a fee as agreed upon in writing by the Grantor, which may from time to time be amended. Section 6.2. Trustee shall be entitled to receive from Grantor payment of or reimbursement for all of the Trustee's actual out-of-pocket expenses and disbursements in connection with its duties under this Agreement (including reasonable attorney('s) fees and expenses), except any such expense or disbursement as may arise from the Trustee's gross negligence, willful misconduct or lack of good faith, and except as provided in Section 6.4 hereof. Section 6.3. No Assets shall be (i) withdrawn from the Trust Account or (ii) used in any manner for paying compensation to, or reimbursement or indemnification of, the Trustee. Section 6.4. The Grantor hereby agrees to indemnify the Trustee for, and hold it harmless against, any loss, liability, costs or expenses (including reasonable attorney('s) fees and expenses) incurred by the Trustee arising out of or in connection with the performance of its obligations in accordance with the provisions of this Agreement, including any loss, liability, costs or expenses arising out of or in connection with the status of the Trustee and its nominee as the holder of record of the Assets; 13 16 provided, however, that Trustee shall not be entitled to any indemnification hereunder with respect to any loss, liability, costs or expenses resulting from the Trustee's breach of this Agreement (including any breach of its fiduciary or other obligations as Trustee) or any gross negligence, willful misconduct or lack of good faith on the part of the Trustee; and provided further that the Beneficiary (and not the Grantor) shall indemnify Trustee for any costs or expenses (including, without limitation, attorney('s) fees and expenses) incurred in connection with any dispute between Grantor and Beneficiary with respect to which Grantor is determined to be the prevailing party. The Grantor and the Beneficiary hereby acknowledge that the foregoing indemnities shall survive the resignation of the Trustee or the termination of this Agreement. ARTICLE 7. RESIGNATION OR REMOVAL OF THE TRUSTEE Section 7.1. The Trustee may resign at any time for any reason upon delivery of a written notice of resignation, effective not less than 90 days after receipt of the notice by the Beneficiary and Grantor. Section 7.2. The Trustee may be removed by the Grantor at any time for any reason by delivery to the Trustee and the Beneficiary of a written notice of removal, effective not less than 90 days after receipt of such notice by the Trustee and the Beneficiary. 14 17 Section 7.3. The foregoing notwithstanding, no such resignation by the Trustee or removal of the Trustee shall be effective until a successor trustee has been duly appointed and approved by the Beneficiary and the Grantor and all Assets in the Trust Account have been duly transferred to the new trustee. Section 7.4. Upon such resignation by the Trustee or such removal of the Trustee, the successor trustee shall succeed to and become vested with all the rights, powers, privileges and duties of the Trustee, and the Trustee shall be discharged from any future duties and obligations under this Agreement. Section 7.5. In the event of the inability of a successor Trustee to be named or qualify within a reasonable time following the resignation or removal of the Trustee, the Trustee shall have the right, upon notice to the parties, to deposit the Assets with a court of competent jurisdiction in the State of New York, whereupon, it shall submit a final report of all Assets delivered and be relieved of all further responsibilities under this Agreement. ARTICLE 8. TERMINATION OF THE TRUST ACCOUNT Section 8.1. This Agreement shall be terminated upon the Trustee's receipt of a certificate substantially in the form of Exhibit C hereto (the "Termination Certificate") signed by a duly authorized officer of the Grantor executed in accordance with Section 9.9 of the Indemnity Reinsurance Agreement or, other than in accordance with such Section 9.9, 15 18 executed by both the Grantor and the Beneficiary. Within 10 days of the termination of this Agreement, the Trustee shall transfer, pay over and deliver to the Grantor all right, title and interest in the remaining Assets of the Trust Account in exchange for a written receipt from the Grantor. Unless terminated as provided above in this Section 8.1, this Agreement shall remain in effect for so long as there are Assets remaining in the Trust Account. ARTICLE 9. MISCELLANEOUS Section 9.1. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), sent by certified, registered or express mail, postage prepaid and return receipt requested, or transmitted by facsimile (with a copy of such notice or other communication and a confirmation of transmission sent by certified, registered or express mail, postage prepaid and return receipt requested no later than the close of business on the next business day following such transmission) and shall be addressed as follows: When Grantor is to be notified: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Attn: General Counsel Facsimile No.: (310) 772-6574 with a copy to: 16 19 SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Attn: Controller Facsimile No.: (310) 772-6684 O'Melveny & Myers 1999 Avenue of the Stars Suite 700 Los Angeles, California 90067 Attn: Robert D. Haymer, Esq. Facsimile No.: (310) 246-6779 Barger & Wolen LLP 515 S. Flower Street 34th Floor Los Angeles, California 90071 Attn: S. Stuart Soldate, Esq. Facsimile No. (213) 614-7399 When Beneficiary is to be notified: John Alden Life Insurance Company 7300 Corporate Center Drive Miami, Florida 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 with copies to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: William W. Rosenblatt, Esq. Facsimile No.: (212) 259-6333 When the Trustee is to be notified: Bankers Trust Company Four Albany Street 10th Floor New York, NY 10006 Attn: Corporate Trust & Agency Group Ms. Karla Leanffor Facsimile No.: (212) 250-6439 A Party may, by notice given in accordance with this Section 9.1 to the other Party, designate another address or Person to which notices required or permitted to be given pursuant to 17 20 this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 9.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and subject to delivery of the mailed copy thereof) or the affidavit of the messenger (if transmitted by personal delivery) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. Section 9.2. Portfolio Inspection. The Beneficiary shall be provided, at its own expense, the ability to review, but not alter or give instruction with respect to the portfolio of the Trust by electronic on-line communication. Section 9.3. Entire Agreement. This Agreement (including Schedules attached hereto) contains the entire agreement and understanding between the Parties with respect to the subject matter hereof. Nothing contained in this Agreement shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates of liability to third parties, whether under any Laws or otherwise, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any Laws. In the event of any conflict between this Agreement and the Asset Purchase Agreement as to the rights or 18 21 obligations or Grantor or Beneficiary (but not with respect to the rights or obligations of Trustee), the Asset Purchase Agreement shall control. In the event of any ambiguity in this Agreement as to the rights or obligations of Grantor or Beneficiary (but not as to the rights or obligations of Trustee) such ambiguity shall be resolved by reference to the Asset Purchase Agreement. Section 9.4. Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of or approval under, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment or approval is set forth in a written instrument which states that it adds to, amends, cancels, renews or extends this Agreement or grants an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. Section 9.5. Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or 19 22 impair, limit or restrict the exercise on the part of any Party of any such right, power or remedy or any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. Section 9.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Each Party consents and submits to the non-exclusive personal jurisdiction of any federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 9.7 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. Section 9.7. Arbitration. The Parties acknowledge and agree that the transactions contemplated herein substantially affect and impact interstate commerce. 20 23 Therefore, all disputes or differences between two or among three of the Parties arising under or which are related to this Agreement (other than proceedings for the sole purpose of injunctive relief) upon which an amicable understanding cannot be reached within thirty (30) days shall be settled by the parties to the dispute (the "Disputing Parties") by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court having jurisdiction thereof. The Arbitrators provided for herein shall construe this Agreement in light of the prevailing custom and practices for transactions of a similar nature. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held in New York, New York, unless otherwise agreed to by the Parties. The Parties agree to arbitrate within ninety (90) days following the transmittal of written demand of any Disputing Party to arbitrate any dispute arbitrable under this Agreement. The Disputing Parties will in good faith, within fifteen (15) days following notice of written demand to arbitrate, attempt to agree on a single Arbitrator. If the Disputing Parties cannot within fifteen (15) days thereafter agree on a single arbitrator, the Parties' Arbitrators shall be chosen as follows: 21 24 (a) In a dispute between two Disputing Parties, there shall be three (3) Arbitrators. Each of the Disputing Parties shall choose one Arbitrator. The third Arbitrator shall be chosen by the other two Arbitrators within thirty (30) days after they have been appointed. If the two Arbitrators cannot agree upon a third Arbitrator, each Arbitrator shall nominate, within three (3) days of such failure to agree, three (3) persons of whom the other shall reject two. The third Arbitrator shall then be chosen by drawing lots within twenty-four (24) hours of determination of the two candidates. If any Disputing Party fails to choose an Arbitrator within thirty (30) days after receiving the written request of the other Disputing Party to do so, the other Disputing Party shall choose both Arbitrators, who shall choose the third Arbitrator. (b) In a dispute among three Disputing Parties, there shall be five (5) Arbitrators, except as otherwise provided herein. Each of the Disputing Parties shall choose one Arbitrator. The remaining two Arbitrators shall be chosen by the unanimous vote of the other three Arbitrators within thirty (30) days after they have been appointed. If the three Arbitrators cannot agree upon a fourth and/or a fifth Arbitrator, each Arbitrator shall nominate, within three (3) days of such failure to agree, three (3) persons of whom each of the others shall reject one. The fourth and/or fifth Arbitrator shall then be chosen by drawing lots within twenty-four (24) hours of determination of the three (3) candidates. 22 25 If any one Disputing Party fails to choose an Arbitrator within thirty (30) days after receiving the written request of the another Disputing Party to do so, then the Arbitrator will be decided by a panel of three (3) Arbitrators pursuant to Paragraph 9.7(a) above. If any two Disputing Parties fail to choose an Arbitrator within thirty (30) days after receiving the written request of the other Disputing Party to do so, then such latter Disputing Party shall choose two Arbitrators, who shall choose a third Arbitrator. A decision of a majority of the Arbitrators shall be final and binding and there shall be no appeal therefrom. The Arbitrators shall award compensatory damages only, not consequential or punitive damages. The Arbitrators shall within forty-five (45) days after the final hearing enter an award and the award shall be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Disputing Parties; all other costs of the respective Disputing Parties, including without limitation fees and expenses of the respective Disputing Party's attorneys, witnesses, and discovery shall be paid by the respective Disputing Party, except to the extent that the Arbitrators otherwise direct based on the equities of the situation. Section 9.8. Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither the Grantor nor the 23 26 Beneficiary shall assign any of its rights or delegate any of its duties hereunder, (in whole or in part and by operation of law or otherwise) without the prior written consent of the other Party hereto, except that Grantor may assign its rights and obligations under this Agreement to any of its Affiliates, provided that Grantor shall remain liable for its obligations hereunder notwithstanding such assignment. Any assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such consent is required hereby, shall be void. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. Section 9.9. Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair 24 27 the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. Section 9.10. Headings. The headings in this Agreement have been inserted for convenience of reference only, and shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. Section 9.11. Counterparts. This Agreement may be executed by the parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. Section 9.12. Errors and Omissions. Inadvertent delays, errors or omissions made by either the Grantor or the Beneficiary in connection with this Agreement or any transaction hereunder shall not relieve the other party from 25 28 any liability which would have attached to such party had such delay, error or omission not occurred, provided that the party causing such delay error or omission rectifies the same as soon as possible after its discovery thereof. Section 9.13. Certain Definitions. Except as the context shall otherwise require, the following terms shall have the following meanings for all purposes of this Agreement (the definitions to be applicable to both the singular and the plural form of each term defined if both such forms of such term are used in this Agreement): (a) The term "Affiliate" with respect to any corporation shall mean a corporation which directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such corporation. The term "control" (including the related terms "controlled by" and "under common control with") shall mean the ownership, directly or indirectly, of more than fifty percent (50%) of the voting stock of a corporation. (b) In addition to the entity designated as "Beneficiary" in the introductory paragraph of this Agreement, the term "Beneficiary" shall also include any successor by operation of law of the Beneficiary named in the introductory paragraph. If a court of law appoints a successor in interest to the named Beneficiary, then the named Beneficiary includes and is limited to the court appointed domiciliary receiver 26 29 (including conservator, rehabilitator or liquidator). (c) The term "business day" shall mean any day on which the offices of the Trustee are open for business. (d) The term "Person" shall mean and include an individual, a corporation, a partnership, an association, a trust, an unincorporated organization or a government or political subdivision thereof. (e) The term "Parent" shall mean an institution that, directly or indirectly, controls another institution. Section 9.14. Documentation to be Provided to Trustee. Grantor has provided or shall provide Trustee with copies of the Asset Purchase Agreement and the Indemnity Reinsurance Agreement. 27 30 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized. SUNAMERICA LIFE INSURANCE COMPANY, As Grantor By: /s/ James W. Rowan ------------------------------------- Name: James W. Rowan Title: SVP JOHN ALDEN LIFE INSURANCE COMPANY, As Beneficiary By: /s/ Scott L. Stanton ------------------------------------- Name: Scott L. Stanton Title: SVP & CFO BANKERS TRUST COMPANY, As Trustee By: /s/ Marie C. Rasch ------------------------------------- Name: Marie C. Rasch Title: Vice President 28 31 Exhibit A BENEFICIARY WITHDRAWAL REQUEST The undersigned, the [insert position]* of John Alden Life Insurance Company ("John Alden"), does hereby certify that, pursuant to Section 2.1 of the Trust Agreement (as defined below) established by SunAmerica for the benefit of John Alden pursuant to the Trust Agreement dated as of March 31, 1997 entered into by and among John Alden, SunAmerica Life Insurance Company ("SunAmerica") and Bankers Trust Company (the "Trust Agreement"): (1) John Alden has paid the Policyholder(s) identified [below/on the attached schedule] with respect to the following claim(s):
Policyholder Address Contract Social Security Claim Type of Name Number Number Amount Claim**
(2) Attached hereto is a certificate executed by a partner of a "Big 6" Accounting Firm stating that SunAmerica was obligated to pay the claim(s) identified hereon, and John Alden has provided reasonable evidence to such Accounting Firm that John Alden has paid such Claim(s). This Beneficiary Withdrawal Request is within the meaning of Section 2.1(c) of the Trust Agreement. Dated: _______________ _________________________ Name: Title: * Chief Executive Officer, Chief Financial Officer, General Counsel or Senior Vice President of Accounting ** E.g., surrender, withdrawal, other benefit or type of payment 32 Exhibit B GRANTOR WITHDRAWAL REQUEST The undersigned, the [insert position] and a duly authorized officer of SunAmerica Life Insurance Company ("SunAmerica"), does hereby certify that, pursuant to Section 2.2 of the Trust Agreement dated as of March 31, 1997 among SunAmerica, John Alden Life Insurance Company, and Bankers Trust Company (the "Trust Agreement"), SunAmerica is entitled to withdraw from the Trust Account established pursuant to the Trust Agreement $[ ] (the "Withdrawal Amount"). SunAmerica requests payment of the Withdrawal Amount [in cash] [by transfer to it of all right, title and interest in, and custody of, the Assets identified in Exhibit attached hereto or readily marketable Assets]. This Grantor Withdrawal Request is within the meaning of Section 2.2(a) of the Trust Agreement. All capitalized terms used herein without definition shall have the meanings given them in the Trust Agreement. Dated:_______________________ ___________________________________ Name: Title: 33 Exhibit C TERMINATION CERTIFICATE The undersigned, the [insert position] and a duly authorized officer of SunAmerica Life Insurance Company ("SunAmerica") does hereby certify that: (1) this Certificate is a "Termination Certificate" within the meaning of Section 8.1 of the Trust Agreement dated as of [_______ __, 1996] entered into by and among John Alden Life Insurance Company ("John Alden"), SunAmerica and Bankers Trust Company, as Trustee; and (2) the Statutory Reserves (as such term is defined in the Indemnity Reinsurance Agreement by and between Sun America and John Alden) as shown on SunAmerica's Quarterly Report for the quarter ended ______________ (a true and correct copy of which is attached hereto) are less than $75 million. Dated: __________ _________________________ Name: Title: EX-10.6 7 TRANSITION SERVICES AGREEMENT W/SUNAMERICA LIFE 1 EXECUTION COPY TRANSITION SERVICES AGREEMENT Between JOHN ALDEN LIFE INSURANCE COMPANY and SUNAMERICA LIFE INSURANCE COMPANY Dated: March 31, 1997 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 APPOINTMENT OF JALIC; SERVICES AND AUTHORITY.................................................. 2 1.1 Engagement........................................................................... 2 1.2 General Description of the Services.................................................. 2 1.3 Performance by Affiliates............................................................ 3 1.4 Controlled Disbursement and Income Accounts.......................................... 3 1.5 Monthly Accounting................................................................... 4 1.6 Maintenance of Books and Records..................................................... 4 1.7 Claims-Payment Instructions.......................................................... 6 1.8 Complaint-Handling Procedure......................................................... 6 1.9 Filings.............................................................................. 7 ARTICLE 2 COMPENSATION; PAYMENT......................................................................... 7 2.1 Fee.................................................................................. 7 2.2 Invoice; Payment..................................................................... 7 2.3 Disputes............................................................................. 7 ARTICLE 3 TRANSITION PERIOD............................................................................. 9 ARTICLE 4 NO HIRE....................................................................................... 9 ARTICLE 5 TERM AND TERMINATION.......................................................................... 10 5.1 Term................................................................................. 10 5.2 Termination for Breach............................................................... 10 5.3 Termination for Receivership......................................................... 10 ARTICLE 6 REPRESENTATIONS............................................................................... 11 ARTICLE 7 INDEPENDENT CONTRACTOR........................................................................ 11 ARTICLE 8 FORCE MAJEURE................................................................................. 11 ARTICLE 9 HOLD HARMLESS................................................................................. 12 ARTICLE 10 MISCELLANEOUS................................................................................. 13 10.1 Notices.............................................................................. 13 10.2 Entire Agreement..................................................................... 15 10.3 Amendments........................................................................... 15 10.4 Waivers.............................................................................. 16 10.5 Governing Law........................................................................ 16 10.6 Arbitration.......................................................................... 17 10.7 Certain Definitions.................................................................. 18
i 3 TABLE OF CONTENTS (cont'd)
Page ---- 10.8 Binding Effect; Assignment; Third Party Beneficiaries................................ 18 10.9 Severability......................................................................... 18 10.10 Headings............................................................................. 19 10.11 Counterparts......................................................................... 19 10.12 Further Assurances................................................................... 19
SCHEDULES: Schedule 1.1 - Services Schedule 2.1 - Compensation of JALIC ii 4 TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT (the "Agreement") dated March 31, 1997 (the "Effective Date") between John Alden Life Insurance Company, a Minnesota corporation ("JALIC"), and SunAmerica Life Insurance Company, an Arizona Corporation (the "Company"). WHEREAS, pursuant to an Asset Purchase and Sale Agreement dated November 29, 1996 (the "Asset Purchase Agreement") between JALIC and the Company, JALIC is selling to the Company certain assets used in JALIC's business of issuing, selling and administering annuity policies and related activities in the United States other than the State of New York; WHEREAS, pursuant to an Indemnity Reinsurance Agreement between JALIC and the Company dated concurrently herewith (the "Indemnity Reinsurance Agreement") JALIC has ceded on a 100% coinsurance basis all of JALIC's Insurance Liabilities arising under the Annuity Contracts and Additional Policies (as defined in the Indemnity Reinsurance Agreement); after the Closing Date pending assumption of the Annuity Contracts and the Additional Policies as contemplated in the Assumption Reinsurance Agreement between JALIC and the Company dated concurrently herewith (the "Assumption Reinsurance Agreement"); WHEREAS, certain of the Annuity Contracts and Additional Policies may become a Novated Contract (as defined in the Assumption Reinsurance Agreement; the Annuity Contracts, the Additional Policies and the Novated Contracts are hereinafter referred to as the "Policies") prior to their transition to the Company and/or their conversion from JALIC's administration system to the Company's administration system; and 5 WHEREAS, the Company desires JALIC to provide to the Company on an interim basis technical and administrative services, assistance and support with respect to the Policies. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good, valuable and sufficient consideration including the consideration provided hereunder, the receipt of which is hereby acknowledged, the Company and JALIC (collectively, the "Parties" and, sometimes individually a "Party"), intending to be legally bound, hereby agree as follows: ARTICLE 1 APPOINTMENT OF JALIC; SERVICES AND AUTHORITY 1.1 Engagement. The Company hereby engages JALIC to perform and provide the technical and administrative service, assistance and support functions described in Schedule 1.1 attached hereto (the "Services"). JALIC hereby accepts such appointment. 1.2 General Description of the Services. The purpose of this Agreement is to set forth the terms upon which JALIC shall provide to the Company the Services on an interim basis in order to permit the Company the opportunity to obtain alternative sources of supply of the Services. In general, the Services shall be consistent with the comparable services provided by JALIC with respect to the Policies immediately prior to the date hereof; provided, however that the Company shall have the discretion to require JALIC to make such changes to such Services, at the Company's sole cost and expense, as the Company deems necessary to be provided in a manner that is reasonable and consistent with the current prevailing standards of the life insurance industry or applicable Law. 1.3 Performance by Affiliates. The Parties recognize that the Services may include services which, by their nature, are more effectively to be provided by Affiliates of JALIC. 2 6 Subject to the next sentence of this Section 1.3, JALIC shall, to the extent required in order for its Affiliates to provide such Services, cause its Affiliates to provide such Services hereunder as if such Affiliates were themselves parties hereto. In connection with the provision of such Services, JALIC's Affiliates shall be entitled, as if such Affiliates were themselves parties hereto, to the benefits of (i) the limitations on liability set forth herein and (ii) the limitations on the obligation to provide Services set forth herein. 1.4 Controlled Disbursement and Income Accounts. (a) JALIC shall establish a controlled disbursement account or accounts (the "Controlled Disbursement Account") for purposes of making any and all payments to Policyholders in the performance of the Services by JALIC hereunder, including, but not limited to, all items set forth in Section 3.3 of the Indemnity Reinsurance Agreement. The Controlled Disbursement Account shall be funded by the Company during the term of this Agreement in a fashion which will enable JALIC to make all such payments to Policyholders on a timely basis consistent with applicable Law and, to the extent not inconsistent with applicable Laws, the standards for timely payment used by JALIC immediately prior to the date hereof. The Company shall be entitled, to the extent permitted by Section 2.1(b) of the Trust Agreement, dated concurrently herewith, by and among the Company, JALIC and Bankers Trust Company, to withdraw funds from the Trust in order to fund the Controlled Disbursement Account. (b) JALIC shall establish an income account (the "Income Account") for purposes of collecting all income received by JALIC with respect to Policies including, but not limited to, premiums received and investment income. JALIC shall promptly deposit all such received income into the Income Account. The balance of the Income Account shall be reflected on the Monthly Accounting provided under Section 1.5 below. 3 7 1.5 Monthly Accounting. For the Term (as defined in Article 3), JALIC shall provide the Company with a monthly accounting for the period beginning on the 22nd day of the previous month and ending on the 21st day of such month (the "Monthly Accounting") relating to the Policies no later than ten (10) Business Days following the end of the related calendar month. The Monthly Accounting will contain such information as is set forth on Schedule 1.5 hereto, including the amount of any income deposited in the Income Account and the amount of any Fees. Schedule 1.5 shall also include a statement of monthly reserves for GAAP and SAP. The first Monthly Accounting shall be provided to the Company no later than forty-five (45) days after the date hereof and the final Monthly Accounting shall be provided to the Company no later than ten (10) Business Days after the expiration of the Term. If any Monthly Accounting reflects a balance due the Company, JALIC shall pay such balance, in cash, contemporaneously with the delivery of the Monthly Accounting to the Company. If the Monthly Accounting reflects a balance due to JALIC, the Company shall pay such balance, in cash, to JALIC within 10 Business Days after receiving the Monthly Accounting. 1.6 Maintenance of Books and Records. (a) For the Term, JALIC shall maintain books and records of all transactions pertaining to the Policies, including, but not limited to, any disbursement requests submitted in respect of the Policies and any documents relating thereto, any material communications relating to any Policy, any material communication concerning any Policy with any regulatory authority, complaint logs and all data used by JALIC in the performance of services required under this Agreement. These books and records shall be maintained, in all material respects, in accordance with any and all applicable Laws. All such books and records pertaining to a Policy shall be the property of the Company. JALIC shall (i) allow the Company, upon reasonable prior notice and during regular business hours, through its 4 8 employees and other Representatives, at the Company's expense to examine and make copies of any books and records retained by JALIC within its possession or control (which for purposes of this section shall be defined as the ability to cause delivery to the Company or access by the Company) and furnish the Company with such financial and reporting data and other information with respect to the Policies, the Third Party Administration Agreements, Assigned Contracts and the Related Agreements as the Company may from time to time reasonably request, to the extent they relate to the Policies, for any reasonable business purpose, including, without limitation, the preparation or examination of Tax Returns, regulatory filings and financial statements and the conduct of any Action, whether pending or threatened, at JALIC's offices of other facilities or properties and (ii) maintain such books and records for the Company's examination and copying. Access to such books and records shall be at the Company's expense, may not unreasonably interfere with JALIC's or any successor company's business operations and the Company shall reimburse JALIC for all reasonable out-of-pocket expenses incurred by JALIC in copying such records. Except for such books and records as may be required or permitted to be maintained by JALIC pursuant to the Asset Purchase Agreement, upon expiration of the Term, JALIC shall deliver to the Company all books and records pertaining to the Policies. (b) JALIC shall back up and maintain its computer files used in the performance of the Services hereunder in the same manner that JALIC backed up and maintained its computer files relating to Policies prior to the date hereof. (c) JALIC shall maintain facilities and procedures for safekeeping all records used in the performance of Services under this Agreement of the same kind used to safekeep JALIC'S own Records. 5 9 (d) Each Party and its Representatives may audit and review the other's records relating to the Services provided hereunder during reasonable business hours and upon reasonable advance notice; provided, however, that such audit or review may be postponed during any such period if it will be unreasonably disruptive to the Party being audited or reviewed. 1.7 Claims-Payment Instructions. JALIC at its own cost will perform during the Term claims administration and processing of the Policies, including, without limitation, review, investigation, adjustment, settlement, defense and payment of claims, special investigation and anti-fraud compliance, and preparation of any report required by regulatory authorities concerning the foregoing Services and will, in connection with such claims administration, retain, at its sole discretion and cost, any outside investigation firms, adjusters, attorneys or other professionals that the Company deems necessary in the adjustment of such claims. In regards to payment of claims regarding the Policies, JALIC shall be entitled to rely on the express, written contractual terms of the Policies. If a claim is presented in respect of a Policy that JALIC in good faith disputes, JALIC shall consult with the Company before paying such claims. If, after such consultation, JALIC and the Company disagree as how to resolve a claim, JALIC shall follow the instruction of the Company and JALIC shall be held harmless and fully indemnified in following such instructions of the Company. 1.8 Complaint-Handling Procedure. The Parties will cooperate with each other in providing information necessary to respond to any inquiries and complaints concerning the Policies. JALIC shall answer all inquiries and complaints received by it concerning any Policy. All inquiries and complaints concerning the Policies received by the Company with respect to a Policy shall be immediately forwarded by facsimile or overnight mail to a contact person 6 10 designated by JALIC for reply. Initially such contact person shall be Milford L. Middelstaedt. JALIC shall be solely responsible for maintaining any complaint files, complaint registers or other reports of any kind, which are required to be maintained under applicable Laws. JALIC shall also be responsible for preparing and submitting any other complaint filings as required by applicable laws. 1.9 Filings. JALIC shall handle all compliance and regulatory matters relating to the administration of Policies, including monitoring changes in applicable Laws, implementing the appropriate and necessary changes to forms and rates as required by applicable Laws, filing and refiling forms and rates as required by applicable Laws, and preparing and filing all reports and other filings required by applicable Laws. JALIC shall use its reasonable efforts to provide copies of all reports and filings with respect to a Policy required to be made with any governmental entity to the Company. ARTICLE 2 COMPENSATION; PAYMENT 2.1 Fee. In consideration of the performance and provision of the Services and in consideration of the other obligations of JALIC to the Company hereunder, the Company shall pay to JALIC a fee determined in accordance with Schedule 2.1 attached hereto (a "Fee"). 2.2 Invoice; Payment. The Fee shall be set forth in the Monthly Accounting and shall be settled in accordance with Section 1.5 hereof. The Monthly Accounting shall be delivered to the Controller of the Company and accompanied by a certification from a senior financial officer of JALIC certifying the policy count and accuracy of the calculations of the Fee. 2.3 Disputes. (a) If within 90 days following the end of the Term, the Company notifies JALIC that it questions all or any part of any of the Fees paid hereunder, JALIC shall, 7 11 at the request of the Company, provide to the Company within 30 days after receipt of such request a written explanation, which explanation shall be signed and certified by a senior financial officer of JALIC, explaining the matter or matters in question in reasonable detail sufficient to permit the Company to verify the accuracy of such Fee. Pending receipt and review of such explanation, the Company shall pay the full amount of any balance set forth on such Monthly Accounting to JALIC when due. Upon receipt of such explanation, the Company shall have 60 days in which to deliver to JALIC a written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement. (b) If the Company and JALIC are unable to resolve any disagreement with respect to the Fee within 30 days after JALIC receives a timely notice of disagreement, the items of disagreement alone shall be referred for final determination to the U.S. national office of Price Waterhouse LLP or, if such firm is unable or unwilling to make such final determination, to such other independent accounting firm as the Parties shall mutually designate. The firm making such determination is referred to herein as the "Independent Party." The Fee shall be deemed to be binding on the Company and JALIC upon the earlier to occur of (i) the Company's failure to deliver to JALIC a notice of disagreement within 30 days after its receipt of such written explanation prepared by JALIC, (ii) resolution of any disagreement by mutual agreement of the Parties after a timely notice of disagreement has been delivered to JALIC, or (iii) notification by the Independent Party of its final determination of the items of disagreement submitted to it. The fees and disbursements of the Independent Party shall be borne equally, one-half by JALIC and one-half by the Company. If pursuant to this Section 2.3, it is ultimately determined that JALIC owes the Company any amount, JALIC shall pay such amount to the Company in cash within 10 days of such determination along with interest calculated at a rate 8 12 equal to the three month LIBOR rate plus 25 basis points on the amount due from the date on which the Company paid or settled the Fee which is the subject of the dispute. ARTICLE 3 TRANSITION PERIOD Subject to Article 5 hereof, the Company agrees to engage JALIC for the provision of the Services for a period of nine months (the "Term"). The Term may be extended or reduced by mutual written agreement of the Parties. ARTICLE 4 NO HIRE 4.1 Without the prior written consent of JALIC, during the Term of this Agreement and for a period of two years thereafter the Company shall not directly or indirectly solicit any employee of JALIC to leave the employ of JALIC, and without the prior written consent of JALIC the Company shall not knowingly hire any person who was an employee of JALIC during the 180 days preceding the date of hire of such person by the Company. Notwithstanding the foregoing, the Company may directly or indirectly solicit for employment any employee of JALIC whose primary business location is not in Miami, Florida at any time and may hire any such employee any time after all Policies of said site outside of Miami, Florida have been transitioned to the Company and/or converted onto the Company's administration system (an "Off-site Transition"); provided, however, that the Company shall give JALIC at least 65 days prior written notice of such Off-site Transition. 4.2 Without the prior written consent of the Company, during the Term and for a period of two years thereafter JALIC shall not directly or indirectly solicit any employee of the Company to leave the employ of the Company, and without the prior written consent of the 9 13 Company, JALIC shall not hire any person who was an employee of the Company during the 180 days preceding the date of hire of such person by JALIC. ARTICLE 5 TERM AND TERMINATION 5.1 Term. Unless sooner terminated pursuant to the provisions of this Article 5, this Agreement shall remain in effect until the end of the Term; provided, however, that this Agreement shall terminate with respect to each Policy that has been transitioned to the Company and/or converted over to the Company's administration system. 5.2 Termination for Breach. In the event of a breach by either Party of any obligation of any provision of this Agreement, the non-breaching Party shall give written notice of breach to the breaching Party, detailing the nature of such breach in sufficient detail to allow the breaching party to cure, if cure is possible. If such breach is not cured by the breaching Party within 15 days after such notice of breach, then the non-breaching Party may terminate this Agreement by giving notice of termination to the breaching Party. Such termination shall be effective on notice of termination by the non-breaching Party to the breaching Party. 5.3 Termination for Receivership. In the event of a receivership or insolvency of either Party, this Agreement may be terminated immediately by the other Party upon written notice. 5.4 Termination Upon Notice. The Company may terminate this Agreement for any reason after the first 25 days of the Term upon the giving of 65 days prior written notice to JALIC in accordance with Section 10.1 hereof. 10 14 ARTICLE 6 REPRESENTATIONS THERE ARE NO REPRESENTATIONS OR WARRANTIES BY JALIC OR ITS AFFILIATES WITH RESPECT TO THE SERVICES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSET PURCHASE AGREEMENT AND THE ANCILLARY AGREEMENTS. NO REPRESENTATION OR WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW, INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AS TO THE SERVICES. ARTICLE 7 INDEPENDENT CONTRACTOR JALIC and its Affiliates shall be independent contractors to the Company and its Affiliates with respect to the performance of the Services hereunder. Nothing contained in this Agreement shall make JALIC, its Affiliates or their employees the employees of the Company. ARTICLE 8 FORCE MAJEURE JALIC and its affiliates shall not be liable for its or their failure to perform hereunder to the extent that such performance is made impracticable, delayed or prevented, in whole or in part, due to any acts of God; fires; wars; Laws or Orders, whether valid or invalid (including, without limitation, requisitions, allocations and price adjustment restrictions) or inability to obtain or unavoidable delay in obtaining necessary power. JALIC and its affiliates shall use commercially reasonable efforts (which shall be substantially similar to those used by JALIC immediately prior to the date hereof) to minimize the likelihood of any damage, loss of data, 11 15 delay or error resulting from such occurrence beyond its or their control. If JALIC or its affiliates fails to perform hereunder as a result of any occurrence described in the preceding sentence, JALIC shall (i) give written notice to that effect to Company within 10 days after such occurrence together with a statement setting forth reasonably full particulars concerning such occurrence and (ii) during the period any Service required to be provided hereunder cannot be provided as a result of such occurrence, use reasonable efforts to remedy such occurrence. To the extent required by any such occurrence, the performance by JALIC or its Affiliates hereunder shall be suspended during the continuance of any such occurrence and this Agreement shall otherwise remain unaffected (except for the Company's obligation to pay the Fees, which shall also be suspended). If such occurrence is remedied during the time that any Service affected by such occurrence is required to be provided under this Agreement, JALIC or its Affiliates shall promptly notify Company and any such suspension shall end. ARTICLE 9 HOLD HARMLESS The Company shall indemnify and hold JALIC and each of its Affiliates harmless from any and all damages, claims, suits, actions, causes of action, proceedings, investigations, losses, liabilities, assessments, judgments, deficiencies and expenses (including, without limitation, reasonable legal, accounting and other professional expenses) ("Liabilities") asserted against or incurred or sustained by JALIC or any of its Affiliates relating to, associated with or arising out of providing the Services hereunder, except to the extent such Liabilities resulted from the negligence, bad faith or willful misconduct of JALIC or its Affiliates. JALIC shall indemnify and hold the Company and its Affiliates harmless from any and all Liabilities directly arising from JALIC's or its Affiliates breach of any provision of this Agreement, including acts of 12 16 negligence, bad faith or willful misconduct by JALIC or its Affiliates in providing the Services. The indemnification provisions under this Article 9 shall survive the Term for all Liabilities arising from omissions or acts committed during the Term. ARTICLE 10 MISCELLANEOUS 10.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), sent by certified, registered or express mail, postage prepaid and return receipt requested, or transmitted by facsimile (with a copy of such notice or other communication and a confirmation of transmission sent by certified, registered, or express mail, postage prepaid and return receipt requested no later than the close of business on the next Business Day following such transmission) and shall be addressed as follows: when the Company is to be notified: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, CA 90067-6022 Attention: General Counsel Facsimile No.: (310) 772-6574 With a copy to: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, CA 90067-6022 Attention: Controller Facsimile No.: (310) 772-6684 13 17 and O'Melveny & Myers 1999 Avenue of the Stars Suite 700 Los Angeles, CA 90067 Attention: Robert D. Haymer, Esq. Facsimile No.: (310) 246-6779 when JALIC is to be notified: John Alden Life Insurance Company 7300 Corporate Center Drive Miami, FL 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 With copies to: John Alden Financial Corporation 7300 Corporate Center Drive Miami, FL 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1497 Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attention: William W. Rosenblatt, Esq. Facsimile No.: (212) 259-6333 A Party may, by notice given in accordance with this Section 10.1 to the other Party, designate another address or Person to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 10.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and subject to delivery of the mailed copy thereof) or the affidavit of the messenger (if transmitted 14 18 by personal delivery), or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. 10.2 Entire Agreement. This Agreement (including the Schedules attached hereto), the Asset Purchase Agreement (including the Ancillary Agreements and the Annex, Exhibits and Schedules attached thereto), the Assumption Reinsurance Agreement and the Indemnity Reinsurance Agreement contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous agreements, representations, warranties and understandings, whether written or oral, by or between the Parties with respect to the subject matter hereof. Nothing contained in this Agreement or any of the Schedules hereto shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates of liability to third parties, whether under any Laws or otherwise, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any such Laws. Notwithstanding anything contained in this Section 10.2 to the contrary, any inconsistencies between this Agreement and the Indemnity Reinsurance Agreement shall be governed by the terms of the Indemnity Reinsurance Agreement. In the event of any conflict between this Agreement, the Indemnity Reinsurance Agreement and the Asset Purchase Agreement as to the rights or obligations of JALIC or the Company, the Asset Purchase Agreement shall control. In the event of any ambiguity in this Agreement as to the rights or obligations of JALIC or the Company, the Asset Purchase Agreement shall control. 10.3 Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of, or approvals under, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment or approval is set forth in a written instrument which states that it adds to, amends, cancels, renews or extends 15 19 this Agreement or grants an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. 10.4 Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for, such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or impair, limit or restrict the exercise by, any Party of any such right, power or remedy any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. 10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CONFLICTS OF LAWS. Each Party consents and submits to the non-exclusive personal jurisdiction of any federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 10.6 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of 16 20 Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. 10.6 Arbitration. The Parties acknowledge and agree that the transactions contemplated herein substantially affect and impact interstate commerce. Therefore, all disputes or differences between JALIC and the Company arising under or which are related to this Agreement upon which an amicable understanding cannot be reached within 30 days shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court having jurisdiction thereof. The Arbitrators provided for herein shall construe this Agreement in light of the prevailing custom and practices for transactions of a similar nature in the insurance industry. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held at a site selected by the Arbitrators. The Parties agree to arbitrate within 90 days following the transmittal of written demand of either Party to arbitrate any dispute arbitrable under this Agreement. The Parties will in good faith, within 15 days following notice of written demand to arbitrate attempt to agree on a single Arbitrator. If the Parties cannot within 15 days thereafter agree on a single Arbitrator, each of the Parties shall appoint an Arbitrator, notifying the other Party of the name and address of such Arbitrator. The Arbitrators appointed by each Party shall agree upon and appoint a third neutral Arbitrator. If either Party shall fail to appoint an Arbitrator as herein provided, or should the two Arbitrators so named fail to select the third Arbitrator within 30 days after their appointment, then, in either event, the President of the American Arbitration Association or its successor shall appoint such second and/or third Arbitrator. A decision of a 17 21 majority of the Arbitrators shall be final and binding and there shall be no appeal therefrom. The Arbitrators shall within 45 days after the last hearing enter an award and the award shall be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Parties; all other costs of the respective Parties, including without limitation fees and expenses of the respective Party's attorneys, witnesses and discovery shall be paid by the respective Party, except to the extent that the Arbitrators otherwise direct based on the equities of the situation. The arbitration shall be held in New York, New York, unless otherwise agreed between the Parties. 10.7 Certain Definitions. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Asset Purchase Agreement. 10.8 Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as otherwise provided herein, neither JALIC nor the Company shall assign any of its rights or delegate any of its duties hereunder (in whole or in part and by operation of law or otherwise) without the prior written consent of the other Party hereto. Any other assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such consent is required hereby, shall be void. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. 10.9 Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as 18 22 expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. 10.10 Headings. The headings in this Agreement have been inserted for convenience of reference only, and shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. 10.11 Counterparts. This Agreement may be executed by the Parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. 10.12 Further Assurances. Subject to the provisions of this Agreement, JALIC and the Company will use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws 19 23 to provide the Services required herein. With regard to any matters not expressly stated herein, the Parties agree to furnish such information, to execute such additional documents, and to cooperate with each other as may be reasonably necessary to carry out the purposes of this Agreement, in accordance with industry practice for transactions of this kind. If either Party becomes aware that any Action has been or is about to be initiated with respect to the Policies, or any other matter reasonably related thereto, it shall inform the other Party as soon as practicable. The Parties agree to cooperate in furnishing to each other any files or other information needed by the other to respond to any Action or threatened Action. IN WITNESS WHEREOF, the Parties have executed this Agreement. JOHN ALDEN LIFE INSURANCE COMPANY By: /s/ Scott L. Stanton ------------------------------------- Title: Senior Vice President and CFO ---------------------------------- SUNAMERICA LIFE INSURANCE COMPANY By: /s/ James W. Rowan ------------------------------------- Title: Senior Vice President ---------------------------------- 20 24 Schedule 1.1 SERVICES I. UNDERWRITING SERVICES Underwriting Services with respect to each new Additional Policy shall consist of those services and only those services JALIC would customarily render had JALIC written such Additional Policies for its own account. The manner and means for providing such services shall be left to JALIC's discretion; provided, however, if JALIC is not providing Services consistent with the current prevailing standards of the life insurance industry, that the services shall be consistent with the comparable services provided by JALIC with respect to the Policies prior to the date hereof; and further provided, however, that the Company shall have the discretion to require JALIC to make such changes to such Services, at the Company's sole cost and expense (in accordance with item III below), as the Company deems necessary to be provided in a manner that is reasonable and consistent with the current prevailing standards of the life insurance industry. II. ADMINISTRATIVE SERVICES Administrative Services with respect to the Policies not yet transitioned to the Company as conducted by JALIC shall consist of those services, and only those services, JALIC would customarily render had JALIC retained the Policies (other than an enhancement to any system or otherwise with regard to the provision of the Services) provided, however that, if JALIC is not providing Services consistent with the current prevailing standards of the life insurance industry, the Company shall have the discretion to require JALIC to make such changes to such Services, at the Company's sole cost and expense (in accordance with item III below), as the Company deems necessary to be provided in a manner that is reasonable and consistent with the current prevailing standards of the life insurance industry. Such services shall include: (a) all Policyholder services relating to the Policies including but not limited to the following: 1. Billing and collection of premiums; 2. Payment of claims; 3. Handling of Policyholder service requests, inquiries and complaints under the Policies; 4. Preparation of quarterly financial statement data (within ten business days after the end of a calendar quarter) and annual financial statement data (within thirty calendar days after the end of the fiscal year), for inclusion in the Company's applicable financial statements; i 25 5. Administration of any agreements providing for the payment of commissions relating to the Policies; 6. Provision of the Monthly Accounting pursuant to Section 1.5; 7. Payment of agent commissions due and payable; 8. Underwriting and issuing any Additional Policies; 9. Preparation and mailing of quarterly and annual statements to policyholders; 10. Relevant information to the Company regarding renewal interest rates for Policies; 11. Provision of such other policyholder services on the Policies as are reasonably required or requested by the Company which have customarily been provided in the past by JALIC; and 12. Implement any changes in the credited rates. (b) All services performed by JALIC's or its Affiliate's employees providing legal, compliance, actuarial, accounting, treasury, human resources and data processing, including the preparation of financial and other relevant reports but excluding any Services which would require payments to Persons other than JALIC's or its Affiliate's employees, unless such payments are made to other Persons who presently and regularly provide such services in the ordinary course to JALIC; and (c) JALIC shall assist the Company in obtaining consents from third party licensors, if any, of the software set forth on Schedule 3.14 of the Asset Purchase Agreement which is necessary for the transitioning of the Policies (the cost of which shall be at the Company's sole cost and expense). (d) The Parties acknowledge that (i) rate renewals shall be made no more frequently than once per quarter, and (ii) no credited rate adjustments with regard to any Policy shall be made during the 60 days prior to the transitioning to the Company or the converting of such Policy to the Company's administrative system. Subject to the terms of the Indemnity Reinsurance Agreement, the Company shall have the sole and absolute discretion in setting (i) the commissions rates for new and renewal Policies, subject to the terms and conditions of the relevant commission agreements (including any notice provisions contained therein) and (ii) the initial credited rates on Policies after the Effective Date and any changes to the renewal credited rate on Policies in force after the Effective Date. III. EXTRAORDINARY SERVICES Upon request of the Company and subject to the provisions of Section 1.2 of this Agreement, JALIC shall use commercially reasonable efforts to provide to the extent readily available such additional services as the Company may reasonably request. Such services to the extent readily available shall consist of any services not covered by item I or II of this Schedule 1.1 including, without limitation, (i) all services provided in connection with the changing by the Company of the commission rates for new and renewal Policies, (ii) the enhancement of ii 26 Services offered pursuant to items I and II above and (iii) to the extent JALIC incurs any out-of-pocket or incremental cost or expense with respect thereto, services provided in connection with the assumption of Policies, including, without limitation, mailing assumption certificates in connection with the assumption of the Policies. IV. MORTGAGE SERVICING JALIC shall provide such servicing with respect to Mortgage Loans in which JALIC has acted as servicer immediately prior to the date hereof consistent and comparable with the servicing provided by JALIC with respect to such Mortgage Loans immediately prior to the date hereof. The Company and JALIC shall simultaneously herewith enter into an Interim Servicing Agreement regarding the servicing of mortgage loans. V. TRANSITIONING SERVICES JALIC shall cooperate with the Company and use commercially reasonable efforts to effect an orderly transition to the Company and/or conversion onto the Company's administrative system of the Policies as rapidly and as smoothly as possible, and to do, or cause to be done, all things necessary, proper or advisable in connection therewith. JALIC shall provide the Company with copies of all databases, files, programs, job streams, accounting and other records and information regarding the Policies and the service and administration of the Policies when requested by the Company in machine readable form reasonably acceptable to the Company. JALIC shall also provide the Company upon request current information regarding production volume and policyholder complaints and reasonable access, to all offices and other facilities and properties of JALIC concerning the Policies and the administration thereof. Services to be provided in connection with such transition and/or conversion shall include, but not be limited to the following: providing the Company remote and on-site access to JALIC's computers, providing mainframe to mainframe connections between JALIC and the Company, providing technical support regarding the Policies and the computer hardware and software systems and providing the Company access to appropriate JALIC personnel. iii 27 Schedule 2.1 COMPENSATION OF JALIC
For Underwriting Services: $80 per Policy issued during such month for (Schedule 1.1 - Item I) which JALIC provided underwriting services; provided that with respect to the first calendar month with respect to which compensation is being calculated contracts issued after March 21, 1997 and prior to the beginning of such month shall be deemed as having been issued in such first month. In addition, the payment for underwriting services contemplated by this clause shall be payable only with respect to policies issued during the term of the Transition Services Agreement. For Administrative Services: $4 multiplied by the average number of (Schedule 1.1 - Item II) Policies administered by JALIC in force during such month, which average shall be based upon the mean number of contracts in force at the end and at the beginning of each fiscal month of JALIC (a fiscal month being the period beginning on the 22nd day of the calendar month preceding the calendar month with respect to which the calculation of compensation is being made and ending on the 21st day of the calendar month with respect to which the calculation of compensation is being made), adjusted for significant transfers occurring during such month. For Extraordinary Services: Direct costs, being 150% of the daily or (Schedule 1.1 - Item III) hourly salary or wages per day for the persons performing services not covered above, which services are provided during the month with respect to which the calculation of compensation is being made, plus any actual out-of-pocket expenses incurred by JALIC in performing such services. For Mortgage Servicing: Compensation is provided in the Interim (Schedule 1.1 - Item IV) Servicing Agreement.
i 28
For Transitioning Services: If JALIC incurs any reasonable direct, (Schedule 1.1 - Item V) out-of- pocket or incremental costs or expenses, including, but not limited to, the payment of reasonable overtime for JALIC employees, the hiring of temporary employees or the retention of employees whose employment would otherwise have been terminated (and the Company has been consulted with regard thereto prior to such intended termination), in providing any of the Transitioning Services, JALIC shall be reimbursed for such costs and expenses. For all Transitioning Services in which no such costs or expenses are incurred by JALIC, there will be a charge for such Transitioning Services.
ii EX-10.7 8 TRANSITION SERVICES AGREEMENT W/JANY DATED 3/31/97 1 EXECUTION COPY TRANSITION SERVICES AGREEMENT Between JOHN ALDEN LIFE INSURANCE COMPANY and JOHN ALDEN LIFE INSURANCE COMPANY OF NEW YORK Dated: March 31, 1997 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 APPOINTMENT OF JALIC; SERVICES AND AUTHORITY.................................................. 2 1.1 Engagement........................................................................... 2 1.2 General Description of the Services.................................................. 2 1.3 Performance by Affiliates............................................................ 2 1.4 Financial Services................................................................... 3 1.5 Maintenance of Books and Records..................................................... 3 1.6 Claims-Payment Instructions.......................................................... 4 1.7 Complaint-Handling Procedure......................................................... 4 1.8 Filings.............................................................................. 4 ARTICLE 2 COMPENSATION; PAYMENT......................................................................... 5 2.1 Fee.................................................................................. 5 2.2 Invoice; Payment..................................................................... 5 2.3 Disputes............................................................................. 5 ARTICLE 3 TRANSITION PERIOD............................................................................. 6 ARTICLE 4 INTENTIONALLY DELETED......................................................................... 6 ARTICLE 5 TERM AND TERMINATION.......................................................................... 7 5.1 Term................................................................................. 7 5.2 Termination for Breach............................................................... 7 5.3 Termination for Receivership......................................................... 7 5.4 Termination Upon Notice.............................................................. 7 5.5 Automatic Termination................................................................ 7 ARTICLE 6 REPRESENTATIONS............................................................................... 8 ARTICLE 7 INDEPENDENT CONTRACTOR........................................................................ 8 ARTICLE 8 FORCE MAJEURE................................................................................. 8 ARTICLE 9 HOLD HARMLESS................................................................................. 9 ARTICLE 10 MISCELLANEOUS................................................................................. 10 10.1 Notices.............................................................................. 10 10.2 Entire Agreement..................................................................... 12 10.3 Amendments........................................................................... 12 10.4 Waivers.............................................................................. 13 10.5 Governing Law........................................................................ 13 10.6 Arbitration.......................................................................... 14
i 3 TABLE OF CONTENTS (cont'd)
Page ---- 10.7 Certain Definitions.................................................................. 15 10.8 Binding Effect; Assignment; Third Party Beneficiaries................................ 15 10.9 Severability......................................................................... 15 10.10 Headings............................................................................. 16 10.11 Counterparts......................................................................... 16 10.12 Further Assurances................................................................... 16
SCHEDULES: Schedule 1.1 - Services Schedule 2.1 - Compensation of JALIC ii 4 TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT (the "Agreement") dated March 31, 1997 (the "Effective Date") between John Alden Life Insurance Company, a Minnesota corporation ("JALIC"), and John Alden Life Insurance Company of New York, a New York corporation (the "Company"). WHEREAS, the Company is engaged in the business of issuing, selling and administering annuity, life and health related insurance policies and related activities solely in the State of New York; WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated as of November 29, 1996 (the "Stock Purchase Agreement") between JALIC and SunAmerica Life Insurance Company, an Arizona corporation ("SunAmerica"), JALIC is selling to SunAmerica all of the issued and outstanding capital stock of the Company; WHEREAS, the Company desires that JALIC provide to the Company on an interim basis technical and administrative services, assistance and support with respect to the In Force Insurance Contracts (hereinafter referred to as "Policies"). NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good, valuable and sufficient consideration including the consideration provided hereunder, the receipt of which is hereby acknowledged, the Company and JALIC (collectively, the "Parties" and, sometimes individually a "Party"), intending to be legally bound, hereby agree as follows: 5 ARTICLE 1 APPOINTMENT OF JALIC; SERVICES AND AUTHORITY 1.1 Engagement. The Company hereby engages JALIC to perform and provide the technical and administrative service, assistance and support functions described in Schedule 1.1 attached hereto (the "Services"). JALIC hereby accepts such appointment. 1.2 General Description of the Services. The purpose of this Agreement is to set forth the terms upon which JALIC shall provide to the Company the Services on an interim basis in order to permit the Company the opportunity to obtain alternative sources of supply of the Services. In general, the Services shall be consistent with, and limited to, the comparable services provided by JALIC with respect to the Policies immediately prior to the date hereof; provided, however that the Company shall have the discretion to require JALIC to make such changes to such Services, at the Company's sole cost and expense, as the Company deems necessary to be provided in a manner that is reasonable and consistent with the current prevailing standards of the life insurance industry or applicable Law. 1.3 Performance by Affiliates. The Parties recognize that the Services may include services which, by their nature, are more effectively to be provided by Affiliates of JALIC. Subject to the next sentence of this Section 1.3, JALIC shall, to the extent required in order for its Affiliates to provide such Services, cause its Affiliates to provide such Services hereunder as if such Affiliates were themselves parties hereto. In connection with the provision of such Services, JALIC's Affiliates shall be entitled, as if such Affiliates were themselves parties hereto, to the benefits of (i) the limitations on liability set forth herein and (ii) the limitations on the obligation to provide Services set forth herein. 2 6 1.4 Financial Services. For the Term (as defined in Article 3), upon the reasonable request of the Company, JALIC shall provide such accounting services as JALIC previously provided to the Company immediately prior to the date hereof in the ordinary course. 1.5 Maintenance of Books and Records. (a) For the Term, JALIC shall assist the Company in maintaining books and records of all transactions pertaining to the Policies, as JALIC previously provided to the Company immediately prior to the date hereof in the ordinary course. These books and records, to the extent maintained by JALIC, shall be maintained, in all material respects, in accordance with any and all applicable Laws. All such books and records pertaining to a Policy shall be the property of the Company. JALIC shall (i) allow the Company, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at the Company's expense to examine and make copies of any books and records pertaining to the Policies retained by JALIC within its possession or control (which for purposes of this section shall be defined as the ability to cause delivery to the Company or access by the Company) for any reasonable business purpose, including, without limitation, the preparation or examination of Tax Returns, regulatory filings and financial statements and the conduct of any Action, whether pending or threatened, concerning the Company, at JALIC's offices of other facilities or properties and (ii) maintain such books and records for the Company's examination and copying. Access to such books and records shall be at the Company's expense, may not unreasonably interfere with JALIC's or any successor company's business operations and the Company shall reimburse JALIC for all reasonable out-of-pocket expenses incurred by JALIC in copying such records. Except for such books and records as may be required or permitted to be maintained by JALIC pursuant to the Stock Purchase 3 7 Agreement, upon expiration of the Term, JALIC shall deliver to the Company all books and records pertaining to the Policies. (b) JALIC shall back up and maintain the computer files used by JALIC in Miami, Florida in the performance of the Services hereunder in the same manner that JALIC backed up and maintained such computer files relating to Policies prior to the date hereof. (c) JALIC shall maintain facilities and procedures for safekeeping all records used in the performance of Services under this Agreement of the same kind used to safekeep JALIC'S own Records. (d) Each Party and its Representatives may audit and review the other's records relating to the Services provided hereunder during reasonable business hours and upon reasonable advance notice; provided, however, that such audit or review may be postponed during any such period if it will be unreasonably disruptive to the Party being audited or reviewed. 1.6 Claims-Payment Instructions. JALIC will provide systems support in the processing of claims as JALIC previously provided to the Company immediately prior to the date hereof in the ordinary course. 1.7 Complaint-Handling Procedure. The Parties will cooperate with each other in providing information necessary to respond to any inquiries and complaints concerning the Policies as JALIC previously provided to the Company immediately prior to the date hereof in the ordinary course. 1.8 Filings. To the extent JALIC has previously provided such service to the Company immediately prior to the date hereof in the ordinary course, JALIC shall handle all compliance and regulatory matters relating to the administration of Policies, including monitoring 4 8 changes in applicable Laws, implementing the appropriate and necessary changes to forms and rates as required by applicable Laws, filing and refiling forms and rates as required by applicable Laws, and preparing and filing all reports and other filings required by applicable Laws. JALIC shall use its reasonable efforts to provide copies of all reports and filings with respect to a Policy required to be made with any governmental entity to the Company. ARTICLE 2 COMPENSATION; PAYMENT 2.1 Fee. The Company shall pay to JALIC a fee for each Service determined in accordance with Schedule 2.1 attached hereto (a "Fee"). 2.2 Invoice; Payment. JALIC shall invoice the Company for the Fees at such intervals as JALIC may deem appropriate, but not more frequently than monthly. Payment of each such invoice shall be made by wire transfer to JALIC within 5 days after receipt by the Company of such invoice. 2.3 Disputes. (a) If within 90 days following the end of the Term, the Company notifies JALIC that it questions all or any part of any of the Fees paid hereunder, JALIC shall, at the request of the Company, provide to the Company within 30 days after receipt of such request a written explanation, which explanation shall be signed and certified by a senior financial officer of JALIC, explaining the matter or matters in question in reasonable detail sufficient to permit the Company to verify the accuracy of such Fee. Pending receipt and review of such explanation, the Company shall pay the full amount of any balance set forth on such Monthly Accounting to JALIC when due. Upon receipt of such explanation, the Company shall have 60 days in which to deliver to JALIC a written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement. 5 9 (b) If the Company and JALIC are unable to resolve any disagreement with respect to the Fee within 30 days after JALIC receives a timely notice of disagreement, the items of disagreement alone shall be referred for final determination to the U.S. national office of Price Waterhouse LLP or, if such firm is unable or unwilling to make such final determination, to such other independent accounting firm as the Parties shall mutually designate. The firm making such determination is referred to herein as the "Independent Party." The Fee shall be deemed to be binding on the Company and JALIC upon the earlier to occur of (i) the Company's failure to deliver to JALIC a notice of disagreement within 30 days after its receipt of such written explanation prepared by JALIC, (ii) resolution of any disagreement by mutual agreement of the Parties after a timely notice of disagreement has been delivered to JALIC, or (iii) notification by the Independent Party of its final determination of the items of disagreement submitted to it. The fees and disbursements of the Independent Party shall be borne equally, one-half by JALIC and one-half by the Company. If pursuant to this Section 2.3, it is ultimately determined that JALIC owes the Company any amount, JALIC shall pay such amount to the Company in cash within 10 days of such determination along with interest calculated at a rate equal to the three month LIBOR rate plus 25 basis points on the amount due from the date on which the Company paid or settled the Fee which is the subject of the dispute. ARTICLE 3 TRANSITION PERIOD Subject to Article 5 hereof, the Company agrees to engage JALIC for the provision of the Services for a period of nine months (the "Term"). The Term may be extended or reduced by mutual written agreement of the Parties. 6 10 ARTICLE 4 INTENTIONALLY DELETED ARTICLE 5 TERM AND TERMINATION 5.1 Term. Unless sooner terminated pursuant to the provisions of this Article 5, this Agreement shall remain in effect until the end of the Term; provided, however, that this Agreement shall terminate with respect to each Policy that has been transitioned to the Company and/or converted over to the Company's administration system. 5.2 Termination for Breach. In the event of a breach by either Party of any obligation of any provision of this Agreement, the non-breaching Party shall give written notice of breach to the breaching Party, detailing the nature of such breach in sufficient detail to allow the breaching party to cure, if cure is possible. If such breach is not cured by the breaching Party within 15 days after such notice of breach, then the non-breaching Party may terminate this Agreement by giving notice of termination to the breaching Party. Such termination shall be effective on notice of termination by the non-breaching Party to the breaching Party. 5.3 Termination for Receivership. In the event of a receivership or insolvency of either Party, this Agreement may be terminated immediately by the other Party upon written notice. 5.4 Termination Upon Notice. The Company may terminate this Agreement for any reason after the first 30 days of the Term upon the giving of 30 days prior written notice to JALIC in accordance with Section 10.1 hereof. 7 11 5.5 Automatic Termination. This Agreement shall terminate upon termination of the Transition Services Agreement, dated concurrently herewith, between SunAmerica and JALIC. ARTICLE 6 REPRESENTATIONS THERE ARE NO REPRESENTATIONS OR WARRANTIES BY JALIC OR ITS AFFILIATES WITH RESPECT TO THE SERVICES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE STOCK PURCHASE AGREEMENT AND THE ANCILLARY AGREEMENTS. NO REPRESENTATION OR WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW, INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AS TO THE SERVICES. ARTICLE 7 INDEPENDENT CONTRACTOR JALIC and its Affiliates shall be independent contractors to the Company and its Affiliates with respect to the performance of the Services hereunder. Nothing contained in this Agreement shall make JALIC, its Affiliates or their employees the employees of SunAmerica or the Company. ARTICLE 8 FORCE MAJEURE JALIC and its Affiliates shall not be liable for its or their failure to perform hereunder to the extent that such performance is made impracticable, delayed or prevented, in whole or in part, due to any acts of God; fires; wars; Laws or Orders, whether valid or invalid (including, without limitation, requisitions, allocations and price adjustment restrictions) or inability to 8 12 obtain or unavoidable delay in obtaining necessary power. JALIC and its Affiliates shall use commercially reasonable efforts (which shall be substantially similar to those used by JALIC immediately prior to the date hereof) to minimize the likelihood of any damage, loss of data, delay or error resulting from such occurrence beyond its or their control. If JALIC or its Affiliates fails to perform hereunder as a result of any occurrence described in the preceding sentence, JALIC shall (i) give written notice to that effect to Company within 10 days after such occurrence together with a statement setting forth reasonably full particulars concerning such occurrence and (ii) during the period any Service required to be provided hereunder cannot be provided as a result of such occurrence, use reasonable efforts to remedy such occurrence. To the extent required by any such occurrence, the performance by JALIC or its Affiliates hereunder shall be suspended during the continuance of any such occurrence and this Agreement shall otherwise remain unaffected (except for the Company's obligation to pay the Fees, which shall also be suspended). If such occurrence is remedied during the time that any Service affected by such occurrence is required to be provided under this Agreement, JALIC or its Affiliates shall promptly notify the Company and any such suspension shall end. ARTICLE 9 HOLD HARMLESS The Company shall indemnify and hold JALIC and each of its Affiliates harmless from any and all damages, claims, suits, actions, causes of action, proceedings, investigations, losses, liabilities, assessments, judgments, deficiencies and expenses (including, without limitation, reasonable legal, accounting and other professional expenses) ("Liabilities") asserted against or incurred or sustained by JALIC or any of its Affiliates relating to, associated with or arising out of providing the Services hereunder, except to the extent such Liabilities resulted from the 9 13 negligence, bad faith or willful misconduct of JALIC or its Affiliates. JALIC shall indemnify and hold the Company and its Affiliates harmless from any and all Liabilities directly arising from JALIC's or its Affiliates breach of any provision of this Agreement, including acts of negligence, bad faith or willful misconduct by JALIC or its Affiliates in providing the Services. The indemnification provisions under this Article 9 shall survive the Term for all Liabilities arising from omissions or acts committed during the Term. ARTICLE 10 MISCELLANEOUS 10.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), sent by certified, registered or express mail, postage prepaid and return receipt requested, or transmitted by facsimile (with a copy of such notice or other communication and a confirmation of transmission sent by certified, registered, or express mail, postage prepaid and return receipt requested no later than the close of business on the next Business Day following such transmission) and shall be addressed as follows: when the Company is to be notified: John Alden Life Insurance Company of New York c/o SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, CA 90067-6022 Attention: General Counsel Facsimile No.: (310) 772-6574 With a copy to: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, CA 90067-6022 Attention: Controller 10 14 Facsimile No.: (310) 772-6684 and O'Melveny & Myers 1999 Avenue of the Stars Suite 700 Los Angeles, CA 90067 Attention: Robert D. Haymer, Esq. Facsimile No.: (310) 246-6779 when JALIC is to be notified: John Alden Life Insurance Company 7300 Corporate Center Drive Miami, FL 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 With copies to: John Alden Financial Corporation 7300 Corporate Center Drive Miami, FL 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1497 Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attention: William W. Rosenblatt, Esq. Facsimile No.: (212) 259-6333 A Party may, by notice given in accordance with this Section 10.1 to the other Party, designate another address or Person to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 10.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and 11 15 subject to delivery of the mailed copy thereof) or the affidavit of the messenger (if transmitted by personal delivery), or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. 10.2 Entire Agreement. This Agreement (including the Schedules attached hereto) and the Stock Purchase Agreement (including the Ancillary Agreements and the Annex, Exhibits and Schedules attached thereto) contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous agreements, representations, warranties and understandings, whether written or oral, by or between the Parties with respect to the subject matter hereof. Nothing contained in this Agreement or any of the Schedules hereto shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates of liability to third parties, whether under any Laws or otherwise, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any such Laws. In the event of any conflict between this Agreement and the Stock Purchase Agreement as to the rights or obligations of JALIC or the Company, the Stock Purchase Agreement shall control. In the event of any ambiguity in this Agreement as to the rights or obligations of JALIC or the Company, the Stock Purchase Agreement shall control. 10.3 Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of, or approvals under, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment or approval is set forth in a written instrument which states that it adds to, amends, cancels, renews or extends this Agreement or grants an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. 12 16 10.4 Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for, such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or impair, limit or restrict the exercise by, any Party of any such right, power or remedy any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. 10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS. Each Party consents and submits to the non-exclusive personal jurisdiction of any federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 10.6 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. 13 17 10.6 Arbitration. The Parties acknowledge and agree that the transactions contemplated herein substantially affect and impact interstate commerce. Therefore, all disputes or differences between JALIC and the Company arising under or which are related to this Agreement upon which an amicable understanding cannot be reached within 30 days shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court having jurisdiction thereof. The Arbitrators provided for herein shall construe this Agreement in light of the prevailing custom and practices for transactions of a similar nature in the insurance industry. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held at a site selected by the Arbitrators. The Parties agree to arbitrate within 90 days following the transmittal of written demand of either Party to arbitrate any dispute arbitrable under this Agreement. The Parties will in good faith, within 15 days following notice of written demand to arbitrate attempt to agree on a single Arbitrator. If the Parties cannot within 15 days thereafter agree on a single Arbitrator, each of the Parties shall appoint an Arbitrator, notifying the other Party of the name and address of such Arbitrator. The Arbitrators appointed by each Party shall agree upon and appoint a third neutral Arbitrator. If either Party shall fail to appoint an Arbitrator as herein provided, or should the two Arbitrators so named fail to select the third Arbitrator within 30 days after their appointment, then, in either event, the President of the American Arbitration Association or its successor shall appoint such second and/or third Arbitrator. A decision of a majority of the Arbitrators shall be final and binding and there shall be no appeal therefrom. The Arbitrators shall within 45 days after the last hearing enter an award and the award shall 14 18 be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Parties; all other costs of the respective Parties, including without limitation fees and expenses of the respective Party's attorneys, witnesses and discovery shall be paid by the respective Party, except to the extent that the Arbitrators otherwise direct based on the equities of the situation. The arbitration shall be held in New York, New York, unless otherwise agreed between the Parties. 10.7 Certain Definitions. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Stock Purchase Agreement. 10.8 Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as otherwise provided herein, neither JALIC nor the Company shall assign any of its rights or delegate any of its duties hereunder (in whole or in part and by operation of law or otherwise) without the prior written consent of the other Party hereto. Any other assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such consent is required hereby, shall be void. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. 10.9 Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable 15 19 adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. 10.10 Headings. The headings in this Agreement have been inserted for convenience of reference only, and shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. 10.11 Counterparts. This Agreement may be executed by the Parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. 10.12 Further Assurances. Subject to the provisions of this Agreement, JALIC and the Company will use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to provide the Services required herein. With regard to any matters not expressly stated herein, the Parties agree to furnish such information, to execute such additional documents, and to 16 20 cooperate with each other as may be reasonably necessary to carry out the purposes of this Agreement, in accordance with industry practice for transactions of this kind. If either Party becomes aware that any Action has been or is about to be initiated with respect to the Policies, or any other matter reasonably related thereto, it shall inform the other Party as soon as practicable. The Parties agree to cooperate in furnishing to each other any files or other information needed by the other to respond to any Action or threatened Action. IN WITNESS WHEREOF, the Parties have executed this Agreement. JOHN ALDEN LIFE INSURANCE COMPANY By:s/ Scott L. Stanton ------------------------------------- Title: Senior Vice President and CFO ---------------------------------- JOHN ALDEN LIFE INSURANCE COMPANY OF NEW YORK By:s/ James W. Rowan ------------------------------------- Title: Senior Vice President ---------------------------------- 17 21 Schedule 1.1 SERVICES I. ADMINISTRATIVE SERVICES Administrative Services with respect to the Policies as conducted by JALIC shall consist of those services, and only those services, JALIC had previously rendered for the Company in the ordinary course immediately prior to the date hereof with respect to the Policies; provided, however that, if JALIC is not providing Services consistent with the current prevailing standards of the life insurance industry, the Company shall have the discretion to require JALIC to make such changes to such Services, at the Company's sole cost and expense (in accordance with item II below), as the Company deems necessary to be provided in a manner that is reasonable and consistent with the current prevailing standards of the life insurance industry. Such services shall include, but only to the extent such Services were previously provided to the Company immediately prior to the date hereof: (a) assistance with all Policyholder services relating to the Policies including but not limited to the following: 1. Billing and collection of premiums; 2. Payment of claims; 3. Handling of Policyholder service requests, inquiries and complaints under the Policies; 4. Upon reasonable request, preparation of quarterly financial statement data (within ten business days after the end of a calendar quarter) and annual financial statement data (within thirty calendar days after the end of the fiscal year), for inclusion in the Company's applicable financial statements; 5. Administration of any agreements providing for the payment of commissions relating to the Policies; 6. Provision of financial services pursuant to Section 1.4; 7. Payment of agent commissions due and payable; 8. Underwriting and issuing any Policies; 9. Preparation and mailing of quarterly and annual statements to policyholders; 10. Relevant information to the Company regarding renewal interest rates for Policies; 11. Provision of such other policyholder services on the Policies as are reasonably required or requested by the Company which have customarily been provided in the past by JALIC; and 12. Implement any changes in the credited rates. i 22 (b) All services performed by JALIC's or its Affiliate's employees providing legal, compliance, actuarial, accounting, treasury, human resources and data processing, including the preparation of financial and other relevant reports but excluding any Services which would require payments to Persons other than JALIC's or its Affiliate's employees, unless such payments are made to other Persons who presently and regularly provide such services in the ordinary course to JALIC; and (c) JALIC shall assist the Company in obtaining consents from third party licensors, if any, of the software set forth on Schedule 3.14 of the Asset Purchase Agreement which is necessary for the transitioning of the Policies (the cost of which shall be at the Company's sole cost and expense). II. EXTRAORDINARY SERVICES Upon request of the Company and subject to the provisions of Section 1.2 of this Agreement, JALIC shall use commercially reasonable efforts to provide to the extent readily available such additional services as the Company may reasonably request. Such services to the extent readily available shall consist of any services not covered by item I of this Schedule 1.1 including, without limitation, (i) underwriting any annuity product which is not substantially similar to a Policy and (ii) the enhancement of Services offered pursuant to item I above. III. TRANSITIONING SERVICES JALIC shall cooperate with the Company and use commercially reasonable efforts to effect an orderly transition to the Company and/or conversion onto the Company's administrative system of the Policies as rapidly and as smoothly as possible, and to do, or cause to be done, all things necessary, proper or advisable in connection therewith. To the extent JALIC maintains the following for the Company, JALIC shall provide the Company with copies of all databases, files, programs, job streams, accounting and other records and information regarding the Policies and the service and administration of the Policies when requested by the Company in machine readable form reasonably acceptable to the Company. Services to be provided in connection with such transition and/or conversion shall include, but not be limited to the following: providing the Company remote and on-site access to JALIC's computers, providing mainframe to mainframe connections between JALIC and the Company, providing technical support regarding the Policies and the computer hardware and software systems, to the extent JALIC has previously provided such technical support to the Company immediately prior to the date hereof in the ordinary course, and providing the Company access to appropriate JALIC personnel. ii 23 Schedule 2.1 COMPENSATION OF JALIC
For Administrative Services: $4 multiplied by the average number of (Schedule 1.1 - Item I) Policies administered by JALIC in force during such month, which average shall be based upon the mean number of contracts in force at the end and at the beginning of each fiscal month of JALIC (a fiscal month being the period beginning on the 22nd day of the calendar month preceding the calendar month with respect to which the calculation of compensation is being made and ending on the 21st day of the calendar month with respect to which the calculation of compensation is being made), adjusted for significant transfers occurring during such month. For Extraordinary Services: Direct costs, being 150% of the daily or (Schedule 1.1 - Item II) hourly salary or wages per day for the persons performing services not covered above, which services are provided during the month with respect to which the calculation of compensation is being made, plus any actual out-of-pocket expenses incurred by JALIC in performing such services. For Transitioning Services: If JALIC incurs any reasonable direct, (Schedule 1.1 - Item III) out-of- pocket or incremental costs or expenses, including, but not limited to, the payment of reasonable overtime for JALIC employees, the hiring of temporary employees or the retention of employees whose employment would otherwise have been terminated (and the Company has been consulted with regard thereto prior to such intended termination), in providing any of the Transitioning Services, JALIC shall be reimbursed for such costs and expenses. For all Transitioning Services in which no such costs or expenses are incurred by JALIC, there will be a charge for such Transitioning Services.
i EX-10.8 9 ADMINISTRATIVE SERVICES AGREEMENT DATED 3/31/97 1 EXECUTION COPY ADMINISTRATIVE SERVICES AGREEMENT Between JOHN ALDEN LIFE INSURANCE COMPANY and SUNAMERICA LIFE INSURANCE COMPANY Dated: March 31, 1997 2 TABLE OF CONTENTS
Page ARTICLE 1 APPOINTMENT OF THE COMPANY; SERVICES AND AUTHORITY............................................ 2 1.1 Engagement........................................................................... 2 1.2 General Description of the Services.................................................. 2 1.3 Performance by Affiliates............................................................ 3 1.4 Controlled Disbursement Account...................................................... 3 1.5 Monthly Accounting. ................................................................. 3 1.6 Maintenance of Books and Records..................................................... 3 1.7 Novation Report...................................................................... 5 1.8 Claims-Payment Instructions.......................................................... 5 1.9 Complaint-Handling Procedure......................................................... 5 1.10 Filings.............................................................................. 6 ARTICLE 2 COMPENSATION; PAYMENT......................................................................... 6 ARTICLE 3 TERM AND TERMINATION.......................................................................... 6 3.1 Term................................................................................. 6 3.2 Termination for Breach............................................................... 7 3.3 Termination for Receivership......................................................... 7 3.4 Other Termination Events............................................................. 7 ARTICLE 4 REPRESENTATIONS............................................................................... 7 ARTICLE 5 INDEPENDENT CONTRACTOR........................................................................ 8 ARTICLE 6 INTENTIONALLY DELETED......................................................................... 8 ARTICLE 7 FORCE MAJEURE................................................................................. 8 ARTICLE 8 HOLD HARMLESS................................................................................. 9 ARTICLE 9 MISCELLANEOUS................................................................................. 10 9.1 Notices.............................................................................. 10 9.2 Entire Agreement..................................................................... 12 9.3 Amendments........................................................................... 13 9.4 Waivers.............................................................................. 13 9.5 Governing Law........................................................................ 13 9.6 Arbitration.......................................................................... 14 9.7 Certain Definitions.................................................................. 15 9.8 Binding Effect; Assignment; Third Party Beneficiaries................................ 15 9.9 Severability......................................................................... 16
i 3 TABLE OF CONTENTS (cont'd)
Page 9.10 Headings............................................................................. 16 9.11 Counterparts......................................................................... 16 9.12 Further Assurances................................................................... 17
SCHEDULES: Schedule 1.1 - Services ii 4 ADMINISTRATIVE SERVICES AGREEMENT ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") dated March 31, 1997 (the "Effective Date") between John Alden Life Insurance Company, a Minnesota corporation ("JALIC"), and SunAmerica Life Insurance Company, an Arizona corporation (the "Company"). WHEREAS, pursuant to an Asset Purchase and Sale Agreement dated as of November 29, 1996 (the "Asset Purchase Agreement") between the Company and JALIC, JALIC is selling to the Company certain assets used in JALIC's business of issuing, selling and administering annuity policies and related activities in the United States other than the State of New York; WHEREAS, pursuant to an Indemnity Reinsurance Agreement between the Company and JALIC dated concurrently herewith (the "Indemnity Reinsurance Agreement") JALIC has ceded on a 100% coinsurance basis all of JALIC's Insurance Liabilities arising under the Annuity Contracts and Additional Policies (as defined in the Indemnity Reinsurance Agreement; the Additional Policies together with the Annuity Contracts are hereinafter referred to as "Policies") after the Closing Date pending assumption of the Policies as contemplated in the Assumption Reinsurance Agreement between the Company and JALIC dated concurrently herewith; and WHEREAS, JALIC desires that the Company provide to JALIC administrative services, with respect to the Policies. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good, valuable and sufficient consideration including the consideration provided hereunder, the receipt of which is hereby acknowledged, JALIC and the 5 Company (collectively, the "Parties" and, sometimes individually a "Party"), intending to be legally bound, hereby agree as follows: ARTICLE 1 APPOINTMENT OF THE COMPANY; SERVICES AND AUTHORITY 1.1 Engagement. For the term of the Agreement, JALIC hereby engages the Company to perform and provide the technical and administrative service, assistance and support functions described in Schedule 1.1 attached hereto (the "Services"). The Company hereby accepts such appointment. 1.2 General Description of the Services. The purpose of this Agreement is to set forth the terms upon which the Company shall provide to JALIC the Services. The Company shall provide the Services in a manner consistent with the then current prevailing standards of the life insurance industry. Services that are consistent with (i) the Company's past practices and (ii) the Company's current prevailing standards with regard to administering its own annuity policies which are similar to the Policies shall be conclusively deemed consistent with industry standards; provided, however, that the Company shall have the discretion to make such changes to such practices that the Company reasonably deems appropriate, so long as such Services continue to be provided in a manner consistent with (i) the current prevailing standards of the life insurance industry and (ii) the current standards of the Company with regard to administering its own annuity policies similar to the Policies. 1.3 Performance by Affiliates. The Parties recognize that the Services may include services which, by their nature, are more effectively to be provided by Affiliates of the Company or to Affiliates of JALIC. Subject to the next sentence of this Section 1.3, the Company shall, to the extent required in order for its Affiliates to provide such Services, cause 2 6 its Affiliates to provide such Services hereunder as if such Affiliates were themselves parties hereto. In connection with the provision of such Services, the Company's Affiliates shall be entitled, as if such Affiliates were themselves parties hereto, to the benefits of (i) the limitations on liability set forth herein and (ii) the limitations on the obligation to provide Services set forth herein. 1.4 Accounts. (a) The Company shall establish and fund on a timely basis a bank account (which need not be a segregated account) for purposes of making any and all payments to holders of Policies in the performance of the Services by the Company hereunder, including, but not limited to, all items set forth in Section 3.3 of the Indemnity Reinsurance Agreement. (b) JALIC shall cooperate with the Company in any reasonable arrangement which will allow the Company to deposit checks made payable to JALIC in a Company bank account. 1.5 Monthly Accounting. For the term of this Agreement, the Company shall provide JALIC with a monthly accounting (the "Monthly Accounting") relating to the Policies no later than ten (10) Business Days following the end of each calendar month. The Monthly Accounting shall contain such information relating to such cash flow transactions as are set forth on Schedule 1.5 hereto, including a statement of income received in connection with the Policies. Such Schedule 1.5 shall also include a statement of monthly reserves for GAAP and SAP. The first Monthly Accounting shall be provided to JALIC no later than forty-five (45) Business Days after the date hereof and the final Monthly Accounting shall be provided to JALIC no later than ten (10) Business Days after the termination of this Agreement. 1.6 Maintenance of Books and Records. (a) For the duration of this Agreement, the Company shall maintain books and records of all transactions pertaining to the Policies, 3 7 including, but not limited to, any disbursement requests submitted in respect of the Policies and any documents relating thereto, any material communications relating to any Policy, any material communication with any regulatory authority, complaint logs and all data used by the Company in the performance of services required under this Agreement. These books and records shall be maintained, in all material respects, in accordance with any and all applicable Laws. All such books and records pertaining to a Policy shall be the property of the Company. The Company shall (i) allow JALIC, upon reasonable prior notice and during regular business hours, through its employees and other Representatives, at JALIC's expense to examine and make copies of such books and records for any reasonable business purpose, including, without limitation, the preparation or examination of Tax Returns, regulatory filings and financial statements and the conduct of any Action or the conduct of any regulatory, contract holder, participant or other dispute resolution, whether pending or threatened, at the Company's offices or other facilities or properties and (ii) maintain such books and records for JALIC's examination and copying. Access to such books and records shall be at JALIC's expense and may not unreasonably interfere with the Company's or any successor company's business operations and JALIC shall reimburse the Company for all reasonable out-of-pocket expenses incurred by the Company in copying such records. Upon termination of this Agreement, all books and records pertaining to Policies for which there has been no Novation (as defined in the Assumption Reinsurance Agreement) shall be delivered promptly to JALIC or such other Person as JALIC shall designate in writing. (b) The Company shall back up and maintain its computer files used in the performance of the Services hereunder in the same manner that the Company presently backs up and maintains its existing computer files relating to annuity policies. 4 8 (c) The Company shall maintain facilities and procedures for safekeeping all records used in the performance of services under this Agreement of the same kind used to safekeep the Company's own records. (d) Each Party and its representatives may audit and review the other's records relating to the Services provided hereunder during reasonable business hours and upon reasonable advance notice; provided, however, that such audit or review may be postponed during any such period if it will be unreasonably disruptive to the Party being audited or reviewed. 1.7 Novation Report. Within 10 business days after the end of each month during the term of this Agreement, beginning with the month in which the first Novation of a Policy occurs, the Company shall provide to JALIC a report indicating all Policies that have been the subject of a Novation by the Company during the prior month. 1.8 Claims-Payment Instructions. The Company at its own cost will perform during the term of this Agreement claims administration and processing of the Policies, including, without limitation, review, investigation, adjustment, settlement, defense and payment of claims, special investigation and anti-fraud compliance, and preparation of any report required by regulatory authorities concerning the foregoing services and will, in connection with such claims administration, retain, at its sole discretion and cost, any outside investigation firms, adjusters, attorneys or other professionals that the Company deems necessary in the adjustment of such claims. In regards to payment of claims regarding the Policies, the Company shall be entitled to rely on the express written contractual terms of the Policies and other books and records provided by JALIC. 5 9 1.9 Complaint-Handling Procedure. The Parties will cooperate with each other in providing information necessary to respond to any inquiries and complaints concerning the Policies. The Company shall answer all inquiries and complaints received by it concerning a Policy. All inquiries and complaints concerning the Policies received by JALIC with respect to a Policy transitioned to the Company or converted to the Company's administrative system shall be immediately forwarded by facsimile or overnight mail to a contact person designated by the Company for reply. Initially, such contact person shall be James W. Rowan. Upon answering such inquiries or complaints, the Company will furnish JALIC with a copy of the complaint file. JALIC shall be solely responsible for maintaining any complaint files, complaint registers or other reports of any kind, which are required to be maintained under applicable Laws. JALIC shall also be responsible for preparing and submitting any other complaint filings as required by applicable Laws. 1.10 Filings. The Company shall handle all compliance and regulatory matters relating to the administration of a Policy, including monitoring changes in applicable laws, implementing the appropriate and necessary changes to forms and rates as required by applicable Laws, filing and refiling forms and rates as required by applicable Laws, and preparing and filing all reports and other filings required by applicable Laws. The Company shall use its reasonable efforts to provide copies of all reports and filings with respect to a Policy required to be made with any governmental entity to JALIC. 6 10 ARTICLE 2 COMPENSATION; PAYMENT There shall be no fee payable to the Company for Services provided to JALIC hereunder. ARTICLE 3 TERM AND TERMINATION 3.1 Term. This Agreement shall commence upon the first Policy or Policies being transitioned to the Company or converted onto the Company's administrative system and shall continue with respect to Policies until such time as all of the liabilities under the Policies have been satisfied or a Novation has occurred or unless earlier terminated pursuant to Sections 3.2, 3.3 or 3.4 below and shall terminate as to each Policy on the effective date of the Novation of such Policy pursuant to the Assumption Reinsurance Agreement. Upon any termination of this Agreement pursuant to Sections 3.2, 3.3 or 3.4 below, the Services performed by the Company shall be assumed by JALIC or JALIC's designee. In such event of termination, the Company shall cooperate in the transfer of services and the applicable books and records maintained by the Company pursuant to Section 1.6 hereof to JALIC or JALIC's designee, so that JALIC or its designee will be able to perform the Services required under this Agreement following termination of this Agreement. 3.2 Termination for Breach. In the event of a breach by either Party of any obligation of any provision of this Agreement, the non-breaching Party shall give written notice of breach to the breaching Party detailing the nature of such breach in sufficient detail to allow the breaching party to cure, if cure is possible. If a material breach of any material obligation is not cured by the breaching Party within 30 days after such notice of breach, then the non- 7 11 breaching Party may terminate this Agreement by giving notice of termination to the breaching Party. Such termination shall be effective on notice of termination by the non-breaching Party to the breaching Party. 3.3 Termination for Receivership. In the event of a receivership or insolvency of either Party, this Agreement may be terminated immediately by the other Party upon written notice. 3.4 Other Termination Events. This Agreement may be terminated at any time upon the mutual written consent of the Parties hereto, which writing shall state the effective date of termination. ARTICLE 4 REPRESENTATIONS THERE ARE NO REPRESENTATIONS OR WARRANTIES BY THE COMPANY OR ITS AFFILIATES WITH RESPECT TO THE SERVICES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSET PURCHASE AGREEMENT AND THE ANCILLARY AGREEMENTS. NO REPRESENTATION OR WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW, INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AS TO THE SERVICES. 8 12 ARTICLE 5 INDEPENDENT CONTRACTOR The Company and its Affiliates shall be independent contractors to JALIC and its Affiliates with respect to the performance of the Services hereunder. Nothing contained in this Agreement shall make the Company, its Affiliates or their employees the employees of JALIC. ARTICLE 6 INTENTIONALLY DELETED ARTICLE 7 FORCE MAJEURE The Company and its Affiliates shall not be liable for its or their failure to perform hereunder to the extent that such performance is made impracticable, delayed or prevented, in whole or in part, due to any acts of God; fires; wars; Laws or Orders, whether valid or invalid (including, without limitation, requisitions, allocations and price adjustment restrictions); or inability to obtain or unavoidable delay in obtaining necessary power. The Company and its Affiliates shall use commercially reasonable efforts (which shall be substantially similar to those used by the Company immediately prior to the date hereof) to minimize the likelihood of any damage, loss of data, delay or error resulting from such occurrence beyond its or their control. If the Company or its Affiliates fails to perform hereunder as a result of any occurrence described in the preceding sentence, the Company shall (i) give written notice to that effect to JALIC within 10 days after such occurrence together with a statement setting forth reasonably full particulars concerning such occurrence and (ii) during the period any Service required to be 9 13 provided hereunder cannot be provided as a result of such occurrence, use reasonable efforts to remedy such occurrence. To the extent required by any such occurrence, the performance by the Company or its Affiliates hereunder shall be suspended during the continuance of any such occurrence and this Agreement shall otherwise remain unaffected. If such occurrence is remedied during the time that any Service affected by such occurrence is required to be provided under this Agreement, the Company or its Affiliates shall promptly notify JALIC and any such suspension shall end. ARTICLE 8 HOLD HARMLESS The Company shall indemnify and hold JALIC and each of its Affiliates harmless from any and all damages, claims, suits, actions, causes of action, proceedings, investigations, losses, liabilities, assessments, judgments, deficiencies and expenses (including, without limitation, reasonable legal, accounting and other professional expenses) ("Liabilities") directly arising from the Company's or its Affiliates breach of any provision of this Agreement, including any act of negligence, bad faith or willful misconduct of the Company in providing the Services. The indemnification provisions under this Article 8 shall survive the term of this agreement for all Liabilities arising from omissions or acts committed during such term. 10 14 ARTICLE 9 MISCELLANEOUS 9.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), or sent by certified, registered or express mail, postage prepaid and return receipt requested, or transmitted by facsimile (with a copy of such notice or other communication and a confirmation of transmission sent by certified, registered, or express mail, postage prepaid and return receipt requested no later than the close of business on the next Business Day following such transmission) and shall be addressed as follows: when JALIC is to be notified: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, CA 90067-6022 Attention: General Counsel Facsimile No.: (310) 772-6574 With a copy to: SunAmerica Life Insurance Company 1 SunAmerica Center, Century City Los Angeles, CA 90067-6022 Attention: Controller Facsimile No.: (310) 772-6684 and O'Melveny & Myers 1999 Avenue of the Stars Suite 700 Los Angeles, CA 90067 Attention: Robert D. Haymer, Esq. Facsimile No.: (310) 246-6779 when the Company is to be notified: 11 15 John Alden Life Insurance Company 7300 Corporate Center Drive Miami, FL 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1342 With copies to: John Alden Financial Corporation 7300 Corporate Center Drive Miami, FL 33126-1223 Attention: General Counsel Facsimile No.: (305) 715-1497 Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attention: William W. Rosenblatt, Esq. Facsimile No.: (212) 259-6333 A Party may, by notice given in accordance with this Section 9.1 to the other Party, designate another address or person to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted. Each notice transmitted in the manner described in this Section 9.1 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), transmitted to the addressee (if transmitted by facsimile and subject to delivery of the mailed copy thereof) or the affidavit of the messenger (if transmitted by personal delivery) (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. 9.2 Entire Agreement. This Agreement (including the Schedules attached hereto), the Asset Purchase Agreement (including the Ancillary Agreements and the Annex, Exhibits and Schedules attached hereto), the Assumption Reinsurance Agreement and the Indemnity Reinsurance Agreement contain the entire agreement and understanding between the Parties with 12 16 respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous agreements, representations, warranties and understandings, whether written or oral, by or between the Parties with respect to the subject matter hereof. Nothing contained in this Agreement or any of the Schedules hereto shall constitute or be interpreted or construed as an admission by any Party or any of its Affiliates of liability to third parties, whether under any Laws or ordinances or otherwise, or as an admission that any Party or any of its Affiliates are in violation of or have ever violated any such Laws. Notwithstanding anything contained in this Section 9.2 to the contrary, any inconsistencies between this Agreement and the Indemnity Reinsurance Agreement shall be governed by the terms of the Indemnity Reinsurance Agreement. In the event of any conflict between this Agreement, the Indemnity Reinsurance Agreement and the Asset Purchase Agreement as to the rights or obligations of JALIC or the Company, the Asset Purchase Agreement shall control. In the event of any ambiguity in this Agreement as to the rights or obligations of JALIC or the Company, the Asset Purchase Agreement shall control. 9.3 Amendments. No addition to, and no cancellation, renewal, extension, modification or amendment of, or approvals under, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification, amendment, or approval is set forth in a written instrument which states that it adds to, amends, cancels, renews or extends this Agreement or grant an approval hereunder and which is executed and delivered on behalf of each Party by an officer of, or attorney-in-fact for, such Party. 9.4 Waivers. No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for, such Party. Such 13 17 waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time or at any time) nor the delay or failure (at any time or for any period of time) to exercise any right, power or remedy shall operate as a waiver of, the right to exercise, or impair, limit or restrict the exercise by, any Party of any such right, power or remedy any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. 9.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CONFLICTS OF LAWS. Each Party consents and submits to the non-exclusive personal jurisdiction of any federal court in the State of Delaware in respect of any proceeding for the sole purpose of injunctive relief or to enforce an arbitration award under Section 9.6 hereof. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable Laws. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in federal court in the State of Delaware and any claim that it may now or hereafter have that any such proceeding in any such court has been brought in an inconvenient forum. 9.6 Arbitration. The Parties acknowledge and agree that the transactions contemplated herein substantially affect and impact interstate commerce. Therefore, all disputes or differences between JALIC and the Company arising under or which are related to this Agreement upon which an amicable understanding cannot be reached within 30 days shall be settled by arbitration 14 18 in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as hereinafter provided, and judgment upon the award entered by the Arbitrators (as defined below) may be entered in any court having jurisdiction thereof. The Arbitrators provided for herein shall construe this Agreement in light of the prevailing custom and practices for transactions of a similar nature in the insurance industry. The "Arbitrators" shall consist of one neutral arbitrator (or as provided below, three neutral arbitrators). The Parties agree that the arbitration, if implemented under this Agreement, shall be held at a site selected by the Arbitrators. The Parties agree to arbitrate within 90 days following the transmittal of written demand of either Party to arbitrate any dispute arbitrable under this Agreement. The Parties will in good faith, within 15 days following notice of written demand to arbitrate attempt to agree on a single Arbitrator. If the Parties cannot within 15 days thereafter agree on a single Arbitrator, each of the Parties shall appoint an Arbitrator, notifying the other Party of the name and address of such Arbitrator. The Arbitrators appointed by each Party shall agree upon and appoint a third neutral Arbitrator. If either Party shall fail to appoint an Arbitrator as herein provided, or should the two Arbitrators so named fail to select the third Arbitrator within 30 days after their appointment, then, in either event, the President of the American Arbitration Association or its successor shall appoint such second and/or third Arbitrator. A decision of a majority of the Arbitrators shall be final and binding and there shall be no appeal therefrom. The Arbitrators shall within 45 days after the last hearing enter an award and the award shall be supported by a written opinion. The fees of the Arbitrators and the direct costs of the arbitration shall be shared equally by the Parties; all other costs of the respective Parties, including without limitation fees and expenses of the respective Party's attorneys, witnesses and discovery shall be paid by the respective Party, except to the extent that the Arbitrators 15 19 otherwise direct based on the equities of the situation. The arbitration shall be held in New York, New York, unless otherwise agreed between the Parties. 9.7 Certain Definitions. Capitalized terms used herein without definition shall have the meaning ascribed to them in the Asset Purchase Agreement. 9.8 Binding Effect; Assignment; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as otherwise provided in this Agreement, neither the Company nor JALIC shall assign any of its rights or delegate any of its duties hereunder (in whole or in part and by operation of Law or otherwise) without the prior written consent of the other Party hereto, which consent shall not be unreasonably withheld. Any other assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Party, if such consent is required hereby, shall be void. Notwithstanding the foregoing, the Company may subcontract all or part of the Services hereunder to a third party without JALIC's consent. No Person (including, without limitation, any employee of a Party) shall be, or be deemed to be, a third party beneficiary of this Agreement. 9.9 Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the 16 20 benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. 9.10 Headings. The headings in this Agreement have been inserted for convenience of reference only, and shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. 9.11 Counterparts. This Agreement may be executed by the Parties in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both of the Parties. 9.12 Further Assurances. Subject to the provisions of this Agreement, JALIC and the Company will use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to provide the Services required herein. With regard to any matters not expressly stated herein, the Parties to this Agreement agree to furnish such information, to execute such additional documents, and to cooperate with each other as may be reasonably necessary to carry out the purposes of this Agreement, in accordance with industry practice for transactions of this kind. 17 21 If either Party becomes aware that any Action has been or is about to be initiated with respect to the Policies, or any other matter reasonably related thereto, it shall inform the other Party as soon as practicable. The Parties agree to cooperate in furnishing to each other any files or other information needed by the other to respond to any Action or threatened Action. IN WITNESS WHEREOF, the parties have executed this Agreement. JOHN ALDEN LIFE INSURANCE COMPANY By: /s/ Scott L. Stanton ------------------------------- Title: Senior Vice President and CFO ------------------------------- SUNAMERICA LIFE INSURANCE COMPANY By: /s/ James W. Rowan ------------------------------- Title: Senior Vice President ------------------------------- 18 22 Schedule 1.1 SERVICES Services with respect to the Policies transitioned to the Company as conducted by the Company shall consist of those services, and only those services, the Company or its Affiliates customarily renders for its own annuity policies. Such Services shall include: (a) all Policyholder services including but not limited to the following: 1. Billing and collection of premiums; 2. Payment of claims; 3. Handling of Policyholder service requests, inquiries and complaints under the Policies; 4. Preparation of quarterly statements of cash flow transaction data (within ten Business Days after the end of a calendar quarter) and annual financial statement data (within thirty-five calendar days after the end of the fiscal year), for inclusion in JALIC's applicable financial statements (except for statements of cash flow testing and actuarial memorandum which shall be delivered on or before March 1 of each calendar year); 5. Administration of any agreements providing for the payment of commissions relating to the Policies; 6. Provision of the Monthly Accounting pursuant to Section 1.5; 7. Payment of agent commissions due and payable; 8. Provision of data on reimbursement of premium taxes and provision of data on net DAC taxes, sales taxes, value added taxes or any other taxes on receipts due and payable; 9. Preparation and mailing of quarterly or annual statements to policyholders; and 10. Provision of such other Policyholder services on the Policies as are reasonably required or which have been previously provided by the Company or its Affiliates with respect to its own annuity policies with respect to its annuity policies which are similar to the Policies. (b) All other services performed by or for the Company or its Affiliates with respect to its own annuity polices similar to the Policies, including the providing of legal, compliance, actuarial, accounting, treasury, human resources and data processing services. i EX-10.9 10 INTERIM SERVICING AGREEMENT 1 - ------------------------------------------------------------------------------- JOHN ALDEN ASSET MANAGEMENT COMPANY INTERIM SERVICER AND SUNAMERICA LIFE INSURANCE COMPANY AND JOHN ALDEN LIFE INSURANCE COMPANY OF NEW YORK (COLLECTIVELY, THE "OWNER") INTERIM SERVICING AGREEMENT DATED AS OF MARCH 31, 1997 - ------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
ARTICLE I DEFINITIONS......................................................................................1 AGREEMENT.................................................................................................1 BUSINESS DAY..............................................................................................1 CERTIFICATE ACCOUNT.......................................................................................1 CORPORATE OFFICE..........................................................................................1 DETERMINATION DATE........................................................................................2 DUE DATE .................................................................................................2 DUE PERIOD................................................................................................2 ESCROW ACCOUNT............................................................................................2 ESCROW PAYMENTS...........................................................................................2 EVENT OF DEFAULT..........................................................................................2 FIRST REMITTANCE DATE.....................................................................................2 INTERIM SERVICER..........................................................................................2 INTERIM SERVICING FEE.....................................................................................2 MATURITY DATE.............................................................................................2 MONTHLY PAYMENT...........................................................................................2 MORTGAGE .................................................................................................2 MORTGAGE FILE.............................................................................................2 MORTGAGE LOANS............................................................................................2 MORTGAGE LOAN SCHEDULE....................................................................................3 MORTGAGE NOTE.............................................................................................3 MORTGAGED PROPERTY........................................................................................3 MORTGAGOR.................................................................................................3 PERSON .................................................................................................3 RECORD DATE...............................................................................................3 REMITTANCE DATE...........................................................................................3 SERVICERS.................................................................................................3 SERVICING ACCOUNTS........................................................................................3 SERVICING AGREEMENTS......................................................................................3 SERVICING FEE.............................................................................................3 SERVICERS' REMITTANCE DATE................................................................................3 ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS...................................................3 SECTION 2.01. Interim Servicer to Act as Interim Servicer..............................................3 SECTION 2.02. Servicing Agreements Between the Owner and the Servicers; Enforcement of Other Agreements...............................................................................4 SECTION 2.03. Liability of the Interim Servicer........................................................4 SECTION 2.04. Collection of Certain Mortgage Loan Payments.............................................4 SECTION 2.05. Servicing Accounts.......................................................................4 SECTION 2.06. Establishment of Certificate Account; Deposits in Certificate Account....................4 SECTION 2.07. Permitted Withdrawals From the Certificate Account.......................................5 SECTION 2.08. Establishment of Escrow Account; Deposits in Escrow Account..............................5 SECTION 2.09. Permitted Withdrawals From Escrow Accounts...............................................6 SECTION 2.10. Payment of Taxes and Insurance...........................................................6 SECTION 2.11. Maintenance of Hazard Insurance..........................................................6 SECTION 2.12. Delinquent Payments on Mortgage Loans....................................................6 SECTION 2.13. Servicing Compensation...................................................................6 SECTION 2.14. Records; Access to Certain Documentation and Information Regarding the Mortgage Loans...........................................................................6 SECTION 2.15. Satisfaction of Mortgages................................................................7
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SECTION 2.16. Limitation of Servicer's Authority.......................................................7 SECTION 2.17. Fidelity Bond and Errors Omissions.......................................................7 ARTICLE III PAYMENTS; STATEMENTS AND REPORTS.................................................................8 SECTION 3.01. Distributions............................................................................8 SECTION 3.02. Statements to the Owner..................................................................8 ARTICLE IV LIABILITY OF THE INTERIM SERVICER................................................................9 SECTION 4.01. Limitation on Liability of the Interim Servicer and Others...............................9 SECTION 4.02. Indemnification..........................................................................9 ARTICLE V DEFAULT..........................................................................................9 SECTION 5.01. Events of Default........................................................................9 ARTICLE VI TERMINATION.................................................................................... 10 SECTION 6.01. Termination............................................................................ 10 ARTICLE VII MISCELLANEOUS PROVISIONS....................................................................... 11 SECTION 7.01. Amendment.............................................................................. 11 SECTION 7.02. Governing Law.......................................................................... 11 SECTION 7.03. Reports; Notices....................................................................... 11 SECTION 7.04. Severability of Provisions............................................................. 11 SECTION 7.05. No Partnership......................................................................... 11 SECTION 7.06. Execution; Successors and Assigns...................................................... 11 SECTION 7.07. Attorney's Fees........................................................................ 11 SECTION 7.08. Entire Agreement....................................................................... 12 SECTION 7.09. Headings............................................................................... 12
EXHIBITS Exhibit A Schedule of Mortgage Loans Exhibit One Certificate Account Letter Agreement Exhibit Two Escrow Account Letter Agreement Exhibit Three Permitted Investments ii 4 This Interim Servicing Agreement relating to the interim servicing of Mortgage Loans identified on Schedule A hereto is effective as of March 31, 1997, is executed between John Alden Asset Management Company having an office at 7300 Corporate Center Drive, Miami, Florida 33126-1223 (hereinafter referred to as the "Interim Servicer"), SunAmerica Life Insurance Company, having an office at 1 SunAmerica Center, 38th Floor, Los Angeles, California 90067-6022 ("SunAmerica"), and John Alden Life Insurance Company of New York, having an office at 1 SunAmerica Center, 38th Floor, Los Angeles, California 90067-6022 ("JANY," and together with "SunAmerica," hereinafter referred to as the "Owner"). RECITALS WHEREAS, the Owner is the owner of certain mortgage loans (the "Mortgage Loans") evidenced by a bond and/or promissory note (the "Notes") and secured by a deed of trust or mortgage on commercial real property (the "Mortgages"), which Mortgage Loans are described in Schedule A annexed hereto; and WHEREAS, the Interim Servicer shall act on behalf of Owner in order to service the Mortgage Loans as an Interim Servicer and to act as a master servicer for any Mortgage Loan or Mortgage Loans serviced under a third party servicing agreement in existence prior to the date hereof. WHEREAS, the Owner and the Interim Servicer have agreed that Interim Servicer shall undertake to service the Mortgage Loans for Owner; NOW THEREFORE, in consideration of the promises and the mutual premises and the recitals set forth above which are made a contractual part hereof and hereinafter contained and the payment of One Dollar ($1.00) by each of the parties to the other in hand paid, receipt whereof is hereby acknowledged, it is mutually covenanted and agreed as follows: ARTICLE I DEFINITIONS Whenever used herein, the following words and phrases, unless the context otherwise requires, shall have the following meanings: ACCEPTED SERVICING PRACTICES: As defined in Section 2.01 of this Agreement. AGREEMENT: This Interim Servicing Agreement, including all exhibits hereto, and all amendments hereof and supplements hereto. BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a day on which banking or savings and loan institutions are authorized or obligated by law or executive order to be closed in the State of Florida. CERTIFICATE ACCOUNT: The trust accounts established and maintained pursuant to Section 2.07 of this Agreement. CORPORATE OFFICE: The principal office of the Interim Servicer in the State of Florida at which at any particular time its corporate business shall be administered, which office at the date of the execution of this instrument is located at 7300 Corporate Center Drive, Miami, Florida 33126. CUT-OFF DATE: March 31, 1997 5 DETERMINATION DATE: The last day (or if such day is not a Business Day, the Business Day immediately preceding such last day) of each month. DUE DATE: The day of the month on which each Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace. DUE PERIOD: With respect to each Remittance Date, the applicable Due Period shall be the period beginning on the first day of the month preceding the month of the Remittance Date, and ending on the last day of the month preceding the Remittance Date. ESCROW ACCOUNT: The separate account or accounts created and maintained pursuant to Section 2.08 of this Agreement. ESCROW PAYMENTS: The amounts constituting ground rents, taxes, assessments, water rates, mortgage insurance premiums, fire and hazard insurance premiums and other payments required to be escrowed by the Mortgagor with the Mortgagee pursuant to any Mortgage Loan and this Agreement. EVENT OF DEFAULT: Any one of the conditions or circumstances enumerated in Article V of this Agreement. FIRST REMITTANCE DATE: April 5, 1997, or if such day is not a Business Day, the first Business Day immediately following; provided however, that the funds remitted to Owner on the First Remittance Date shall include all payments collected by Interim Servicer under the Mortgage Loans between March 21, 1997 and March 31, 1997. INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any insurance policy covering a Mortgage Loan to the extent such proceeds are applied to the restoration of the related Mortgaged Property or released to the related Mortgagor in accordance with Accepted Servicing Practices. INTERIM SERVICER: John Alden Asset Management Company or its successors or assigns. INTERIM SERVICING FEE: Monthly compensation with respect to each Mortgage Note being serviced under this Agreement in an amount to be deducted by the Interim Servicer from the Monthly Payment made with respect to such Mortgage Note in an amount as set forth in Section 2.13. The obligation of the Owner to pay the Interim Servicing Fee with respect to each Mortgage Note is limited to, and payable solely from, the Monthly Payment of the specific Mortgage Note as to which the entire amount of the Monthly Payment (excluding late fees or penalty charges which are or may become due) has been made and collected by the Interim Servicer, and may only be deducted by the Interim Servicer after the entire amount of a regular Monthly Payment (excluding late fees or penalty charges which are or may become due) for such month with respect to such Mortgage Note has been received, and deposited, by the Interim Servicer into the Certificate Account. MATURITY DATE: The date on which each Mortgage Note, pursuant to its terms, shall mature such date being set forth on the Mortgage Loan Schedule. MONTHLY PAYMENT: The scheduled monthly payment of principal and interest on a Mortgage Loan which is payable by a Mortgagor under the related Mortgage Note. MORTGAGE: The mortgage, deed of trust, deed to secure debt, or other instrument creating a first lien on or first priority ownership interest in an estate in fee simple in real property securing a Mortgage Note. MORTGAGE FILE: The contents of each Mortgage File pertaining to a particular Mortgage Loan. MORTGAGE LOANS: Such of the mortgage loans identified in Schedule A hereto. 2 6 MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached hereto as Schedule A, such schedule identifying each Mortgage Loan by city and state of the Mortgaged Property, the servicer code and the name of the Mortgagor and setting forth as to each Mortgage Loan the type, its principal balance as of the close of business on the Cut-off Date (after deducting any payment of principal due on or before such date), loan number and borrower's name. MORTGAGE NOTE: The note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage. MORTGAGED PROPERTY: The property securing a Mortgage Note. MORTGAGOR: The obligor on a Mortgage Note. PERSON: Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. RECORD DATE: The close of business of the last Business Day of the month preceding the month of the related Remittance Date. REMITTANCE DATE: The 5th day of every consecutive month, beginning on the First Remittance Date, or if such 5th day is not on a Business Day, the first Business Day thereafter. SERVICERS: The various Servicers which currently service the Mortgage Loans pursuant to Servicing Agreements. SERVICING ACCOUNTS: The account or accounts established pursuant to Section 2.06 of this Agreement. SERVICING AGREEMENTS: Various Servicing Agreements between the Owner and Servicers providing terms for the servicing of particular Mortgage Loans. SERVICING FEE: The Servicing Fee payable to the Servicer shall be fee as set forth in the respective Servicing Agreement. SERVICERS' REMITTANCE DATE: The Business Day prior to each Remittance Date or as otherwise may be provided in the Servicing Agreements. ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS SECTION 2.01. Interim Servicer to Act as Interim Servicer. Acting itself or through the Servicers as provided in Section 2.02, the Interim Servicer shall service and administer the Mortgage Loans on the Owner's behalf, in accordance with this Agreement and the Mortgage Loans which such services shall consist of collecting and remitting collected funds consisting of all amounts due and owing under the Mortgage Loans including without limitation principal, interest, taxes and insurance with regard to each Mortgage Loan and providing periodic reports and other information to Owner as provided elsewhere herein. In carrying out its duties, the Interim Servicer shall exercise the same care it customarily employs and exercises in servicing and administering Mortgage Loans for its own account which shall be consistent with accepted mortgage servicing practices of prudent lending institutions with regard to the services being performed hereunder ("Accepted Servicing Practices"). The Interim Servicer, in its sole discretion, may and is hereby authorized to perform any of its servicing responsibilities through such servicing institutions or organizations, with which it has, prior to the date hereof, executed contracts to perform servicing duties on its behalf with respect to the Mortgage Loans or any particular Mortgage Loan, and such designee shall have all 3 7 the rights and powers of the Interim Servicer with respect to such Mortgage Loans under this Agreement to the extent provided in any Servicing Agreement, but the Interim Servicer shall not thereby be released from any of its obligations in this Agreement. Notwithstanding the foregoing, the Interim Servicer shall not enter into any agreements subsequent to the date hereof with a servicing institution or organization to perform any of its services hereunder. The Owner shall furnish the Interim Servicer with any powers of attorney and other documents necessary or appropriate to enable the Interim Servicer or its designee to carry out its servicing and administrative duties hereunder. SECTION 2.02. Servicing Agreements Between the Owner and the Servicers; Enforcement of Other Agreements. (a) The Owner is a party to the Servicing Agreements with the Servicers for the servicing and administration of the Mortgage Loans. (b) As part of its servicing activities hereunder, the Interim Servicer, for the benefit of the Owner, shall use Accepted Servicing Practices to enforce the obligations of the Servicers under the Servicing Agreements, including, without limitation, any obligation to remit amounts in the Servicing Accounts to the Interim Servicer for deposit into the Certificate Account on each Servicers' Remittance Date and to have the Servicers make advances in respect of delinquent payments if so required. In addition, Interim Servicer shall forward to Owner reports or other information received by Interim Servicer from Servicers with respect to any Mortgage Loan. SECTION 2.03. Liability of the Interim Servicer. Except where explicitly stated otherwise, the Interim Servicer's responsibility as Interim Servicer shall be limited to using commercially reasonable efforts to enforce the terms of the Servicing Agreements. The Interim Servicer shall not be liable for any action or failure to act on the part of any of the Servicers but shall remain responsible for the servicing of the Mortgage Loans. The Interim Servicer shall be entitled to enter into any agreements with the Servicers, for indemnification of the Interim Servicer by such Person and nothing contained in this Agreement shall be deemed to limit or modify such indemnification. SECTION 2.04. Collection of Certain Mortgage Loan Payments. The Interim Servicer shall use commercially reasonable efforts to cause the Servicers to collect all payments called for under the terms and provisions of the Mortgage Loans in accordance with Accepted Servicing Practices. SECTION 2.05. Servicing Accounts. Pursuant to the Servicing Agreements, each Servicer shall be required to establish and maintain one or more Servicing Accounts (collectively, the "Servicing Accounts"). The Servicer is required to deposit into the Servicing Account all funds received by them with respect to the Mortgage Loans less any amount which the Servicers are permitted to retain pursuant to the Servicing Agreements. On each Servicer Remittance Date, the Servicer is required to remit from the Servicing Account to the Interim Servicer the scheduled servicer remittance plus all other amounts with respect to the Mortgage Loans deposited by the Servicer into the Servicing Account as of the Servicer Remittance Date which amount shall be deposited by the Interim Servicer into the Certificate Account. SECTION 2.06. Establishment of Certificate Account; Deposits in Certificate Account. The Interim Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan separate and apart from any of its own funds and general assets and shall establish and maintain one or more Certificate Accounts, which shall be trust accounts (collectively, the "Certificate Account"), titled the "John Alden Asset Management Company, as Interim Servicer in trust for JANY Commercial Mortgage Loans", the "John Alden Asset Management Company, as Interim Servicer in trust for JANY Residential Mortgage Loans" , the "John Alden Asset Management Company, as Interim Servicer in trust for SunAmerica Life Commercial Mortgage Loans" and the "John Alden Asset Management Company, as Interim Servicer in trust for SunAmerica Life Residential Mortgage Loans", respectively. Such Certificate Accounts shall be established with an investment grade bank. The Certificate Account shall be insured by the Federal Deposit Insurance Corporation. The creation of any Certificate Account shall be evidenced 4 8 by a letter agreement in the form of Exhibit One hereto. A copy of such letter agreement shall be furnished to the Owner. The Interim Servicer shall not close or move the Certificate Account without the prior written consent of the Owner. The Interim Servicer shall deposit in the Certificate Account upon receipt, net of the Interim Servicing Fees, and retain therein the following payments and collections received by it subsequent to the Cut-off Date (other than in respect of principal and interest on the Mortgage Loans due on or before the Cut-off Date) all funds collected by the Interim Servicer in connection with the Mortgage Loans (other than amounts to be deposited in the Escrow Accounts) including without limitation: (i) all payments on account of principal, including principal prepayments on the Mortgage Loans; (ii) all payments on account of interest on the Mortgage Loans; (iii) all proceeds received by the Interim Servicer under any title, hazard or other insurance policy, other than proceeds to be held in the Escrow Account and applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the Interim Servicer's normal servicing procedures; and (iv) all awards or settlements in respect of condemnation proceedings or eminent domain affecting any Mortgaged Property which are not released to the Mortgagor in accordance with the Interim Servicer's normal servicing procedures. SECTION 2.07. Permitted Withdrawals From the Certificate Account. The Interim Servicer may, from time to time, withdraw funds from the Certificate Account for the following purposes: (i) to make payments to the Owner in the amounts and in the manner provided for in Section 3.01 of this Agreement; (ii) to reimburse itself for unpaid Interim Servicing Fees; or (iii) to clear and terminate the Certificate Account upon the termination of this Agreement. SECTION 2.08. Establishment of Escrow Account; Deposits in Escrow Account. (a) On direct serviced loans, the Interim Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan which constitute Escrow Payments separate and apart from any of its own funds and general assets and shall establish and maintain a JANY commercial-mortgage loan escrow account, a JANY residential-mortgage loan escrow account, a SunAmerica commercial-mortgage loan escrow account and a SunAmerica residential-mortgage loan escrow account (collectively, the "Escrow Accounts"), which shall be trust accounts, titled "John Alden Asset Management Company, as Interim Servicer in trust for JANY Commercial Mortgage Loans", the "John Alden Asset Management Company, as Interim Servicer in trust for JANY Residential Mortgage Loans" , the "John Alden Asset Management Company, as Interim Servicer in trust for SunAmerica Life Commercial Mortgage Loans" and the "John Alden Asset Management Company, as Interim Servicer in trust for SunAmerica Life Residential Mortgage Loans", respectively. The Escrow Accounts shall be established with an investment grade commercial bank. The Escrow Accounts shall be insured by the Federal Deposit Insurance Corporation. The creation of any Escrow Accounts shall be evidenced by a letter agreement in the form of Exhibit "Two" hereto. A copy of such certification or letter agreement shall be furnished to the Owner. The Interim Servicer shall not close or move the Escrow Accounts without the prior written consent of the Owner. The Interim Servicer, on direct serviced loans, shall deposit in the Escrow Accounts upon receipt, and retain therein: (i) all Escrow Payments collected on account of the Mortgage Loans, for the purpose of effecting timely payment of any such items as required under the terms of this Agreement, and (ii) all amounts representing proceeds 5 9 of any hazard insurance policy which are to be applied to the restoration or repair of any Mortgaged Property. The Interim Servicer shall make withdrawals therefrom only in accordance with Section 2.09 hereof. (b) The Interim Servicer may invest all or a portion of the funds in the Escrow Accounts in interest bearing accounts. The Interim Servicer shall receive as additional compensation all income and gain realized from any such interest bearing accounts. If any principal losses are incurred in respect of any such interest bearing accounts, the Interim Servicer shall reimburse and restore to the Escrow Accounts the amount of any such principal losses out of the Interim Servicer's own funds immediately as realized. Notwithstanding the foregoing, the Interim Servicer's right to invest funds in the Escrow Accounts shall in no way limit the rights of the Interim Servicer to be compensated for its services as provided in this Agreement. SECTION 2.09. Permitted Withdrawals From Escrow Accounts. On direct serviced Mortgage Loans withdrawals from the Escrow Accounts established under Section 2.08 may be made by the Interim Servicer as the case may be, only (a) to effect timely payments of ground rents, taxes, assessments, water rates, mortgage insurance premiums, fire and hazard insurance premiums or other items constituting Escrow Payments for the related Mortgage Loan, (b) to refund to any Mortgagor any funds found to be in excess of the amounts required under the terms of the related Mortgage Loan, (c) for transfer to the Certificate Account in accordance with the terms of the related Mortgage Loan, (d) for application to restoration or repair of the Mortgaged Property, (e) to pay to the Mortgagor, to the extent required by law, any interest paid on the funds deposited in the Escrow Accounts, or (f) to clear and terminate the Escrow Accounts upon the termination of this Agreement. SECTION 2.10. Payment of Taxes and Insurance. On direct serviced Mortgage Loans, the Interim Servicer shall maintain accurate records reflecting the status of, taxes and hazard insurance coverage and shall obtain, from time to time, all bills for the of such charges. To the extent that a Mortgage does not provide for Escrow s, the Interim Servicer shall use commercially reasonable efforts in accordance with Accepted Servicing Practices to determine that any such payments are made by the Mortgagor at the time they first become due. The Interim Servicer shall make reasonable efforts in accordance with Accepted Servicing Practices to cause any Servicer to maintain records concerning real estate taxes and insurance premiums. SECTION 2.11. Maintenance of Hazard Insurance. The Interim Servicer shall use its reasonable efforts in accordance with Accepted Servicing Practices to cause each Servicer to maintain for each Mortgage Loan fire and hazard insurance with extended coverage customary in the area where the Mortgaged Property is located, in an amount which is at least equal to the outstanding principal balance owing on the Mortgage Loan or the full insurable value of the improvements securing the Mortgage Loan, whichever is less. For direct serviced loans, Interim Servicer will use its reasonable efforts in accordance with Accepted Servicing Practices to cause Mortgagors to carry the above described insurance. SECTION 2.12. Delinquent Payments on Mortgage Loans. In the event that any payment due under any Mortgage Loan is not paid when the same becomes due and payable and such failure continues beyond any applicable grace period, the Interim Servicer shall notify the Owner of such failure on the monthly remittance report. The Interim Servicer shall have no obligation to foreclose upon or otherwise take title, in the name of the Owner, to Mortgaged Property for any Mortgage Loan which is in default. Also, the Interim Servicer shall have no obligation to advance to the Owner any defaulted payments of principal and interest with respect to any such defaulted Mortgage Loans. SECTION 2.13. Servicing Compensation. As compensation for its services hereunder, the Interim Servicer shall be entitled to withdraw from the Certificate Account or otherwise deduct from each Monthly Payment on a Mortgage Loan an Interim Servicing Fee which shall be 1/8% per loan annualized and collected monthly for each Mortgage Loan being serviced hereunder for the first ninety days of servicing and thereafter 1/4% per loan annualized and collected monthly for each Mortgage Loan being serviced hereunder from the Certificate Account from the payments on account of the specified Mortgage Loan as provided for in this Agreement but only in the manner contemplated in the definition of Interim Servicing Fee. 6 10 SECTION 2.14. Records; Access to Certain Documentation and Information Regarding the Mortgage Loans. (a) The Interim Servicer shall maintain records with respect to each Mortgage Loan which shall be clearly marked to show either SunAmerica or JANY as the owner of the Mortgage Loan, whether the Mortgage Loan is a residential Mortgage Loan or a commercial Mortgage Loan, the address of the mortgaged premises, and the name and address of the current Mortgagor. The Interim Servicer shall also maintain a file of legal notices, correspondence, forms, reports and notes of conversations with the Mortgagor and its representatives relating to the Mortgage Loans received on or after March 31, 1997. (b) The Interim Servicer shall provide access to the Owner to examine and audit the Mortgage Files and other books, records or information of the Interim Servicer with respect to this Agreement and the Mortgage Loans, such access to be afforded without charge but only upon reasonable request and during normal business hours at the offices of the Interim Servicer designated by it at all times. All such Mortgage Files and other books, records, or information with respect to the Mortgage Loans shall at all times be the property of the Owner. SECTION 2.15. Satisfaction of Mortgages. Upon the payment in full of any Mortgage Loan, or the receipt by the Servicers or Interim Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes, the Interim Servicer shall contact the Owner to procure, with respect to the mortgage, which secured the Mortgage Note, a satisfaction or release of the Mortgage covering the property. SECTION 2.16. Limitation of Servicer's Authority. (a) The Interim Servicer shall not, at any time, waive or consent to a postponement of compliance on the part of any Mortgagor with any material term or provision of any Note or Mortgage or in any other manner grant a material indulgence to any Mortgagor without prior approval by the Owner. (b) The Interim Servicer shall not, at any time, take any action with respect to any existing or proposed lease or tenancy affecting any Mortgaged Property or waive or consent to a postponement of compliance on the part of any tenant with any material term or provision of its lease or in any other manner grant a material indulgence to a tenant under a lease, without prior approval of the Owner. (c) Owner reserves to itself the right to accept prepayments, in whole or in part, of a Mortgage Loan whether or not any such prepayments are permitted under the terms of the Mortgage Loan documents, and in connection therewith to waive any prepayment charge, premium or penalty required by the Mortgage Loan documents. Any such prepayment charge, premium or penalty actually collected by the Interim Servicer shall be deposited in the Certificate Account and remitted to the Owner. SECTION 2.17. Fidelity Bond and Errors Omissions. The Interim Servicer agrees to obtain and maintain at its expense and shall keep in full force and effect throughout the term of this Agreement, a blanket fidelity bond and an errors and omissions insurance policy covering its officers and employees and other persons acting on its behalf in connection with the servicing activities hereunder. The amount of coverage shall be at least equal to the coverage that prudent mortgage loan servicers having servicing portfolios of a similar size. In the event that any such bond or policy ceases to be in effect, the Interim Servicer agrees to obtain a comparable replacement bond or policy with equivalent coverage. No provision of this Section 2.17 shall operate to diminish or restrict or otherwise impair the Interim Servicer's responsibilities and obligations set forth in this Agreement. The Interim Servicer shall use commercially reasonable efforts in accordance with Accepted Servicing Practices to cause the Servicers to maintain comparable coverage as provided by this Section 2.17. 7 11 ARTICLE III PAYMENTS; STATEMENTS AND REPORTS SECTION 3.01. Distributions. (a) On each Remittance Date, the Interim Servicer shall distribute to the Owner, from the funds on deposit in the Certificate Account, an amount equal to the cash held on deposit in the Certificate Account as of the close of business on the Determination Date, minus amounts due, reimbursable and or payable to the Interim Servicer for Interim Servicing Fees on such Determination Date. (b) All distributions made to the Owner on each Remittance Date shall be made by four separate wire transfers of immediately available funds representing distributions relating to JANY-owned commercial Mortgage Loans, JANY-owned residential Mortgage Loans, SunAmerica-owned residential Mortgage Loans and SumAmerica-owned commercial Mortgage Loans in accordance with written wiring instructions to be provided to the Interim Servicer by Owner. (c) Any and all payments including, without limitation, principal, interest, taxes and insurance relating to a Mortgage Loan described on Schedule A hereto, collected by the Interim Servicer after the termination of this Agreement with respect to a particular Mortgage Loan or Mortgage Loans, shall be remitted to Owner, or its designee at the written direction of Owner, on the 15th and 25th days of the months in which such payments are received. Interim Servicer shall not be entitled to Interim Servicing Fees in connection with any such payments collected. SECTION 3.02. Statements to the Owner. Upon each Remittance Date, the Interim Servicer will furnish to the Owner a statement representing distributions relating to JANY-owned commercial Mortgage Loans, JANY- owned residential Mortgage Loans, SunAmerica-owned Residential Mortgage Loans and SumAmerica-owned Commercial Mortgage Loans setting forth the following information with respect to each such Mortgage Loan; (i) the amount of such remittance allocable to principal (including a separate breakdown of any principal prepayments, including the date of such prepayment, and any prepayment penalties or premiums, if any); (ii) the amount of such distribution allocable to interest; (iii) the amount of servicing compensation withheld by the Interim Servicer during the Due Period; (iv) the principal balance of each Mortgage Loan and all of the Mortgage Loans at the close of business on the applicable Determination Date after giving effect to payments received on the Mortgage Loans; (v) the number and aggregate principal balances of each Mortgage Loan and the Mortgage Loans delinquent (a) 30 days, (b) 60 days, and (c) 90 days or more; and (vi) any statement, report or other information received from Servicers relating to the Mortgage Loans. 8 12 ARTICLE IV LIABILITY OF THE INTERIM SERVICER SECTION 4.01. Limitation on Liability of the Interim Servicer and Others. The Interim Servicer and any director, officer, employee or agent of the Interim Servicer may rely on any document of any kind which it in good faith reasonably believes to be genuine and to have been adopted or signed by the proper authorities respecting any matters arising hereunder. The Interim Servicer shall have no obligation to appear with respect to, prosecute or defend any legal action which is not incidental to the Interim Servicer's obligations, representations, covenants, duties, warranties or representations made, assumed, or imposed by, or on it, under this Agreement, or otherwise to service the Mortgage Loans in accordance with this Agreement. SECTION 4.02. Indemnification. The Interim Servicer shall indemnify the Owner and hold the Owner harmless against any and all claims, penalties, fines, reasonable legal fees and related costs and expenses and any other reasonable fees and expenses that Owner may sustain as a result of the failure of the Interim Servicer to perform its duties in accordance with the terms of this Agreement. The Owner shall indemnify the Interim Servicer and hold the Interim Servicer harmless against any and all claims, penalties, fines, reasonable legal fees and related costs and expenses and any other reasonable fees and expenses that the Interim Servicer may sustain as a result of its action pursuant to the terms hereunder other than such claims, penalties, fines, reasonable legal fees and related costs and expenses and any other reasonable fees and expenses that the Interim Servicer may sustain as a result of the failure of the Interim Servicer to perform its duties in accordance with the terms of this Agreement. ARTICLE V DEFAULT SECTION 5.01. Events of Default. In case one or more of the following Events of Default by the Interim Servicer shall occur and be continuing, that is to say: (i) any failure by the Interim Servicer to distribute to the Owner any required to be made under the terms of this Agreement within three (3) days of its due date; or (ii) any failure on the part of the Interim Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Interim Servicer in this Agreement, which remains unremedied for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Interim Servicer by the Owner; or (iii) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator or receiver or liquidation in any insolvency, readjustment or debt marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Interim Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of thirty (30) days; or (iv) the Interim Servicer shall consent to the appointment of a conservator or receiver or liquidator or liquidating committee in any insolvency, readjustment of debt, marshalling of assets and liabilities voluntary liquidation or similar proceedings of or relating to the Interim Servicer or of or relating to all or substantially all of its property; or (v) the Interim Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or 9 13 reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend of its obligations. then, and in each and every such case, in addition to whatever rights the Interim Servicer or the Owner may have at law or in equity to damages, including injunctive relief and specific performance, the Owner, by notice in writing to the Interim Servicer may terminate all of the rights and obligations of the Interim Servicer as Servicer of the Mortgage Loans under this Agreement, as a result of such Event of Default, but without prejudice to any rights it may have. On or after the receipt by the Interim Servicer of such written notice, all authority and power of the Interim Servicer under this Agreement, whether with respect to the Mortgage Loans or otherwise, shall pass to and be vested in the successor Servicer appointed by the Owner pursuant to and under this Section, the successor servicer is hereby authorized and empowered to execute and deliver, on behalf of the Interim Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination. The Interim Servicer agrees to cooperate with the Owner and any successor servicer in effecting the termination of the Interim Servicer's responsibilities, and rights hereunder and shall promptly provide the successor servicer all documents and records reasonably requested by it to enable it to assume the Interim Servicer's functions hereunder and shall promptly also transfer to the successor servicer all amounts which then have been or should have been deposited in the Certificate Account by the Interim Servicer or which are thereafter received with respect to the Mortgage Loans. ARTICLE VI TERMINATION SECTION 6.01. Termination. (a) During the first sixty days after the execution of this Agreement, the Owner as of right may terminate this Agreement as to all or any number of the Mortgage Loans, with or without cause, upon written notice to the Interim Servicer, which notice shall be given no later than thirty (30) days prior to the effective date of such termination. Thereafter, the Owner as of right may terminate this Agreement as to all or any number of the Mortgage Loans, with or without cause, upon written notice to the Interim Servicer, which notice shall be given no later than ten (10) days prior to the effective date of such termination. (b) In the event that notice of termination of this Agreement is given, the Interim Servicer covenants that all funds, documents, mortgage servicing files, books, papers and accounts relating to the Mortgage Loans shall, at the option of the Owner, immediately upon receipt of notice of termination, be submitted to the control of the Owner or the Owner's designee and that, on the date of termination, they will be transferred to the Owner or the Owner's designee, without prejudice to the rights, if any, of either party against the other. Any breach of this covenant shall be restrainable by injunction. (c) From and after the effective date of termination of this Agreement pursuant to any provision of this Agreement, the Interim Servicer shall be relieved of further responsibility in connection with servicing the Mortgage Loans except as provided in Section 3.01(c) hereof which Section survives termination of this Agreement. The Interim Servicer forthwith upon such termination (i) shall pay over to the Owner or its designee all monies collected and held by it pursuant to this Agreement or pursuant to any agreement, letter or arrangement relating to the Mortgage Loans less any unpaid Interim Servicing Fees and expenses due the Interim Servicer pursuant to this Agreement, (ii) shall deliver to the Owner a full accounting, including a statement showing the payments collected by it and a statement of monies held in trust by it for the payment of taxes, insurance premiums or other charges with respect to the Mortgage Loans, and (iii) otherwise use its best efforts to effect the orderly and efficient transfer of servicing to a new servicer selected by the Owner, or the Owner. 10 14 ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.01. Amendment. This Agreement may be amended from time to time only by the mutual consent of the Interim Servicer and the Owner. SECTION 7.02. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. SECTION 7.03. Reports; Notices. Unless requested not to do so by Owner, the Interim Servicer will furnish Owner with copies of all communications sent to or received from Mortgagors with respect to a Mortgage Loan concerning refinancing, subordinate financing, transfers of mortgaged premises or prepayment. In addition, the Interim Servicer shall provide to Owner such periodic, special or other reports or information, whether or not specifically provided for in this Agreement as Owner shall reasonably request and which the Interim Servicer prepares and keeps in the ordinary course of its business or which may be generated by the Interim Servicer's data processing system without special programming or computer time. Any data and reports requested by Owner which are not kept by the Interim Servicer in the ordinary course of its business or which cannot be generated by the Interim Servicer's data processing system without special programming or computer time, shall be provided to Owner on request at Owner's cost and expense provided such request does not materially disrupt the Interim Servicer's normal business activities. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by registered mail to (i) in the case of the Interim Servicer, 7300 Corporate Center Drive, Miami, Florida 33126, Attention: General Counsel or such other address as may hereafter be furnished to the Owner in writing by the Interim Servicer with a duplicate copy to Servicing Manager, and (ii) in the case of the Owner, SunAmerica Life Insurance Company, 1 SunAmerica Center, Century City, Los Angeles, California 90067-6022, or such other address as may hereafter be furnished to the Interim Servicer in writing by the Owner. Any notice required or permitted to be mailed shall be given by first class mail, postage prepaid, at the address shown above. Any notice mailed or transmitted within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the addressee receives such notice, provided, however, that any demand, notice or communication to or upon the Interim Servicer shall not be effective until received. SECTION 7.04. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions of terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the rights of the holders thereof. SECTION 7.05. No Partnership. Nothing herein contained shall be deemed or construed to create a co-partnership or joint venture between the parties hereto. SECTION 7.06. Execution; Successors and Assigns. This Agreement may be executed in one or more counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original; such counterparts, together, shall constitute one and the same agreement. This Agreement shall inure to the benefit of and be binding upon all parties hereto, and their respective successors and assigns. SECTION 7.07. Attorney's Fees. In the event any party hereto brings an action to interpret or enforce any of the provisions of the Agreement, the party against whom judgement is rendered in such action shall be liable to the others for reimbursement of their costs, expenses and reasonable attorney's fees, including such costs, expenses and fees as may be incurred on appeal. 11 15 SECTION 7.08. Entire Agreement. The Agreement constitutes the entire agreement between the parties regarding the interim servicing of Mortgage Loans and shall supersede any prior or contemporaneous writings or oral agreements with respect to the transactions contemplated hereby. SECTION 7.09. Headings. Section headings are for reference only, and shall not affect the interpretation or meaning of any provision of the Agreement. 12 16 IN WITNESS WHEREOF, the Interim Servicer and the Owner have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written. JOHN ALDEN ASSET MANAGEMENT COMPANY as Interim Servicer By: /s/Scott L. Stanton ------------------------------------ Title: Senior Vice President and Chief Financial Officer SUNAMERICA LIFE INSURANCE COMPANY as Owner By: /s/Susan L. Harris ------------------------------------ Title: Senior Vice President JOHN ALDEN LIFE INSURANCE COMPANY OF NEW YORK as Owner By: /s/Susan L. Harris ------------------------------------ Title: Senior Vice President 13 17 STATE OF NEW YORK) COUNTY OF NEW YORK) On this 31st day of March, 1997, before me, a notary public in and for said State, personally appeared Scott L. Stanton personally known to me on the basis of satisfactory evidence) to be the person who executed the within instrument as Senior Vice President and Chief Financial Officer on behalf of John Alden Asset Management Company, and acknowledged to me that such corporation executed the within instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this Certificate first above written. ------------------------------ NOTARY PUBLIC In and for the State of New York 14 18 STATE OF NEW YORK) COUNTY OF NEW YORK) On this 31st day of March, 1997, before me, a notary public in and for said State, personally appeared Susan L. Harris personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the within instrument as Senior Vice President on behalf of SunAmerica Life Insurance Company, and acknowledged to me that such corporation executed the within instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this Certificate first above written. ------------------------------ NOTARY PUBLIC In and for the State of New York 15 19 STATE OF NEW YORK) COUNTY OF NEW YORK) On this 31st day of March, 1997, before me, a notary public in and for said State, personally appeared Susan L. Harris personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the within instrument as Senior Vice President on behalf of John Alden Life Insurance Company of New York, and acknowledged to me that such corporation executed the within instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this Certificate first above written. ------------------------------ NOTARY PUBLIC In and for the State of New York 16 20 EXHIBIT ONE CERTIFICATE ACCOUNT LETTER AGREEMENT [FORM FOR SUNAMERICA] ______________, 19___ To:______________________________ ______________________________ ______________________________ (the "Depository") As "Interim Servicer" under the Interim Servicing Agreement, dated as of March 31, 1997 (the "Agreement"), we hereby authorize and request you to establish an account, as a Certificate Account pursuant to Section 2.06 of the Agreement, to be designated as "John Alden Asset Management Company, as Interim Servicer, in trust for SunAmerica Life Insurance Company." All deposits in the account shall be subject to withdrawal therefrom by order signed by the Interim Servicer. You may refuse any deposit which would result in violation of the requirement that the account be fully insured as described below. This letter is submitted to you in duplicate. Please execute and return one original to us. ______________________________ By: __________________________ The undersigned, as "Depository", hereby certifies that the above described account has been established under Account Number _________________, at the office of the depository indicated above, and agrees to honor withdrawals on such account as provided above. The account will be insured by the Bank Insurance Fund, or the Savings Association Insurance Fund. ________________________________ (name of Depository) By______________________________ 1 21 EXHIBIT ONE CERTIFICATE ACCOUNT LETTER AGREEMENT [FORM FOR JANY] ______________, 19___ To:______________________________ ______________________________ ______________________________ (the "Depository") As "Interim Servicer" under the Interim Servicing Agreement, dated as of March 31, 1997 (the "Agreement"), we hereby authorize and request you to establish an account, as a Certificate Account pursuant to Section 2.06 of the Agreement, to be designated as "John Alden Asset Management Company, as Interim Servicer, in trust for John Alden Life Insurance Company of New York." All deposits in the account shall be subject to withdrawal therefrom by order signed by the Interim Servicer. You may refuse any deposit which would result in violation of the requirement that the account be fully insured as described below. This letter is submitted to you in duplicate. Please execute and return one original to us. ______________________________ By: __________________________ The undersigned, as "Depository", hereby certifies that the above described account has been established under Account Number _________________, at the office of the depository indicated above, and agrees to honor withdrawals on such account as provided above. The account will be insured by the Federal Deposit Insurance Corporation. ________________________________ (name of Depository) By______________________________ 2 22 EXHIBIT TWO ESCROW ACCOUNT LETTER AGREEMENT _____________, 19___ To:_________________________ _________________________ _________________________ (the "Depository") As "Interim Servicer" under the Interim Servicing Agreement, dated as of March 31, 1997 (the "Agreement"), we hereby authorize and request you to establish an account, as an Escrow Account pursuant to Section 2.08 of the Agreement, to be designated as "John Alden Asset Management Company, as Interim Servicer, in trust for SunAmerica Life Insurance Company. All deposits in the account shall be subject to withdrawal therefrom by order signed by the Company. You may refuse any deposit which would result in violation of the requirement that the account be fully insured as described below. This letter is submitted to you in duplicate. Please execute and return one original to us. ______________________________ By: __________________________ The undersigned, as "Depository", hereby certifies that the above described account has been established under Account Number _________________, at the office of the depository indicated above, and agrees to honor withdrawals on such account as provided above. The account will be insured by the Federal Deposit Insurance Corporation. _______________________________ (name of Depository) By: ___________________________ 1 EX-10.10 11 ASSET REPURCHASE AGREEMENT 1 ASSET REPURCHASE AGREEMENT This Asset Repurchase Agreement (the "Agreement") is entered into as of March 31, 1997 by and between John Alden Life Insurance Company, a Minnesota corporation ("Seller"), and SunAmerica Life Insurance Company, an Arizona corporation ("Purchaser"). Reference is made to the Asset Purchase and Sale Agreement dated as of November 29, 1996 by and between Seller and Purchaser (the "Asset Purchase Agreement") and the Stock Purchase and Sale Agreement dated as of November 29, 1996 by and between Seller and Purchaser (the "Stock Agreement"). The Asset Purchase Agreement and the Stock Agreement are referred to herein as the "1996 Agreements". All capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed thereto in the 1996 Agreements. WHEREAS, in connection with the transactions contemplated by the 1996 Agreements, Purchaser desires to have, and Seller desires to grant, the option to require Seller to repurchase certain of the assets transferred, sold or assigned by Seller to Purchaser under the Asset Purchase Agreement or owned by JANY for cash. WHEREAS, Schedule A (which Schedule includes commercial and residential loans held by Seller or JANY) sets forth Mortgage Loans to be acquired by Purchaser under the Asset Purchase Agreement or which are Mortgage Loans under the Stock Purchase Agreement, which, due to the lack of or defects in the documentation required pursuant to the 1996 Agreements, are not acceptable to Purchaser ("Schedule A Mortgage Loans"). Such lack of or defects in documentation shall constitute a Put Event (as defined below) unless cured as provided herein. NOW THEREFORE, in consideration of the premises and agreements contained herein and other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, Seller and Purchaser, intending to be legally bound, hereby agree as follows: Section 1.1 In the event that Purchaser determines that a Put Event shall be existing at the end of the Cure Period (as defined below) with respect to a Schedule A Mortgage Loan (each a "Rejected Asset"), Purchaser shall have the right to require Seller to repurchase for cash the Rejected Asset on a rescission basis (the amount of the cash purchase price being 2 the Book Value on the Closing Date of the Rejected Asset plus interest for the Cure Period calculated at the three month LIBOR rate in effect on the Business Day preceding the Closing Date plus 100 basis points, from the Closing Date to the date of repurchase, less any payments received in respect of the Rejected Asset by Purchaser (which payments shall be retained by Purchaser) during the Cure Period. The "Cure Period" shall mean the period beginning on the Closing Date and ending on (i) July 31, 1997 in the case of all Schedule A Mortgage Loans with respect to which the subject property is located outside of the States of New York, Connecticut, New Jersey and the District of Columbia, and (ii) September 30, 1997 in the case of Schedule A Mortgage Loans with respect to which the subject property is located in the States of New York, Connecticut, New Jersey or the District of Columbia. The repurchases contemplated by the paragraph immediately above shall be effected in accordance with the procedures set forth in Sections 1.2 and 1.3 below ("Asset Put Election"). One or more of the lack of or defects in documentation listed on Schedule A hereto, if not cured by Seller to the reasonable satisfaction of Purchaser on or prior to the second Business Day prior to the end of the Cure Period, constitutes a "Put Event" with respect to the related Schedule A Mortgage Loan. Section 1.2 Purchaser may make an Asset Put Election with respect to any Schedule A Mortgage Loan by giving Seller notice of such Asset Put Election (a "Put Notice") within five (5) Business Days after the end of the Cure Period. The Put Notice shall identify the Rejected Asset and certify the Put Event as to each Rejected Asset upon which its rejection is based. The Put Notice shall also include the amount of cash Purchaser expects to receive as the repurchase price calculated in accordance with Section 1.1. Section 1.3 Within ten (10) Business Days of the end of the Cure Period, Seller shall transfer to Purchaser as to each Rejected Asset cash in an amount calculated in accordance with Section 1.1 hereof. Purchaser shall simultaneously reconvey the Rejected Assets to Seller by appropriate transfer documents, but without warranty or representation by Purchaser except that Purchaser shall represent that it has not sold, assigned, transferred, modified or hypothecated such Rejected Assets to any other party or taken any action that materially and adversely affects the rights of the holder of such Rejected Assets without Seller's prior written consent, which consent shall not be unreasonably withheld. Section 1.4. Attached as Schedule C is a listing of various Mortgage Loans. The Mortgage Loans on Schedule C are 2 3 referred to herein as the "Schedule C Mortgage Loans". The parties have identified certain minor issues with respect to the documentation relating to the Schedule C Mortgage Loans, as noted on Schedule C. Seller, at its sole cost and expense, will use its commercially reasonable efforts to promptly resolving the identified problems with respect to the Schedule C Mortgage Loans (including any Mortgage Loans listed on Schedule B that duplicate the Mortgage Loans listed on Schedule A with respect to any problems on Schedule C) in addition to resolving the lack of or defects in documentation with respect to the Schedule A Mortgage Loans. Such efforts shall include retention of the employees listed on Schedule B, and at the request of Purchaser retention of a third party contractor reasonably acceptable to Seller and at Seller's sole cost and expense to aid in the resolution process. Section 1.5. Seller's obligations under this Agreement are in addition to its obligations under the 1996 Agreements, as amended, and do not constitute a waiver by Purchaser of any of its rights or remedies under the 1996 Agreements. Without limiting the generality of the foregoing, Seller's obligations hereunder are not subject to the "basket" provisions in Section 10.3(b) or (c) of the Asset Purchase Agreement or Section 9.3(b) or (c) of the Stock Agreement. Section 1.6. All representations and warranties set forth in the 1996 Agreements will survive the execution of this Agreement pursuant to the terms of the 1996 Agreements, notwithstanding any knowledge that Purchaser has with respect to any of the Mortgage Loans that are the subject of this Agreement and or the 1996 Agreements or its examination of any related documentation. Section 1.7 The provisions in Article 12 (Miscellaneous) of the Asset Purchase Agreement shall be incorporated herein as though set forth in this Agreement in their entirety. 3 4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. JOHN ALDEN LIFE INSURANCE COMPANY By: /s/Scott L. Stanton ------------------------------------ Name: Scott L. Stanton Title: Senior Vice President and Chief Financial Officer SUNAMERICA LIFE INSURANCE COMPANY By: /s/James W. Rowan ------------------------------------ Name: James W. Rowan Title: Senior Vice President 4 EX-10.11 12 MARKETING AGREEMENT 1 Exhibit 10.11 MARKETING AGREEMENT This Marketing Agreement (the "Agreement") dated March 28, 1997, is by and between SunAmerica Life Insurance Company (the "Company") and NSM Sales Corporation ("NSM"). I. Appointment. NSM is appointed to promote the Company and its annuity policies described on Schedule 1 and Schedule 2 (collectively the "Fee Schedules"), attached hereto and incorporated herein by reference (the "Policies"), to qualified agents recruited by NSM to solicit and procure applications for the Policies. This appointment is limited to those jurisdictions in which the Company and NSM are both licensed as required by prevailing regulatory requirements and in which the Policies identified on the Fee Schedules have been approved for sale. Except as provided in Section V below, this appointment is not exclusive and the Company reserves the right to appoint other agents in the same territory. II. Duties and Responsibilities of NSM. NSM understands and agrees that its responsibilities under this Agreement include the following: A. NSM will recommend for appointment appropriately licensed individuals or entities (each an "Agent" to solicit sales of Policies issued by the Company. NSM is responsible for collecting the information required by the Company to investigate the character, work experience and background of any proposed Agent prior to appointment by the Company. No Agent may act on behalf of the Company until properly appointed by the Company. The Company reserves the right to refuse to appoint any proposed Agent and to terminate the appointment of any Agent, with or without cause, at any time. NSM may assume that each Agent will be properly appointed by the Company within 10 days of receiving the appropriate and necessary information, unless the Company notifies it otherwise. B. NSM shall use reasonable efforts to supervise and monitor the Agent force and will instruct the Agent force to act in a manner which complies with all applicable federal, state and local laws and regulations and all Company rules and procedures. NSM shall immediately notify the Company of any known act or omission of any Agent that may violate any federal, state or local law or regulation or any Company rule or procedure, will instruct such Agent to remedy such violation and will recommend to the Company that such Agent be terminated if NSM deems termination appropriate. C. NSM may not use the Company service marks or logos except as approved by the Company in writing. D. Except where permitted by and in full compliance with applicable law or regulation, NSM and its Agents may not pay or allow any rebate of premium or commission, directly or indirectly, or, share any commission with any person or entity not licensed and appointed to represent the Company. E. NSM will forward to the Company, within 2 business days of receipt, any papers or notice served upon or sent to NSM in connection with any regulatory or legal proceeding, hearing, action or policyholder complaint filed against or involving the Company or any Policy issued by the Company. 2 F. If any Agent is a federal or state chartered bank, thrift or savings and loan institution (collectively, "Bank") or will be marketing any Policies on the premises of any Bank, NSM shall instruct each such Agent to comply and cause Bank to comply with the Interagency Statement on Retail Sales of Nondeposit Investment Products (Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Office of Thrift Supervision, February 14, 1994) and any additional or subsequent release from any agency or regulatory body with authority over such entities, which is designed to provide governance to financial institutions in connection with the sale of nondeposit investment products on the premises of such institutions. Such compliance to include, without limitation, ensuring that all sales materials used by such Agent are in compliance with all applicable requirements of federal and state banking laws. G. NSM will arrange for or provide training to the Agents to become familiar with the Policies, including provision of all necessary training materials; provide marketing support for the Agents in the distribution of the Policies; provide ongoing service support for the Agents as it relates to the Policies; and provide assistance to the Company in resolving any disputes between the Company and any Agent. H. NSM is responsible for all funds relating to the Company business received by NSM and shall ensure that such funds are remitted to the Company. NSM is not authorized to collect cash on behalf of the Company and all checks relating to the Company business shall be made payable to the Company. If NSM receives money in any form for or on account of the Company, such money shall constitute trust funds for the Company and shall be remitted immediately to the Company. I. NSM will promptly deliver all Policy applications it receives to the Company. NSM shall, and shall instruct its Agents to, follow the instructions on the application with the highest degree of care and comply with the Company's underwriting and administrative guidelines, policies and procedures. Neither NSM nor its Agents are authorized to alter or waive any question or answer on any application for insurance or any provision of any Policy issued by the Company. The Company reserves the right, in the Company's sole discretion, to refuse to process any application, to reject any application or to cancel any Policy and refund any premium, in whole or in part. NSM shall and shall instruct its Agents to promptly return to the Company any Policy that is not delivered to the customer or which is otherwise returned by the customer during any "free look" period. J. During the term of this Agreement and for (1) year thereafter, NSM will not actively solicit or recruit for employment any employee of the Company or any affiliate of the Company who had been employed in a marketing or marketing support capacity during the one-year period immediately preceding the proposed date of employment. A pattern of frequently employing such individuals will be deemed to be conclusive proof of active recruitment. III. Duties and Obligations of the Company. The Company understands and agrees that its responsibilities under this Agreement include the following: A. The Company will promptly file for approval in all states, except New York, the policies identified on Schedule 1 (the "Exclusive Policies") and will make the Exclusive Policies available to NSM in accordance with the terms of this Agreement. The Company will use its best efforts to obtain regulatory approval to sell the Exclusive Policies in every state except 2 3 New York promptly as possible. Additionally, the Company will make available to NSM for marketing policies identified on Schedule 2. B. The Company will extend every reasonable effort to support NSM in its marketing of the Policies. C. The Company will apprise NSM of any applicable laws or regulations with which NSM or the Agents are obligated to comply which become effective after the date of this Agreement. D. During the term of this Agreement and unless this Agreement is terminated for cause (as defined in Section VIII below), for a period of one year after termination, the Company and its affiliates will (i) keep confidential the list of Agents appointed through NSM (the "NSM Agent List"); and (ii) not actively market, for purposes of selling the Policies, to any Agent who submitted business through NSM in the two years prior to termination of the Agreement. If the Agreement is terminated for cause (as defined in Section VIII below) or, if on the date of termination NSM no longer has the exclusive rights to sell the Exclusive Policies due to its failure to meet the minimum sales levels as set forth in Section V.A. of the Agreement, for a period of six months, the Company and its affiliates will (i) keep confidential the NSM Agent List; and (ii) will not actively market, for purposes of selling the Policies, to any Agent who submitted business through NSM in the two years prior to termination of the Agreement. Notwithstanding the above, if an Agent submits an application for a Policy after the Agreement is terminated, either directly (and neither the Company nor any affiliate of the Company has directly marketed to such Agent) or through a marketing company, managing general agent, general agency arrangement or otherwise (provided such marketing company, managing general agent or general agency arrangement has not utilized the NSM Agent List to recruit such agent), the Company is not prohibited from accepting and processing such business. NSM shall not be entitled to any fee payment for such business. E. During the term of this Agreement and for (1) year thereafter, the Company will not actively solicit or recruit for employment any employee of NSM or any affiliate of NSM who had been employed in a marketing or marketing support capacity during the one-year period immediately preceding the proposed date of employment. A pattern of frequently employing such individuals will be deemed to be conclusive proof of active recruitment. IV. Sales and Promotional Materials. A. The Company will develop and provide all "consumer" sales and promotional material for use in marketing the Policies which, in its discretion, it deems appropriate; provided, however, such material will include a separate and fully descriptive brochure for each Policy. In addition, the Company will develop software applications for use in marketing the Exclusive Policies. NSM shall be responsible for the creation of any other sales and promotional material it desires to use in the marketing of the Policies, including all expenses associated with the creation of such sales and promotional materials; provided, however, that every piece of sales and promotional material must be approved by the Company prior to the use of such materials in accordance with Section IV, C, below. The Company shall be responsible for delivering all sales and promotional materials it creates to NSM in such quantities as NSM requires. NSM shall be responsible for storing all sales and promotional materials and for fulfilling requests from Agents for copies of the same. 3 4 B. For purposes of this section "sales and promotional material" includes, without limitation, any of the following that refer to the Company or any Policy: advertisements (such as material published or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape or electronic display, signs or billboards or other public media), sales literature (any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), marketing literature or software used in the recruitment of Agents, educational or training materials or other communications distributed or made generally available to some or all Agents or employees or otherwise used in marketing the Policies. C. The Company retains the full right to approve or disapprove any piece of sales or promotional material. All sales and promotional material must be submitted to the Company for approval at least five (5) business days prior to use. The Company will be deemed to have approved any sales or promotional material submitted to the Company in writing unless it notifies NSM, in writing, of its disapproval or required changes within the five (5) business day review period; provided, however, that if approval or submission of any sales or promotional material by any state regulatory agency is required prior to use, no sales or promotional material may be used before compliance with such obligation. Fifteen copies of each final piece of sales or promotional material must be submitted to the address below within 14 business days of its use, together with information regarding the extent and time period of its use. All sales and promotional materials must be submitted to the Company pursuant to this Section IV to the following address: (or to such other address of which the Company notifies NSM in writing): SunAmerica Marketing, Inc. 1 SunAmerica Center Los Angeles, California 90067-6022 Attention: Gail Wright V. Exclusivity Rights and Obligations. A. The Company and NSM agree that NSM shall be given the exclusive right to market the Exclusive Policies listed on Schedule 1 to appropriately licensed independent insurance agents. No other products will be subject to the exclusivity rights and obligations of this Section V. In order for NSM to retain this exclusive right, NSM must meet the following minimum sales levels of the Exclusive Policies (inclusive of all sales by Agents) by the end of the applicable period (the Company fiscal year is the period from October 1 through September 30): 4 5
Minimum Sales Levels* (by total premium based on sales Sales Period of the Exclusive Policies only) ------------ -------------------------------- 4/1/97 - 9/30/97 $100,000,000 Company Fiscal Year 1998 $350,000,000 Company Fiscal Year 1999 $400,000,000 Thereafter A number to be agreed upon by the parties
* Sales figures include the sale of the All Purpose Plus and Income Advantage products underwritten by John Alden Life Insurance Company during any period the Exclusive Policies are not being underwritten by the Company. If NSM fails to meet the minimum sales levels in any given period, the Company may terminate the exclusivity rights granted to NSM as set forth above. B. NSM agrees that it will not market any annuity product not issued by the Company which is substantially similar to the Exclusive Policies. If NSM wants to market an annuity issued by an insurer other than the Company, it will provide the Company, or an affiliate of the Company, the first opportunity to make available to NSM such annuity for marketing, (the "Additional Product"). The Company will promptly review any proposal by NSM for an Additional Product. If the Company does not make available to NSM the Additional Product and NSM desires to market the Additional Product (to be underwritten by a different insurer), the parties will negotiate in good faith to determine whether the Additional Product is substantially similar to either of the Exclusive Policies, taking into consideration such features as the interest rate guarantee period and crediting rate structure, surrender charge period and bonus interest rate structure. If NSM markets an annuity product of another insurer which is substantially similar to the Exclusive Policies, the Company will no longer be bound by the provisions of this Section V if NSM markets the Additional Product. C. NSM will submit to the Company by July 31* of each year a sales plan which identifies NSM's sales objectives and marketing plans for the Company's ensuing fiscal year. VI. Agent Recruitment. A. Each Agent recruited by NSM must be appointed by the Company and must execute an Agent's Agreement in the form provided by the Company. NSM may not modify the form of Agent's Agreement or preliminary data sheet in any manner. The Company will pay all appointment fees associated with the appointment of such Agents. B. If NSM recruits an Agent who has an existing contractual or business relationship with the Company or any affiliate of the Company as of April 1, 1997, then NSM shall be entitled to compensation only with respect to premiums received and accepted by the Company with respect to the Exclusive Policies, unless the Agent is released from its existing agency relationship and thereafter submits business through NSM. 5 6 VII. Compensation. A. As full compensation for services performed by NSM under this Agreement, the Company shall pay NSM pursuant to the Fee Schedules (as they may be modified from time to time) based upon premiums received and accepted by the Company for Policies issued upon applications submitted either directly by NSM or by Agents recruited by NSM. B. The Company reserves the right to amend Schedule 2 to add or delete product which either become available or which the Company is no longer underwriting at any time by giving written notice of such modification to NSM. Such amended Schedule shall be incorporated into this Agreement as if attached hereto. C. In no event shall the Company be liable for the payment of any fee or commission with respect to any solicitation made, in whole or in part, by any person not appropriately licensed and appointed by the Company prior to the commencement of such solicitation. Commissions shall be payable only on premiums actually received by the Company for Policies issued, delivered and accepted by the Company. D. If any Policy is returned to the Company pursuant to a "free look" provision, the full fee and commission paid by the Company will be unearned and NSM shall return such unearned fee to the Company upon demand or, in the absence of such demand or failure of NSM or return such unearned fee, the unearned fee will be charged back to NSM. The Company shall demand that the respective Agent return the unearned commission and shall use best efforts, including the use of a collection agency, to recover such funds from the Agent; provided, however, if the Company uses a collection agency, the costs associated therewith will be split equally between the Company and NSM. If, despite using its best efforts for one year, the Company remains unable to recover such funds from the Agent, the Company may recover the original amount of such unearned commission from NSM. In the event that the Company returns all or a part of any premium received on any Policy predicated upon the negligence or other error of NSM or its Agents (other than under circumstances pursuant to which the Policy owner is obligated to pay a surrender charge to the Company) or if premiums received are not good funds, NSM shall promptly repay to the Company all or any corresponding part of the unearned fee received by NSM on account of such Policy. E. If any premium is returned by the Company as set forth above, the full fee and commission paid by the Company will be unearned and NSM shall return such unearned fee to the Company upon demand or, in the absence of such demand or failure of NSM or return such unearned fee, the unearned fee will be charged back to NSM. The Company shall demand that the respective Agent return the unearned commission and shall use best efforts, including the use of a collection agency, to recover such funds from the Agent; provided, however, if the Company uses a collection agency, the costs associated therewith will be split equally between the Company and NSM. If, despite using its best efforts for one year, the Company remains unable to recover such funds from the Agent, the Company may recover the original amount of such unearned commission from NSM. F. Compensation on any Policy renewal, change, exchange, conversion, or any situation not specifically provided for in the Fee Schedules shall be paid according to the Company's guidelines and practices. 6 7 G. The Company shall provide a fee statement to NSM for each pay period. Such statements shall be grouped by NSM "Annuity Specialist" and shall be considered complete and accurate unless NSM provides the Company with written notice specifying any errors or objections within 60 days from the date of the statement. VIII. Termination. A. The term of this Agreement shall be for one year and will be renewed automatically unless either party hereto provides the other with notice of its intent not to renew at least 90 days prior to the date of renewal. NSM shall continue to receive fee payments in accordance with the terms of Schedule 1 and Schedule 2 on all additional premium received after non-renewal for Policies written during the term of this Agreement. B. Both NSM and the Company have the right at any time to terminate this Agreement, without stating any cause, by mailing to the other party a notice of termination. The notice of termination shall be effective upon 180 days from the date notice is sent. Any termination shall be without prejudice to any application submitted by NSM prior to notice of termination becoming effective unless NSM requests that the processing of any application be discontinued. If the Company or NSM terminates the Agreement pursuant to this provision, NSM shall continue to receive fee payments in accordance with the terms of Schedule 1 and Schedule 2 on all additional premium received for Policies written during the term of this Agreement. C. This Agreement shall automatically terminate "for cause" upon (1) the dissolution or the transfer of control of NSM or the Company, other than transfer of control to an affiliate; or (2) the filing for protection under any state or federal Bankruptcy law by NSM, the insolvency of NSM, or the filing of any petition in bankruptcy or receivership against NSM; or (3) a material breach of this Agreement; or (4) misapplication, misdirection or misappropriation by NSM of funds or property of the Company or funds received by NSM from policy owners as premiums for the issuance of a Company Policy or additional premiums to be applied to an existing Policy; or (5) receipt by the Company of excessive policy owner complaints relating to NSM's performance and or service of policy owner issues; or (6) the Company making the Exclusive Policies available to any marketing agency or agent other than through NSM; or (7) NSM marketing any product which is substantially similar to the Exclusive Policies. Upon termination by the Company of this Agreement for any of the reasons specified above, NSM will not be entitled to further fee payments. If NSM terminates this Agreement for any of the reasons specified above, NSM shall continue to receive fee payments in accordance with the terms of Schedule 1 and Schedule 2 on all additional premium received for Policies written during the term of this Agreement. D. Upon termination of this Agreement, NSM shall (i) promptly return any and all materials furnished by the Company, including, but not limited to, all manuals, forms, computer software not purchased by NSM, promotional materials, supplies and customer records and (ii) not represent itself as an authorized marketing company of the Company or as having any affiliation with the Company. E. Termination of this Agreement shall not release either party from any liability that is incurred prior to the termination of this Agreement. 7 8 F. Upon termination of this Agreement, NSM shall not and shall advise the Agents to not solicit, induce or attempt to solicit or induce any policyholder to relinquish or replace any policy issued by the Company or any affiliate of the Company. Furthermore, NSM shall not sell or transfer to any third party any customer list containing the names of any policyholders. NSM and the Company agree that the customer information is a proprietary trade secret of the Company and the Company will protect this right to the fullest extent permitted by law. NSM explicitly agrees that it will not disclose and it shall advise the Agents to not disclose this information to any competitor of the Company. NSM acknowledges and agrees that this provision may be enforced by an action for an injunction, as well as or in addition to any action for damages. G. The Company may communicate directly with any Policy holder at any time for purposes of servicing a Policy or to attempt to conserve business. IX. Indemnification. A. NSM shall be responsible to the Company for all acts and omissions of NSM and any employee of NSM. NSM shall indemnify the Company and hold it harmless from and against any loss, expense, cost (including reasonable attorneys' fees and expenses), cause of action and/or damage, resulting or arising from the acts and/or omissions, including any breach of this Agreement, of NSM and any employee in fulfilling its obligations and responsibilities under this Agreement. This provision shall survive the termination of this Agreement. In addition to and without limiting the above, NSM shall indemnify the Company and hold it harmless from and against any loss, expense, cost (including reasonable attorneys' fees and expenses), cause of action and/or damage resulting or arising from the act and/or omission of any Agent of which NSM should have known had NSM fulfilled its obligations under Section II B. of this Agreement. B. The Company shall be responsible to NSM for all acts and omissions of the Company and any employee of the Company. The Company shall indemnify NSM and hold it harmless from and against any loss, expense, cost (including reasonable attorney's fees and expenses), cause of action and/or damage, resulting or arising from the acts and/or omissions, including any breach of this Agreement, of the Company or any employee of the Company in fulfilling its obligations and responsibilities under this Agreement. This provision shall survive the termination of this Agreement. X. General Provisions. A. All data, information and materials ("Confidential Materials") supplied by any of the parties under this Agreement or otherwise, shall be kept in confidence and shall not be disclosed or disseminated to any third parties without the prior written consent of the furnishing party except in conformity to any requirements of state or federal law. No party shall use the Confidential Materials for any purpose other than to fulfill the terms of this Agreement except in conformity to any requirements of state or federal law. Confidential Information shall not include (i) any information that is or becomes generally available to the public, other than as a result of a breach of this Agreement, or (b) any information that is lawfully obtained from a third party with a right to disclose such information, or (c) any information that each party either possessed prior to the effective date of this Agreement or independently developed at any time. Upon termination of this Agreement for any reason, the parties shall immediately cease 8 9 their use of and return all Confidential Materials to the furnishing party without the retention of any copies. B. Nothing in this Agreement shall be construed as creating a relationship of either employee and employer or partnership between NSM or any Agent and the Company. NSM is an independent contractor and has no authority except that which is expressly set forth in this Agreement. C. This Agreement, including any exhibits or addendums hereto and the Fee Schedules, constitutes the entire agreement and supersedes all previous agreements, both verbal and written, if any, between NSM and the Company with respect to the subject matter hereof. D. This Agreement shall be binding upon and inure to the benefit of NSM and the Company and their respective successors and assigns; provided, however that neither this Agreement nor any rights or obligations under this Agreement, may be assigned or delegated by either NSM or the Company, except by the Company as to affiliates and subsidiaries of the Company, without the prior written consent of the other. E. In the event that any term or provision of this Agreement is held to be invalid or in conflict with any law or regulation, the validity of the remaining provisions of this Agreement shall not be affected. F. The failure of the Company to enforce or insist upon strict compliance with any provision of this Agreement shall not constitute a waiver of the right to enforce or insist upon strict compliance with any such provision in the future. G. Except as otherwise provided for herein, the terms of this Agreement may be modified only in a writing executed by both parties. H. Subject to the provisions of Sections IV, all notices pertaining to this Agreement shall be valid when given at the address set forth on the signature page hereof, unless prior written notice is received that notices should be sent to an alternative address: Any notice by certified mail shall be deemed to have been given three (3) days after the date of mailing and any notice personally delivered shall be deemed to have been given when received. I. Where a party has reserved rights under this Agreement or where a party's consent is required, each such party have the right to exercise its sole discretion. J. This Agreement shall be construed under the laws of the State of California. 9 10 K. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. NSM SALES CORPORATION By: /s/ Mark Cogen ------------------------------------- Mark Cogen, Senior Vice President 5500 Glendon Court Dublin, Ohio 43016 Attention: Gary F. Kadlec, President SUNAMERICA LIFE INSURANCE COMPANY By: /s/ Joe Tumbler ------------------------------------- Joe Tumbler, Executive Vice President 1 SunAmerica Center Los Angeles, California 90067-6022 Attention: Susan L. Harris, Senior Vice President and General Counsel-Corporate Affairs 10 11 SCHEDULE 1 This Schedule I is attached to and made a part of that certain Marketing Agreement (the "Agreement") by and between SunAmerica Life Insurance Company (the "Company") and NSM Sales Corporation ("NSM"), dated as of March 28, 1997. Capitalized terms are used as defined in the Agreement. The Company shall pay, as the compensation specified in Section VII of the Agreement, the fees set forth below:
Fee Payable to NSM as a Product Name Percentage of Premiums Collected Income Advantage 1.15% (Form # SA-918C) Plus Annuity (Form # SA-916C) 1.15%
FEES ARE PAID ON PREMIUMS COLLECTED DURING THE FIRST FOUR POLICY YEARS ONLY As to any Policy which is surrendered in the first policy year, the compensation paid by the Company will be unearned as set forth below and shall be charged back to NSM as set forth below: (1) Within the first 6 months from Policy issuance - 100% of the compensation. (2) 6 months to 1 year from Policy issuance - 50% of the compensation. Schedule 1 Page 1 of 1 12 Schedule 2 This Schedule 2 is attached to and made a part of that certain Marketing Agreement (the "Agreement") by and between SunAmerica Life Insurance Company (the "Company") and NSM Sales Corporation ("NSM"), dated as of March 28, 1997. Capitalized terms are used as defined in the Agreement. The Company shall pay, as the compensation specified in Section VII of the Agreement, the fees set forth below, which is the total compensation that the Company will pay on business submitted through NSM, any Agent or any agency directly appointed by the Company as a result of such agent's or agency's relationship with NSM and to the extent any portion of such compensation is payable directly to an Agent or others, the fee payable to NSM will be correspondingly reduced.
Fee Payable as a MAximum Commission Payable to Agent as Product Name Percentage of Premiums Collected A Percentage of Premium Collected - ----------------------------------- -------------------------------- -------------------------------------- SINGLE PREMIUM IMMEDIATE ANNUITY 5-Year 3.50 3.00 6-9 Year 4.00 3.50 10 Year Plus/Life 4.50 4.00 STERLING SELECT PLUS (Flexible Premium Deferred Annuity) Issue Age Issue Age Issue Age Issue Age 0-80 81-85 0-80 81-85 5.50 2.50 5.00 2.00 STERLING SELECT/STERLING SELECT II Issue Age Issue Age Issue Age Issue Age (Single Premium Deferred Annuity) 0-80 81-85 0-80 81-85 3-Year Maturity 2.75 2.50 2.25 2.00 5-Year Maturity 4.75 2.50 4.25 2.00 7-Year Maturity 5.50 2.50 5.00 2.00 10-Year Maturity 5.50 2.50 5.00 2.00 Renewal Commission/3-Year Maturity* 2.50 2.50 2.00 2.00 INDEXAMERICA Issue Age Issue Age Issue Age Issue Age 0-80 81-85 0-80 81-85 5.50 3.50 5.00 3.00
Schedule 2 Page 1 of 2 13 * A renewal fee based on account value on the third anniversary will be paid if a 3-Year Maturity Sterling Select Single Premium Deferred Annuity is renewed with 30 days after the end of the initial 3 year term. The renewal commission will be paid 60 days after the end of the initial term if the policy is renewed into a 3,5,7, or 10-Year Sterling Select Single Premium Deferred Annuity. No renewal commission is paid on renewals of the 5,7, or 10-Year Sterling Select Single Premium Deferred Annuity. As to any Policy which is surrendered in the first policy year, the compensation paid by the Company will be unearned as set forth below and shall be charged back to NSM as set forth below: (1) Within the first 6 months from the Policy issuance - 100% of the compensation. (2) 6 months to 1 year from Policy issuance - 50% of the compensation. Schedule 2 Page 2 of 2 EX-10.12 13 AMENDMENT NO. 1 TO STOCK PURCHASE AND SALE AGMT. 1 AMENDMENT NO. 1 TO THE STOCK PURCHASE AND SALE AGREEMENT DATED NOVEMBER 29, 1996 BY AND BETWEEN JOHN ALDEN LIFE INSURANCE COMPANY AND SUNAMERICA LIFE INSURANCE COMPANY This Amendment is made and entered into as of this 31st day of March, 1997, and is hereby made a part of and incorporated into the Stock Purchase and Sale Agreement dated November 29, 1996 (the "Agreement") by and between John Alden Life Insurance Company, a Minnesota stock insurance company ("Seller"), and SunAmerica Life Insurance Company, an Arizona stock insurance company ("Purchaser"). Capitalized terms used herein and not otherwise defined shall have the respective meaning ascribed thereto in the Agreement. WHEREAS, JALIC and SunAmerica have entered into the Agreement; and WHEREAS, JALIC and SunAmerica desire to amend the Agreement in the manner hereinafter set forth. NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that: 1. Purchase Price Adjustment. The second sentence of Section 1.2 shall be deleted in its entirety and replaced with the following sentence: "In consideration for the sale, assignment and delivery of the JANY Stock, at the Closing Purchaser shall pay to Seller a purchase price of One Hundred Thirty One Million Dollars ($131,000,000) (the "Purchase Price"). 2. Schedules. The Schedules to the Agreement set forth below shall be amended to include, restate or delete, as the case may be, as set forth below. The representations, warranties and indemnification contained in the Agreement shall in no way be affected by any such amendment, restatement or deletion of any Schedule. a. Schedule 2.8(a) Schedule 2.8(a) shall be amended to include: (i) under the heading "Contract Forms for JANY - Health" reference to Student Health Policy, HSR- 2 50; (ii) under the heading "Contract Forms for JANY - ARMS" reference to Preferred Excess Loss Insurance Policy, N-1133 and Standard Excess Loss Insurance Policy, N-1071; (iii) under the heading "Contract Forms for JANY - Annuities" reference to (a) SPIA (Lottery), N-1500, (b) SPIA, N-1030-P, (c) Flex, N-2347-P(3/94), (d) Flex, N-2347-P(3/94)(Q) and (e) SPDA, N-2370-P(4/94). In addition, Schedule 2.8(a) shall be amended to include under the heading "JANY ENDORSEMENTS - Life" the following endorsements: American Crown/JANY Endorsement M195 Amendment to Application N-0126-A-4 Aviation Exclusion Rider N-2048-E Declaration of Continued Insurability N-5112A-1 Schedule 2.8(a) shall be amended to include under the heading "JANY ENDORSEMENTS - Long Term Care" the following endorsements: Policy Change Endorsement E1295 Notice to Buyer N-D-107-NY Sticker - Non-Qualified Policy NY-1350-O 8/96 Schedule 2.8(a) shall be amended to include a new heading "JANY ENDORSEMENTS - ARMS - Excess Loss" the following endorsements: Endorsement - Excess Loss N-1133-E Endorsement - Active at Work N-1133-E.AW Endorsement - Monthly Cumulative N-1133-E.MCA Endorsement - Pre-Existing Conditions N-1133-E.PE Endorsement - Terminal Liability N-1133-E.TL Further, Schedule 2.8(a) shall be amended to include under the heading "Annuities" the following contracts: SPIA Lottery Endorsement N-1500-E1 Restricted Ownership Endorsement N-1004-E TSA Contract Loan Request & Agreement NY-1064-5 3/88 Amendment to Application NY-1216-0 12/89 IRA Endorsement IRA 1 Annuity Tables Endorsement N-2350-P SPDA IRA Endorsement N-2363-E TSA Endorsement N-0816-E(11/96) Endorsement M195 Deposit & Annuity Operations 8700 2 3 b. Schedule 2.8(f) Schedule 2.8(f) shall be amended to add the following sentence to the description of the Reinsurance Agreement between John Alden Life Insurance Company of New York and Heritage Reinsurance Company, Ltd. (now Lincoln Reinsurance Company, Ltd.) effective January 1, 1995: "This Reinsurance Agreement was assigned by Lincoln Reinsurance Company, Ltd. to Lincoln National Reinsurance Company (Barbados) Limited on December 31, 1996. c. Schedule 2.11. Schedule 2.11 (1) shall be amended to add the following sentence to the description of the Modified Coinsurance Agreement between John Alden Life Insurance Company of New York and Heritage Reinsurance Company, Ltd. (now Lincoln Reinsurance Company, Ltd.) effective January 1, 1995: "This Reinsurance Agreement was assigned by Lincoln Reinsurance Company, Ltd. to Lincoln National Reinsurance Company (Barbados) Limited on December 31, 1996. The HMO Reinsurance Agreements between John Alden Life Insurance Company and the third parties listed in Schedule 2.11 (2) have been non-renewed. The First Catastrophe Excess of Loss Reinsurance Agreement and Second Catastrophe Excess of Loss Reinsurance Agreement described in Schedule 2.11 (3) and (4), respectively, shall be terminated effective June 30, 1997. The business ceded by John Alden Life Insurance Company of New York under the Administrative Services Agreement described in Schedule 2.11 (11) and each of the agreements listed in Schedule 2.11 (12), (13) and (14) has been non-renewed. d. Schedule 2.13. Schedule 2.13 shall be amended to include under the heading "JALIC-JANY owned software can be licensed" reference to "ULP - Universal Life Policy Pages System (JANY Owned)." The reference to "BA Brokers Ally System (JANY Owned)" which appears under the heading "License from Third Parties - will need to negotiate with vendors" shall be deleted as there is no need to negotiate with vendor. e. Schedule 2.22. Schedule 2.22 shall be amended such that under the heading "General and Annuity Accounts - Annuity Via ACH Authorization" reference to George Carvajel - Cash Management Team Leader shall be deleted and replace by Mattie Garvin - Cash Management Accountant II. 3 4 In addition, Schedule 2.22 shall be amended to delete under the heading "JANY Bank Accounts Transaction Authorization List - Investment" reference to the following accounts (as they are closed). 89922400 JANY General D 89922101 JANY General Trade 1 D 89922403 JANY Spread D 89922404 JANY Spread Trade 1 D The same heading shall include reference to the following account: 89922442 JANY Individual Life D f. Schedule 2.23. Schedule A-1 hereto shall be added to Schedule 2.23. g. Schedule 2.30. Schedule A-2 hereto shall be added to Schedule 2.30. h. Schedule 2.32(l). The first page of Schedule 2.32(l) shall be deleted in its entirety and replace with Schedule A-3 hereto. In addition, Schedule A-4 hereto shall be added to Schedule 2.32(l). 3. Headings. The headings in this Amendment have been inserted for convenience of reference only, and shall not be considered a part of this Amendment and shall not limit, modify or affect in any way the meaning or interpretation of this Amendment. 4. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both parties, regardless of whether each of the parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both parties. 5. Miscellaneous. All other terms and conditions of the Agreement shall remain unchanged and the Agreement shall remain in full force and effect. 4 5 IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date first written above. JOHN ALDEN LIFE INSURANCE COMPANY By /s/Scott L. Stanton ---------------------------------- Name: Scott L. Stanton Title: Senior Vice President and Chief Financial Officer SUNAMERICA LIFE INSURANCE COMPANY By /s/James W. Rowan ---------------------------------- Name: James W. Rowan Title: Senior Vice President 5 6 SCHEDULE A-1 Schedule 2.23(c) (Reserving Practices) The parties to the Stock Purchase and Sale Agreement acknowledge and agree that JANY's past and current use of curtate CARVM factors to determine reserves does not breach or in any way violate the representations and warranties made by Seller in Section 2.23. Notwithstanding the foregoing, Seller represents and warrants to Purchaser (and Section 2.23 is amended to include such representation and warranty) that if JANY had used continuous CARVM factors to determine reserves at December 31, 1996, such reserves would not have been more than $6.7 million more than JANY's actual reserves at December 31, 1996 (which were determined in accordance with curtate CARVM factors). 6 EX-10.13 14 AMEND. NO. 1 TO ASSET PURCHASE AND SALE AGREEMENT 1 AMENDMENT NO. 1 TO THE ASSET PURCHASE AND SALE AGREEMENT DATED NOVEMBER 29, 1996 BY AND BETWEEN JOHN ALDEN LIFE INSURANCE COMPANY AND SUNAMERICA LIFE INSURANCE COMPANY This Amendment is made and entered into as of this 31st day of March, 1997, and is hereby made a part of and incorporated into the Asset Purchase and Sale Agreement dated November 29, 1996 (the "Agreement") by and between John Alden Life Insurance Company, a Minnesota stock insurance company ("Seller"), and SunAmerica Life Insurance Company, an Arizona stock insurance company ("Purchaser"). Capitalized terms used herein and not otherwise defined shall have the respective meaning ascribed thereto in the Agreement. WHEREAS, JALIC and SunAmerica have entered into the Agreement; and WHEREAS, JALIC and SunAmerica desire to amend the Agreement in the manner hereinafter set forth. NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that: 1. Closing Date Portfolio Securities. (a) JALIC/Oxford Mortgage Loans. Schedule 1.2(a)(i) to the Agreement is hereby amended to delete any and all references to the JALIC/Oxford Mortgage Loans. (b) Waters Edge Mortgage. Schedules 1.2(a)(i) to the Agreement is hereby amended to delete any and all references to the Waters Edge Group Mortgage. (c) State Insurance Deposits. Schedule 1.2(a)(i) hereto is hereby amended to delete any and all references to the State Insurance Deposits. In addition to cash otherwise to be delivered pursuant to Section 1.2(a)(iv) of the Agreement, the parties hereto further agree that (i) if, at Closing, the Book Value of the State Insurance Deposits is greater than the Market Value, then Purchaser shall deliver to Seller cash in an amount equal to the difference between the Book Value and 2 Market Value of the State Insurance Deposits and (ii) if, at Closing, the Book Value of the State Insurance Deposits is less than the Market Value, then Seller shall deliver to Purchaser cash in an amount equal to the difference between the Book Value and Market Value of the State Insurance Deposits. An estimate of such amount shall be included on the Estimated Closing Date Statement and paid by the appropriate party at the Closing. The difference between the amount so estimated and the actual amount based on Book Value and Market Value at Closing shall be included on the Post Closing Date Statement and paid as a post closing adjustment in accordance with Section 1.6. 2. Put Value Increase. The parties hereto hereby agree that the Pooled Mortgage Loans and the Marconi Mortgage shall not be sold, assigned or transferred by Seller to Purchaser. The Pooled Mortgage Loans and the Marconi Mortgage shall be included in the Rejected Mortgages. In connection therewith, Section 1.2(c) shall be deleted and restated to read, in its entirety, as follows: "Notwithstanding anything contained in this section 1.2 to the contrary, Purchaser shall have the right not to purchase up to $64,150,000 Book Value of (i) mortgages or (ii) mortgage related private placements which comprise a portion of the October 21 Portfolio Securities (the "Rejected Mortgages"), and such Rejected Mortgages shall not be sold, assigned, transferred, conveyed or delivered to Purchaser hereunder; provided, however, that upon written notice by Purchaser to Seller delivered not less than 10 days prior to Closing specifying such Rejected Mortgages, Seller shall deliver to the Trust, as part of the Reinsurance Premium, an amount equal to the Book Value of the Rejected Mortgages. Rejected Mortgages shall include the Pooled Mortgage Loans and the Marconi Mortgage." 3. Restriction on Put Mortgages. Seller hereby agrees that it shall not sell, transfer, convey or otherwise assign to Oxford Life Insurance Company any Mortgage or Mortgages which are included in the Rejected Mortgages. 4. Assets Transferred to Trust Account and Purchaser . Section 1.2(b) is hereby amended and restated in its entirety as follows: "On the Closing Date, delivery of the Closing Date Portfolio Securities (other than the following: (i) the Mortgage Loans identified on Schedule A-1 hereto and (ii) the private placement instruments identified on Schedule A-2 hereto) shall be made by transfer to the trust account (the "Trust") established pursuant to the Trust Agreement. The cash portion of the Reinsurance Premium shall be transferred by Seller to the Trust by wire transfer of immediately available funds. Securities, cash equivalents and other assets included among the Closing Date Portfolio Securities shall be transferred by such instruments of transfer as are acceptable to the Trustee and reasonably acceptable to Purchaser. The gross amount of the cash payment wired by Seller shall be reduced by an amount equal to one day's interest on such gross amount at an interest rate equal to the 2 3 three month LIBOR rate in effect on the Business Day preceding the Closing Date plus 25 basis points. In addition, on the Closing Date, delivery of the Mortgage Loans identified on Schedule A-1 hereto and the private placement instruments identified on Schedule A-2 hereto shall be made by transfer to the Purchaser. Such assets shall be transferred by such instruments of transfer as are commercially necessary to effect the transfer. In addition, on the Closing Date, delivery of cash, publicly traded investment grade bonds and/or treasuries, which will cause the Trust to continue to meet the terms of Purchaser's investment policies, with an aggregate Book Value on Purchaser's books equal to the total of (i) and (ii), less (iii), where (i) is Seller's Book Value on the Closing Date of those Mortgage Loans identified on Schedule A-1 hereto, (ii) is Seller's Book Value on the Closing Date of the private placement instruments identified on Schedule A-2 hereto, and (iii) is the Statutory Reserves with respect to the Annuity Contracts and Additional Policies reinsured under the RSL Agreements, shall be made by Purchaser to the Trust. Such delivery by Purchaser shall be made by such instruments of transfer as are acceptable to the Trustee and reasonably acceptable to Seller." 5. "Annuity Contract" Definition. The third sentence of the definition of "Annuity Contract" as set forth in Annex A is amended to and restated in its entirety to read as follows: "Notwithstanding anything to the contrary in this Agreement, "Annuity Contracts" shall not include (i) any policy for which the reserves or applicable premiums are not actually transferred to Purchaser, (ii) any policy not described in Schedule 3.8(b) attached hereto, (iii) Annuity Contracts issued on or prior to April 1, 1978, (iv) single premium immediate annuities and supplementary contracts involving life contingencies which are not ceded to Oxford Life Insurance Company or Lincoln National Reinsurance Company Limited, (v) universal life flexible premium deferred annuity riders, and (vi) annuity policies assumed by Seller from Aristar Life Insurance Company. " 6. Recapture. Schedule 3.11 to the Agreement is hereby amended to delete any and all references to the RSL 1 Jr. Agreement. 7. Payments Received After Closing. Section 8.1 is hereby amended to add new Section 8.1(c) to read as follows: "(c) Following the Closing Date, if Seller receives any interest, dividends, return of principal or other payments with respect to any Closing Date Portfolio Securities, Purchaser shall at all times be the owner of any such payments, Seller shall hold such payments for the benefit of Purchaser, and Seller shall promptly, remit such payment to Purchaser. Seller shall use commercially reasonable efforts to remit such payments to Purchaser no later than two business days after receipt by Seller. 3 4 If any such payment is not remitted by Seller to Purchaser within two business days after receipt thereof by Seller, Seller shall remit such payment to Purchaser at the time Seller makes settlement payments to Purchaser pursuant to Section 4.1 of the Indemnity Reinsurance Agreement with interest calculated at a rate equal to the three month LIBOR rate plus 25 basis points on the amount due from the date of receipt by Seller but not including the date on which such amount is actually paid to Purchaser. " 8. Policyholder Consents. The first sentence of Section 8.9 shall be amended and restated in its entirety to read as follows: "Promptly after the Closing, Purchaser shall (i) distribute to policyholders of Annuity Contracts (other than Contracts reinsured under the RSL Agreements) notice of the transactions reflected herein and (ii) use commercially reasonable efforts to obtain Novations of all Annuity Contracts (other than Contracts reinsured under the RSL Agreements) (as contemplated by Section 2.4 of the Assumption Reinsurance Agreement)." 9. Additional Definitions. The following definitions are hereby added to Annex A of the agreement. "JALIC/Oxford Mortgage Loans" means that pool of conventional mortgage loans owned by the Seller and Oxford Life Insurance Company on a 50/50 pari passu basis pursuant to that Participation and Servicing Agreement Series A 1990 dated as of February 14, 1990, and identified on Schedule A-3 attached hereto. "Marconi Mortgage" means and that certain Mortgage Loan identified as loan number 900656, referred to by Seller as the Marconi Mortgage. "Pooled Mortgage Loans" means collectively, the pooled mortgage loans held by Seller under (i) that certain Sale and Servicing Agreement dated as of May 18, 1989 by and between Morsemere Federal Savings Bank, Originator, Company, and Initial Class B Certificateholder and Purchaser, as Initial Class A Certificateholder, (ii) that certain Participation and Servicing Agreement dated as of May 26, 1988 by and between Ensign Bank, F.S.B., as seller, servicer and purchaser of the subordinated certificate and Drexel Burnham Lambert MRP Inc., as initial purchaser of the senior certificates, (iii) that certain Representations, Warranties, Purchase and Participation Agreement dated and effective as of June 30, 1988 by and among Seller, as purchaser and initial Class A Certificateholder, Investors Florida Savings Bank and IFS Service Corporation, and (iv) that certain Servicing Agreement dated as of December 1, 1992 by and among Seller, Federal Deposit Insurance Corporation, as receiver for Mechanics and Farmers Savings Bank, F.S.B., Citytrust, a Connecticut bank and trust company, and John Alden Asset Management Company, as Servicer, and identified on Schedule A-4 attached hereto. "RSL 1 Jr. Agreement" means that certain Coinsurance Agreement effective January 1, 1989 by and between Seller and Reliance Standard Life Insurance Company. 4 5 "RSL Agreements" means collectively, (i) that Coinsurance Agreement effective June 30, 1990 by and between Seller and Reliance Standard Life Insurance Company and (ii) that Coinsurance Agreement effective October 31, 1990 by and between Seller and Reliance Standard Life Insurance Company. "State Insurance Deposits" means all instruments held on deposit for the benefit of policyholders by state insurance departments on behalf of Seller and identified on Schedule A-5. "Statutory Reserves" means a reserve not less than the aggregate statutory reserves and claims reserves calculated in a manner and on a consistent basis with Seller's past practices. "Waters Edge Group Mortgage" means and that certain Mortgage Loan identified as loan number 7140, referred to by Seller as the Waters Edge Group Mortgage. 10. Recording Costs. The costs of recordation in connection with the transfer of any of the Closing Date Portfolio Securities, including, without limitation, recording costs and fees of a title company to record any documents in connection with the transfer of Closing Date Portfolio Securities shall be borne equally by the Seller and the Purchaser. Recording costs excludes, without limitation, any fees or costs for title policies or endorsements to title policies and title searches in connection therewith. 11. Changes in Schedules. To the extent set forth below, the Schedules to the Agreement shall be amended to include, restate or delete the following information, as the case may be, provided that the representations, warranties and indemnification contained in the Agreement shall in no way be affected by any such amendment, restatement or deletion of any Schedules: a. Schedule 3.3 Schedule 3.3 shall be revised by Schedule A-6 hereto. b. Schedule 3.8(a) The information contained in Schedule 3.8(a) under the heading "JOHN ALDEN LIFE INSURANCE COMPANY Annuities In-Force" shall be amended to: (i) change the form name of form # J-1035-P to "SPIA": (ii) add form number J-5905-P to form name "Flex", (iii) add the word "(Oregon)" after the form names for the form numbers J-8014-P and J-8013-C. The information contained in Schedule 3.8(a) under the heading "JOHN ALDEN LIFE INSURANCE COMPANY Forms Approved in 1996" shall be amended to 5 6 include the following information: Forms Approved in 1997 LTC Waiver Endorsement Pennsylvania J-0748-E(PA) TSA Endorsement Alaska, Arizona, Arkansas, J-O816-E(1/97) California, Colorado, Georgia, Idaho, Kansas, Kentucky, Maine, Michigan, Mississippi, New Hampshire, Oklahoma, South Carolina, Tennessee, Wyoming TSA Endorsement Alaska, Arizona, Arkansas, J-O817-E(1/97) California, Colorado, Georgia, Idaho, Indiana, Kentucky, Maine, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, Oklahoma, South Carolina, Tennessee, Texas, Virginia, Wyoming The information contained in Schedule 3.8(a) under the heading "Approved JALIC Annuity Endorsements (Standard & State Specific)" shall be amended to include "Tax Sheltered Annuity Endorsement, J-0816-E(1/97)," "Tax Sheltered Annuity Endorsement, J-0817-E(1/97)," "Tax Sheltered Annuity Endorsement, J-0817-E(1/97)(PA)," and "Endorsement - Long Term Care Facility Waiver, J-0748-E(PA)." And form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively. c. Schedule 3.9 Schedule 3.9(a) shall be amended so as to replace the lists of policy forms for Indiana, Iowa, Utah and Wisconsin with the lists attached hereto as Schedule A-7 hereto. In addition, the following changes to Schedule 3.9(a) shall also be made: - - the list of John Alden Life Endorsement Approvals for Alaska shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Arizona shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) 6 7 - - the list of John Alden Life Endorsement Approvals for California shall be amended such the form "Individual Retirement Annuity Rider," form number J-0710-E(9/88) shall be deleted in its entirety and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Georgia shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Idaho shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Indiana shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include form "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Kansas shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include form "TSA Endorsement," form number J-0816-E(1/97) - - the list of John Alden Life Endorsement Approvals for Kentucky shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Maryland shall be amended to delete in its entirety reference to form "Individual Retirement Annuity Rider," J-0710-E (9/88) and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively - - the list of John Alden Life Endorsement Approvals for Minnesota shall be amended to delete in its entirety reference to form "Individual Retirement Annuity Rider," J-0710-E (9/88) and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively 7 8 - - the list of John Alden Life Endorsement Approvals for Missouri shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include form "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Pennsylvania shall be restated in its entirety by Schedule A-8 hereto - - the list of John Alden Life Endorsement Approvals for Oklahoma shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Oregon shall be amended to delete in its entirety reference to the forms "Individual Retirement Annuity Rider," form number J-0710-E, and "Individual Retirement Annuity Rider, form number J-0710-E(9/88) and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, - - the list of John Alden Life Endorsement Approvals for South Carolina shall be amended to delete in its entirety reference to the forms "Individual Retirement Annuity Rider," form number J-0710-E, and "Individual Retirement Annuity Rider, form number J-0710-E(9/88) and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include form "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Tennessee shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include forms "TSA Endorsement," form number J-0816-E(1/97) and "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Texas shall be amended to delete in its entirety reference to the forms "Individual Retirement Annuity Rider," form number J-0710-E, and "Individual Retirement Annuity Rider, form number J-0710-E(9/88) and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively, and the list shall include form "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Washington shall be amended to delete in its entirety reference to the forms "Individual Retirement Annuity Rider," form number J-0710-E, and "Individual Retirement Annuity 8 9 Rider, form number J-0710-E(9/88) and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively - - the list of John Alden Life Endorsement Approvals for West Virginia shall be amended to delete in its entirety reference to the form "Individual Retirement Annuity Rider," form number J-0710-E, and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively - - the list of John Alden Life Endorsement Approvals for Virginia shall be amended such that form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively and the list shall include form "TSA Endorsement," form number J-0817-E(1/97) - - the list of John Alden Life Endorsement Approvals for Utah shall be amended to delete in its entirety reference to the form "Individual Retirement Annuity Rider," form number J-0710-E, and form numbers J-O614-E(7/86) and J-0619-E shall be restated as J-0617(7/86) and J-0691-E, respectively c. Schedule 3.11 Schedule 3.11 shall be deleted and replaced by Schedule A-9 hereto. d. Schedule 3.20 Number 24 to Schedule 3.20, "General Agent Agreement by and between John Alden Life Insurance Company and Progressive Financial effective October 29, 1993" shall be deleted as such agreement was terminated February 8, 1997. e. Schedule 3.22(a) Schedule 3.22(a) shall be deleted and replaced by Schedule A-10 hereto. f. Schedule 3.22(l) Schedule 3.22(l) shall be deleted and replaced by Schedule A-11 hereto. g. Schedule 3.24 Schedule 3.24 shall be deleted and replaced by Schedule A-12 hereto. 12. Marketing Agreement. From and after the Ledger Cut-Off Date (as defined in the Indemnity Reinsurance Agreement) through and including the date of termination of the Transition Services Agreement, Seller shall continue to underwrite and make its annuity products available for sale and marketed through NSM Sales Corporation. Any annuity contracts issued by Seller during such period shall be deemed to be Additional Policies (as defined in the Indemnity Reinsurance Agreement) and automatically reinsured with the Purchaser as provided in the Indemnity Reinsurance Agreement. 9 10 13. Additional Ancillary Agreement. The last page of Section 1.4(a) is amended to include within the definition of "Ancillary Agreements" that certain Asset Repurchase Agreement by and between Seller and Purchaser dated as of March 31, 1997. 14. Headings. The headings in this Amendment have been inserted for convenience of reference only, and shall not be considered a part of this Amendment and shall not limit, modify or affect in any way the meaning or interpretation of this Amendment. 15. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original instrument, but all such counterparts shall together constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by both parties, regardless of whether each of the parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both parties. 16. Miscellaneous. All other terms and conditions of the Agreement shall remain unchanged and the Agreement shall remain in full force and effect. 10 11 IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date first written above. JOHN ALDEN LIFE INSURANCE COMPANY By /s/ SCOTT L. STANTON ------------------------------------- Name: Scott L. Stanton Title: SVP & CEO SUNAMERICA LIFE INSURANCE COMPANY By /s/ SUSAN L. HARRIS ------------------------------------- Name: Susan L. Harris Title: Secretary (Amendment to the Asset Purchase Agreement) EX-10.14 15 AMEND. NO. 1 TO MARKETING AGREEMENT 1 Exhibit 10.14 AMENDMENT NO. 1 TO MARKETING AGREEMENT DATED MARCH 28, 1997 BETWEEN SUNAMERICA LIFE INSURANCE COMPANY ("COMPANY") AND NSM SALES CORPORATION ("NSM") WHEREAS, both parties desire to amend Section V (Exclusivity Rights and Obligations) in the above-referenced Agreement; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties, intending to be legally bound, agree as follows: 1. The last sentence of Paragraph A, Section V is amended to read: If NSM fails to meet the minimum sales levels in any given period, the Company may terminate the exclusivity rights granted to NSM as set forth above; provided, however, if on July 15, 1997, the Company is unable, for whatever reason, to issue the Exclusive Policies in the Company's name and on the Company's data processing systems in those states that collectively accounted for 70% of NSM's 1996 sales of the corresponding John Alden Life Insurance Company annuity products, the minimum sales level for the period of April 1, 1997 to September 30, 1997 will be waived by the Company. This amendment shall become effective on March 28, 1997. All other terms and provisions and conditions of said Marketing Agreement shall remain in full force and effect. SunAmerica Life Insurance Company NSM Sales Corporation By: /s/ Illegible Signature By: /s/ Anne V. Wardlow ------------------------------- ----------------------------- Title: Executive Vice President Title: Senior Vice-President --------------------------- -------------------------- EX-99.1 16 NEWS RELEASE DATED DECEMBER 2, 1996 1 EXHIBIT 99.1 [JOHN ALDEN FINANCIAL CORPORATION LOGO] NEWS RELEASE ================================================================================ For Immediate Release Contact: Mark Schoder (305) 715-3767 JOHN ALDEN ANNOUNCES DEFINITIVE AGREEMENT TO SELL ANNUITY OPERATIONS PRODUCES $175-$200 MILLION OF AVAILABLE CAPITAL MIAMI, FL, DECEMBER 2, 1996 -- John Alden Financial Corporation (NYSE: JA) announced today that it has entered into a definitive agreement to sell substantially all of its annuity business to SunAmerica, Inc. (NYSE:SAI). The transaction includes the sale of all of the common stock of John Alden Life Insurance Company of New York (JANY) and the reinsurance of the annuity block of John Alden Life Insurance Company (JALIC). This reinsurance will initially be on an indemnity basis and will transition to an assumption basis as soon as practical. Most of the transition to an assumption basis is expected to be completed within two years. This transaction is contingent upon regulatory approvals and is expected to close by the end the first quarter of 1997. On November 14, the Company announced that it had entered into a non-binding letter of intent regarding these operations with SunAmerica. The total purchase price is approximately $240 million. This represents approximately $169 million paid to acquire the business and $71 million of adjusted capital and surplus in JANY as of September 30, 1996. It does not include any capital used to support the annuity business in JALIC. The Company's available capital will be enhanced by both the after-tax income generated from the transaction and by the release of the capital previously allocated to support the annuity business. The Company intends to use a portion of this available capital to strengthen its healthcare operations, after which it estimates there will be approximately $175 to $200 million of capital available for other uses. This additional capital will be used primarily to repurchase common stock, pay down debt and, to a lesser extent, for general corporate purposes. As a result of this sale of its annuity business and the Company's previously announced intention to sell its Credit operations, the Company expects to record a net deferred gain of approximately $45 million. This amount is net of transaction expenses, taxes, goodwill and other adjustments relating to these transactions. The net deferred gain will be recognized as income as SunAmerica completes the assumption of policyholder liabilities. The Company expects to begin recognizing the gain in 1997 and to earn the majority of the gain in 1998. "We made a decision earlier this year to focus the Company's resources exclusively on our healthcare lines," said Glendon E. Johnson, Chairman of the Board, Chief Executive Officer and President. "In doing this, we significantly enhance the potential for the future success of these operations. As a result of this decision, we have realized the value of our annuity operations. This annuity transaction is being done to benefit all of the parties involved -- shareholders, policyholders and agents. SunAmerica has earned an outstanding industry reputation and holds very high industry ratings." * * * * * -More- 2 [JOHN ALDEN LOGO] Page 2 Dec., 1996 John Alden Financial Corporation is an insurance holding company that, through its subsidiaries, is principally engaged in providing group health insurance, managed care and other health-related risk management services and products. SunAmerica, Inc. is a financial services company that specializes in retirement savings products and services. FOR MORE INFORMATION Fax-on Demand - Call (800) 656-2580 for access to all of John Alden's 1996 news releases. Internet Address - Visit John Alden's site on the Internet at http://www.jalden.com. E-Mail - Contact us at corpcomm@jalden.com to ask questions or request materials. ### EX-99.2 17 NEWS RELEASE DATED MARCH 31, 1997 1 EXHIBIT 99.2 [JOHN ALDEN FINANCIAL CORPORATION LOGO] NEWS RELEASE =============================================================================== For Immediate Release Investor Relations Contact: Mark Schoder (305) 715-3767 Media Relations Contact: Christina Wells (305) 715-3162 JOHN ALDEN CLOSES SALE OF ANNUITY BUSINESS AND RESTRUCTURES OPERATIONS MIAMI, FL, MARCH 31, 1997 -- John Alden Financial Corporation (NYSE: JA) reported today that the sale of its annuity business to SunAmerica Inc. has closed. The transaction includes the sale of all of the common stock of John Alden Life Insurance Company of New York and the reinsurance of substantially all of the annuity business of John Alden Life Insurance Company. Related to the sale of the Company's annuity operations, its proposed sale of its credit operations, and the anticipated reduction in group health premiums, the Company reviewed its workforce level and the structure of its operations, including overhead functions. As a result of this review, the Company will reduce its workforce by approximately 725 employees during 1997. Of this amount, approximately 250 positions are directly employed in discontinued operations, which include the Company's annuity and credit operations. Charges associated with these eliminations are included in the $45 million net deferred gain previously announced. The remaining 475 positions represent approximately 20% of the full-time workforce of the Company's continuing operations, which include its group health business and Alden Risk Management Services. Accordingly, John Alden will take an after-tax charge of approximately $15 million in the first quarter relating to its continuing operations. In addition, the Company will not fill an estimated 100 open positions in these operations. "Decisions like this are the most difficult to make, but this is a necessary step in successfully positioning this Company for the future," said Glendon E. Johnson, Chairman of the Board, Chief Executive Officer and President. "While it will be challenging for us to reduce our expenses in line with the anticipated reduction in premium, we are committed to maintaining a competitive expense ratio on a long-term basis." * * * * * John Alden Financial Corporation is an insurance holding company that, through its subsidiaries, is principally engaged in providing group health insurance, managed care and other health-related risk management products and services. SunAmerica Inc. is a diversified financial services company specializing in retirement savings and investment products and services. FOR MORE INFORMATION Fax-on-Demand - Call (800) 656-2580 for a complete menu of John Alden news releases. Internet Address - Visit John Alden's site on the Internet at http://www.jalden.com. E-Mail - Contact us at corpcomm@jalden.com to ask questions or request material. -----END PRIVACY-ENHANCED MESSAGE-----