Exhibit 10.01

 

 

 

STOCK PURCHASE AGREEMENT

 

BY AND AMONG

 

RBC INSURANCE HOLDINGS (USA) INC.,

 

ATHENE HOLDING LTD.,

 

PROTECTIVE LIFE INSURANCE COMPANY,

 

AND

 

RBC USA HOLDCO CORPORATION

(solely for purposes of Sections 5.14-5.17 and Articles 7, 8 and 10)

 

 

Dated as of October 22, 2010

 

 

 

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TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

ARTICLE 1 Definitions and Terms

 

2

 

 

 

 

 

Section 1.1

 

Specific Definitions

 

2

Section 1.2

 

Interpretation

 

21

 

 

 

 

 

ARTICLE 2 Purchase and Sale

 

22

 

 

 

 

 

Section 2.1

 

Purchase and Sale

 

22

Section 2.2

 

Closing

 

22

Section 2.3

 

Purchase Price

 

23

Section 2.4

 

Pre-Closing Deliverables

 

23

Section 2.5

 

Payment at Closing

 

24

Section 2.6

 

Post-Closing Adjustment

 

24

Section 2.7

 

Closing Deliveries

 

27

Section 2.8

 

Post-Closing Deliveries

 

29

Section 2.9

 

No Set-off

 

29

 

 

 

 

 

ARTICLE 3 Representations and Warranties of Seller

 

30

 

 

 

Section 3.1

 

Organization and Authority of Seller

 

30

Section 3.2

 

Binding Effect

 

30

Section 3.3

 

Organization, Qualification and Authority of the Company

 

30

Section 3.4

 

Capital Structure; Ownership of the Shares

 

31

Section 3.5

 

Filings and Consents

 

31

Section 3.6

 

No Violations

 

32

Section 3.7

 

Financial and Statutory Statements

 

33

Section 3.8

 

Absence of Certain Changes or Events

 

34

Section 3.9

 

Litigation and Claims

 

34

Section 3.10

 

Taxes

 

35

Section 3.11

 

Employee Benefits

 

37

Section 3.12

 

Compliance with Laws; Permits

 

41

Section 3.13

 

Property

 

42

Section 3.14

 

Intellectual Property

 

43

Section 3.15

 

Contracts

 

44

Section 3.16

 

Insurance Matters

 

45

Section 3.17

 

Insurance Producers and Third-Party Administrators

 

46

Section 3.18

 

Environmental Matters

 

47

Section 3.19

 

Finders’ Fees

 

48

Section 3.20

 

Insurance

 

48

Section 3.21

 

Indebtedness

 

49

Section 3.22

 

Investment Company

 

49

Section 3.23

 

Company Portfolio Assets

 

49

Section 3.24

 

Insurance Business

 

49

 

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Section 3.25

 

Reinsurance and Coinsurance

 

51

Section 3.26

 

Actuarial Reports

 

52

Section 3.27

 

Risk-Based Capital

 

53

Section 3.28

 

Labor Matters

 

53

Section 3.29

 

Affiliate Transactions

 

53

Section 3.30

 

Separate Accounts; Regulatory Filings

 

54

Section 3.31

 

Books and Records

 

55

Section 3.32

 

Internal Controls

 

55

Section 3.33

 

Shared Assets and Shared Employees

 

55

Section 3.34

 

Contract List

 

56

Section 3.35

 

No Other Representations or Warranties

 

56

 

 

 

 

 

ARTICLE 4 Representations and Warranties of Purchaser

 

56

 

 

 

Section 4.1

 

Organization and Authority of Purchaser

 

56

Section 4.2

 

Binding Effect

 

57

Section 4.3

 

Filings and Consents

 

57

Section 4.4

 

No Violations

 

57

Section 4.5

 

Finders’ Fees

 

58

Section 4.6

 

Financial Capability

 

58

Section 4.7

 

Investigation by Purchaser

 

59

Section 4.8

 

Purchase for Own Account

 

59

Section 4.9

 

Purchaser and Annuity Reinsurer Statutory Statements

 

59

Section 4.10

 

No Impediments

 

60

Section 4.11

 

Annuity Reinsurer

 

60

Section 4.12

 

No Other Representations or Warranties

 

60

 

 

 

 

 

ARTICLE 5 Covenants

 

60

 

 

 

 

 

Section 5.1

 

Confidentiality; Access; Transition Matters

 

60

Section 5.2

 

Conduct of Business

 

64

Section 5.3

 

Access to, and Maintenance, Transfer and Preservation of, Books and Records

 

67

Section 5.4

 

Delivery of Financial Information

 

68

Section 5.5

 

Reasonable Best Efforts; Regulatory Matters; Third Party Consents

 

68

Section 5.6

 

Employment, Benefits and Transferring Employees

 

73

Section 5.7

 

Transaction Agreements

 

77

Section 5.8

 

Retained Intellectual Property; Seller’s Marks

 

77

Section 5.9

 

Intercompany Agreements and Accounts

 

78

Section 5.10

 

Further Assurances

 

79

Section 5.11

 

Equity Commitment

 

79

Section 5.12

 

Director and Officer Indemnification; Directors’ and Officers’ Insurance

 

79

Section 5.13

 

Acquisition Proposals

 

80

Section 5.14

 

Non-Compete

 

81

Section 5.15

 

Non-Solicitation of Business Employees

 

84

Section 5.16

 

Non-Solicitation of Holders of Insurance Contracts

 

85

Section 5.17

 

Relief

 

85

 

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Section 5.18

 

Notification

 

85

Section 5.19

 

Insurance

 

86

Section 5.20

 

Books and Records

 

86

Section 5.21

 

Reinsurance Transactions

 

86

Section 5.22

 

Closing Date Share Redemption

 

87

Section 5.23

 

Existing Surplus Note Repayment

 

87

Section 5.24

 

Policyholder Lists

 

87

Section 5.25

 

Announcement to Employees and Producers

 

87

Section 5.26

 

Portfolio Asset Activity

 

87

Section 5.27

 

Bank Accounts

 

87

Section 5.28

 

Purchaser and Annuity Reinsurer Capital

 

88

 

 

 

 

 

ARTICLE 6 Conditions to Closing

 

88

 

 

 

 

 

Section 6.1

 

Conditions to the Obligations of the Counterparties and Seller

 

88

Section 6.2

 

Conditions to the Obligations of the Counterparties

 

89

Section 6.3

 

Conditions to the Obligations of Purchaser

 

90

Section 6.4

 

Conditions to the Obligations of Seller

 

90

Section 6.5

 

Conditions to the Obligations of Life Reinsurer

 

91

 

 

 

 

 

ARTICLE 7 Survival; Indemnification

 

92

 

 

 

 

 

Section 7.1

 

Survival

 

92

Section 7.2

 

Indemnification by Purchaser and Life Reinsurer

 

93

Section 7.3

 

Indemnification by Seller and USA Holdco

 

94

Section 7.4

 

Claims

 

95

Section 7.5

 

Characterization of Indemnification Payments

 

98

Section 7.6

 

Computation of Losses Subject to Indemnification

 

98

Section 7.7

 

Remedies

 

100

Section 7.8

 

No Right of Contribution

 

100

Section 7.9

 

Representations and Warranties of USA Holdco

 

100

Section 7.10

 

Representations and Warranties of Life Reinsurer

 

101

 

 

 

 

 

ARTICLE 8 Tax Matters

 

103

 

 

 

 

 

Section 8.1

 

Tax Indemnity

 

103

Section 8.2

 

Tax Returns

 

105

Section 8.3

 

Contest Provisions

 

105

Section 8.4

 

Assistance and Cooperation

 

106

Section 8.5

 

Miscellaneous

 

107

Section 8.6

 

Coordination with Article 7

 

107

 

 

 

 

 

ARTICLE 9 Termination

 

107

 

 

 

 

 

Section 9.1

 

Termination

 

107

Section 9.2

 

Effect of Termination

 

108

 

 

 

 

 

ARTICLE 10 Miscellaneous

 

109

 

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Section 10.1

 

Notices

 

109

Section 10.2

 

Amendment; Waiver

 

111

Section 10.3

 

Assignment

 

111

Section 10.4

 

Entire Agreement; No Other Representations and Warranties

 

111

Section 10.5

 

Fulfillment of Obligations

 

112

Section 10.6

 

No Third-Party Beneficiaries

 

112

Section 10.7

 

Public Disclosure

 

112

Section 10.8

 

Expenses

 

112

Section 10.9

 

Schedules

 

112

Section 10.10

 

GOVERNING LAW

 

113

Section 10.11

 

Submission to Jurisdiction

 

113

Section 10.12

 

WAIVER OF JURY TRIAL

 

113

Section 10.13

 

Counterparts

 

114

Section 10.14

 

Headings

 

114

Section 10.15

 

Severability

 

114

Section 10.16

 

Specific Performance

 

114

 

Annexes

 

 

 

Annex A

 

Form of Life Business Reinsurance Agreement

Annex B

 

Form of Annuity Business Reinsurance Agreement

Annex C

 

Form of Administrative Services Agreement

Annex D

 

Form of Trademark License Agreement

Annex E

 

Form of Transition Services Agreement

 

 

 

Exhibits

 

 

 

Exhibit A

 

EB Volume Adjustment Amount Calculation

Exhibit B

 

NB Volume Adjustment Amount Calculation

 

 

 

Schedules

 

 

 

Schedule 1.1(a)

 

Agreed Accounting Principles

Schedule 1.1(b)

 

Definition

Schedule 2

 

Form of Capital & Surplus Worksheet

Schedule 6.1(b)

 

Additional Required Governmental Authorizations

Schedule 6.2(d)

 

Other Agreements

Schedule 7.3(a)

 

Indemnification Matters

 

 

 

Seller’s Disclosure Schedule

Purchaser’s Disclosure Schedule

Life Reinsurer’s Disclosure Schedule

 

iv

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This Stock Purchase Agreement is dated as of October 22, 2010, by and among RBC
Insurance Holdings (USA) Inc., a Delaware corporation (“Seller”), Athene Holding
Ltd., a Bermuda exempted company (“Purchaser”), Protective Life Insurance
Company, a Tennessee insurance company (“Life Reinsurer”), and, solely for
purposes of Sections 5.14 through Section 5.17 and Articles 7, 8 and 10 of this
Agreement, RBC USA Holdco Corporation, a Delaware corporation (“USA Holdco”)
(Seller, Purchaser, Life Reinsurer and USA Holdco, the “Parties” and each
individually, a “Party”).  Certain terms used herein and not otherwise defined
shall have the meanings set forth in Article 1.

 

RECITALS:

 

A.            Seller owns all of the issued and outstanding shares of capital
stock of Liberty Life Insurance Company, a South Carolina insurance company (the
“Company”);

 

B.            Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the shares of common stock, par value $1.00 per
share, of the Company (the “Common Stock”), issued and outstanding as of the
Effective Time, upon the terms and subject to the conditions set forth herein;

 

C.            On the Closing Date and effective immediately prior to the
Effective Time, the Company will redeem its issued and outstanding Existing
Surplus Note by paying the Existing Surplus Note Repayment Amount to Seller in
accordance with the terms and conditions of this Agreement;

 

D.            On the Closing Date and effective immediately prior to the
Effective Time but after the redemption of the outstanding Existing Surplus
Note, the Company will redeem and cancel the Redeemed Shares for consideration
equal to the Closing Date Share Redemption Amount, payable to Seller upon the
surrender for cancellation of stock certificates representing the Redeemed
Shares, in the form of the Closing Date Note and, if applicable, the Share
Redemption Cash Consideration, in accordance with the terms and conditions of
this Agreement;

 

E.            On the Closing Date and effective immediately following the
Effective Time, the Company will enter into the Closing Date Reinsurance
Agreements;

 

F.             On the Closing Date and effective immediately following the
Effective Time, but after the consummation of the Reinsurance Transactions,
Purchaser shall cause the Company to repay and redeem the outstanding principal
amount of the Closing Date Note by wire transfer of immediately available funds
and Seller shall surrender the Closing Date Note to the Company for
cancellation;

 

G.            Concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to the willingness of Seller to enter into
this Agreement, the investor named therein (the “Investor”) and Purchaser have
entered into an equity commitment letter, dated as of the date of this
Agreement, a copy of which has been delivered to Seller (the “Equity Commitment
Letter”);

 

H.            Prior to the execution and delivery of this Agreement, and as a
condition and inducement to the willingness of Seller to enter into this
Agreement, Purchaser has deposited

 

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$150,000,000 (the “Escrow Funds”) into an escrow account (the “Escrow Account”)
at State Street Bank and Trust Company to satisfy any obligations of Purchaser
and its Affiliates arising out of or resulting from the breach by Purchaser or
its Affiliates of its or their representations, warranties, covenants or other
obligations under this Agreement or the Annuity Business Reinsurance Agreement
(the agreement pursuant to which Purchaser deposited the Escrow Funds, the
“Escrow Agreement”); and

 

I.             In connection with this Agreement, at the Closing, Purchaser,
Life Reinsurer, Seller and the Company and certain of their respective
Affiliates, as applicable, will enter into the other Transaction Agreements;

 

Now, Therefore, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and upon the terms and subject to
the conditions set forth herein, the Parties hereto hereby agree as follows:

 

ARTICLE 1
Definitions and Terms

 

Section 1.1            Specific Definitions.  As used in this Agreement, the
following terms have the meanings set forth or referenced below:

 

“Acquisition Parties” has the meaning set forth in Section 5.13(a).

 

“Acquisition Proposal” has the meaning set forth in Section 5.13(c).

 

“Action” means any civil, criminal, administrative or other claim, action, suit,
litigation, arbitration, investigation, inquiry, hearing, charge, complaint,
demand, notice or other proceeding, in each case, by or before any Governmental
Authority or arbitral body.

 

“Actuarial Analyses” has the meaning set forth in Section 3.26(a).

 

“Actuarial Appraisal” has the meaning set forth in Section 3.26(a).

 

“Adjusted Capital and Surplus” means, as of any date of determination, an amount
equal to (a) the sum of (1) the capital and surplus of the Company (as would be
reflected in line 38, column 1 in the “Liabilities, Surplus and Other Funds”
section of the Company’s balance sheet in the most recent annual statutory
financial statements filed with the Department) as of such date or, if the line
number is changed in such annual statutory financial statements, on the line
that supersedes line 38 and reflects capital and surplus as of such date, in
each case, calculated in accordance with SAP applied consistently with its
application in connection with the preparation of the Quarterly Statutory
Statement, subject to the Agreed Accounting Principles, and (2) the Asset
Valuation Reserve as of such date minus (b) the aggregate par value of the
outstanding Existing Surplus Note minus (c) the Admitted Net Deferred Tax Asset
as of such date.

 

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“Administrative Services Agreement” means the Administrative Services Agreement
substantially in the form of Annex C attached hereto.

 

“Admitted Net Deferred Tax Asset” means, as of any date of determination, the
admitted net deferred tax asset of the Company (as would be reflected in line
16.2, column 3 in the “Assets” section of the Company’s balance sheet in the
most recent annual statutory financial statements (page 2) filed with the
Department) as of such date or, if the line number is changed in such annual
statutory financial statements, on the line that supersedes line 16.2 and
reflects admitted net deferred tax asset as of such date, in each case,
calculated in accordance with SAP applied consistently with its application in
connection with the preparation of the Quarterly Statutory Statement, subject to
the Agreed Accounting Principles.

 

“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, such other
Person at the time at which the determination of affiliation is made.  The term
“control” (including, with correlative meanings, the terms “controlled by” and
“under common control with”), as applied to any Person, means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or other ownership interests, by contract or otherwise.  For the
avoidance of doubt, for purposes of this Agreement, the Company shall be deemed
to be an Affiliate of Seller until the Effective Time, and an Affiliate of
Purchaser thereafter.

 

“Affiliate Agreements” means Contracts between the Company, on the one hand, and
any officer, director, employee or consultant of Seller or any Affiliate of
Seller (other than the Company), or any immediate family member of such natural
person, on the other hand.

 

“After-Acquired Business” has the meaning set forth in Section 5.14(b)(8).

 

“Aggregate After-Acquired Revenues” has the meaning set forth in
Section 5.14(b)(8).

 

“Agreed Accounting Principles” means the agreed procedures, methodologies and
exceptions set forth in Schedule 1.1(a).

 

“Agreement” means this Stock Purchase Agreement and all Exhibits, Annexes and
Schedules hereto, as the same may be amended or supplemented from time to time
in accordance with the terms hereof.

 

“Ancillary Agreements” means the Transition Services Agreement, the Trademark
License Agreement, the Assignment Agreements and any other agreement or
instrument to be entered into in order to give effect to the Purchase.

 

“Annual Statutory Statements” has the meaning set forth in Section 3.7(b).

 

“Annuity Business” means the fixed, payout and indexed annuities business of the
Company.

 

3

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“Annuity Business Reinsurance Agreement” has the meaning set forth in
Section 5.7(b).

 

“Annuity Reinsurer” has the meaning set forth in Section 5.7(b).

 

“Annuity Reinsurer Bermuda Statutory Statements” has the meaning set forth in
Section 4.9(b).

 

“Applicable Rate” means an interest rate equal to three-month LIBOR for dollars
that appears on page LIBOR 01 (or a successor page) of the Reuters Telerate
Screen as of 11:00 a.m., London time, on the day that is two (2) Business Days
preceding the date the Post-Closing Adjustment becomes due and payable.

 

“Asset Valuation Reserve” means, as of any date of determination, the asset
valuation reserve of the Company (as would be reflected in line 24.1, column 1
in the “Liabilities, Surplus and Other Funds” section of the Company’s balance
sheet in the most recent annual statutory financial statement filed with the
Department) as of such date or, if the line number is changed in such annual
statutory financial statements, on the line that supersedes line 24.1 and
reflects asset valuation reserve as of such date, in each case, calculated in
accordance with SAP applied consistently with its application in connection with
the preparation of the Quarterly Statutory Statement, subject to the Agreed
Accounting Principles.

 

“Assigned Pre-Closing Confidentiality Agreements” has the meaning set forth in
Section 5.1(e).

 

“Assignment Agreement” means each of (a) the assignment agreement between Seller
or one of its Affiliates (other than the Company) and the Company, effective on
or prior to the Closing Date, pursuant to which (1) the Company assigns and
transfers to Seller or such Affiliate the Excluded Assets and (2) Seller or such
Affiliate assumes the Excluded Liabilities and (b) the assignment agreement
between RBC Insurance Services, Inc. and Purchaser, effective as of the Closing
Date, pursuant to which RBC Insurance Services, Inc. and Seller and any of its
Affiliates, if applicable, assigns to Purchaser its rights under each Assigned
Pre-Closing Confidentiality Agreement.

 

“Bankruptcy and Equity Exceptions” has the meaning set forth in Section 3.2.

 

“Benefit Plans” has the meaning set forth in Section 3.11(a).

 

“Books and Records” means all books, ledgers, files, reports, customer lists,
policy information, contracts, administrative and pricing manuals, claims
records, sales records, underwriting records, financial records, compliance
records (including those prepared for or filed with regulators of the Company),
plans and operating records (in whatever form maintained), Tax Returns
(including work papers with respect to the Company), Tax records and all other
records of the Company or relating to the Company or the conduct of the Company
Business, each in the possession or control of Seller, the Company or their
respective Affiliates, whether or not stored in hardcopy form or on electronic,
magnetic, optical or other media; provided, however, that with respect to those
Books and Records in the possession of, controlled by or

 

4

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relating to Seller or its Affiliates that also relate to the Company, the
Company Business or Seller or any of its Affiliates (other than the Company),
“Books and Records” means those excerpts of such Books and Records that relate
primarily to the Company or the Company Business, except for such Books and
Records that relate primarily to any Excluded Liability.

 

“Burdensome Condition” has the meaning set forth in Section 5.5(e).

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks in New York, New York are authorized or obligated by law or executive
order to close.

 

“Business Employee” means each individual who immediately prior to or as of the
Closing Date is an active employee, independent contractor or director of the
Company whose duties relate primarily to the Company Business, including any
such Person who is absent from employment due to illness, vacation, injury,
military service or other authorized absence (including an employee who is
“disabled” within the meaning of the short-term disability plan currently in
place for the applicable employer or who is on approved leave under the Family
and Medical Leave Act of 1993).

 

“Change of Control” has the meaning set forth in Section 5.14(c).

 

“Claim Notice” has the meaning set forth in Section 7.4(a).

 

“Closing” has the meaning set forth in Section 2.2.

 

“Closing Date” has the meaning set forth in Section 2.2.

 

“Closing Date Note” means the note (surplus note, convertible note or other type
of note) or other payment obligation, to be dated the Closing Date, in a form
mutually acceptable to Seller and Purchaser, to be issued by the Company to
Seller in a principal amount equal to the difference between (i) the Closing
Date Share Redemption Amount and (ii) the Share Redemption Cash Consideration,
if any.

 

“Closing Date Reinsurance Agreements” means, collectively, the Annuity Business
Reinsurance Agreement and the Life Business Reinsurance Agreement.

 

“Closing Date Share Redemption” has the meaning set forth in Section 2.1(a).

 

“Closing Date Share Redemption Amount” means an amount equal to the ceding
commissions payable to the Company on the Closing Date pursuant to the Closing
Date Reinsurance Agreements or, if greater, the maximum amount of funds that the
Department approves for payment by the Company to Seller for the purpose of
redeeming the Redeemed Shares (including by payment of the Closing Date Note).

 

“Closing Date Transactions” means the (i) the redemption of the Existing Surplus
Note, (ii) the Closing Date Share Redemption (including the payment of the Share
Redemption Cash Consideration, if any), (iii) the issuance of the Closing Date
Note, (iv) the entry into the

 

5

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Closing Date Reinsurance Agreements and (v) the repayment, redemption and
cancellation of the Closing Date Note.

 

“Code” means the Internal Revenue Code of 1986.

 

“Common Stock” has the meaning set forth in the Recitals.

 

“Company” has the meaning set forth in the Recitals.

 

“Company Accounting Policies” means the accounting procedures and methodologies
of the Company in effect as of July 31, 2010 with respect to GAAP and June 30,
2010 with respect to SAP.

 

“Company Benefit Plans” has the meaning set forth in Section 3.11(a).

 

“Company Business” means the business of the Company, including the Company’s
life and annuity insurance and reinsurance business and the business of
marketing, issuing, underwriting and administering insurance products and
services.

 

“Company Indemnification Rights” has the meaning set forth in Section 7.6(a).

 

“Competing After-Acquired Revenues” has the meaning set forth in
Section 5.14(b)(8).

 

“Competing Business” has the meaning set forth in 5.14(a).

 

“Condition Satisfaction” has the meaning set forth in Section 2.2.

 

“Consultation Period” has the meaning set forth in Section 2.6(d).

 

“Contract” means any agreement, contract, instrument, guarantee, undertaking,
lease, note, mortgage, indenture, license or other legally binding commitment or
obligation, whether written or oral.

 

“Copied Books and Records” means copies of Books and Records (or portions
thereof) that are not Excluded Books and Records and that Seller or its
Affiliates reasonably determine are (i) required to be retained by Seller or any
such Affiliate (other than the Company) under applicable Law or any Governmental
Order, (ii) reasonably related to any Excluded Liabilities or to any matter set
forth on Schedule 7.3(a) or (iii) reasonably necessary to be retained by Seller
or any such Affiliate for financial disclosure or reporting purposes.

 

“Counterparty” means either Life Reinsurer or Purchaser and “Counterparties”
means both Life Reinsurer and Purchaser.

 

“CPA Firm” has the meaning set forth in Section 2.6(d).

 

“Current Employees” means all current employees of the Company as of the Closing
Date.

 

6

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“Department” means the South Carolina Department of Insurance.

 

“Disclosure Schedule” means Seller’s Disclosure Schedule or Purchaser’s
Disclosure Schedule and “Disclosure Schedules” means, collectively, Seller’s
Disclosure Schedule and Purchaser’s Disclosure Schedule.

 

“EB Volume Adjustment Amount” has the meaning set forth in Exhibit A.

 

“Effective Time” has the meaning set forth in Section 2.2.

 

“Employees” means all Current Employees and Former Employees.

 

“Encumbrances” means any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien or charge of any kind, in each case
other than as arising under or imposed by this Agreement or any Ancillary
Agreement.

 

“Environmental Law” means any Law relating to pollution or protection of the
environment, including the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.

 

“Equity Commitment Letter” has the meaning set forth in the Recitals.

 

“ERISA” has the meaning set forth in Section 3.11(a).

 

“ERISA Affiliate” means any trade or business, whether or not incorporated, that
together with the Company would be deemed a “single employer” pursuant to
Section 414(b), (c), (m) or (o) of the Code.

 

“ERISA Plans” has the meaning set forth in Section 3.11(c).

 

“Escrow Account” has the meaning set forth in the Recitals.

 

“Escrow Agreement” has the meaning set forth in the Recitals.

 

“Escrow Funds” has the meaning set forth in the Recitals.

 

“Estimated Adjusted Capital and Surplus” means the Company’s Adjusted Capital
and Surplus as derived from the Estimated Balance Sheet.

 

“Estimated Balance Sheet” means the balance sheet of the Company prepared by
Seller which shall (a) reflect Seller’s good faith estimate of the items set
forth on a statutory balance sheet of the Company as of the Closing Date,
prepared without giving effect to the Closing Date Transactions and (b) be
prepared by Seller in accordance with SAP applied consistently with its
application in connection with the preparation of the Quarterly Statutory
Statement.

 

“Estimated EB Volume Adjustment Amount” means the EB Volume Adjustment Amount as
set forth on the Estimated EB Volume Adjustment Schedule.

 

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“Estimated EB Volume Adjustment Schedule” means a schedule prepared by Seller
which shall (a) reflect Seller’s good faith estimate of the items set forth in
Exhibit A hereto, including the EB Volume Adjustment Amount as of December 31,
2010 and (b) be prepared by Seller in accordance with and based upon (1) figures
reflected in the Company’s Books and Records as of the date of determination and
(2) SAP applied consistently with its application in connection with the
preparation of the Quarterly Statutory Statement.

 

“Estimated NB Volume Adjustment Amount” means the NB Volume Adjustment Amount as
set forth on the Estimated NB Volume Adjustment Schedule.

 

“Estimated NB Volume Adjustment Schedule” means a schedule prepared by Seller
which shall (a) reflect Seller’s good faith estimate of the items set forth in
Exhibit B hereto, including the NB Volume Adjustment Amount as of December 31,
2010 and (b) be prepared by Seller in accordance with and based upon (1) figures
reflected in the Company’s Books and Records as of the date of determination and
(2) SAP applied consistently with its application in connection with the
preparation of the Quarterly Statutory Statement.

 

“Estimated Purchase Price” has the meaning set forth in Section 2.3.

 

“Exchange Act” means the Securities Exchange Act of 1934.

 

“Excluded Assets” means all assets of the Company that are related to the
funding of non-qualified or change of control employee benefits (including the
assets held in BMA Rabbi Trust — Account Number P50166001).

 

“Excluded Books and Records” means (i) any Books and Records that relate to any
internal corporate proceedings of Seller or its Affiliates (other than the
internal corporate proceedings of the Company), including minute books,
shareholder consents, consolidated financial reports, documents and other
materials reflecting or relating to internal approval processes of Seller or its
Affiliates (other than the Company), (ii) any financial records (including
general ledgers) or Tax Returns of Seller or its Affiliates (other than those of
or relating to the Company) and (iii) any Books and Records that are stored
electronically and are inextricably commingled with the books and records of
Seller or its Affiliates (other than the Company).

 

“Excluded Liabilities” means Losses incurred by the Company arising from or
related to (a) the Benefit Plans and (b) claims by Current Employees and Former
Employees arising from their employment relationship with the Company (including
discrimination, harassment, wrongful discharge, unfair labor practices,
immigration or occupational safety) arising out of actions or inactions prior to
the Effective Time.  For the avoidance of doubt, liabilities listed on
Section 1.1(a) of Seller’s Disclosure Schedule, and any Losses related thereto
shall not constitute Excluded Liabilities.

 

“Excluded Taxes” means (i) Taxes reflected as a liability in the calculation of
Final Adjusted Capital and Surplus, and (ii) the amount of Taxes imposed on the
Company from a reduction in the Company’s policyholder surplus account as a
result of the transactions contemplated in this Agreement.

 

8

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“Existing Surplus Note Repayment Amount” means $31,000,000, together with
accrued but unpaid interest due thereon through the date on which the Existing
Surplus Note is repaid.

 

“Existing Surplus Note” means the fully subordinated surplus note, dated
April 30, 2003 between the Company and Seller in an aggregate principal amount
of $31,000,000.

 

“Final Adjusted Capital and Surplus” has the meaning set forth in
Section 2.6(e).

 

“Final Balance Sheet” has the meaning set forth in Section 2.6(e).

 

“Final EB Volume Adjustment Amount” has the meaning set forth in Section 2.6(e).

 

“Final EB Volume Adjustment Schedule” has the meaning set forth in
Section 2.6(e).

 

“Final NB Volume Adjustment Amount” has the meaning set forth in Section 2.6(e).

 

“Final NB Volume Adjustment Schedule” has the meaning set forth in
Section 2.6(e).

 

“Final Purchase Price Adjustment Materials” has the meaning set forth in
Section 2.6(e).

 

“Form of Capital and Surplus Worksheet” means the Form of Capital and Surplus
Worksheet set forth on Schedule 2.

 

“Former Employee” means any individual who formerly was employed by the Company
or any of its predecessors at or prior to the Closing Date.

 

“GAAP” means generally accepted accounting principles in the United States.

 

“GAAP Financial Statements” has the meaning set forth in Section 3.7(a).

 

“Governmental Authority” means any U.S. or foreign federal, state, local,
municipal, county or other governmental, quasi-governmental, administrative,
regulatory or self-regulatory authority or organization, body, agency, court,
tribunal, commission or other similar entity, including any branch, department
or official thereof.

 

“Governmental Authorizations” means all licenses, permits, certificates and
other authorizations and approvals of or by a Governmental Authority required
(a) with respect to any Party, to perform its respective obligations hereunder
and under the other Transaction Agreements to which it is a party, and (b) with
respect to the Company, to carry on its business substantially as currently
conducted under applicable Law and to perform its obligations hereunder and
under the other Transaction Agreements to which it is a party.

 

9

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“Governmental Order” means any order, writ, judgment, injunction, declaration,
decree, stipulation, determination, award or agreement entered by or with any
Governmental Authority.

 

“Hazardous Materials” means (a) petroleum and petroleum-derived substances,
radioactive materials, asbestos, toxic molds or polychlorinated biphenyls, and
(b) any pollutant, contaminant, hazardous substance, hazardous waste, toxic
substance, waste, additive, chemical, material, or substance or other compound
element, material or substance in any form whatsoever (including products)
defined or regulated as such or for which liability or standards of care are
imposed under any Environmental Law.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

“IAS Contract” has the meaning set forth in Schedule 1.1(b).

 

“Indemnified Parties” has the meaning set forth in Section 7.3(a).

 

“Indemnifying Party” means the Party liable for indemnification pursuant to
Article 7 hereof.

 

“Initial Adjusted Capital and Surplus” means $ 238,359,557.

 

“Insurance Contract” means any Contract or policy of insurance or reinsurance,
binder, slip, endorsement or certificate, and forms with respect thereto,
including any life, health, accident and disability insurance policy, variable,
fixed, indexed or payout annuity, guaranteed investment contract and any other
insurance policy or insurance or annuity contract or certificate, in each case
issued or assumed by the Company.

 

“Intellectual Property” means (a) patents and patent applications;
(b) trademarks, trademark registrations, trademark applications, trade names,
service names, service marks and Internet domain name registrations
(“Trademarks”); (c) copyrights, whether or not registered, and registrations and
applications for registration thereof; (d) confidential proprietary information,
including trade secrets, processes, methods, formulae, algorithms and know-how;
and (e) rights in Software.

 

“Intercompany Agreements” means any Contract between the Company, on the one
hand, and Seller or any Affiliate of Seller (other than the Company), on the
other hand.

 

“Intercompany Obligation” means any loan, note, advance, receivable, payable or
other obligation between Seller or any Affiliate of Seller (other than the
Company), on the one hand, and the Company, on the other hand.

 

“IRS” means the Internal Revenue Service.

 

“Investor” has the meaning set forth in the Recitals.

 

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“Knowledge of Life Reinsurer” or “Life Reinsurer’s Knowledge” means the actual
knowledge after reasonable inquiry as of the date of this Agreement of any of
the individuals set forth on Section 1.1(a) of Life Reinsurer’s Disclosure
Schedule.

 

“Knowledge of Purchaser” or “Purchaser’s Knowledge” means the actual knowledge
after reasonable inquiry as of the date of this Agreement of any of the
individuals set forth on Section 1.1(a) of Purchaser’s Disclosure Schedule.

 

“Knowledge of Seller” or “Seller’s Knowledge” means the actual knowledge after
reasonable inquiry as of the date of this Agreement of any of the individuals
set forth on Section 1.1(b) of Seller’s Disclosure Schedule.

 

“Law” means any U.S. or foreign federal, regional, state or local law, statute,
ordinance, directive, rule, regulation, order, judgment, decree, injunction or
other legally binding obligation imposed by a Governmental Authority.

 

“Leased Real Property” has the meaning set forth in Section 3.13(a).

 

“Liability” means, with respect to any Person, any indebtedness, liability,
claim (including unasserted claims whether known or unknown), loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise.

 

“Life Business Reinsurance Agreement” has the meaning set forth in
Section 5.7(b).

 

“Life Reinsurer” has the meaning set forth in the Preamble.

 

“Life Reinsurer’s Disclosure Schedule” means the disclosure schedule delivered
by Life Reinsurer to Seller on the date of this Agreement.

 

“Life Reinsurer’s FSA” has the meaning set forth in Section 5.6(g).

 

“Life Reinsurer Confidentiality Agreement” means the Confidentiality and
Nondisclosure Agreement, dated as of June 18, 2010, between RBC Insurance
Services, Inc. and Protective Life Corporation.

 

“Life Reinsurer Specified Representations” has the meaning set forth in
Section 7.1(a).

 

“Losses” means any damages, claims, losses, liabilities, charges, actions,
suits, proceedings, deficiencies, Taxes, interest, penalties, and reasonable
out-of-pocket costs and expenses (including reasonable attorneys’ fees and
expenses).

 

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“Material Adverse Effect” means:

 

(a)           with respect to the Company, any effect, event, condition or
change that

 

(1)           has a material adverse effect on the assets, liabilities,
business, operations, financial condition or results of operations of the
Company, taken as a whole, excluding the impact of (A) changes in insurance Laws
and other Laws of general applicability or changes in the interpretation thereof
by Governmental Authorities, except to the extent any such change has had or
would reasonably be expected to have a disproportional adverse effect on the
Company compared to similar companies in the life insurance or annuity
industries, (B) changes in GAAP or SAP or interpretations thereof, except to the
extent any such change has had or would reasonably be expected to have a
disproportional adverse effect on the Company compared to similar companies in
the life insurance or annuity industries, (C) changes generally affecting the
life insurance or annuity industries, including changes in economic or market
conditions and changes in prevailing interest rates, currency exchange rates or
price levels or trading volumes in the U.S. or foreign securities markets,
except to the extent any such change has had or would reasonably be expected to
have a disproportional adverse effect on the Company compared to similar
companies in the life insurance or annuity industries, (D) changes in global or
national political conditions (including the outbreak or escalation of war or
acts of terrorism) or due to natural disasters, (E) the effects of the actions
or omissions expressly contemplated by this Agreement or that are taken with the
prior consent of Purchaser in connection with the transactions contemplated
hereby, (F) the announcement or pendency of this Agreement and the transactions
contemplated hereby, (G) adverse changes resulting from, or having the same
effect as, plans of Purchaser, Life Reinsurer or their respective Affiliates
that have been disclosed to the public or to employees, suppliers or customers
of the Company, in each case with respect to restructuring, integrating or
operating the Company following the Closing (including, in the case of (E), (F),
(G), any change, or announcement of a potential change, in the credit rating of
the Company, and the consequences of the exercise by any counterparty of
contractual rights triggered thereby; provided, however, that the facts and
circumstances underlying any such change or announcement may, except as may be
provided in any other subsection of this definition, be considered in
determining whether a Material Adverse Effect has occurred) and (H) any failure,
in and of itself, by the Company to meet any internal or published projections,
forecasts or revenue or earnings predictions (provided, however, that the facts
and circumstances underlying any such failure may, except as may be provided in
any other subsection of this definition, be considered in determining whether a
Material Adverse Effect has occurred); or

 

(2)           would materially impair the ability of the Company to perform its
obligations under the Transaction Agreements;

 

(b)           with respect to Seller or USA Holdco, as applicable, any effect,
event, condition or change that would materially impair the ability of Seller,
USA Holdco or any of their respective Affiliates, as applicable, to perform
their respective obligations under this Agreement or the Ancillary Agreements;
and

 

12

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(c)           with respect to Purchaser or Life Reinsurer, as applicable, any
effect, event, condition or change that would materially impair the ability of
Purchaser or Life Reinsurer, or any of their respective Affiliates, as
applicable, to perform their respective obligations under the Transaction
Agreements.

 

“Material Contract” means any Contract to which the Company is a party or by or
to which the Company or any of its assets is bound or subject (other than
Insurance Contracts, Reinsurance Agreements, Benefit Plans and Producer
Agreements (except as set forth in paragraph (f) below)) and which:

 

(a)           requires or is reasonably likely to require payments in aggregate
to or from the Company or the delivery or receipt by the Company of goods or
services with a fair market value in excess of $250,000 in any twelve-month
period or $500,000 throughout the term of such Contract, and is not terminable
by the Company upon sixty (60) days or shorter notice without penalty or
premium;

 

(b)           restricts or limits the Company’s ability to freely engage in any
line or type of business in any particular geographic area or any particular
medium, or provides for “exclusivity” or any similar requirement in favor of any
Person other than the Company;

 

(c)           relates to the acquisition or disposition by the Company of any
company, division or other enterprise, assets or business (whether by merger,
sale of stock, sale of assets or otherwise), to the extent any continuing
obligations of the Company thereunder remain in effect, and other than Portfolio
Asset transactions in the ordinary course in accordance with the Company’s
written investment policies in effect on the date of this Agreement;

 

(d)           provides for the incurrence of indebtedness for borrowed money by
the Company, or the lending of money by the Company, in each case, in excess of
$250,000 in the aggregate;

 

(e)           provides for the imposition of any material Encumbrance (other
than a Permitted Encumbrance) on any assets of the Company;

 

(f)            is a Contract between the Company, on the one hand, and a
Producer organization, on the other hand, responsible (a) in the case of
annuities for at least $20,000,000 in deposits during the fiscal year ended
December 31, 2009 or the twelve (12) month period preceding the date of this
Agreement or (b) in the case of life insurance for at least $1,000,000 in new
sales (measured by annualized premiums) during the fiscal year ended
December 31, 2009 or the twelve (12) month period preceding the date of this
Agreement;

 

(g)           is a partnership, joint venture or limited liability company
agreement;

 

(h)           is an indemnification agreement pursuant to which a claim against
the Company is pending or, to the Knowledge of Seller, threatened, or a
reasonable factual

 

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basis for any such claim exists, in each case if Seller has determined that such
claim or claims is or are reasonably likely to exceed $250,000 in the aggregate;

 

(i)            is an Intercompany Agreement that will not be terminated at or
prior to Closing;

 

(j)            is an Affiliate Agreement that will not be terminated at or prior
to Closing;

 

(k)           grants a right of first refusal or first offer or similar right;

 

(l)            contains guarantees or keep-wells made or supported by the
Company;

 

(m)          provides for a preferred or “most favored nations” status for any
party thereto;

 

(n)           evidences or implements any interest rate, derivatives or hedging
transaction;

 

(o)           is a Contract listed in Section 3.14(a)(4) of Seller’s Disclosure
Schedule; or

 

(p)           other than the Contracts listed above, provides for the
outsourcing or delegation by the Company of material elements of its
underwriting, claims, policy administration or investment management functions.

 

“McCamish Agreements” means, collectively, (i) that certain Master
Administration Agreement, dated November 13, 2006, between McCamish Systems,
L.L.C. and the Company and (ii) that certain Consulting Services Agreement dated
March 24, 2006 between McCamish Systems, L.L.C. and the Company.

 

“NB Volume Adjustment Amount” has the meaning set forth in Exhibit B.

 

“New York Court” has the meaning set forth in Section 10.11.

 

“Non-Compete Period” has the meaning set forth in Section 5.14(a).

 

“Notice of Agreement” has the meaning set forth in Section 2.6(c).

 

“Notice Period” has the meaning set forth in Section 7.4(a).

 

“Ordinary Course Liabilities” means Liabilities incurred by the Company from
time to time in the ordinary course of business under and in accordance with the
terms of the Insurance Contracts; provided, however, that “Ordinary Course
Liabilities” shall not include any Liabilities incurred by the Company due to
bad faith claims under the Insurance Contracts, claims under the Insurance
Contracts that are not within applicable policy limits or any other claims under
the Insurance Contracts that are not within the express terms of the Insurance
Contracts or are extra-contractual obligations.

 

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“Owned Intellectual Property” means the Intellectual Property owned by the
Company (solely or jointly with any Person).

 

“Owned Real Property” has the meaning set forth in Section 3.13(a).

 

“Party” or “Parties” has the meaning set forth in the Preamble.

 

“Pension Plan” has the meaning set forth in Section 3.11(c).

 

“Permits” has the meaning set forth in Section 3.12(b).

 

“Permitted Encumbrances” means the following Encumbrances:  (a) any Encumbrances
disclosed in the Statutory Statements; (b) Encumbrances for Taxes, assessments
or other governmental charges or levies that are not yet due or payable or that
are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established (if required pursuant to SAP); (c)
materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Encumbrances and
other like Encumbrances arising in the ordinary course of business by operation
of Law for amounts not yet due or which are being contested in good faith or
pursuant to original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business that
would not reasonably be expected to materially impair or detract from the value
and use of such property and assets; (d) all deposits that have been made in the
ordinary course of business with any Governmental Authorities in connection with
a governmental authorization, registration, filing, license, permit or approval;
(e) landlords’ Encumbrances under leases arising by operation of Law for amounts
not yet due; or (f) all exceptions to any title insurance coverage that (1)
customarily or of necessity are not or cannot be removed (such as rights or
instruments that are recorded against the applicable real property or any part
thereof), (2) would be shown by a current title report or other similar report
or listing, (3) may be shown by a current survey or physical inspection, (4) are
zoning, building, subdivision, land use, environmental regulations or other
similar requirements or restrictions or (5) are matters that are the obligations
of tenants, subtenants or other occupants of any portion of any real property
owned by the Company under any lease, sublease, license or other occupancy
agreement, in each case to the extent such exceptions to title insurance
coverage would not reasonably be expected materially to impair or detract from
the value or use of the applicable properties and assets.

 

“Person” means an individual, a corporation, a partnership, an association, a
limited liability company, a trust or other entity or organization.

 

“Personally Identifiable Information” means:  (i) any information that
identifies or can be used to identify an individual, such as first and last
name, social security number or other government issued number or identifier,
date of birth, home or other physical address, e-mail address or other online
contact information, telephone number, biometric data, mother’s maiden name, or
other personally identifiable information; (ii) any “non-public personal
information” as that term is defined in the Gramm-Leach-Bliley Act found at 15
USC Subchapter 1, § 6809(4); and (iii) “protected health information” as defined
in the Health Insurance Portability and Accountability Act found at 45 CFR
§160.103.

 

15

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“Portfolio Assets” means any portfolio assets beneficially owned (within the
meaning of Rule 13d-3 under the Exchange Act) by the Company for investment
purposes, including bonds, notes, debentures, mortgage loans, real estate and
all other instruments of indebtedness, stocks, partnership or joint venture
interests and all other equity interests, certificates issued by or interests in
trusts, derivatives and all other assets acquired for investment purposes.

 

“Post-Closing Adjustment” has the meaning set forth in Section 2.6(g).

 

“Post-Closing Tax Period” means any Tax period beginning after the Effective
Time; and, with respect to any Straddle Period, the portion of such Tax period
beginning after the Effective Time.

 

“Pre-Closing Confidentiality Agreement” means those agreements by and between
Seller or any of its Affiliates (including the Company), on the one hand, and
Persons expressing an interest in acquiring an ownership interest (whether by
merger, sale or purchase of capital stock, sale or purchase of assets,
reinsurance or otherwise) in the capital stock or assets of Seller or the
Company, on the other hand, with respect to the confidentiality of information
about the Company.

 

“Pre-Closing Tax Period” means any Tax period ending at or before the Effective
Time; and, with respect to any Straddle Period, the portion of such Tax period
ending at the Effective Time.

 

“Preliminary Final Adjusted Capital and Surplus” means the Company’s Adjusted
Capital and Surplus as derived from the Preliminary Final Balance Sheet.

 

“Preliminary Final Balance Sheet” means the balance sheet of the Company, which
shall (a) reflect Purchaser’s good faith calculation of the actual values set
forth on the Estimated Balance Sheet, prepared without taking into account the
Closing Date Transactions and (b) be prepared by Purchaser in accordance with
SAP applied consistently with its application in connection with the preparation
of the Quarterly Statutory Statement.

 

“Preliminary Final EB Volume Adjustment Amount” means the EB Volume Adjustment
Amount as set forth on the Preliminary Final EB Volume Adjustment Schedule.

 

“Preliminary Final EB Volume Adjustment Schedule” means a schedule prepared by
Purchaser which shall (a) reflect Purchaser’s calculation of the items set forth
in Exhibit A hereto, including the EB Volume Adjustment Amount as of December
31, 2010 and (b) be prepared by Purchaser in accordance with and based upon (1)
figures reflected in the Company’s Books and Records as of the date of
determination and (2) SAP applied consistently with its application in
connection with the preparation of the Quarterly Statutory Statement.

 

“Preliminary Final NB Volume Adjustment Amount” means the NB Volume Adjustment
Amount as set forth on the Preliminary Final NB Volume Adjustment Schedule.

 

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“Preliminary Final NB Volume Adjustment Schedule” means a schedule prepared by
Purchaser which shall (a) reflect Purchaser’s calculation of the items set forth
in Exhibit B hereto, including the NB Volume Adjustment Amount as of December
31, 2010 and (b) be prepared by Purchaser in accordance with and based upon (1)
figures reflected in the Company’s Books and Records as of the date of
determination and (2) SAP applied consistently with its application in
connection with the preparation of the Quarterly Statutory Statement.

 

“Producer Agreements” means Contracts between the Company and any agent, broker
or distributor in respect of the marketing, selling, servicing or issuing of
insurance business by the agent, broker or producer of the Company.

 

“Producers” has the meaning set forth in Section 3.17(a).

 

“Purchase” means the purchase by Purchaser of the Shares.

 

“Purchase Price” has the meaning set forth in Section 2.3.

 

“Purchase Price Adjustment Materials” has the meaning set forth in Section
2.6(a)(3).

 

“Purchaser” has the meaning set forth in the Preamble.

 

“Purchaser Bermuda Statutory Statements” has the meaning set forth in Section
4.9(a)(2).

 

“Purchaser Confidentiality Agreement” means the Confidentiality and
Nondisclosure Agreement, dated as of July 12, 2010 between RBC Insurance
Services, Inc., Apollo Global Management LLC, Purchaser and Annuity Reinsurer.

 

“Purchaser Indemnified Parties” has the meaning set forth in Section 7.3(a).

 

“Purchaser Specified Representations” has the meaning set forth in Section
7.1(a).

 

“Purchaser’s Disclosure Schedule” has the meaning set forth in the preamble to
Article 4.

 

“Quarterly Statutory Statement” has the meaning set forth in Section 3.7(b).

 

“RBC” means Royal Bank of Canada, a Canadian chartered bank.

 

“RBC Severance Plan” has the meaning set forth in Section 5.6(b).

 

“Real Property Leases” has the meaning set forth in Section 3.13(a).

 

“Redeemed Shares” means that number of shares equal to the product of the number
of shares issued and outstanding immediately prior to the Closing Date Share
Redemption multiplied by the quotient of the Closing Date Share Redemption
Amount divided by $628,100,000.

 

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“Registered Intellectual Property” means all Owned Intellectual Property that is
currently registered, filed or issued under the authority of any Governmental
Authority (or, in the case of an Internet domain name, with an Internet domain
name registrar), or for which a pending application to register has been filed
with any Governmental Authority.

 

“Registered Separate Accounts” has the meaning set forth in Section 3.30(a).

 

“Regulatory Approvals” means the consents, approvals, waivers, authorizations,
notices and filings referred to in Section 3.5(a), Section 4.3(a) or Schedule
6.1(b).

 

“Regulatory Asset Adequacy Issues Summary” means each regulatory asset adequacy
issues summary in respect of the Company delivered to the Department for the
years ended December 31, 2007, 2008 and 2009, including all amendments,
supplements, errata and annexes thereto.

 

“Reinsurance Agreements” means any reinsurance or retrocessional treaty or
agreement, including facultative certificates, other than the Closing Date
Reinsurance Agreements, to which the Company is a party or under which it has
any existing rights, obligations or liabilities and which (a) is in force as of
the date of this Agreement or (b) is terminated or expired as of the date of
this Agreement but under which the Company may continue to receive benefits or
have obligations.

 

“Reinsurance Transactions” means the transactions contemplated by the Closing
Date Reinsurance Agreements.

 

“Representatives” means, with respect to any Person, the directors, officers,
employees, partners, agents, contractors or advisors (including attorneys,
accountants, consultants, bankers and financial advisors) of such Person.

 

“Resolution Process” has the meaning set forth in Section 5.5(e).

 

“Restricted Person” has the meaning set forth in Section 5.14(a).

 

“Restricted Products” has the meaning set forth in Section 5.14(a).

 

“Review Period” has the meaning set forth in Section 2.6(c).

 

“SAP” has the meaning set forth in Section 3.7(b).

 

“SCDOI” has the meaning set forth in Section 5.22(a).

 

“SEC” has the meaning set forth in Section 3.30(b).

 

“SEC Reports” has the meaning set forth in Section 3.30(b).

 

“Securities Act” has the meaning set forth in Section 4.8(a).

 

“Seller” has the meaning set forth in the Preamble.

 

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“Seller Indemnified Parties” has the meaning set forth in Section 7.2(a).

 

“Seller Specified Representations” has the meaning set forth in Section 7.1(a).

 

“Seller’s 401(k) Plan” has the meaning set forth in Section 5.6(c).

 

“Seller’s Disclosure Schedule” has the meaning set forth in the preamble to
Article 3.

 

“Seller’s FSA” has the meaning set forth in Section 5.6(g).

 

“Seller’s Group” means any “affiliated group” (as defined in Section 1504(a) of
the Code without regard to the limitations contained in Section 1504(b)) that,
at any time on or before the Closing Date, includes or has included Seller or
any predecessor of or successor to Seller, or any other group of corporations
that, at any time on or before the Closing Date, files or has filed Tax Returns
on a combined, consolidated or unitary basis with Seller or any predecessor of
or successor to Seller.

 

“Seller’s Marks” has the meaning set forth in Section 5.8(b).

 

“Seller’s Objection” has the meaning set forth in Section 2.6(c).

 

“Separate Accounts” has the meaning set forth in Section 3.30(a).

 

“Share Redemption Cash Consideration” has the meaning set forth in Section
5.22(a).

 

“Shares” means all of the issued and outstanding shares of capital stock of or
other equity or voting interest in the Company.

 

“Software” means (a) computer programs, including software implementation of
algorithms, models and methodologies, whether in source code, object code, human
readable form or other form, (b) databases, including any and all data and
collections of data, whether machine readable or otherwise, and (c) all
documentation including user manuals and other training documentation relating
to any of the foregoing.

 

“Statutory Statements” has the meaning set forth in Section 3.7(b).

 

“Straddle Period” means any taxable year or period beginning on or before and
ending after the Effective Time.

 

“Subsidiary” means with respect to any entity, any other entity as to which it
owns, directly or indirectly, or otherwise controls, more than 50% of the
outstanding stock or other equity interests, the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such entity.

 

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“Tax” or “Taxes” means all federal, state, local and foreign net or gross
income, profits, franchise, gross receipts, premium, license, environmental
(including taxes under Section 59A of the Code), customs duty, escheat payments,
capital stock, alternative or add-on minimum, severances, stamp, transfer,
payroll, sales, employment, unemployment, disability, use, ad valorem, property,
withholding, excise, retaliatory, occupation, production, value added, windfall,
occupancy and other taxes, charges, fees, levies, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts and any interest in respect of such penalties and
additions imposed by any Governmental Authority and any liability for any of the
foregoing as transferee.

 

“Tax Attribute” has the meaning set forth in Section 3.10(m).

 

“Tax Contest” has the meaning set forth in Section 3.10(d).

 

“Tax Returns” means all reports and returns relating to or required to be filed
in connection with any Tax, including any information return, claim for refund,
amended return or declaration of estimated Tax.

 

“Tax Sharing Agreements” means all existing agreements or arrangements (whether
or not written) binding the Company that provide for the allocation,
apportionment, sharing or assignment of any Tax liability or benefit.

 

“Taxing Authority” means the IRS and any other Governmental Authority
responsible for the administration and/or collection of any Tax.

 

“Third Party” means any Person other than the Company, Purchaser, Life
Reinsurer, Seller, USA Holdco or any of their respective Affiliates.

 

“Third-Party Claim” has the meaning set forth in Section 7.4(a).

 

“Towers Watson” has the meaning set forth in Section 3.26(a).

 

“Trademark License Agreement” means the Trademark License Agreement
substantially in the form of Annex D attached hereto.

 

“Transaction Agreements” means, collectively, this Agreement, the Ancillary
Agreements, the Administrative Services Agreement, the Equity Commitment Letter,
the Escrow Agreement, the Closing Date Note and the Closing Date Reinsurance
Agreements.

 

“Transferred Shares” has the meaning set forth in Section 2.1(b).

 

“Transferring Employees” has the meaning set forth in Section 5.6(a).

 

“Transition Services Agreement” means the Transition Services Agreement
substantially in the form of Annex E attached hereto.

 

“Treasury Regulations” means the regulations prescribed under the Code.

 

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“Unresolved Items” has the meaning set forth in Section 2.6(d).

 

“USA Holdco” has the meaning set forth in the Preamble.

 

“USA Holdco Specified Representations” has the meaning set forth in Section
7.1(a).

 

“WARN Act” has the meaning set forth in Section 5.6(a).

 

Section 1.2             Interpretation.

 

(a)           As used in this Agreement, unless the express context otherwise
requires, references:

 

(1)           to the Preamble or to the Recitals, Sections, Annexes, Exhibits or
Schedules are to the Preamble or a Recital or Section of, or an Annex, Exhibit
or Schedule to, this Agreement;

 

(2)           to any Contract (including this Agreement) or organizational
document are to the Contract or organizational document as amended, modified,
supplemented or replaced from time to time;

 

(3)           to any statute or regulation are to the statute or regulation as
amended, modified, supplemented or replaced from time to time (and, in the case
of statutes, include any rules and regulations promulgated under the statute)
and to any section of any statute or regulation include any successor to the
section;

 

(4)           to any Governmental Authority include any successor to the
Governmental Authority and to any Affiliate include any successor to the
Affiliate;

 

(5)           to any copy of any Contract or other document are to a correct and
complete copy; and

 

(6)           to the transactions contemplated by this Agreement are to each
transaction contemplated by or provided for in this Agreement and any Contracts
entered into in connection with this Agreement.

 

(b)           Whenever the words “include”, “includes” or “including” are used
in this Agreement, they will be deemed to be followed by the words “without
limitation”.  Any singular term in this Agreement will be deemed to include the
plural, and any plural term the singular.  All pronouns and variations of
pronouns will be deemed to refer to the feminine, masculine or neuter, singular
or plural, as the identity of the Person referred to may require.

 

(c)           The terms “dollars” and “$” mean U.S. dollars, unless otherwise
indicated.

 

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(d)           It is the intention of the Parties that this Agreement not be
construed more strictly with regard to one Party than with regard to any other
Party.

 

ARTICLE 2
Purchase and Sale

 

Section 2.1             Purchase and Sale.

 

(a)           Closing Date Share Redemption.  On the Closing Date, effective
immediately prior to the Effective Time but after the payment of the Existing
Surplus Note Repayment Amount, (i) Seller shall surrender to the Company for
cancellation, stock certificates representing the Redeemed Shares and (ii) the
Company shall (A) redeem and cancel the Redeemed Shares and (B) pay the Share
Redemption Cash Consideration, if any, to Seller, by wire transfer of
immediately available funds to the account designated by Seller pursuant to
Section 2.4(a)(i), and (C) execute, issue and deliver to Seller the Closing Date
Note in an outstanding principal amount equal to the difference between (i) the
Closing Date Share Redemption Amount and (ii) the Share Redemption Cash
Consideration, if any, in respect of such Redeemed Shares (such transaction, the
“Closing Date Share Redemption”).

 

(b)           Transferred Shares.  On the terms and subject to the conditions
set forth in this Agreement, at the Closing and after giving effect to the
Closing Date Share Redemption, Seller shall sell, transfer, assign, convey or
deliver, or cause to be sold, transferred, assigned or delivered to Purchaser,
and Purchaser shall purchase and accept from Seller, all of the issued and
outstanding shares of capital stock of or other equity or voting interest in the
Company as of the Effective Time (in the aggregate, the “Transferred Shares”),
free and clear of any and all Encumbrances, for the consideration specified in
this Article 2.

 

(c)           Closing Date Note Redemption.  On the Closing Date, effective
immediately following the Effective Time but after the consummation of the
Reinsurance Transactions, Purchaser shall cause the Company to repay and redeem
the issued and outstanding Closing Date Note by wire transfer of immediately
available funds to the account designated by Seller pursuant to Section
2.4(a)(i) of an amount equal to the outstanding principal amount of the Closing
Date Note, and Seller shall surrender the Closing Date Note to the Company for
cancellation.

 

Section 2.2             Closing.  The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place at the offices of Sullivan &
Cromwell LLP, 125 Broad Street, New York, New York at 10:00 A.M., New York City
time, on the later of (a) the first Business Day of January 2011 and (b) the
first Business Day of the month following the month during which the last of the
conditions in Article 6 (other than conditions that by their terms are to be
satisfied at the Closing, but subject to the satisfaction or waiver at or prior
to the Closing of all such conditions) has been satisfied or waived in
accordance with this Agreement (the “Condition Satisfaction”) or, if the
Condition Satisfaction occurs less than three (3) Business Days prior to the
first Business Day of any month, on the first Business Day of the immediately
succeeding

 

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month, or at such other time and place as the Parties hereto may mutually agree;
it being understood that, if the Condition Satisfaction occurs at any time in
April 2011, the Closing shall occur on April 29, 2011.  The date on which the
Closing occurs is referred to herein as the “Closing Date”.  Upon occurrence of
the Closing, the purchase and sale of the Transferred Shares described in
Section 2.1(b) shall be deemed to have become effective at 12:01 A.M., New York
City time, on the Closing Date (the “Effective Time”), the payment of the
Existing Surplus Note Repayment Amount shall be deemed to have become effective
at 12:00:30 A.M., New York City time, on the Closing Date, the Closing Date
Share Redemption shall be deemed to have become effective at 12:00:45 A.M., New
York City time, on the Closing Date and the Closing Date Reinsurance Agreements
shall be deemed to have become effective immediately following the Effective
Time; it being understood that, if the Closing Date is April 29, 2011, the
Parties shall jointly determine the effective times of the purchase and sale of
the Transferred Shares, the payment of the Existing Surplus Note Repayment
Amount and the Closing Date Share Redemption, provided that Seller shall receive
the Existing Surplus Note Repayment Amount, the Estimated Purchase Price, the
Share Redemption Cash Consideration (if any) and the repayment of the Closing
Date Note in immediately available funds on the Closing Date and that the
Closing Date Reinsurance Agreements shall be deemed to have become effective at
11:59 P.M. on the Closing Date.

 

Section 2.3             Purchase Price.  The purchase price for the Transferred
Shares shall be an amount equal to (a) $628,100,000, minus (b) the Closing Date
Share Redemption Amount, plus (c) the Estimated EB Volume Adjustment Amount, if
any, minus (d) the Estimated NB Volume Adjustment Amount, if any, (e) (1) plus
the excess, if any, of the Estimated Adjusted Capital and Surplus over the
Initial Adjusted Capital and Surplus, or (2) minus the excess, if any, of the
Initial Adjusted Capital and Surplus over the Estimated Adjusted Capital and
Surplus (such total amount, the “Estimated Purchase Price”).  The Estimated
Purchase Price, as adjusted pursuant to Section 2.6, is hereinafter referred to
as the “Purchase Price.”

 

Section 2.4             Pre-Closing Deliverables.

 

(a)           Not less than ten (10) Business Days prior to the anticipated
Closing Date, Seller shall (i) deliver to Purchaser instructions designating the
account into which the Estimated Purchase Price, the Share Redemption Cash
Consideration, if any, and the repayment of the Closing Date Note shall be
deposited by wire transfer on the Closing Date and (ii) prepare, or cause to be
prepared (in good faith and in accordance with this Agreement), and deliver to
Purchaser and Life Reinsurer:

 

(1)           the Estimated Balance Sheet;

 

(2)           the Estimated EB Volume Adjustment Schedule and the Estimated NB
Volume Adjustment Schedule; and

 

(3)           a statement setting forth a reasonably detailed calculation of (A)
the Estimated Adjusted Capital and Surplus of the Company, as derived from the
Estimated Balance Sheet in accordance with the Form of Capital and Surplus
Worksheet, (B) the Estimated EB Volume Adjustment Amount as set forth on the
Estimated EB Volume

 

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Adjustment Schedule and (C) the Estimated NB Volume Adjustment Amount as set
forth on the Estimated NB Volume Adjustment Schedule.

 

(b)           Not less than ten (10) Business Days prior to the anticipated
Closing Date, Purchaser shall deliver or cause to be delivered to Seller a
request for the resignation of certain directors and officers of the Company.

 

(c)           Seller shall have delivered to Purchaser the list of bank names
and other information required in accordance with Section 5.27.

 

Section 2.5             Payment at Closing.  At the Closing, Purchaser shall pay
to Seller the Estimated Purchase Price and the Company shall pay to Seller the
Share Redemption Cash Consideration, if any, in each case by wire transfer of
immediately available funds to the account designated by Seller pursuant to
Section 2.4(a)(i).

 

Section 2.6             Post-Closing Adjustment.

 

(a)           As soon as practicable, and in any event within ninety (90) days
following the Closing Date, Purchaser shall prepare, or cause to be prepared (in
good faith and in accordance with this Agreement), and deliver to Seller and
Life Reinsurer:

 

(1)           the Preliminary Final Balance Sheet;

 

(2)           the Preliminary Final EB Volume Adjustment Schedule and the
Preliminary Final NB Volume Adjustment Schedule; and

 

(3)           a statement setting forth a reasonably detailed calculation of (A)
the Preliminary Final Adjusted Capital and Surplus of the Company, as derived
from the Preliminary Final Balance Sheet in accordance with the Form of Capital
and Surplus Worksheet, (B) the Preliminary Final EB Volume Adjustment Amount as
set forth on the Preliminary Final EB Volume Adjustment Schedule and (C) the
Preliminary Final NB Volume Adjustment Amount as set forth on the Preliminary
Final NB Volume Adjustment Schedule (collectively with the materials described
in Section 2.6(a)(1), (2) and (3), the “Purchase Price Adjustment Materials”).

 

(b)           In connection with Purchaser’s preparation of the Purchase Price
Adjustment Materials, to the extent that Purchaser does not have all relevant
information in its possession, Seller shall provide to Purchaser, Life Reinsurer
and their respective Representatives full access to the books and records of
Seller and to any other information, including work papers of its accountants
(subject to execution by Purchaser, Life Reinsurer and/or their respective
Representatives, as applicable, of a customary hold-harmless agreement in form
and substance reasonably acceptable to such accountants), and to any employees
during regular business hours and on reasonable advance notice, in each case, to
the extent reasonably necessary for Purchaser’s preparation of the Purchase
Price Adjustment Materials.

 

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(c)           Within thirty (30) days following its receipt of the Purchase
Price Adjustment Materials from Purchaser (the “Review Period”), Seller shall
either (1) notify Purchaser and Life Reinsurer in writing of its agreement with
the Purchase Price Adjustment Materials and the calculations set forth therein
(“Notice of Agreement”); or (2) if Seller determines that any of the Purchase
Price Adjustment Materials or the calculations reflected therein have not been
prepared on the basis set forth in Section 2.6(a) or contains or reflects
mathematical errors, inform Purchaser and Life Reinsurer in writing of its
objection (the “Seller’s Objection”), which notice shall set forth in reasonable
detail a description of the basis of the Seller’s Objection and the adjustments
to such Purchase Price Adjustment Materials or the calculations reflected
therein that Seller requests be made.  Purchaser shall, following the Closing
Date through the date that the Purchase Price Adjustment Materials become the
Final Purchase Price Adjustment Materials in accordance with the penultimate
sentence of Section 2.6(e), take all actions necessary or desirable to maintain
and preserve all accounting books, records, policies and procedures on which the
Purchase Price Adjustment Materials are based or on which the Final Purchase
Price Adjustment Materials are to be based so as not to impede or delay the
determination of the Purchase Price Adjustment Materials or the preparation of
the Seller’s Objection or the Final Purchase Price Adjustment Materials in the
manner and utilizing the methods permitted by this Agreement.  Upon receipt by
Purchaser and Life Reinsurer of a Notice of Agreement from Seller or if no
Seller’s Objection is received by Purchaser and Life Reinsurer prior to the
expiration of the Review Period, the Purchase Price Adjustment Materials,
Purchaser’s calculation of the Preliminary Final Adjusted Capital and Surplus,
the Preliminary Final EB Volume Adjustment Amount and the Preliminary Final NB
Volume Adjustment Amount shall be deemed to have been accepted by Seller and
will become final and binding upon the Parties in accordance with the
penultimate sentence of Section 2.6(e).

 

(d)           If Seller timely delivers a Seller’s Objection to Purchaser and
Life Reinsurer, Purchaser and Life Reinsurer shall have thirty (30) days from
the date of such delivery to review and respond to Seller’s Objection (the
“Consultation Period”).  The Parties shall use reasonable, good faith efforts to
resolve any disagreements that they may have with respect to the matters set
forth in the Seller’s Objection.  If the Parties are unable to resolve all of
their disagreements with respect to the matters set forth in the Seller’s
Objection within ten (10) Business Days following the expiration of the
Consultation Period, then the Parties shall submit all matters that remain in
dispute with respect to the Seller’s Objection (along with a copy of the
Purchase Price Adjustment Materials and Purchaser’s calculation of the amounts
set forth therein, marked to indicate those line items that are still in
dispute) to Ernst & Young, LLP, or another internationally recognized firm of
independent certified public accountants with appropriate actuarial expertise as
to which the Parties mutually agree (the “CPA Firm”), which shall, acting as an
expert and not as an arbitrator, make a final determination, on the basis of the
standard set forth in Section 2.6(a) hereof, and only with respect to any
remaining differences submitted to the CPA Firm, in accordance with this
Section 2.6(d), of the appropriate amount of each line item in the Purchase
Price Adjustment Materials and Purchaser’s calculation of the amounts set forth
therein as to which the Parties disagree (such items that remain in dispute, the
“Unresolved Items”).

 

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(e)           The Parties shall instruct the CPA Firm to deliver its written
determination to Purchaser, Life Reinsurer and Seller no later than fifteen (15)
Business Days after the Unresolved Items are referred to the CPA Firm.  The CPA
Firm’s determination shall include a certification that it reached such
determination in accordance with this Section 2.6(e) and shall be conclusive and
binding upon the Parties, absent clear and manifest error.  With respect to each
Unresolved Item, the CPA Firm’s determination, if not in accordance with the
position of either Seller or Purchaser, shall not be more favorable to Seller
than the amounts advocated by Seller in the Seller’s Objection or more favorable
to Purchaser than the amounts advocated by Purchaser in the Purchase Price
Adjustment Materials or Purchaser’s calculations of the amounts set forth
therein with respect to such disputed line item and/or calculation.  For the
avoidance of doubt, (1) the CPA Firm’s review of the Purchase Price Adjustment
Materials and Purchaser’s calculation of the amounts set forth therein shall be
limited to a determination of whether such documents and calculations were
prepared in accordance with Section 2.6(a), and (2) the CPA Firm shall not
review any line items or make any determination with respect to any matters
other than the Unresolved Items that were referred to the CPA Firm for
resolution pursuant to this Section 2.6(e).  The Purchase Price Adjustment
Materials and the determination of the amounts set forth therein that are final
and binding on the Parties, as determined either through (A) Seller’s delivery
of a Notice of Agreement pursuant to Section 2.6(c), (B) Seller’s failure to
deliver Seller’s Objection prior to expiration of the Review Period pursuant to
Section 2.6(c), (C) agreement by the Parties during the Consultation Period or
(D) the determination of the CPA Firm pursuant to this Section 2.6(e) are
referred to herein as the “Final Purchase Price Adjustment Materials”, “Final
Balance Sheet”, “Final Adjusted Capital and Surplus”, “Final EB Volume
Adjustment Schedule”, “Final EB Volume Adjustment Amount”, “Final NB Volume
Adjustment Schedule” and “Final NB Volume Adjustment Amount”, as the case may
be.  For the avoidance of doubt and notwithstanding anything in this Agreement
to the contrary, the Parties acknowledge and agree that from and after the
Closing, the resolution process set forth in this Section 2.6 shall be the sole
remedy of the Parties with respect to all matters and calculations expressly
included in the Purchase Price Adjustment Materials and the Final Balance Sheet
and that such resolution process forecloses any right of the Parties to
indemnification pursuant to Article 7 with respect to such matters; provided,
however, that the facts and circumstances underlying the matters determined in
the resolution process may be considered in determining whether any breach of a
representation or warranty made hereunder has occurred; provided, further, that
any resulting indemnification claim made under Article 7 shall not result in a
duplication of recoveries.

 

(f)            The Parties agree that judgment may be entered upon the CPA
Firm’s determination in any court having jurisdiction over Purchaser or Seller,
as the case may be.  The fees and disbursements of the CPA Firm shall be paid by
the Parties in proportion to those matters submitted to the CPA Firm that are
resolved against that Party, as such fees and disbursements are allocated by the
CPA Firm in accordance with this Section 2.6 at the time of the CPA Firm’s
determination.  At any time following delivery of any Purchase Price Adjustment
Materials, Purchaser shall, and shall cause the Company to, provide to Seller
and its Representatives full access to the Books and Records of the Company and
to any other information, including work papers of its

 

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accountants (subject to execution by Seller and/or its Representatives, as
applicable, of a customary hold-harmless agreement in form and substance
reasonably acceptable to such accountants), and to any employees during regular
business hours and on reasonable advance notice, to the extent necessary for
Seller to review the Purchase Price Adjustment Materials or Purchaser’s
calculation of the amounts set forth therein, to prepare Seller’s Objection or
to prepare materials for presentation to the CPA Firm.  The Parties shall make
readily available to the CPA Firm, during regular business hours and on
reasonable advance notice, interviews with such employees, and all relevant
information, books and records and any work papers of their respective
accountants (in each case, subject to execution by the CPA Firm of a customary
hold-harmless agreement in form and substance reasonably acceptable to such
accountants) relating to the Purchase Price Adjustment Materials and any
Unresolved Items and all other items reasonably required by the CPA Firm to
fulfill its obligations under Section 2.6(e).  In acting under this Agreement,
the CPA Firm will be entitled to the privileges and immunities of an arbitrator.

 

(g)           The “Post-Closing Adjustment” shall be the amount equal to
(1) (x) the Final Adjusted Capital and Surplus minus (y) the Estimated Adjusted
Capital and Surplus plus (2) (x) the Final EB Volume Adjustment Amount minus
(y) the Estimated EB Volume Adjustment Amount minus (3) (x) the Final NB Volume
Adjustment Amount minus (y) the Estimated NB Volume Adjustment Amount.  If the
Post-Closing Adjustment is a positive amount, then Purchaser shall pay in cash
to Seller the amount in United States dollars equal to the Post-Closing
Adjustment.  If the Post-Closing Adjustment is a negative amount, then Seller
shall pay in cash to Purchaser the amount in United States dollars equal to the
absolute value of the Post-Closing Adjustment.  Any such payments shall be made
by wire transfer of immediately available funds to an account designated by
Seller or Purchaser (as applicable) within two (2) Business Days after the
Purchase Price Adjustment Materials and the amounts calculated therein become
the Final Purchase Price Adjustment Materials and final and binding calculations
of such amounts, respectively, in accordance with this Section 2.6, together
with an amount of interest on such payment at the Applicable Rate calculated on
the basis of a 360-day year for the actual number of days elapsed, accrued from
the Closing Date until, but not including, the date of payment.  Any payment
made pursuant to this Section 2.6 shall be treated for all tax purposes as an
adjustment to the Purchase Price.

 

Section 2.7             Closing Deliveries.  At the Closing, in addition to the
payment by Purchaser of the Estimated Purchase Price and the payment by the
Company of the Share Redemption Cash Consideration, if any, in each case
pursuant to Section 2.5,

 

(a)           Purchaser shall deliver or cause to be delivered:

 

(1)           to Seller, a certificate of the Secretary, Assistant Secretary or
other duly authorized officer of Purchaser, dated the Closing Date, as to the
resolutions duly and validly adopted by the Board of Directors of Purchaser
evidencing its authorization of the execution, delivery and performance of this
Agreement and the other Transaction Agreements to which Purchaser is a party;

 

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(2)           to Seller, the certificates referenced in Sections 6.4(a)(1) and
(b)(1); and

 

(3)           to Seller and Life Reinsurer, counterparts of each of the
Transaction Agreements (other than the Closing Date Reinsurance Agreements) to
which Purchaser and/or its Affiliates (other than the Company) is a party, duly
executed by Purchaser and/or such Affiliates of Purchaser (other than the
Company).

 

(b)           Seller shall deliver or cause to be delivered:

 

(1)           to Purchaser, a certificate or certificates evidencing all of the
Transferred Shares, duly endorsed in blank or accompanied by stock powers duly
executed in blank, in proper form for transfer on the stock transfer books of
the Company and with any requisite stock transfer Tax stamps properly affixed
thereto;

 

(2)           to Purchaser, a certificate or certificates evidencing the
cancellation of all of the Redeemed Shares;

 

(3)           to Purchaser and Life Reinsurer, a certificate of the Secretary,
Assistant Secretary or other duly authorized officer of Seller, dated the
Closing Date, as to the resolutions duly and validly adopted by the Board of
Directors of Seller evidencing its authorization of the execution, delivery and
performance of this Agreement and the other Transaction Agreements to which
Seller is a party;

 

(4)           to Purchaser and Life Reinsurer, a certificate of the Secretary,
Assistant Secretary or other duly authorized officer of the Company or any
Affiliate of Seller that is a party to any Transaction Agreement, dated the
Closing Date, as to the resolutions duly and validly adopted by the Board of
Directors of the Company or such Affiliate, as the case may be, evidencing its
authorization of the execution, delivery and performance of this Agreement and
the other Transaction Agreements to which the Company or such Affiliate, as the
case may be, is a party;

 

(5)           to Purchaser, an affidavit in a form reasonably satisfactory to
Purchaser, stating under penalties of perjury its U.S. taxpayer identification
number and that it is not a foreign person within the meaning of
Section 1445(b)(2) of the Code;

 

(6)           to Purchaser, copies of the resignations referenced in
Section 6.3(a);

 

(7)           to Purchaser, the certificates referenced in Sections 6.2(a) and
(b);

 

(8)           to Life Reinsurer, the certificates referenced in Sections
6.2(a) and (b);

 

(9)           to Purchaser, the Books and Records of the Company in accordance
with Section 5.20;

 

(10)         to Purchaser, the releases contemplated by Section 5.9(a);

 

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(11)         to Purchaser, a copy of each Assigned Pre-Closing Confidentiality
Agreement in accordance with Section 5.1(e); and

 

(12)         to Purchaser and Life Reinsurer, counterparts of each of the
Transaction Agreements (other than the Closing Date Reinsurance Agreements) to
which Seller and/or its Affiliates (including the Company) is a party, duly
executed by Seller and/or such Affiliates (including the Company).

 

(c)           Life Reinsurer shall deliver or cause to be delivered:

 

(1)           to Seller, a certificate of the Secretary, Assistant Secretary or
other duly authorized officer of Life Reinsurer, dated the Closing Date, as to
the resolutions duly and validly adopted by the Board of Directors of Life
Reinsurer evidencing its authorization of the execution, delivery and
performance of this Agreement and the other Transaction Agreements to which Life
Reinsurer is or will be a party;

 

(2)           to Seller, the certificates referenced in Sections 6.4(a)(2) and
(b)(2); and

 

(3)           to Purchaser and Seller, counterparts of each of the Transaction
Agreements to which Life Reinsurer is or will be a party, duly executed by Life
Reinsurer.

 

Section 2.8             Post-Closing Deliveries.  On the Closing Date,
immediately following the Closing,

 

(a)           Purchaser shall cause: (i) the Company to deliver to Life
Reinsurer, a counterpart of the Life Business Reinsurance Agreement, duly
executed by the Company; and (ii) Annuity Reinsurer and the Company to deliver
to each other a counterpart of the Annuity Business Reinsurance, duly executed
by each of them;

 

(b)           Life Reinsurer shall deliver to the Company a counterpart of the
Life Business Reinsurance Agreement, duly executed by Life Reinsurer; and

 

(c)           Seller shall deliver or cause to be delivered to the Company the
Closing Date Note for cancellation, immediately upon repayment by the Company of
the Closing Date Note.

 

Section 2.9             No Set-off.  Neither Seller or any of its Affiliates, on
the one hand, nor Purchaser, Life Reinsurer or any of their respective
Affiliates, on the other hand, shall have any set-off or other similar rights
with respect to (a) any of the funds received by such Party pursuant to this
Agreement or (b) any other amounts claimed to be owed to the other Party or its
Affiliates arising out of this Agreement or any other agreement, including, for
the avoidance of doubt, the Ancillary Agreements.

 

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ARTICLE 3
Representations and Warranties of Seller

 

Except as otherwise set forth in the disclosure schedule delivered by Seller to
Purchaser on the date of this Agreement (“Seller’s Disclosure Schedule”), Seller
makes the following representations and warranties to each of Purchaser and Life
Reinsurer as of the date of this Agreement and as of the Closing Date; provided,
however, that any representations and warranties that are made as of a specific
date or as of the date of this Agreement are only made as of such date:

 

Section 3.1             Organization and Authority of Seller.  Seller (a) is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the State of Delaware, (b) has all requisite power to operate its
business as now conducted and (c) is duly qualified as a foreign corporation to
do business, and is in good standing (if applicable), in each jurisdiction where
the conduct of its business or the ownership or leasing of its properties
requires such qualification, except where failure to so qualify or be in good
standing would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect with respect to Seller or the Company. 
Seller and each applicable Affiliate of Seller (including the Company) has all
requisite corporate power and authority to execute and deliver this Agreement
and each Transaction Agreement to which it is or, prior to the Effective Time,
will be a party, and to perform its obligations hereunder and thereunder.  No
additional corporate proceedings on the part of Seller or any applicable
Affiliate of Seller (including the Company) are necessary to authorize the
consummation of this Agreement or the Transaction Agreements to which any of
them is or, prior to the Effective Time, will be a party, or the transactions
contemplated hereby or thereby.

 

Section 3.2             Binding Effect.  This Agreement and each of the other
Transaction Agreements to which Seller or any applicable Affiliate of Seller
(including the Company) is or, prior to the Effective Time, will be a party has
been, or upon execution and delivery thereof, will be, duly and validly
authorized, executed and delivered by Seller and each applicable Affiliate of
Seller (including, prior to the Effective Time, the Company) to the extent a
party thereto and constitutes a valid and legally binding obligation of Seller
and each applicable Affiliate of Seller (including, prior to the Effective Time,
the Company) to the extent a party thereto enforceable against Seller and each
such Affiliate of Seller (including, prior to the Effective Time, the Company)
to the extent a party thereto in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights, including creditors of
insurance companies, and to general equity principles (the “Bankruptcy and
Equity Exceptions”).

 

Section 3.3             Organization, Qualification and Authority of the
Company.  The Company (a) is a corporation duly incorporated and validly
existing under the Laws of the State of South Carolina, (b) has all requisite
corporate power and authority to own, lease or otherwise hold its assets and to
carry on its business as currently conducted and (c) is duly qualified as a
foreign corporation to do business, and is in good standing (if applicable), in
each jurisdiction where the conduct of its business or the ownership or leasing
of its properties requires such qualification, except, in the case of clauses
(b) and (c), where the failure to have such power and authority or to

 

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be so qualified or in good standing, as the case may be, would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect with respect to the Company.  Seller has made available to Purchaser
(1) copies of the Articles of Incorporation and By-Laws, in each case as amended
to the date of this Agreement, and (2) copies of the stock transfer books and
minute books or similar records of the Company.

 

Section 3.4             Capital Structure; Ownership of the Shares.

 

(a)           The authorized capital stock of the Company consists of 24,000,000
shares of Common Stock, of which 10,000,000 shares are issued and outstanding,
and 3,000,000 shares of preferred stock, par value $1.00 per share, none of
which is issued and outstanding.  The Transferred Shares, following the Closing
Date Share Redemption, will be the only shares of capital stock of, or other
equity or voting interest in, the Company issued and outstanding.  All of the
Shares have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of any preemptive or
subscription rights, applicable Law or the organization documents of the
Company.  Except for this Agreement, there are no preemptive or other
outstanding rights, options, warrants, subscriptions, puts, calls, conversion
rights, voting trusts, stockholder agreements, proxies or other rights,
agreements or commitments of any character relating to the authorized and
issued, unissued or treasury shares of capital stock of the Company.  Other than
the Existing Surplus Note and, as of the Closing Date, the Closing Date Note,
the Company has not issued any debt securities or other securities that are
convertible into, or exchangeable or redeemable for, or that give any Person a
right to subscribe for or acquire, capital stock of the Company, and no such
securities or obligations evidencing such rights are outstanding.  There are no
capital appreciation rights, phantom stock plans, securities with participation
rights or features, or similar obligations and commitments of the Company. 
Except for the Closing Date Share Redemption, there are no obligations,
contingent or otherwise, to repurchase, redeem (or establish a sinking fund with
respect to redemption) or otherwise acquire any shares of capital stock of the
Company.

 

(b)           Seller owns all of the Shares, of record and beneficially, free
and clear of all Encumbrances, and has the full and unrestricted power and
authority to sell, convey, assign, transfer and deliver the Transferred Shares
to Purchaser upon the terms and subject to the conditions of this Agreement, and
the sale, conveyance, assignment, transfer and delivery of the Transferred
Shares will convey to Purchaser good title to the Transferred Shares, free and
clear of any Encumbrances.  The Company does not have any Subsidiaries and,
except for Portfolio Assets, does not own, directly or indirectly, any capital
stock or other equity interests of any Person or have any direct or indirect
equity or ownership interest in any business, and is not a member of or
participant in any partnership, joint venture or other entity.

 

Section 3.5             Filings and Consents.

 

(a)           No Governmental Authorization is required to be made or obtained
by Seller or the Company or any of their respective Affiliates in connection
with the

 

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execution, delivery or performance by Seller and each applicable Affiliate of
Seller (including the Company) of this Agreement and the Ancillary Agreements to
which any of them is or, prior to the Effective Time, will be a party, or the
consummation by Seller and each applicable Affiliate of Seller (including the
Company) of the transactions contemplated hereby or thereby (including the
payment of the Existing Surplus Note Repayment Amount and the Closing Date Share
Redemption Amount), except for (a) any notification and report form required to
be filed under the HSR Act with the Federal Trade Commission and the Antitrust
Division of the Department of Justice and (b) the consents, approvals, waivers,
registrations, notices and filings set forth in Section 3.5(a) of Seller’s
Disclosure Schedule.

 

(b)           No consent, approval or authorization of, or action by, or notices
to, or waivers from, any Third Party is required to be made or obtained by
Seller or the Company in connection with the execution, delivery or performance
by Seller and each applicable Affiliate of Seller (including the Company) of
this Agreement or the other Ancillary Agreements to which any of them is or,
prior to the Effective Time, will be a party, or the consummation by Seller and
each applicable Affiliate of Seller (including the Company) of the transactions
contemplated hereby or thereby, except for the consents, approvals, waivers and
notices set forth in Section 3.5(b) of Seller’s Disclosure Schedule and for any
consents, approvals, waivers or notices the failure of which to be obtained or
made would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect with respect to Seller or the Company.

 

Section 3.6             No Violations.  Subject to receipt of the Governmental
Authorizations and other consents, approvals and authorizations and the making
of the filings, registrations, notices and waivers referred to in Sections 3.5
and 4.3 and Schedule 6.1(b), and the expiration of related waiting periods, the
execution, delivery and performance by Seller and each applicable Affiliate of
Seller (including the Company) of this Agreement and (a) the Ancillary
Agreements to which any of them is or, prior to the Effective Time, will be a
party, and the consummation by Seller and each applicable Affiliate of Seller of
the transactions contemplated hereby or thereby do not and will not constitute a
breach or violation of, or a default under, or give rise to any Encumbrance or
any acceleration of remedies, penalty, increase or decrease in benefit payable
or right of termination under, any Material Contract or any other note, bond,
loan or credit agreement, mortgage, indenture or other Contract to which Seller
or any of its Affiliates (including the Company) or by which any of them or any
of their respective properties or assets is subject or bound, or (b) the
Ancillary Agreements to which any of them is or, prior to the Effective Time,
will be a party, and the consummation by Seller and each applicable Affiliate of
Seller of the transactions contemplated hereby or thereby do not and will not
(i) constitute a breach or violation of, or a default under, the organizational
documents of Seller or any applicable Affiliate of Seller (including the
Company) or (ii) conflict with or violate in any material respect any Law or
other Governmental Authorization applicable to Seller or any applicable
Affiliate of Seller (including the Company) or by which any of them or any of
their respective properties or assets is bound or subject, except (1) in the
case of clause (a), as would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect with respect to Seller or the
Company and (2) in the case of clause (b)(ii), for any such

 

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conflict or violation arising as a result of the regulatory status of or any
Governmental Authorizations held or not held by Purchaser, Life Reinsurer or
their respective Affiliates.

 

Section 3.7             Financial and Statutory Statements.

 

(a)           Prior to the date of this Agreement, Seller has made available to
Purchaser and Life Reinsurer copies of (1) the unaudited annual balance sheets
of the Company as of October 31, 2009 and 2008 and the related unaudited
statements of income for the fiscal years then ended and (2) the unaudited
quarterly balance sheet of the Company as of July 31, 2010 and the related
unaudited statements of income for such period (the financial statements
referenced in clauses (1) and (2), collectively, the “GAAP Financial
Statements”).  The GAAP Financial Statements (A) were derived from and are
consistent with the Books and Records, (B) were prepared in accordance with GAAP
applied on a consistent basis during the periods presented, (C) fairly present,
in all material respects, in accordance with GAAP, the financial position,
results of operations, assets and liabilities of the Company as of the
respective dates of, and for the periods referred to in, the GAAP Financial
Statements, subject, in the case of quarterly financial statements, to the
absence of notes and schedules and to normal year-end adjustments that are not
or would not be material in amount or effect and (D) were prepared in compliance
with the internal control procedures of the Company.

 

(b)           Prior to the date of this Agreement, Seller has made available to
Purchaser and Life Reinsurer copies of the following statutory statements, in
each case together with the exhibits, schedules and notes thereto and any
affirmations and certifications filed therewith:  (1) the annual statutory
statements of the Company, as filed with the Department, as of and for the years
ended December 31, 2009, 2008 and 2007, (2) the audited annual statutory
financial statements of the Company as of and for the years ended December 31,
2009, 2008 and 2007 (the statements referenced in clauses (1) and (2), the
“Annual Statutory Statements”), and (3) the unaudited quarterly statutory
financial statements of the Company as of and for the quarter ended June 30,
2010 (the “Quarterly Statutory Statement”) (collectively with the Annual
Statutory Statements and the Quarterly Statutory Statement, the “Statutory
Statements”).  The Statutory Statements (A) were derived from and are consistent
with the Books and Records, (B) were prepared in accordance with all applicable
Laws, statutory accounting practices and procedures otherwise required,
permitted or then in effect by the Department, as the case may be (“SAP”),
applied in each case on a consistent basis during the period presented,
(C) fairly present, in all material respects, the statutory financial position
of the Company at the dates thereof and the statutory results of operations,
capital and surplus of the Company for the periods then ended and (D) were
prepared in compliance with the internal control procedures of the Company.  No
material deficiency has been asserted by any Governmental Authority with respect
to any of the Statutory Statements.  As of the Closing Date, the statutory
statements delivered to Purchaser pursuant to Section 5.4 will (A) fairly
present, in all material respects, the statutory financial position of the
Company as of the dates thereof and the statutory results of operations, capital
and surplus of the Company for the periods then ended (B) be derived from and
consistent with the Books and Records (C) be prepared in accordance with all
applicable Laws and SAP, applied in

 

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each case on a consistent basis during the period presented and (D) be prepared
in compliance with the internal control procedures of the Company.

 

(c)           The Company does not have any Liabilities of the nature required
to be disclosed in Statutory Statements or the notes thereto other than
(1) Liabilities reflected or reserved against in the most recent Quarterly
Statutory Statement (or the notes thereto, if applicable), (2) Ordinary Course
Liabilities incurred since the date of the latest Quarterly Statutory Statement
and (3) Liabilities that would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect with respect to the Company.

 

(d)           There are no material impairments on any assets of the Company
other than impairments reflected in the GAAP Financial Statements or the
Statutory Statements as of and for the period ended July 31, 2010 or June 30,
2010, respectively.

 

(e)           The Company has not applied for nor obtained any permitted
accounting practice or procedure from the Department other than a permitted
practice or procedure of general applicability to all life insurance companies
in the State of South Carolina.  The Statutory Statements were not prepared on
the basis of any permitted accounting practice or procedure.

 

(f)            The most recently filed Annual Statutory Statement contains, in
accordance with SAP, an adequate reserve for all Taxes payable by the Company
for all taxable periods through the date of such Annual Statement.

 

(g)           The GAAP Financial Statements contain adequate provision for all
uncertain tax positions in accordance with ASC 740-10-25 (formerly FIN 48) for
all taxable periods through the date of such GAAP Financial Statements.

 

Section 3.8             Absence of Certain Changes or Events.  (a) Since
June 30, 2010 through the date of this Agreement, the Company has conducted its
business in the ordinary course consistent with past practice, and (b) Since
June 30, 2010, there has not occurred any event or events that, individually or
in the aggregate, have resulted in, or would reasonably be expected to result
in, a Material Adverse Effect with respect to the Company.

 

Section 3.9             Litigation and Claims.

 

(a)           There is no material Action pending or, to the Knowledge of
Seller, threatened, against the Company or the Company Business or any of its
properties or assets other than (1) ordinary course insurance claims litigation,
(2) those which involve claims that are within applicable policy limits and do
not allege bad faith or extra-contractual obligations or (3) those with respect
to which certification as a class has not been granted and is not being sought.

 

(b)           As of the date of this Agreement, there is no material Action
pending or, to the Knowledge of Seller, threatened, against Seller or any of its
Affiliates (including the Company), any of their respective properties or assets
or the Company Business that

 

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questions the validity of, or seeks injunctive relief with respect to, this
Agreement or any of the other Transaction Agreements or the right of Seller or
any of its Affiliates (including the Company) to enter into this Agreement or
any of the other Transaction Agreements to the extent Seller or any of its
Affiliates (including the Company) is or, prior to the Effective Time, will be a
party thereto.

 

(c)           The Company is not a party or subject to any material Governmental
Order applicable to the Company, the Company Business or any of the Company’s
properties or assets.

 

Section 3.10           Taxes.

 

(a)           All Income Tax Returns and other material Tax Returns required to
be filed on or before the Closing Date by or with respect to the Company have
been or will be timely filed on or before the Closing Date and are (or will be)
true, correct and complete in all material respects.

 

(b)           All Taxes due on or before the Closing Date for which the Company
could be held liable, including those shown to be due on the Tax Returns
referred to in clause (a), have been, or by the Closing Date will be, timely
paid or remitted to the proper Taxing Authority.

 

(c)           The Company has not been granted an extension of time within which
to file any Tax Returns of the Company that is currently in effect and no such
extension has been requested.

 

(d)           To the Knowledge of Seller, no issues that have been raised by the
relevant Taxing Authority in connection with the examination of any Tax Returns
filed by or with respect to the Company are currently pending, and all
deficiencies asserted in writing or assessments made in writing for Taxes with
respect to the Company have been fully paid.  No federal, state, local or
foreign audit, examination, refund litigation, adjustment in controversy, or
other administrative proceeding or court proceeding (each a “Tax Contest”) has
occurred, is occurring or has been initiated in writing with regard to Tax
Returns of or that include the Company, and the Company has not received any
written notice that any such Tax Contest is pending or threatened.

 

(e)           There are no outstanding commitments or agreements extending or
waiving the statutory period of limitations applicable to any claim for, or the
period for the collection or assessment of, Taxes of the Company, and no power
of attorney is currently in force or has been requested with respect to any
matter relating to Taxes that could affect the Company.  Taking all extensions
and waiver agreements into account, the statutory period of limitations for the
collection or assessment of Taxes with respect to the Company for each taxable
period ending on or before December 31, 2006 has expired.

 

(f)            Since May 1, 2003, no Tax rulings, requests for rulings, closing
agreements, private letter rulings, technical advance memoranda or other similar

 

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agreements or rulings (including any gain recognition agreements under
Section 367 of the Code and applications for a material change in accounting
method or to change the basis for determining items under Section 481 or
Section 807 of the Code) have been entered into with, issued by, or filed with
any Taxing Authority with respect to or relating to the Company.

 

(g)           The Company is not a member of an affiliated, consolidated,
combined or unitary group.

 

(h)           No claim is pending or, to the Knowledge of Seller, threatened by
a Tax Authority in a jurisdiction where the Company does not file Tax Returns or
pay Taxes that the Company is or may be subject to Tax in that jurisdiction.

 

(i)            Seller has delivered to Purchaser a copy of any Tax Sharing
Agreements currently in effect with respect to any open year with respect to the
Company.

 

(j)            The Company has not (1) participated or engaged in any
transaction, or taken any Tax Return position, described in Treasury Regulation
Section 301.6111-2(b)(2) (or any corresponding or similar provision of state,
local or non-U.S. Tax Law) or (2) participated or engaged in any “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4 (or any
corresponding or similar provision of state, local or non-U.S. Tax Law).

 

(k)           The Company has not constituted either a “distributing
corporation” or a “controlled corporation” (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (1) in the two (2) years prior
to the date of this Agreement or (2) in a distribution which could otherwise
constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions
contemplated by this Agreement.

 

(l)            To the extent that the Company has been a party to any
transaction intended to qualify as a tax-free reorganization, such transaction
met all requirements imposed by the Code, Treasury Regulations and other
applicable Law in order for the transaction to so qualify.

 

(m)          As of December 31, 2009, the operations loss carryovers (within the
meaning of Section 172 or Section 810 of the Code, as applicable), capital loss
carryover, tax credit and value of business acquired (VOBA) amounts
(collectively, the “Tax Attributes”) of the Company were not less than the
amounts identified in Section 3.10(m)(i) of Seller’s Disclosure Schedule and, as
of such date, such Tax Attributes were not subject to any limitations on their
use under Section 382, 383 or 384, or any provision of any Treasury Regulation
promulgated under such Code provisions.  Seller estimates in good faith that, as
of June 30, 2010, the Tax Attributes of the Company were no less than the
amounts identified in Section 3.10(m)(ii) of Seller’s Disclosure Schedule.

 

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(n)           Seller has delivered to Purchaser a schedule reflecting the
Company’s treatment for tax purposes of “specified policy acquisition expenses,”
which schedule was correct as of December 31, 2009 and was properly computed in
accordance with Section 848 of the Code.

 

(o)           As of June 30, 2010, (i) the amount of the Company’s policyholders
surplus account was not more than the amount set forth on Section 3.10(o)(i) of
Seller’s Disclosure Schedule and (ii) the amount of the Company’s shareholders
surplus account (as defined in Section 815 of the Code) was not less than the
amount set forth on Section 3.10(o)(ii) of Seller’s Disclosure Schedule.

 

(p)           The Company will not be required to include any adjustment in
taxable income for any Tax period or portion thereof after the Closing Date
under Section 481(c) or 807(f) of the Code (or any similar provision of the Tax
laws of any jurisdiction) as a result of a change in method of accounting for a
Tax period or portion thereof prior to the Closing Date.

 

(q)           No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transfers effected pursuant to this Agreement.

 

(r)            The Company has complied in all material respects with all
applicable Law, pertaining to Tax information reporting or withholding of Taxes,
and has withheld and paid (or will withhold and pay or there were or will be
withheld and paid on its behalf) all material Taxes required to be withheld by
the Company, and such withheld Taxes have been either duly and timely paid to
the proper Taxing Authority or properly set aside in accounts for such purpose.

 

(s)           There are no outstanding liens for Taxes upon the assets or
properties of the Company, except for statutory liens for Taxes not yet due or
payable.

 

(t)            For the taxable period ending on the Closing Date and for all
prior taxable periods for which the applicable statute of limitations has not
expired, the Company is and was a “life insurance company” for purposes of the
Code and is and was subject to taxation under Subchapter L of the Code.

 

(u)           The Company’s tax reserves for the Insurance Contracts issued by
the Company as reflected in the federal income Tax Returns filed by the Company
have been properly calculated and maintained in the manner required by
Subchapter L of the Code, the Treasury Regulations promulgated thereunder and
all applicable rulings or other official interpretations thereof.

 

Section 3.11           Employee Benefits.

 

(a)           All benefit, compensation and employment plans, contracts,
policies or arrangements that either (1) cover Employees or current or former
directors of the Company, including “employee benefit plans” within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974
(“ERISA”), and deferred

 

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compensation, stock option, stock purchase, stock appreciation rights, stock
based, incentive, change in control and bonus plans and fringe benefit, paid
time off, vacation, holiday, sick pay, or short-term or long-term disability
arrangements, or (2) are maintained by the Company or an ERISA Affiliate of the
Company and under which the Company could have any liability or contingent
liability, including any plan subject to Title IV or Section 302 of ERISA or
Section 412 of the Code (collectively, the “Benefit Plans”) are listed on
Section 3.11(a) of Seller’s Disclosure Schedule.  Section 3.11(a) of Seller’s
Disclosure Schedule separately specifies the Benefit Plans that are maintained
or sponsored by the Company or pursuant to which the Company may have any
current or contingent obligation or liability (the “Company Benefit Plans”).

 

(b)           Seller has made available to Purchaser and Life Reinsurer, with
respect to each Company Benefit Plan, copies of: (1) all plan documents and
amendments, trust agreements and insurance and annuity contracts and policies
and (2) the actuarial report for the most recent plan year for which such report
exists for any Company Benefit Plan that is subject to Title IV or Section 302
of ERISA or Section 412 of the Code.  Seller has made available to Purchaser and
Life Reinsurer a copy of the RBC -USA Retirement and Savings Plan and the most
recent applicable IRS determination letter.

 

(c)           All Benefit Plans are in substantial compliance with the terms of
such plans, ERISA, the Code and other applicable Law.  Each Benefit Plan that is
subject to ERISA (the “ERISA Plans”) that is an “employee pension benefit plan”
within the meaning of Section 3(2) of ERISA (a “Pension Plan”) and that is
intended to be qualified under Section 401(a) of the Code, has received a
favorable determination letter from the IRS covering all Tax Law changes prior
to the Economic Growth and Tax Relief Reconciliation Act of 2001, or has applied
to the IRS for such favorable determination letter within the applicable
remedial amendment period under Section 401(b) of the Code, and to the Knowledge
of Seller there are no circumstances likely to result in the loss of the
qualification of such plan under Section 401(a) of the Code.  The Company has
not engaged in a transaction with respect to any ERISA Plan that, assuming the
taxable period of such transaction expired as of the date of this Agreement,
could subject the Company to Taxes or penalties imposed by either Section 4975
of the Code or Section 502(i) of ERISA in an amount that would be material.  The
Company has not incurred and does not reasonably expect to incur material Taxes
or penalties imposed by Section 4980F of the Code or Section 502 of ERISA.

 

(d)           All material contributions required to be made under each Benefit
Plan, as of the date of this Agreement, have been timely made and all
obligations in respect of each Benefit Plan have been properly accrued and
reflected in the GAAP Financial Statements.  All premiums or other payments that
are due have been paid with respect to each Benefit Plan in accordance with the
terms and conditions of such Benefit Plan, and contracts or policies related
thereto.

 

(e)           As of the date of this Agreement, there are no pending or, to the
Knowledge of Seller, threatened claims, litigation or other proceedings, at law
or in

 

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equity (except for claims for benefits payable in the normal operations of any
Benefit Plan) relating to the Company Benefit Plans.

 

(f)            Except as set forth in Section 3.11(f) of Seller’s Disclosure
Schedule, neither the execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement will (1) entitle any Employees to
severance or other pay or benefits or any increase in severance or other pay or
benefits, either upon the consummation of such transactions or upon any other
event, including any termination of employment after the date of this Agreement
(but excluding any severance or other pay or benefits payable upon termination
of employment immediately prior to the Effective Time in accordance with
Section 5.6(a) of his Agreement), (2) accelerate the time of payment or vesting
or result in any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or result in any
other material obligation pursuant to, any of the Benefit Plans, (3) limit or
restrict the right of the Company or, after the consummation of the transactions
contemplated by this Agreement, Purchaser to merge, amend or terminate any of
the Benefit Plans or (4) result in payments under any of the Benefit Plans that
would not be deductible under Section 162(m) or Section 280G of the Code.  No
amount paid or payable (whether in cash, in property, or in the form of
benefits) by the Company in connection with the transactions contemplated hereby
(either alone or in conjunction with any other event) will be an “excess
parachute payment” within the meaning of Section 280G of the Code, or would
constitute an “excess parachute payment” if such amounts were subject to the
provisions of Section 280G of the Code.  No Person is entitled to receive any
additional payment from the Company as a result of the imposition of a Tax under
Section 4999 of the Code.

 

(g)           There are no pending investigations, audits, examinations or
inquiries by any Governmental Authority involving any Benefit Plan.

 

(h)           Except as may be required by Law or this Agreement, none of
Seller, the Company nor any of their ERISA Affiliates has announced any plan or
made any commitment to create or contribute to any additional employee benefit
plans that would constitute a Benefit Plan if already adopted or contributed to,
or to amend or modify any existing Benefit Plan.

 

(i)            Each Benefit Plan that is a nonqualified deferred compensation
plan within the meaning of Section 409A of the Code (i) has been administered,
operated and maintained in all material respects according to the requirements
of Section 409A of the Code since January 1, 2009, (ii) has been administered,
operated and maintained in good faith compliance with Section 409A of the Code
for all applicable periods prior to January 1, 2009, and (iii) the terms of the
written plan document of each such Benefit Plan comply with Section 409A of the
Code (such that no Tax would be imposed under Section 409A of the Code if each
Plan is operated in compliance with its terms).  No person is entitled to
receive any additional payment from the Company as a result of the imposition of
a Tax under Section 409A of the Code.

 

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(j)            Except as listed in Section 3.11(j) of the Seller’s Disclosure
Schedule, neither the Company nor any of its ERISA Affiliates sponsors, has
sponsored, contributes to, has contributed to, or has any obligation or
contingent obligation under (1) a plan subject to Title IV of ERISA, including
any defined benefit plan (as defined in Section 3(35) of ERISA), a multiemployer
plan (as defined in Section 3(37) of ERISA), or a multiple employer plan subject
to Section 4063 or 4064 of ERISA, (2) a multiple employer welfare benefit
arrangement (as defined in Section 3(40)(A) of ERISA), or (3) a plan subject to
Section 302 of ERISA or Section 412 of the Code.

 

(k)           Neither the Company nor any of its ERISA Affiliates has incurred
any excise Taxes under Chapter 43 of the Code with respect to any Benefit Plan
and nothing has occurred with respect to any Benefit Plan that would reasonably
be expected to subject the Company or any of its ERISA Affiliates to any such
material Taxes.  Neither the Company nor any of its ERISA Affiliates has any
material liability whether direct, indirect, contingent or otherwise, (1) under
Section 502(i) or 502(l) of ERISA or Section 4975 of the Code, (2) under
Section 302 of ERISA or Section 412 of the Code or (3) under Title IV of ERISA,
and nothing has occurred with respect to any Benefit Plan that would reasonably
be expected to subject the Company or any of its ERISA Affiliates to any such
liability.  The Company does not have any material liability, whether direct,
indirect, contingent or otherwise, on account of any violation of the health
care requirements of Part 6 or 7 of Subtitle I of ERISA or Section 4980B or
4980D of the Code.

 

(l)            No Benefit Plan that is a defined benefit plan has or has had an
“accumulated funding deficiency” (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA and neither the Company nor any
of its ERISA Affiliates has an outstanding funding waiver, and there has been no
determination that any such plan is, or is expected to be, in “at risk” status
(within the meaning of Section 303(i)(4) of ERISA or Section 430(i)(4) of the
Code).

 

(m)          Except as set forth in Section 3.11(m) of Seller’s Disclosure
Schedule, the Company does not have any obligation to provide any continuation
of welfare benefits (including medical, dental and life insurance benefits)
after any Employee’s employment or provision of services has terminated, except
for coverage continuation requirements of Part 6 of Subtitle I of ERISA or
similar state Laws.

 

(n)           None of Seller, the Company or any of their ERISA Affiliates has
terminated an employee benefit plan for which the Company could have any
existing or continuing liability or obligation relating thereto.

 

(o)           Seller has provided, or caused to be provided, to Purchaser a list
of all full and part-time Current Employees as of the date of this Agreement,
which list includes each such Employee’s position, employer, location, date of
hire, current annual salary, hourly rate of pay, commission and/or bonus
arrangement (as applicable), eligibility for overtime, accrued paid time off,
vacation and sick pay, service credited for purposes of vesting and eligibility
under any Benefit Plan, status as full-time or part-time, current

 

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status as either active or on leave and, if on leave, the type and beginning
date of such leave, and such information is in accordance in all material
respects with the Books and Records of the Company as of such date.

 

(p)           None of the Company Benefit Plans is subject to the Laws of any
jurisdiction outside of the United States.

 

Section 3.12           Compliance with Laws; Permits.

 

(a)           The Company is, and at all times since January 1, 2008 has been,
in compliance with all applicable Laws and Governmental Orders applicable to it
or its assets, properties or businesses, including (1) the Real Estate
Settlement Procedures Act, Truth in Lending Act, Equal Credit Opportunity Act,
Fair Credit Reporting Act, state licensing requirements and all other applicable
Laws relating to the sale, distribution, sourcing, origination or referral of
loans, and compensation for such services, (2) all applicable Laws relating to
the sale and marketing of securities, including variable annuity and life
Insurance Contracts, and the administration of related investor accounts,
(3) all applicable Laws relating to the sale, marketing, issuance,
administration and underwriting of Insurance Contracts issued by it and (4) any
other Laws regulating the Company Business, except, in each case, for any
non-compliance that, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect with respect to the Company.  As
of the date of this Agreement, there are no Governmental Orders in effect
against the Company, Seller or any of their respective Affiliates relating to
the transactions contemplated by this Agreement or the other Transaction
Agreements.  Since January 1, 2008, the Company has filed all material reports,
statements, documents, registrations, filings or submissions required to be
filed with any Governmental Authority, and all such material reports,
statements, documents, registrations, filings and submissions were in compliance
with all applicable Laws when filed or as amended or supplemented (except, in
each case, for any non-compliance that, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect with respect
to the Company), and no material deficiencies that remain unsatisfied have been
asserted in writing by any Governmental Authority with respect to such material
reports, statements, documents, registrations, filings or submissions.  The
Company (1) has not received, at any time since January 1, 2008, any notice or
communication from any Governmental Authority regarding any actual, alleged or
potential material violation of, or material failure on the part of the Company
to comply with, any applicable Laws, Governmental Authorizations or Governmental
Orders applicable to it or its assets, properties or business (including any
Laws regulating the insurance business) and (2) is not a party to, or bound by,
any Governmental Order that is material to the Company Business.  The Company is
in compliance with all applicable Laws relating to, and its policies applicable
to, its collection, use of and disclosure of personal or private information of
customers or consumers, including the Gramm-Leach-Bliley Act, the Health
Insurance Portability and Accountability Act and state privacy Laws, except, in
each case, for any non-compliance that, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect with respect
to the Company.

 

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(b)           Except as would not reasonably be expected to impair the conduct
of the Company Business in any material respect, (1) the Company holds all
material governmental qualifications, registrations, filings, licenses, permits,
approvals or authorizations necessary to conduct the Company Business and to own
or use its assets and properties, as such Company Business, assets and
properties are conducted, owned and used on the date of this Agreement
(collectively, the “Permits”), and (2) all such Permits are valid and in full
force and effect.  The Company is not the subject of any pending or, to the
Knowledge of Seller, threatened Action seeking, or that would reasonably be
expected to lead to, the revocation, cancellation, suspension, limitation,
amendment, termination, modification, restriction, impairment or non-renewal of
any Permit.

 

(c)           Except for limitations imposed by applicable Law that are
applicable to insurance companies generally, as of the date of this Agreement
there is no Governmental Order between the Company and any Governmental
Authority that would be binding on the Company following the Closing that
(1) prohibits or restricts the payment of shareholder dividends or other
shareholder distributions by the Company, (2) restricts the authority of the
Company to conduct the Company Business or would reasonably be expected to
adversely impact the operations of the Company Business, (3) requires the
maintenance of any employees or physical location or (4) requires the
maintenance of the Company’s surplus.

 

(d)           The Company is not a party to any contract with or other
undertaking to, or subject to any order by, or the recipient of any supervisory
letter or other written communication of any kind from, any Governmental
Authority which relates to its reserve adequacy or its claims, marketing, sales,
trade or underwriting practices or policies in respect of its business, nor to
the Knowledge of Seller, has the Company been notified by any Governmental
Authority that such Governmental Authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, contract, undertaking, letter or other written communication.

 

(e)           No representation or warranty is made in this Section 3.12 with
respect to the matters covered in Section 3.10 (Taxes), Section 3.11 (Employee
Benefits), Section 3.14 (Intellectual Property), Section 3.16 (Insurance
Matters), Section 3.18 (Environmental Matters) and Section 3.22 (Investment
Company).

 

Section 3.13           Property.

 

(a)           Section 3.13(a) of Seller’s Disclosure Schedule lists, as of the
date of this Agreement, all real property that is owned by the Company
(collectively, together with all easements, licenses, rights and appurtenances
relating thereto, the “Owned Real Property”) and all real property in which the
Company has a leasehold interest (all such property, the “Leased Real Property”
and the leases pursuant to which the Leased Real Property is leased, the “Real
Property Leases”).  Except as set forth on Section 3.13(a) of Seller’s
Disclosure Schedule, or except as would not reasonably be expected to result in
a Material Adverse Effect with respect to the Company, the Company has (i) good
and

 

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marketable fee simple title to all Owned Real Property and (ii) good and valid
leasehold title to all Leased Real Property, subject only to any Permitted
Encumbrances.

 

(b)           Except as set forth on Section 3.13(b) of Seller’s Disclosure
Schedule, with respect to each lease for Leased Real Property and except as
would not reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Effect with respect to the property, (i) the Company has not
received any notice from any other party to a lease for any Leased Real Property
of the termination thereof, (ii) no default has occurred or is continuing under
any lease for any Leased Real Property and (iii) no material dispute or
controversy exists under any material lease for any Leased Real Property.

 

(c)           Except as would not reasonably be expected to result, individually
or in the aggregate, in a Material Adverse Effect, there are no existing or
pending or, to the knowledge of the Company, threatened in writing, condemnation
or eminent domain proceedings to which a material portion of the Leased Real
Property or the Owned Real Property is subject.

 

(d)           The Company has not received written notice of any current or
pending material regulatory proceedings, administrative actions or litigation
relating to any portion of the Leased Real Property or the Owned Real Property,
as applicable.

 

(e)           Section 3.13(e) of the Seller’s Disclosure Schedule sets forth the
Owned Real Property and the Leased Real Property that is being marketed for
sale, lease or sublease as of the date of this Agreement.

 

(f)            Except as would not reasonably be expected to result in a
Material Adverse Effect with respect to the Company, the Company has not
assigned, leased, sublet, transferred, disposed of or permitted to exist any
Encumbrance (other than a Permitted Encumbrance), on its interest in any Leased
Real Property or the Owned Real Property.  Seller has delivered or otherwise
made available to Purchaser and Life Reinsurer copies of the Real Property
Leases as in effect on the date of this Agreement, together with all amendments,
extensions, renewals, guaranties, modifications, supplements or other
agreements, if any, thereto.

 

Section 3.14           Intellectual Property.

 

(a)           Section 3.14(a) of Seller’s Disclosure Schedule sets forth a list
of (1) all Registered Intellectual Property, (2) all material unregistered
Trademarks, (3) all material Software owned by the Company and used in the
Company Business as currently conducted, and (4) all licenses granting to the
Company the right to use material Software owned by a third party and used in
the Company Business as currently conducted, other than (i) licenses for
commercially available Software licensed pursuant to a shrink wrap or click
through license agreement or (ii) software or Intellectual Property provided
under or used by Persons other than the Company in connection with the IAS
Contract and the McCamish Agreements.

 

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(b)           The Company has sufficient rights to use all Intellectual Property
used in or necessary for the conduct of the Company Business as currently
conducted, free and clear of all Encumbrances, other than Permitted
Encumbrances, except where the lack of such rights would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect
with respect to the Company.  The Company is the exclusive owner of all Owned
Intellectual Property, free and clear of all Encumbrances, other than Permitted
Encumbrances, except where the lack of such rights would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect
with respect to the Company; and the Owned Intellectual Property is not subject
to any outstanding order, judgment or decree that adversely affects the
Company’s ownership or use of such Owned Intellectual Property in any material
manner.

 

(c)           The Company has not received, since January 1, 2008, any written
notice, that remains unresolved, alleging that the Company infringed the
Intellectual Property rights of any Third Party.  To the Knowledge of Seller,
the conduct of the Company Business as currently conducted does not infringe the
Intellectual Property rights of any Third Party in any material manner.  To the
Knowledge of Seller, no Person is infringing any Owned Intellectual Property in
any material manner.

 

(d)           Since January 1, 2008, there has been no (i) loss or misuse of
Personally Identifiable Information, (ii) inadvertent, unauthorized, and/or
unlawful processing, disclosure, access, alteration, corruption, transfer, sale
or rental, destruction, or use of Personally Identifiable Information, or
(iii) any other act or omission that compromises the security, confidentiality,
or integrity of Personally Identifiable Information, in each case of (i),
(ii) and (iii), requiring under applicable Law that the Company notify its
customers thereof.

 

Section 3.15           Contracts.

 

(a)           Section 3.15(a) of Seller’s Disclosure Schedule sets forth a list
of each Material Contract as in effect on the date of this Agreement or pursuant
to which the Company has any rights or obligations as of the date of this
Agreement.  Seller has made available to Purchaser and Life Reinsurer a copy of
each Material Contract.

 

(b)           Each Material Contract is a valid and binding obligation of the
Company and, to the Knowledge of Seller, is a valid and binding obligation of
each other party thereto and is in full force and effect and, to the Knowledge
of Seller, enforceable by the Company against each other party thereto in
accordance with its terms, subject in each case to the Bankruptcy and Equity
Exceptions.

 

(c)           The Company is not and, to the Knowledge of Seller, no other party
to any Material Contract is, in violation, breach or default of any Material
Contract, except for such violations, breaches, events or conditions that would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect with respect to the Company, and, to the Knowledge of
Seller there does not exist any event, condition or omission that would
reasonably be expected to constitute such a material violation,

 

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breach or default (whether by lapse of time or notice or both) or would
reasonably be expected to permit the termination, modification, cancellation or
acceleration of performance of the obligation of the Company or any other party
to any Material Contract.

 

Section 3.16           Insurance Matters.

 

(a)           The Company has substantially complied with all applicable
requirements under the Code with respect to the Insurance Contracts issued,
assumed, entered into, reinsured or sold by the Company, including reporting,
withholding and disclosure requirements, and has reported all distributions
under such Insurance Contracts substantially in accordance with the Tax laws
relevant to such Insurance Contracts (including but not limited to the
requirements of Sections 72, 101, 401 through 409A, 412, 415, 417, 817, 7702,
and 7702A of the Code and any Treasury Regulations and administrative guidance
issued thereunder).

 

(b)           Each hardware, software and other product used by the Company to
maintain such Insurance Contracts’ qualification (but only as to Insurance
Contracts which were entered into prior to, or in effect as of, in each case,
the Closing Date) for Tax treatment under the Code for which such policies,
plans or contracts purported to qualify at the time of their issuance or
purchase has been properly designed and implemented to maintain such
qualification.

 

(c)           The Company is not party to any “hold harmless,” Tax sharing or
indemnification agreements regarding the Tax qualification or treatment of any
product or plan sold, issued, entered into or administered by the Company
(whether developed by, administered by, or reinsured with any unrelated third
party).

 

(d)           There are no currently pending U.S. federal, state, local or
foreign audits or other administrative or judicial proceedings against the
Company, or, to Seller’s Knowledge, against any other party, with regard to the
Tax treatment of any Insurance Contract issued, reinsured or sold by the
Company.

 

(e)           Each Insurance Contract issued, assumed, exchanged, modified or
sold by the Company provides, and since the date of issuance of such Insurance
Contract has provided, the purchaser, policyholder, account holder, other holder
or intended beneficiary thereof with Tax treatment under the Code that is the
same as or more favorable than the Tax treatment (1) that was purported to apply
in materials provided at the time of issuance, assumption, exchange,
modification or purchase or (2) for which such policies or contracts were
intended or reasonably expected to qualify under the Code at the time of
issuance, assumption, exchange, modification or purchase.

 

(f)            No Insurance Contract constitutes a “modified endowment contract”
under Section 7702A of the Code except where the holder of the contract was
timely notified in writing upon its issuance, assumption, exchange or
modification of its status as a “modified endowment contract” under
Section 7702A.

 

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(g)           The Company has not requested relief from the IRS concerning the
qualification of any Insurance Contract issued by the Company under, or in
compliance with, the Code and the Treasury Regulations promulgated thereunder,
and the IRS has not asserted in writing that any such policy or contract fails
to so qualify or comply.  The Company has not requested relief from the IRS
concerning the treatment of any life insurance policy issued by the Company as a
modified endowment contract within the meaning of Section 7702A of the Code, and
the IRS has not asserted in writing that any such policy not known or intended
to be a modified endowment contract is a modified endowment contract.  There are
no ongoing audits or material investigations by any Taxing Authority which
relate to the failure or potential failure of any Insurance Contract issued by
the Company to comply with the requirements of the Code applicable thereto, or
the inadvertent treatment of a material number of insurance policies as modified
endowment contracts within the meaning of Section 7702A of the Code.

 

(h)           The Company has not entered into any closing agreements with the
IRS concerning the Insurance Contracts.

 

(i)            All Insurance Contracts that have been issued, assumed,
exchanged, modified or sold by the Company as annuity contracts constitute
annuities for purposes of U.S. federal income Tax law.  All Insurance Contracts
that have been issued, assumed, exchanged, modified or sold by the Company as
life or health insurance contracts constitute life or health insurance for
purposes of U.S. federal income Tax law.

 

(j)            The assets of any separate account maintained by the Company that
is required to be diversified pursuant to Section 817(h) of the Code are and
always have been adequately diversified within the meaning of Section 817(h) of
the Code and Treasury Regulations promulgated thereunder, and the Company is
treated for U.S. federal income tax purposes as the owner of the assets
underlying the respective Insurance Contracts issued by the Company.

 

Section 3.17           Insurance Producers and Third-Party Administrators.

 

(a)           To the Knowledge of Seller, each Person, including salaried
employees of the Company, performing the duties of insurance producer, agency,
managing general agent, broker, solicitor, adjuster, marketer, underwriter,
wholesaler, distributor, producer or customer representative for the Company
(collectively, “Producers”), at the time such Producer wrote, sold, solicited,
produced or serviced or adjusted business, or performed such other act for or on
behalf of the Company that may require a producer’s, solicitor’s, broker’s,
adjusters’ or other insurance license, was duly licensed and appointed, where
required, as an insurance producer, managing general agent, third party
administrator, broker, solicitor or adjuster, as applicable (for the type of
business written, sold, or produced by such insurance producer, agency, managing
general agent, third party administrator, broker, solicitor, adjuster or
customer representative), in the particular jurisdiction in which such Producer
wrote, sold, produced, solicited, or serviced such business, as may be required
by the various states.

 

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(b)                                 Seller has made available to Purchaser and
Life Reinsurer copies of the standard forms of Producer Agreements used by the
Company that are in effect as of the date of this Agreement.  Each Producer
Agreement is a valid and binding obligation of the Company and, to the Knowledge
of Seller, is a valid and binding obligation of each other party thereto and is
in full force and effect and, to the Knowledge of Seller, enforceable by the
Company against each other party thereto in accordance with its terms, subject
in each case to the Bankruptcy and Equity Exceptions.  The Company is not in
default under any such Producer Agreement, except as would not reasonably be
likely to have a Material Adverse Effect.  To the Knowledge of Seller, no
Producer has materially breached the terms of any agency or broker contract with
the Company.

 

(c)                                  To the Knowledge of Seller, no Producer has
indicated in writing to Seller or the Company that any Producer will be unable
or unwilling to continue its relationship with the Company after the Closing.

 

(d)                                 Since January 1, 2007, the Company has not
engaged in, or colluded with or assisted any other Persons with, the paying of
contingent commissions to steer business to the Company or colluded with brokers
or agents to “rig bids” or submit false quotes to customers.  To the Knowledge
of Seller, none of the Company’s in-force Insurance Contracts are reinsured to
an insurer or reinsurer that is controlled by an agent, broker or other producer
that placed such Insurance Contract.

 

(e)                                  To the Knowledge of Seller, each
third-party administrator, at the time such third-party administrator serviced
or adjusted business, or performed such other act for or on behalf of the
Company that may require an insurance license, was duly licensed and appointed,
where required, as a third-party administrator (for the type of business
serviced by such third-party administrator), in the particular jurisdiction in
which such third-party administrator serviced such business, as may be required
by the various states.

 

Section 3.18                                Environmental Matters.

 

(a)                                  None of the Owned Real Property or the
Leased Real Property is subject to a written notice, request for information or
order from, or agreement with, a Governmental Authority or Third Party
respecting the release or threatened release of a Hazardous Material into the
environment.

 

(b)                                 There has been no release, discharge or
disposal of Hazardous Materials on, at or under the Owned Real Property, the
Leased Real Property or, to the Knowledge of Seller, any real property securing
a mortgage loan owned by the Company that is in foreclosure, or arising out of
the conduct by the Company of its business, in each case, that would reasonably
be expected to result in the imposition of any material liability to the Company
under the Environmental Laws.

 

(c)                                  None of the Owned Real Property, the Leased
Real Property or, to the Knowledge of Seller, any real property securing a
mortgage loan owned by the Company that is in foreclosure, is subject to any
Encumbrance, other than a Permitted

 

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Encumbrance, in favor of any Governmental Authority for (1) liability to the
Company under any Environmental Laws or (2) costs incurred by a Governmental
Authority in response to a release or threatened release of a Hazardous Material
into the environment for which the Company is primarily liable.

 

(d)                                 With respect to the Owned Real Property, the
Leased Real Property or the operation by the Company of its business thereon or,
to the Knowledge of Seller, with respect to any real property securing a
mortgage loan owned by the Company that is in foreclosure, there are no material
Actions pending or, to the Knowledge of Seller, threatened arising under or
relating to an Environmental Law or making any claim based on an Environmental
Law for personal injury, wrongful death or property damage in each case against,
or that would be expected to result in material liability to, the Company.

 

(e)                                  Since January 1, 2004, the Company has
operated its business in compliance in all material respects with applicable
Environmental Laws and has in place and is undertaking commercially reasonable
risk management procedures regarding potential environmental liability to the
Company in connection with its portfolio of mortgage loans.

 

(f)                                    Since January 1, 2004, the Company has
not received, any written claim, notice of violation or citation concerning any
violation or alleged violation of any applicable Environmental Law regarding its
operations or any real property securing a mortgage loan owned by the Company
and the Company is not subject to any outstanding obligations under any order or
citation issued pursuant to Environmental Law.

 

Section 3.19                                Finders’ Fees.  Except for Goldman,
Sachs & Co., whose fees will be paid by USA Holdco or one of its Affiliates
(other than the Company), there is no investment banker, broker, financial
advisor, finder or other intermediary that has been retained by or is authorized
to act on behalf of Seller or the Company or any of their respective Affiliates
who might be entitled to any fee or commission from Seller, Purchaser, the
Company or any of their respective Affiliates in connection with the
transactions contemplated by this Agreement.

 

Section 3.20                                Insurance.  Section 3.20 of Seller’s
Disclosure Schedule sets forth a list of all insurance policies covering the
Company or any of its properties, assets, employees or operations, as in effect
on the date of this Agreement, including policies procured by Seller or any of
its Affiliates that name the Company as an insured.  All such insurance policies
are in full force and effect (and all premiums due and payable thereon have been
paid in full on a timely basis); and no written notice of cancellation,
termination or revocation or other written notice that any such insurance policy
is no longer in full force or effect or that the issuer of any policy is not
willing or able to perform its obligations thereunder has been received by the
Company; and there is no claim by the Company pending under any of such
insurance policies as to which coverage has been denied by the insurer or that,
after reviewing the information provided with respect to such claim, the insurer
has advised the Company it intends to deny; and the Company is not in material
default under any provision of such insurance policies, except such defaults as
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect with respect to the Company.  The Company has in place
risk management and

 

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disaster recovery policies and procedures that its senior management reasonably
believes to be sufficient in scope and operation to protect against risks of the
types reasonably expected to be incurred by Persons similarly situated.

 

Section 3.21                                Indebtedness.  Other than the
Existing Surplus Note and, as of the Closing Date, the Closing Date Note, the
Company does not have any material (a) indebtedness for borrowed money other
than indebtedness incurred in the ordinary course of business consistent with
past practice, (b) obligations evidenced by notes, bonds, debentures or other
similar instruments (other than performance, surety and appeal bonds arising in
the ordinary course of business consistent with past practice in respect of
which the Company’s liability remains contingent), (c) reimbursement, payment or
similar obligations, contingent or otherwise, under acceptance, letter of credit
or similar facilities or (d) Liability of others described in clauses
(a) through (c) above that the Company has guaranteed or that is otherwise its
legal Liability, including, in each case, any accrued and unpaid interest or
penalties thereon.

 

Section 3.22                                Investment Company.  The Company is
not an investment company subject to registration and regulation under the
Investment Company Act of 1940.

 

Section 3.23                                Company Portfolio Assets. 
Section 3.23 of Seller’s Disclosure Schedule sets forth (a) a list of each
Portfolio Asset (other than policy loans under Insurance Contracts and cash) as
of September 30, 2010, (b) information as to the cost of each such Portfolio
Asset and the market value, if available, thereof as of September 30, 2010 and
(c) a list of any such Portfolio Assets (1) on any internal watch list prepared
by the Company or (2) with respect to which the Company has recognized
other-than-temporary impairments.  Except as set forth in Section 3.23 of
Seller’s Disclosure Schedule, none of the Portfolio Assets is in default in the
payment of principal, interest or dividends.  The Company holds valid title to
all Portfolio Assets free and clear of all Encumbrances, other than Permitted
Encumbrances and interests of nominees, custodians or similar intermediaries.

 

Section 3.24                                Insurance Business.

 

(a)                                  All policy and contract forms on which the
Company has issued, Insurance Contracts and which are currently being used by
the Company or were used by the Company for business which is still in force and
all amendments, applications, marketing materials, brochures, illustrations and
certificates pertaining thereto have, to the extent required by applicable Law,
been approved by all applicable Governmental Authorities or filed with and not
objected to by such Governmental Authorities within the period provided by
applicable Law for objection, subject to such exceptions as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect with respect to the Company.  All Insurance Contracts and all
such policy and contract forms, amendments, applications, marketing materials,
brochures, illustrations and certificates comply in all material respects with,
and have been administered in all material respects in accordance with,
applicable Law.  Any rates with respect to Insurance Contracts and all
amendments, applications, marketing materials, brochures, illustrations and
certificates pertaining thereto issued by the Company which are required to be
filed with or approved by any Governmental Authority have been so filed or

 

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approved and the rates used by the Company conform in all material respects
thereto.  Section 3.24(a) of Seller’s Disclosure Schedule contains a list of all
forms of Insurance Contracts that are being marketed by the Company as of the
date of this Agreement.  Seller has made available to Purchaser and Life
Reinsurer a representative sample of forms (including riders thereto) of
Insurance Contracts sold by the Company since January 1, 1995, including such
forms used in each of the principal lines of business of the Company, including
life, health and annuity products.

 

(b)                                 Seller has made available for inspection of
Purchaser and Life Reinsurer (1) copies of all examination reports (including
financial, market conduct and similar examinations) issued by any insurance
regulatory authority with respect to the Company or the Company Business which
have been completed and issued since December 31, 2007; (2) any draft or
incomplete examination reports (including financial, market conduct and similar
examinations) provided to the Company by any insurance regulatory authority with
respect to the Company or the Company Business pursuant to any currently ongoing
or incomplete examinations; (3) all material Holding Company System Act filings
or submissions made by the Company with any insurance regulatory authority since
December 31, 2007; and (4) all other material correspondence, inquiries and
other materials relating to the Company or the Company Business received from or
delivered to any insurance regulatory authority since December 31, 2007.  Except
as set forth in Section 3.24(b) of Seller’s Disclosure Schedule, since
December 31, 2007, no material deficiencies or violations with respect to the
Company have been asserted in writing by any insurance regulatory authority,
other than any deficiency or violation which has been cured or otherwise
resolved to the satisfaction of the insurance regulatory authority that noted
such deficiency or violation.  The Company is not deemed “commercially
domiciled” under the Laws of any jurisdiction and is not otherwise treated as
domiciled in a jurisdiction other than the State of South Carolina.

 

(c)                                  All benefits claimed by, or paid, payable,
or credited to, any Person under any Insurance Contract have in all material
respects been paid or credited (or provision as required under SAP for payment
thereof has been made) in accordance with the terms of the applicable Insurance
Contract, and such payments, credits or provisions were not materially
delinquent and were paid or credited (or will be paid or credited) without fines
or penalties (excluding interest), except for any such claim for benefits for
which there is a reasonable basis to contest payment.

 

(d)                                 There are no unpaid claims or assessments
made against the Company by any state insurance guaranty associations or similar
organizations in connection with such association’s insurance guaranty fund.

 

(e)                                  Copies of the underwriting standards and
guidelines utilized and rates and rating factors and criteria applied by the
Company with respect to Insurance Contracts outstanding as of the date of this
Agreement have been previously made available to Purchaser and Life Reinsurer. 
Each Insurance Contract has been issued substantially in compliance with and in
accordance with the underwriting standards, guidelines and criteria made
available to Purchaser and Life Reinsurer.

 

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(f)                                    The compliance advertising control log of
the Company for the years ending December 31, 2007, December 31, 2008 and
December 31, 2009 and all printed advertising materials provided to consumers
since January 1, 2010 have been made available to Purchaser and Life Reinsurer.

 

(g)                                 The Company has marketed, sold and issued
the Insurance Contracts in compliance with applicable Law in all material
respects, including (1) all applicable requirements and prohibitions relating to
suitability of sales and replacement of policies and annuity products, (2) all
applicable requirements relating to the disclosure of the nature of insurance
products as policies of insurance, (3) all applicable requirements relating to
insurance product projections and illustrations, and (4) all applicable
requirements relating to the advertising, sales and marketing of insurance and
annuity products and guaranteed investment contracts.

 

(h)                                 Since January 1, 2006, the Company has not
received any written notice of any unclaimed property or escheat audit or
investigation from any Governmental Authority.  The Company maintains unclaimed
property and escheat policies, procedures and guidelines that comply in all
material respects with all applicable Laws, copies of which have previously been
provided to Purchaser by Seller.  The Company is, and at all times since
January 1, 2008 has been, in material compliance with all such policies,
procedures and guidelines and any applicable Laws related thereto.

 

(i)                                     The Company does not currently maintain
and, since January 1, 2005, has not maintained any retained asset or other
similar accounts with respect to benefits payable under any Insurance Contract.

 

Section 3.25                                Reinsurance and Coinsurance.

 

(a)                                  Section 3.25(a) of Seller’s Disclosure
Schedule sets forth a list of all Reinsurance Agreements to which the Company is
a party or under which it has any existing rights, obligations or liabilities. 
Seller has made available to Purchaser and Life Reinsurer a copy of each
Reinsurance Agreement.  All Reinsurance Agreements set forth in
Section 3.25(a) of Seller’s Disclosure Schedule are in full force and effect and
the Company is not and, to the Knowledge of Seller, no other party thereto is in
default in any material respect as to any provision thereof; and, except as set
forth in Section 3.25(a) of Seller’s Disclosure Schedule, no such agreement
contains any provision providing that any party thereto may terminate such
agreement by reason of the transactions contemplated by this Agreement.  All
reinsurance premiums due under such Reinsurance Agreements have been paid in
full or were adequately accrued or reserved for by the Company.  To the extent
credit has been taken in any Statutory Statement pursuant to applicable Law for
reinsurance pursuant to any Reinsurance Agreement, the Company was entitled to
take such credit in such Statutory Statement.

 

(b)                                 Since January 1, 2008, (1) neither Seller
nor the Company has received any written notice from any reinsurer party to a
Reinsurance Agreement that any amount of reinsurance ceded by the Company will
be uncollectible or otherwise defaulted upon

 

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or that there is a dispute with respect to any material amounts recoverable or
payable by the Company pursuant to such Reinsurance Agreement, and (2) no such
reinsurer is in default or has otherwise failed to pay any material amount when
due.

 

(c)                                  None of the Reinsurance Agreements is or,
to the Knowledge of Seller, would be deemed to be, finite reinsurance, financial
reinsurance or such other form of reinsurance that does not meet the risk
transfer requirements under applicable Law.  Each of the Reinsurance Agreements
has been properly characterized and accounted for in the Statutory Statements of
the Company in all material respects in accordance with SAP, and no Governmental
Authority has objected to such characterization and accounting.

 

(d)                                 Section 3.25(d) of Seller’s Disclosure
Schedule sets forth a list, as of the date of this Agreement, of all
Encumbrances, collateral or security arrangements, including by means of a
credit for reinsurance trust or letter of credit, to or for the benefit of any
cedent under any Reinsurance Agreement.

 

(e)                                  As of the date of this Agreement, there are
no pending or, to the Knowledge of Seller, threatened, Actions with respect to
any Reinsurance Agreement.

 

Section 3.26                                Actuarial Reports.

 

(a)                                  Seller has, or has caused to be, delivered
or made available to Purchaser and Life Reinsurer a copy of (1) the “Actuarial
Appraisal of Liberty Life Insurance Company as of December 31, 2009,” dated
June 24, 2010, prepared by Towers Watson Pennsylvania Inc. (“Towers Watson”)
(the “Actuarial Appraisal”), (2) each Regulatory Asset Adequacy Issues Summary,
(3) each actuarial opinion from the Chief Actuary of the Company supporting the
applicable Regulatory Asset Adequacy Issues Summary, (4) each actuarial
memorandum supporting the applicable actuarial opinion, and (5) each actuarial
appraisal prepared at the request of and for the benefit of the Company, Seller
or any of their respective Affiliates by independent actuaries, in each case,
(A) since December 31, 2007 and (B) including all attachments, addenda,
supplements and modifications thereto (the items described in (2) though
(4) above, the “Actuarial Analyses”).  As of the date of this Agreement, Towers
Watson has not issued any new report or errata with respect to the Actuarial
Appraisal nor has it notified Seller or its Affiliates that the Actuarial
Appraisal is inaccurate in any material respect.  Each Actuarial Analysis was
based upon the Company’s Books and Records and an inventory of Insurance
Contracts in force that, at the relevant time of preparation, was complete and
accurate in all material respects and was prepared using appropriate modeling
procedures and assumptions accurately applied and in conformity with generally
accepted actuarial standards consistently applied.  The factual information
furnished by Seller and the Company to Towers Watson expressly for the purpose
of preparing the Actuarial Appraisal was accurate in all material respects as of
the date so delivered.

 

(b)                                 The policy reserves of the Company recorded
in the Statutory Statements as of their respective dates:  (1) were computed in
accordance with presently accepted actuarial standards consistently applied and
were fairly stated, in accordance with sound

 

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actuarial principles; (2) were based on actuarial assumptions which produce
reserves at least as great as those called for in any Insurance Contract as to
reserve basis and method, and are in accordance with all other Insurance
Contract provisions; (3) met the requirements in all material respects of
insurance Laws of the State of South Carolina and, to the best of the knowledge
of the Chief Actuary of the Company, are at least as great as the minimum
aggregate amounts required by the State of South Carolina; (4) were computed on
the basis of assumptions consistent with those used in computing the
corresponding items in the Annual Statement as at the prior year end; and
(5) included provision for all actuarial reserves and related statement items
that ought to be established; provided, that in no event shall this
Section 3.26(b), Section 3.7(c) or any other provision of this Agreement be
deemed to constitute a guaranty, warranty or other representation as to the
adequacy or sufficiency of the reserves as provided in any balance sheet or
other financial statement.

 

Section 3.27                                Risk-Based Capital.  Seller has made
available to Purchaser and Life Reinsurer copies of all material filings
submitted by the Company to any insurance regulatory authority during the twelve
(12) months preceding the date of this Agreement that report risk-based capital
calculations.  The risk-based capital calculations were made in accordance with,
and met all requirements of, applicable Law at the time such filings were made
in all material respects.

 

Section 3.28                                Labor Matters.  The Company is not a
party to any agreement with respect to its Current Employees with any labor
union or any other employee organization, group or association organized for
purposes of collective bargaining.  To the Knowledge of Seller, there are not
currently, and during the twenty-four (24) months preceding the date of this
Agreement there have not been, any bona fide organizational efforts with respect
to the formation of a collective bargaining unit involving the Employees. 
During the twenty-four (24) months preceding the date of this Agreement there
has been no strike, work stoppage or lockout.  With respect to the Employees,
Seller and the Company are in compliance with all Laws regarding employment,
employment practices, screening procedures, wages, hours and terms and
conditions of employment, including the federal Violent Crime Control and Law
Enforcement Act of 1994, except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect with respect to
the Company.  All Current Employees are employed at will, and there are no
employment, retention or other similar agreements in effect between a Current
Employee and the Company.  There are not currently any complaints, charges or
claims pending against the Company asserting that an independent contractor with
respect to the Company Business was not or has not been properly classified as
such.  To the Knowledge of Seller, there are no pending or threatened
complaints, charges or claims against the Company in connection with or relating
to the employment or termination of employment of any Employee.

 

Section 3.29                                Affiliate Transactions. 
Section 3.29 of Seller’s Disclosure Schedule sets forth a list of (a) all
Intercompany Agreements in effect as of the date of this Agreement, (b) all
Affiliate Agreements in effect as of the date of this Agreement and
(c) intercompany assets and liabilities, organized by company, as of
September 30, 2010.

 

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Section 3.30                                Separate Accounts; Regulatory
Filings.

 

(a)                                  Section 3.30(a)(1) of Seller’s Disclosure
Schedule sets forth a list of all separate accounts maintained by the Company
(collectively, the “Separate Accounts”) and (i) each Separate Account is duly
and validly established and maintained under the Laws of its state of domicile,
is operated in compliance with applicable Laws and is either excluded from the
definition of an investment company pursuant to Sections 3(c)(1), 3(c)(7) or
3(c)(11) of the Investment Company Act, or is duly registered as an investment
company under the Investment Company Act (any account so registered, a
“Registered Separate Account”) and (ii) the Insurance Contracts under which any
Separate Account’s assets are held are duly and validly issued and are either
exempt from registration under the Securities Act  or were sold pursuant to an
effective registration statement under the Securities Act, and any such
registration statement is currently in effect to the extent necessary to allow
the Company to receive contributions under such policies.

 

(b)                                 The Company and each Separate Account have
filed or furnished all reports, schedules, registration statements and other
documents and exhibits thereto required in connection with the offering of
Separate Account products with or to the United States Securities and Exchange
Commission (the “SEC”) since January 1, 2007 (the “SEC Reports”).  As of their
respective dates of filing with or furnishing to the SEC (or, if amended or
supplemented by a filing prior to the date of this Agreement, as of the date of
such latest filing), the SEC Reports complied in all material respects with the
requirements of the Securities Act or the Investment Company Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
SEC Reports, and none of the SEC Reports when filed with or furnished to the SEC
(or, if amended or supplemented by a filing prior to the date of this Agreement,
as of the date of such latest filing) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The financial statements of the Company and its Registered Separate
Accounts included in the SEC Reports complied, as of their respective dates of
filing with the SEC (or, if amended or supplemented by a filing prior to the
date of this Agreement, as of the date of such latest filing), in all material
respects with all applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the financial position of
the Company and its Registered Separate Accounts and were prepared in accordance
with the applicable internal control procedures of the Company.

 

(c)                                  Other than the SEC Reports, which are
addressed in clause (b) of this Section 3.30, and except as set forth in
Section 3.30(c) of Seller’s Disclosure Schedule, the Company and its Separate
Accounts have timely filed (after taking into account all grace periods or
extensions) all material reports, registrations, statements, documents, filings
and submissions, together with any amendments required to be made with respect

 

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thereto, that they were required to file since January 1, 2008 with any
Governmental Authority, and have paid all fees and assessments due and payable
in connection therewith.  No violations or material deficiencies have been
asserted by any such Governmental Authority with respect to such reports,
registrations, statements, documents, filings or submissions that have not been
resolved to the satisfaction of the Governmental Authority that noted such
violation or deficiency.

 

Section 3.31                                Books and Records.  The Books and
Records are consistent with and accurately reflect the assets, transactions and
business of the Company in all material respects and have been maintained in all
material respects in accordance with applicable Law.

 

Section 3.32                                Internal Controls.

 

(a)                                  The Company maintains accurate Books and
Records reflecting its assets and liabilities, and maintains proper and adequate
internal accounting controls that provide assurance that:  (1) transactions are
executed with management’s general or specific authorization; (2) transactions
are recorded as necessary to permit preparation of its financial statements in
conformity in all material respects with SAP or GAAP, as applicable, and to
maintain accountability for its assets; (3) access to its assets is permitted
only in accordance with management’s general or specific authorization; (4) the
reporting of its assets is compared with existing assets at regular intervals
and appropriate actions are taken with respect to any differences; and
(5) accounts, notes and other receivables and inventory are recorded accurately,
and proper and adequate procedures are implemented to effect the collection
thereof on a current and timely basis.

 

(b)                                 To Seller’s Knowledge, neither the Company
nor any of its Representatives has received any non-frivolous complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting, reserving or auditing practices, procedures, methodologies or
methods of the Company or its internal accounting controls, including any
complaint, allegation, assertion or claim that the Company has engaged in
questionable accounting, reserving or auditing practices.

 

Section 3.33                                Shared Assets and Shared Employees.

 

(a)                                  Section 3.33(a) of Seller’s Disclosure
Schedule sets forth a list of all material assets, properties or rights of every
kind and description that are (1) (A) owned or licensed by Seller or any of its
Affiliates (other than the Company) and (B) used in the operation or conduct of
the Company Business or (2) (A) owned or licensed by the Company and (B) used in
the operation or conduct of the business of Seller or any of its Affiliates
(other than the Company).

 

(b)                                 Section 3.33(b) of Seller’s Disclosure
Schedule sets forth a list of (1) any employee, agent, consultant or contractor
of Seller or any of its Affiliates (other than the Company) who provides
services to the Company Business and (2) any Business Employee who provides
services to the business of Seller or any of its Affiliates (other

 

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than the Company), in each case other than pursuant to the terms of any
Intercompany Agreement.

 

Section 3.34                                Contract List.  Seller has made
available to Purchaser and Life Reinsurer a list of the Contracts the Company
has identified that may allow for any Person other than the Company to terminate
such Contract upon any change in the credit rating of the Company.  All
Contracts included on the list have been made available to Purchaser and Life
Reinsurer.

 

Section 3.35                                No Other Representations or
Warranties.  Except for the representations and warranties contained in
Article 3 and Section 7.9 and any certificate delivered by such entity under
this Agreement, none of USA Holdco, Seller, the Company or any other Person
makes any other express or implied representation or warranty on behalf of USA
Holdco, Seller, the Company or otherwise in respect of the Company Business or
the Shares.

 

ARTICLE 4
Representations and Warranties of Purchaser.

 

Except as otherwise set forth in the disclosure schedule delivered by Purchaser
to Seller on the date of this Agreement (“Purchaser’s Disclosure Schedule”),
Purchaser (on its behalf and on behalf of Annuity Reinsurer) makes the following
representations and warranties to Seller as of the date of this Agreement and as
of the Closing Date; provided, however, that any representations and warranties
that are made as of a specific date or as of the date of this Agreement are only
made as of such date:

 

Section 4.1                                      Organization and Authority of
Purchaser.  Purchaser (a) is an exempted company duly incorporated, validly
existing and in good standing under the Laws of Bermuda, (b) has all requisite
power to operate its business as now conducted and (c) is duly qualified as a
foreign corporation to do business, and is in good standing (if applicable), in
each jurisdiction where the conduct of its business or the ownership or leasing
of its properties requires such qualification, except where failure to so
qualify or be in good standing would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect with respect to
Purchaser.  Annuity Reinsurer (x) is an exempted company duly incorporated,
validly existing and in good standing under the Laws of Bermuda, (y) has all
requisite power to operate its business as now conducted and (z) is duly
qualified as a foreign corporation to do business, and is in good standing (if
applicable), in each jurisdiction where the conduct of its business or the
ownership or leasing of its properties requires such qualification, except where
failure to so qualify or be in good standing would not, individually or in the
aggregate, reasonably be expected to materially impair the ability of Annuity
Reinsurer to perform its obligations under the Transaction Agreements to which
it is or will be a party.  Purchaser and each applicable Affiliate of Purchaser
(including Annuity Reinsurer) has all requisite corporate power and authority to
execute and deliver this Agreement and each other Transaction Agreement to which
it is or will be a party and to perform its obligations hereunder and
thereunder.  All necessary corporate action has been taken to bind the Purchaser
and each applicable Affiliate of Purchaser (including Annuity Reinsurer) to this
Agreement and each other Transaction Agreement to which it is or will be a
party, and no additional corporate proceedings on the part of Purchaser or any
applicable Affiliate of Purchaser (including Annuity Reinsurer) are necessary to
authorize the

 

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consummation of this Agreement or the other Transaction Agreements to which any
of them is or will be a party or the transactions contemplated hereby or
thereby.

 

Section 4.2                                      Binding Effect.  This Agreement
and each of the other Transaction Agreements to which Purchaser or any
applicable Affiliate of Purchaser (including Annuity Reinsurer) is or will be a
party has been, or upon execution and delivery thereof, will be, duly and
validly authorized, executed and delivered by Purchaser and each applicable
Affiliate of Purchaser (including Annuity Reinsurer) to the extent a party
thereto and constitutes a valid and legally binding obligation of Purchaser and
each applicable Affiliate of Purchaser (including Annuity Reinsurer) to the
extent a party thereto enforceable against Purchaser and each such Affiliate of
Purchaser (including Annuity Reinsurer) to the extent a party thereto in
accordance with its terms, subject to the Bankruptcy and Equity Exceptions.

 

Section 4.3                                      Filings and Consents.

 

(a)                                  No Governmental Authorization is required
to be made or obtained by Purchaser or any of its Affiliates (including Annuity
Reinsurer) in connection with the execution, delivery or performance by
Purchaser and each applicable Affiliate of Purchaser (including Annuity
Reinsurer) of this Agreement and the other Transaction Agreements to which any
of them is or will be a party, or the consummation by Purchaser and each
applicable Affiliate of Purchaser (including Annuity Reinsurer) of the
transactions contemplated hereby or thereby except for (a) any notification and
report form required to be filed under the HSR Act with the Federal Trade
Commission and the Antitrust Division of the Department of Justice and (b) the
consents, approvals, waivers, registrations, notices and filings set forth in
Section 4.3(a) of Purchaser’s Disclosure Schedule.

 

(b)                                 Schedule 6.1(b) sets forth all Governmental
Authorizations to be made or obtained by Purchaser, any of its Affiliates
(including Annuity Reinsurer) or the Company in connection with the execution,
delivery or performance of the Annuity Business Reinsurance Agreement.

 

(c)                                  No consent, approval or authorization of,
or action by, or notices to, or waivers from, any Third Party is required to be
made or obtained by Purchaser or any of its Affiliates in connection with the
execution, delivery or performance by Purchaser and each applicable Affiliate of
Purchaser (including Annuity Reinsurer) of this Agreement and the other
Transaction Agreements to which any of them is or will be a party, or the
consummation by Purchaser and each applicable Affiliate of Purchaser (including
Annuity Reinsurer) of the transactions contemplated hereby or thereby, except
for the consents, approvals, waivers and notices set forth in Section 4.3(c) of
Purchaser’s Disclosure Schedule.

 

Section 4.4                                      No Violations.  Subject to
receipt of the Governmental Authorizations and other consents, approvals and
authorizations and the making of the filings, registrations, notices and waivers
referred to in Sections 3.5 and 4.3 and Schedule 6.1(b), and the expiration of
related waiting periods, the execution, delivery and performance by Purchaser
and each applicable

 

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Affiliate of Purchaser (including Annuity Reinsurer) of this Agreement and the
other Transaction Agreements to which any of them is or will be a party, and the
consummation by Purchaser and each applicable Affiliate of Purchaser (including
Annuity Reinsurer) of the transactions contemplated hereby or thereby do not and
will not (a) constitute a breach or violation of, or a default under, or give
rise to any Encumbrance or any acceleration of remedies, penalty, material
increase or decrease in benefit payable or right of termination under any
Contract or any note, bond, loan or credit agreement, mortgage, indenture or
other Contract to which Purchaser or any of its Affiliates (including Annuity
Reinsurer) or by which any of them or any of their respective properties or
assets is subject or bound, (b) constitute a breach or violation of, or a
default under, the organizational documents of Purchaser or any applicable
Affiliate of Purchaser (including Annuity Reinsurer) or (c) conflict with or
violate in any material respect any Law or other Governmental Authorization
applicable to Purchaser or any applicable Affiliate of Purchaser (including
Annuity Reinsurer) or by which any of them or any material portion of their
respective properties or assets is bound or subject, except (1) in the case of
clause (a), as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect with respect to Purchaser and
(2) in the case of clause (c), for any such conflict or violation arising as a
result of the regulatory status of or any Governmental Authorizations held or
not held by Seller, Life Reinsurer or their respective Affiliates.

 

Section 4.5                                      Finders’ Fees.  No investment
banker, broker, financial advisor, finder or other intermediary has been
retained by or is authorized to act on behalf of Purchaser or any of its
Affiliates who might be entitled to any fee or commission from Seller or the
Company in connection with the transactions contemplated by this Agreement. 
Purchaser shall bear 100% of the cost of any fee or commission payable to any
investment banker, broker, financial advisor, finder or other intermediary who
has been retained by Purchaser or any of its Affiliates.

 

Section 4.6                                      Financial Capability.

 

(a)                                  Upon fulfillment of the commitments set
forth in the Equity Commitment Letter and after deducting any amounts released
from the Escrow Account to Seller in accordance with the Escrow Agreement,
Purchaser shall have sufficient funds to enable it to consummate the Purchase
(in accordance with the terms, and subject to the conditions, set forth in this
Agreement) and to contribute capital to Annuity Reinsurer, as necessary, for
Annuity Reinsurer to make all payments required by it upon execution of the
Annuity Business Reinsurance Agreement.

 

(b)                                 Purchaser has received the executed Equity
Commitment Letter (a copy of which has been provided to Seller).

 

(c)                                  The Equity Commitment Letter, as of the
date of this Agreement, is in the form so delivered to Purchaser.  The Equity
Commitment Letter has not been amended or modified, and the commitment set forth
in the Equity Commitment Letter has not been withdrawn or rescinded in any
respect.  The Equity Commitment Letter is in full force and effect and is a
legal, valid and binding obligation of Purchaser.

 

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Section 4.7                                      Investigation by Purchaser. 
Purchaser acknowledges that it has made its own inquiry and investigation into,
and based thereon, has formed an independent judgment concerning the Company and
its business.

 

Section 4.8                                      Purchase for Own Account.

 

(a)                                  Purchaser is an “accredited investor” as
that term is defined in Rule 501 of Regulation D under the Securities Act of
1933 (the “Securities Act”).

 

(b)                                 Purchaser is acquiring the Transferred
Shares for investment and not with a view toward, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the Transferred Shares.  Purchaser agrees that the Transferred Shares
may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act and any
applicable state securities laws, except pursuant to an exemption from such
registration under such act and such laws.

 

(c)                                  Purchaser is able to bear the economic risk
of holding the Transferred Shares for an indefinite period, and has knowledge
and experience in financial and business matters such that it is capable of
evaluating the risks of an investment in the Transferred Shares.

 

Section 4.9                                      Purchaser and Annuity Reinsurer
Statutory Statements.  Prior to the date of this Agreement, Purchaser has made
available to Seller true and correct copies of the following statutory
statements, in each case together with the exhibits, schedules and notes thereto
and any affirmations and certifications filed therewith:

 

(a)                                  (1) the audited consolidated financial
statement of Purchaser and its Subsidiaries prepared in accordance with Bermuda
statutory accounting principles for the fiscal year ended December 31, 2009 and
(2) the unaudited quarterly consolidated financial statement of Purchaser and
its Subsidiaries prepared in accordance with Bermuda statutory accounting
principles as of and for the quarter ended June 30, 2010 (collectively, the
“Purchaser Bermuda Statutory Statements”).  The Purchaser Bermuda Statutory
Statements fairly present, in all material respects, the consolidated statutory
financial position of Purchaser at the dates thereof and the consolidated
statutory results of operations, capital and surplus of Purchaser for the
periods then ended.

 

(b)                                 (1) the audited financial statement of
Annuity Reinsurer prepared in accordance with Bermuda statutory accounting
principles for the fiscal year ended December 31, 2009 and (2) the unaudited
quarterly  financial statement of Annuity Reinsurer prepared in accordance with
Bermuda statutory accounting principles as of and for the quarter ended June 30,
2010, including all certificates by Annuity Reinsurer’s approved actuary in
respect of the payment of any distribution of surplus by Annuity Reinsurer and
the declaration or payment of any dividends by Annuity Reinsurer to any Person
(collectively, the “Annuity Reinsurer Bermuda Statutory Statements”).  The
Annuity Reinsurer Bermuda Statutory Statements fairly present, in all material
respects,

 

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the statutory financial position of Annuity Reinsurer at the dates thereof and
the consolidated statutory results of operations, capital and surplus of Annuity
Reinsurer for the periods then ended.

 

Section 4.10                                No Impediments.  There is no Action
pending or, to the Knowledge of Purchaser, threatened, against Purchaser or any
of its Affiliates (including Annuity Reinsurer), as applicable, that would
reasonably be likely, individually or in the aggregate, to materially impair or
delay the ability of Purchaser to obtain those of the Regulatory Approvals to be
obtained by Purchaser or its Affiliates or materially impair or delay the
ability of Purchaser to effect the Closing.

 

Section 4.11                                Annuity Reinsurer.  Annuity
Reinsurer is (and through the Closing Date will be) a wholly owned Subsidiary of
Purchaser.  Purchaser has all requisite corporate power and authority to cause
Annuity Reinsurer to execute and deliver each of the Transaction Agreements to
which it is or will be a party and to perform its obligations thereunder.

 

Section 4.12                                No Other Representations or
Warranties.  Except for the representations and warranties contained in this
Article 4, neither Purchaser nor any other Person makes any express or implied
representation or warranty on behalf of Purchaser to Seller.

 

ARTICLE 5
Covenants

 

Section 5.1                                      Confidentiality; Access;
Transition Matters.

 

(a)                                  From the date of this Agreement until the
Closing Date, subject to applicable Laws, Seller shall and shall cause the
Company to permit Purchaser and Life Reinsurer and their respective
Representatives to have reasonable access, during regular business hours, and
upon reasonable advance notice and in a manner not unreasonably interfering with
Seller’s or the Company’s properties or business operations, to (1) the Books
and Records and the facilities and offices of the Company and, to the extent
relating to the Company or the Company Business, Seller, (2) operating data and
such other information concerning the Company or the Company Business that
Purchaser, Life Reinsurer or any of their Representatives may from time to time
reasonably request and (3) the employees of Seller and the Company whose
assistance and expertise is reasonably necessary to assist Purchaser or Life
Reinsurer and their respective Representatives in connection with preparation to
integrate and transition the Company and the Company Business.  Subject to any
applicable Laws, Seller shall furnish, or cause to be furnished, such financial
and operating data and other information that is available with respect to the
Company or the Company Business as Purchaser, Life Reinsurer or their respective
Representatives shall from time to time reasonably request.  Notwithstanding the
foregoing, in no event shall Purchaser, Life Reinsurer or their respective
Representatives have access to any information (x) the disclosure of which
would, in Seller’s reasonable judgment, based on advice of Seller’s legal
counsel, create any potential Liability under applicable Laws, including
antitrust laws, or would adversely affect any legal privilege, in each case,
other than any immaterial liability or

 

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effect or (y) that in the reasonable judgment of Seller, based on advice of
Seller’s legal counsel, would result in the disclosure of any trade secrets of
third parties or other information subject to confidentiality obligations to
third parties (provided that, in any such case, Seller shall use commercially
reasonable efforts to obtain waivers with respect to the confidentiality
restrictions to which any such other information is subject).  Purchaser and
Life Reinsurer shall reimburse Seller promptly for reasonable out of pocket
expenses (excluding, for the avoidance of doubt, compensation of employees of
Seller, the Company and their respective Affiliates) it or the Company incurs in
complying with any such request by or on behalf of Purchaser or Life Reinsurer
pursuant to this Section 5.1; provided that, with respect to any assistance
provided under Section 5.1(a)(3) reimbursable expenses shall also include any
costs or expenses that become payable or reimbursable by the Company to Third
Parties in connection with any such integration and transition activities,
subject, for any such expenses exceeding $50,000, to the prior consent of the
Counterparty to which assistance is being provided by Seller or the Company in
connection with the incurrence of such expenses.

 

(b)                                 Purchaser agrees, on behalf of itself and
its Affiliates (it being understood that for purposes of Sections 5.1(b) and
5.1(c), the Investor shall be deemed to be an Affiliate of Purchaser
irrespective of whether the investment contemplated by the Equity Commitment
Letter has already been effected) and Representatives, to hold, and cause its
Affiliates and Representatives to hold, the information provided to Purchaser or
its Representatives in connection with this Agreement or the other Transaction
Agreements in accordance with and subject to the terms of the Purchaser
Confidentiality Agreement as though the terms thereof restricted disclosure and
use of such information by Purchaser and its Affiliates and Representatives and
the Investor in the same manner and to the same degree as it restricts
disclosure of “Evaluation Material” pursuant to the Purchaser Confidentiality
Agreement.  Life Reinsurer agrees, on behalf of itself and its Representatives,
to hold the information provided to it or its Representatives in connection with
this Agreement or the other Transaction Agreements in accordance with and
subject to the terms of the Life Reinsurer Confidentiality Agreement as though
the terms thereof restricted disclosure and use of such information by Life
Reinsurer and its Representatives in the same manner and to the same degree as
it restricts disclosure of “Evaluation Material” pursuant to the Life Reinsurer
Confidentiality Agreement.  The Purchaser Confidentiality Agreement and the Life
Reinsurer Confidentiality Agreement shall terminate at the Closing; provided,
however, that the confidentiality obligations of the Purchaser, Life Reinsurer
and their respective Affiliates and Representatives shall not terminate with
respect to any portion of the confidential information relating to Seller or any
of its Affiliates (other than the Company).  If, for any reason, the
transactions contemplated by this Agreement and/or the other Transaction
Agreements are not consummated, (1) the Purchaser Confidentiality Agreement and
the Life Reinsurer Confidentiality Agreement shall nonetheless continue in full
force and effect in accordance with their respective terms and (2) Purchaser and
Life Reinsurer shall, and shall cause their respective Affiliates and
Representatives to, promptly destroy or return to Seller any report, analysis or
other material containing information provided to Purchaser, Life Reinsurer or
their respective Affiliates or Representatives in connection with this Agreement
or the other Transaction Agreements; provided, that neither

 

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Purchaser, Life Reinsurer nor their respective Affiliates or Representatives
will be required to erase any such report, analysis or material that has been
electronically stored and has been saved to a back-up file in accordance with
Purchaser’s, Life Reinsurer’s or their respective Representative’s of
Affiliate’s ordinary electronic back-up practices, on the condition that, except
as otherwise required by applicable Law, (i) Purchaser, Life Reinsurer and their
respective Affiliates’ and Representatives’ personnel whose functions are not
primarily information technology do not access such retained copies and
(ii) Purchaser, Life Reinsurer and their respective Affiliate’s and
Representatives’ personnel whose functions are primarily information technology
in nature access such copies only as reasonably necessary for the performance of
their information technology duties (e.g., for purposes of system recovery). 
Notwithstanding the foregoing, Purchaser and Life Reinsurer may, to the extent
required by Law or the written record keeping policies of Purchaser or Life
Reinsurer, as applicable, maintain one copy of any such report, analysis or
material in its legal department for its file related to the transactions
contemplated hereby and in the Transaction Agreements separate and apart from
all unrelated files solely for litigation purposes should litigation arise with
respect to obligations under this Agreement or the Transaction Agreements;
provided that access to such report, analysis or material is restricted to legal
personnel for the purposes permissible hereunder.

 

(c)                                  None of Seller, Purchaser, Life Reinsurer
and their respective Affiliates and Representatives shall make public the terms
or conditions of this Agreement, including the subject matter of this Agreement
or negotiations relating to this Agreement or any documents referred to herein;
provided, however, that the foregoing obligation of Seller, Purchaser, Life
Reinsurer and their respective Affiliates and Representatives shall not prohibit
disclosure of any such information (1) if required by Law or stock exchange
rules (in which case the Party required to make such disclosure shall allow (to
the extent permitted by law and reasonably practicable) the other Parties a
reasonable opportunity to comment on such disclosure in advance of such
disclosure); (2) to auditors or ratings agencies; provided, that such auditors
or ratings agencies are made aware of the provisions of this Section 5.1; (3) by
Seller and its Affiliates to custodians, retrocessionaires, reinsurers or
investment managers of the Company and/or its business, where in the reasonable
opinion of Seller such disclosure is reasonably necessary to facilitate the
transactions contemplated by this Agreement and the other Transaction
Agreements; (4) to the extent that the information has been made public by or on
behalf of, or with the prior consent of, (A) Seller, with respect to disclosure
by Purchaser, Life Reinsurer or any of their respective Affiliates and
Representatives, or (B) Purchaser or Life Reinsurer, as applicable, with respect
to disclosure by Seller or any of its Affiliates and Representatives; (5) to the
extent reasonably necessary in connection with any Action or in any dispute with
respect to this Agreement or any other Transaction Agreement; (6) to the
Investor or Apollo Global Management LLC without obtaining Seller’s prior
consent and (7) with the prior approval of Seller (not to be unreasonably
withheld or delayed), by Purchaser to (A) Persons who are equity holders of
Purchaser as of the date of this Agreement, or (B) Apollo Global Management
LLC’s existing partners in investment vehicles managed or controlled by Apollo
Global Management LLC and investors or potential investors, in the case of each
(A) or (B) where in the reasonable

 

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opinion of Purchaser such disclosure is reasonably necessary to facilitate the
transactions contemplated by this Agreement and the other Transaction
Agreements.

 

(d)                                 From and after the Closing, Seller and its
Affiliates shall, and shall cause each of their Representatives to, maintain in
confidence any written, oral or other information relating to the Company or the
Company Business or obtained from Purchaser or its Affiliates (including the
Company) or from Life Reinsurer or its Affiliates, except that the foregoing
requirements of this Section 5.1(d) shall not apply to the extent that (1) any
such information is or becomes generally available to the public other than as a
result of disclosure by Seller or its Affiliates or any of their respective
Representatives in breach of this Agreement; (2) any such information is
required by applicable Law, Governmental Order or a Governmental Authority to be
disclosed (with notice given to Purchaser and/or Life Reinsurer, as applicable,
to the extent permitted by Law) (including any report, statement, testimony or
other submission to such Governmental Authority); (3) any such information was
or becomes available to Seller or its Affiliates on a non-confidential basis and
from a source (other than Purchaser or Life Reinsurer or any of their respective
Affiliates or Representatives (including the Company)) that is not known by
Seller (x) to be bound by a confidentiality agreement with respect to such
information or (y) to be otherwise obligated to keep such information
confidential; or (4) any such information is reasonably necessary to be
disclosed in connection with any Action or in any dispute with respect to this
Agreement or any other Transaction Agreement (including in response to any
summons, subpoena or other legal process or formal or informal investigative
demand issued to the disclosing party in the course of any litigation,
investigation or administrative proceeding); provided, that if Seller or any of
its Affiliates becomes legally compelled by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or similar judicial or
administrative process to disclose such confidential information, to the extent
reasonably practicable, Seller shall provide Purchaser or Life Reinsurer, as the
case may be, with prompt notice of the intended disclosure before the actual
disclosure so that Purchaser or Life Reinsurer may seek a protective order.

 

(e)                                  Effective as of the Closing Date and
pursuant to the Assignment Agreement, Seller shall or shall cause its applicable
Affiliate to assign to Purchaser its rights under each Pre-Closing
Confidentiality Agreement pursuant to which the counterparty to any Pre-Closing
Confidentiality Agreement was given access to a data room maintained by or on
behalf of Seller in connection with a potential negotiated transaction in
respect of the Company (each such Pre-Closing Confidentiality Agreement, an
“Assigned Pre-Closing Confidentiality Agreement”).  At the Closing, Seller shall
or shall cause its applicable Affiliate to deliver to Purchaser a copy of each
Assigned Pre-Closing Confidentiality Agreement.  In the event that Purchaser or
any of its Affiliates or Representatives reasonably determines in good faith
that it is likely that a Third Party may be using or disclosing confidential
information in violation of one or more of the Pre-Closing Confidentiality
Agreements not assigned to Purchaser, (i) Purchaser may notify Seller of the
potential breach by the applicable Third Party and (ii) Seller shall determine
whether such Third Party is party to a Pre-Closing Confidentiality Agreement. 
In the event that such Third Party has executed a Pre-Closing Confidentiality
Agreement,

 

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Seller hereby agrees that it shall notify Purchaser thereof and, at the request
of Purchaser, shall use its commercially reasonable efforts to enforce its
rights under the applicable agreement.

 

Section 5.2                                      Conduct of Business.  During
the period from the date of this Agreement until the Closing, except (a) as
otherwise contemplated by this Agreement or the other Transaction Agreements,
(b) for matters set forth in Section 5.2 of Seller’s Disclosure Schedule, (c) as
required by applicable Law or (d) as Purchaser (or, where indicated, Purchaser
and Life Reinsurer) otherwise consents in writing in advance, Seller shall cause
the Company to (1) conduct the Company Business in the ordinary course
consistent with past practice, (2) use its commercially reasonable efforts to
preserve intact its business and relationships, including by maintaining the
Insurance Contracts and Permits, by keeping available the services of those of
the officers and key employees, consultants and agents of its business, and by
maintaining material relationships (contractual or otherwise) and goodwill with
customers, regulators, suppliers, creditors, employees and service providers of
and to its business and others having business dealings with it, in each case
that Purchaser and Life Reinsurer have not indicated expressly that they intend
to terminate subsequent to the Closing (it being understood and agreed that
adverse changes in the Company’s business and relationships (including any
rating agency actions and any actual or reasonably foreseeable consequences
thereof) that result from or are caused by the announcement of the transaction
and the plans of Purchaser, Life Reinsurer or their respective Affiliates with
respect to restructuring, integrating or operating the Company that have been
disclosed to the public or to employees, suppliers or customers of the Company
shall not constitute, or be taken into account in determining whether there has
been, a breach by Seller of its obligation under this Section 5.2, and (3) cause
the Company to not to do any of the following:

 

(a)                                  declare, set aside or pay any dividend or
distribution on any shares of capital stock or other equity interest, or
purchase, redeem, repay, repurchase or otherwise acquire any shares of its
capital stock or other equity interest, other than the Closing Date Share
Redemption;

 

(b)                                 effect any recapitalization,
reclassification, stock split or like change in its capitalization;

 

(c)                                  amend its articles or certificate of
incorporation, bylaws or other organizational documents;

 

(d)                                 issue, sell, pledge, transfer or otherwise
dispose of or encumber any shares of its capital stock or securities convertible
into or exchangeable for any such shares, or any rights, warrants, options,
calls or commitments to acquire any such shares or other of its securities;

 

(e)                                  without the consent of Purchaser and Life
Reinsurer, purchase, sell, lease, pledge, exchange, encumber or otherwise
dispose or acquire any property or assets (other than transactions in respect of
any Portfolio Asset and other transactions occurring in the ordinary course of
business and Permitted Encumbrances), make any capital expenditure

 

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for which the aggregate consideration paid or payable in any individual
transaction is in excess of $50,000 or in the aggregate in excess of $500,000 or
exercise any option to extend any Real Property Leases;

 

(f)                                    incur any indebtedness for money borrowed
other than indebtedness incurred in the ordinary course of business; make any
loans, advances or capital contributions to, or investments in, any other
Person, other than investments made in the ordinary course of business in
accordance with its investment policies; assume, grant, guarantee or endorse,
pledge or otherwise secure any assets or property or otherwise as an
accommodation become responsible for (whether primary or secondary) the
obligations of any Person;

 

(g)                                 without the consent of Purchaser and Life
Reinsurer, adopt a plan of complete or partial liquidation or rehabilitation or
authorize or undertake a merger, dissolution, rehabilitation, consolidation,
restructuring, recapitalization or other reorganization;

 

(h)                                 without the consent of Purchaser and Life
Reinsurer, change its fiscal year, except as required by the Company Accounting
Policies, GAAP or SAP, or make any change in its methods, principles or
practices of accounting or adopt or seek permission for a permitted practice;

 

(i)                                     acquire (by merger, consolidation or
acquisition of stock, other equity interest or assets, bulk reinsurance or
otherwise) any Person or other business organization or assets or liabilities
comprising a business or a segment, division or line of business or any material
amount of property or assets in or of any other Person or create or acquire any
Subsidiaries;

 

(j)                                     default under any indebtedness or cancel
or compromise any indebtedness or waive any material rights relating thereto;

 

(k)                                  (i) change its investment policies or
guidelines or make or dispose of investments other than in the ordinary course
of business (except as required or permitted in (ii) through (iv) below),
(ii) sell any Portfolio Asset that is in an unrealized gain position under SAP,
unless (x) the security or asset is placed on the Company’s internal credit
watch list or becomes other than temporarily impaired under SAP, in each case,
determined consistent with past practice and in accordance with such policies of
the Company as in effect on the date of such determination or (y) such sale is
required by RBC Group Risk Management, (iii) take any action with respect to
restructuring, foreclosing or otherwise working out any commercial mortgages
except with the consent of Purchaser and Life Reinsurer, and (iv) except as
permitted by the Company’s investment policy then in use, acquire any Portfolio
Assets; provided, however, that upon reasonable prior notice by Purchaser and
not more frequently than once per week, appropriate personnel of Company will
meet with Purchaser to review the Company’s investment strategy and activities.

 

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(l)                                     without the consent of Purchaser and
Life Reinsurer, incur, create or assume any Encumbrance, other than Permitted
Encumbrances;

 

(m)                               without the consent of Purchaser and Life
Reinsurer, make any change in any of the policies, guidelines, practices,
principles, standards, procedures or systems of the Company, in each case with
respect to the Company’s reinsurance, claims administration, reserving,
actuarial determinations, pricing, hedging, Producer compensation, policy
retention and conservation or underwriting, other than such changes as are
required by GAAP, SAP or applicable Law or, in respect of underwriting, pricing
or claims administration, in the ordinary course of business consistent with
past practice;

 

(n)                                 without the consent of Purchaser and Life
Reinsurer, modify or amend in any respect materially adverse to the Company or
terminate any of the Material Contracts or waive, release or assign any material
rights or claims thereunder or enter into or amend any Contract which would, if
entered into or amended prior to the date of this Agreement, have been a
Material Contract;

 

(o)                                 without the consent of Purchaser and Life
Reinsurer, except as contemplated by existing written agreements and policies in
effect prior to the date of this Agreement, or as otherwise required by
applicable Law, (1) grant or provide any material severance or termination
payments or benefits to any director, officer or employee, (2)increase the
compensation, bonus or pension, welfare, severance or other benefits of, or make
any new equity awards to any director, officer or employee of the Company,
except for merit-based increases in base compensation in the ordinary course of
business consistent with past practice, (3) establish, adopt, amend or terminate
any Benefit Plan or materially amend the terms of any outstanding equity-based
awards, (4) take any action to accelerate the vesting or payment, or fund or in
any other way secure the payment, of compensation or benefits under any Benefit
Plan, to the extent not already provided in any such Benefit Plan, or
(5) materially change any actuarial or other assumptions used to calculate
funding obligations with respect to any Benefit Plan or to change the manner in
which contributions to such plans are made or the basis on which such
contributions are determined, except as may be required by GAAP;

 

(p)                                 settle or compromise or agree to the
dismissal of any Action or threatened Action (in each case, except for claims
under any Insurance Contracts within applicable policy limits), other than any
settlement or compromise of any Action that involves solely cash payments of
less than $100,000 (excluding any policy benefit paid in connection with such
settlement or compromise);

 

(q)                                 make or change any Tax election, change any
annual Tax accounting period, adopt or change any method of Tax accounting, file
any amended Tax Return, enter into any closing agreement, settle any Tax claim
or assessment, enter into any transactions outside the ordinary course of
business (other than the transactions contemplated by this Agreement or the
Transaction Agreements) that would materially alter the Tax Attributes of the
Company set forth on Section 3.10(m)(ii) of Seller’s Disclosure Schedule,
surrender any right to claim a Tax refund, offset or other reduction

 

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in Tax liability, consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment or take or omit to take any other
action, if such action or omission would have the effect of materially
increasing the Tax liability or reducing any Tax attribute of the Company;

 

(r)                                    without the consent of Purchaser and Life
Reinsurer, enter into any new line of business, or introduce any new products or
services, or change in any material respect existing products or services,
except as may be required by applicable Law;

 

(s)                                  modify or amend in any material respect or
terminate any of the Intercompany Agreements or Affiliate Agreements or waive,
release or assign any material rights or claims thereunder or enter into any
Contract which would, if entered into prior to the date of this Agreement, have
been an Intercompany Agreement or an Affiliate Agreement;

 

(t)                                    incur any Intercompany Obligations other
than in the ordinary course of business;

 

(u)                                 without the consent of Purchaser and Life
Reinsurer, negotiate or enter into any new reinsurance agreement or arrangement
or renew or amend any existing Reinsurance Agreement, except (i) as set forth on
Section 5.2(u) of Seller’s Disclosure Schedule and (ii) for renewals of yearly
renewable term Reinsurance Agreements on substantially the same terms as those
in effect on the date of this Agreement; or

 

(v)                                 without the consent of Purchaser and Life
Reinsurer, authorize or enter into any Contract to do any of the foregoing.

 

Section 5.3                                      Access to, and Maintenance,
Transfer and Preservation of, Books and Records.

 

(a)                                  From and after the date of this Agreement
and until the Closing Date, Seller shall, and shall cause the Company to,
preserve and maintain the Books and Records in all material respects in the same
manner and with the same care that the Books and Records have been maintained
prior to the execution of this Agreement.  At the Closing (i) to the extent such
documents are in the possession of the Company, Seller shall, or shall cause its
Affiliates to, deliver to Purchaser or its designee (including Life Reinsurer),
but only to the extent not located at an office of the Company, (1) all
corporate records of the Company, including any corporate records relating
solely to the Company’s legal existence, stock ownership and corporate
governance and (2) all material Permits of the Company and (ii) or as soon as
possible thereafter (but not later than five (5) Business Days after the Closing
Date) to the extent such documents are not in the possession of the Company,
Seller shall, or shall cause its Affiliates to, deliver to Purchaser or its
designee (including Life Reinsurer), but only to the extent not located at an
office of the Company, (1) all corporate records of the Company, including any
corporate records relating to the Company’s legal existence, stock ownership and
corporate governance and (2) all Permits of the Company.

 

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(b)                                 Purchaser and Life Reinsurer agree that each
shall preserve and keep, or cause to be preserved and kept, all original Books
and Records in respect of the Company in its or its Affiliates’ or its
designees’ possession for the longer of any applicable statute of limitations
and a period of six (6) years from the Closing Date.  During such six-year or
longer period, upon reasonable notice and for any reasonable business purpose,
including for audit, accounting or regulatory matters, the preparation of
regulatory and statutory filings and financial statements and the conduct or
defense of any regulatory inquiry or other Action, except as determined in good
faith to be appropriate to ensure compliance with any applicable Laws and
subject to any applicable privileges (including the attorney-client privilege),
Seller and its Affiliates and their respective Representatives shall have access
during normal business hours to examine, inspect and copy the Books and Records
relating to periods prior to the Closing Date; provided, however, that such
investigation may not unreasonably interfere with any of the businesses or
operations of Purchaser, Life Reinsurer or the Company or any of their
applicable Affiliates; and provided, further, that the auditors and accountants
of Purchaser or its Affiliates shall not be obligated to make any work papers
available to any Person unless and until such Person has signed a customary
agreement relating to such access to work papers in form and substance
reasonably acceptable to such auditors or accountants.  After such six-year or
longer period, before Purchaser, Life Reinsurer or any of their Affiliates or
designees shall dispose of any of such Books and Records, it shall give at least
thirty (30) days’ prior written notice of its intention to dispose of such Books
and Records to Seller, and Seller shall be given an opportunity, at its cost and
expense, to remove and retain all or any part of such Books and Records as
Seller may elect.  If so requested by Purchaser, Seller shall enter into a
customary joint defense agreement with Purchaser, Life Reinsurer or any of their
respective Affiliates, as applicable, with respect to any information to be
provided to Seller pursuant to this Section 5.3(b).

 

Section 5.4                                      Delivery of Financial
Information.  As soon as practicable, but in any event within forty-five (45)
days following the end of each calendar quarter or within sixty (60) days
following the end of each calendar year that is completed prior to the Closing
Date, commencing with the quarter ended September 30, 2010, Seller shall cause
to be delivered to Purchaser and Life Reinsurer the unaudited quarterly or
annual statutory financial statements of the Company as of and for the end of
such quarter or year prepared in accordance with SAP and filed with the
Department.

 

Section 5.5                                      Reasonable Best Efforts;
Regulatory Matters; Third Party Consents.

 

(a)                                  Subject to the terms and conditions of this
Agreement, Seller, on the one hand, and Purchaser and Life Reinsurer, on the
other hand, agree to use their respective reasonable best efforts (1) to take,
or cause to be taken, all actions, including, executing and delivering, or
causing to be executed and delivered, any documents and other papers and to make
any filings and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective, as soon as practicable after the
date of this Agreement, the transactions contemplated by this Agreement and the
other Transaction Agreements, including the Closing Date Share Redemption, the
payment of the Existing Surplus Note Repayment Amount and consummation of the
Reinsurance Transactions,

 

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(2) to refrain from taking any actions that would reasonably be expected to
impair, delay or impede the Closing and (3) not in limitation of any other
provision of this Agreement, to use their respective reasonable best efforts to
cause all the conditions to the obligations of the other Parties to consummate
the transactions contemplated by this Agreement to be met as soon as reasonably
practicable.

 

(b)                                 Seller, on the one hand, and Purchaser and
Life Reinsurer, on the other hand, shall, in connection with the efforts
referenced in Section 5.5(a), keep the other Party or Parties reasonably
apprised of the status of the matters relating to the completion of the
transactions contemplated hereby, including with respect to the satisfaction of
the conditions set forth in Article 6.

 

(c)                                  Subject to the terms and conditions of this
Agreement, each of Purchaser and Life Reinsurer, on the one hand, and Seller, on
the other hand, shall, and shall cause their respective Affiliates and
Representatives to, use their respective reasonable best efforts (1) to take, or
cause to be taken, all actions reasonably necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such Party
or its Affiliates with respect to transactions contemplated by the Transaction
Agreements and, subject to the conditions set forth in Article 6, to consummate
the transactions contemplated by this Agreement and the other Transaction
Agreements; and (2) subject to Section 5.5(d) to obtain (and to cooperate with
the other Party or Parties to obtain) as promptly as practicable all consents,
authorizations, orders and approvals of, or any exemptions by, all Governmental
Authorities that may be or become reasonably necessary for the execution and
delivery of, and the performance of the obligations pursuant to, and the
consummation of the transactions contemplated by this Agreement and the other
Transaction Agreements (including the payment of the Existing Surplus Note
Repayment Amount and the Closing Date Share Redemption (including the issuance
and repayment of the Closing Date Note and the payment of the Share Redemption
Cash Consideration, if any)).  Purchaser and Life Reinsurer, on the one hand,
and Seller, on the other hand, shall cooperate with the reasonable requests of
the other Party or Parties in promptly seeking to obtain all such
authorizations, consents, orders and approvals.  Neither Seller, nor Purchaser
or Life Reinsurer, shall take, or shall permit any of its Affiliates and
Representatives to take, any action that would reasonably be expected to have
the effect of delaying, impairing or impeding the receipt of any required
approvals.

 

(d)                                 Purchaser, Annuity Reinsurer or the Company
shall not be obligated to take or refrain from taking any action, or suffer to
exist any condition, limitation, restriction or requirement, in each case that
is imposed by a Governmental Authority on such Person or Persons, in connection
with their respective pursuits of any of the consents and approvals listed on
Section 3.5(a) of Seller’s Disclosure Schedule, Section 4.3(a) of Purchaser’s
Disclosure Schedule or Schedule 6.1(b) that would, individually or in the
aggregate result or reasonably be likely to result in, a Burdensome Condition.

 

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(e)                                  Definitions.  For purposes of this
Agreement:

 

“Burdensome Condition” means, after giving effect to, and to the extent it
cannot be mitigated through, the Resolution Process, (A) a material impairment
of the economic benefits, taken as a whole, which Purchaser and its Affiliates,
taken together, reasonably expect to derive from the consummation of the
transactions contemplated by this Agreement and the Transaction Agreements, had
Purchaser and its Affiliates not been obligated to take or refrain from taking
or agree to take or refrain from taking such action or suffer to exist such
condition, limitation, restriction or requirement, which impairment is such
that, had it been known prior to the date of this Agreement, a prudent Person in
their positions and with such expectations would not have entered into this
Agreement and the Transaction Agreements; (B) a condition reasonably likely to
cause an impairment of the business or the assets, liabilities, properties,
operations, results of operations or financial condition of any of Purchaser or
any of its Subsidiaries; or (C) any requirement to sell, divest, operate in a
specified manner, hold separate or discontinue (other than any temporary
measure), before or after the Closing Date, any portion of the assets,
liabilities, businesses, operations, or interests in any assets or businesses of
the Company, Purchaser or any of its Affiliates, or any requirement that the
Company, Purchaser or Annuity Reinsurer maintain additional capital; provided,
that in the case of each of clause (B) and clause (C), the effect of such
condition or requirement (whether such condition or requirement is imposed on
Purchaser, any of its Affiliates or the Company, and regardless of the actual
size or financial resources of the Person or Persons on whom the condition or
requirement is imposed) would be material to the assets, liabilities, business,
operations, financial condition or results of operations of an entity having the
size of, and financial resources equal to those of, the Company, if such
condition or requirement were imposed on such entity (excluding, for this
purpose, the impact of any such condition or requirement to the extent that it
arises from changes in insurance Laws and other Laws or changes in the
interpretation thereof by Governmental Authorities, in each case, solely to the
extent such change is of general applicability), and provided, further, that in
the case of each of clauses (A), (B) and (C), no requirement that is
contemplated by the Transaction Agreements (including the transfer of assets and
reserves pursuant to the Closing Date Reinsurance Agreements, the repayment of
the Existing Surplus Note and the Closing Date Share Redemption Amount) shall
constitute, or be taken into account in determining whether there is or has been
imposed, a Burdensome Condition.

 

“Resolution Process” means, with respect to any condition, limitation,
restriction or requirement that would reasonably be likely to result in a
Burdensome Condition, that, prior to Purchaser being entitled to invoke the
actual or potential existence of a Burdensome Condition, Purchaser and Life
Reinsurer shall:  (1) provide Seller with all information reasonably requested
by it to enable Seller to analyze the causes and potential implications of such
condition and effect; and (2) meet with Seller in order to:  (x) exchange and
review their and Seller’s views as to such condition, limitation, restriction or
requirement; (y) discuss any potential approaches that would avoid such
condition, limitation, restriction or requirement or mitigate its impact; and
(z) negotiate in good faith to attempt to agree to modify the transactions
contemplated hereby, on

 

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mutually acceptable terms and on an equitable basis in a way that would
substantially eliminate any such condition, limitation, restriction or
requirement or sufficiently mitigate its adverse impact so that it would no
longer constitute a Burdensome Condition; it being understood and agreed that if
reasonable steps can be identified to avoid such effect or condition or
sufficiently mitigate the negative impact thereof, Purchaser and Life Reinsurer
will take, or cause their Affiliates to take, as applicable, all such reasonable
steps.

 

(f)                                    Without limiting the generality of the
foregoing, as promptly as practicable after the date of this Agreement, each
Party shall make all filings and notifications with all Governmental Authorities
that may be or become reasonably necessary, proper or advisable for the
execution and delivery of, and the performance of the obligations pursuant to,
and the consummation of the transactions contemplated by, this Agreement
(including the Purchase and payment of the Closing Date Share Redemption Amount)
and the other Transaction Agreements, including (1) Purchaser causing “Form A”
or similar change-of-control applications to be filed in each jurisdiction where
required by applicable insurance Laws with respect to the transactions
contemplated by this Agreement and the other Transaction Agreements (no later
than ten (10) Business Days from the date of this Agreement), (2) Seller and
Purchaser, cooperating with each other, causing to be made an appropriate filing
of a notification and report form pursuant to the HSR Act (which filing,
including the exhibits thereto, notwithstanding anything contained herein to the
contrary, need not be shared or otherwise disclosed to the other Party) with
respect to the transactions contemplated by this Agreement and the other
Transaction Agreements (no later than ten (10) Business Days from the date of
this Agreement), (3) Seller causing the Company to request approval or
non-disapproval for the Closing Date Share Redemption (including the issuance
and repayment of the Closing Date Note and the payment of the Share Redemption
Cash Consideration, if any) (no later than ten (10) Business Days from the date
of this Agreement), (4) Seller causing the Company to make all filings required
for approval of the Reinsurance Transactions (no later than ten (10) Business
Days from the date of this Agreement), and (5) Seller, Purchaser and Life
Reinsurer each causing to be made any other filing that may be required under
any insurance, financial services or similar applicable Law or by any
Governmental Authority with jurisdiction over enforcement of any applicable
insurance, financial services or similar Law, including all other Regulatory
Approvals (no later than ten (10) Business Days from the date of this
Agreement).  Purchaser, Seller and Life Reinsurer shall as promptly as
practicable make any and all other filings and submissions of information and
documentary materials with such Governmental Authorities which are required or
requested by such Governmental Authorities in order to obtain the approvals or
waivers required by such Governmental Authorities to consummate the transactions
contemplated by this Agreement and the other Transaction Agreements.  Purchaser
shall have responsibility for the filing fees associated with its HSR Act
filing, any “Form A” or similar change of control application and any filings
associated with the Closing Date Reinsurance Agreements and the approval of the
Closing Date Share Redemption (including the issuance and repayment of the
Closing Date Note and the payment of the Share Redemption Cash Consideration, if
any); Seller shall have responsibility for the filing fees associated with
payment of the

 

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Existing Surplus Note Repayment Amount; and Seller, Purchaser and Life Reinsurer
shall have responsibility for their other respective filing fees associated with
any other required filing.  If any Governmental Authority requires that a
hearing be held in connection with any approval, Purchaser, Life Reinsurer or
Seller, as applicable, shall use its reasonable best efforts to arrange for such
hearing to be held as promptly as practicable.  Except as may be required as a
result of the Resolution Process, no Party shall be obligated to contest any
final, non-appealable action or decision taken by any Governmental Authority
prohibiting the consummation of the transactions contemplated by this Agreement
or any of the other Transaction Agreements.  In the event that the transaction
is subject to any such circumstances, the Parties shall engage in the Resolution
Process in an effort to in good faith resolve such circumstances in order to
permit the consummation of the transactions contemplated by this Agreement and
the other Transaction Agreements.

 

(g)                                 Subject to applicable Laws relating to the
sharing of information and other than in regards to confidential portions
thereof, each of Seller, Purchaser and Life Reinsurer shall promptly notify the
other Parties of any communication it receives from any Governmental Authority
relating to the matters that are the subject of this Agreement and any of the
other Transaction Agreements and, to the extent practicable, permit the other
Parties to review in advance, and consider in good faith the views of the other
Parties in connection with, any proposed written communication to any
Governmental Authority in connection with any Governmental Authorization, and
promptly provide the other Parties with copies of all correspondence, filings or
communications between such Party or any of its Representatives, on the one
hand, and any Governmental Authority or members of the staff of any Governmental
Authority, on the other hand in connection with any Governmental Authorization. 
Prior to submitting any letter, filing or other written communication (other
than routine administrative or logistical communications) with any Governmental
Authority in connection with any Governmental Authorization, each Party shall
allow the other Parties reasonable opportunity to review and provide comments on
a draft of such written communication in advance of submitting such written
communication to such Governmental Authority.  Purchaser or Life Reinsurer, on
the one hand, and Seller, on the other hand, shall not participate, or agree to
participate or permit its Representatives to participate or agree to
participate, in any meeting with any Governmental Authority in connection with
any Governmental Authorization unless it consults with the other Party or
Parties in advance and, to the extent permitted by the applicable Governmental
Authority and subject to applicable Laws relating to the sharing of information,
gives the other Party or Parties reasonable opportunity to attend and
participate prior to participating in any meeting with any Governmental
Authority in respect of such Governmental Authorization.  Subject to the
Purchaser Confidentiality Agreement, the Life Reinsurer Confidentiality
Agreement and Section 5.1 of this Agreement, Seller, on the one hand, and
Purchaser and Life Reinsurer, on the other hand, shall coordinate and cooperate
fully with the other Party or Parties in exchanging such information and
providing such assistance as the other Party or Parties may reasonably request
in connection with the foregoing (including in seeking early termination of any
applicable waiting periods under the HSR Act); provided, however, that none of
Purchaser, Life Reinsurer and Seller or any of their respective Affiliates shall
be required

 

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(1) to disclose any information that in the reasonable judgment of such Party
would result in the disclosure of any trade secrets of Third Parties or violate
any of its contractual obligations or obligations with respect to
confidentiality or (2) to disclose any privileged information or confidential
competitive information; and provided, further, that Purchaser’s obligations to
notify Seller with respect to communications received by a Taxing Authority, as
well as the rights and obligations of the Parties to this Agreement with respect
to any Tax Contest, shall be governed solely by Article 8.  None of Purchaser,
Life Reinsurer or Seller shall be required to comply with any of the foregoing
provisions of this Section 5.5(g) to the extent that such compliance would be
prohibited by applicable Law.  The Parties further covenant and agree not to
extend any waiting period associated with any Governmental Authorization or
enter into any agreement with any Governmental Authority not to consummate the
transactions contemplated by this Agreement, except with the prior written
consent of the other Parties hereto.

 

(h)                                 Each of Seller, Purchaser and Life Reinsurer
shall use their reasonable best efforts to obtain any other Third Party consents
and approvals and make any other notifications that may be required in
connection with the transactions contemplated by this Agreement and the other
Transaction Agreements; provided, that no Party shall be required to compensate
any Third Party, commence or participate in litigation or offer or grant any
accommodation (financial or otherwise) to any Third Party to obtain any such
consent or approval.  Each Party shall promptly advise the other Parties of any
communication that causes such Party to believe that there is a reasonable
likelihood that any such consent or approval will not be obtained or that the
receipt of such consent or approval will be materially delayed or conditioned.

 

Section 5.6                                      Employment, Benefits and
Transferring Employees.

 

(a)                                  Not more than thirty (30) days following
the date of this Agreement, Life Reinsurer shall provide a list to Seller of the
Current Employees to whom Life Reinsurer intends to offer employment, commencing
at the Effective Time (the “Transferring Employees”).  Life Reinsurer shall
provide, or shall cause to be provided, to each Transferring Employee, for a
period of 18 months following the Closing Date (but only for so long as such
Transferring Employee remains employed by Life Reinsurer or its Affiliates),
(i) base salary that is no less than the base salary provided to such
Transferring Employee immediately before the Closing Date, (ii) an opportunity
to earn bonus and incentive compensation that is comparable to the opportunity
available to employees of Life Reinsurer and its Affiliates with similar duties
or responsibilities, (iii) employee benefits and other terms and conditions of
employment that are not less favorable in the aggregate than those provided to
similarly situated employees of Life Reinsurer and its Affiliates, (iv) job
duties and responsibilities that are comparable to those such Transferring
Employee held immediately before the Closing Date (but taking into account such
changes as may be appropriate in connection with the transition of business to
the systems and processes of Life Reinsurer and its Affiliates), and
(v) employment at the same facility at which each Transferring Employee worked
immediately before the Closing Date, or at a facility that is within twenty-five
(25) miles from such facility.  Seller shall use its reasonable best efforts to
assist Life Reinsurer in

 

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its efforts to hire the employees receiving offers under this Section 5.6(a) and
Seller shall not take, and will cause each of its Affiliates not to take, any
action which would impede, hinder, interfere or otherwise compete with such
efforts.  Seller shall cause each Employee of the Company other than the
Transferring Employees to either be terminated immediately prior to the
Effective Time or transferred to an Affiliate of the Company, and shall
cooperate with Life Reinsurer in transferring the employment of all Transferring
Employees from the Company to Life Reinsurer as of the Effective Time.  Seller
shall be responsible for and shall satisfy all notice and other requirements
applicable to all Employees pursuant to the Workers Adjustment and Retraining
Notification Act and any and all comparable state, local and other Laws (the
“WARN Act”).  Seller shall be responsible for all severance obligations
applicable to all Employees terminated prior to the Effective Time.

 

(b)                                 Notwithstanding the provisions of
Section 5.6(a), for a period of eighteen (18) months after the Closing Date,
Life Reinsurer will cause each Transferring Employee to be provided with
severance benefits that are no less favorable in the aggregate than the
severance benefits that would have been payable to such Transferred Employee
under the “RBC Insurance (USA) Severance Pay Plan” (made available by Seller to
Purchaser and Life Reinsurer as in effect immediately prior to the date of this
Agreement) (the “RBC Severance Plan”) had the RBC Severance Plan remained
applicable to such Transferring Employee, and taking into account (1) the
Transferring Employee’s service as set forth in Section 5.6(c) as well as the
Transferring Employee’s service with Life Reinsurer and its Affiliates, and
(2) any arrangements made by Life Reinsurer to reduce or eliminate such benefits
in the event that a Transferring Employee subsequently refuses an offer of
employment that is substantially comparable in the aggregate from Purchaser or
its Affiliates.

 

(c)                                  As of the Closing Date, the Company shall
cease to participate in all Benefit Plans.  As of the Closing Date, all
Employees shall cease to accrue further benefits under all Benefit Plans, and
Life Reinsurer shall cause all Transferring Employees to commence participation
in employee benefit plans and compensation arrangements sponsored and maintained
by Life Reinsurer or its Affiliates in accordance with the terms of such plans
and arrangements.  Life Reinsurer shall permit each Transferring Employee who
has received an eligible rollover distribution (as defined in
Section 402(c)(4) of the Code) from the RBC -USA Retirement and Savings Plan
(the “Seller’s 401(k) Plan”), if any, to roll such eligible rollover
distribution, including any associated loans, as part of any lump sum
distribution to the extent permitted by Seller’s 401(k) Plan into an account
under the Protective Life Corporation 401(k) and Stock Ownership Plan.  With
respect to any plan that is a “welfare benefit plan” (as defined in
Section 3(1) of ERISA), or any plan that would be a “welfare benefit plan” (as
defined in Section 3(1) of ERISA) if it were subject to ERISA, maintained by
Life Reinsurer or its Affiliates, Life Reinsurer and its Affiliates shall
(1) provide coverage for Transferring Employees under its medical, dental and
health plans as of the Closing Date, (2) waive any pre-existing condition,
actively-at-work requirements and waiting periods and (3) cause such plans to
honor any expenses incurred by the Transferring Employees and their
beneficiaries under similar plans of Seller or the Company during the portion of
the

 

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calendar year in which the Closing Date occurs for purposes of satisfying
applicable deductible, co-insurance and maximum out-of-pocket expenses.  With
respect to any Transferring Employees who become participants in any benefit
plan or program of Life Reinsurer or any of its Affiliates, Life Reinsurer shall
give credit (or, as applicable, cause credit to be given by any of its
Affiliates) under such plans and programs, for purposes of eligibility
(including for purposes of satisfying any minimum service requirements for
participation), vesting and benefit accrual thereunder, for all service
recognized by the Company except (1) for purposes of determining benefit
accruals under any Pension Plan of Life Reinsurer or its Affiliates and (2) to
the extent that such credit would result in a duplication of benefits.

 

(d)                                 Life Reinsurer shall credit the Transferring
Employees with vacation days accrued but unused as of the Closing, to the extent
such accrual is treated as a liability in the preparation of the Final Balance
Sheet.  Seller shall, on or prior to the Closing, deliver to Life Reinsurer a
list of each Transferring Employee who has accrued but unused vacation days, and
the number of such accrued but unused vacation days, in each case as of the
Closing.

 

(e)                                  Seller shall retain and honor all
obligations under the Benefit Plans, including all severance obligations to all
Employees whose employment with the Company and its Affiliates is terminated on
or as of the Closing Date and, to the extent applicable, and, subject to
Section 5.6(g), Seller shall take all action necessary prior to the Closing Date
to assume (or to have an Affiliate other than the Company assume) all Company
Benefit Plans.  Without limiting the foregoing, Seller shall retain
responsibility for and continue to pay (or cause to be paid) all medical, life
insurance, disability and other welfare plan expenses and benefits for
Transferring Employees with respect to claims incurred by such Transferring
Employees or their covered dependents prior to the Closing Date, in accordance
with the terms of the Benefit Plans.  Expenses and benefits with respect to
claims incurred by Transferring Employees or their covered dependents on or
after the Closing Date shall be the responsibility of Life Reinsurer and its
Affiliates in accordance with the applicable terms of the plans of Life
Reinsurer and its Affiliates.  For purposes of this paragraph, a claim is deemed
incurred when the services that are the subject of the claim are performed; in
the case of life insurance, when the death occurs; in the case of long-term
disability benefits, when the disability begins; and in the case of a hospital
stay, when the employee or covered dependent first enters the hospital.

 

(f)                                    Seller and its Affiliates shall be
responsible for all legally mandated continuation of health care coverage for
all Employees and any of their covered dependents who experience a qualifying
event on or prior to the Closing Date.  Life Reinsurer shall be responsible for
all legally mandated continuation of health care coverage for all Transferring
Employees and any of their covered dependents who experience a qualifying event
after the Closing Date.

 

(g)                                 Life Reinsurer shall establish flexible
spending accounts for medical and dependent care expenses under a new or
existing plan established or maintained under Section 125 and Section 129 of the
Code (“Life Reinsurer’s FSA”), effective as of the

 

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Effective Time, for each Transferring Employee who, on or prior to such date, is
a participant in, and maintains a flexible spending account for medical or
dependent care expenses under, a Benefit Plan (“Seller’s FSA”).  As of the
Effective Time and based on the information provided by Seller, Life Reinsurer
shall credit to the applicable account of each such Transferring Employee under
Life Reinsurer’s FSA an amount that reflects such Transferring Employee’s
compensation allocations to and claims history under Seller’s FSA immediately
prior to the Effective Time.  Within thirty (30) days after the Effective Time,
either (i) Seller shall transfer to Life Reinsurer a cash payment equal to the
excess, if any, of the aggregate amount withheld from Transferring Employees’
compensation under Seller’s FSA immediately prior to the Effective Time over the
aggregate amount of reimbursements paid to Transferring Employees under Seller’s
FSA immediately prior to the Effective Time, or (ii) Life Reinsurer shall
transfer to Seller a cash payment equal to the excess, if any, of the aggregate
amount of reimbursements paid to Transferring Employees under Seller’s FSA
immediately prior to the Effective Time over the aggregate amount withheld from
Transferring Employees’ compensation under Seller’s FSA immediately prior to the
Effective Time.  Life Reinsurer and Seller intend that the actions to be taken
pursuant to this Section 5.6(g) be treated as an assumption by Life Reinsurer of
the portion of Seller’s FSA and the elections made thereunder attributable to
such Transferring Employees for the plan year in which the Effective Time
occurs.  Nothing in this Section 5.6(g) shall require Life Reinsurer to accept
any obligations or duties or perform any services under Seller’s FSA with
respect to plan years prior to the plan year in which the Effective Time occurs.

 

(h)                                 Seller, Purchaser and Life Reinsurer shall
cooperate in (1) making all filings required under the Code or ERISA and any
applicable securities Laws with respect to the Benefit Plans that cover
Employees, (2) implementing all appropriate communications with participants,
(3) maintaining and transferring appropriate records and (4) taking all such
other actions as may be necessary and appropriate to implement the provisions of
this Section 5.6.  After the Closing, to the extent permitted by Law, Seller
shall provide Life Reinsurer with copies of its Books and Records regarding the
employment of, and the benefits provided to, all Transferring Employees.

 

(i)                                     Nothing contained in this Section 5.6
shall create any rights enforceable by Third Parties, including the Transferring
Employees.

 

(j)                                     Not later than thirty (30) days after
the end of each calendar year ending after the Closing Date during which Seller
or any of its Affiliates make any payments to an Employee under any Benefit Plan
that are deductible by the Company for purposes of determining its Tax for
Post-Closing Tax Periods, Seller shall provide a written notice to the Company
that describes such payments in a manner sufficient to allow the Company to
claim such payments as deductions on its U.S. federal income Tax Return.  Not
later than thirty (30) days after the date on which the Company files its U.S.
federal income Tax Return for any Post-Closing Tax Period, the Company shall
make a payment to Seller in an amount equal to the Tax benefit actually realized
(if any) as a result of claiming such payments as deductions on its U.S. federal
income Tax Return.  In determining the amount of any such Tax benefit actually
realized, any deduction for an

 

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amount described in this Section 5.6(j) shall be treated as having been used on
a pro rata basis with all other deductions and Tax Attributes of the Company
available to be used in such tax year.  To the extent that such deduction is not
treated as used to offset income in a given taxable year, any unused amount
shall be treated as creating a Tax benefit in the year in which operations loss
carryovers for such year are used to reduce taxable income.

 

Section 5.7                                      Transaction Agreements.

 

(a)                                  At or prior to the Closing, each of
Purchaser, Life Reinsurer and Seller shall, and shall cause their respective
relevant Affiliates to, enter into each of the Transaction Agreements (other
than the Closing Date Reinsurance Agreements) to which such Party or any of its
relevant Affiliates is a party.

 

(b)                                 On the Closing Date, immediately after the
Closing (i) the Company will enter into a reinsurance agreement with Life
Reinsurer in the form attached as Annex A hereto, with such changes as are both
(a) mutually acceptable to Purchaser and Life Reinsurer and (b) approved in
writing by Seller, such approval not to be unreasonably withheld, conditioned or
delayed (provided that in no event shall Seller be required to consent to a
proposed change to Section 1.3(b)(i) thereof, including any change to
definitions of terms used therein, that would result in a reduction in the
ceding commission payable to the Company thereunder), pursuant to which the
Company will cede to Life Reinsurer, all of its liabilities in respect of its
life (other than variable life) and health insurance business (the “Life
Business Reinsurance Agreement”); and (ii) immediately following its entry into
the Life Business Reinsurance Agreement, the Company will enter into a
reinsurance agreement on a modified coinsurance basis with Athene Life Re Ltd.,
a wholly owned Subsidiary of Purchaser (“Annuity Reinsurer”), in the form
attached as Annex B hereto, with such changes as are both (a) acceptable to
Purchaser and (b) approved in writing by Seller, such approval not to be
unreasonably withheld, conditioned or delayed (provided that in no event shall
Seller be required to consent to a proposed reduction of the amount set forth in
item “A” of Schedule II thereof, “Initial Statement of Ceding Commission”, or
any other change to such schedule or definitions of terms used therein, or the
definition of “Initial Ceding Commission,” that would have the effect of
reducing the “Initial Ceding Commission” payable to the Company thereunder),
pursuant to which the Company will cede to Annuity Reinsurer on a modified
coinsurance basis a quota share percentage of all of its liabilities in respect
of the Annuity Business (the “Annuity Business Reinsurance Agreement”).

 

Section 5.8                                      Retained Intellectual Property;
Seller’s Marks.

 

(a)                                  The Intellectual Property designated on
Section 5.8(a) of Seller’s Disclosure Schedule shall be assigned (and the
tangible embodiments thereof transferred) by the Company to Seller or one of its
Affiliates at or prior to the Closing.

 

(b)                                 Except as expressly set forth in the
Trademark License Agreement, immediately, and in no event later than the third
(3rd) Business Day following the Closing, (1) Purchaser shall cause the Company
to cease use of any and all Trademarks

 

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owned by or registered to USA Holdco or its Affiliates (other than the Company),
other than those set forth on Section 5.8(b)(1) of Seller’s Disclosure Schedule,
and any Trademarks confusingly similar thereto (collectively, “Seller’s Marks”)
in all respects, to make the necessary filings with the appropriate Governmental
Authorities to remove Seller’s Marks from the Trademarks, fictitious names or
d/b/a’s and any other names used by the Company, and to replace or remove
Seller’s Marks on signage, advertising materials and other materials; and
(2) Seller shall, and shall cause its Affiliates (other than the Company) to,
cease using any and all Trademarks set forth on Section 5.8(b)(2) of Seller’s
Disclosure Schedule.

 

(c)                                  Notwithstanding anything in this Agreement
to the contrary, each of the Parties hereto hereby agrees that each of the other
Parties hereto, in addition to any other remedies available to it for any breach
or threatened breach of this Section 5.8, shall be entitled to a preliminary
injunction, temporary restraining order or other equitable relief restraining
and enjoining a Party and the Company from the acts or omissions occasioned by
any such breach or threatened breach, without having to post bond or any other
financial undertaking.

 

Section 5.9                                      Intercompany Agreements and
Accounts.

 

(a)                                  Except as otherwise provided in this
Agreement or set forth in Section 5.9(a) of Seller’s Disclosure Schedule, Seller
shall, and shall cause its Affiliates to, take all actions as may be necessary
(including executing one or more instruments evidencing such termination and one
or more releases, in each case, in form and substance reasonably satisfactory to
Purchaser) prior to or concurrent with the Closing and to release the Company
from any and all liabilities arising in connection with:  (1) all data
processing, accounting, insurance (including coverage issued to, or under
self-insured programs of, Seller and its Affiliates (other than the Company)),
banking, personnel, legal, communications, Software, Software services, research
and development, pooled sourcing and purchasing and other products, benefits or
services provided by Seller or its Affiliates to the Company or provided by the
Company to Seller or its Affiliates and (2) all Intercompany Agreements, after
giving effect to Sections 5.9(b) and 5.9(c); provided, however, that this
Section 5.9(a) shall not apply to any Intercompany Agreement set forth in
Section 5.9(a) of Seller’s Disclosure Schedule.  At the Closing, Seller shall
provide evidence of the termination of, and release contemplated by this
Section 5.9(a) (other than any Intercompany Agreement set forth in
Section 5.9(a) of Seller’s Disclosure Schedule), in form and substance
reasonably satisfactory to Purchaser and Seller.

 

(b)                                 At least three (3) Business Days prior to
the anticipated Closing Date, Seller shall prepare and deliver to Purchaser an
estimated statement setting out in reasonable detail the calculation of all
Intercompany Obligations and, to the extent reasonably requested by Purchaser,
provide Purchaser with supporting documentation to verify the underlying
intercompany accounts and transactions.  The net amount of such intercompany
accounts as shown on such estimated statement shall be paid in full by cash

 

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payment from Seller (or its Affiliates) to the Company or from the Company to
Seller (or its applicable Affiliates), as the case may be, prior to the Closing.

 

(c)                                  Within thirty (30) days after the Closing
Date, Seller shall deliver a final statement setting out in reasonable detail
the calculation of all Intercompany Obligations (including all amounts owed or
owing and reflecting the amount paid by the Company or Seller (or its
Affiliates), as the case may be, pursuant to Section 5.9(b))  between the
Company, on the one hand, and Seller or any Affiliate, on the other hand, as of
the Closing and, to the extent reasonably requested by Purchaser, provide
Purchaser with supporting documentation to verify the underlying intercompany
accounts and transactions.  The net amount of such intercompany accounts as
shown on such final statement shall be paid in full by cash payment from Seller
to the Company or from the Company to Seller, as the case may be, within two
(2) Business Days of the delivery of the final statement of the calculation of
such accounts to Purchaser.

 

(d)                                 For the avoidance of doubt, no payment made
pursuant to this Section 5.9 shall result in a Purchase Price adjustment
pursuant to Sections 2.3 through 2.6, and Purchaser shall prepare the
Preliminary Final Balance Sheet pursuant to Section 2.6(a) without reflecting
any changes to intercompany account balances occurring after the Closing as a
result of the application of Section 5.9(b) and Section 5.9(c).

 

Section 5.10                                Further Assurances.  At any time
after the Closing Date, each Party shall, and Purchaser shall cause the Company
(or its successors) to, promptly execute, acknowledge and deliver any other
assurances or documents reasonably requested by a Party, as the case may be, and
necessary for each Party, as the case may be, to satisfy its respective
obligations hereunder or to give effect to the provisions of this Agreement and
the transactions contemplated hereby.

 

Section 5.11                                Equity Commitment.

 

(a)                                  Purchaser shall take, or cause its
Affiliates to take, all actions, and do (or cause to be done) all things,
necessary, proper or advisable to (i) issue Class A common stock of Purchaser as
contemplated by the Equity Commitment Letter at or prior to the Condition
Satisfaction and (ii) fully enforce the Investor’s obligations (and the rights
of Purchaser) under the Equity Commitment Letter, including at the request of
Seller.

 

(b)                                 Purchaser shall promptly (and in any event
within one (1) Business Day) notify the Seller of (i) the expiration or
termination (or attempted or purported termination, whether or not valid) of the
Equity Commitment Letter, or (ii) any refusal by the Investor to provide or any
stated intent by the Investor to refuse to provide the full financing
contemplated by the Equity Commitment Letter.

 

Section 5.12                                Director and Officer
Indemnification; Directors’ and Officers’ Insurance.

 

(a)                                  For a period of six (6) years after the
Closing Date, Seller shall not, and shall cause its Affiliates not to, amend,
repeal or modify (unless required by Law) any provision in their respective
organizational documents as in effect on the date of this

 

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Agreement relating to the exculpation, indemnification or advancement of
expenses of any individual who served as a director or officer of the Company at
any time prior to the Effective Time, it being the intent of the Parties that
such directors and officers shall continue to be entitled to such exculpation,
indemnification and advancement of expenses with respect to matters existing or
occurring prior to the Effective Time to the fullest extent permitted by Law.

 

(b)                                 Seller shall and shall cause its Affiliates
to maintain in effect for six (6) years after the Closing the current policies
of directors’ and officers’ liability insurance maintained by Seller and its
Affiliates with respect to matters occurring prior to the Effective Time to the
extent such policies apply to any director or officer covered by this
Section 5.12; provided, that Seller and its Affiliates may substitute therefor
policies (including “tail” policies) of substantially the same coverage as the
existing policies and containing terms and conditions that are not less
advantageous in the aggregate than the existing policies (including with respect
to the period covered).

 

(c)                                  If Seller or any of its successors or
assigns (1) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving Person of such consolidation or merger or
(2) shall transfer all or substantially all of its properties and assets to any
other Person, then, and in each such case, proper provisions shall be made so
that the successors and assigns of Seller shall assume all of its obligations
set forth in this Section 5.12.

 

(d)                                 The provisions of this Section 5.12 are
intended to be for the benefit of and shall be enforceable by, each current and
former director and officer of the Company and its successors, assigns, heirs
and Representatives.

 

Section 5.13                                Acquisition Proposals.

 

(a)                                  From the date of this Agreement through the
earlier of the Closing Date and the date of termination of this Agreement
pursuant to Article 9, as applicable, Seller and its Affiliates shall not and
shall cause the Company and its Representatives not to, directly or indirectly
(1) solicit, initiate, encourage, facilitate or accept any inquiries, proposals,
offers or other indications of interest by or from any Person other than
Purchaser, Life Reinsurer and their respective Affiliates acting together (the
“Acquisition Parties”) with respect to an Acquisition Proposal, (2) participate
in any discussions, conversations, negotiations or other communications with any
Person other than the Acquisition Parties with respect to an Acquisition
Proposal, (3) furnish or confirm any information to any Person other than the
Acquisition Parties in connection with an Acquisition Proposal, (4) otherwise
assist, facilitate or encourage the making of, or cooperate in any way
regarding, any inquiry, proposal, offer or other indication of interest by or
from any Person other than the Acquisition Parties with respect to an
Acquisition Proposal, or (5) enter into any term sheet, letter of intent,
agreement or other non-binding or binding understanding or arrangement with, or
accept or agree to any offer or proposal by or from, any Person other than the
Acquisition Parties with respect to an Acquisition Proposal.

 

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(b)                                 From the date of this Agreement through the
earlier of the Closing Date and the date of termination of this Agreement
pursuant to Article 9, as applicable, Seller and each of its Affiliates shall,
and shall cause the Company and its Representatives to, cease and terminate
immediately any existing discussions or negotiations with respect to or in
furtherance of any Acquisition Proposal with any Person other than the
Acquisition Parties.

 

(c)                                  For purposes of this Section 5.13,
“Acquisition Proposal” means any of the following transactions (but excluding,
in each case, this Agreement and the other Transaction Agreements and the
transactions contemplated hereby and thereby):  (1) any acquisition, purchase or
other transaction involving the direct or indirect sale or transfer of all or
any part of the business or assets (excluding sales of Portfolio Assets in the
ordinary course of business) of the Company, or any of the equity interests of
the Company, (2) any merger, consolidation, business combination,
reorganization, dissolution, recapitalization or similar transaction involving
the Company, (3) any bulk reinsurance, reinsurance, coinsurance or similar
transaction involving all or any part of the business of the Company (other than
the Closing Date Reinsurance Agreements) or as permitted in Section 5.2, (4) the
issuance of any security exercisable or convertible into, or exchangeable or
redeemable for, capital stock of the Company or (5) the granting of any rights,
warrants, options, calls or commitments to acquire capital stock of the Company.

 

(d)                                 In the event that Seller, the Company or any
Affiliate of Seller or the Company receives an Acquisition Proposal, the Person
receiving such Acquisition Proposal shall promptly, but in no event later than
forty eight (48) hours thereafter, notify Purchaser and Life Reinsurer in
writing of such proposal and provide a copy thereof (if in written or electronic
form) or, if in oral form, a written summary of the terms and conditions
thereof, including the names of the interested parties.

 

(e)                                  After the date of this Agreement, Seller
shall, or shall cause the Company to, request that all Third Parties (other than
Life Reinsurer) who executed a Pre-Closing Confidentiality Agreement in
connection with the consideration of a possible Acquisition Proposal return to
the Company, or destroy, all confidential information heretofore furnished to
such Third Parties by or on behalf of each of Seller or the Company, as promptly
as practicable, subject to the terms of such agreements.

 

Section 5.14                                Non-Compete.

 

(a)                                  Except as contemplated by this Agreement or
the other Transaction Agreements and subject to the other provisions of this
Section 5.14, for a period of eighteen (18) months from the Closing Date (the
“Non-Compete Period”), USA Holdco agrees not to, and shall cause each of its
Affiliates (each, a “Restricted Person”) not to, directly or through a
Restricted Person engage in the United States in the business of
(i) underwriting Restricted Products or (ii) reinsuring Restricted Products
either (A) through use of a fronting company or (B) otherwise where the
reinsurance involves USA Holdco or the Restricted Person engaging in designing
or manufacturing the

 

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underlying business (each of (i) and (ii), a “Competing Business”); provided,
however, that, Purchaser, in its sole discretion, may waive the restrictions in
this Section 5.14(a) with respect to any Restricted Products that are variable
life, and variable universal life insurance policies and fixed, indexed, payout
and variable annuities and Life Reinsurer, in its sole discretion, may waive the
restrictions in this Section 5.14(a) with respect to any Restricted Products
that are whole life, universal life or fixed life insurance policies.  Any
Restricted Person, and USA Holdco with respect to such Restricted Person, shall
not have any obligation under this Section 5.14 with respect to any Restricted
Person from and after such time as such Restricted Person ceases to be an
Affiliate of USA Holdco.  A Restricted Person shall not include (i) any Person
that purchases or receives assets, operations or a business from USA Holdco or
one of its Affiliates, if such Person is not an Affiliate of USA Holdco after
such transaction is consummated; (ii) any Person who acquires, directly or
indirectly, any interest in USA Holdco or any of its Affiliates, if such Person
is not an Affiliate of USA Holdco after such transaction is consummated; or
(iii) any Affiliate of USA Holdco in which a Person who is not an Affiliate of
USA Holdco holds equity interests and with respect to which USA Holdco or any of
its Affiliates, as applicable, has contractual or legal obligations (including
fiduciary duties of representatives on the board of directors or similar body of
such Subsidiary) limiting USA Holdco’s or such Affiliate’s ability to impose on
such Affiliate a non-competition obligation such as that in this Section 5.14. 
“Restricted Products” means any of whole life, universal life, fixed life,
variable life, and variable universal life insurance policies and fixed,
indexed, payout and variable annuities.

 

(b)                                 Notwithstanding anything to the contrary set
forth in Section 5.14(a), and without implication that the following activities
otherwise would be subject to the provisions of this Section 5.14, nothing in
this Agreement shall preclude, prohibit or restrict USA Holdco from engaging, or
require USA Holdco to cause any Restricted Person not to engage, in any manner
in any of the following; provided, however, that nothing in this
Section 5.14(b) shall relieve USA Holdco or any of its Affiliates from their
obligations under Sections 5.16 and 5.24 of this Agreement);

 

(1)                                  marketing, selling or distributing
Restricted Products that are underwritten by a Person other than USA Holdco or
its Affiliates;

 

(2)                                  maintaining or making investments in the
ordinary course of business consistent with past practice, including in a
general or separate account of an insurance company, in an investment fund or
other investment vehicle or investments by any employee benefit plan or trust of
USA Holdco or its Affiliates, in Persons engaging in a Competing Business,
provided, that each such investment is a passive investment where USA Holdco or
such Restricted Person:  (A) does not have the right to designate a majority of
the members of the board of directors or other governing body of such entity or
to otherwise influence or direct the operation or management of any such entity,
(B) is not a participant with any other Person in any group (as such term is
used in Regulation 13D of the Exchange Act) with such intention or right and
(C) owns less than twenty-five percent (25%) of the outstanding voting
securities (including convertible securities) of such entity;

 

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(3)                                  selling any of its assets or businesses to
a Person engaged in lines of business that compete with the Competing Business;

 

(4)                                  managing, controlling, advising or
providing administrative or similar services to investment funds or other
investment vehicles that make investments in Persons engaging in a Competing
Business, so long as such investments are in the ordinary course of business;

 

(5)                                  providing investment management, advisory,
administrative or similar services to any Person;

 

(6)                                  selling and/or underwriting insurance
products or annuities other than insurance products or annuities constituting
Restricted Products, as well as any services and products relating thereto;

 

(7)                                  providing reinsurance to any Person
engaging in a Competing Business, so long as USA Holdco and the Restricted
Persons are not engaged in designing or manufacturing of such reinsured
business;

 

(8)                                  effecting an acquisition, merger or other
combination with any Person, or subject to the proviso of this
Section 5.14(b)(8), entering into alliances or joint ventures engaging in, any
business that would otherwise violate this Section 5.14 as a result of a
transaction with any Person after the Closing Date (an “After-Acquired
Business”); provided, that any of the following conditions is satisfied: 
(A) the value of the consideration paid or contributed by USA Holdco or the
Restricted Person for the acquisition of, merger or combination with, or
alliance or joint venture in respect of the After-Acquired Business exceeds $2
billion; (B) less than 35% of the Aggregate After-Acquired Revenues are derived
from operations in the United States; or (C) (i) at the time of such
acquisition, merger, combination, alliance or joint venture, the revenues
derived from the Competing Business by the After-Acquired Business (the
“Competing After-Acquired Revenues”) constitute no more than 35% of the gross
revenues on a consolidated basis of the After-Acquired Business in the most
recently completed fiscal year immediately prior to the date of such
acquisition, merger or combination (the “Aggregate After-Acquired Revenues”), or
(ii) if at the time of such acquisition, merger, combination, alliance or joint
venture, the Competing After-Acquired Revenues constitute more than 35% of the
Aggregate After-Acquired Revenues then, within twelve (12) months after such
acquisition, merger, combination, alliance or joint venture, (x) USA Holdco or
such Restricted Person signs a definitive agreement to dispose, and subsequently
disposes of, the relevant portion of the business or securities of such
After-Acquired Business, or (y) USA Holdco or such Restricted Person otherwise
modifies the After-Acquired Business such that the Competing After-Acquired
Revenues constitute not more than 35% of the Aggregate After-Acquired Revenues;
provided, however, that in the case of a joint venture or alliance, the revenues
attributable to USA Holdco or any Restricted Person shall be equal to the
Competing After-Acquired Revenues multiplied by the beneficial interest
(expressed as a percentage) of USA Holdco or such Restricted Person in the joint
venture or alliance;

 

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(9)                                  conducting or engaging in any activity via
third-party distributors or agents or third-party distribution or agent networks
not comprised of consultants who devote all of their professional time to USA
Holdco or its Affiliates;

 

(10)                            selling, distributing, marketing, underwriting
or otherwise providing any products or services in the ordinary course of
business to a Person engaged in a Competing Business;

 

(11)                            purchasing or otherwise obtaining any products
or services in the ordinary course of business from a Person engaged in a
Competing Business; or

 

(12)                            continuing to engage in any activities or
businesses engaged in, or continuing to provide any products or services
provided, as of the date of this Agreement, by USA Holdco or its Affiliates
(other than the Company).

 

(c)                                  Notwithstanding anything in this Agreement
to the contrary, this Section 5.14 shall terminate and cease to be effective 
(i) immediately with respect to USA Holdco upon a Change of Control of USA
Holdco; and (ii) immediately with respect to any Restricted Person upon a Change
of Control of such Restricted Person; provided, that upon such Change of
Control, such Person shall no longer be a Restricted Person.  “Change of
Control” means the occurrence of one of the following events:  (a) if any Person
shall, directly or indirectly, acquire beneficial ownership of more than 50% of
the voting securities of USA Holdco or a Restricted Person, as applicable, then
issued and outstanding, (b) the consummation of a merger, consolidation, binding
share exchange or other business combination of USA Holdco or a Restricted
Person, as applicable, into or with another Person in which the stockholders of
USA Holdco or such Restricted Person, as applicable, immediately prior to the
consummation of such transaction shall own less than 50% of the voting
securities of the surviving Person (or the parent of the surviving Person where
the surviving Person is wholly owned by the parent Person) immediately following
the consummation of such transaction or (c) the consummation of the sale,
transfer, lease or other disposition (but not including a transfer, lease or
other disposition by pledge or mortgage to a bona fide lender) of all or
substantially all of the assets of USA Holdco or a Restricted Person, as
applicable.

 

Section 5.15                                Non-Solicitation of Business
Employees.  For a period of twenty-four (24) months from the Closing Date, USA
Holdco shall not, and shall cause the Restricted Persons not to, directly or
indirectly, solicit for employment any Person who is a Transferring Employee;
provided, however, that nothing in this Section 5.15 shall prohibit USA Holdco
or any of its Affiliates from (a) engaging in general advertising or
(b) employing or hiring any Transferring Employee who contacts USA Holdco or any
of its Affiliates on his or her own initiative without direct solicitation or
only as a result of a general solicitation to the public or general advertising,
(c) soliciting for employment or hiring any Transferring Employee that (i) was
terminated without cause by Life Reinsurer or any of its Affiliates, or (ii) was
terminated for cause by Life Reinsurer or any of its Affiliates or voluntarily
resigned from the employ of Life Reinsurer or any of its Affiliates and has not
been employed by Purchaser or any of its Affiliates for at least one month prior
to the date of such solicitation or hire.

 

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Section 5.16                                Non-Solicitation of Holders of
Insurance Contracts.  USA Holdco shall not, and shall cause the Restricted
Persons not to, (a) sponsor, support, establish or implement any program for the
solicitation, substitution, replacement, surrender, exchange, non-renewal or
other termination of any Insurance Contract underwritten, issued or assumed by
the Company prior to the Closing Date that is a Restricted Product or
(b) otherwise intentionally facilitate or encourage any program for the
solicitation, substitution, replacement, surrender, non-renewal or other
termination of any Insurance Contract underwritten, issued or assumed by the
Company prior to the Closing Date that is a Restricted Product, whether by
employees of any Restricted Person, by Producers, or otherwise.

 

Section 5.17                                Relief.  In the event that any
Action is brought in equity to enforce the provisions of Sections 5.1(c) and
(d), 5.14, 5.15, 5.16 or 5.17, no Party will allege, and each Party hereby
waives the defense or counterclaim, that there is an adequate remedy at Law. 
USA Holdco, on behalf of itself and its Affiliates, acknowledges and agrees that
the scope, duration and geographic limitations contained in Sections 5.1(c) and
(d), 5.14, 5.15, 5.16 or 5.17 are reasonable and appropriate and that but for
these limitations, Purchaser and Life Reinsurer would not have entered into this
Agreement.  USA Holdco shall not, and shall cause its Affiliates not to,
challenge or threaten to challenge, and shall not assist any Person in
challenging, the scope, duration or geographic limitations contained in Sections
5.1(c) and (d), 5.14, 5.15, 5.16 or 5.17.  In the event that any of the
provisions in Sections 5.1(c) and (d), 5.14, 5.15, 5.16 or 5.17 should ever be
adjudicated to exceed the scope, duration or geographic limitations permitted by
applicable Law in any jurisdiction, then such provisions shall be deemed
reformed in such jurisdiction to the maximum scope, duration and geographic
limitations enforceable under applicable Law, but shall otherwise remain in full
force and effect in all other jurisdictions.

 

Section 5.18                                Notification.  From the date of this
Agreement through the Closing, (x) each Party shall give prompt written notice
to the other Parties of:  (a) any notice or other communication received by such
Party from any Governmental Authority or Third Party in connection with the
transactions contemplated under this Agreement or the other Transaction
Agreements and (b) any Action commenced or, to such Party’s Knowledge,
threatened in writing in respect of this Agreement or any other Transaction
Agreement or the transactions contemplated hereby or thereby and (y) Seller will
give prompt written notice to the other Parties of the receipt, after the date
of this Agreement, of: (a) any Governmental Order between the Company and any
Governmental Authority that would be binding on the Company following the
Closing that (1) prohibits or restricts the payment of shareholder dividends or
other shareholder distributions by the Company, (2) restricts the authority of
the Company to conduct the Company Business or would reasonably be expected to
adversely impact the operations of the Company Business, (3) requires the
maintenance of any employees or physical location or (4) requires the
maintenance of the Company’s surplus and (b) any new report or errata issued by
Towers Watson with respect to the Actuarial Appraisal or any notice from Towers
Watson to Seller or its Affiliates that the Actuarial Appraisal is inaccurate in
any material respect.  No notification to any Party made pursuant to this
Section 5.18 shall have the effect of satisfying the conditions in Article 6 of
this Agreement, nor shall any such notification have any effect for the purpose
of determining the right of any Party to claim or obtain indemnification under
this Agreement.

 

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Section 5.19                                Insurance.

 

(a)                                  From and after the Closing Date, the
Company shall cease to be insured by Seller’s or its Affiliates’ insurance
policies (other than any the Company maintains directly) or by any of their
self-insured programs to the extent such insurance policies or programs cover
the Company.  With respect to events or circumstances relating to the Company
that occurred or existed prior to the Closing Date that are covered by liability
insurance policies or any workers’ compensation insurance policies (but not
self-insurance programs sponsored by Seller and/or its Affiliates) and that
apply to the locations at which the businesses of the Company operate, Purchaser
and Company may, to the extent permissible under such policies or programs, make
claims thereunder by forwarding the claims notice in accordance with
Section 10.1 within one (1) year of the Closing Date.

 

(b)                                 Except to the extent reserved or reflected
in the Final Balance Sheet and deducted from the Final Adjusted Capital and
Surplus, with respect to any open claims against the insurance policies of
Seller or any of its Affiliates (other than the Company) relating to the Losses
suffered by Company prior to the Closing Date, Seller agrees to remit to
Purchaser all proceeds realized from such claims.

 

Section 5.20                                Books and Records.  Prior to the
Closing Date, Seller and Purchaser shall develop and implement a plan that will
result in (i) Seller retaining a copy of the Copied Books and Records and
(ii) the delivery or transfer, subject to compliance with applicable Law, of the
Books and Records (other than the Excluded Books and Records and Seller’s copies
of the Copied Books and Records) to Purchaser (or a Person designated by
Purchaser) at the Closing or as soon as possible thereafter (but not later than
five (5) Business Days thereafter in the manner (and in the case of physical
Books and Records at the location(s)) reasonably requested by Purchaser to the
extent not located at an office of the Company or not maintained by the vendor
under the IAS Contract or McCamish Systems, LLC under the McCamish Agreements. 
Parent and Seller agree, and agree on behalf of their Affiliates, not to retain
following the Closing any Books and Records, including any copies (other than
the Excluded Books and Records and Seller’s copies of the Copied Books and
Records).

 

Section 5.21                                Reinsurance Transactions.  During
the period from the date of this Agreement through the Closing Date, Seller
shall, and shall cause the Company to, provide to Purchaser, Life Reinsurer and
their respective Affiliates and Representatives such reasonable cooperation as
is reasonably requested by Purchaser and such Affiliates and is necessary,
proper or advisable in connection with the Reinsurance Transactions, including
(1) taking such reasonable corporate actions requested by Purchaser or Life
Reinsurer to permit the consummation of the Reinsurance Transactions; and
(2) taking such other reasonable actions reasonably requested by Purchaser or
Life Reinsurer to effect the foregoing and (3) subject to Section 5.5(d), taking
all action necessary to obtain any approvals or authorizations of, and making
any filings and registrations with, and notifications to, all Governmental
Authorities required in connection with the Reinsurance Transactions; provided,
that Seller shall not be required to compensate any Third Party, commence or
participate in litigation or offer or grant any accommodation (financial or
otherwise) to any Third Party to effect the foregoing.

 

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Section 5.22                                Closing Date Share Redemption.

 

(a)                                  Seller and Purchaser shall use their
reasonable best efforts, subject to the receipt of all Regulatory Approvals, to
cause the Company to effect the Closing Date Share Redemption, including issuing
the Closing Date Note to Seller immediately prior to the Effective Time and
repaying in full the Closing Date Note immediately following (i) the Effective
Time and (ii) the consummation of the Reinsurance Transactions.  In addition,
Seller may request from the South Carolina Insurance Department (the “SCDOI”)
approval to pay up to $120,000,000 of the Closing Date Redemption Amount in cash
(the “Share Redemption Cash Consideration”); provided that if in the Purchaser’s
sole discretion such request would be likely to delay the approval (or
non-disapproval) of the Closing Date Share Redemption, then at Purchaser’s
request Seller shall take such actions as necessary to withdraw its request for
the approval of the Share Redemption Cash Consideration.

 

(b)                                 Seller shall or shall cause the Company to
deliver to Purchaser, on a weekly basis, a summary report of the Company’s cash
management strategy and activities.

 

Section 5.23                                Existing Surplus Note Repayment. 
Seller and Purchaser shall use their reasonable best efforts, subject to the
receipt of all Regulatory Approvals, to cause the Company to pay in full to
Seller the Existing Surplus Note Repayment Amount immediately prior to the
Closing Date Share Redemption.

 

Section 5.24                                Policyholder Lists.  After the date
of this Agreement, neither Seller nor any of its Affiliates (including, prior to
the Closing, the Company) shall share or provide any policyholder lists of the
Company or similar information with or to any Producer or other person, except
for the provision of any such information as required by judicial or
administrative process or, in the opinion of counsel to Seller or any of its
Affiliates, as applicable, by other requirements of Law.  For the avoidance of
doubt, nothing in this Section 5.24 shall require Seller or its Affiliates to
retrieve policyholder lists in possession of any Producers or other Persons as
of the date of this Agreement.

 

Section 5.25                                Announcement to Employees and
Producers.  Promptly after the date of this Agreement, the Parties shall
cooperate in the preparation and communication of an announcement of this
Agreement, the other Transaction Agreements or the transactions contemplated
hereby or thereby to the Employees of the Company and to Producers.

 

Section 5.26                                Portfolio Asset Activity.  Seller
shall or shall cause the Company to deliver to Purchaser, on a weekly basis, a
summary report of all transaction activity and other significant events with
respect to the Portfolio Assets.

 

Section 5.27                                Bank Accounts.  At least ten
(10) business days prior to the anticipated Closing Date, Seller shall cause the
Company to provide to Purchaser a list of the bank names, locations and account
numbers of all bank and safe deposit box accounts of the Company,

 

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including any custodial accounts for securities owned by the Company, and the
names of all persons authorized to draw thereon or to have access thereto.

 

Section 5.28                                Purchaser and Annuity Reinsurer
Capital.  During the period from the date of this Agreement until the Closing
(if the Closing occurs) or until the final resolution of all disputes between
Purchaser and Seller (if the Closing does not occur), except (a) as required by
applicable Law or (b) as Seller otherwise consents in writing in advance,
Purchaser shall (1) use its commercially reasonable efforts to, and cause
Annuity Reinsurer to use its commercially reasonable efforts to, preserve intact
its business and its Permits and maintain its material relationships and
goodwill with regulators and (2) not do, and cause Annuity Reinsurer not to do,
any of the following:

 

(a)                                  declare, set aside or pay any dividend or
distribution on any shares of capital stock or other equity interest, or
purchase, redeem, repay, repurchase or otherwise acquire any shares of its
capital stock or other equity interest, other than dividends or distributions
from Annuity Reinsurer to Purchaser;

 

(b)                                 adopt a plan of complete or partial
liquidation or rehabilitation or authorize or undertake a dissolution,
rehabilitation, consolidation, restructuring, or other similar reorganization;

 

(c)                                  fail to maintain (on a consolidated basis,
including both Purchaser and Annuity Reinsurer) at least $153,000,000 in
“statutory surplus” as defined under the Bermuda Insurance Act 1978 (not
including, for purposes of such calculation, (i) funds subject to the Escrow
Agreement or (ii) any assets backing such statutory surplus that are subject to
any mortgage, deed of trust, pledge, hypothecation, security interest,
encumbrance, claim, lien or charge of any kind, including collateral assignment
of assets for purposes of Regulation 114-type trusts, funds withheld accounts
and similar credit for reinsurance arrangements securing reinsurance obligations
except, in the case of subsection 5.28(c)(ii), for up to $5,000,000 in funds
withheld accounts, which may be included in the calculation of such statutory
surplus), which amount shall be invested in the instruments in which those
assets are invested as of the date of this Agreement, or in other debt
instruments with a ready market; or

 

(d)                                 authorize or enter into any Contract to do
any of the foregoing.

 

ARTICLE 6
Conditions to Closing

 

Section 6.1                                      Conditions to the Obligations
of the Counterparties and Seller.  The respective obligations of each Party to
effect the Closing are subject to the satisfaction (or waiver by such Party) on
or prior to the Closing Date of the following conditions:

 

(a)                                  No Injunctions.  No Governmental Order
preventing the consummation of the Purchase or the other transactions
contemplated by the Transaction Agreements shall be in effect; provided,
however, that, prior to invoking this provision, a Party shall have used its
reasonable best efforts (in cooperation with the other Parties) to have any such

 

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Governmental Order vacated or reversed without the imposition of a Burdensome
Condition on Purchaser, its Affiliates or the Company.

 

(b)                                 Approvals of Governmental Authorities. 
(i) All Governmental Authorizations listed on Section 3.5(a) of Seller’s
Disclosure Schedule, Section 4.3(a) of Purchaser’s Disclosure Schedule and
Schedule 6.1(b) shall have been obtained, in each case, without the imposition
of any Burdensome Condition, and (ii) any waiting period (and any extension of
such period) under the HSR Act applicable to the transactions contemplated by
this Agreement shall have expired or shall have been terminated without the
imposition of a Burdensome Condition; provided, that in the case of each of
clause (i) and (ii) of this Section 6.1(b), only Purchaser shall be entitled to
assert that the condition set forth in this Section 6.1(b) is not satisfied due
to the imposition of any Burdensome Condition.

 

(c)                                  No Actions.  No Action by any Governmental
Authority shall be pending that has the effect, or would have the effect, if
determined adversely, of preventing the consummation of the Purchase or any of
the other transactions contemplated by the Transaction Agreements or that
imposes any Burdensome Condition; provided, that only Purchaser shall be
entitled to assert that the condition set forth in this Section 6.1(c) is not
satisfied due to the imposition of any Burdensome Condition.

 

(d)                                 Closing Date Share Redemption Amount.  The
Department shall have approved (i) the Closing Date Share Redemption, including
the issuance of the Closing Date Note, in an amount not less than the ceding
commissions payable under the Closing Date Reinsurance Agreements, and (ii) the
repayment in full of the Closing Date Note immediately following the Effective
Time.

 

Section 6.2                                      Conditions to the Obligations
of the Counterparties.  The obligation of Purchaser to effect the Closing and
the obligations of Life Reinsurer to execute and deliver the Life Business
Reinsurance Agreement are subject to the satisfaction (or waiver by the
Counterparties) on or prior to the Closing of the following conditions:

 

(a)                                  Representations and Warranties.  The
representations and warranties of Seller and USA Holdco shall be true and
correct as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent they speak as of an
earlier date, in which case they shall be true and correct as though made on and
as of such earlier date); provided, however, that for purposes of determining
the satisfaction of this condition, no effect shall be given to any exception or
qualification in such representations and warranties relating to materiality or
Material Adverse Effect with respect to Seller or the Company, and provided,
further, that, for purposes of this condition, such representations and
warranties (other than those set forth in Sections 3.4 and 3.8(b), which shall
be true and correct in all respects) shall be deemed to be true and correct in
all respects unless the failure or failures of such representations and
warranties to be so true and correct would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect with respect to
Seller or the Company.  The

 

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Counterparties shall have received a certificate to such effect dated the
Closing Date and executed by a duly authorized officer of Seller.

 

(b)                                 Covenants.  The covenants and obligations of
Seller set forth in this Agreement to be performed on or prior to the Closing
shall have been duly performed in all material respects, and each Counterparty
shall have received a certificate to such effect dated the Closing Date and
executed by a duly authorized officer of Seller.

 

(c)                                  Excluded Assets and Excluded Liabilities. 
Prior to the Closing, Seller or one of its Affiliates (other than the Company)
and the Company shall have executed the Assignment Agreement.

 

(d)                                 Other Agreements.  Seller shall have
executed and delivered to the Counterparties each of the Transaction Agreements
to which it and such Counterparty is a party and shall have caused each
applicable Affiliate of Seller (including the Company) to execute and deliver to
the Counterparties each of the Transaction Agreements (other than the Closing
Date Reinsurance Agreements) to which such Affiliate of Seller and such
Counterparty are party.  The matters set forth on Schedule 6.2(d) shall have
been addressed as set forth therein.

 

Section 6.3                                      Conditions to the Obligations
of Purchaser.  The obligation of Purchaser to effect the Closing  is subject to
the satisfaction (or waiver by Purchaser) on or prior to the Closing of the
following additional conditions:

 

(a)                                  Resignations.  Such directors and officers
of the Company as requested by Purchaser in accordance with Section 2.4(b) shall
have tendered their written resignations from such director and officer
positions, effective upon consummation of the Closing.

 

(b)                                 Life Business Reinsurance Agreement.  Life
Reinsurer shall have executed and delivered the Life Business Reinsurance
Agreement.

 

Section 6.4                                      Conditions to the Obligations
of Seller.  The obligations of Seller to effect the Closing are subject to the
satisfaction (or waiver by Seller) on or prior to the Closing of the following
conditions:

 

(a)                                  Representations and Warranties.

 

(1)                                  The representations and warranties of
Purchaser shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except to the
extent they speak as of an earlier date, in which case they shall be true and
correct as though made on and as of such earlier date); provided, however, that
for purposes of determining the satisfaction of this condition, no effect shall
be given to any exception or qualification in such representations and
warranties relating to materiality or Material Adverse Effect with respect to
Purchaser, and provided, further, that, for purposes of this condition, such
representations and warranties shall be deemed to be so true and correct in all
respects unless the failure or failures of such representations and warranties
to be so true and correct would, individually or in the

 

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aggregate, reasonably be expected to result in a Material Adverse Effect with
respect to Purchaser.  Seller shall have received a certificate to such effect
dated the Closing Date and executed by a duly authorized officer of Purchaser.

 

(2)                                  The representations and warranties of Life
Reinsurer shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent they speak as of an earlier date, in which
case they shall be true and correct as though made on and as of such earlier
date); provided, however, that for purposes of determining the satisfaction of
this condition, no effect shall be given to any exception or qualification in
such representations and warranties relating to materiality or Material Adverse
Effect with respect to Life Reinsurer, and provided, further, that, for purposes
of this condition, such representations and warranties shall be deemed to be so
true and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct would, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect
with respect to Life Reinsurer.  Seller shall have received a certificate to
such effect dated the Closing Date and executed by a duly authorized officer of
Life Reinsurer.

 

(b)                                 Covenants.

 

(1)                                  The covenants and obligations of Purchaser
set forth in this Agreement to be performed on or prior to the Closing shall
have been duly performed in all material respects, and Seller shall have
received a certificate to such effect dated the Closing Date and executed by a
duly authorized officer of Purchaser.

 

(2)                                  The covenants and obligations of Life
Reinsurer set forth in this Agreement to be performed on or prior to the Closing
shall have been duly performed in all material respects, and Seller shall have
received a certificate to such effect dated the Closing Date and executed by a
duly authorized officer of Life Reinsurer.

 

(c)                                  Other Agreements.  Purchaser and Life
Reinsurer shall have executed and delivered to Seller each of the Transaction
Agreements to which Purchaser or Life Reinsurer is a party and shall have caused
each of their applicable Affiliates (including Annuity Reinsurer) to execute and
deliver to Seller each of the Transaction Agreements to which such Affiliate of
Purchaser or Life Reinsurer, as the case may be, is a party.

 

Section 6.5                                      Conditions to the Obligations
of Life Reinsurer(a)                   .  The obligations of Life Reinsurer to
execute and deliver the Life Business Reinsurance Agreement are subject to the
satisfaction (or waiver by Life Reinsurer) on or prior to Closing of the
following condition:

 

(a)                                  Life Business Reinsurance Agreement. 
Purchaser shall have caused the Company to execute and deliver the Life Business
Reinsurance Agreement.

 

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ARTICLE 7

Survival; Indemnification

 

Section 7.1                                      Survival.

 

(a)                                  The representations and warranties of the
Parties contained in or made pursuant to this Agreement or in any certificate
furnished pursuant to this Agreement shall survive the Closing for the periods
set forth in this Section 7.1.  All of the representations and warranties of
Seller and Purchaser contained in this Agreement shall terminate eighteen (18)
months after the Closing Date (and no claims shall be made for indemnification
under Section 7.2 or Section 7.3 thereafter), except that (i) the
representations and warranties contained in Section 3.1 (Organization and
Authority of Seller), Section 3.2 (Binding Effect), Section 3.3 (Organization,
Qualification and Authority of the Company), Section 3.4 (Capital Structure,
Ownership of Shares) and Section 3.19 (Finders’ Fees) (collectively, the “Seller
Specified Representations”) shall have no expiration date; (ii) the
representation and warranties contained in Section 3.16 (Insurance Matters) and
Section 3.24(g) (Insurance Business) shall terminate on the date that is
thirty-six (36) months after the Closing Date; (iii) the representations and
warranties contained in Section 7.9(a) (Organization and Authority of USA
Holdco) and Section 7.9(b) (Binding Effect) (such representations of USA Holdco,
collectively, the “USA Holdco Specified Representations”) shall have no
expiration date; (iv) the representations and warranties contained in
Section 4.1 (Organization and Authority of Purchaser), Section 4.2 (Binding
Effect) and Section 4.5 (Finders’ Fees) (such representations of Purchaser,
collectively, the “Purchaser Specified Representations”) shall have no
expiration date; (v) the representations and warranties contained in
Section 7.10(a) (Organization and Authority of Life Reinsurer),
Section 7.10(b) (Binding Effect) and Section 7.10(f) (Finders’ Fees) (such
representations of Life Reinsurer, collectively, the “Life Reinsurer Specified
Representations”) shall have no expiration date; (vi) the representations and
warranties contained in Section 3.10 (Taxes) and Section 3.11 (Employee
Benefits) shall terminate thirty (30) days after the expiration of the relevant
statute of limitations and (vii) the representations and warranties contained in
Section 3.18 (Environmental Matters) shall terminate on the date that is seven
(7) years after the Closing Date.

 

(b)                                 Except for covenants to be fully performed
on or prior to the Closing, or as specifically provided by their terms, each
covenant or agreement of the Parties contained in this Agreement shall survive
the Closing until fully performed.  For avoidance of doubt, the provisions of
Article 8 shall survive without limitation as to time.

 

(c)                                  Notwithstanding the foregoing, if notice of
any claim for indemnification under Section 7.2 or Section 7.3 hereof shall have
been given in accordance with Section 7.4 within the applicable survival period,
the representations, warranties, covenants and agreements that are the subject
of such indemnification claim shall survive with respect to such indemnification
claim until such claim is finally resolved.

 

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Section 7.2                                      Indemnification by Purchaser
and Life Reinsurer.

 

(a)                                  Except to the extent governed by Article 8
(Tax Matters) and subject to Section 7.2(b), Purchaser hereby agrees that it
shall indemnify, defend and hold harmless Seller, its Affiliates, and, if
applicable, their respective Representatives (the “Seller Indemnified Parties”)
from, against and in respect of, and reimburse any Seller Indemnified Party for,
any Losses imposed on, sustained, incurred or suffered by or asserted against
any of the Seller Indemnified Parties, to the extent arising from (1) any
inaccuracy or breach of any representation or warranty made by Purchaser
contained in this Agreement or in any certificate furnished by Purchaser
pursuant to this Agreement (determined, for the purposes of this Section 7.2(a),
without regard to any qualifications or references to “Knowledge,” “Material
Adverse Effect,” “material,” “in all material respects” or any other knowledge
or materiality qualification or references contained in any specific
representation or warranty); (2) any breach of any covenant, obligation or
agreement of Purchaser contained in this Agreement; and (3) the Annuity Business
Reinsurance Agreement, the Closing Date Share Redemption and any action related
thereto; provided, however, that the Seller Indemnified Parties will not be
entitled to indemnification under this Section 7.2(a) in the case of any alleged
breaches under clause (1) of this Section 7.2(a), to the extent Seller had
Knowledge of any such breach under clause (1) of this Section 7.2(a) prior to
the date hereof.

 

(b)                                 Purchaser shall not be liable to the Seller
Indemnified Parties for any Losses under Section 7.2(a)(1) (other than Losses to
the extent arising as a result of the inaccuracy or breach of any Purchaser
Specified Representation, as to which this Section 7.2(b) shall not apply)
(i) unless such Losses exceed an aggregate amount equal to $3,768,600, and then
only for Losses in excess of that amount and (ii) in excess of an aggregate
amount with respect to all Liabilities for Losses to all Seller Indemnified
Parties equal to $376,860,000.

 

(c)                                  Life Reinsurer hereby agrees that it shall
indemnify, defend and hold harmless the Seller Indemnified Parties from, against
and in respect of, and reimburse any Seller Indemnified Party for, any Losses
imposed on, sustained, incurred or suffered by or asserted against any of the
Seller Indemnified Parties, to the extent arising from (1) any inaccuracy or
breach of any representation or warranty made by Life Reinsurer contained in
this Agreement or in any certificate furnished by Life Reinsurer pursuant to
this Agreement (determined, for the purposes of this Section 7.2(c), without
regard to any qualifications or references to “Knowledge,” “Material Adverse
Effect,” “material,” “in all material respects” or any other knowledge or
materiality qualification or references contained in any specific representation
or warranty); (2) any breach of any covenant, obligation or agreement of Life
Reinsurer contained in this Agreement; and (3) the transactions contemplated by
the Life Business Reinsurance Agreement, the Closing Date Share Redemption and
any action related thereto; provided, however, that the Seller Indemnified
Parties will not be entitled to indemnification under this Section 7.2(c) in the
case of any alleged breaches under clause (1) of this Section 7.2(c), to the
extent Seller had Knowledge of any such breach under clause (1) of this
Section 7.2(c) prior to the date hereof.

 

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(d)                                 Life Reinsurer shall not be liable to the
Seller Indemnified Parties for any Losses under Section 7.2(c)(1) (other than
Losses to the extent arising as a result of the inaccuracy or breach of any Life
Reinsurer Specified Representation, as to which this Section 7.2(d) shall not
apply) (i) unless such Losses exceed an aggregate amount equal to $2,512,400,
and then only for Losses in excess of that amount and (ii) in excess of an
aggregate amount with respect to all Liabilities for Losses to all Seller
Indemnified Parties equal to $251,240,000.

 

(e)                                  It is understood and agreed that,
notwithstanding the joint exercise of their rights to the extent expressly
provided in this Agreement or the other Transaction Agreements, Purchaser and
Life Reinsurer are independent parties and that the indemnification and other
obligations of Purchaser and Life Reinsurer under this Agreement are several and
not joint.  Neither Purchaser nor Life Reinsurer is responsible for the
obligations of the other Party under this Agreement, and except as otherwise
specifically provided in this Agreement or the other Transaction Agreements, the
failure of either Purchaser or Life Reinsurer to perform any obligations
hereunder will not, in and of itself, give rise to liability on the part of, nor
prejudice the rights of, the other such Party hereunder.  Knowledge (including
actual knowledge of any alleged breach under clause (1) of Section 7.3(a) prior
to the date of this Agreement) of Purchaser, on the one hand, and Life
Reinsurer, on the other hand, shall not be imputed to the other Party.  Any
liability for indemnification under this Agreement shall be determined without
duplication of recovery by any Seller Indemnified Party by reason of the state
of facts giving rise to such liability constituting a Loss under
Section 7.2(a)(3) or Section 7.2(c)(3).

 

Section 7.3                                      Indemnification by Seller and
USA Holdco.

 

(a)                                  Except to the extent governed by Article 8
(Tax Matters) and subject to Section 7.3(b), Seller and USA Holdco hereby agree
that they shall, jointly and severally, indemnify, defend and hold harmless
Purchaser, its Affiliates (including, following the Closing, the Company), Life
Reinsurer and each of their respective Representatives (the “Purchaser
Indemnified Parties” and, collectively with the Seller Indemnified Parties, the
“Indemnified Parties”) from, against and in respect of, and reimburse any
Purchaser Indemnified Party for, any Losses imposed on, sustained, incurred or
suffered by or asserted against any of the Purchaser Indemnified Parties, to the
extent arising from (1) any inaccuracy or breach of any representation or
warranty made by Seller or USA Holdco contained in this Agreement, including,
for the avoidance of doubt, representations made under Section 3.16, or in any
certificate furnished by Seller or USA Holdco pursuant to this Agreement
(determined, for the purposes of this Section 7.3(a), other than with respect to
the representations or warranties in Sections 3.7(a), 3.7(b) and 3.8(b), without
regard to any qualifications or references to “Knowledge,” “Material Adverse
Effect,” “material,” “in all material respects” or any other knowledge or
materiality qualification or references contained in any specific representation
or warranty); (2) any breach of any covenant, obligation or agreement of Seller
or USA Holdco contained in this Agreement; (3) any Excluded Liabilities; and
(4) any matter set forth in Schedule 7.3(a); provided, however, that
(x) Purchaser, its Affiliates (including,

 

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following the Closing, the Company) and their Representatives will not be
entitled to indemnification under this Section 7.3(a) in the case of any alleged
breaches under clause (1) of this Section 7.3(a), to the extent that Purchaser
had Knowledge of any such breach under clause (1) of this Section 7.3(a) prior
to the date hereof and (y) Life Reinsurer and its Representatives will not be
entitled to indemnification under this Section 7.3(a) in the case of any alleged
breaches under clause (1) of this Section 7.3(a), to the extent that Life
Reinsurer had Knowledge of any such breach under clause (1) of this
Section 7.3(a) prior to the date hereof.

 

(b)                                 Except to the extent governed by Article 8
(Tax Matters), neither Seller nor USA Holdco shall be liable to any Purchaser
Indemnified Parties for (i) any Losses under Section 7.3(a)(1) (other than
Liability for Losses to the extent arising as a result of the inaccuracy or
breach of any Seller Specified Representation or any USA Holdco Specified
Representation, as to which this Section 7.3(b) shall not apply) unless such
Losses exceed an aggregate amount equal to $6,281,000, and then only for Losses
in excess of that amount, and (ii) for any Losses under Section 7.3(a)(1) (other
than Liability for Losses to the extent arising as a result of the inaccuracy or
breach of any Seller Specified Representation or any USA Holdco Specified
Representation, as to which this Section 7.3(b) shall not apply) or any Losses
for which Seller or USA Holdco is liable under Section 8.1(a)(4) in respect of
any breach of Seller’s representations in Sections 3.10(m), 3.10(n) and
3.10(o) in excess of an aggregate amount with respect to all Liabilities for
such Losses to all Purchaser Indemnified Parties equal to $157,025,000.

 

(c)                                  Notwithstanding anything contained herein
to the contrary, in no event shall Seller or USA Holdco have any obligations to
indemnify a Counterparty pursuant to this Section 7.3 for Losses to the extent
caused to such Counterparty by the other Counterparty.

 

Section 7.4                                      Claims.  Except to the extent
governed by Article 8 (Tax Matters):

 

(a)                                  In the event that any written claim or
demand for which an Indemnifying Party may have liability to any Indemnified
Party hereunder is asserted against or sought to be collected from any
Indemnified Party by a Third Party (or, solely for purposes of this Section 7.4
in the event that any Purchaser Indemnified Party becomes aware of any
circumstance that will result in a claim for indemnity against Seller or USA
Holdco arising from any inaccuracy in or breach of the representations set forth
in Section 3.16 (Insurance Matters) or a claim for Losses in respect of matters
described in Schedule 7.3(a)(1)) (such claim, demand or circumstance, a
“Third-Party Claim”) (for the avoidance of doubt, any claim, demand,
circumstance or Loss arising from any inaccuracy or breach of the
representations set forth in Section 3.16 or a claim for Losses in respect of
matters described in Schedule 7.3(a)(1) shall not be a Third-Party Claim under
or for purposes of Section 7.6(a), but shall be subject to the procedures set
forth in this Section 7.4 in respect of Third-Party Claims), such Indemnified
Party shall promptly notify the Indemnifying Party in writing of such
Third-Party Claim, which notice shall describe in reasonable detail the facts
and circumstances with respect to the subject matter of such Third-Party Claim
and any relevant time constraints relating thereto (a

 

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“Claim Notice”); provided, however, that the failure to give a timely Claim
Notice shall affect the rights of an Indemnified Party hereunder only to the
extent that such failure actually materially prejudices the Indemnifying Party
with respect to such Third-Party Claim.  Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, as promptly as reasonably practicable after
the Indemnified Party’s receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to such
Third-Party Claim.  With respect to any claim for indemnity arising from any
inaccuracy in or breach of the representations set forth in Section 3.16
(Insurance Matters), or a claim by any Purchaser Indemnified Party for Losses in
respect of matters described in Schedule 7.3(a)(1), the Purchaser Indemnified
Party shall notify Seller promptly if it becomes aware of any such inaccuracy,
breach or potential claim and the Purchaser Indemnified Parties shall be
entitled, under this Article 7, to indemnification for any Losses arising from
such inaccuracy or breach regardless of whether any Taxing Authority or any
other Third Party has made any assertion or taken any action with respect to
such inaccuracy or breach.  The Indemnifying Party shall have thirty (30) days
(or such lesser number of days set forth in the Claim Notice as may be required
by court proceeding in the event of a litigated matter) after receipt of the
Claim Notice (the “Notice Period”) to notify the Indemnified Party in writing
that it desires to defend, or negotiate on behalf of the Indemnified Party
against or in connection with such Third-Party Claim.

 

(b)                                 In the event that the Indemnifying Party
notifies the Indemnified Party in writing within the Notice Period that it
desires to defend the Indemnified Party against a Third-Party Claim, the
Indemnifying Party shall have the right to defend or negotiate on behalf of the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such negotiations or defense, with counsel of its choosing,
at its expense; provided, that such counsel is reasonably acceptable to the
Indemnified Party.  For the period following the Indemnified Party’s delivery of
a Claim Notice with respect to a Third-Party Claim and prior to the time it
receives a notice from the Indemnifying Party advising that the Indemnifying
Party will be assuming the defense of such Third-Party Claim, the Indemnified
Party may take any actions that are reasonably necessary to defend such
Third-Party Claim, and the Indemnifying Party shall be liable for the reasonable
fees and expenses of counsel employed by the Indemnified Party for such period,
which fees and expenses of counsel the Indemnifying Party shall reimburse the
Indemnified Party promptly upon written request therefor if the Third-Party
Claim is finally determined to be subject to indemnification by the Indemnifying
Party pursuant to this Article 7.  Once the Indemnifying Party has duly assumed
the defense of a Third-Party Claim, the Indemnified Party shall have the right,
but not the obligation, to participate in any such defense and to employ counsel
of its choosing, at its own expense, separate from the counsel employed by the
Indemnifying Party; provided, however, that, if the Indemnified Party has been
advised by its outside counsel there exists an actual conflict of interest
between the Indemnified Party and the Indemnifying Party, the Indemnifying Party
shall be liable for the fees and expenses of separate counsel employed by the
Indemnified Party.  If the Indemnifying Party shall have assumed the defense of
a Third-Party Claim, the Indemnified Party shall not admit any liability with
respect to, or pay, settle, compromise or discharge, such Third-Party Claim
without the

 

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Indemnifying Party’s prior written consent.  If the Indemnifying Party has
assumed the defense of a Third-Party Claim, the Indemnifying Party shall not,
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld, conditioned or delayed, admit any liability with
respect to, or pay, settle, compromise or discharge such Third-Party Claim;
provided, however, that the Indemnifying Party may pay, settle, compromise or
discharge such a Third-Party Claim without the written consent of the
Indemnified Party if such settlement (1) includes a complete and unconditional
release of the Indemnified Party from all liability in respect of such
Third-Party Claim, (2) does not subject the Indemnified Party to any injunctive
relief or other equitable remedy that would restrict the future activity or
conduct of the Indemnified Party or any of its Affiliates and (3) does not
result in any monetary liability for the Indemnified Party that will not be
promptly paid or reimbursed by the Indemnifying Party.  If the Indemnifying
Party assumes the defense of any Third-Party Claim arising from any inaccuracy
in or breach of the representations set forth in Section 3.16 (Insurance
Matters) or a claim for Losses under Section 7.3(a)(4), neither Seller nor USA
Holdco, or any of their Affiliates or Representatives, shall (1) submit any
written communication or document to the Internal Revenue Service or (2) send
any communication or documents to any purchaser, policyholder, account holder,
other holder or intended beneficiary of any Insurance Contract issued, assumed,
exchanged, modified or sold by the Company, relating to such Third-Party Claim
without the prior written consent of Life Reinsurer, if such claim relates to an
Insurance Contract reinsured under the Life Business Reinsurance Agreement, or
Purchaser, in all other cases, such consent not to be unreasonably withheld,
delayed or conditioned.

 

(c)                                  If the Indemnifying Party (1) elects not to
defend the Indemnified Party against a Third-Party Claim, whether by not giving
the Indemnified Party timely notice of its desire to so defend or otherwise or
(2) after assuming the defense of a Third-Party Claim, fails to take reasonable
steps necessary to defend such Third-Party Claim within thirty (30) days after
receiving written notice from the Indemnified Party to the effect that the
Indemnifying Party in good faith determines that the Indemnifying Party has so
failed, the Indemnified Party shall have the right but not the obligation to
assume its own defense; it being understood that the Indemnified Party’s right
to indemnification for a Third-Party Claim shall not be adversely affected by
assuming the defense of such Third-Party Claim.

 

(d)                                 The Indemnified Party and the Indemnifying
Party shall cooperate in order to ensure the proper and adequate defense or
prosecution of a Third-Party Claim.  Such cooperation shall include the
retention and (upon any Indemnified Party’s or Indemnifying Party’s request) the
provision of records and information which are relevant to such Third-Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.

 

(e)                                  The Indemnified Party and the Indemnifying
Party shall use reasonable best efforts to avoid production of confidential
information (consistent with applicable Law), and to cause all communications
among employees, counsel and others

 

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representing any party to a Third-Party Claim to be made so as to preserve any
applicable attorney-client or work-product privileges.

 

(f)                                    The indemnities provided in this
Agreement shall survive the Closing; provided, however, that the indemnities
provided under Section 7.2(a)(1), Section 7.2(b)(1) or Section 7.3(a)(1) shall
terminate when the applicable representation or warranty terminates pursuant to
this Agreement, except as to any item as to which the Person to be indemnified
shall have, before the expiration of the applicable period, previously delivered
a Claim Notice.

 

Section 7.5                                      Characterization of
Indemnification Payments.

 

(a)                                  All amounts paid by Seller, USA Holdco and
Purchaser under this Article 7 and Article 8 shall, to the maximum extent
permitted by applicable Law, be treated for all Tax purposes as adjustments to
the Purchase Price.

 

(b)                                 All amounts paid by Seller or USA Holdco
pursuant to an indemnification of Life Reinsurer, or by Life Reinsurer under
this Article 7 shall, to the maximum extent permitted by applicable Law, be
treated for all Tax purposes as adjustments made under the Life Business
Reinsurance Agreement.

 

Section 7.6                                      Computation of Losses Subject
to Indemnification.

 

(a)                                  Purchaser, Life Reinsurer, Seller and USA
Holdco agree, on behalf of all Purchaser Indemnified Parties and Seller
Indemnified Parties, that Losses hereunder shall be limited to actual monetary
damages only and shall not include any exemplary, consequential (including lost
profits) or punitive damages; provided, that Losses shall include (i) lost
profits in respect of any claim under Sections 7.2(a)(2), 7.2(c)(2) or
7.3(a)(2) and (ii) any such exemplary, consequential (including lost profits)
and punitive damages awarded by a court of competent jurisdiction in respect of
a Third-Party Claim.  Except to the extent governed by Article 8 (Tax Matters),
any Indemnified Party seeking indemnification under this Agreement shall use
reasonable efforts to mitigate the amount of its Losses, including, subject to
Section 7.6(b), by using reasonable efforts to recover from insurance policies
or other applicable sources of recovery, any Losses of such Indemnified Parties;
it being understood that in the event that an Indemnified Party’s rights against
a Third Party with respect to any occurrence, claim or loss that results in a
payment by an Indemnifying Party under this Article 7, such Indemnifying Party
shall be subrogated to such rights to the extent of such payment; provided,
further, that the Purchaser Indemnified Parties shall use their reasonable
efforts to protect and preserve any rights to indemnification from Third Parties
to which the Company is entitled as of the date of this Agreement (the “Company
Indemnification Rights”) and the Purchaser Indemnified Parties shall not take
any action that would prejudice or adversely affect any Company Indemnification
Right without the written consent of Seller.

 

(b)                                 The Indemnified Parties’ obligations under
this Section 7.6 shall not, nor shall they be construed to, require Purchaser,
Life Reinsurer or any of their respective

 

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Affiliates to (i) mitigate, net or reduce the amount of their Losses or
(ii) otherwise reimburse an Indemnifying Party, in each of case (i) and (ii), to
the extent doing so would require any of them to recover any payments pursuant
to any agreement entered into by such Indemnified Party with Purchaser, Life
Reinsurer or any of their respective Affiliates in connection with the
transactions contemplated by the Transaction Agreements, nor shall such
Indemnifying Party be subrogated to any right under any such agreement in
respect of any payment made by an Indemnifying Party; provided, however, that
such Indemnified Parties shall nevertheless be required to use reasonable
efforts to recover ordinary course policyholder claims under the Closing Date
Reinsurance Agreements (but not Extra-Contractual Obligations, as defined
therein).

 

(c)                                  Seller and USA Holdco shall be liable for
the reasonable out-of-pocket fees and expenses incurred by the Purchaser
Indemnified Parties that are directly related to the pursuit by the Purchaser
Indemnified Parties of recoveries from insurance policies or Third Parties in
accordance with Section 7.6(a); provided, however, that Seller and USA Holdco
shall only be liable to Purchaser Indemnified Parties for such fees and expenses
if Purchaser Indemnified Parties consult with Seller or USA Holdco with respect
to the pursuit of any such recovery and the incurrence of any such fees and
expenses (including the Persons to whom such fees or expenses are contemplated
to be paid).

 

(d)                                 Any liability for indemnification under this
Agreement shall be determined without duplication of recovery by reason of the
state of facts giving rise to such liability constituting a breach of more than
one representation or warranty or agreement and shall be net of any insurance or
other recoveries (subject to Section 7.6(b)) relating to the relevant claims
actually received by the Indemnified Party (after taking into account any
deductibles, copayments or other cost-sharing arrangements) in connection with
the facts giving rise to such right of indemnification, net of all actual
out-of-pocket costs and expenses reasonably incurred by the Indemnified Party in
obtaining such recovery, but it being understood and agreed that Purchaser and
Life Reinsurer shall not be indemnified by Seller or USA Holdco in respect of
the same Loss except to the extent (and solely to the extent) that Purchaser and
Life Reinsurer have each actually suffered such Loss or portion thereof.  If the
Indemnified Party or an Affiliate receives any amounts under applicable
insurance policies or from any other Person (subject to Section 7.6(b)) alleged
to be responsible for any Losses, subsequent to an indemnification payment by
the Indemnifying Party, then such Indemnified Party shall promptly reimburse the
Indemnifying Party for any payment made or expense incurred by such Indemnifying
Party in connection with providing such indemnification payment up to the amount
received by the Indemnified Party or its Affiliate, net of all actual
out-of-pocket costs and expenses reasonably incurred by the Indemnified Party in
obtaining such recovery.

 

(e)                                  No Loss shall be recoverable by any
Indemnified Party with respect to any matter to the extent (but only to the
extent) reflected or reserved against in the preparation of the Final Balance
Sheet.  In calculating the amount of any Loss, there shall be deducted an amount
equal to any net Tax benefit realized as a result of such Loss by

 

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the party claiming such Loss, and there shall be added an amount equal to any
Tax imposed (including the utilization of a Tax loss or Tax credit carried
forward) on the receipt of any indemnity payment with respect thereto.  All such
calculations shall be made at the time of the relevant indemnification payment
using reasonable assumptions (as agreed to by the Indemnifying Party and the
Indemnified Party) and present value concepts (using a discount rate equal to
the applicable federal rate in effect at the time of the event giving rise to
the Loss (based on the federal mid-term rate)).

 

Section 7.7                                      Remedies.  Except in the case
of fraud or as otherwise specifically provided herein, from and after the
Closing, the remedies provided in this Article 7 shall be the exclusive monetary
remedies of the Indemnified Parties from and after the Closing in connection
with any breach or inaccuracy of a representation or warranty or non-performance
of any covenant or agreement contained herein or any breach or inaccuracy of any
certificate or any Excluded Liabilities.  For the avoidance of doubt, nothing in
this Article 7 shall affect any right to indemnification under the terms of any
other agreement between Purchaser and its Affiliates (including, after the
Closing, the Company) or Life Reinsurer and its Affiliates, on the one hand, and
Seller and its Affiliates, on the other hand.

 

Section 7.8                                      No Right of Contribution.  None
of Seller or USA Holdco or any of their Affiliates shall have any right of
contribution against the Company with respect to any inaccuracy, breach or
failure to timely perform any of Seller’s or USA Holdco’s representations,
warranties, covenants or agreements contained in this Agreement.

 

Section 7.9                                      Representations and Warranties
of USA Holdco.

 

(a)                                  Organization and Authority of USA Holdco. 
USA Holdco (a) is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware, (b) has all requisite power to
operate its business as now conducted and (c) is duly qualified as a foreign
corporation to do business, and is in good standing (if applicable), in each
jurisdiction where the conduct of its business or the ownership or leasing of
its properties requires such qualification, except where failure to so qualify
or be in good standing would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect with respect to the Company
or Seller.  USA Holdco and each applicable Affiliate of USA Holdco has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform their obligations hereunder.  No additional corporate proceedings
on the part of USA Holdco or any applicable Affiliate of USA Holdco are
necessary to authorize the consummation of this Agreement or the transactions
contemplated hereby.

 

(b)                                 Binding Effect.  This Agreement and each of
the other Ancillary Agreements has been, or upon execution and delivery thereof,
will be, duly and validly authorized, executed and delivered by USA Holdco and
constitutes a valid and legally binding obligation of USA Holdco enforceable
against USA Holdco in accordance with its terms, subject to the Bankruptcy and
Equity Exceptions.

 

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(c)                                  Governmental Filings and Consents.  No
Governmental Authorization is required to be made or obtained by USA Holdco in
connection with the execution, delivery or performance by USA Holdco of this
Agreement, or the consummation by USA Holdco of the transactions contemplated
hereby, except for (a) any notification and report form required to be filed
under the HSR Act with the Federal Trade Commission and the Antitrust Division
of the Department of Justice and (b) the consents, approvals, waivers,
registrations, notices and filings set forth in Section 3.5(a) of Seller’s
Disclosure Schedule, Section 4.3(a) of Purchaser’s Disclosure Schedule and
Schedule 6.1(b).

 

(d)                                 No Violations.  Subject to receipt of the
Governmental Authorizations and other consents, approvals and authorizations and
the making of the filings, registrations, notices and waivers referred to in
Section 7.9(c), and the expiration of related waiting periods, the execution,
delivery and performance by USA Holdco of this Agreement, and the consummation
by USA Holdco of the transactions contemplated hereby do not and will not
(1) constitute a breach or violation of, or a default under, or give rise to any
Encumbrance (other than Permitted Encumbrances) or any acceleration of remedies,
penalty, material increase or decrease in benefit payable or right of
termination under any Material Contract, (2) constitute a breach or violation
of, or a default under, the organizational documents of USA Holdco or
(3) subject to Section 7.9(c), conflict with or violate in any material respect
any Law or other Governmental Authorization applicable to USA Holdco or by which
it or any of its properties or assets is bound or subject, except, in the case
of clause (1), as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect with respect to Seller or the
Company and in the case of clause (3), for any such conflict or violation
arising as a result of the regulatory status of or any Governmental
Authorizations held or not held by Purchaser, Life Reinsurer or their respective
Affiliates.

 

(e)                                  No Other Representations or Warranties
Controls.  Except for the representations and warranties contained in Article 3
and Section 7.9, none of USA Holdco, Seller, the Company or any other Person
makes any other express or implied representation or warranty on behalf of USA
Holdco, Seller, the Company or otherwise in respect of the Company Business or
the Shares.

 

Section 7.10                                Representations and Warranties of
Life Reinsurer.

 

(a)                                  Organization and Authority of Life
Reinsurer.  Life Reinsurer (a) is an insurance company duly incorporated,
validly existing and in good standing under the Laws of the State of Tennessee,
(b) has all requisite power to operate its business as now conducted and (c) is
duly qualified as a foreign corporation to do business, and is in good standing
(if applicable), in each jurisdiction where the conduct of its business or the
ownership or leasing of its properties requires such qualification, except where
failure to so qualify or be in good standing would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect with
respect to Life Reinsurer.  Life Reinsurer has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder.  No additional corporate proceedings on the part of Life Reinsurer or
any applicable Affiliate of Life Reinsurer are

 

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necessary to authorize the consummation of this Agreement or the transactions
contemplated hereby.

 

(b)                                 Binding Effect.  This Agreement and each of
the other Ancillary Agreements to which Life Reinsurer is or will be a party has
been, or upon execution and delivery thereof, will be, duly and validly
authorized, executed and delivered by Life Reinsurer and constitutes, or will
constitute, a valid and legally binding obligation of Life Reinsurer enforceable
against Life Reinsurer in accordance with its terms, subject to the Bankruptcy
and Equity Exceptions.

 

(c)                                  Governmental Filings and Consents.  No
Governmental Authorization is required to be made or obtained by Life Reinsurer
in connection with the execution, delivery or performance by Life Reinsurer of
this Agreement, or the consummation by Life Reinsurer of the transactions
contemplated hereby to be consummated by it except for the consents, approvals,
waivers, registrations, notices and filings set forth in Section 3.5(a) of
Seller’s Disclosure Schedule, Section 4.3(a) of Purchaser’s Disclosure Schedule
and Schedule 6.1(b).

 

(d)                                 Life Business Reinsurance Agreement
Governmental Filings and Consents.  Schedule 6.1(b) sets forth all Governmental
Authorizations to be made or obtained by Life Reinsurer, any of its Affiliates
or the Company in connection with the execution, delivery or performance of the
Life Business Reinsurance Agreement.

 

(e)                                  No Violations.  Subject to receipt of the
Governmental Authorizations and other consents, approvals and authorizations and
the making of the filings, registrations, notices and waivers referred to in
Section 7.10(c), and the expiration of related waiting periods, the execution,
delivery and performance by Life Reinsurer of this Agreement, and the
consummation by Life Reinsurer of the transactions contemplated hereby to be
consummated by it do not and will not (1) constitute a breach or violation of,
or a default under, or give rise to any Encumbrance (other than Permitted
Encumbrances) or any acceleration of remedies, penalty, material increase or
decrease in benefit payable or right of termination under any material Contract
to which Life Reinsurer or any of its properties or assets is subject or bound,
(2) constitute a breach or violation of, or a default under, the organizational
documents of Life Reinsurer or (3) subject to Section 7.10(c), conflict with or
violate in any material respect any Law or other Governmental Authorization
applicable to Life Reinsurer by which it or any material portion of its
properties or assets is bound or subject, except in the case of clause (1), as
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect with respect to Life Reinsurer and in the case of
clause (3), for any such conflict or violation arising as a result of the
regulatory status of or any Governmental Authorizations held or not held by
Purchaser, Seller or their respective Affiliates.

 

(f)                                    Finders’ Fees.  No investment banker,
broker, financial advisor, finder or other intermediary has been retained by or
is authorized to act on behalf of Life Reinsurer or any of its Affiliates who
might be entitled to any fee or commission from Seller or the Company in
connection with the transactions contemplated by this Agreement.  Life

 

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Reinsurer shall bear 100% of the cost of any fee or commission payable to any
investment banker, broker, financial advisor, finder or other intermediary who
has been retained by Life Reinsurer or any of its Affiliates.

 

(g)                                 Financial Capability.  On the Closing Date,
Life Reinsurer will have sufficient funds available to it to consummate the
transactions contemplated by the Life Business Reinsurance Agreement.

 

(h)                                 Investigation by Life Reinsurer.  Life
Reinsurer acknowledges that it has made its own inquiry and investigation into,
and based thereon, has formed an independent judgment concerning the Company and
its business.

 

(i)                                     No Impediments.  There is no Action
pending or, to Life Reinsurer’s Knowledge, threatened, against Life Reinsurer or
any of its Affiliates (as applicable) that would reasonably be likely,
individually or in the aggregate, to materially impair or delay the ability of
Life Reinsurer to obtain those of the Regulatory Approvals to be obtained by
Life Reinsurer or its respective Affiliates or materially impair or delay the
ability of Life Reinsurer to effect the Closing.

 

(j)                                     No Other Representations or Warranties
Controls.  Except for the representations and warranties contained in this
Section 7.10, neither Life Reinsurer nor any other Person makes any express or
implied representation or warranty on behalf of Life Reinsurer to Seller.

 

ARTICLE 8
Tax Matters

 

Section 8.1                                      Tax Indemnity.

 

(a)                                  Seller and USA Holdco shall be liable for
and pay, and agree that they shall, jointly and severally indemnify, defend and
hold harmless any Purchaser Indemnified Party from, against and in respect of,
and reimburse any Purchaser Indemnified Party for, any Taxes, and any reasonable
expenses, including reasonable fees for outside attorneys and other outside
consultants, incurred in connection with any such Taxes  (1) imposed on any
member of Seller’s Group (other than the Company) for any taxable year;
(2) imposed on the Company or for which the Company may otherwise be liable for
any Pre-Closing Tax Period (other than Excluded Taxes); (3) imposed on the
Company by reason of the Company being a member of any affiliated, consolidated,
unitary, or combined group for a Tax period ending on or before the Closing Date
(including Taxes imposed by reason of Treasury Regulation Section 1.1502-6 or
any comparable provision of state, local or foreign law) or as a transferee or
successor under any Tax allocation, sharing or assumption agreement or by
operation of Law with respect to such period; (4) resulting from any breach of
Seller’s representations as set forth in Section 3.10; and (5) resulting from
any breach of Seller’s covenants as set forth in Section 5.2(q) and this
Section 8.1.  Neither Seller nor USA Holdco shall have an obligation to
indemnify any Purchaser Indemnified Party for Taxes of the Company for a

 

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Pre-Closing Tax Period to the extent a Tax Attribute from a Pre-Closing Tax
Period is applied to reduce the Liability of the Company for such Taxes other
than an obligation resulting from a breach of the representation as set forth in
Section 3.10(m).  Except to the extent reflected as an asset (or otherwise taken
into account) in the calculation of Final Adjusted Capital and Surplus, Seller
shall be entitled to any refund or credit of Taxes of the Company received for
Pre-Closing Tax Periods, and Purchaser shall transfer (or cause to be
transferred) the amount of any such refund or credit to Seller (net of any
increase in Taxes payable by Purchaser or the Company as a result of receiving
such refund or credit) within three (3) Business Days of the receipt or
entitlement thereto.  In the event that any refund or credit of Taxes for which
a payment has been made to Seller is subsequently reduced or disallowed, Seller
shall indemnify and hold harmless Purchaser for any Tax assessed against
Purchaser or the Company by reason of such reduction or disallowance (net of any
Tax benefit resulting from such reduction or disallowance).

 

(b)                                 Purchaser shall be liable for and pay, and
hereby agrees that it shall indemnify, defend and hold harmless any Seller
Indemnified Party from, against and in respect of, and reimburse any Seller
Indemnified Party for, any (1) Taxes, and any reasonable expenses, including
reasonable fees for outside attorneys and other outside consultants, incurred in
connection with any such Taxes of the Company for any Post-Closing Tax Period
and (2) Excluded Taxes and any reasonable expenses, including reasonable fees
for outside attorneys and other outside consultants, incurred in connection with
any such Excluded Taxes; provided, however that Purchaser shall not be liable
for or pay, and shall not indemnify, defend and hold harmless any Seller
Indemnified Party from any Taxes, and any reasonable expenses, including
reasonable fees for outside attorneys and other outside consultants, incurred in
connection with any such Taxes, to the extent arising from Taxes for which
Seller is liable pursuant to Section 8.1(a).  All refunds that are not described
in the last two sentences of Section 8.1(a) shall be for the account of
Purchaser.

 

(c)                                  For purposes of Sections 8.1(a) and (b), in
the case of any Straddle Period, the portion of any Tax that is allocable to the
Pre-Closing Tax Period shall be:

 

(1)                                  in the case of Taxes that are either
(x) based upon or related to income, premiums or receipts or (y) imposed in
connection with any sale or other transfer or assignment of property (real or
personal, tangible or intangible) (other than conveyances pursuant to this
Agreement), deemed equal to the amount which would be payable if the taxable
year ended at the Effective Time; and

 

(2)                                  in the case of Taxes imposed on a periodic
basis with respect to the assets of the Company, or otherwise measured by the
level of any item, deemed to be the amount of such Taxes for the entire period
(or, in the case of such Taxes determined on an arrears basis, the amount of
such Taxes for the immediately preceding period), multiplied by a fraction the
numerator of which is the number of calendar days in the period ending on the
Closing Date and the denominator of which is the number of calendar days in the
entire period.

 

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(d)                                 All excise, sales, use, transaction,
conveyance, stock transfer, value-added, transfer (including real property
transfer or gains), stamp, documentary, filing, recordation, and other similar
Taxes, levies, or assessments, together with any interest, additions, or
penalties with respect thereto and any interest in respect of such additions or
penalties, resulting from the transactions contemplated by this Agreement shall
be borne one-half by Purchaser and one-half by Seller.

 

(e)                                  Except as provided in Section 7.3(b)(ii) no
indemnification provided for under this Section 8.1 shall be subject to any of
the limitations of Section 7.3(b).

 

Section 8.2                                      Tax Returns.

 

(a)                                  Seller shall prepare and file or cause to
be prepared and filed when due (taking into account all extensions properly
obtained):  (1) all Tax Returns that are required to be filed by or with respect
to the Company on a combined, consolidated or unitary basis with Seller or any
Affiliate of Seller and (2) all other Tax Returns that are required to be filed
by or with respect to the Company on or before the Closing Date.  Seller shall
pay any Taxes due in respect of such Tax Returns. Any Tax Return described in
this Section 8.2(a) shall be prepared in a manner consistent in all material
respects with past practice and without a change of any election or accounting
method except to the extent required by applicable Law.  Any such Tax Returns on
which the Company’s address is required to be provided (including the IRS
Form 1120-L and any separately filed Tax Returns of the Company) shall use
P.O. Box 1389, Greenville SC 29602-1389 as the Company’s address.

 

(b)                                 Purchaser shall prepare and file or cause to
be prepared and filed when due (taking into account all extensions properly
obtained) all other Tax Returns that are required to be filed by or with respect
to the Company.  Purchaser shall pay any Taxes due in respect of such Tax
Returns.  With respect to Tax Returns required to be filed by Purchaser with
respect to any Pre-Closing Tax Period and any Straddle Period, Purchaser shall
prepare such Tax Returns in a manner reasonably consistent with past practice of
the Company and Seller, and shall provide Seller with copies of any such Tax
Returns no less than thirty (30) days prior to the due date for such Tax
Returns, taking into account all available extensions (or, if such due date is
within 30 days following the Closing Date, as promptly as practicable following
the Closing Date).  Seller shall have the right to review and comment on such
Tax Returns.  Seller or USA Holdco shall pay Purchaser the Taxes for which
Seller or USA Holdco is liable pursuant to Section 8.1(a) but which are payable
with Tax Returns to be filed by Purchaser pursuant to Section 8.2(a) and
(b) within five (5) Business Days prior to the due date for payment of such Tax.

 

Section 8.3                                      Contest Provisions.

 

(a)                                  Purchaser shall promptly notify Seller in
writing upon receipt by Purchaser, any of its Affiliates or the Company of
notice of any pending or threatened Tax Contest that may affect the Tax
liabilities of the Company for which Seller or USA Holdco would be required to
indemnify Purchaser pursuant to Section 8.1(a); provided,

 

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that Purchaser’s failure so to notify Seller shall not limit Purchaser’s rights
under this Article 8 except to the extent Seller is materially prejudiced by
such failure.

 

(b)                                 Seller and USA Holdco shall have the right
to represent the Company’s interests in any Tax Contests relating solely to
taxable years or periods ending on or before the Closing Date, and to employ
counsel of their choice at their expense, provided, that Seller and USA Holdco
shall have first notified Purchaser in writing (1) of their intention to do so;
(2) the identity of counsel, if any, chosen by Seller or USA Holdco in
connection therewith; and (3) that Seller and USA Holdco agree that Seller and
USA Holdco shall be liable for any Taxes and any reasonable expenses, including
reasonable fees for outside attorneys and other outside consultants incurred in
connection with any such Taxes that result from such audit or proceeding. 
Notwithstanding anything to the contrary contained herein, none of Seller or USA
Holdco shall be entitled to settle, either administratively or after the
commencement of litigation, any claim for Taxes that would materially adversely
affect the liability for Taxes of Purchaser or for which Purchaser and the
Company are not entitled to full indemnification pursuant to this Agreement
(including, but not limited to, the imposition of income tax deficiencies, the
calculation of reserve items, the reduction of asset bases or cost adjustments,
the lengthening of any amortization or depreciation periods, the denial of
amortization or depreciation deductions, or the reduction of loss or credit
carryforwards) without the prior written consent of Purchaser.  Such consent
shall not be unreasonably withheld, delayed or conditioned.

 

(c)                                  Seller and USA Holdco shall be entitled to
participate at their own expense in the defense of any other Tax Contest which
may be the subject of indemnification by Seller or USA Holdco pursuant to
Section 8.1(a) and, with the written consent of Purchaser, which consent shall
be granted at the sole discretion of Purchaser, and at Seller’s or USA Holdco’s
sole expense, may assume the entire defense of such tax claim.  Neither
Purchaser nor the Company shall be entitled to settle, either administratively
or after the commencement of litigation, any claim for Taxes that would be the
subject of indemnification by Seller or USA Holdco under Section 8.1(a) without
the prior written consent of Seller and USA Holdco, which consent shall not be
unreasonably withheld, delayed or conditioned.

 

(d)                                 Any Indemnified Party seeking
indemnification under this Article 8 shall use reasonable efforts to mitigate
the amount of its Taxes (and any reasonable expenses, including reasonable fees
for outside attorneys and other outside consultants incurred in connection with
any such Taxes), provided that no Party shall be required to concede the amount
of any Tax for which such Party is liable in order to mitigate the Taxes of
another Party.

 

Section 8.4                                      Assistance and Cooperation. 
After the Closing Date, Seller, on the one hand, and Purchaser, on the other
hand, shall:

 

(a)                                  assist (and cause their respective
Affiliates to assist) the other party in preparing and filing (including, if
reasonably requested, taking over the preparation and

 

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filing of) any Tax Returns or reports that such other party is responsible for
preparing and filing in accordance with Section 8.2;

 

(b)                                 cooperate fully in preparing for any Tax
Contests regarding any Tax Returns of the Company, including providing any
necessary power of attorney;

 

(c)                                  make available to the other and to any
Taxing Authority as reasonably requested all information, records, and documents
(including, for the avoidance of doubt, work papers) relating to Taxes of the
Company;

 

(d)                                 provide timely notice to the other in
writing of any pending or threatened Tax Contests or tax assessments of the
Company for taxable periods for which the other may have a liability under
Section 8.1; and

 

(e)                                  furnish the other with copies of all
correspondence received from any taxing authority in connection with any tax
audit or information request with respect to any such taxable period.

 

Section 8.5                                      Miscellaneous.

 

(a)                                  Any tax allocation or sharing agreement or
arrangement, whether or not written, that may have been entered into by Seller
or any member of Seller’s Group and the Company shall be terminated as to the
Company as of the Closing, and no payments that are owed by or to the Company
and are attributable to periods after the Closing pursuant thereto shall be made
thereunder.

 

(b)                                 The obligations of the parties set forth in
this Article 8 shall be unconditional and absolute and shall remain in effect
without limitation as to time.

 

Section 8.6                                      Coordination with Article 7. 
If there shall be any conflicts between the provisions of this Article 8 and
Article 7, the provisions of this Article 8 shall control.

 

ARTICLE 9
Termination

 

Section 9.1                                      Termination.  This Agreement
may be terminated, and the Purchase and the other transactions contemplated by
this Agreement abandoned, at any time prior to the Closing:

 

(a)                                  by written agreement of the Parties;

 

(b)                                 by the Counterparties, acting together, or
Seller, by giving written notice of such termination to the other Party or
Parties, if the Closing shall not have occurred prior to April 30, 2011.

 

(c)                                  by the Counterparties, acting together, or
Seller, by giving written notice of such termination to the other Party or
Parties, in the event of (1) the issuance of a final,

 

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non-appealable Governmental Order by any Governmental Authority permanently
restraining or prohibiting the Purchase or the consummation of the other
transactions contemplated by the Transaction Agreements or (2) the enactment of
any statute, or the promulgation of any rule or regulation by any Governmental
Authority prohibiting the Purchase or the consummation of the Transaction
Agreements; provided, however, that prior to invoking this provision as a result
of any such prohibition or restraint, the Party or Parties invoking it, shall
negotiate in good faith with the other Party or Parties to attempt to agree to
modify the transactions, on mutually acceptable terms and on an equitable basis
(including by implementing alternative means of structuring the transactions
mutually satisfactory), in a way that would eliminate such restraint or
prohibition;

 

(d)                                 so long as neither Counterparty is in
material breach of their respective obligations under this Agreement, by the
Counterparties, acting together, by giving written notice of such termination to
Seller, if Seller shall breach or fail to comply with any representation,
warranty, covenant or agreement contained herein with which it is required to
comply, which breach or non-compliance would cause the failure to satisfy a
condition to closing set forth in Section 6.2 or Section 6.3, and in any such
case such breach or non-compliance is incapable of being cured or, if capable of
being cured, is not cured within sixty (60) days after the Counterparties have
notified Seller in writing of their intent to terminate this Agreement pursuant
to this Section 9.1(d); or

 

(e)                                  so long as Seller is not in material breach
of its obligations under this Agreement, by Seller, by giving written notice of
such termination to the other Parties, if Purchaser or Life Reinsurer shall
breach or fail to comply with any representation, warranty, covenant or
agreement contained herein with which it is required to comply, which breach or
non-compliance would cause the failure to satisfy a condition to closing set
forth in Section 6.4, and in any such case such breach or non-compliance is
incapable of being cured or, if capable of being cured, is not cured within
sixty (60) days after Seller has notified the Counterparties, as applicable, in
writing of its intent to terminate this Agreement pursuant to this
Section 9.1(e).

 

Section 9.2                                      Effect of Termination.  If this
Agreement is terminated in accordance with Section 9.1 hereof, this Agreement
shall thereafter become null and void and of no further force and effect, and no
Party hereto shall have any liability to any other Party hereto or their
respective Affiliates, or their respective Representatives, except that (1) the
obligations of the Parties hereto contained in the Purchaser Confidentiality
Agreement and the Life Reinsurer Confidentiality Agreement and in Section 5.1
with respect to confidentiality obligations, this Section 9.2 and Article 10
hereof and the Escrow Agreement (to the extent provided therein) shall survive
such termination, and (2) such termination will not relieve any Party from
liability to the extent that such termination was caused by the willful
misconduct, fraud or intentional breach by such Party of its obligations under
this Agreement prior to such termination.

 

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ARTICLE 10
Miscellaneous

 

Section 10.1                                Notices.  All notices or other
communications hereunder shall be deemed to have been duly given and made if in
writing and if served by personal delivery upon the Party for whom it is
intended, if delivered by registered or certified mail, return receipt
requested, or by a national courier service, or if sent by facsimile or e-mail;
provided, that the facsimile or e-mail is promptly confirmed, to the Person at
the address set forth below, or such other address as may be designated in
writing hereafter, in the same manner, by such Person.  Any such notice shall be
deemed given when so delivered personally by courier or by overnight delivery
service or sent by facsimile transmission (and immediately after transmission
receipt of which has been confirmed by telephone by the sender), sent by e-mail
(and immediately after transmission receipt of which has been confirmed by
telephone by the sender) or, if mailed, four (4) Business Days after the mailing
as follows:

 

To Purchaser:

 

Athene Holding Ltd.

44 Church Street

Hamilton, HM12

Bermuda

Telephone:  (441) 279-8412

Facsimile:  (441) 279-8401 Attn:  President and General Counsel

Email: cgillis@athenelifere.bm; tshanafelt@athenelifere.bm

 

With copies (which shall not constitute notice) to:

 

Sidley Austin LLP

1 South Dearborn

Chicago, Illinois  60603

Telephone:  (312) 853-7061

Facsimile:  (312) 853-7036

Attn:  Perry J. Shwachman, Esq.

Email:  pshwachman@sidley.com

 

and

 

Sidley Austin LLP

787 Seventh Avenue

New York, New York  10019

Telephone:  (212) 839-5835

Facsimile:  (212) 839-5599

Attn:  Jonathan J. Kelly, Esq.

Email:  jjkelly@sidley.com

 

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To Life Reinsurer:

 

Protective Life Insurance Company

2801 Highway 280 South

Birmingham, Alabama 35223

Telephone: (205) 268-1000

Facsimile:  (205) 268-3597

Attn:  General Counsel

Email:  Debbie.Long@Protective.com

 

With a copy (which shall not constitute notice) to:

 

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York  10022

Telephone:  (212) 909-6459

Facsimile:  (212) 909-7459

Attn:  Nicholas F. Potter, Esq.

Email:  nfpotter@debevoise.com

 

To Seller:

 

Two Little Falls Center

2751 Centerville Road, Suite 212

Wilmington, DE 19808

Telephone:                                    (302) 892-5903

Facsimile:                                        (302) 892-5900

Attn:                    Kimberly L. Wagner

Email:             subsidiarygovernanceoffice@rbc.com

 

With a copy (which shall not constitute notice) to:

 

Sullivan & Cromwell LLP

125 Broad Street

New York, New York  10004

Telephone:  (212) 558-4000

Facsimile:   (212) 558-3588

Attn:                    Donald J. Toumey, Esq.

Marion C. Leydier, Esq.

Email:              toumeyd@sullcrom.com

leydierm@sullcrom.com

 

To USA Holdco:

 

One Liberty Plaza

 

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New York, NY 10006

Telephone:  (212) 858-8310

Facsimile:  (212) 428-3056

Attn:                    Roger Blissett

Email:             subsidiarygovernanceoffice@rbc.com

 

With a copy (which shall not constitute notice) to:

 

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

Telephone:                                    (212) 558-4000

Facsimile:                                         (212) 558-3588

Attn:                    Donald J. Toumey, Esq.

Marion C. Leydier, Esq.

Email:              toumeyd@sullcrom.com

leydierm@sullcrom.com

  

Section 10.2           Amendment; Waiver.  Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Parties hereto, or in the case of a
waiver, by the Party against whom the waiver is to be effective.  No failure or
delay by any Party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.

 

Section 10.3                                Assignment.  Neither this Agreement
nor any of the rights, interests or obligations under it may be assigned or
delegated, in whole or in part, by any of the Parties without the prior written
consent of the other Parties, and any attempted or purported assignment or
delegation in violation of this Section 10.3 shall be null and void.  Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by the Parties hereto and their respective heirs,
executors, administrators, successors, legal representatives and permitted
assigns.

 

Section 10.4                                Entire Agreement; No Other
Representations and Warranties.  This Agreement and the other Transaction
Agreements contain the entire agreement between the Parties hereto with respect
to the subject matter of this Agreement and the other Transaction Agreements and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, except for the Purchaser Confidentiality Agreement and the Life
Reinsurer Confidentiality Agreement (which, subject to Section 5.1(a), shall
terminate on the Closing Date, to the extent not previously terminated) to the
extent not in conflict with this Agreement, between or on behalf of each of
Seller and/or its Affiliates, on the one hand, and Purchaser and/or its
Affiliates, on the other hand, with respect to the subject matter of this
Agreement and the Ancillary Agreements.

 

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Section 10.5                                Fulfillment of Obligations.  Any
obligation of any Party to any other Party under this Agreement, which
obligation is performed, satisfied or fulfilled by an Affiliate of such Party,
shall be deemed to have been performed, satisfied or fulfilled by such Party.

 

Section 10.6                                No Third-Party Beneficiaries. 
Except as provided in Section 5.12 with respect to director and officer
indemnification and Article 7 with respect to Seller Indemnified Parties and
Purchaser Indemnified Parties, this Agreement is for the sole benefit of the
Parties and their permitted successors and assigns and nothing expressed or
implied in this Agreement is intended to or shall confer any rights, remedies,
obligations or liabilities upon any Person other than the Parties hereto and
their respective heirs, executors, administrators, successors, legal
representatives and permitted assigns.

 

Section 10.7                                Public Disclosure.  Purchaser, Life
Reinsurer and Seller will consult with each other before issuing any press
release or other public statement or communication with respect to the Purchase,
this Agreement, the Transaction Agreements or the transactions contemplated
hereby or thereby and will accept all reasonable comments it deems appropriate
or desirable to any such release, statement or communication; provided, that the
Parties hereto may, without the prior consent of any other Party (but after
prior consultation and after providing the other Parties hereto with copies of
the proposed disclosure), issue such communication or make such public statement
as may be required by applicable Law or stock exchange rules; provided, further,
that if requested by any Party, the Party making such disclosure shall use its
reasonable best efforts to obtain confidential treatment for such portions of
any such disclosure that the requesting Party identifies as confidential. 
Purchaser, Life Reinsurer and Seller will cooperate to jointly develop all
public communications.

 

Section 10.8                                Expenses.  Except as otherwise
expressly provided in this Agreement or the Ancillary Agreements, whether or not
the transactions contemplated by this Agreement and the Ancillary Agreements are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be borne by the Party
incurring such expenses.

 

Section 10.9                                Schedules.  Each of Seller’s
Disclosure Schedule, Purchaser’s Disclosure Schedule and Life Reinsurer’s
Disclosure Schedule to this Agreement constitutes a part of this Agreement and
is incorporated into this Agreement for all purposes as if fully set forth
herein.  Any fact or item which is disclosed on any section of Seller’s
Disclosure Schedule, Purchaser’s Disclosure Schedule or Life Reinsurer’s
Disclosure Schedule, as the case may be, shall be deemed disclosed on such other
section or sections of Seller’s Disclosure Schedule, Purchaser’s Disclosure
Schedule or Life Reinsurer’s Disclosure Schedule, as the case may be, to the
extent that its relevance or applicability to information called for by such
other section or sections is reasonably apparent, notwithstanding the omission
of a reference or cross reference thereto.  The disclosure of any matter in any
portion of Seller’s Disclosure Schedule, Purchaser’s Disclosure Schedule or Life
Reinsurer’s Disclosure Schedule, as applicable, shall neither be deemed to
constitute an admission by Seller, Purchaser or Life Reinsurer, respectively,
nor be taken as an indication of the materiality thereof or the level of
materiality that is applicable to any representation or warranty set forth
herein.  Any capitalized term used in any Exhibit, Annex, Schedule or section of
Seller’s Disclosure Schedule, Purchaser’s Disclosure Schedule or Life

 

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Reinsurer’s Disclosure Schedule but not otherwise defined therein will have the
meaning given to such term in this Agreement.

 

Section 10.10                          GOVERNING LAW.  THIS AGREEMENT AND ITS
ENFORCEMENT WILL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS
PRINCIPLES OF SUCH STATE THAT WOULD PROVIDE FOR THE APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION.

 

Section 10.11                          Submission to Jurisdiction.  Each Party
hereby irrevocably and unconditionally submits to the exclusive jurisdiction of
the United States District Court for the Southern District of New York and of
any New York state court sitting in The City of New York (each, a “New York
Court”), for purposes of all legal proceedings arising out of or relating to the
this Agreement and the other Transaction Agreements, or the transactions
contemplated by this Agreement and the other Transaction Agreements, or for
recognition and enforcement of any judgment in respect thereof.  In any such
action, suit or other proceeding, each Party hereby irrevocably waives, to the
fullest extent permitted by Law, any objection that it may now or hereafter have
to the laying of the venue of any such proceedings brought in such court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum.  Each Party also agrees that any final and non-appealable
judgment against a Party in connection with any action, suit or other proceeding
shall be conclusive and binding on such Party and that such award or judgment
may be enforced in any court of competent jurisdiction, either within or outside
of the United States.  A certified or exemplified copy of such award or judgment
shall be conclusive evidence of the fact and amount of such award or judgment. 
Each Party agrees that any process or other paper to be served in connection
with any action or proceeding under this Agreement shall, if delivered, sent or
mailed in accordance with Section 10.1, constitute good, proper and sufficient
service thereof.

 

Section 10.12                          WAIVER OF JURY TRIAL.  EACH PARTY
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY
AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12.

 

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Section 10.13                          Counterparts.  This Agreement may be
executed in one or more counterparts, each of which will be deemed to constitute
an original, and may be delivered by facsimile or other electronic means
intended to preserve the original graphic or pictorial appearance of a document.

 

Section 10.14                          Headings.  The heading references herein
and the table of contents hereto are for convenience purposes only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

Section 10.15                          Severability.  The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other
provisions hereof.  If any provision of this Agreement, or the application
thereof to any Person or entity or any circumstance, is found by a court or
other Governmental Authority of competent jurisdiction to be invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.

 

Section 10.16                          Specific Performance.  Subject to
Section 7.7, the Parties hereto agree that irreparable damage would occur if any
of the provisions of this Agreement were not performed in accordance with their
specific terms on a timely basis or were otherwise breached.  Subject to
Section 7.7, it is accordingly agreed that the Parties hereto shall be entitled
to seek injunctive or other equitable relief to prevent breaches of this
Agreement and the other Transaction Agreements, to enforce specifically the
terms and provisions of this Agreement and the other Transaction Agreements in
any court identified in Section 10.11 above  and to thereafter cause the
Purchase and the other transactions contemplated hereby to be consummated on the
terms and subject to the conditions thereto set forth in this Agreement, this
right being in addition to any other remedy to which they are entitled at law or
in equity.  Each of the Parties hereto hereby waives (i) the defense that a
remedy at law would be adequate and (ii) any requirement under any Law to post a
bond or other security as a prerequisite to obtaining equitable relief.

 

[Next page is a signature page.]

 

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IN WITNESS WHEREOF, the Parties have executed or caused this Agreement to be
executed as of the date first written above.

 

 

RBC INSURANCE HOLDINGS (USA) INC.

 

 

 

 

 

By:

/s/ Rene DeGagne

 

 

 

 

 

By:

/s/ Kimberly L. Wagner

 

 

 

 

 

ATHENE HOLDING LTD.

 

 

 

 

 

By:

/s/ Zachary Jones

 

 

 

 

 

PROTECTIVE LIFE INSURANCE COMPANY

 

 

 

 

 

By:

/s/ Carolyn King

 

 

 

 

 

Solely for purposes of Sections 5.14 through 5.17 and Article 7, 8 and 10

 

 

 

 

 

RBC USA HOLDCO CORPORATION

 

 

 

 

 

By:

/s/ D.A. McWilliams

 

 

 

 

 

By:

/s/ Lisa D. Levey

 

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