Exhibit 10.1

EXECUTION VERSION

--------------------------------------------------------------------------------

STOCK PURCHASE AGREEMENT
among
THE PERSONS IDENTIFIED AS “SELLERS”
ON THE SIGNATURE PAGES HERETO,
TIPTREE OPERATING COMPANY, LLC
(on its own behalf and in its capacity as Seller Representative),
and
PFG ACQUISITION CORP.

Dated as of October 29, 2014

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Table of Contents

Article I
 
Sale and Purchase of Shares
 
Section 1.1
Sale and Purchase of Shares
2
Section 1.2
Closing
2
Section 1.3
Other Closing Deliveries
3
Section 1.4
Additional Consideration.
4
Section 1.5
Withholding
8
Section 1.6
Seller Representative
8
Section 1.7
Payments to Sellers
12
Section 1.8
Allocation of Purchase Price
13
Section 1.9
Post-Closing Restructuring
13
Section 1.10
Efforts of the IRA Sellers
13
 
 
 
Article II
 
Representations and Warranties Regarding Sellers
 
Section 2.1
Authority
14
Section 2.2
Ownership of Securities
14
Section 2.3
Corporate Status
15
Section 2.4
Governmental Authorization
15
Section 2.5
Non-Contravention; Other Third Party Consents
15
Section 2.6
Finders’ Fees
16
Section 2.7
IRAs
16
 
 
 
Article III
 
Representations and Warranties Regarding the transferred companies
 
Section 3.1
Corporate Status; Operations of PHAC
17
Section 3.2
Governmental Authorization
17
Section 3.3
Non-Contravention
17
Section 3.4
Capitalization; Title to Shares
18
Section 3.5
Transferred Subsidiaries
19
Section 3.6
Financial Statements
20
Section 3.7
No Undisclosed Liabilities
22
Section 3.8
Absence of Certain Changes
22
Section 3.9
Material Contracts
22
Section 3.10
Properties
25
Section 3.11
Intellectual Property; Information Technology
26
Section 3.12
Litigation
27
Section 3.13
Compliance with Laws
28
Section 3.14
Permits and Licenses
28
Section 3.15
Employees, Labor Matters, Etc
29
Section 3.16
Employee Benefit Plans and Related Matters; ERISA
30
Section 3.17
Tax Matters
32
Section 3.18
Insurance
36

 
 
 

i

--------------------------------------------------------------------------------

Table of Contents (continued)

Section 3.19
Regulatory Matters
36
Section 3.20
Reinsurance Agreements
37
Section 3.21
Reserves
37
Section 3.22
Actuarial Reports
38
Section 3.23
Rates
38
Section 3.24
Agents; Binding Authority
38
Section 3.25
Agreements with Regulators
38
Section 3.26
Claims Handling
39
Section 3.27
Market Conduct; Producers
39
Section 3.28
Broker Dealer Matters
40
Section 3.29
Ratings
41
Section 3.30
Separate Accounts
41
Section 3.31
Finders’ Fees
43
Section 3.32
Intercompany Amounts
43
Section 3.33
No Other Representations and Warranties
43
 
 
 
Article IV
 
Representations and Warranties of Buyer
 
Section 4.1
Organization
44
Section 4.2
Corporate and Governmental Authorization
44
Section 4.3
Non-Contravention
45
Section 4.4
Financing
45
Section 4.5
Limited Guaranty
46
Section 4.6
Purchase for Investment
46
Section 4.7
Litigation
47
Section 4.8
Finders’ Fees
47
Section 4.9
Independent Investigation
47
Section 4.10
No Other Representations and Warranties
47
 
 
 
Article V
 
Certain Covenants
 
Section 5.1
Conduct of the Business
47
Section 5.2
Notice of Certain Events
51
Section 5.3
No Solicitation
52
Section 5.4
Access to Information; Confidentiality
52
Section 5.5
Subsequent Financial Statements
54
Section 5.6
Public Announcements
55
Section 5.7
Consents, Approvals and Filings
55
Section 5.8
Resignations
57
Section 5.9
Further Assurances
57
Section 5.10
Consents and Waivers of Sellers
57
Section 5.11
Financing
58
Section 5.12
Exercise of Warrants
61

ii

--------------------------------------------------------------------------------

Table of Contents (continued)

Section 5.13
Termination of Affiliate Transactions; Intercompany Balances
62
Section 5.14
Non-Compete; Non-Solicitation
62
 
 
 
Article VI
 
Tax Matters
 
Section 6.1
Taxes; Tax Returns
64
Section 6.2
Books and Records; Cooperation
66
Section 6.3
Transfer Taxes
66
Section 6.4
Refunds
66
Section 6.5
Tax Contests
66
Section 6.6
Tax Sharing Agreements
67
Section 6.7
Overlap
67
 
 
 
Article VII
 
Conditions Precedent
 
Section 7.1
Conditions to the Obligations of Buyer and Sellers
67
Section 7.2
Conditions to Obligations of Buyer
68
Section 7.3
Conditions to Obligations of Sellers
69
Section 7.4
Frustration of Closing Conditions
69
 
 
 
Article VIII
 
Termination
 
Section 8.1
Termination
69
Section 8.2
Effect of Termination
71
Section 8.3
Termination Fee
71
 
 
 
Article IX
 
Indemnification
 
Section 9.1
Survival
73
Section 9.2
Indemnification by Sellers
74
Section 9.3
Indemnification by Buyer
75
Section 9.4
Certain Limitations
75
Section 9.5
Payment Adjustments
77
Section 9.6
Third Party Claim Procedures
78
Section 9.7
Other Claims
79
Section 9.8
Duty to Mitigate
79
Section 9.9
Escrow Account
79
 
 
 
Article X
 
Definitions
 
Section 10.1
Certain Terms
80
Section 10.2
Construction
96
 
 
 

iii

--------------------------------------------------------------------------------

Table of Contents (continued)

Article XI
 
Miscellaneous
 
Section 11.1
Notices
98
Section 11.2
Amendment; Waivers
99
Section 11.3
Expenses
99
Section 11.4
Governing Law; Venue
100
Section 11.5
WAIVER OF JURY TRIAL
100
Section 11.6
Successors and Assigns
101
Section 11.7
Entire Agreement
101
Section 11.8
Severability
101
Section 11.9
Counterparts; Effectiveness; Third Party Beneficiaries
101
Section 11.10
Specific Performance
102

iv

--------------------------------------------------------------------------------

Annexes

Annex A        Sample Closing Statement
Annex B        Allocation among Sellers
Annex C        Accounting Principles

Exhibits

Exhibit A        Form of Spousal Consent to Transaction
Exhibit B        Form of Hartford Acknowledgment
Exhibit C        Form of PFASC Purchase Agreement
Exhibit D        Form of Buyer Restructuring Purchase Agreement

v

--------------------------------------------------------------------------------

This Stock Purchase Agreement (this “Agreement”), dated as of October 29, 2014,
is made by and entered into among (i) Tiptree Operating Company, LLC, a Delaware
limited liability company (“Tiptree”, on its own behalf and in its capacity as
the Seller Representative pursuant to Section 1.6, the “Seller Representative”),
(ii) each of the other Persons identified as a “Seller” on the signature pages
hereto (the “Company Sellers” and together with Tiptree, “Sellers”), and (iii)
PFG Acquisition Corp., a Delaware corporation (“Buyer”).

RECITALS
WHEREAS, Tiptree owns, in the aggregate, 100% of the issued and outstanding
shares of common stock of PFG Holdings Acquisition Corp., a Delaware corporation
(“PHAC”), par value $0.01 per share, (the “PHAC Common Stock” and the shares of
PHAC Common Stock held by Tiptree, the “PHAC Shares”);
WHEREAS, PHAC, the Company Sellers and the IRAs collectively own, in the
aggregate, 100% of the issued and outstanding shares of Series A Participating
Preferred Stock of the Philadelphia Financial Group, Inc., a Pennsylvania
corporation (the “Company”), par value $0.001 per share (the “Preferred Stock”),
100% of the issued and outstanding shares of common stock of the Company, par
value $0.001 per share, (the “Common Stock” and, collectively with the shares of
Preferred Stock and all shares of Common Stock issued upon the exercise of the
Warrants as contemplated hereby or otherwise issuable pursuant to rights set
forth in Section 2.2 of the Seller Disclosure Letter, the “Company Shares” and,
together with the PHAC Shares, the “Shares”), of the Company and 100% of the
issued and outstanding warrants to acquire shares of Common Stock (the
“Warrants”);
WHEREAS, each IRA Seller is the sole owner of the individual retirement account
or arrangement subject to Section 408 of the Code set forth immediately below
such Seller’s name on Annex B (each such account or arrangement, an “IRA” and
collectively, the “IRAs”);
WHEREAS, prior to the execution of this Agreement, each IRA Seller has executed
and delivered an irrevocable instruction to such IRA to sell all of the Shares
owned by such IRA to Buyer at the Closing (each an “IRA Instruction Letter”);
WHEREAS, the Company owns, directly or indirectly, 100% of the issued and
outstanding shares of capital stock or other equity interests in each of its
Subsidiaries (the “Transferred Subsidiaries” and, together with the Company and
PHAC, the “Transferred Companies”);
WHEREAS, the Transferred Subsidiaries include, among other Subsidiaries,
Philadelphia Financial Life Assurance Company, an insurance company organized
under the laws of the Commonwealth of Pennsylvania (“PFLAC”), Philadelphia
Financial Life Assurance Company of New York, an insurance company organized
under the laws of the State of New York (“PFLAC NY”), Philadelphia Financial
Life International Ltd., a Bermuda exempted company and a Class C long-term
insurer (“PFLIL”), Philadelphia Financial Life Assurance Company (Bermuda) Ltd.,
a Bermuda exempted company and a Class C long-term insurer (“PFLAC BDA” and,
together

1

--------------------------------------------------------------------------------

with PFLAC, PFLAC NY and PFLIL, the “Insurance Subsidiaries”), PFASC Holdings,
LLC, a Delaware limited liability company (“PFASC Holdings”), Philadelphia
Financial Administration Services Company, LLC, a Delaware limited liability
company 21% of the equity interests of which are owned by PFLAC and 79% of the
equity interests of which are owned by PFASC Holdings (“PFASC”), Philadelphia
Financial Distribution Company, a Delaware corporation (the “Transferred Broker
Dealer”) and Philadelphia Financial Agency Inc., a Delaware corporation;
WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire that Sellers
sell to Buyer, (i) all of the PHAC Shares, (ii) all of the shares of Preferred
Stock owned by the Company Sellers and the IRAs, and (iii) all of the shares of
Common Stock owned by the Company Sellers and the IRAs (including all of the
shares of Common Stock to be issued upon exercise of the Warrants owned by the
Company Sellers or the IRAs as contemplated hereby or otherwise issuable to the
Company Sellers or the IRAs pursuant to rights set forth in Section 2.2 of the
Seller Disclosure Letter) (clauses (i), (ii) and (iii), collectively, the
“Purchased Shares”), on the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, concurrently with the execution of this Agreement, and as a condition
and inducement to the Sellers’ willingness to enter into this Agreement, the
parties identified as “Guarantors” therein (the “Guarantors”) are entering into
a limited guaranty in favor of the Sellers (the “Limited Guaranty”) with respect
to certain obligations of Buyer hereunder.
NOW, THEREFORE, in consideration of the representations, warranties, covenants
and agreements contained in this Agreement, the parties hereto hereby agree as
follows:

ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.1    Sale and Purchase of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Tiptree shall sell, and
the Company Sellers shall cause their related IRAs to sell, to Buyer all of the
Purchased Shares for the Purchase Price.
Section 1.2    Closing. Unless this Agreement shall have been terminated
pursuant to Section 8.1, and subject to the satisfaction or waiver of each of
the conditions set forth in Article VII, the closing of the purchase and sale of
the Purchased Shares (the “Closing”) shall take place at 10:00 a.m., New York
City time, on the date that is the tenth Business Day following the day on which
all of the conditions set forth in Article VII have been satisfied or waived
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions at the
Closing), at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New
York, New York, 10022, unless another date, time or place is agreed to in
writing by the parties. The actual date and time of the Closing are herein
referred to as the “Closing Date.” At the Closing:

2

--------------------------------------------------------------------------------

(a)    Sellers shall deliver, or cause to be delivered, to Buyer, free and clear
of all Liens (other than the RGA Liens), certificates representing all of the
Purchased Shares, duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly executed in blank, and bearing or accompanied by
all requisite stock transfer stamps; and
(b)    Buyer shall pay to the Seller Representative on behalf of Tiptree, the
Company Sellers and the IRAs, by wire transfer of immediately available funds to
an account designated in writing by the Seller Representative at least two (2)
Business Days prior to the Closing Date, an amount equal to the Closing Cash
Consideration minus the sum of (i) the Estimated Excess Indebtedness and (ii)
the Estimated Leakage Amount (such amount, the “Estimated Consideration”).

Section 1.3    Other Closing Deliveries. At the Closing, in addition to Sellers’
delivery of certificates representing all of the Purchased Shares as specified
in Section 1.2(a) and Buyer’s payment of the amounts specified in Section
1.2(b), and as otherwise set forth herein:
(a)    Sellers shall deliver, or cause to be delivered, to Buyer the letters of
resignation described in Section 5.8;
(b)    Sellers shall deliver, or cause to be delivered, to Buyer a receipt for
payment of the amount specified in Section 1.2(b);
(c)    Sellers shall deliver to Buyer the certificate contemplated by Section
7.2(a);
(d)    Sellers shall have delivered to Buyer certificates in form and substance
reasonably satisfactory to Buyer, duly executed and acknowledged, certifying any
facts that would exempt the transactions contemplated hereby from withholding
under Section 1445 of the Code;
(e)    each Seller that is not a natural person shall deliver to Buyer a copy,
certified as of the Closing Date, by an officer of such Seller, of the
resolutions of such Seller’s managing member, board of directors or similar
governing body authorizing the execution and delivery of this Agreement and the
other Transaction Agreements (as applicable) and the consummation of the
transactions contemplated hereby and thereby (to the extent applicable);

3

--------------------------------------------------------------------------------

(f)    each Seller that is a married natural person shall deliver to Buyer a
Spousal Consent to Transaction, in the form attached as Exhibit A, duly executed
by such Seller’s spouse;
(g)    Sellers shall deliver to Buyer (i) a good standing or compliance
certificate from the Insurance Regulator for (A) Bermuda, with respect to PFLIL
and PFLAC BDA, (B) the Commonwealth of Pennsylvania, in the case of PFLAC and
(C) the State of New York, with respect to PFLAC NY, in each case dated as of a
date within five (5) Business Days prior to the Closing Date, and (ii) a good
standing certificate or comparable document for each of the Transferred
Companies from the Secretary of State or other applicable Governmental Authority
of each such Transferred Company’s jurisdiction of organization, in each case
dated as of a date within five (5) Business Days prior to the Closing Date;
(h)    Sellers shall deliver to Buyer the Books and Records of each of the
Transferred Companies that are not already held by the Transferred Companies;
(i)    Buyer shall deliver to the Seller Representative the certificate
contemplated by Section 7.3(a);
(j)    Sellers shall deliver to Buyer the Hartford Acknowledgment, in the form
attached as Exhibit B, duly executed by each of the Hartford Companies, in
effect and not revoked by any Hartford Company as of the date of delivery;
(k)    Sellers shall deliver to Buyer the RGA Pay-off Letter, duly executed by
each party thereto, which shall become effective upon payment of the RGA
Indebtedness by or on behalf of Buyer to the account specified in the RGA
Pay-off Letter following the Closing on the Closing Date; and
(l)    each party hereto shall deliver to the other such other documents and
instruments as may be reasonably necessary to consummate the transactions
contemplated by this Agreement.
All such certificates, stock powers, documents and instruments shall be in form
and substance reasonably satisfactory to the party hereto receiving delivery
thereof hereunder.
Section 1.4    Additional Consideration.
(a)    Pre-Closing Estimate; Closing of the Books on the Closing Date. Not later
than five (5) Business Days prior to the Closing, the Sellers shall deliver to
the Buyer a statement (the “Pre-Closing Estimate”) setting forth the Sellers’
good faith calculation of the Estimated Consideration and including a
description in reasonable detail of the estimated Excess Indebtedness (the
“Estimated Excess Indebtedness”) and the estimated Leakage Amount (the
“Estimated Leakage

4

--------------------------------------------------------------------------------

Amount”). The Pre-Closing Estimate (and each component thereof) shall be
calculated in accordance with the Accounting Principles. In addition, in
preparation for the Closing, Sellers shall cause a full balance sheet closing to
take place with respect to the Transferred Companies as of the close of business
on the day immediately preceding the Closing Date (the “Closing Balance Sheet
Date”), as if it were the last day of a fiscal period for the Transferred
Companies, including by preparing all closing entries and post-closing trial
balances in respect of the Closing Balance Sheet Date.
(b)    Closing Statement. As soon as practicable, and in any event within ninety
(90) days following the Closing Date, Buyer shall prepare and deliver to the
Seller Representative a statement (the “Closing Statement”) comprising a
consolidated balance sheet and statement of cash flows of the Company as of the
Closing Balance Sheet Date and calculations in reasonable detail of (i) the 2014
Net Working Capital, (ii) 2014 Excess Cash, (iii) the Additional Consideration
derived from the amounts in clauses (i) and (ii), (iv) Excess Indebtedness, (v)
the Leakage Amount and (vi) the Indebtedness/Leakage True-Up Amount derived from
the amounts in clauses (iv) and (v). The Closing Statement (and each component
thereof) shall be calculated in accordance with the Accounting Principles and in
a form consistent with, and subject to the adjustments set forth in, the sample
Closing Statement attached hereto as Annex A. From and after the delivery of the
Closing Statement until such time as the Closing Statement becomes final,
binding and conclusive upon the parties, Buyer shall (i) make available to the
Seller Representative and its accountants and advisors the documents and data
used in the preparation of, or reasonably related to, the Closing Statement and
each of the components thereof and (ii) give the Seller Representative access,
during normal business hours and upon reasonable advance notice, to the
personnel, accountants, properties, books and records of the Transferred
Companies for the purpose of determining whether the Closing Statement contains
any mathematical errors or was prepared in a manner inconsistent with the
Accounting Principles.
(c)    Dispute Notice. The Closing Statement shall become final, binding and
conclusive upon the parties on the thirtieth (30th) day following receipt by the
Seller Representative of the Closing Statement, unless prior to such thirtieth
(30th) day the Seller Representative delivers to Buyer a written notice (a
“Dispute Notice”) stating that the Seller Representative believes that the
Closing Statement contains mathematical errors or was not prepared in accordance
with the Accounting Principles and specifying in reasonable detail each item
that the Seller Representative disputes (a “Disputed Item”), the amount in
dispute for each such Disputed Item and the reasons supporting the Seller
Representative’s positions. The Seller Representative may not challenge the
Closing Statement on any other basis.
(d)    Resolution Period. If the Seller Representative timely delivers a Dispute
Notice, then Buyer and the Seller Representative shall seek in good faith to
resolve the Disputed Items during the 15-day period beginning on the date Buyer
receives the Dispute Notice (the “Resolution Period”). If Buyer and the Seller
Representative reach agreement with respect to any Disputed Items, Buyer shall
revise the Closing Statement to reflect such agreement.
(e)    Independent Accountant. If Buyer and the Seller Representative are unable
to resolve all of the Disputed Items during the Resolution Period, then Buyer
and the Seller

5

--------------------------------------------------------------------------------

Representative shall jointly engage and submit the unresolved Disputed Items
(the “Unresolved Items”) to the Independent Accountant; provided that if Buyer
and the Seller Representative do not appoint an Independent Accountant within
ten (10) days after the end of the Resolution Period, they shall request the
American Arbitration Association to appoint as the Independent Accountant a
nationally recognized independent registered public accounting firm that has not
had a material relationship with the Transferred Companies, the Seller
Representative, any Seller, Buyer or any Affiliate of any of the foregoing,
within the preceding two years, and such appointment shall be final, binding and
conclusive on Buyer, Sellers and the Seller Representative. Buyer and the Seller
Representative shall use their commercially reasonable efforts to cause the
Independent Accountant to issue its written determination regarding the
Unresolved Items within thirty (30) days after the Unresolved Items are
submitted for review, and Buyer, Sellers and the Seller Representative shall
cooperate with the Independent Accountant during its engagement. Buyer and the
Seller Representative shall promptly (and in any event within ten (10) Business
Days) after the Independent Accountant’s engagement, each submit to the
Independent Accountant their respective computations of the Unresolved Items and
information, arguments and support for their respective positions, and shall
concurrently deliver a copy of such materials to the other party. Each of Buyer
and the Seller Representative shall then be given an opportunity to supplement
the information, arguments and support included in its initial submission with
one additional submission to respond to any arguments or positions taken by the
other party in such other party’s initial submission, which supplemental
information shall be submitted to the Independent Accountant (with a copy
thereof to the other party) within five (5) Business Days after the first date
on which both parties have submitted their respective initial submissions to the
Independent Accountant. The Independent Accountant shall thereafter be permitted
to request additional or clarifying information from the parties, and each of
the parties shall cooperate with such requests of the Independent Accountant;
provided that communication with the Independent Accountant by any party hereto
or any of their respective representatives with respect to or in any way related
to the duties contemplated to be performed by the Independent Accountant hereby
may not occur ex parte, and each of the Seller Representative and Buyer or their
respective designees must participate in any such communication, including by
receiving copies of any materials submitted to the Independent Accountant in
connection herewith. The Independent Accountant shall determine, based solely on
the materials so presented by the parties and upon information received in
response to such requests for additional or clarifying information and not by
independent review, only those Unresolved Items still in dispute and shall
render a written report to Buyer and the Seller Representative in which the
Independent Accountant sets forth its determination regarding what adjustments,
if any, should be made to the amounts and computations set forth in the Closing
Statement solely as to the Unresolved Items and shall determine, on that basis,
the appropriate amount of the 2014 Net Working Capital, 2014 Excess Cash, the
Additional Consideration, Excess Indebtedness, the Leakage Amount and the
Indebtedness/Leakage True-Up Amount,. In resolving any Unresolved Item, the
Independent Accountant (x) shall be bound to the principles of this Section 1.4
and the terms of this Agreement, (y) shall limit its review to matters
specifically set forth in the Dispute Notice and (z) shall not assign a value to
any item higher than the highest value for such item claimed by either party or
less than the lowest value for such item claimed by either party. The report of
the Independent Accountant shall be final, binding and conclusive on Buyer,
Sellers and the Seller Representative absent manifest error, and Buyer shall
revise the Closing Statement to reflect the determination of

6

--------------------------------------------------------------------------------

the Independent Accountant as set forth in such report promptly upon receipt
thereof. The fees, expenses and costs of the Independent Accountant shall be
borne equally by Buyer and Sellers.
(f)    Adjustment Amounts.
(i)    If a positive Additional Consideration is finally determined to exist
pursuant to this Section 1.4, then Buyer shall pay such Additional Consideration
to Sellers by wire transfer of immediately available funds to an account or
accounts designated in writing by the Seller Representative on behalf of all
Sellers as follows: (A) one-third (1/3) of such amount shall be so payable on
the first anniversary of the Closing Date and (B) two-thirds (2/3) of such
amount shall be so payable on the second anniversary of the Closing Date.
(ii)    If a negative Additional Consideration is finally determined to exist
pursuant to this Section 1.4, then Sellers shall promptly, and in any event
within ten (10) Business Days after such final determination, pay or cause to be
paid their respective Allocated Portion of such Additional Consideration by wire
transfer of immediately available funds to an account designated within two (2)
Business Days following such final determination to the Seller Representative in
writing by Buyer.
(iii)    If a positive Indebtedness/Leakage True-Up Amount (which, for the
avoidance of doubt, shall be payable to Buyer) and a positive Additional
Consideration (which, for the avoidance of doubt, shall be payable to Sellers)
are finally determined to exist pursuant to this Section 1.4, then (x) if the
Indebtedness/Leakage True-Up Amount is less than or equal to the Additional
Consideration, the Indebtedness/Leakage True-Up Amount shall reduce the
aggregate amount of Additional Consideration to be paid to Sellers under Section
1.4(f)(i), and (y) if the Indebtedness/Leakage True-Up Amount is greater than
the Additional Consideration, Sellers shall promptly, and in any event within
ten (10) Business Days after such final determination, pay or cause to be paid
their respective Allocated Portion of the difference between the
Indebtedness/Leakage True-Up Amount and the Additional Consideration by wire
transfer of immediately available funds to an account designated within two (2)
Business Days following such final determination to the Seller Representative in
writing by Buyer and the Additional Consideration shall be reduced to zero.
(iv)    If both a positive Indebtedness/Leakage True-Up Amount and a negative
Additional Consideration are finally determined to exist pursuant to this
Section 1.4, then Sellers shall promptly, and in any event within ten (10)
Business Days after such final determination, pay or cause to be paid their
respective Allocated Portion of such Indebtedness/Leakage True-Up Amount by wire
transfer of immediately available funds to an account designated within two (2)
Business Days following such final determination to the Seller Representative in
writing by Buyer.
(v)    If a negative Indebtedness/Leakage True-Up Amount is finally determined
to exist pursuant to this Section 1.4, then Buyer shall promptly, and in any
event within ten (10) Business Days after such final determination, pay such
Indebtedness/Leakage

7

--------------------------------------------------------------------------------

True-Up Amount by wire transfer of immediately available funds to an account
designated within two (2) Business Days following such final determination to
Buyer in writing by the Seller Representative.
(g)    Indemnification Not Affected. No Person’s rights to indemnification under
this Agreement shall be deemed to limit, supersede or otherwise affect, or be
limited, superseded or otherwise affected by, the terms of this Section 1.4.
Section 1.5    Withholding. Each party shall be entitled to deduct and withhold
from any amounts payable pursuant to or as contemplated by this Agreement such
amounts as such party reasonably determines are required to be deducted or
withheld therefrom or in connection therewith under the Code or Treasury
Regulations. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid. Buyer
and Sellers shall cooperate in the preparation and filing of any forms or other
documentation claiming exemption or relief from any requirement to withhold.
Section 1.6    Seller Representative. (a) Each Seller hereby constitutes and
appoints Tiptree, in its capacity as the Seller Representative, to act as its
representative for all purposes under the Transaction Agreements, and the Seller
Representative hereby accepts such appointment. Each Seller hereby irrevocably
constitutes and appoints, with full power of substitution, the Seller
Representative as its true and lawful attorney‑in‑fact, with full power and
authority in such Seller’s name, to take all actions required or permitted to be
taken hereunder, and otherwise to act on behalf of, and to bind, each Seller for
all purposes under the Transaction Agreements, including (i) approving or
contesting any amounts in the Closing Statement and entering into any settlement
or agreement to resolve any Disputed Item, (ii) administering any
indemnification matter on behalf of Sellers, including agreeing to the
settlement of any indemnification matter and otherwise handling and negotiating
indemnification matters, (iii) executing and delivering such waivers and
consents in connection with this Agreement and each other Transaction Agreement
and the consummation of the transactions contemplated hereby and thereby as the
Seller Representative, in its sole discretion, may deem necessary or desirable,
(iv) refraining from enforcing any right of any Seller and/or the Seller
Representative arising out of or under or in any manner relating to this
Agreement or any other Transaction Agreement; provided that no such failure to
act on the part of the Seller Representative, except as otherwise expressly
provided in the applicable Transaction Agreement, shall be deemed a waiver of
any such right or interest by the Seller Representative or by such Seller unless
such waiver is in writing signed by the waiving party or by the Seller
Representative and (v) making, executing, acknowledging and delivering all such
other agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and, in
general, to do any and all things and to take any and all action that the
Representative, in its sole and absolute discretion, may consider necessary or
proper or convenient in connection with or to carry out the transactions
contemplated by this

8

--------------------------------------------------------------------------------

Agreement, the Transaction Agreements and all other agreements, documents or
instruments referred to herein or therein or executed in connection herewith and
therewith. Without limiting the foregoing, (i) each Seller hereby expressly
consents to the amendment of the Shareholders Agreement by and among PFG and its
shareholders party thereto, dated as of December 16, 2010 (the “Shareholders
Agreement”), to the extent reasonably required to facilitate the transactions
contemplated hereby (provided that the foregoing consent to amend such
Shareholders Agreement shall not apply to any amendment that would have a
disproportionate material adverse effect upon any individual Seller as compared
to the effect thereof on the other Sellers hereunder), and (ii) each Seller
hereby agrees to cause the Articles of Incorporation of the Company, dated
August 5, 1999 and as amended on July 12, 2012, to be amended prior to the
Closing to delete the last sentence of the definition of “Sale Transaction”
provided for in Article VI, Section F therein. Each Seller agrees to deliver, as
and when requested by the Seller Representative, certificates evidencing such
Seller’s Purchased Shares duly endorsed or accompanied by written instruments of
transfer in form satisfactory to the Seller Representative, duly executed by
such Seller, free and clear of any liens or other adverse claims or restrictions
(other than the RGA Liens), and to appoint the Seller Representative as the
custodian of such Purchased Shares for purposes of the Closing, with full power
to deliver such Purchased Shares to the Buyer at Closing, whether or not such
Purchased Shares are certificated or held of record in book entry form. Each
Seller agrees to cooperate fully in, take all necessary and desirable actions
approved by the Seller Representative in connection with, and not to take any
action prejudicial or inconsistent with, the transactions contemplated hereby.
(b)    In furtherance of this Section 1.6, each of the Sellers (i) hereby
irrevocably grants to, and appoints the Seller Representative and its designees
as its irrevocable proxy and attorney-in-fact (with full power of substitution
and resubstitution) to vote the Shares, provide written consents, express
consent or dissent or otherwise utilize voting power in accordance with the
Seller Representative’s rights and obligations under this Section 1.6 during the
term hereof, (ii) hereby affirms that the irrevocable proxy set forth in this
Section 1.6(b) is given in connection with the execution of this Agreement, and
that such irrevocable proxy is given to secure the performance of the duties of
such Seller under this Agreement and (iii) hereby (A) affirms that such
irrevocable proxy is coupled with an interest and (B) affirms that such
irrevocable proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 1759 of the General Association Act of the
Commonwealth of Pennsylvania. Each Seller hereby represents that all proxies,
powers of attorney, instructions or other requests given by such Seller prior to
the execution of this Agreement in respect of the voting of the Shares held by
such Seller, if any, are not irrevocable and each Seller hereby revokes (or
causes to be revoked) any and all previous proxies, powers of attorney,
instructions or other requests with respect to the Shares. The vote, if any, of
the proxy holder pursuant to the proxy set forth in this Section 1.6 shall
control the outcome, and be determinative, of any conflict between the vote by
the proxy holder of any Seller’s Shares and a vote by such Seller. Each Seller
shall provide evidence

9

--------------------------------------------------------------------------------

to the Seller Representative in connection with the actions of such Seller under
or relating to this Section 1.6(b) as the Seller Representative shall reasonably
request.
(c)    Each Seller acknowledges that this Section 1.6 is intended to promote the
efficient negotiation and handling of matters arising under or in connection
with the Transaction Agreements. Buyer shall be entitled to rely upon, without
independent investigation, any act, notice, instruction or communication from
the Seller Representative and shall not be liable in any manner whatsoever for
any action taken or not taken in reliance upon the actions taken or not taken or
communications or writings given or executed by the Seller Representative.
Without limiting the generality of the foregoing, each Seller hereby irrevocably
constitutes and appoints, with full power of substitution, the Seller
Representative as its true and lawful attorney-in-fact, with full power and
authority in such Seller’s name, place and stead, to execute, certify,
acknowledge, deliver, file and record all agreements, certificates, instruments
and other documents and any amendment thereto, and to take any other action that
the Seller Representative deems necessary or appropriate in connection with
Sellers’ or the Seller Representative’s obligations under the Transaction
Agreements and, at the Seller Representative’s request, each Seller shall
evidence such power by execution of a separate certificate, affidavit, power of
attorney or other instrument in such form and substance as may be reasonably
requested by the Seller Representative. Each Seller’s appointment of the Seller
Representative as its attorney-in-fact shall be deemed to be a power coupled
with an interest and shall survive the incompetency, bankruptcy or dissolution
of Sellers giving such power. In the event of any conflict between this Section
1.6 and the Shareholders Agreement, the provisions of this Section 1.6 shall
prevail. The following arrangements between Sellers and the Seller
Representative are made in consideration of the Seller Representative’s
acceptance of its appointment as the Seller Representative.
(d)    In the event that the Seller Representative becomes unable to perform its
responsibilities hereunder or resigns from such position, Sellers holding a
majority of the Preferred Stock immediately prior to the Closing shall select
another representative to fill such vacancy and such substituted representative
shall be deemed to be the Seller Representative for all purposes under the
Transaction Agreements.
(e)    All actions, decisions and instructions of the Seller Representative in
accordance with the power and authority granted to it under the terms of this
Agreement shall be conclusive and binding upon all Sellers and shall be deemed
authorized, approved, ratified and confirmed by Sellers, having the same force
and effect as if performed pursuant to the direct authorization of such Sellers,
and no Seller shall have any cause of action against the Seller Representative
for any action taken, decision made or instruction given by the Seller
Representative. The Seller Representative hereby agrees that any exercise of the
powers, authorities or rights granted to it by Sellers under the terms of this
Agreement shall

10

--------------------------------------------------------------------------------

be consistent with and in furtherance of the agreements contained in this
Agreement, including the agreements of the Company Sellers set forth in Section
1.10.
(f)    Sellers agree, severally and not jointly, in accordance with their
respective Allocated Portion of the Purchase Price, to indemnify the Seller
Representative for, and to hold the Seller Representative harmless against, any
Losses incurred, arising out of or in connection with the Seller
Representative’s carrying out its duties hereunder or under any other
Transaction Agreement, including costs and expenses of successfully defending
the Seller Representative against any claim of liability with respect thereto;
provided that Seller Representative shall not be entitled to indemnification
hereunder from any Seller to the extent such Losses are the result of the Seller
Representative’s willful breach (as defined in Section 8.2), fraudulent acts or
omissions. The Seller Representative may consult with counsel of its own choice
and will have full and complete authorization and protection for any action
taken and suffered by it in good faith and in accordance with the opinion of
such counsel. The Seller Representative may deliver to the Sellers from time to
time a statement of costs, expenses and other Losses of the Seller
Representative subject to indemnification by the Sellers hereunder, divided
among the Sellers in accordance with their Allocated Portions and, upon receipt
thereof, each Seller shall promptly (and in any event within five (5) Business
Days of receipt thereof) remit its allocated amount to the Seller Representative
in the manner indicated in such statement; provided that in no event shall any
Seller’s aggregate indemnification obligation under this Section 1.6(f) exceed
the aggregate proceeds that such Seller would have received had the transactions
contemplated hereby been consummated on the terms and conditions set forth
herein. In addition, the Seller Representative may, at its sole election, offset
from any amounts received hereunder for distribution to the Sellers the amount
of any Losses for which the Seller Representative is entitled to indemnification
pursuant to this Section 1.6(f) and use such amounts to satisfy all or any
portion of such indemnification obligations of the Sellers. The indemnity
obligations of this Section 1.6(f) shall survive the resignation, replacement or
removal of the Seller Representative or the termination of this Agreement.
(g)    The provisions of this Section 1.6 shall be binding upon the executors,
heirs, legal representatives, personal representatives, successor trustees, and
successors of each Seller, and any references in this Agreement to a Seller
shall mean and include the successors to such Seller’s rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
(h)    The Seller Representative, in its capacity as such, hereby represents and
warrants to Buyer, as of the date hereof and as of the Closing Date, as follows:
(i)    Organizational Status. The Seller Representative is a limited liability
company duly organized, validly existing and in good standing under the

11

--------------------------------------------------------------------------------

Laws of its jurisdiction of incorporation or organization that has all requisite
limited liability company power and authority to carry on its business as now
conducted.
(ii)    Authority. The Seller Representative has all requisite limited liability
company power and authority to execute and deliver the Transaction Agreements to
which it is or will be a party, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution and delivery by
the Seller Representative of each of the Transaction Agreements to which it is
or will be a party and the consummation by the Seller Representative of the
transactions contemplated by such Transaction Agreements have been duly
authorized by all requisite limited liability company action on the part of the
Seller Representative. Each of the Transaction Agreements to which the Seller
Representative is or will be a party has been, or upon execution and delivery
thereof will be, duly executed and delivered by the Seller Representative.
Assuming due authorization, execution and delivery by the other parties thereto,
each of the Transaction Agreements to which each the Seller Representative is or
will be a party constitutes, or upon execution and delivery thereof, will
constitute, the legal, valid and binding obligation of each the Seller
Representative, enforceable against it in accordance with its terms, subject to
the Enforceability Exceptions.
(iii)    Non-Contravention; Other Third Party Consents. The execution, delivery
and performance of the Transaction Agreements by the Seller Representative and
the consummation of the transactions contemplated thereby by such Person do not
and will not (a) conflict with or result in any violation or breach of any
provision of the Organizational Documents of the Seller Representative or (b)
conflict with or result in a violation or breach of any provision of any
applicable Law.

Section 1.7    Payments to Sellers. After its receipt of any amounts from Buyer
pursuant to the terms of this Agreement and subject to (i) the right of set off
of the Seller Representative set forth in Section 1.6(f) and (ii) the payment,
or reservation of funds in an amount sufficient to pay, out-of-pocket fees and
expenses incurred on behalf of the Sellers in connection with the transactions
contemplated hereby as determined by the Seller Representative in good faith,
the Seller Representative shall promptly pay to Tiptree, each Company Seller and
each IRA, by wire transfer of immediately available funds to an account
specified by Tiptree, such Company Seller or such IRA, the portion of such
amount allocated to Tiptree, such Company Seller or such IRA, as applicable, as
determined in accordance with Annex B (with respect to any amount payable to
Tiptree, any Company Seller or an IRA, the “Allocated Portion” of Tiptree, such
Company Seller or such IRA, as the case may be). For the avoidance of doubt, any
reference in this Agreement to

12

--------------------------------------------------------------------------------

any Company Seller’s Allocated Portion shall include the Allocated Portion of
such Company Seller’s related IRA, as well as such Company Seller’s direct
Allocated Portion.
Section 1.8    Allocation of Purchase Price. The Purchase Price (as adjusted as
set forth in this Agreement) shall be solely allocated for all Tax purposes to
the Purchased Shares in accordance with Annex B. The parties shall, and shall
cause their Affiliates to, file all Tax Returns in a manner consistent with such
allocation.
Section 1.9    Post-Closing Restructuring. Following the Closing, PFLAC will
sell all of its equity interests in PFASC to an Affiliate of Buyer pursuant to a
purchase agreement substantially in the form of Exhibit C hereto.  Thereafter,
the Company will sell all of its equity interests in the Transferred
Subsidiaries other than PFASC Holdings and the PFASC equity interests held by
PFASC Holdings to an Affiliate of Buyer pursuant to a purchase agreement
substantially in the form of Exhibit D hereto. Notwithstanding the foregoing,
Buyer, in its sole discretion, may make such changes to Exhibit C and Exhibit D
as it desires after the date hereof so long as such changes do not, individually
or in the aggregate, (i) violate the other obligations of Buyer hereunder
(including, without limitation, those set forth in Sections 5.7 and 5.9), (ii)
adversely affect the rights or liabilities of Sellers hereunder or (iii)
adversely affect the ability of the parties hereto to satisfy the conditions to
Closing set forth in Article VII or otherwise to consummate the transactions
contemplated hereby.
Section 1.10    Efforts of the IRA Sellers. Each IRA Seller shall cause its
related IRA to take all steps necessary, desirable or appropriate in order to
sell and transfer the Purchased Shares owned by such IRA to Buyer and effect the
Closing in accordance with the terms of this Agreement. Without limiting the
foregoing, each IRA Seller agrees that, except to deliver the IRA Instruction
Letter Correction Notice as expressly contemplated hereby, (i) it shall not, and
shall not attempt to, revoke, rescind, cancel, amend or modify its IRA
Instruction Letter, (ii) it shall not deliver any instruction or notice to its
related IRA to transfer Purchased Shares to any Person other than to Buyer at
the Closing or any other instruction or notice that conflicts with or is
contrary to the instructions contained in the IRA Instruction Letter, (iii) it
shall cause its related IRA to exercise all Warrants held in the relevant IRA at
least ten (10) Business Days prior to the Closing and (iv) each IRA Seller
identified with an asterisk on Annex B has, as of the date hereof, completed and
duly executed the “Letter of Instruction” contemplated by its IRA Instruction
Letter, has provided the original of such executed “Letter of Instruction” to
the Seller Representative to be held in escrow and has made available a true,
complete and correct copy of such executed “Letter of Instruction” to Buyer, and
each such IRA Seller hereby irrevocably authorizes and directs the Seller
Representative to release and deliver such “Letter of Instruction” on such IRA
Seller’s behalf to its related IRA prior to or at the Closing for the purpose of
effecting the transactions contemplated hereby, and (v) each IRA Seller other
than those identified with an asterisk on Annex B shall deliver to its related
IRA the “Closing Notice” contemplated by its IRA Instruction Letter at least ten
(10) Business Days prior to the Closing and shall not, and shall not attempt to,
revoke, rescind, cancel, amend or modify such “Closing Notice”.

13

--------------------------------------------------------------------------------

Notwithstanding anything to the contrary herein, on or prior to November 3,
2014, each IRA Seller and Buyer will execute and deliver to such IRA Seller's
IRA a joint notice of correction to each such IRA Seller's IRA Instruction
Letter in form and substance reasonably acceptable to the Buyer and the Seller
Representative, notifying the applicable IRA custodian of the date of this
agreement and otherwise affirming the substance of the IRA Instruction Letter
(each, an "IRA Instruction Letter Correction Notice"). IRA Seller acknowledges
and agrees that it has executed this Agreement in its individual capacity and as
beneficial owner of such IRA Seller's related IRA.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING SELLERS
Each Seller hereby represents and warrants (solely as to itself and not with
respect to any other Seller and, with respect to any Shares, solely with respect
to the Shares to be sold directly or indirectly by such Seller (including by
such Seller’s related IRA) to Buyer hereunder) to Buyer, as of the date hereof
and as of the Closing Date, as follows with respect to such Seller:
Section 2.1    Authority. Such Seller Party has, as applicable, all requisite
corporate, limited liability, organizational or individual power and authority
to execute and deliver the Transaction Agreements to which it is or will be a
party, to perform its obligations thereunder and to consummate the transactions
contemplated thereby. The execution and delivery by such Seller Party of each of
the Transaction Agreements to which it is or will be a party and the
consummation by any such Seller Party of the transactions contemplated by such
Transaction Agreements have been duly authorized by all requisite corporate,
limited liability, organizational or individual action on the part of each such
Seller Party or any owner of the equity securities of such Seller Party. Each of
the Transaction Agreements to which such Seller Party is or will be a party has
been, or upon execution and delivery thereof, will be, duly executed and
delivered by such Seller Party. Assuming due authorization, execution and
delivery by the other parties thereto, each of the Transaction Agreements to
which each such Seller Party is or will be a party constitutes, or upon
execution and delivery thereof, will constitute, the legal, valid and binding
obligation of each such Seller Party, enforceable against it in accordance with
its terms, except (i) that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter in
effect relating to creditors’ rights generally and (ii) that the remedies of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding thereafter may be brought (the exceptions in (i) and (ii),
collectively, the “Enforceability Exceptions”).
Section 2.2    Ownership of Securities. Except as set forth in Section 2.2 of
the Seller Disclosure Letter, such Seller (or in the case of an IRA Seller, its
related IRA)

14

--------------------------------------------------------------------------------

has valid title to and ownership of the number of shares of PHAC Common Stock,
Preferred Stock and Common Stock and Warrants held by such Seller (or in the
case of an IRA Seller, its related IRA) as of the date hereof as set forth
opposite such Seller’s name on Section 2.2 of the Seller Disclosure Letter, and
all of such shares have been (and, in the case of shares of Common Stock to be
issued to such Seller (or in the case of an IRA Seller, its related IRA)
following the date hereof upon the exercise of any Warrants or pursuant to the
other rights set forth on Section 2.2 of the Seller Disclosure Letter, when so
issued will be) validly issued and are fully paid and nonassessable and free and
clear of all Liens. Other than the Shares, Warrants and other rights to acquire
equity securities listed in Section 2.2 of the Seller Disclosure Letter, neither
such Seller (or in the case of an IRA Seller, its related IRA) nor any of such
Seller’s Affiliates owns any shares of capital stock of PHAC, the Company or any
of their respective Subsidiaries, or any other equity security of PHAC, the
Company or any of their respective Subsidiaries, or any warrant, purchase right,
subscription right, conversion right, exchange right, contingent right to
receive, or other right of any kind to have, any such equity security. Upon
delivery of and payment for the Purchased Shares held by such Seller (or in the
case of an IRA Seller, its related IRA) at the Closing, Buyer will acquire good
and valid title to such Purchased Shares, free and clear of any Lien other than
the RGA Liens.
Section 2.3    Corporate Status. With respect to each such Seller Party that is
not a natural person, such Seller Party is a trust or custodial account
established as an individual retirement account for a natural person, or is a
corporation, limited liability company or limited partnership, as applicable,
duly incorporated or organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation or organization that has all requisite
corporate or organizational power and authority to carry on its business as now
conducted and to own, lease and operate its properties and assets.
Section 2.4    Governmental Authorization. Except for any consent, approval,
license, permit, order, qualification, authorization of, or registration or
other action by, or any filing with or notification to, any Governmental
Authority (each, a “Governmental Approval”) (i) set forth in Section 2.4 of the
Seller Disclosure Letter or (ii) the failure of which to be obtained would not,
individually or in the aggregate, reasonably be expected to be material to the
Transferred Companies or the Business, the execution and delivery by such Seller
Party of the Transaction Agreements to which any of them is or will be a party
do not, and the performance by each such Seller Party of, and the consummation
by each such Seller Party of the transactions contemplated by, such Transaction
Agreements will not, require any Governmental Approvals.
Section 2.5    Non-Contravention; Other Third Party Consents. Except as set
forth in Section 2.5 of the Seller Disclosure Letter, the execution, delivery
and performance of the Transaction Agreements by each such Seller Party that is
or will be a

15

--------------------------------------------------------------------------------

party thereto and the consummation of the transactions contemplated thereby by
such Persons do not and will not (a) conflict with or result in any violation or
breach of any provision of the Organizational Documents of any of such Seller
Parties, (b) assuming compliance with the matters referred to in Section 2.4,
conflict with or result in a violation or breach of any provision of any
applicable Law or (c) assuming compliance with the matters referred to in
Section 2.4, require any consent of or other action by any Person under, result
in any breach of, or constitute a default (or event which, with the giving of
notice or lapse of time, or both, would constitute a default) under, or give to
any Person any rights of termination, acceleration, cancellation or material
modification of, or result in the creation of any Lien (other than Permitted
Liens) on any of the assets, properties or rights of any of such Seller Parties
pursuant to, any Contract to which any of such Seller Parties is a party or by
which any of them or any of their respective properties, assets or rights is
bound or subject, except, in the case of clauses (b) and (c), for any such
breaches, defaults, rights or Liens that would not, individually or in the
aggregate, reasonably be expected to be material to the Transferred Companies or
the Business or to the ability of any such Seller Party to consummate the
transactions contemplated by the Transaction Agreements.
Section 2.6    Finders’ Fees. Except as set forth on Section 2.6 of the Seller
Disclosure Letter, neither any such Seller Party nor any Person acting on behalf
of any such Seller Party has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by the Transaction Agreements.
Section 2.7    IRAs. Each Company Seller is the sole owner of the IRA set forth
opposite such Company Seller’s name on Annex B. Each Company Seller has all of
the requisite authority and power to cause its related IRA to sell and transfer
the Shares owned by such IRA to Buyer in accordance with the provisions of this
Agreement. Each Company Seller has delivered to Buyer a true, complete and
correct copy of the IRA Instruction Letter executed and delivered by such
Company Seller and countersigned by its related IRA. Other than the IRA
Instruction Letter, no Company Seller has instructed its IRA to sell, transfer
or otherwise dispose of any Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE TRANSFERRED COMPANIES
Sellers hereby represent and warrant, severally in accordance with their
respective Allocated Portions and not jointly, to Buyer, as of the date hereof
and as of the Closing Date, as follows (provided that each of the
representations and warranties in this Article III with

16

--------------------------------------------------------------------------------

respect to PHAC are made solely by Tiptree in its capacity as the sole
stockholder of PHAC for all purposes hereunder):
Section 3.1    Corporate Status; Operations of PHAC.
(m)    Each of the Transferred Companies is a corporation or other organization
duly incorporated or organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation or organization and has all requisite
corporate or organizational power and authority to carry on its business as now
conducted and to own, lease and operate its properties and assets. Except as
would not, individually or in the aggregate, reasonably be expected to be
material to the Transferred Companies or the Business, each of the Transferred
Companies is duly qualified to do business as a foreign corporation or other
organization and is in good standing in each of the jurisdictions in which the
nature of its business or the properties owned, leased or operated by it makes
such qualification necessary. Sellers have made available to Buyer, prior to the
date of this Agreement, true, complete and correct copies of the Organizational
Documents of the Transferred Companies as amended to date, and none of the
Transferred Companies is in violation of any provision of such Organizational
Documents. The Organizational Documents for each of the Transferred Companies as
made available to Buyer are in full force and effect as of the date of this
Agreement. Except for the Insurance Subsidiaries, none of the Transferred
Companies is a regulated insurance company.
(n)    PHAC was formed solely for the purpose of acquiring and holding its
investment in the Company and has no assets, liabilities or obligations of any
nature, and has not engaged in any business activities, other than those
incident to such purpose.
Section 3.2    Governmental Authorization. Except as set forth in Section 3.2 of
the Seller Disclosure Letter and except for any Governmental Approval that may
be required as a result of the identity and ownership structure of Buyer, the
sale of the Purchased Shares to Buyer and the consummation of the other
transactions contemplated by the Transaction Agreements will not require any
Governmental Approval.
Section 3.3    Non-Contravention. Except as set forth in Section 3.3 of the
Seller Disclosure Letter, the execution, delivery and performance of the
Transaction Agreements by each Seller that is or will be a party thereto and the
consummation of the transactions contemplated thereby by such Persons do not and
will not (a) conflict with or result in any violation or breach of any provision
of the Organizational Documents of any of the Transferred Companies, (b)
assuming compliance with the matters referred to in Section 3.2, conflict with
or result in a violation or breach of any provision of any applicable Law or (c)
assuming compliance with the matters referred to in Section 3.2, require any

17

--------------------------------------------------------------------------------

consent of or other action by any Person under, result in any breach of, or
constitute a default (or event which, with the giving of notice or lapse of
time, or both, would constitute a default) under, or give to any Person any
rights of termination, acceleration, cancellation or material modification of,
or result in the creation of any Lien (other than Permitted Liens) on any of the
assets, properties or rights of any of the Transferred Companies pursuant to,
any Contract (including, for the avoidance of doubt, any Hartford Transaction
Agreement) or Permit to which any of the Transferred Companies is a party or by
which any of them or any of their respective properties, assets or rights is
bound or subject, except, in the case of clauses (b) and (c), as would not,
individually or in the aggregate, reasonably be expected to be material to the
Transferred Companies or the Business.
Section 3.4    Capitalization; Title to Shares.
(i)    The authorized capital stock of the Company comprises (i) 6,500,000
shares of Preferred Stock, 6,277,534 of which are issued and outstanding and
(ii) 7,083,330 shares of Common Stock, 4,839,732.67 of which are issued and
outstanding and which, together with the 6,277,534 shares of Preferred Stock
specified in clause (i) above and the shares of Common Stock issuable upon
exercise of the Warrants and other rights set forth in Section 2.2 of the Seller
Disclosure Letter, constitute the Company Shares. Of the 4,839,732.67 issued and
outstanding shares of Common Stock, 562,198.67 are Restricted Shares. The
authorized capital stock of PHAC comprises 1,000 shares of PHAC Common Stock, of
which 1,000 are issued and outstanding and which constitute the PHAC Shares. The
Shares have been (or, in the case of Shares issuable upon exercise of the
Warrants or pursuant to the other rights set forth in Section 2.2 of the Seller
Disclosure Letter, when so issued will be) duly authorized and validly issued
and are fully paid and nonassessable, and are not subject to and were not issued
in violation of any preemptive or similar rights.
(j)    Except as set forth in Section 3.4(a) or as set forth in Section 3.4(b)
of the Seller Disclosure Letter, there are no outstanding (i) shares of capital
stock of or other voting or equity interests in PHAC or the Company, (ii)
securities of PHAC or the Company convertible into or exercisable or
exchangeable for shares of capital stock of or other voting or equity interests
in PHAC or the Company, (iii) options, warrants, call rights, appreciation
rights, restricted stock unit, restricted stock or phantom stock or other rights
or Contracts or commitments of any kind to acquire from PHAC or the Company, or
other obligation of any Seller Party or PHAC or the Company to issue, transfer
or sell, any capital stock of or other voting or equity interests in PHAC or the
Company or securities convertible into or exercisable or exchangeable for, or
referenced by, capital stock of or other voting or equity interests in PHAC or
the Company, (iv) voting trusts, proxies or other Contracts or commitments to
which PHAC or the Company is bound with respect to the voting of any shares of
capital stock of or other voting or equity interests in PHAC or the Company or
the Transferred Subsidiaries or (v) stockholders agreements, registration rights
agreements or

18

--------------------------------------------------------------------------------

other contractual obligations or commitments of any character with respect to
the transfer of, or the registration for sale of, any shares of capital stock of
or other voting or equity interests in PHAC or the Company (the items in clauses
(i), (ii) and (iii) being referred to collectively as the “Company Securities”).
There are no outstanding obligations of any of the Transferred Companies to
repurchase, redeem or otherwise acquire any Company Securities. There are no
outstanding bonds, debentures, notes or other Indebtedness of PHAC or the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matter for which PHAC or the
Company’s stockholders are entitled to vote.

Section 3.5    Transferred Subsidiaries.
(a)    The authorized, issued and outstanding shares of capital stock of and
other voting or equity interests in all of the Transferred Subsidiaries and the
Company’s direct or indirect ownership interest in such Transferred Subsidiaries
are identified in Section 3.5 of the Seller Disclosure Letter. Except as set
forth in Section 3.5 of the Seller Disclosure Letter, all of the outstanding
shares of capital stock of and other voting or equity interests in each
Transferred Subsidiary have been duly authorized and validly issued, are fully
paid and nonassessable, are not subject to and were not issued in violation of
any preemptive or similar rights, and are owned beneficially and of record by
the Company or one of its wholly owned Transferred Subsidiaries as set forth in
Section 3.5 of the Seller Disclosure Letter, free and clear of any Liens. Except
as set forth in Section 3.5 of the Seller Disclosure Letter, there are no
outstanding (i) shares of capital stock of or other voting or equity interests
in any Transferred Subsidiary, (ii) securities of PHAC, the Company or any of
the Transferred Subsidiaries convertible into or exercisable or exchangeable for
shares of capital stock of or other voting or equity interests in any
Transferred Subsidiary or (iii) options, warrants, call rights, appreciation
rights, restricted stock unit, restricted stock or phantom stock or other rights
or Contracts, commitments or understandings of any kind to acquire from PHAC,
the Company or any of the Transferred Subsidiaries, or other obligation of any
of the Seller Parties or the Transferred Companies to issue, transfer or sell,
any capital stock of or voting or equity interests in any Transferred Subsidiary
or securities convertible into or exercisable or exchangeable for, or referenced
by, capital stock of or other voting or equity interests in any Transferred
Subsidiary (the items in clauses (i), (ii) and (iii) being referred to
collectively as the “Transferred Subsidiary Securities”). There are no
outstanding obligations of PHAC, the Company or any of the Transferred
Subsidiaries to repurchase, redeem or otherwise acquire any Transferred
Subsidiary Securities. No Transferred Company has any Contract to make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person.

19

--------------------------------------------------------------------------------

(b)    Except for investment assets held by the Transferred Companies in the
ordinary course of business consistent with past practice for their own accounts
(rather than for a separate account of any Insurance Subsidiary) in accordance
with the investment policies of the Transferred Companies previously disclosed
to Buyer (including any amendments not prohibited hereby following the date
hereof, the “Investment Policy”) and except for any Transferred Subsidiary
Security, none of the Transferred Companies owns any shares of capital stock of
or other voting or equity interests in (including any securities exercisable or
exchangeable for or convertible into capital stock of or other voting or equity
interests in) any other Person. Except for investments made by the Insurance
Subsidiaries and held in their separate accounts for the benefit of life
insurance or annuity contracts issued by such Insurance Subsidiaries (“Separate
Account Investments”), the Transferred Companies, individually and in the
aggregate, do not own 5% or more of the capital stock of, or of the voting or
equity interests in, any Person that is not a Transferred Company.
Section 3.6    Financial Statements.
(a)    Sellers have delivered to Buyer true, complete and correct copies of (i)
the audited consolidated financial statements of the Company at and for the
periods ended December 31, 2013, 2012 and 2011 (the most recent such date, the
“Reference Date”), together with the report of the Company’s independent auditor
thereon (the “Annual Consolidated Financial Statements”), and (ii) the unaudited
interim consolidated financial statements of the Company at and for the six
month period ended June 30, 2014 (the “Interim Consolidated Financial
Statements” and, together with the Annual Consolidated Financial Statements, the
“Consolidated Financial Statements”), including in each of clauses (i) and (ii)
a balance sheet and statements of income or operations, cash flows and retained
earnings or shareholders’ equity. The Consolidated Financial Statements (A) were
derived from and are consistent with the Books and Records, (B) have been
prepared in accordance with United States generally accepted accounting
principles (“GAAP”) applied on a consistent basis (except as may be indicated in
the notes thereto) and (C) present fairly, in all material respects, the
financial position, results of operations and cash flows of the Company and the
Transferred Subsidiaries on a consolidated basis at and for the respective
periods indicated (subject, in the case of the Interim Consolidated Financial
Statements, to normal year-end adjustments, which will not be, in the aggregate,
material in amount or effect to the Transferred Companies taken as a whole).
(b)    Sellers have delivered to Buyer true, complete and correct copies of (i)
the audited financial statements of PFASC at and for the period ended on the
Reference Date, together with the report of the Company’s independent auditor
thereon (the “PFASC Annual Financial Statements”), and (ii) the unaudited
interim financial statements of PFASC at and for the six month period ended June
30, 2014 (the “PFASC Interim Financial Statements” and, together with the PFASC
Annual Financial Statements, the “PFASC

20

--------------------------------------------------------------------------------

Financial Statements”), including in each of clauses (i) and (ii) a balance
sheet and statements of income or operations, cash flows and retained earnings
or equity owners’ equity. The PFASC Financial Statements (A) were derived from
and are consistent with the Books and Records, (B) have been prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto) and (C) present fairly, in all material respects, the
financial position, results of operations and cash flows of PFASC at and for the
respective periods indicated (subject, in the case of the PFASC Interim
Financial Statements, to normal year-end adjustments, which will not be, in the
aggregate, material in amount or effect to PFASC).
(c)    Sellers have delivered to Buyer true, complete and correct copies of the
following statutory financial statements, in each case together with the
exhibits, schedules and notes thereto (the “Statutory Statements”): (i) the
annual statement of each of the Insurance Subsidiaries, as filed with the
domiciliary Insurance Regulator of such Insurance Subsidiary, in each case, as
of and for the years ended December 31, 2013, 2012 and 2011; (ii) the audited
statutory financial statements of each of the Insurance Subsidiaries, as filed
with the domiciliary Insurance Regulator of such Insurance Subsidiary, in each
case, for the year ended December 31, 2013; and (iii) the quarterly financial
statements of each of the Insurance Subsidiaries, as filed with the domiciliary
Insurance Regulator of such Insurance Subsidiary, in each case, for the six
month period ended June 30, 2014. Except as set forth in Section 3.6(b) of the
Seller Disclosure Letter, the Statutory Statements (A) were derived from and are
consistent with the Books and Records, (B) were prepared in all material
respects accordance with SAP applied on a consistent basis during the period
presented and (C) present fairly, in all material respects, the respective
statutory financial position of the Insurance Subsidiaries at the respective
dates thereof, and the statutory results of their operations and cash flows for
the periods then ended (subject, in the case of any interim financial statements
included in the Statutory Statements, to normal year-end adjustments that will
not be, in the aggregate, material in amount or effect, and to the absence of
footnotes).
(d)    The Books and Records (which, with respect to PFASC and PFASC Holdings
only, shall be limited to Books and Records applicable to all periods beginning
on and after July 13, 2012), (i) are true, complete and correct in all material
respects, (ii) have been maintained, in all material respects, in accordance
with sound business practices and applicable Law, (iii) accurately present and
reflect, in all material respects, the Business and all transactions and actions
related thereto and, as of the Closing Date, shall accurately reflect, in all
material respects, the amounts reported to Seller and its Affiliates by third
party recordkeepers, (iv) have been prepared using processes and procedures for
which there are no material weaknesses or significant deficiencies in internal
controls over financial reporting that could adversely affect the ability of the
Transferred Companies, Sellers and their respective Affiliates to accurately
present and reflect, in all material respects, the Business and other
transactions and actions related thereto, and (v) contain no material Data

21

--------------------------------------------------------------------------------

Input Inaccuracies. The Books and Records are in material compliance with any
and all recordkeeping maintenance requirements in applicable Contracts.
(e)    The Transferred Companies have devised and maintained systems of internal
accounting controls with respect to the Business sufficient to provide
reasonable assurances that (i) all transactions are executed in accordance with
management’s general or specific authorization, (ii) all transactions are
recorded as necessary to permit the preparation of financial statements in
conformity with GAAP and to maintain proper accountability for items,
(iii) access to their property and assets is permitted only in accordance with
management’s general or specific authorization and (iv) recorded accountability
for items is compared with actual levels at reasonable intervals and appropriate
action is taken with respect to any differences.

Section 3.7    No Undisclosed Liabilities. None of the Transferred Companies has
any liabilities or obligations, whether known, unknown, absolute, accrued,
contingent or otherwise or whether due or to become due, except (a) as set forth
in Section 3.7 of the Seller Disclosure Letter, (b) for liabilities and
obligations specifically disclosed or reserved against in the Consolidated
Financial Statements as of and for the period ending on the Reference Date or
specifically disclosed in the notes thereto, or (c) for liabilities and
obligations that were incurred after the Reference Date in the ordinary course
of business consistent with past practice, which would not, individually or in
the aggregate, reasonably be expected to be material to the Transferred
Companies or the Business, or pursuant to the transactions contemplated by this
Agreement.
Section 3.8    Absence of Certain Changes. Except as set forth in Section 3.8 of
the Seller Disclosure Letter, from the Reference Date to the date of this
Agreement, (a) the Business has been conducted in the ordinary course of
business consistent with past practice, (b) no occurrence, fact, condition,
change, development or effect has come into existence or occurred that,
individually or in the aggregate, has resulted in, or would reasonably be
expected to result in, a Material Adverse Effect, and (c) none of the
Transferred Companies has taken any of the actions listed in clauses (a) through
(ff) of Section 5.1.
Section 3.9    Material Contracts.
(a)    Except as set forth in Section 3.9(a) of the Seller Disclosure Letter, as
of the date of this Agreement, none of the Transferred Companies is a party to
or bound by:

22

--------------------------------------------------------------------------------

(i)    any Contract relating to Indebtedness (whether incurred, assumed,
guaranteed or secured by any asset), including the Note Purchase Agreement and
any other Contract relating to the RGA Indebtedness, and any Contract pursuant
to which any Transferred Company has an obligation to loan or contribute funds
or make investments (excluding investment portfolio transactions (such
investment portfolio transactions to include Separate Account investment
transactions) in the ordinary course of business and loans and advances to
employees in the ordinary course of business);
(ii)    any material agency, broker, selling, marketing or similar Contract
between any Transferred Company and any Producer;
(iii)    any joint venture, partnership, limited liability company or other
similar Contract (including any material Contract providing for joint research,
development or marketing) other than a Contract relating to a Separate Account
Investment;
(iv)    any Contract that relates to the administration, claims, underwriting,
investment management or other material functions of any of the Transferred
Companies or the Business (excluding Separate Accounts investment agreements);
(v)    any Contract or series of related Contracts, including any option
Contract, relating to the acquisition or disposition of any business, a material
amount of stock or assets of any other Person, any division or line of business
or any material property (whether by merger, sale or purchase of stock, sale or
purchase of assets or otherwise), in each case, any such acquisition or
disposition involving aggregate consideration of $250,000 or more, or any
Contract which grants a right of first refusal or offer of the same in respect
of any of the foregoing transactions;
(vi)    any Contract that (A) materially limits the freedom of any of the
Transferred Companies to compete in any line of business or with any Person or
in any area or that would so materially limit the freedom of Buyer or its
Affiliates or the any of the Transferred Companies after the Closing, (B)
contains material exclusivity obligations or restrictions binding on any of the
Transferred Companies that would be binding on Buyer or any of its Affiliates
after the Closing or (C) provides for a preferred or “most favored nation”
status for any party thereto;
(vii)    any Contract or series of related Contracts providing for aggregate
payments by or to any of the Transferred Companies in any twelve month period of
$100,000 or more for the provision of services or materials, supplies, goods,
equipment or other assets;

23

--------------------------------------------------------------------------------

(viii)    any Contract relating to any interest rate, derivatives or hedging
transaction other than a Contract relating to a Separate Account Investment;
(ix)    any Affiliate Transaction;
(x)    the Hartford Transaction Agreements;
(xi)    any Lease for Leased Real Property;
(xii)    any IP License;
(xiii)    any Reinsurance Agreement;
(xiv)    any Contract that was entered into with a Governmental Authority to the
extent relating to the Transferred Companies or the Business; or
(xv)    any other Contract that is material to the Business and is not
terminable upon ninety (90) calendar days’ written notice without material
penalty or premium.
(b)    (i) Each of the Hartford Transaction Agreements and each Contract
disclosed in the Seller Disclosure Letter or required to be disclosed therein
pursuant to this Section 3.9 (each, a “Material Contract”) is a legal, valid and
binding agreement of the Transferred Company that is a party thereto enforceable
against such Transferred Company and, to the Knowledge of Sellers, each other
party thereto in accordance with its terms, subject to the Enforceability
Exceptions, and is in full force and effect (except for those Material Contracts
that expire in accordance with their respective terms following the date of this
Agreement and not in violation thereof); (ii) none of the Transferred Companies
has received written notice of its default or breach in any material respect the
terms of, or has provided or received any written notice of termination with
respect to, any such Material Contract; and (iii) to the Knowledge of Sellers,
no event or circumstance has occurred that, with notice or lapse of time or
both, (A) would constitute a material default or an event of default thereunder,
(B) would give rise to any right to terminate or cancel such Material Contract,
or accelerate or materially modify the terms thereof, or (C) would create any
Lien (other than Permitted Liens) on any material assets, properties or rights
of any Transferred Company. True, complete and correct copies of each such
Material Contract (including all material modifications and amendments thereto
and waivers thereunder) have been made available to Buyer prior to the date of
this Agreement.
(c)    Except as set forth in Section 3.9(c) of the Seller Disclosure Letter:
(i) no Transferred Company that is a party to any Hartford Transaction Agreement
has provided or received notice of termination (provisional or otherwise) in
respect of such Hartford Transaction Agreement, and, to the Knowledge of
Sellers, no event or circumstance

24

--------------------------------------------------------------------------------

has occurred that would, with notice or lapse of time or both, reasonably be
expected to give rise to the delivery by any party to any Hartford Transaction
Agreement of any such notice, (ii) none of the Transferred Companies or Sellers
or their respective Affiliates has received written notification of any dispute
with respect to any material amounts recoverable by any Transferred Company
pursuant to any Hartford Transaction Agreement, (iii) as of the date hereof, all
payments due and payable to any Transferred Company under all of the Hartford
Transaction Agreements have been paid in full, and (iv) no Transferred Company
that is a party to any Hartford Transaction Agreement has provided or received
written notice of a claim for indemnification under such Hartford Transaction
Agreement.
(d)    Section 3.9(d) of the Seller Disclosure Letter sets forth a true and
correct list of all Intracompany Agreements in effect as of the date hereof.

Section 3.10    Properties.
(a)    Title to Assets. Except as would not, individually or in the aggregate,
reasonably be expected to be material to the Transferred Companies or the
Business, the Transferred Companies have good and valid title to, or otherwise
have the right to use pursuant to a valid and enforceable lease, license or
similar contractual arrangement, all of the material assets (real and personal,
tangible and intangible, including all Intellectual Property) used or held for
use in the Business, including assets that are reflected on the balance sheet
included in the Consolidated Financial Statements as of the Reference Date as
being owned by the Transferred Companies or were acquired after the Reference
Date (except for assets that have been disposed of since the date thereof), in
each case free and clear of any Lien other than Permitted Liens. This Section
3.10(a) does not apply to investment assets acquired or sold in the ordinary
course of business in accordance with the Investment Policy.
(b)    Owned Real Property. No Transferred Company currently owns any real
property interests in fee except for Separate Account Investments.
(c)    Leased Real Property. Section 3.10(c) of the Seller Disclosure Letter
lists as of the date of this Agreement all of the real property leased by any of
the Transferred Companies (the “Leased Real Property”). Sellers have made
available to Buyer, prior to the date of this Agreement, true, complete and
correct copies of each of the leases pursuant to which such Leased Real Property
is leased, together with all material amendments and modifications thereto and
all guarantees thereof (collectively, the “Leases”). Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect: (i) the Transferred Companies hold good and valid leasehold
title to the Leased Real Properties, (ii) all of such Leases are valid and in
full force and effect and all rents and additional rents due to date on each
such Lease have been paid,

25

--------------------------------------------------------------------------------

and (iii) the Transferred Companies enjoy peaceful and undisturbed possession in
all material respects under all Leases.
Section 3.11    Intellectual Property; Information Technology.
(a)    Owned Intellectual Property. Section 3.11(a) of the Seller Disclosure
Letter lists all Intellectual Property that the Transferred Companies purport to
own (the “Owned Intellectual Property”) that is registered or subject to a
pending application for registration with a Governmental Authority (or, in the
case of domain names, a domain name registrar) (including, in each case, the
record owner, the jurisdiction in which such Intellectual Property has been
registered or an application for registration is pending, the registration
number and/or application number and the registration and/or application date).
All such registrations and applications are subsisting and are, to the Knowledge
of the Sellers, valid and enforceable. All application, maintenance and renewal
fees due and owing in relation to such registrations and applications have been
paid in full. To the Knowledge of Sellers, none of the Transferred Companies is
using any such Owned Intellectual Property that is the subject of a registration
or application in a manner that would reasonably be expected to result in the
cancellation or unenforceability of any registration or application of such
Owned Intellectual Property.
(b)    Material Licenses and Other Agreements. Section 3.11(b) of the Seller
Disclosure Letter lists each Contract to which any of the Transferred Companies
is a party or by which any of them is otherwise bound that relates explicitly to
Intellectual Property and that is material to any of the Transferred Companies,
including (i) licenses, assignments or transfers of Intellectual Property to any
of the Transferred Companies by any other Person, (ii) licenses, assignments or
transfers of Intellectual Property to any other Person by any of the Transferred
Companies, (iii) Contracts otherwise granting or restricting the right to use
Intellectual Property and (iv) Contracts transferring, assigning, indemnifying
with respect to or otherwise relating to Intellectual Property used or held for
use in the Business, in each case other than licenses for commercially available
“off-the-shelf” software involving license fees of less than $100,000 per annum
(collectively, the “IP Licenses”).
(c)    No Infringement. Within the last three years, the conduct of the Business
has not been and as currently conducted is not infringing, diluting,
misappropriating or otherwise conflicting in any material respect with the
rights of any Person in respect of any Intellectual Property. Except as set
forth in Section 3.11(c) of the Seller Disclosure Letter, (i) to the Knowledge
of Sellers, no Person has been within the last three years or is currently
materially infringing upon, diluting, misappropriating or otherwise in conflict
with any of the material Owned Intellectual Property; (ii) none of the
Transferred Companies have within the last three years brought or threatened a
claim in writing against any Person asserting that such Person is infringing,
diluting, misappropriating or otherwise in conflict with the Owned Intellectual
Property; and (iii) no claim or demand has been asserted or threatened against
any of the Transferred Companies in writing within the last three years
challenging the validity of any Intellectual Property owned by or licensed to
the Transferred

26

--------------------------------------------------------------------------------

Companies or any of the Transferred Companies’ title or rights thereto, or
alleging that any of the Transferred Companies or the conduct of the Business is
infringing, diluting, misappropriating or otherwise in conflict with any
Intellectual Property rights of any other Person.
(d)    Privacy, Data and Computer Systems. The Transferred Companies have
established and are in compliance in all material respects with commercially
reasonable security programs, contractual requirements and privacy policies that
are designed to protect (i) the security, confidentiality and integrity of
transactions executed through their information technology systems, including
encryption or other security protocols and techniques when appropriate and (ii)
the security, confidentiality and integrity of all Personal Data and other
confidential or proprietary data or information. To the Knowledge of the
Sellers, within the last three years, none of the Transferred Companies has
suffered and no service provider to the Transferred Companies has suffered any
material security breach with respect to any Personal Data, data or information
of the Transferred Companies or systems used in the Business, nor has any of the
Transferred Companies been notified or been required by Law to notify any
customers, consumers, employees or Governmental Authority of any information
security breach involving Personal Data or other personal or confidential
information of such customers, consumers or employees. The Transferred Companies
are in compliance in all material respects with applicable privacy Laws and
regulations regarding the collection, retention, use and disclosure of Personal
Data. The Transferred Companies have implemented business continuity and
disaster recovery technology and procedures that are commercially reasonable for
the Business. To the Knowledge of the Sellers, the information technology
systems of the Transferred Companies do not contain any Malware that would
reasonably be expected to interfere with the conduct of the Business in any
material respect.
(e)    Open Source Code. Except as would not, individually or in the aggregate,
reasonably be expected to be material to the Transferred Companies or the
Business, no Software marketed, distributed, licensed, or sold by any
Transferred Company is subject to any “copyleft” or other obligation or
condition (including any obligation or condition under any “open source” license
such as the GNU Public License, Lesser GNU Public License, or Mozilla Public
License) (collectively, “Public Software”) that (i) requires the disclosure,
licensing, or distribution of any source code for any portion of such Software,
or (ii) requires that such Software be redistributable at no charge, in each
case, as a result of any Transferred Company’s use, modification or distribution
of Public Software.
Section 3.12    Litigation. Except as set forth in Section 3.12 of the Seller
Disclosure Letter, (i) there is no Litigation pending or, to the Knowledge of
Sellers, threatened against or affecting the Business or any of the Transferred
Companies (other than claims under the terms of the Insurance Contracts that are
within applicable policy limits and were incurred in the ordinary

27

--------------------------------------------------------------------------------

course of business consistent with past practice that do not allege bad faith)
and (ii) there are no outstanding settlement agreements or similar written
agreements with any Governmental Authority and no material outstanding orders,
judgments, stipulations, decrees, injunctions, determinations or awards issued
by any Governmental Authority against or affecting the Business or any of the
Transferred Companies.
Section 3.13    Compliance with Laws. Except as set forth in Section 3.13 of the
Seller Disclosure Letter, none of the Transferred Companies (i) are, or at any
time since January 1, 2011 have been, in material violation of any orders, laws,
statutes, regulations, rules, ordinances, writs, injunctions, directives,
judgments, decrees, principles of common law, constitution or treaty enacted,
promulgated, issued, enforced or entered by any Governmental Authority (“Laws”),
(ii) have received written notice alleging any material violation of any
applicable Law.
Section 3.14    Permits and Licenses. Except as set forth in Section 3.14 of the
Seller Disclosure Letter or as would not, individually or in the aggregate,
reasonably be expected to be material to the Transferred Companies or the
Business, in each case taken as a whole, the Transferred Companies own, hold or
possess, and have, at all times since January 1, 2011, owned, held or possessed,
all licenses (including insurance licenses), franchises, permits, privileges,
immunities, certificates, variances, orders, consents, approvals, registrations
and other authorizations from a Governmental Authority that are necessary to
entitle them to own or lease, operate and use their properties, assets or rights
and to carry on and conduct their business as conducted immediately prior to the
date of this Agreement and PFASC owns, holds and possesses all licenses that are
necessary to perform their obligations under the Hartford Transaction Agreements
(collectively, the “Permits”), and all such Permits are valid and in full force
and effect. Section 3.14 of the Seller Disclosure Letter lists all jurisdictions
in which the Insurance Subsidiaries are domiciled, licensed or authorized to
write insurance business. Except as set forth in Section 3.14 of the Seller
Disclosure Letter, (i) since January 1, 2011, none of the Transferred Companies
has received any written notice or claim of any material violation of any Permit
nor, to the Knowledge of Sellers, has any such notice or claim been threatened,
(ii) no material Litigation in respect of the suspension, cancellation, adverse
modification, revocation or non-renewal of any Permit is pending or, to the
Knowledge of Sellers, threatened and (iii) the Transferred Companies are, and at
all times since January 1, 2011, have been, in material compliance with all
terms and conditions of the Permits. No Transferred Company is required to be
registered, licensed or qualified as a bank, trust company, commodity
broker-dealer, futures commission merchant, transfer agent, real estate broker,
introducing broker, municipal advisor, investment adviser, commodity trading
advisor, or commodity pool operator. No Transferred Company has received written
notice of any pending judicial, arbitral or administrative action, suit,
proceeding or investigation concerning any failure to obtain any bank, trust
company, commodity broker-dealer, futures commission merchant, transfer agent,
real estate broker, introducing broker, municipal advisor, investment adviser,
commodity trading advisor or commodity pool operator registration, license or
qualification. No Transferred Company engages in any activity that would cause
such Transferred Company to be a municipal advisor, as defined in Rule 15Ba1-1
under the Exchange Act.

28

--------------------------------------------------------------------------------

Section 3.15    Employees, Labor Matters, Etc.
(a)    Employee Information. Sellers have made the following information
available to Buyer with respect to each current Employee as of the date of this
Agreement containing: (i) his or her employment status, including classification
as a consultant or employee, full-time or part-time, (ii) dates of service;
(iii) job title; (iv) rate of pay or annual salary or commission rate; (v)
compensation payable pursuant to a guaranteed bonus; (vi) visa status; and (vii)
work location.
(b)    Leave of Absence. There is no current Employee who is not fully available
to perform work because of disability or other long-term leave.
(c)    At Will Status. Except as set forth in Section 3.15(c) of the Seller
Disclosure Letter, the service of each of the current Employees is terminable at
will. Sellers have delivered to Buyer true, complete and correct copies of all
material employee manuals and handbooks, disclosure materials, policies or
policy statements.
(d)    Collective Bargaining Agreements; Labor Union Activity. Except as set
forth in Section 3.15(d) of the Seller Disclosure Letter, none of the
Transferred Companies is a party to, or is otherwise bound by, any collective
bargaining agreement or other Contract with a labor organization, and, to the
Knowledge of the Sellers, there are no labor unions or other organizations or
groups representing, purporting to represent or attempting to represent any
current Employees.
(e)    Compliance. Except as would not, individually or in the aggregate,
reasonably be expected to result in a material liability to any of the
Transferred Companies, each of the Transferred Companies: (i) is in compliance
with all applicable requirements of Law, Contracts and orders, judgments,
stipulations, decrees, injunctions, determinations or awards issued by any
arbitrator or any court or other Governmental Authority with respect to
employment, wages, hours or other labor-related matters; (ii) has withheld and
reported all amounts required by any applicable requirements of Law or Contract
to be withheld and reported with respect to wages, salaries and other payments
to any Employee; (iii) has no liability for any arrears of wages; and (iv) has
no liability for any payment to any trust or other fund governed by or
maintained by or on behalf of any Governmental Authority with respect to
unemployment compensation benefits, social security or other benefits or
obligations for any Employee (other than routine payments to be made in the
normal course of business and consistent with past practice).
(f)    No Misclassified Employees. Each Person who renders services to the
Transferred Companies who, during the past three years, has been or was
classified by the Transferred Companies as having the status of an independent
contractor or other non-employee status for any purpose (including for purposes
of taxation and tax reporting and under Company Benefit Plans) is properly so
characterized.
(g)    Labor-Related Claims. Except as set forth in Section 3.15(g) of the
Seller Disclosure Letter, there is no material Litigation, claim, labor dispute,
audit, proceeding or grievance pending or, to the Knowledge of Sellers,
threatened or reasonably anticipated relating to any employment Contract,
compensation, wages and hours, leave of absence, plant closing notification,
employment statute or regulation, privacy right, labor dispute, workers’
compensation policy, long-

29

--------------------------------------------------------------------------------

term disability policy, safety, retaliation, immigration or discrimination
matter involving any Employee, including charges of unfair labor practices or
harassment complaints.
Section 3.16    Employee Benefit Plans and Related Matters; ERISA.
(a)    Disclosure. Section 3.16(a) of the Seller Disclosure Letter contains a
true, complete and correct list of each material Company Benefit Plan (including
a description of any material oral Company Benefit Plans), indicating whether
any such plan is or was exclusively for the benefit of Employees. With respect
to each material Company Benefit Plan, Sellers have provided or made available
to Buyer, prior to the date of this Agreement, to the extent applicable, (i)
true, complete and correct copies of all plan documents, trust agreements,
insurance Contracts or other funding arrangements, (ii) the two most recent
actuarial and trust reports, (iii) the two most recent Forms 5500 with all
attachments required to have been filed with the IRS or the Department of Labor,
and all schedules thereto, (iv) the most recent IRS determination letter, (v)
all current summary plan descriptions, (vi) all material communications received
during the twelve month period prior to the date of this Agreement from or sent
to the IRS, the PBGC, the Department of Labor or any other Governmental
Authority (including a written description of any oral communication), (vii) all
current employee handbooks and manuals, and (viii) all amendments and
modifications to any such Company Benefit Plan or related document.
(b)    Qualification. Each Company Benefit Plan intended to be qualified under
Section 401(a) of the Code, and the trust (if any) forming a part thereof, is so
qualified and has received a favorable determination letter from the IRS and, to
the Knowledge of the Sellers, no facts exist that could reasonably be expected
to adversely affect such qualification.
(c)    Liability; Compliance.
(i)    Each Company Benefit Plan has been operated in all material respects in
accordance with its terms and all applicable Law. All material contributions and
premiums required to have been paid by the Transferred Companies or any of their
ERISA Affiliates to any Company Benefit Plan under the terms of any such plan or
its related trust, insurance contract or other funding arrangement, or pursuant
to any applicable Law (including ERISA and the Code) have been paid within the
time prescribed by any such plan, agreement or applicable Law.
(ii)    (A) No Company Benefit Plan is a Multiemployer Plan or a plan that has
two or more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a “Multiple Employer
Plan”); (B) none of the Transferred Companies nor any of their respective ERISA
Affiliates has, at any time during the last six years, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan; and
(C) none of PHAC, the Company and its subsidiaries nor any ERISA Affiliates has
incurred any Withdrawal Liability that has not been satisfied in full. Neither
the Transferred Companies nor any of their ERISA Affiliates maintains or has
ever maintained a plan subject to Title IV of ERISA. There does not now exist,
nor do any circumstances exist that could result in, any Controlled Group
Liability that would be

30

--------------------------------------------------------------------------------

a liability of the Transferred Companies following the Closing. Without limiting
the generality of the foregoing, none of the Transferred Companies has engaged
in any transaction described in Section 4069 or Section 4204 or 4212 of ERISA.
(iii)    There are no material pending or, to the Knowledge of the Sellers,
threatened claims by or on behalf of any participant in any of the Company
Benefit Plans, or otherwise involving any Company Benefit Plan or the assets of
any Company Benefit Plan. To the Knowledge of the Sellers, the Company Benefit
Plans are not presently under audit or examination (nor has notice been received
of a potential audit or examination) by the IRS, the Department of Labor, or any
other Governmental Authority, domestic or foreign, and no matters are pending
with respect to a Company Benefit Plan under the IRS’s Voluntary Compliance
Resolution program, its Closing Agreement Program, or other similar programs.
(iv)    Except as set forth in Section 3.16(c)(iv) of the Seller Disclosure
Letter, none of the Transferred Companies has any liability (contingent or
otherwise) in respect of, or obligation to provide, post-retirement health,
medical, life insurance or other benefits for any Employee except as required to
avoid excise tax under Section 4980B of the Code.
(v)    (A) Except as set forth on Section 3.16(c)(v) of the Seller Disclosure
Letter, the execution, delivery and performance of the Transaction Agreements by
the Seller Parties and the Transferred Companies and the consummation of the
transactions contemplated thereby will not (alone or in combination with any
other event) result in an increase in the amount of compensation or benefits or
the acceleration of the vesting or timing of payment of any compensation or
benefits payable to or in respect of any Employee or any increased or
accelerated funding obligation with respect to any Company Benefit Plan. (B) No
payment or deemed payment by any of the Transferred Companies will arise or be
made as a result (alone or in combination with any other event) of the
execution, delivery and performance of the Transaction Agreements by the Seller
Parties or the Transferred Companies or the consummation of the transactions
contemplated thereby, that could not be deductible pursuant to Section 280G of
the Code. (C) No Person is entitled to receive any additional payment (including
any tax gross-up or other payment) from the Transferred Companies as a result of
the imposition of the excise taxes required by Section 4999 of the Code or any
taxes required by Section 409A of the Code.
(vi)    Except as set forth in Section 3.26(c)(vi) of the Seller Disclosure
Letter, none of the Transferred Companies has, during the 90-day period
preceding the date hereof, effectuated (i) a “plant closing” or a “mass lay-off”
(as such terms are defined in the Worker Adjustment and Retraining Act of 1988
(the “WARN Act”)) or (ii) a “plant closing”, “termination of operations” or
“transfer of operations” as such terms are defined in the Millville Dallas
Airmotive Plant Job Loss Notification Act (the “NJ WARN Act”) in the case of the
items in clauses (i) and (ii) affecting any site of employment or facility of
Sellers or any of their Subsidiaries relating to the Business, except in
accordance with the WARN Act and the NJ WARN ACT.

31

--------------------------------------------------------------------------------

(d)    No Foreign Plans. None of the Transferred Companies maintains, or has any
liability with respect to: (i) any plan, program, policy, practice, Contract or
other arrangement mandated by a Governmental Authority other than the United
States; or (ii) any Company Benefit Plan that covers or has covered Employees
whose services are or have been performed primarily outside of the United
States.
(e)    No Covered Health Insurance Provider. No Transferred Company or any
Affiliate is or has ever been a “covered health insurance provider” within the
meaning of Section 162(m)(6)(c) of the Code.
(f)    Compliance with ERISA. The Transferred Companies have conducted the
Business with respect to employee benefit plans subject to ERISA, Section 4975
of the Code and Similar Law in all material respects in accordance with such
laws, rules and regulations. Without limiting the generality of the immediately
preceding sentence, none of the Transferred Companies, to Seller’s Knowledge,
has engaged in a non-exempt “prohibited transaction” within the meaning of
Section 406 of ERISA, Section 4975(c) of the Code or similar provision of any
Similar Law.
Section 3.17    Tax Matters.  
(a)    (i) All material Tax Returns required to have been filed by or with
respect to any of the Transferred Companies have been duly and timely filed
(taking into account any extensions) in accordance with applicable Law. All such
Tax Returns were when filed and continue to be true, correct and complete in all
material respects.
(ii)    All material Taxes required to be paid by or with respect to any of the
Transferred Companies, whether or not shown on such Tax Returns, have been
timely paid.
(b)    The Transferred Companies have complied in all material respects with all
applicable Law relating to the collection and withholding of Taxes respectively
applicable to such Transferred Companies (including all information reporting
and record keeping requirements) and all such Taxes have been, to the extent
required, paid in the manner prescribed by applicable Law by or on behalf of the
Transferred Companies.
(c)    No written agreement or other document waiving or extending, or having
the effect of waiving or extending, the statute of limitations or the period of
assessment or collection of any material Taxes with respect to any Transferred
Company, and no written power of attorney with respect to any such Taxes that is
still effective has been filed or entered into with any Governmental Authority.
There are no current federal, state, local, or foreign reassessments,
assessments, audits, inquiries, claims, suits, proceedings (each, an “Audit”)
with respect to material Taxes or material Tax Returns of any of the Transferred
Companies. No Audit with respect to Taxes, or Tax Returns, or any other material
deficiency or claim with respect to Taxes, of or with respect to the Transferred
Companies is, to the Knowledge of Sellers, pending, proposed or threatened. No
jurisdiction in which any Transferred Company has not filed a Tax Return has
asserted that such Transferred Company is required to file such Tax Return in
such jurisdiction.

32

--------------------------------------------------------------------------------

(d)    Except as set forth in Section 3.17(d) of the Seller Disclosure Letter,
none of the Transferred Companies has any liability for Taxes of any other
Person (other than another Transferred Company) (i) under Treasury Regulations
Section 1.1502-6 (or any corresponding or similar provision of applicable Law),
(ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.
(e)    PFASC is treated as a partnership for U.S. federal income tax purposes,
and PFASC Holdings is treated as an entity disregarded from its owner for U.S.
federal income tax purposes. Except as set forth in Section 3.17(e) of the
Seller Disclosure Letter, no Transferred Company has made an entity
classification election for U.S. federal, state or local Tax purposes.
(f)    No closing agreement pursuant to Section 7121 of the Code (or any similar
provision of state, local or foreign law) has been entered into by any of the
Transferred Company and that would be binding upon such Transferred Company
after the Closing Date.
(g)    None of the Transferred Companies will be required to include any item of
income or gain in, or exclude any item of loss or deduction from, the
determination of taxable income for any Taxable Period (or portion thereof)
ending after the Closing Date as a result of any (i) change in method of
accounting under Section 481 of the Code or change in the basis for determining
any item under section 807(f) of the Code (or any corresponding provision of
state, local or foreign Law) for a Taxable Period that includes the period
ending on or prior to the Closing Date; (ii) installment sale or open
transaction disposition made prior to the Closing; or (iii) intercompany
transactions that are subject to Treasury Regulations Section 1.1502-13 (or any
similar provision of state, local or foreign Law) occurring prior to the
Closing. No Transferred Company has participated in a listed transaction within
the meaning of Treasury Regulations Section 1.6011-4(c)(3)(i)(A). No transferred
Company has been a “distributing corporation” or a “controlled corporation”
within the meaning of Section 355 of the Code in the two years prior to the date
of this Agreement. No Transferred Company is a party to a “gain recognition
agreement” within the meaning of the Treasury Regulations under Section 367 of
the Code.
(h)    Section 3.17(h) of the Seller Disclosure Letter lists each Transferred
Company for which an election under Section 953(d) of the Code is in effect.
(i)    Insurance Products.
(i)    Each of the Insurance Contracts that is a life insurance contract
qualifies as a “life insurance contract” under Section 7702 of the Code.
(ii)    Except for Insurance Contracts issued under annuity contract forms that
were issued to a Person that was not a “natural person” (within the meaning of
Section 72(u) of the Code) and that do not otherwise qualify within the
exceptions set forth in Section 72(u) of the Code or the “grandfathering” rules
thereunder, the Insurance Contracts that are annuity contracts qualify as
“annuities” under Section 72 of the Code.
(iii)    None of the Insurance Contracts is a “modified endowment contract”
within the meaning of Section 7702A of the Code, except for those Insurance
Contracts that

33

--------------------------------------------------------------------------------

are being administered as “modified endowment contracts” and with respect to
which the holder of the Insurance Contract has been notified in writing of the
status of such Insurance Contracts as a “modified endowment contract” under
Section 7702A of the Code.
(iv)    Each of the Transferred Companies and the insurance company that issued
any Insurance Contract has complied in all material respects with all Tax
reporting, withholding, and disclosure requirements that are applicable to such
Insurance Contract and, in particular, has reported distributions under such
Insurance Contracts substantially in compliance in all material respects with
all applicable requirements of the Code, Treasury Regulations and forms issued
by the IRS.
(v)    Neither the Transferred Companies, any insurance company that issued any
Insurance Contract nor any Seller Party has entered into any agreement, or
otherwise requested relief, with the IRS regarding the failure of any Insurance
Contract to meet the requirements of applicable Law, including Sections 72, 101,
401 through 409A, 412, 415, 417, 457, 817, 7702 and 7702A of the Code and any
Treasury Regulations and administrative guidance issued thereunder, as
applicable to such Insurance Contracts. Except as set forth in Section
3.17(i)(v) of the Seller Disclosure Letter, neither the Insurance Subsidiaries,
any insurance company that issued any Insurance Contract nor any Seller Party is
party to any “hold harmless,” Tax sharing or indemnification agreement with any
party regarding the Tax treatment of the Insurance Contracts or any plan or
arrangement in connection with which such Insurance Contracts were purchased or
have been administered. In addition, neither the Insurance Subsidiaries nor any
Seller Party is a party to or has received notice of any federal, state, local
or foreign audits or other administrative or judicial Litigation with respect to
any party with regard to the Tax treatment of any Insurance Contracts, or of any
claims by the purchasers, holders or intended beneficiaries of the Insurance
Contracts regarding the Tax treatment of such Insurance Contracts.
(vi)    To the Knowledge of Sellers, each Insurance Contract that is a life
insurance contract was issued to a Person who or which, at the time such
Insurance Contract was issued, possessed an insurable interest in all Persons
insured under such Insurance Contract.  No claims have been made by and, to the
Knowledge of Sellers, no amount is due to, any holder of an Insurance Contract
under any side letter between the issuer of such Insurance Contract, on the one
hand, and such holder of such Insurance Contract, on the other hand, regarding
any Tax matters referred to in such side letter, and, to the Knowledge of
Sellers, all representations and warranties set forth in each such side letter
with respect to Tax matters are, and have at all times since the effective date
of such side letter been, true and correct. No such side letter exists other
than as set forth on Section 3.17(i)(vi) of the Seller Disclosure Letter.
(vii)    Except as set forth in Section 3.17(i)(vii) of the Seller Disclosure
Letter, none of the Insurance Contracts is or has ever been intended to qualify
as a “pension plan contract” within the meaning of Section 818(a) of the Code or
is otherwise intended to qualify under any section of the Code that is
applicable to, or that provides for, deferred compensation plans or
arrangements.

34

--------------------------------------------------------------------------------

(viii)    All information technology owned by the Transferred Companies, and all
processes and procedures performed by the Transferred Companies in each case
that have been used to maintain the Insurance Contracts’ qualification for their
Tax treatment under applicable provisions of the Code, to monitor the Insurance
Contracts for treatment as “modified endowment contracts” or to facilitate
compliance with the reporting, withholding and disclosure requirements described
in Section 3.17(i)(iv), have been designed, implemented and performed to
maintain such qualification or facilitate such monitoring or compliance in all
material respects. The Transferred Companies have maintained in all material
respects all Tax-related records necessary (A) to determine the Insurance
Contracts’ qualification for Tax treatment under applicable provisions of the
Code, (B) to monitor the Insurance Contracts for treatment as “modified
endowment contracts” or (C) to facilitate compliance with the reporting,
withholding and disclosure requirements described in Section 3.17(i)(iv) in the
manner required by Revenue Procedure 98-25.
(ix)    The Tax Treatment of each Insurance Contract issued by a Transferred
Company has not been materially mischaracterized or misstated in any written
materials delivered by such Transferred Company  to the owner of such Insurance
Contract at the time such Insurance Contract was issued or at the time that such
Insurance Contract was subsequently modified. Solely for purposes of this
paragraph, (A) the “Tax Treatment” of such an Insurance Contract shall mean, (1)
as applicable, the status of such Insurance Contract as set forth in clause (i)
or (ii) of Section 3.17(i), (2) the status of such Insurance Contract as a
“modified endowment contract” within the meaning of Section 7702A of the Code,
or (3) the status of the Transferred Company issuing such Insurance Contract as
the owner, for federal income tax purposes, of the assets underlying such
Insurance Contract and held in a “segregated asset account,” in each case
pursuant to Tax Law in effect at the time such written materials were delivered
to the owner of such Insurance Contract; and (B) the “Tax Law” relating to the
Tax Treatment of such Insurance Contract shall be limited to Sections 72, 101,
817, 7702 and 7702A of the Code and any Treasury Regulations and administrative
guidance issued thereunder.
(j)    Section 3.17(j) of the Seller Disclosure Letter lists each Insurance
Subsidiary that has a “policyholders surplus account” within the meaning of
Section 815 of the Code and the value of such account.
(k)    Except as set forth in Section 3.17(l) of the Seller Disclosure Letter
with respect to “segregated asset accounts” maintained by the Insurance
Subsidiaries that are in liquidation, each “segregated asset account,” within
the meaning of Section 817(h) of the Code, maintained by an Insurance Subsidiary
meets, and since establishment of such account has met, on all applicable
testing dates or within any applicable remediation periods, the diversification
requirements of Section 817(h) of the Code and Treasury Regulation Section
1.817-5.
(l)    Each Insurance Contract has been designed and administered by such
Insurance Subsidiary so that such Insurance Subsidiary is treated for United
States federal income tax purposes as the owner of the assets underlying such
Insurance Contract and held in a “segregated asset account.” To the Knowledge of
Sellers, no owner of an Insurance Contract has engaged in

35

--------------------------------------------------------------------------------

activities that would result in such owner being deemed to be the owner of any
segregated account assets supporting such owner’s Insurance Contract.
(m)    Except as set forth on Section 3.17(m) of the Seller Disclosure Letter,
none of the Transferred Companies is either a party to or bound by any Tax
sharing agreement, Tax indemnity agreement, or similar agreement (each, a “Tax
Sharing Agreement”) that will remain in effect after the Closing Date.
(n)    None of the Transferred Companies has made an election under Section
108(i) of the Code to defer the recognition of any cancellation of indebtedness
income.
The representations and warranties in this Section 3.17 are not intended to
serve as a representation to or guarantee of, nor can they be relied upon for,
(i) any Tax position taken by Buyer or any of the Transferred Companies for any
Post-Closing Tax Period (other than the representations and warranties in
Section 3.17(e), (f), (g),(h), (i), (j), (k), (l), and (n)) or (ii) the
availability of any net operating loss, capital loss, tax credit, tax basis or
similar Tax attributes of the Transferred Companies in a Post-Closing Tax
Period.
Section 3.18    Insurance. Section 3.18 of the Seller Disclosure Letter sets
forth, and Sellers have made available to Buyer, prior to the date of this
Agreement, true, complete and correct copies of all insurance policies
(including fidelity bonds and other similar instruments) relating to the
Business, or the employees, officers or directors of the Transferred Companies.
All premiums payable under such policies have been timely paid, and Sellers and
the Transferred Companies are otherwise in compliance in all material respects
with the terms and conditions of such policies. Such policies (or other policies
providing substantially similar insurance coverage) have been in effect
continuously since August 1, 2013 and remain in full force and effect, and no
written notice of cancellation, termination or revocation with respect thereto
has been received by Sellers or any of the Transferred Companies.
Section 3.19    Regulatory Matters.
(a)    Each Transferred Company has timely filed all material reports,
statements, registrations, filings or submissions required to be filed with any
Governmental Authority since January 1, 2011, and all such reports, statements,
documents, registrations, filings or submissions were true, complete and
accurate in all material respects when filed. No material deficiencies or
violations have been asserted in writing by any Governmental Authority with
respect to such reports, statements, registrations, filings, or submissions that
have not, to the Knowledge of Sellers, been resolved to the satisfaction of the
applicable Governmental Authority.
(b)    Sellers have made available to Buyer, prior to the date of this
Agreement, true, complete and correct copies of (i) all reports of examination
(including financial, market conduct and similar examinations) of the
Transferred Companies issued by any Governmental Authority since January 1,
2011, and all consent orders or material correspondence related thereto and (ii)
all insurance holding company filings or submissions with respect to any of the
Transferred

36

--------------------------------------------------------------------------------

Companies since January 1, 2011, and all material correspondence related
thereto. Except as set forth in Section 3.19(b) of the Seller Disclosure Letter,
as of the date hereof, to the Knowledge of Sellers, no audits or examinations
are currently being performed or are scheduled to be performed with respect to
any Transferred Company by any Governmental Authority.
(c)    Except as set forth in Section 3.19(c) of the Seller Disclosure Letter,
there are no insurance policies issued, reinsured or assumed by any of the
Transferred Companies that are currently in force under which any Transferred
Company may be required to allocate profit or pay dividends to the holders
thereof.
Section 3.20    Reinsurance Agreements.
(a)    Except as set forth in Section 3.20(a) of the Seller Disclosure Letter,
each Insurance Subsidiary is entitled under applicable Law to take full credit
in the Statutory Statements of such Insurance Subsidiary for all amounts
recoverable by it pursuant to any Reinsurance Agreement to which it is a party,
and all such amounts have been properly recorded in the Books and Records and
are properly reflected in the Statutory Statements of such Insurance Subsidiary,
in each case in all material respects. All Reinsurance Agreements, as of the
date hereof, satisfy in all material respects the requisite risk transfer
criteria necessary to obtain reinsurance accounting treatment under Financial
Accounting Standard No. 113 and Statement of Statutory Accounting Principle No.
62 or other accounting rules, as applicable. All material collateral provided by
any reinsurer in connection with any Reinsurance Agreement (A) is in a form
permitting the applicable Insurance Subsidiary to take credit for reinsurance
under the insurance laws and regulations of its state of domicile, (B) if other
than a letter of credit, is subject to a perfected security interest in favor of
the applicable Insurance Subsidiary, (C) is not subject to any Contract allowing
that such collateral be reduced or diminished in any manner, and (D) is
sufficient to discharge the obligations of such reinsurer under the related
Reinsurance Agreements.
(b)    With respect to all reinsurance agreements for which each Insurance
Subsidiary is taking credit on its most recent statutory financial statements or
has taken credit on any statutory financial statements from and after January 1,
2011, there has been no separate Contract between any of the Insurance
Subsidiaries and the assuming reinsurer that would under any circumstances
reduce, limit, mitigate or otherwise affect any actual or potential loss to the
parties under any such reinsurance agreement, other than inuring contracts that
are explicitly defined in any such reinsurance agreement.
Section 3.21    Reserves. The aggregate loss reserves (including reserves for
incurred but not reported losses) of the Insurance Subsidiaries recorded in the
respective Statutory Statements, as of their respective dates: (a) were
determined in all material respects in accordance with generally accepted
actuarial standards consistently applied (except as otherwise noted therein);
(b) were fairly stated in all material respects in accordance with sound
actuarial principles; (c) satisfied all applicable Law in all material respects
and were computed on the basis of methodologies consistent in all material
respects with those used in computing the corresponding reserves in the prior
fiscal years, except as otherwise noted in the financial statements and notes
thereto included

37

--------------------------------------------------------------------------------

in such Statutory Statements and related actuarial opinions for the applicable
Insurance Subsidiary for the 2013 fiscal year, copies of which have been made
available to Buyer prior to the date of this Agreement; (d) have been based on
actuarial assumptions which produced reserves at least as great as those called
for in any contract provision as to reserve basis and method, and are in
accordance with all other contract provisions in all material respects; and (e)
include provisions for all actuarial reserves and related items which ought to
be established in accordance with applicable Law and in accordance with prudent
insurance practices generally followed in the insurance industry.
Section 3.22    Actuarial Reports. Sellers have made available to Buyer, prior
to the date of this Agreement, true, complete and correct copies of all
actuarial reports prepared by opining actuaries, independent or otherwise, from
and after January 1, 2011, with respect to the Insurance Subsidiaries (including
all material attachments, addenda, supplements and modifications thereto). As of
the date of this Agreement, there have been no actuarial reports of a similar
nature covering any Insurance Subsidiary in respect of any period subsequent to
the latest period covered in such actuarial reports. Except as set forth in
Section 3.22 of the Seller Disclosure Letter, the historical financial and
actuarial information and factual data and other information (including, without
limitation, the inventory of Reinsurance Agreements and Insurance Contracts in
force, the terms and conditions of such Reinsurance Agreements and Insurance
Contracts, and the coding, compilation or aggregation of such factual data and
other information) furnished by Sellers and its Affiliates or the Transferred
Companies in writing to the relevant actuaries expressly in connection with the
preparation of the actuarial reports were (i) compiled from the Books and
Records; (ii) to the Knowledge of Sellers, generated from the same underlying
sources and systems that were utilized by Sellers or their applicable Affiliates
to prepare the Financial Statements for the year ended December 31, 2013 to the
extent applicable; and (iii) true, complete and correct in all material respects
for the periods covered in such reports. To the Knowledge of Sellers, no
material data provided in connection with the preparation of such actuarial
reports were inaccurate in any material respect.
Section 3.23    Rates. Any rates or rating plans of the Insurance Subsidiaries
required to be filed with or approved by any applicable Governmental Authority
have been so filed or approved and the rates applied by each of the Insurance
Subsidiaries to the Contracts of insurance conform in all material respects to
the relevant filed or approved rates.
Section 3.24    Agents; Binding Authority. No agent, broker or other Person who
is not an employee of any of the Insurance Subsidiaries has or, since January 1,
2011, has had “binding authority” or permission to bind or obligate any of the
Transferred Companies to issue any insurance or reinsurance Contract.
Section 3.25    Agreements with Regulators.
(a)    Except as set forth in Section 3.25(a) of the Seller Disclosure Letter,
neither any of the Insurance Subsidiaries nor PFASC is a party to any written
agreement,

38

--------------------------------------------------------------------------------

consent, decree or memorandum of understanding with, or to any commitment letter
or similar undertaking to, or subject to any cease-and-desist or other order or
directive by, or recipient of any extraordinary supervisory letter from, or has
adopted any policies, procedures or board resolutions at the request of, any
Governmental Authority which restricts the conduct of its business or dividends,
or in any manner relates to its capital adequacy, credit or risk management
policies or management, nor has any of them been advised by any Governmental
Authority that it is contemplating any such undertaking. None of PHAC, the
Company, Sellers and any of their Affiliates have been notified in writing or,
to the Knowledge of the Sellers, notified orally since January 1, 2011 by any
Governmental Authority that it is considering issuing or requesting any such
undertaking.
(b)    The Insurance Subsidiaries are not subject to any assessments or similar
charges arising on account of or in connection with their participation, whether
voluntary or involuntary, in any guarantee association or comparable entity
established or governed by any state or other jurisdiction, other than any such
assessments or charges for which appropriate accruals have been made or
appropriate reserves have been established on the Statutory Statements.
Section 3.26    Claims Handling. All amounts claimed by any Person under any
Insurance Contract issued by any of the Insurance Subsidiaries have in all
material respects been paid (or provision for payment thereof has been made) in
accordance with the terms of the Contracts under which they arose, such payments
were not materially delinquent and were paid (if previously paid) without fines
or penalties, except for any such claim for benefits for which the affected
company reasonably believes or believed that there is a reasonable basis to
contest payment.
Section 3.27    Market Conduct; Producers.
(a)    Except as set forth in Section 3.27(a) of the Seller Disclosure Letter,
(i) each of the Insurance Subsidiaries and, to the Knowledge of the Sellers,
each other insurance company that has issued or sold any Insurance Contract has
marketed, sold and issued its Insurance Contracts in compliance, in all material
respects, with applicable Laws, all orders and written directives of all
Governmental Authorities, and all market conduct recommendations resulting from
market conduct or other examinations or audits by Governmental Authorities in
the respective jurisdictions in which such products have been marketed, sold or
issued, (ii) the manner in which the such Person compensates any other Person
that is not an insurance agent who is involved in the sale or servicing of
Insurance Contracts does not render such Person an insurance agent under any
applicable Laws, and (iii) the manner in which the such Person compensates each
Person involved in the sale or servicing of Insurance Contracts is in compliance
in all material respects with all applicable Laws.
(b)    Except as set forth in Section 3.27(b) of the Seller Disclosure Letter,
since January 1, 2011, (i) each Producer, at the time that it wrote, sold,
produced or administered business for or on behalf of any of the Insurance
Subsidiaries, was duly licensed, authorized and appointed (for the type of
business written, sold, produced or administered by such Producer) in the
particular jurisdiction in which such Producer wrote, sold, produced or
administered such business, and no such Producer violated any term or provision
of applicable Law relating to the writing, sale,

39

--------------------------------------------------------------------------------

production or administration of such business, (ii) no Producer has materially
breached the terms of any agency, broker or servicing contract with any of the
Insurance Subsidiaries or violated any material applicable Law or policy of any
of the Insurance Subsidiaries in the solicitation, negotiation, writing, sale,
production or administration of such business and (iii) no Producer has been
enjoined, indicted, convicted or made the subject of any consent decree or
judgment on account of any violation of applicable Law in connection with such
Producer’s actions in his, her or its capacity as Producer for any of the
Insurance Subsidiaries or any enforcement or disciplinary proceeding alleging
any such violation.
Section 3.28    Broker Dealer Matters.
(a)    The Transferred Broker-Dealer is, and at all times since January 1, 2011,
has been, (i) duly registered under the Exchange Act as a broker-dealer with the
U.S. Securities and Exchange Commission (“SEC”), (ii) in compliance in all
material respects with the applicable provisions of the Exchange Act and (iii)
current in all material filings required by the SEC or any other Governmental
Authority. The Transferred Broker-Dealer is, and at all times since January 1,
2011, has been, (i) a member in good standing of FINRA and such other
organizations in which its membership is required in order to conduct its
business as now conducted and (ii) in compliance in all material respects with
all applicable rules and regulations of FINRA and such other organizations. As
of the date hereof, none of the Transferred Companies other than the Transferred
Broker-Dealer or, in connection with their service to such entities, any of
their respective directors, officers, or employees, is registered or required to
be registered as a broker or dealer, a salesperson, a registered representative
or in any similar capacity with the SEC, FINRA, the securities commission of any
state or any other self-regulatory body. 
(b)    Neither the Transferred Broker-Dealer nor, to the Knowledge of Sellers,
any “associated person” (within the meaning of the Exchange Act) thereof, is (i)
ineligible pursuant to Section 15(b) of the Exchange Act to act as a
broker-dealer or as an associated person of a registered broker-dealer, (ii)
subject to a “statutory disqualification” as such term is defined in the
Exchange Act or (iii) subject to a disqualification that would be a basis for
censure, limitations on the activities, functions or operations of, or
suspension or revocation of the registration of the Transferred Broker-Dealer as
a broker-dealer under Section 15 of the Exchange Act.  As of the date of this
Agreement, there is no Litigation pending or, to the Knowledge of Sellers, 
threatened in writing that would reasonably be expected to result in the
Transferred Broker-Dealer or any “associated person” (within the meaning of the
Exchange Act) thereof becoming ineligible to act in such capacity.  Except for
the registrations listed in Section 3.28(b) of Seller Disclosure Letter, since
January 1, 2012, each of the directors, officers, employees, contractors and
agents employed, supervised or controlled by any Transferred Company who is
required to be registered as a broker-dealer, principal, registered
representative, salesperson, investment advisory representative or insurance
agent in connection with his, her or its activities for or with a Transferred
Company with any Governmental Authority has been duly licensed or registered.
(c)    Sellers have provided or made available to Buyer, prior to the date of
this Agreement, true, complete and correct copies of the Transferred
Broker-Dealer’s Form BD as most recently filed with the SEC and all state
registration forms, each as amended to date.  The information

40

--------------------------------------------------------------------------------

contained in each such form was true and complete at the time of filing and the
Transferred Broker-Dealer has made all amendments to such form as it is required
to make under any applicable Law. The Form BD is in compliance in all material
respects with the applicable requirements of the Exchange Act and does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. 
(d)    The Transferred Broker-Dealer maintains its minimum net capital in
material compliance with all applicable Law imposed by the SEC or any other
Governmental Authority and in an amount sufficient to ensure that it has not
been required to file notice under Rule 17a-11 under the Exchange Act.
(e)    The Transferred Broker-Dealer has, and at all times since January 1,
2011, had, in place, to the extent required by applicable Law, processes to
establish, maintain, review, test and modify written compliance policies and
written supervisory procedures reasonably designed to achieve compliance with
applicable FINRA rules, the rules of any domestic or foreign securities or
broker-dealer industry self-regulatory organization of which such Transferred
Broker-Dealer is a member and federal securities laws and regulations. All such
policies comply in all material respects with applicable Law, and, since January
1, 2011, there have been no material violations or, to the Knowledge of Sellers,
allegations by any employee or client of Sellers or any of their Affiliates or
any Governmental Authority of material violations of such policies.
(f)    The Transferred Broker-Dealer has adopted written anti-money laundering
programs and written customer identification programs applicable to its Separate
Accounts that comply with applicable Law and, at all times since January 1,
2011, the Transferred Broker-Dealer has complied with the terms of such programs
in all material respects.
Section 3.29    Ratings. As of the date of this Agreement, the financial
strength or claims-paying ability of each of PFLAC and PFLAC NY is rated “A-” by
A.M. Best Company, Inc. (“A.M. Best”). Except for its ordinary course annual
review of this rating, A.M. Best has not announced that it has undertaken a
review of its rating of the financial strength or claims-paying ability of any
of PFLAC and PFLAC NY.
Section 3.30    Separate Accounts.
(a)    Sellers have made available to Buyer prior to the date of this Agreement
a list of all separate accounts maintained by the Insurance Subsidiaries
(collectively, the “Separate Accounts”).  Except as set forth in Section 3.30 of
the Seller Disclosure Letter or as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, (a) each Separate
Account is duly and validly established and maintained under the applicable Laws
of the applicable Insurance Subsidiary’s state of domicile; (b)  each Separate
Account at all times since January 1, 2012 has been operated in compliance with
all applicable Laws; (c) each Separate Account at all times since inception has
been excluded from the definition of an investment company

41

--------------------------------------------------------------------------------

pursuant to Sections 3(c)(1), 3(c)(7) or 3(c)(11) of the Investment Company Act
of 1940, as amended; (d) the portion of the assets of each Separate Account
equal to the reserves and other contract liabilities of such Separate Account is
not chargeable with liabilities arising out of any other business the applicable
Insurance Subsidiary may conduct or may have conducted; and (5) the Insurance
Contracts under which any Separate Account’s assets are held are duly and
validly issued and are exempt from registration under the Securities Act,
pursuant to Section 3(a)(2), 3(a)(8) or 4(a)(2) of the Securities Act or
Regulation D thereunder.
(b)    Each private placement memorandum, prospectus, offering document, sales
brochure, sales literature or advertising material, as amended or supplemented,
authored by an Insurance Subsidiary and relating to any Separate Account, as of
their respective mailing dates or dates of use, to the Knowledge of the Sellers,
(i) complied in all material respects with applicable Law and (ii) did not
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Since January 1, 2011, all material advertising or marketing
materials relating to each Separate Account that were required to be filed with
any Governmental Authority have been timely filed therewith.  Except as set
forth in Section 3.30(b) of the Seller Disclosure Letter, to the Knowledge of
Sellers, no examinations, investigations, inspections or formal or informal
inquiries, including periodic regulatory examinations of the Separate Accounts’
affairs and condition, civil investigative demands and market conduct
examinations, by any Governmental Authority are being conducted as of the date
of this Agreement.  No written notice has been received from, and, to the
Knowledge of Sellers, no investigation, inquiry or review is pending or
threatened by, any Governmental Authority that has jurisdiction over the
Separate Accounts with respect to any alleged material violation of any
applicable Law in connection with the operation of the business of the Separate
Accounts or any failure to have, or any threatened revocation of, any material
Permit required in connection with the operation of the business of the Separate
Accounts.  Since January 1, 2012, all advertising or marketing materials
relating to a Separate Account that were required to be filed with FINRA or any
other Governmental Authority have been timely filed.
(c)    Each Transferred Company or any of its Affiliates, and to the Knowledge
of Sellers, any of their respective directors, officers, members, managers,
partners, or employees, that has provided investment advisory services (if any)
to any Separate Account has done so in compliance in all material respects with
such Separate Account’s investment objectives, investment policies and
restrictions (as they may be amended from time to time) and other Contract terms
and applicable Laws.
(d)    All issued and outstanding Separate Account shares and other interests
have been duly and validly issued, are fully paid and, unless otherwise required
by

42

--------------------------------------------------------------------------------

applicable Law, nonassessable, and were not issued in violation of preemptive or
similar rights or applicable Law.
(e)    No Separate Account is ineligible pursuant to Rule 506(d) of Regulation D
under the Securities Act with respect to an offering of securities in reliance
on Rule 506 of Regulation D under the Securities Act, nor is there any
Proceeding pending or, to the Knowledge of Sellers, threatened by any
Governmental Authority that would result in the ineligibility of any such
Separate Account to participate in an offering of securities of the Separate
Accounts in reliance on Rule 506 of Regulation D under the Securities Act.
Section 3.31    Finders’ Fees. There is no investment banker, broker, finder or
other intermediary retained by or authorized to act on behalf of any Seller or
any of the Transferred Companies who is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission from Buyer or any of its
Affiliates (including, after the Closing, the Transferred Companies) upon
consummation of the transactions contemplated by this Agreement.
Section 3.32    Intercompany Amounts.
(a)    Section 3.33(a) of the Seller Disclosure Letter lists all inter-company
balances as of the Reference Date between Tiptree or any of its controlled
Affiliates (other than the Transferred Companies), on the one hand, and a
Transferred Company, on the other hand.
(b)    Except as set forth in Section 3.33(a) of the Seller Disclosure Letter,
since the Reference Date, there has not been any accrual of liability by any
Company to Tiptree or any of its controlled Affiliates (other than the
Transferred Companies) or other transaction between the Transferred Companies
and Sellers or any of their respective Affiliates (other than the Transferred
Companies), other than arising as a result of any Seller’s employment with any
of the Transferred Companies.
Section 3.33    No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement, any certificate or
other instrument delivered pursuant hereto or in any other Transaction
Agreement, none of Sellers or any of their Affiliates or their respective
Representatives makes any representation or warranty of any kind whatsoever,
oral or written, express or implied, with respect to Sellers, their Affiliates,
PHAC, the Company, the Transferred Subsidiaries, the Business, this Agreement,
the transactions contemplated by this Agreement or any other matter, including
any relating to the financial condition, results of operations, assets or
liabilities of any of the foregoing entities. Except for the representations and
warranties contained in this Agreement, any certificate or other instrument
delivered pursuant hereto or in any other Transaction Agreement, each of the
Sellers disclaims, on behalf of itself, its Affiliates and

43

--------------------------------------------------------------------------------

their respective Representatives, any other representations or warranties,
whether made by the Sellers, any of their Affiliates or their respective
Representatives or any other Person and (ii) each of the Sellers disclaims, on
behalf of itself, its Affiliates and their respective Representatives, all
liability and responsibility for any other representation, warranty, opinion,
projection, forecast, advice, statement or information made, communicated or
furnished (orally or in writing) to Buyer or its Affiliates or their respective
Representatives (including any opinion, projection, forecast, advice, statement
or information that may have been or may be provided to the Buyer or its
Affiliates or Representatives by any Representative of the Sellers or any of
their respective Affiliates).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers, as of the date hereof and as of the
Closing Date, as follows:
Section 4.1    Organization. Buyer is a Delaware Corporation duly organized,
validly existing and in good standing under the Laws of Delaware and has all
requisite power and authority to carry on its business as now conducted. Except
as would not, individually or in the aggregate, reasonably be expected to be
material to the ability of Buyer to consummate the transactions contemplated by
this Agreement, Buyer is duly qualified to do business as an organization and is
in good standing in each of the jurisdictions in which the nature of its
business or the properties owned, leased or operated by it makes such
qualification necessary.
Section 4.2    Corporate and Governmental Authorization.
(a)    Each Buyer Party has, as applicable, all requisite corporate, limited
liability, organizational or individual power and authority to execute and
deliver the Transaction Agreements to which it is or will be a party, to perform
its obligations thereunder and to consummate the transactions contemplated
thereby. The execution and delivery by each Buyer Party of each of the
Transaction Agreements to which it is or will be a party and the consummation by
each Buyer Party of the transactions contemplated by such Transaction Agreements
have been duly authorized by all requisite corporate, limited liability,
organizational or individual action on the part of each such Buyer Party. Each
of the Transaction Agreements to which a Buyer Party is or will be a party has
been, or upon execution and delivery thereof, will be, duly executed and
delivered by such Buyer Party. Assuming due authorization, execution and
delivery by the other parties thereto, each of the Transaction Agreements to
which each Buyer Party is or will be a party constitutes, or upon execution

44

--------------------------------------------------------------------------------

and delivery thereof, will constitute, the legal, valid and binding obligation
of each such Buyer Party, enforceable against it in accordance with its terms,
subject to the Enforceability Exceptions.
(b)    Except as set forth in Section 4.2(b) of Buyer Disclosure Letter, the
execution and delivery by the Buyer Parties of the Transaction Agreements to
which any of them is or will be a party do not, and the performance by each such
Buyer Party of, and the consummation by each such Buyer Party of the
transactions contemplated by, the Transaction Agreements will not require any
Governmental Approvals.
Section 4.3    Non-Contravention. The execution, delivery and performance of the
Transaction Agreements by each Buyer Party that is or will be a party thereto
and the consummation of the transactions contemplated thereby by such Persons do
not and will not (a) conflict with or result in any violation or breach of any
provision of the Organizational Documents of any of such Buyer Parties, (b)
assuming compliance with the matters referred to in Section 4.2, conflict with
or result in a violation or breach of any provision of any applicable Law or (c)
assuming compliance with the matters referred to in Section 4.2, require any
consent of or other action by any Person under, result in any breach of, or
constitute a default (or event which, with the giving of notice or lapse of
time, or both, would constitute a default) under, or give to any Person any
rights of termination, acceleration, cancellation or material modification of,
or result in the creation of any Lien (other than Permitted Liens) on any of the
assets, properties or rights of any such Buyer Parties pursuant to, any Contract
to which any of such Buyer Parties is a party or by which Buyer or any of
Buyer’s respective properties, assets or rights is bound or subject, except, in
the case of clauses (b) and (c), for any such breaches, defaults, rights or
Liens that would not, individually or in the aggregate, reasonably be expected
to be material to the ability of such Buyer Party to consummate the transactions
contemplated by the Transaction Agreements.
Section 4.4    Financing. Buyer has delivered to the Seller Representative true,
complete and correct copies of: (i) the executed commitment letter (including
the exhibits, annexes and schedules thereto), dated as of October 29, 2014
between Buyer and Hannover Finance, Inc. (the “Debt Financing Commitment”),
pursuant to which, upon the terms and subject to the conditions set forth
therein, the Person named therein has agreed to lend the amounts set forth
therein to PFASC for the purpose of funding the transactions contemplated by
this Agreement (the “Debt Financing”); (ii) the fee letter referenced in the
Debt Financing Commitment, dated as of October 29, 2014 between Buyer and
Hannover Finance, Inc. (the “Fee Letter”) (except that the fee amounts, pricing
caps and other economic terms set forth therein, none of which could adversely
affect the conditionality, enforceability, availability, termination or
aggregate principal amount of the Debt Financing, have been redacted from the
Fee Letter); and (iii) the executed equity commitment letter, dated as of
October 29, 2014 among Buyer and the parties identified as “Blackstone Funds”
therein (the “Equity Financing Commitment” and together with the Debt Financing
Commitment, the “Financing Commitments”), pursuant to which, upon the terms and
subject to the conditions set forth therein, the Persons named therein have
committed to invest the cash amount in Buyer set forth in its Equity Financing
Commitment (the “Equity Financing” and together with the Debt Financing, the
“Financing”). None of the Financing Commitments have been amended or modified
prior to the date of this Agreement, and, as of the date hereof, the respective
commitments contained

45

--------------------------------------------------------------------------------

in the Financing Commitments have not been withdrawn, terminated or rescinded in
any respect. There are no other side letters, Contracts or arrangements to which
Buyer or any of its Affiliates is a party relating to any of the Financing
Commitments. As of the date hereof, the Financing Commitments are in full force
and effect and constitute the legal, valid and binding obligations of Buyer and,
to the Knowledge of Buyer, the other parties thereto, subject to the
Enforceability Exceptions. Other than as expressly set forth in the Debt
Financing Commitment and the Fee Letter, with respect to the Debt Financing, or
in the Equity Financing Commitment, with respect to the Equity Financing, there
are no conditions precedent related to the funding of the full net proceeds of
the Financing. Assuming the accuracy in all material respects of the
representations and warranties set forth in Article II and Article III and
satisfaction of all conditions set forth in Section 7.1 and Section 7.2 as of
the Closing Date, upon receipt of the proceeds contemplated by the Financing
Commitments, Buyer will have access on the Closing Date to sufficient cash funds
to pay all amounts contemplated by this Agreement to be paid by it at the
Closing (including, without limitation, the Closing Cash Consideration and the
full and final payment of the RGA Indebtedness) and to pay all related fees of
Buyer and to perform its obligations hereunder. As of the date hereof, no event
has occurred that (with or without notice or lapse of time or both) would or
would reasonably be expected to constitute a breach or default or failure to
satisfy a condition precedent by Buyer under the Financing Commitments, or, to
the Knowledge of Buyer, the other parties to the Financing Commitments. Buyer
has fully paid or caused to be fully paid all commitment fees or other fees
required to be paid on or prior to the date hereof pursuant to the Financing
Commitments. As of the date hereof, Buyer does not have any reason to believe
that it or any of the other parties to the Financing Commitments will be unable
to satisfy on a timely basis (taking into account the anticipated timing of the
satisfaction of the condition set forth in Section 7.1(b)) any term or condition
of the Financing Commitments required to be satisfied by it or such other party,
that the conditions thereof will not otherwise be satisfied or that the full
amount of the Financing will not be available on the Closing Date. Without
limiting Section 11.10, in no event shall the receipt or availability of any
funds or financing (including, for avoidance of doubt, the Financing) by or to
Buyer or any of its Affiliates or any other financing transaction be a condition
to the Buyer’s obligation to consummate the acquisition in accordance with the
terms of this Agreement.
Section 4.5    Limited Guaranty. Concurrently with the execution of this
Agreement, Buyer has delivered to the Seller Representative a true and complete
copy of the executed Limited Guaranty. The Limited Guaranty is in full force and
effect and is a legal, valid and binding obligation of the Guarantors,
enforceable against Guarantors in accordance with its terms, subject to the
Enforceability Exceptions, and no event has occurred which (with or without
notice or lapse of time, or both) would reasonably be expected to constitute a
default on the part of the Guarantors under the Limited Guaranty.
Section 4.6    Purchase for Investment. Buyer is purchasing the Purchased Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks

46

--------------------------------------------------------------------------------

of its investment in the Purchased Shares and is capable of bearing the economic
risks of such investment.
Section 4.7    Litigation. There is no Litigation pending against, or, to the
Knowledge of Buyer, threatened against or affecting, Buyer before any court or
arbitrator or any Governmental Authority that in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the transactions contemplated by
this Agreement.
Section 4.8    Finders’ Fees. Except for Lazard Frères & Co. LLC, whose fees and
expenses will be paid by Buyer, there is no investment banker, broker, finder or
other intermediary retained by or authorized to act on behalf of Buyer who is
entitled to any broker’s, finder’s, financial advisor’s or other similar fee or
commission from Sellers or any of Sellers’ Affiliates upon consummation of the
transactions contemplated by this Agreement.
Section 4.9    Independent Investigation. Buyer acknowledges that it has
conducted its own independent investigation and analysis of the business,
operations, assets, liabilities, results of operations, condition (financial or
otherwise) and prospects of the Company.
Section 4.10    No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement, any certificate or
other instrument delivered pursuant hereto or in any other Transaction
Agreement, none of Buyer or any of its Affiliates or their respective
Representatives makes any representation or warranty of any kind whatsoever,
oral or written, express or implied, with respect to Buyer, its Affiliates, the
transactions contemplated by this Agreement or any other matter. Except for the
representations and warranties contained in this Agreement, any certificate or
other instrument delivered pursuant hereto or in any other Transaction
Agreement, (i) Buyer disclaims any other representations or warranties, whether
made by Buyer, any of its Affiliates or their respective Representatives or any
other Person and (ii) Buyer disclaims, on behalf of itself, its Affiliates and
their respective Representatives, all liability and responsibility for any other
representation, warranty, opinion, projection, forecast, advice, statement or
information made, communicated or furnished (orally or in writing) to the
Sellers or any of their Affiliates or their respective Representatives
(including any opinion, projection, forecast, advice, statement or information
that may have been or may be provided to any Seller or its Affiliates or
Representatives by any Representative of Buyer or any of its Affiliates).
ARTICLE V
CERTAIN COVENANTS
Section 5.1    Conduct of the Business. From the date hereof until the Closing,
Sellers shall cause the Transferred Companies to conduct the Business in the
ordinary course consistent with past practice (including with respect to their
management of working capital) and

47

--------------------------------------------------------------------------------

to preserve intact the Business, the assets of the Transferred Companies and the
current relationships and goodwill of the Transferred Companies with the
Hartford Companies, customers, suppliers, contractors, licensors, employees,
agents, producers, distributors, insureds, Insurance Regulators and others
having business dealings with them, and to keep available the services of their
present officers and significant employees. Without limiting the generality of
the foregoing, from the date hereof until the Closing, except as otherwise
expressly permitted or required by this Agreement, as set forth in Section 5.1
of the Seller Disclosure Letter or as required by applicable Law, without the
prior written consent of Buyer (which consent shall not be unreasonably
withheld, conditioned or delayed), Sellers shall cause the Transferred Companies
not to:
(c)    (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
outstanding capital stock, (ii) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock or (iii) purchase, redeem or otherwise acquire any
shares of outstanding capital stock of the Transferred Companies or any rights,
warrants or options to acquire any such shares;
(d)    transfer, issue, sell, grant, pledge, encumber or otherwise dispose of,
or authorize the transfer, issuance, sale, pledge, encumbrance or disposition
of, any shares of capital stock of any of the Transferred Companies, any other
voting securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities;
(e)    amend any of their respective Organizational Documents;
(f)    sell, lease, license or otherwise dispose of (including by way of
reinsurance) any of the material assets (other than investments), properties or
rights of any of the Transferred Companies;
(g)    enter into any Contract with respect to any merger, consolidation,
liquidation, dissolution or business combination involving any of the
Transferred Companies or otherwise adopt or enter into a plan of complete or
partial liquidation, dissolution, recapitalization or reorganization of the
Transferred Companies;
(h)    except for Separate Account Investments made on or after the date of this
Agreement, acquire (by merger, consolidation, acquisition of stock or assets,
bulk reinsurance or otherwise) any corporation, partnership or other business
organization or assets or liabilities comprising a business or a segment,
division or line of business, any material amount of property or assets in or of
any other Person, or any real property, or create or acquire any Subsidiaries;
(i)    (i) modify or amend or terminate any Material Contract or waive, release
or assign any rights or claims thereunder other than in the ordinary course of
business consistent with past practice or applicable Law, (ii) enter into any
Contract that, if entered into prior to the date hereof, would have been a
Material Contract, other than in the ordinary course of business consistent with
past practice or applicable Law, or (iii)  modify or amend or terminate, or
waive, release or

48

--------------------------------------------------------------------------------

assign any rights or claims under any Contract described in the foregoing clause
(ii) other than in the ordinary course of business consistent with past practice
or applicable Law;
(j)    (i) incur (x) any Indebtedness in an aggregate amount in excess of
$250,000 or (y) any Indebtedness that cannot be prepaid without penalty at any
time upon the election of the applicable Transferred Company (other than, in
each case, current trade accounts payable in respect of property or services
purchased in the ordinary course of business consistent with past practice);
(ii) assume, grant, guarantee or endorse, pledge or otherwise secure any assets
or property or otherwise as an accommodation become responsible for (whether
primarily or secondarily) the obligations of any Person; (iii) make any loans or
advances to (x) any Seller or Affiliate of any Seller or (y) to any Person
(other than, in the case of clause (y), loans and advances in the ordinary
course of business consistent with past practice); or (iv) make any investments
in any Person (other than Separate Account investments and investments in wholly
owned Subsidiaries in existence as of the date of this Agreement and investments
effected in the ordinary course of business consistent with the existing
investment policies of the applicable Transferred Company);
(k)    (i) cancel or prepay any Indebtedness (other than any interest payments
and scheduled amortization payments, in each case, in the amount and at such
time as is required under the terms of such Indebtedness) or (ii) default under
any Indebtedness (other than Indebtedness held or owned for the benefit of a
Separate Account where the default is attributable to the refusal or failure by
the owner of an Insurance Contract to pay premiums in respect of such Insurance
Contract necessary to satisfy such Indebtedness or to keep such Indebtedness
current);
(l)    except as expressly contemplated by this Agreement, modify or amend or
enter into any Affiliate Transaction or Intracompany Agreement, or waive,
release or assign any rights or claims thereunder;
(m)    enter into any new line of business, or introduce any new products or
services, cease any existing line of business or change in any material respect
or cease to offer existing products or services, except as may be required by
applicable Law;
(n)    make any capital expenditures in excess of $200,000 individually or
$300,000 in the aggregate (not including those made in the ordinary course of
business in accordance with the Company’s current budget for capital
expenditures) or fail to make any capital expenditures contemplated by such
budget;
(o)    create any material Lien on any Intellectual Property material to the
Business or any Transferred Companies;
(p)    establish, adopt, amend or terminate any material Company Benefit Plan or
any arrangement which upon its establishment or adoption would constitute a
Company Benefit Plan except in the ordinary course of business consistent with
past practices as required by applicable Law or the terms of a Company Benefit
Plan;
(q)    make or promise to make any bonus, profit-sharing or similar payment,
grant any new equity-based awards to any Employee (whether payable in cash or
otherwise), or increase

49

--------------------------------------------------------------------------------

the amount of wages, salary, commissions, fringe benefits, severance benefits,
or other compensation or benefits, or remuneration payable to, or for the
benefit of, any Employee except for increases in base salary in the ordinary
course of business consistent with past practice for any non-executive employee;
(r)    accelerate the vesting or payment of, or fund or in any other way secure
the payment, compensation or benefits under, any Company Benefit Plan to the
extent not required by the terms of such Company Benefit Plan or this Agreement;
(s)    (i) terminate the employment of any Employee except in the ordinary
course of business consistent with past practice with respect to any employee
with a base salary less than $200,000, (ii) hire any new employee or (iii) enter
into a collective bargaining agreement or similar labor agreement with respect
to any Employees or renew, extend or renegotiate any existing collective
bargaining agreement or similar labor agreement with respect to any Employees;
(t)    make, revoke or amend any material Tax election or settle or compromise
any material Tax liability, file any amended material Tax Return or claim for
refund, consent to extend the period of limitations for the payment or
assessment of any Tax, or enter into any closing agreement affecting any Tax
liability or refund;
(u)    (i) settle or compromise any material Tax Audit or forgo the right to any
refund of material Taxes; (ii) change any of the Transferred Companies’ methods,
policies or practices of Tax accounting or methods of reporting income or
deductions for Tax purposes from those employed in the preparation of its most
recently filed Tax Return; or (iii) request a ruling relating to Taxes;
(v)    terminate, cancel or amend, or cause the termination, cancellation or
amendment of, any material insurance coverage (and any surety bonds, letters of
credit, cash collateral or other deposits related thereto required to be
maintained with respect to such coverage) maintained by the Transferred
Companies that is not replaced by comparable insurance coverage;
(w)    change in any material respect the terms for, or policies with respect
to, the payment of commissions to any of its insurance agents, brokers or
producers;
(x)    enter into any reinsurance commutations, or enter into, amend, modify or
otherwise revise any Reinsurance Agreement;
(y)    reduce any Insurance Reserves other than as required by GAAP or SAP or as
a result of loss or expense payments to other Persons in the ordinary course of
business consistent with past practice in accordance with the terms of any
applicable Insurance Contract, release any loss reserves or estimate of loss
adjustment expense reserves for uncollectible reinsurance for any Insurance
Subsidiary for any loss year ending prior to the Closing Date or, except in
connection with the settlement of any Litigation permitted pursuant to this
Section 5.1, reduce any reserves in respect of any Litigation or threatened
Litigation;

50

--------------------------------------------------------------------------------

(z)    make any change in its actuarial, underwriting, reinsurance, claims
administration and payment, selling, reserving, Tax, financial accounting or
investment policies, guidelines, practices or principles (other than any change
required by applicable Laws or a change in GAAP or SAP);
(aa)    amend or otherwise change the Investment Policy of a Transferred Company
(other than in respect of any of its Separate Accounts) or make any investment
or manage such Transferred Company’s general account investment portfolio other
than in compliance with its Investment Policy;
(bb)    materially change any payment, collection or billing practices, policies
or procedures;
(cc)    enter into any settlement or release requiring any Transferred Company
to pay or deliver cash or property or to admit liability with respect to any
material Litigation or Order with respect to the Business (except for claims
under policies or contracts of insurance or reinsurance in the ordinary course
of business);
(dd)    abandon, modify, waive or terminate any material Permit of any
Transferred Company;
(ee)    (i) make any payment to, or on behalf of, any Seller or any Affiliate of
any Seller; (ii) incur any liability to, or on behalf of, any Seller or any
Affiliate of any Seller, including in the case of clauses (i) and (ii), with
respect to (x) any fees, costs or expenses in connection with the sale of the
Transferred Companies, the preparation and negotiation of this Agreement and the
performance and consummation of transactions contemplated by this Agreement or
the other Transaction Documents, including the fees and disbursements of
counsel, financial advisors, actuaries and accountants; or (y) any filing fees
payable in connection with filings with Governmental Authorities made in
connection with the transactions contemplated by this Agreement;
(ff)    waive any payments or other amounts owed to any of the Transferred
Companies by any Seller or any Affiliate thereof;
(gg)    pay any expenses or costs in connection with the relocation of PFASC’s
office spaces (other than any such expenses or costs paid by PFASC); or
(hh)    agree or commit to do or authorize any of the foregoing.
Section 5.2    Notice of Certain Events. From the date hereof until the Closing,
Sellers, on the one hand, and Buyer, on the other hand, shall promptly notify
each other in writing of: (a) any circumstance, event or action the existence,
occurrence or taking of which (i) has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect or (ii) has
resulted in or would reasonably be expected to result in the failure of any of
the conditions set forth in Article VII to be satisfied; (b) any notice or other
communication from any Person

51

--------------------------------------------------------------------------------

alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; (c) any notice or other
communication from any Governmental Authority whose consent or approval is
required for consummation of the transactions contemplated by this Agreement;
and (d) any Litigation commenced or, to the Knowledge of Sellers, threatened
against, relating to or involving or otherwise affecting any Seller Party or the
Transferred Companies that, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 3.12 or that relates to
the consummation of the transactions contemplated by this Agreement.
Section 5.3    No Solicitation. From the date hereof until the earlier of the
termination of this Agreement in accordance with Article VIII and the Closing,
Sellers shall not, and shall cause their Affiliates and its and their respective
officers, directors, employees, investment bankers, attorneys, accountants,
consultants or other agents or advisors (each, a “Representative”) not to,
directly or indirectly: (i) take any action to solicit, initiate or encourage
the submission of any Acquisition Proposal; (ii) engage in any discussions or
negotiations with, furnish any nonpublic information relating to the Transferred
Companies or afford access to the properties, assets, books or records of the
Transferred Companies to, otherwise cooperate in any way with, or knowingly
assist, participate in, facilitate or encourage any effort by any Third Party
that is seeking to make, or has made, an Acquisition Proposal or a modification
of a previously received Acquisition Proposal; or (iii) enter into any Contract
with respect to an Acquisition Proposal.
Section 5.4    Access to Information; Confidentiality.
(f)    From the date hereof until the Closing, Sellers shall give, and shall
cause the Transferred Companies to give, Buyer, its financial advisers,
actuaries, auditors and other authorized representatives and agents reasonable
access during normal business hours upon prior notice to (i) all of the offices,
properties, Books and Records of the Transferred Companies and to all of the
books and records of Sellers relating to the Transferred Companies; (ii) such
financial and operating data and other information relating to the Transferred
Companies as such Persons may reasonably request; and (iii) the employees and
financial advisors of Sellers or the Transferred Companies whose assistance and
expertise are necessary to assist Buyer in connection with Buyer’s investigation
of the Transferred Companies and Buyer’s preparation to transition the
Transferred Companies and their business and personnel into Buyer’s ownership
and operation following the Closing; provided that in no event shall Sellers or
their Affiliates be required to provide access to any such records and
information to the extent that they contain information that is subject to an
attorney-client or other legal privilege. Any investigation pursuant to this
Section 5.4(a) shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Sellers or the Transferred
Companies.
(g)    After the Closing, each Seller and their Affiliates shall hold, and shall
cause their Representatives to hold, in confidence, unless required to disclose
by judicial or administrative process or by other requirements of Law, all (i)
written, oral or other information concerning the Transferred Companies and (ii)
this Agreement and the

52

--------------------------------------------------------------------------------

Transaction Agreements and any written, oral or other information related to the
negotiation hereof and thereof (“Transaction Confidential Information”, and
together with (i), “Buyer Confidential Information”), except to the extent that
any such Buyer Confidential Information can be shown to have been (x) previously
known on a nonconfidential basis by the Person to which such Buyer Confidential
Information was disclosed, (y) generally available in the public domain other
than as a result of any act or omission by Sellers or their Affiliates or (z)
later lawfully acquired by such Person on a non-confidential basis and from a
source (other than those related to its prior ownership of the Transferred
Companies or Buyer or any of its Affiliates (including the Transferred
Companies) or representatives) that is not bound by an obligation of
confidentiality with respect to such information. The obligation of Sellers and
their Affiliates to hold any such information in confidence shall be satisfied
if they exercise the same care with respect to such information as they would
take to preserve the confidentiality of their own similar information. If any
Seller or Affiliate or Representative of Seller is required to disclose by
judicial or administrative process or by other requirements of Law any Buyer
Confidential Information, it shall give Buyer prompt written notice of such
requirement provide Buyer with prompt written notice of such disclosure
requirement so that Buyer may seek a protective order or other remedy protecting
such Buyer Confidential Information. In the event that such protective order or
other remedy is not obtained, or Buyer waives its right to seek such an order or
remedy, the applicable Seller, Affiliate or Representative shall be entitled to
furnish only that portion of such Buyer Confidential Information that is legally
required to be disclosed and shall exercise its commercially reasonable efforts
to obtain assurances that appropriate confidential treatment will be accorded
such Buyer Confidential Information.
(h)    From and after the Closing, the Seller Representative shall afford, and
shall use its commercially reasonable efforts to cause its Affiliates to afford,
to Buyer and its agents reasonable access during normal business hours upon
prior notice to its books and records, books of account, financial and other
records (including accountant’s work papers), information, employees, financial
advisers, actuaries, auditors and other representatives and agents to the extent
necessary or useful for Buyer in connection with any audit, investigation,
dispute or litigation or any other reasonable business purpose relating to any
of the Transferred Companies; provided, that in no event shall such Persons be
required to provide access to any such records and information to the extent
that they contain information that is subject to an attorney-client or other
legal privilege; provided, further, that any such access by Buyer shall not
unreasonably interfere with the conduct of the business of such Person.
(i)    After the Closing, Buyer and its Affiliates (including the Transferred
Companies) shall hold, and shall cause their Representatives to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of Law, (i) written, oral or other information
concerning the Sellers and their Affiliates (other than the Transferred
Companies) and (ii) Transaction Confidential Information (together with

53

--------------------------------------------------------------------------------

(i), the “Seller Confidential Information”) except to the extent that such
information can be shown to have been (x) previously known on a nonconfidential
basis by the Person to which such Seller Confidential Information was disclosed,
(y) generally available in the public domain other than as a result of any act
or omission by Buyer or its Affiliates or (z) later lawfully acquired by such
Person on a non-confidential basis and from sources other than those related to
its acquisition and ownership of the Transferred Companies. The obligation of
Buyer and its Affiliates to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar
information. If any Buyer or Affiliate or Representative of Buyer is required to
disclose by judicial or administrative process or by other requirements of Law
any Seller Confidential Information, it shall give Seller prompt written notice
of such requirement provide Seller with prompt written notice of such disclosure
requirement so that Seller may seek a protective order or other remedy
protecting such Buyer Confidential Information. In the event that such
protective order or other remedy is not obtained, or Seller waives its right to
seek such an order or remedy, the applicable Buyer, Affiliate or Representative
shall be entitled to furnish only that portion of such Seller Confidential
Information that is legally required to be disclosed and shall exercise its
commercially reasonable efforts to obtain assurances that appropriate
confidential treatment will be accorded such Seller Confidential Information.
(j)    From and after the Closing, Buyer shall afford, and shall cause its
Affiliates to afford, to the Seller Representative and its agents reasonable
access during normal business hours upon reasonable prior notice to its books
and records, books of account, financial and other records (including
accountant’s work papers), information, employees, financial advisers,
actuaries, auditors and other representatives and agents to the extent necessary
or useful for the Seller Representative to address and respond to any audit,
investigation, dispute or litigation, or in connection with any other reasonable
business purpose, arising from or relating to a Seller’s prior ownership of any
of the Transferred Companies; provided that in no event shall such Persons be
required to provide access to any such records and information to the extent
that they contain information that is subject to an attorney-client or other
legal privilege; provided, further, that any such access by the Seller
Representative pursuant to this Section 5.4(e) shall not unreasonably interfere
with the business operations of the Buyer or its Affiliates.

Section 5.5    Subsequent Financial Statements. Sellers shall promptly deliver
to Buyer following the filing or preparation thereof, as applicable, true,
complete and correct copies of all audited and unaudited financial statements of
the types identified in Section 3.6 with respect to each of the Transferred
Companies between the date hereof and the Closing Date, and all statutory
statements of each of the Insurance Subsidiaries

54

--------------------------------------------------------------------------------

prepared or filed by the Transferred Insurance Subsidiaries between the date
hereof and the Closing Date (all of which shall be timely filed with the
applicable Insurance Regulator in compliance with applicable Law), and all such
financial statements shall be prepared in accordance with GAAP or SAP, as
applicable, consistently applied. Each Seller hereby represents and warrants,
severally in accordance with its respective Allocated Portions and not jointly,
that, as of the Closing Date, the information about the Transferred Companies
included in any form, document or report filed or furnished by Tiptree Financial
Inc. with the SEC after the date hereof and prior to the Closing Date will
comply in all material respects with the requirements of the Securities Act and
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder, as applicable, and as of their respective dates will not contain any
untrue statement of material fact or omit to state a material fact required to
be stated therein to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 5.6    Public Announcements. No party to this Agreement or any Affiliate
or Representative of such party shall issue or cause the publication of any
press release or public announcement or otherwise communicate with any news
media in respect of this Agreement or the transactions contemplated by this
Agreement without the prior written consent of the other party (which consent
shall not be unreasonably withheld, conditioned or delayed), except as may be
required by Law or applicable securities exchange rules, in which the case the
party required to publish such press release or public announcement shall allow
the other party a reasonable opportunity to comment on such press release or
public announcement in advance of such publication and shall consider in good
faith such comments.
Section 5.7    Consents, Approvals and Filings.
(e)    The Sellers and Buyer shall each use their commercially reasonable
efforts, and shall cooperate fully with each other to (i) comply with all
requirements of Governmental Authorities applicable to the transactions
contemplated by this Agreement and (ii) to seek to obtain as promptly as
practicable all Governmental Approvals necessary or advisable in connection with
the transactions contemplated by this Agreement; provided, however, that Buyer
shall not be obligated to comply with any condition imposed by a Governmental
Authority or in connection therewith which would reasonably be expected to have
a material adverse effect on the business, assets, liabilities, properties,
condition (financial or otherwise), operations or results of operations of Buyer
or any of its Affiliates, or any requirement to sell, divest, operate in a
specified manner, hold separate or discontinue or limit, before or after the
Closing Date, any assets, liabilities, business, operations or interest in any
assets or business of Buyer or any of its Affiliates or any of the Transferred
Companies. The parties shall cooperate with the reasonable requests of each
other in seeking

55

--------------------------------------------------------------------------------

to obtain as promptly as practicable all such Governmental Approvals. In
connection therewith, the parties shall make, and cause their respective
Affiliates to make, all filings required by applicable Laws as promptly as
practicable after the date hereof in order to facilitate prompt consummation of
the transactions contemplated by this Agreement, and shall provide and shall
cause their respective Affiliates to provide such information and communications
to Governmental Authorities as such Governmental Authorities may request. Each
of the parties shall provide to the other party copies of all applications or
other communications to Governmental Authorities in connection with this
Agreement in advance of the filing or submission thereof.
(f)    Without limiting the generality of the foregoing, as soon as reasonably
practicable after the date hereof, but no later than twenty (20) Business Days
following the date hereof in the case of the Form A, the parties shall make all
filings and notifications with all Governmental Authorities that may be or may
become reasonably necessary, proper or advisable under the Transaction
Agreements and applicable Laws to consummate and make effective the transactions
contemplated by the Transaction Agreements, including Buyer 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 the Transaction Agreements.
(g)    From and after the date hereof, the parties shall use their commercially
reasonable efforts, and shall cooperate fully with each other to obtain as
reasonably as practicable following the date hereof all required approvals,
consents, waivers or authorizations from Third Parties (other than any
Governmental Authority) required in connection with the consummation of the
transactions contemplated by this Agreement, including the Hartford
Acknowledgment (each, a “Third Party Consent”). Sellers or their Affiliates
shall be responsible for 100% of the costs (including any license or other fees
and expenses) associated with obtaining the consents from such Third Parties or
replacement of such rights. Without limiting the foregoing, in the event a Third
Party Consent other than the Hartford Acknowledgment has not been obtained by
the Closing Date, then each of the parties hereto shall, and shall cause their
respective Affiliates to, use their respective commercially reasonable efforts
to (A) provide Buyer and its Affiliates with rights or access to the benefits
provided under any such Contract for which an approval, consent or waiver has
not been obtained or substantially equivalent rights or access until the first
anniversary of the Closing Date and (B) without limiting clause (A), enforce for
the account of Buyer any rights of Sellers or the Transferred Companies arising
from such Contract. In addition, each of the parties hereto shall continue to
use their commercially reasonable efforts after the Closing to obtain such Third
Party Consents that have not been received as of the Closing.
(h)    Notwithstanding anything to the contrary in this Agreement, neither party
nor any of their respective Affiliates shall be required to disclose pursuant to
this Section 5.7 (1) any information that in the reasonable judgment of such
party would result

56

--------------------------------------------------------------------------------

in the disclosure of any trade secrets of such party or Third Parties, (2) any
privileged information or confidential competitive information or (3) any
information to the other party or any of its Affiliates that in the reasonable
judgment of such non-disclosing party would violate any of its contractual
obligations with respect to confidentiality; provided, that with respect to
clause (3), the non-disclosing party shall have first used its reasonable best
efforts to obtain a waiver or consent necessary to allow it to disclose such
information; provided, further, that if such consent or waiver to disclose is
not obtained, the non-disclosing party shall provide such information directly
to the applicable Governmental Authority and may seek to have such information
treated confidentially.
Section 5.8    Resignations. Sellers shall deliver to Buyer letters of
resignation, effective as of the Closing, of all officers and directors of any
of the Transferred Companies set forth on Section 5.8 of the Buyer Disclosure
Letter.
Section 5.9    Further Assurances. Following the Closing, each of the parties
hereto shall, and shall cause its Affiliates and its and its Affiliates’
Representatives to, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be necessary, or
otherwise reasonably be requested by any other party hereto to confirm and
assure the rights and obligations provided for in this Agreement and render
effective the consummation of the transaction contemplated hereby and thereby,
or otherwise to carry out the intent and purposes of this Agreement.
Section 5.10    Consents and Waivers of Sellers.
(a)    Each Seller agrees that the only amounts to which it is entitled in
connection with the transactions contemplated hereby at and after the Closing
hereunder are (i) its Allocated Portion of the payment of the Closing Cash
Consideration to be made by Buyer to the Seller Representative at the Closing,
(ii) its Allocated Portion of any positive Additional Consideration, in each
case as contemplated by Section 1.7 and (iii) any amounts to which it is
entitled as a Seller Indemnitee pursuant to Article IX hereof.
(b)    Each Seller hereby waives and releases, effective as of the Closing, each
of the Transferred Companies, Buyer and their respective Affiliates of and from
any claim, demand, cause of action, debt, obligation, liability or other matter
of any nature, fixed or contingent, known or unknown, whether at law or in
equity, by reason of any event, occurrence, circumstance or matter of any nature
that occurred, arose or existed at any time on or before the Closing Date, other
than any claim for the amounts referred to in paragraph (a) of this Section 5.10
and, with respect to Sellers who are Employees, for compensation for service as
an employee or director of any of the Transferred Companies in accordance with
the terms of such employment.

57

--------------------------------------------------------------------------------

(c)    Each Seller hereby waives, acknowledges and agrees that such Seller shall
not have and shall not attempt to exercise or assert, any right of contribution
or indemnity or any other claim whatsoever against any Transferred Company or
any officer or employee of any Transferred Company in connection with any matter
with respect to which indemnity is or may be sought from the Sellers under the
Transaction Agreements.
(d)    Each Seller hereby waives any and all rights such Seller may have under
the Stockholders Agreement with respect to the transfer of the Shares to Buyer
pursuant to this Agreement and hereby agrees that, subject to the occurrence of
the Closing and effective on the Closing Date, the Stockholders Agreement shall
be terminated and be of no further force and effect.
Section 5.11    Financing.
(a)    Subject to the terms and conditions herein provided, from the date hereof
until the earlier of the termination of this Agreement in accordance with its
terms and the Closing Date, Buyer shall use its commercially reasonable efforts
to take, or cause to be taken, all actions and do, or cause to be done, all
things necessary, proper or advisable to arrange for Buyer to obtain the
proceeds of the Financing on the terms and conditions described in the Financing
Commitments (provided that Buyer may (x) amend, modify, supplement, restate,
assign, substitute or replace the Financing Commitments and any related Fee
Letter to add or replace lenders, collateral agents or similar entities or (y)
otherwise amend, modify, supplement, restate, assign, substitute or replace or
consent to any waiver of any provision or remedy under, the Financing
Commitments in a manner that would not (i) reduce the aggregate amount of the
proceeds to Buyer of the Financing (including by increasing the amount of fees
to be paid or original issue discount), (ii) reduce the amount of the Equity
Financing unless (A) the Debt Financing is increased by, or other sources of
financing are available to Buyer in, a corresponding amount no later than the
date of such amendment, modification, supplementation, restatement, assignment,
substitution, replacement or waiver, (B) such reduction is expressly conditioned
upon the consummation of the Debt Financing or other financing at such increased
amount at the Closing, and (C) after giving effect thereto, the representations
in the sixth sentence of Section 4.4 hereof remain accurate, (iii) impose new or
additional conditions, or expand any existing conditions, to the receipt of the
proceeds of the Financing or otherwise amend, modify, supplement, restate,
assign, substitute, replace or waive any other provision of the Financing
Commitments, in each case, in a manner that would reasonably be expected to
delay or prevent or make less likely to occur the funding of the Financing (or
satisfaction of the conditions to the Financing) on the Closing Date or (iv)
adversely affect the ability of Buyer or the Seller Representative, as
applicable, to enforce its rights against other parties to the Equity Financing
Commitments or the definitive agreements relating to the Equity Financing),
including using its commercially reasonable efforts to (A) maintain in effect
the

58

--------------------------------------------------------------------------------

Financing Commitments in accordance with the terms and subject to the conditions
thereof (subject to Buyer’s right to amend, modify, supplement, restate, assign,
substitute or replace the Financing Commitments in accordance herewith), (B)
satisfy on a timely basis (taking into account the anticipated timing of the
satisfaction of the condition set forth in Section 7.1(b)) all conditions
applicable to Buyer’s obtaining the Financing at the Closing set forth therein
to the extent within Buyer’s control, (C) negotiate and enter into definitive
agreements with respect to the Financing on terms and conditions no less
favorable to Buyer than those described and contemplated by the Financing
Commitments and the Fee Letter (and, upon the reasonable request of the Seller
Representative, update the Seller Representative of the status of its efforts to
arrange the Financing), (D) upon the satisfaction or the waiver of the
conditions set forth in such definitive agreements and herein, consummate the
financing on the Closing Date, including using its (and causing its controlled
Affiliates to use) best efforts to cause the persons committed to fund the
Financing to so fund the Financing at the Closing and enforce its rights under
the Financing Commitments and the definitive agreements in respect of the Debt
Financing, including by seeking specific performance of the parties thereunder
as and only to the extent permitted under Section 11.10 and (E) comply in all
material respects with its covenants and other obligations under the Financing
Commitments.
(b)    Buyer shall keep the Seller Representative informed on a reasonably
current basis and in reasonable detail of the status of its efforts to arrange
the Debt Financing and provide to the Seller Representative, upon request,
copies of the definitive agreements and any other material documents relating to
the Debt Financing. Buyer shall give the Seller Representative prompt notice of
(i) any termination of any Debt Financing Commitment, any definitive agreement
in respect of the Debt Financing or any portion of the Debt Financing, (ii) any
material breach, default, termination or repudiation of any provisions of the
Debt Financing Commitment or any material agreements entered into in respect
thereof by any party thereto, of which Buyer becomes aware, and (iii) the
receipt of any written notice or other written communication from any party to
any of the Financing Commitments with respect to any material breach, default,
termination or repudiation of any provisions of the Debt Financing Commitment or
any definitive agreements entered into in respect thereof. In the event any
portion of the Financing becomes unavailable on the terms and conditions
contemplated by the Financing Commitments, Buyer shall promptly notify Sellers
and shall use its reasonable best efforts to, as promptly as reasonably
practicable, arrange and obtain in replacement thereof, and negotiate and enter
into definitive agreements with respect to, alternative financing from
alternative sources in an amount such that the aggregate funds that would be
available to Buyer at the Closing will be sufficient to pay all amounts
contemplated by this Agreement to be paid by it at the Closing and to perform
its obligations hereunder; provided that Buyer shall not be required to arrange
for or obtain any such alternative financing on terms and conditions that are
less favorable to Buyer and its Affiliates than the terms contained in the Debt
Financing Commitment and the Fee Letter. Buyer shall promptly deliver to Sellers
true, complete and correct copies of all agreements

59

--------------------------------------------------------------------------------

pursuant to which any such alternative source shall have committed to provide
Buyer with any portion of the Financing. For purposes of this Agreement,
references to “Financing,” “Equity Financing” and “Debt Financing” shall include
the financing contemplated by the applicable Financing Commitments as permitted
or required by this Section 5.11 to be amended, modified, supplemented,
restated, assigned, substituted or replaced and references to “Financing
Commitments,” “Equity Financing Commitment”, “Debt Financing Commitment” and
“Fee Letter” shall include such documents as permitted or required by this
Section 5.11 to be amended, modified, supplemented, restated, assigned,
substituted or replaced, in each case from and after such amendment,
modification or replacement.
(c)    Prior to the Closing, Sellers shall, and shall cause each of their
Affiliates (including the Transferred Companies) to, and shall use their
respective reasonable best efforts to cause its and their representatives to,
provide to Buyer such cooperation as may be reasonably requested by Buyer to
assist Buyer in causing the conditions in the Financing Commitments to be
satisfied and such cooperation as is otherwise necessary or reasonably requested
by Buyer in connection with Buyer’s obtaining the Financing in accordance with
its terms. Such cooperation shall include: (i) granting the Buyer’s financing
sources access to the Books and Records (including cash management and
accounting systems) and to any information about the Transferred Companies and
the Business as Buyer may reasonably request in order to permit such Buyer’s
financing sources to conduct an appropriate due diligence review of the
Transferred Companies and the Business; (ii) making available to Buyer and such
Buyer’s financing sources its and the Transferred Companies’ employees and
representatives for participation in a customary and reasonable number of
meetings, presentations and due diligence sessions; (iii) furnishing to Buyer
and such Buyer’s financing sources such financial statements, financial data,
audit reports and information as Buyer may reasonably request; (iv) causing the
Transferred Companies to execute and deliver (or using reasonable best efforts
to obtain from their advisors) such documents, Contracts (including definitive
financing documents, pledge documents and security documents), certificates
(including a solvency certificate from the chief financial officer of the
Transferred Companies), legal opinions or other documents and instruments
relating to guarantees and other matters ancillary to the Financing as may be
reasonably requested by the Buyer, in each case to be effective as of or after
the Closing, (v) facilitating the pledging of, and the granting, recording and
perfection of security interests in, share certificates, securities and other
collateral at and after the Closing, (vi) causing the Transferred Companies to
take such corporate actions, effective as of or after the Closing, as shall be
reasonably requested by the Buyer to permit the consummation of the Financing
and to permit the proceeds thereof to be made available at the Closing, (vii)
causing the Transferred Companies to deliver notices of prepayment, termination
or redemption within the time periods required by the relevant agreements
governing any existing Indebtedness of the Transferred Companies, and obtaining
customary payoff letters, prepayment notices, Lien terminations and instruments
of discharge to be delivered at Closing, to allow the payoff, discharge and
termination in full on the Closing Date of all existing Indebtedness

60

--------------------------------------------------------------------------------

of the Transferred Companies, and (viii) furnishing the Buyer and its financing
sources promptly with all documentation and other information which any lender
providing or arranging the Debt Financing has reasonably requested and that such
lender has determined is required by regulatory authorities in connection with
such Debt Financing under applicable “know your customer” and anti-money
laundering rules and regulations, including, without limitation, the PATRIOT
Act. Such requested cooperation shall not unreasonably interfere with the
ongoing operations of the Sellers or the Transferred Companies. In no event
shall the Sellers, the Transferred Companies or any of their respective
Subsidiaries be required to (1) bear any cost or expense, pay any fee, enter
into any definitive agreement or incur any other liability in connection with
the Debt Financing prior to the Closing, in each case, except to the extent
covered by the Buyer’s obligations pursuant to the terms of the immediately
following sentence, (2) except for the prepayment, termination or redemption
notices described in clause (vii) of this Section 5.11(c) and documents
delivered pursuant to clause (viii) of this Section 5.11(c), enter into any
definitive agreement in connection with the Debt Financing prior to the Closing
or (3) take any actions to the extent such actions would unreasonably interfere
with the ongoing business or operations of the Sellers or the Transferred
Companies. Buyer shall promptly, upon request by the Seller Representative,
reimburse the Sellers for all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) incurred by the Sellers or any of their
respective Subsidiaries and their respective Representatives in connection with
the Debt Financing, including the cooperation of the Sellers, the Transferred
Companies and their respective Subsidiaries and Representatives contemplated by
this Section 5.11, and shall indemnify and hold harmless the Sellers and their
Subsidiaries and their respective Representatives from and against any and all
Losses suffered or incurred by any of them in connection with the arrangement of
the Debt Financing and any information used in connection therewith, except to
the extent any of the foregoing arise from (i) the gross negligence or willful
misconduct of, or material breach of this Agreement by, the Sellers, the
Transferred Companies or their respective Subsidiaries or (ii) historical
information provided, directly or indirectly, by the Sellers, the Transferred
Companies or their respective Subsidiaries that was requested by Buyer or any of
its Representatives or Financing Sources in connection with the arrangement of
the Debt Financing. Sellers shall keep confidential and not disclose to any
Person (other than their representatives, on a need-to-know basis and in
connection with the transactions contemplated hereby), the Debt Finacning
Commitment, the Fee Letter or the terms thereof, without prior written consent
of the Buyer, except as such Seller may be required to disclose any such
information by judicial or administrative process or by other requirements of
Law.
Section 5.12    Exercise of Warrants. At least five (5) Business Days prior to
the Closing (or at such earlier time as any Warrant Holder so elects), each
Warrant Holder will exercise each of the Warrants held by such Warrant Holder,
and (if applicable) each IRA Seller will cause its related IRA that holds
Warrants to exercise each of the Warrants held by such IRA, in each case by
surrendering each such Warrant to the Company with the

61

--------------------------------------------------------------------------------

exercise form attached thereto duly completed and executed. Each such Warrant
shall be exercised on a “net exercise” basis, with the number of shares of
Common Stock issuable upon such exercise reduced by that number of shares of
Common Stock having a Fair Market Value (as defined in the applicable Warrant)
equal to the aggregate Warrant Price (as defined in the applicable Warrant) for
the shares of Common Stock being purchased. Each Seller acknowledges and agrees
that each share of Common Stock issued pursuant to the exercise of the Warrants
held by such Warrant Holder will be a Share for all purposes of this Agreement,
and each Warrant Holder and each applicable IRA Seller shall direct the Company
to issue such Shares into the custody of the Seller Representative as if the
Seller Representative had requested such delivery pursuant to Section 1.6
hereof.
Section 5.13    Termination of Affiliate Transactions; Intercompany Balances.
Except as set forth on Section 5.13 of the Seller Disclosure Letter, Sellers
shall, and shall cause their Affiliates to, take such actions as may be
necessary to terminate, prior to the Closing, all Affiliate Transactions, and
Sellers shall ensure that none of the Transferred Companies that are parties
thereto shall incur any liability in connection with such termination. Except as
set forth in Section 5.13 of the Seller Disclosure Letter, Sellers shall cause
all receivables and payables between any Transferred Company, on the one hand,
and any Seller or any Affiliate of any Seller (other than the Transferred
Companies), on the other hand, to be settled or extinguished prior to the
Closing.
Section 5.14    Non-Compete; Non-Solicitation.
(g)    Non-compete. For a period of two (2) years after the Closing Date,
Tiptree shall not, and shall not permit any of its controlled Affiliates
(whether now existing or existing subsequent to the date of this Agreement) to,
directly or indirectly, conduct, operate, control, manage, participate, own,
invest in or otherwise engage in, any business engaged in the sale or
administration of corporate owned life insurance products, bank owned life
insurance products or similar insurance products, as conducted as of the date of
this Agreement or as of the Closing Date, in any geographical jurisdiction in
which the Business operates as of the date of this Agreement or as of the
Closing Date (a “Competing Business”). Notwithstanding the foregoing, nothing in
this Section 5.14(a) shall prohibit (x) Tiptree or its Affiliates from owning or
investing in not more than 5% of the outstanding capital stock of any publicly
traded company, so long as Tiptree or the applicable Affiliate does not have any
representative, designee or nominee on the board of directors (or equivalent
body) of such company and does not actively participate in the business of such
company or (y) Tiptree or its Affiliates from (i) selling any of its assets or
businesses to a Person engaged in lines of business that compete with the
Competing Business; (ii) managing or controlling investment funds that make
investments in Persons engaging in a Competing Business, so long as such
investments are in the ordinary course of business and not for the account of

62

--------------------------------------------------------------------------------

any such Person; or (iii) providing investment management and similar services
to any Person engaging in a Competing Business.
(h)    Non-Solicitation of Employees. For a period of two (2) years after the
Closing Date, Tiptree shall not, and shall not permit any of its controlled
Affiliates (whether now existing or existing subsequent to the date of this
Agreement) to, directly or indirectly, for its own benefit or the benefit of any
other Person, solicit or attempt to solicit, or induce or attempt to induce, or
employ or hire (as an employee or independent contractor), any current Employee
of the Transferred Companies to leave his or her employment with Buyer, the
Transferred Companies or their respective Affiliates or successors in interest.
The restrictions in this Section 5.14(b) shall cease to apply to any Employee
six months after the date of termination of his or her employment with Buyer,
the Transferred Companies or their respective Affiliates or successors in
interest, provided that such Employee has not terminated his or her employment
at the encouragement of Tiptree or any of its Affiliates. Nothing in this
Section 5.14(b) shall restrict or preclude Tiptree or any of its Affiliates from
making generalized searches for employees by the use of advertisements in the
media or by engaging search firms that are not instructed to solicit any of the
current Employees.
(i)    The parties agree that the agreements contained in this Section 5.14 are
reasonable and necessary to protect and preserve Buyer’s legitimate business
interests and the value of the Business, the Transferred Companies and the
Shares. Tiptree further acknowledges and agrees that Buyer’s agreements
contained in this Agreement, including its agreements to acquire the Shares
indirectly owned by Tiptree, are being entered into by Buyer in exchange for and
reliance upon the agreements of Tiptree contained in this Section 5.14. Tiptree
acknowledges and agrees that the remedy of indemnity payments pursuant to
Article X and the other remedies at law for any breach of the requirements of
this Section 5.14 would be inadequate, and agrees and consents that without
intending to limit any additional remedies that may be available, temporary and
permanent injunctive and other equitable relief may be granted without proof of
actual damage or inadequacy of legal remedy, in any proceeding which may be
brought to enforce any of the provisions of this Section 5.14.
(j)    If, at the time of enforcement of the agreements contained in this
Section 5.14, a court shall hold that the duration or scope stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration and scope reasonable under such circumstances shall be
substituted for the stated duration and scope and that the court shall be
allowed and directed to revise the restrictions contained herein to cover the
maximum scope and duration permitted by applicable Law.
ARTICLE VI
TAX MATTERS

63

--------------------------------------------------------------------------------

Section 6.1    Taxes; Tax Returns.
(k)    Sellers shall pay, reimburse, indemnify and hold harmless the Buyer
Indemnitees for, from and against any and all Taxes and other Losses in respect
of Taxes that (i) are imposed on or with respect to the Transferred Companies
for any Pre-Closing Tax Period, and, without duplication, any interest, penalty
or additions to Tax accruing after the Closing Date on Taxes described in this
clause (i), (ii) arise under Treasury Regulation Section 1.1502-6 or any similar
provision of state, local or foreign Law by virtue of the Transferred Companies
having been a member of a consolidated, combined, affiliated, unitary or other
similar tax group prior to the Closing, (iii) are imposed by reason of the
Transferred Companies having liability for Taxes of another Person arising under
principles of transferee or successor liability or by contract as a result of
transactions taking place prior to the Closing, and (iv) resulting from an
inclusion under Section 951 of the Code by any Transferred Company at the end of
the taxable year of any Transferred Subsidiary that is a controlled foreign
corporation (as defined under Section 957 of the Code) that includes the Closing
Date to the extent such inclusion results from any transactions or activities
occurring between the beginning of the taxable year of such controlled foreign
corporation that includes the Closing Date and through the Closing, in each of
the above cases, to the extent such Taxes exceed the accrual in respect thereof
shown on the Closing Statement as finally determined; provided, that, Sellers
shall not be liable or otherwise be required to pay, reimburse, indemnify or
hold harmless Buyer Indemnitees for, from and against any Taxes (or any other
Losses in respect of Taxes) with respect to any (x) transaction of Buyer or any
of its Affiliates not in the ordinary course of business that occurs on the
Closing Date but after the Closing, (y), filing of any amended Tax Return or
change in any Tax election or accounting method with respect to the Transferred
Companies relating to any Pre-Closing Tax Period after the Closing Date by
Buyer, any of its Affiliates, or any transferee of Buyer or its Affiliates or
(z) transactions pursuant to the Buyer Restructuring. The amount of any payments
required to be made pursuant to this Section 6.1 shall be computed (i) without
regard to any net operating loss, net capital loss or other Tax deduction,
credit or benefit that is attributable to, arises from or relates to any
Post-Closing Tax Period and (ii) assuming that any income or gain attributable
to the Buyer Restructuring is allocated to a Post Closing Tax Period (including
pursuant to Section 6.1(c)). To the extent permitted by Law, Buyer shall elect
to carry forward any net operating loss, net capital loss or other Tax assets
generated in a Post-Closing Tax Period. For the avoidance of doubt, the
limitations described in Sections 9.4(a) and (b) shall not apply to this Section
6.1(a).
(l)    The Seller Representative shall be responsible for (i) preparing and
filing (or causing to be prepared and filed) all Tax Returns with respect to the
Transferred Companies that are due prior to the Closing Date and (ii) causing
the Transferred Companies to pay all Taxes of or with respect to the Transferred
Companies reflected on such Tax Returns that become due and payable prior to the
end of the day on the Closing Date, in each case, within the time and in the
manner prescribed by Law. All such Tax Returns shall

64

--------------------------------------------------------------------------------

be prepared and filed in accordance with past practices and the requirements of
this Agreement, except as required by applicable Law.
(m)    Buyer shall be responsible for (i) preparing and filing (or causing to be
prepared and filed) all Tax Returns with respect to the Transferred Companies
for Pre-Closing Periods that are due after the Closing Date and all Straddle
Period Tax Returns and (ii) causing all Taxes with respect to such Tax Returns
to be paid, in each case, within the time and in the manner prescribed by Law.
All such Tax Returns shall be prepared and filed in accordance with past
practices and the requirements of this Agreement, to the extent permitted by
applicable Law. Sellers will reimburse Buyer for Taxes reflected on such Tax
Returns within ten (10) days after such Tax Returns are filed to the extent that
such Taxes are indemnifiable by Sellers under Section 6.1(a). The preparation
and filing of any Tax Return that does not relate to a Pre-Closing Tax Period or
a Straddle Period shall be exclusively within the control of Buyer.
(n)    Each of the Seller Representative, on one hand, and Buyer, on the other
hand, shall use commercially reasonable efforts to make any Tax Returns and work
papers in respect of Pre-Closing Tax Periods and Straddle Periods for which such
party is responsible for preparing available for review by the other party
sufficiently in advance of the due date for filing such Tax Returns (after
taking into account available extensions), but in all events at least thirty
(30) days prior to the date such Tax Return is required to be filed, to provide
such other party with a meaningful opportunity to analyze, comment on and
dispute such Tax Returns and for such Tax Returns to be modified, as
appropriate, before filing. With respect to any Tax Returns for Pre-Closing Tax
Periods prepared by Buyer, Buyer shall reflect any reasonable comments made by
Sellers. In the event of any disagreement between Buyer and Seller
Representative, such disagreement shall be resolved by the Independent
Accountant, and any such determination by the Independent Accountant shall be
final unless otherwise not consistent with a determination (as defined in
Section 1313(a) of the Code). The fees and expenses incurred pursuant to this
Article VI of the Independent Accountant shall be borne equally by Buyer, on the
one hand, and Sellers, on the other hand.
(o)    For purposes of this Section 6.1, any liability for Taxes attributable to
a Taxable Period that begins before and ends after the Closing Date (a “Straddle
Period”) shall be apportioned between the portion of such period ending on the
Closing Date and the portion beginning on the day after the Closing Date (i) in
the case of real and personal property Taxes, by apportioning such Taxes on a
per diem basis, (ii) in the case of Taxes based upon an amount of premiums, the
amount of Tax imposed based upon the amount of premiums written or deposits made
as of and including the Closing, and (iii) in the case of all other Taxes, on
the basis of a closing of the books as of the end of day on the Closing Date.

65

--------------------------------------------------------------------------------

(p)    After the Closing, Buyer and Sellers shall not, and shall not permit any
of their Affiliates to, amend any Tax Returns or change any Tax elections or
accounting methods with respect to the Transferred Companies relating to any
Pre-Closing Tax Period to the extent such amendment or change could reasonably
be expected to have a material cost to the other party, including the
Transferred Companies.

Section 6.2    Books and Records; Cooperation. The parties to this Agreement and
their respective Affiliates will provide each other with such cooperation and
information as the Buyer or Sellers reasonably may request of the other or such
Affiliates with respect to any Tax matter at the expense of the requesting Party
(unless such expense is a Loss for which an indemnity is due), provided that the
foregoing shall be done in a manner so as not to interfere unreasonably with the
conduct of the business of the parties.
Section 6.3    Transfer Taxes. All Transfer Taxes incurred in connection with
transactions contemplated by this Agreement shall be borne equally between
Sellers, on the one hand, and Buyer, on the other hand; provided that any
Transfer Taxes resulting from the Buyer Restructuring shall be solely for the
account of the Buyer.
Section 6.4    Refunds. All refunds, credits or offsets of Taxes (including
interest actually received thereon from a relevant taxing authority) for which
Sellers are responsible pursuant to Section 6.1(a) or Section 9.2 (other than to
the extent such refund, credit or offset results from the carryback of a Tax
attribute of any Transferred Company generated in a Post-Closing Tax Period or
is reflected in the Closing Statement) shall be for the account of Sellers, and
Buyer shall promptly pay such amounts (less any net Taxes incurred by Buyer, its
Affiliates or the Transferred Companies in connection with the receipt of such
refund, credit, offset or interest) to Sellers if such refunds, credits or
offsets are received by Buyer or any Transferred Company. Buyer shall be
entitled to all other refunds, credits or offsets of Taxes (including interest
received thereon from a relevant taxing authority) in respect of any Taxes of
the Transferred Companies, and Sellers shall pay such amounts to Buyer if such
amounts are received by Sellers or any Affiliate thereof (less any net Taxes
incurred by Sellers or their Affiliates in connection with the receipt of such
refund, credit, offset or interest).
Section 6.5    Tax Contests. Each of the Seller Representative, on one hand, and
Buyer, on the other hand, shall promptly notify the other in writing upon
receipt by the Seller Representative, Buyer, any Transferred Company or any of
their Affiliates of notice of any Tax audits, examinations or assessments that
could give rise to a liability for which the other party is

66

--------------------------------------------------------------------------------

responsible under this Agreement, provided that failure to provide such notice
shall not limit the rights of such party under this Article VI except to the
extent the other party is materially prejudiced by such failure. The Seller
Representative shall control the portion of any such audit, examination or
proceeding that relates to any Taxes for which Sellers are responsible, provided
that the Seller Representative shall (i) keep Buyer regularly informed as to the
status of any such audit, examination or proceeding (including by providing
copies of all notices received from the relevant Tax Authority), (ii) permit
Buyer to participate in any such audit, examination or proceeding at Buyer’s
expense and (iii) to the extent it could have an adverse impact on Buyer or its
Affiliates in a Post-Closing Tax Period, not settle or compromise any such
audit, examination or proceeding without the consent of Buyer, which consent
shall not be unreasonably withheld. Buyer shall control any audit, examination
or proceeding (or portion thereof) that does not relate to Taxes for which
Sellers are responsible under Section 6.1(a) or Section 9.2.
Section 6.6    Tax Sharing Agreements. Prior to the Closing Date, Sellers shall
terminate all Tax Sharing Agreements between any Transferred Company, on the one
hand, and any Seller or any of their respective Affiliates (other than the
Transferred Companies), on the other hand, such that no Transferred Company
shall have any obligations thereunder following the Closing.
Section 6.7    Overlap. To the extent of any inconsistency between Section 6.5
and Section 9.6, this Article VI shall control as to Tax matters.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1    Conditions to the Obligations of Buyer and Sellers. The
obligations of Buyer and Sellers to consummate the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing of the
following conditions (or waiver thereof in writing by Buyer and the Seller
Representative on behalf of Sellers):
(c)    No Restraints. Consummation of the transactions contemplated hereby shall
not have been restrained, enjoined or otherwise prohibited or made illegal by
any applicable Law.
(d)    Other Governmental Approvals. Each of the Governmental Approvals set
forth in Section 3.2 of the Seller Disclosure Letter and Section 4.2 of the
Buyer Disclosure Letter, in connection with the consummation of the transactions
contemplated hereby, shall have been made or obtained and no consent, approval,
permit or authorization shall have been revoked; and, if applicable, any waiting
period in respect thereof (and any extensions thereof) shall have expired or
otherwise been terminated without disapproval thereof.

67

--------------------------------------------------------------------------------

(e)    RGA Indebtedness. The RGA Indebtedness will be eligible for prepayment
and the notes issued in respect thereof eligible for redemption, in each case
pursuant to Section 3.17(d) of the Note Purchase Agreement on the Closing Date.

Section 7.2    Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions
(or waiver thereof in writing by Buyer):
(k)    Representations; Performance. The representations and warranties of
Sellers set forth in Article II and Article III of this Agreement (other than
the Seller Fundamental Representations) shall be true and correct (without
regard to materiality or Material Adverse Effect qualifiers therein) at and as
of the date of this Agreement and as of the Closing Date with the same effect as
though made at and as of such date (except to the extent expressly made at and
as of a specific date, in which case as of such specific date), except where the
failure to be so true and correct would not, individually or in the aggregate,
have a Material Adverse Effect. The Seller Fundamental Representations (i) that
are qualified by materiality or “Material Adverse Effect” shall be true and
correct in all respects and (ii) that are not so qualified shall be true and
correct in all material respects, in each case at and as of the date of this
Agreement and at and as of the Closing Date with the same effect as though made
at and as of such date (except to the extent expressly made as of a specific
date, in which case as of such specific date). Sellers shall have in all
material respects duly performed or complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with by
Sellers on or prior to the Closing Date. Each Seller shall have delivered to
Buyer a certificate dated the Closing Date and signed by a duly authorized
officer (in the case of any Seller that is not a natural person) or by such
Seller (in the case of a Seller who is a natural person) to the effect set forth
above in this Section 7.2(a).
(l)    No Material Adverse Effect. No event, occurrence, fact, condition,
change, development or effect shall exist or have occurred or come to exist
since the Reference Date that, individually or in the aggregate, has resulted
in, or would reasonably be expected to result in, a Material Adverse Effect.
(m)    Third Party Approvals. The Third Party Approvals set forth on Schedule
7.2 shall have been obtained and shall not have been revoked.

68

--------------------------------------------------------------------------------

Section 7.3    Conditions to Obligations of Sellers. The obligation of Sellers
to consummate the transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions
(or waiver thereof in writing by the Seller Representative on behalf of
Sellers):
(a)    Representations; Performance. The representations and warranties of Buyer
set forth in Article IV of this Agreement (other than the Buyer Fundamental
Representations) shall be true and correct (without regard to materiality or
Material Adverse Effect qualifiers therein) at and as of the date of this
Agreement and as of the Closing Date with the same effect as though made at and
as of such date (except to the extent expressly made as of an earlier date, in
which case as of such specific date), except where the failure to be so true and
correct would not, individually or in the aggregate, have a material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
by this Agreement. The Buyer Fundamental Representations (i) that are qualified
by materiality shall be true and correct in all respects and (ii) that are not
so qualified shall be true and correct in all respects, in each case at and as
of the date of the Agreement and at and as of the Closing Date with the same
effect as though made at and as of such date (except to the extent expressly
made as of a specific date, in which case as of such specific date). Buyer shall
have in all material respects duly performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by Buyer on or prior to the Closing Date. Buyer shall have delivered to the
Seller Representative a certificate dated the Closing Date and signed by a duly
authorized officer to the effect set forth above in this Section 7.3(a).
Section 7.4    Frustration of Closing Conditions. The Sellers may not rely as a
basis for not consummating the transactions contemplated hereby on the failure
of any condition set forth in Section 7.3 to be satisfied if such failure was
directly caused by the Sellers’ failure to perform in all material respects any
of its material obligations under this Agreement. Buyer may not rely as a basis
for not consummating the transactions contemplated hereby on the failure of any
condition set forth in Section 7.2 to be satisfied if such failure was directly
caused by the Buyer’s failure to perform in all material respects any of its
material obligations under this Agreement.
ARTICLE VIII
TERMINATION
Section 8.1    Termination. This Agreement may be terminated at any time prior
to the Closing Date:

69

--------------------------------------------------------------------------------

(n)    by the written agreement of Buyer and the Seller Representative;
(o)    by either Buyer or the Seller Representative by notice to the other
party, if:
(i)    the Closing shall not have been consummated on or before July 31, 2015
(as may be extended in accordance with this clause (b), the “End Date”);
provided that the right to terminate this Agreement pursuant to this Section
8.1(b)(i) shall not be available to any party whose breach of any provision of
this Agreement results in the failure of the Closing to be consummated by such
time; provided further, that if the Closing has not occurred by July 31, 2015
due solely to the failure of any Governmental Approval set forth in Section 3.2
of the Seller Disclosure Letter or Section 4.2 of the Buyer Disclosure Letter to
have been obtained as contemplated by Section 7.1(b), the End Date shall be
automatically extended to the date that is the last day of the month that is
three months after the month in which the End Date occurs; or
(ii)    (A) there shall be any Law that permanently makes consummation of the
Closing illegal or otherwise prohibited or (B) any judgment, injunction, order
or decree of any Governmental Authority having competent jurisdiction
permanently enjoining Buyer or Sellers from consummating the Closing is entered
and such judgment, injunction, judgment or order shall have become final and
nonappealable.
(p)    by Buyer by notice to the Seller Representative, if a breach of any
representation or warranty or failure to perform or comply with any covenant or
agreement set forth in this Agreement on the part of Sellers shall have occurred
that would cause the condition set forth in Section 7.2(a) not to be satisfied
and such breach or failure shall not have been cured or eliminated within thirty
(30) days following receipt by the Seller Representative of written notice
thereof from Buyer or the End Date, whichever is earlier; provided that Buyer
will not have the right to terminate this Agreement pursuant to Section 8.1(c)
if the Seller Representative could then terminate this Agreement pursuant to
Section 8.1(d) or if Buyer is otherwise then in material breach of any of its
representations, warranties, covenants or agreements hereunder;
(q)    by the Seller Representative by notice to Buyer, if a breach of any
representation or warranty or failure to perform or comply with any covenant or
agreement set forth in this Agreement on the part of Buyer shall have occurred
that would cause the condition set forth in Section 7.3(a) not to be satisfied
and such breach or failure shall not have been cured or eliminated within thirty
(30) days following receipt by Buyer of written notice thereof from the Seller
Representative or the End Date, whichever is earlier; provided that the Seller
Representative will not have the right to terminate this Agreement pursuant

70

--------------------------------------------------------------------------------

to Section 8.1(d) if the Seller Representative could then terminate this
Agreement pursuant to Section 8.1(c) or if any Seller is otherwise then in
material breach of any of its representations, warranties, covenants or
agreements hereunder; or
(r)    by the Seller Representative by notice to Buyer, if (i) all of the
conditions set forth in Sections 7.1 and 7.2 have been satisfied (other than
those conditions that by their nature are to be satisfied at the Closing, but
each of which is at the time of such notice of termination capable of being
satisfied as if such time were the Closing), (ii) the Seller Representative has
irrevocably notified Buyer in writing (A) that all of the conditions set forth
in Sections 7.1 and 7.3 have been satisfied or waived (other than those
conditions that by their nature are to be satisfied at the Closing, but each of
which is at the time of such notice of termination capable of being satisfied as
if such time were the Closing), and (B) that Sellers are ready, willing and able
to consummate the Closing; and (iii) Buyer fails to consummate the Closing
within three (3) Business Days following the date the Closing was required by
Section 1.3.

Section 8.2    Effect of Termination. If this Agreement is terminated pursuant
to Section 8.1, this Agreement shall, except as expressly indicated in the last
sentence of this Section 8.2, become void and of no effect without liability of
any party (or any of its directors, officers, employees, stockholders,
Affiliates, agents, representatives or advisors) to the other parties hereto,
provided that no such termination shall relieve either party of liability for
fraud or any willful and material breach of this Agreement or for any liability
existing pursuant to the surviving provisions expressly indicated in the last
sentence of this Section 8.2. For purposes hereof, “willful and material breach”
means a material breach by a party to this Agreement as a result of an action or
failure to act by such party that such party knew would result in a breach of
this Agreement. The provisions of Section 1.6(d) (Seller Representative
Indemnification), Section 5.6 (Public Announcements), the reimbursement and
indemnification provisions of Section 5.11(c), this Section 8.2 (Termination),
Section 8.3 (Termination Fee), Section 10.1 (Certain Terms), Section 10.2
(Construction) and Article XI (Miscellaneous) shall survive any termination
hereof pursuant to Section 8.1.
Section 8.3    Termination Fee.
(a)    In the event that this Agreement is terminated by the Seller
Representative pursuant to Section 8.1(d) or Section 8.1(e) or is otherwise
terminated when terminable pursuant to Section 8.1(d) or Section 8.1(e), then
Buyer shall promptly, but in no event later than two (2) Business Days after the
date of such termination, pay or cause to be paid to Tiptree (in its individual
capacity, and not as Seller Representative hereunder) or its designees

71

--------------------------------------------------------------------------------

the Termination Fee (an amount equal to $10,000,000) (the “Termination Fee”) by
wire transfer of same day funds (it being understood that in no event shall
Buyer be required to pay the Termination Fee on more than one occasion). Solely
for purposes of establishing the basis for the amount thereof, and without in
any way increasing the amount of the Termination Fee or expanding the
circumstances in which the Termination Fee is to be paid, it is agreed that the
Termination Fee is not a penalty, but rather is liquidated damages in a
reasonable amount that will compensate Sellers in the circumstances in which the
Termination Fee is payable for the efforts and resources expended and
opportunity forgone while negotiating this Agreement and in reliance on this
Agreement and on the expectation of the consummation of the transactions
contemplated hereby, which amount would otherwise be impossible to calculate
with precision.
(b)    Notwithstanding anything to the contrary in this Agreement, in the event
Buyer fails to effect the Closing or otherwise breaches this Agreement or fails
to perform hereunder, then, except as and only to the extent expressly permitted
by Section 11.10, Sellers’ sole and exclusive remedy (whether at law, in equity,
in contract, in tort or otherwise) against the Buyer Related Parties in respect
of this Agreement, any Contract executed in connection herewith (including the
Equity Financing Commitment, the Limited Guaranty and the Debt Financing
Commitment, but excluding the Confidentiality Agreement) and the transactions
contemplated hereby and thereby shall be to terminate this Agreement in
accordance with (and subject to the conditions of) this Article VIII and
collect, if due, the Termination Fee and any reimbursement or indemnity
obligations under Section 5.11(c) or Section 11.3 from Buyer or pursuant to the
Limited Guaranty from Guarantors, and upon payment of such amounts in accordance
with Section 5.11(c), Section 11.3 and this Section 8.3(b), except in connection
with an order of specific performance as and only to the extent provided in
Section 11.10, (A) no Buyer Related Party shall have any further liability or
obligation relating to or arising out of this Agreement, any Contract executed
in connection herewith (including the Equity Financing Commitment, the Limited
Guaranty and the Debt Financing Commitment, but excluding the Confidentiality
Agreement) or any of the transactions contemplated hereby or thereby, (B)
neither Sellers nor any other Seller Related Party shall be entitled to bring or
maintain any claim, action, proceeding or other Litigation against Buyer or any
other Buyer Related Party arising out of or in connection with this Agreement,
any Contract executed in connection herewith (including the Equity Financing
Commitment, the Limited Guaranty and the Debt Financing Commitment, but
excluding the Confidentiality Agreement) or any of the transactions contemplated
hereby or thereby (or the abandonment or termination thereof) or any matters
forming the basis for such termination, and (C) Sellers and the Seller
Representative shall use their reasonable best efforts to cause any claim,
action, proceeding or other Litigation pending in connection with this
Agreement, any Contract executed in connection herewith (including the Equity
Financing Commitment, the Limited Guaranty and the Debt Financing Commitment,
but excluding the Confidentiality Agreement) or any of the transactions
contemplated hereby or thereby, to the extent maintained by Sellers or another
Seller Related Party against Buyer

72

--------------------------------------------------------------------------------

or any other Buyer Related Party, to be dismissed with prejudice promptly
following the payment of any such amounts. For the avoidance of doubt, (x) under
no circumstances shall Sellers (directly or through the Seller Representative)
be entitled to collect the Termination Fee on more than one occasion and (y)
under no circumstances shall Sellers (directly or through the Seller
Representative) be permitted or entitled to receive both a grant of specific
performance of the obligation to close contemplated by Section 11.10 that
results in the Closing occurring and any money damages, including the
Termination Fee. In connection with any loss suffered as a result of any breach
of any representation, covenant or agreement in this Agreement or the failure of
the Closing to be consummated, or in respect of any oral representation made or
alleged to have been made in connection herewith, in each case, other than in a
circumstance in which the Seller Representative is permitted to terminate this
Agreement and cause Tiptree or its designee to receive the Termination Fee
pursuant to this Section 8.3 or any reimbursement or indemnity obligations under
Section 5.11(c), Section 11.3 or the Limited Guaranty, Sellers agrees that the
maximum aggregate liability of Buyer shall be limited to an amount equal to the
amount of the Termination Fee plus any reimbursement or indemnity obligations
under Section 5.11(c), Section 11.3 and the Limited Guaranty, and in no event
shall Sellers (directly or through the Seller Representative) seek to recover
any money damages in excess of such amount. In no event shall Sellers (directly
or through the Seller Representative) seek equitable relief or to recover
monetary damages from any Buyer Related Party in connection with the
transactions contemplated by this Agreement other than (i) Buyer pursuant to
(and subject to the conditions of) this Agreement and (ii) monetary damages from
Guarantors pursuant to (and subject to the conditions of) the Limited Guaranty.
(c)    The parties acknowledge that the agreements contained in this Section are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the parties would not enter into this Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.1    Survival. The representations and warranties of the parties
contained in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall survive the Closing until the
date that is eighteen (18) months following the Closing Date (the “Survival
Period”); provided that the representations and warranties in Section 3.17
(other than Section 3.17(i), (k) and (l)) shall survive for the applicable
statute of limitations plus sixty (60) days and the representations and
warranties in Section 3.17(i), (k) and (l) shall survive until the earlier of
(x) the date that is three (3) years following the Closing Date and (y) the
Early Termination Date; provided further, that the representations and
warranties in Sections 2.1 (Authority), 2.2 (Ownership of Securities), 2.3
(Corporate Status), 2.6 (Finders’ Fees); 3.1 (Corporate Status), 3.4

73

--------------------------------------------------------------------------------

(Capitalization), and 3.31 (Finders’ Fees) (collectively, the “Seller
Fundamental Representations”) shall survive the Closing indefinitely or until
the latest date permitted by Law. Unless a specified period is set forth in this
Agreement (in which event such specified period will control), covenants and
agreements of the parties contained in this Agreement that by their terms are
required to be satisfied or complied with prior to the Closing shall for
purposes of this Article IX survive the Closing until the eighteen (18) month
anniversary of the Closing Date. The covenants and agreements of the parties
contained in this Agreement that by their terms are required to be satisfied or
complied with after the Closing shall survive the Closing in accordance with
their respective terms. Notwithstanding the preceding sentences, any
representation, warranty, covenant or agreement in respect of which indemnity
may be sought under this Agreement for Losses arising as a result of an
inaccuracy or breach thereof shall survive the time at which it would otherwise
terminate pursuant to the preceding sentences with respect to any particular
claim for indemnification thereunder, if written notice of the inaccuracy or
breach thereof giving rise to such claim for indemnification shall have been
given to the party against whom such indemnity may be sought prior to such time
in accordance with the procedures set forth in this Article IX.
Section 9.2    Indemnification by Sellers.
(d)    Subject to Section 9.2(b), Sellers shall, severally and not jointly,
defend, indemnify and hold harmless each of Buyer, its Affiliates, and, after
the Closing, the Transferred Companies, and their respective officers,
directors, employees, agents, advisers, successors and permitted assigns and
representatives (collectively, the “Buyer Indemnitees”) from and against, and
pay or reimburse the Buyer Indemnitees for, any and all losses, liabilities,
damages, costs, out-of-pocket expenses (including reasonable expenses of
investigation, enforcement and collection and reasonable attorneys’ and
accountants’ fees and expenses in connection with any Litigation), whether or
not involving a third-party claim, interest, penalties and regulatory fines,
settlements and consents to judgment, and judicial awards and judgments,
(collectively, “Losses”), resulting from or arising out of (i) any inaccuracy in
or breach of any representation or warranty made by any Seller in Article II
hereof, (ii) any inaccuracy in or breach of any representation or warranty made
by the Sellers (or by Tiptree with respect to PHAC) in Article III hereof, (iii)
any breach of any covenant or agreement, nonfulfillment or default in the
performance of any of the covenants and agreements of such Seller under this
Agreement, (iv) any Controlled Group Liability, or (v) any Leakage Amount to the
extent such Leakage Amount was not deducted from the consideration paid by Buyer
in accordance with Section 1.4.
(e)    Any amounts required to be paid by any Seller pursuant to this Article IX
shall be satisfied in the following manner: (A) with respect to the satisfaction
of indemnification obligations arising pursuant to Section 9.2(a)(i), the
obligation shall be considered the sole obligation of the individual Seller that
breached the applicable representation and warranty in Article II, or if
multiple Sellers so breached, the several but not joint obligation of all such
Sellers, apportioned based on their relative Allocated Portions, (B) with
respect to the satisfaction of indemnification obligations arising pursuant to
Section 9.2(a)(ii) and Section 9.2(a)(iii), the obligations of Sellers shall be
considered several and

74

--------------------------------------------------------------------------------

not joint, apportioned among all Sellers based on their relative Allocated
Portions; provided that, as among the Sellers, non-breaching Sellers may seek
recovery from breaching Sellers (but not the Seller Representative, in its
capacity as such) for Losses incurred pursuant to this Article IX.

Section 9.3    Indemnification by Buyer. Buyer shall defend, indemnify and hold
harmless Sellers and Sellers’ respective officers, directors, employees, agents,
advisers, successors and permitted assigns and representatives (collectively,
the “Seller Indemnitees”) from and against, any and all Losses resulting from or
arising out of (a) any inaccuracy in or breach of any representation or warranty
made by Buyer in Article IV hereof or in any certificate or instrument delivered
pursuant hereto or (b) any breach of any covenant or agreement, nonfulfillment
or default in the performance of any of the covenants and agreements of the
Buyer under this Agreement.
Section 9.4    Certain Limitations.
(d)    After the Closing, except with respect to inaccuracies in or breaches of
the Seller Fundamental Representations and without limiting the provisions of
Section 6.1(a), Sellers shall not be required to indemnify Buyer Indemnitees (i)
for Losses under Section 9.2(a)(i) and Section 9.2(a)(ii) until the aggregate
amount of all such Losses exceeds $1,500,000 (the “Deductible”), in which event
Sellers shall be responsible only for Losses in excess of the Deductible, or
(ii) for Losses under Section 9.2(a)(i) and Section 9.2(a)(ii) in the aggregate
in excess of an amount equal to 12.9% of the Closing Cash Consideration (the
“Cap”) or (iii) with respect to any individual Seller, for Losses in excess of
such Seller’s aggregate proceeds from the transactions contemplated hereby
(which, in the case of the Company Sellers, shall include the proceeds paid to
the IRAs).
(e)    After the Closing, except with respect to inaccuracies in or breaches of
the representations and warranties contained in Sections 4.1 (Corporate Status),
4.2 (Corporate and Governmental Authorization) and 4.8 (Finders’ Fees) (the
“Buyer Fundamental Representations”), Buyer shall not be required to indemnify
Seller Indemnitees (i) for Losses under Section 9.3(a) until the aggregate
amount of all such Losses exceeds the Deductible, in which event Buyer shall be
responsible only for Losses in excess of such Deductible, or (ii) for Losses in
excess of the Cap.
(f)    For purposes of this Article IX, with respect to any inaccuracy or breach
of any representation or warranty, any express qualifications or limitations set
forth in such representation or warranty as to “materiality”, “Material Adverse
Effect” and similar materiality qualifications contained therein shall be
disregarded solely for purposes of

75

--------------------------------------------------------------------------------

determining the amount of Losses of the applicable Indemnified Party’s in
respect of such breach or inaccuracy, but not for purposes of establishing
whether the representation or warranty as made by the applicable party or
parties to this Agreement was actually inaccurate or breached.
(g)    Notwithstanding anything herein to the contrary, no Indemnified Party
shall be entitled to indemnification or reimbursement under any provision of
this Agreement for any amount to the extent such Person or its Affiliates has
been indemnified or reimbursed for such amount under any other provision of this
Agreement.
(h)    The rights and remedies of any party in respect of any inaccuracy or
breach of any representation, warranty, covenant or agreement shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
or circumstances upon which any claim of any such inaccuracy or breach is based
may also be the subject matter of any other representation, warranty, covenant
or agreement as to which there is no inaccuracy or breach.
(i)    Except as provided in Section 11.10, the indemnities provided for in
Article VI and this Article IX shall be the sole and exclusive remedy of Buyer
Indemnitees or Seller Indemnitees, as the case may be, after the Closing for any
inaccuracy of any representation or warranty of Sellers or Buyer, respectively,
herein or any other breach of this Agreement; provided that nothing herein shall
limit in any way any such party’s remedies in respect of fraud or willful breach
(as defined in Section 8.2) by the other party in connection with the
transactions contemplated hereby.
(j)    No party to this Agreement (or any of its Affiliates) shall, in any
event, be liable or otherwise responsible to any other party (or any of its
Affiliates) for any punitive damages, lost profits, diminution of value or
consequential, special or indirect damages of such other party (or any of its
Affiliates) arising out of or relating to this Agreement or the performance or
breach hereof, other than any such damages arising in connection with a Third
Party Claim; provided that, notwithstanding the foregoing, Sellers shall be
liable hereunder for lost profits and consequential damages to the extent they
are (i) not based on any special circumstances of the Indemnified Party not
actually known to the Sellers, (ii) the natural, probable and reasonably
foreseeable result of the event that gave rise thereto or the matter for which
indemnification is sought hereunder and (iii) resulting from breaches or
inaccuracies of the representations and warranties in Section 3.17(i), (k) and
(l)).
(k)    In no event will any Seller or any of their respective Affiliates have
any liability hereunder in respect of the Losses of any Person to the extent
such Losses result from or arise out of the Buyer Restructuring and would not
have been incurred by any Person but for the Buyer Restructuring. For the
avoidance of doubt, subject to the foregoing sentence, the consummation of the
Buyer Restructuring shall not limit the Buyer

76

--------------------------------------------------------------------------------

Indemnitees’ right to indemnification under Section 9.2, and the Buyer
Indemnitees shall be entitled to indemnification of their Losses to the same
extent that such indemnification would have been available had the Buyer
Restructuring not occurred.
(l)    Notwithstanding anything to the contrary in this Agreement, none of the
limitations in this Section 9.4 shall apply in the event of any fraud or willful
breach on the part of any of the parties.
(m)    The rights of Buyer to indemnification or any other remedy under this
Agreement shall not be impacted or limited by any knowledge that Buyer may have
acquired, or could have acquired, whether before or after the Closing Date, nor
by any investigation or diligence by Buyer. Sellers hereby acknowledge that,
regardless of any investigation made (or not made) by or on behalf of Buyer, and
regardless of the results of any such investigation, Buyer has entered into this
transaction in express reliance upon the representations and warranties of
Sellers made in this Agreement.

Section 9.5    Payment Adjustments.
(f)    Any indemnity payment made by Sellers to Buyer Indemnitees, on the one
hand, or by Buyer to Seller Indemnities, on the other hand, pursuant to this
Article IX in respect of any Loss shall be net of an amount equal to (x) any
insurance proceeds actually received by the Indemnified Party in respect of such
claim minus (y) any related costs and expenses, including the aggregate cost of
pursuing any related insurance claims plus any related increases in insurance
premiums or other chargebacks. If an Indemnified Party receives any amounts
under applicable insurance policies, or from any other Person 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, net of any expenses incurred by such
Indemnified Party in collecting such amount.
(g)    Any Loss suffered or incurred by the Buyer Indemnitees or the Seller
Indemnitees for which an indemnification claim is made under this Agreement
shall be (i) net of, and reduced by the amount of any reduction in Taxes
actually realized by the indemnified party during the period ending two (2)
years following the end of the Tax year in which such Loss was incurred
(determined on a “with and without” basis) (“Tax Benefit”) and (ii) shall be
increased by any increase in Taxes actually realized by the indemnified party
during the period ending two (2) years following the end of the Tax year in
which such Loss was incurred (determined on a “with and without” basis) as a
result of its entitlement to indemnification (“Tax Detriment”); provided, for
the avoidance of doubt, that a Tax

77

--------------------------------------------------------------------------------

Detriment shall not include any increase in Taxes arising out of an
indemnification payment treated as an adjustment to the Purchase Price as
provided under Section 9.5(c). If the indemnified party receives a Tax Benefit
or Tax Detriment after it has already received an indemnification payment on
account of its claim, then the indemnifying party or indemnified party, as
applicable, shall promptly thereafter make a corrective payment.
(h)    Any indemnification payments made pursuant to this Agreement shall be
treated for tax purposes as an adjustment to the Purchase Price.
Section 9.6    Third Party Claim Procedures. In the case of any Litigation
asserted by a third party (a “Third Party Claim”) against a party entitled to
indemnification under this Agreement (an “Indemnified Party”), notice shall be
given by the Indemnified Party to the party required to provide indemnification
(the “Indemnifying Party”) promptly after such Indemnified Party has written
notice of such Third Party Claim, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of such Third Party Claim; provided that (a) counsel for the
Indemnifying Party who shall conduct the defense of such Third Party Claim shall
be reasonably satisfactory to the Indemnified Party, and the Indemnified Party
may participate in such defense at such Indemnified Party’s expense, and (b) the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its indemnification obligation under this
Agreement except to the such Indemnifying Party is materially prejudiced as a
result of such failure to give notice. If the Indemnifying Party does not
promptly assume the defense of such Third Party Claim following notice thereof,
the Indemnified Party shall be entitled to assume and control such defense
without prejudice to the ability of the Indemnified Party to enforce its claim
for indemnification against the Indemnifying Party hereunder. Except with the
prior written consent of the Indemnified Party, no Indemnifying Party, in the
defense of any such Third Party Claim, shall consent to entry of any judgment or
enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of an irrevocable release from all liability with respect to
such Third Party Claim. If the Indemnified Party and the Indemnifying Party have
conflicting (or substantially divergent) interests in respect of the matter at
issue, or (ii) the Indemnified Party shall have the right to take over and
control the defense, settlement, negotiation or Litigation relating to any such
Third Party Claim, and the Indemnifying Party shall pay the reasonable fees and
expenses of the Indemnified Party’s counsel in respect thereof; provided that if
the Indemnified Party does so take over and control, the Indemnified Party shall
not settle such Third Party Claim without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld, conditioned or
delayed. In any event, Sellers, and Buyer shall cooperate in the defense of any
Third Party Claim subject to this Article IX and the records of each shall be
reasonably available to the other with respect to such defense. This Section 9.6
shall not apply to Third Party Claims in respect of Taxes, which shall be
governed by Section 6.5.

78

--------------------------------------------------------------------------------

Section 9.7    Other Claims. A claim for indemnification to the extent not
resulting from a Third Party Claim may be asserted by written notice to the
party from whom indemnification is sought and, unless disputed by the
Indemnifying Party by delivery of a written dispute notice to the party seeking
indemnification within sixty (60) days after receipt by the Indemnifying Party
of such claim for indemnification, shall be deemed agreed by all parties, final
and undisputed and shall be paid by any such Indemnifying Party promptly, but in
no even more than thirty (30) days after receipt of such undisputed claim for
indemnification.
Section 9.8    Duty to Mitigate. Nothing herein shall relieve an Indemnified
Party of its common-law duty to mitigate Losses.
Section 9.9    Escrow Account.
(h)    From the Closing Date until the date that is the later to occur of (i)
the date that is the earlier of (x) three (3) years following the Closing Date
and (y) the Early Termination Date and (ii) the date on which any and all claims
by the Buyer Indemnitees for indemnification under this Article IX have been
fully and finally resolved, if Tiptree proposes at any time to declare or pay a
dividend, make a distribution or otherwise undertake any action that would
reasonably be expected to result in the consolidated stockholders’ equity of
Tiptree (determined in accordance with GAAP) being less than $200 million, then,
prior to authorizing or taking any such action, Tiptree and Buyer will enter
into an escrow agreement with an escrow agent reasonably acceptable to Tiptree
and Buyer, which agreement shall be on terms reasonably acceptable to Tiptree
and Buyer. The escrow agreement shall provide that (i) if the escrow agreement
is executed prior to the date that is the earlier of (x) three (3) years
following the Closing Date and (y) the Early Termination Date, then upon
execution of the escrow agreement, Tiptree will deposit into an escrow account
with such escrow agent an amount of cash equal to the Cap, less any amounts
actually paid by Tiptree prior to the execution date in respect of
indemnification obligations pursuant to Sections 9.2(a)(i) or (ii) hereof; (ii)
if the escrow agreement is executed on or after the date that is the earlier of
(x) three (3) years following the Closing Date and (y) the Early Termination
Date, then upon execution of the escrow agreement, Tiptree will deposit into an
escrow account with such escrow agent an amount of cash equal to the aggregate
amount claimed by the Buyer Indemnitees pursuant to pending claims for
indemnification as of the execution date; (iii) the escrowed funds shall not be
released (except to satisfy indemnification obligations owed to the Buyer
Indemnitees under this Agreement or as contemplated by Section 9.9(b)) until any
and all claims by the Buyer Indemnitees for indemnification under this Article
IX have been fully and finally resolved, provided that, upon the date that is
the earlier of (i) three (3) years following the Closing Date and (ii) the Early
Termination Date, the balance of the escrowed funds shall be reduced to equal
the aggregate amount claimed by the Buyer Indemnitees pursuant to pending claims
for indemnification as of such date; and (iv) the escrow account, while in
existence, will be the first source of recovery by the Buyer Indemnitees of any
amounts subject to indemnification pursuant to Section 9.2(a)(i) or (ii) hereof
and payable by Tiptree.
(i)    Tiptree’s obligations under Section 9.9(a) shall immediately terminate
and become null and void, and any escrow agreement entered into pursuant thereto
shall terminate and

79

--------------------------------------------------------------------------------

all amounts held in escrow pursuant to such escrow agreement shall be returned
and released to Tiptree promptly upon the consummation of the transactions
contemplated by that certain Agreement and Plan of Merger, dated as of August
11, 2014, by and among Tiptree, Caroline Holdings LLC and Fortegra Financial
Corporation.
ARTICLE X
DEFINITIONS
Section 10.1    Certain Terms.
(f)    The following terms have the respective meanings given to them below:
“2014 Excess Cash” means the amount, if any, by which PFASC’s consolidated cash
and cash equivalents as of December 31, 2014 exceeds the RGA Reserved Amounts,
as derived from the PFASC 2014 Financial Statements and calculated in accordance
with the Accounting Principles, in a form consistent with, and subject to the
adjustments set forth in, the sample Closing Statement attached as Annex A;
provided that in the event of any inconsistency between the application of GAAP
in the preparation of the PFASC 2014 Financial Statements and the Accounting
Principles, the Accounting Principles shall apply.
“2014 Net Working Capital” means the amount of Current Assets less the amount of
Current Liabilities, in each case as of the close of business on December 31,
2014.
“Accounting Principles” means GAAP consistently applied using the same
accounting methods, historical policies, practices, principles and procedures,
with consistent classifications, judgments and estimation methodologies as were
used in the preparation of the PFASC Annual Financial Statements (in the case of
calculations of 2014 Excess Cash, 2014 Net Working Capital, Current Assets,
Current Liabilities and Excess Indebtedness) or the Annual Consolidated
Financial Statements at and for the period ended on the Reference Date (in the
case of the calculation of Leakage Amounts), in each case subject to the
principles, practices and methodologies set forth on Annex C.
“Acquisition Proposal” means, other than the transactions contemplated by this
Agreement, any Third Party offer, proposal or inquiry relating to, or any Third
Party indication of interest in, any acquisition or purchase, direct or
indirect, whether by way of asset purchase, stock purchase, merger,
consolidation, share exchange, business combination or otherwise, of 20% or more
of the assets or equity of the Transferred Companies.
“Additional Consideration” means the amount equal to the sum (whether positive
or negative) of (i) the product of 0.9 multiplied by the amount (if any) of the
2014 Excess Cash, plus (ii) the WC Adjustment Amount (if positive), minus (iii)
the absolute value of the amount of WC Adjustment Amount (if negative).

80

--------------------------------------------------------------------------------

“Affiliate” means, with respect to any Person, at the time in question, any
other Person controlling, controlled by or under common control with such
Person. For the avoidance of doubt, unless otherwise specified herein, the
Transferred Companies shall be deemed “Affiliates” of Sellers (and not Buyer)
prior to the Closing and shall be deemed “Affiliates” of Buyer (and not Sellers)
from and after the Closing; it being understood that, for purposes of this
definition, no Seller shall be deemed to be an Affiliate of Buyer.
“Affiliate Transaction” means any Contract with any Transferred Company (on one
hand) and any Seller or Affiliate of Seller (other than a Transferred Company)
or any officer, employee, consultant, director, stockholder of any Transferred
Company, any Seller or an Affiliate of any Seller, on the other hand.
“Books and Records” means all books, accounts, ledgers and records (including
documents, data, computer generated, recorded or stored records) relating to the
business of the Transferred Companies, including customer lists, contract forms,
applications, enrollment forms, policy information, policyholder information,
claim records, sales records, underwriting records, administrative, pricing,
underwriting, claims handling and reserving manuals, corporate and accounting
and other records (including the books of account and other records), statutory
filings of the Transferred Companies as required under applicable Law, Tax
records (including Tax Returns), disclosure and other documents and filings
required under applicable Law, financial records, and compliance records
relating to the business of the Transferred Companies, including any database,
magnetic or optical media and any other form of recorded, computer generated or
stored information or process relating to the operations of the Transferred
Companies.
“Business” means the business and operations of the Transferred Companies as
conducted as of the date hereof and at any time between the date hereof and the
Closing.
“Business Day” means any day, other than a Saturday or a Sunday, on which
commercial banks in New York, New York, and Philadelphia, Pennsylvania are open
for normal banking business.
“Buyer Disclosure Letter” means the letter, dated as of the date hereof,
delivered by Buyer to the Seller Representative prior to the execution of this
Agreement and identified as the Buyer Disclosure Letter.
“Buyer Party” means Buyer or any Affiliate of Buyer that is a party to any
Transaction Agreement.
“Buyer Related Parties” means (i) Buyer, Guarantors and the Financing Sources,
(ii) the former, current and future holders of any equity, partnership or
limited liability company interest, controlling persons, directors, officers,
employees, agents, attorneys, Affiliates, members, managers, general or limited
partners, stockholders or assignees of any of Buyer,

81

--------------------------------------------------------------------------------

Guarantors or the Financing Sources or (iii) any future holders of any equity,
partnership or limited liability company interest, controlling persons,
directors, officers, employees, agents, attorneys, Affiliates, members,
managers, general or limited partners, stockholders, assignees of any of the
foregoing.
“Buyer Restructuring” means those actions set forth in Section 1.9 or any other
corporate, capital, debt or other restructuring of the Transferred Companies
implemented by Buyer and its Affiliates following the Closing.
“Change of Control of Buyer” means (a) any transaction after which any “person”
as such term is used in Section 3(a)(9) of the Exchange Act other than an
Affiliate of The Blackstone Group L.P. (a “Non-Affiliate”), a Delaware limited
partnership, becomes the “beneficial owner” as defined in Rule 13d-3 or Rule
16a-1(a)(2) promulgated under the Exchange Act), directly or indirectly, of
securities of Buyer or its successor representing 50% or more of (1) the
outstanding shares of common stock of Buyer or its successor or (2) the combined
voting power of Buyer’s or its successor’s then outstanding securities; (b) the
sale or disposition of all or substantially all of Buyer’s or its successor’s
assets to a Non-Affiliate (or consummation of any transaction having similar
effect); or (c) the dissolution or liquidation of Buyer or its successor.
“Closing Cash Consideration” means $155,000,000.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Benefit Plans” means each employee benefit plan, scheme, program,
policy, practice, arrangement or contract providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other material employee benefits or
remuneration of any kind including, but not limited to, any “employee benefit
plan,” as defined in Section 3(3) of ERISA, whether or not subject to ERISA, any
bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option or other equity-based arrangement, and any employment, consulting,
termination, retention, change in control or severance plan, program, policy,
arrangement or contract, whether written, unwritten or otherwise, funded or
unfunded, for the benefit of any Employee or any dependent or beneficiary
thereof, or with respect to which any of the Transferred Companies has or may
have any liability or obligation.
“Confidentiality Agreement” means the Nondisclosure Agreement, dated July 15,
2014, by and between Philadelphia Financial Group, Inc. and its Affiliates and
Blackstone Tactical Opportunities Advisors, L.L.C.
“Contract” means any contract, agreement, understanding, indenture, note, bond,
loan, instrument, lease, conditional sale contract, purchase or sales order,
mortgage, license or other enforceable arrangement or agreement, whether in
writing or oral.

82

--------------------------------------------------------------------------------

“Controlled Group Liability” means any and all liabilities of the Transferred
Companies by reason of their affiliation with any member of its Controlled Group
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Section 414(b), (c), (m) or (o) of the Code)
(i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under
Sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with
the continuation coverage requirements of Section 601 et seq. of ERISA and
Section 4980B of the Code, and (v) under corresponding or similar provisions of
foreign laws or regulations, other than such liabilities that arise solely out
of, or relate solely to, the Company Benefit Plans.
“Current Assets” means the aggregate amount of PFASC’s “Prepaid expenses” and
“Due from Hartford” accounts, in each case derived from the PFASC 2014 Financial
Statements and calculated in accordance with the Accounting Principles, in a
form consistent with, and subject to the adjustments set forth in, the sample
Closing Statement attached as Annex A; provided that in the event of any
inconsistency between the application of GAAP in the preparation of the PFASC
2014 Financial Statements and the Accounting Principles, the Accounting
Principles shall apply. For the avoidance of doubt, Current Assets shall exclude
all cash and cash equivalents, deferred Tax assets and income Tax assets.
“Current Liabilities” means the aggregate amount of PFSAC’s “Compensation
accruals”, “Other accrued expenses” and “Intercompany payable” accounts, in each
case derived from the PFASC 2014 Financial Statements and calculated in
accordance with the Accounting Principles, in a form consistent with, and
subject to the adjustments set forth in, the sample Closing Statement attached
as Annex A; provided that in the event of any inconsistency between the
application of GAAP in the preparation of the PFASC 2014 Financial Statements
and the Accounting Principles, the Accounting Principles shall apply. For the
avoidance of doubt, Current Liabilities shall exclude all amounts payable in
respect of Indebtedness (including in respect of RGA Indebtedness), Leakage
Amounts, deferred Tax liabilities and income Tax liabilities.
“Data Input Inaccuracies” means inaccuracies or omissions in (i) the inputting
of factual data, including data (and any omission of data) relating to the
inventory of Insurance Contracts in force, the terms of such Insurance
Contracts, the relevant information related to the annuitants or insureds of
such Insurance Contracts and transactions related thereto, CUSIP numbers,
interest rates, principal amounts, the terms of loan documents and
organizational documents, the terms of leases, lease abstracts and rent rolls or
(ii) the coding, compilation or aggregation of such factual data.
“Early Termination Date” means the date of the earlier of the following to
occur: (a) the transfer of the Insurance Contracts from the administration
system used by the Transferred Companies prior to Closing and (b) the
consummation of a Change of Control of Buyer.

83

--------------------------------------------------------------------------------

“Employee” means any current or former employee, independent contractor or
director of any of the Transferred Companies, including any such person who is
absent from employment due to illness, vacation, injury, military service,
long-term disability 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, as amended).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any corporation that is or was part of the same
controlled group of corporations with any Transferred Company within the meaning
of Section 414(b) of the Code, Section 4001 of ERISA, any trade or business
(whether or not incorporated) that is or was under common control with any
Transferred Company within the meaning of Section 414(c) of the Code, and any
other entity that is or was, together with any Transferred Company, a “single
employer” under Section 414(m) or (o) of the Code.
“Excess Indebtedness” means the amount, if any, by which the consolidated
Indebtedness of the Transferred Companies as of the close of business on
December 31, 2014, in each case derived from the PFASC 2014 Financial Statements
and calculated in accordance with the Accounting Principles, in a form
consistent with, and subject to the adjustments set forth in, the sample Closing
Statement attached as Annex A, exceeds $83,300,000; provided that in the event
of any inconsistency between the application of GAAP in the preparation of the
PFASC 2014 Financial Statements and the Accounting Principles, the Accounting
Principles shall apply.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
“Financing Sources” means the entities that have committed to provide or
otherwise entered into agreements in connection with the Debt Financing or other
financings (other than the Equity Financing) in connection with the transactions
contemplated hereby and their respective Affiliates, including the parties to
the Debt Financing Commitment and any joinder agreements or other agreements
relating thereto.
“FINRA” means the Financial Industry Regulatory Authority.
“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, any court, tribunal or arbitrator, and any
self-regulatory organization.

84

--------------------------------------------------------------------------------

“Hartford Acknowledgment” means the Hartford Acknowledgment executed by the
Hartford Companies in the form attached to the Agreement as Exhibit B.
“Hartford Companies” means Hartford Life Insurance Company, Hartford Life and
Annuity Insurance Company, Hartford Fire Insurance Company, Hartford Life
Private Placement LLC and Hartford Life, Inc.
“Hartford Transaction Agreements” means, collectively, (i) the Master
Transaction Agreement; (ii) the General Account COLI Administrative Services
Agreement, dated as of July 14, 2012, by and among Hartford Life Insurance
Company, Hartford Life and Annuity Insurance Company, Hartford Fire Insurance
Company and PFASC; (iii) the Separate Account Support Services Agreement, dated
as of July 14, 2012, by and between Hartford Life Insurance Company and PFASC;
(iv) Administrative Services Agreement, dated as of July 14, 2012, by and among
Hartford Life Insurance Company, Hartford Life and Annuity Insurance Company,
Hartford Fire Insurance Company and PFASC; (v) the Broker-Dealer Sales and
Services Agreement by and among Hartford Life Insurance Company, Hartford Life
and Annuity Insurance Company, Hartford Equity Sales Company, Inc. and
Philadelphia Financial Distribution Company, dated July 13, 2012; (vi) the
Transition Services Agreement by and between Hartford Life Insurance Company and
PFASC, dated as of July 13, 2012; (vii) the Patent License Agreement, by and
between Hartford Fire Insurance Company and PFASC, dated as of July 13, 2013;
(viii) the Software License Agreement, by and between Hartford Fire Insurance
Company and PFASC, dated as of July 13, 2012; (ix) the Consent Agreement, by and
among Hartford Life Insurance Company, Hartford Life and Annuity Insurance
Company, Hartford Fire Insurance Company, Hartford International Life
Reinsurance Corporation, PFASC and PFLAC, dated as of July 13, 2012; (x) the
Assignment and Assumption Agreement, dated as of July 13, 2012, by and among
Hartford Life Insurance Company, Hartford Life and Annuity Insurance Company,
Hartford Fire Insurance Company, Hartford Life Private Placement, LLC, Hartford
Life, Inc. and PFASC; (xi) the Cash Escrow Agreement, by and among Hartford Life
Insurance Company, Hartford Life and Annuity Insurance Company, PFASC and U.S.
Bank National Association, dated as of July 13, 2013; (xii) the Separate Account
Support Services Agreement by and between Hartford Life Insurance Company and
the Issuer effective as of July 14, 2012; and (xiii) any Contract entered into
by any Transferred Company pursuant to or in connection with any of the
foregoing, in each case including any schedules, exhibits or annexes thereto.
“Indebtedness” means, with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid (other than trade payables
incurred in the ordinary course of business consistent with past practices), (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to any property purchased by such Person, (e) all
obligations of such

85

--------------------------------------------------------------------------------

Person incurred or assumed as the deferred purchase price of property or
services (excluding obligations of such Person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of business
consistent with past practices), (f) all lease obligations of such Person
capitalized on the books and records of such Person, (g) all obligations of
others secured by a Lien on property or assets owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (h) all
obligations of such Person under interest rate, currency or commodity
derivatives or hedging transactions, (i) all letters of credit or performance
bonds issued for the account of such Person (excluding (i) letters of credit
issued for the benefit of suppliers to support accounts payable to suppliers
incurred in the ordinary course of business consistent with past practices, (ii)
standby letters of credit relating to workers’ compensation insurance and (iii)
surety bonds and customs bonds), (j) all guaranties and arrangements having the
economic effect of a guaranty by such Person of any Indebtedness of any other
Person and (k) all accrued interest, penalties, fees, premiums and other amounts
due on payment of the foregoing.
“Indebtedness/Leakage True-Up Amount” means an amount (whether positive or
negative) equal to (i) the amount (whether positive or negative) of (A) Excess
Indebtedness as finally determined pursuant to Section 1.4, minus (B) the
Estimated Excess Indebtedness, plus (ii) the amount (whether positive or
negative) of (A) the Leakage Amount as finally determined pursuant to Section
1.4, minus (B) the Estimated Leakage Amount.
“Independent Accountant” means Ernst & Young LLP, or, if such firm is not
willing or able to serve in such capacity, another nationally recognized
independent registered public accounting firm appointed by mutual agreement of
Buyer and the Seller Representative.
“Insurance Contract” means any all insurance Contracts, binders, slips,
certificates, endorsements, riders, treaties, policies, products or other
arrangements, other than Reinsurance Agreements, sold, issued or entered into by
any of the Insurance Subsidiaries in connection with the Business or
administered by PFASC pursuant to the Hartford Transaction Agreements, in each
case as such Contract, binder, slip, certificate, endorsement, rider, treaty,
policy, product or other arrangement may have been amended, modified or
supplemented.
“Insurance Regulator” means any insurance supervisory department or officials
having jurisdiction over any part of the operations, business, assets,
liabilities, products and services of any of the Insurance Subsidiaries or
PFASC.
“Insurance Reserves” means any reserves, funds or provisions for losses, claims,
premiums, expenses and other liabilities in respect of the Insurance Contracts
issued by the Insurance Subsidiaries.
“Intellectual Property” means (a) patents, patent applications and statutory
invention registrations, including reissues, divisions, continuations,
continuations in part, renewals,

86

--------------------------------------------------------------------------------

reissues, extensions and reexaminations of any of the foregoing, all patents
that may issue on such applications, and all rights therein provided by
applicable local Law, international treaties or conventions, (b) trademarks,
service marks, trade dress, logos, designs, emblems, slogans, signs or insignia,
Internet domain names, other similar designations of source, any and all common
law rights thereto, and registrations and applications for registration of any
of the foregoing (including intent-to-use applications), all rights therein
provided by applicable local Law, international treaties or conventions and all
reissues, extensions and renewals of any of the foregoing together with the
goodwill symbolized by or associated with any of the foregoing, (c)
copyrightable works and works of authorship (including Software (in any form
including source code and executable or object code) and subroutines),
copyrights, whether or not registered, moral rights, rights of attribution and
integrity and registrations and applications for registration of any of the
foregoing, and all rights therein provided by applicable local Law,
international treaties or conventions, (d) Trade Secrets, (e) data, databases
and datasets, (f) rights of privacy and publicity and (g) the right to sue for
past infringement of any of the foregoing.
“Intracompany Agreement” means any Contract between PFASC, on the one hand, and
any other Transferred Company, on the other hand.
“IRA Seller” means each Company Seller identified on Annex B as the sole owner
of an individual retirement account or arrangement subject to Section 408 of the
Code.
“IRS” means the Internal Revenue Service.
“Knowledge” means the knowledge, after reasonable inquiry, of (a) with respect
to Sellers, those persons listed in Section 9.1(a) of the Seller Disclosure
Letter; and (b) with respect to Buyer, those persons listed in Section 9.1(b) of
the Buyer Disclosure Letter.
“Leakage Amount” means the aggregate of (i) all amounts paid and liabilities
incurred, and all amounts and liabilities committed or authorized to be paid or
incurred, as the case may be, by any Transferred Company (which amount, in the
case of any non-cash dividend, payment or other distribution, shall be the fair
market value thereof, determined at the time of such dividend, payment or
distribution), (ii) all payments and liabilities cancelled or waived by any
Transferred Company, in the case of clauses (i) and (ii), from July 1, 2014
through immediately prior to the Closing on the Closing Date in connection with
any Leakage Transaction and (iii) the excess, if any, of the Transferred
Companies’ current income Tax liabilities over the Transferred Companies’
current income Tax assets as of the Closing Balance Sheet Date, calculated in
accordance with the Accounting Principles, provided, for the avoidance of doubt,
that the calculation pursuant to clause (iii) shall exclude all deferred Tax
assets and deferred Tax liabilities. For the avoidance of doubt, the Leakage
Amount shall not include Tax liabilities resulting from actions after the
Closing that are out of the ordinary course of business (including the Buyer
Restructuring).

87

--------------------------------------------------------------------------------

“Leakage Transaction” means any arrangement or transaction (other than
compensation paid to any Company Seller in connection with such Company Seller’s
employment by a Transferred Company, which compensation shall be no greater than
the level of compensation provided as of the date of this Agreement except with
Buyer’s prior written consent or as expressly permitted by Section 5.1, or any
other payments or obligations to any such Company Seller pursuant to any Company
Benefit Plan) pursuant to which (i) any Transferred Company pays any amount, or
incurs any liability, to or on behalf of any Seller or any Affiliate of any
Seller, (ii) makes, commits to make or authorizes the making of any payment to
any Seller or any Affiliate of any Seller or (iii) cancels or waives any
liability or payment obligation of any Seller or any Affiliate of any Seller
owed to any Transferred Company, including any of the actions described in
Section 5.1(a), 5.1(h)(ii) with respect to any Seller or any Affiliate of
Seller, 5.1(h)(iii)(x), 5.1(h)(iv) with respect to any Seller or any Affiliate
of Seller, 5.1(i)(i), 5.1(j) with respect to Affiliate Transactions, 5.1(n)
through 5.1(p) to the extent benefiting any Seller or any Affiliate of any
Seller, 5.1(cc), 5.1(dd), 5.1(ee) or 5.1(ff) with respect to any of the
foregoing.
“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, lease, encumbrance or other adverse claim of any kind
in respect of such property or asset. For purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any property or asset that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
“Litigation” means any action, cause of action, claim, cease and desist letter,
demand, suit, arbitration proceeding, citation, summons, subpoena or
investigation of any nature, civil, criminal, regulatory or otherwise, in law or
in equity.
“Malware” means any virus, Trojan horse, time bomb, key-lock, spyware, worm,
malicious code or other Software program designed to or able to, without the
knowledge and authorization of the Sellers or the Transferred Companies,
disrupt, disable, harm, interfere with the operations of or install itself
within or on any Software, computer data, network memory or hardware.
“Master Agreement” means that certain Master Transaction Agreement, dated as of
November 22, 2011, as amended by that certain First Amendment thereto, dated as
of July 13, 2012, by and among Hartford Life Insurance Company, Hartford Life
and Annuity Insurance Company and PFASC.
“Material Adverse Effect” means a material adverse effect on (a) the assets,
liabilities, business, operations, condition (financial or otherwise) or results
of operations of the Transferred Companies, taken as a whole, or on PFASC taken
individually or (b) the ability of any Seller Party to perform its obligations
under any of the Transaction Agreements or

88

--------------------------------------------------------------------------------

to consummate the transactions contemplated thereby, but excluding, in the case
of clause (a), any material adverse effect resulting after the date hereof from
(i) changes in general economic or market conditions in the United States or
worldwide, (ii) matters affecting the life insurance industry generally, (iii)
changes or prospective changes in GAAP, SAP or applicable Law, (iv) the identity
of, or facts relating to, Buyer or any of its Affiliates and the execution,
announcement or performance of this Agreement, (v) acts of war, sabotage or
terrorism, or any escalation or worsening of such acts, (vi) any earthquakes,
hurricanes, tornados, and other storms, floods or other natural disasters, or
any other force majeure event, (vii) any action taken, or the failure to take
any action, by the Sellers with Buyer’s written consent or at Buyer’s request,
or (viii) any failure to meet any internal or public projections, forecasts,
guidance, estimates, milestones, budgets, revenues, earnings, cash flow or cash
position (it being understood that the exception in this clause (viii) shall not
prevent or otherwise affect a determination that the underlying cause of any
such change or failure referred to therein (if not otherwise failing because of
any other exception in this definition) is a Material Adverse Effect); provided
that any such effect described in the preceding clauses (i), (ii), (iii), (v),
and (vi) may be taken into account in determining whether or not there has been
a Material Adverse Effect to the extent such effect disproportionately affects
the Transferred Companies relative to other Persons engaged in the industries in
which the Transferred Companies operate.
“Multiemployer Plan” means any “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA.
“Note Purchase Agreement” means the Senior Note Purchase Agreement, dated as of
July 13, 2012, among PFASC, RGA Worldwide Reinsurance Company, LTD., as
noteholder, RGA Reinsurance Company, as collateral agent, PFASC Holdings, LLC
(solely for the purposes specified therein) and the Company (solely for the
purposes specified therein).
“Organizational Documents” means the articles of incorporation, certificate of
incorporation, charter, bylaws, articles of formation, certificate of formation,
regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, organization or on-going business of a Person, including any
amendments thereto.
“PBGC” means the Pension Benefit Guaranty Corporation.
“Permitted Liens” means (a) statutory Liens for Taxes and other governmental
charges and assessments that are not yet due and payable or that are being
contested in good faith by appropriate proceedings and for which adequate
accruals or reserves have been established on the appropriate balance sheet in
accordance with GAAP, (b) statutory Liens

89

--------------------------------------------------------------------------------

of carriers, warehousemen, mechanics, materialmen and other similar Liens
arising in the ordinary course of business, (c) easements, rights of way, zoning
ordinances and other similar encumbrances of record affecting real property, and
(d) statutory Liens in favor of lessors arising in connection with any property
leased to the Transferred Companies, which Liens and other encumbrances
described in clauses (a) through (d) do not materially detract from the current
value or materially interfere with the current use by the Transferred Companies
of the assets, properties or rights affected thereby and would not reasonably be
expected to have or result in a Material Adverse Effect.
“Person” means a natural person, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
“Personal Data” means information that can be used to distinguish or trace an
individual’s identity either alone or when combined with other personal or
identifying information that is linked or linkable to a specific individual
collected by a Transferred Company that the Transferred Companies are required
to keep confidential under applicable Law.
“PFASC 2014 Financial Statements” means the audited financial statements of
PFASC at and for the period ended December 31, 2014, together with the report of
the Company’s independent auditor thereon, a true, complete and correct copy of
which shall be delivered to Buyer pursuant to Section 5.5.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing
Date; and, with respect to a Tax period that begins on or before the Closing
Date and ends thereafter, the portion of such Tax period ending on the Closing
Date.
“Post-Closing Tax Period” means any Tax period beginning after the Closing Date
and, with respect to a Tax period that begins on or before the Closing Date and
ends thereafter, the portion of such Tax period beginning after the Closing
Date.
“Producer” means any insurance agent, broker, broker-dealer, third party
administrator, intermediary or other Person that has marketed, sold or
administered any Insurance Contract written, sold or administered by any
Transferred Company.
“Purchase Price” means an amount equal to (i) the Closing Cash Consideration,
minus (ii) the Excess Indebtedness, minus (iii) the Leakage Amount, plus (iv)
the Additional Consideration (if positive), minus (v) the absolute value of the
Additional Consideration (if negative).
“Reinsurance Agreement” means any reinsurance or retrocessional treaty or
agreement to which any of the Insurance Subsidiaries is a party and (a) which is
in effect

90

--------------------------------------------------------------------------------

as of the date hereof, (b) is terminated or expired as of the date hereof but
under which an Insurance Subsidiary or any of its Affiliates may continue to
receive benefits or have obligations or (c) is an assumption reinsurance
agreement.
“Related Person” means, with respect to any Person, any trade or business,
whether or not incorporated, which, together with such Person, is treated as a
single employer under Section 414 of the Code.
“Restricted Shares” means the restricted shares of Common Stock granted pursuant
to the Restricted Stock Agreements and as to which the vesting restrictions
thereon have not lapsed immediately prior to the Closing.
“Restricted Stock Agreement” means the outstanding restricted stock award
agreements entered into between the Company and certain members of management
evidencing the acquisition of the Restricted Shares.
“RGA Indebtedness” means the Indebtedness outstanding under the Note Purchase
Agreement.
“RGA Liens” means all liens securing the RGA Indebtedness.
“RGA Pay-off Letter” means a pay-off letter, in a form reasonably satisfactory
to Buyer, among the parties to the Note Purchase Agreement indicating the amount
required for the payment in full of the RGA Indebtedness and the termination of,
or the defeasance of all of the covenants and other obligations of the
Transferred Companies under, the Note Purchase Agreement as of the Closing Date.
“RGA Reserved Amounts” means, as of any date of determination, an amount of cash
and cash equivalents equal to the sum of the amount that would be required to be
held in the Debt Servicing Coverage Account as of such date of determination
plus the amount that would be required to be held in the Working Capital Account
as of such date of determination, in each case pursuant to the Note Purchase
Agreement without giving effect to any amendments, modification or supplements
to the Note Purchase Agreement on or following the date hereof.
“SAP” means, with respect to any Insurance Subsidiary, the statutory accounting
practices prescribed or permitted by its domiciliary Insurance Regulator. For
the avoidance of doubt, the domiciliary Insurance Regulator with respect to
PFLIL and PFLAC BDA is the Bermuda Monetary Authority.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, as the same may be amended from time to
time.

91

--------------------------------------------------------------------------------

“Seller Disclosure Letter” means the letter, dated as of the date hereof,
delivered by the Seller Representative on behalf of Sellers to Buyer prior to
the execution of this Agreement and identified as the Seller Disclosure Letter.
“Seller Party” means, with respect to each Seller, such Seller and any Affiliate
of such Seller that is a party to any Transaction Agreement.
“Seller Related Parties” means (i) Sellers, the Seller Representative and the
Transferred Companies, (ii) the former, current and future holders of any
equity, partnership or limited liability company interest, controlling persons,
directors, officers, employees, agents, attorneys, Affiliates, members,
managers, general or limited partners, stockholders or assignees of any of
Sellers, the Seller Representative or the Transferred Companies or (iii) any
future holders of any equity, partnership or limited liability company interest,
controlling persons, directors, officers, employees, agents, attorneys,
Affiliates, members, managers, general or limited partners, stockholders,
assignees of any of the foregoing.
“Similar Law” means any state, local, non-US or other law, rule or regulation
that contains provisions that are similar to the fiduciary responsibility and/or
prohibited transaction provisions contained in Title I of ERISA or Section 4975
of the Code.
“Software” means all computer software, including but not limited to,
application software, system software and firmware, including all source code
and object code versions thereof and all executables and utilities, in any and
all forms and media, and all related documentation.
“Subsidiary” means, with respect to any Person, any entity of which securities
or other ownership interests (a) having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
or (b) representing at least 50% of such securities or ownership interests are
at the time directly or indirectly owned by such Person.
“Target Working Capital Amount” means $1,850,000.
“Tax” means (a) all taxes, charges, fees, duties, customs, tariffs, imposts,
payments in lieu, levies, penalties or other assessments or charges in the
nature of a tax or any other similar payment imposed by any Tax Authority,
whether payable by reason of contract, assumption, transferee liability,
operation of Law, agreement entered into with a Tax Authority, or otherwise,
including, but not limited to, income, license, recording, occupation,
environmental, customs duties, single business, margin, unemployment,
disability, mortgage, inventory, alternative or add-on minimum, profits,
receipts, excise, premium, property, sales, use, transfer, franchise, payroll,
withholding, social security, estimated or other taxes or any other similar
payment or similar items or fees, and (b) any interest, penalty, fine or
addition to any of the foregoing, whether disputed or not.

92

--------------------------------------------------------------------------------

“Tax Authority” means any Governmental Authority having primary jurisdiction
over the assessment, determination, collection or imposition of any Tax.
“Tax Return” means any federal, state, local or foreign tax report, return
(including information return), claim for refund, election, notice, estimated
tax filing, declaration, statement, report, schedule, form or information return
or any amendment to any of the foregoing relating to Taxes request, or other
statement or document (including any related or supporting information) supplied
to, required to be filed with, or required to be maintained by any Tax Authority
with respect to Taxes, including any return or filing made on a consolidated,
group, combined, unified or affiliated basis and any schedules or filings
related to uncertain tax positions, and any schedule, attachment or supplement
thereto, and any amendment thereof.
“Taxable Period” shall mean any taxable year or any other period that is treated
as a taxable year, with respect to which any Tax may be imposed under any
applicable statute, rule, or regulation.
“Third Party” means any Person as defined in this Agreement or in Section 13(d)
of the Exchange Act, other than the parties to this Agreement or any of their
Affiliates.
“Third Party Approval” means any consent, agreement, sublicense, approval,
authorization, notice or waiver of, to or by any third party (other than a
Governmental Authority).
“Trade Secrets” means trade secrets and all other proprietary confidential
information, including customer lists, forms and types of financial, business,
scientific, technical, economic, or engineering information, discoveries or
know-how, including algorithms, apparatuses, patterns, plans, compilations,
devices, formulae, inventions, designs, prototypes, methods, techniques,
processes, inventions, procedures, programs or codes.
“Transaction Agreements” means, collectively, this Agreement and any other
certificate, document, agreement or other instrument entered into pursuant to or
in connection with this Agreement.
“Transfer Taxes” means any real property transfer or gains, real property,
excise, sales, use, documentary, transfer, value added, stock transfer, and
stamp Taxes, any transfer, recording, registration, and other fees, and any
similar Taxes imposed on the transactions (or deemed transactions) contemplated
by, or related to, this Agreement and all transactions involving the ownership,
acquisition, or perfection of security interests (for the avoidance of doubt,
Transfer Taxes do not include any Taxes imposed, in whole or in part, on the
basis of net income by any Tax Authority or any withholding Taxes imposed on
Sellers or any other party to this Agreement).

93

--------------------------------------------------------------------------------

“Treasury Regulation” means the regulations prescribed under the Code.
“Warrant Holders” means each Seller that is a holder of Warrants.
“WC Adjustment Amount” means an amount (whether positive or negative) equal to
the product of 0.9 and (a) the 2014 Net Working Capital minus (b) the Target
Working Capital Amount.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as those terms are
defined in Part I of Subtitle E of Title IV of ERISA.
(g)    Each of the following terms is defined in the section of this Agreement
set forth opposite such term below:
Term
Section
Agreement
Preamble
Allocated Portion
Section 1.7
A.M. Best
Section 3.29
Annual Consolidated Financial Statements
Section 3.6(a)
Audit
Section 3.17(c)
Buyer
Preamble
Buyer Confidential Information
Section 5.4(b)
Buyer Fundamental Representations
Section 9.4(a)
Buyer Indemnitees
Section 9.2
Cap
Section 9.4(a)
Closing
Section 1.2
Closing Balance Sheet Date
Section 1.4(a)
Closing Date
Section 1.2
Closing Statement
Section 1.4(b)
Common Stock
Recitals
Company
Recitals
Company Seller
Preamble
Company Securities
Section 3.4(b)
Consolidated Financial Statements
Section 3.6(a)
Debt Financing
Section 4.4
Debt Financing Commitment
Section 4.4
Deductible
Section 9.4(a)
Disputed Item
Section 1.4(c)
Dispute Notice
Section 1.4(c)

94

--------------------------------------------------------------------------------

Term
Section
End Date
Section 8.1(b)(i)
Enforceability Exceptions
Section 2.1
Equity Financing
Section 4.4
Equity Financing Commitment
Section 4.4
Estimated Consideration
Section 1.2(b)
Estimated Excess Indebtedness
Section 1.4(a)
Estimated Leakage Amount
Section 1.4(a)
Fee Letter
Section 4.4
Financing Commitments
Section 4.4
Financing
Section 4.4
GAAP
Section 3.6(a)
Governmental Approval
Section 2.4
Guarantors
Recitals
Indemnified Party
Section 9.6
Indemnifying Party
Section 9.6
Insurance Subsidiaries
Recitals
Interim Consolidated Financial Statements
Section 3.6(a)
Investment Policy
Section 3.5(b)
IP License
Section 3.11(b)
IRA
Recitals
IRA Instruction Letter
Recitals
Laws
Section 3.13 (a)
Leased Real Property
Section 3.10(c)
Leases
Section 3.10(c)
Limited Guaranty
Recitals
Losses
Section 9.2
Material Contract
Section 3.9(b)
NJ WARN Act
Section 3.16(c)
Owned Intellectual Property
Section 3.11(a)
Permits
Section 3.14
PFASC
Recitals
PFASC Annual Financial Statements
Section 3.6(b)
PFASC Financial Statements
Section 3.6(b)
PFASC Holdings
Recitals
PFASC Interim Financial Statements
Section 3.6(b)
PFLAC
Recitals
PFLAC BDA
Recitals
PFLAC NY
Recitals

95

--------------------------------------------------------------------------------

Term
Section
PFLIL
Recitals
Pre-Closing Estimate
Section 1.4(a)
Public Software
Section 3.11(a)
Purchased Shares
Recitals
Preferred Stock
Recitals
Reference Date
Section 3.6(a)
Resolution Period
Section 1.4(d)
SEC
Section 3.28(c)
Seller Confidential Information
Section 5.4(d)
Seller Fundamental Representations
Section 9.1
Sellers
Preamble
Seller Indemnitees
Section 9.3
Seller Representative
Preamble
Separate Account
Section 3.30
Separate Account Investments
Section 3.5(b)
Shares
Recitals
Statutory Statements
Section 3.6(b)
Straddle Period
Section 6.2
Survival Period
Section 9.1
Tax Benefit
Section 9.5(b)
Tax Sharing Agreement
Section 3.17(k)
Termination Fee
Section 8.3(a)
Third Party Claim
Section 9.6
Third Party Consent
Section 5.7(c)
Tiptree
Preamble
Transaction Confidential Information
Section 5.4(b)
Transferred Broker Dealer
Recitals
Transferred Companies
Recitals
Transferred Subsidiaries
Recitals
Transferred Subsidiary Securities
Section 3.5(a)
Unresolved Items
Section 1.4(e)
Warrants
Recitals
WARN Act
Section 3.16(c)(vi)

Section 10.2    Construction. The words “hereof,” “herein” and “hereunder” and
words of like import used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The words “party”
or “parties” shall refer to parties to this Agreement. The captions herein are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof. References

96

--------------------------------------------------------------------------------

to Articles, Sections, Exhibits and Schedules are to Articles, Section, Exhibits
and Schedules of this Agreement unless otherwise specified. All Exhibits,
Schedules and Disclosure Letters annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized term used in any Exhibit, Schedule or Disclosure Letter
but not otherwise defined therein shall have the meaning given to such term in
this Agreement. Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation,” whether or not they are in fact
following by those words or words of like import. “Writing,” “written” and
comparable terms refer to printing, typing and other means of reproducing words
(including electronic media) in a visible form. References to any agreement or
contract are to that agreement or contract as amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof. References to
any Person include the successors and permitted assigns of that Person.
References from or through any date mean, unless otherwise specified, from and
including or through and including, respectively. Any reference to “days” means
calendar days unless Business Days are expressly specified. If any action under
this Agreement is required to be done or taken on a day that is not a Business
Day, then such action shall be required to be done or taken not on such day but
on the first succeeding Business Day thereafter. The Transaction Agreements are
to be construed without regard to any presumption or rule requiring construction
or interpretation against the party drafting or causing any instrument to be
drafted.
ARTICLE XI
MISCELLANEOUS

97

--------------------------------------------------------------------------------

Section 11.1    Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been duly given or made if (a)
delivered personally, (b) mailed by certified or registered mail with postage
prepaid, (c) sent by next-Business Day or overnight mail or delivery, or (d)
sent by facsimile or email with receipt confirmed (followed by delivery of an
original via next-Business Day or overnight mail or delivery), as follows (or at
such other address for a Party as shall be specified by like notice):
(i)
if to Buyer,

PFG Acquisition Corp.
c/o The Blackstone Group L.P.
345 Park Avenue
New York, NY 10154
Telephone: (212) 583-5407
Fax: (212) 583-5720
Attention: Menes Chee, President
Email: Menes.Chee@Blackstone.com
with a copy (which will not constitute notice) to:

Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Facsimile: (212) 909-6836
Telephone: (212) 909-6000
Attention: Nicholas F. Potter, Esq.
     Marilyn A. Lion, Esq.
E-mail: nfpotter@debevoise.com
     malion@debevoise.com
if to Sellers,

Tiptree Operating Company, LLC
780 Third Avenue
New York, New York 10017
Telephone: (212) 446-1400
Fax:    (212) 446-1409
Attention:    Geoffrey N. Kauffman, President and CEO
    Neil C. Rifkind, VP, General Counsel
Email:    gkauffman@tiptreefinancial.com
    nrifkind@tiptreefinancial.com

98

--------------------------------------------------------------------------------

with a copy (which will not constitute notice) to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telephone:    (212) 756-2000
Fax:        (212) 593-5955
Attention:    Michael R. Littenberg, Esq.
        Richard A. Presutti, Esq.
Email:        Michael.Littenberg@srz.com
        Richard.Presutti@srz.com
All such notices, requests, demands, waivers and other communications will be
deemed to have been received (i) if by personal delivery, on the day of such
delivery, (ii) if by certified or registered mail, on the fifth Business Day
after the mailing thereof, (iii) if by next-Business Day or overnight mail or
delivery, on the day delivered or (iv) if by fax or email prior to 5:00 p.m. at
the place of receipt, on the day on which such fax or email was sent; provided
that a copy is also sent by next-Business Day or overnight mail or delivery.
Section 11.2    Amendment; Waivers. No amendment, modification or discharge of
this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
none is exclusive of any other, or of any rights or remedies that any party may
otherwise have at law or in equity.
Section 11.3    Expenses. Except as otherwise provided herein, all costs, fees
and expenses incurred in connection with this Agreement, and the transactions
contemplated hereby (including all such expenses relating to the negotiation,
preparation and execution of the Transaction Agreements, or relating to the
consummation of the transactions contemplated thereby), whether or not
consummated, shall be paid by the party incurring such costs, fees or expenses;
provided, however, in the event this Agreement is terminated pursuant to Section
8.1, Buyer shall indemnify the Sellers for any and all Losses resulting from or
arising out of any action contemplated by Section 5.01(q)(ii) that is taken with
the consent of Buyer by the Company or any of its Subsidiaries after the date
hereof and prior to the date on which this Agreement is terminated, including
without limitation Losses arising out of or resulting from (i) the termination
of employment of any employee hired with the consent of Buyer pursuant to

99

--------------------------------------------------------------------------------

Section 5.01(q)(ii) and (ii) any action or failure to act by any employee hired
with the consent of Buyer pursuant to Section 5.01(q)(ii) prior to the date of
termination of this Agreement.
Section 11.4    Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OR RULES OF
CONFLICT OF LAWS THEREOF (EXCEPT WITH RESPECT TO NEW YORK GENERAL OBLIGATIONS
LAW SECTIONS 5-1401 AND 5-1402). Each of the parties hereby irrevocably submit
to the jurisdiction of the courts of the State of New York and the federal
courts of the United States of America located in the State, City and County of
New York solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby and thereby. Each of the
parties irrevocably agrees that all claims in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby and
thereby, or with respect to any such action or proceeding, shall be heard and
determined in such a New York State or federal court, and that such jurisdiction
of such courts with respect thereto shall be exclusive, except solely to the
extent that all such courts shall lawfully decline to exercise such
jurisdiction. Each of the parties hereby waives, and agrees not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof or of any such document or in respect of any such transaction, that it is
not subject to such jurisdiction. Each of the parties hereby waives, and agrees
not to assert, to the maximum extent permitted by law, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof or of
any such document or in respect of any such transaction, that such action, suit
or proceeding may not be brought or is not maintainable in such courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts. Each of the parties hereby
consents to and grants any such court jurisdiction over the person of such
parties and over the subject matter of any such dispute and agree that mailing
of process or other papers in connection with any such action or proceeding in
the manner provided in Section 11.1 or in such other manner as may be permitted
by law, shall be valid and sufficient service thereof.
Section 11.5    WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN OR RELATING TO THIS AGREEMENT AND ANY OF
THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES
THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF SUCH 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) IT UNDERSTANDS
AND HAS CONSIDERED THE

100

--------------------------------------------------------------------------------

IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY AND (D) IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVER AND CERTIFICATIONS IN THIS SECTION 11.5.
Section 11.6    Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns; provided that except as permitted below, this
Agreement shall not be assignable or otherwise transferable by any Seller, on
the one hand, without the prior written consent of Buyer, or by Buyer without
the prior written consent of the Seller Representative. Notwithstanding the
foregoing, without the consent of any Seller Party, Buyer may transfer or assign
(including by way of a pledge), in whole or from time to time in part, (a) to
one or more of its Affiliates, the right to purchase all or a portion of the
Purchased Shares, (b) if applicable, to an Affiliate of Buyer that purchases the
equity interests of the Transferred Subsidiaries (other than PFASC Holdings) as
contemplated by Section 1.9, or (c) to its lenders or other financing sources
any or all of its rights hereunder (including its rights to seek indemnification
hereunder) as collateral security; provided that, in the case of clauses (a),
(b) and (c), no such transfer or assignment will relieve Buyer of its
obligations hereunder. Upon any such permitted assignment, the references in
this Agreement to Buyer shall also apply to any such assignee unless the context
otherwise requires.
Section 11.7    Entire Agreement. This Agreement, the other Transaction
Agreement (when executed and delivered) and the Confidentiality Agreement
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
Section 11.8    Severability. If any provision, including any phrase, sentence,
clause, section or subsection, of this Agreement is determined by a court of
competent jurisdiction to be invalid, inoperative or unenforceable for any
reason, such circumstances shall not have the effect of rendering such provision
in question invalid, inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision herein contained invalid,
inoperative, or unenforceable to any extent whatsoever. Upon any such
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
Section 11.9    Counterparts; Effectiveness; Third Party Beneficiaries. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original and all of which shall together constitute one and the same
instrument. This Agreement shall become effective when each party shall have
received a counterpart hereof signed by all of the other parties. Until and
unless each party has received a counterpart hereof signed by the other party,
this Agreement shall have no effect and no party shall have any right or
obligation hereunder (whether by virtue of any other oral or written agreement
or other communication). Each party may deliver its signed counterpart of this
Agreement

101

--------------------------------------------------------------------------------

to the other parties by means of electronic mail or any other electronic medium
utilizing image scan technology, and such delivery will have the same legal
effect as hand delivery of an originally executed counterpart. Except as
provided under Article IX, no provision of this Agreement is intended to confer
any rights, benefits, remedies, obligations, or liabilities hereunder upon any
Person other than the parties and their respective successors and assigns.
Section 11.10    Specific Performance. The parties hereto agree that irreparable
damage for which monetary relief, even if available, would not be an adequate
remedy, would occur in the event any provision of this Agreement is not
performed in accordance with the specific terms hereof or is otherwise breached.
Accordingly, the parties acknowledge and agree that, prior to the valid
termination of this agreement in accordance with Section 8.1, but subject to
Section 8.3(b) and Section 8.3(c) and the following sentence of this Section
11.10, the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court specified in Section 11.4, in addition to any other remedy
to which they are entitled at law or in equity. Notwithstanding anything to the
contrary in this Agreement, however, the parties hereby acknowledge and agree
that Sellers shall be entitled to specific performance to cause Buyer to draw
down the full proceeds of the Equity Financing pursuant to the terms and
conditions of the Equity Financing Commitment and to cause Buyer to effect the
Closing in accordance with Section 1.2, in each case, only if (i) all conditions
in Section 7.1 and Section 7.2 have been satisfied (other than those conditions
that, by their nature, are to be satisfied at the Closing, but each of which is
at the time Sellers seek specific performance pursuant to this Section 11.10
capable of being satisfied as if such time were the Closing) or the failure of
which to be satisfied is attributable primarily to a breach by Buyer of its
representations, warranties, covenants or agreements contained in this
Agreement), (ii) the Debt Financing has been funded or will be funded at the
date the Closing is required to have occurred pursuant to Section 1.2 upon
delivery of a drawdown notice by Buyer and/or notice from Buyer that the Equity
Financing will be funded at such date, (iii) Buyer fails to complete the Closing
by the date the Closing is required to have occurred pursuant to Section 1.2,
(iv) the Seller Representative has confirmed in writing to Buyer that all
conditions set forth in Section 7.3 have been satisfied or that the Seller
Representative on behalf of Sellers would be willing to waive any unsatisfied
conditions in Section 7.3 for purposes of consummating the Closing and (v) such
specific performance would result in the consummation of the Closing in
accordance with this Agreement substantially contemporaneously with the
consummation of the Debt Financing and the Equity Financing. Each party hereto
agrees that it will not oppose the granting of an injunction, specific
performance and other equitable relief on the basis that (i) the other party has
an adequate remedy at law or (ii) an award of specific performance is not an
appropriate remedy for any reason at law or equity.

102

--------------------------------------------------------------------------------

[Remainder of page intentionally left blank.]

103

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
SELLER AND SELLER REPRESENTATIVE:
TIPTREE OPERATING COMPANY, LLC, in its capacity as a Seller and as the Seller
Representative hereunder

By        /s/ Geoffrey Kauffman    
    Name: Geoffrey Kauffman
    Title: President and Chief Executive Officer
COMPANY SELLERS:

        /s/ Peter Duryea    
    Name: Peter Duryea

        /s/ Joseph Fillip    
    Name: Joseph Fillip

        /s/ John Fischer    
    Name: John Fischer

        /s/ Ken Foley    
    Name: Ken Foley

        /s/ Antony Geyelin    
    Name: Anthony Geyelin

 
 
 

--------------------------------------------------------------------------------

        /s/ Diana Goodman    
    Name: Diana Goodman

        /s/ John Hillman    
    Name: John Hillman

        /s/ Jim Hom    
    Name: Jim Hom

        /s/ Joanne Illenberger    
    Name: Joanne Illenberger

        /s/ Karen Jones    
    Name: Karen Jones

        /s/ Kent Keim    
    Name: Kent Keim

        /s/ Ken Kilbane    
    Name: Ken Kilbane

        /s/ Andrew McKeon    
    Name: Andrew McKeon

        /s/ Todd Miller    

 
 
 

--------------------------------------------------------------------------------

    Name: Todd Miller

        /s/ Harley Misson    
    Name: Harley Misson

        /s/ Anthony Moretti    
    Name: Anthony Moretti

        /s/ Albert Morina    
    Name: Albert Morina

        /s/ Susan Oberlies    
    Name: Susan Oberlies

        /s/ Lorena Plaza    
    Name: Lorena Plaza

        /s/ John Reilly    
    Name: John Reilly

        /s/ Greg Rorer    
    Name: Greg Rorer

        /s/ Paul Sulek    
    Name: Paul Sulek

 
 
 

--------------------------------------------------------------------------------

BUYER:
PFG ACQUISITION CORP.

By        /s/ Menes Chee    
    Name: Menes Chee
    Title: President

 
 
 

--------------------------------------------------------------------------------

ANNEX C
ACCOUNTING PRINCIPLES
Capitalized terms used but not defined in this Annex C have the meanings given
to them in the Agreement to which this Annex C is attached.

Philadelphia Financial Group, Inc. and subsidiaries (the Company) prepare
consolidated financial statements in accordance with U.S. generally accepted
accounting principles.

In addition to being included in the Company’s consolidated financial
statements, Philadelphia Financial Administration Services Company, LLC (PFASC)
prepares separate company financial statements in accordance with U.S. generally
accepted accounting principles.

Annex A of the Stock Purchase Agreement includes certain calculations that
require non-GAAP measurements of net working capital.

2014 Net Working Capital consists of only the following current assets and
current liabilities:

Only Items Included in Current Assets
Prepaid expenses
Amounts due from Hartford
Intercompany Receivables

Only Items Included in Current Liabilities
Compensation accruals
Other accrued expenses
Intercompany payables

2014 Net Working Capital excludes any and all current assets and current
liabilities not listed above. For the avoidance of doubt, the following items
are excluded from 2014 Net Working Capital:

Excluded from Current Assets
Cash
Cash equivalents
Deferred Tax assets
Income Tax assets

Excluded from Current Liabilities
Note principal scheduled to be paid in the subsequent 12-month period
Interest on note payable
Deferred Tax liabilities
Income Tax liabilities
Leakage Amounts

 
 
 

--------------------------------------------------------------------------------

The 2014 Excess Cash calculation excludes the following items:
•
Working Capital Account Target Amount (as defined in the Note Purchase Agreement
without giving effect to any amendments, modification or supplement to the Note
Purchase Agreement on or following the date hereof)

•
Debt Service Coverage Account Target Amount (as defined in the Note Purchase
Agreement without giving effect to any amendments, modification or supplement to
the Note Purchase Agreement on or following the date hereof)

•
$13,420 that was funded by Hartford in July 2012 for deferred compensation
awards

The WC Adjustment Amount calculation utilizes the aforementioned 2014 Net
Working Capital calculation, which is a non-GAAP measurement.
The Additional Consideration calculation incorporates the aforementioned 2014
Excess Cash calculation, which is a non-GAAP measurement