Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

 

BY AND AMONG

 

ALLSTATE LIFE INSURANCE COMPANY,

 

RESOLUTION LIFE HOLDINGS, INC.

 

AND

 

RESOLUTION LIFE L.P.

 

(SOLELY FOR PURPOSES OF SECTION 5.25 AND ARTICLE X)

 

DATED AS OF JULY 17, 2013

 

 

 

 

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TABLE OF CONTENTS

 

 

 

Page

ARTICLE I.             DEFINITIONS

2

 

 

SECTION 1.1.

Definitions

2

 

 

 

ARTICLE II.           PURCHASE OF THE SHARES

14

 

 

SECTION 2.1.

Purchase and Sale of Shares

14

SECTION 2.2.

Closing

14

SECTION 2.3.

Closing Deliveries

14

SECTION 2.4.

Payment at Closing

15

SECTION 2.5.

Post-Closing Payments

15

SECTION 2.6.

Additional Post-Closing Payments

18

 

 

 

ARTICLE III.         REPRESENTATIONS AND WARRANTIES OF SELLER

18

 

 

SECTION 3.1.

Organization, Standing and Corporate Power

18

SECTION 3.2.

Capital Structure

19

SECTION 3.3.

Subsidiaries

19

SECTION 3.4.

Authority

20

SECTION 3.5.

Noncontravention; Consents

20

SECTION 3.6.

Financial Statements; Insurance Reserves; Internal Controls

20

SECTION 3.7.

No Undisclosed Liabilities

21

SECTION 3.8.

Absence of Certain Changes or Events

22

SECTION 3.9.

Employees and Benefit Plans

22

SECTION 3.10.

Taxes

23

SECTION 3.11.

Compliance with Applicable Laws

25

SECTION 3.12.

Litigation

26

SECTION 3.13.

Contracts

26

SECTION 3.14.

Insurance Matters

28

SECTION 3.15.

Tax Treatment of Insurance Contracts

29

SECTION 3.16.

Reinsurance Contracts

30

SECTION 3.17.

Actuarial Reports

31

SECTION 3.18.

Company Insurance Policies

32

SECTION 3.19.

Environmental Matters

32

SECTION 3.20.

Intellectual Property

32

SECTION 3.21.

Brokers

34

SECTION 3.22.

Real Property

34

SECTION 3.23.

Sufficiency of Assets

34

SECTION 3.24.

Book and Records

34

SECTION 3.25.

Transactions with Affiliates

34

SECTION 3.26.

Investment Assets

34

 

 

 

ARTICLE IV.         REPRESENTATIONS AND WARRANTIES OF BUYER

35

 

 

SECTION 4.1.

Organization, Standing and Corporate Power

35

SECTION 4.2.

Authority

35

SECTION 4.3.

Noncontravention; Consents

36

 

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SECTION 4.4.

Compliance with Applicable Laws

36

SECTION 4.5.

Purchase Not for Distribution

36

SECTION 4.6.

Litigation

36

SECTION 4.7.

Financial Ability

37

SECTION 4.8.

Solvency

39

SECTION 4.9.

Brokers

39

 

 

 

ARTICLE V.           COVENANTS

39

 

 

SECTION 5.1.

Conduct of Business of the Company

39

SECTION 5.2.

Access to Information; Books and Records; Confidentiality

42

SECTION 5.3.

Reasonable Best Efforts

43

SECTION 5.4.

Consents, Approvals and Filings

43

SECTION 5.5.

Public Announcements

47

SECTION 5.6.

Related Party Agreements

48

SECTION 5.7.

Use of Name; Domain Name Assignments

48

SECTION 5.8.

Further Assurances

49

SECTION 5.9.

Access to Books and Records

50

SECTION 5.10.

Non-Competition

50

SECTION 5.11.

Non-Solicitation

51

SECTION 5.12.

Employee Matters

52

SECTION 5.13.

Variable Annuity Transaction

52

SECTION 5.14.

Post-Closing Distribution

54

SECTION 5.15.

Specified Capital Charge

55

SECTION 5.16.

Organizational Documents

55

SECTION 5.17.

Transition Matters

56

SECTION 5.18.

Certain Business

56

SECTION 5.19.

Investment Assets

57

SECTION 5.20.

Resignations

57

SECTION 5.21.

Financial Information

57

SECTION 5.22.

Annuity Administration

57

SECTION 5.23.

Buyer Financing

57

SECTION 5.24.

Financing Cooperation

59

SECTION 5.25.

Subscription Rights

61

SECTION 5.26.

Certain Covenants

61

 

 

 

ARTICLE VI.         CONDITIONS PRECEDENT

61

 

 

SECTION 6.1.

Conditions to Each Party’s Obligations

61

SECTION 6.2.

Conditions to Obligations of Buyer

62

SECTION 6.3.

Conditions to Obligations of Seller

63

 

 

 

ARTICLE VII.       INDEMNIFICATION

64

 

 

SECTION 7.1.

Survival of Representations, Warranties and Covenants

64

SECTION 7.2.

Indemnification

64

SECTION 7.3.

Certain Limitations

65

SECTION 7.4.

Definitions

66

SECTION 7.5.

Procedures for Third Party Claims

67

SECTION 7.6.

Direct Claims

69

SECTION 7.7.

Sole Remedy

69

 

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SECTION 7.8.

Certain Other Matters

69

SECTION 7.9.

Product Tax Claims

70

 

 

 

ARTICLE VIII.     TAX MATTERS

72

 

 

SECTION 8.1.

Indemnification for Taxes

72

SECTION 8.2.

Filing of Tax Returns

73

SECTION 8.3.

Tax Refunds

74

SECTION 8.4.

Cooperation and Exchange of Information

74

SECTION 8.5.

Conveyance Taxes

74

SECTION 8.6.

Pre-Closing Tax Payment

74

SECTION 8.7.

Miscellaneous

75

 

 

 

ARTICLE IX.         TERMINATION PRIOR TO CLOSING

76

 

 

SECTION 9.1.

Termination of Agreement

76

SECTION 9.2.

Effect of Termination

77

 

 

 

ARTICLE X.           GENERAL PROVISIONS

77

 

 

SECTION 10.1.

Fees and Expenses

77

SECTION 10.2.

Notices

78

SECTION 10.3.

Interpretation

80

SECTION 10.4.

Entire Agreement; Third Party Beneficiaries

80

SECTION 10.5.

Governing Law

80

SECTION 10.6.

Assignment

80

SECTION 10.7.

Jurisdiction; Enforcement

81

SECTION 10.8.

Severability; Amendment; Modification; Waiver

82

SECTION 10.9.

Certain Limitations

82

SECTION 10.10.

Specific Performance

83

SECTION 10.11.

No Offset

84

SECTION 10.12.

Counterparts

84

 

 

EXHIBIT A – Form of Administrative Services Agreement

EXHIBIT B – Form of Agent Servicing Agreement

EXHIBIT C – Form of Amended and Restated Reinsurance Agreement

EXHIBIT D – Form of Intellectual Property License

EXHIBIT E – Form of Principal Underwriting Agreement

EXHIBIT F – Form of Recapture Agreement

EXHIBIT G – Form of Reinsurance Trust

EXHIBIT H – Form of Transition Services Agreement

EXHIBIT I – Commitment Letters

EXHIBIT J – Surplus Notes and Preferred Stock Term Sheet

 

ANNEX A – Accounting Principles

 

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STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT, dated as of July 17, 2013 (this “Agreement”), by and
among Allstate Life Insurance Company, an insurance company organized under the
laws of the State of Illinois (“Seller”), Resolution Life Holdings, Inc., a
corporation organized under the laws of the State of Delaware (“Buyer”) and,
solely for purposes of Section 5.25 and Article X, Resolution Life L.P., a
Bermuda limited partnership and the sole owner of Buyer (“Parent”).

 

WHEREAS, Seller owns 100% of the issued and outstanding shares of common stock,
par value $100.00 per share (the “Shares”), of Lincoln Benefit Life Company, an
insurance company organized under the laws of the State of Nebraska (the
“Company”);

 

WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, Seller desires to sell to Buyer, and Buyer desires to acquire from
Seller, all of the Shares;

 

WHEREAS, as of the date hereof, pursuant to the Existing Seller Reinsurance
Agreements and the Vermont Captive Reinsurance Agreement (each as defined
below), the Company reinsures to Seller and the Vermont Captive all of the
insurance and annuity business written by the Company that is not reinsured to
third party reinsurers;

 

WHEREAS, after the date hereof and prior to the Closing (as defined below),
Seller shall, and shall cause the Company to, enter into the Recapture Agreement
(as defined below) pursuant to which, upon the terms and subject to the
conditions set forth therein, (i) the Company will recapture from Seller (A) all
of the fixed deferred annuity, value adjusted deferred annuity and indexed
deferred annuity business written by the Company that is reinsured to Seller,
(B) all of the life insurance business written by the Company through
Independent Producers that is reinsured to Seller, other than the Specified Life
Business (each as defined below), and (C) all of the net Liability of Seller
with respect to the accident and health and long-term care insurance business
written by the Company that is reinsured to Seller ((A), (B) and (C)
collectively, the “Recaptured Business”);

 

WHEREAS, concurrently with the consummation of the Recapture, pursuant to the
Recapture Agreement, Seller will transfer to the Company the Investment Assets
listed in Section 1.1(a) of the Seller Disclosure Schedule (the Investment
Assets set forth on such list, which is dated as of June 30, 2013, as such list
may be revised between June 30, 2013 and the Closing Date as provided in Section
5.19 of the Seller Disclosure Schedule, the “Recaptured Investment Assets”);

 

WHEREAS, at or prior to the Closing, Seller shall, and shall cause the Company
to, enter into the other Restructuring Agreements (as defined below) pursuant to
which Seller will continue to reinsure and administer the Company’s insurance
and annuity businesses other than the Recaptured Business, the Vermont Captive
Business and any business reinsured to third party reinsurers (comprising all of
the immediate annuity business written by the Company, all life insurance
business written by the Company through Exclusive Producers (as defined below)
and the Specified Life Business);

 

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WHEREAS, prior to the execution and delivery of this Agreement, Buyer, Seller
and The Bank of New York Mellon (the “Escrow Agent”) have entered into an Escrow
Agreement, dated July 16, 2013 (the “Escrow Agreement”) pursuant to which Buyer
has deposited $60,000,000 into an account (the “Escrow Account”) maintained by
the Escrow Agent to support Buyer’s obligations under this Agreement; and

 

WHEREAS, Parent desires to provide Seller and its Affiliates the right to
subscribe for class A limited partnership interests or other equity interests of
Parent with an aggregate capital commitment of up to $100,000,000.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants
and agreements contained in this Agreement, the parties agree as follows:

 

ARTICLE I.
DEFINITIONS

 

SECTION 1.1.        Definitions.  For purposes of this Agreement, the following
terms have the respective meanings set forth below:

 

“Accounting Principles” means the principles, practices and methodologies set
forth on Annex A.

 

“Action” means any action, demand, suit, arbitration proceeding, citation,
summons, subpoena or investigation by or before any Governmental Entity, other
than any examination by a taxing authority, including a Tax audit.

 

“Adjusted Initial Amount” means an amount equal to: (A) the Base Price; (B) plus
(if positive) or minus the absolute value of (if negative) (i) the Estimated
Closing Statutory Value; minus (ii) the Reference Statutory Value; (C) plus (if
positive) or minus the absolute value of (if negative) the Estimated Recapture
Adjustment Amount.

 

“Administrative Services Agreement” means the administrative services agreement
substantially in the form attached as Exhibit A.

 

“Affiliate” of any Person means another Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with, such first Person, and the term “Affiliated” shall have a
correlative meaning.  For the purposes of this definition, “control,” when used
with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly through the ownership of voting
securities, by contract, or otherwise, and the terms “controlling” and
“controlled” have the meanings correlative to the foregoing.  For the avoidance
of doubt, unless otherwise specified herein, the Company shall be deemed an
“Affiliate” of Seller (and not Buyer) prior to the Closing, and shall be deemed
an “Affiliate” of Buyer (and not Seller) from and after the Closing.

 

“Agent Servicing Agreement” means the agent servicing agreement substantially in
the form attached as Exhibit B.

 

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 “Amended and Restated Reinsurance Agreement” means the amended and restated
reinsurance agreement substantially in the form attached as Exhibit C.

 

“Applicable Law” means any law, statute, ordinance, regulation, order,
injunction, judgment, decree, constitution or treaty enacted, promulgated,
issued, enforced or entered by any Governmental Entity applicable to any Person
or such Person’s businesses, properties, assets or rights, as may be amended
from time to time.

 

“Applicable Rate” means an interest rate equal to six-month LIBOR for dollars
that appears on page LIBOR 01 (or a successor page) of the Reuters Telerate
Screen as of 11:00 a.m., New York time, on the day that is two Business Days
preceding the date the Final Adjustment Statement is finalized pursuant to
Section 2.5(b), calculated on the basis of a 360 day year and the actual number
of days elapsed.

 

“Base Price” means $600,000,000.

 

“Books and Records” means all of the books and records of the Company (including
all data and other information stored on discs, tapes or other media), including
all such books and records to the extent relating to the Company’s governance,
legal existence or stock ownership, and copies of all books and records of
Seller and its Affiliates that are material to the ongoing operation of the
Company Business by Buyer after the Closing (other than as a result of the
provision of services by Seller to Buyer pursuant to the Transition Services
Agreement); provided that, to the extent any such books and records of the
Company contain any information that relates to Seller or any of its Affiliates,
or any of their respective businesses, other than the Company or the Company
Business, such information shall not constitute “Books and Records” for purposes
of this Agreement and any such information may be redacted from the “Books and
Records.”  For the avoidance of doubt, no minutes, resolutions or other
governance or similar legal entity documents of any Person other than the
Company shall constitute “Books and Records” for purposes of this Agreement.

 

“Business Day” means any day other than a Saturday, a Sunday or any other day on
which banking institutions in Chicago, Illinois or New York City are required or
authorized by Applicable Law to be closed.

 

“Buyer Disclosure Schedule” means the disclosure schedule (including any
attachments thereto) delivered by Buyer to Seller in connection with, and
constituting a part of, this Agreement.

 

“Buyer Party” means Buyer or any Affiliate of Buyer that is a party to any
Transaction Agreement.

 

“Closing Balance Sheets” means, collectively, the Estimated Balance Sheet, the
Subject Balance Sheet and the Final Balance Sheet.

 

“Closing RBC Ratio” means the RBC Ratio as of the Closing Date, calculated after
giving effect to the Recapture, the other transactions contemplated by this
Agreement to take place at or prior to the Closing, the consummation of the NER
Financing and the effect of

 

3

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the application of Treasury Regulation § 1.1502-36(d) on the transactions
contemplated by this Agreement, but without giving effect to any Specified
Capital Charge.

 

“Closing Statutory Value” means an amount equal to: (i) the capital and surplus
of the Company as of the Closing Date as would be required to be reflected in
line 38, column 1 in the “Liabilities, Surplus and Other Funds” section of the
2012 NAIC Annual Statement Blank or the successor to such line number; plus (ii)
the asset valuation reserve of the Company as of the Closing Date as would be
required to be reflected in line 24.1 of such section of the Annual Statement
Blank or the successor to such line number; plus (iii) the interest maintenance
reserve of the Company as of the Closing Date (whether positive or negative)
that is related to the historical unamortized balance (as described in the
Accounting Principles) recaptured by the Company in connection with the
Recapture, including amortization with respect to such balance from the date of
Recapture to the Closing Date in accordance with Seller’s past practices; and
(iv) either minus the admitted net deferred tax asset of the Company as of the
Closing Date or plus the net deferred tax liability of the Company as of the
Closing Date, as applicable, as would be required to be reflected in line 18.2
or line 15.2, as applicable, of such section of the Annual Statement Blank or
the successor to such line number; in each case as calculated from amounts set
forth on the applicable Closing Balance Sheet prepared in accordance with the
Accounting Principles after giving effect to the Recapture and the other
transactions contemplated hereby to occur on or prior to the Closing Date but,
for the avoidance of doubt, before giving effect to the application of the
Treasury Regulation § 1.1502-36(d) with respect to the transactions contemplated
by this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company Benefit Plan” means each Employee Benefit Plan that is sponsored or
maintained by the Company for the benefit of Company Employees (or their
dependents and beneficiaries).

 

“Company Business” means, collectively, the Recaptured Business and all of the
other life insurance business, other than the Specified Life Business and the
Vermont Captive Business, written by the Company through Independent Producers
that is reinsured to third parties, as more particularly identified in Section
1.1(b) of the Seller Disclosure Schedule.

 

“Company Employee” means each individual who is or was employed by the Company.

 

“Confidentiality Agreement” means the confidentiality agreement dated as of
January 15, 2013, between Resolution Life U.S. Limited and Seller.

 

“Consolidated Returns” means any and all Tax Returns of the Seller Group.

 

“Controlled Group Liability” means any and all liabilities: (i) under Title IV
of ERISA; (ii) under the minimum funding requirements of Section 302 of ERISA or
Section 412 of the Code; or (iii) under Section 4971 of the Code, other than
such liabilities that arise solely out of, or relate to, the Company Benefit
Plans or the Seller Benefit Plans.

 

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“Employee Benefit Plan” means a written or unwritten plan, policy, program,
agreement and arrangement, whether covering a single individual or a group of
individuals, that is (i) an “employee benefit plan” within the meaning of
Section 3(3) of ERISA, (ii) a stock bonus, stock purchase, stock option,
restricted stock, stock appreciation right or similar equity-based plan or (iii)
any other employment, severance, deferred-compensation, retirement,
welfare-benefit, bonus, incentive or fringe benefit plan, policy, program,
agreement or arrangement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Escrow Funds” has the meaning given to such term in the Escrow Agreement.

 

“Excluded Liabilities” means any Liabilities resulting from or arising out of:
(i) any business ceded to a newly formed captive as provided in Section 5.18;
and (ii) the Excluded Employee Liabilities.

 

“Exclusive Producer” means any Producer that markets, sells or administers
business of the type written by Seller or any of its Affiliates exclusively for
or on behalf of Seller or any of its Affiliates, notwithstanding whether such
Producer also sells products of the type not written by Seller or any of its
Affiliates on behalf of third parties.

 

“Existing Seller Reinsurance Agreements” means: (i) the Coinsurance Agreement,
effective December 31, 2001, between the Company and Seller; (ii) the Modified
Coinsurance Agreement, effective December 31, 2001, between the Company and
Seller pursuant to which the Company cedes to Seller liabilities under variable
universal life insurance contracts written by the Company; and (iii) the
Modified Coinsurance Agreement, effective December 31, 2001, between the Company
and Seller pursuant to which the Company cedes to Seller liabilities under
variable annuity contracts written by the Company.

 

“Final Adjustment Amount” means an amount equal to: (i) the Final Statutory
Surplus Adjustment Amount; plus (ii) the Final Recapture Adjustment Amount.

 

“Final Recapture Adjustment Amount” means an amount equal to: (i) the Closing
Recapture Adjustment Amount; minus (ii) the Estimated Recapture Adjustment
Amount.

 

 “Final Statutory Surplus Adjustment Amount” means an amount equal to: (i) the
Final Closing Statutory Value; minus (ii) the Estimated Closing Statutory Value.

 

“Financed Amounts” means: (a) statutory reserves, calculated in accordance with
SAP, with respect to the universal life insurance business with secondary
guarantees and term life insurance business with premium guarantees that are
included in the Company Business; minus (b) Economic Reserves (as such term is
described or defined in the NER Commitment Letter or the term sheet attached
thereto), excluding any risk spread or similar fees or other costs and expenses
incurred by Buyer or the Captive (as such term is defined in the NER Commitment
Letter) in connection with or arising under the NER Financing.

 

“Financing Sources” means the parties to the Commitment Letters or any
definitive documents relating to the Financing (other than Buyer).

 

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

 

“Governmental Entity” means any domestic or foreign court, arbitral tribunal,
federal, provincial, state or local government or administration, or regulatory
or other governmental authority, commission or agency (including any industry or
other self-regulating body).

 

“Independent Producer” means any Producer that is not an Exclusive Producer.

 

“Insurance Contracts” means the insurance policies, annuity contracts and, other
than for purposes of Section 3.15, the assumed reinsurance treaties, together
with all binders, slips, certificates, endorsements and riders thereto, in each
case that constitute a part of the Company Business and were issued or entered
into by the Company prior to the Closing.

 

“Insurance Regulator” means, with respect to any jurisdiction, the Governmental
Entity charged with the supervision of insurance companies in such jurisdiction.

 

“Insurance Reserves” means the reserves for the payment of benefits, losses,
claims, unearned premium and expenses under the Insurance Contracts.

 

“Intellectual Property” means: (i) trademarks, service marks, trade names, trade
dress, and registrations and applications of any of the foregoing, including all
goodwill associated with any of the foregoing (“Trademarks”); (ii) copyrights,
copyrightable works, rights in Software, Internet web site content, and
registrations and applications of any of the foregoing, (iii) Internet URLs and
domain names, and registrations thereof; (iv) patents and applications for
patents, including all reissues, divisions, renewals, extensions, provisional,
continuations and continuations-in-part thereof; (v) Trade Secrets; (vi) all
similar intellectual property rights; and (vii) all administrative and legal
rights arising therefrom and relating thereto.

 

“Intellectual Property License” means the intellectual property license
substantially in the form attached as Exhibit D.

 

“Investment Assets” means any interest in any bonds, notes, debentures, mortgage
loans, real estate, instruments of indebtedness, stocks, partnership interests
and all other equity interests, certificates issued by or interests in trusts,
derivatives or other assets acquired for investment or hedging purposes.

 

“IRS” means the U.S. Internal Revenue Service.

 

“Knowledge” means the actual knowledge of (i) with respect to Seller, those
Persons listed in Section 1.1(c) of the Seller Disclosure Schedule, and (ii)
with respect to Buyer, those Persons listed in Section 1.1(a) of the Buyer
Disclosure Schedule.

 

“Liability” means any liability, damage, expense or obligation of any kind,
character or description, whether known or unknown, absolute or contingent,
accrued or unaccrued, disputed or undisputed, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due, vested or
unvested, asserted or unasserted, executory, determined, determinable or
otherwise.

 

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“Lien” means any pledge, security interest, encumbrance, mortgage, title defect,
license, lien, charge or other similar restrictions or limitations of any nature
whatsoever.

 

“Limited Partnership Agreement” means the limited partnership agreement of
Resolution Life L.P.

 

“Material Adverse Effect” means a material adverse effect on:  (a) the business,
operations, condition (financial or otherwise) or results of operations of the
Company, but excluding any such effect to the extent resulting from or arising
out of:  (i) any change, development, event or occurrence arising out of or
relating to general political, economic or securities or financial market
conditions (including changes in interest rates or changes in equity prices and
corresponding changes in the value of the Investment Assets of the Company);
(ii) any change, development, event or occurrence generally affecting
participants in the life insurance, annuity or financial services industries;
(iii) any change in GAAP, SAP or Applicable Law, or the interpretation or
enforcement thereof; (iv) acts of war, sabotage or terrorism, or any escalation
or worsening of such acts, any earthquakes, hurricanes, tornadoes, and other
storms, floods or other natural disasters, or any other force majeure event;
(v) the announcement of this Agreement and the transactions contemplated hereby,
including any loss of or change in relationship with any customers or business
partners or departure of any employees or officers resulting therefrom; (vi) the
identity of or facts related to Buyer; (vii) any action taken by Seller or any
of its Representatives at the written instruction of or with the written consent
of Buyer, or any failure to act by Seller or any of its Representatives because
Buyer has withheld its consent when such consent was required hereunder;
(viii) any downgrade or threatened downgrade in the rating assigned to the
Company by any rating agency (provided, that this clause (viii) shall not by
itself exclude the underlying cause of any such downgrade or threatened
downgrade); (ix) any failure, in and of itself, of the Company to meet any
financial projections or targets (provided, that this clause (ix) shall not by
itself exclude the underlying causes of any such failure); (x) any matter set
forth in the Seller Disclosure Schedule (to the extent that any such effect
described in the preceding clauses (i) though (iv) does not materially and
disproportionally adversely affect the Company relative to other Persons engaged
in the industries in which the Company operates); or (b) the ability of Seller
to consummate the transactions contemplated hereby.

 

“Maximum Capital Amount” means the amount of total adjusted capital (as defined
in the RBC Instructions) of the Company that would cause the Closing RBC Ratio
to equal 400%.

 

“MBA Group” means any marketing organization that includes one or more consortia
of Independent Producers that are master brokerage agencies.

 

“Permitted Lien” means, with respect to any asset, any: (i) carriers’,
mechanics’, materialmens’ or similar Lien either (A) with respect to amounts not
yet due and payable or (B) that are being contested in good faith and for which
appropriate reserves have been taken on the Books and Records; (ii) Lien arising
from any act of Buyer or any of its Affiliates (with respect to an asset of
Seller or one of its Affiliates); (iii) pledge or deposit to secure obligations
under workers’ compensation laws or similar legislation or to secure public or
statutory obligations; (iv) Lien that is disclosed in any section of the Seller
Disclosure Schedule or the Buyer Disclosure Schedule, as applicable; (v) Lien
related to deposits required by any Insurance

 

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Regulator; (vi) Lien for Taxes, assessments or other governmental charges either
(A) not yet due and payable or (B) the amount or validity of which is being
contested in good faith and for which appropriate reserves have been taken on
the Books and Records; and (vii) Lien or other imperfection of title that does
not materially detract from the current value or materially interfere with the
current use of the assets, properties or rights affected thereby or impair
materially the ability of Buyer to consummate any of the transactions
contemplated by this Agreement, as applicable.

 

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, association, trust, unincorporated organization, Governmental
Entity or other entity.

 

“Post-Closing Tax Periods” means any and all Tax periods that begin on the day
after the Closing Date and the portion of any Straddle Period beginning on the
day after the Closing Date.

 

“Pre-Closing Tax Periods” means any and all Tax periods that end on or before
the Closing Date and the portion of any Straddle Period ending at the end of day
on which the Closing occurs.

 

“Principal Underwriting Agreement” means the amended and restated principal
underwriting agreement substantially in the form attached as Exhibit E.

 

“Producer” means any producer, broker, agent, general agent, managing general
agent, master broker agency, broker general agency, financial specialist or
other Person responsible for marketing or producing insurance policies, annuity
contracts, protection and retirement products on behalf of the Company prior to
the Closing.

 

“RBC Instructions” means the Life RBC Instructions of the National Association
of Insurance Commissions or any successor thereof as in effect at the applicable
time of determination.

 

“RBC Ratio” means, as of any date of determination, the ratio (expressed as a
percentage) that the Company’s total adjusted capital (as defined in the RBC
Instructions) as of such date bears to the Company’s company action level risk
based capital (as defined in the RBC Instructions) as of such date, calculated
in accordance with the life insurance risk based capital formula contained in
the RBC Instructions.

 

“Recapture” means the recapture of the Recaptured Business pursuant to the
Recapture Agreement.

 

“Recapture Agreement” means the recapture agreement substantially in the form
attached as Exhibit F.

 

“Reference Statutory Value” means $293,853,484.

 

“Reinsurance Trust” means the trust agreement substantially in the form attached
as Exhibit F.

 

8

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“Representative” means any Person’s Affiliates, or its or its Affiliates’
directors, officers, employees, agents, advisors, attorneys, accountants,
consultants and representatives.

 

“Required Capital Amount” means, as of any date of determination, the amount
(expressed in dollars and after taking into account any Specified Capital
Charge) of total adjusted capital (as defined in the RBC Instructions) that the
Company is required by the Nebraska Department of Insurance to maintain as of
such date.

 

“Restructuring Agreements” means the Recapture Agreement, the Amended and
Restated Reinsurance Agreement, the Administrative Services Agreement and the
Reinsurance Trust.

 

“SAP” means statutory accounting practices prescribed or permitted by the
Nebraska Department of Insurance.

 

“Seller Benefit Plan” means each Employee Benefit Plan (other than the Company
Benefit Plans) that has been maintained, established or contributed to by Seller
or any of its Affiliates (other than the Company) that provides, has provided or
may provide benefits or compensation (assuming any vesting, performance or other
benefit requirements are met) in respect of any Company Employee or any of their
beneficiaries or dependents.

 

“Seller Disclosure Schedule” means the disclosure schedule (including any
attachments thereto) delivered by Seller to Buyer in connection with, and
constituting a part of, this Agreement.

 

“Seller Group” means (i) the “affiliated group” as defined in Section 1504(a) of
the Code of which The Allstate Corporation is the common parent, and (ii) with
respect to each state, local or foreign jurisdiction in which Seller or any of
its current Subsidiaries files a consolidated, combined or unitary Tax Return
and in which the Company is or is required to be included, the group with
respect to which such Tax Return is filed.

 

“Seller Party” means Seller or any Affiliate of Seller that is a party to any
Transaction Agreement.

 

“Selling Agreement” means the Selling Agreement, dated as of June 1, 2006, by
and among the VA Buyer, American Skandia Life Assurance Company, American
Skandia Marketing, Incorporated, Allstate Financial Services, LLC and, solely
with respect to certain provisions thereto, The Allstate Corporation.

 

“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, in any and all forms and media, and all
related documentation.

 

“Specified Capital Amount” means: (i) for purposes of Section 5.4(b) and
Section 6.1(c), the amount of total adjusted capital (as defined in the RBC
Instructions) of the Company that would cause the Closing RBC Ratio to equal
350%; and (ii) for purposes of Section 5.15, the amount of total adjusted
capital (as defined in the RBC Instructions) of the Company that would cause the
RBC Ratio as of the date on which the Specified Capital Charge then being
imposed on

 

9

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the Company by the Nebraska Department of Insurance is so imposed (calculated
without giving effect to such Specified Capital Charge) to equal 350% or such
greater RBC Ratio maintained by the Company immediately prior to the imposition
of such Specified Capital Charge.

 

“Specified Capital Charge” means any risk based capital charge the Company is
required by the Nebraska Department of Insurance to incur with respect to the
reinsurance provided by Seller under the Amended and Restated Reinsurance
Agreement.  Notwithstanding the foregoing, no “Specified Capital Charge” shall
be deemed to have been imposed to the extent such charge is imposed as a result
of the difference between the Fair Market Value (as such term is defined in the
Amended and Restated Reinsurance Agreement) and the Reinsurer Statutory Book
Value (as such term is defined in the Amended and Restated Reinsurance
Agreement) of the assets in the trust account established pursuant to the
Reinsurance Trust.

 

“Specified Life Business” means, collectively, (i) the term life insurance
policies written by the Company prior to the Closing Date that have been
reinsured to Seller and retroceded by Seller to ALIC Reinsurance Company and
(ii) the term life insurances policies of the type identified on
Section 1.1(d) of the Seller Disclosure Schedule that were written by the
Company and are reinsured by third party reinsurers.

 

“Specified VA Transaction Agreements” means all agreements relating to the
Variable Annuity Transaction, including: (i) the Administrative Services
Agreement, effective as of June 1, 2006, by and between the Company and Seller;
(ii) the Principal Underwriting Agreement, entered into as of June 1, 2006, by
and between the Company and ALFS, Inc.; (iii) the Coinsurance Agreement,
effective as of December 31, 2001, between the Company and Seller to the extent
related to the VA Contracts; (iv) the Modified Coinsurance Agreement, effective
December 31, 2001, between the Company and Seller, pursuant to which the Company
cedes to Seller liabilities under variable annuity contracts written by the
Company and (v) the distribution agreements, fund agreements and reinsurance
agreements listed in Section 1.1(e) of the Seller Disclosure Schedule.

 

“Straddle Period” means any Tax period that includes, but does not end on, the
Closing Date.

 

“Subsidiary” of any Person at the time in question means another Person more
than 50% of the total combined voting power of all classes of capital stock or
other voting interests of which, or more than 50% of the equity securities of
which, is at such time owned directly or indirectly by such first Person.

 

“Tax Return” means any report, estimate, extension request, information
statement, claim for refund, or return relating to, or required to be filed in
connection with, any Tax, including any schedule or attachment thereto, and any
amendment thereof.

 

“Taxes” means any and all federal, state, local, or foreign income, premium,
property (real or personal), sales, excise, employment, payroll, withholding,
gross receipts, license, severance, stamp, occupation, windfall profits,
environmental, customs duties, capital stock, franchise, profits, social
security (or similar, including FICA), unemployment, disability, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of

 

10

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any kind or any charge of any kind in the nature of (or similar to) taxes
whatsoever, including any interest, penalty or addition thereto.

 

“Trade Secrets” means all inventions, processes, designs, formulae, trade
secrets, know-how, ideas, research and development, data, databases and
confidential information.

 

“Transaction Agreements” means this Agreement, the Transition Services
Agreement, the Intellectual Property License, the Restructuring Agreements, the
Principal Underwriting Agreement, the Agent Servicing Agreement and the Equity
Commitment Letter.

 

“Transaction Expenses” means, without duplication, all liabilities (except for
any Taxes, including Conveyance Taxes) incurred by any party hereto for fees,
expenses, costs or charges as a result of the contemplation, negotiation,
efforts to consummate or consummation of the transactions contemplated by this
Agreement, including any fees and expenses of investment bankers, attorneys,
accountants or other advisors, and any fees payable by such parties to
Governmental Entities or other third parties, in each case, in connection with
the consummation of the transactions contemplated by this Agreement.

 

“Transition Services Agreement” means the transition services agreement
substantially in the form attached as Exhibit H.

 

“Treasury Regulations” means all proposed, temporary and final regulations
promulgated under the Code, as such regulations may be amended from time to
time.

 

“VA Buyer” means The Prudential Insurance Company of America, a New
Jersey-domiciled stock life insurance company.

 

“VA Contracts” means the variable annuity contracts written by the Company the
liabilities under which such contracts were ceded to the VA Buyer in connection
with the Variable Annuity Transaction.

 

“VA Indemnity Reinsurance Agreement” means the Indemnity Reinsurance Agreement,
dated June 1, 2006, between Seller and the VA Buyer, which was entered into in
connection with the Variable Annuity Transaction.

 

“Variable Annuity Transaction” means the transactions contemplated by the Master
Transaction Agreement, dated as of March 8, 2006, by and among The Allstate
Corporation, Seller, Allstate Life Insurance Company of New York, Prudential
Financial, Inc. and The Prudential Insurance Company of America (the “VA Master
Transaction Agreement”) and the documents related thereto.

 

“Vermont Captive” means Lincoln Benefit Reinsurance Company, an Affiliate of
Seller that is an insurance company organized under the laws of the State of
Vermont.

 

“Vermont Captive Business” means the business reinsured under the Vermont
Captive Reinsurance Agreement.

 

11

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“Vermont Captive Reinsurance Agreement” means the Reinsurance Agreement,
effective September 30, 2012, between the Company and the Vermont Captive.

 

In addition, the following terms shall have the respective meanings set forth in
the following sections of this Agreement:

 

Term

 

Section

Actuarial Reports

Additional Equity Financing

 

3.17

5.24

Adjustment Report

 

2.5(c)(v)

After-Acquired Business

 

5.10(b)(iv)

Aggregate After-Acquired Revenues

 

5.10(b)(iv)

Agreement

 

Preamble

Alternative Financing

 

5.23(f)

Alternative Reinsurance Arrangement

 

5.4(d)

Business Investment Assets

 

5.19

Buyer

 

Preamble

Buyer Burdensome Condition

 

5.4(a)

Buyer Fundamental Representations

 

6.3(a)

Buyer Indemnified Persons

 

7.2(a)

Buyer Related Parties

 

10.1(e)

Cap

 

7.3(a)

Ceded Reinsurance Contracts

 

3.16(a)

Closing

 

2.2

Closing Date

Closing Recapture Adjustment Amount

 

2.2

2.5(c)(viii)

Commitment Letters

 

4.7(a)

Company

 

Recitals

Company Insurance Policies

 

3.18(a)

Company Intellectual Property Rights

 

3.20(a)

Company Reinsurance Contracts

 

3.16(a)

Company Trademarks

 

5.7(b)

Competing After-Acquired Revenues

 

5.10(b)(iv)

Competing Business

 

5.10(a)

Condition Satisfaction

 

2.2

Contracts

 

3.13(a)

Conveyance Taxes

 

8.5

Debt Commitment Letter

Debt Financing

 

4.7(a)

4.7(a)

Deductible

 

7.3(a)

Direct Product Tax Claim

 

7.9(a)

Dispute Notice

 

2.5(c)(ii)

Equity Commitment Letter

 

4.7(a)

Equity Financing

 

4.7(a)

Escrow Account

 

Recitals

Escrow Agent

 

Recitals

Escrow Agreement

 

Recitals

 

12

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Term

 

Section

Estimated Balance Sheet

 

2.4(a)

Estimated Closing Statement

 

2.4(a)

Estimated Closing Statutory Value

Estimated Recapture Adjustment Amount

 

2.4(a)

2.4(a)

Excluded Employee Liabilities

 

5.12(b)

Fee Letter

 

4.7(b)

Final Adjustment Statement

 

2.5(b)

Final Balance Sheet

 

2.5(c)(viii)

Final Closing Statutory Value

 

2.5(c)(viii)

Financing

 

4.7(a)

Indemnitee

 

7.4(i)

Indemnitor

 

7.4(ii)

Indemnifiable Losses

 

7.4(iii)

Indemnity Payment

 

7.4(iv)

Independent Accounting Firm

 

2.5(c)(iv)

Investors

 

4.7(d)

Milliman

 

3.17

NER Commitment Letter

 

4.7(a)

NER Financing

 

4.7(a)

New York Court

 

10.7(a)

Organizational Documents

 

3.1(b)

Outside Date

 

9.1(b)

Parent

 

Recitals

Permits

 

3.11(b)

Process Agent

 

10.7(c)

Purchase Price

 

2.1

Recapture Adjustment Amount

 

Accounting Principles

Recaptured Business

 

Recitals

Recaptured Investment Assets

 

Recitals

Reference Balance Sheet

Required Financial Information

 

3.6(a)

5.24(b)

Resolution Period

 

2.5(c)(iv)

Review Period

 

2.5(c)(i)

Seller

 

Preamble

Seller Burdensome Condition

 

5.4(a)

Seller Fundamental Representations

 

6.2(a)

Seller Indemnified Persons

 

7.2(b)

Seller Intellectual Property

 

3.20(e)

Seller Trademarks

 

5.7(a)

Shared Reinsurance Agreement

 

5.4(d)

Shares

 

Recitals

Solvent

 

4.8

Specified Termination

 

10.1(b)

Statutory Statements

 

3.6(b)

Subject Balance Sheet

 

2.5(b)(i)

 

13

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Term

 

Section

Tax Contest

 

8.4

Tax Refund

 

8.3

Termination Fee

 

10.1(b)

Third Party Claim

 

7.4(v)

Threshold Amount

 

7.3(a)

Trademarks

 

1.1

 

ARTICLE II.
PURCHASE OF THE SHARES

 

SECTION 2.1.        Purchase and Sale of Shares.  Upon the terms and subject to
the conditions of this Agreement, Seller agrees to sell to Buyer, and Buyer
agrees to purchase from Seller, all of the Shares for an aggregate purchase
price (the “Purchase Price”) in cash equal to the Base Price, as adjusted
pursuant to Sections 2.4, 2.5 and 2.6.

 

SECTION 2.2.        Closing.  The closing of the purchase and sale of the Shares
(the “Closing”) shall take place at the offices of Willkie Farr & Gallagher LLP,
787 Seventh Avenue, New York, New York 10019, at 10:00 a.m., New York time, on
(i) the first Business Day of the month immediately following the month in which
all the conditions set forth in Article VI have been satisfied or waived (other
than those conditions that by their terms are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions at the Closing)
shall have been so satisfied or waived in accordance with this Agreement (the
“Condition Satisfaction”) or (ii) if the Condition Satisfaction occurs less than
two Business Days prior to the first Business Day of such month and the parties
do not have prior notice that the Condition Satisfaction is reasonably likely to
occur during such period, then the Closing shall take place on the first
Business Day of the second month immediately following the month in which the
Condition Satisfaction occurs, in each case unless another date, time or place
is agreed to in writing by the parties hereto.  The day on which the Closing
actually takes place is referred to herein as the “Closing Date;” provided that,
for purposes of the Closing Balance Sheets and any amounts calculated therefrom,
the “Closing Date” shall be deemed to be, and the transactions contemplated
hereby will be deemed to have occurred at, 12:01 a.m., Central Time, on the
first calendar day of the month in which the Closing occurs.

 

SECTION 2.3.        Closing Deliveries.

 

(a)          Seller’s Closing Deliveries.  At the Closing, Seller shall deliver
or cause to be delivered to Buyer:

 

(i)           certificates representing the Shares, free and clear of all Liens,
duly endorsed in blank or accompanied by sufficient instruments of transfer and
bearing or accompanied by all requisite stock transfer tax stamps;

 

(ii)          a certificate of Seller duly executed by an authorized officer of
Seller, dated as of the Closing Date, certifying as to Seller’s compliance with
the conditions set forth in Section 6.2(a) and Section 6.2(b);

 

14

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(iii)         counterparts of each Transaction Agreement to which a Seller Party
is a party, duly executed by such Seller Party, other than this Agreement and
any other Transaction Agreement entered into and delivered to Buyer prior to the
Closing Date; and

 

(iv)         the written resignations of the directors and officers of the
Company, effective as of the Closing, except as requested by Buyer not less than
five Business Days prior to the Closing.

 

(b)          Buyer’s Closing Deliveries.  At the Closing, Buyer shall make the
payment contemplated by Section 2.4 and, if applicable, the payment contemplated
by Section 2.6, and also deliver to Seller:

 

(i)           a certificate of Buyer duly executed by an authorized officer of
Buyer, dated as of the Closing Date, certifying as to Buyer’s compliance with
the conditions set forth in Section 6.3(a) and Section 6.3(b); and

 

(ii)          counterparts of each Transaction Agreement to which a Buyer Party
is a party, duly executed by such Buyer Party, other than this Agreement and any
other Transaction Agreement entered into and delivered to Seller prior to the
Closing Date.

 

SECTION 2.4.        Payment at Closing.

 

(a)          No later than five Business Days prior to the anticipated Closing
Date, Seller shall deliver to Buyer: (i) a statement (the “Estimated Closing
Statement”) setting forth an estimated balance sheet of the Company as of the
Closing Date prepared in good faith from the Books and Records in accordance
with the Accounting Principles, consistently applied (the “Estimated Balance
Sheet”) and showing Seller’s calculations of (A) the Closing Statutory Value
(the “Estimated Closing Statutory Value”) and (B) the Recapture Adjustment
Amount (the “Estimated Recapture Adjustment Amount”) and (C) the Adjusted
Initial Amount based on (A) and (B); and (ii) reasonable supporting
documentation with respect to the calculation of the amounts set forth in the
Estimated Closing Statement.

 

(b)          In addition to the deliveries contemplated by Section 2.3, at the
Closing, Buyer shall pay to Seller or its designee by wire transfer of
immediately available funds to an account designated by Seller an amount equal
to the Adjusted Initial Amount; provided, that Buyer may choose to have a
portion of the Adjusted Initial Amount paid to Seller or its designee by the
Escrow Agent out of the Escrow Funds pursuant to a joint written instruction of
Buyer and Seller so long as Buyer pays the remaining portion of the Adjusted
Initial Amount directly to Seller or such designee.

 

SECTION 2.5.        Post-Closing Payments.

 

(a)          The Final Adjustment Amount shall be determined as set forth in
subsections (b) and (c) of this Section 2.5.  If the Final Adjustment Amount is
a positive number, then Buyer shall pay such Final Adjustment Amount to Seller
or its designee within five Business Days after the final determination
thereof.  If the Final Adjustment Amount is a

 

15

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negative number, then Seller shall pay the absolute value of such Final
Adjustment Amount to Buyer within five Business Days after the final
determination thereof.  Any payments required to be made by either party
pursuant to this Section 2.5(a) shall (i) be made by wire transfer of
immediately available funds and (ii) include interest on the amount required to
be paid at the Applicable Rate, compounded annually on the basis of a year of
365 days, from (and including) the Closing Date to (but excluding) the date such
payment is made.

 

(b)          No later than 90 days after the Closing Date, Buyer shall deliver
to Seller: (i) a statement (the “Final Adjustment Statement”) setting forth the
balance sheet of the Company as of the Closing Date prepared in good faith from
the Books and Records in accordance with the Accounting Principles, consistently
applied (the “Subject Balance Sheet”) and showing Buyer’s calculations of
(A) the Closing Statutory Value, (B) the Recapture Adjustment Amount and (C) the
Final Adjustment Amount based on (A) and (B); and (ii) reasonable supporting
documentation with respect to the calculation of the amounts set forth in the
Final Adjustment Statement.  Seller shall, during such period of no longer than
90 days after the Closing Date, provide Buyer and the Company and their
Representatives with reasonable access to the employees of Seller to the extent
such employees have knowledge about the Company Business and to all
documentation, records and other information of the Company or Seller, as Buyer,
the Company or any of their Representatives may reasonably request and that are
necessary to facilitate the preparation of the Final Adjustment Statement;
provided, that such access does not unreasonably interfere with the conduct of
the business of Seller and that such access and cooperation shall not, in the
event of any dispute arising out of this Agreement, serve to prejudice Seller or
any of its Affiliates.

 

(c)          (i)           Seller shall have 45 days from the date on which the
Final Adjustment Statement is delivered to it to review the Final Adjustment
Statement, the Subject Balance Sheet and the calculations of (A) the Closing
Statutory Value, (B) the Closing Recapture Adjustment Amount, and (C) the Final
Adjustment Amount based on (A) and (B) (the “Review Period”).  In furtherance of
such review, Buyer and the Company shall provide Seller and its Representatives
with reasonable access during such 45 day period to the employees of Buyer and
the Company (including to the Chief Financial Officer of Buyer) and to all
documentation, records and other information of Buyer and the Company as Seller
or any of its Representatives may reasonably request; provided, that such access
does not unreasonably interfere with the conduct of the business of Buyer or the
Company and that such access and cooperation shall not, in the event of any
dispute arising out of this Agreement, serve to prejudice Buyer or any of its
Affiliates.

 

(ii)          If Seller disagrees with the Final Adjustment Statement (including
any amount or computation set forth therein) in any respect and on any basis,
Seller may, on or prior to the last day of the Review Period, deliver a notice
to Buyer setting forth, in reasonable detail, each disputed item or amount and
the basis for Seller’s disagreement therewith (the “Dispute Notice”).  The
Dispute Notice shall set forth, with respect to each disputed item, Seller’s
position as to the correct amount or computation that should have been included
in the Final Adjustment Statement and as to the Final Adjustment Amount.

 

(iii)         If no Dispute Notice is received by Buyer with respect to any item
in the Final Adjustment Statement on or prior to the last day of the Review
Period, the

 

16

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amount or computation with respect to such item as set forth in the Final
Adjustment Statement shall be deemed accepted by Seller, whereupon the amount or
computation of such item or items shall be final and binding on the parties.

 

(iv)         For a period of 10 Business Days beginning on the date that Buyer
receives a Dispute Notice (the “Resolution Period”), if any, Buyer and Seller
shall endeavor in good faith to resolve by mutual agreement all matters
identified in the Dispute Notice.  In the event that the parties are unable to
resolve by mutual agreement any matter in the Dispute Notice within such 10
Business Day period, Buyer and Seller shall jointly engage
PricewaterhouseCoopers LLP (the “Independent Accounting Firm”) to make a
determination with respect to all matters in dispute.  If PricewaterhouseCoopers
LLP is unwilling or unable to serve, Seller and Buyer shall cooperate in good
faith to appoint, within 30 days after Seller and Buyer receive notice from
PricewaterhouseCoopers LLP of its refusal or inability to act as the Independent
Accounting Firm, an independent certified public accounting firm of national
recognition mutually acceptable to Buyer and Seller, in which event such firm
shall be the “Independent Accounting Firm.”

 

(v)          Buyer and Seller will direct the Independent Accounting Firm to
render a determination within 30 days after its retention, and Buyer, Seller and
their respective employees and agents will cooperate with the Independent
Accounting Firm during its engagement.  Buyer, on the one hand, and Seller, on
the other hand, shall promptly (and in any event within 10 Business Days) after
the Independent Accounting Firm’s engagement, each submit to the Independent
Accounting Firm their respective computations of the disputed items identified
in the Dispute Notice and information, arguments and support for their
respective positions, and shall concurrently deliver a copy of such materials to
the other party.  Each party 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 Accounting Firm (with a copy
thereof to the other party) within five Business Days after the first date on
which both parties have submitted their respective initial submissions to the
Independent Accounting Firm.  The Independent Accounting Firm shall thereafter
be permitted to request additional or clarifying information from the parties,
and each of the parties shall cooperate and shall cause their Representatives to
cooperate with such requests of the Independent Accounting Firm.  The
Independent Accounting Firm 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 issues in dispute specifically set forth in the Dispute Notice and
shall render a written report to Buyer and Seller (the “Adjustment Report”) in
which the Independent Accounting Firm shall, after considering all matters set
forth in the Dispute Notice, determine what adjustments, if any, should be made
to the amounts and computations set forth in the Final Adjustment Statement
solely as to the disputed items and shall determine the appropriate Final
Adjustment Amount on that basis.

 

17

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(vi)         The Adjustment Report shall set forth, in reasonable detail, the
Independent Accounting Firm’s determination with respect to each of the disputed
items or amounts specified in the Dispute Notice, and the revisions, if any, to
be made to the Final Adjustment Statement, together with supporting
calculations.  In resolving any disputed item, the Independent Accounting Firm
(i) shall be bound to the principles of this Section 2.5 and the terms of this
Agreement, (ii) shall limit its review to matters specifically set forth in the
Dispute Notice and (iii) 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.

 

(vii)       All fees and expenses relating to the work of the Independent
Accounting Firm shall be shared equally by Buyer and Seller.  The Adjustment
Report shall be final and binding upon Buyer and Seller, and shall be deemed a
final arbitration award that is binding on each of Buyer and Seller, and, absent
fraud, no party shall seek further recourse to courts, other tribunals or
otherwise, other than to enforce the Adjustment Report.

 

(viii)      The final form of the balance sheet of the Company as of the Closing
Date as finally determined pursuant to this Section 2.5 is referred to herein as
the “Final Balance Sheet”, the amount of the Closing Statutory Value calculated
therefrom is referred to as the “Final Closing Statutory Value” and the amount
of the Recapture Adjustment Amount calculated therefrom is referred to as the
“Closing Recapture Adjustment Amount.”  Notwithstanding anything to the contrary
contained in this Agreement, the provisions of this Section 2.5 represent the
sole and exclusive method for determining the Final Balance Sheet, the Final
Closing Statutory Value and the Closing Recapture Adjustment Amount.

 

SECTION 2.6.        Additional Post-Closing Payments.  If Seller or any of its
Affiliates exercises the right under Section 5.25 to subscribe for class A
limited partnership or other equity interests of Parent, Buyer shall at the
Closing pay to Seller, by wire transfer of immediately available funds to an
account designated by Seller, an amount equal to 10% of the aggregate capital
commitment contemplated by the related subscription agreement entered into
pursuant to the exercise of such right; provided, that such payment shall not
exceed $6,000,000 in the aggregate.  Any payment made pursuant to this
Section 2.6 shall be treated as an adjustment to the Purchase Price.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER

 

Subject to and as qualified by the matters set forth in the Seller Disclosure
Schedule in accordance with Section 10.3, Seller represents and warrants to
Buyer, as of the date hereof and as of the Closing Date (or such other date
specified herein), as follows:

 

SECTION 3.1.        Organization, Standing and Corporate Power.

 

(a)          Seller is an insurance company duly incorporated, validly existing
and in good standing under the laws of the State of Illinois.  Each other Seller
Party is an entity duly

 

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incorporated or organized (as the case may be), validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.  The Company is an insurance company duly incorporated, validly
existing and in good standing under the laws of the State of Nebraska.  Each of
Seller and the Company has the requisite corporate power and authority to own,
lease or otherwise hold the assets and properties owned, leased or otherwise
held by it and to carry on its business as now being conducted, except where the
failure to have such power and authority would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.  Each of
Seller and the Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership, leasing or operation of its properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified or in good standing (individually or in the aggregate) would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

 

(b)          Seller has made available to Buyer true, correct and complete
copies of the certificate of incorporation and bylaws (or other organizational
documents) (collectively, the “Organizational Documents”), each as amended to
the date hereof, of the Company.

 

SECTION 3.2.        Capital Structure.

 

(a)          The issued and outstanding capital stock of the Company consists of
25,000 shares, $100.00 par value per share, which constitute the Shares.  There
are 30,000 authorized shares of capital stock of the Company.  Except for the
Shares, no securities of the Company are issued, reserved for issuance or
outstanding.  All outstanding shares of capital stock of the Company were duly
authorized and validly issued and are fully paid and non-assessable, and are not
subject to any preemptive rights.  Except as set forth in Section 3.2 of the
Seller Disclosure Schedule, there are no securities (whether convertible,
exchangeable or otherwise), options, warrants, rights, commitments or agreements
of any kind to which either Seller or the Company is a party or by which either
of them is bound obligating either of them to issue, sell, deliver or redeem
shares of capital stock or other equity interests of the Company.

 

(b)          There are no restrictions upon the voting or transfer of the Shares
pursuant to the Organizational Documents of the Company or any agreement to
which Seller or the Company is a party.

 

(c)          Seller is the record and beneficial owner of all of the shares of
capital stock of the Company, free and clear of all Liens, other than any
restrictions on transfer generally imposed under applicable securities laws. 
Upon consummation of the transactions contemplated by this Agreement, including
the execution and delivery of the documents to be delivered at Closing, Buyer
shall be vested at the Closing with good and valid title in and to all of the
shares of capital stock of the Company, free and clear of all Liens, other than
any restrictions on transfer generally imposed under applicable securities laws.

 

SECTION 3.3.        Subsidiaries.  The Company does not own any shares of the
capital stock of, or other voting or equity interest in, including any
securities exercisable or exchangeable for or convertible into shares of capital
stock of or other voting or equity interest in,

 

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any Person, except for Investment Assets acquired and held in the ordinary
course of the investment activities of the Company.

 

SECTION 3.4.        Authority.  Each Seller Party has the requisite corporate
power and authority to enter into the Transaction Agreements to which it is or
will be a party and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery by each Seller Party of the Transaction
Agreements to which it is or will be a party and the consummation by each Seller
Party of the transactions contemplated hereby and thereby have been and, with
respect to the Transaction Agreements to be executed and delivered after the
date of this Agreement, will be, duly authorized by all necessary corporate
action on the part of such Seller Party.  Each of the Transaction Agreements to
which a Seller Party is or will be a party has been or, with respect to the
Transaction Agreements to be executed and delivered after the date of this
Agreement, will be, duly executed and delivered by such Seller Party and,
assuming the Transaction Agreements constitute valid and binding agreements of
the Buyer Parties party thereto, constitute valid and binding obligations of
such Seller Party, enforceable against such Seller Party in accordance with
their terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors’ rights generally and (ii) the remedy
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 therefor may be brought.

 

SECTION 3.5.        Noncontravention; Consents.  Except as disclosed in
Section 3.5 of the Seller Disclosure Schedule, the execution and delivery of the
Transaction Agreements by each Seller Party that is or will be a party thereto,
and the consummation of the transactions contemplated hereby and thereby by such
Seller Party, do not and will not (i) conflict with any of the provisions of the
Organizational Documents of any of the Seller Parties, (ii) subject to the
matters referred to in the next sentence, conflict with, result in a breach of
or default (with or without notice or lapse of time or both) under, give any
contracting party the right to terminate, cancel, accelerate or receive any
additional payment under, or result in the creation of any Lien (other than a
Permitted Lien) on any property, asset or right of the Company under, any
contract or commitment that is binding on the Company or (iii) subject to the
matters referred to in the next sentence, contravene any Applicable Law, which,
in the case of clauses (ii) and (iii) above, would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  No
consent, approval or authorization of, or declaration or filing with, or notice
to, any third party or Governmental Entity is required by or with respect to any
Seller Party in connection with the execution and delivery of the Transaction
Agreements by the Seller Parties, or the consummation by the Seller Parties of
the transactions contemplated hereby and thereby, except for the consents,
approvals, authorizations, declarations, filings and notices set forth in
Section 3.5 of the Seller Disclosure Schedule.

 

SECTION 3.6.        Financial Statements; Insurance Reserves; Internal Controls.

 

(a)          Seller has previously delivered to Buyer a true, correct and
complete copy of the unaudited pro forma balance sheet of the Company as of
December 31, 2012 prepared after giving pro forma effect to the Recapture and
the other transactions contemplated by this Agreement to take place at or prior
to the Closing Date but, for the avoidance of doubt, without giving effect to
the application of Treasury Regulation § 1.1502-36(d) with respect to the

 

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transactions contemplated by this Agreement (the “Reference Balance Sheet”). 
The Reference Balance Sheet was prepared in good faith from the Books and
Records in accordance with the Accounting Principles, using the amounts set
forth in the Statutory Statements as the “actual” column and making pro forma
adjustments to give effect to assumptions that provide a reasonable basis for
presenting the significant effects of the Recapture and the other transactions
contemplated by this Agreement (but not, for the avoidance of doubt, the effect
of the application of Treasury Regulation § 1.1502-36(d) on the transactions
contemplated by this Agreement).

 

(b)          Seller has previously delivered to Buyer true, correct and complete
copies of (i) the audited annual statutory financial statements of the Company
as of and for the years ended December 31, 2011 and December 31, 2012 and
(ii) the unaudited interim statutory financial statements of the Company as of
and for the three-month period ending March 31, 2013 (collectively, the
“Statutory Statements”).  Except as set forth in Section 3.6(b) of the Seller
Disclosure Schedule, the Statutory Statements were prepared in accordance with
SAP and fairly present, in all material respects, the admitted assets,
liabilities and capital and surplus of the Company at their respective dates and
the results of operations, changes in surplus and cash flows of the Company at
and for the periods indicated, subject, in the case of the financial statements
referenced in clause (ii) above, to normal recurring year-end adjustments. 
Section 3.6(b) of the Seller Disclosure Schedule sets forth a complete list of
all permitted practices used by the Company in the preparation of the Statutory
Statements.

 

(c)          Subject to Section 10.9(c), except as set forth in
Section 3.6(b) of the Seller Disclosure Schedule, the Insurance Reserves
reflected on the Statutory Statements with respect to the Recaptured Business as
of their respective dates:  (i) have been computed in all material respects in
accordance with presently accepted actuarial standards consistently applied;
(ii) were fairly stated in accordance with sound actuarial principles;
(iii) 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; (iv) met, in
all material respects, all requirements of SAP; and (v) include provisions for
all actuarial reserves and related statement items which ought to be
established, in each case, as required to be certified by the actuaries of the
Company, pursuant to Applicable Law.

 

(d)          Each of the Company and Seller (with respect to the Company
Business) has devised and maintained a system of internal accounting controls
with respect to its business sufficient to provide reasonable assurances that:
(i) transactions are executed according to the management’s general or specific
authorization; (ii) transactions are recorded as necessary to permit the
preparation of financial statements in conformity with SAP and to maintain
accountability for assets; (iii) access to its assets is permitted only in
accordance with management’s general or specific authorization; and
(iv) recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 

SECTION 3.7.        No Undisclosed Liabilities.  The Company does not have any
Liability that is required to be reflected in a balance sheet (or the notes
thereto) of the Company prepared in accordance with SAP except (i) those
Liabilities provided for, disclosed or reflected in the Statutory Statements or
in the notes thereto, (ii) Liabilities disclosed in Section 3.7 of the Seller
Disclosure Schedule and (iii) Liabilities incurred in the ordinary course of
business

 

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consistent with past practice since December 31, 2012.  This Section 3.7 does
not relate to Tax matters (which are the subject of Section 3.10).

 

SECTION 3.8.        Absence of Certain Changes or Events.  Except as disclosed
in Section 3.8 of the Seller Disclosure Schedule, from December 31, 2012 through
the date hereof, the Company (i) has conducted its business in the ordinary
course, and there has not been any event or change having, or that would
reasonably be expected to have, a Material Adverse Effect.  Without limiting the
generality of the foregoing, from December 31, 2012 through the date hereof, the
Company has not, except as set forth in Section 3.8 of the Seller Disclosure
Schedule, taken any action or failed to take any action that would have required
Buyer’s consent under clauses (vi), (vii), (viii), (ix), (x), (xi), (xii) and
(xvi) (with respect to any of the actions contemplated by such identified
clauses) of Section 5.1(a) had such action or omission occurred during the
period from the date hereof to the Closing.

 

SECTION 3.9.        Employees and Benefit Plans.

 

(a)          Section 3.9(a) of the Seller Disclosure Schedule includes a list of
all material Company Benefit Plans.  With respect to each such Company Benefit
Plan, Seller has delivered or made available to Buyer true, correct and complete
copies of (i) each writing constituting such Company Benefit Plan (including,
any and all amendments thereto) or, if unwritten, a summary thereof, and
(ii) the most recent summary plan description for each Company Benefit Plan for
which such a summary plan description is required.

 

(b)          Except as disclosed in Section 3.9(b) of the Seller Disclosure
Schedule, there are no material claims or disputes pending or, to the Knowledge
of Seller, threatened by any Producer or former Producer with respect to any
Company Benefit Plan, other than claims for benefits in the ordinary course of
business.

 

(c)          Except as disclosed in Section 3.9(c) of the Seller Disclosure
Schedule or to the extent required by COBRA, no Company Benefit Plan provides
any Producer or any former Producer medical, dental or life insurance coverage
or any other welfare benefits after termination of such person’s service for the
Company.

 

(d)          Except as disclosed in Section 3.9(d) of the Seller Disclosure
Schedule, the Company does not participate in, sponsor or maintain (i) any
multiemployer plan within the meaning of Section 3(37) of ERISA or any Employee
Benefit 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,
(ii) any Employee Benefit Plan subject to Section 4063 or 4064 of ERISA,
(iii) any “multiple employer welfare arrangement” as defined in Section 3(40) of
ERISA, (iv) any Employee Benefit Plan funded by a voluntary employees’
beneficiary association within the meaning of Section 501(c)(9) of the Code, or
(v) any other Employee Benefit Plan subject to Section 412 of the Code,
Section 430 of the Code or 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 a Liability of the Company following the Closing.

 

(e)          Each Company Benefit Plan in which or under which any Producer or
former Producer participates or is otherwise entitled to receive a benefit based
on services

 

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rendered to or for the Company that is intended to be qualified under
Section 401(a) of the Code is subject to a favorable determination by the
Internal Revenue Service and, to the Knowledge of Seller, no event has occurred
and no condition exists that has adversely affected or would reasonably be
expected adversely to affect the qualification of any such Company Benefit
Plan.  Each Company Benefit Plan in which or under which any Producer or former
Producer participates or is otherwise entitled to receive a benefit based on
services rendered to or for the Company (i) has been administered in all
material respects in accordance with its terms and (ii) is in compliance in all
material respects with all Applicable Laws.

 

(f)           Each Company Benefit Plan (i) in which or under which any Producer
or former Producer participates or is otherwise entitled to receive a benefit
based on services rendered to or for the Company and (ii) that is a
“nonqualified deferred compensation plan” within the meaning of
Section 409A(d)(1) of the Code, and any award under any such Company Benefit
Plan that is subject to Section 409A of the Code, has, in each case, been
operated in compliance in all material respects with Section 409A of the Code
since January 1, 2009.  No Producer or former Producer of the Company is
entitled to receive any additional payment (including any tax gross-up or other
payment) from the Company as a result of the imposition of any taxes arising
under Section 409A of the Code.

 

(g)          Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause the
accelerated vesting, funding or delivery of, or increase the amount or value of,
any payment or benefit to any Producer or former Producer.  Without limiting the
generality of the foregoing, no amount paid or payable (whether in cash, in
property or in the form of benefits) by the Company to any Producer in
connection with the transactions contemplated hereby will be an “excess
parachute payment” within the meaning of Section 280G of the Code.

 

(h)          As of the date hereof, no person is a common law employee of the
Company.  Each of Seller (with respect to the Company Business) and the Company
has complied, in all material respects, with all Applicable Laws regarding
employment, labor and wage and hour matters as they pertain to any Company
Employee or Producer.  With respect to the Company Employees, no labor
organization or group of employees has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or threatened to
be brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority.  There are no material strikes, work stoppages,
slowdowns, lockouts, arbitrations or grievances, or other material labor
disputes, pending or threatened against or involving any Company Employees or
the Company.

 

SECTION 3.10.     Taxes.  Except as disclosed in Section 3.10 of the Seller
Disclosure Schedule:

 

(a)          (i) All material Tax Returns required to be filed by or filed on
behalf of the Company have been properly prepared and duly and timely filed
(after giving effect to any valid extensions of time in which to make such
filings) with the appropriate Tax authorities in all jurisdictions in which such
Tax Returns are required to be filed and are true, correct and complete in all
material respects and (ii) all material Taxes (whether or not shown on such Tax

 

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Returns) required to be paid with respect to, or that could give rise to a Lien
on the assets of, the Company have been duly and timely paid.

 

(b)          The Company has complied in all material respects with all
Applicable Laws relating to the payment and withholding of Taxes and has duly
and timely withheld all material Taxes required to be withheld by the Company,
and such withheld Taxes have been either duly and timely paid to the proper
Governmental Entity or properly set aside in accounts for such purpose.

 

(c)          No material deficiencies for any Taxes have been proposed, asserted
or assessed in writing against or with respect to the income or assets of the
Company.  No Taxes with respect to the income or assets of the Company are
currently under audit, examination or investigation by any Governmental Entity
or the subject of any judicial or administrative proceeding.  No agreement,
waiver or other document or arrangement is currently in effect extending the
period for assessment or collection of Taxes (including any applicable statute
of limitation) by or on behalf of the Company other than any agreement, waiver
or other document or arrangement relating to Consolidated Returns.

 

(d)          The Company is not a party to any agreement dealing primarily with
Tax sharing, allocation, indemnity or distribution pursuant to which it will
have any obligation to make any payments after the Closing.

 

(e)          The Company does not have any liability for the Taxes of any Person
under Treasury Regulations Section 1.1502-6 or any similar provision of state,
local or foreign law, or as a transferee or successor.

 

(f)           There are no material Liens for Taxes as a result of any unpaid
Taxes upon the assets of the Company except for Taxes not yet due and payable.

 

(g)          During the past two years, the Company has not been a “distributing
corporation” or a “controlled corporation” within the meaning of
Section 355(a)(1)(A) of the Code.

 

(h)          The Company has not ever engaged in any “listed transactions”
within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

 

(i)           No jurisdiction (whether within or without the United States) in
which the Company has not filed a particular type of Tax Return or in which the
Seller Group has not filed a particular type of Tax Return with respect to the
Company has asserted that the Company is required to file such Tax Return in
such jurisdiction.

 

(j)           The Company will not be required to include any item of income in,
or exclude any item of deduction from, 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 for a taxable period ending on or prior to the Closing Date
under Section 481 of the Code (or any corresponding provision of state, local or
foreign income Tax law), (ii) installment sale or open transaction disposition
made on or prior to the Closing Date, (iii) prepaid amount received on or

 

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prior to the Closing Date or (iv) any election pursuant to Section 108(i) of the
Code (or any similar provision of state, local or foreign law) made with respect
to any Pre-Closing Tax Period.

 

(k)          The Company is not a party to a “gain recognition agreement” within
the meaning of the Treasury Regulations under Section 367 of the Code.

 

(l)           No Tax ruling or closing agreement pursuant to Section 7121 of the
Code (or any predecessor provision or any similar provision of state or local
law) will be binding on the Company after the Closing Date.

 

(m)         Seller’s calculation of its tax basis in the Shares, which has
previously been provided to Buyer, was calculated using information reported on
the consolidated federal income Tax Returns of the Seller Group that include the
Company for the years 1984 through 2011, with adjustments to such amount in 2012
computed based on the Company’s 2012 NAIC annual statement tax provision.  All
federal income Tax Returns of the Seller Group that include the Company for Tax
years through 2010 have been audited by the IRS with no adjustments in respect
of the Company.  The Company’s 2012 NAIC annual statement tax provision has been
audited by Deloitte Tax LLP.

 

SECTION 3.11.     Compliance with Applicable Laws.

 

(a)          Except as disclosed in Section 3.11(a) of the Seller Disclosure
Schedule, since December 31, 2010, the Company (including each of its separate
accounts) has been, and the Company Business has been conducted, in compliance
in all material respects with all Applicable Laws.  Except as disclosed in
Section 3.11(a) of the Seller Disclosure Schedule, neither the Company
(including as to any of its separate accounts) nor Seller has at any time since
December 31, 2010 received any written notice or other written communication
from any Governmental Entity regarding any actual or alleged violation of, or
failure on the part of the Company or the Company Business to comply in any
material respect with, any Applicable Laws, in each case other than any such
item that has been cured or otherwise resolved to the satisfaction of such
Governmental Entity or that is no longer being pursued by such Governmental
Entity following a response by the Company.

 

(b)          The Company owns, holds or possesses all permits, licenses,
approvals, authorizations, consents and registrations that are necessary to
entitle it to own or lease, operate and use its assets or properties and to
carry on and conduct its business as currently conducted (collectively,
“Permits”).  Schedule 3.11(b) of the Seller Disclosure Schedule sets forth a
true, correct and complete list of all material Permits.  The Company is in
material compliance with all of the terms and requirements of each such Permit. 
With respect to the Permits, the Company has not at any time since December 31,
2010 received any written notice or other written communication from any
Governmental Entity regarding any actual or proposed revocation, suspension or
termination of, or modification to, any such Permit, in each case other than any
such item that has been cured or otherwise resolved to the satisfaction of such
Governmental Entity, that is no longer being pursued by such Governmental Entity
following a response by the Company or that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  All
Permits are valid and in full force and effect, except where the

 

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failure of such Permits to be in full force and effect would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.12.     Litigation.  Except as disclosed in Section 3.12 of the Seller
Disclosure Schedule, and excluding those Actions relating to the Insurance
Contracts or any other policies or contracts of insurance written by the Company
that involve claims within applicable policy limits, (i) there is no Action
pending or with respect to which the Company or Seller (with respect to the
Company Business) has been served with notice or any other Action that, to the
Knowledge of Seller, is threatened against the Company or against Seller or any
of its Affiliates (with respect to the Company Business), that individually (or
in the aggregate with respect to any Actions based on similar facts,
circumstances or events or involving similar factual allegations) (A) would
reasonably be expected to result in any Liability or loss in excess of $500,000,
(B) would reasonably be expected to have the effect of preventing any of the
transactions contemplated by any Transaction Agreement or (C) would reasonably
be expected to result in an injunction or other similar remedy that would
reasonably be expected to be materially adverse to the Company or the Company
Business and (ii) there is no order of any Governmental Entity outstanding or,
to the Knowledge of Seller, threatened against the Company or any of its assets,
properties, rights or businesses or against Seller (with respect to the Company
Business) resulting in, or that would reasonably be expected to result in, (A) a
Liability or loss of $500,000 or more or (B) an injunction or other similar
remedy that would reasonably be expected to be materially adverse to the Company
or the Company Business.  Subject to Section 10.9(c) and without making any
representation or warranty as to the adequacy or sufficiency of such reserves,
each of Seller and the Company establishes reserves with respect to Actions
relating to the Insurance Contracts as and when it is required to do so under
SAP and Applicable Law.

 

SECTION 3.13.     Contracts.

 

(a)          Section 3.13(a) of the Seller Disclosure Schedule lists each
Contract to which the Company is a party or by which it or any of its assets is
or are bound as of the date hereof.  The term “Contracts” means all of the
following types of contracts (other than any insurance or annuity policy or
contract written by the Company or any Company Reinsurance Contract):

 

(i)           contracts containing any provision or covenant limiting the
ability of the Company to engage in any line of business, to compete with any
Person or to do business in any geographic area, in each case except for
contracts and agreements that limit the ability of the Company to solicit the
employment of or hire individuals employed by other Persons, or obligating the
Company or, following the Closing, Buyer or any of its Affiliates, to conduct
any business on an exclusive basis with any Person;

 

(ii)          mortgages, indentures, loan or credit agreements, security
agreements and other agreements and instruments relating to the borrowing of
money or extension of credit to the Company or the direct or indirect guarantee
by the Company of any obligation of any Person or any other Liability of the
Company in respect of indebtedness for borrowed money of any Person;

 

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(iii)         agency, broker, selling, marketing or similar contracts between
the Company, on the one hand, and any Producer of the Company who, or any MBA
Group that, was responsible for placing 2% or more of the aggregate gross
written premium of the Company Business for the year ended December 31, 2012;

 

(iv)         any contract (other than any Seller Benefit Plan) between the
Company, on the one hand, and any director, officer or Company Employee (or any
Affiliate (other than the Company, Seller or any of their respective Affiliates)
of a director, officer or Company Employee), on the other hand;

 

(v)          any direct or indirect guarantee by Seller or any of its Affiliates
(other than the Company) in favor of or in respect of any obligations of the
Company;

 

(vi)         any joint venture, partnership or limited liability company
contract binding on the Company, in each case except for the Business Investment
Assets;

 

(vii)       any contract under which the Company may become obligated to pay any
brokerage or finder’s or similar fees or expenses in connection with the
transactions contemplated hereby;

 

(viii)      any collective bargaining agreement;

 

(ix)         any contract pursuant to which any Lien, other than a Permitted
Lien, is placed or imposed on any Business Investment Asset or other material
asset, property or right of the Company;

 

(x)          any contract granting or restricting rights to Intellectual
Property that is material to the operation of the Company Business as presently
conducted;

 

(xi)         any contract that relates to the acquisition or disposition by the
Company of any of any business or operations, capital stock or assets or any
Person or any real estate as to which there are any material ongoing obligations
of the Company;

 

(xii)       any contract relating to any material interest rate, derivative or
hedging transaction; and

 

(xiii)      any other contract of the Company providing for the provision of
goods or services involving payment by the Company in excess of $500,000
annually or $3,000,000 in the aggregate over the term of the contract and that
is not terminable on notice of 90 or fewer calendar days without penalty or
premium.

 

(b)          Each of the Contracts disclosed in Section 3.13(a) of the Seller
Disclosure Schedule constitutes a valid and binding obligation of the Company or
Seller, as applicable, and, to the Knowledge of Seller, each other party
thereto, enforceable against the Company and, to the Knowledge of Seller, each
other party thereto in accordance with its terms (except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditors’ rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief

 

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may be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought) and is in full force and effect. 
Neither the Company nor the Seller has received written notice of cancellation
of any Contract.  There exists no material breach or event of default with
respect to any Contract on the part of the Company or Seller, as applicable, or,
to the Knowledge of Seller, any other party thereto.

 

SECTION 3.14.     Insurance Matters.

 

(a)          The Company has filed all material reports, statements,
registrations, filings or submissions required to be filed with any Insurance
Regulator since December 31, 2010, and no material deficiencies have been
asserted in writing by any Governmental Entity since December 31, 2010 with
respect to any such reports, statements, registrations, filings and submissions
that have not been cured or otherwise resolved.  Seller has made available to
Buyer true, correct and complete copies of all material reports and
registrations (including registrations as a member of an insurance holding
company system) and any supplements or amendments thereto filed since
December 31, 2010 with any Governmental Entity in respect of the Company or the
Company Business and all financial examination and market conduct examination
reports of all Insurance Regulators with respect to the Company or the Company
Business issued since December 31, 2010.  Except as set forth in
Section 3.14(a) of the Seller Disclosure Schedule, neither the Company nor
Seller (with respect to the Company Business) is subject to any pending or, to
the Knowledge of Seller, threatened financial or market conduct examination or
other investigation by an Insurance Regulator.

 

(b)          Except as set forth in Section 3.14(b) of the Seller Disclosure
Schedule, the Company is and since December 31, 2010, has been in compliance
with all Applicable Laws regulating the marketing and sale of insurance or
annuity policies or contracts written by the Company, regulating advertisements,
requiring mandatory disclosure of policy information, requiring employment of
standards to determine if the purchase of an insurance or annuity policy or
contract is suitable for an applicant, prohibiting the use of unfair methods of
competition and deceptive acts or practices and regulating replacement
transactions.  For purposes of this Section 3.14(b), (i) “advertisement” means
any material designed to create public interest in insurance or annuity policies
or contracts or in an insurer, or in an insurance producer, or to induce the
public to purchase, increase, modify, reinstate, borrow on, surrender, replace
or retain such an insurance or annuity policy or contract, and (ii) “replacement
transaction” means a transaction in which a new insurance or annuity policy or
contract written by the Company is to be purchased by a prospective insured and
the proposing producer knows or should know that one or more existing insurance
or annuity policies or contracts will lapse, or will be forfeited, surrendered,
reduced in value or pledged as collateral.

 

(c)          Since December 31, 2010, the Company has timely paid in all
material respects all guaranty fund assessments that have been due, claimed or
asserted by, or are the subject of any voluntary contribution commitment to, any
state guaranty fund or association or any Governmental Entity charged with the
supervision of insurance companies in any jurisdiction in which the Company does
business.  Except for regular periodic assessments in the ordinary course of
business or assessments based on developments that are publicly known within the
insurance industry, no claim or assessment is pending or, to the Knowledge of
Seller, threatened against the Company by any state insurance guaranty
association in connection with

 

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such association’s fund relating to insolvent insurers, except for any such
claims or assessments that are not and would not reasonably be expected,
individually or in the aggregate, to be materially adverse to the Company
Business.

 

(d)          Except as set forth on Section 3.14(d) of the Seller Disclosure
Schedule, no provision in any insurance or annuity policy or contract written by
the Company gives the holder thereof or any other Person the right to receive
policy dividends or otherwise participate in the revenue, earnings or profits of
the Company.

 

(e)          Except as set forth in Section 3.14(e) of the Seller Disclosure
Schedule, to the Knowledge of Seller, since December 31, 2010, (A) each Producer
at any time that it wrote, sold or produced business for the Company was in all
material respects duly licensed, authorized and appointed (for the type of
business written, sold or produced by such Producer) in the particular
jurisdiction in which such Producer wrote, sold or produced such business and,
to the Knowledge of Seller, no such Producer violated in any material respect
any term or provision of Applicable Law relating to the writing, sale or
production of such business, (B) no Producer has violated in any material
respect any Applicable Law in the solicitation, negotiation, writing, sale or
production of business for the Company and (C) no Producer has in any material
respect 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 an Producer for the
Company or any enforcement or disciplinary proceeding alleging any such
violation.

 

(f)           Neither the Company nor Seller (with respect to the Company
Business) is a party to any written contract, consent decree or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or subject to any cease-and-desist or other order or directive by, or a
recipient of any extraordinary supervisory letter from, or has adopted any
policy, procedure or board or stockholder resolution at the request of, any
Insurance Regulator that restricts materially the conduct of its business (or in
the case of Seller, the Company Business) or in any manner relates to its
capital adequacy, credit or risk management policies or management.

 

(g)          The insurance or annuity policies or contracts written by the
Company are, to the extent required under Applicable Law, on forms and at rates
approved by the applicable Insurance Regulator or filed and not objected to by
such Insurance Regulator within the period provided for objection, in each case
except as would not reasonably be expected to result in a material violation of
Applicable Law by, or a material fine on, the Company.

 

SECTION 3.15.     Tax Treatment of Insurance Contracts.

 

(a)          All Insurance Contracts that are subject to Section 101(f) of the
Code satisfy, in all material respects, the requirements of that Section and
otherwise qualify as life insurance contracts for purposes of the Code, and all
Insurance Contracts (other than long-term care insurance contracts or annuity
contracts) satisfy in all material respects, the requirements of Section 7702 of
the Code and otherwise qualify as life insurance contracts for purposes of the
Code.  All Insurance Contracts that are annuity contracts satisfy, in all
material respects, all applicable requirements of Sections 72 and 817 of the
Code.  All Insurance Contracts that are

 

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long term care insurance contracts satisfy, in all material respects, the
requirements of Section 7702B of the Code.

 

(b)          None of the Insurance Contracts are “modified endowment contracts”
within the meaning of Section 7702A of the Code, except for those Insurance
Contracts that are being administered as modified endowment contracts.

 

(c)          With respect to all relevant Tax periods, Seller, the Company and
their respective Affiliates have materially complied with all reporting,
withholding, and disclosure requirements under the Code that are applicable to
the Insurance Contracts and, in particular, but without limitation, have
reported distributions under such Insurance Contracts in compliance in all
material respects with all applicable requirements of the Code, Treasury
Regulations and forms issued by the IRS.

 

(d)          As of the date hereof, none of Seller, the Company or any of their
respective Affiliates has entered into any agreement or is involved in any
discussions or negotiations with the IRS or any other Taxing authority regarding
the failure of any Insurance Contracts to meet the requirements of Section 72,
101, 817, 7702, 7702A or 7702B of the Code, as applicable to such Insurance
Contracts.  In addition, none of Seller, the Company or any of their respective
Affiliates is a party to or has received notice of any federal, state, local or
foreign audits or other administrative or judicial actions with regard to the
Tax treatment of any Insurance Contracts, or of any claims by the purchasers of
the Insurance Contracts regarding the Tax treatment of the Insurance Contracts
or the plan or arrangement in connection with which such Insurance Contracts
were purchased.

 

(e)          The Tax treatment of each Insurance Contract is not, and since the
time of issuance has not been, materially less favorable to the purchaser,
holder or intended beneficiaries thereof than the Tax treatment under the Code
(i) that was purported by the Company to apply to such Insurance Contract in
written materials provided by the Company to such purchaser, holder or intended
beneficiary at the time such Insurance Contract was initially sold or issued or
subsequently modified or (ii) for which policies, products or contracts of that
type were designed by the Company to qualify at such time or were reasonably
expected, based on written materials provided by the Company to such purchaser,
holder or intended beneficiary at the time such Insurance Contract was initially
sold or issued or subsequently modified, to qualify at such time, except for
changes resulting from changes to the Code after the time of such sale, issuance
or modification.

 

SECTION 3.16.     Reinsurance Contracts.

 

(a)          Section 3.16(a) of the Seller Disclosure Schedule lists (i) each
reinsurance agreement to which the Company is a party as the ceding company
thereunder which is in-force as of the date hereof, other than any such
agreement under which the Company has gross ceded Insurance Reserves (calculated
in accordance with SAP) of $2,500,000 or less as of December 31, 2012 (the
“Ceded Reinsurance Contracts”), and (ii) each reinsurance contract pursuant to
which the Company has assumed Liability under or with respect to any insurance
or annuity policy or contract (such contracts, together with the Ceded
Reinsurance Contracts, the “Company Reinsurance Contracts”).

 

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(b)          Each of the Company Reinsurance Contracts constitutes a valid and
binding obligation of the Company and, to the Knowledge of Seller, each other
party thereto, enforceable against the Company and, to the Knowledge of Seller,
each other party thereto in accordance with its terms (except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditors’ rights generally and (ii) the remedy 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 therefor
may be brought) and is in full force and effect.  Except as set forth in
Section 3.16(b) of the Seller Disclosure Schedule, the Company has not received
written notice of early termination of any such Company Reinsurance Contract. 
There exists no material breach or event of default with respect to any Company
Reinsurance Contract on the part of the Company or, to the Knowledge of Seller,
any other party thereto.

 

(c)          Except as set forth in Section 3.16(c) of the Seller Disclosure
Schedule, there is no dispute pending with respect to any material amounts
recoverable or payable by the Company pursuant to any Ceded Reinsurance
Contract.  The Company is entitled under SAP to take full credit in its
statutory financial statements for all amounts recoverable by it pursuant to the
Ceded Reinsurance Contracts.

 

(d)          To the Knowledge of Seller, Employers Reassurance Corporation is a
party to a capital maintenance agreement with General Electric Capital
Corporation, pursuant to which General Electric Capital Corporation is required
to maintain Employers Reassurance Corporation’s capital level at no less than
300% of its authorized control level risk based capital as determined in
accordance with risk based capital factors and formulae prescribed by the
National Association of Insurance Commissioners from time to time.

 

SECTION 3.17.     Actuarial Reports.  Seller has delivered to Buyer true,
correct and complete copies of the actuarial reports dated June 30, 2012 and
December 31, 2012 prepared by Milliman, Inc. (“Milliman”) with respect to the
Recaptured Business other than the portions of the Recaptured Business
identified in Section 3.17 of the Seller Disclosure Schedule (collectively, and
together with any exhibits and appendices thereto, the “Actuarial Reports”). 
Seller has complied in all material respects with all information requests by
Milliman in connection with its preparation of the Actuarial Report.  Except as
set forth on Section 3.17 of the Seller Disclosure Schedule, the factual
information and data furnished by Seller and its Affiliates to Milliman
expressly in connection with the preparation of the Actuarial Reports, were
(a) derived from the relevant Books and Records and (b) accurate in all material
respects as of the date delivered to Milliman, subject in each case to any
limitations and qualifications contained in the Actuarial Report; provided, that
(notwithstanding the inclusion of the measure of “lost profits” within the
definition of “Indemnifiable Losses”) Seller does not guarantee the projected
results included in the Actuarial Report and makes no representation or warranty
with respect to the Actuarial Report, any estimates, projections, predications,
forecasts or assumptions in the Actuarial Report or the assumptions on the basis
of which such information was, or data were, prepared, or to the effect that the
projected profits set forth in the Actuarial Report will be realized.

 

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SECTION 3.18.     Company Insurance Policies.

 

(a)          Section 3.18(a) of the Seller Disclosure Schedule lists all
material insurance policies (including fidelity bonds and other similar
instruments, but excluding Ceded Reinsurance Contracts) in effect on the date
hereof covering the Company or its officers or directors (the “Company Insurance
Policies”).

 

(b)          Except as set forth in Section 3.18(b) of the Seller Disclosure
Schedule, each of the Company Insurance Policies is in all material respects in
full force and effect and all premiums due thereon have been timely paid or
adequate provisions for the payment thereof have been made, and the Company is
not in material breach or default and has not taken any action or failed to take
any action that, with notice or the lapse of time or both, would constitute such
a breach or default, or permit termination or modification of, any such Company
Insurance Policy.  There is no material claim pending under any of such policies
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies and, to the Knowledge of Seller, there has been no threatened
termination of, material alteration in coverage, or material premium increase
with respect to, any such Company Insurance Policies.

 

SECTION 3.19.     Environmental Matters.  Except as set forth in Section 3.19 of
the Seller Disclosure Schedule, there are no pending or, to the Knowledge of
Seller, threatened Actions against the Company that seek to impose, or that are
reasonably likely to result in, any material Liability or obligation of the
Company under any Applicable Law concerning worker health and safety, pollution
or the protection of the environment or human health as it relates to the
environment, and the Company is not subject to any agreement, order, judgment,
decree, letter or memorandum by or with any Governmental Entity or third party
imposing any material Liability or obligation on the Company with respect to any
of the foregoing.

 

SECTION 3.20.     Intellectual Property.

 

(a)          The Company owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary for the
operation of its business as presently conducted, except to the extent that such
failure to own or have such right would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  Section 3.20(a)(i) of
the Seller Disclosure Schedule sets forth all patents, and applications for
patents, all registered trademarks and all applications for trademarks, all
registered copyrights and all Internet domain names owned by the Company. 
Except as set forth in Section 3.20(a)(ii) of the Seller Disclosure Schedule,
with respect to: (x) each of the items set forth in Section 3.20(a)(i) of the
Seller Disclosure Schedule; (y) each of the material unregistered trademarks,
copyrights, trade names, service marks and Trade Secrets owned by the Company
and necessary for the operation of its business; and (z) the Internet domain
names listed in Section 5.7(e) of the Seller Disclosure Schedule (collectively,
the “Company Intellectual Property Rights”), the Company possesses all right,
title and interest in and to each of the Company Intellectual Property Rights,
free and clear of any Lien, license or other restriction, other than any
Permitted Lien.  The Company Intellectual Property Rights are subsisting and, to
the Knowledge of Seller, valid and enforceable.

 

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(b)          The conduct of the Company Business as currently conducted does not
infringe, misappropriate, dilute or otherwise violate any Intellectual Property
rights owned by third parties, except to the extent that such infringement,
misappropriations, dilution or violation would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Except as
disclosed in Section 3.20(b) of the Seller Disclosure Schedule and since
December 31, 2010, the Company has not received any written notice that it has
infringed, misappropriated, diluted or otherwise violated any Intellectual
Property rights owned by third parties except to the extent that such alleged
violation would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

 

(c)          The Company has not made any pending claim against any third party
alleging infringement, misappropriation, dilution or other violation of any
material Company Intellectual Property Right and, to the Knowledge of Seller,
since December 31, 2010, none of the Company Intellectual Property Rights is
being infringed, misappropriated, diluted or otherwise violated by any Person.

 

(d)          All employees and consultants who contributed to the creation,
discovery or development of any material Company Intellectual Property Rights
used in the conduct of the business of the Company did so either (i) within the
scope of his or her employment with the Company, Seller or another Affiliate of
Seller or (ii) pursuant to written agreements that have validly and irrevocably
assigned all Intellectual Property arising therefrom to the Company, Seller or
another Affiliate of Seller, except to the extent such failure to do so in
accordance with subsection (i) or (ii) above would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Except as
disclosed in Section 3.20(d) of the Seller Disclosure Schedule, the collection,
storage, use and dissemination by the Company of personally identifiable data
and information of consumers of its services or users of any websites operated
by the Company is currently, and has since December 31, 2010 been, in compliance
with all applicable privacy policies, terms of use and Applicable Laws, except
to the extent such failure to comply would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Seller and
its Affiliates (including the Company) use commercially reasonable measures to
protect the consumer information of the Company Business that they collect and
maintain and have not since December 31, 2010 experienced any breach in security
or any incident of unauthorized access, disclosure, use, destruction or loss of
any personally identifiable data or information of consumers of the Company
Business, except breaches or incidents that have not materially and adversely
affected the Company Business and would not, individually or in the aggregate,
reasonably be expected to materially and adversely affect the Company Business.

 

(e)          Section 3.20(e)(i) of the Seller Disclosure Schedule sets forth all
material Intellectual Property owned by Seller or any of its Affiliates
necessary for the operation of the Company Business as presently conducted
(“Seller Intellectual Property”).  Immediately after the Closing, the Company
will own all of the Company Intellectual Property Rights, free and clear of any
Lien, other than Permitted Liens, and will, through the Transition Services
Agreement and the Intellectual Property License, have the right to use all
Seller Intellectual Property necessary for the operation of the Company Business
(recognizing, for this purpose, that the Company does not intend to write any
new business after the Closing (other than policies issued upon conversion of an
insurance policy included in the Company Business that has a conversion

 

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feature and any policies issued pursuant to any of the Transaction Agreements)),
on substantially the same terms and conditions as in effect prior to the
Closing.

 

(f)           Seller or one of its Affiliates has implemented reasonable backup
and disaster recovery arrangement to ensure the continued operation of the
Company in the event of a disaster or business interruption.

 

SECTION 3.21.     Brokers.  Seller is solely responsible for the payment of the
fees and expenses of any broker, investment banker, financial adviser or other
Person acting in a similar capacity in connection with the transactions
contemplated by this Agreement or any of the Transaction Agreements based upon
arrangements made by or on behalf of Seller or any Affiliate.

 

SECTION 3.22.     Real Property.  The Company does not own any real property
except for Investment Assets, does not lease any real property and does not have
any Liability with respect to or arising out of any real property (other than
any Liability to Seller or any of its Affiliates, which will be paid in full and
settled pursuant to Section 5.6).

 

SECTION 3.23.     Sufficiency of Assets.  Except as set forth in Section 3.23 of
the Seller Disclosure Schedule, and assuming the adequate capitalization of the
Company by Buyer at the Closing in an amount sufficient to support the ongoing
administration of the Company Business after the Closing, as of the Closing, the
assets, properties and rights of the Company, and the assets, rights, properties
and services made available to Buyer or the Company pursuant to this Agreement
and the other Transaction Agreements (and the assets used to provide such
services), including in each case the Intellectual Property that will be
licensed pursuant to the Intellectual Property License, will, as of the Closing,
comprise assets, properties and rights that are sufficient to permit Buyer to
administer the Company Business immediately following the Closing Date (after
giving effect to the Restructuring Agreements) in substantially the same manner
as the Company Business is being administered as of the date hereof.  This
Section 3.23 does not address employee matters, which are addressed in
Section 3.9.

 

SECTION 3.24.     Book and Records.  All Books and Records are maintained in
accordance with Applicable Law.

 

SECTION 3.25.     Transactions with Affiliates.  Section 3.25 of the Seller
Disclosure Schedule lists all contracts between the Company, on the one, hand,
and Seller or any Affiliate of Seller (other than the Company), on the other
hand, that will not be terminated on or prior to the Closing Date.

 

SECTION 3.26.     Investment Assets.

 

(a)          Seller has provided Buyer prior to the date hereof a true, correct
and complete list of all Investment Assets owned by the Company in its general
account as of June 30, 2013 and such list is set forth in Section 3.26(a) of the
Seller Disclosure Schedule.

 

(b)          Except as set forth on Section 3.26(b) of the Seller Disclosure
Schedule, all of the Business Investment Assets were acquired in compliance, in
all material respects, with Applicable Law.  The Company or Seller or its
applicable Affiliate, as applicable, has good and

 

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marketable title in and to all of the Business Investment Assets it purports to
own, and after the Closing the Company will have good and marketable title in
and to all Business Investment Assets, in each case free and clear of all Liens,
other than Permitted Liens, except to the extent such Business Investment Asset
is on deposit with Insurance Regulators pursuant to Applicable Law on behalf of
the Company.

 

(c)          Except as set forth on Section 3.26(c) of the Seller Disclosure
Schedule, neither the Company nor Seller (with respect to the Recaptured
Investment Assets) has any material funding obligations of any kind, or material
obligation to make any additional advances or investments (including any
obligation relating to any currency or interest rate swap, hedge or similar
arrangement), in respect of any of the Business Investment Assets.  There are no
material outstanding commitments, options, put agreements or other arrangements
relating to the Business Investment Assets to which Buyer or the Company may be
subject upon or after the Closing.

 

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER

 

Subject to and as qualified by the matters set forth in the Buyer Disclosure
Schedule, Buyer represents and warrants to Seller, as of the date hereof and as
of the Closing Date (or such other date specified herein), as follows:

 

SECTION 4.1.        Organization, Standing and Corporate Power.  Buyer is a
corporation, duly organized, validly existing and in good standing under the
laws of Delaware.  Each other Buyer Party is an entity duly incorporated or
organized (as the case may be), validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization.  Buyer has the
requisite corporate power and authority to own, lease or otherwise hold the
assets and properties owned, leased or otherwise held by it and to carry on its
business as now being conducted.  Buyer is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification necessary, other than in such jurisdictions
where the failure to be so qualified or in good standing (individually or in the
aggregate) would not reasonably be expected, individually or in the aggregate,
to materially impair the ability of Buyer to consummate any of the transactions
contemplated hereby.

 

SECTION 4.2.        Authority.  Each Buyer Party has the requisite corporate
power and authority to enter into the Transaction Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby.  The
execution and delivery by each Buyer Party of the Transaction Agreements to
which it is or will be a party and the consummation by each Buyer Party of the
transactions contemplated hereby and thereby have been and, with respect to the
Transaction Agreements to be executed and delivered after the date of this
Agreement, will be, duly authorized by all necessary corporate action on the
part of such Buyer Party.  Each of the Transaction Agreements to which a Buyer
Party is or will be a party has been duly executed and delivered by such Buyer
Party and, assuming such Transaction Agreements constitute the valid and binding
agreement of the Seller Parties party thereto, constitute valid and binding
obligations of such Buyer Party, enforceable against such Buyer Party in
accordance with their terms except that (i) such enforcement may be subject to
applicable bankruptcy,

 

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insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors’ rights generally and (ii) the remedy 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 therefor may be brought.

 

SECTION 4.3.        Noncontravention; Consents.  Except as disclosed in
Section 4.3 of the Buyer Disclosure Schedule, the execution and delivery 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 Buyer
Party do not and will not (i) conflict with any of the provisions of the
Organizational Documents of any Buyer Party, (ii) subject to the matters
referred to in the next sentence, conflict with, result in a breach of or
default (with or without notice or lapse of time or both) under, give rise to a
right of termination under, or result in the creation of any Lien (other than a
Permitted Lien) on any property or asset of Buyer or any of its Subsidiaries
under, any agreement, permit, license or instrument to which Buyer or any of its
Subsidiaries is a party or (iii) subject to the matters referred to in the next
sentence, contravene any Applicable Law, which, in the case of clauses (ii) and
(iii) above, would materially impair the ability of Buyer to consummate any of
the transactions contemplated hereby.  No consent, approval or authorization of,
or declaration or filing with, or notice to, any third party or other
Governmental Entity is required by or with respect to any Buyer Party in
connection with the execution and delivery of the Transaction Agreements by the
Buyer Parties or the consummation by the Buyer Parties of any of the
transactions contemplated thereby.  To the Knowledge of Buyer, no fact or
circumstance relating to Buyer or its Affiliates (including their plans for
funding the purchase of the Shares or financing or operating the Company from
and after the Closing) exists as of the date hereof that would render Buyer or
its Affiliates, as applicable, unable promptly to obtain any approval,
authorization or consent of any Governmental Entity required to be obtained to
consummate the transactions contemplated by the Transaction Agreements.

 

SECTION 4.4.        Compliance with Applicable Laws.  Except as disclosed in
Section 4.4 of the Buyer Disclosure Schedule, since its formation, Buyer has
been in compliance in all material respects with all Applicable Laws.  Except as
disclosed in Section 4.4 of the Buyer Disclosure Schedule, Buyer has not
received any written notice or other written communication from any Governmental
Entity regarding any (i) actual or alleged violation of, or failure on the part
of Buyer to comply with, any Applicable Laws or (ii) investigation by any
Governmental Entity of any such violation or failure to comply, in each case
other than any such item that has been cured or otherwise resolved to the
satisfaction of such Governmental Entity or that is no longer being pursued by
such Governmental Entity following a response by Buyer.

 

SECTION 4.5.        Purchase Not for Distribution.  The Shares to be acquired
under the terms of this Agreement will be acquired by Buyer for its own account
and not with a view to distribution.  Buyer will not resell, transfer, assign,
pledge or otherwise dispose of any Shares, except in compliance with the
registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws, or pursuant to an available exemption
therefrom.

 

SECTION 4.6.        Litigation.  There is no Action pending or, to the Knowledge
of Buyer, threatened in writing against or affecting Buyer or any Affiliate of
Buyer that (i) seeks to

 

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restrain or enjoin the consummation of any of the transactions contemplated by
this Agreement or (ii) would reasonably be expected to impair materially the
ability of Buyer to consummate any of the transactions contemplated by this
Agreement, including the Financing.  Neither Buyer nor any of its Affiliates
nor, to the Knowledge of Buyer, any officer, director or employee of Buyer or
any of its Affiliates has been permanently or temporarily enjoined or barred by
any order, judgment or decree of any Governmental Entity from engaging in or
continuing any conduct or practice in connection with the business conducted by
the Company or otherwise that would reasonably be expected to have, individually
or in the aggregate, a material adverse effect on the ability of any Buyer Party
to consummate any of the transactions contemplated by any Transaction Agreement.

 

SECTION 4.7.                       Financial Ability.

 

(a)                               Attached as Exhibit I are true, correct and
complete copies of: (i) the executed commitment letter, dated as of July 17,
2013 among Buyer, Royal Bank of Canada, RBC Capital Markets, The Royal Bank of
Scotland plc and RBS Securities Inc. (as amended, supplemented or replaced in
compliance with this Agreement, the “Debt Commitment Letter”), pursuant to
which, upon the terms and subject to the conditions set forth therein, Royal
Bank of Canada and The Royal Bank of Scotland plc have agreed to lend the
amounts set forth therein to Buyer for the purpose of funding the transactions
contemplated by this Agreement (the “Debt Financing”); (ii) the executed equity
commitment letter, dated as of July 17, 2013 among Buyer, Parent and Resolution
Life GP Ltd. (as amended, supplemented or replaced as permitted by this
Agreement, the “Equity Commitment Letter”), pursuant to which, upon the terms
and subject to the conditions set forth therein, Parent has committed to invest
in Buyer the cash amount set forth therein (the “Equity Financing”), and which
makes Seller an express third-party beneficiary to the Equity Commitment Letter
entitled to enforce the obligations of Parent and the General Partner (as
defined in the Equity Commitment Letter) thereunder, subject to the limitations
set forth therein; and (iii) the executed commitment letter, dated as of July
17, 2013 between Buyer and Hannover Life Reassurance Company of America (as
amended, supplemented or replaced as permitted by this Agreement, the “NER
Commitment Letter” and together with the Debt Commitment Letter and the Equity
Commitment Letter, the “Commitment Letters”), pursuant to which, upon the terms
and subject to the conditions set forth therein, Hannover Life Reassurance
Company of America has agreed to provide financing for certain of the Financed
Amounts (the “NER Financing” and together with the Debt Financing and the Equity
Financing, the “Financing”).  Buyer has made available to Seller true and
complete copies of (A) the subscription agreements executed prior to the date
hereof by the Investors, including the amendments thereto executed on or prior
to the date hereof, whereby they have committed to become limited partners of
Parent and to make the capital contributions contemplated thereby and (B) the
fully executed Limited Partnership Agreement of Parent that is in effect as of
the date hereof.

 

(b)                              None of the Commitment Letters has been amended
or modified prior to the date of this Agreement (provided that the existence or
exercise of “flex” provisions (if any) in the Fee Letter (as defined below) or
in the NER Commitment Letter shall not constitute an amendment or modification
of the Commitment Letters), and, as of the date hereof, the respective
commitments contained in the Commitment Letters have not been withdrawn,
terminated or rescinded in any respect.  As of the date hereof, each Commitment
Letter (x) is in

 

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full force and effect and (y) is a legal, valid and binding obligation of Buyer
and, to the Knowledge of Buyer, the other parties thereto and is enforceable
against Buyer and, to the Knowledge of Buyer, each of the other parties thereto,
in each case except that (A) such enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors’ rights generally and (B) the remedy 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 therefor may be brought.  Other than as set forth in the
Commitment Letters and the Fee Letter, there are no conditions related to the
funding of the full amount of the Financing (including any “flex” provisions)
(or, in the case of the NER Financing, related to the closing of such Financing)
under any agreement relating to the Financing to which Buyer or any of its
Affiliates is a party.  Buyer has fully paid any and all commitment fees or
other fees in connection with the Commitment Letters that have become due and
payable thereunder.  No event has occurred and no circumstance exists that, with
or without notice, lapse of time or both, would constitute a default or breach
on the part of Buyer or any of its Affiliates or, to the Knowledge of Buyer, on
the part of any other party to any Commitment Letter, under any term or
condition of any Commitment Letter.  Assuming the conditions set forth in
Article VI will be satisfied at or prior to the Closing, and assuming compliance
in all material respects by Seller with its obligations under this Agreement,
Buyer has no reason to believe that Buyer or any of its Affiliates will be
unable to satisfy on a timely basis any term or condition that is required to be
satisfied by it or any of its Affiliates as a condition to the funding of the
Financing (or, in the case of the NER Financing, to the closing of such
Financing) by the Financing Sources, or that the Financing will not be made
available to Buyer on the Closing Date.  There are no side letters or other
agreements, contracts or arrangements, written or oral, related to the funding
or investing, as applicable, of the full amount of the Financing, other than the
fee letter in connection with the Debt Financing (the “Fee Letter”), a true,
correct and complete copy of which has been provided by Buyer to Seller prior to
the date hereof, with only the fee amounts and the economic terms of any market
“flex” (none of which would adversely affect the amount or availability of the
Debt Financing) redacted.

 

(c)                               The funding commitments under the Commitment
Letters, assuming the commitment under the NER Commitment Letter were limited to
$450,000,000 in Financed Amounts, are in an amount sufficient to permit the
Buyer Parties to consummate the transactions contemplated hereby and by the
other Transaction Agreements and to perform their obligations under this
Agreement and the other Transaction Agreements, including the payment by Buyer
of the Purchase Price at the Closing as contemplated to be paid by Section 2.1,
to ensure that the Company is adequately capitalized at the Closing in an amount
sufficient to support the ongoing administration of the Company Business
following the Closing and to pay all fees and expenses payable by them in
connection with this Agreement and the other Transaction Agreements.

 

(d)                             No consent, approval or authorization of, or
declaration or filing with, or notice to, any third party or other Governmental
Entity is required by or with respect to any equity investor in Parent (the
“Investors”) in connection with (A) the execution and delivery of the
Transaction Agreements by the Buyer Parties or the consummation by the Buyer
Parties of any of the transactions contemplated thereby, or (B) the execution
and delivery of the Equity Commitment Letter or any definitive agreement with
respect to the Equity Financing by any Buyer Party or any Investor or the
consummation by any Buyer Party or any Investor of the

 

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Financing, except for the consents, approvals, authorizations, declarations,
filings and notices set forth in Section 4.7(d) of the Buyer Disclosure
Schedule.

 

SECTION 4.8.                       Solvency.  Buyer is not entering into the
transactions contemplated by this Agreement with the intent to hinder, delay or
defraud either present or future creditors of Buyer or the Company.  Immediately
following the Closing and after giving effect to the transactions contemplated
by the Transaction Agreements, including the payment of the Adjusted Initial
Amount as contemplated by Section 2.4 and the payment of all other amounts
required to be paid by the Company or by Buyer or any of its Affiliates in
connection with the transactions contemplated by the Transaction Agreements and
all related fees and expenses, each of Buyer and the Company will be solvent. 
For the purposes of this Agreement, the term “Solvent,” when used with respect
to any Person, means that, as of any date of determination, (i) the amount of
the “fair saleable value” of the assets of such Person will, as of such date,
exceed (x) the value of all “liabilities of such Person, including a reasonable
estimate of contingent and other liabilities,” as of such date, as such quoted
terms are generally determined in accordance with Applicable Law governing
determinations of the insolvency of debtors, and (y) the amount that will be
required to pay the probable liabilities of such Person with respect to its
existing debts (including contingent and other liabilities) as such debts become
absolute and mature, (ii) such Person will not have, as of such date, an
unreasonably small amount of capital for the operation of the businesses in
which it is engaged or proposed to be engaged following such date and (iii) such
Person will be able to pay its liabilities, as of such date, including
contingent and other liabilities, as they mature.  For purposes of this
definition, “not have an unreasonably small amount of capital for the operation
of the businesses in which it is engaged or proposed to be engaged” and “able to
pay its liabilities, as of such date, including a reasonable estimate of
contingent and other liabilities” means that such Person will be able to
generate enough cash to meet its obligations as they become due.

 

SECTION 4.9.                       Brokers.  Buyer is solely responsible for the
payment of the fees and expenses of any broker, investment banker, financial
adviser or other Person acting in a similar capacity in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer or any Affiliate.

 

ARTICLE V.
COVENANTS

 

SECTION 5.1.                       Conduct of Business of the Company.

 

(a)                               Except as expressly provided for by this
Agreement, as required by Applicable Law, as set forth in Section 5.1 of the
Seller Disclosure Schedule or as Buyer otherwise consents in advance in writing
(which consent shall not be unreasonably withheld, conditioned or delayed), from
the date of this Agreement to the Closing Date, Seller shall and shall cause the
Company to carry on the Company Business only in the ordinary course consistent
with past practice and use commercially reasonable efforts to preserve intact
and maintain its current business organizations and its material relationships
with third parties (including agents, brokers, insureds and others having
business dealings with them) and employees.  Without limiting the generality of
the foregoing, from the date of this Agreement to the Closing Date, except as
expressly provided for by this Agreement, as required by Applicable

 

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Law or as set forth in Section 5.1 of the Seller Disclosure Schedule, Seller
shall cause the Company not to, and to the extent affecting the Company
Business, it shall not, without the prior written consent of Buyer (which
consent shall not be unreasonably withheld, conditioned or delayed):

 

(i)                                  enter into, amend, modify, terminate or
waive any provision of any (A) Contract or (B) any Company Benefit Plan to the
extent that such Company Benefit Plan pertains to any Producer or former
Producer, other than as required under the express terms of any existing Company
Benefit Plan or by Applicable Law;

 

(ii)                              other than Investment Assets and other than
acquisitions, dispositions or transfers in the ordinary course of business
consistent with past practice, acquire, dispose of or transfer any asset,
property or Intellectual Property right of the Company or the Company Business
with a value in excess of $500,000 per such asset, property or Intellectual
Property right or $5,000,000 in the aggregate;

 

(iii)                          (A) split, combine or reclassify any of the
Company’s outstanding capital stock or equity securities or issue or authorize
the issuance of any other stock or securities (including any derivatives
securities) in respect of, in lieu of or in substitution for shares or other
interests representing any of the Company’s outstanding capital stock or equity
securities, (B) whether directly or indirectly, purchase, redeem or otherwise
acquire any Shares or other interests representing outstanding capital stock or
equity securities of the Company or any rights, warrants or options to acquire
any such Shares or interests or (C) amend the Organizational Documents of the
Company, or adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization, business
combination or other reorganization, of the Company;

 

(iv)                          issue, sell, convey, transfer, dispose of, pledge
or otherwise encumber any Shares or other interests representing the capital
stock of or equity interests in the Company or any other securities of the
Company of any sort, or issue, sell, grant or enter into any subscription,
warrant, option, conversion or other right, agreement, commitment, arrangement
or understanding of any kind, contingent or otherwise, to purchase or otherwise
acquire, any such Shares or interests, or any securities convertible into or
exchangeable for any such Shares or interests, or permit any of its Affiliates
to do any of the foregoing;

 

(v)                              promise, grant or agree to increase the
compensation or benefits of any Producer or former Producer, or permit any of
its Affiliates to do any of the foregoing, in each case other than in the
ordinary course of business consistent with past practice or as required by any
Employee Benefit Plan in-force as of the date hereof;

 

(vi)                          in the case of the Company, acquire (by merger,
consolidation, acquisition of stock or assets or otherwise) any other Person or
all or substantially all the assets of any other Person or create or acquire any
Subsidiaries;

 

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(vii)                      make any material change in the accounting,
actuarial, investment, reserving, underwriting, claims payment or administration
policies, practices or principles of the Company or Seller (with respect to the
Company Business), except as may be required by GAAP or SAP;

 

(viii)                  in the case of the Company, make, or commit to make, any
capital expenditures that are, in the aggregate, in excess of $5,000,000;

 

(ix)                          in the case of the Company, incur, assume or
guarantee any indebtedness for borrowed money or otherwise become responsible
for any indebtedness of another Person;

 

(x)                              in the case of the Company, other than in
connection with the management of Investment Assets, make any loans, advances or
capital contributions to, or investments in, any other Person, other than loans
and advances to Producers and Company Employees in the ordinary course of
business consistent with past practice;

 

(xi)                          pay, settle or compromise any Action or threatened
Action involving the Company or the Company Business, except for claims under
Insurance Contracts within applicable policy limits and other than any
settlement or compromise that involves solely monetary damages that are not in
excess of $500,000;

 

(xii)                      in the case of the Company, make, change or revoke
any material election related to Taxes, settle or compromise any material Tax
liability, enter into any closing agreement related to Tax, consent to any
extension or waiver of the limitations period applicable to any Tax claim or
assessment, change any taxable period or any Tax accounting method, amend any
material Tax Returns, surrender any right to claim a material Tax refund, offset
or other reduction in Tax liability, in each case if any such election, change,
revocation, settlement, compromise, consent, waiver or other action would
reasonably be expected to adversely impact the Tax position of the Company for
any period ending after the Closing Date;

 

(xiii)                  declare, set aside or pay any dividends, or make any
other distributions, in respect of any of the Shares;

 

(xiv)                  abandon, modify, waive or terminate any material Permit
of the Company;

 

(xv)                      amend or modify any Transaction Agreement entered into
prior to the Closing Date; or

 

(xvi)                  agree or commit to do any of the foregoing.

 

(b)                              Notwithstanding anything in this Agreement to
the contrary, between the date hereof and the Closing Date, neither Seller nor
any of its Affiliates (including the Company) shall be required to take any
action, or refrain from taking any action, at the instruction or request of
Buyer unless and until Buyer has presented Seller with written evidence to
Seller’s

 

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reasonable satisfaction that Hannover Life Reassurance Company of America has
consented to such action or inaction, as applicable.

 

SECTION 5.2.                       Access to Information; Books and Records;
Confidentiality.

 

(a)                               Prior to the Closing Date, Seller shall, and
shall cause the Company to, afford to Buyer and its Representatives reasonable
access upon reasonable notice at reasonable times during normal business hours
to all of the properties, books, contracts and records of the Company and
Seller, to the extent related to the Company Business, and, during such period,
Seller shall, and shall cause the Company to, furnish to Buyer such information
that relates to the Company Business or the business, properties, financial
condition, operations and senior personnel of the Company as Buyer may from time
to time reasonably request, other than any such properties, books, contracts,
records and information that (i) are subject to an attorney-client or other
legal privilege that might be impaired by such disclosure or (ii) are subject to
an obligation of confidentiality.  All requests for access or information
pursuant to this Section 5.2 shall be directed to such Person or Persons as
Seller shall designate.  Without limiting the terms thereof, the Confidentiality
Agreement shall govern the obligations of Buyer and its Representatives with
respect to all information of any type furnished or made available to them
pursuant to this Section 5.2.

 

(b)                              At the Closing, Seller shall cause all Books
and Records in the possession of Seller or any of its Affiliates to be delivered
to the Company (or a Person designated by Buyer) in the manner (and in the case
of physical Books and Records, at the location(s)) reasonably requested by
Buyer, subject to the following exceptions:  (i) Buyer recognizes that certain
Books and Records may contain information that relates to the Company Business
but relates primarily to businesses of Seller other than the Company Business,
and that Seller may retain such Books and Records if it provides copies of the
relevant portions thereof to Buyer; and (ii) Buyer recognizes that Seller may
need to retain Books and Records to perform certain services under the
Transaction Agreements and that Seller may retain such Books and Records as long
as they are necessary to provide such services, provided that (A) Seller shall
provide Buyer and its Representatives reasonable access to such records and (B)
once such Books and Records are no longer necessary for the provision of such
services, Seller shall cause all such Books and Records to be delivered to the
Company (or a Person designated by Buyer) or, at Buyer’s option, to be
destroyed.

 

(c)                               Following the Closing Date, Seller shall, and
shall cause its Affiliates to: (i) allow Buyer, upon reasonable prior notice and
during normal business hours, through its employees and Representatives, the
right, at Buyer’s expense, to examine any records retained by Seller or any of
its Affiliates for any reasonable business purpose, including the preparation or
examination of Buyer’s Tax Returns, regulatory filings and financial statements,
but only to the extent that such records of Seller relate to the operation of
the Company Business prior to the Closing; (ii) allow Buyer to interview
Seller’s employees for any reasonable purpose relating to the Company, including
the preparation or examination of Buyer’s Tax Returns, regulatory and statutory
filings and financial statements and the conduct of any litigation relating to
the Company Business or otherwise (except litigation involving Seller or any of
its Affiliates), or the conduct of any regulatory, customer or other dispute
resolution process (other than any dispute involving Seller or any of its
Affiliates); and (iii) maintain such records for Buyer’s examination

 

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until at least the sixth anniversary of the Closing Date, after which
anniversary Seller may destroy such records in its discretion after giving
reasonable prior written notice to Buyer of its intent to destroy such
documents, provided, that Seller and its Affiliates shall have no obligation to
maintain or retain any books and records to the extent that electronic or paper
copies or originals of such books and records are delivered to Buyer or any of
its Affiliates (including the Company) at or prior to the Closing.  Access to
such employees and records shall not unreasonably interfere with the business
operations of Seller or its Affiliates.  Notwithstanding the foregoing, access
to records relating to Taxes shall be governed exclusively by Section 8.4.

 

(d)                             From and after the Closing: (i) Seller shall,
and shall cause its Affiliates and Representatives to, maintain in confidence
any written, oral or other information to the extent relating to the Company
Business obtained by virtue of Seller’s ownership of the Company prior to the
Closing or otherwise obtained by Seller pursuant to Section 5.9; and (ii) Buyer
shall, and shall cause its Affiliates and representatives to, maintain in
confidence any written, oral or other information of or relating to Seller or
its Affiliates (other than information relating to the Company Business)
obtained by virtue of its ownership of the Company from and after the Closing,
except, in each case, to the extent that the applicable party is required to
disclose such information by judicial or administrative process or pursuant to
Applicable Law (provided that such party has given the other party written
notice of such potential disclosure and, to the extent reasonably requested by
such other party, cooperated with such other party in seeking an appropriate
order or other remedy protecting such information from disclosure) or such
information can be shown to have been in the public domain through no fault of
the applicable party.

 

(e)                               From and after the date hereof, Seller shall,
and shall cause its Affiliates to, and shall instruct its Representatives to,
maintain in confidence any written, oral or other information to the extent
relating to Parent or any of the Investors, including the identity of the
Investors, the terms of the Limited Partnership Agreement and the terms of the
Subscription Agreements, in each case, obtained by Seller in connection with the
transactions contemplated hereunder, except to the extent that the applicable
Person is requested or required to disclose such information by judicial or
administrative process or pursuant to Applicable Law (provided that, to the
extent practicable and permitted under Applicable Law, Seller shall notify Buyer
of such request or requirement so that Buyer or one of its Affiliates may seek
an appropriate order or other remedy protecting such information from
disclosure) or such information can be shown to have been in the public domain
through no fault of Seller or any of its Affiliates.

 

SECTION 5.3.                       Reasonable Best Efforts.  Upon the terms and
subject to the conditions and other agreements set forth in this Agreement, each
of the parties agrees to use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by the Transaction Agreements.

 

SECTION 5.4.                       Consents, Approvals and Filings.

 

(a)                               Seller and Buyer shall each use its reasonable
best efforts to obtain, and shall cooperate with the reasonable requests of each
other in seeking to obtain, as promptly as

 

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practicable, all necessary permits, orders or other consents, approvals or
authorizations of Governmental Entities and consents or waivers of all other
third parties necessary in connection with the consummation of the transactions
contemplated by the Transaction Agreements, including the Financing (including
those set forth in Section 3.5 of the Seller Disclosure Schedule or Section 4.3
of the Buyer Disclosure Schedule but excluding those contemplated by Section
5.4(c)); provided, that Buyer and Seller shall share equally in the costs
(including any license or other fees and expenses) associated with obtaining any
such consents or waivers from such other third parties.  In connection
therewith, Seller and Buyer shall make and cause their respective Affiliates to
make all legally required filings as promptly as practicable in order to
facilitate prompt consummation of the transactions contemplated by the
Transaction Agreements (including the Financing), shall provide and shall cause
their respective Affiliates to provide such information and communications to
Governmental Entities as such Governmental Entities may request, shall take and
shall cause their respective Affiliates to take all steps that are necessary,
proper or advisable to avoid any Action by any Governmental Entity with respect
to the transactions contemplated by the Transaction Agreements (including the
Financing), shall defend or contest in good faith any Action brought against
such Person or any of its Affiliates by any third party (including any
Governmental Entity), whether judicial or administrative, challenging any of the
Transaction Agreements or the transactions contemplated thereby (including the
Financing), or that could otherwise prevent, impede, interfere with, hinder or
delay in any material respect the consummation of any such transaction,
including by using its reasonable best efforts to have vacated or reversed any
stay or temporary restraining order entered with respect to any such transaction
by any Governmental Entity, and shall consent to and comply with any condition
imposed by any Governmental Entity on its grant of any such permit, order,
consent, approval or authorization, other than any such condition that, (i) in
the case of Buyer, would have a Material Adverse Effect or require the Company
immediately after the Closing to maintain a level of total adjusted capital (as
defined in the RBC Instructions) in excess of the Maximum Capital Amount (such
condition, a “Buyer Burdensome Condition”) or (ii) in the case of Seller, would
require Seller to provide or maintain any guarantee or keepwell or incur any
Liability with respect to the Company after the Closing Date, require Seller to
make any capital contribution (whether through the acquisition of surplus notes
or equity securities or otherwise) to the Company that would not be repaid in
full prior to or at the Closing or restrict in any material respect the ability
of Seller or any of its Affiliates to conduct their respective businesses after
the Closing Date (a “Seller Burdensome Condition”).  Each of the parties shall
provide to the other party copies of all applications or other communications to
Governmental Entities in connection with this Agreement in advance of the filing
or submission thereof.

 

(b)                              Without limiting the generality of the
foregoing, within 20 Business Days after the date hereof, each party shall file
with all applicable Insurance Regulators requests for approval of the
transactions contemplated by the Transaction Agreements (including the Financing
but excluding the Recapture), which requests shall include applications from any
Investors if and to the extent such Investors are required to be included in
such filings under Applicable Law and all required exhibits; provided, that,
notwithstanding the foregoing, the following shall apply with respect to the NER
Financing: Buyer shall use its reasonable best efforts to file a complete
package of materials for approval of the NER Financing substantially
contemporaneously with the filing of its “Form A” statement with Nebraska;
provided, further that Buyer may require up to 30 Business Days after the date
hereof in order to make such filing.  Buyer shall not, and shall cause its
Affiliates, Representatives and Financing Sources not to,

 

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make any written or oral request for approval from any Governmental Entity for
the NER Financing to include financing of more than $513,000,000 in Financed
Amounts, subject to Section 4.3 of the Buyer Disclosure Schedule.  Buyer shall
not, and shall cause its Affiliates and Representatives not to, in connection
with seeking to obtain any permit, order, consent, approval or authorization of
any Governmental Entity in connection with the transactions contemplated by this
Agreement, request approval to operate the Company at or after the Closing at a
level of total adjusted capital (as defined in the RBC Instructions) that would
correspond to an RBC Ratio below 300%.  Seller acknowledges that Buyer may
request in its “Form A” filing the approval of the Nebraska Department of
Insurance for the payment immediately prior to, on or immediately after the
Closing of a dividend by the Company in an amount that, after giving effect to
the transactions contemplated by this Agreement to occur on or prior to the
Closing, would not cause the Closing RBC Ratio to be less than the Specified
Capital Amount; provided, that obtaining approval from the Nebraska Department
of Insurance for all or any portion of such dividend (either alone or as part of
Buyer’s request for approval of the transactions contemplated by this Agreement)
is not a condition to the Closing.  Seller shall use its commercially reasonable
efforts to cooperate with Buyer’s reasonable requests in seeking approval for
such dividend; provided that, in connection with the foregoing, Seller shall not
be required to take any action that would adversely affect Seller or any of its
Affiliates, including by delaying in any material respect the consummation of
the transactions contemplated by this Agreement or negatively affecting the
likelihood that any applicable Governmental Entity will approve the repayment in
full by the Company, prior to or at the Closing, of any capital contributed to
the Company by Seller or any of its Affiliates in connection with the Recapture
or pursuant to any keepwell entered into in connection with the Recapture. 
Unless it would be prohibited to do so under Applicable Law, Buyer shall cause
any presentation provided to the Governmental Entities in the State of Nebraska
with respect to the transactions contemplated by this Agreement to be
substantially consistent with the presentation provided by Buyer to the Lead
Arrangers (as such term is defined in the Debt Commitment Letter) on or prior to
the date hereof, including with respect to initial capitalization.  Buyer shall
enforce its rights under the Equity Commitment Letter to cause Parent to
exercise its rights under the Subscription Agreement and the Limited Partnership
Agreement to cause any Investors to furnish any information, representations,
certifications, applications, affidavits, forms and other documents, make any
filings and take such other actions, as may be required under Applicable Law or
that otherwise may be requested or required by any Governmental Entity in
connection with the transactions contemplated by this Agreement, including as
necessary to complete and make any regulatory filing in connection with the
transactions contemplated by this Agreement.  A reasonable time prior to
furnishing any written materials to any Insurance Regulator in connection with
the transactions contemplated by the Transaction Agreements (including the
Financing), each party shall furnish the other a copy thereof, and the receiving
party shall have a reasonable opportunity to provide comments thereon.  Each
party shall give to the other party prompt written notice if it (or any of its
Affiliates) receives, and Buyer shall give Seller written notice if any of the
Investors receive, any notice or other communication from any Insurance
Regulator in connection with the transactions contemplated by the Transaction
Agreements (including the Financing) promptly after becoming aware of such
notice or communication, and, in the case of any such notice or communication
which is in writing, shall furnish the other party with a copy thereof promptly
after receipt thereof.  If any Insurance Regulator requires that a hearing be
held in connection with any such approval, each party shall use its reasonable
best efforts to arrange for such hearing to be held

 

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promptly after the notice that such hearing is required has been received by
such party.  Each party shall give to the other party reasonable prior written
notice of the time and place when any meetings, telephone calls or other
conferences (other than immaterial non-substantive matters or matters that are
time-sensitive and for which reasonable prior notice cannot be given) may be
held by it with any Insurance Regulator in connection with the transactions
contemplated by the Transaction Agreements, and the other party shall have the
right to have a representative or representatives attend or otherwise
participate in any such meeting, telephone call or other conference.

 

(c)                               Seller shall, and, to the extent reasonably
requested by Seller, Buyer shall cooperate in Seller’s efforts to, as promptly
as practicable after the date hereof, but in no event later than 20 Business
Days after the date hereof, file with all applicable Governmental Entities
requests for approval of the Recapture to be completed pursuant to the terms of
the Recapture Agreement effective as of July 1, 2013 or such other date as may
be mutually agreed by the parties (it being agreed that, if any permit, order,
consent, approval or authorization of any Governmental Entity that is required
in connection with effecting the Recapture as of July 1, 2013 cannot be
obtained, then the parties shall negotiate in good faith and use commercially
reasonable efforts to agree to an alternative date as proximate as possible to
July 1, 2013 for effecting the Recapture that is acceptable to such Governmental
Entity and mutually acceptable to both parties; provided, that neither party may
object to any other effective date if implementing the Recapture as of such date
would not have a material adverse effect on the aggregate economic benefits,
taken as a whole, that such party reasonably expects to derive from the
implementation of the Recapture as of July 1, 2013).  Promptly after receipt of
all applicable orders, consents, approvals and authorizations of any
Governmental Entity required in connection with the consummation of the
Recapture, Seller shall, and shall cause the Company to, execute the Recapture
Agreement and amend the Existing Seller Reinsurance Agreements as and to the
extent necessary to reflect the Recapture.  From the time at which the Recapture
is consummated until the Closing, Seller shall continue to administer the
Company Business pursuant to existing intercompany arrangements.  In the event
that, in connection with its grant of any order, consent, approval or
authorization with respect to the consummation of the Recapture, any
Governmental Entity requires Seller or any of its Affiliates to make a capital
contribution to the Company (whether through the acquisition of surplus notes or
equity securities or otherwise), to provide any guarantee or keepwell to the
Company or to enter into any other agreement or arrangement with respect to the
Company or the Recapture, Buyer and Seller shall each use reasonable best
efforts to obtain approval from all applicable Governmental Entities for (A)  in
the event that a capital contribution is required, a dividend, distribution or
other payment in the full amount of such capital contribution to be made in cash
by the Company to Seller prior to or at the Closing, (B) in the event that a
guarantee or keepwell is required, a termination of such guarantee or keepwell
prior to or at the Closing and a repayment in cash of any amounts paid under
such guarantee or keepwell between the date hereof and the Closing, and (C) in
the event that any such other agreement or arrangement with respect to the
Company or the Recapture is required, an unwinding or termination of such
agreement or arrangement prior to or at the Closing.

 

(d)                             From the date hereof to the Closing Date, Seller
and Buyer shall each use its reasonable best efforts, and shall cooperate fully
with each other, to cause the reinsurer under each Ceded Reinsurance Contract
pursuant to which such reinsurer reinsures both risk included

 

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in the Company Business and risk that is not included in the Company Business
(each, a “Shared Reinsurance Agreement”) to (i) enter into (A) a novation to
Seller or one or more of its Affiliates of the portion of such Shared
Reinsurance Agreement comprising risk that is not included in the Company
Business or (B) an amendment of such Shared Reinsurance Agreement to exclude the
risk that is not included in the Company Business together with a new
reinsurance arrangement with Seller or one or more of its Affiliates pursuant to
which such risk will be reinsured by such reinsurer on the same terms as those
applicable under the Shared Reinsurance Agreement (each of (A) and (B), an
“Alternative Reinsurance Arrangement”) and (ii) waive any right to terminate
such Shared Reinsurance Agreement pursuant to its terms as a result of the
consummation of the transactions contemplated by this Agreement; provided that
neither party shall be required to compromise any right, asset or benefit or
expend any amount, incur any Liability or provide any other consideration in
connection with obtaining the consent of any reinsurer to any Alternative
Reinsurance Arrangement.  The Amended and Restated Reinsurance Agreement will
provide that, if the parties are unable to effect an Alternative Reinsurance
Arrangement with respect to any Shared Reinsurance Agreement and such Shared
Reinsurance Agreement remains in effect after the Closing, the Company will
assign to Seller all rights to the reinsurance recoveries under such Shared
Reinsurance Agreement that relate to the business reinsured to Seller or the
Vermont Captive, and Seller will administer the business that is subject to such
Shared Reinsurance Agreement and is not included in the Company Business under
the Administrative Services Agreement.

 

(e)                               From the date hereof to the Closing Date,
Seller shall use its reasonable best efforts to cause the reinsurer under each
Ceded Reinsurance Contract that covers only Specified Life Business, or that
otherwise covers only business that is not Company Business, to enter into
either (i) a novation of such Ceded Reinsurance Contract from the Company to
Seller or one of its Affiliates or (ii) a termination of such Ceded Reinsurance
Contract together with the concurrent entry into a new reinsurance contract with
Seller on the same terms covering such Specified Life Business or such other
business; provided that neither party shall be required to compromise any right,
asset or benefit or expend any amount, incur any Liability or provide any other
consideration in connection with obtaining the consent of any reinsurer to any
such alternative arrangement.  If the parties are unable to effect an
alternative arrangement with respect to any such Ceded Reinsurance Contract and
such Ceded Reinsurance Contract remains in effect after the Closing Date, Buyer
shall assign to Seller all rights to the reinsurance recoveries under such Ceded
Reinsurance Contract and Seller will administer the business that is subject to
such Ceded Reinsurance Contract under the Administrative Services Agreement.

 

SECTION 5.5.                       Public Announcements.  Each of Buyer and
Seller, and their respective Affiliates, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public announcement with respect to the transactions
contemplated by the Transaction Agreements (including regarding its plans
relating to employees, Producers or other third parties or with respect to the
funding or operation of the business of the Company) and shall not issue any
such press release or make any such public announcement with respect to such
matters without the advance approval of the other party following such
consultation (such approval not to be unreasonably withheld or delayed), except
as may be required by Applicable Law or by the requirements of any securities
exchange; provided, that, in the event that any party is required under
Applicable Law or the requirements of any securities exchange to issue any such
press release or make any public announcement and

 

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it is not feasible to obtain the advance approval of the other party hereto as
required by this Section 5.5, the party that issues such press release or makes
such statement shall provide the other party with notice and a copy of such
press release or statement as soon as reasonably practicable and will make any
correction that may be reasonably required by the other party.

 

SECTION 5.6.                       Related Party Agreements.  Except as set
forth in Section 5.6 of the Seller Disclosure Schedule, all of the intercompany
arrangements between Seller and its Affiliates (other than the Company), on the
one hand, and the Company, on the other hand, will be terminated immediately
prior to the Closing, including by terminating the Company’s participation in
all agreements between more than one of the Company’s Affiliates, on the one
hand, and the Company, on the other hand, and Seller shall cause all
intercompany balances between Seller and its respective Affiliates (other than
the Company), on the one hand, and the Company, on the other hand, to be paid in
full and settled immediately prior to the Closing or as soon thereafter as is
reasonably practicable.

 

SECTION 5.7.                       Use of Name; Domain Name Assignments.

 

(a)                               Prior to or at the Closing, the Company shall
transfer any and all right, title or interest, including all associated
goodwill, which it may have in or to the names, trademarks and service marks set
forth in Section 5.7(a) of the Seller Disclosure Schedule or any name,
trademark, service mark, acronym or logo incorporating any of such names,
trademarks or service marks (collectively, the “Seller Trademarks”), to Seller
or as Seller may direct.

 

(b)                              Prior to or at the Closing, Seller shall, and
shall cause its Affiliates (other than the Company) to, transfer any and all
right, title or interest, including all associated goodwill, which it or they
may have in or to the names, trademarks and service marks set forth in
Section 5.7(b) of the Seller Disclosure Schedule or any name, trademark, service
mark, acronym or logo incorporating any of such names, trademarks or service
marks that does not also contain all or a portion of a Seller Trademark
(collectively, the “Company Trademarks”), to the Company.

 

(c)                               Following the Closing Date, except as
otherwise provided in this Section 5.7, Buyer shall cause the Company promptly
to cease and discontinue any and all uses of the Seller Trademarks, whether or
not in combination with other words, symbols or other distinctive or
non-distinctive elements, and all trade, corporate or business names,
trademarks, tag lines, identifying logos, trade dress, monograms, slogans,
service marks, domain names, brand names and other name or source identifiers
that are derivations, translations, adaptations, combinations or variations of
the Seller Trademarks; provided, that the Company may use Seller Trademarks in
accordance with the Intellectual Property License.  Buyer, for itself and its
Affiliates, agrees that, except as provided in this Section 5.7 and the
Intellectual Property License, any and all rights of the Company to the Seller
Trademarks, including any such rights licensed to the Company pursuant to any
agreements or other arrangements, whether written or oral, with Seller or its
Affiliates, shall terminate on the Closing Date without recourse by Buyer or the
Company.  Neither Buyer nor any of its Affiliates shall seek to register in any
jurisdiction any trade, corporate or business name, trademark, tag-line,
identifying logo, trade dress, monogram, slogan, service mark, domain name,
brand name or other name or source identifier that is a derivation, translation,
adaptation, combination or variation of the Seller Trademarks.

 

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(d)                             The Company hereby grants to Seller and the
Vermont Captive a perpetual, irrevocable fully paid-up right and license for the
Vermont Captive to continue to use the name “Lincoln Benefit” in its legal name
and for associated uses requiring reference to such legal name.  For the
avoidance of doubt, no right is granted to use the name “Lincoln Benefit” as a
brand in connection with the advertising, promotion, marketing, sale or
distribution of products or services, except in connection with products or
services associated with the Company, but such entity shall be permitted to
identify itself as the seller of its products and services in an informational
context.  Upon the request of Buyer after the Closing Date, Seller will use its
reasonable best efforts as promptly as practicable after receiving such request
to change the name of the Vermont Captive to a name that does not include
“Lincoln Benefit” or any confusingly similar name.

 

(e)                               Prior to or at the Closing, the Company shall
transfer any and all right, title or interest which it may have in or to any
Internet domain name containing all or a portion of a Seller Trademark to Seller
or as Seller may direct.  Seller may, from and after the Closing, maintain in
effect the Internet domain name “allstatelincoln.com”, and may cause such
Internet domain name to redirect to an Internet domain name owned by Seller or
any of its Affiliates that does not include a Company Trademark.  Prior to or at
Closing, Seller shall, and shall cause its Affiliates (other than the Company)
to, transfer any and all right, title or interest which it or they may have in
or to any Internet domain name containing all or a portion of a Company
Trademark that does not also contain a Seller Trademark, as set forth in
Section 5.7(e) of the Seller Disclosure Schedule, to the Company.  Except as
contemplated above, nothing in this Agreement requires Seller to assign any
rights in or to, or grant the Company a right or license to use, any domain name
that includes “Allstate” in its name, and nothing in this Agreement requires the
Company to assign any rights in or to, or grant Seller a right or license to
use, any domain name that includes the Lincoln Benefit name in it.

 

SECTION 5.8.                       Further Assurances.

 

(a)                               Seller and Buyer shall (i) execute and
deliver, or shall cause to be executed and delivered, such documents,
certificates, agreements and other writings and shall take, or shall cause to be
taken, such further actions as may be reasonably required or requested by any
party to carry out the provisions of the Transaction Agreements and consummate
or implement expeditiously the transactions contemplated by the Transaction
Agreements and (ii) shall refrain from taking any actions that could reasonably
be expected to impair, delay or impede the Closing.

 

(b)                              On and after the Closing Date, Seller and Buyer
shall, and shall cause their respective Affiliates to, take all reasonable
actions and execute any additional documents, instruments or conveyances of any
kind which may be reasonably necessary to carry out any of the provisions
hereof, so as to put Buyer and its Affiliates in full possession and operating
control of the Company Business.  Notwithstanding the foregoing, no party shall
be obligated pursuant to this Section 5.8 to execute or deliver, or cause to be
executed or delivered, any document, certificate, agreement, instrument,
conveyance or other writing, or take, cause to be taken, any action, if the
effect thereof would be to increase the Liability or obligations of such party
in any material respect, other than as contemplated elsewhere in this Agreement
or the other Transaction Agreements.

 

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SECTION 5.9.                       Access to Books and Records.  Until the later
of the sixth anniversary of the Closing or such time as the information and
access described below is no longer reasonably required by Seller (provided,
that Buyer shall give 30 days’ notice to Seller prior to destroying any records
to permit Seller, at its expense, to examine, duplicate or repossess such books
and records), Buyer shall afford promptly to Seller and its Representatives
access to the books, records, officers, employees, auditors and other advisors
of the Company, and provide information with respect to the Company in a readily
accessible form (including financial information in a form consistent with the
Company’s historical practice for the preparation of such financial
information), to the extent reasonably required by Seller for any lawful
business purpose, including litigation, disputes, compliance, financial
reporting (including financial audits of historical information), loss
reporting, regulatory, Tax and accounting matters (including for any such
matters related to the Transition Services Agreement), and including all
reasonable purposes relating to the Variable Annuity Transaction and the ongoing
relationship between Seller and its Affiliates, on the one hand, and the VA
Buyer, on the other hand, and Buyer shall cooperate fully with Seller and its
Representatives to furnish such books and records and information and make
available such officers, employees, auditors and other advisors of the Company;
provided, that such access does not unreasonably interfere with the conduct of
the business of Buyer or the Company.  Notwithstanding the foregoing, access to
records relating to Taxes shall be governed exclusively by Section 8.4.

 

SECTION 5.10.               Non-Competition.

 

(a)                               For a period of 24 months following the
Closing Date, Seller shall not, and shall cause each of its Affiliates not to,
directly or indirectly, (i) engage in the business of selling any life insurance
or annuities within the United States through any MBA Group (“Competing
Business”), (ii) induce any MBA Group or other Producer to terminate its
relationship with the Company, (iii) induce any MBA Group or other Producer, or
solicit any holder of an insurance or annuity policy or contract included in the
Company Business, to replace, terminate or lapse any insurance or annuity policy
or contract included in the Company Business or (iv) enter into any plan,
program, scheme or course of action to market, endorse, encourage, suggest,
institute, promote, or target, through mass mailings, sales campaigns or
programs, promotions, sales incentives or by any other concerted means, any full
or partial surrender, exchange, replacement or termination with respect to any
insurance or annuity policy or contract included in the Company Business.

 

(b)                              Notwithstanding anything to the contrary set
forth in Section 5.10(a), and without implication that the following activities
otherwise would be subject to the provisions of this Section 5.10, nothing in
this Agreement shall preclude, prohibit or restrict Seller from engaging, or
require Seller to cause any of its Affiliates not to engage, in any manner in
any of the following:

 

(i)                                  engaging in the activities that are
described in Section 5.10(b) of the Seller Disclosure Schedule or that are
permitted pursuant to any of the Transaction Agreements;

 

(ii)                              making investments in the ordinary course of
business, including in a general or separate account of an insurance company, in
Persons engaged in a

 

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Competing Business; provided, that Seller or such Affiliate of Seller: (A) does
not have the right to designate a majority of the members of the board of
directors or other governing body of such entity or otherwise to direct the
operation or management of any such entity; (B) is not a participant with any
other Person in any group (as such term is used in Regulation 13D of the
Securities Exchange Act of 1934, as amended) with such right; and (C) owns less
than 10% of the outstanding voting securities (including convertible securities)
of such entity, excluding any investment held in a general account or separate
account of any insurance company or in any portfolio managed for or on behalf of
a third party;

 

(iii)                          selling any of its assets or businesses to a
Person engaged in a Competing Business or any business that competes with a
Competing Business; or

 

(iv)                          acquiring any assets, or acquiring, merging or
combining with any Person that would cause Seller or any of its Affiliates (as
then constituted) to be engaged in Competing Business (“After-Acquired
Business”); provided, that either (A) at the time of such acquisition, merger or
combination, the revenues derived from the Competing Business by the
After-Acquired Business (the “Competing After-Acquired Revenues”) constitute no
more than 20% of the gross revenues of the After-Acquired Business (for the
avoidance of doubt, including the revenues of all Persons directly or indirectly
acquired as a result of such acquisition, merger or combination) in the most
recently completed fiscal year immediately prior to the date of such
acquisition, merger or combination (the “Aggregate After-Acquired Revenues”), or
(B) if at the time of such acquisition, merger or combination, the Competing
After-Acquired Revenues constitute more than 20% of the Aggregate After-Acquired
Revenues then, within one year after such acquisition, merger or combination,
(i) Seller or such Affiliate of Seller signs a definitive agreement to dispose,
and subsequently disposes of, the relevant portion of the business or securities
of such After-Acquired Business or (ii) Seller or such Affiliate of Seller
otherwise modifies the After-Acquired Business such that the Competing
After-Acquired Revenues constitute not more than 20% of the Aggregate
After-Acquired Revenues.

 

SECTION 5.11.               Non-Solicitation.  For a period of 24 months
following the Closing Date, without the prior written consent of Seller, neither
Buyer nor any of its Affiliates shall, whether directly or indirectly, solicit
for employment, employ or contract for the services of any Person who is
employed by or engaged in the business of Seller or any of its Affiliates (other
than any individuals identified in a writing signed by Buyer and Seller on or
after the date hereof); provided, that nothing in this Section 5.11 shall
prohibit Buyer or any of its Affiliates (including the Company) from engaging in
general solicitations not directed at such Persons or from soliciting, employing
or contracting for the services of any such Person whose employment with or
engagement by Seller and its Affiliates has been terminated by Seller or its
applicable Affiliate or who has otherwise ceased to be employed or engaged by
Seller or any of its Affiliates for a period of at least six months prior to the
first contact by Buyer or any of its Affiliates with such Person.

 

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SECTION 5.12.               Employee Matters.

 

(a)                               On or prior to the Closing, Seller shall take
all necessary actions to cause the Company to have no individuals employed by
the Company.

 

(b)                              Seller shall retain and, to the extent that the
Company has any responsibility or obligation for any such liabilities, shall
assume, effective immediately prior to the Closing, any and all liabilities and
obligations (including any and all obligations in respect of the payment of
wages or any other remuneration or compensation, the provision of any employee
benefits (including pursuant to any Company Benefit Plan) and any claims related
to termination of any such services or with regard to any failure to comply with
any applicable provision of law) relating to the retention by the Company or by
Seller or any of its Affiliates of any person, whether as an employee, director,
independent contractor, principal or otherwise, at any time prior to the Closing
(collectively, the “Excluded Employee Liabilities”).  From and after the
Closing, neither the Company nor the Buyer nor any of their respective
Affiliates shall have any responsibility, liability or obligation for, and shall
not be deemed to have assumed or to become responsible for, any such Excluded
Employee Liabilities.  For the avoidance of doubt, “Excluded Employee
Liabilities” does not include any Liabilities to Producers (other than Producers
that were employees of the Company, if any, and then such term includes those
Liabilities incurred with respect to such Producers solely in their capacities
as employees of the Company or of Seller or any of its Affiliates) or any
Liabilities relating to any deferred compensation plan sponsored by the Company
for the benefit of Producers.

 

SECTION 5.13.               Variable Annuity Transaction.

 

(a)                               From the Closing until the termination in
accordance with its terms of the VA Indemnity Reinsurance Agreement, except as
instructed by Seller or as required under Applicable Law, Buyer shall, and shall
cause the Company to, subject to Section 5.13(f), (i) use commercially
reasonable efforts to continue in-force each Specified VA Transaction Agreement
to the extent relating to the VA Contracts, (ii) not agree to amend, modify or
terminate, expand or otherwise alter any Specified VA Transaction Agreement in
any manner without Seller’s prior written consent, (iii) cooperate in good faith
with Seller’s efforts to, and take all actions reasonably requested by Seller
to, amend, modify, expand or otherwise alter any Specified VA Transaction
Agreement to the extent relating to the VA Contracts in the manner requested by
Seller in response to a request received by Seller or any of its Affiliates from
the VA Buyer or any of its Affiliates pursuant to the Specified VA Transaction
Agreements, and (iv) use commercially reasonable efforts to enforce all of the
Company’s rights and timely perform all of the Company’s obligations under each
Specified VA Transaction Agreement to the extent relating to the VA Contracts. 
Buyer shall, and shall cause the Company to, provide Seller with notice of any
proposal to terminate any Specified VA Transaction Agreement or to amend or
reduce any fees payable under any Specified VA Transaction Agreement to the
extent relating to the VA Contracts promptly after becoming aware of any such
proposal.

 

(b)                              From and after the Closing Date, Buyer shall
not, and shall cause the Company not to, use any information relating to holders
of any VA Contract for the purpose of marketing, selling or soliciting sales of
Variable Annuity Contracts (as defined in the VA Master Transaction Agreement),
fixed annuities, equity-indexed annuities, market value adjusted

 

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annuities or mutual funds, except to the extent required for the Company to
fulfill its obligations under any Ancillary Agreement (as defined in the VA
Master Transaction Agreement) to which it is a party or as required by
Applicable Law.

 

(c)                               From the Closing Date until the date that is
10 years following the termination or expiration of the Selling Agreement, Buyer
shall not, and shall cause the Company not to, directly or indirectly,
(i) disclose, transfer or license to any unaffiliated Person (other than Seller
and its Affiliates) engaged in the manufacture, issuance, marketing, sale or
solicitation, servicing or administration of Variable Annuity Contracts, fixed
annuities, equity-indexed annuities, market value adjusted annuities or mutual
funds, any information relating to any holders of any VA Contract, except (A) to
the extent required for the Company to perform its obligations under any
Ancillary Agreement to which it is a party, (B) as required by Applicable Law or
(C) to the extent that (x) the information relating to the holders of VA
Contracts does not indicate that such Persons have purchased VA Contracts,
(y) the information relating to holders of VA Contracts is included in a list or
other data file that does not constitute a targeted list of holders of VA
Contracts and (z) the Company requires the Person to whom the information is
disclosed, transferred or licensed to agree to restrictions on replacements of
VA Contracts substantially equivalent to the restriction set forth in
Section 5.13(b) and not to disclose, transfer or license such information to an
unaffiliated Person or (ii) enter into any plan, program, scheme or course of
action to market, endorse, encourage, suggest, institute, promote, or target,
through mass mailings, sales campaigns or programs, promotions, sales incentives
or by any other concerted means, any full or partial surrender, exchange,
replacement or termination with respect to any VA Contract.

 

(d)                             From and after the Closing Date, Buyer shall
comply with the confidentiality obligations with respect to the VA Contracts
under the VA Master Transaction Agreement and the Ancillary Agreements as if it
were a party thereto.

 

(e)                               From and after the Closing Date, Buyer shall
not, directly or indirectly, sell, convey or transfer 50% or more of the
outstanding capital stock of the Company or all or substantially all of its
properties or assets to any Person, in one transaction or a series of
transactions that are part of a common plan, or any transaction that constitutes
the functional equivalent of any of the foregoing, unless the acquiring Person
in such transaction or transactions expressly agrees pursuant to an agreement in
a form reasonably acceptable to Seller to assume all of the obligations of Buyer
under this Section 5.13.

 

(f)                                Seller shall promptly reimburse Buyer or the
Company for its reasonable and documented out-of-pocket costs incurred in
connection thereto, including with respect to compliance with this Section 5.13.

 

(g)                              From and after the Closing, Seller shall
(i) use commercially reasonable efforts to continue in-force each Specified VA
Transaction Agreement to the extent relating to the VA Contracts, (ii) not agree
to amend, modify or terminate, expand or otherwise alter any Specified VA
Transaction Agreement to the extent relating to the VA Contracts in any manner
that would adversely affect Buyer without Buyer’s prior written consent, which
consent may not be unreasonably withheld, conditioned or delayed, (iii) use
commercially reasonable efforts to enforce all of Seller’s or its Affiliates’
rights and timely perform all of Seller’s or its Affiliates’

 

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obligations under each Specified VA Transaction Agreement to the extent relating
to the VA Contracts, (iv) promptly pay over to the Company any amounts recovered
by it or any of its Affiliates (net of any costs, fees, expenses or Taxes
incurred by Seller or any of its Affiliates in connection with the recovery or
receipt of such amounts) from the applicable counterparty to such Specified VA
Transaction Agreements with respect to the VA Contracts, other than any amounts
received or recovered by any Affiliate of Seller that provides underwriting,
broker-dealer or other services to such counterparties or any of their
Affiliates for providing such services; provided, that such recovered amounts
shall be reduced by any related amounts paid to the Company under any
reinsurance agreement pursuant to which the Company cedes business to Seller or
any of its Affiliates (it being the intent of the parties that the Company be
able to enjoy all the rights, privileges and benefits of Seller and its
Affiliates (other than any Affiliate providing underwriting, broker-dealer or
other services as described above) under the Specified VA Transaction Agreements
to the extent relating to the VA Contracts), and (v) promptly deliver to Buyer
any notices, reports or certifications delivered to it or any of its Affiliates
in writing by any conterparty to any of the Specified VA Transaction Agreements
to the extent relating to the VA Contracts.  Each of Buyer and Seller shall
consider in good faith any amendment of the Specified VA Transaction Agreements
to the extent relating to the VA Contracts that the other may reasonably
request.

 

SECTION 5.14.               Post-Closing Distribution.

 

(a)                               From and after the Closing and for so long as
any Reinsured Convertible Policy (as defined in the Administrative Services
Agreement) with respect to which any Exclusive Producer has received any
commissions remains in-force, Seller shall have the right, acting on behalf of
the Company pursuant to the Administrative Services Agreement, subject to
Section 5.14(d), to (i) maintain the appointment of such Exclusive Producer to
act as an insurance agent on behalf of the Company, (ii) provide such
information to such Exclusive Producer as is necessary to permit such Exclusive
Producer to offer Designated Company Conversion Policies (as defined in the
Administrative Services Agreement) on behalf of the Company to the holder of
such Reinsured Convertible Policy and (iii) pay commissions to such Exclusive
Producer for the placement of such Designated Company Conversion Policy
(including with respect to trail commissions with respect thereto) as determined
by Seller pursuant to the Administrative Services Agreement.  Buyer shall not,
and shall cause the Company and each of its other Affiliates not to, target any
Reinsured Convertible Policy or any Designated Company Conversion Policy issued
pursuant to this Section 5.14 for replacement with another policy written by the
Company or any other Person other than in accordance with the terms of this
Section 5.14.

 

(b)                              Following the Closing Date, at Seller’s sole
cost and expense, Buyer shall, and shall cause the Company to, provide such
information to any Exclusive Provider as is necessary to permit such Exclusive
Provider to service customers with respect to any insurance policy or contract
produced by such Exclusive Provider, and none of Buyer or any of its Affiliates
shall, whether directly or indirectly, support or sponsor a program with the
intended or reasonably expected result to be the replacement of any Exclusive
Provider.

 

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(c)                               Seller shall promptly reimburse Buyer and the
Company for its reasonable and documented out-of-pocket costs incurred in
complying with the obligations in this Section 5.14.

 

(d)                             From and after the Closing Date, Buyer shall
not, directly or indirectly, sell, convey or transfer 50% or more of the
outstanding capital stock of the Company or all or substantially all of its
properties or assets to any Person, in one transaction or a series of
transactions that are part of a common plan, or any transaction that constitutes
the functional equivalent of any of the foregoing, unless the acquiring Person
in such transaction or transactions expressly agrees pursuant to an agreement in
a form reasonably acceptable to Seller to assume all of the obligations of Buyer
under this Section 5.14.

 

SECTION 5.15.               Specified Capital Charge.

 

(a)                               From and after the date hereof, each of Seller
and Buyer shall cooperate in good faith, and shall use, and shall cause its
Affiliates to use, reasonable best efforts, both prior to and after the Closing,
to ensure that no Specified Capital Charge is imposed on the Company; provided,
that, except as provided in Section 5.15(b), neither party shall be required to
make any capital contribution to the Company or agree to any limitation on
dividends in order to comply with the foregoing.

 

(b)                              If, at any time after the Closing but prior to
the earlier of (i) the completion of the Company’s first triennial examination
that is completed by the Nebraska Insurance Department after the Closing Date
and (ii) the fifth anniversary of the Closing Date, a Specified Capital Charge
is imposed on the Company, then Seller shall either (A) purchase from the
Company surplus notes or preferred stock having the terms set forth in the term
sheet attached as Exhibit J in an aggregate principal amount or with an
aggregate liquidation preference, as applicable, equal to the amount by which
the Required Capital Amount as of the date on which such Specified Capital
Charge is imposed on the Company is increased directly as a result of such
Specified Capital Charge, but only to the extent that such Required Capital
Amount exceeds the Specified Capital Amount or (B) choose to amend the terms of
the Amended and Restated Reinsurance Agreement and the Reinsurance Trust (or the
composition of the assets held in the trust account established pursuant to the
Reinsurance Trust) in order to eliminate the effect of such Specified Capital
Charge.  If Seller elects to effect any amendment contemplated by clause (B) of
the immediately preceding sentence, the parties shall amend or modify such
agreements to eliminate the effect of such Specified Capital Charge, and each
party shall agree to any such amendment or modification so long as it would not
adversely affect such party.  The obligations of Seller under this Section 5.15
shall not apply from and after any date on which Parent is no longer the direct
or indirect owner of at least a majority of the outstanding equity securities of
the Company (except as a result of an initial public offering of Parent or any
Affiliate of Parent that controls the Company) or the Company is no longer
domiciled in the State of Nebraska.

 

SECTION 5.16.               Organizational Documents.  Seller may, between the
date hereof and the Closing Date, amend the Organizational Documents of the
Company in order to permit the Company to issue preferred stock on the terms set
forth in the term sheet attached as Exhibit J.  Buyer shall not, from and after
the Closing and for so long as either (i) Seller’s

 

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obligations under Section 5.15 remain in effect or (ii) Seller holds any shares
of preferred stock of the Company, permit the Company’s Organizational Documents
to be amended in any manner that would affect the Company’s ability to issue
such preferred stock on such terms or that would affect any of the terms thereof
or rights associated therewith.

 

SECTION 5.17.               Transition Matters.

 

(a)                               Promptly after the date hereof, and in any
event within 60 days hereafter, Seller and Buyer shall each appoint a transition
team to:

 

(i)                                  cooperate in good faith to develop a
separation plan for separating the Company Business from the businesses of
Seller and its Affiliates (including the Company) that is not Company Business
so as to minimize the adverse impact of such separation on each party’s
businesses, and

 

(ii)                              review, revise and update, where appropriate,
the schedules to the Transition Services Agreement, the Administrative Services
Agreement and the Agent Servicing Agreement between the date hereof and the
Closing and any such mutually agreed upon revised and updated schedules will
replace the corresponding schedules attached to the form of Transition Services
Agreement, the form of Administrative Services Agreement or the form of the
Agent Servicing Agreement, as applicable.

 

(b)                              Seller may, between the date hereof and the
Closing Date, take any actions necessary or appropriate to cause the Company’s
participation under the agreement identified in Section 5.17(b) of the Seller
Disclosure Schedule to be terminated as of or prior to the Closing Date and for
the Company no longer to be a party to such agreement from and after such date;
provided that Seller shall arrange for the Company to have direct or indirect
access to the retained asset account that is the subject of such agreement for
the term specified in the Transition Services Agreement.

 

SECTION 5.18.               Certain Business.  Prior to the Closing Date, Seller
may cause the Company to recapture from Seller the business identified on
Section 5.18 of the Seller Disclosure Schedule and cause the Company to cede
such business to an Affiliate of Seller on reinsurance terms that are
substantially similar to the terms pursuant to which the Vermont Captive
Business is ceded by the Company to the Vermont Captive provided, however, that
such recapture does not result in any adverse effect to the Company that is not
reimbursed by Seller or otherwise subject to indemnification by Seller under
this Agreement, including without limitation with respect to the risk based
capital treatment of such reinsurance.  In addition, any such business shall
only be recaptured to the extent of actual payments by the captive, it being the
intent that Seller shall retain the financial risk of any uncollected or
uncollectible amount with respect to such reinsurance.  If Seller does not
effect the recapture and reinsurance transactions described in the previous
sentence prior to the Closing, Buyer shall, and shall cause the Company to, at
Seller’s request and sole cost and expense, cooperate with Seller to cause such
recapture and reinsurance transactions to be effected after the Closing Date and
take all reasonable actions, and execute all documents, certificates,
agreements, instruments or conveyances or other writings of any kind, that may
be reasonably necessary to carry out and give effect to such recapture and
reinsurance transactions, including using reasonable best efforts

 

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to obtain, at Seller’s sole cost and expense, any consents, approvals or
authorizations of Governmental Entities that may necessary to effect such
recapture and reinsurance transactions.

 

SECTION 5.19.               Investment Assets.  From June 30, 2013 and until the
Closing, Seller shall cause the Investment Assets held by the Company and the
Recaptured Investment Assets (collectively, the “Business Investment Assets”) to
be managed in accordance with the investment guidelines set forth in
Section 5.19 of the Seller Disclosure Schedule.

 

SECTION 5.20.               Resignations.  At or prior to the Closing, Seller
shall deliver to Buyer letters of resignation, effective as of the Closing, of
all of the officers and directors of the Company, except as requested by Buyer
not less than five Business Days prior to the Closing.

 

SECTION 5.21.               Financial Information.  Seller shall cause the
Company to deliver to Buyer true, correct and complete copies of the quarterly
and annual statutory financial statements of the Company that are filed with the
Nebraska Department of Insurance between the date hereof and the Closing,
promptly after the filing thereof.

 

SECTION 5.22.               Annuity Administration.  After the date hereof,
Seller may negotiate and execute agreements relating to the administration by
se2 of the annuity contracts included in the Company Business and may take any
other actions that may be reasonably necessary to transition the administration
of such annuity contracts to se2.  Buyer acknowledges that such transition might
not be completed prior to the Closing and agrees that it shall, and shall cause
the Company to, cooperate with Seller to effect such transition after the
Closing.  The costs and expenses of such transition shall be borne by the
parties in the manner contemplated by the Transition Services Agreement.

 

SECTION 5.23.               Buyer Financing.

 

(a)                               Buyer shall, and shall cause its Affiliates
to, use reasonable best efforts to (A) obtain the proceeds of the Debt Financing
on the terms and conditions set forth in the Debt Commitment Letters and
(B) close the NER Financing on the terms and conditions set forth in the NER
Commitment Letter.  Without limiting the foregoing, Buyer shall, and shall cause
its Affiliates to, use reasonable best efforts to (i) maintain in effect the
Debt Commitment Letter and the NER Commitment Letter in accordance with their
terms, (ii) satisfy as promptly as practicable (or obtain the waiver of) all
conditions applicable to obtaining the Debt Financing and NER Financing that are
within the control of Buyer or any of its Affiliates on terms set forth in the
applicable Commitment Letters or in any definitive documents with respect to
such Financing, (iii) enter into, as promptly as practicable after the date
hereof, definitive documents with respect to the Debt Financing on terms and
conditions set forth in the Debt Commitment Letters and (iv) use its reasonable
best efforts to cause the Financing Sources to fund the Debt Financing at or
prior to the Closing and close the NER Financing immediately after the Closing
(including by commencing Actions against the Financing Sources to enforce the
terms of the applicable Commitment Letters or any definitive documents relating
to such Financing).  Buyer shall, and shall cause its Affiliates to, comply with
all of their obligations under the Commitment Letters and any definitive
documents relating to the Financing.

 

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(b)                              Buyer shall not, without the prior written
consent of Seller, permit any amendment or modification to be made to the Debt
Commitment Letter or any definitive document relating to the Debt Financing that
would (A) reduce the aggregate amount of the Debt Financing (without a
corresponding increase in another portion of the Financing effected in
compliance with this Section 5.23), including by changing the amount of fees to
be paid or original issue discount of the Debt Financing), (B) impose new or
additional conditions, or otherwise amend, modify or expand the conditions, to
the drawdown of the Debt Financing in a manner that, in the reasonable
expectation of Buyer, would delay or prevent the Closing or make the drawdown of
the Debt Financing (or the satisfaction of the conditions to such drawdown) less
likely to occur; provided, however, that Buyer may replace, amend or modify the
Debt Commitment Letter to add or replace Financing Sources, lead arrangers,
syndication agents, bookrunners or similar entities.

 

(c)                               Buyer shall not, without the prior written
consent of Seller, permit any amendment or modification to be made to the NER
Commitment Letter that would (A) change the aggregate amount of the NER
Financing, including by changing the amount of fees to be paid, (B) impose new
or additional conditions, or otherwise amend, modify or expand the conditions,
to the closing of the NER Financing in a manner that would reasonably be
expected to delay or prevent the Closing; provided, that Buyer may replace,
amend or modify the NER Commitment Letter to add or replace Financing Sources.

 

(d)                             Buyer shall not, without the prior written
consent of Seller, permit any amendment or modification to be made to the Equity
Commitment Letter, and shall cause its Affiliates to use reasonable best efforts
to obtain the proceeds of the Equity Financing on the terms and conditions set
forth in the Equity Commitment Letter.

 

(e)                               Buyer shall not release or consent to the
termination of the obligations of any Financing Source under any Commitment
Letter or any definitive document with respect to the Financing without Seller’s
prior written consent, provided for the avoidance of doubt that no such consent
is required in connection with any release or termination in connection with the
replacement of one or more Financing Sources as permitted under this
Section 5.23.

 

(f)                                Buyer shall give Seller reasonably prompt
notice of (I) any termination of the Commitment Letters or material breach by
any party thereto of which Buyer becomes aware, (II) the receipt of any written
notice or other written communication from any Financing Source regarding any
actual or alleged breach, default, termination or repudiation of any Commitment
Letter or any definitive document with respect to the Financing by any party
thereto and (III) any reason Buyer believes in good faith that it will not be
able to obtain all or any portion of the Financing on the terms, in the manner
or from the sources contemplated by the Commitment Letters or the definitive
documents relating thereto.  Buyer shall provide any information reasonably
requested by Seller relating to any of the circumstances described in the
foregoing sentence as soon as reasonably practicable, but in any event within
three Business Days, after the date that Seller delivers to Buyer a written
request for such information.  Buyer shall consult with and keep Seller
reasonably informed upon request of the status of its efforts to arrange for and
consummate the Financing,  and shall promptly provide Seller true, correct and
complete copies of any definitive documents that are executed in connection with
the Financing.  If any portion of the Debt Financing or NER Financing becomes
unavailable on the terms and

 

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conditions set forth in the applicable Commitment Letters, Buyer shall
(1) promptly notify Seller of such unavailability and the reasons therefor and
(2) use its reasonable best efforts, as promptly as practicable following the
occurrence of such event, to arrange for and obtain, and negotiate and enter
into definitive documents with respect to, alternative financing from
alternative sources (“Alternative Financing”) in an amount sufficient to permit
the Buyer Parties to consummate the transactions contemplated by this Agreement
and the other Transaction Agreements and pay all related costs and expenses
required to be paid by them in connection therewith; provided that (i) in no
event may any Alternative Financing involve a public offering that is registered
with, or require any filings with, the Securities and Exchange Commission or
under the securities laws of any jurisdiction and (ii) in no event shall Buyer
be required to enter into any Alternative Financing on terms that, taken in the
aggregate, are materially less favorable to it than the terms of the Equity
Financing, Debt Financing or the NER Financing, as the case may be.

 

(g)                              For the avoidance of doubt and notwithstanding
anything in this Agreement to the contrary, Buyer acknowledges and agrees that
obtaining neither the Debt Financing nor the Equity Financing is a condition to
the Closing and reaffirms its obligation to consummate the transactions
contemplated by this Agreement irrespective and independently of the
availability of the Debt Financing and the Equity Financing, subject only to the
fulfillment of the conditions set forth in Sections 6.1 and 6.2 (or waiver
thereof as provided in Sections 6.1 and 6.2).  Buyer further acknowledges and
agrees that the closing or consummation of the NER Financing shall not be a
condition to the Closing and reaffirms its obligation to consummate the
transactions contemplated by this Agreement notwithstanding that the NER
Financing has not been consummated, subject only to the fulfillment of the
conditions set forth in Sections 6.1 and 6.2 (or waiver thereof as provided in
Sections 6.1 and 6.2), including obtaining the prior approval of the
Governmental Entities set forth on Section 4.3 of the Buyer Disclosure Schedule
with respect to the NER Financing.  The closing of the NER Financing will not
occur until after the Closing.

 

SECTION 5.24.               Financing Cooperation.

 

(a)                               Seller shall, between the date hereof and the
Closing Date, use its reasonable best efforts to (and to cause its Affiliates
and their respective personnel and advisors to use their reasonable best efforts
to), as promptly as reasonably practicable, cooperate with and provide such
assistance to Buyer as is reasonably requested by Buyer in Buyer’s efforts to
obtain (i) the Debt Financing and the NER Financing on the terms contemplated
herein and in the respective Commitment Letters and (ii) additional equity
financing through the admission of new investors to Parent as limited partners
on the terms contemplated under the Limited Partnership Agreement (“Additional
Equity Financing”).

 

(b)                              The cooperation and assistance contemplated by
Section 5.24(a) shall comprise the following: (i) providing information,
including adjustment figures, reasonably requested in connection with (A) any
customary offering documents, bank information memoranda and similar documents,
which include (x) all audited annual statutory financial statements of the
Company for the three (3) most recently completed fiscal years of the Company
that have been filed with the Nebraska Department of Insurance prior to the
Closing Date and (y) unaudited interim statutory financial statements of the
Company that have been filed with the Nebraska Department of Insurance prior to
the Closing Date for any fiscal quarter

 

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ended after the date of the most recent financial statements delivered pursuant
to clause (x), (B) rating agency presentations, by providing financial and other
factual data related to the Company Business and (C) the Reference Balance
Sheet, updated as of the end of the most recent fiscal quarter of the Company
ended at least 60 days prior to the Closing Date (or, if the most recently
completed fiscal quarter is the end of a fiscal year of the Company, ended at
least 120 days prior to the Closing Date); (ii) executing and delivering (or
using reasonable best efforts to obtain from its advisors) customary
certificates or other similar documents and instruments relating to the NER
Financing as may be reasonably requested by Buyer; (iii) subject to receipt of
assurances of confidentiality in form and substance reasonably satisfactory to
Seller, providing authorization letters to the Financing Sources authorizing the
distribution of information to prospective lenders; (iv) providing actuarial and
financial information requested by Hannover Life Reassurance Company of America
(all such information described in this Section 5.24(b)(i) and (v) together with
all information provided to the Financing Sources prior to the date hereof,
collectively, the “Required Financial Information”); (vi) subject to receipt of
assurances of confidentiality in form and substance reasonably satisfactory to
Seller, arranging for the participation of appropriate officers of Seller in a
reasonable number of management and other meetings (including customary
one-on-one meetings with the lead arrangers for the Debt Financing and with
potential investors for the Additional Equity Financing), presentations, due
diligence sessions and sessions with rating agencies on reasonable advance
notice; (vii) filing all required applications and requests for approval with
all applicable Governmental Entities required in connection with the NER
Financing (which will be prepared by Buyer and whose form and substance will be
subject to the approval of Seller, which shall not be unreasonably withheld,
conditioned or delayed); and (viii) taking such corporate actions as shall be
reasonably requested of Seller or the Company by Buyer to permit the
consummation of the Financing or Additional Equity Financing to permit the
proceeds thereof to be made available at the Closing and permit the Closing of
the NER Financing to occur immediately after the Closing, provided, however,
that Seller and, until the Closing occurs, the Company shall not (1) have any
Liability or any obligation under any agreement or document related to the
Financing or any Additional Equity Financing or (2) be required to incur any
Liability in connection with the Financing or Additional Equity Financing other
than out-of-pocket expenses incurred in connection with its compliance with this
Section 5.24, which shall promptly be reimbursed by Buyer.  Without limitation
to the foregoing, Seller shall provide, and shall use its commercially
reasonable efforts to cause each of its and the Company’s Representatives,
including legal, tax, regulatory and accounting to provide, all other
information and cooperation reasonably requested by the Financing Sources or
Buyer.   Neither Seller nor any of its Affiliates shall have any obligation to
provide any representations, warranties, assurances or opinions to any Person as
to the accuracy or completeness of any information made available to any
Financing Source, potential lender, equity or other investors, rating agencies,
Governmental Entity or any other Person, and, except for the rights of the Buyer
Indemnified Persons pursuant to Section 7.2(a)(i) (subject to the limitations
set forth in this Agreement), Seller shall have no Liability or obligation with
respect to any information provided pursuant to this Section 5.24 or otherwise
in connection with the Financing or any Additional Financing.

 

(c)                               Notwithstanding Sections 5.24(a) and 5.24(b),
Buyer acknowledges and agrees that the Company shall not, prior to the Closing,
be obligated to incur any Liability or commitment to any third-party under or in
connection with the Financing or any Additional Equity Financing.  Buyer shall
indemnify and hold harmless Seller and the Company and their

 

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respective officers, directors, employees, Affiliates and agents from and
against any and all Liabilities suffered or incurred by them under or in
connection with the Financing or any Additional Equity Financing.

 

SECTION 5.25.               Subscription Rights.  From the date hereof to the
earliest of: (i) the Closing; (ii) the termination of this Agreement in
accordance with its terms; and (iii) the execution by Seller or any of its
Affiliates of the Limited Partnership Agreement as contemplated by this
Section 5.25, Seller and its Affiliates collectively shall have the right, but
not the obligation, to subscribe for class A limited partnership interests or
other equity interests of Parent with an aggregate capital commitment of up to
$100,000,000 and, if such right is exercised, Parent shall accept, and shall not
reject, the full amount of such subscription; provided that Seller or its
applicable Affiliate shall execute the Limited Partnership Agreement and a
subscription agreement that is in a form that is the same as the form of the
subscription agreements entered into prior to the date hereof by the Investors
of Parent as of the date hereof, except that the subscription agreements of such
Investors require such Investors to increase their respective capital
commitments in order to facilitate the Closing hereunder as provided therein. 
From the date hereof to the earliest of: (i) the Closing; (ii) the termination
of this Agreement in accordance with its terms; and (iii) the execution by
Seller or any of its Affiliates of the Limited Partnership Agreement as
contemplated by this Section 5.25, Parent shall not permit any amendment to the
Limited Partnership Agreement, including Section 13.13 thereof, that would
adversely affect the rights of Seller or any of its Affiliates as a potential
Investor in Parent relative to the rights of other Investors in Parent.

 

SECTION 5.26.               Certain Covenants.

 

(a)                               Buyer shall not consent to the addition of any
Additional Initial Lender (as defined in the Debt Commitment Letter) without
Seller’s prior written consent, other than any lender listed on the most current
“Bank List” compiled and maintained by the National Association of Insurance
Commissioners, pursuant to the Purposes and Procedures Manual of the Securities
Valuation Office of the National Association of Insurance Commissioners.

 

(b)                              Between the date hereof and the Closing Date,
Buyer shall not enter into any agreement pursuant to which the Company would
incur any Liability with respect to indebtedness for borrowed money, or pursuant
to which the Company would secure or guarantee the indebtedness of any other
Person, without Seller’s prior written consent.

 

ARTICLE VI.
CONDITIONS PRECEDENT

 

SECTION 6.1.                       Conditions to Each Party’s Obligations.  The
obligations of Buyer and Seller to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver in writing at or prior to
the Closing of the following conditions:

 

(a)                               Approvals.  All consents, approvals or
authorizations of, declarations or filings with or notices to any Governmental
Entity in connection with the transactions contemplated hereby that are set
forth in Section 3.5 of the Seller Disclosure Schedule or Section 4.3 of the
Buyer Disclosure Schedule shall have been obtained or made and shall be in full
force

 

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and effect and all waiting periods required by Applicable Law with respect
thereto shall have expired or been terminated, in each case without the
imposition of a Buyer Burdensome Condition in the event that Buyer is seeking to
invoke this condition or a Seller Burdensome Condition in the event that Seller
is seeking to invoke this condition.

 

(b)                              No Injunctions or Restraints.  No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction and no statute, rule or regulation of any
Governmental Entity preventing the consummation of the purchase and sale of the
Shares or any other material transaction contemplated by the Transaction
Agreements shall be in effect; provided, that the party invoking this condition
shall have used all reasonable best efforts to have any such order or injunction
vacated.

 

(c)                               RBC Ratio.  The Required Capital Amount as of
the Closing Date shall not be greater than the Specified Capital Amount;
provided that, if the Required Capital Amount as of the Closing Date is greater
than the Specified Capital Amount, then Seller shall have the option, in its
sole discretion, to, and this condition shall be deemed to have been satisfied
if Seller exercises its option to, purchase from the Company surplus notes or
preferred stock having the terms set forth in the term sheet attached as
Exhibit J in an aggregate principal amount or with an aggregate liquidation
preference, as applicable, equal to the excess of the Required Capital Amount as
of the Closing Date over the Specified Capital Amount; provided further that,
notwithstanding the foregoing, this condition shall not be deemed to have been
satisfied (notwithstanding whether Seller has exercised its option to purchase
surplus notes or preferred stock as contemplated above) if the Required Capital
Amount as of the Closing Date is greater than the Maximum Capital Amount.

 

SECTION 6.2.                       Conditions to Obligations of Buyer.  The
obligations of Buyer to consummate the transactions contemplated hereby shall be
subject to the satisfaction or waiver in writing at or prior to the Closing of
the following additional conditions:

 

(a)                               Representations and Warranties.  (i) The
representations and warranties of Seller set forth in this Agreement other than
Sections 3.1, 3.2, 3.3, 3.4 and 3.21 (the “Seller Fundamental Representations”)
(without giving effect to any limitation as to materiality or Material Adverse
Effect, other than as set forth in the first sentence of Section 3.8) shall be
true and correct on and as of the Closing Date as though made on and as of the
Closing Date (except to the extent any such representation and warranty speaks
only as of an earlier date, in which event such representation and warranty
shall have been true and correct as of such date), except where the failure of
all such representations and warranties to be so true and correct would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (ii) the Seller Fundamental Representations set forth in
Sections 3.2(b), 3.2(c), 3.4 and 3.21 shall be true and correct in all respects
on and as of the Closing Date with the same effect as though made on and as of
the Closing Date (except for representations and warranties that are made as of
a specific date, which representations and warranties shall be true and correct
at and as of such earlier date) and (iii) the other Seller Fundamental
Representations that are qualified by materiality or Material Adverse Effect
shall be true and correct in all respects, and the other Seller Fundamental
Representations that are not so qualified shall be true and correct in all
material respects, in each case on and as of the Closing Date with the same
effect as though made on and as of the Closing Date (except for representations
and warranties that are made as

 

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of a specific date, which representations and warranties shall be true and
correct at and as of such earlier date).

 

(b)                              Performance of Obligations of Seller.  Seller
shall have performed and complied in all material respects with all agreements,
obligations and covenants required to be performed or complied with by it under
this Agreement on or prior to the Closing Date.

 

(c)                               Closing Deliveries.  Seller shall have
delivered or caused to be delivered to Buyer each of the documents required to
be delivered pursuant to Section 2.3(a).

 

(d)                             No Material Adverse Effect.  Since the date of
this Agreement, there shall not have occurred any Material Adverse Effect or any
fact, event, circumstance, effect, development, occurrence or condition of any
character that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

SECTION 6.3.                       Conditions to Obligations of Seller.  The
obligations of Seller to consummate the transactions contemplated hereby shall
be subject to the satisfaction or waiver in writing at or prior to the Closing
of the following additional conditions:

 

(a)                               Representations and Warranties.  (i) The
representations and warranties of Buyer set forth in this Agreement other than
Sections 4.1, 4.2 and 4.7 (the “Buyer Fundamental Representations”) (without
giving effect to any limitation as to materiality) shall be true and correct on
and as of the Closing Date as though made on and as of the Closing Date (except
to the extent any such representation and warranty speaks only as of an earlier
date, in which event such representation and warranty shall have been true and
correct as of such date), except where the failure of all such representations
and warranties to be so true and correct would not, individually or in the
aggregate, have a material adverse effect on the ability of Buyer to consummate
any of the transactions contemplated by this Agreement (ii) the Buyer
Fundamental Representations set forth in Sections 4.2 and 4.9 shall be true and
correct in all respects on and as of the Closing Date with the same effect as
though made on and as of the Closing Date (except for representations and
warranties that are made as of a specific date, which representations and
warranties shall be true and correct at and as of such earlier date) and
(iii) the other Buyer Fundamental Representations that are qualified by
materiality or Material Adverse Effect shall be true and correct in all
respects, and the other Buyer Fundamental Representations that are not so
qualified shall be true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as though made on and as of the
Closing Date (except for representations and warranties that are made as of a
specific date, which representations and warranties shall be true and correct at
and as of such earlier date).

 

(b)                              Performance of Obligations of Buyer.  Buyer
shall have performed and complied in all material respects with all agreements,
obligations and covenants required to be performed or complied with by it under
this Agreement on or prior to the Closing Date.

 

(c)                               Closing Deliveries.  Buyer shall have
delivered or caused to have delivered to Seller each of the documents required
to be delivered pursuant to Section 2.3(b).

 

(d)                             Recapture Conditions.  Prior to or at the
Closing, (i) any guarantee or keepwell required to be provided by Seller or any
of its Affiliates to the Company in connection

 

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with or as a result of the consummation of the Recapture shall have been
terminated and (ii) any other agreements or arrangements with respect to the
Company or the Recapture that Seller or any of its Affiliates was required to
enter into in connection with or as a result of the Recapture shall have been
unwound or terminated; provided that any order, consent, approval or
authorization of any Insurance Regulator or other Governmental Entity that may
have been required in order to effect any of the foregoing shall have been
obtained without the imposition of a Seller Burdensome Condition.

 

ARTICLE VII.
INDEMNIFICATION

 

SECTION 7.1.                       Survival of Representations, Warranties and
Covenants.

 

(a)                               The representations and warranties of Seller
and Buyer contained in this Agreement shall survive the Closing solely for
purposes of this Article VII and shall terminate and expire on the earlier of
March 31, 2015 or 30 days after receipt by Buyer of an audit report with respect
of the annual financial statements of the Company for the year ending
December 31, 2014, after which time no claim for indemnification with respect
thereto may be brought; provided, that notwithstanding the foregoing, (i) the
Buyer Fundamental Representations, the Seller Fundamental Representations and
the representations and warranties set forth in Section 3.10 shall survive until
the expiration of the applicable statute of limitations plus 60 days, after
which time no claim for indemnification with respect thereto may be brought,
(ii) the representations and warranties set forth in Section 3.15 shall (subject
to Section 7.9) survive until the fourth anniversary of the Closing Date, after
which time no claim for indemnification with respect thereto may be brought and
(iii) the representations and warranties set forth in Section 3.6(a) shall not
survive the Closing.

 

(b)                              To the extent that it is to be performed after
the Closing, each covenant in this Agreement will survive and remain in effect
in accordance with its terms plus a period of six months thereafter, after which
no claim for indemnification with respect thereto may be brought hereunder.  All
covenants in this Agreement that by their terms are required to be fully
performed prior to the Closing will survive the Closing for a period of six
months, after which time no claim for indemnification with respect thereto may
be brought hereunder.

 

(c)                               Notwithstanding the foregoing, any claim for
indemnification with respect to any breach of any representation, covenant or
agreement in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the preceding
paragraphs (a) and (b) of this Section 7.1 if such claim has been properly made
pursuant to this Article VII prior to such time.

 

SECTION 7.2.                       Indemnification.

 

(a)                               Seller shall indemnify and hold harmless Buyer
and its directors, officers, employees and Affiliates (collectively, the “Buyer
Indemnified Persons”) from and against any and all Indemnifiable Losses to the
extent directly or indirectly resulting from or arising out of:

 

(i)                                  any breach of any representation or
warranty of Seller made in this Agreement;

 

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(ii)                              any breach or nonfulfillment of any agreement
or covenant of Seller under this Agreement; or

 

(iii)                          any Excluded Liabilities.

 

(b)                              Buyer shall indemnify and hold harmless Seller
and its directors, officers, employees and Affiliates (collectively, the “Seller
Indemnified Persons”) from and against any and all Indemnifiable Losses to the
extent directly or indirectly resulting from or arising out of:

 

(i)                                  any breach of any representation or
warranty of Buyer made in this Agreement; or

 

(ii)                              any breach or nonfulfillment of any agreement
or covenant of Buyer under this Agreement.

 

(c)                               For purposes of this Article VII (i) a breach
of a representation or warranty shall be deemed to exist either if such
representation or warranty is actually inaccurate or breached or would have been
inaccurate or breached if such representation or warranty had not contained any
qualification as to materiality or Material Adverse Effect (which, in each case,
instead will be read as any adverse effect or change) or similar language, and
(ii) the amount of Indemnifiable Losses in respect of a breach resulting from
the application of clause (i) above shall be determined without regard to any
limitation or qualification as to materiality or Material Adverse Effect (which
instead will be read as any adverse effect or change) or similar language set
forth in such representation or warranty, in each case other than any such
limitation or qualification contained in Sections 3.8, 3.13(a), 3.18(a), the
first sentence of Section 3.9(a), the second sentence of Section 3.11(b), the
second sentence of Section 3.17 or the first sentence of Section 3.20(e), or
that is inherent in SAP or in the methods, procedures and practices that
constitute the Accounting Principles for purposes of Section 3.6.

 

SECTION 7.3.                       Certain Limitations.

 

(a)                               No party shall be obligated to indemnify and
hold harmless its respective Indemnitees under Section 7.2(a)(i) (in the case of
Seller) or Section 7.2(b)(i) (in the case of Buyer) (i) with respect to any
claim or claims based on a series of substantially similar facts, events or
circumstances, unless such claim or claims involved Indemnifiable Losses in
excess of $75,000 (the “Threshold Amount”) (nor shall any claim that does not
exceed the Threshold Amount be applied to or considered for purposes of
calculating the amount of Indemnifiable Losses for which the Indemnitor is
responsible under clause (ii) below) and (ii) unless and until the aggregate
amount of all Indemnifiable Losses of the Indemnitees under such
Section 7.2(a)(i) or such Section 7.2(b)(i), as the case may be, exceeds 1.5% of
the Purchase Price for all such Indemnifiable Losses (the “Deductible”), at
which point such Indemnitor shall be liable to its respective Indemnitees for
the value of the Indemnitee’s claims under Section 7.2(a)(i) or
Section 7.2(b)(i), as the case may be, that is in excess of the Deductible,
subject to the limitations set forth in this Article VII.  Subject to
Section 7.3(c), the maximum aggregate Liability of Seller, on the one hand, and
Buyer on the other hand, to their respective Indemnitees for any and all
Indemnifiable Losses under Section 7.2(a)(i), in the case of Seller, or
Section 7.2(b)(i), in the case of Buyer, shall be 20% of the Purchase Price (the
“Cap”); provided, that the maximum

 

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aggregate Liability of Seller to all Buyer Indemnified Persons for any or all
Indemnifiable Losses under this Agreement shall not exceed the Purchase Price. 
The limitations in this Section 7.3 shall not apply to claims made in respect of
the Excluded Liabilities or under Article VIII or to Indemnifiable Losses
arising from breaches of Section 3.10, and the Deductible shall not apply with
respect to any Indemnifiable Losses resulting from or arising out of any breach
of any representation or warranty set forth in Section 3.15, which shall instead
be subject to the terms of Section 7.9(e).

 

(b)                              If any Indemnitee actually recognizes a Tax
benefit in respect of an Indemnifiable Loss as described in the proviso in the
definition of “Indemnifiable Losses” set forth in Section 7.4(iii) subsequent to
an Indemnity Payment made by an Indemnitor to an Indemnitee with respect to such
Indemnifiable Loss, then such Indemnitee shall promptly pay to the Indemnitor
the amount of such Tax benefit recognized by such Indemnitee up to the amount of
such Indemnity Payment received by the Indemnitee, net of any expenses incurred
by such Indemnitee in pursuing such Tax benefit, within 15 days after the
Indemnitee recognizes such Tax benefit in the form of cash actually received or
reduction in cash Taxes actually paid.  If any Tax benefit (or portion thereof)
in respect of an Indemnifiable Loss as described in the proviso in the
definition of “Indemnifiable Losses” set forth in Section 7.4(iii), that either
(i) reduces the Indemnity Payments made by an Indemnitor prior to the time such
payment is made or (ii) obligates an Indemnitee to make payments to the
Indemnitor under the immediately preceding sentence of this Section 7.3(b), is
disallowed as a result of an audit or otherwise, the applicable Indemnitor shall
promptly pay to the applicable Indemnitee the amount of such disallowed Tax
benefit within 30 days after the Indemnitee notifies the Indemnitor that the
adjustment with respect to such disallowance has been paid or otherwise taken
into account.

 

(c)                               In the case of Indemnifiable Losses resulting
from or arising out of breaches of Section 3.15, the Cap shall, with respect to
Indemnifiable Losses subject to indemnification by Seller under this Agreement,
be increased by fifty (50) million dollars, provided that the maximum aggregate
Liability of Seller with respect to Liabilities other than those resulting from
or arising out of any breach of Section 3.15 shall still be as described in
Section 7.3(a) (and not increased by this Section 7.3(c)).

 

SECTION 7.4.                       Definitions.  As used in this Agreement:

 

(i)                                  “Indemnitee” means any Person entitled to
indemnification under this Agreement;

 

(ii)                              “Indemnitor” means any Person required to
provide indemnification under this Agreement;

 

(iii)                          “Indemnifiable Losses” means any and all damages,
losses, liabilities, obligations, costs and expenses (including reasonable
attorneys’ fees and expenses); provided, that any Indemnity Payment (x) shall in
no event include any amounts constituting consequential, incidental, indirect,
special or punitive damages (except to the extent actually paid to a third party
in connection with a Third Party Claim), or any damages for lost profits,
unless: (1) such damages for lost profits do not constitute consequential,
incidental, indirect, special or punitive damages of any Buyer Indemnified

 

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Person; (2) such damages for lost profits are recoverable under the laws of the
State of New York; (3) the Indemnitee satisfies all elements necessary for proof
of such damages for lost profits under such laws; and (4) such lost profits can
be demonstrated by reference to the Actuarial Report and therefore to be within
the reasonable contemplation of the parties (it being understood that nothing in
this Section 7.4 is intended to limit the effect of the statement set forth in
the proviso to the last sentence of Section 3.17, and that lost profits damages
with respect to the reduction or elimination of any profits contemplated by the
Actuarial Report shall in no event exceed the present value ascribed to any such
remaining profits contemplated by the Actuarial Report as of the date of the
Indemnifiable Loss giving rise to the related claim, calculated based on the
assumptions on which the Actuarial Report was prepared and discounted using a
discount rate of 12%), and (y) shall be net of any (A) net amounts recovered by
the Indemnitee or any of its Affiliates for the Indemnifiable Losses for which
such Indemnity Payment is made under any insurance policy, reinsurance
agreement, warranty or indemnity or otherwise from any Person other than a party
hereto, and the Indemnitee shall promptly reimburse the Indemnitor for any such
net amount that is received by it or any of its Affiliates from any such other
Person with respect to any Indemnifiable Losses after any indemnification with
respect thereto has actually been paid pursuant to this Agreement, (B) amounts
included in the calculation of the Final Closing Statutory Value and (C) as
determined pursuant to Section 7.3(b), Tax benefits actually recognized by the
Indemnitee or any of its Affiliates in respect of any Indemnifiable Losses for
which such Indemnity Payment is made (it being understood that no Indemnity
Payment to be made hereunder may be withheld or otherwise delayed due to the
fact that an anticipated Tax benefit has not actually been recognized by the
applicable Indemnitee).

 

(iv)                          “Indemnity Payment” means any amount of
Indemnifiable Losses required to be paid pursuant to this Agreement; and

 

(v)                              “Third Party Claim” means any claim, action,
suit, or proceeding made or brought by any Person that is not a party to this
Agreement.

 

SECTION 7.5.                       Procedures for Third Party Claims.

 

(a)                               If any Indemnitee receives notice of assertion
or commencement of any Third Party Claim against such Indemnitee in respect of
which an Indemnitor may be obligated to provide indemnification under this
Agreement, the Indemnitee shall give such Indemnitor reasonably prompt written
notice (but in no event later than 30 days after becoming aware) thereof and
such notice shall include a reasonable description of the claim based on the
facts known at the time and any documents relating to the claim and an estimate
of the Indemnifiable Loss and shall reference the specific sections of this
Agreement that form the basis of such claim; provided, that no delay on the part
of the Indemnitee in notifying any Indemnitor shall relieve the Indemnitor from
any obligation hereunder unless (and then solely to the extent) the Indemnitor
is actually prejudiced by such delay (except that the Indemnitor shall not be
liable for any expenses incurred during the period in which the Indemnitee
failed to give such notice).  Thereafter, the Indemnitee shall deliver to the
Indemnitor, within five calendar days after the Indemnitee’s receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnitee relating to the Third Party Claim.

 

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(b)                              The Indemnitor shall be entitled to participate
in the defense of any Third Party Claim and, if it so chooses, to assume the
defense thereof with counsel selected by the Indemnitor.  Should the Indemnitor
so elect to assume the defense of a Third Party Claim, the Indemnitor shall not
as long as it conducts such defense be liable to the Indemnitee for legal
expenses incurred by the Indemnitee in connection with the defense thereof
subsequent to the Indemnitor notifying the Indemnitee in writing of its election
to assume such defense.  If the Indemnitor assumes such defense, the Indemnitee
shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
Indemnitor, it being understood that the Indemnitor shall control such defense. 
The Indemnitor shall be liable for the reasonable fees and expenses of counsel
employed by the Indemnitee for any period during which the Indemnitor has not
assumed the defense thereof (other than during any period in which the
Indemnitee shall have not yet given notice of the Third Party Claim as provided
above).  If the Indemnitor chooses to defend any Third Party Claim, all of the
parties hereto shall cooperate in the defense thereof.  Such cooperation shall
include the retention and (upon the Indemnitor’s request) the provision to the
Indemnitor of records and information that are relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. 
Whether or not the Indemnitor shall have assumed the defense of a Third Party
Claim, the Indemnitee shall not admit any Liability with respect to, or pay,
settle, compromise or discharge, such Third Party Claim without the Indemnitor’s
prior written consent (which consent shall not be unreasonably withheld,
conditioned or delayed).  If the Indemnitor has assumed the defense of a Third
Party Claim, the Indemnitor may only pay, settle, compromise or discharge a
Third Party Claim with the Indemnitee’s prior written consent (which consent
shall not be unreasonably withheld, conditioned or delayed); provided, that the
Indemnitor may pay, settle, compromise or discharge such a Third Party Claim
without the written consent of the Indemnitee if such settlement (i) includes a
release of the Indemnitee from all Liability in respect of such Third Party
Claim, (ii) does not subject the Indemnitee to any injunctive relief or other
equitable remedy and (iii) does not include a statement or admission of fault,
culpability or failure to act by or on behalf of the Indemnitee.  If the
Indemnitor submits to the Indemnitee a bona fide settlement offer with respect
to a Third Party Claim that has been accepted by all Persons bringing such Third
Party Claim and otherwise satisfies the requirements set forth in the proviso of
the immediately preceding sentence and the Indemnitee refuses to consent to such
settlement, then thereafter the Indemnitor’s liability to the Indemnitee with
respect to such Third Party Claim shall not exceed the Indemnitor’s portion of
the settlement amount included in such settlement offer.

 

(c)                               Notwithstanding anything in this Agreement to
the contrary, Seller shall have the right to represent the interests of the
Company and settle all issues, and to employ counsel of its choice at its
expense, in any audit or other examination or administrative or court proceeding
relating to Taxes for any Pre-Closing Tax Period or any Straddle Period;
provided, that Seller shall not pay, discharge, settle, compromise, litigate, or
otherwise dispose of any item subject to such Tax proceedings with respect to a
Straddle Period or, in the case of any such Tax proceedings relating to the
treatment of the Recapture or the calculation of any attribute reduction of the
Company arising out of the transactions contemplated by this Agreement, with
respect to any Pre-Closing Tax Period ending on the Closing Date, without
obtaining the prior written consent of Buyer, which consent shall not be
unreasonably withheld, conditioned or delayed.  Notwithstanding the foregoing
and subject to Seller’s rights set forth in the preceding

 

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sentence, Buyer shall be entitled, at its expense, to participate in the conduct
of any Tax audit and any judicial or administrative proceeding relating to any
such Tax audit and to be kept reasonably informed of the conduct and progress
thereof.

 

SECTION 7.6.                       Direct Claims.  The Indemnitor will have a
period of 30 days within which to respond in writing to any claim by an
Indemnitee on account of an Indemnifiable Loss that does not result from a Third
Party Claim.  If the Indemnitor does not so respond within such 30 day period,
the Indemnitor will be deemed to have rejected such claim, in which event the
Indemnitee will be entitled to pursue such remedies as may be available to the
Indemnitee.

 

SECTION 7.7.                       Sole Remedy.

 

(a)                               Except for (i) the right of Seller to an
injunction, specific performance or other equitable relief pursuant to
Section 10.10 and (ii) the right of Seller to receive the Termination Fee
pursuant to Article X, prior to the Closing, the Escrow Account shall be the
sole and exclusive source of recovery and remedy of Seller or any of its
Affiliates with respect to any breach by Buyer, Parent or any of their
Affiliates of any representation, warranty, covenant or agreement contained in
this Agreement or the Equity Commitment Letter and, as such, the obligations of
Buyer, Parent and their Affiliates hereunder and thereunder are non-recourse to
any other Buyer Related Party that is not a party hereto or thereto in all
respects.

 

(b)                              The parties hereto acknowledge and agree that,
except as set forth in Section 10.10 and except for any claims relating to or
affecting the Final Balance Sheet or the Final Closing Statutory Value
(including claims relating to or arising out of Section 3.6), which shall be
resolved and determined in accordance with Section 2.5, if the Closing occurs,
their sole and exclusive remedy following the Closing with respect to any and
all claims arising out of or related to the transactions contemplated by this
Agreement shall be pursuant to the provisions set forth in this Article VII or
Article VIII, as applicable.

 

SECTION 7.8.                       Certain Other Matters.

 

(a)                               Upon making any Indemnity Payment, Indemnitor
will, to the extent of such Indemnity Payment, be subrogated to all rights of
Indemnitee against any third Person (other than any Tax authority) in respect of
the Indemnifiable Loss to which the Indemnity Payment related.  Without limiting
the generality or effect of any other provision hereof, each such Indemnitee and
Indemnitor will duly execute upon request all instruments reasonably necessary
to evidence and perfect the above-described subrogation rights.

 

(b)                              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. The representations, warranties and covenants of Seller,
and the Buyer Indemnified Persons’ rights to indemnification with respect
thereto, shall not be affected or deemed waived by reason of (and the Buyer
Indemnified Persons shall be deemed to have relied upon the representations and
warranties of Seller set forth herein notwithstanding) (i) any investigation
made by or on

 

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behalf of any of the Buyer Indemnified Persons (including by any of its
advisers, consultants or representatives) or by reason of the fact that any of
the Buyer Indemnified Persons or any of such advisers, consultants or
representatives knew or should have known that any such representation or
warranty is, was or might be inaccurate, regardless of whether such
investigation was made or such knowledge was obtained before or after the
execution and delivery of this Agreement or (ii) Buyer’s waiver of any condition
set forth in Article VI.  The representations, warranties and covenants of
Buyer, and the Seller Indemnified Persons’ rights to indemnification with
respect thereto, shall not be affected or deemed waived by reason of (and the
Seller Indemnified Persons shall be deemed to have relied upon the
representations and warranties of Buyer set forth herein notwithstanding)
(i) any investigation made by or on behalf of any of the Seller Indemnified
Persons (including by any of its advisers, consultants or representatives) or by
reason of the fact that any of the Seller Indemnified Persons or any of such
advisers, consultants or representatives knew or should have known that any such
representation or warranty is, was or might be inaccurate, regardless of whether
such investigation was made or such knowledge was obtained before or after the
execution and delivery of this Agreement or (ii) Seller’s waiver of any
condition set forth in Article VI.

 

(c)                               For the avoidance of doubt, Seller shall not
be required to indemnify any Buyer Indemnified Person for any Liability to the
extent it was reserved for on the Final Balance Sheet or to the extent it was
included in the calculation of the Final Closing Statutory Value.

 

SECTION 7.9.                       Product Tax Claims.

 

(a)                               The Buyer Indemnified Persons may, within the
applicable time period specified in Section 7.1(a) but subject to
Section 7.9(b)(ii), bring a claim pursuant to Section 7.2(a)(i) that relates to
a breach of a representation or warranty under Section 3.15 even if no related
Third Party Claim has first been asserted or made against Buyer or the Company
with respect thereto (a “Direct Product Tax Claim”); provided, however, that any
Direct Product Tax Claim must be based on the good faith determination by Buyer
that a breach of a representation or warranty under Section 3.15 has occurred. 
If any Buyer Indemnified Person brings a Direct Product Tax Claim, Seller and
Buyer shall cooperate in good faith to determine whether any breach of a
representation or warranty under Section 3.15 has occurred and, if necessary, to
develop corrective measures that are appropriate, reasonable, cost-efficient and
effective, taking into account all of the relevant facts and circumstances then
applicable.

 

(b)                              Notwithstanding anything to the contrary in
this Agreement, with respect to any breach of Section 3.15:

 

(i)                                  Seller shall have no liability except to
the extent that the relevant representation or warranty was breached based on
the facts that existed and the Applicable Law (and interpretations thereof) as
in effect as of or before the Closing Date;

 

(ii)                              Subject to Section 7.9(c), Seller shall only
be required to indemnify the Buyer Indemnified Persons for Indemnifiable Losses
with respect to Direct Product Tax Claims to the extent that such Indemnifiable
Losses arise out of a circumstance identified in a written notice (describing in
reasonable detail the circumstances giving rise to the claim of a breach of the
representations and warranties

 

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made in Section 3.15) delivered to Seller on or prior to the later of
December 31, 2015 and (a) with respect to any annuity contracts that are part of
the Company Business, the date that is one year after the substantial completion
of the conversion of the administration of the annuity contracts to se2 as
contemplated by the Transition Services Agreement or (b) with respect to life
contracts that are part of the Company Business, the date that is one year after
the substantial completion of the migration of the life contracts as provided in
the Transition Services Agreement; and

 

(iii)                          Seller shall have no liability with respect to
any insurance or annuity policy or contract issued after the Closing Date other
than any insurance or annuity policy or contract that is part of the Company
Business, an application for which has been submitted prior to the Closing Date
and that is issued by the Company on the terms set forth in such application on
or within 30 days after the Closing Date.

 

(c)                               If, with respect to a Direct Product Tax
Claim, Seller and Buyer cannot agree as to whether a breach of a representation
or warranty under Section 3.15 has occurred, then (i) if Seller promptly (and in
any event within 30 Business Days) after receiving a written notice with respect
to such Direct Product Tax Claim delivers or causes to be delivered to Buyer an
opinion addressed to Buyer and issued by a reputable nationally recognized law
firm, accounting firm or actuarial firm that is familiar with analyzing matters
of the type covered by the representations and warranties set forth in
Section 3.15 to the effect that it is more likely than not that no such breach
has occurred with respect to the Direct Product Tax Claim then in dispute, then
Seller shall not be required to indemnify Buyer with respect to such disputed
Direct Product Tax Claim unless and until either a Third Party Claim with
respect thereto subsequently arises, such opinion is subsequently withdrawn or
qualified, the parties otherwise agree that such opinion is no longer
controlling or such opinion is not subsequently reaffirmed or re-issued promptly
upon the reasonable request of Buyer (other than as a result of a change in
Applicable Law) in which case (A) Seller shall, as provided in
Section 7.2(a)(i) but subject to Section 7.9(e), the Cap and the other
limitations set forth in this Agreement (other than as specified below),
indemnify Buyer for any Indemnifiable Loss attributable to a breach of a
representation or warranty under Section 3.15 (including any penalties or fees
imposed by the IRS) resulting from or arising out of the matters set forth in
such disputed Direct Product Tax Claim, regardless of whether the
representations and warranties set forth in Section 3.15 shall have otherwise
expired pursuant to Section 7.1(a), Section 7.9(b)(ii) or any other provision of
this Agreement and (ii) if Seller does not deliver or cause to be delivered to
Buyer any such opinion within such 30-Business Day period, then such breach of a
representation or warranty set forth in Section 3.15 that is alleged by Buyer
shall be deemed conclusively to have been established with respect to such
Direct Product Tax Claim.  If Seller and Buyer cannot agree with respect to the
appropriate, reasonable, cost efficient and effective corrective measures, the
disagreement shall be resolved by a recognized law firm, accounting firm or
actuarial firm selected by mutual agreement of Buyer and Seller, and any such
determination by such law firm, accounting firm or actuarial firm shall be
final.  The parties shall use their reasonable best efforts to cause such law
firm, accounting firm or actuarial firm to render a determination within 60 days
of the referral of such matter for resolution.  The fees and expenses of such
accounting firm, law firm or actuarial firm shall be borne equally by Buyer and
Seller.

 

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(d)                             In the event that the corrective measures
described in this Section 7.9 include making any request to the IRS for relief
with respect to such failure, Buyer and Seller shall jointly participate in all
discussions or other proceedings with the IRS, including attendance at meetings
and joint approval of all written submissions.  Buyer shall control the decision
of whether or not to enter into a closing agreement or other arrangement with
the IRS in connection with such discussions or other proceedings; provided that
if the closing agreement or other arrangement involves any admission that would
reasonably be expected to form the basis of a claim against Seller under this
Agreement, then Buyer may not enter into any such closing agreement or other
arrangement without the consent of Seller, which shall not be unreasonably
withheld, conditioned or delayed.  Buyer shall control the implementation of the
corrective measures described in this Section 7.9.

 

(e)                               Seller shall not be obligated to indemnify any
Buyer Indemnified Person under Section 7.2(a)(i) with respect to any claim for
Indemnifiable Losses resulting from or arising out of any breach of any
representation or warranty set forth in Section 3.15 unless and until the
aggregate amount of all such Indemnifiable Losses exceeds $7,500,000, at which
point Seller shall be liable for all Indemnifiable Losses that are in excess of
such amount, subject to the Cap and the other applicable limitations set forth
in Section 7.3.

 

ARTICLE VIII.
TAX MATTERS

 

SECTION 8.1.                       Indemnification for Taxes.

 

(a)                               Seller shall indemnify and hold harmless the
Buyer Indemnified Persons from any and all Indemnifiable Losses to the extent
arising out of the following:

 

(i)                                  Taxes with respect to the Company for all
Pre-Closing Tax Periods, except to the extent of any accrued liability for Taxes
taken into account in the calculation of the Final Adjustment Amount; and

 

(ii)                              liability for Taxes of any Person other than
the Company pursuant to any provision of joint and several liability under
Treasury Regulation Section 1.1502-6 and any corresponding provision of state,
local, or foreign law.

 

(b)                              Buyer agrees to indemnify and hold harmless the
Seller Indemnified Persons from and against any and all liabilities for Taxes
that are not subject to indemnification by Seller pursuant to Section 8.1(a).

 

(c)                               For purposes of this Agreement, Taxes for a
Straddle Period shall be allocated between the Pre-Closing Tax Period and the
Post-Closing Tax Period in the following manner:

 

(i)                                  in the case of Taxes based on or measured
by income, gain, or receipts, or related to the actual or deemed sale or
transfer of property, or which are withholding Taxes, such Taxes shall be
allocated based on an interim closing of the books as of the Closing Date; and

 

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(ii)                              in the case of Taxes calculated on a periodic
basis, the portion of such Taxes allocable to the Pre-Closing Tax Period shall
be deemed to be the amount of such Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days in the
portion of the Straddle Period ending on the Closing Date and the denominator of
which is the number of days in the entire Straddle Period.

 

(d)                             Notwithstanding any other provision of this
Agreement, the Seller Indemnified Persons shall not be liable for (and Buyer
shall indemnify the Seller Indemnified Persons against) any Taxes resulting from
any transaction or event that is outside the ordinary course of business and
occurs after the Closing but on the Closing Date, unless such transaction or
event is initiated by Seller or the Company before the Closing.

 

SECTION 8.2.                       Filing of Tax Returns.

 

(a)                               (i)                                  Seller
shall prepare and timely file, or cause to be prepared and timely filed, all
Consolidated Returns that include the Company, regardless of when such Tax
Returns are required to be filed.

 

(ii)                              Seller shall prepare and timely file, or cause
to be prepared and timely filed, all Tax Returns for the Company for taxable
periods that end on or before the Closing Date and that are required to be filed
prior to the Closing Date (taking into account any extensions) other than Tax
Returns described in Section 8.2(a)(i).

 

(iii)                          From and after the Closing, Buyer shall cause the
Company to provide Seller and its Affiliates in a timely fashion in accordance
with past practice all filing information relating to the Company necessary for
the preparation and filing of the Consolidated Returns.

 

(b)                              Buyer shall prepare and timely file, or cause
to be prepared and timely filed, Tax Returns for the Company for taxable periods
that end on or before the Closing Date that are not described in
Section 8.2(a) and for any Straddle Period.  Such Tax Returns shall be prepared
in a manner consistent with the positions taken, and with accounting methods
used, on the Tax Returns filed by or with respect to the Company prior to the
date on which the Closing occurs, unless otherwise required by Applicable Law or
agreed by Seller and Buyer.  Buyer shall deliver any such Tax Return to Seller
for Seller’s review at least 30 days (or, in the case of premium tax returns, 10
days) prior to the date such Tax Return is required to be filed and shall accept
all reasonable comments of Seller consistent with Applicable Law in respect of
such Tax Returns.  To the extent consistent with Applicable Law, Buyer shall, or
shall cause the Company to, file all Tax Returns for any Straddle Period on the
basis that the relevant Tax period ended as of the Closing Date, unless the
relevant Tax authority will not accept a Tax Return filed on that basis.

 

(c)                               Buyer shall prepare and timely file, or cause
the Company to prepare and timely file, all Tax Returns required to be filed by
or with respect to the Company for any Tax period beginning after the Closing
Date.

 

(d)                             Except to the extent otherwise required by
Applicable Law, Buyer shall not, and shall not permit any of its Affiliates to,
without the prior written consent of Seller, which

 

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consent may not be unreasonably withheld, conditioned or delayed, amend any Tax
Returns of the Company relating in whole or in part to a Pre-Closing Tax Period.

 

SECTION 8.3.                       Tax Refunds.  Any Tax refund, credit, or
similar benefit (including any interest paid or credited with respect thereto)
(a “Tax Refund”) relating to the Company for Taxes paid for any Pre-Closing Tax
Period shall be the property of Seller except to the extent such Tax Refund was
taken into account in calculating the Final Adjustment Amount.  If received by
Buyer or the Company, Buyer shall, or shall cause the Company to, pay such Tax
Refund promptly to Seller, net of any Tax cost to Buyer or any of its Affiliates
attributable to the receipt of such refund.  In the event that any such Tax
Refund is subsequently contested by any Tax authority, such contest shall be
handled in accordance with the procedures in Section 7.5.  Any additional Taxes
resulting from the contest shall be indemnified in accordance with Section 8.1.

 

SECTION 8.4.                       Cooperation and Exchange of Information. 
Seller and Buyer shall provide each other with such cooperation and information
as either of them or their respective Affiliates may reasonably request of the
other in filing any Tax Return, amended Tax Return or claim for Tax Refund,
determining a liability for Taxes or a right to a Tax Refund, or participating
in or conducting any contest in respect of Taxes (a “Tax Contest”).  Such
cooperation and information shall include providing copies of relevant Tax
Returns or portions thereof, together with accompanying schedules, related work
papers and documents relating to rulings or other determinations by Tax
authorities.  Each party and its Affiliates shall make its employees available
on a basis mutually convenient to both parties to provide explanations of any
documents or information provided hereunder.  Each of Seller and Buyer shall
retain all Tax Returns, schedules and work papers, records and other documents
in its possession relating to Tax matters of the Company for each Tax period
first ending after the Closing Date and for all prior Tax periods until the
later of (i) the expiration of the statute of limitations of the Tax period to
which such Tax Returns and other documents relate, without regard to extensions
except to the extent notified in writing of such extensions for the respective
Tax periods, or (ii) three years following the due date (without extension) for
such Tax Returns.  Any information obtained under this Section 8.4 shall be kept
confidential except as otherwise may be necessary in connection with the filing
of Tax Returns or claims for Tax Refunds or in conducting a contest or as
otherwise may be required by Applicable Law or the rules of any stock exchange.

 

SECTION 8.5.                       Conveyance Taxes.  Buyer or Seller, as
appropriate, shall execute and deliver all instruments and certificates
necessary to enable the other to comply with any filing requirements relating to
any sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees and any similar Taxes
(“Conveyance Taxes”) which become payable in connection with the purchase of
Shares by Buyer or the consummation of any of the other transactions
contemplated by this Agreement and shall file such applications and documents as
shall permit any Conveyance Taxes to be assessed and paid.  Any Conveyance Taxes
incurred in connection with the consummation of the transactions contemplated by
this Agreement shall be paid 50% by Buyer and 50% by Seller.

 

SECTION 8.6.                       Pre-Closing Tax Payment.  Notwithstanding
anything in this Agreement to the contrary, prior to the Closing, the Company
shall make a payment to Seller to

 

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fund its full share of the Tax liability of the Seller Group for the Pre-Closing
Tax Period, including the Company’s income related to the Recapture.

 

SECTION 8.7.                       Miscellaneous.

 

(a)                               Seller and Buyer agree to treat all payments
(other than interest on a payment) made by either of them to or for the benefit
of the other or the other’s Affiliates or the Company under this Article VIII
and under other indemnity provisions of this Agreement as adjustments to the
Purchase Price for Tax purposes and that such treatment shall govern for
purposes hereof to the extent permissible under Applicable Law.

 

(b)                              Notwithstanding any provision in this Agreement
to the contrary, the obligations of Seller to indemnify and hold harmless the
Buyer Indemnified Persons, as well as the obligations of Buyer to indemnify and
hold harmless the Seller Indemnified Persons, pursuant to this Article VIII
shall terminate on the later of three months after the expiration of the
applicable statute of limitations (taking into account any applicable extensions
or tollings thereof) with respect to the Tax liabilities in question or 60 days
after the final administrative or judicial determination of such Tax
liabilities, except for any indemnity obligations as to which a claim has been
made before the expiration of the applicable period.

 

(c)                               In the event of any Tax Contest, the conduct
of the parties shall be governed by the provisions of Section 7.5.

 

(d)                             In the event of any inconsistency between
Article VII and Article VIII with respect to indemnification under this
Agreement for or with respect to any Taxes of the Company, Article VIII shall
control.

 

(e)                               Should it be necessary, equitable adjustments
will be made to prevent duplicate recovery for indemnification with respect to
the same item.

 

(f)                                Buyer shall not withhold any amounts pursuant
to any Tax law; provided, that Seller has delivered or caused to be delivered on
or prior to the Closing Date to Buyer a certificate, in compliance with Treasury
Regulations Section 1.1445-2(b)(2), certifying that the transactions
contemplated hereby are exempt from withholding under Section 1445 of the Code.

 

(g)                              Seller will cause all Tax sharing, allocation,
indemnity and similar agreements or arrangements between the Company, on the one
hand, and Seller or any Affiliates of Seller, on the other hand, to be
terminated effective prior to or as of the Closing Date, and after the Closing
Date the Company shall have no obligation or rights under any such agreement or
arrangement for any past, present or future period.

 

(h)                              Buyer and Seller acknowledge and agree that
neither Seller nor any of its Affiliates shall be obligated to make any election
under Treasury Regulations Section 1.1502-36 in connection with the transactions
contemplated by this Agreement.

 

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ARTICLE IX.
TERMINATION PRIOR TO CLOSING

 

SECTION 9.1.                       Termination of Agreement.  This Agreement may
be terminated at any time prior to the Closing:

 

(a)                               by Seller or Buyer in writing, if there shall
be any order, injunction or decree of any Governmental Entity that prohibits or
restrains any party from consummating the transactions contemplated hereby, and
such order, injunction or decree shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant to this
Section 9.1(a) shall have performed in all material respects its obligations
under this Agreement, acted in good faith and, if binding on such party, used
reasonable best efforts to prevent the entry of, and to remove, such order,
injunction or decree in accordance with its obligations under this Agreement;

 

(b)                              by Seller or Buyer in writing, if the Closing
has not occurred on or prior to May 1, 2014 (as it may be extended, the “Outside
Date”), unless the failure of the Closing to occur is the result of a material
breach of this Agreement by the party seeking to terminate this Agreement;
provided, that (i) if on the Outside Date either of the conditions set forth in
Section 6.1(a) or Section 6.1(b) has not been satisfied then, upon the written
notice of Seller to Buyer, the Outside Date shall be extended to a date and time
that is not later than 5:00 pm, New York City time, on August 1, 2014 and
(ii) the right to terminate this Agreement pursuant to this Section 9.1(b) will
not be available (A) to any party if the other party has, in good faith, filed
an action seeking, and is then pursuing, specific performance as permitted by
Section 10.10 or (B) Buyer until the first Business Day after the end of the
cure period contemplated by Section 9.1(d), if any such cure period is
applicable.

 

(c)                               by either Seller or Buyer (but only so long as
Seller or Buyer, as applicable, is not in material breach of its obligations
under this Agreement) in writing, if a breach of any provision of this Agreement
that has been committed by the other party would cause the failure of any mutual
condition to Closing or any condition to Closing for the benefit of the
non-breaching party and such breach is not capable of being cured or is not
cured within 20 calendar days after the breaching party receives written notice
from the non-breaching party that the non-breaching party intends to terminate
this Agreement pursuant to this Section 9.1(c);

 

(d)                             by Seller if (i) all of the conditions to
Buyer’s obligations under this Agreement set forth in Section 6.1 or Section 6.2
have been satisfied (other than those conditions that by their terms are to be
satisfied at the Closing; provided, that such conditions must be capable of
being satisfied assuming, for this purpose, that the Closing Date were the date
that valid notice of termination of this Agreement is delivered by Seller to
Buyer pursuant to this Section 9.1(d)), (ii) Seller has confirmed in writing to
Buyer that all of the conditions to Seller’s obligations under this Agreement
set forth in Section 6.1 or Section 6.3 (other than those conditions that by
their terms are to be satisfied at the Closing) have been satisfied or will be
waived and that Seller is ready and willing to proceed with the Closing and
(iii) Buyer fails to comply with its obligations under Article II to consummate
the Closing by the time specified in Section 2.2, provided that in the event the
sole reason Buyer has failed to consummate the Closing is the result of a
failure of the Financing Sources under the Debt Commitment Letter to

 

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provide the Debt Financing, Buyer shall have 30 days to cure such failure and
Seller shall not be entitled to terminate this Agreement until the end of such
cure period.

 

(e)                               by Seller, if (i) any Governmental Entity
imposes any condition in connection with its grant of any permit, order,
consent, approval or authorization required in connection with the Recapture
that requires Seller or any of its Affiliates to incur any Liability or take any
action other than (A) enter into a keepwell for the benefit of the Company or
(B) make a capital contribution to the Company with a simultaneous commitment
from such Governmental Entity that it will permit the Company to repay such
capital contribution through a cash dividend to Seller or such Affiliate prior
to the Closing or (ii) Seller is required to make a payment under any keepwell
entered into pursuant to clause (i) above; or

 

(f)                                by mutual written consent of Seller and
Buyer.

 

SECTION 9.2.                       Effect of Termination.  If this Agreement is
terminated pursuant to Section 9.1, this Agreement shall become null and void
and of no further force and effect without Liability of either party (or any
Representative of such party) to the other party to this Agreement; provided,
that no such termination shall relieve a party from Liability for any fraud or
intentional breach of this Agreement.  Notwithstanding the foregoing,
Section 1.1, Section 5.5, this Section 9.2 and Article X shall survive
termination hereof pursuant to Section 9.1.  If this Agreement is terminated
pursuant to Section 9.1, all confidential information received by Buyer with
respect to the Company or the Company Business (including any confidential
information relating to the Variable Annuity Transaction) shall be treated in
accordance with the Confidentiality Agreement, which shall remain in full force
and effect notwithstanding the termination of this Agreement.

 

ARTICLE X.
GENERAL PROVISIONS

 

SECTION 10.1.               Fees and Expenses.

 

(a)                               Except as provided below in this Section 10.1,
whether or not the purchase and sale of the Shares is consummated, each party
hereto shall, except as otherwise provided in this Agreement, pay its own
Transaction Expenses incident to preparing for, entering into and carrying out
the Transaction Agreements and the consummation of the transactions contemplated
thereby.

 

(b)                              In the event Seller terminates this Agreement
pursuant to Section 9.1(c) or pursuant to Section 9.1(d) (including, for the
avoidance of doubt, as a result of the unavailability of the Financing, whether
or not such unavailability was caused by Buyer or any of its Affiliates) (any
such termination, a “Specified Termination”), then Buyer shall pay, or Buyer and
Seller shall execute a joint written instruction pursuant to the Escrow
Agreement to cause the Escrow Agent to pay out of the Escrow Funds on behalf of
Buyer, to Seller a non-refundable fee in the amount of $60,000,000 (the
“Termination Fee”), by wire transfer of same-day funds to an account designated
by Seller, no later than two Business Days after such termination.

 

(c)                               If Buyer fails to promptly pay the Termination
Fee when due, Seller takes any action to collect the Termination Fee and the
Termination Fee is subsequently paid, Buyer

 

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shall promptly reimburse Seller for all reasonable and documented out-of-pocket
fees and expenses incurred by Seller in connection with any such actions taken
by Seller to collect the Termination Fee (including reasonable and documented
fees and expenses of all attorneys, consultants and other experts retained by
Seller).

 

(d)                             Notwithstanding anything in this Agreement to
the contrary, in the event the Termination Fee is paid in accordance with
Section 10.1(b), payment thereof shall be the sole and exclusive remedy of
Seller against Buyer, Parent, the Financing Sources and any of their respective
Affiliates, with respect to (i) any loss or damage suffered, directly or
indirectly, as a result of the failure of any of the transactions contemplated
by the Transaction Agreements to be consummated, (ii) the termination of this
Agreement, (iii) any liabilities or obligations arising under this Agreement or
(iv) any claims or actions arising out of or relating to any breach, termination
or failure of or under this Agreement.  Buyer and Seller acknowledge and agree
that the agreements contained in this Section 10.1 are an integral part of the
transactions contemplated by the Transaction Agreements, and that, without these
agreements, neither Buyer nor Seller would enter into this Agreement, and that
the Termination Fee is not a penalty but rather is liquidated damages in a
reasonable amount that will compensate Seller in circumstances in which the
Termination Fee is paid for the efforts and resources expended and opportunities
foregone while negotiating and seeking to consummate the transactions
contemplated by this Agreement, which amount would otherwise be impossible to
calculate with precision.

 

(e)                               Notwithstanding anything to the contrary in
this Agreement, if Seller effects a Specified Termination (which Specified
Termination may be effected by Seller in its sole discretion in the
circumstances contemplated by Section 9.1), then Seller’s and its Affiliates’
sole and exclusive remedy (whether at law, in equity, in contract, in tort or
otherwise) against Buyer, Parent and any of their respective former, current or
future directors, officers, employees, agents, general or limited partners,
managers, members, stockholders, Affiliates or assignees or any former, current
or future director, officer, employee, agent, general or limited partner,
manager, member, stockholder, Affiliate or assignee of any of the foregoing
(collectively, the “Buyer Related Parties”) for any breach, loss or Liability,
shall be to receive payment of the Termination Fee and the fees and expenses
referred to in Section 10.1(c) and none of the Buyer Related Parties will have
any additional Liability, commitment or obligation to Seller or any of its
Affiliates relating to or arising out of this Agreement or the Equity Commitment
Letter, through Buyer, whether by or through attempted piercing of the corporate
veil, by or through a claim by or on behalf of Buyer against the Parent or any
other Buyer Related Party, by the enforcement of any assessment or by any legal
or equitable proceeding, by virtue of any statute, regulation or other
Applicable Law, or otherwise.  The foregoing shall not be construed as or deemed
to be a waiver or election of remedies by either party, each of whom, subject to
Section 7.7(a) and Section 10.1(d), expressly reserves any and all rights and
remedies available to it at law or in equity in the event of any breach by the
other party under this Agreement prior to the Closing.

 

SECTION 10.2.               Notices.  All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
delivered personally or by overnight courier (providing proof of delivery) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):

 

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(a)                               if to Buyer or Parent:

 

Resolution Life Holdings, Inc.
733 Third Avenue, 16th Floor
New York, NY 10017
Attention:  W. Weldon Wilson

Email: weldon@weldonwilson.com

 

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

 

Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
Attention:  Nicholas F. Potter

                   David Grosgold

 

(b)                              if to Seller:

 

Allstate Life Insurance Company
3100 Sanders Road
Northbrook, Illinois 60062
Attention:  Jess Merten
Email: Jess.Merten@allstate.com

 

with copies to:

 

Allstate Life Insurance Company
3075 Sanders Road
Northbrook, Illinois 60062
Attention:  Joy Thomas
Email: Joy.Thomas@allstate.com

 

and

 

Allstate Life Insurance Company
2775 Sanders Road
Northbrook, Illinois 60062
Attention:  Beth Lapham
Email: blapham@allstate.com

 

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

 

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York  10019
Attention:  John M. Schwolsky

                  Alexander M. Dye

 

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Notice given by personal delivery or overnight courier shall be effective upon
actual receipt.

 

SECTION 10.3.               Interpretation.  When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.  All references herein to any agreement, instrument, statute, rule or
regulation are to the agreement, instrument, statute, rule or regulation as
amended, modified, supplemented or replaced from time to time (and, in the case
of statutes, includes any rules and regulations promulgated under said statutes)
and to any section of any statute, rule or regulation including any successor to
said section.  Disclosure of any item in the Buyer Disclosure Schedule or Seller
disclosure schedule, as the case may be, shall be deemed disclosed in all other
sections of such disclosure schedule to the extent the applicability of such
fact or item to such other section of such disclosure schedule is reasonably
apparent.  Disclosure of any item in the Buyer Disclosure Schedule or Seller
Disclosure Schedule, as the case may be, shall not be deemed an admission that
such item represents a material item, fact, exception of fact, event or
circumstance or that occurrence or non-occurrence of any change or effect
related to such item would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.  Whenever the words
“include,” “includes” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation.”  Whenever the singular
is used herein, the same shall include the plural, and whenever the plural is
used herein, the same shall include the singular, where appropriate.  Whenever
the word “Dollars” or the “$” sign appear in this Agreement, they shall be
construed to mean United States Dollars, and all transactions under this
Agreement shall be in United States Dollars.  This Agreement has been fully
negotiated by the parties hereto and shall not be construed by any Governmental
Entity against either party by virtue of the fact that such party was the
drafting party.

 

SECTION 10.4.               Entire Agreement; Third Party Beneficiaries.  This
Agreement (including all exhibits and schedules hereto), the Confidentiality
Agreement and the other Transaction Agreements constitute the entire agreement,
and supersede all prior agreements, understandings, representations and
warranties, both written and oral, among the parties with respect to the subject
matter of this Agreement.  Except as set forth in (i) Section 5.11 with respect
to Affiliates of Seller and (ii) Articles VII and VIII with respect to the Buyer
Indemnified Persons and the Seller Indemnified Persons, this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies.

 

SECTION 10.5.               Governing Law.  This Agreement and any dispute
arising hereunder shall be governed by, and construed in accordance with, the
laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.

 

SECTION 10.6.               Assignment.  Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise (other than following the
Closing by operation of law in a merger), by either party without the prior
written consent of the other party, and any such assignment that is not

 

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consented to shall be null and void; provided, that Buyer may, without the prior
written consent of Seller, assign its right to acquire the Shares, on the terms
and subject to the conditions set forth herein, to a wholly owned subsidiary of
Buyer, provided further, that no such assignment shall limit, or relieve Buyer
of, any of Buyer’s duties or obligations under any Transaction Agreement. 
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.

 

SECTION 10.7.               Jurisdiction; Enforcement.

 

(a)                               Each of the parties hereto hereby irrevocably
and unconditionally submits to the exclusive jurisdiction of any court of the
United States or any state court, which in either case is located in the City of
New York (each, a “New York Court”) for purposes of enforcing this Agreement or
determining any claim arising from or related to the transactions contemplated
by this Agreement.  In any such action, suit or other proceeding, each of the
parties hereto irrevocably and unconditionally waives and agrees not to assert
by way of motion, as a defense or otherwise any claim that it is not subject to
the jurisdiction of any such New York Court, that such action, suit or other
proceeding is not subject to the jurisdiction of any such New York Court, that
such action, suit or other proceeding is brought in an inconvenient forum or
that the venue of such action, suit or other proceeding is improper; provided,
that nothing set forth in this sentence shall prohibit any of the parties hereto
from removing any matter from one New York Court to another New York Court. 
Each of the parties hereto also agrees that any final and unappealable judgment
against a party hereto in connection with any action, suit or other proceeding
will be conclusive and binding on such party and that such award or judgment may
be enforced in any court of competent jurisdiction, either within or outside of
the United States.  A certified or exemplified copy of such award or judgment
will be conclusive evidence of the fact and amount of such award or judgment. 
Any process or other paper to be served in connection with any action or
proceeding under this Agreement shall, if delivered or sent in accordance with
Section 10.2, constitute good, proper and sufficient service thereof. 
Notwithstanding the foregoing or anything to the contrary in this Agreement, the
determination of the Final Adjustment Amount or any other amount to be
calculated or derived from the Final Balance Sheet, or any dispute relating to
the Final Balance Sheet, the Reference Balance Sheet or any amounts required to
be calculated therefrom, shall be governed by the terms of Section 2.5.

 

(b)                              EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES
SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.7.

 

(c)                               Parent hereby designates, appoints and
empowers Buyer with offices at the address set forth in Section 10.2(a) as its
authorized agent (Buyer in such capacity, the

 

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“Process Agent”) to receive for it and on its behalf service of summons or other
legal process in any action, suit or proceeding relating to this Agreement in
the State of New York.  Such service may be made by mailing or delivering a copy
of such process to the Process Agent at the Process Agent’s above address, and
Parent hereby irrevocably authorizes and directs the Process Agent to accept
such service on its behalf.  Parent covenants and agrees that, for so long as
this Agreement continues in effect, it shall maintain a duly appointed agent for
the service of summons and other legal process in New York, New York, United
States of America, for the purposes of any legal action, suit or proceeding
brought by any party in respect of this Agreement and shall keep Seller advised
of the identity and location of such agent.  If for any reason Parent does not
at any time have an authorized agent for service of process in New York, such
entity irrevocably consents to the service of process out of any New York Court
by mailing copies thereof by registered United States air mail to it at its
address specified in Section 10.2(a).  Nothing in this Agreement shall affect
the right of Seller to commence legal proceedings or otherwise sue Parent in the
country in which it is domiciled or in any other court having jurisdiction over
such entity in order to enforce the judgment of any New York Court or to serve
process upon such entity in any manner authorized by the laws of any such
jurisdiction.

 

SECTION 10.8.               Severability; Amendment; Modification; Waiver.

 

(a)                               Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under Applicable Law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any Applicable Law in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never been contained
herein.

 

(b)                              This Agreement may be amended or a provision
hereof waived only by a written instrument signed by each of Buyer and Seller.

 

(c)                               No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.

 

SECTION 10.9.               Certain Limitations.

 

(a)                               Notwithstanding anything to the contrary
contained herein, the other Transaction Agreements, the Seller Disclosure
Schedule or any of the Schedules or Exhibits hereto or thereto, Buyer
acknowledges and agrees that neither Seller nor any of its Affiliates (including
the Company), nor any Representative of any of them, makes or has made, and
Buyer has not relied on, any inducement or promise to Buyer except as
specifically made in this Agreement or any representation or warranty to Buyer,
oral or written, express or implied, other than as expressly set forth in
Article III and that the Company.  Without limiting the generality of the
foregoing, other than as expressly set forth in Article III, no Person has made
any

 

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representation or warranty to Buyer with respect to the Company, the Shares or
any other matter, including with respect to (i) merchantability, suitability or
fitness for any particular purpose, (ii) the operation of the Company by Buyer
after the Closing, (iii) the probable success or profitability of the Company
after the Closing or (iv) any information, documents or material made available
to Buyer, its Affiliates or their respective Representatives in any “data
rooms,” information memoranda, management presentations, functional “break-out”
discussions or in any other form or forum in connection with the transactions
contemplated by this Agreement, including any estimation, valuation, appraisal,
projection or forecast with respect to the Company.

 

(b)                              Buyer further acknowledges and agrees that it
(i) has made its own inquiry and investigation into and, based thereon, has
formed an independent judgment concerning the Company and the Company Business,
(ii) has been provided adequate access to such information as it has deemed
necessary to enable it to form such independent judgment, (iii) has had such
time as it deems necessary and appropriate fully and completely to review and
analyze such information, documents and other materials and (iv) has been
provided an opportunity to ask questions of Seller with respect to such
information, documents and other materials and has received answers to such
questions that it considers satisfactory.

 

(c)                               Seller makes no express or implied
representation or warranty under this Agreement as to the future experience,
success or profitability of the Company Business, whether or not conducted or
administered in a manner similar to the manner in which the Company Business was
conducted prior to the Closing or that the Insurance Reserves held by or on
behalf of the Company or otherwise with respect to the Company Business or the
assets supporting such Insurance Reserves have been or will be adequate or
sufficient for the purposes for which they were established.

 

SECTION 10.10.       Specific Performance.  The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, including any party’s failure to take all actions as are
necessary on such party’s part in accordance with the terms and conditions of
this Agreement to consummate the transactions contemplated hereby.  It is
accordingly agreed that, without the necessity of posting bond or any other
undertaking, the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement (including that Seller shall be
entitled to cause Buyer and its Affiliates to enforce their rights under the
Commitment Letters or any definitive documents relating to the Financing, or to
seek Alternative Financing as contemplated by Section 5.23 in the event that the
Debt Financing or the NER Financing cannot be obtained), this being in addition
(subject to the terms of this Agreement) to any other remedy to which such party
is entitled at law or in equity (except as otherwise provided in this
Agreement).  In the event that any Action is brought in equity to enforce the
provisions of this Agreement, no party hereto shall allege, and each party
hereto hereby waives any defense or counterclaim, that there is an adequate
remedy at law.  The foregoing shall not be construed as or deemed to be a waiver
or election of remedies by either party, each of whom, subject to
Section 7.7(a) and Section 10.1(d), expressly reserves any and all rights and
remedies available to it at law or in equity in the event of any breach by the
other party under this Agreement prior to the Closing.  If a court of competent
jurisdiction (as contemplated by Section 

 

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10.7) (i) declines to grant an injunction or other form of specific performance
or equitable relief to require Buyer to cause the Financing to be funded and
consummate the transactions contemplated hereby (including by granting monetary
damages in lieu of such injunction, specific performance or other equitable
relief) or (ii) grants Seller such injunction, specific performance or other
equitable relief but the Financing nonetheless fails to be funded such that the
transactions contemplated by this Agreement cannot be consummated, Seller shall
continue to be entitled to effect a Specified Termination and receive the
Termination Fee pursuant to the terms of Article IX and Section 10.1.  For the
avoidance of doubt, in no event shall Seller be permitted to receive both a
grant of specific performance that results in the occurrence of the Closing and
the payment of the Termination Fee.

 

SECTION 10.11.       No Offset.  No party to this Agreement may offset any
amount due to the other party hereto or any of such other party’s Affiliates
against any amount owed or alleged to be owed from such other party or its
Affiliates under this Agreement or any other Transaction Agreement without the
written consent of such other party.

 

SECTION 10.12.       Counterparts.  This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other parties.  Each party may deliver its signed
counterpart of this Agreement 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.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be signed by
their respective duly authorized officers, all as of the date first written
above.

 

 

 

ALLSTATE LIFE INSURANCE COMPANY

 

 

 

 

 

By:

/s/ Jesse E. Merten

 

 

Name: Jesse E. Merten

 

Title: Senior Vice President and
Chief Financial Officer,
Allstate Life Insurance Company

 

 

 

 

 

By:

/s/ Steven C. Verney

 

 

Name: Steven C. Verney

 

Title: Executive Vice President and
Chief Risk Officer,
Allstate Insurance Company

 

 

 

 

 

 

 

RESOLUTION LIFE HOLDINGS, INC.

 

 

 

 

 

By:

/s/ W. Weldon Wilson

 

 

Name: W. Weldon Wilson

 

Title:  President and Secretary

 

 

 

 

 

RESOLUTION LIFE L.P., acting through its general partner, RESOLUTION LIFE GP
LTD.

 

(solely for purposes of Section 5.25 and Article X)

 

 

 

 

 

By:

/s/ Brad Adderly

 

 

Name: Brad Adderly

 

Title: Director, Resolution Life GP Ltd.

 

85

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EXHIBIT A

 

 

 

 

 

 

 

 

 

 

ADMINISTRATIVE SERVICES AGREEMENT

 

by and between

 

LINCOLN BENEFIT LIFE COMPANY

 

and

 

ALLSTATE LIFE INSURANCE COMPANY

 

Effective as of [          ]

 

 

 

 

 

 

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

 

TABLE OF CONTENTS

 

ARTICLE

 

Page

 

 

 

ARTICLE I

DEFINITIONS

2

Section 1.1

Definitions

2

 

 

 

ARTICLE II

AUTHORITY; RETAINED SERVICES

5

Section 2.1

Authority

5

Section 2.2

Violations of Applicable Law and Applicable Contracts

5

Section 2.3

Retained Services

6

Section 2.4

Power of Attorney

6

 

 

 

ARTICLE III

STANDARD FOR SERVICES; FACILITIES; SUBCONTRACTING, ETC.

7

Section 3.1

Services; Standard for Services

7

Section 3.2

Facilities and Personnel

7

Section 3.3

Subcontracting

7

Section 3.4

Independent Contractor

8

Section 3.5

Limitation on Services

8

Section 3.6

Disaster Recovery

8

 

 

 

ARTICLE IV

UNDERWRITING; CONVERSION AND REPLACEMENT; PRODUCERS

8

Section 4.1

Post-Closing Contracts

8

Section 4.2

Parties’ Responsibilities

9

Section 4.3

Conversion and Replacement

10

Section 4.4

Producers

11

 

 

 

ARTICLE V

COLLECTIONS

11

Section 5.1

Collection Services

11

 

 

 

ARTICLE VI

CLAIMS HANDLING

12

Section 6.1

Claim Administration Services

12

Section 6.2

Description of Claim Administration Services

12

 

 

 

ARTICLE VII

REGULATORY AND LEGAL PROCEEDINGS

13

Section 7.1

Notice of Action

13

Section 7.2

Defense of Regulatory Complaints and Actions

13

Section 7.3

Other Actions

14

Section 7.4

Cooperation

15

 

 

 

ARTICLE VIII

SEPARATE ACCOUNT ADMINISTRATIVE SERVICES

16

Section 8.1

Separate Account Administrative Services

16

Section 8.2

Changes to Fund Options

16

Section 8.3

Changes to Separate Account Fees

16

 

i

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ARTICLE IX

MISCELLANEOUS SERVICES

16

Section 9.1

Ceded Reinsurance Contracts

16

Section 9.2

Amendments and Replacements

18

Section 9.3

Vermont Captive Reinsurance Agreement

18

Section 9.4

Non-Guaranteed Elements

18

Section 9.5

Contractholder Services

19

Section 9.6

Principal Underwriting Agreement

19

Section 9.7

Other Services

19

 

 

 

ARTICLE X

NOTIFICATION TO CONTRACTHOLDERS

19

Section 10.1

Notification to Contractholders

19

 

 

 

ARTICLE XI

QUARTERLY PREMIUM TAX AND INSOLVENCY FUND ACCOUNTINGS

20

Section 11.1

Quarterly Accountings

20

Section 11.2

Adjustments Regarding Quarterly Accountings

20

 

 

 

ARTICLE XII

CERTAIN ACTIONS BY COMPANY

20

Section 12.1

Filings

20

Section 12.2

Annual Adjustment

21

 

 

 

ARTICLE XIII

REGULATORY MATTERS AND REPORTING

21

Section 13.1

Regulatory Compliance and Reporting

21

Section 13.2

Additional Reports and Updates

22

Section 13.3

Additional Reports

23

 

 

 

ARTICLE XIV

BOOKS AND RECORDS

23

Section 14.1

Maintenance of Books and Records

23

 

 

 

ARTICLE XV

COOPERATION

24

Section 15.1

Cooperation

24

 

 

 

ARTICLE XVI

PRIVACY REQUIREMENTS

24

Section 16.1

Confidentiality Obligations

24

Section 16.2

Security Incidents

25

 

 

 

ARTICLE XVII

CONSIDERATION FOR ADMINISTRATIVE SERVICES

26

Section 17.1

Consideration for Administrative Services

26

 

 

 

ARTICLE XVIII

BANK ACCOUNTS; TRADEMARKS

26

Section 18.1

Establishment of Bank Accounts

26

Section 18.2

Trademarks

27

 

 

 

ARTICLE XIX

INDEMNIFICATION

29

Section 19.1

Administrator’s Obligation to Indemnify

29

Section 19.2

Company’s Obligation to Indemnify

29

Section 19.3

Definitions

30

Section 19.4

Applicability of Stock Purchase Agreement

30

 

ii

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

 

Section 19.5

No Duplication

31

 

 

 

ARTICLE XX

DURATION; TERMINATION

31

Section 20.1

Duration

31

Section 20.2

Termination

31

 

 

 

ARTICLE XXI

GENERAL PROVISIONS

32

Section 21.1

Schedules and Exhibits

32

Section 21.2

Notices

32

Section 21.3

Interpretation

33

Section 21.4

Entire Agreement; Third Party Beneficiaries

34

Section 21.5

Governing Law

34

Section 21.6

Assignment

34

Section 21.7

Jurisdiction; Enforcement

34

Section 21.8

Severability; Amendment; Modification; Waiver

35

Section 21.9

Specific Performance

35

Section 21.10

Counterparts

35

Section 21.11

Survival

36

 

iii

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

 

ADMINISTRATIVE SERVICES AGREEMENT

 

This ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”), effective as of
[                ], (the “Inception Date”), is entered into by and between
LINCOLN BENEFIT LIFE COMPANY, a Nebraska domiciled stock life insurance company
(the “Company”), and ALLSTATE LIFE INSURANCE COMPANY, an Illinois domiciled
stock life insurance company (the “Administrator”, and together with the
Company, the “Parties”, and each a “Party”).

 

RECITALS:

 

WHEREAS, the Administrator owns 100% of the issued and outstanding capital stock
of the Company;

 

WHEREAS, the Administrator, Resolution Life Holdings, Inc., a corporation
organized under the laws of the State of Delaware (the “Buyer”) and, solely for
the purposes of Section 5.25 and Article X thereof, Resolution Life L.P., a
Bermuda limited partnership, have entered into a Stock Purchase Agreement dated
as of July 17, 2013 (the “Stock Purchase Agreement”), pursuant to which the
Administrator proposes to sell, and the Buyer proposes to purchase, 100% of the
issued and outstanding capital stock of the Company;

 

WHEREAS, the Stock Purchase Agreement provides, among other things, for the
Company and the Administrator to  enter into this Agreement;

 

WHEREAS, pursuant to the Amended and Restated Reinsurance Agreement entered into
between the Company and the Administrator, effective as of 12:01 a.m. Central
Time on [        ] (the “Reinsurance Agreement”), the Administrator (in its
capacity as Reinsurer) has agreed to indemnify the Company for (i) on a
coinsurance basis, one hundred percent (100%) of the General Account Liabilities
of the Company, (ii) on a modified coinsurance basis, one hundred percent (100%)
of the Separate Account Liabilities of the Company and (iii) one hundred percent
(100%) of the Reinsurer Extra Contractual Obligations (each as defined in the
Reinsurance Agreement);

 

WHEREAS, the Company wishes to appoint the Administrator to provide the
administrative services with respect to the LBL Contracts, the Ceded Reinsurance
Contracts, the Shared Separate Account and the Separate Account (each as defined
below) set forth in this Agreement, and the Administrator desires to provide
such administrative services;

 

WHEREAS, the Company and the Administrator are parties to the General Account
Reinsurance Agreement and the Variable Annuity Reinsurance Agreement, pursuant
to which the Administrator reinsures liabilities in respect of the variable
annuity contracts written by the Company (the “VA Business”), and the VA ASA,
pursuant to which the Administrator is obligated to provide administrative
services to the Company in respect of the VA Business, and such agreements will
continue in full force and effect in accordance with its terms following the
Inception Date;

 

WHEREAS, the Company is also a party to a reinsurance agreement, effective
September 30, 2012 (the “Vermont Captive Reinsurance Agreement”), pursuant to
which the Company

 

1

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

 

cedes to its current Affiliate, Lincoln Benefit Reinsurance Company, a Vermont
domiciled captive insurance company (the “Vermont Captive”), one hundred percent
(100%) of the policy benefits under specified universal life insurance policies
written by the Company with issue dates within the range set forth in the
Vermont Captive Reinsurance Agreement (the “Vermont Captive Contracts”);

 

WHEREAS, the Company also wishes to appoint the Administrator to provide the
administrative services with respect to the Vermont Captive Contracts and the
Vermont Captive Reinsurance Agreement set forth in this Agreement, and the
Administrator desires to provide such administrative services.

 

NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein, the Parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1        Definitions.  Any capitalized term used but not defined
herein, unless otherwise indicated, shall have the meaning set forth in the
Reinsurance Agreement.  As used in this Agreement, the following terms shall
have the following meanings:

 

“Action” shall have the meaning specified in the Stock Purchase Agreement.

 

“Administered Business” shall mean the LBL Contracts, the portion of the Shared
Separate Account that relates to the LBL Contracts, the Separate Account, the
Vermont Captive Contracts, the Vermont Captive Reinsurance Agreement and the
portion of the Ceded Reinsurance Contracts that relates to LBL Contracts.

 

“Administrative Services” shall have the meaning specified in Section 2.1.

 

“Agreement” shall have the meaning specified in the Preamble.

 

“Annual Adjustment” shall have the meaning specified in Section 12.3.

 

“Applicable Law” shall have the meaning specified in the Stock Purchase
Agreement.

 

“Claims” shall have the meaning specified in the Section 6.1.

 

“Claimants” shall have the meaning specified in the Section 6.2.

 

“Company” shall have the meaning specified in the Preamble.

 

“Company Business” shall have the meaning specified in the Stock Purchase
Agreement.

 

2

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

 

“Covered Insurance Policies” means the LBL Contracts and the Vermont Captive
Contracts.

 

“Customer Information” shall have the meaning specified in the Section 16.1.

 

“Customers” shall have the meaning specified in the Section 16.1.

 

“Designated Company Conversion Policies” means (i) Underwriting Period
Conversion Policies and (ii) Post-Underwriting Period Conversion Policies.

 

“Disaster Recovery Policies” shall have the meaning specified in the
Section 3.6.

 

“Excluded Conversion Policies” means policies issued from and after the
Inception Date as a result of the exercise of a policyholder of any conversion
right in a Pre-Closing Policy or a Post-Closing Policy, other than Designated
Company Conversion Policies.

 

“Inception Date” has the meaning specified in the Preamble.

 

“Information Security Program” shall have the meaning specified in the
Section 16.1.

 

“Insolvency Fund Quarterly Accounting” shall have the meaning specified in
Section 11.1.

 

“LBL Contracts” shall have the meaning specified in the Reinsurance Agreement;
provided, however, that for purposes of this Agreement, LBL Contracts shall not
include any Post-Underwriting Period Conversion Policies.

 

“Licensed Names and Marks” shall have the meaning specified in Section 18.2.

 

“Licensor Standards” shall have the meaning specified in Section 18.2.

 

“Materials” shall have the meaning specified in Section 18.2.

 

“New Conversion Policy Form” shall have the meaning specified in Section 4.3(b).

 

“Post-Inception Date Assessments” shall have the meaning specified in
Section 11.1.

 

“Post-Underwriting Period Conversion Policies” shall have the meaning specified
in Section 4.3(b).

 

“Premium Tax Credits” shall have the meaning specified in Section 12.2.

 

“Principal Underwriting Agreement” shall have the meaning specified in the Stock
Purchase Agreement.

 

3

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

 

“Quarterly Accountings” shall have the meaning specified in Section 11.1.

 

“Quarterly Premium Tax Accounting” shall have the meaning specified in
Section 11.1.

 

“Reinsurance Agreement” shall have the meaning specified in the Preamble.

 

“Reinsured Convertible Policy” shall have the meaning specified in
Section 4.3(a).

 

“Reinsurer” means the Administrator in its capacity as reinsurer under the
Reinsurance Agreement.

 

“Replacement Policy” shall have the meaning specified in Section 4.3(a).

 

“Retained Services” shall have the meaning specified in Section 2.3.

 

“Separate Account” means the registered separate account of the Company
established by the Administrator in accordance with the Transition Services
Agreement into which the separate account assets held in respect of the LBL
Contracts (but not in respect of the Company Business) will be transferred from
the Shared Separate Account pursuant to the Transition Services Agreement in
connection with the separation of the administration of the variable life
insurance policies included in the LBL Contracts from the administration of the
variable life insurance policies included in the Company Business.

 

“Separate Account Separation” shall mean the formation of a new registered
separate account of the Company and the transfer from the Shared Separate
Account to such new separate account of all assets and amounts held in the
Shared Separate Account in respect of the LBL Contracts.

 

“Shared Separate Account” means the Lincoln Benefit Life Variable Life Account
40 Act File No. 811-9154, but only so long as such separate account includes
assets held in respect of LBL Contracts.  For clarity, after the effective time
of the Separate Account Separation, the Lincoln Benefit Life Variable Life
Account 40 Act File No. 811-9154 shall not be a Shared Separate Account under
this Agreement, and the Administrator shall have no obligations under this
Agreement to, among other things, provide any services with respect to the
Lincoln Benefit Life Variable Life Account 40 Act File No. 811-9154.

 

“Subcontractor” shall have the meaning specified in Section 3.3.

 

“Transaction Agreements” shall have the meaning specified in the Stock Purchase
Agreement.

 

“Transition Services Agreement” shall have the meaning specified in the Stock
Purchase Agreement.

 

4

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

 

“Underwriting Period Conversion Policy” shall have the meaning specified in
Section 4.1(a).

 

“Underwriting Termination Date” means (i) with respect to annuity contracts,
December 31, 2013, and (ii) with respect to life insurance policies,
December 31, 2015.

 

“VA ASA” means the Administrative Services Agreement by and between the
Administrator and the Company, effective as of June 1, 2006.

 

“Vermont Captive” shall have the meaning specified in the Preamble.

 

“Vermont Captive Contracts” shall have the meaning specified in the Preamble.

 

“Vermont Captive Reinsurance Agreement” shall have the meaning specified in the
Preamble.

 

ARTICLE II

 

AUTHORITY; RETAINED SERVICES

 

Section 2.1        Authority.  Subject to Section 2.3, the Company hereby
appoints the Administrator, and the Administrator hereby accepts appointment, to
provide as an independent contractor of the Company, from and after the
Inception Date, on the terms and subject to the limitations as set forth in this
Agreement, all administrative services necessary or appropriate with respect to
the Administered Business, including those provided by or on behalf of the
Administrator specifically with respect to the Administered Business prior to
the Inception Date (unless the Administrator and the Company mutually decide any
such services are no longer necessary or appropriate, which decision of each of
the Parties shall not be unreasonably withheld, conditioned or delayed), and
those set forth in this Agreement and on Schedule A, other than the Retained
Services (the “Administrative Services”).  At all times during the term of this
Agreement, the Administrator shall hold, possess and maintain, either directly
or through the appointment of Subcontractors permitted pursuant to Section 3.3,
any and all licenses, franchises, permits, privileges, immunities, approvals and
authorizations from any Governmental Entity that are necessary to perform the
Administrative Services.

 

Section 2.2        Violations of Applicable Law and Applicable Contracts. 
Notwithstanding any other provision of this Agreement to the contrary, the
Company shall have the right to direct the Administrator to perform any action
necessary for the Administered Business or the administration thereof to comply
with Applicable Law or the terms of the LBL Contracts, Ceded Reinsurance
Contracts or Vermont Captive Contracts, or to cease performing any action that
constitutes a violation of Applicable Law or the terms of the LBL Contracts,
Ceded Reinsurance Contracts or Vermont Captive Contracts, to the extent such
action, inaction or administration is within the control of the Administrator,
taking into account the recommendations of the Administrator provided to the
Company hereunder, which the Company shall only reject in good faith and in
light of the intent of the parties to and the stated purposes of the Stock
Purchase Agreement, this Agreement and the other Transaction Agreements.  The
Administrator shall have the right to direct the Company to perform any action
necessary for the Administered Business or the administration thereof to comply
with Applicable Law or the terms of the LBL

 

5

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

 

Contracts, Ceded Reinsurance Contracts or Vermont Captive Contracts, or to cease
performing any action that constitutes a violation of Applicable Law or the
terms of the LBL Contracts, Ceded Reinsurance Contracts or Vermont Captive
Contracts, in either case to the extent such action, inaction or administration
constitutes a Retained Service.

 

Section 2.3        Retained Services.  The Parties hereby agree that,
notwithstanding anything herein to the contrary, the Company shall, for the term
of this Agreement, continue to provide on its own behalf (i) those
administrative services described in Schedule B, (ii) those administrative
services that the Company is required by Applicable Law to perform without the
Administrator or a third party acting on its behalf and (iii) the preparation of
accounting reports, tax returns, guaranty fund reports, and other reports and
certifications contemplated in Articles XI and XII, in each instance based on
information with respect to the LBL Contracts  and Vermont Captive Contracts
provided by the Administrator as contemplated therein (collectively, the
“Retained Services”), in each case, (i) in accordance with the applicable terms
of this Agreement, (ii) in compliance with Applicable Law, (iii) in a
professional, competent and workmanlike manner, with the skill, diligence and
expertise that would reasonably be expected from experienced and qualified
personnel performing such duties in like circumstances, and (iv) at a level no
lower than the service standards applied by the Company to other comparable
insurance business administered by the Company for its own account.  The
Administrator shall have no obligation to provide such Retained Services but
shall provide assistance with respect to the Administered Business reasonably
requested by the Company in connection therewith in a timely manner to enable
the Company to perform such Retained Services.  The Company shall not be deemed
to be in breach of this Agreement as a result of any failure to perform, or
inadequacy in the performance of, Retained Services hereunder to the extent the
performance of such Retained Services is reasonably dependent upon
Administrative Services or the performance by the Administrator or its
Affiliates of their obligations under the Transaction Agreements that have not
been performed.  The Administrator shall promptly reimburse the Company for any
documented and reasonable out-of-pocket costs or expenses incurred by it in the
performance of the Retained Services to the extent (a) such Retained Services
(1) relate solely to the Administered Business, (2) do not constitute
entity-level services required to be performed by or on behalf of the Company
and (3) are not in the ordinary course of business of the Company, and (b) such
out-of-pocket costs and expenses in aggregate exceed $15,000 in the calendar
month for which such costs and expenses are being sought for reimbursement or
$120,000 in the calendar year for which such costs and expenses are being sought
for reimbursement.

 

Section 2.4        Power of Attorney.  Subject to the terms and conditions
herein, the Company hereby appoints and names the Administrator, acting through
its authorized Subcontractors, and each of their respective officers and
employees, as the Company’s lawful attorney-in-fact, from and after the
Inception Date for so long as the Administrator is authorized to perform the
Administrative Services and solely to the extent necessary to provide the
Administrative Services, (a) to do any and all lawful acts that the Company
might have done with respect to the Administered Business, and (b) to proceed by
all lawful means (i) to perform any and all of the Company’s obligations with
respect to the Administered Business, (ii) to enforce any right and defend (in
the name of the Company, when necessary) against any liability arising with
respect to the Administered Business, (iii) to sue or defend (in the name of the
Company, when necessary) any Action arising from or relating to the Administered
Business,

 

6

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

 

(iv) to collect any and all Recoveries due or payable under or relating to the
LBL Contracts, the Separate Account, the Shared Separate Account with respect to
the LBL Contracts, and the Ceded Reinsurance Contracts; (v) to collect any and
all amounts due or payable to the Company under or relating to the Vermont
Captive Contracts; (vi) to sign (in the Company’s name, when necessary)
vouchers, receipts, releases and other papers in connection with any of the
foregoing matters, (vii) to enforce the rights and perform the obligations of
the Company under any agency, distribution or service arrangements to the extent
related to the LBL Contracts or the Vermont Captive Contracts; (viii) to take
actions necessary, as may be reasonably determined by the Administrator, to
maintain the Administered Business in compliance with Applicable Law; (ix) to
request rate and form changes for the LBL Contracts in accordance with
Article IV herein; and (x) to do everything lawful in connection with the
satisfaction of the Administrator’s obligations and the exercise of its rights
under this Agreement.

 

ARTICLE III

 

STANDARD FOR SERVICES; FACILITIES; SUBCONTRACTING, ETC.

 

Section 3.1        Services; Standard for Services.  Subject to Article II, from
and after the Inception Date and thereafter during the term of this Agreement
(unless otherwise specified), the Administrator shall  perform the
Administrative Services, and the Administrator’s performance of the
Administrative Services shall comply with and be subject in all events to the
standards set forth in this Section 3.1.  The Administrator shall provide the
Administrative Services in all material respects in accordance with the terms of
the LBL Contracts, the Ceded Reinsurance Contracts, the Vermont Captive
Contracts and the Vermont Captive Reinsurance Agreement and, if applicable,
their respective registration statements.  In addition, the Administrator shall
provide the Administrative Services (i) in accordance with the applicable terms
of this Agreement, (ii) in compliance with Applicable Law, (iii) in a
professional, competent and workmanlike manner, with the skill, diligence and
expertise that would reasonably be expected from experienced and qualified
personnel performing such duties in like circumstances, and (iv) at a level no
lower than the service standards applied by Administrator to other comparable
insurance business administered by the Administrator for its own account.

 

Section 3.2        Facilities and Personnel.  The Administrator shall at all
times maintain either directly or through the appointment of Subcontractors,
sufficient facilities and trained personnel of the kind necessary to perform its
obligations under this Agreement in accordance with the performance standards
set forth herein.

 

Section 3.3        Subcontracting.  The Administrator may subcontract for the
performance of any Administrative Service to: (a) any Person if the service to
be subcontracted is primarily a routine task or function; (b) an Affiliate of
the Administrator; (c) any reinsurer under a Ceded Reinsurance Contract or an
ALIC Outward Reinsurance Contract or its Affiliates; (d) an existing
subcontractor that was providing such service to the Company immediately before
the Closing Date; (e) any subcontractor to which Administrator or an Affiliate
subcontracts the same or similar services for business administered for its own
account; and (f) any other Person with the prior written consent of the Company,
such consent not to be unreasonably withheld, conditioned  or delayed (each such
subcontracting party, a “Subcontractor”), provided that no such subcontracting
shall relieve the Administrator from any of its obligations or liabilities
hereunder,

 

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and the Administrator shall remain responsible for all obligations or
liabilities of such Subcontractor with respect to the providing of such service
or services as if provided by the Administrator.

 

Section 3.4        Independent Contractor.  For all purposes hereof, except as
explicitly set forth herein, the Administrator shall at all times act as an
independent contractor and the Administrator and its Affiliates, on the one
hand, and the Company and its Affiliates, on the other hand, shall not be deemed
an agent, lawyer, employee, representative, joint venturer or fiduciary of one
another, nor shall this Agreement or the Administrative Services or any activity
or any transaction contemplated hereby be deemed to create any partnership or
joint venture between the Parties or among their Affiliates.

 

Section 3.5        Limitation on Services.  The Administrator shall not be
deemed to be in breach of this Agreement as a result of any failure to perform,
or inadequacy in the performance of, Administrative Services hereunder to the
extent the performance of such Administrative Services is reasonably dependent
upon Retained Services or the performance by Buyer or its Affiliates of their
obligations under the Transaction Agreements (other than the Company’s
obligations under the Principal Underwriting Agreement with respect to the LBL
Contracts, solely to the extent that the Administrator is responsible hereunder
for the Company’s performance of such obligations) that have not been
performed.  This Section 3.5 shall not be construed to limit the rights and
remedies otherwise available to the Administrator or its Affiliates in the event
of any breach by the Company, Buyer or any of their Affiliates of any of the
Transaction Agreements.

 

Section 3.6        Disaster Recovery.  The Administrator has made available to
the Company its backup, business continuation and disaster recovery plans
applicable to the business of the Administrator (the “Disaster Recovery
Policies”) in effect as of the Inception Date.  From time to time upon the
Company’s written request, the Administrator shall deliver a copy of its
then-current Disaster Recovery Policies to the Company.  For as long as
Administrative Services are provided hereunder, the Administrator shall, and
shall cause its Affiliates to, abide by the Disaster Recovery Policies with
respect to the Administered Business.  At all times during the term of this
Agreement, the Disaster Recovery Policies applicable to the Administered
Business shall be no less protective of the Administered Business than the
backup, business continuation and disaster recovery plans applicable to
insurance business administered by the Administrator for its own account.

 

ARTICLE IV

 

UNDERWRITING; CONVERSION AND REPLACEMENT; PRODUCERS

 

Section 4.1        Post-Closing Contracts.  Subject to the terms of this
Article IV:

 

(a)          from the Inception Date until the first to occur of (i) the
Underwriting Termination Date or (ii) the termination of this Agreement, the
Administrator shall be authorized to (x) issue, in the name of the Company, life
insurance policies and annuity contracts of the types included in, and utilizing
the same forms, rates and prospectuses as are in use for, the Pre-Closing
Contracts, with amendments to such forms, rates and prospectuses from time to
time as

 

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are necessary for the issuance of such policies or contracts to comply with
Applicable Law or for any other business purpose, and shall be authorized to
file and seek necessary approvals from applicable Governmental Entities, in the
name of the Company, with respect to any such amendments; provided that the
Administrator’s authority to file amendments to any such rates shall be subject
to the prior written consent of the Company (not to be unreasonably withheld,
conditioned or delayed), and (y) withdraw such products, forms, rates and
prospectuses.  Life insurance policies issued by the Administrator pursuant to
this Section 4.1(a) upon conversion of a Pre-Closing Policy or a Post-Closing
Policy produced by an Exclusive Producer are referred to herein as “Underwriting
Period Conversion Policies”;

 

(b)          the Administrator shall be authorized to issue, in the name of the
Company from and after the Inception Date, solely to the extent required to
comply with Applicable Law, life insurance policies and annuity contracts as
required to replace or remediate LBL Contracts or Vermont Captive Contracts.

 

Section 4.2        Parties’ Responsibilities.

 

(a)          The Administrator, at its sole cost and expense (but without
duplication of amounts payable under the Reinsurance Agreement), shall assume
all responsibility for (i) the provision of all applications and other
contractholder materials to agents and persons seeking to apply for Post-Closing
Policies (other than the Post-Underwriting Period Conversion Policies), (ii) all
underwriting necessary or appropriate with respect to such applicants pursuant
to the underwriting guidelines utilized by the Company as of the Inception Date,
or as may be otherwise agreed by the Parties (the agreement of the Company not
to be unreasonably withheld, conditioned or delayed), (iii) the processing of
underwriting-related transactions in respect of the Post-Closing Policies (other
than the Post-Underwriting Period Conversion Policies) and (iv) the issuance of
Post-Closing Policies (other than the Post-Underwriting Period Conversion
Policies).

 

(b)          The Company shall assume all responsibility for (i) the provision
of all applications and other contractholder materials to agents and persons
seeking to apply for Post-Underwriting Period Conversion Policies and Excluded
Conversion Policies, (ii) with respect to Post-Underwriting Period Conversion
Policies, all underwriting necessary or appropriate with respect to such
applicants pursuant to the underwriting guidelines as may be agreed by the
Parties (the agreement of the Parties not to be unreasonably withheld,
conditioned or delayed), (iii) if needed, with respect to Excluded Conversion
Policies, all underwriting necessary or appropriate with respect to such
applicants, (iv) the processing of underwriting-related transactions in respect
of the Post-Underwriting Period Conversion Policies and Excluded Conversion
Policies and (v) the issuance of Post-Underwriting Period Conversion Policies
and Excluded Conversion Policies.  Without limiting the generality of Article XV
or any other provision of this Agreement, the Administrator shall reasonably
cooperate and provide all assistance, information and records reasonably
available to it as may reasonably be requested by the Company in connection with
the Company’s performance of the foregoing obligations.1

 

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1        Note to Draft: Provision requiring the Company to administer the
Post-Underwriting Period Conversion Policies is subject to agreement as to
expense allowance payable to Company under the Reinsurance Agreement.

 

9

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(c)          The Administrator shall promptly notify the Company of all
revisions to the LBL Contracts and Vermont Captive Contracts made pursuant to
Section 4.1 and shall, on behalf of the Company, prepare and provide to
Contractholders all such revisions to the LBL Contracts and Vermont Captive
Contracts to be made by the Company.

 

Section 4.3        Conversion and Replacement.

 

(a)          From and after the Inception Date, the Administrator shall be
entitled, to the extent permitted by Applicable Law, to offer to any holder of a
Pre-Closing Policy or a Post-Closing Policy, in each case that entitles the
holder thereof to convert such policy to another policy written by the Company
(a “Reinsured Convertible Policy”), the opportunity to convert such Reinsured
Convertible Policy into a policy written by the Administrator or one of its
Affiliates (a “Replacement Policy”).  If such offer is not accepted, or if no
such offer is timely made, then subject to the terms of this Article IV, (i) the
Administrator shall issue, in the name of the Company, an Underwriting Period
Conversion Policy upon exercise by the policyholder of a Reinsured Convertible
Policy, on or prior to December 31, 2015, of such policyholder’s right to
receive a conversion policy issued by the Company, and (ii) the Company shall
issue a Post-Underwriting Period Conversion Policy upon exercise by the
policyholder of a Reinsured Convertible Policy, on or after January 1, 2016, of
such policyholder’s right to receive a conversion policy issued by the Company,
as applicable.

 

(b)          From and after January 1, 2016, the Company may (i) amend any of
its policy forms, rates and prospectuses from time to time, (ii) cease offering
any such policy forms, rates and prospectuses and (iii) withdraw any such
product, form, rate or prospectus, provided, however, that until such time as no
Reinsured Convertible Policies are outstanding, the Company shall maintain in
effect at least one (1) new life policy form and associated rate filing
developed jointly by the Parties, that meets the requirements of each Reinsured
Convertible Policy for a conversion policy issued by the Company.  In connection
with the Company’s requirement to maintain such policy form and associated rate
filings, after the Inception Date the Parties will work together to develop and
submit to appropriate Governmental Entities, as soon as practicable, a life
insurance policy form and associated rate filing that meets the requirements of
each Reinsured Convertible Policy for a conversion policy (the “New Conversion
Policy Form”), provided, that if such form and associated rate filings have not
been agreed to by the Parties by [September 30, 2014] then the Administrator’s
approval of any such policy form and associated rate filing developed in good
faith by the Company (after providing the Administrator reasonable opportunity
to comment thereon and taking into account the recommendations of the
Administrator) shall not be unreasonably withheld, conditioned or delayed.  Any
policy issued on a New Conversion Policy Form to meet the conversion
requirements of a Reinsured Convertible Policy originally produced by an
Exclusive Producer shall constitute a “Post-Underwriting Period Conversion
Policy.”  Any amendments to the New Conversion Policy Form (including the
associated rate filing) shall require the prior written consent of each Party in
order for any such amended policy to continue to be eligible for issuance as a
Post-Underwriting Period Conversion Policy.  For the avoidance of doubt:
(x) other than the New Conversion Policy Form, no policy issued to satisfy the
conversion requirements of a Reinsured Convertible Policy produced by an
Exclusive Producer shall constitute a Post-Underwriting Period Conversion
Policy, and (y) subject to the Administrator’s rights pursuant to
Section 4.1(a), nothing contained herein shall be construed to limit the
Company’s right to develop and maintain

 

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policy forms, rates and prospectuses other than the New Conversion Policy Form,
or require the Company to discontinue offering any policy form, associated rate
or prospectus.

 

(c)          Subject to the foregoing, the Administrator will share equally with
the Company the reasonable costs associated with the Company and Administrator’s
joint development, filing, approval and maintenance of a New Conversion Policy
Form, for use from and after December 31, 2015, which costs to the Administrator
shall not exceed five hundred thousand dollars ($500,000).

 

(d)          The Company shall not, and shall cause each of its Affiliates not
to, target any LBL Contract for replacement with another policy written by the
Company or any other Person other than in accordance with the terms of this
Article IV, provided, however, that the restrictions in this
Section 4.3(d) shall not restrict general marketing and solicitation activities
(i) not specifically targeted or directed to holders of LBL Contracts or
(ii) subject to clause (i), targeted or directed to holders of insurance
policies and contracts included in the Company Business regardless of whether
such holders are also holders of LBL Contracts.  From and after the Inception
Date, Company shall not, directly or indirectly, sell, convey or transfer all or
substantially all of its properties or assets to, any Person, in one transaction
or a series of transactions that are part of a common plan, or any transaction
that constitutes the functional equivalent of any of the foregoing, unless the
acquiring Person in such transaction or transactions expressly agrees to assume
all of the obligations of the Company under this Section 4.3(d).

 

(e)          Upon a specific written request by the Administrator, and at the
Administrator’s sole cost and expense, the Company shall provide such
information to  Administrator for the use of the Exclusive Producers as is
reasonably necessary to permit Exclusive Producers to offer Designated Company
Conversion Policies on behalf of the Company to the holders of Reinsured
Convertible Policies.

 

Section 4.4        Producers.  From and after the Inception Date, the
Administrator shall have the sole and exclusive right and obligation, on behalf
of the Company, to (i) appoint and enter into agreements with Exclusive
Producers for the LBL Contracts, (ii) monitor the performance and licensing of
the Exclusive Producers for the LBL Contracts to the extent required by
Applicable Law, (iii) calculate and pay all commissions to Exclusive Producers
in respect of the LBL Contracts and (iv) terminate Exclusive Producers’
authority and agreements with Exclusive Producers with respect to the LBL
Contracts, provided, that the Administrator shall indemnify and hold harmless
the Company Indemnified Parties from and against any and all Indemnifiable
Losses incurred by any of them in connection with such actions.

 

ARTICLE V

 

COLLECTIONS

 

Section 5.1        Collection Services.  From and after the Inception Date and
subject to Section 2.3, the Administrator shall assume all responsibility for
the receipt and processing of all premiums, deposits, policy loan interest or
repayments and other Recoveries with respect to the LBL Contracts and the
Vermont Captive Contracts and the allocation of such amounts between the General
Account of the Company and, if applicable, the Separate Account or Shared
Separate

 

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Account in accordance with the terms of the LBL Contracts, the Vermont Captive
Contracts, the Reinsurance Agreement and this Agreement.  The Administrator, on
behalf of the Company, shall process payment of any amounts to be paid out of
each Separate Account or Shared Separate Account in accordance with the terms of
the applicable LBL Contract or Vermont Captive Contract, to the extent of
sufficient funds therein.  The Parties shall cooperate to establish procedures
to prevent the commingling of assets attributable to the Administered Business,
on the one hand, and the business of the Company that is not Administered
Business, on the other hand, including by establishment of separate lockboxes
with respect to the LBL Contracts and Vermont Captive Contracts, on the one
hand, and the business of the Company that is not Administered Business, on the
other hand, and otherwise to ensure that funds are traceable to the appropriate
Company insurance policy.

 

(a)          The Company shall promptly remit to the Administrator all premiums,
deposits, policy loan interest and repayments, claims expenses, expense
allowance and all other Recoveries received by it with respect to the LBL
Contracts, the Separate Account, the Shared Separate Account with respect to the
LBL Contracts, the Vermont Captive Contracts or the Vermont Captive Reinsurance
Agreement and the Administrator shall promptly remit to the Company all
premiums, deposits, policy loans, interest and repayments received by it with
respect to the Company Business.

 

ARTICLE VI

 

CLAIMS HANDLING

 

Section 6.1        Claim Administration Services.  From and after the Inception
Date, subject to Section 2.3, the Administrator shall acknowledge, consider,
review, investigate, deny, settle, pay or otherwise dispose of each claim for
benefits and disbursements reported under each LBL Contract and Vermont Captive
Contract (each, a “Claim” and collectively the “Claims”).

 

Section 6.2        Description of Claim Administration Services.  Without
limiting the foregoing, the Administrator shall:

 

(i)           provide claimants under the LBL Contracts and Vermont Captive
Contracts and their authorized representatives (collectively, “Claimants”) with
Claim forms and provide reasonable explanatory guidance to Claimants in
connection therewith;

 

(ii)          establish, maintain and organize Claim files and maintain and
organize other Claims-related records;

 

(iii)         review all Claims and determine whether the Claimant is eligible
for benefits and if so, the nature and extent of such benefits;

 

(iv)         prepare and distribute to the appropriate recipients and
Governmental Entities any Claims reports as required by Applicable Law;

 

(v)          respond to all written or oral Claims-related communications that
the Administrator reasonably believes to require a response;

 

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(vi)         maintain a complaint log with respect to the LBL Contracts and
Vermont Captive Contracts in accordance with applicable requirements of
Governmental Entities, and at the Company’s request, provide a copy of such log;
and

 

(vii)       respond to and manage any Claims-related matters pursuant to
Article VII.

 

ARTICLE VII

 

REGULATORY AND LEGAL PROCEEDINGS

 

Section 7.1        Notice of Action.  If the Company or the Administrator
receives notice of or otherwise becomes aware of any examination or Action
instituted or threatened in writing against the Company that relates exclusively
or in part to the Administered Business, such Party shall promptly notify the
other Party thereof, and in no event more than five (5) Business Days after
receipt of notice thereof, and shall promptly furnish to such other Party copies
of all pleadings in connection therewith.

 

Section 7.2        Defense of Regulatory Complaints and Actions.

 

(a)          From and after the Inception Date, with respect to any examination
or Action initiated by a Governmental Entity with respect to the Administered
Business, the Administrator shall supervise and control the investigation,
contest, defense and/or settlement of all such Actions at its own cost and
expense, in the name of the Company when necessary, subject to Sections 2.3 and
clauses (b), (c) and (d) below.  The Administrator’s supervision and control of
such examinations and Actions shall not constitute a waiver of any right to
indemnification or payment that it may have under the terms of the Stock
Purchase Agreement, the Reinsurance Agreement, this Agreement or any other
Transaction Agreement.

 

(b)          The Company authorizes the Administrator to prepare, with a copy to
the Company, a response to any such examination or Action initiated by a
Governmental Entity with respect to the Administered Business within the
Governmental Entity’s requested time frame for response or, if no such time
frame is provided, within the time frame as allowed by Applicable Law; provided,
that, subject to meeting such time frames, the Administrator shall provide its
proposed response to the Company for its prior review and comment; provided,
further, that with respect to such examinations or Actions that relate in part
to the Company Business, the Administrator shall not respond to any such
examinations or Actions without taking into account in good faith any
recommendations of the Company provided to the Administrator with respect to
such matters and shall not unreasonably reject such recommendations.

 

(c)          Notwithstanding anything in this Agreement to the contrary, the
Company, upon written notice to the Administrator and at its own cost and
expense, shall have the right at any time to supervise and exclusively control
the defense and/or settlement of any examination or Action initiated by a
Governmental Entity that, if successful, would reasonably be expected to
materially interfere with the business, financial condition or reputation of the
Company or any of its Affiliates; provided, however, the Company shall not
respond to any such examinations or Actions that relate to the Administered
Business without taking into account in good faith any recommendation of the
Administrator provided to the Company with respect to

 

13

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such matters and shall not unreasonably reject such recommendation, and shall
not settle or compromise any such examinations or Actions without the
Administrator’s prior written consent (which consent shall not be unreasonably
withheld, delayed or conditioned).  The Company’s supervision and control of
such examinations and Actions shall not constitute a waiver of any right to
indemnification or payment that it may have under the terms of the Stock
Purchase Agreement, the Reinsurance Agreement, this Agreement or any other
Transaction Agreement.

 

(d)          The Administrator shall not settle or compromise any examination or
Action described in Section 7.2(a) without the Company’s prior written consent
(which consent shall not be unreasonably withheld, delayed or conditioned)
unless (i) there is no finding or admission of any violation of Applicable Law
or any violation of the rights of any Person by the Company or any of its
Affiliates, (ii) the sole relief provided is monetary damages that are paid in
full by the Administrator or its Affiliates and a full and complete release is
provided to the Company and its Affiliates and (iii) the settlement does not
encumber any of the assets of the Company or its Affiliates or contain any
restriction or condition that would materially adversely affect the Company or
its Affiliates.

 

Section 7.3        Other Actions.

 

(a)          From and after the Inception Date, with respect to any Action with
respect to the Administered Business by any Person other than a Governmental
Entity, the Administrator shall:

 

(i)           subject to Sections 2.3 and clauses (b), (c) and (d) below,
supervise and control the investigation, contest, defense and/or settlement of
all such Actions at its own cost and expense, in the name of the Company when
necessary; and

 

(ii)          keep the Company fully informed of the progress of all Actions
supervised or controlled by the Administrator in which the Company is a named
party and, at the Company’s request, provide to the Company a report summarizing
the nature of such Action, the alleged actions or omissions giving rise to such
Actions and copies of any files or other documents that the Company may
reasonably request in connection with its review of such matters, in each case
other than such files, documents and other information as would, in the judgment
of counsel to the Administrator, lead to the loss or waiver of legal privilege.

 

The Administrator’s supervision and control of such Actions shall not constitute
a waiver of any right to indemnification or payment that it may have under the
terms of the Stock Purchase Agreement, the Reinsurance Agreement, this Agreement
or any other Transaction Agreement.

 

(b)          The Company shall have the right to engage its own separate legal
representation, at its own expense, and to participate fully in the defense of
any Action (other than Actions brought by a Governmental Entity, which are the
subject of Section 7.2) relating to the Administered Business with respect to
which the Company is a named party if such Action, if successful, reasonably
could be expected to materially interfere with the business, financial condition
or reputation of the Company or any of its Affiliates, without waiving any right
to

 

14

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indemnification or payment that it may have under the terms of the Stock
Purchase Agreement, the Reinsurance Agreement, this Agreement or any other
Transaction Agreement.

 

(c)          The Administrator shall not settle or compromise any Action
described in Section 7.3(b) without the Company’s prior written consent (which
consent shall not be unreasonably withheld, delayed or conditioned) unless
(i) there is no finding or admission of any violation of Applicable Law or any
violation of the rights of any Person by the Company or any of its Affiliates,
(ii) the sole relief provided is monetary damages that are paid in full by the
Administrator or its Affiliates and a full and complete release is provided to
the Company and its Affiliates, (iii) the settlement does not encumber any of
the assets of the Company or its Affiliates or contain any restriction or
condition that would materially adversely affect the Company or its Affiliates
and (iv) the Action neither is certified, nor seeks certification, as a class
action.

 

(d)          The Company, upon written notice to the Administrator and at its
own cost and expense, shall have the right at any time to assume sole and
exclusive control over the response, defense, settlement or other resolution of
any Action (other than Actions brought by a Governmental Entity, which are the
subject of Section 7.2) that, if successful, reasonably could be expected to
materially interfere with the business, financial condition or reputation of the
Company or any of its Affiliates; provided, however, the Company shall not
respond to any such Actions without taking into account in good faith any
recommendation of the Administrator provided to the Company with respect to such
Actions and shall not unreasonably reject such recommendation, and shall not
settle or compromise any such Actions without the Administrator’s prior written
consent (which consent shall not be unreasonably withheld, delayed or
conditioned).  The Company’s supervision and control of such examinations and
Actions shall not constitute a waiver of any right to indemnification or payment
that it may have under the terms of the Stock Purchase Agreement, the
Reinsurance Agreement, this Agreement or any other Transaction Agreement.

 

Section 7.4        Cooperation.  Each Party hereto shall cooperate with and
assist the controlling Party in responding to, defending, prosecuting and
settling any examination or Action under this Article VII; provided, that
neither Party shall be required to waive any applicable attorney-client,
attorney work product or other evidentiary privileges, and provided, further
that neither Party shall be required to provide the other Party access to any
federal, state, or local consolidated income Tax Return that includes the
responding Party or its Affiliates.  Without limiting the generality of the
foregoing, each of the Parties shall assist each other and cooperate with the
other Party in doing all things necessary, proper or advisable in a commercially
reasonable manner in connection with any and all market conduct or other
Governmental Entity examinations to the extent related to the Administered
Business.  Notwithstanding anything to the contrary contained in this Agreement,
neither the Company nor the Administrator shall have the authority to institute,
prosecute or maintain any regulatory proceeding on behalf of the other Party
without the prior written consent of such other Party, except as expressly
contemplated in this Agreement.

 

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ARTICLE VIII

 

SEPARATE ACCOUNT ADMINISTRATIVE SERVICES

 

Section 8.1        Separate Account Administrative Services.  From and after the
Inception Date, subject to Section 2.3, in addition to the services described in
any Article of this Agreement, the Administrative Services with respect to, or
as a result of, the Shared Separate Account and the Separate Account shall
include those services set forth on Schedule A attached hereto.

 

Section 8.2        Changes to Fund Options.  Prior to the Separate Account
Separation, the Administrator may make recommendations to the Company as to
changes in Fund options for the Shared Separate Account from and after the
Inception Date and the Company shall not unreasonably reject such
recommendations, but the Administrator will not change Fund options for the
Shared Separate Account from and after the Inception Date and prior to the
Separate Account Separation unless such changes are made: (a) with the prior
written consent of the Company, such consent not to be unreasonably withheld,
conditioned or delayed, (b) in fulfillment of the fiduciary obligations of the
Company or (c) by the Board of Trustees of a Fund to liquidate, merge or remove
a Fund pursuant to the terms of the then-existing fund participation agreements
or through a regulatory process.  From and after the Separate Account
Separation, the Company shall accept the recommendations of the Administrator as
to Fund options for the Separate Account, unless implementing such
recommendations would result in a breach of the Company’s fiduciary duties or
result in a violation of Applicable Law or the applicable LBL Contract.  If the
Administrator makes a change in the LBL Contracts, the Shared Separate Account
or the Separate Account in connection with the change of a Fund option as
permitted above, the Administrator shall, at its own expense, prepare for
signature by the Company and transmit on behalf of the Company to the
appropriate Governmental Entity any SEC exemptive application, no-action letter
or other regulatory filing necessary to reflect or implement such change.

 

Section 8.3        Changes to Separate Account Fees.  Prior to the Separate
Account Separation, the Administrator may propose changes to any fees or other
amounts receivable from or in respect of Fund options for the Shared Separate
Account to the extent related to the LBL Contracts for approval by the Company,
which approval shall not be unreasonably withheld, conditioned or delayed.  From
and after the Separate Account Separation, the Administrator may, in its sole
discretion, make changes to any fees or other amounts receivable from or in
respect of Fund options for the Separate Account to the extent related to the
LBL Contracts, except as would result in a violation of Applicable Law or the
applicable LBL Contract.

 

ARTICLE IX

 

MISCELLANEOUS SERVICES

 

Section 9.1        Ceded Reinsurance Contracts.

 

(a)          From and after the Inception Date, subject to Section 2.3, the
Administrator shall have the authority and responsibility to, and shall, manage
and administer the

 

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portion of the Ceded Reinsurance Contracts that relates to the LBL Contracts,
including providing all reports and notices that relate to the LBL Contracts
required with respect to the Ceded Reinsurance Contracts to the reinsurers
within the time required by the applicable Ceded Reinsurance Contract and doing
all other things necessary to comply with the terms and conditions of the Ceded
Reinsurance Contracts.  Without limiting the foregoing, the Administrator shall
timely pay all reinsurance premiums due to reinsurers under the Ceded
Reinsurance Contracts with respect to the LBL Contracts, and collect from such
reinsurers all reinsurance recoverables due thereunder with respect to the LBL
Contracts.  The Administrator shall also have the authority to exercise any of
the Company’s rights with respect to trust accounts, letters of credit or other
security posted for the benefit of the Company in respect of the LBL Contracts
under any Ceded Reinsurance Contract that is not a Shared Reinsurance
Agreement.  Notwithstanding the foregoing, in the event that the Administrator
materially fails to perform its obligations under this Section 9.1(a) with
respect to any Shared Reinsurance Agreement, then upon written notice to the
Administrator, the Company may assume the authority and responsibility to manage
and administer the portion of such Shared Reinsurance Agreement that relates to
the LBL Contracts, and the Administrator shall use reasonable best efforts
timely to provide any data, information, premiums and other amounts necessary in
connection with such management and administration and shall otherwise cooperate
in good faith with the Company in connection therewith.  Notwithstanding the
foregoing, the Company shall reasonably cooperate with Administrator, at
Administrator’s expense, in the administration of the Ceded Reinsurance
Contracts to the extent that the Company’s participation is required thereunder
or is reasonably requested by the counterparty to any Ceded Reinsurance
Contract.

 

(b)          The Company shall have the authority and responsibility to, and
shall, manage and administer the portion of the Shared Reinsurance Agreements
that does not relate to the LBL Contracts, including providing all reports and
notices that relate to policies other than the LBL Contracts required with
regard to such Shared Reinsurance Agreements to the reinsurer within the time
required by such Shared Reinsurance Agreements and doing all other things
necessary to comply with the terms and conditions of such Shared Reinsurance
Agreements.  Without limiting the foregoing, the Company shall timely pay all
reinsurance premiums due to the reinsurer under such Ceded Reinsurance Contracts
with respect to the policies other than LBL Contracts, and collect from such
reinsurer all reinsurance recoverables due thereunder with respect to the
policies other than the LBL Contracts.  Notwithstanding the foregoing, in the
event that the Company materially fails to perform its obligations under this
Section 9.1(b) with respect to such Shared Reinsurance Agreement, then upon
written notice to the Company, the Administrator may assume the authority and
responsibility to manage and administer the portion of such Shared Reinsurance
Agreement that does not relate to the LBL Contracts, and the Company shall use
reasonable best efforts timely to provide any data, information, premiums and
other amounts necessary in connection with such management and administration
and shall otherwise cooperate in good faith with the Administrator in connection
therewith.  In the event that (i) the Company has not materially failed to
perform its obligation under this Section 9.1(b) with respect to a Shared
Reinsurance Agreement but (ii) the Company is determined to be obligated to
provide consolidated reporting with respect to such Shared Reinsurance
Agreement, the Parties shall cooperate in good faith to develop a mutually
agreeable method to manage and administer such Shared Reinsurance Agreement. 
The Company shall have the right to exercise all of its rights with respect to
trust accounts, letters of credit or other security posted for the benefit of
the Company under any Shared Reinsurance Agreement; provided that it shall hold
in

 

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trust for the benefit of the Administrator, and transfer to the Administrator,
any amounts withdrawn by the Company from any such trust accounts, letters of
credit or other security that relate to the LBL Contracts (which amounts
constitute Recoveries under the Reinsurance Agreement); provided, however, that
the Company shall honor Administrator’s requests for collateral draws with
respect to the LBL Contracts to the extent permitted under such Shared
Reinsurance Agreement.

 

Section 9.2        Amendments and Replacements.  From and after the Inception
Date, the Administrator shall have the right to terminate, amend or replace with
a new reinsurance agreement between the Administrator and the applicable
reinsurer, in whole or in part, any of the Ceded Reinsurance Contracts to the
extent such termination, amendment or replacement relates to the LBL Contracts
or Vermont Captive Contracts, respectively; provided such termination, amendment
or replacement does not affect the reinsurance coverage or other reinsurance
terms provided thereunder with respect to the Company Business.  The Company
shall, upon the Reinsurer’s request, cooperate with the Administrator and take
all actions reasonably requested by the Administrator to cause such
terminations, amendments or replacements of Ceded Reinsurance Contracts or to
cause such new Ceded Reinsurance Contracts to be entered into.  The
Administrator shall reimburse the Company for all reasonable and documented
out-of-pocket costs and expenses incurred by the Company or its Affiliates in
connection with such terminations, amendments or replacements of Ceded
Reinsurance Contracts or the entering into of such new Ceded Reinsurance
Contracts.

 

Section 9.3        Vermont Captive Reinsurance Agreement.  The Administrator
shall have the authority and responsibility on behalf of the Company to manage
and administer the Vermont Captive Reinsurance Agreement, including providing
all reports and notices required thereunder to be provided by the Company within
the time required thereby.

 

Section 9.4        Non-Guaranteed Elements.

 

(a)          With respect to the LBL Contracts, in accordance with the terms of
the Reinsurance Agreement, the Administrator may provide recommendations to the
Company as to the setting of all Non-Guaranteed Elements.

 

(b)          With respect to the Vermont Captive Contracts, the Administrator,
in consultation with the Vermont Captive, may, from time to time, make
recommendations to the Company with respect to Non-Guaranteed Elements so long
as the recommendations comply with the written terms of the Vermont Captive
Contracts, Applicable Law and Actuarial Standards of Practice promulgated by the
Actuarial Standard Board governing redetermination of non-guaranteed charges. 
The Company shall establish Non-Guaranteed Elements, taking into account the
recommendations of the Administrator (in consultation with the Vermont Captive)
with respect thereto.  The Company shall fully consider any such recommendations
and act reasonably and in good faith in determining whether any such
recommendations should be accepted and shall not unreasonably delay
implementation of any accepted recommendations after such recommendations are
provided in writing, except to the extent that an applicable Governmental Entity
finally determines that Applicable Law would require the implementation of such
recommendations to apply to any policy or contract that constitutes Company
Business.

 

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(c)          Notwithstanding anything to the contrary contained herein, in the
event that an applicable Governmental Entity finally determines that Applicable
Law would require the implementation of Administrator’s recommendations with
respect to one or more LBL Contracts or Vermont Captive Contracts to apply to
any policy or contract that constitutes Company Business (a) the Parties shall
cooperate in good faith to develop a mutually agreeable plan to set
Non-Guaranteed Elements with respect to such LBL Contracts or Vermont Captive
Contracts and such Company Business, and the Parties shall implement any such
plan so agreed and (b) the Company shall not be liable for any Indemnified
Losses incurred by the Administrator as a result of the Company’s failure to
implement Administrator’s recommendations.  In the event that the Company is
notified by an applicable Governmental Entity that it proposes making a
determination that Applicable Law would require the implementation of such
recommendations to apply to any policy or contract that constitute Company
Business, the Company shall promptly notify the Administrator of such
notification.  The Parties will thereafter cooperate in good faith and use their
reasonable best efforts to reach agreements with such Governmental Entity that
will avoid a final determination to such effect.  The Administrator acknowledges
that the Company has certain indemnification rights under the Reinsurance
Agreement for Indemnifiable Losses resulting from the Company’s acceptance and
implementation of the Administrator’s recommendations in accordance with this
Section 9.4.

 

Section 9.5        Contractholder Services.  From and after the Inception Date
subject to Section 2.3, the Administrator shall provide all contractholder
services in connection with the LBL Contracts and Vermont Captive Contracts.

 

Section 9.6        Principal Underwriting Agreement.  The Administrator shall
have the authority and responsibility on behalf of the Company to perform the
services and other obligations required of the Company, and to enforce the
Company’s rights, under the Principal Underwriting Agreement, in each case to
the extent relating to the LBL Contracts covered thereunder; provided, however,
that the Administrator shall have no responsibility to perform any
indemnification obligations of the Company under the Principal Underwriting
Agreement to the extent such obligations arise out of any act or omission of the
Company (other than an act or omission for which Administrator is responsible
hereunder).

 

Section 9.7        Other Services.  Subject to Section 2.3, the Administrator
shall provide such other administrative services as are necessary or appropriate
to fully effectuate the purpose of the Reinsurance Agreement, the Vermont
Captive Reinsurance Agreement and this Agreement, including such services as are
not performed by or on behalf of Company on the date hereof but the need for
which may arise due to changes or developments in Applicable Law and are
consistent with the allocation of the services set forth herein between the
Administrator and the Company.

 

ARTICLE X

 

NOTIFICATION TO CONTRACTHOLDERS

 

Section 10.1     Notification to Contractholders.  If required by Applicable
Law, the Administrator shall send to applicable contractholders under the LBL
Contracts and the Vermont Captive Contracts a written notice prepared by the
Administrator and reasonably acceptable to

 

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the Company to the effect that the Administrator has been appointed by the
Company to provide the Administrative Services with respect to the LBL Contracts
and the Vermont Captive Contracts, as applicable.  The Administrator shall send
such notice by first class U.S. mail at a time reasonably acceptable to the
Company and the Administrator and in all events in accordance with Applicable
Law.  Unless otherwise required by Applicable Law, the Administrator may include
such notice in a regularly scheduled mailing to such contractholders in lieu of
a separate mailing.

 

ARTICLE XI

 

QUARTERLY PREMIUM TAX AND INSOLVENCY FUND ACCOUNTINGS

 

Section 11.1     Quarterly Accountings.  Subject to Section 2.3, from and after
the Inception Date, within [ten (10)] Business Days after the end of each
calendar quarter that this Agreement is in effect (or more frequently as
mutually agreed by the Parties), the Company shall submit to the Administrator a
written statement of accounting in a form and containing such information to be
agreed upon by the Parties hereto (each, an “Insolvency Fund Quarterly
Accounting”) setting forth the insolvency fund amounts assessed against or
payable by the Company, to the extent that such assessments constitute the
Company’s General Account Liabilities in respect of the LBL Contracts and the
Vermont Captive Contracts (collectively, the “Post-Inception Date
Assessments”).  In addition, within twenty (20) Business Days after the last day
of each calendar quarter that this Agreement is in effect (or more frequently as
mutually agreed by the Parties), the Administrator shall submit to the Company a
written statement of accounting in a form and containing such information to be
agreed upon by the Parties hereto (each, a “Quarterly Premium Tax Accounting”,
and together with the Insolvency Fund Quarterly Accountings, the “Quarterly
Accountings”) setting forth the estimated premium taxes due with respect to the
LBL Contracts and the Vermont Captive Contracts as a result of premiums
collected or annuitizations occurring during such quarter.  Concurrent with the
delivery of each Quarterly Premium Tax Accounting, the Administrator shall remit
to the Company the amount set forth on such Quarterly Premium Tax Accounting
with respect to such estimated premium taxes due and the amount set forth in
such Insolvency Fund Quarterly Accounting with respect to the Post-Inception
Date Assessments, and any other amounts owed to the Company pursuant to this
Agreement.

 

Section 11.2     Adjustments Regarding Quarterly Accountings.  In the event that
subsequent data or calculations require revision of any of the Quarterly
Accountings, the required revision and appropriate payments thereunder shall be
made within twenty (20) Business Days after the Parties hereto mutually agree as
to the appropriate revision.

 

ARTICLE XII

 

CERTAIN ACTIONS BY COMPANY

 

Section 12.1     Filings.  Subject to Section 2.3, the Company shall prepare and
timely file any filings required to be made with any Governmental Entity that
relate to the Company generally and not just to the LBL Contracts or the Vermont
Captive Contracts, including filings with guaranty associations and filings and
premium tax returns with taxing authorities.  The

 

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Administrator shall timely provide to the Company upon request all information
in the possession of the Administrator with respect to the LBL Contracts and the
Vermont Captive Contracts that may be reasonably required for the Company to
prepare such filings and tax returns.

 

Section 12.2     Annual Adjustment.  The Company shall pay or provide to the
Administrator the benefit of any Post-Inception Date Assessments which have been
applied to reduce the Company’s premium tax liability (“Premium Tax Credits”). 
The Company shall provide to the Administrator by April 15 of each year a
statement of the amount (the “Annual Adjustment”) of (i) premium taxes
(including retaliatory taxes) paid with respect to premiums collected or
annuitizations occurring during the prior calendar year (to the extent that such
taxes constitute the Company’s General Account Liabilities), less (ii) estimated
premium taxes paid by the Administrator to the Company with respect to such
premiums under the provisions of Article XI, less (iii) Premium Tax Credits for
the prior calendar year.  By May 31 of each year the Administrator shall pay to
the Company the Annual Adjustment, if a positive amount, and the Company shall
pay or credit to the Administrator the absolute value of the Annual Adjustment,
if a negative amount.

 

ARTICLE XIII

 

REGULATORY MATTERS AND REPORTING

 

Section 13.1     Regulatory Compliance and Reporting.  Subject to Section 2.3,
upon the timely and reasonable request of the Company, the Administrator shall
provide to the Company such information with respect to the LBL Contracts and
the Vermont Captive Contracts as is reasonably required to enable the Company
timely to comply with regulatory and financial reporting requirements applicable
to the Company from time to time, other than such regulatory and financial
reporting requirements that are required because the Company or its Affiliates
are subject to non-U.S. legal or regulatory requirements and industry
standards.  Without limiting the foregoing, the Administrator shall provide the
reports and information set forth on Schedule A within the timeframes indicated
therein.  In addition, and without limiting the Administrator’s obligation to
provide the Administrative Services hereunder, upon the timely and reasonable
request of the Company, the Administrator shall promptly provide to the Company
copies of all existing records relating to the Administered Business (including,
with respect to records maintained in machine readable form, hard copies) that
are reasonably necessary to satisfy any requirements imposed by Applicable Law
or any Governmental Entity upon the Company with respect to the Administered
Business.  All (i) such information and (ii) such records furnished in the
ordinary course of business relating to the Administered Business shall be
furnished at the Administrator’s sole cost and expense.  Without limiting the
generality of the foregoing, upon the timely and reasonable request of the
Company, the Administrator shall promptly prepare and furnish to Governmental
Entities, to the extent permitted by Applicable Law,  all reports and related
summaries (including, statistical summaries), certificates of compliance and
other reports required or requested by any such Governmental Entity with respect
to the Administered Business, other than such reports, summaries and
certificates that are required or requested because the Company or its
Affiliates are subject to non-U.S. legal or regulatory requirements and industry
standards.  Without limiting the foregoing:

 

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(i)           As soon as practicable but not more than ten (10) Business Days
after the end of each month that this Agreement is in effect (or,  with respect
to any January, within fifteen (15) Business Days after the end of such month),
the Administrator shall provide to the Company reports and summaries of
transactions (and upon the reasonable request of the Company, detailed
supporting records) related to the LBL Contracts and the Vermont Captive
Contracts as may be reasonably required for use in connection with the
preparation of the Company’s GAAP financial statements (or any consolidated GAAP
financial statements of the Company or its Affiliates, as applicable), including
all premiums received and all benefits paid.  The Parties shall cooperate in
good faith to establish the manner for the providing of such reports.

 

(ii)          As soon as practicable but not more than twelve (12) Business Days
after the end of each calendar quarter that this Agreement is in effect, (or
more frequently as mutually agreed by the Parties), the Administrator shall
timely provide to the Company reports and summaries of transactions (and upon
the reasonable request of the Company, detailed supporting records) related to
the LBL Contracts and the Vermont Captive Contracts as may be reasonably
required for use in connection with the preparation of the Company’s statutory
financial statements, U.S. tax returns and other required U.S. financial reports
and to comply with the requirements of the U.S. regulatory authorities having
jurisdiction over the Company (or any consolidated statutory financial
statements, U.S. tax returns or other U.S. financial reports of the Company or
its Affiliates, as applicable), including all premiums received and all benefits
paid.  The Parties shall cooperate in good faith to establish the manner for the
providing of such reports.

 

(iii)         The Administrator shall promptly provide notice to the Company of
any changes in the reserve methodology used by the Administrator in calculating
statutory reserves for the LBL Contracts and the Vermont Captive Contracts.

 

(iv)         Within thirty (30) Business Days after each calendar year end (or
such longer time as may be agreed by the Parties) that this Agreement is in
effect, the Administrator shall provide to the Company an actuarial analysis of
statutory reserves for the LBL Contracts and the Vermont Captive Contracts,
reasonably adequate to support opinions prepared according to accepted actuarial
standards of practice to be issued by the Company, and as otherwise required for
regulatory reporting purposes.  The Administrator shall also provide supporting
documentation as reasonably requested by the Company or as required by
Governmental Entities or actuarial standards of practice.  In the event that
Applicable Law imposes (a) a legal requirement on the Administrator, in its
capacity as reinsurer under the Reinsurance Agreement or administrator under
this Agreement, to provide an actuarial opinion as to the adequacy of statutory
reserves for the LBL Contracts or the Vermont Captive Contracts, or (b) a legal
requirement on the Company to obtain such an actuarial opinion from the
Administrator in any such capacity, the Administrator shall timely provide such
opinion directly to the applicable Governmental Entity in substantially the form
required by Applicable Law.

 

Section 13.2     Additional Reports and Updates.  For so long as this Agreement
remains in effect, upon reasonable notice, each Party shall from time to time
furnish to the other such other reports and information related to Administered
Business as may be reasonably required by

 

22

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such other Party for regulatory, tax or similar purposes and reasonably
available to it, and such reports or information shall be prepared and delivered
on a timely basis in order for the receiving Party to comply with any filing
deadlines required by Applicable Law or by contract.

 

Section 13.3     Additional Reports.  The Administrator shall provide such
subcertifications with respect to the LBL Contracts and the Vermont Captive
Contracts to enable the Company to meet its requirements under Section 302 of
the Sarbanes-Oxley Act of 2002 or any Applicable Law requiring the making of
certifications by an unaffiliated third party, in a form to be mutually agreed
upon by the Parties hereto.

 

ARTICLE XIV

 

BOOKS AND RECORDS

 

Section 14.1     Maintenance of Books and Records.

 

(a)          As of and following the Inception Date, the Administrator shall
maintain books and records of all transactions pertaining to the Administered
Business (i) in accordance with any and all Applicable Laws, (ii) in accordance
with the Administrator’s internal record retention procedures and policies, and
(iii) in a format accessible by the Company and its representatives.  All
original books and records with respect to the LBL Contracts and Vermont Captive
Contracts shall be or remain the property of the Company and shall not be
destroyed without the consent of the Company; provided, that the Administrator
shall continue to have custody of such books and records for so long as is
reasonably required for the Administrator to carry out its duties under this
Agreement.

 

(b)          During the term of this Agreement, upon any reasonable request from
the Company or its representatives, the Administrator shall (i) provide to the
Company and its representatives reasonable access during normal business hours
to the books and records under the control of the Administrator pertaining to
the Administered Business; provided that such access shall not unreasonably
interfere with the conduct of the business of the Administrator, (ii) permit the
Company and its representatives to make copies of such records and provide
reasonable access to employees concerning the information in such records and
(iii) permit the Company and its representatives to review or copy any Tax
Returns for which the Administrator is responsible that relate to the
Administrative Services.  Nothing herein shall require the Administrator to
disclose any information to the Company or its representatives to the extent
such information does not pertain to the Administered Business or if such
disclosure would jeopardize any attorney-client privilege, the work product
immunity or any other legal privilege or similar doctrine or contravene any
Applicable Law or any contract (including any confidentiality agreement to which
the Administrator or any of its Affiliates is a party) (it being understood that
the Administrator shall use its reasonable best efforts to enable such
information to be furnished or made available to the Company or its
representatives without so jeopardizing privilege or contravening such
Applicable Law or contract) or require the Administrator to disclose any
personnel or related records.

 

(c)          During the term of this Agreement, upon any reasonable request from
the Administrator or its representatives, the Company shall (i) provide to the
Administrator and its

 

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representatives reasonable access during normal business hours to the books and
records under the control of the Company pertaining to the Administered Business
or the Retained Services; provided that such access shall not unreasonably
interfere with the conduct of the business of the Company, and (ii) permit the
Administrator and its representatives to make copies of such records.  Nothing
herein shall require the Company to disclose any information to the
Administrator or its representatives if such disclosure would jeopardize any
attorney-client privilege, the work product immunity or any other legal
privilege or similar doctrine or contravene any Applicable Law or contract
(including any confidentiality agreement to which the Company or any of its
Affiliates is a party) (it being understood that the Company shall use its
reasonable best efforts to enable such information to be furnished or made
available to the Administrator or its representatives without so jeopardizing
privilege or contravening such Applicable Law or contract) or require the
Company to disclose its tax records (other than premium tax filings) or any
personnel or related records.

 

(d)          The Administrator shall maintain facilities and procedures that are
in accordance with Applicable Law and commercially reasonable standards of
insurance recordkeeping for safekeeping the books and records maintained by the
Administrator or its Affiliates that pertain to the Administered Business.  The
Administrator shall back up all of its computer files relating to the
Administered Business or otherwise used in the performance of the Administrative
Services under this Agreement on a daily basis and shall maintain back-up files
in an off-site location.

 

ARTICLE XV

 

COOPERATION

 

Section 15.1     Cooperation.  Each Party hereto shall cooperate fully with the
other in all reasonable respects in order to accomplish the objectives of this
Agreement including making available to each their respective officers and
employees for interviews and meetings with Governmental Entities and furnishing
any additional assistance, information and documents as may be reasonably
requested by a Party from time to time.

 

ARTICLE XVI

 

PRIVACY REQUIREMENTS

 

Section 16.1     Confidentiality Obligations.  In providing the Administrative
Services provided for under this Agreement, and in connection with maintaining,
administering, handling and transferring the data of the Contractholders and
other recipients of benefits under the LBL Contracts and Vermont Captive
Contracts, the Administrator shall, and shall cause its Affiliates to, comply
with any Applicable Law and/or regulations with respect to privacy or data
security relative to Customer Information (as defined below), and shall
implement and maintain an effective information security program (the
“Information Security Program”) designed to protect Customer Information in
compliance with all applicable privacy laws and other Applicable Law:

 

(i)           to ensure the security, integrity and confidentiality of Customer
Information;

 

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(ii)          to protect against any anticipated threats or hazards to the
security or integrity of such Customer Information; and

 

(iii)         to protect against unauthorized access to or use of Customer
Information which could result in substantial harm or inconvenience to the owner
thereof or its Affiliates, or to Customers or potential Customers thereof.

 

The Administrator has made a copy of such Information Security Program in effect
as of the Inception Date available to the Company.  From time to time upon the
Company’s written request, the Administrator shall deliver a copy of its
then-current Information Security Program to the Company.  For as long as
Administrative Services are provided hereunder, the Administrator shall, and
shall cause its Affiliates to, abide by the Information Security Program with
respect to the Administered Business.  At all times during the term of this
Agreement, the Information Security Program shall be no less protective of the
Administered Business than the information security program of the Administrator
applicable to the insurance business administered by the Administrator for its
own account.

 

“Customer Information” is defined as all tangible and intangible information
provided or disclosed hereunder about present or former contract holders,
annuitants, or other beneficiaries  (collectively, hereinafter “Customers”) or
potential Customers of any Party or its Affiliates, including, but not limited
to, name, address, telephone number, email address, account or policy
information, and any list, description, or other grouping of Customers or
potential Customers, and any medical records or other medical information of
such Customers or potential Customers and any other type of information deemed
“nonpublic” and protected by privacy laws and any other Applicable Law.

 

Section 16.2     Security Incidents.

 

(a)          In the event that any Party discovers a security breach that has
resulted or may reasonably result in unauthorized access to or disclosure of, or
have any material adverse effect on, the security of any Customer Information
related to the LBL Contracts or the Vermont Captive Contracts (a “Security
Incident”) such Party shall (i) within 24 hours, notify the other Party of said
Security Incident; and (ii) work with the other Party to take all measures
reasonably necessary to restore the security of such Customer Information.  The
Company shall have the exclusive right to provide notice of any Security
Incident to any Customers of the LBL Contracts or the Vermont Captive Contracts,
any law enforcement Person or any other Governmental Authorities and to
determine the content and timing of any such notice; provided, any such notice
shall be subject to review and approval by the Administrator.

 

(b)          Each Party acknowledges that the breach of its obligations under
this Section 16.2 may cause irreparable injury and damages, which may be
difficult to ascertain.  Therefore a Party shall be entitled to seek injunctive
relief with respect to any breach or threatened breach of this Section 16.2 by
the other Party and its Affiliates.  This provision shall not in any way limit
such other remedies as may be available to any Party at law or in equity.

 

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ARTICLE XVII

 

CONSIDERATION FOR ADMINISTRATIVE SERVICES

 

Section 17.1     Consideration for Administrative Services.  Except as set forth
herein, with respect to the LBL Contracts, apart from the performance by the
Company of its obligations under the Reinsurance Agreement, there shall be no
fee or other consideration due to the Administrator for the performance of the
Administrative Services and the Administrator’s other obligations under this
Agreement. With respect to the Vermont Captive Contracts, the Administrator
shall be entitled to collect and retain all claims expense, expense allowance or
similar amounts due to the Company under the terms of the Vermont Captive
Reinsurance Agreement, and the Company hereby sells, assigns, transfers and
delivers to the Administrator all of its rights, title and interest in one
hundred percent of such amounts actually received or receivable at or after the
Inception Date by the Company or the Administrator.

 

ARTICLE XVIII

 

BANK ACCOUNTS; TRADEMARKS

 

Section 18.1     Establishment of Bank Accounts.

 

(a)          The Administrator shall have the right to open and maintain the
Bank Accounts in respect of the LBL Contracts in accordance with the terms of
the Reinsurance Agreement, provided that the Administrator shall notify the
Company in writing upon opening any such Bank Account in the name of the
Company.

 

(b)          During the term of this Agreement, the Administrator may use such
Bank Accounts or open and maintain one or more additional bank accounts with
banking institutions with respect to the Vermont Captive Contracts (the “Vermont
Captive Bank Accounts”).  The Administrator shall have the exclusive authority
over the Vermont Captive Bank Accounts including, without limitation, the
exclusive authority to (a) open the Vermont Captive Bank Accounts in the name of
the Company, (b) designate the authorized signatories on the Vermont Captive
Bank Accounts, (c) issue drafts on and make deposits in the Vermont Captive Bank
Accounts in the name of the Company, (d) make withdrawals from the Vermont
Captive Bank Accounts and (e) enter into agreements with respect to the Vermont
Captive Bank Accounts on behalf of the Company; provided, that in no event shall
the Company be responsible for any fees, overdraft charges or other payments,
liabilities or obligations with respect to any such Bank Accounts or be
obligated to provide funding for the Bank Accounts.  The Company shall do all
things necessary at the Reinsurer’s expense to (x) enable and authorize the
Administrator to use the Company’s existing lockboxes with respect to the
Vermont Captive Contracts, if any, and (y) enable the Administrator to open and
maintain the Vermont Captive Bank Accounts including, without limitation,
executing and delivering such depository resolutions and other documents as may
be requested from time to time by the banking institutions.  The Company agrees
that without the Reinsurer’s prior written consent it shall not make any changes
to the authorized signatories on the Vermont Captive Bank Accounts nor attempt
to withdraw any funds therefrom.

 

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Section 18.2     Trademarks.  Administrator hereby acknowledges that the Company
has adopted and is using the names and marks listed on Schedule C hereto in
connection with the LBL Contracts and Vermont Captive Contracts (collectively,
the “Licensed Names and Marks”).  The Company and Administrator agree as
follows:

 

(a)          The Company hereby grants to the Administrator and Administrator
hereby accepts a non-exclusive, non-transferable, royalty-free license to use
the Licensed Names and Marks in connection with the Administrative Services,
including Post-Closing Policies, during the term of, and subject to the terms
and conditions set forth in this Agreement.  Any of the rights in the foregoing
license may be sublicensed by the Administrator in connection with any contract
permitted by Section 3.3; provided, that such sublicense is limited to the use
of the Licensed Names and Marks in connection with the Administrative Services,
including Post-Closing Policies and does not extend the right to further
sublicense any such Licensed Names and Marks.  If the Administrator sublicenses
any of the rights in the foregoing license, the Administrator shall remain
liable for any actions or omissions by the sublicensee. The Administrator is
granted no rights to use the Licensed Names and Marks, other than those rights
specifically described and expressly licensed in this Agreement and no right is
granted hereunder for the use of the Licensed Names and Marks in connection with
any services other than the Administrative Services, including Post-Closing
Policies.  Other than in connection with the Administrative Services, including
Post-Closing Policies, none of the rights licensed to the Administrator under
this Section 18.2 may be assigned, sublicensed or otherwise transferred by the
Administrator, nor shall such rights inure to the benefit of any trustee in
bankruptcy, receiver or successor of the Administrator, whether by operation of
law or otherwise, without the prior written consent of the Company, and any
assignment, sublicense or other transfer without such consent shall be null and
void. The merger of Administrator with or into another entity shall not
constitute an assignment or other transfer of the rights licensed to the
Administrator under this Section 18.2.

 

(b)          The Administrator agrees that it will use the Licensed Names and
Marks as the Company used them prior to the Closing and that the nature of such
use on the Materials (as defined below) shall be at least equal to the standard
of quality maintained by the Company in connection with such Licensed Names and
Marks immediately prior to the Closing and consistent with established industry
practice (collectively, the “Licensor Standards”).  The Administrator agrees to
make available for review, upon the Company’s request, all materials that
incorporate the Licensed Names and Marks including, but not limited to,
advertising copy, labels, stickers, policies, brochures or other materials,
including any applicable materials in connection with the Administrator’s
performance under this Agreement (collectively, the “Materials”).  If the
Company objects to the manner in which a Licensed Name or Mark is used in
connection with any Materials, the Company may request that the Administrator
take, and the Administrator shall promptly take, all steps necessary to remedy
any such deficiencies within 15 days after such notification, including to
promptly discontinue the use of any such Materials.  The Administrator shall
promptly notify the Company of any material complaints received in writing from
third parties regarding the products or services offered or provided under the
Licensed Names and Marks and, at the request of the Company, shall reasonably
cooperate with the Company in addressing and mitigating the circumstances giving
rise to such complaints.  The Administrator shall (a) permit the Company or its
representatives reasonable access to such of the Administrator’s facilities and
personnel as are actively involved in use of the Licensed

 

27

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Names and Marks on reasonable prior written notice, and (b) make available to
the Company or its representatives for inspection specimens demonstrating the
Administrator’s use of the Licensed Names and Marks on the Materials or
otherwise in connection with the Licensed Names and Marks, as requested by the
Company from time to time for the purpose of verifying that the Administrator’s
use complies with Licensor Standards and to the extent reasonably necessary to
maintain the validity of the Licensed Names and Marks and the valuable goodwill
and reputation established by the Licensed Names and Marks.

 

(c)          The Administrator agrees not to adopt or use any service mark, logo
or design confusingly similar to the Licensed Names and Marks.  It is understood
that the Company retains the right, in its sole discretion, to modify the
Licensed Names and Marks, upon reasonable prior notice to the Administrator. 
Any material costs incurred by the Administrator associated with any mailings to
Contractholders required under Applicable Law as a result of such modification
shall be reimbursed by the Company.

 

(d)          The Administrator recognizes the value of the goodwill associated
with the Licensed Names and Marks and acknowledges that, as between the
Administrator and the Company, all proprietary rights therein and the goodwill
attached thereto belong exclusively to the Company.  All uses of the Licensed
Names and Marks by the Administrator shall, with respect to service mark
ownership only, inure solely to the benefit of the Company and any registration
of the Licensed Names and Marks shall be registered by the Company in its name,
it being understood that the present license shall not in any way affect the
ownership by the Company of the Licensed Names and Marks, each of which shall
continue to be the exclusive property of the Company.  The Company shall, in its
own name and at its own expense, maintain appropriate service mark protection
for the Licensed Names and Marks.  The Administrator shall not at any time
during the term of this Agreement or at any time thereafter do or cause to be
done any act contesting the validity of the Licensed Names and Marks, contesting
or in any way impairing or tending to impair the Company’s entire right, title
and interest in the Licensed Names and Marks and the registrations thereof or
adversely affecting the value of the Licensed Names and Marks or the reputation
and goodwill of the Company.  The Administrator shall not represent that it has
any right, title or interest in the reputation and good will of the Company. 
The Administrator shall not represent that it has any right, title or interest
in the Licensed Names and Marks other than the rights expressly granted by this
Agreement.

 

(e)          Subject to the provisions of Article XIX hereof, except with
respect to any uses of the Licensed Names and Marks not authorized under this
Agreement, the Company will indemnify, defend and hold the Administrator
harmless from any Losses from claims that the Licensed Names and Marks infringe
on the rights of third parties. Subject to the provisions of Article XIX, the
Administrator will indemnify, defend and hold the Company harmless from any
Losses that arise in connection with the Administrator’s use of the Licensed
Names and Marks other than as authorized under this Agreement.  This
Section 18.2 shall survive the termination or expiration of this Agreement.

 

(f)           The right to institute and prosecute actions for infringement of
the Licensed Names and Marks is reserved exclusively to the Company, and the
Company shall have the right to join the Administrator in any such actions as a
formal party.  The Company may also request, and the Administrator shall
provide, assistance with respect to any such infringement

 

28

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action.  Any such action shall be conducted at the Company’s expense.  The
Administrator shall provide prompt written notice to the Company of any
infringement or unauthorized use of the Licensed Names and Marks of which it is
aware, and agrees to assist the Company at the Company’s expense in any such
action brought by the Company.  It is understood, however, that the Company is
not obligated to institute and prosecute any such actions in any case in which
it, in its sole judgment, may consider it inadvisable to do so.  Any recovery
obtained by the Company as a result of any such action shall belong solely to
Company.

 

(g)          The agreements and covenants contained in this Section 18.2 shall
continue in effect until such time as this Agreement is terminated.  Upon
termination of this Agreement, the Administrator shall discontinue all use of
the Licensed Names and Marks (but in no event will such use extend beyond sixty
(60) calendar days after termination).  Upon any such termination, the
Administrator shall take all commercially reasonable actions necessary to effect
such discontinuance.  Upon termination, all of the Administrator’s rights to the
Licensed Names and Marks shall revert to and continue to reside with and be
owned exclusively by the Company.

 

ARTICLE XIX

 

INDEMNIFICATION

 

Section 19.1     Administrator’s Obligation to Indemnify.  The Administrator
shall indemnify, defend and hold harmless the Company and its Affiliates and
their respective officers, directors, stockholders, employees, representatives,
successors and assigns (collectively, the “Company Indemnified Persons”) from
and against any and all Indemnifiable Losses incurred by the Company Indemnified
Persons to the extent arising from (i) any breach by the Administrator of the
covenants and agreements of the Administrator contained in this Agreement (an
“Administrator Breach”), (ii) any violations of Applicable Law by the
Administrator or its Affiliates or Subcontractors (including without limitation
under the Securities Act of 1933) or otherwise arising from any untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, contained in any registration statement or prospectus or
other product materials relating to an LBL Contract or Vermont Captive Contract
or any interest offered under an LBL Contract or Vermont Captive Contract or any
amendment thereof, but only to the extent prepared or updated by Administrator
and excluding any such statement or omission made in reliance upon and in
conformity with information furnished in writing to Administrator by LBL or its
Affiliates after the date hereof expressly for use therein, (iii) any
indemnification payment by the Company pursuant to the Principal Underwriting
Agreement in respect of LBL Contracts covered thereunder (except to the extent
arising out of any act or omission of the Company for which Administrator is not
responsible pursuant to this Agreement) and (iv) any successful enforcement of
this indemnity; provided that, the Administrator shall have no obligation to
indemnify any Company Indemnified Party to the extent such Indemnifiable Loss
results from (i) any act or omission resulting from the negligence or willful
misconduct of the Company after the Inception Date, or (ii) any Company Breach.

 

Section 19.2     Company’s Obligation to Indemnify.  The Company hereby agrees
to indemnify, defend and hold harmless the Administrator and its Affiliates and
their respective

 

29

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officers, directors, stockholders, employees, representatives, successors and
assigns (collectively, the “Administrator Indemnified Persons”) from and against
any and all Indemnifiable Losses incurred by the Administrator Indemnified
Persons to the extent arising from (i) any breach by the Company of the
covenants and agreements of the Company contained in this Agreement (a “Company
Breach”), (ii) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, contained in any
registration statement or prospectus or other product materials relating to an
LBL Contract or Vermont Captive Contract or any interest offered under an LBL
Contract or Vermont Captive Contract or any amendment thereof, in each case,
that is made in reliance upon and in conformity with information provided in
writing by the Company or an Affiliate after the Inception Date expressly for
use by the Administrator in the preparation of such registration statement or
prospectus and (iii) any successful enforcement of this indemnity; provided
that, the Company shall have no obligation to indemnify any Administrator
Indemnified Party to the extent such Indemnifiable Loss results from (i) any act
or omission resulting from the negligence or willful misconduct of the
Administrator or a Subcontractor, or (ii) any Administrator Breach.

 

Section 19.3     Definitions.  As used in this Agreement:

 

“Indemnitee” means any Person entitled to indemnification under this Agreement;

 

“Indemnitor” means any Person required to provide indemnification under this
Agreement;

 

“Indemnifiable Losses” means any and all damages, losses, Liabilities,
obligations, costs and expenses (including reasonable attorneys’ fees and
expenses); provided, that any Indemnity Payment (x) shall in no event include
any amounts constituting punitive damages relating to the breach or alleged
breach of this Agreement (except to the extent actually paid to a third party in
connection with a Third Party Claim) and (y) and shall be net of any amounts
recovered by or recoverable by the Indemnitee for the Indemnifiable Losses for
which such Indemnity Payment is made under any insurance policy, reinsurance
agreement, warranty or indemnity or otherwise from any Person other than a Party
hereto, and the Indemnitee shall promptly reimburse the Indemnitor for any such
amount that is received by it from any such other Person with respect to an
Indemnifiable Losses after any indemnification with respect thereto has actually
been paid pursuant to this Agreement;

 

“Indemnity Payment” means any amount of Indemnifiable Losses required to be paid
pursuant to this Agreement; and

 

“Third Party Claim” means any claim, action, suit, or proceeding made or brought
by any Person that is not an Indemnitee.

 

Section 19.4     Applicability of Stock Purchase Agreement.  The procedures set
forth in Section 7.5 of the Stock Purchase Agreement shall apply to Losses
indemnified under this Article XIX.

 

30

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

 

Section 19.5     No Duplication.  To the extent that an Indemnitee has received
payment in respect of an Indemnifiable Loss pursuant to the provisions of any
other Transaction Agreement, such Indemnitee shall not be entitled to
indemnification for such Indemnifiable Loss under this Agreement to the extent
of such payment.

 

ARTICLE XX

 

DURATION; TERMINATION

 

Section 20.1     Duration.  This Agreement shall commence on the Inception Date
and continue with respect to each LBL Contract and each Vermont Captive Contract
until no further Administrative Services in respect of such LBL Contract or
Vermont Captive Contract are required, unless this Agreement is earlier
terminated under Section 20.2.

 

Section 20.2     Termination.

 

(a)          This Agreement is subject to immediate termination at the option of
the Company, upon written notice to the Administrator, upon the occurrence of
any of the following events:

 

(i)           A voluntary or involuntary proceeding is commenced in any
jurisdiction by or against the Administrator for the purpose of conserving,
rehabilitating or liquidating the Administrator, and such proceeding shall
continue undismissed for 60 days; or

 

(ii)          There is a material and continuing breach by the Administrator of
this Agreement and such breach is not cured within twenty (20) Business Days
following receipt by Administrator of written notice of such breach from the
Company; provided, however, if such material breach is not curable within such
twenty (20) Business Day period, the Company may not terminate the
Administrator’s performance of the Administrative Services if the Administrator
has, within such twenty (20) Business Day period, provided the Company with a
detailed, written description of the Administrator’s good faith plan to cure
such material and continuing breach; provided, further, if such material and
continuing breach is not cured within forty-five (45) days following the
Administrator’s delivery to the Company of such plan, the Company may terminate
the Administrator’s performance of the Administrative Services.

 

(b)          This Agreement may be terminated at any time upon the mutual
written consent of the Parties hereto, which writing shall state the effective
date of termination.

 

(c)          In the event that this Agreement is terminated under any of the
provisions of Section 20.2(a):

 

(i)           the Administrator and the Company shall each cooperate in the
prompt transfer of the applicable Administrative Services and any books and
records and other materials maintained by the Administrator related to such
Administrative Services (or, where required by Applicable Law, copies thereof)
to the Company or the Company’s designee reasonably acceptable to the
Administrator;

 

31

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

 

(ii)          in the event there has occurred a Change in Control at or prior to
such termination, the Administrator shall use its reasonable best efforts to
provide the Company or a replacement servicer designated by the Company with a
license to, or seek to obtain consents of third parties for the use of, software
and systems used by the Administrator in performing the Administrative Services
as reasonably necessary to permit the Company or such replacement servicer to
perform the Administrative Services for a reasonable period following such
termination, such that the Company or such replacement servicer shall be able to
perform the applicable Services without interruption following termination of
this Agreement; and

 

(iii)         the Administrator shall reimburse the Company for (A) reasonable
out-of-pocket costs for transitioning the Administrative Services to a
substitute provider reasonably acceptable to the Company (provided that in the
event the Reinsurance Agreement is in effect at the time of such termination,
the Company shall obtain the Administrator’s consent to such substitute
provider, such consent not to be unreasonably withheld, conditioned or delayed,
and the Administrator shall notify the Company of its decision with respect to
such consent as soon as reasonably practicable and in any event within thirty
(30) days following delivery of the Company’s request for such consent), (B) any
reasonable fees paid to any such substitute provider in connection with the
performance of any Administrative Services and (C) any reasonable out-of-pocket
costs incurred by the Company with respect to the Administrative Services after
termination of this Agreement; provided, however, that the Administrator shall
not be liable for the fees and expenses set forth in clauses (B) and (C) of this
Section 20.2(c)(iii) that are incurred following the termination of the
Reinsurance Agreement.

 

ARTICLE XXI

 

GENERAL PROVISIONS

 

Section 21.1     Schedules and Exhibits.  The Schedules and Exhibits to this
Agreement that are specifically referred to herein are a part of this Agreement
as if fully set forth herein.

 

Section 21.2     Notices.  All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally or by overnight courier (providing proof of delivery) to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):

 

(a)          if to the Company:

 

Lincoln Benefit Life Company

[        ]

[        ]

Attention:  [     ]

 

with copies (which shall not constitute notice) to:

 

Debevoise & Plimpton LLP

919 Third Avenue

 

32

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

 

New York, New York 10022

Attention:          Nicholas F. Potter

David Grosgold

 

(b)          if to the Administrator:

 

Allstate Life Insurance Company

3100 Sanders Road

Northbrook, Illinois 60062

Attention:  Jess Merten

Email: Jess.Merten@allstate.com

 

with copies to:

 

Allstate Life Insurance Company

3075 Sanders Road

Northbrook, Illinois 60062

Attention:  Joy Thomas

Email: Joy.Thomas@allstate.com

 

and

 

Allstate Life Insurance Company

2775 Sanders Road

Northbrook, Illinois 60062

Attention:  Beth Lapham

Email: blapham@allstate.com

 

with copies (which shall not constitute notice) to:

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York  10019

Attention:          John M. Schwolsky

Alexander M. Dye

 

Notice given by personal delivery or overnight courier shall be effective upon
actual receipt.

 

Section 21.3     Interpretation.  When a reference is made in this Agreement to
a Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated.  All
references herein to any agreement, instrument, statute, rule or regulation are
to the agreement, instrument, statute, rule or regulation as amended, modified,
supplemented or replaced from time to time (and, in the case of statutes,
includes any rules and regulations promulgated under said statutes) and to any
section of any statute, rule or regulation including any successor to said
section.  The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  Whenever the words “include,” “includes” or
“including” are

 

33

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

 

used in this Agreement, they shall be deemed to be followed by the words
“without limitation.”  Whenever the singular is used herein, the same shall
include the plural, and whenever the plural is used herein, the same shall
include the singular, where appropriate.  Whenever the word “Dollars” or the “$”
sign appear in this Agreement, they shall be construed to mean United States
Dollars, and all transactions under this Agreement shall be in United States
Dollars.  This Agreement has been fully negotiated by the Parties hereto and
shall not be construed by any Governmental Entity against either Party by virtue
of the fact that such Party was the drafting Party.

 

Section 21.4     Entire Agreement; Third Party Beneficiaries.  This Agreement
(including all exhibits and schedules hereto) and the other Transaction
Agreements constitute the entire agreement, and supersede all prior agreements,
understandings, representations and warranties, both written and oral, among the
Parties with respect to the subject matter of this Agreement.  Except as set
forth in Article XIX with respect to the Administrator Indemnified Parties and
the Company Indemnified Parties, this Agreement is not intended to confer upon
any Person other than the Parties hereto and their successors and permitted
assigns any rights or remedies.

 

Section 21.5     Governing Law.  This Agreement and any dispute arising
hereunder shall be governed by, and construed in accordance with, the laws of
the State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.

 

Section 21.6     Assignment.  Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise (other than by operation of law in a
merger), by either Party without the prior written consent of the other Party,
and any such assignment that is not consented to shall be null and void. 
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the Parties and their respective
successors and assigns.

 

Section 21.7     Jurisdiction; Enforcement.

 

(a)          Each of the Parties hereto hereby irrevocably and unconditionally
submits to the exclusive jurisdiction of any court of the United States or any
state court, which in either case is located in the City and County of New York
(each, a “New York Court”) for purposes of enforcing this Agreement or
determining any claim arising from or related to the transactions contemplated
by this Agreement.  In any such action, suit or other proceeding, each of the
Parties hereto irrevocably and unconditionally waives and agrees not to assert
by way of motion, as a defense or otherwise any claim that it is not subject to
the jurisdiction of any such New York Court, that such action, suit or other
proceeding is not subject to the jurisdiction of any such New York Court, that
such action, suit or other proceeding is brought in an inconvenient forum or
that the venue of such action, suit or other proceeding is improper; provided,
that nothing set forth in this sentence shall prohibit any of the Parties hereto
from removing any matter from one New York Court to another New York Court. 
Each of the Parties hereto also agrees that any final and unappealable judgment
against a Party hereto in connection with any action, suit or other proceeding
will be conclusive and binding on such Party and that such award or judgment may
be enforced in any court of competent jurisdiction, either within or outside of
the United States.  A certified or exemplified copy of such award or judgment
will be conclusive evidence of the fact and amount of such award or judgment.
Any process or other paper to be served in

 

34

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connection with any action or proceeding under this Agreement shall, if
delivered or sent in accordance with Section 21.2, constitute good, proper and
sufficient service thereof.

 

(b)          EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 21.7.

 

Section 21.8     Severability; Amendment; Modification; Waiver.

 

(a)          Whenever possible, each provision or portion of any provision of
this Agreement will be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any Applicable Law in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.

 

(b)          This Agreement may be amended or a provision hereof waived only by
a written instrument signed by each of the Administrator and the Company.

 

(c)          No delay on the part of any Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any Party of any right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.

 

Section 21.9     Specific Performance.  The Parties agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement or to enforce
specifically the performance of the terms and provisions hereof in any court of
competent jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.  The Parties hereby waive, in any action for
specific performance, the defense of adequacy of a remedy at law and the posting
of any bond or other security in connection therewith.

 

Section 21.10   Counterparts.  This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the Parties and
delivered to the other Party.  Each Party

 

35

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may deliver its signed counterpart of this Agreement to the other Party 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.

 

Section 21.11   Survival.  Articles XVI, XIX, XX and XXI shall survive the
termination of this Agreement.

 

[Remainder of page intentionally left blank]

 

36

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IN WITNESS WHEREOF, the Company and the Administrator have caused this Agreement
to be signed by their respective duly authorized officers, all as of the date
first written above.

 

 

 

LINCOLN BENEFIT LIFE COMPANY

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

ALLSTATE LIFE INSURANCE COMPANY

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

[Administrative Services Agreement]

 

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

EXHIBIT C

 

 

 

 

 

 

 

AMENDED AND RESTATED REINSURANCE AGREEMENT

 

between

 

LINCOLN BENEFIT LIFE COMPANY
and

 

ALLSTATE LIFE INSURANCE COMPANY

 

 

Dated as of [·]

 

 

 

 

 

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

 

TABLE OF CONTENTS

 

 

Page

 

 

 

 

 

 

Article I

DEFINITIONS

 

2

 

 

 

 

Article II

COVERAGE

 

11

 

 

 

 

Article III

ADMINISTRATION; GENERAL

 

12

 

 

 

 

Article IV

INITIAL REINSURANCE PREMIUM; ADDITIONAL CONSIDERATION; NET SETTLEMENT

 

16

 

 

 

 

Article V

DURATION AND TERMINATION

 

19

 

 

 

 

Article VI

INSOLVENCY

 

20

 

 

 

 

Article VII

LICENSES; SECURITY

 

20

 

 

 

 

Article VIII

DAC TAXES

 

23

 

 

 

 

Article IX

ARBITRATION

 

24

 

 

 

 

Article X

INDEMNIFICATION; DISCLAIMER

 

25

 

 

 

 

Article XI

GENERAL PROVISIONS

 

27

 

 

SCHEDULES

 

SCHEDULE A

-

CEDED REINSURANCE CONTRACTS

 

 

 

SCHEDULE B

-

SEPARATE ACCOUNTS

 

 

 

SCHEDULE C

-

MONTHLY REPORT

 

 

 

EXHIBITS

 

 

 

 

 

EXHIBIT A

-

TRUST AGREEMENT

 

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

 

AMENDED AND RESTATED REINSURANCE AGREEMENT

 

 

This Amended and Restated Reinsurance Agreement, dated as of [·], 2013 (this
“Agreement”), is made and entered into by and between Lincoln Benefit Life
Company, a Nebraska domiciled stock life insurance company (the “Company”), and
Allstate Life Insurance Company, an Illinois domiciled stock life insurance
company (the “Reinsurer”, and together with the Company, the “Parties”, and each
a “Party”).

 

WHEREAS, the Reinsurer owns 100% of the issued and outstanding capital stock of
the Company;

 

WHEREAS, the Reinsurer, Resolution Life Holdings, Inc., a corporation organized
under the laws of the State of Delaware (the “Buyer”), and Resolution Life L.P.,
solely for purposes of Section 5.25 and Article X thereto, a Bermuda limited
partnership, have entered into a Stock Purchase Agreement, dated as of July 17,
2013 (the “Stock Purchase Agreement”), pursuant to which the Reinsurer proposes
to sell, and the Buyer proposes to purchase, 100% of the issued and outstanding
capital stock of the Company;

 

WHEREAS, the Stock Purchase Agreement provides, among other things, for the
Company and the Reinsurer to enter into this Agreement;

 

WHEREAS, the Reinsurer provides reinsurance coverage to the Company in
accordance with the terms of the following reinsurance agreements:  (i) a
coinsurance agreement between the Parties effective as of December 31, 2001
covering the Company’s general account liabilities for all policies and market
value adjustment annuities (the “General Account Reinsurance Agreement”), (ii) a
modified coinsurance agreement between the Parties effective as of December 31,
2001 covering the Company’s separate account liabilities for variable life
insurance policies (the “Variable Life Reinsurance Agreement”, and together with
the General Account Reinsurance Agreement, the “Subject Reinsurance Agreements”)
and (iii) a modified coinsurance agreement between the Parties effective as of
December 31, 2001 covering the Company’s separate account liabilities for
variable annuity policies (the “Variable Annuity Reinsurance Agreement”);

 

WHEREAS, the Company is also a party to a Reinsurance Agreement, effective
September 30, 2012 (the “Vermont Captive Reinsurance Agreement”), pursuant to
which the Company cedes to the Vermont Captive one hundred percent (100%) of the
policy benefits under specified universal life insurance policies written by the
Company with issue dates within the range set forth in the Vermont Captive
Reinsurance Agreement;

 

WHEREAS, prior to the closing of the transactions contemplated in the Stock
Purchase Agreement, the Company and the Reinsurer entered into a Recapture
Agreement (the “Recapture Agreement”) pursuant to which the Company recaptured
from the Reinsurer certain of the business that was previously ceded or
retroceded to the Reinsurer under the Subject Reinsurance Agreements;

 

WHEREAS, in connection with the Closing of the transactions contemplated in the
Stock Purchase Agreement, the Company and the Reinsurer desire to amend and
restate, in its entirety,

 

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the Variable Life Reinsurance Agreement with respect to the business of the
Company that was reinsured under the Variable Life Reinsurance Agreement and has
not recaptured by the Company pursuant to the Recapture Agreement;

 

WHEREAS, in connection with the Closing of the transactions contemplated in the
Stock Purchase Agreement, the Company and the Reinsurer desire to amend and
restate the General Account Reinsurance Agreement with respect to the portion of
the business of the Company that was reinsured under the General Account
Reinsurance Agreement and has not recaptured by the Company pursuant to the
Recapture Agreement, except for the Company’s variable annuity policies
reinsured pursuant to the General Account Reinsurance Agreement (which variable
annuity policies will continue to be reinsured by the Reinsurer pursuant to the
General Account Reinsurance Agreement with respect to all general account
liabilities associated with such variable annuity policies);

 

WHEREAS, the Variable Annuity Reinsurance Agreement shall remain in full force
and effect without amendment; and

 

WHEREAS, the Company wishes to appoint the Reinsurer to provide administrative
and other services with respect to the Reinsured Risks (as defined below), and
the Reinsurer, as Administrator, desires to provide such administrative services
and other services;

 

NOW, THEREFORE, the Company and the Reinsurer agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1                        Definitions.  Any capitalized term used but
not defined herein, unless otherwise indicated, shall have the meaning set forth
in the Stock Purchase Agreement.  As used in this Agreement, the following terms
shall have the following meanings:

 

“Administrative Services Agreement” means the Administrative Services Agreement
entered into between the Company and the Reinsurer as of the date hereof.

 

“Administrator” means the Reinsurer in its capacity as administrator under the
Administrative Services Agreement.

 

“Agreement” shall have the meaning set forth in the Preamble.

 

“ALIC Outward Reinsurance Contracts” means all reinsurance or coinsurance
treaties and agreements to which the Reinsurer is or becomes a party, as
retrocedent, and that relate to the retrocession by the Reinsurer of risks
assumed under this Agreement, including  (a) all reinsurance or coinsurance
treaties and agreements in force as of the date of this Agreement to which the
Reinsurer is a ceding party to and that relate to the LBL Contracts, (b) any
such treaty or agreement that is terminated or expired but under which the
Reinsurer may continue to receive benefits with respect to the LBL Contracts,
(c) any other new or replacement reinsurance or coinsurance treaties or
agreements covering the LBL Contracts that are entered into by the Reinsurer and
(d) any Alternative Reinsurance Arrangement.

 

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“Alternative Reinsurance Arrangement” shall have the meaning set forth in
Section 3.10(b).

 

“ARIAS” shall have the meaning set forth in Section 9.1.

 

“Bank Accounts” shall have the meaning set forth in Section 4.4.

 

“Captive” means ALIC Reinsurance Company, a South Carolina domiciled captive
insurance Company.

 

“Captive Change of Control” means the occurrence of one or more of the following
events:  any Person other than TAC, one or more Affiliates of TAC or the
Reinsurer (whether or not then an Affiliate of TAC) acquires or assumes
(x) Control of the Captive, whether by merger, consolidation, stock acquisition
or otherwise (including the acquisition or assumption of the power to direct the
Captive’s management and policies by means of a management or services agreement
or other contractual arrangement) or (y) all or substantially all of the assets
or Liabilities of the Captive by reinsurance (whether indemnity or assumption)
or otherwise; provided, however, that the acquisition of Control of TAC by any
Person shall not constitute a Change in Control.  Notwithstanding the foregoing,
no Captive Change in Control shall be deemed to occur if TAC provides a
guarantee for the benefit of the Company, on terms reasonably satisfactory to
the Company, of all obligations of the Captive to the Reinsurer that are
assigned to the Company in accordance with the terms of the definition of
Required Balance.

 

“Ceded Reinsurance Contracts” means (a) all reinsurance or coinsurance treaties
and agreements in force as of the date of this Agreement to which the Company is
a ceding party and that relate to the LBL Contracts, (b) any such treaty or
agreement that is terminated or expired but under which the Company may continue
to receive benefits with respect to the LBL Contracts, and (c) any other new or
replacement reinsurance or coinsurance treaties or agreements covering the LBL
Contracts that are entered into by the Reinsurer on behalf of the Company as
Administrator under the Administrative Services Agreement, including with
respect to subclauses (a), (b) and (c) above, the Vermont Captive Reinsurance
Agreement and those treaties and agreements set forth on Schedule A.

 

“Change in Control” means the occurrence of one or more of the following
events:  any Person other than TAC or one or more Affiliates of TAC acquires or
assumes (x) Control of the Reinsurer, whether by merger, consolidation, stock
acquisition or otherwise (including the acquisition or assumption of the power
to direct the Reinsurer’s management and policies by means of a management or
services agreement or other contractual arrangement) or (y) all or substantially
all of the assets or Liabilities of the Reinsurer by reinsurance (whether
indemnity or assumption) or otherwise; provided, however, that the acquisition
of Control of TAC by any Person shall not constitute a Change in Control. 
Notwithstanding the foregoing, no Change in Control shall be deemed to occur if
TAC provides a guarantee for the benefit of the Company of all Reinsured Risks
and all obligations of the Reinsurer hereunder on terms reasonably satisfactory
to the Company.

 

“Company” shall have the meaning set forth in the Preamble.

 

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“Company Extra Contractual Obligations” means all Extra Contractual Obligations
to the extent arising out of, resulting from or relating to any alleged or
actual act, error or omission after the Inception Date (including the failure of
the Company to perform any Retained Services for such term as defined in the
Administrative Services Agreement to the extent required thereunder), whether
intentional, in bad faith, reckless, grossly negligent, negligent or otherwise,
by the Company or any of its Affiliates, or any service providers engaged or
compensated by the Company or its Affiliates (other than the Reinsurer, any of
its Affiliates or any designee or subcontractor appointed by Administrator under
the Administrative Services Agreement), in each case unless such action was
directed by the Reinsurer in writing.

 

“Company Indemnified Persons” shall have the meaning set forth in Section 10.1.

 

“Contractholder” means the holder of any LBL Contract.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Designated Company Conversion Policies” shall have the meaning set forth in the
Administrative Services Agreement.

 

“Eligible Assets” shall have the meaning set forth in Section 7.4.

 

“Exclusive Producer” means any Producer that markets, sells or administers
business of the type written by the Reinsurer or any of its Affiliates
exclusively for or on behalf of the Reinsurer and its Affiliates,
notwithstanding whether such Producer also sells products of the type not
written by the Reinsurer or any of its Affiliates on behalf of third parties.

 

“Extra Contractual Obligation” means all Liabilities (for the avoidance of
doubt, other than Liabilities arising under the express terms and conditions of
the LBL Contracts), including Liabilities for fines, penalties, Taxes, fees,
forfeitures, compensatory, punitive, exemplary, special, treble, bad faith, tort
or any other form of damages, and legal fees and expenses relating thereto,
arising out of, resulting from or relating to any alleged or actual act, error
or omission, whether intentional, in bad faith, reckless, grossly negligent,
negligent or otherwise, in connection with (i) the form, sale, marketing,
underwriting, production, issuance, cancellation or administration of the LBL
Contracts, (ii) the investigation, defense, trial, settlement or handling of
claims, benefits, dividends or payments under or relating to the LBL Contracts,
or (iii) the failure to pay or the delay in payment or errors in calculating or
administering the payment of benefits, claims, dividends or any other amounts
due or alleged to be due under or in connection with the LBL Contracts.

 

“Fair Market Value” means (i) as to cash, the amount thereof; and (ii) as to an
asset other than cash, the amount at which such asset could be bought or sold in
a current transaction between willing parties other than in a forced or
liquidation sale.

 

“Fronting Period” means the period of time on and after the date hereof that the
Reinsurer has the right under Section 4.1(a) of the Administrative Services
Agreement to issue life insurance contracts in the name of the Company.

 

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“Fund” means any registered investment company in which a Separate Account
invests.

 

“General Account Liabilities” means the following Liabilities of the Company,
whether incurred before, at or after the Inception Date:  (a) all claims,
benefits, claim expenses, interest on claims or unearned premiums, interest on
policy funds, withdrawals, amounts payable for returns or refunds of premium
surrender amounts and other amounts payable under the terms of the LBL
Contracts; (b) all Liabilities arising out of changes to the terms and
conditions of the LBL Contracts mandated by Applicable Law or initiated by a
Contractholder pursuant to the terms of the applicable LBL Contracts; (c) all
expense allowances payable under the LBL Contracts and all experience refunds
that relate to the LBL Contracts (including under the Transamerica Reinsurance
Agreement); (d) all premium taxes due or accrued in respect of premiums paid,
deposits made or annuitizations occurring with respect to the LBL Contracts net
of premium tax credits to the extent arising out of assessments or charges
described in clause (e); (e) all assessments and similar charges with respect to
the LBL Contracts in connection with participation by the Company or the
Reinsurer, whether voluntary or involuntary, in any guaranty association
established or governed by any state or other jurisdiction, arising on account
of insolvencies, rehabilitations or similar proceedings occurring before, on or
after the Inception Date; (f) all commissions (including both fronted and trail
commissions), expense allowances, benefit credits, other compensation and other
servicing and administration fees payable with respect to the LBL Contracts to
or for the benefit of Producers; (g) all escheat and unclaimed property
Liabilities arising under the LBL Contracts; (h) all premiums and other amounts
payable under the Ceded Reinsurance Contracts in respect of the LBL Contracts;
and without duplication, (i) all expense reimbursement amounts payable to
Allstate Distributors, LLC by the Company under the Principal Underwriting
Agreement with respect to the LBL Contracts; in each of the cases of subclauses
(a) through (i) above, net of amounts actually collected under the Ceded
Reinsurance Contracts by or on behalf of the Company in respect of the LBL
Contracts.  For the avoidance of doubt, General Account Liabilities (A) exclude
the Separate Account Liabilities and the Company Extra Contractual Obligations,
and (B) include any general account fixed options under LBL Contracts.

 

“General Account Reinsurance Agreement” shall have the meaning set forth in the
Recitals.

 

“General Account Reserves” means the aggregate amount of general account
reserves of the Company with respect to the General Account Liabilities (without
regard to the reinsurance provided hereunder), determined in accordance with
Nebraska SAP; provided, the term “General Account Reserves” does not include the
Separate Account Reserves.  For the avoidance of doubt, such General Account
Reserves shall include the amounts for General Account Liabilities that would be
reflected in lines 1 through 4 inclusive, column 1, in the “Liabilities, Surplus
and Other Funds” section of the NAIC statement blank used to prepare the
Company’s statutory balance sheet as of December 31, 2012, or if the line
numbers are changed pursuant to relevant guidance from the NAIC, the successor
to such line numbers.

 

“Illinois SAP” means the statutory accounting principles prescribed or permitted
by the Commissioner of Insurance of the State of Illinois but disregarding any
permitted practices applicable to the Reinsurer, other than those of general
applicability to life insurers.

 

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“Inception Date” shall have the meaning set forth in Section 2.1

 

“LBL Contracts” means all Pre-Closing Policies and Post-Closing Policies,
excluding policies issued or coverages otherwise provided as a result of the
exercise by a Contractholder of any conversion right in a Pre-Closing Policy or
a Post-Closing Policy, other than all Designated Company Conversion Policies.

 

“LIBOR Determination Date” means the date as of which One-Month LIBOR is to be
determined, or if such date is not a London Banking Day, the next immediately
succeeding London Banking Day.

 

“London Banking Day” means any business day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.

 

“Minimum Balance” shall have the meaning set forth in Section 7.7

 

“Monthly Accounting Period” means each calendar month during the term of this
Agreement or any fraction thereof ending on the date this Agreement is
terminated in accordance with Section 5.2.

 

“Monthly Report” shall have the meaning set forth in Section 4.5.

 

“Monthly Settlement” shall have the meaning set forth in Section 4.5.

 

“Nebraska Commissioner” means the Commissioner of Insurance of the State of
Nebraska.

 

“Nebraska SAP” means the statutory accounting principles prescribed or permitted
by the Commissioner of Insurance of the State of Nebraska but disregarding any
permitted practices applicable to the Company, other than those of general
applicability to life insurers.

 

“New York Court” shall have the meaning set forth in Section 11.5.

 

“Non-Guaranteed Elements” means cost of insurance charges, loads and expense
charges, credited interest rates, mortality and expense charges, administrative
expense risk charges, variable premium rates, variable paid-up amounts,
policyholder dividends and other policy features that are subject to change.

 

“One-Month LIBOR” means for each interest period, the London interbank offered
rate for deposits in U.S. dollars having a maturity of one month which appears
on Bloomberg:  verb “BBAM”, 1) “Official BBA Libor Fixings” as of 11:00 a.m.,
London time, on the related LIBOR Determination Date.  If this rate does not
appear on Bloomberg:  verb “BBAM”, 1) “Official BBA Libor Fixings” on that date,
the rate for such interest period will be determined on the basis of the rates
at which deposits in U.S. dollars, having a maturity of one month and in a
principal amount of not less than U.S. $1,000,000, are offered at approximately
11:00 a.m., London time, on the LIBOR Determination Date with respect to that
interest period, to prime banks in the London interbank market.

 

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“Parties” shall have the meaning set forth in the Preamble.

 

“Policy Loan Balance” means, with respect to any date of determination, the
amount of contract loans in respect of the LBL Contracts, as of such date, as
would be reflected in line 6, column 3 in the “Assets” section of the NAIC
statement blank used to prepare the Company’s statutory balance sheet as of
December 31, 2012 or if the line number is changed pursuant to relevant guidance
from the NAIC, the successor line number to such line number, net of any
unearned policy loan interest on such loans but including any due and accrued
interest thereon, determined in accordance with Nebraska SAP.

 

“Post-Closing Policies” means all of the life insurance and annuity contracts
issued by the Administrator in the name of the Company pursuant to the
Administrative Services Agreement.

 

“Post-Underwriting Period Conversion Policies” shall have the meaning set forth
in the Administrative Services Agreement.

 

“Pre-Closing Policies” means all of the life insurance and annuity contracts
written or reinsured by the Company prior to the Inception Date and reinsured
pursuant to the Subject Reinsurance Agreements, other than (i) the Recaptured
Business and (ii) all variable annuity policies written by the Company to the
extent reinsured by the Reinsurer under the Variable Annuity Reinsurance
Agreement or the General Account Reinsurance Agreement.  For the avoidance of
doubt, the Pre-Closing Policies shall be comprised of (i) all life insurance
business written by the Company through Exclusive Producers prior to the
Inception Date, (ii) all immediate annuities written by the Company prior to the
Inception Date, (iii) all Specified Life Business and (iv) the Reinsured
Policies.

 

“Premiums” means premiums, considerations, deposits, payments, loan interest and
principal repayments and other amounts received by or on behalf of the Company
in respect of the LBL Contracts.

 

“Principal Underwriting Agreement” means the Principal Underwriting Agreement
entered into between the Company and Allstate Distributors, LLC as of the date
hereof.

 

“Producer” means any producer, broker, agent, general agent, managing general
agent, master broker agency, broker general agency, financial specialist or
other Person responsible for marketing or producing insurance policies, annuity
contracts, protection and retirement products on behalf of the Company.

 

“Recapture Agreement” shall have the meaning set forth in the Recitals.

 

“Recaptured Business” means the business written by the Company that was
reinsured by the Reinsurer pursuant to the Subject Reinsurance Agreement and is
recaptured by the Company pursuant to the Recapture Agreement.

 

“Recoveries” shall have the meaning set forth in Section 4.2(a).

 

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“Recoveries Collateral” shall have the meaning set forth in Section 4.3(a).

 

“Reinsurance Receivables” means, as of any date of determination, the sum of
(x) the amounts recoverable from reinsurers under the Ceded Reinsurance
Agreements or the ALIC Outward Reinsurance Contracts, as of such date, as would
be reflected in line 16.1, column 3 in the “Assets” section of the NAIC
statement blank used to prepare the statutory balance sheet of the Company or
the Reinsurer, as applicable, as of December 31, 2012 or if the line number is
changed pursuant to relevant guidance from the NAIC, the successor line number
to such line number, plus (y) the funds held by or deposited with reinsured
companies under the Ceded Reinsurance Agreements or the ALIC Outward Reinsurance
Contracts, as of such date, as would be reflected in line 16.2, column 3 in the
“Assets” section of the NAIC statement blank used to prepare the statutory
balance sheet of the Company or the Reinsurer, as applicable, as of December 31,
2012 or if the line number is changed pursuant to relevant guidance from the
NAIC, the successor line number to such line number, plus (z) other amounts
receivable under reinsurance contracts from reinsurers under the Ceded
Reinsurance Agreements of the ALIC Outward Reinsurance Contracts, as of such
date, as would be reflected in line 16.3, column 3 in the “Assets” section of
the NAIC statement blank used to prepare the statutory balance sheet of the
Company or the Reinsurer, as applicable, as of December 31, 2012 or if the line
number is changed pursuant to relevant guidance from the NAIC, the successor
line number to such line number, in each case determined in accordance with SAP
or Applicable Law of the Company Domiciliary State.

 

“Reinsured Policies” means those term life insurance policies reinsured by the
Company pursuant to the Transamerica Reinsurance Agreement.

 

“Reinsured Risks” shall have the meaning set forth in Section 2.1

 

“Reinsurer” shall have the meaning set forth in the Preamble.

 

“Reinsurer Extra Contractual Obligations” means all Extra Contractual
Obligations to the extent arising out of, resulting from or relating to any
alleged or actual act, error or omission, whether intentional, in bad faith,
reckless, grossly negligent, negligent or otherwise, by the Reinsurer or any of
its Affiliates, or any service providers engaged or compensated by the Reinsurer
or its Affiliates (other than any Company Extra Contractual Obligations).

 

“Reinsurer Indemnified Persons” shall have the meaning set forth in
Section 10.2.

 

“Reinsurer Statutory Book Value” means, with respect to any Eligible Asset, the
amount carried in respect of such asset by the Reinsurer as an admitted asset
determined in accordance with Illinois SAP.

 

“Required Balance” means, as of any date of determination, an amount equal to
(i) the General Account Reserves as of such date, minus (ii) the Policy Loan
Balance as of such date, minus (iii) the Reinsurance Receivables as of such
date, minus (iv) the amount of Uncollected/Deferred Premiums as of such date,
minus (v) reserve credits on the Reinsurer’s books and records as of such date
with respect to the ALIC Outward Reinsurance Contracts whereby the Reinsurer
cedes liabilities to an Affiliate of the Reinsurer, provided, however, that

 

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with respect to clause (v), the Required Balance shall only be reduced, (A) in
an amount that in the aggregate does not exceed 40% of the General Account
Reserves as of such date, (B) to the extent of the Value of any assets held as
collateral for the reinsurance under the applicable ALIC Outward Reinsurance
Contract and (C) to the extent the Reinsurer has assigned to the Company all its
rights with respect to such collateral on terms reasonably satisfactory to the
Company.  Notwithstanding the foregoing, from and after the occurrence of both a
Change in Control and a Captive Change of Control, the Required Balance shall
be, as of any date of determination, an amount equal to (i) the General Account
Reserves less (ii) the Policy Loan Balance as of such date.

 

“Reserve Credit” means full reserve credit for the reinsurance ceded to the
Reinsurer under this Agreement in the Statutory Financial Statements required to
be filed by the Company with the Commissioner of Insurance of the State of
Nebraska.

 

“Separate Account Charges” shall have the meaning set forth in
Section 4.2(a)(iii)

 

“Separate Account Liabilities” means those liabilities that are payable from the
assets of the Separate Accounts in respect of the LBL Contracts.

 

“Separate Account Separation” shall have the meaning set forth in the
Administrative Services Agreement.

 

“Separate Accounts” means the portion of the variable life separate
account(s) of the Company described on Schedule B that relate to the LBL
Contracts and, following the Separate Account Separation, the new separate
account formed in connection therewith.

 

“Shared Reinsurance Agreement” shall have the meaning set forth in
Section 3.10(b).

 

“Shared Separate Account” means the Lincoln Benefit Life Variable Life Account
A, but only so long as such separate account includes assets held in respect of
LBL Contracts.

 

“Specified Life Business” means, collectively, (i) the term life insurance
policies written by the Company prior to the Inception Date that have been
reinsured to the Reinsurer and retroceded by the Reinsurer to ALIC Reinsurance
Company and (ii) the term life insurance policies of the type identified on
Section 1.1(d) of the Seller Disclosure Schedule to the Stock Purchase Agreement
that were written by the Company and are reinsured by third party reinsurers.

 

“Statutory Financial Statements” means, with respect to any Party, the annual
and quarterly statutory financial statements of such Party.

 

“Stock Purchase Agreement” shall have the meaning set forth in the Recitals.

 

“Subject Reinsurance Agreements” shall have the meaning set forth in the
Recitals.

 

“TAC” means The Allstate Corporation, a Delaware corporation.

 

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“Transaction Agreements” shall have the meaning set forth in the Stock Purchase
Agreement.

 

“Transamerica” means Transamerica International Reinsurance Company.

 

“Transamerica Reinsurance Agreement” means that certain [Reinsurance Agreement],
dated as of [      ] by and between the Company and Transamerica.

 

“Transfer Instruments” shall have the meaning set forth in Section 7.5

 

“Trust Account” means the trust account established by the Reinsurer for the
benefit of the Company under the Trust Agreement.

 

“Trust Agreement” means that certain Trust Agreement dated as of the date hereof
by and among the Reinsurer, the Company and the Trustee, as trustee,
substantially in the form of Exhibit A hereof.

 

“Trustee” shall have the meaning set forth in Section 7.2.

 

“UCC” shall have the meaning set forth in Section 4.3(b)(i).

 

“Uncollected/Deferred Premiums” means, as of any date of determination, the sum
of (i) uncollected premiums in the course of collection in respect of the LBL
Contracts, as of such date, as would be reflected in line 15.1, column 3 in the
“Assets” section of the NAIC statement blank used to prepare the Reinsurer’s
balance sheet in its most recent Statutory Financial Statement or if the line
number is changed pursuant to relevant guidance from the NAIC, the successor
line number to such line number, plus (ii) deferred premiums and installments
booked but deferred and not yet due in respect of the LBL Contracts, as of such
date, as would be reflected in line 15.2, column 3 in the “Assets” section of
the NAIC statement blank used to prepare the Reinsurer’s balance sheet in its
most recent Statutory Financial Statement or if the line number is changed
pursuant to relevant guidance from the NAIC, the successor line number to such
line number, in each case determined in accordance with Nebraska SAP.

 

“Value” means, with respect to the assets in the Trust Account, their Reinsurer
Statutory Book Value prior to a Change in Control and following the occurrence
of a Change in Control, their Fair Market Value.

 

“Variable Annuity Reinsurance Agreement” shall have the meaning set forth in the
Recitals.

 

“Variable Life Reinsurance Agreement” shall have the meaning set forth in the
Recitals.

 

“Vermont Captive” means Lincoln Benefit Reinsurance Company, a Vermont domiciled
captive insurance company.

 

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“Vermont Captive Reinsurance Agreement” shall have the meaning set forth in the
Recitals.

 

ARTICLE II
COVERAGE

 

Section 2.1        Coverage.  Upon the terms and subject to the conditions and
other provisions of this Agreement, as of [12:01 a.m.] Central Time on the
1st day of the month in which the Closing occurs (the “Inception Date”), the
Company hereby cedes to the Reinsurer, and the Reinsurer hereby agrees to
indemnify the Company (i) on a coinsurance basis, for one hundred percent (100%)
of the General Account Liabilities of the Company; (ii) on a modified
coinsurance basis, for one hundred percent (100%) of the Separate Account
Liabilities of the Company and (iii) for one hundred percent (100%) of the
Reinsurer Extra Contractual Obligations, in each case, payable by the Company on
or after the Inception Date (the “Reinsured Risks”).

 

Section 2.2        Conditions.

 

(a)          The Company, on its own initiative, shall not change the terms and
conditions of any LBL Contract, other than for any changes that are required due
to (i) changes in Applicable Law, (ii) the terms of the LBL Contracts or
(iii) the requirements of any Governmental Entity.  If the Company’s liability
under any of the LBL Contracts is changed because of changes made on or after
the Inception Date in the terms and conditions of the LBL Contracts (including
to any contract riders or endorsements thereto) that are required due to the
reasons identified in clauses (i), (ii) or (iii) above, the Reinsurer will share
in the change proportionately to the coinsurance share hereunder and the Company
and the Reinsurer will make all appropriate adjustments to amounts due each
other under this Agreement.  With respect to any change required due to the
reasons identified in clauses (i) or (iii) above, the Company shall, to the
extent practicable, prior to the effectiveness of any such change, promptly
notify the Reinsurer of such proposed change and afford the Reinsurer the
opportunity, to the extent practicable, to object to such change under
applicable administrative procedures (both formal and informal).

 

(b)          Except as otherwise set forth or contemplated herein, including in
paragraph (a) above, no changes, amendments or modifications made on or after
the Inception Date of the terms and conditions of the LBL Contracts (including
to any contract riders or endorsements thereto) shall be covered hereunder
unless made by the Reinsurer pursuant to the Administrative Services Agreement
or made or consented to by the Company with the prior written approval of the
Reinsurer.  In the event that any such changes, amendments or modifications are
made or consented to in any LBL Contract by the Company without the prior
written approval of the Reinsurer, this Agreement will cover Reinsured Risks
incurred by the Company under such LBL Contract as if the non-approved changes,
amendments or modifications had not been made.

 

Section 2.3        Indemnity Reinsurance.  This Agreement is an indemnity
coinsurance and modified coinsurance agreement solely between the Company and
the Reinsurer, and the performance of the obligations of each Party under this
Agreement shall be rendered solely to the

 

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other Party.  The Company shall be and shall remain the only party hereunder
that is liable to any insured, cedent, Contractholder, claimant or beneficiary
under any annuity contract or insurance policy reinsured hereunder.

 

Section 2.4        Territory.  The territorial limits of this Agreement shall be
identical with those of the LBL Contracts.

 

ARTICLE III
ADMINISTRATION; GENERAL

 

Section 3.1        Contract Administration.  The Reinsurer shall administer the
LBL Contracts (other than the Post-Underwriting Period Conversion Policies), the
Ceded Reinsurance Contracts with respect to the LBL Contracts (other than with
respect to the Post-Underwriting Period Conversion Policies) and the Separate
Accounts (to the extent provided in the Administrative Services Agreement)
directly on behalf of the Company, in each instance in accordance with the terms
of the Administrative Services Agreement.  The Post-Underwriting Period
Conversion Policies shall be administered by the Company.  The Company agrees to
administer the Post-Underwriting Period Conversion Policies in accordance with
Applicable Law, the terms of such policies and, subject to the foregoing, using
a degree of skill and attention no less than that which the Company exercises
with respect to the Company Business.1

 

Section 3.2        Non-Guaranteed Elements.  The Reinsurer may, from time to
time, make recommendations to the Company with respect to Non-Guaranteed
Elements so long as the recommendations comply with the written terms of the LBL
Contracts, Applicable Law and Actuarial Standards of Practice promulgated by the
Actuarial Standard Board governing redetermination of non-guaranteed charges. 
The Company shall fully consider any such recommendations and act reasonably and
in good faith in determining whether any such recommendations should be accepted
and shall not unreasonably delay implementation of any accepted recommendations
after such recommendations are provided in writing, except to the extent that an
applicable Governmental Entity finally determines that Applicable Law would
require the implementation of such recommendations to apply to any policy or
contract that constitutes Company Business.  Notwithstanding anything to the
contrary contained herein, in the event that an applicable Governmental Entity
finally determines that Applicable Law would require the implementation of the
Reinsurer’s recommendations with respect to one or more LBL Contracts to apply
to any policy or contract that constitutes Company Business (a) the Parties
shall cooperate in good faith to develop a mutually agreeable plan to set
Non-Guaranteed Elements with respect to such LBL Contracts and such Company
Business, and the Parties shall implement any such plan so agreed and (b) the
Company shall not be liable for any Indemnified Losses incurred by the Reinsurer
as a result of the Company’s failure to implement the Reinsurer’s
recommendations.  In the event that the Company is notified by an applicable
Governmental Entity that it proposes making a determination that Applicable Law
would require the implementation of such recommendations to apply to any policy
or contract that constitute Company Business, the Company shall promptly (but in
any event within two (2) Business

 

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1              Note to Draft: The Company’s obligations to assume the
administration of the Post-Underwriting Period Conversion Policies is subject to
agreement between Seller and Buyer as to the compensation to be received by the
Company in connection thereto.

 

12

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Days) notify the Reinsurer of such notification.  The parties will thereafter
cooperate in good faith and use their reasonable best efforts to reach
agreements with such Governmental Entity that will avoid a final determination
to such effect.

 

Section 3.3        Policy Exchanges, Replacements or Surrenders.  Unless
otherwise agreed in writing by the Parties to this Agreement, (i) the Company
will not institute, promote, or encourage any exchange, replacement or surrender
program with respect to the LBL Contracts; and (ii) the Company shall not use
any information regarding the LBL Contracts, including information regarding the
Contractholders, other than for purposes of complying with its obligations under
the Administrative Services Agreement and this Agreement or as otherwise
required by Applicable Law.

 

Section 3.4        Errors and Omissions.  If any delay, omission, error or
failure to pay amounts due or to perform any other act required by this
Agreement is unintentional and caused by misunderstanding or oversight, the
Company and the Reinsurer will adjust the situation to what it would have been
had the misunderstanding or oversight not occurred.  The Party first discovering
such misunderstanding or oversight, or an act resulting from such
misunderstanding or oversight, will notify the other Party in writing promptly
upon discovery thereof, and the Parties shall act to correct such
misunderstanding or oversight within twenty (20) Business Days of such other
Party’s receipt of such notice.  However, this Section 3.4 shall not be
construed as a waiver by either Party of its right to enforce strictly the terms
of this Agreement.

 

Section 3.5        Age, Sex and Other Adjustments.  If the Company’s liability
under any of the LBL Contracts is changed because of a misstatement of age or
sex or any other material fact, the Reinsurer will share in the change
proportionately to the reinsurance share hereunder and the Company and the
Reinsurer will make all appropriate adjustments to amounts due each other under
this Agreement.

 

Section 3.6        Set-off.  Any debts or credits, matured or unmatured, in
favor of or against either the Company or the Reinsurer with respect to this
Agreement are deemed mutual debts or credits, as the case may be, and shall be
set off from any amounts due to the Company or the Reinsurer hereunder, as the
case may be, and only the net balance shall be allowed or paid.  For the
avoidance of doubt, no such set-off shall affect the obligations of the Parties
or their respective Affiliates under the terms of the Stock Purchase Agreement
or any other Transaction Agreement.  In the event of any insolvency,
rehabilitation, conservatorship or comparable proceeding by or against the
Ceding Company or the Reinsurer, the rights of offset and recoupment set forth
in this Section 3.6 shall apply to the fullest extent permitted by Applicable
Law.

 

Section 3.7        Defenses.  The Reinsurer accepts, reinsures and assumes the
Reinsured Risks subject to any and all defenses, set-offs and counterclaims to
which the Company would be entitled with respect to the Reinsured Risks, it
being expressly understood and agreed to by the Parties hereto that no such
defenses, set-offs, or counterclaims are or shall be waived by the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby and that the Reinsurer is and shall be fully subrogated in and to all
such defenses, set-offs and counterclaims.

 

13

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Section 3.8        Guaranty Fund Assessments and Premium Taxes.  The Company and
the Reinsurer shall settle amounts due with regard to guaranty fund assessments,
premium taxes and premium tax credits included in the General Account
Liabilities in accordance with the terms of the Administrative Services
Agreement.

 

Section 3.9        Conversion.  From and after the Inception Date, the Company
shall make policies available for issuance upon the exercise by a Contractholder
of any conversion right in an LBL Contract in accordance with the terms of the
Administrative Services Agreement.

 

Section 3.10     Ceded Reinsurance Contracts.

 

(a)          From and after the Inception Date, pursuant to the terms of the
Administrative Services Agreement, the Reinsurer shall have the exclusive right
to terminate, amend or replace with a new reinsurance agreement between the
Reinsurer and the applicable reinsurer, in whole or in part, any of the Ceded
Reinsurance Contracts to the extent such termination, amendment or replacement
relates to the LBL Contracts; provided such termination, amendment or
replacement does not affect the reinsurance coverage or other reinsurance terms
provided thereunder with respect to the Company Business.  The Company agrees to
not terminate, amend or replace any of the Ceded Reinsurance Contracts to the
extent such termination, amendment or replacement relates to or affects the
reinsurance coverage provided thereunder with respect to the LBL Contracts.  The
Company shall, upon the Reinsurer’s request, cooperate with the Reinsurer and
take all actions reasonably requested by the Reinsurer to cause such
terminations, amendments or replacements of Ceded Reinsurance Contracts or to
cause such replacement Ceded Reinsurance Contracts to be entered into.  The
Reinsurer shall reimburse the Company for all reasonable and documented
out-of-pocket costs and expenses incurred by the Company or its Affiliates in
connection with such terminations, amendments or replacements of Ceded
Reinsurance Contracts or the entering into of such new Ceded Reinsurance
Contracts.

 

(b)          From and after the Inception Date, to the extent not completed
prior to the Inception Date pursuant to Section 5.4 of the Stock Purchase
Agreement, the Reinsurer and the Company shall each use its reasonable best
efforts, and shall cooperate fully with each other, to cause the reinsurer under
each Ceded Reinsurance Contract pursuant to which such reinsurer reinsures both
risk included in the Company Business and risk that is not included in the
Company Business (each, a “Shared Reinsurance Agreement”) to (i) enter into
(A) a novation to the Reinsurer or one or more of its Affiliates of the portion
of such Shared Reinsurance Agreement comprising risk that is not included in the
Company Business or (B) an amendment of such Shared Reinsurance Agreement to
exclude the risk that is not included in the Company Business together with a
new reinsurance arrangement with the Reinsurer or one or more of its Affiliates
pursuant to which such risk will be reinsured by such reinsurer on the same
terms as those applicable under the Shared Reinsurance Agreement (each of
(A) and (B), an “Alternative Reinsurance Arrangement”) and (ii) waive any right
to terminate such Shared Reinsurance Agreement pursuant to its terms as a result
of the consummation of the transactions contemplated by this Agreement;
provided, that neither Party shall be required to compromise any right, asset or
benefit or expend any amount, incur any liability or provide any other
consideration in connection with obtaining the consent of any reinsurer to any
Alternative Reinsurance Arrangement.  For the avoidance of doubt, if the Parties
are unable to effect an Alternative

 

14

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Reinsurance Arrangement with respect to any Shared Reinsurance Agreement and
such Shared Reinsurance Agreement remains in effect after the Inception Date,
all rights to the reinsurance recoveries under such Shared Reinsurance Agreement
that relate to the LBL Contracts shall be included in the Recoveries, the
Company shall have no obligation to seek collection for any such Recoveries
(other than with respect to  the Post-Underwriting Period Conversion Policies or
as may be provided in the Administrative Services Agreement), and the Reinsurer
will administer such Shared Reinsurance Agreement with respect to the LBL
Contracts (other than with respect to the Post-Underwriting Period Conversion
Policies) under the Administrative Services Agreement.

 

(c)          From and after the Inception Date, to the extent not completed
prior to the Inception Date pursuant to Section 5.4 of the Stock Purchase
Agreement, the Reinsurer shall have the right but not the obligation to continue
to use efforts to cause the reinsurer under each Ceded Reinsurance Contract
other than the Shared Reinsurance Agreements to enter into either (i) a novation
of such Ceded Reinsurance Contract from the Company to the Reinsurer or one of
its Affiliates or (ii) a termination of such Ceded Reinsurance Contract together
with the concurrent entry into a new reinsurance contract with the Reinsurer;
provided, that neither Party shall be required to compromise any right, asset or
benefit or expend any amount, incur any liability or provide any other
consideration in connection with obtaining the consent of any reinsurer to any
such alternative arrangement.  For the avoidance of doubt, if the Parties are
unable to effect an alternative arrangement with respect to any such Ceded
Reinsurance Contract and such Ceded Reinsurance Contract remains in effect after
the Inception Date, all rights to the reinsurance recoveries under such Ceded
Reinsurance Contract shall be included in Recoveries, the Company shall have no
obligation to seek collection for any such Recoveries (other than with respect
to the Post-Underwriting Period Conversion Policies or as may be provided in the
Administrative Services Agreement), and the Reinsurer will administer such Ceded
Reinsurance Contract (other than with respect to the Post-Underwriting Period
Conversion Policies) under the Administrative Services Agreement.

 

(d)          Subject to the provisions of Section 3.10(a), Liabilities with
respect to the LBL Contracts under any Ceded Reinsurance Contract that is
terminated or recaptured by the Reinsurer shall be ceded hereunder automatically
to the Reinsurer without further action, subject to receipt by the Reinsurer of
any reserve transfer or similar transfers or settlement amount, if any, received
by the Company from the applicable reinsurer and, in such event, the Reinsurer
shall pay any special transfer or recapture fee or any other amount payable by
the Company in respect of the LBL Contracts in connection therewith as may be
required under such Ceded Reinsurance Contract.

 

(e)          From and after the Inception Date, the Reinsurer shall have the
right but not the obligation to seek Transamerica’s consent to (and upon receipt
of such consent to effectuate on behalf of the Company) either (i) a novation of
the Transamerica Reinsurance Agreement (together with any related servicing
agreement) from the Company to the Reinsurer or one of its Affiliates or (ii) a
termination of the Transamerica Reinsurance Agreement (together with any related
servicing agreement) together with the concurrent entry into a new reinsurance
contract and any related servicing agreement with the Reinsurer; provided, that
neither Party shall be required to compromise any right, asset or benefit or
expend any amount, incur any

 

15

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liability or provide any other consideration in connection with obtaining the
consent of Transamerica to any such alternative arrangement.

 

Section 3.11     Follow the Fortunes.  The Reinsurer’s Liability under this
Agreement shall attach simultaneously with that of the Company under the LBL
Contracts, and the Reinsurer’s Liability under this Agreement shall be subject
in all respects to the same risks, terms, rates, conditions, interpretations,
assessments, waivers, proportion of Premiums paid to the Company.

 

ARTICLE IV
INITIAL REINSURANCE PREMIUM; ADDITIONAL CONSIDERATION; NET SETTLEMENT

 

Section 4.1        Initial Reinsurance Premium.  The Parties agree and
acknowledge that the initial reserve transfer occurred under the Subject
Reinsurance Agreements (or predecessor reinsurance agreements), and there will
be no additional initial reinsurance premium or ceding commission due between
the Parties as a result of entering into this Agreement except as provided in
Section 4.2

 

Section 4.2        Additional Consideration.

 

(a)          As additional consideration for the Reinsurer entering into this
Agreement, as of the Inception Date, the Company hereby irrevocably sells,
assigns, transfers and delivers to the Reinsurer as premium hereunder all of its
rights, title and interest in one hundred percent (100%) of all of the following
amounts actually received or receivable at or after the Inception Date by the
Company or the Reinsurer, whether in its role as reinsurer hereunder or as
Administrator, with respect to the LBL Contracts (items (i) through (v) below,
collectively, the “Recoveries”):

 

(i)           Premiums;

 

(ii)          all amounts actually collected or collectable under the Ceded
Reinsurance Contracts in respect of the LBL Contracts (including all recoveries,
returns, amounts in respect of profit sharing and all other sums to which the
Company may be entitled under the Ceded Reinsurance Contracts in respect of the
LBL Contracts);

 

(iii)         all mortality and expense risk charges, administrative expense
charges, rider charges, contract maintenance charges, back-end sales loads and
other considerations billed separately for the LBL Contracts collected or
collectible by the Company, and any other charges, fees and similar amounts
received or receivable by the Company from the Separate Accounts in respect of
the LBL Contracts (collectively, the “Separate Account Charges”).  For the
avoidance of doubt, the Separate Account Charges shall include any revenue
sharing fees, service fees and distribution fees received or receivable from or
in respect of Funds pursuant to a plan adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended;

 

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(iv)         all amounts that are transferrable from the Separate Accounts to
the general account of the Company in respect of the LBL Contracts; and

 

(v)          without duplication, all other payments, collections, releases of
funds, recoveries and other considerations or payments with respect to the LBL
Contracts, including all premiums, payments, reimbursements, interest or other
amounts that the Company receives in connection with any reinstatement or
reissuance of an LBL Contract or any conversion, exchange or replacement policy
that is reinsured under this Agreement.

 

(b)          The Company agrees to execute and record all additional documents
and take all other steps reasonably requested by the Reinsurer to effectuate
such transfer to the Reinsurer.  Direct receipt by the Reinsurer, including in
its role as Administrator under the Administrative Services Agreement, or any of
its Affiliates of any such amounts shall satisfy the Company’s obligations to
transfer any such amount to the Reinsurer hereunder.

 

(c)          The Company hereby and pursuant to the Administrative Services
Agreement appoints the Reinsurer as its agent to collect all Recoveries in the
Company’s name.  The Company agrees and acknowledges that the Reinsurer and its
permitted assigns and delegatees are entitled to enforce, in the name of the
Company, all rights at law or in equity or good faith claims of the Company with
respect to such Recoveries.  If necessary for such collection, the Company shall
reasonably cooperate, at the Reinsurer’s expense, in any litigation or other
dispute resolution mechanism relating to such collection.  The Parties
acknowledge and agree that the Reinsurer shall be responsible for and has hereby
assumed the financial risk of any uncollected or uncollectible Recoveries.  To
the extent that the Company recovers any Recoveries from any third party
attributable to the LBL Contracts, the Company shall promptly transfer such
amounts to the Reinsurer, together with any pertinent information that the
Company may have relating thereto.

 

Section 4.3        Security Interest.

 

(a)          The Parties intend the Company’s assignment pursuant to the first
sentence of Section 4.2(a) to be a present assignment of all of the Company’s
rights, title and interest and not an assignment as collateral.  However, to the
extent that such assignment is not recognized as a present assignment, is not
valid or is recharacterized as a pledge rather than a lawful conveyance to the
Reinsurer, the Company does hereby grant, bargain, sell, convey, assign and
otherwise pledge to the Reinsurer all of the Company’s now owned and hereafter
acquired or arising, whether governed by Article 9 of the UCC or other law,
wherever located, and all proceeds and products thereof, right, title and
interest, if any (legal, equitable or otherwise) to all Recoveries (and any
lockbox or account set up for the receipt of the Recoveries after the Inception
Date) (“Recoveries Collateral”) to secure all of the Company’s obligations to
remit the Recoveries to the Reinsurer.

 

(b)          Upon the failure of the Company to remit Recoveries to the
Reinsurer, which failure remains uncured ten (10) days after written notice
thereof is received by the

 

17

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Company, the Reinsurer shall have, in addition to all other rights under this
Agreement or under Applicable Law, the following rights:

 

(i)           the right to exercise all rights and remedies granted a secured
party under the Uniform Commercial Code, as said code has been enacted in the
State of Nebraska, the State of Illinois, or any other applicable jurisdiction
(the “UCC”), as though all the Recoveries Collateral constituted property
subject to a security interest under Article 9 thereof; and

 

(ii)          the right to intercept and retain monies and property in any
lockbox or account set up for the receipt of Recoveries.

 

(c)          This Section 4.3 is being included in this Agreement to ensure
that, if an insolvency or other court determines that, notwithstanding the
provisions of this Agreement, including Section 4.2(a), and the express intent
of the Parties in entering into this Agreement, the Company retained ownership
of or any rights in the Recoveries Collateral, the Reinsurer’s rights to the
Recoveries Collateral are protected with a first priority, perfected security
interest, and it is the intent of the Parties that this Section 4.3 be
interpreted as such.

 

(d)          Nothing contained herein shall be construed to support the
conclusion that the Company will retain any ownership of or any rights in the
Recoveries Collateral after the Inception Date or to support the conclusion that
the Reinsurer does not acquire full ownership thereof as of the Inception Date.

 

(e)          The Company shall execute and deliver and the Reinsurer is
authorized to execute and deliver any and all financing statements reasonably
requested by the Reinsurer to the extent that it may appear appropriate to the
Reinsurer to file such financing statements in order to perfect the Reinsurer’s
title under Article 9 of the UCC to any and all Recoveries Collateral and the
Company shall do such further acts and things as the Reinsurer may reasonably
request in order that the security interest granted hereunder may be maintained
as a first perfected security interest.  All costs and expenses incurred in
connection with obtaining a first priority, perfected security interest shall be
borne by the Reinsurer.

 

Section 4.4        Bank Accounts.  During the term of this Agreement, the
Reinsurer may open and maintain one or more accounts with banking institutions
with respect to the LBL Contracts (the “Bank Accounts”).  The Reinsurer shall
have the exclusive authority over the Bank Accounts including, without
limitation, the exclusive authority to (a) open the Bank Accounts in the name of
the Company, (b) designate the authorized signatories on the Bank Accounts,
(c) issue drafts on and make deposits in the Bank Accounts in the name of the
Company, (d) make withdrawals from the Bank Accounts and (e) enter into
agreements with respect to the Bank Accounts on behalf of the Company; provided,
that in no event shall the Company be responsible for any fees, overdraft
charges or other payments, liabilities or obligations with respect to any such
Bank Accounts or be obligated to provide funding for the Bank Accounts.  The
Company shall do all things necessary at the Reinsurer’s expense to (x) enable
and authorize the Reinsurer to use the Company’s existing lockboxes with respect
to the LBL Contracts and (y) to enable the Reinsurer to open and maintain the
Bank Accounts

 

18

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including, without limitation, executing and delivering such depository
resolutions and other documents as may be requested from time to time by the
banking institutions.  The Company agrees that without the Reinsurer’s prior
written consent it shall not make any changes to the authorized signatories on
the Bank Accounts nor attempt to withdraw any funds therefrom.

 

Section 4.5        Reports and Settlements.

 

(a)          The Reinsurer shall provide to the Company periodic accounting and
other reports with respect to the LBL Contracts as specified in the
Administrative Services Agreement. Other than with respect to the
Post-Underwriting Conversion Policies, settlement with respect to amounts owed
hereunder by the Reinsurer to the Company and by the Company to the Reinsurer
shall be performed through the direct payment by the Reinsurer of Reinsured
Risks and direct receipt by the Reinsurer of Recoveries on an ongoing basis in
its capacity as Administrator under the Administrative Services Agreement.

 

(i)           Except as otherwise specifically provided herein, all amounts due
to be paid to the Company and the Reinsurer under this Agreement with regards to
the Post-Underwriting Period Conversion Policies shall be determined on a net
basis, as of the last day of each Monthly Accounting Period.  Each net amount
due with respect to each Monthly Accounting Period (the “Monthly Settlement”)
shall be paid by the Reinsurer to the Company, or by the Reinsurer to the
Company, as applicable, no later than fifteen (15) days after delivery of the
Monthly Report.

 

(ii)          Within fifteen (15) days of the end of each Monthly Accounting
Period, the Company shall supply the Reinsurer with a report in the form of
Schedule C which shall set forth the Recoveries with respect to the
Post-Underwriting Period Conversion Policies collected during the prior Monthly
Accounting Period and the General Account Liabilities paid during the prior
Monthly Accounting Period (the “Monthly Report”).

 

(iii)       If the actual data required for the Monthly Report cannot be
supplied with the appropriate report, the Company shall produce best estimates
and shall provide amended reports based on actual data no more than ten
(10) days after the actual data becomes available and the Parties will settle
any additional amounts due within five (5) days thereafter.

 

ARTICLE V
DURATION AND TERMINATION

 

Section 5.1        Duration.  Except as otherwise provided herein, this
Agreement shall be unlimited in duration.

 

Section 5.2        Reinsurer’s Liability.  The Reinsurer’s liability with
respect to the Reinsured Risks will terminate on the earliest of:  (i) the date
the Company’s liability with

 

19

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respect to the Reinsured Risks is terminated and all amounts due the Company
from the Reinsurer with respect thereto have been paid by or on behalf of the
Reinsurer to or on behalf of the Company; and (ii) the date this Agreement is
terminated upon the written agreement of the Parties.

 

ARTICLE VI
INSOLVENCY

 

Section 6.1        Payments.  In the event of the insolvency of the Company, all
reinsurance made, ceded, renewed or otherwise becoming effective under this
Agreement shall be payable by the Reinsurer directly to the contractholders of
the contracts reinsured, without diminution because of the insolvency of the
Company.  It is agreed and understood, however, that (i) in the event of the
insolvency of the Company, the domiciliary liquidator, receiver or legal
successor of the insolvent Company shall give written notice of the pendency of
a claim against the insolvent Company on the LBL Contract within a reasonable
time after such claim is filed in the insolvency proceeding and (ii) during the
pendency of such claim the Reinsurer may investigate such claim and interpose,
at its own expense, in the proceeding where such claim is to be adjudicated, any
defenses which it may deem available to the Company or its liquidator, receiver
or statutory successor.

 

Section 6.2        Expenses.  It is further understood that any expense thus
incurred by the Reinsurer pursuant to Section 6.1may be filed as a claim against
the insolvent Company as part of the expense of liquidation, to the extent of a
proportionate share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.  Where two or more assuming
reinsurers are involved in the same claim and a majority in interest elect to
interpose a defense to such claim, the expense shall be apportioned subject to
court approval, in accordance with the terms of this Agreement as though such
expense had been incurred by the Company.

 

ARTICLE VII
LICENSES; SECURITY

 

Section 7.1        Licenses.  At all times during the term of this Agreement,
the Reinsurer shall (i) hold and maintain all licenses and authorizations
required so that the Company may receive Reserve Credit or (ii) otherwise take
such steps as may be required to provide the Company with Reserve Credit.

 

Section 7.2        Security.  During the term of this Agreement until such time
as a Trust Account is no longer required pursuant to Section 7.7, as security
for the payment of amounts due the Company under this Agreement, the Reinsurer,
as grantor, shall establish and maintain the Trust Account with a trustee
reasonably acceptable to the Company (the “Trustee”) naming the Company as sole
beneficiary thereof.  Concurrently with the execution of this Agreement, on the
Inception Date, the Reinsurer shall deposit into the Trust Account Eligible
Assets with a Reinsurer Statutory Book Value (including investment income due
and accrued) equal to the Reinsurer’s good faith estimate of the Required
Balance as of the Inception Date  .  All transfers to and withdrawals from the
Trust Account shall be in accordance with and subject to the requirements set
forth in the Trust Agreement; provided that, in addition to the requirements set

 

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out in the Trust Agreement, the Reinsurer shall transfer amounts to, and
withdraw amounts from, the Trust Account as set forth in Section 7.6.

 

Section 7.3        Trust Account and Settlements.  The trustee shall hold assets
in the Trust Account pursuant to the terms of the Trust Agreement.

 

Section 7.4        Investment of Trust Assets.  The assets held in the Trust
Account shall be valued at their Value (including investment income due and
accrued).  The assets that may be held in the Trust Account shall consist of
cash and investments that are permitted to be carried by the Company as admitted
assets determined in accordance with Nebraska SAP; provided, that (i) each such
asset that is a security is issued by an institution that is not the Reinsurer,
the Company or an Affiliate of either Party, and (ii) such assets comply with
the requirements specified by the investment guidelines as set forth on
Exhibit C of the Trust Agreement; provided, further, that such assets shall be
managed in accordance with commercially reasonable investment guidelines agreed
by the Company and the Reinsurer upon the occurrence of a Change in Control (the
assets pursuant to this sentence being the “Eligible Assets”).

 

Section 7.5        Deposit of Assets.  Prior to depositing assets in the Trust
Account, the Reinsurer will execute assignments, endorsements, medallion
guaranteed stock powers, and medallion guaranteed bond powers in blank
(collectively “Transfer Instruments”) as appropriate in each instance for the
type of asset, to transfer legal title to the trustee of all shares, obligations
or any other assets requiring assignment, conveyance or transfer, in order that
the Company, or the trustee upon the direction of the Company, may whenever
necessary negotiate the assets, attach the endorsements and record the
assignments without any additional consent or signature from the Reinsurer or
any other entity.  The Transfer Instruments shall be accompanied by a
Certificate duly executed by an Assistant Secretary of the Reinsurer evidencing
the due authority of the signatories to execute the Transfer Instruments on
behalf of the Reinsurer.

 

Section 7.6        Adjustment of Security and Withdrawals.  Subject to
Section 7.7, the amount of security provided by the Reinsurer shall be adjusted
following the end of each Monthly Accounting Period to be equal to the Required
Balance as of the end of such Monthly Accounting Period (such amounts to be
calculated by the Reinsurer and a report thereof to be furnished to the Company
no later than ten (10) Business Days following the end of such Monthly
Accounting Period) as follows:

 

(a)          If the aggregate Value of the Eligible Assets held in the Trust
Account at the end of any Monthly Accounting Period is less than the Required
Balance, calculated based on the most recent Monthly Accounting Period report,
the Reinsurer shall, no later than ten (10) Business Days following delivery of
the relevant report, transfer additional Eligible Assets to the Trust Account so
that the aggregate Value of the Eligible Assets held in the Trust Account is not
less than the Required Balance as of the end of such Monthly Accounting Period.

 

(b)          If the aggregate Value of the Eligible Assets in the Trust Account
at the end of any Monthly Accounting Period exceeds 100% of the Required
Balance, calculated based on the most recent Monthly Accounting Period report,
then the Reinsurer shall have the right to withdraw the excess from the Trust
Account in accordance with the terms of the Trust

 

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Agreement; provided, however, that after a Change in Control the 100% amount
above shall become 102%.

 

(c)          The report required to be delivered by the Reinsurer as described
in this Section 7.6 shall include a listing of each asset in the Trust Account
and the Reinsurer Statutory Book Value and Fair Market Value of each such asset
as of the end of the relevant Monthly Accounting Period.

 

(d)          The Company may withdraw the assets held in the Trust Account only
in accordance with the terms of the Trust Agreement to pay to the Company
amounts that are (i) due to the Company from the Reinsurer under this Agreement,
but not yet recovered from the Reinsurer, (ii) not the subject of a good faith
dispute and (iii) not paid by the Reinsurer within ten (10) Business Days after
the Reinsurer has received written notice of such failure to pay from the
Company.

 

(e)          The amount of any withdrawal from the Trust Account in excess of
amounts permitted under the terms of the Trust Agreement shall be held in trust
by the Company and maintained in a segregated account, separate and apart from
the assets of the Company for the benefit of the Reinsurer and promptly returned
to the Reinsurer, plus interest, compounded monthly, at One-Month LIBOR plus
150  basis points from and including the date of withdrawal to but excluding the
date on which such excess withdrawal is returned to the Trust Account.

 

Section 7.7        Termination of Trust Account.  Notwithstanding anything to
the contrary herein, if, prior to the occurrence of a Change in Control, the
Required Balance as set forth in the report required to be delivered by the
Reinsurer as described in Section 7.6 with respect to any Monthly Accounting
Period is less than or equal to $250 million (the “Minimum Balance”), then
(i) the Reinsurer and the Company shall promptly deliver a joint written notice
to the Trustee to terminate the Trust Account, and (ii) the Reinsurer shall have
no further obligation to maintain any assets in the Trust Account pursuant to
this Agreement or the Trust Agreement.

 

Section 7.8        Certain Reports.

 

(a)          The Reinsurer shall provide written notice of the occurrence of any
Change in Control or Captive Change of Control within two (2) Business Days
after its occurrence.  In addition, the Reinsurer shall cooperate fully with the
Company and promptly respond to the Company’s reasonable inquiries from time to
time concerning the determination of whether a Change in Control or a Captive
Change of Control has occurred.

 

Section 7.9        Vermont Captive.  To the extent the Vermont Captive proposes
to reinsure any business in addition to the business currently reinsured under
the Vermont Captive Reinsurance Agreement, the parties shall negotiate in good
faith with respect to the treatment of the business currently reinsured under
the Vermont Captive Reinsurance Agreement.

 

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ARTICLE VIII
DAC TAXES

 

Section 8.1        DAC Taxes.

 

(a)          Each of the Company and Reinsurer acknowledges that it is subject
to taxation under Subchapter L of the Code and hereby makes the election
contemplated in section 1.848-2(g)(8) of the Treasury regulations under the Code
with respect to this Agreement.  Each of the Company and Reinsurer (i) agrees
that such election shall be effective for the taxable year of each Party that
includes the Inception Date and for all subsequent years during which this
Agreement remains in effect and (ii) warrants that it will take no action to
revoke the election.

 

(b)          Pursuant to section 1.848-2(g)(8) of the Treasury regulations, each
Party hereby agrees (i) to attach a schedule to its federal income tax return
for its first taxable year ending on or after the Inception Date that identifies
this Agreement as a reinsurance agreement for which the joint election under
section 1.848-2(g)(8) has been made, (ii) that the Party with net positive
consideration (as defined in the Treasury regulations) for this Agreement for
each taxable year will capitalize specified policy acquisition expenses with
respect to the Agreement without regard to the general deductions limitation of
section 848(c)(1) of the Code, and (iii) to exchange information pertaining to
the amount of net consideration (as defined in the Treasury regulations) under
this Agreement to ensure consistency.

 

(c)          By March 1 of each year, the Reinsurer shall submit a schedule to
the Company of its calculation of the net consideration for the preceding
calendar year.  If the Company agrees with the calculation, the Company shall
use this information in determining its net consideration for such prior year. 
If the Company disagrees with the calculation, the Parties shall act in good
faith to resolve any differences so that consistency is maintained for tax
return reporting purposes.

 

(d)          By May 15 of each calendar year, the Reinsurer shall reimburse (or
be reimbursed by, as the facts may provide) the Company for DAC taxes incurred
for the previous tax year with respect to the policies after the Inception
Date.  The DAC tax reimbursement shall be computed by multiplying the DAC tax
factor by the sum of (i) 100% of premiums received during the previous tax year
on the Reinsured Contracts after the Inception Date subject to section 848 of
the Code and (ii) the Company’s net consideration (as defined in the Treasury
regulations) for the previous tax year under this Agreement for periods
beginning on or after the Inception Date.  The “DAC tax factor” shall be 0.215%
for annuity contracts, 0.252% for group life contracts and 0.946% for life
insurance contracts, non-cancellable A&H contracts and guaranteed renewable A&H
contracts.  The Company and the Reinsurer mutually agree to prospectively adjust
the DAC tax factor to reflect any changes in the federal income tax rate
applicable to the Company or the Reinsurer, as the case may be,  or changes to
section 848 of the Code or the related Treasury regulations.

 

23

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ARTICLE IX
ARBITRATION

 

Section 9.1        Resolution of Damages.  As a condition precedent to any right
arising under this Agreement, any dispute between the Company and the Reinsurer
arising out of the provisions of this Agreement, or concerning its
interpretation or validity, whether arising before or after termination of this
Agreement, shall be submitted to arbitration pursuant to the commercial
arbitration rules of AIDA Reinsurance and Insurance Arbitration Society
(“ARIAS”).

 

Section 9.2        Composition of Panel.  Unless the Parties agree upon a single
arbitrator within fifteen (15) days after the receipt of notice of intention to
arbitrate, all disputes shall be submitted to an arbitration panel composed of
two arbitrators and an umpire, chosen in accordance with Sections 9.3 and 9.4.

 

Section 9.3        Appointment of Arbitrators.  The Party requesting arbitration
(hereinafter referred to as the “claimant”) shall appoint an arbitrator and give
written notice thereof, by registered mail or a recognized overnight courier to
the other Party (hereinafter referred to as the “respondent”) together with its
notice of intention to arbitrate.  Unless a single arbitrator is agreed upon
within fifteen (15) days after the receipt of the notice of intention to
arbitrate, the respondent shall, within thirty (30) days after receiving such
notice, also appoint an arbitrator and notify the claimant thereof in a like
manner.  Before instituting a hearing, the two arbitrators so appointed shall
choose an impartial umpire.  If, within thirty (30) days after they are both
appointed, the arbitrators fail to agree upon the appointment of an umpire, the
umpire shall be selected pursuant to the rules of ARIAS.  The arbitrators shall
be present or former executives or officers of life insurance or reinsurance
companies.  The arbitrators and umpire shall be disinterested individuals and
not be under the control of either Party, and shall have no financial interest
in the outcome of the arbitration.

 

Section 9.4        Failure of a Party to Appoint Arbitrator.  If the respondent
fails to appoint an arbitrator within thirty (30) days after receiving a notice
of intention to arbitrate, such arbitrator shall be selected pursuant to the
rules of ARIAS, and shall then, together with the arbitrator appointed by the
claimant, choose an umpire as provided in Section 9.3.

 

Section 9.5        Choice of Forum.  Any arbitration instituted pursuant to this
Article IX shall be held in New York, New York or such other place as the
Parties may mutually agree.

 

Section 9.6        Procedure Governing Arbitration.  Each party participating in
the arbitration shall have the obligation to produce those documents and as
witnesses to the arbitration those of its employees as any other participating
party reasonably requests providing always that the same witnesses and documents
be obtainable and relevant to the issues before the arbitration and not be
unduly burdensome or excessive.  The parties may mutually agree as to
pre-hearing discovery prior to the arbitration hearing and in the absence of
agreement, upon the request of any party, pre-hearing discovery may be conducted
as the panel shall determine in its sole discretion to be in the interest of
fairness, full disclosure, and a prompt hearing, decision and award by the
panel.  The panel shall be the final judge of the procedures of the panel, the
conduct of the arbitration of the rules of evidence, the rules of privilege and
production and of

 

24

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excessiveness and relevancy of any witnesses and documents upon the petition of
any participating party.

 

Section 9.7        Arbitration Award.  The arbitration panel shall render its
decision within sixty (60) days after termination of the proceeding unless the
parties consent to an extension, which decision shall be in writing, stating the
reason therefor.  The decision of the majority of the panel shall be final and
binding on the parties to the proceeding except to the extent otherwise provided
in the Federal Arbitration Act.  Judgment upon the award may be entered in any
court having jurisdiction pursuant to the Federal Arbitration Act.

 

Section 9.8        Cost of Arbitration.  Unless otherwise allocated by the
panel, each party shall bear the expense of its own arbitrator and its own
witnesses and shall equally bear with the other parties the expense of the
umpire and the arbitration.

 

Section 9.9        Limit of Authority.  It is agreed that the arbitrators shall
have no authority to impose any punitive, exemplary or consequential damage
awards on either of the Parties hereto.

 

Section 9.10     Survival.  This Article IX shall survive the termination of
this Agreement.

 

ARTICLE X
INDEMNIFICATION; DISCLAIMER

 

Section 10.1     Reinsurer’s Obligation to Indemnify.  The Reinsurer hereby
agrees to indemnify, defend and hold harmless the Company and its Affiliates and
their respective officers, directors, stockholders, employees, representatives,
successors and assigns (collectively, the “Company Indemnified Persons”) from
and against any and all Indemnifiable Losses incurred by the Company Indemnified
Persons to the extent arising from (i) any breach by the Reinsurer of the
covenants and agreements of the Reinsurer contained in this Agreement, (ii) all
Reinsurer Extra Contractual Obligations, (iii) the Company’s acceptance and
implementation of the Reinsurer’s recommendations in accordance with
Section 3.2, (iv) any determination that the setting of Non-Guaranteed Elements
by the Company in accordance with such recommendations while setting
Non-Guaranteed Elements in a different manner on policies or contracts that
comprise the Company Business constitutes a failure by the Company to comply
with Applicable Law; provided, that Indemnifiable Losses payable under this
clause (iv) shall (A) be limited to Indemnifiable Losses actually paid to a
third party in connection with a Third Party Claim (including any additional
amounts that are required to be credited or paid to policyholders or
beneficiaries) and (B) only be payable if such determination is made by an
applicable Governmental Entity or a court of competent jurisdiction, and (v) any
successful enforcement of this indemnity.

 

Section 10.2     Company’s Obligation to Indemnify.  The Company hereby agrees
to indemnify, defend and hold harmless the Reinsurer and its Affiliates and
their respective officers, directors, stockholders, employees, representatives,
successors and assigns (collectively, the “Reinsurer Indemnified Persons”) from
and against any and all Indemnifiable Losses incurred by the Reinsurer
Indemnified Persons to the extent arising from (i) any breach by the Company of
the covenants and agreements of the Company contained in this Agreement,
(ii) all

 

25

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Company Extra Contractual Obligations, (iii) (A) changes to Non-Guaranteed
Elements that are made by the Company on or after the Inception Date without the
Reinsurer’s prior written consent or (B) the failure of the Company to implement
the Reinsurer’s recommendations with respect to Non-Guaranteed Elements that
satisfy the requirements of Section 3.2, and (iv) any successful enforcement of
this indemnity.

 

Section 10.3     Definitions.  As used in this Agreement:

 

(a)          “Indemnitee” means any Person entitled to indemnification under
this Agreement;

 

(b)          “Indemnitor” means any Person required to provide indemnification
under this Agreement;

 

(c)          “Indemnifiable Losses” means any and all damages, losses,
Liabilities, obligations, costs and expenses (including reasonable attorneys’
fees and expenses); provided, that any Indemnity Payment (x) shall in no event
include any amounts constituting punitive damages relating to the breach or
alleged breach of this Agreement (except to the extent actually paid to a third
party in connection with a Third Party Claim) and (y) shall be net of any
amounts recovered by or recoverable by the Indemnitee for the Indemnifiable
Losses for which such Indemnity Payment is made under any insurance policy,
reinsurance agreement, warranty or indemnity or otherwise from any Person other
than a Party hereto, and the Indemnitee shall promptly reimburse the Indemnitor
for any such amount that is received by it from any such other Person with
respect to an Indemnifiable Losses after any indemnification with respect
thereto has actually been paid pursuant to this Agreement; and

 

(d)          “Indemnity Payment” means any amount of Indemnifiable Losses
required to be paid pursuant to this Agreement; and

 

(e)          “Third Party Claim” means any claim, action, suit, or proceeding
made or brought by any Person that is not an Indemnitee.

 

Section 10.4     Applicability of Stock Purchase Agreement.  The procedures set
forth in Section 7.5 of the Stock Purchase Agreement shall apply to
Indemnifiable Losses indemnified under this Article X.

 

Section 10.5     No Duplication.  If any Indemnifiable Losses are indemnified
under any other Transaction Agreement, the Company Indemnified Person or
Reinsurer Indemnified Person shall not be entitled to indemnification with
respect to such Indemnifiable Losses pursuant to such other Transaction
Agreement and shall instead be entitled to indemnification pursuant to
Section 10.1 or Section 10.2 of this Agreement.

 

26

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ARTICLE XI
GENERAL PROVISIONS

 

Section 11.1     Schedules and Exhibits.  The Schedules and Exhibits to this
Agreement that are specifically referred to herein are a part of this Agreement
as if fully set forth herein.

 

Section 11.2     Notices.  All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally or by overnight courier (providing proof of delivery) to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):

 

(a)          if to the Company:

 

Lincoln Benefit Life Company

[TBD]

Attention:

 

with copies (which shall not constitute notice) to:

 

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York  10022

Attention:          Nicholas F. Potter

David Grosgold

 

(b)          if to the Reinsurer:

 

Allstate Life Insurance Company

[TBD]

Attention:

 

with copies (which shall not constitute notice) to:

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York  10019

Attention:  John M. Schwolsky
                  Alexander M. Dye

 

Notice given by personal delivery or overnight courier shall be effective upon
actual receipt.

 

Section 11.3     Interpretation.  When a reference is made in this Agreement to
a Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated.  All
references herein to any agreement, instrument, statute, rule or regulation are
to the agreement, instrument, statute, rule or regulation as amended, modified,
supplemented or replaced from time to time (and, in the case of statutes,
includes any rules and regulations promulgated under said statutes) and to any
section of any statute, rule or regulation including any successor to said
section.  The table of contents and headings contained

 

27

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in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.  Whenever the words
“include,” “includes” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation.”  Whenever the singular
is used herein, the same shall include the plural, and whenever the plural is
used herein, the same shall include the singular, where appropriate.  Whenever
the word “Dollars” or the “$” sign appear in this Agreement, they shall be
construed to mean United States Dollars, and all transactions under this
Agreement shall be in United States Dollars.  This Agreement has been fully
negotiated by the Parties hereto and shall not be construed by any Governmental
Entity against either Party by virtue of the fact that such Party was the
drafting Party.

 

Section 11.4     Entire Agreement; Third Party Beneficiaries.  This Agreement
(including all exhibits and schedules hereto) and the other Transaction
Agreements constitute the entire agreement, and supersede all prior agreements,
understandings, representations and warranties, both written and oral, among the
Parties with respect to the subject matter of this Agreement.  Except as set
forth in Article X with respect to the Reinsurer Indemnified Persons and the
Company Indemnified Persons, this Agreement is not intended to confer upon any
Person other than the Parties hereto and their successors and permitted assigns
any rights or remedies.

 

Section 11.5     Governing Law and Jurisdiction.

 

(a)          This Agreement and any dispute arising hereunder shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.  While the parties contemplate that all disputes
hereunder will be decided pursuant to Article IX hereof, the parties submit to
the jurisdiction of any court of the United States or any state court, which in
either case is located in the City of New York (each, a “New York Court”) with
respect to any legal proceedings to enforce an arbitral award issued in
accordance with Article IX.  In any such action, suit or other proceeding, each
of the parties hereto irrevocably and unconditionally waives and agrees not to
assert by way of motion, as a defense or otherwise any claim that it is not
subject to the jurisdiction of any such New York Court, that such action, suit
or other proceeding is not subject to the jurisdiction of any such New York
Court, that such action, suit or other proceeding is brought in an inconvenient
forum or that the venue of such action, suit or other proceeding is improper;
provided, that nothing set forth in this sentence shall prohibit any of the
parties hereto from removing any matter from one New York Court to another New
York Court.  Each of the parties hereto also agrees that any final and
unappealable judgment against a party hereto in connection with any action, suit
or other proceeding will be conclusive and binding on such party and that such
award or judgment may be enforced in any court of competent jurisdiction, either
within or outside of the United States.  A certified or exemplified copy of such
award or judgment will be conclusive evidence of the fact and amount of such
award or judgment.  Any process or other paper to be served in connection with
any action or proceeding under this Agreement shall, if delivered or sent in
accordance with Section 11.2 of this Agreement, constitute good, proper and
sufficient service thereof.

 

(b)          EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS

 

28

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CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO
REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.5(b).

 

Section 11.6                Assignment.  Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise (other than by operation of
law in a merger), by either Party without the prior written consent of the other
Party, and any such assignment that is not consented to shall be null and void. 
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the Parties and their respective
successors and assigns.  For the avoidance of doubt, the Reinsurer shall be
permitted to retrocede any of the Reinsured Risks at its sole discretion.

 

Section 11.7                Severability; Amendment; Modification; Waiver.

 

(a)                               Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under Applicable Law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any Applicable Law in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never been contained
herein.

 

(b)                              This Agreement may be amended or a provision
hereof waived only by a written instrument signed by each of the Reinsurer and
the Company.

 

(c)                               No delay on the part of any Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any Party of any right, power or
privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.

 

Section 11.8                Counterparts.  This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the Parties
and delivered to the other Party.  Each Party may deliver its signed counterpart
of this Agreement to the other Party 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.

 

Section 11.9                Cooperation.  Each Party hereto shall cooperate
fully with the other in all reasonable respects in order to accomplish the
objectives of this Agreement including making

 

29

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available to each their respective officers and employees for interviews and
meetings with Governmental Entities and furnishing any additional assistance,
information and documents as may be reasonably requested by a Party from time to
time.

 

Section 11.10        Survival.  Articles VIII, IX, X and XI shall survive the
termination of this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

30

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IN WITNESS WHEREOF, the Company and the Reinsurer have caused this Agreement to
be signed by their respective duly authorized officers, all as of the date first
written above.

 

 

 

 

LINCOLN BENEFIT LIFE COMPANY

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

ALLSTATE LIFE INSURANCE COMPANY

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

Signature Page

 

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

 

SCHEDULE A

 

CEDED REINSURANCE CONTRACTS

 

 

Schedule A

 

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

 

SCHEDULE B

 

SEPARATE ACCOUNTS

 

[This schedule will list only the LBL variable life separate account.  The LBL
variable annuity separate account relates to business ceded to ALIC under the
Variable Annuity Reinsurance Agreement.  All liabilities under the MVAA
non-unitized separate account will be retained by LBL.]

 

 

Schedule B

 

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

 

SCHEDULE C

 

MONTHLY REPORT

 

 

Schedule C

 

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EXHIBIT A

 

TRUST AGREEMENT

 

 

Exhibit A

 

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

 

EXHIBIT F

 

RECAPTURE AGREEMENT

 

This RECAPTURE AGREEMENT, dated as of [             ], 2013 (the “Execution
Date”), (this “Agreement”) is made and entered into by and between Allstate Life
Insurance Company, an insurance company organized under the laws of the State of
Illinois (the “Reinsurer”), and Lincoln Benefit Life Company, an insurance
company organized under the laws of the State of Nebraska (the “Company”, and
together with the Reinsurer, the “Parties”).

 

WHEREAS, the Reinsurer owns 100% of the issued and outstanding capital stock of
the Company;

 

WHEREAS, the Reinsurer, Resolution Life Holdings, Inc. (“Buyer”), a corporation
organized under the laws of the State of Delaware, and, solely for purposes of
Section 5.25 and Article X thereof, Resolution Life L.P., a Bermuda limited
partnership and the sole owner of Buyer, have entered into a Stock Purchase
Agreement dated as of July 17, 2013 (the “Stock Purchase Agreement”), pursuant
to which the Reinsurer proposes to sell, and the Buyer proposes to purchase,
100% of the issued and outstanding capital stock of the Company;

 

WHEREAS, the Stock Purchase Agreement provides, among other things, for the
Company and the Reinsurer to enter into this Agreement as soon as practicable
following the signing of the Stock Purchase Agreement;

 

WHEREAS, the Reinsurer provides reinsurance coverage to the Company in
accordance with the terms of the following reinsurance agreements: (i) a
coinsurance agreement between the parties effective as of December 31, 2001
covering the Company’s general account liabilities for all policies and market
value adjustment annuities (the “General Account Reinsurance Agreement”), (ii) a
modified coinsurance agreement between the parties effective as of December 31,
2001 covering the Company’s separate account liabilities for variable life
insurance policies (the “Variable Life Reinsurance Agreement, and together with
the General Account Reinsurance Agreement, the “Subject Reinsurance Agreements”)
and (iii) a modified coinsurance agreement between the parties effective as of
December 31, 2001 covering the Company’s separate account liabilities for
variable annuity insurance policies (the “Variable Annuity Reinsurance
Agreement”);

 

WHEREAS, the Company and the Reinsurer desire that the Company recapture from
the Reinsurer the Recaptured Business (as defined below) currently ceded or
retroceded under the Subject Reinsurance Agreements;

 

WHEREAS, the Company and the Reinsurer desire a full and final settlement,
discharge and release of any and all of each of their respective liabilities,
duties and obligations with respect to the Recaptured Business except as
expressly set forth below;

 

WHEREAS, the business reinsured pursuant to the Subject Reinsurance Agreements
that is not recaptured pursuant to this Agreement shall continue to be reinsured
pursuant to the terms of the Subject Reinsurance Agreements, as amended from
time to time, until such time as such Subject Reinsurance Agreements are
terminated, restated or replaced; and

 

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

 

WHEREAS, in connection with the closing of the transactions contemplated in the
Stock Purchase Agreement, the Parties will enter into an Amended and Restated
Reinsurance Agreement (the “Amended and Restated Reinsurance Agreement”) that
will (i) amend and restate, in its entirety, the Variable Life Reinsurance
Agreement with respect to the business of the Company that was reinsured under
the Variable Life Reinsurance Agreement and that is not recaptured by the
Company pursuant to this Agreement and (ii) amend and restate the General
Account Reinsurance Agreement with respect to the portion of the business of the
Company that was reinsured under the General Account Reinsurance Agreement and
that is not recaptured by the Company pursuant to this Agreement, except for the
Company’s variable annuity policies reinsured pursuant to the General Account
Reinsurance Agreement (which variable annuity policies will continue to be
reinsured by the Reinsurer pursuant to the General Account Reinsurance Agreement
with respect to all general account liabilities associated with such variable
annuity policies); and

 

WHEREAS, the Variable Annuity Reinsurance Agreement shall remain in full force
and effect in accordance with its terms without amendment.

 

NOW, THEREFORE, the Company and the Reinsurer (each a “Party”, and together, the
“Parties”) agree as follows:

 

Article I.

 

DEFINITIONS

 

Section 1.2.  Definitions.  Capitalized terms used herein and not defined
herein, unless otherwise indicated, have the respective meaning assigned to them
in the Stock Purchase Agreement.  For purposes of this Agreement, the following
terms have the respective meanings set forth below:

 

“Accounting Principles” means the principles, practices and methodologies set
forth in Annex A.

 

“Amended and Restated Reinsurance Agreement”  has the meaning set forth in the
Recitals.

 

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

 

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

 

“Effective Time”  has the meaning set forth in the Article II.

 

“Execution Date”  has the meaning set forth in the Preamble.

 

“Exclusive Producer” means any Producer that markets, sells or administers
business of the type written by the Reinsurer or any of its Affiliates
exclusively for or on behalf of the Reinsurer and its Affiliates,
notwithstanding whether such Producer also sells products of the type not
written by the Reinsurer or any of its Affiliates on behalf of third parties.

 

“Illinois SAP” shall mean statutory accounting procedures and practices
prescribed or permitted

 

- 2 -

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by the Director of Insurance of the State of Illinois.

 

“Independent Producer” means any Producer that is not an Exclusive Producer.

 

“Net Statutory General Account Reserves” shall mean the general account reserves
of the Reinsurer in respect of the Recaptured Business as would be reflected in
lines 1 through 4 inclusive in the “Liabilities, Surplus and Other Funds”
section of the NAIC statement blank used to prepare the Reinsurer’s statutory
balance sheet as of December 31, 2012 (or if the line numbers are changed
pursuant to relevant guidance from the NAIC, the successor to such line numbers)
prepared in accordance with Illinois SAP.  For the avoidance of doubt, Net
Statutory General Account Reserves are net of reserve credit taken under Third
Party Reinsurance.  Such reserves shall expressly exclude any additional or
voluntary actuarial reserves, if any, established by the Reinsurer under
Illinois Administrative Code Section 1410.

 

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

 

“Producer” means any producer, broker, agent, general agent, managing general
agent, master broker agency, broker general agency, financial specialist or
other Person responsible for marketing or producing insurance policies, annuity
contracts, protection and retirement products on behalf of the Company.

 

“Recapture Balances”  has the meaning set forth in Section 3.2.

 

“Recapture Consideration”  has the meaning set forth in Section 3.1.

 

“Recapture Statement”  has the meaning set forth in Section 3.1.

 

“Recaptured Business”  has the meaning set forth in Article II.

 

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

 

“Specified Life Business” has the meaning set forth in the Stock Purchase
Agreement.

 

“Subject Reinsurance Agreements”  has the meaning set forth in the Recitals.

 

“Statutory Book Value” means the amount carried in respect of such asset by the
Reinsurer as an admitted asset determined in accordance with Illinois SAP, but
disregarding any permitted practices applicable to the Reinsurer, other than
those of general applicability to life insurer in the State of Illinois.  The
Statutory Book Value of the assets to be transferred as part of the Recapture
Consideration shall be determined as provided in the Accounting Principles.

 

“Third Party Reinsurance” means all third-party reinsurance of the Company with
respect to the Recaptured Business in effect as of the Effective Time.

 

“Variable Annuity Reinsurance Agreement” has the meaning set forth in the
Recitals.

 

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Article II.

 

RECAPTURE

 

Effective as of 12:01 a.m. Central time on July 1, 2013 (the “Effective Time”),
the Company hereby recaptures from the Reinsurer one hundred percent (100%) of
all liabilities ceded or retroceded to the Reinsurer under the Subject
Reinsurance Agreements arising under (i) all of the fixed deferred annuity,
value adjusted deferred annuity and indexed deferred annuity business written by
the Company, (ii) all of the life insurance business written by the Company
through Independent Producers, other than the Specified Life Business, and
(iii) all of the net liability of the Company with respect to the accident and
health and long-term care insurance business written by the Company, in each
case as more particularly identified in Section 1.1(b) of the Seller Disclosure
Schedule ((i), (ii), and (iii)  collectively, the “Recaptured Business”).  For
the avoidance of doubt, this Agreement does not apply to the Variable Annuity
Reinsurance Agreement.  The Recaptured Business, the Recapture Consideration and
the Recapture Balances shall be determined by the Reinsurer using the
methodologies set forth in the Accounting Principles and shall be as reflected
in a recapture balance sheet prepared by the Reinsurer as of the Effective Time
in accordance with the Accounting Principles (the “Recapture Balance Sheet”). 
The Recapture Balance Sheet shall be prepared in a manner consist with the
preparation of the Reference Balance Sheet.

 

 

 

Article III.

 

RECAPTURE CONSIDERATION

 

Section 3.1.  Recapture Consideration. Notwithstanding anything contained in the
Subject Reinsurance Agreements to the contrary, as consideration for the
Company’s recapture of the Recaptured Business, the Reinsurer shall transfer to
the Company cash, the policy loans included in the Recaptured Business and
outstanding as of the Effective Time and assets set forth in Section 1.1(a) of
the Seller Disclosure Schedule (as such list may be revised from the date of
signing of the Stock Purchase Agreement to the Execution Date as provided in
Section 5.19 of the Seller Disclosure Schedule or as otherwise mutually agreed
between the Reinsurer and the Buyer) with an aggregate Statutory Book Value,
including investment income due, accrued and unearned, as of the Effective Time
equal to the Reinsurer’s best estimate of the sum of (i) the Net Statutory
General Account Reserves as of the Effective Time attributable to the Recaptured
Business minus (if positive) or plus (if negative) the absolute value of
(ii) the amount of the final settlement in respect of the Recaptured Business
determined in accordance with Article V of the General Account Reinsurance
Agreement and Article IV of the Variable Life Reinsurance Agreement for the
period commencing on the first day of the calendar quarter during which the
Effective Time falls and ending at the Effective Time (the “Recapture
Consideration”).   Within ten (10) Business Days following the Execution Date
(but in any event prior to the Closing Date), the Reinsurer shall deliver to the
Company a statement with a copy of the Recapture Balance Sheet and showing the
Reinsurer’s calculation of the Recapture Consideration, the Net Statutory
General Account Reserves and the Recapture Balances (the “Recapture
Statement”).  Following delivery of such calculation of the Recapture
Consideration (but prior to the Closing Date), the Reinsurer

 

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shall transfer to the Company the assets comprising the Recapture Consideration,
however, the parties agree and acknowledge that certain types of assets may take
up to twenty (20) Business Days to transfer.  The parties will act use
commercially reasonable efforts to transfer prior to the Closing Date any assets
not transferred after twenty (20) Business Days.  A copy of the Recapture
Statement shall be delivered to Buyer.

 

Section 3.2.  Interest Maintenance Reserve; Other Recapture Balances.

 

(a)  As of the Effective Time, the Reinsurer shall transfer to the Company all
liability for the interest maintenance reserve that is attributable to the
Recaptured Business at the point in time immediately prior to the consummation
of the transactions contemplated by this Agreement, as well as any liability for
the interest maintenance reserve that is attributable to the Recaptured Business
that is created following the Effective Time, in each case determined in
accordance with the Accounting Principles and as shown in the Recapture Balance
Sheet.

 

(b)  All account balances (both assets and liabilities) related to the
Recaptured Business and ceded by the Company to the Reinsurer under the Subject
Reinsurance Agreements (other than (i) those that are reflected in Net Statutory
General Account Reserves and (ii) the liability for interest maintenance reserve
related to the Recaptured Business) will be transferred from the Reinsurer to
the Company (the “Recapture Balances”) as of the Effective Time.  The Recapture
Balances shall be determined in accordance with the Accounting Principles and
shall be derived from the Recapture Balance Sheet. Such Recapture Balances shall
include, but are not limited to, uncollected premiums and agents’ balances,
deferred premiums, policyholder dividends, premiums received in advance,
commissions due and accrued, commissions and expense allowances on reinsurance
assumed, general expenses due or accrued, transfers to separate accounts, taxes,
licenses and fees due and accrued, amounts withheld or retained, remittances and
items not allocated, liability for benefits for employees and agents, abandoned
property, guaranty funds receivable or on deposit, guaranty funds payable,
premium tax receivable, and accounts receivable and payable related to long-term
care third party administration agreements, in each case to the extent
attributable to the Recaptured Business.  The Recapture Balances shall also
include amounts in respect of the Recaptured Business that are paid to or
received by the Reinsurer on behalf of the Company after the Effective Time. 
Upon recapture of these Recapture Balances, a net reinsurance recoverable or a
reinsurance payable will be recorded by the Company in respect of the Recapture
Balances.  As part of the Recapture Statement, the Reinsurer shall deliver to
the Company a statement showing the Reinsurer’s calculations of the Recapture
Balances.  The net reinsurance recoverable or reinsurance payable will be
settled by the Reinsurer or the Company, as applicable, in cash or fair value of
assets within twenty (20) Business Days after delivery of the Recapture
Statement (but in any event prior to the Closing Date).

 

Section 3.3.  Company Release of the Reinsurer with respect to the Recaptured
Business. In consideration of the receipt of the payment described in
Section 3.1 and the release provided in Section 3.4, as of the Effective Time,
the Company hereby forever releases and discharges the Reinsurer, and its
predecessors, successors, affiliates, agents, officers, directors, employees and
shareholders, from any and all past, present, and future obligations,
adjustments, liability for payment of interest, offsets, actions, causes of
action, suits, debts, sums of money, accounts, premium payments, reckonings,
bonds, bills, covenants, contracts, controversies, agreements,

 

- 5 -

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promises, damages, judgments, liens, rights, costs and expenses (including
attorneys’ fees and costs actually incurred), claims and demands, liabilities
and losses of any nature whatsoever, all whether known or unknown, vested or
contingent, that the Company now has, owns, or holds or claims to have, own, or
hold, or at any time had, owned, or held, or claimed to have had, owned, or
held, or may after the execution of this Agreement have, own, or hold or claim
to have, own, or hold, against the Reinsurer, arising from, based upon, or in
any way related to the Recaptured Business, it being the intention of the
Parties that this release operate as a full and final settlement of the
Reinsurer’s current and future liabilities to the Company under and in
connection with the Recaptured Business, provided, however, that this release
does not discharge obligations of the Reinsurer that have been undertaken or
imposed by the terms of this Agreement or any of the other Transaction
Agreements.

 

Section 3.4.  Reinsurer Release of the Company with respect to the Recaptured
Business. In consideration of the release provided in Section 3.3, as of the
Effective Time, the Reinsurer hereby forever releases and discharges the
Company, and its predecessors, successors, affiliates, agents, officers,
directors, employees and shareholders, from any and all past, present, and
future obligations, adjustments, liability for payment of interest, offsets,
actions, causes of action, suits, debts, sums of money, accounts, premium
payments, reckonings, bonds, bills, covenants, contracts, controversies,
agreements, promises, damages, judgments, liens, rights, costs and expenses
(including attorneys’ fees and costs actually incurred), claims and demands,
liabilities and losses of any nature whatsoever, all whether known or unknown,
vested or contingent, that the Reinsurer now has, owns, or holds or claims to
have, own, or hold, or at any time had, owned, or held, or claimed to have had,
owned, or held, or may after the execution of this Agreement have, own, or hold
or claim to have, own, or hold, against the Company, arising from, based upon,
or in any way related to the Recaptured Business, it being the intention of the
Parties that this release operate as a full and final settlement of the
Company’s current and future liabilities to the Reinsurer under and in
connection with the Recaptured Business, provided, however, that this release
does not discharge obligations of the Company that have been undertaken or
imposed by the terms of this Agreement or any of the other Transaction
Agreements.

 

Article IV.

 

MISCELLANEOUS

 

Section 4.1.  Notices.  All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally or by overnight courier (providing proof of delivery) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):

 

(a)

if to Company:

 

 

 

Lincoln Benefit Life Company]

 

[TBD]

 

Attention:

 

- 6 -

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

 

 

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

 

 

 

Debevoise & Plimpton LLP

 

919 Third Avenue

 

New York, New York 10022

 

Attention:

Nicholas F. Potter

 

 

David Grosgold

 

 

 

(b)

if to the Reinsurer:

 

 

 

 

Allstate Life Insurance Company

 

[TBD]

 

Attention:

 

 

 

with copies (which shall not constitute notice) to:

 

 

 

Willkie Farr & Gallagher LLP

 

787 Seventh Avenue

 

New York, New York  10019

 

Attention:  John M. Schwolsky

 

Alexander M. Dye

 

Notice given by personal delivery or overnight courier shall be effective upon
actual receipt.

 

Section 4.2.  Entire Agreement; Third Party Beneficiaries.  This Agreement
(including any exhibits and schedules hereto) constitutes the entire agreement,
and supersedes all prior agreements, understandings, representations and
warranties, both written and oral, among the parties with respect to the subject
matter of this Agreement.  From the Execution Date until the earlier of the
Closing and the termination of the Stock Purchase Agreement in accordance with
its terms, Buyer shall be a third-party beneficiary of this Agreement.  Except
as set forth in the immediately preceding sentence for Buyer, this Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies.

 

Section 4.3.  Governing Law.  This Agreement and any dispute arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
New York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.

 

Section 4.4.  Assignment.  Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise (other than following the Execution Date
by operation of law in a merger or scheme of arrangement), by either party
without the prior written consent of the other party, and any such assignment
that is not consented to shall be null and void.  Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.

 

Section 4.5.  Jurisdiction; Enforcement.

 

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(a)        Each of the Parties hereto hereby irrevocably and unconditionally
submits to the exclusive jurisdiction of any court of the United States or any
state court, which in either case is located in the City and County of New York
(each, a “New York Court”) for purposes of enforcing this Agreement or
determining any claim arising from or related to the transactions contemplated
by this Agreement.  In any such action, suit or other proceeding, each of the
Parties hereto irrevocably and unconditionally waives and agrees not to assert
by way of motion, as a defense or otherwise any claim that it is not subject to
the jurisdiction of any such New York Court, that such action, suit or other
proceeding is not subject to the jurisdiction of any such New York Court, that
such action, suit or other proceeding is brought in an inconvenient forum or
that the venue of such action, suit or other proceeding is improper; provided,
that nothing set forth in this sentence shall prohibit any of the Parties hereto
from removing any matter from one New York Court to another New York Court. 
Each of the Parties hereto also agrees that any final and unappealable judgment
against a Party hereto in connection with any action, suit or other proceeding
will be conclusive and binding on such Party and that such award or judgment may
be enforced in any court of competent jurisdiction, either within or outside of
the United States.  A certified or exemplified copy of such award or judgment
will be conclusive evidence of the fact and amount of such award or judgment.
Any process or other paper to be served in connection with any action or
proceeding under this Agreement shall, if delivered or sent in accordance with
Section 4.1, constitute good, proper and sufficient service thereof

 

(b)        The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that, without the necessity of posting bond or other
undertaking, the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in accordance with this Agreement,
this being in addition (subject to the terms of this Agreement) to any other
remedy to which such party is entitled at law or in equity.  In the event that
any Action is brought in equity to enforce the provisions of this Agreement, no
party hereto shall allege, and each party hereto hereby waives any defense or
counterclaim, that there is an adequate remedy at law.

 

(c)        EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.5(c).

 

Section 4.6.  Severability.

 

(a)        Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
Applicable Law, but if any

 

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provision or portion of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any Applicable Law in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.

 

(b)        This Agreement may be amended or a provision hereof waived only by a
written instrument signed by each of the Company and the Reinsurer; provided
that for the period from the Execution Date until the earlier of the Closing and
the termination of the Stock Purchase Agreement in accordance with its terms,
the prior consent of Buyer shall be required for any amendment of this Agreement
or the waiver by the Company of any of its rights hereunder.

 

(c)        No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.

 

Section 4.7.  No Offset.  No party to this Agreement may offset any amount due
to the other party hereto or any of such other party’s Affiliates against any
amount owed or alleged to be owed from such other party or its Affiliates under
this Agreement or any other Transaction Document without the written consent of
such other party.

 

Section 4.8.  Counterparts.  This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties.  Each party may deliver its signed counterpart
of this Agreement 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.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Reinsurer and the Company have caused this Agreement to
be signed by their respective duly authorized officers, all as of the date first
written above.

 

 

 

ALLSTATE LIFE INSURANCE COMPANY

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

LINCOLN BENEFIT LIFE COMPANY

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

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ANNEX A

Accounting Principles

 

[To insert Annex A of the Stock Purchase Agreement]

 

- 11 -

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EXHIBIT G

 

 

 

 

 

 

 

 

TRUST AGREEMENT

 

Dated as of

 

[__________]

 

ALLSTATE LIFE INSURANCE COMPANY,

as Grantor

 

and

 

LINCOLN BENEFIT LIFE INSURANCE COMPANY,

as Beneficiary

 

and

 

THE BANK OF NEW YORK MELLON

 

as Trustee

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

Section 1

Deposit of Assets to the Trust Account

2

 

 

 

Section 2

Withdrawal of Assets from the Trust Account

3

 

 

 

Section 3

Procedure for Withdrawals of Assets; Certain Covenants

5

 

 

 

Section 4

Redemption, Investment and Substitution of Assets

6

 

 

 

Section 5

Income

7

 

 

 

Section 6

Right to Vote Assets

7

 

 

 

Section 7

Additional Rights and Duties of the Trustee

8

 

 

 

Section 8

The Trustee’s Compensation, Expenses and Indemnification

11

 

 

 

Section 9

Resignation of the Trustee

11

 

 

 

Section 10

Termination of the Trust Account

12

 

 

 

Section 11

Definitions

12

 

 

 

Section 12

Governing Law

14

 

 

 

Section 13

Successors and Assigns

15

 

 

 

Section 14

Severability

15

 

 

 

Section 15

Entire Agreement

15

 

 

 

Section 16

Amendments

15

 

 

 

Section 17

Notices, etc.

15

 

 

 

Section 18

Headings

16

 

 

 

Section 19

Counterparts

16

 

 

 

Section 20

USA Patriot Act

17

 

 

 

Section 21

Required Disclosure

17

 

 

 

Section 22

Representations

17

 

 

EXHIBITS

A — Form of Beneficiary Withdrawal Notice

B — Form of Grantor Withdrawal Notice

C — Investment Guidelines

D — Grantor Representatives

E —  Beneficiary Representatives

 

i

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TRUST AGREEMENT

 

THIS TRUST AGREEMENT, dated as of [_______] (this “Agreement”), by and among
Allstate Life Insurance Company, an Illinois-domiciled life insurance company
(such insurer and its successors by operation of law, including, without
limitation, any liquidator, rehabilitator, receiver or conservator thereof,
being hereinafter referred to as the “Grantor”), Lincoln Benefit Life Insurance
Company, a Nebraska-domiciled life insurance company (such insurer and its
successors by operation of law, including, without limitation, any liquidator,
rehabilitator, receiver or conservator thereof, being hereinafter referred to as
the “Beneficiary”), and The Bank of New York Mellon, a national banking
association, as trustee, for the benefit of the Beneficiary (such bank and its
successors by operation of law, in its or their capacity as trustee, being
referred to as the “Trustee”).

 

RECITALS

 

WHEREAS, the Grantor desires to establish with the Trustee a trust account with
account # [___________] (the “Trust Account”), and transfer to the Trustee for
deposit in the Trust Account Assets (as hereinafter defined) to be made subject
to this Agreement in order to secure payments of certain amounts at any time and
from time to time owing by the Grantor to the Beneficiary under the Reinsurance
Agreement (as hereinafter defined);

 

WHEREAS, the Trustee has agreed to act as Trustee hereunder and, in accordance
with the terms hereof, to hold Assets in trust in the Trust Account on the terms
herein set forth;

 

WHEREAS, the Trustee is a qualified U.S. financial institution as defined in
Nev. Rev. Stat. § 44-416.08; and

 

WHEREAS, this Agreement is made for the sole use and benefit of the Beneficiary
and for the purpose of setting forth the duties and powers of the Trustee with
respect to the Trust Account;

 

NOW, THEREFORE, for and in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:

 

Section 1            Deposit of Assets to the Trust Account.

 

(a)          Concurrently with the execution and delivery of this Agreement, the
Trustee shall establish a Trust Account in the Grantor’s name, and shall
administer the Trust Account as Trustee for the benefit of the Beneficiary in
accordance with the terms of this Agreement and for the sole use and benefit of
the Beneficiary.  All such trusteed Assets at all times shall be maintained in
or credited to the Trust Account, separate and distinct from all other assets of
the Trustee, and shall be continuously maintained or credited by the Trustee.

 

(b)          On the date hereof, the Grantor shall transfer or cause to be
transferred to the Trustee, for deposit to the Trust Account, Eligible Assets in
accordance with Section 7.2 of the Reinsurance Agreement and shall transfer to
the Trustee, for deposit to the Trust Account, such Eligible Assets as it may
from time to time be required to deposit by this Agreement, the

 

2

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Reinsurance Agreement or otherwise (all such Eligible Assets and proceeds
thereof (other than Income) in the Trust Account are “Assets”).  The Grantor,
prior to depositing Eligible Assets with the Trustee, shall execute or cause to
be executed assignments, endorsements in blank, or transfer legal title to the
Trustee of all shares, obligations or any other assets requiring assignment, in
order that the Beneficiary or the Trustee, upon the direction of the
Beneficiary, may whenever necessary negotiate any such Eligible Assets without
the consent or signature from the Grantor or any other entity.

 

(c)          The Grantor hereby represents, warrants and covenants (i) that any
assets transferred by the Grantor to the Trustee for deposit to the Trust
Account will be in such form that the Beneficiary whenever necessary may, and
the Trustee upon direction by the Beneficiary may, negotiate any such assets
without consent or signature from the Grantor or any person in accordance with
the terms of this Agreement; and (ii) that all assets transferred by the Grantor
to the Trustee for deposit to the Trust Account will consist only of Eligible
Assets at the time of such transfer.

 

Section 2            Withdrawal of Assets from the Trust Account.

 

(a)

 

(i)           The Beneficiary shall have the right to withdraw Assets from the
Trust Account subject only to (A)(1) the presentation of a written notice (given
as provided in Section 17 hereof) from the Beneficiary to the Trustee and the
Grantor in the form as attached hereto as Exhibit A (a “Beneficiary Withdrawal
Notice”) which shall include a certification by the Beneficiary to the Trustee
and the Grantor that the Grantor has failed to pay an amount due to the
Beneficiary under the Reinsurance Agreement, such amount is not subject to a
good faith dispute and such failure has not been cured within ten (10) Business
Days after the Grantor has received written notice of such failure from the
Beneficiary (an “Uncured Grantor Default”), signed by a duly authorized officer
of the Beneficiary, and (2) an email transmitted to the Trustee and all of the
Grantor’s representatives then-listed on Exhibit D hereto (as such list may be
modified from time to time by the Grantor in written notice to both the Trustee
and the Beneficiary, given as provided in Section 17 hereof), attaching such
executed Beneficiary Withdrawal Notice in PDF format with the cover note to such
email transmission stating that such email transmission, together with the
Beneficiary Withdrawal Notice attached thereto, constitutes a notice to the
Trustee and the Grantor as provided in Section 17 hereof (any transmission of
such email, a “Beneficiary Email Notice”), and (B) the satisfaction of the
requirements set forth in Section 2(a)(ii).  The Beneficiary Withdrawal Notice
shall specify the Assets to be withdrawn and an instruction to the Trustee as to
how such specified Assets shall be delivered.  The Beneficiary shall acknowledge
receipt of any such Assets withdrawn upon request by the Trustee.

 

(ii)          The occurrence of one of the following four events subsequent to
the Beneficiary giving the Beneficiary Withdrawal Notice and the applicable
Beneficiary Email Notice to the Trustee and the Grantor shall be a condition of
withdrawal of Assets by the Beneficiary in accordance with Section 2(a)(i):

 

(A)                          Five (5) Business Days shall have elapsed from and
including the date on which the Trustee originally received a copy of the

 

3

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Beneficiary Withdrawal Notice and the Beneficiary Email Notice, and the Trustee
shall not have received any notice, given as provided in Section 17 hereof, from
the Grantor disputing the amount requested for withdrawal by the Beneficiary in
the Beneficiary Withdrawal Notice;

 

(B)                           The Trustee shall have received a certificate
signed by the Beneficiary and the Grantor fixing and determining the amount of
Assets, if any, the Beneficiary may withdraw from the Trust Account;

 

(C)                           The Trustee shall have received a certificate from
the Beneficiary certifying that a non-appealable award from an arbitration panel
has been entered specifying the amount of Assets which the Beneficiary may
withdraw from the Trust Account, with a copy of such arbitration award attached;
or

 

(D)                          The Trustee shall have received, in the manner
provided in Section 17 hereof, other written confirmation from the Grantor
permitting the withdrawal requested in the Beneficiary Withdrawal Notice.

 

(b)

 

(i)           If the aggregate Value of all Eligible Assets held in the Trust
Account as of the end of any Quarterly Accounting Period is greater than the
percentage of the Required Balance as of the end of such Quarterly Accounting
Period specified in the Reinsurance Agreement (an “Overfunding Event”), the
Grantor shall have the right to withdraw Assets from the Trust Account equal to
such excess (“Excess”) subject only to (A)(1) the presentation of a written
notice (given as provided in Section 17 hereof) from the Grantor to the Trustee
and the Beneficiary in the form as attached hereto as Exhibit B (a “Grantor
Withdrawal Notice”) which shall include a certification by the Grantor to the
Trustee and the Beneficiary of the occurrence of an Overfunding Event and the
amount of such Excess, signed by a duly authorized officer of the Grantor, and
(2) an email transmitted to the Trustee and all of the Beneficiary’s
representatives then-listed on Exhibit E hereto (as such list may be modified
from time to time by the Beneficiary in written notice to both the Trustee and
the Grantor, given as provided in Section 17 hereof), attaching such executed
Grantor Withdrawal Notice in PDF format with the cover note to such email
transmission stating that such email transmission, together with the Grantor
Withdrawal Notice attached thereto, constitutes a notice to the Trustee and the
Beneficiary as provided in Section 17 hereof (any transmission of such email, a
“Grantor Email Notice”), and (B) the satisfaction of the requirements set forth
in Section 2(b)(ii).  The Grantor Withdrawal Notice shall specify the Assets to
be withdrawn and an instruction to the Trustee as to how such specified Assets
shall be delivered.  The Grantor shall acknowledge receipt of any such Assets
withdrawn upon request by the Trustee.

 

(ii)          The occurrence of one of the following four events subsequent to
the Grantor giving the Grantor Withdrawal Notice and the applicable Grantor
Email Notice to the

 

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Trustee and the Beneficiary shall be a condition of withdrawal of Assets by the
Grantor in accordance with Section 2(b)(i):

 

(A)                          Five (5) Business Days shall have elapsed from and
including the date on which the Trustee originally received a copy of the
Grantor Withdrawal Notice and the Grantor Email Notice, and the Trustee shall
not have received any notice, given as provided in Section 17 hereof, from the
Beneficiary disputing the amount requested for withdrawal by the Grantor in the
Grantor Withdrawal Notice;

 

(B)                           The Trustee shall have received a certificate
signed by the Grantor and the Beneficiary fixing and determining the amount of
Assets, if any, the Grantor may withdraw from the Trust Account;

 

(C)                           The Trustee shall have received a certificate from
the Grantor certifying that a non-appealable award from an arbitration panel has
been entered specifying the amount of Assets which the Grantor may withdraw from
the Trust Account, with a copy of such arbitration award attached; or

 

(D)                          The Trustee shall have received, in the manner
provided in Section 17 hereof, other written confirmation from the Beneficiary
permitting the withdrawal requested in the Grantor Withdrawal Notice.

 

(c)          The Trustee shall have no responsibility whatsoever to determine
that any Assets withdrawn from the Trust Account pursuant to Section 2 of this
Agreement will be used and applied in the manner contemplated hereunder or in
accordance with the terms of the Reinsurance Agreement.  The Trustee shall have
no duty to compel the Grantor to deposit Assets into the Trust Account.

 

Section 3            Procedure for Withdrawals of Assets; Certain Covenants.

 

(a)          Following receipt of a Withdrawal Notice, and the satisfaction of
the conditions set forth in Section 2(a) or 2(b), as applicable, the Trustee
shall promptly take any and all steps necessary to transfer, absolutely and
unequivocally, all right, title and interest to the invested Assets or cash
amount specified in such Withdrawal Notice and shall deliver such invested
Assets or cash amount as specified in such Withdrawal Notice.  The Trustee shall
be protected in relying conclusively upon any written demand, instruction,
direction, acknowledgment, statement, notice, resolution, request, consent,
order, certificate, report, appraisal, opinion, electronic mail, letter, or
other communication (collectively, “Communications”) of the Beneficiary or the
Grantor, as applicable, for any such withdrawal that on its face conforms to the
requirements of this Agreement.

 

(b)          Subject to Section 4 and Section 10 of this Agreement, in the
absence of a Withdrawal Notice, the Trustee shall allow no substitutions or
withdrawals of any Asset from the Trust Account.

 

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(c)          The Trustee may neither take, nor consent to the taking of, any
action which would or could result in the placement of any lien on any of the
Trust Account’s Assets except as stated under this Agreement.  In addition, the
Trustee shall have no authority to assign, transfer, pledge, or set off any of
the Trust Account’s Assets except as expressly permitted herein.  Neither the
Grantor, nor the Trustee, nor their respective successors and assigns, shall
alienate, sell, transfer, assign, encumber or otherwise impair any of the Trust
Account’s Assets except as stated under this Agreement.  Any attempt to do so is
void and of no force or effect.

 

(d)          The Assets held in the Trust Account shall be managed in accordance
with the Investment Guidelines.  The Grantor may retain (and pay the service
fees of) a professional investment manager (the “Investment Manager”) to manage
and make investment decisions with regard to any of the Assets held in the Trust
Account in accordance with the Investment Guidelines, and the Grantor agrees to
provide reasonable advance written notice to the Trustee and the Beneficiary of
the appointment of each Investment Manager so retained; provided that the
Grantor shall remain responsible for all its obligations or liabilities under
this Agreement despite delegation of any such obligations or liabilities to such
Investment Manager and the Grantor shall be liable with respect to the services
to be provided by the Investment Manager as if provided by the Grantor.

 

Section 4            Redemption, Investment and Substitution of Assets.

 

(a)          The Trustee shall surrender for payment all maturing Assets and all
Assets called for redemption and deposit the principal amount of the proceeds of
any such payment to the Trust Account and will provide notice thereof by
electronic mail or other Electronic Methods to the Beneficiary and the Grantor.

 

(b)          From time to time, at the written order and direction of the
Grantor or its designated Investment Manager, and without consent of, or prior
notice to, the Beneficiary, the Trustee shall, invest and reinvest the Assets in
the Trust Account in Eligible Assets.  The Trustee shall have no responsibility
whatsoever to determine that such designated investments constitute Eligible
Assets, and may rely on the direction of the Grantor or its designated
Investment Manager.

 

(c)          From time to time, and without consent of, or prior notice to, the
Beneficiary, the Grantor or its designated Investment Manager may direct the
Trustee to substitute Assets, provided that at the time of such substitution,
the withdrawn Assets are replaced with other Eligible Assets having a Value at
least equal to the Value of the Assets so withdrawn.

 

(d)          All investments and substitutions of Assets referred to in
paragraphs (b) and (c) of this Section shall be in compliance with the
definition of “Eligible Assets” in Section 11.  Any instruction or order
concerning such investments or substitutions of Assets shall be referred to
herein as an “Investment Order.”  The Trustee shall execute Investment Orders
and settle securities transactions by itself or by means of an agent or broker,
including an Affiliate.  The Trustee shall not be responsible for any act or
omission, or for the solvency, of any such agent or broker, provided that the
Trustee shall have selected and retained such agent or broker with reasonable
care.

 

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(e)          When the Trustee is directed to deliver Assets against payment,
delivery will be made in accordance with generally-accepted market practice.

 

(f)           Any loss incurred from any investment pursuant to the terms of
this Section 4, or from any settlement of Eligible Assets, shall be borne
exclusively by the Trust Account.  The Trustee shall not be liable for any loss
due to changes in market rates or penalties for early redemption.

 

Section 5            Income.

 

All payments of interest, dividends and other income in respect of Assets (the
“Income”) shall be posted and credited by the Trustee in the separate income
column of the custody ledger (the “Income Account”) within the Trust Account
established and maintained by the Trustee on behalf of the Grantor at an office
of the Trustee in [       ].  Any Income automatically posted and credited on
the payment date to the Income Account by the Trustee which is not subsequently
received by the Trustee shall be debited from the Income Account and, if any
such Income is paid by the Trustee to the Grantor, such amount shall be
reimbursed by the Grantor to the Trustee.  Any amounts deposited in the Income
Account are not part of the Assets in the Trust Account and as such are not
subject to the terms and conditions of this Agreement with respect to the Assets
in the Trust Account.  Any amounts deposited in the Income Account shall be paid
to the Grantor or its designee, or credited to an account of the Grantor or its
designee, in accordance with written instructions provided from time to time by
the Grantor to the Trustee.

 

Section 6            Right to Vote Assets.

 

(a)          Whenever Eligible Assets (including, but not limited to, warrants,
options, conversions, subscriptions, takeovers, other forms of capital
reorganizations, redemptions, tenders, options to tender or non-mandatory puts
or calls) confer optional rights on the Grantor or provide for discretionary
action or alternative courses of action by the Grantor, the Grantor or its
Investment Manager shall be responsible for making any decisions relating
thereto and for instructing the Trustee to act.  In order for the Trustee to
act, it must receive the Grantor’s or Investment Manager’s written instructions
at the Trustee’s offices, addressed as the Trustee may from time to time
request, by the reasonable deadline specified by the Trustee from time to time. 
If the Trustee does not receive such written instructions prior to such
specified deadlines, the Trustee shall not be liable for failure to take any
action relating to or to exercise any rights conferred by such assets.

 

(b)          The Trustee shall notify the Grantor or its Investment Manager by
Electronic Methods of such rights or discretionary actions or of the date or
dates by when such rights must be exercised or such action must be taken
provided that the Trustee has received from the issuer or one of the nationally
recognized bond or corporate action services to which the Trustee subscribes,
notice of such rights or discretionary corporate action or of the date or dates
such rights must be exercised or such action must be taken.  If the Trustee
shall not actually receive such notice, the Trustee shall have no liability for
failing to so notify the Grantor or its Investment Manager.

 

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(c)          With respect to all Eligible Assets, however registered,  the
voting rights are to be exercised by the Grantor or its Investment Manager.  The
Trustee’s only duty shall be to deliver by Electronic Methods to the Grantor or
its Investment Manager any documents (including proxy statements, annual reports
and signed proxies) relating to the exercise of such voting rights.

 

Section 7            Additional Rights and Duties of the Trustee.

 

(a)          The Trustee shall furnish to the Grantor and the Beneficiary a
statement of all Assets in the Trust Account upon the inception of the Trust
Account and at the end of each calendar month thereafter (the “Monthly
Statement”).The Monthly Statement shall list (i) all of the Assets with CUSIP
number (if applicable) and other specific identifying information with respect
to any Asset that has no CUSIP number, and (ii) any transfers of Assets to or
from the Trust Account during such calendar month, including all purchases and
sales of Assets during such calendar month.  The Monthly Statement shall be
given as soon as practicable, but in no event later than ten (10) Business Days
after the end of the calendar month most recently concluded.  At the Grantor’s
or the Beneficiary’s request, the Trustee may provide daily reporting to the
Beneficiary, the Grantor or its designated Investment Manager by granting access
to the Trustee’s automated data system affording on-line access to trust
accounts information.  The Monthly Statement under this Section 7(a) shall be
deemed given by the Trustee to the Grantor and the Beneficiary to the extent
that the Grantor and the Beneficiary, as the case may be, had previously
requested and had been given access to the Trustee’s automated data system
affording on-line access to trust accounts information and such information is
posted by the Trustee on such system within such ten (10) Business Day period.

 

(b)          Before accepting any asset for deposit to the Trust Account, the
Trustee shall determine that such asset is in such form that the Beneficiary
whenever necessary may, or the Trustee upon written direction by the Beneficiary
may, negotiate such asset without consent or signature from the Grantor or any
other Person.

 

(c)          The Trustee shall notify the Grantor and the Beneficiary by
Electronic Methods, within ten (10) days, of any deposits to or withdrawals from
the Trust Account.

 

(d)          All Assets shall be safely held by the Trustee in its office in the
United States, except that the Trustee may hold any Asset that is in book-entry
form as of the date it is credited to the Trust Account (a “Book-Entry Asset”)
through the book-entry account maintained by the Trustee with the related
depository for such Book-Entry Asset (such a depository being referred to herein
as a “Depository”).  A Book-Entry Asset may be held in the name of a nominee
maintained by the Depository.

 

(e)          The Trustee shall accept and may open all mail directed to the
Grantor or the Beneficiary in care of the Trustee.  The Trustee shall promptly
forward all mail to the addressee whether or not opened.

 

(f)           The Trustee shall keep full and complete records of the
administration of the Trust Account.  Upon the reasonable written request of the
Grantor or the Beneficiary, the Trustee shall promptly permit the Grantor or the
Beneficiary, their respective agents, employees or independent auditors to
examine, audit, excerpt, transcribe and copy, at their own expense,

 

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during the Trustee’s normal business hours any books, documents, papers and
records relating to the Trust Account or the Assets.

 

(g)          The Trustee is authorized to rely conclusively upon all
Communications (including, without limitation, Investment Orders, Withdrawal
Notices and Termination Notices) given by officers, agents and/or employees
named in letters and incumbency certificates furnished to the Trustee from time
to time by the Grantor, the Investment Manager or the Beneficiary and by
attorneys-in-fact acting under written authority furnished to the Trustee by the
Grantor, the Investment Manager or the Beneficiary (collectively
“Instructions”), including Instructions given by letter, facsimile transmission
or Electronic Methods, if the Trustee reasonably believes such Instructions to
be genuine and to have been signed, sent or presented by the proper party or
parties.  The Trustee shall not incur any liability to anyone resulting from
actions taken by the Trustee in reliance in good faith without fraud, negligence
or willful misconduct on such Instructions.  The Trustee shall not incur any
liability in executing Instructions prior to receipt by it of (i) notice of the
revocation of the written authority of the individual(s) named therein or
(ii) notice from any officer, agent or employee of the Grantor, the Investment
Manager or the Beneficiary named in a letter or incumbency certificate delivered
hereunder prior to receipt by it of a more current certificate.

 

(h)          The duties and obligations of the Trustee shall only be such as are
specifically set forth in this Agreement, as it may from time to time be amended
in accordance with the terms hereof, and no implied duties or obligations shall
be read into this Agreement against the Trustee.  The Trustee shall be liable
only for its own fraud, negligence, willful misconduct or lack of good faith. 
Subject to the preceding sentence, the Trustee is not liable for acting in
accordance with or relying upon any instruction, notice, demand, certificate or
document contemplated by and given in accordance with this Agreement from the
Grantor or the Beneficiary or for any consequential, punitive or special
damages.

 

(i)           No provision of this Agreement shall require the Trustee to take
any action which, in the Trustee’s reasonable judgment, would result in any
violation of this Agreement or any provision of law.  The Trustee shall exercise
the same due care that is expected of a fiduciary with the responsibility for
the safeguarding of the Assets in the Trust Account and for compliance with all
provisions of this Agreement, whether or not the Assets are in the Trustee’s
possession.

 

(j)           The Trustee may confer with a nationally recognized outside law
firm of its selection in relation to matters arising under this Agreement and
shall, upon demand, be indemnified and held harmless by the Grantor from and
against any and all losses incurred by the Trustee hereunder for any actions
taken, omitted or suffered by it in connection with this Agreement or under any
transaction contemplated hereby without any lack of good faith, fraud,
negligence or willful misconduct on the part of the Trustee and in accordance
with the written advice or opinion of such counsel.  The written opinion of such
law firm shall be full and complete authority and protection for the Trustee
with respect to any action taken, omitted or suffered by it in good faith and in
accordance with such written advice or opinion of such law firm.

 

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(k)          The parties hereto acknowledge that nothing in this Agreement shall
obligate the Trustee to extend credit, grant financial accommodation or
otherwise advance moneys for the purpose of making any payments or part thereof
or otherwise carrying out any Instructions, including, without limitation, any
Investment Order.

 

(l)           Except as set forth in Section 7(d), the Trustee shall not be
responsible for the existence, genuineness or value of any of the Assets or for
the validity, perfection, priority or enforceability of any liens or security
interest in any of the Assets, whether impaired by operation of law or by reason
of any action or omission to act on its part hereunder, except to the extent
such action or omission constitutes fraud, negligence, bad faith or willful
misconduct on the part of the Trustee, for the validity of title to the Assets,
for insuring the Assets or for the payment of taxes, charges, assessments or
liens upon the Assets.

 

(m)         The Trustee shall not incur any liability for not performing any act
or fulfilling any duty, obligation or responsibility hereunder by reason of any
occurrence beyond the control of Trustee, including, but not limited to, any act
or provision of any present or future law or regulation or Governmental
Authority, any act of God or war or terrorism, accidents, labor disputes, loss
or malfunction of utilities or computer software or hardware, or the
unavailability of the Federal Reserve Bank wire or other wire or communication
facility, so long as the Trustee maintains and updates from time to time
business continuation and disaster recovery procedures that it determines meet
the standards of the banking industry.

 

(n)          The Trustee is authorized to disclose information concerning the
Trust Account and Assets to its Affiliates and other providers of services as
may be necessary in connection with the administration of the Assets or
performance of this Agreement (including, by way of example and not by way of
limitation, attorneys and accountants for the Trustee).

 

(o)          The Trustee shall in no way be responsible for determining the
amount of Assets required to be deposited, or to monitor whether or not the
Assets at any time are or continue to be Eligible Assets or have been invested
in accordance with the Investment Guidelines or to determine independently the
prices or market value of any Assets.  The Trustee shall be under no obligation
to determine whether or not any instructions given by the Grantor and
Beneficiary are contrary to any provision of law.  It is understood and agreed
that the Trustee’s duties are solely those set forth herein and that the Trustee
shall have no duty to take any other action unless specifically agreed to by the
Trustee in writing.  Without limiting the generality of the foregoing, the
Trustee shall not have any duty to advise, manage, supervise or make
recommendations with respect to the purchase, retention or sale of any Assets as
to which a default in the payment of principal or interest has occurred or to be
responsible for the consequences of insolvency or the legal inability of any
broker, dealer, bank or other agent employed by the Grantor or Trustee with
respect to the Assets provided that, in cases where the Trustee has employed
such an agent, the Trustee shall have selected and retained such agent with
reasonable care.  The Trustee shall have no liability for any release of Assets
made by it at the direction of the Beneficiary or the Grantor provided in
accordance with the terms hereof.

 

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Section 8            The Trustee’s Compensation, Expenses and Indemnification.

 

(a)          The Grantor shall pay the Trustee, as compensation for its services
under this Agreement, a fee computed at its usual and customary rates for
services of this sort, as determined in good faith by the Trustee from time to
time and communicated to and agreed to in writing by the Grantor.  The Grantor
shall also pay or reimburse the Trustee for all of the Trustee’s expenses and
disbursements in connection with its duties under this Agreement (including
reasonable attorneys’ fees and expenses), except any such expense or
disbursement as may arise from the Trustee’s fraud, negligence, willful
misconduct or lack of good faith.

 

(b)          The Grantor hereby indemnifies the Trustee for, and holds it
harmless against, any losses (including reasonable attorneys’ fees and expenses)
incurred or paid (other than as a result of the Trustee’s fraud, negligence,
willful misconduct or lack of good faith), arising out of or in connection with
the performance of its duties and obligations under this Agreement, including
without limitation any loss arising out of or in connection with the status of
the Trustee in connection with the performance of its duties and any nominee as
the holder of record of any or all of the Assets.  In addition to and not in
limitation of the foregoing, the Beneficiary hereby indemnifies the Trustee for,
and holds it harmless against, any losses (including attorney’s fees and
expenses) incurred or paid (other than as a result of the Trustee’s fraud,
negligence, willful misconduct or lack of good faith), arising out of or in
connection with actions taken by the Trustee pursuant to any written instruction
from the Beneficiary to perform any such action.  The Grantor and the
Beneficiary each hereby acknowledge that the foregoing indemnities shall survive
the resignation of the Trustee or removal of the Trustee or the termination of
this Agreement.

 

(c)          No Assets shall be withdrawn from the Trust Account or used in any
manner for paying compensation to, or reimbursement or indemnification of, the
Trustee.

 

(d)          The Trustee hereby waives any and all rights of offset,
counterclaim and recoupment against the Beneficiary and the Trust Account, and
waives any lien (statutory or otherwise) that it may assert against the Trust
Account.

 

(e)          The Trustee hereby indemnifies each of the Grantor and the
Beneficiary for, and holds it harmless against, any losses (including reasonable
attorneys’ fees and expenses) arising out of the performance of the Trustee’s
obligations under this Agreement with respect to such party to the extent
resulting from the Trustee’s fraud, negligence, willful misconduct or lack of
good faith.  The Trustee hereby acknowledges that the foregoing indemnities
shall survive the resignation of the Trustee or removal of the Trustee or the
termination of this Agreement.

 

Section 9            Resignation of the Trustee.

 

(a)          The Trustee may resign at any time by giving not less than ninety
(90) days’ written notice thereof to the Beneficiary and to the Grantor.  The
Grantor and the Beneficiary jointly also may remove the Trustee at any time,
without assigning any reason therefor, on fifteen (15) days’ prior written
notice thereof to the Trustee.  Such resignation or removal shall become
effective on the acceptance of appointment by a successor Trustee and the
transfer to

 

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such successor Trustee of all Assets in the Trust Account in accordance with
paragraph (b) of this Section 9.

 

(b)          Upon receipt of the Trustee’s notice of resignation or giving
notice to the Trustee of removal, the Grantor and the Beneficiary shall promptly
appoint a successor trustee.  Any successor trustee shall be a bank that is a
member of the Federal Reserve System and a qualified U.S. financial institution
as defined in Nev. Rev. Stat. § 44-416.08 and shall not be a parent, a
subsidiary or an Affiliate of the Grantor or the Beneficiary.  Upon the
acceptance of the appointment as trustee hereunder by a successor trustee and
the transfer to such successor Trustee of all Assets in the Trust Account, the
resignation or removal of the Trustee shall become effective.  Thereupon, such
successor trustee shall succeed to and become vested with all the rights,
powers, privileges and duties of the Trustee, and the Trustee shall be
discharged from any future duties and obligations under this Agreement, but the
Trustee shall continue after its resignation or removal to be entitled to the
benefits of the indemnities provided herein for a Trustee.

 

Section 10         Termination of the Trust Account.

 

(a)          The Trust Account and this Agreement, except for the indemnities
provided herein, which shall survive termination, may be terminated, other than
pursuant to an order of a court having jurisdiction, only after the Grantor and
the Beneficiary have given the Trustee joint written notice of termination of
the Trust Account (the “Termination Notice”).  Any Notice of Intention shall
specify the date on which the Trust Account shall terminate (the “Termination
Date”).

 

(b)          On the Termination Date, the Trustee shall transfer any Assets
remaining in the Trust Account to the Grantor, at which time all duties and
obligations of the Trustee with respect to such Assets shall cease.

 

Section 11         Definitions.

 

Except as the context shall otherwise require, the following terms shall have
the following meanings for all purposes of this Agreement (the definitions to be
applicable to both the singular and the plural forms of each term defined if
both such forms of such term are used in this Agreement):

 

The term “Affiliate” with respect to any Person shall mean a Person which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person.

 

The term “Agreement” shall have the meaning specified in the preamble.

 

The term “Applicable Law” means any U.S.  domestic or foreign federal,
provincial, state or local statute, law, ordinance or code, or any written
rules, regulations or administrative interpretations issued by any Governmental
Authority pursuant to any of the foregoing, and any order, writ, injunction,
directive, judgment or decree of a court of competent jurisdiction applicable to
the parties hereto.

 

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The term “Assets” shall have the meaning specified in Section 1(b) of this
Agreement.

 

The term “Beneficiary” shall have the meaning specified in the preamble.

 

The term “Beneficiary Email Notice” shall have the meaning specified in
Section 2(a) of this Agreement.

 

The term “Book-Entry Asset” shall have the meaning specified in Section 7(d) of
this Agreement.

 

The term “Beneficiary Withdrawal Notice” shall have the meaning specified in
Section 2(a) of this Agreement.

 

The term “Business Day” shall mean any day that is not a Saturday, Sunday, legal
holiday or other day on which commercial banks in New York, New York are
authorized or required by law to close.

 

The term “Communications” shall have the meaning specified in Section 3(a) of
this Agreement.

 

The term “Depository” shall have the meaning specified in Section 7(d) of this
Agreement.

 

The term “Electronic Methods” shall mean delivery by electronic mail or through
the grant of access to the recipient of the Trustee’s automated data system
affording on-line access to the notice that is the subject of the delivery.

 

The term “Eligible Assets” shall have the meaning set forth in the Reinsurance
Agreement.

 

The term “Excess” shall have the meaning specified in Section 2(b) of this
Agreement.

 

The term “Governmental Authority” means any court, administrative or regulatory
or self-regulatory agency or commission, or other federal, provincial, state or
local governmental or self-regulatory authority or instrumentality having
jurisdiction over any party hereto.

 

The term “Grantor” shall have the meaning specified in the preamble.

 

The term “Grantor Email Notice” shall have the meaning specified in
Section 2(b) of this Agreement.

 

The term “Grantor Withdrawal Notice” shall have the meaning specified in
Section 2(b) of this Agreement.

 

The term “Income” shall have the meaning specified in Section 5 of this
Agreement.

 

The term “Income Account” shall have the meaning specified in Section 5 of this
Agreement.

 

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The term “Instructions” shall have the meaning specified in Section 7(g) of this
Agreement.

 

The term “Investment Guidelines” means the Investment Guidelines attached hereto
as Exhibit C.

 

The term “Investment Order” shall have the meaning specified in Section 4(d) of
this Agreement.

 

The term “Monthly Statement” shall have the meaning specified in Section 7(a) of
this Agreement.

 

The term “Overfunding Event” shall have the meaning specified in Section 2(b) of
this Agreement.

 

The term “Person” shall mean and include an individual, a corporation, a limited
liability company, a partnership, an association, a trust, an unincorporated
organization or a government or political subdivision thereof

 

The term “Quarterly Accounting Period” shall have the meaning set forth in the
Reinsurance Agreement.

 

The term “Reinsurance Agreement” means the Amended and Restated Reinsurance
Agreement, dated as of [____________], 2013, between the Beneficiary and the
Grantor.

 

The term “Required Balance” shall have the meaning set forth in the Reinsurance
Agreement.

 

The term “Termination Date” shall have the meaning specified in Section 10(a) of
this Agreement.

 

The term “Termination Notice” shall have the meaning specified in
Section 10(a) of this Agreement.

 

The term “Trust Account” shall have the meaning specified in the preamble.

 

The term “Trustee” shall have the meaning specified in the preamble.

 

The term “Uncured Grantor Default” shall have the meaning specified in
Section 2(a).

 

The term “Value” shall have the meaning set forth in the Reinsurance Agreement.

 

The term “Withdrawal Notice” means a Beneficiary Withdrawal Notice or a Grantor
Withdrawal Notice.

 

Section 12         Governing Law.

 

This Agreement and the Trust Account shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
principles or rules of conflict

 

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of laws; to the extent such principles or rules are not mandatorily applicable
by statute and would permit or require the application of the laws of another
jurisdiction.

 

Section 13         Successors and Assigns.

 

No party may assign this Agreement or any of its obligations hereunder without
the prior written consent of the other parties; provided, however, that this
Agreement shall inure to the benefit of and bind those who, by operation of law,
become successors to the parties, including, without limitation, any liquidator,
rehabilitator, receiver or conservator and any successor, merged or consolidated
entity; and provided, further, that, in the case of the Trustee, the successor
trustee is eligible to be a trustee under the terms hereof.

 

Section 14         Severability.

 

In the event that any provision of this Agreement shall be declared invalid or
unenforceable by any Governmental Authority having jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remaining portions of this Agreement.

 

Section 15         Entire Agreement.

 

This Agreement constitutes the entire agreement among the parties, and there are
no understandings or agreements, conditions or qualifications regarding the
rights and obligations of the Trustee, which are not fully expressed in this
Agreement.

 

Section 16         Amendments.

 

This Agreement may be modified or otherwise amended, and the observance of any
term of this Agreement may be waived, only if such modification, amendment or
waiver is in writing and signed by all of the parties.  Notwithstanding the
foregoing, this Agreement may also be amended by the Grantor in the manner
contemplated by Section 5.15 of the Stock Purchase Agreement (as defined in the
Reinsurance Agreement) in the circumstances contemplated therein.

 

Section 17         Notices, etc.

 

Unless otherwise provided in this Agreement, all Communications (including,
without limitation, any Investment Orders or Instructions) required or permitted
to be given or made under the terms hereof shall be in writing and shall be
deemed to have been duly given or made (a) (i) when delivered personally,
(ii) when made or given by facsimile or electronic mail or other Electronic
Method, or (iii) in the case of mail delivery, upon the expiration of three days
after any Communication shall have been deposited in the United States mail for
transmission by first class mail, postage prepaid, or upon receipt thereof,
whichever shall first occur and (b) when addressed as follows:

 

If to the Grantor:

[_______________]

[_______________]

 

15

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[_______________]

Fax: [___________]

Attention:

 

with a copy to:

 

[_______________]

[_______________]

[_______________]

Fax: [___________]

Attention:

 

If to the Beneficiary:

[_______________]

[_______________]

[_______________]

Fax: [___________]

Attention:

 

with a copy to:

[_______________]

[_______________]

[_______________]

Fax:

Attention:

 

If to the Trustee:

[_______________]

[_______________]

[_______________]

Fax:

Attention:

 

Each party may from time to time designate a different address for
Communications (including, without limitation, Investment Orders) by giving
written notice of such change to the other parties.

 

Section 18         Headings.

 

The headings of the sections and the table of contents have been inserted for
convenience of reference only, and shall not be deemed to constitute a part of
this Agreement.

 

Section 19         Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall constitute an original, but such counterparts
together shall constitute one and the same agreement.

 

16

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Section 20         USA Patriot Act.

 

The Grantor and the Beneficiary hereby acknowledge that the Trustee is subject
to federal laws, including the Customer Identification Program (“CIP”)
requirements under the USA PATRIOT Act and its implementing regulations,
pursuant to which the Trustee must obtain, verify and record information that
allows the Trustee to identify the Grantor and the Beneficiary.  Accordingly,
prior to opening an account hereunder, the Trustee will ask the Grantor and the
Beneficiary to provide certain information including the Grantor’s and the
Beneficiary’s name, physical address, tax identification number and other
information that will help the Trustee to identify and verify the Grantor’s and
the Beneficiary’s identity such as organizational documents, certificate of good
standing, license to do business, or other pertinent identifying information. 
The Grantor and the Beneficiary agree that the Trustee cannot open an account
hereunder unless and until the Trustee verifies the Grantor’s and the
Beneficiary’s identity in accordance with the Trustee’s CIP.

 

Section 21         Required Disclosure.

 

The Trustee is authorized to supply any information regarding the Trust Account
and related Assets that is required by Applicable Law.  Each of the Grantor and
the Beneficiary agrees to supply the Trustee with any required information if it
is not otherwise reasonably available to the Trustee.  The Trustee will use
commercially reasonable efforts to provide notice to the Grantor or the
Beneficiary, as applicable, following any such disclosure, subject to legal or
regulatory restrictions on such notice.

 

Section 22         Representations.

 

Each party represents and warrants to the others that it has full authority to
enter into this Agreement upon the terms and conditions hereof and that the
individual executing this Agreement on its behalf has the requisite authority to
bind such party to this Agreement, and that the Agreement constitutes a binding
obligation of such party enforceable in accordance with its terms.

 

[Remainder of page intentionally left blank.  Signature page follows.]

 

17

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.

 

 

ALLSTATE LIFE INSURANCE COMPANY

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

 

LINCOLN BENEFIT LIFE INSURANCE COMPANY

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

[___________]

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

[Trust Agreement]

 

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

 

EXHIBIT A

 

FORM OF BENEFICIARY WITHDRAWAL NOTICE

 

From:                        Lincoln Benefit Life Insurance Company of America
(“Beneficiary”)

 

To:                                         [______________] (the “Trustee”)

 

Allstate Life Insurance Company (the “Grantor”)

 

Date:                           [__________]

 

Re:                                        Trust Agreement dated as of [_____],
2013 among the Grantor, the Beneficiary, and the Trustee (as amended, modified
or supplemented from time to time, the “Trust Agreement”)

 

Dear Sirs:

 

We hereby give you notice pursuant to Section 2(a) of the Trust Agreement that
the Beneficiary is entitled to withdraw the [sum of $________] [following
Assets] from the Trust Account [Describe specific Assets].  This notice
constitutes certification by the Beneficiary that an Uncured Grantor Default (as
defined in Section 2(a)(i) of the Trust Agreement) has occurred.

 

Payment or delivery should be immediately made to [Insert account information]
by the following method: [Describe method of cash transfer and/or Assets to be
withdrawn and delivery instructions].

 

Yours faithfully,

 

 

[__________]

 

 

 

For and on behalf of

Lincoln Benefit Life Insurance Company

 

A-1

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EXHIBIT B

 

FORM OF GRANTOR WITHDRAWAL NOTICE

 

From:                        Allstate Life Insurance Company (the “Grantor”)

 

To:                                         [___________] (the “Trustee”)

 

Date:                           [______]

 

Re:                                        Trust Agreement dated as of [    
        ], 2013 among the Grantor, Lincoln Benefit Life Insurance Company (the
“Beneficiary”), and the Trustee (as amended, modified or supplemented from time
to time, the “Trust Agreement”)

 

Dear Sirs:

 

We hereby give you notice pursuant to Section 2(b) of the Trust Agreement that
the Grantor is entitled to withdraw the [sum of $____________] [following
Assets] from the Trust Account [Describe specific Assets.].   This notice
constitutes certification by the Grantor that an Overfunding Event (as defined
in Section 2(b)(i) of the Trust Agreement) has occurred and the amount of the
applicable Excess is $[            ].

 

Payment or delivery should be immediately made to [Insert account information]
by the following method:  [Describe method of cash transfer and/or Assets to be
withdrawn and delivery instructions].

 

Yours faithfully,

 

 

[_______]

For and on behalf of

Allstate Life Insurance Company

 

B-1

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EXHIBIT C

 

INVESTMENT GUIDELINES

 

[Attached]

 

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

 

EXHIBIT D

 

GRANTOR REPRESENTATIVES

 

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

 

EXHIBIT E

 

BENEFICIARY REPRESENTATIVES

 

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

EXHIBIT H

 

 

 

 

 

TRANSITION SERVICES AGREEMENT

 

 

BY

 

and

 

BETWEEN

 

 

ALLSTATE LIFE INSURANCE COMPANY

 

and

 

 

RESOLUTION LIFE HOLDINGS, INC.

 

 

 

 

DATED AS OF _______, 2013

 

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

 

Table of Contents

 

 

 

Page

ARTICLE I

CERTAIN DEFINITIONS

 

 

 

1.1

SPA Definitions

1

1.2

Other Definitions

1

 

 

 

ARTICLE II

SCHEDULED SERVICES

 

 

 

2.1

Scheduled Services

3

2.2

Standard of Services

6

2.3

Limitation on Services

7

2.4

Variances

8

2.5

Dispute Resolution

9

2.6

No Agency

10

2.7

Subcontracting

10

2.8

Consents

10

2.9

Transition Management

11

2.10

Transition Plan

11

2.11

Records and Audit

12

2.12

Ownership of Intellectual Property; License

12

2.13

Separate Accounts

12

2.14

Notice to Policyholders

12

2.15

Link on Website

13

2.16

Customer Telephone Service

13

 

 

 

ARTICLE III

TERM AND TRANSITION ASSISTANCE

 

 

 

3.1

Term

13

3.2

Extension and Termination

13

3.3

Return of Materials

14

 

 

 

ARTICLE IV

COMPENSATION AND PAYMENT ARRANGEMENTS FOR SCHEDULED SERVICES

 

4.1

Compensation for Scheduled Services

14

4.2

Payment Terms

16

 

 

 

ARTICLE V

INDEMNIFICATION

 

5.1

Indemnification by Seller

18

5.2

Indemnification by Buyer

18

 

i

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5.3

Indemnification Procedures

18

 

 

 

ARTICLE VI

FORCE MAJEURE

 

ARTICLE VII

REMEDIES AND SURVIVAL

 

7.1

Financial Remedies Upon Material Breach

20

7.2

Specific Performance

20

7.3

Limitation of Liability

20

7.4

Survival Upon Expiration or Termination

21

 

 

 

ARTICLE VIII

CONFIDENTIALITY

 

8.1

Confidential Information

21

8.2

Unauthorized Acts

21

 

 

 

ARTICLE IX

SYSTEM ACCESS AND CONSUMER PRIVACY

 

9.1

System Access

22

9.2

Consumer Privacy

22

 

 

 

ARTICLE X

DISCLAIMER OF REPRESENTATIONS, WARRANTIES AND COVENANTS

 

ARTICLE XI

MISCELLANEOUS

 

11.1

Notices

22

11.2

Interpretation

24

11.3

Entire Agreement; Third-Party Beneficiaries

24

11.4

Governing Law

24

11.5

Assignment

24

11.6

Jurisdiction; Enforcement

24

11.7

Severability; Amendment; Modification; Waiver

25

11.8

Counterparts

26

 

ii

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TRANSITION SERVICES AGREEMENT

 

 

This Transition Services Agreement (this “Agreement” or “TSA”)), dated as of the
Closing Date, 2013, is by and between Allstate Life Insurance Company, an
insurance company organized under the laws of the State of Illinois (“Seller”),
and Resolution Life Holdings, Inc., a corporation organized under the laws of
the State of Delaware (“Buyer”).  Seller and Buyer shall each be referred to as
a “Party” in this Agreement and, collectively, as the “Parties.”

 

WHEREAS, Seller, Buyer and, solely for purposes of Section 5.25 and Article X
thereof, Resolution Life L.P., a Bermuda limited partnership and the sole owner
of Buyer, have entered into a Stock Purchase Agreement, dated as of July 17,
2013 (the “SPA”), whereby Buyer has acquired from Seller the ownership and
control of Lincoln Benefit Life Company, an insurance company organized under
the laws of the State of Nebraska;

 

WHEREAS, in connection with the SPA, Seller and its Affiliates desire to provide
certain transition services to Buyer and certain of its Affiliates on the terms
set forth herein; and

 

NOW THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

 

ARTICLE I
CERTAIN DEFINITIONS

 

1.1         SPA Definitions.  All defined terms used, but not defined, in this
Agreement shall have the meanings given such terms in the SPA.

 

1.2         Other Definitions.  For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:

 

“Additional Service” has the meaning set forth in Section 2.1.5.

 

“Appraisal Fees” has the meaning set forth in Schedule 1(a).

 

“Base Fee” has the meaning set forth in Schedule 1(a).

 

“Business” means, collectively, the Recaptured Business and all of the other
life insurance business, other than the Specified Life Business and the Vermont
Captive Business, written by the Company through Independent Producers that is
reinsured to third parties, as more particularly identified in Section 1.1(b) of
the Seller Disclosure Schedule of the SPA.

 

“Buyer Indemnified Person” has the meaning set forth in Section 5.1.

 

“Confidential Information” has the meaning set forth in Section 8.1.

 

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

 

“Cost of Service” means the estimated actual internal costs, fees and expenses,
and subcontracting costs under subcontracting relationships existing immediately
prior to the Closing Date, incurred by Seller and/or Providing Party in
performing the Scheduled Services and Migration services, which includes costs
such as stay bonuses and incremental severance payments to employees involved in
performing such Scheduled Services and Migration services, but shall not include
any incremental costs, fees or expenses paid for subcontracting pursuant to
Section 2.7.

 

“Customer Information” has the meaning set forth in Section 9.2.

 

“Customers” has the meaning set forth in Section 9.2.

 

“Designated Recipient” has the meaning set forth in Section 2.1.1(b).

 

“Dispute” has the meaning set forth in Section 2.5.

 

“Fees” has the meaning set forth in Section 4.1.1.

 

“Force Majeure Event” has the meaning set forth in ARTICLE VI.

 

“Guest User” has the meaning set forth in ARTICLE IX.

 

“Host” has the meaning set forth in ARTICLE IX.

 

“Indemnitee” means any Person entitled to indemnification under this Agreement.

 

“Indemnitor” means any Person required to provide indemnification under this
Agreement.

 

“Migration” means activities reasonably required to complete the migration of
business records and data used in the Business prior to the Closing Date or
generated during the term of this Agreement prior to the completion of
migration, including those activities set forth in Schedule 1(b), to and into
the environment or system specified by Buyer and its Affiliates or, as
applicable, a Designated Recipient.

 

“Out of Pocket Costs” has the meaning set forth in Section 4.1.2.

 

“Policy” means the policies and contracts of the types listed in the Actuarial
Reports prepared by Milliman.

 

“Providing Party” means Seller or any Person designated by Seller in accordance
with the terms of this Agreement to provide Scheduled Services.

 

“Receiving Party” means Buyer or Designated Recipient.

 

“Sales and Service Taxes” has the meaning set forth in Section 4.1.3.

 

“Scheduled Services” has the meaning set forth in Section 2.1.1(b).

 

2

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“Seller Indemnified Person” has the meaning set forth in Section 5.2.

 

“Separation” means activities reasonably required to complete the segregation
and extraction necessary to separate the business records and data used by the
businesses transferred to Buyer pursuant to the SPA from the environment and
systems of Seller and its Affiliates.

 

“Service Fees” means, collectively, the Fees and Out of Pocket Costs.

 

“Service Providers” has the meaning set forth in Section 2.1.1.

 

“Service Term” has the meaning set forth in Section 2.1.1(b).

 

“Significant Service Shortfall” has the meaning set forth in Section 2.2.1.

 

“Signing Date” has the meaning set forth in Section 2.1.5.

 

“Systems” has the meaning set forth in ARTICLE IX.

 

“Term” has the meaning set forth in Section 3.1.

 

“Termination Date” has the meaning set forth in Section 3.2.2.

 

“Third Party Claim” means any claim, action, suit, or proceeding made or brought
by any Person that is not a party to this Agreement;

 

“Transition Manager” has the meaning set forth in Section 2.9.

 

“TSA Material Contract” means a contract:  (i) to which Seller or its Affiliates
are a named party; (ii) whose nominal value is at least $300,000 USD; and (iii)
which is required for Seller to fulfill its obligations under this Agreement.

 

“Unauthorized Access” has the meaning set forth in Section 8.2.

 

“VAT” has the meaning set forth in Section 4.1.3(a).

 

ARTICLE II
SCHEDULED SERVICES

 

2.1         Scheduled Services.

 

2.1.1     Services.

 

(a)          Seller, directly or through its Affiliates, and their respective
employees, agents or subcontractors permitted in accordance with Section 2.7
herein (“Service Providers”), shall provide or cause to be provided to Buyer and
certain of its Affiliates all services set forth on Schedules 1(a)-(f) from and
after the date of this Agreement for the duration set forth in Schedules
1(a)-(f).  Buyer shall pay, or cause to be paid, the Service Fees as set forth
in Section 4.1 to Seller for providing the services set forth on Schedules
1(a)-(f), or causing such services to be provided.

 

3

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

 

(b)          The services set forth on Schedules 1(a)-(f) are hereinafter
referred to as the “Scheduled Services”, and the duration for which each
Scheduled Service is to be provided as set forth in Schedules 1(a)-(f) is
referred to as the “Service Term”.  Schedules 1(a)-(f) set forth, for each
Scheduled Service, the Providing Party and the Receiving Party and, where
appropriate, the Affiliate or permitted third party designated in writing by the
Receiving Party to receive such Service (the “Designated Recipient”).  The
Receiving Party, in its sole discretion, may change any Affiliate or third party
designated as the Designated Recipient for a Scheduled Service from the Person
currently so designated in Schedules 1(a)-(f), provided that any additional cost
to the Providing Party caused by or arising from such change shall be borne by
the Receiving Party.

 

2.1.2     Direction of Employees.  The Providing Party shall be solely
responsible for all salary, employment, payroll and other benefits of and
liabilities owed to, and compliance with immigration and visa laws and
requirements in respect of, its personnel assigned to perform the Scheduled
Services.  In performing their respective duties hereunder, all personnel
engaged in providing Scheduled Services shall be under the direction, control
and supervision of the Providing Party; and the Providing Party shall have the
sole right to exercise all authority with respect to the employment (including
termination of employment), assignment and compensation of such personnel.  The
employees of the Providing Party engaged in providing Scheduled Services to the
Receiving Party shall not, by virtue thereof, become employees of the Receiving
Party.

 

2.1.3     Cooperation.  Seller shall and shall cause each Providing Party to,
and Buyer shall and shall cause each Receiving Party to, use its reasonable best
efforts to: (a) cooperate with the other Party with respect to the provision or
receipt of such Scheduled Service and (b) enable the Providing Party to provide
and the Receiving Party or Designated Recipient to receive such Scheduled
Service in accordance with this Agreement.  The failure of a Party to comply
with this provision with respect to a Scheduled Service in a way that materially
prevents or materially hinders the other Party from providing or receiving such
Scheduled Service at all or in accordance with the service standard in Section
2.2.1 shall result in the following: (i) with respect to payment of Fees under
Section 4.1.1(a)(i)-(iii), (x) if such non-cooperation by Seller or a Providing
Party occurs during the first twelve (12) month period of this Agreement, the
Appraisal Fees, as set forth in Section 4.1.1(a)(i), for the Schedule 1(a)(i),
(a)(ii), or (c)-(f) on which such Scheduled Service appears shall be extended by
the period of such non-cooperation, and (y) if such non-cooperation by Seller or
a Providing Party occurs during the six (6) months thereafter (including as
extended by Section 2.1.3(i)(x)), the fees set forth in Section 4.1.1(a)(ii)
shall be extended by the period of such non-cooperation provided that
notwithstanding Sections 2.1.3(i)(x) and 2.1.3(i)(y), the fees set forth in
Section 4.1.1(a)(iv) shall apply after the end of the twenty-fourth (24th)
calendar month from the date hereof; or (ii) if the Buyer or a Receiving Party
is failing to cooperate, Buyer shall pay Seller for any incremental fees, costs
or expenses arising from such non-cooperation.  A Party must provide notice to
the other Party if it believes such other Party is failing to cooperate.  Upon
receipt of such notice, such Party shall have thirty (30) days to cure such
failure to cooperate.  Notwithstanding the foregoing, a failure to cooperate on
the part of such Party shall not excuse performance of the respective Scheduled
Service.  Such cooperation shall include assisting Buyer in benchmarking the
costs to be paid by the Receiving Party in the administrative services agreement
to be entered into between third

 

4

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party administrators and the Receiving Party; provided that Seller shall not be
obligated to breach any existing obligation to a third party administrator.

 

2.1.4     Permits.  Seller represents and covenants that, as of the date hereof,
it and any of its Affiliates through which Seller intends to provide a Scheduled
Service has all material Permits necessary to provide the Scheduled Services. 
Seller shall be responsible for keeping in force all Permits necessary to
provide the Scheduled Services, with any associated costs borne by Seller and
Buyer equally.  Notwithstanding anything in this Agreement to the contrary,
Seller shall not be obligated to provide any Scheduled Service if the provision
of such Scheduled Service would violate any Applicable Law or rules of
professional ethics.  If Seller is prevented from providing, or causing to be
provided, any Scheduled Service because providing such Scheduled Service or
causing it to be provided would violate any Applicable Law or rules of
professional ethics, Seller shall (i) notify Buyer of such prevention as soon as
practicable, and (ii) provide or cause to be provided alternative equivalent
services, and Seller and Buyer shall pay equally any additional costs, fees and
expenses associated with such alternative services.  Except with respect to such
alternative services provided during the first twelve (12) months in which
Scheduled Services are provided pursuant to this Agreement, if costs in
connection with the provision of alternative equivalent services are reduced,
the fees charged to Buyer will be reduced commensurately.  If Seller changes the
manner in which it provides the Scheduled Services such that it or its
Affiliates must obtain any additional Permits necessary to provide the Scheduled
Services for which it is responsible, other than in response to a change in
Applicable Law, Seller shall be responsible for obtaining such necessary
Permits, at Seller’s cost.

 

2.1.5     Omitted Services.  If at any time after the Closing Date, Buyer
becomes aware of any service that is not a Scheduled Service (i) that had been
provided by a Service Provider, in whole or in part, to the Business in the
period of time during the twelve (12) months prior to the execution of the SPA
(the “Signing Date”), (unless such service was terminated in the normal course
of business prior to the Closing Date) and (ii) that is (A) reasonably necessary
to conduct the Business or (B) reasonably necessary for Buyer to satisfy its
obligations under the SPA, the Administrative Services Agreement or any of the
other Transaction Agreements (each, an “Omitted Service”), then Buyer shall
provide written notice thereof to Seller’s Transition Manager:  (w) within 100
days after the date hereof, or (x) for an Omitted Service that has historically
been provided on a quarterly basis, promptly after discovering the need for such
Omitted Service and in no event later than thirty (30) days from the end of the
first full quarterly period after the date hereof to which such Omitted Service
is related, or (y) for an Omitted Service that has historically been provided on
an annual basis, promptly after discovering the need for such Omitted Service
and in no event later than ninety (90) days from the end of the first relevant
annual period after the date hereof to which such Omitted Service is related. 
If such notice is provided, (a) Seller shall cause the Omitted Service to begin
to be provided to Buyer and/or its Affiliates within a commercially reasonable
period of time under the circumstances after receipt of such notice, (b) such
Omitted Service shall be deemed to be a Scheduled Service, (c) Schedules
1(a)-(f) shall be deemed amended to include such Omitted Service, and (d) such
Omitted Service shall be provided in accordance with the terms and conditions of
this Agreement. With respect to an Omitted Service qualifying under Section
2.1.5(i) that becomes a Scheduled Service included in Schedules 1(a)-(f), Buyer
shall pay an amount commensurate with the Service Fees set forth in Schedules
1(a)-(f) for similar Scheduled Services, to the extent such similar Scheduled
Services exist, and Schedules 1(a)-(f) shall be

 

5

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amended accordingly to include such amount.  For an Omitted Service qualifying
under Section 2.1.5(ii) that becomes a Scheduled Service included in Schedules
1(a)-(f), or an Omitted Service for which there is no similar Scheduled Service
in Schedules 1(a)-(f), Seller shall determine in good faith the amounts payable
by Buyer based on the Service Fees set forth in Schedules 1(a)-(f) and provide
notice of such amounts to Buyer; provided, that upon such notice, Buyer shall in
its sole discretion have the right to accept or reject the provision of such
service.  In the event that the Receiving Party requests that the Providing
Party provide additional services that are not Omitted Services (“Additional
Services”), the Providing Party shall consider such request in good faith and if
it decides it is willing to provide or to cause one of its Affiliates to provide
such Additional Services, in the Providing Party’s reasonable discretion, the
Parties shall negotiate in good faith to agree on the terms upon which the
Providing Party would provide such Additional Services and the amounts payable
by Buyer for such Additional Services.  In the event that the Providing Party
agrees to provide any such Additional Service, the Parties will enter into an
amendment to this Agreement amending Schedules 1(a)-(f) to reflect such
Additional Service, and such Additional Service shall be deemed to be part of
this Agreement and the Scheduled Services from and after the date of such
amendment.  The foregoing obligations of Seller with respect to an Omitted
Service or an Additional Service shall not apply with respect to any services
that are excluded services set forth in Schedule 1(h) hereto.

 

2.1.6     Finance and Actuarial Corporate Support.  In the performance of the
Scheduled Services listed in Schedule 1(c)(ii), at the Receiving Party’s
reasonable request, Providing Party shall provide compilations of data and
information in a reporting format consistent with that used by Providing Party
for its own business to enable the Receiving Party to direct the Business;
provided that Providing Party shall have no obligation to provide reports that
include any judgment, analysis, or data relating to or reflecting policy data
not owned by the Receiving Party, or that reflect any other data or processes
proprietary to the Providing Party.  The Parties agree that the Providing Party
will not have any responsibility for the direction of the Business.

 

2.2         Standard of Services.

 

2.2.1     General Standard.  The Providing Party shall perform each Scheduled
Service for which it is responsible or to cause such Scheduled Services to be
performed for the Receiving Party or its Designated Recipient at a standard that
is no lower than the service standards set forth on Schedule 1(g), and, if no
standard for a Scheduled Service is set forth on Schedule 1(g), at a standard no
lower than the standard to which such Scheduled Service was provided in the
twelve (12) months immediately prior to the Signing Date.  The target milestones
and timelines relating to the Migration services in Schedule 1(b) shall be
estimated in good faith and documented in the Migration plan, and such Migration
services shall be provided in a workmanlike manner. The Receiving Party
understands and agrees that the Providing Party is not in the business of
providing transition services to third parties, and under no circumstances shall
the Providing Party be held accountable to a higher standard of care than that
set forth herein.  The description of services in Schedules 1(a)-(f) shall not
alter, amend or supplement the service standard set forth in this Section.  If
the Receiving Party provides the Providing Party with written notice of the
occurrence of any Significant Service Shortfall (as defined below) in the
Scheduled Services, the Providing Party shall rectify such Significant Service
Shortfall promptly, provided that any Dispute as to whether a Significant
Service Shortfall

 

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occurred shall be resolved in accordance with Section 2.5 hereto, and the
Providing Party shall take corrective action in good faith in connection with
such alleged Significant Service Shortfall until such Dispute is resolved;
provided further that the Providing Party’s obligations under this Agreement
shall be relieved to the extent, and for the duration of, any Force Majeure
Event as set forth in ARTICLE VI; provided further, that any costs, fees and
expenses associated and in connection with remedying such Significant Service
Shortfall shall be borne by the Party responsible for causing such shortfall. 
For purposes of this Section 2.2.1, a “Significant Service Shortfall” shall
occur if a service level standard set forth in Schedule 1(g) is not met for two
(2) consecutive months.

 

2.2.2     Disaster Recovery Program.  For the duration of the Term, the
Providing Party shall, and shall cause its relevant Affiliates to, maintain
backup, business continuation and disaster recovery plans consistent with past
practices as they existed during the twelve (12) months immediately preceding
the Signing Date.

 

2.3         Limitation on Services.

 

2.3.1     Buyer acknowledges and agrees that Seller’s obligation to cause
Service Providers to provide the Scheduled Services to Buyer and/or its
Affiliates under the standards of performance set forth in Section 2.2.1 of this
Agreement or Schedule 1(g) shall be subject to and shall be limited to the
extent to which Service Providers’ ability to provide Scheduled Services to
Buyer or its Affiliates is adversely affected by Buyer’s failure to perform its
obligations hereunder, under the SPA or any other Transaction Agreement, or its
Affiliates’ failure to perform hereunder, under the SPA or any other Transaction
Agreement.

 

2.3.2     Seller shall have no obligation to cause any Scheduled Services to be
provided to any Person other than Buyer, its Affiliates, Buyer’s Designated
Recipient or its Affiliates.

 

2.3.3     Seller shall cause to be provided the Scheduled Services in accordance
herewith solely to allow Buyer and its Affiliates to conduct the Business in
substantially the same manner as conducted during the twelve (12) months prior
to the Signing Date (inclusive of any organic growth in volume and scope of such
businesses).  Except as otherwise mutually agreed by the Parties, Seller shall
not be obligated to cause to be provided Scheduled Services to Buyer and its
Affiliates in support of the businesses of Buyer and its Affiliates other than
the Business.

 

2.3.4     Seller shall not be obligated to cause any Service Provider to provide
any Scheduled Service (or portion thereof) to the extent performance of such
Scheduled Service (or portion thereof) would require such Service Provider to
violate or breach (i) any Applicable Law or any Order; (ii) the terms and
conditions of a TSA Material Contract applicable to the administration of the
Business, unless to not do so would not be in compliance with Applicable Law or
any Order; (iii) subject to Seller’s obligations under Section 2.9, any executed
written agreement in effect as of the Closing Date between such Service Provider
and a non-affiliated third party; (iv) such Service Provider’s written policies
and procedures generally applicable to its other businesses or customers,
including any changes made thereto, to the extent such changes are made (A)
after the Closing Date and (B)(I) to comply with Applicable Law or any Order, or
(II) to respond to a new legal or regulatory issue or to respond to a reasonably
plausible security

 

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threat; or (v) the SPA or any other Transaction Agreement; provided that, for
the avoidance of doubt, Seller shall continue to be obligated to cause Service
Providers to provide such Scheduled Services (or portion thereof) to the extent
that doing so would not result in any such violation or breach; provided further
that to the extent that (i)-(v) herein apply Seller and Buyer shall negotiate in
good faith and agree upon a course of action to provide alternative equivalent
services with Seller and Buyer to share equally any costs, fees or expenses
associated with such alternative equivalent services.

 

2.3.5     Subject to Section 2.3, Seller and Buyer reserve the right to suggest
any changes to (i) the manner in which the Scheduled Services are provided or
received, (ii) the location from which the Scheduled Services are provided or to
which the Scheduled Services are received or (iii) the personnel involved in the
provision or receipt of the Scheduled Services. The Parties shall negotiate such
changes in good faith, with any incremental costs, fees or expenses borne by the
Party suggesting such change.  Notwithstanding the foregoing, Seller shall not
make a change under this Section 2.3.5 that makes receipt of the Scheduled
Services materially more expensive or the Separation process materially more
difficult or complicated unless such change is also being implemented broadly
across Seller’s own business operations.

 

2.3.6     Except with respect to any Company Employee hired pursuant to the SPA,
if Buyer desires to hire or employ any other employee of Seller who provides or
supports any Scheduled Services prior to the date of discontinuation of all
Scheduled Services hereunder for which such employee has any duties or
obligations, the Parties shall discuss in good faith whether and to what extent
the hiring or employment of such employee will reduce Seller’s obligations
hereunder with respect to such Scheduled Services; provided that, even if such
employee of Seller is hired by Buyer and was the sole employee responsible for
providing any Scheduled Service, Seller shall remain obligated to provide such
Scheduled Services if such employee is hired or employed by Buyer or its
Affiliates to perform a service that is not the same as the Scheduled Service
for which such employee was solely responsible for providing.  Notwithstanding
the foregoing, Seller shall continue to provide any resources reasonably
necessary for such a hired employee to perform his or her duties and obligations
during the Term of this Agreement and any extensions thereof.

 

2.4         Variances.  With respect to VUL Contracts administered pursuant to
this Agreement, Seller shall cause to be provided to Buyer and/or its Affiliates
(a) such daily reports as Seller and/or their Affiliates produced during the
nine (9) months prior to the Closing Date (the “Pre-Closing Date Period”)
summarizing (i) the discrepancies arising in the execution and recording of
investment transactions pursuant to the VUL Contracts, and (ii) during such
portion of the Term in which Seller provides Scheduled Services, gains or losses
to Buyer resulting from or arising out of the administration of the VUL
Contracts (including, without limitation, delayed legal interest or claim
interest from processing delays, unrecovered miscalculations of claim payment
amounts, and other errors in processing claims resulting in gains or losses to
Buyer) (collectively, the items summarized in (a)(i) and (a)(ii) are the
“Variances”), and (b) such weekly and monthly reconciliation reports as Seller
and/or their Affiliates produce as of the Closing Date. For such Variances,
Seller shall, in accordance with their guidelines existing as of the Closing
Date, reconcile and credit or debit the applicable Contractholder’s account. For
so long as Seller is providing the Scheduled Services during the Term, at the
end of every six (6) month period during the Term (each, a “True-Up Period”) and
once immediately following the

 

8

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discontinuation of all of the Scheduled Services (the “Final True-Up Period”),
Seller shall aggregate the Monthly Net Variances over the months occurring
during the applicable True-Up Period or Final True-Up Period (such aggregate
being the “True-Up Sum”). If the True-Up Sum for a True-Up Period or the Final
True-Up Period, as applicable, is negative, then Seller shall invoice Buyer for
such True-Up Sum and Buyer shall remit payment in accordance with ARTICLE IV;
provided, that such True Up Sum shall not exceed the “Variance Limit” (which
shall be equal to the cumulative sum of Ten Thousand Dollars ($10,000) per month
times the number of months of such True-Up Period or Final True-Up Period). If
the True-Up Sum for a True-Up Period or the Final True-Up Period, as applicable,
is positive, then Seller shall remit such True-Up Sum to Buyer. The “Monthly Net
Variance” shall be the aggregate amount during a given month credited to
Contractholders’ accounts or paid to Contractholders to correct Variances
(negative amounts), less any amounts debited from Contractholders’ accounts or
recovered from Contractholders (including contractholders in connection with the
correction of Variances (positive amounts)), and less any amounts retained by
Seller in connection with a Variance and not required under Seller’s Guidelines
existing as of the Closing Date or Applicable Law, to be paid or credited to
Contractholders to correct such Variance.

 

2.5         Dispute Resolution.

 

2.5.1     Amicable Resolution.  The Parties mutually desire that friendly
collaboration will continue between them during the Term.  Accordingly, they
will try to resolve in an amicable manner all disagreements and
misunderstandings connected with their respective rights and obligations under
this Agreement, including any amendments hereto.  In furtherance thereof, in the
event of any dispute or disagreement (a “Dispute”) between the Parties in
connection with this Agreement (including the standard of performance, delay of
performance or non-performance of obligations, or payment or non-payment of
Service Fees hereunder), then the Transition Managers shall attempt to resolve
the Dispute amicably.  If the Transition Managers are unable to resolve a
Dispute in a timely manner, then either Transition Manager, by written request
to the other, may request that such Dispute be referred for resolution to the
president (or similar position) of the division implicated by the matter for
Seller and Buyer, which presidents will have fifteen (15) days to resolve such
Dispute.  If the presidents of the relevant divisions for each Party do not
agree to a resolution of such Dispute within fifteen (15) days after the
reference of the matter to them, or if the Dispute is not otherwise resolved in
a friendly manner as set forth in this Section 2.5.1, either Party involved in
the Dispute may bring an action regarding such Dispute as set forth in Section
11.6.  Notwithstanding anything to the contrary in this Section 2.5.1, any
amendment to the terms of this Agreement may only be effected in accordance with
Section 11.7.

 

2.5.2     Non-Exclusive Remedy.  Nothing in this Section 2.5 will prevent either
Party from immediately seeking injunctive or interim relief (i) in the event of
any actual or threatened breach of any of the provisions of ARTICLE VIII, (ii)
in the event that the Dispute relates to, or involves a claim of, actual or
threatened infringement or violation of intellectual property or (iii) to the
extent necessary for either Party to preserve any right.  All such actions for
injunctive or interim relief shall be brought in a court of competent
jurisdiction in accordance with Section 11.6.  Such remedy shall not be deemed
to be the exclusive remedy for breach of this Agreement, and further remedies
may be pursued in accordance with Section 2.5.1.

 

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2.5.3     Commencement of Dispute Resolution Procedure.  Notwithstanding
anything to the contrary in this Agreement, each Party, but none of their
respective Affiliates, is entitled to commence a dispute resolution procedure
under this Agreement pursuant to this Section 2.5, and each Party will cause its
respective Affiliates not to commence any dispute resolution procedure in
connection with this Agreement other than through such Party as provided in this
Section 2.5.3.

 

2.5.4     Compensation.  With respect to any Scheduled Services provided as set
forth in Schedules 1(a)-(f), during the pendency of any Dispute, the Receiving
Party shall continue to make all payments due and owing under ARTICLE IV for
such Scheduled Services and the Providing Party shall continue to provide all
such Scheduled Services in accordance with the service standard set forth in
Section 2.2.1; provided that either Party may recoup any payments or losses
incurred during the pendency of a Dispute based on the resolution of such
Dispute.  The Parties will proceed in good faith with the Migration timeline
identified in the Migration plan during pendency of any Dispute concerning any
Scheduled Service set forth in Schedule 1(b).

 

2.6         No Agency.  Each Party acknowledges that it has entered into this
Agreement for independent business reasons.  The relationship of the Parties
hereunder is that of independent contractors and nothing contained herein shall
be deemed to create a joint venture, partnership or any other relationship. 
Neither Party shall have any power or authority to negotiate or conclude any
agreement, or to make any representation or to give any understanding on behalf
of the other in any way whatsoever.

 

2.7         Subcontracting.  The Providing Party may subcontract for the
performance of any Scheduled Service to: (a) any Person if the service to be
subcontracted is primarily a routine task or function; (b) an Affiliate of the
Providing Party; (c) any reinsurer or its Affiliates; (d) an existing
subcontractor that was providing such service to the Providing Party or the
Receiving Party immediately before the Closing Date; (e) any subcontractor to
which Seller or an Affiliate subcontracts the same or similar services for
itself; and (f) any other Person with the prior written consent of the Receiving
Party, such consent not to be unreasonably withheld, conditioned or delayed,
provided that no such subcontracting shall relieve the Providing Party from any
of its obligations or liabilities hereunder, and the Providing Party shall
remain responsible for all obligations or liabilities of such subcontractor with
respect to the provision of such service or services as if provided by the
Providing Party.  In the event that the Providing Party subcontracts for
performance of any Scheduled Service under Section 2.7(a), (c) or (e), Seller
shall pay any incremental fees to the subcontractor that are in excess of the
Fees set forth for that Scheduled Service in Schedules 1(a)-(f); provided that
if Seller subcontracts to any person under Sections 2.7(a)-(e) after the date
hereof, to the extent that such subcontracting makes Separation more difficult
or complicated, then Seller shall pay all incremental costs, fees and expenses
relating to Separation caused by such subcontracting.

 

2.8         Consents.  Notwithstanding any provision of this Agreement to the
contrary, if the provision of any Scheduled Service as contemplated by this
Agreement requires the consent, license or approval of any third party that has
not been obtained prior to the date hereof as contemplated by Section 5.4(a) of
the SPA, Seller shall continue to use commercially reasonable efforts to obtain
such consent, license, or approval as promptly as possible after the Closing

 

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Date; provided, however, that under no circumstances shall the performance of
such Scheduled Service require the Providing Party or any of its directors (or
persons in similar positions), officers, employees or agents to violate any
Applicable Laws or breach any TSA Material Contract.  Seller and Buyer shall
share equally all costs of obtaining such third party consents, licenses or
approvals necessary for the provision and receipt of the Scheduled Services,
including any payments that are required to any third party.  If the Providing
Party reasonably believes that it is unable to provide such Scheduled Service
because of a failure to obtain necessary consents, licenses, sublicenses or
approvals, Providing Party shall promptly notify the Receiving Party and the
Parties shall negotiate in good faith and agree upon a course of action to
provide alternative equivalent services with Seller and Buyer to share equally
any costs, fees or expenses associated with such alternative equivalent
services.

 

2.9         Transition Management.  Each Party shall appoint a transition
manager (each,  a “Transition Manager”).  The Transition Managers shall have the
authority to represent the position of their respective Parties and to make
operational decisions regarding the Parties’ performance of this Agreement. 
Each Transition Manager shall appoint or designate in a writing directed to the
other Transition Manager, a person or persons to act in his or her stead on
day-to-day matters within various functional areas when the Transition Manager
is unavailable.  Subject to the right to delegate duties to others, the
Transition Managers shall serve as the primary contact point for the respective
principals with respect to the obligations of the Parties under this Agreement. 
Each Transition Manager’s responsibilities shall include: (a) conducting reviews
of compliance with the service standard in Section 2.2.1; (b) assuring
compliance with this Agreement, including the schedules; (c) mitigating and
resolving technical and business issues; (d) managing the service migration
process; and (e) participating in the dispute resolution process under Section
2.5.  A Party may designate a replacement for its Transition Manager by written
notice to the other Party.  Each Transition Manager, and any successor, shall
have an educational background, experience, skills and other qualifications
necessary to perform his or her assigned duties.  Nothing in this Agreement
shall be deemed to authorize either Transition Manager to amend this Agreement
in any way.

 

2.10       Transition Plan.  Promptly after the date hereof, and in any event
within thirty (30) days hereafter, Seller and Buyer shall each appoint a
transition team to cooperate in good faith to develop a Migration plan for
separating the Company Business from the businesses of Seller and its Affiliates
(including the Company) that is not Company Business so as to minimize the
adverse impact of such Migration on each party’s businesses.  Such Migration
plan shall include a decision on whether to separate the accounting/finance
conversion from the administrative conversion, such that, if included, Seller
would continue providing Scheduled Services for accounting/finance functions to
December 31, 2014 but the administrative conversion would occur earlier.  Buyer
shall bear any additional costs incurred as a result of the decision to separate
the accounting/finance conversion from the administrative conversion.  Seller
and Buyer each agree to cooperate in the performance of the activities set forth
on Schedule 1(b) and the Migration of the performance of the Scheduled Services
on Schedules 1(a) and 1(c)-(f) from a Service Provider to Buyer, an Affiliate or
a third party of Buyer’s choice, taking into account, in good faith, the need to
minimize both the cost of such Migration and disruption to the ongoing business
activities of each party.

 

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2.11       Records and Audit.  Each Party shall maintain true and correct
records of all receipts, invoices, reports and other documents relating to the
provision and receipt of Scheduled Services and the policyholder records of the
Business in accordance with their respective standard accounting practices and
procedures, consistently applied, and shall provide each other with reasonable
access to such records, subject to Applicable Law and the obligations of ARTICLE
VIII.  Following the Term of this Agreement, Seller shall, and shall cause its
Affiliates to: (i) allow Buyer, upon reasonable prior notice and during normal
business hours, through its employees and Representatives, the right, at Buyer’s
expense and no more than once per calendar year unless required by a
governmental regulatory agency, to examine any records produced during the Term
of this Agreement relating to the provision of Scheduled Services, or any other
obligation under this Agreement, or the policyholder records of the Business
that are retained by Seller or any of its Affiliates for any purpose, including
the preparation or examination of Buyer’s Tax Returns, regulatory filings,
financial statements and the conduct of any litigation or otherwise, or the
conduct of any regulatory, customer or other dispute resolution process, but
only to the extent that such records of Seller relate to the provision of
Scheduled Services or the policyholder records of the Business during the Term
of this Agreement; (ii) maintain such records in accordance with Seller’s and
its Affiliates’ record retention policies; and (iii) provide reasonable access
to employees concerning the information in such records for any independent
audit of Buyer; provided that Seller and its Affiliates may destroy such records
in their discretion in compliance with their record retention policies after
giving reasonable prior written notice to Buyer of their intention to destroy
such records; provided further that Seller and its Affiliates shall have no
obligation to maintain or retain any books and records to the extent that
electronic or paper copies or originals of such books and records are delivered
to Buyer at or prior to the end of the Term of this Agreement.  The Providing
Party shall provide, to the Receiving Party and any independent auditors engaged
by it, reasonable access to staff and data relating to the Systems in which the
Receiving Party’s data is held or processed.

 

2.12       Ownership of Intellectual Property; License.  Any Intellectual
Property owned by a Party or its Affiliates and used after the date hereof in
connection with the provision or receipt of the Scheduled Services, as
applicable, shall remain the property of such Party or its Affiliates.  Each
Party grants, and shall cause its Affiliates to grant, to the other Party and
its Affiliates a royalty-free, non-exclusive, non-transferable, worldwide
license, during the term of this Agreement, to use the intellectual property
owned by such Party or its Affiliates only to the extent necessary for the other
Party and its Affiliates to provide or receive the Scheduled Services, as
applicable.  Other than the license granted to a Party and its Affiliates
pursuant to the preceding sentence, the SPA, the Administrative Services
Agreement or any other Transaction Agreement, neither party nor its Affiliates
shall have any right, title or interest in the intellectual property owned by
the other party or its Affiliates.

 

2.13       Separate Accounts.  Seller will perform, or has performed, services
required for Separate Account Separation (as defined in the ASA).  Seller and
Buyer shall each equally bear the fees, costs and expenses associated with
Separate Account Separation (as defined in the ASA), to be invoiced in
accordance with Section 4.2 herein, with the total aggregate exposure of each
Party not to exceed fifty thousand U.S. dollars ($50,000).

 

2.14       Notice to Policyholders.  Seller shall, on behalf of Buyer and at
Buyer’s cost, include an announcement of the Closing, in form and substance
agreed to by the Parties, Seller’s

 

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consent not to be unreasonably withheld or delayed, with the first
correspondence sent to the policyholders of the Company after the Closing, such
announcement to be provided in the ordinary course of business or at such time
as otherwise required by Applicable Law.

 

2.15       Link on Website.  After Migration is successfully completed and
continuing for one (1) year thereafter, Seller shall include and maintain a link
displayed on the appropriate Allstate website that directs users that click or
activate the link to the Company website.  Such link shall be accompanied by
appropriate language notifying the Company’s policyholders of the Company’s
website, and instructing them to access such website directly in the future.

 

2.16       Customer Telephone Service.  After Migration is successfully
completed and continuing for one (1) year thereafter, each Party shall redirect
any inquiries it receives regarding the other Party to the appropriate telephone
number of such Party.

 

ARTICLE III
TERM AND TRANSITION ASSISTANCE

 

3.1         Term.  The term (the “Term”) of this Agreement shall commence as of
the date hereof and, subject as to any Scheduled Service to the earlier
expiration of the Service Term with respect thereto, shall continue until the
earliest of:

 

3.1.1     the date on which the last of the Scheduled Services under this
Agreement is terminated; or

 

3.1.2     the date on which this Agreement is terminated by mutual agreement of
the Parties.

 

3.2         Extension and Termination.

 

3.2.1     Extension.  If Buyer reasonably believes that it will not be able to
complete its Migration of one or more Scheduled Services by the end of the
18th month under this Agreement, then upon written notice provided to Seller at
least ninety (90) days prior to the end of such 18-month period, Buyer shall
have the right to request and cause Seller to continue to provide such Scheduled
Services; provided that, with respect to such extended Scheduled Services, Buyer
shall pay the applicable Fees set forth in Section 4.1.1(a)(iii).
Notwithstanding the foregoing, if Buyer is unable to complete Migration before
the end of such 18-month period due primarily to the Providing Party failing to
fulfill its obligations in the performance of any of the Scheduled Services,
Buyer shall pay the applicable Fees set forth in Section 4.1.1.(a)(ii) until all
such deficiencies are cured.

 

3.2.2     Early Termination.  If the Receiving Party wishes to terminate a
Scheduled Service (or a portion thereof) before Buyer has completed its
Migration of all Scheduled Services, the Receiving Party shall notify the
Providing Party in writing of the proposed date on which such Scheduled Service
(or portion thereof) shall terminate (the “Termination Date”), at least 60 days
prior to the Termination Date.  The termination of a portion of a service shall
not change the Fees for such service.  Effective on the Termination Date, such
Scheduled Service (or portion thereof) shall be discontinued and thereafter,
this Agreement shall be of no further force and effect with respect to such
Scheduled Service (or

 

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portion thereof), except as to obligations accrued prior to the Termination
Date. Except with respect to obligations accrued prior to the Termination Date,
if all Scheduled Services on one of the Schedules 1(a)(i), (a)(ii), (b)(i),
(b)(ii), (c)(i), (c)(ii) or (d)-(f) are terminated, any fees, costs or expenses
associated with such Schedule 1(a)(i), (a)(ii), (b)(i), (b)(ii), (c)(i), (c)(ii)
or (d)-(f), shall no longer be due or owing subsequent to the date of
termination of the last Scheduled Service on such Schedule.

 

3.3         Return of Materials.  After a Scheduled Service is terminated, each
Party will return all materials in a form usable by the other Party, with the
cost to change the form of such materials, if applicable, to be borne by the
recipient, and property owned by the other Party and materials and property of a
proprietary nature involving a Party or its Affiliates relevant solely to the
provision or receipt of that Scheduled Service and no longer needed regarding
the performance of other Scheduled Services under this Agreement, and will do so
(and will cause its Affiliates to do so) within thirty (30) days after the
applicable termination.

 

ARTICLE IV
COMPENSATION AND PAYMENT ARRANGEMENTS FOR SCHEDULED SERVICES

 

4.1         Compensation for Scheduled Services.

 

4.1.1     Compensation Generally.  In accordance with the payment terms set
forth in Section 4.2 and subject to Section 4.1.3, the Receiving Party agrees
timely to pay the Providing Party, on a monthly basis:

 

(a)          an amount for the provision of Scheduled Services as follows
(collectively, the “Fees”):

 

(i)           during the first twelve (12) months of this Agreement, for
Scheduled Services on Schedules 1(a) and 1(c)-(f), the Appraisal Fees;

 

(ii)          except with respect to Scheduled Services listed on Schedule
1(c)(ii), during the period starting at the end of the period in subsection (i)
until six (6) months thereafter, for Scheduled Services on Schedules 1(a) and
1(c)-(f); the Cost of Service plus 10% of the Cost of Service; or

 

(iii)         except with respect to Scheduled Services listed on Schedule
1(c)(ii), during the period starting at the end of the period in subsection
(ii), for Scheduled Services on Schedules 1(a) and 1(c)-(f); the Cost of Service
plus 20% of the Cost of Service; and

 

(iv)         during the period starting at the end of the 24th month from the
date hereof, an additional $500,000 for every one (1) month period thereafter;

 

(v)          for Scheduled Services on Schedule 1(b), the Fees set forth on
Schedule 1(b);

 

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(vi)         for those Scheduled Services listed on Schedule 1(c)(ii), fees for
any such services above the current stated estimates will be incremental and
charged on a time and materials basis at Seller’s cost; and1

 

(b)          any payments due to Seller pursuant to Section 2.4 (Variance).

 

Seller shall calculate the Cost of Service six (6) months in advance of the
periods specified in subsections (i)-(iii) of Section 4.1.1.(a) and shall
promptly notify Buyer or Receiving Party of such calculation. If the Cost of
Service so calculated (x) is higher than the Base Fee, for purposes of Section
4.1.1.(a) the Cost of Service shall be capped at 110% of the Base Fee; or (y) is
lower than the Base Fee, for purposes of Section 4.1.1.(a) the Cost of Service
shall in no case be lower than 90% of the Base Fee.

 

4.1.2     Out of Pocket Costs.  Except with respect to any Out of Pocket Costs
(as defined below) incurred in providing the Scheduled Services set forth in
Schedules 1(a)-(f) of this Agreement, without limiting the foregoing and subject
to Section 2.8 and Section 4.1.3, the Receiving Party agrees to pay, or
reimburse the Providing Party for its payment of, all Out of Pocket Costs of the
Providing Party.  For purposes hereof, the term “Out of Pocket Costs” means all
fees, costs or other expenses (including Sales and Service Taxes) (except for
any consent fees in the SPA or Section 2.8 herein) payable by the Providing
Party or its Affiliates to third parties that are not Affiliates of the
Providing Party in connection with the Scheduled Services and Migration services
provided by the Providing Party hereunder.  The Providing Party shall request in
writing from the Receiving Party the approval of all Out of Pocket Costs above
fifty thousand U.S. dollars ($50,000); and agrees not to accrue such Out of
Pocket Costs until it receives written approval from the Receiving Party.  The
Providing Party shall use commercially reasonable efforts: (a) not to incur Out
of Pocket Costs that are inconsistent with the type of Out of Pocket Costs
incurred under past practices with the applicable Scheduled Services without the
prior written consent of the Receiving Party; and (b) to minimize the amount of
its Out of Pocket Costs, consistent with providing the Scheduled Services in
accordance with the standard set forth in Section 2.2.1.

 

4.1.3     Taxes.

 

(a)          The Receiving Party will pay and be liable for all sales, goods or
services, excise, privilege, value added (“VAT”), lease, use, transfer,
consumption or similar gross receipts based taxes (the “Sales and Service
Taxes”) imposed on Scheduled Services and Migration services provided by the
Providing Party.  Such taxes will be payable by the Receiving Party to the
Providing Party in the manner set forth in Section 4.2 or as otherwise mutually
agreed in writing by the Parties and under the terms of the Applicable Law which
governs the relevant Sales and Service Tax.  Notwithstanding the previous
sentence, if the Receiving Party is exempt from liability for such taxes, the
Receiving Party shall provide the Providing Party with a certificate (or other
proof), which certificate or proof is reasonably acceptable to the Providing
Party, evidencing an exemption from liability for such Sales and Service Taxes. 
The Receiving Party’s obligation to pay Sales and Service Taxes under this

 

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1  Note to Draft:  The detailed calculation of those Fees described in Section
4.11(a)(vi) will be discussed prior to Closing and documented in Schedule 1(c).

 

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Section 4.1.3 shall be subject to the receipt of a valid and customary invoice
or other document under the terms of Applicable Law for each Sales and Service
Tax.  The Providing Party shall be responsible for any losses (including any
deficiency, interest and penalties) imposed as a result of a failure timely to
remit any Sales and Service Taxes to the applicable tax authority to the extent
the Receiving Party timely remits such Sales and Service Taxes to the Providing
Party or the Receiving Party’s failure to do so results from the Providing
Party’s failure timely to charge or provide notice of such Sales and Service
Taxes to the Receiving Party.  The Receiving Party shall be entitled to any
refund on any Sales and Service Taxes paid in excess of liability as determined
at a later date.  Each Party shall promptly notify the other Party of any
deficiency claim or similar notice by a taxing authority with respect to Sales
and Service Taxes payable under this Agreement, and of any pending tax audit or
other proceeding that could lead to the imposition of Sales and Services Taxes
payable under this Agreement.

 

(b)          Each Party shall pay and be responsible for its own personal
property taxes and taxes based on its own income, profits or assets.  Payments
for Scheduled Services or other amounts under this Agreement shall be made net
of withholding taxes, provided however that if the Providing Party believes that
a reduced rate of withholding applies or the Providing Party is exempt from
withholding, the Receiving Party shall only be required to apply such reduced
rate of withholding or not withhold if the Providing Party provides the
Receiving Party with evidence reasonably satisfactory to the Receiving Party
that a reduced rate of or no withholding is required.  Satisfactory evidence for
this purpose may include rulings from, or other correspondence with, tax
authorities and tax opinions rendered by qualified persons reasonably
satisfactory to the Receiving Party, to the extent reasonably requested by the
Receiving Party.  Without limiting the generality of the foregoing, each Party
shall provide the other with executed originals of Internal Revenue Service Form
W-9 certifying that such Party is exempt from U.S. federal backup withholding
tax, and any updates with respect thereto as appropriate.  The Receiving Party
shall promptly remit any amounts withheld to the appropriate taxing authority
and in the event that the Receiving Party receives a refund of any amounts
previously withheld from payments to the Providing Party and remitted, the
Receiving Party shall surrender such refund to the Providing Party.

 

(c)          With respect to each provision in this Section 4.1.3, the Receiving
Party and the Providing Party shall reasonably cooperate with each other and
take any action to provide or make available any information reasonably
requested (and with a sufficient level of detail) in order to minimize any Sales
and Service Taxes payable with respect to the Scheduled Services and Migration
services.

 

4.2         Payment Terms.

 

4.2.1     Within fifteen (15) days following the end of any month during which
Service Providers provide Scheduled Services, Seller shall issue or cause to be
issued an invoice (and reasonably sufficient backup materials related thereto)
(“TSA Monthly Invoice”), which shall set forth the amounts payable by or on
behalf of Buyer pursuant to Section 4.1.  The Parties acknowledge that there may
be a reasonable lag in the submission of charges from Service Providers and
third parties (including vendors) relating to the provision of Scheduled
Services. With respect to any amounts payable by Buyer hereunder that accrue or
are incurred by a Service Provider during the Term but that are not billed to
such Service Provider or of which such

 

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Service Provider does not become aware until after the Term, Seller shall set
forth or shall cause to be set forth such amounts payable in invoices (and
reasonably sufficient backup materials related thereto) sent to Buyer as soon as
practicable following the end of the Term (each a “Post-Term Invoice”); but in
any event within sixty 60 days.

 

4.2.2     Subject to Section 4.2.5, (a) Seller shall aggregate all costs
incurred by it between the Signing Date and Closing Date for work on the
Migration of the policies of the Recaptured Business to the third party
administrator selected by the Buyer, and shall provide monthly reports on the
Migration plan and achievement under it to Buyer in a form mutually agreed upon
by the Parties; (b) all such costs described in subsection (a) shall be reported
to Buyer within forty-five (45) days after the Closing Date and Seller shall
subsequently invoice Buyer for all such costs; and (c) Buyer also agrees to
reimburse Seller for those costs incurred after the Closing Date by Seller for
the Migration of the policies of the Recaptured Business.

 

4.2.3     Payment in full of the amounts so invoiced or noticed shall be made by
electronic transfer of immediately available funds or other method satisfactory
to the Providing Party, within thirty (30) days after the date of receipt of the
monthly invoice.  Except with respect to any amount in Dispute pursuant to
Section 2.5 herein, any amount unpaid after the thirtieth (30th) day following
receipt by Buyer of such TSA Monthly Invoice or Post-Term Invoice shall bear an
overdue interest charge calculated at a rate of 1.5% per month on a pro-rated
basis on such overdue balance until paid. In no event shall Buyer offset any
amounts due hereunder.

 

4.2.4     Should a Party dispute any portion of the amount due from it on any
invoice or require any adjustment to an invoiced amount, then such Party shall
notify the other Party in writing of the nature and basis of the Dispute or
adjustment as soon as reasonably possible using, if necessary, the dispute
resolution procedures set forth in Section 2.5.  The Parties shall use their
reasonable best efforts to resolve any such Dispute prior to the payment due
date.  All amounts required to be paid pursuant to this Agreement shall be paid
and payable in U.S. dollars.

 

4.2.5     To the extent that, after the Signing Date, Seller has (i) negotiated
and entered into agreements relating to the administration by se2 of the annuity
contracts included in the Business, or (ii) taken any other actions that are
reasonably necessary to transition the administration of such annuity contracts
to se2, the Parties agree that Seller shall bear all costs and expenses relating
to such transition; provided, that if Buyer causes the Company to request
additional or different services from se2 in connection therewith that result in
increased costs or expenses, Buyer shall reimburse Seller for such increased
costs and expenses. To the extent Buyer causes the Company to implement changes
to the services provided by se2 that reduce the costs or expenses associated
therewith, Seller shall be entitled to retain such cost or expense savings in
excess of such amount.  For the avoidance of doubt, to the extent there is any
conflict between Schedule 1(b)(ii) and this Section 4.2.5, Schedule 1(b)(ii)
shall control.

 

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ARTICLE V
INDEMNIFICATION

 

5.1         Indemnification by Seller.  Seller shall indemnify and hold harmless
Buyer and each of its Affiliates (each, an “Buyer Indemnified Person”), from any
and all Indemnifiable Losses to the extent relating to or arising out of Third
Party Claims relating to, resulting from or arising out of: (a) any fraud, gross
negligence or willful misconduct by or on behalf of Seller or any other Service
Providers in providing any of the Scheduled Services that Seller or any other
Service Provider is obligated to provide hereunder; (b) any material breach by
Seller or any other Service Provider of any of its obligations under this
Agreement or (c) any actual or alleged infringement of any third party’s
intellectual property rights as a result of receiving Scheduled Services herein;
provided with respect to (c) that such Scheduled Services are being provided in
substantially the same manner as provided to the Business by Seller in the
twelve (12) months prior to the Signing Date, unless altered at the sole
discretion of Seller.

 

5.2         Indemnification by Buyer.  Buyer shall indemnify and hold harmless
Seller and each of its Affiliates (each, a “Seller Indemnified Person”) from any
and all Indemnifiable Losses to the extent relating to or arising out of Third
Party Claims relating to, resulting from or arising out of: (i) any material
breach by Buyer of any of its obligations under this Agreement or (ii) any
Scheduled Service that is altered, at the request of Buyer or Receiving Party,
from the manner in which Seller provided such service to the Business in the
twelve (12) months prior to the Signing Date.

 

5.3         Indemnification Procedures.

 

(a)          If any Indemnitee receives notice of assertion or commencement of
any Third Party Claim against such Indemnitee in respect of which an Indemnitor
may be obligated to provide indemnification under this Agreement, the Indemnitee
shall give such Indemnitor reasonably prompt written notice (but in no event
later than thirty (30) days after becoming aware) thereof and such notice shall
include a reasonable description of the claim and any documents relating to the
claim and an estimate of the Indemnifiable Loss and shall reference the specific
sections of this Agreement that form the basis of such claim; provided, however,
that no delay on the part of the Indemnitee in notifying any Indemnitor shall
relieve the Indemnitor from any obligation hereunder unless (and then solely to
the extent) the Indemnitor is actually prejudiced by such delay.  Thereafter,
the Indemnitee shall deliver to the Indemnitor, within five calendar days after
the Indemnitee’s receipt thereof, copies of all notices and documents (including
court papers) received by the Indemnitee relating to the Third Party Claim.

 

(b)          The Indemnitor shall be entitled to participate in the defense of
any Third Party Claim and, if it so chooses, to assume the defense thereof with
counsel selected by the Indemnitor.  Should the Indemnitor so elect to assume
the defense of a Third Party Claim, the Indemnitor shall not as long as it
conducts such defense be liable to the Indemnitee for legal expenses
subsequently incurred by the Indemnitee in connection with the defense thereof. 
If the Indemnitor assumes such defense, the Indemnitee shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnitor, it being understood that
the Indemnitor shall control such defense.  The Indemnitor shall be liable for
the reasonable fees and expenses of counsel employed by the

 

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Indemnitee for any period during which the Indemnitor has not assumed the
defense thereof (other than during any period in which the Indemnitee shall have
not yet given notice of the Third Party Claim as provided above).  If the
Indemnitor chooses to defend any Third Party Claim, the Parties shall cooperate
in the defense thereof.  Such cooperation shall include the retention and (upon
the Indemnitor’s request) the provision to the Indemnitor of records and
information that are relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.  Whether or not the Indemnitor
shall have assumed the defense of a Third Party Claim, the Indemnitee shall not
admit any liability with respect to, or pay, settle, compromise or discharge,
such Third Party Claim without the Indemnitor’s prior written consent.  If the
Indemnitor has assumed the defense of a Third Party Claim, the Indemnitor may
only pay, settle, compromise or discharge a Third Party Claim with the
Indemnitee’s prior written consent (which consent shall not be unreasonably
withheld, conditioned or delayed); provided, however, that the Indemnitor may
pay, settle, compromise or discharge such a Third Party Claim without the
written consent of the Indemnitee if such settlement (i) includes a complete and
unconditional release of the Indemnitee from all liability in respect of such
Third Party Claim, (ii) does not subject the Indemnitee to any injunctive relief
or other equitable remedy and (iii) does not include a statement or admission of
fault, culpability or failure to act by or on behalf of the Indemnitee.  If the
Indemnitor submits to the Indemnitee a bona fide settlement offer that satisfies
the requirements set forth in the proviso of the immediately preceding sentence
and the Indemnitee refuses to consent to such settlement, then thereafter the
Indemnitor’s liability to the Indemnitee with respect to such Third Party Claim
shall not exceed the Indemnitor’s portion of the settlement amount included in
such settlement offer, and the Indemnitee shall either assume the defense of
such Third Party Claim or pay the Indemnitor’s attorneys’ fees and other
out-of-pocket costs incurred thereafter in continuing the defense of such Third
Party Claim.

 

ARTICLE VI
FORCE MAJEURE

 

If performance by either Party of any terms or provisions hereof shall be
delayed or prevented, in whole or in part, because of or related to compliance
with any Applicable Law, decree, request or order of any Governmental Entity, or
because of riots, war, public disturbance, fire, explosion, storm, flood, acts
of God, acts of terrorism, or for any other reason that is not within the
control of the such Party and that by the exercise of reasonable diligence such
Party is unable to prevent (each, a “Force Majeure Event”), then (i) such Party
shall give written notice to the other Party, (ii) the Parties shall promptly
confer, in good faith, to agree upon equitable, reasonable action to minimize
the impact, on both Parties, of such conditions, and (iii) such Party shall be
excused from its obligations hereunder during the period such Force Majeure
Event continues, and no liability shall attach against it on account thereof. 
Neither Party shall be excused from performance if it fails to use reasonable
diligence to remedy the situation and remove the cause and effect of the Force
Majeure Event.

 

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ARTICLE VII
REMEDIES AND SURVIVAL

 

7.1         Financial Remedies Upon Material Breach.  In the event of material
breach of any provision of this Agreement by a Party, the non-defaulting Party
shall give the defaulting Party written notice thereof, and:

 

7.1.1     If such breach arises from the Receiving Party’s non-payment of an
amount that is not in Dispute, the Receiving Party shall cure the breach within
ten (10) calendar days after receipt of written notice of such non-payment.  If
the Receiving Party does not cure such breach prior to the end of such ten (10)
day period, then the Receiving Party shall pay the Providing Party the
undisputed amount plus an amount of interest equal to three percent per annum
above the “prime rate” as announced in the “Money Rates” section of the then
most recent edition of the Eastern Edition of The Wall Street Journal, which
interest rate shall change as and when the “prime rate” changes.  The Parties
agree that this rate of interest constitutes reasonable liquidated damages and
not an unenforceable penalty.

 

7.1.2     If such breach results or arises from the Providing Party’s failure to
provide one or more of the Scheduled Services at the service standard provided
in Section 2.2.1 or any Schedule appended hereto, Seller shall provide or shall
cause to be provided alternative equivalent services and Seller shall pay any
additional costs, fees and expenses associated and in connection with such
alternative services.  If such breach is for any other material failure to
perform in accordance with this Agreement, the defaulting Party shall cure such
breach within thirty (30) days of the date of such notice.  The defaulting Party
shall remain liable for any damages relating to such breach, subject to the
limits set forth in Section 7.3.

 

7.2         Specific Performance.  The parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in any court of competent
jurisdiction, in addition to any other remedy to which they are entitled at law
or in equity. The parties hereby waive, in any action for specific performance,
the defense of adequacy of a remedy at law and the posting of any bond or other
security in connection therewith.

 

7.3         Limitation of Liability.  Except with respect to each Party’s
obligations under ARTICLE V (Indemnification) and ARTICLE VIII
(Confidentiality), the maximum liability of either Party (including its
Affiliates) hereunder shall not exceed two times the total amount received by
Seller in the performance of this Agreement. Notwithstanding anything else in
this Agreement, the Parties, on behalf of themselves and all other Indemnitees,
waive any claim to any punitive or consequential damages against each other;
provided that the foregoing shall not apply in respect to any indemnification
claim asserted by Buyer pursuant to Section 5.1 or by Seller pursuant to Section
5.2 to the extent that punitive or consequential damages are awarded to a third
party against either Party (including its Affiliates), as the case may be, by a
court of competent jurisdiction pursuant to a final and non-appealable judgment

 

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7.4         Survival Upon Expiration or Termination.  The provisions of Sections
2.5, 2.10, 2.11, 2.15, 2.16, and 3.3, and ARTICLE I, ARTICLE IV, ARTICLE V,
ARTICLE VII, ARTICLE VIII, ARTICLE IX, ARTICLE X, and ARTICLE XI shall survive
the termination or expiration of this Agreement unless otherwise agreed to in
writing by both Parties.

 

ARTICLE VIII
CONFIDENTIALITY

 

8.1         Confidential Information.  Each Party covenants that it will (a)
accord the Confidential Information (as defined below) of the other Party the
same degree of confidential treatment that it accords its similar proprietary
and confidential information but in no event less than a reasonable degree of
care, (b) not use such Confidential Information for any purpose other than those
stated in this Agreement and (c) not disclose such Confidential Information to
any Person unless disclosure to such Person is made in the ordinary course of
such Party’s conduct of its business and is subject to protections comparable to
those such Party would apply in connection with a comparable disclosure of its
own Confidential Information.  Notwithstanding any other provision of this
Agreement, a party may disclose Confidential Information of the other Party,
without liability for such disclosure, to the extent the disclosing party
demonstrates that such disclosure is (i) required to be made pursuant to
Applicable Law, (ii) required to be made to a court or other tribunal in
connection with the enforcement of such Party’s rights under this Agreement or
to contest claims between the Parties, (iii) made to such Party’s service
providers or Affiliates or, with respect to client information and client
account information or records, the applicable current or then-existing client,
(iv) with respect to Intellectual Property, made to such Party’s clients or
prospective clients in connection with marketing activities or servicing of
client accounts, in each case for clauses (iii) and (iv), subject to a
confidentiality agreement that includes protections no less restrictive than
those set forth herein, or (v) approved by the prior written consent of the
other Party.  Each Party will promptly notify the other Party if it receives a
subpoena or otherwise becomes aware of events that may legally require it to
disclose Confidential Information of the other Party, and will cooperate with
the other Party (at the other Party’s expense) to obtain an order quashing or
otherwise modifying the scope of such subpoena or legal requirement, in an
effort to prevent the disclosure of such Confidential Information.  For purposes
of this Agreement, “Confidential Information” means all confidential or
proprietary information and documentation of either Party made available to the
other Party under this Agreement that is either identified in writing as
confidential or which the receiving Party recognized or should reasonably have
recognized at the time of disclosure as being of a confidential nature.

 

8.2         Unauthorized Acts.  Each Party shall (a) notify the other Party
promptly of any unauthorized possession, use, or knowledge of any Confidential
Information by any Person that shall become known to it, any attempt by any
person to gain possession of Confidential Information without authorization or
any attempt to use or acquire knowledge of any Confidential Information without
authorization (collectively, “Unauthorized Access”), (b) promptly furnish to the
other Party full details of any Unauthorized Access and use reasonable efforts
to assist the other Party in investigating or preventing the reoccurrence of any
Unauthorized Access, (c) promptly take action and cooperate with the other Party
to remove such Unauthorized Access, (d) cooperate with the other Party in any
litigation and investigation

 

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against third parties deemed necessary by such Party to protect its proprietary
rights, and (e) use commercially reasonable efforts to prevent a recurrence of
any such Unauthorized Access.

 

ARTICLE IX
SYSTEM ACCESS AND CONSUMER PRIVACY

 

9.1         System Access.

 

(a)          If the Providing Party or the Receiving Party are at any time given
access (each in such capacity, a “Guest User”) to the other’s computer system(s)
or software (collectively, “Systems”) in connection with the performance of this
Agreement, such Guest User shall comply with the other party’s (each in such
capacity, a “Host”) Systems security policies, procedures and requirements which
the Host makes available to the Guest User in writing from time to time.

 

9.2         Consumer Privacy.  In providing the Scheduled Services, the
Providing Party shall, and shall cause its Affiliates to, comply with Applicable
Law with respect to privacy or data security relative to Customer Information
(as defined below), and shall maintain the information security program in place
prior to the date hereof.  “Customer Information” means all tangible and
intangible information provided or disclosed hereunder about present or former
present or former clients, life insurance or annuity policy holders, annuitants,
or other beneficiaries (collectively, hereinafter “Customers”) or potential
Customers of any Party or its Affiliates, including name, address, telephone
number, email address, account or policy information, and any list, description,
or other grouping of Customers or potential Customers, and any medical records
or other medical information of such Customers or potential Customers and any
other type of information deemed “nonpublic” and protected by privacy laws and
any other Applicable Law.

 

ARTICLE X
DISCLAIMER OF REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Except for the representations, warranties and covenants expressly made in this
Agreement, each Party has not made and does not hereby make any express or
implied representations, warranties or covenants, statutory or otherwise, of any
nature, including with respect to the warranties of merchantability, quality,
quantity, suitability or fitness for a particular purpose or the results
obtained by the Scheduled Services.  All other representations, warranties, and
covenants, express or implied, statutory, common law or otherwise, of any
nature, including with respect to the warranties of merchantability, quality,
quantity, suitability or fitness for a particular purpose or the results
obtained by the Scheduled Services are hereby disclaimed by the Providing Party.

 

ARTICLE XI
MISCELLANEOUS

 

11.1       Notices.  All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally or by overnight courier (providing proof of delivery) to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):

 

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if to Seller, to:

 

Allstate Life Insurance Company
3100 Sanders Road
Northbrook, Illinois 60062
Attention:  Jess Merten
Email: Jess.Merten@allstate.com

 

with copies to:

 

Allstate Life Insurance Company
3075 Sanders Road
Northbrook, Illinois 60062
Attention:  Joy Thomas
Email: Joy.Thomas@allstate.com

 

and

 

Allstate Life Insurance Company
2775 Sanders Road
Northbrook, Illinois 60062
Attention:  Beth Lapham
Email: blapham@allstate.com

 

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

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York  10019

Attention:                              John M. Schwolsky

Alexander M. Dye

 

If to Buyer, to:

 

Resolution Life Holdings, Inc.
733 Third Avenue, 16th Floor
New York, NY 10017
Attention:  Simon Packer

 

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

 

Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
Attention:  Nicholas F. Potter

 

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Notice given by personal delivery or overnight courier shall be effective upon
actual receipt.

 

11.2       Interpretation.  When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.  Whenever the words “include,” “includes” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation.”  Whenever the singular is used herein, the same shall include the
plural, and whenever the plural is used herein, the same shall include the
singular, where appropriate.  Whenever the word “Dollars” or the “$” sign appear
in this Agreement, they shall be construed to mean United States Dollars, and
all transactions under this Agreement shall be in United States Dollars.  This
Agreement has been fully negotiated by the parties hereto and shall not be
construed by any Governmental Entity against either party by virtue of the fact
that such party was the drafting party.

 

11.3       Entire Agreement; Third-Party Beneficiaries.  This Agreement
(including all Exhibits and Schedules hereto), the SPA and the other Transaction
Documents constitute the entire agreement, and supersede all prior agreements,
understandings, representations and warranties, both written and oral, among the
Parties with respect to the subject matter hereof.  Except as set forth in
ARTICLE V with respect to Buyer Indemnified Persons and Seller Indemnified
Persons, this Agreement is not intended to and shall not confer upon any Person
other than the Parties hereto any rights or remedies.

 

11.4       Governing Law.  This Agreement and any dispute arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
New York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.

 

11.5       Assignment.  Except with respect to any assignment, in whole or in
part, of this Agreement or any of the rights, interests or obligations under
this Agreement, to (i) an Affiliate, (ii) a successor-in-interest to all or a
portion of the business of the Receiving Party, or (iii) by merger,
reorganization or operation of law, neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by either Party without the prior written consent of the other
Party, and any such assignment that is not consented to shall be null and void. 
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the Parties and their respective
successors and assigns.

 

11.6       Jurisdiction; Enforcement.

 

11.6.1   Each of the Parties hereby irrevocably and unconditionally submits to
the exclusive jurisdiction of any court of the United States or any state court,
which in either case is located in the City of New York (each, a “New York
Court”) for purposes of enforcing this Agreement or determining any claim
arising from or related to the transactions contemplated by this Agreement.  In
any such action, suit or other proceeding, each of the parties hereto
irrevocably and unconditionally waives and agrees not to assert by way of
motion, as a defense or otherwise any claim that it is not subject to the
jurisdiction of any such New York Court, that

 

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such action, suit or other proceeding is not subject to the jurisdiction of any
such New York Court, that such action, suit or other proceeding is brought in an
inconvenient forum or that the venue of such action, suit or other proceeding is
improper; provided that nothing set forth in this sentence shall prohibit any of
the parties hereto from removing any matter from one New York Court to another
New York Court.  Each of the Parties also agrees that any final and unappealable
judgment against a party hereto in connection with any action, suit or other
proceeding will be conclusive and binding on such party and that such award or
judgment may be enforced in any court of competent jurisdiction, either within
or outside of the United States.  A certified or exemplified copy of such award
or judgment will be conclusive evidence of the fact and amount of such award or
judgment.  Any process or other paper to be served in connection with any action
or proceeding under this Agreement shall, if delivered or sent in accordance
with Section 11.1 of this Agreement, constitute good, proper and sufficient
service thereof.

 

11.6.2   EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.6.

 

11.7       Severability; Amendment; Modification; Waiver.

 

11.7.1   Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any Applicable Law in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.

 

11.7.2   Except as otherwise contemplated by this Agreement, this Agreement may
be amended or a provision hereof waived only by a written instrument signed by
each of Seller and Buyer.

 

11.7.3   No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.

 

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11.8       Counterparts.  This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the Parties and delivered to the
other Party.  Each Party may deliver its signed counterpart of this Agreement to
the other Party 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.

 

[Remainder of page intentionally left blank]

 

26

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IN WITNESS WHEREOF, the Parties, acting through their authorized officers, have
caused this Agreement to be duly executed and delivered as of the date first
above written.

 

 

ALLSTATE LIFE INSURANCE COMPANY

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

RESOLUTION LIFE HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

27

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EXHIBIT J

 

Lighthouse – Surplus Notes and Preferred Stock Term Sheet1

 

I. SURPLUS NOTES TERMS

 

Securities Offered

$[·] aggregate principal amount of Surplus Notes due [·]2 (the “notes”).

 

 

Issuer

[Lighthouse] (“Issuer”)

 

 

Issue Date

[·]

 

 

Scheduled Maturity Date

[·]3

 

 

Interest Rate

The yield shall equal the 5 year treasury as of the Issue Date plus 450 basis
points.  In no case shall the yield on the notes be less than 4.5% or exceed
maximum amounts allowable under Applicable Law.  At the Scheduled Maturity Date
and each 5 year anniversary thereafter (the “Reset Date”), the yield will reset
for the subsequent 5 year period.  At any Reset Date, the yield will be equal to
the 5 year treasury as the Reset Date, plus 450 basis points.  In no case shall
the yield on the surplus note at any Reset Date be less than 6.0%.

 

 

Scheduled Interest Payment Dates

Interest on the notes will accrue from [·].4 Subject to the prior approval of
the Director of Insurance of the State of Nebraska (the “Director”), pursuant to
Section 44-221 of Chapter 44 of the Nebraska Revised Statutes, interest on the
notes is scheduled to be paid semiannually in arrears on [May 15] and
[November 15] of each year, beginning on [·], and on the date the notes are
scheduled to mature.

 

 

Optional Redemption by Issuer

Subject to the prior approval of the Director pursuant to Section 44-221 of
Chapter 44 of the Nebraska Revised Statutes, the notes may be redeemed, in whole
or in part, at the option of Issuer any time prior to the Scheduled Maturity
Date at a redemption price equal to the aggregate principal amount then
outstanding, plus any accrued but unpaid interest thereon.

 

 

Optional Redemption by any Holder

Subject to the prior approval of the Director pursuant to Section 44-221 of
Chapter 44 of the Nebraska Revised Statutes, the notes may be redeemed at the
option of any holder of the notes at any time

 

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1                                           Capitalized terms used herein but
not otherwise defined shall have the meaning ascribed to them in the Stock
Purchase Agreement by and among Allstate Life Insurance Company, Resolution Life
Holdings, Inc. and Resolution Life L.P. (solely for purposes of Section 5.25 and
Article X), dated as of July 17, 2013 (the “SPA”).

 

2                                           To insert date that corresponds to 5
years from the Issue Date.

 

3                                           To insert date that corresponds to 5
years from the Issue Date.

 

4                                           To insert date that corresponds with
the Issue Date.

 

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prior to the Scheduled Maturity Date in an aggregate principal amount up to the
Holder Optional Redemption Amount.  “Holder Optional Redemption Amount” means
the sum of (i) the amount by which (x) exceeds (y), where (x) is equal to the
Required Capital Amount (as defined in the SPA) as of the Issue Date, and (y) is
equal to such lesser amount of capital which the Director permits Issuer to hold
as of the applicable redemption date; provided that the amount calculated
pursuant to this clause (i) shall not in any case exceed the aggregate principal
amount of notes then outstanding and (ii) all accrued and unpaid interest on the
notes subject to redemption.

 

 

Mandatory Redemption by Issuer

Subject to the prior approval of the Director pursuant to Section 44-221 of
Chapter 44 of the Nebraska Revised Statutes, Issuer shall be required to redeem
all of the notes then outstanding at a redemption price equal to the aggregate
principal amount then outstanding, plus any accrued but unpaid interest thereon,
in the event Issuer (i) is no longer domiciled in Nebraska or (ii) receives
approval from the Director permitting Issuer to hold an amount of capital that
is equal to the Specified Capital Amount (as defined for purposes of
Section [5.15(b)/6.1(c)]5 of the SPA), or any lesser capital amount (each, a
“Mandatory Redemption Event”).  Upon the occurrence of a Mandatory Redemption
Event, the notes will immediately mature in full and all unpaid amounts of
principal and accrued interest will become immediately due and payable without
any action on the part of any holder of the notes.

 

 

Subordination

The notes will rank pari passu with each other and with any existing or future
surplus notes or similar obligations of Issuer.  The notes will be expressly
subordinate in right of payment to policy claims and other creditor claims of
Issuer, including all existing or future permitted indebtedness issued, incurred
or guaranteed by Issuer, other than any future surplus notes or similar
obligations of Issuer.  The notes will be unsecured obligations of Issuer.

 

 

Legal Status of Notes; Restrictions on Payment

 

Pursuant to Section 44-221 of Chapter 44 of the Nebraska Revised Statutes, each
payment of interest on or principal of the notes may be made only with the prior
approval of the Director and only out of surplus funds which the Director
determines to be available for such payments under Section 44-221.  If these
conditions to payment are not met, the applicable scheduled payment or scheduled
maturity date of such interest or principal will be extended until such time, if
any, at which such conditions are met.  Interest will continue to accrue on any
unpaid principal amount of the notes; although interest payments with respect to
which the scheduled payment dates have been so extended are cumulative, interest
will not accrue on interest with respect to which the scheduled payment dates
have

 

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5                                           Select appropriate provision of the
SPA pursuant to which the notes are issued.

 

- 2 -

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been extended, during the period of such extension.

 

 

Covenants

In the event that the notes have not been paid in full (including the payment of
any accrued interest on the notes) upon the Scheduled Maturity Date or upon an
event of default (which shall include a failure by Issuer to redeem the notes or
make any payments with respect thereto, including as a result of the failure of
Issuer to obtain the applicable approvals of Governmental Entities with respect
thereto), Issuer shall not make or declare any dividend or distribution on, or
redeem or repurchase any shares of, its capital stock until such time as the
notes have been paid in full or such event of default has been cured, as
applicable; provided, that dividends shall be permitted to the extent required
to pay the items designated (i) – (iv) in paragraph (q) (“Waterfall”) of
Schedule 5 to the Project Lighthouse Term Sheet for Credit Facility attached to
the Project Lighthouse Commitment Letter of even date with this term sheet.

 

Issuer shall take all steps necessary to ensure that each applicable
Governmental Entity will approve the full repayment of the notes upon the
Scheduled Maturity Date or any optional or mandatory redemption date.

 

Issuer shall not issue any securities that rank senior to the notes without
obtaining the consent of the holders of a majority of the aggregate principal
amount of the notes then outstanding. 

 

 

Remedies

In the event of Issuer’s rehabilitation, liquidation or dissolution, the notes
will immediately mature in full without any action on the part of any holder of
the notes, with payment thereon being subject to the satisfaction of the
conditions to payment described herein.

 

If the Director approves in whole or in part a payment of any interest on or
principal of any notes and Issuer fails to pay the full amount of such approved
payment on the scheduled payment date, such approved amount will be immediately
payable on such date without any action on the part of any holder of notes.

 

 

Issuance

Issuer will provide Seller with customary representations and warranties,
certificates and opinions of counsel in connection with the issuance of the
notes.

 

 

II.  PREFERRED STOCK TERMS

 

 

 

Issuer

[Lighthouse] (“Issuer”)

 

 

Securities Offered

[·] shares of Cumulative Preferred Stock, Series A, $1.00 par value per share
(the “Preferred Stock” and each share, a “share”).  Each holder of Preferred
Stock will be entitled to all the rights and preferences of the Preferred Stock
represented thereby (including

 

- 3 -

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dividend, voting, redemption and liquidation rights).

 

 

Issue Date

[·]

 

 

Liquidation Preference

$[·] per share (the “liquidation amount”)

 

 

Final Redemption Date

[·]6

 

 

Dividend Payment Dates

Each [January 15], [April 15], [July 15] and [October 15], commencing [·],
subject to adjustment in the case of any such date that falls on a day that is
not a business day.

 

 

Dividends

Dividends on the Preferred Stock will accrue on the liquidation amount and be
payable on each dividend payment date at an annual rate equal to the 5 year
treasury as of the Issue Date plus 450 basis points.  In no case shall the yield
on the preferred stock be less than 4.5% or exceed maximum amounts allowable
under Applicable Law.  At the Final Redemption Date and each 5 year anniversary
thereafter (the “Reset Date”), the yield will reset for the subsequent 5 year
period.  At any Reset Date, the yield will be equal to the 5 year treasury as
the Reset Date, plus 450 basis points.  In no case shall the yield on the
preferred stock at any Reset Date be less than 6.0%.

 

 

Optional Redemption by Issuer

Shares may be redeemed, in whole or in part, at the option of Issuer any time
prior to the Final Redemption Date at a redemption price per share equal to the
liquidation amount, plus any accrued but unpaid dividends.

 

 

Optional Redemption by any Holder

Shares may be redeemed at the option of any holder of shares at any time prior
to the Final Redemption Date for an aggregate redemption price up to the Holder
Optional Redemption Amount.  “Holder Optional Redemption Amount” means the sum
of (i) the amount by which (x) exceeds (y), where (x) is equal to the Required
Capital Amount (as defined in the SPA) as of the Issue Date; provided that the
amount calculated pursuant to this clause (i) shall not in any case exceed the
aggregate liquidation amount, and (y) is equal to such lesser amount of capital
which the Director permits Issuer to hold as of the applicable redemption date
and (ii) all accrued but unpaid dividends on the shares subject to redemption.

 

 

Mandatory Redemption by Issuer

Issuer shall be required to redeem all of the shares then outstanding at a per
share redemption price equal to the liquidation amount, plus any accrued but
unpaid dividends (A) upon the Final Redemption Date or (B) in the event Issuer
(i) is no longer domiciled in Nebraska or (ii) receives approval from the
Director permitting Issuer to hold an amount of capital that is equal to the
Specified Capital Amount

 

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6                                           To insert date that corresponds to 5
years from the Issue Date.

 

- 4 -

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(as defined for purposes of Section [5.15(b)/6.1(c)]7 of the SPA), or any lesser
capital amount (each, a “Mandatory Redemption Event”).  Upon the occurrence of a
Mandatory Redemption Event, the aggregate liquidation amount and all accrued but
unpaid dividends will become immediately due and payable without any action on
the part of any holder of the Preferred Stock.

 

 

Liquidation Rights

In the event Issuer voluntarily or involuntarily liquidates, dissolves or winds
up its affairs, holders of shares will be entitled to receive an amount per
share equal to the liquidation amount, plus any accrued but unpaid dividends. 
Distributions will be made only to the extent of Issuer’s assets that are
available for distribution to shareholders, after payment or provision for
payment of its debts and other liabilities, before any distribution of assets is
made to holders of Issuer’s common stock or any of its junior stock.

 

 

Voting Rights

Holders of Preferred Stock will have no voting rights, except with respect to
certain changes in the terms of the Preferred Stock and as otherwise required by
applicable law. 

 

 

Covenants

In the event that the aggregate liquidation amount, plus any accrued but unpaid
dividends, has not been paid in full upon a Mandatory Redemption Event or upon
an event of default (which shall include a failure by Issuer to redeem the
shares or make any payments with respect thereto), Issuer shall not make or
declare any dividend or distribution on, or redeem or repurchase any shares of,
its capital stock (other than the Preferred Stock) until such time as the
aggregate liquidation amount, plus any accrued but unpaid dividends, has been
paid in full or such event of default has been cured, as applicable; provided,
that dividends shall be permitted to the extent required to pay the items
designated (i) – (iv) in paragraph (q) (“Waterfall”) of Schedule 5 to the
Project Lighthouse Term Sheet for Credit Facility attached to the Project
Lighthouse Commitment Letter of even date with this term sheet.

 

Issuer shall take all steps necessary to ensure that any necessary approval of a
Governmental Entity with respect to the full payment of the liquidation amount,
plus any accrued but unpaid dividends, upon any optional or mandatory redemption
date is obtained.

 

 

Ranking

The shares of Preferred Stock will rank senior to our common stock and all other
junior stock or preferred stock Issuer may issue (except for any series that may
be issued upon the requisite vote or consent of the holders of at least a
two-thirds of the shares of the Preferred Stock at the time outstanding and
entitled to vote and the requisite vote or consent of all other series of
preferred stock, if any), with respect to the payment of dividends and
distributions of assets upon

 

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7                                           Select appropriate provision of the
SPA pursuant to which the preferred stock is issued.

 

- 5 -

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our liquidation, dissolution or winding-up.

 

 

Issuance

Issuer will provide Seller with customary representations and warranties,
certificates and opinions of counsel in connection with the issuance of the
preferred stock.

 

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Exhibit 2 to Annex A of Stock Purchase Agreement

 

Recapture Adjustment

 

The “Recapture Adjustment Amount” equals 35% multiplied by 87.5% multiplied by
(i) $350 million less (ii) the statutory Mark to Market Gain position (whether
positive or negative) of the Recaptured Investment Assets as of the recapture
effective date.

 

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