Exhibit 10.01




 





 


 


STOCK PURCHASE AGREEMENT


 


BY AND AMONG


 


RBC INSURANCE HOLDINGS (USA) INC.,


 


ATHENE HOLDING LTD.,


 


PROTECTIVE LIFE INSURANCE COMPANY,


 


AND


 


RBC USA HOLDCO CORPORATION


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


 


 


Dated as of October 22, 2010


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1 Definitions and
  Terms

  	
  2

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Specific Definitions

  	
  2

  
	
  Section 1.2

  	
  Interpretation

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 Purchase and Sale

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
  Purchase and Sale

  	
  22

  
	
  Section 2.2

  	
  Closing

  	
  22

  
	
  Section 2.3

  	
  Purchase Price

  	
  23

  
	
  Section 2.4

  	
  Pre-Closing Deliverables

  	
  23

  
	
  Section 2.5

  	
  Payment at Closing

  	
  24

  
	
  Section 2.6

  	
  Post-Closing Adjustment

  	
  24

  
	
  Section 2.7

  	
  Closing Deliveries

  	
  27

  
	
  Section 2.8

  	
  Post-Closing Deliveries

  	
  29

  
	
  Section 2.9

  	
  No Set-off

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 Representations
  and Warranties of Seller

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
  Organization and Authority of Seller

  	
  30

  
	
  Section 3.2

  	
  Binding Effect

  	
  30

  
	
  Section 3.3

  	
  Organization, Qualification and Authority of the Company

  	
  30

  
	
  Section 3.4

  	
  Capital Structure; Ownership of the Shares

  	
  31

  
	
  Section 3.5

  	
  Filings and Consents

  	
  31

  
	
  Section 3.6

  	
  No Violations

  	
  32

  
	
  Section 3.7

  	
  Financial and Statutory Statements

  	
  33

  
	
  Section 3.8

  	
  Absence of Certain Changes or Events

  	
  34

  
	
  Section 3.9

  	
  Litigation and Claims

  	
  34

  
	
  Section 3.10

  	
  Taxes

  	
  35

  
	
  Section 3.11

  	
  Employee Benefits

  	
  37

  
	
  Section 3.12

  	
  Compliance with Laws; Permits

  	
  41

  
	
  Section 3.13

  	
  Property

  	
  42

  
	
  Section 3.14

  	
  Intellectual Property

  	
  43

  
	
  Section 3.15

  	
  Contracts

  	
  44

  
	
  Section 3.16

  	
  Insurance Matters

  	
  45

  
	
  Section 3.17

  	
  Insurance Producers and Third-Party Administrators

  	
  46

  
	
  Section 3.18

  	
  Environmental Matters

  	
  47

  
	
  Section 3.19

  	
  Finders’ Fees

  	
  48

  
	
  Section 3.20

  	
  Insurance

  	
  48

  
	
  Section 3.21

  	
  Indebtedness

  	
  49

  
	
  Section 3.22

  	
  Investment Company

  	
  49

  
	
  Section 3.23

  	
  Company Portfolio Assets

  	
  49

  
	
  Section 3.24

  	
  Insurance Business

  	
  49

  



 


i

















 


	
  Section 3.25

  	
  Reinsurance and Coinsurance

  	
  51

  
	
  Section 3.26

  	
  Actuarial Reports

  	
  52

  
	
  Section 3.27

  	
  Risk-Based Capital

  	
  53

  
	
  Section 3.28

  	
  Labor Matters

  	
  53

  
	
  Section 3.29

  	
  Affiliate Transactions

  	
  53

  
	
  Section 3.30

  	
  Separate Accounts; Regulatory Filings

  	
  54

  
	
  Section 3.31

  	
  Books and Records

  	
  55

  
	
  Section 3.32

  	
  Internal Controls

  	
  55

  
	
  Section 3.33

  	
  Shared Assets and Shared Employees

  	
  55

  
	
  Section 3.34

  	
  Contract List

  	
  56

  
	
  Section 3.35

  	
  No Other Representations or Warranties

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 Representations
  and Warranties of Purchaser

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  Organization and Authority of Purchaser

  	
  56

  
	
  Section 4.2

  	
  Binding Effect

  	
  57

  
	
  Section 4.3

  	
  Filings and Consents

  	
  57

  
	
  Section 4.4

  	
  No Violations

  	
  57

  
	
  Section 4.5

  	
  Finders’ Fees

  	
  58

  
	
  Section 4.6

  	
  Financial Capability

  	
  58

  
	
  Section 4.7

  	
  Investigation by Purchaser

  	
  59

  
	
  Section 4.8

  	
  Purchase for Own Account

  	
  59

  
	
  Section 4.9

  	
  Purchaser and Annuity Reinsurer Statutory Statements

  	
  59

  
	
  Section 4.10

  	
  No Impediments

  	
  60

  
	
  Section 4.11

  	
  Annuity Reinsurer

  	
  60

  
	
  Section 4.12

  	
  No Other Representations or Warranties

  	
  60

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 Covenants

  	
  60

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
  Confidentiality; Access; Transition Matters

  	
  60

  
	
  Section 5.2

  	
  Conduct of Business

  	
  64

  
	
  Section 5.3

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

  	
  67

  
	
  Section 5.4

  	
  Delivery of Financial Information

  	
  68

  
	
  Section 5.5

  	
  Reasonable Best Efforts; Regulatory Matters; Third Party
  Consents

  	
  68

  
	
  Section 5.6

  	
  Employment, Benefits and Transferring Employees

  	
  73

  
	
  Section 5.7

  	
  Transaction Agreements

  	
  77

  
	
  Section 5.8

  	
  Retained Intellectual Property; Seller’s Marks

  	
  77

  
	
  Section 5.9

  	
  Intercompany Agreements and Accounts

  	
  78

  
	
  Section 5.10

  	
  Further Assurances

  	
  79

  
	
  Section 5.11

  	
  Equity Commitment

  	
  79

  
	
  Section 5.12

  	
  Director and Officer Indemnification; Directors’ and Officers’
  Insurance

  	
  79

  
	
  Section 5.13

  	
  Acquisition Proposals

  	
  80

  
	
  Section 5.14

  	
  Non-Compete

  	
  81

  
	
  Section 5.15

  	
  Non-Solicitation of Business Employees

  	
  84

  
	
  Section 5.16

  	
  Non-Solicitation of Holders of Insurance Contracts

  	
  85

  
	
  Section 5.17

  	
  Relief

  	
  85

  



 


ii

















 


	
  Section 5.18

  	
  Notification

  	
  85

  
	
  Section 5.19

  	
  Insurance

  	
  86

  
	
  Section 5.20

  	
  Books and Records

  	
  86

  
	
  Section 5.21

  	
  Reinsurance Transactions

  	
  86

  
	
  Section 5.22

  	
  Closing Date Share Redemption

  	
  87

  
	
  Section 5.23

  	
  Existing Surplus Note Repayment

  	
  87

  
	
  Section 5.24

  	
  Policyholder Lists

  	
  87

  
	
  Section 5.25

  	
  Announcement to Employees and Producers

  	
  87

  
	
  Section 5.26

  	
  Portfolio Asset Activity

  	
  87

  
	
  Section 5.27

  	
  Bank Accounts

  	
  87

  
	
  Section 5.28

  	
  Purchaser and Annuity Reinsurer Capital

  	
  88

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 Conditions to Closing

  	
  88

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
  Conditions to the Obligations of the Counterparties and
  Seller

  	
  88

  
	
  Section 6.2

  	
  Conditions to the Obligations of the Counterparties

  	
  89

  
	
  Section 6.3

  	
  Conditions to the Obligations of Purchaser

  	
  90

  
	
  Section 6.4

  	
  Conditions to the Obligations of Seller

  	
  90

  
	
  Section 6.5

  	
  Conditions to the Obligations of Life Reinsurer

  	
  91

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 Survival;
  Indemnification

  	
  92

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
  Survival

  	
  92

  
	
  Section 7.2

  	
  Indemnification by Purchaser and Life Reinsurer

  	
  93

  
	
  Section 7.3

  	
  Indemnification by Seller and USA Holdco

  	
  94

  
	
  Section 7.4

  	
  Claims

  	
  95

  
	
  Section 7.5

  	
  Characterization of Indemnification Payments

  	
  98

  
	
  Section 7.6

  	
  Computation of Losses Subject to Indemnification

  	
  98

  
	
  Section 7.7

  	
  Remedies

  	
  100

  
	
  Section 7.8

  	
  No Right of Contribution

  	
  100

  
	
  Section 7.9

  	
  Representations and Warranties of USA Holdco

  	
  100

  
	
  Section 7.10

  	
  Representations and Warranties of Life Reinsurer

  	
  101

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 Tax Matters

  	
  103

  
	
   

  	
   

  	
   

  
	
  Section 8.1

  	
  Tax Indemnity

  	
  103

  
	
  Section 8.2

  	
  Tax Returns

  	
  105

  
	
  Section 8.3

  	
  Contest Provisions

  	
  105

  
	
  Section 8.4

  	
  Assistance and Cooperation

  	
  106

  
	
  Section 8.5

  	
  Miscellaneous

  	
  107

  
	
  Section 8.6

  	
  Coordination with Article 7

  	
  107

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 Termination

  	
  107

  
	
   

  	
   

  	
   

  
	
  Section 9.1

  	
  Termination

  	
  107

  
	
  Section 9.2

  	
  Effect of Termination

  	
  108

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 Miscellaneous

  	
  109

  



 


iii

















 


	
  Section 10.1

  	
  Notices

  	
  109

  
	
  Section 10.2

  	
  Amendment; Waiver

  	
  111

  
	
  Section 10.3

  	
  Assignment

  	
  111

  
	
  Section 10.4

  	
  Entire Agreement; No Other Representations and Warranties

  	
  111

  
	
  Section 10.5

  	
  Fulfillment of Obligations

  	
  112

  
	
  Section 10.6

  	
  No Third-Party Beneficiaries

  	
  112

  
	
  Section 10.7

  	
  Public Disclosure

  	
  112

  
	
  Section 10.8

  	
  Expenses

  	
  112

  
	
  Section 10.9

  	
  Schedules

  	
  112

  
	
  Section 10.10

  	
  GOVERNING LAW

  	
  113

  
	
  Section 10.11

  	
  Submission to Jurisdiction

  	
  113

  
	
  Section 10.12

  	
  WAIVER OF JURY TRIAL

  	
  113

  
	
  Section 10.13

  	
  Counterparts

  	
  114

  
	
  Section 10.14

  	
  Headings

  	
  114

  
	
  Section 10.15

  	
  Severability

  	
  114

  
	
  Section 10.16

  	
  Specific Performance

  	
  114

  



 


Annexes


 


	
  Annex
  A

  	
   

  	
  Form of
  Life Business Reinsurance Agreement

  
	
  Annex
  B

  	
   

  	
  Form of
  Annuity Business Reinsurance Agreement

  
	
  Annex
  C

  	
   

  	
  Form of
  Administrative Services Agreement

  
	
  Annex
  D

  	
   

  	
  Form of
  Trademark License Agreement

  
	
  Annex
  E

  	
   

  	
  Form of
  Transition Services Agreement

  



 


Exhibits


 


	
  Exhibit A

  	
   

  	
  EB
  Volume Adjustment Amount Calculation

  
	
  Exhibit B

  	
   

  	
  NB
  Volume Adjustment Amount Calculation

  



 


Schedules


 


	
  Schedule
  1.1(a)

  	
   

  	
  Agreed
  Accounting Principles

  
	
  Schedule
  1.1(b)

  	
   

  	
  Definition

  
	
  Schedule
  2

  	
   

  	
  Form of
  Capital & Surplus Worksheet

  
	
  Schedule
  6.1(b)

  	
   

  	
  Additional
  Required Governmental Authorizations

  
	
  Schedule
  6.2(d)

  	
   

  	
  Other
  Agreements

  
	
  Schedule
  7.3(a)

  	
   

  	
  Indemnification
  Matters

  



 


Seller’s
Disclosure Schedule


Purchaser’s
Disclosure Schedule


Life
Reinsurer’s Disclosure Schedule


 


iv

















 


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


 


RECITALS:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


ARTICLE 1

Definitions and Terms


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5
















 


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


 


“Code”
means the Internal Revenue Code of 1986.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6

















 


“Department”
means the South Carolina Department of Insurance.


 


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


 


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


 


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


 


“Employees”
means all Current Employees and Former Employees.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


8

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“IRS”
means the Internal Revenue Service.


 


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


 


10

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


11

















 


“Material
Adverse Effect” means:


 


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


 


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


 


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


 


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


 


12

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


14

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15
















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


16

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


17

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


18

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


19

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


20

















 


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


 


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


 


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


 


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


 


Section 1.2             Interpretation.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


21

















 


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


 


ARTICLE 2

Purchase and Sale


 


Section 2.1             Purchase and Sale.


 


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


 


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


 


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


 


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


 


22

















 


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


 


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


 


Section 2.4             Pre-Closing Deliverables.


 


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


 


(1)           the
Estimated Balance Sheet;


 


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


 


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


 


23

















 


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


 


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


 


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


 


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


 


Section 2.6             Post-Closing Adjustment.


 


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


 


(1)           the
Preliminary Final Balance Sheet;


 


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


 


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


 


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


 


24

















 


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


 


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


 


25
















 


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


 


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


 


26

















 


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


 


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


 


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


 


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


 


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


 


27

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


28

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


29

















 


ARTICLE 3

Representations and Warranties of Seller


 


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


 


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


 


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


 


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


 


30

















 


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


 


Section 3.4             Capital Structure;
Ownership of the Shares.


 


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


 


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


 


Section 3.5             Filings and Consents.


 


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


 


31

















 


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


 


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


 


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


 


32

















 


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


 


Section 3.7             Financial and Statutory
Statements.


 


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


 


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


 


33

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 3.9             Litigation and Claims.


 


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


 


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


 


34

















 


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


 


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


 


Section 3.10           Taxes.


 


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


 


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


 


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


 


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


 


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


 


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


 


35
















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


36

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 3.11           Employee Benefits.


 


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


 


37

















 


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


 


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


 


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


 


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


 


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


 


38

















 


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


 


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


 


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


 


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


 


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


 


39

















 


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


 


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


 


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


 


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


 


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


 


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


 


40

















 


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


 


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


 


Section 3.12           Compliance with Laws;
Permits.


 


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


 


41

















 


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


 


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


 


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


 


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


 


Section 3.13           Property.


 


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


 


42

















 


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


 


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


 


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


 


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


 


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


 


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


 


Section 3.14           Intellectual Property.


 


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


 


43

















 


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


 


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


 


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


 


Section 3.15           Contracts.


 


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


 


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


 


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


 


44

















 


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


 


Section 3.16           Insurance Matters.


 


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


 


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


 


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


 


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


 


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


 


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


 


45
















 


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


 


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


 


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


 


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


 


Section 3.17           Insurance Producers and
Third-Party Administrators.


 


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


 


46

















 


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


 


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


 


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


 


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


 


Section 3.18           Environmental Matters.


 


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


 


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


 


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


 


47

















 


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


 


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


 


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


 


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


 


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


 


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


 


48

















 


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


 


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


 


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


 


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


 


Section 3.24           Insurance Business.


 


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


 


49

















 


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


 


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


 


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


 


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


 


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


 


50

















 


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


 


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


 


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


 


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


 


Section 3.25           Reinsurance and
Coinsurance.


 


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


 


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


 


51

















 


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


 


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


 


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


 


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


 


Section 3.26           Actuarial Reports.


 


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


 


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


 


52

















 


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


 


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


 


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


 


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


 


53

















 


Section 3.30           Separate Accounts;
Regulatory Filings.


 


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


 


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


 


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


 


54

















 


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


 


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


 


Section 3.32           Internal Controls.


 


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


 


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


 


Section 3.33           Shared Assets and Shared
Employees.


 


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


 


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


 


55
















 


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


 


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


 


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


 


ARTICLE 4

Representations and Warranties of Purchaser.


 


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


 


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


 


56

















 


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


 


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


 


Section 4.3             Filings and Consents.


 


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


 


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


 


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


 


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


 


57

















 


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


 


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


 


Section 4.6             Financial Capability.


 


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


 


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


 


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


 


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


 


Section 4.8             Purchase for Own Account.


 


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


 


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


 


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


 


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


 


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


 


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


 


59

















 


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


 


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


 


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


 


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


 


ARTICLE 5

Covenants


 


Section 5.1             Confidentiality; Access;
Transition Matters.


 


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


 


60

















 


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


 


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


 


61

















 


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


 


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


 


62

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


64

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


65
















 


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


 


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


 


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


 


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


 


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


 


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


 


66

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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(e)           Definitions.  For purposes of this Agreement:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 5.6             Employment, Benefits and
Transferring Employees.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 5.7             Transaction Agreements.


 


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


 


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


 


Section 5.8             Retained Intellectual
Property; Seller’s Marks.


 


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


 


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


 


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


 


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


 


Section 5.9             Intercompany Agreements
and Accounts.


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 5.11           Equity Commitment.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 5.13           Acquisition Proposals.


 


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


 


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


 


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


 


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


 


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


 


Section 5.14           Non-Compete.


 


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


 


81

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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Section 5.19           Insurance.


 


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


 


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


 


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


 


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


 


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Section 5.22           Closing Date Share
Redemption.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 6

Conditions to Closing


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(a)           Representations and Warranties.


 


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


 


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


 


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


 


(b)           Covenants.


 


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


 


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


 


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


 


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


 


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


 


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ARTICLE 7

Survival; Indemnification


 


Section 7.1             Survival.


 


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


 


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


 


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


 


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Section 7.2             Indemnification by
Purchaser and Life Reinsurer.


 


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


 


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


 


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


 


93

















 


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


 


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


 


Section 7.3             Indemnification by Seller
and USA Holdco.


 


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


 


94

















 


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


 


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


 


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


 


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


 


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


 


95
















 


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


 


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


 


96

















 


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


 


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


 


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


 


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


 


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


 


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


 


Section 7.5                                      Characterization of Indemnification Payments.


 


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


 


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


 


Section 7.6                                      Computation of Losses Subject to Indemnification.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 7.9                                      Representations and Warranties of USA Holdco.


 


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


 


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


 


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


 


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


 


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


 


Section 7.10                                Representations and Warranties of Life Reinsurer.


 


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


 


101

















 


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


 


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


 


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


 


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


 


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


 


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


 


102

















 


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


 


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


 


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


 


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


 


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


 


ARTICLE 8

Tax Matters


 


Section 8.1                                      Tax Indemnity.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 8.2                                      Tax Returns.


 


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


 


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


 


Section 8.3                                      Contest Provisions.


 


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


 


105
















 


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


 


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


 


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


 


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


 


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


 


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


 


106

















 


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


 


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


 


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


 


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


 


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


 


Section 8.5                                      Miscellaneous.


 


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


 


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


 


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


 


ARTICLE 9

Termination


 


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


 


(a)                                  by written agreement of the Parties;


 


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


 


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


 


107

















 


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


 


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


 


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


 


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


 


108

















 


ARTICLE 10

Miscellaneous


 


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


 


To
Purchaser:


 


Athene
Holding Ltd.


44
Church Street


Hamilton,
HM12


Bermuda


Telephone:  (441) 279-8412


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


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


 


With
copies (which shall not constitute notice) to:


 


Sidley
Austin LLP


1
South Dearborn


Chicago, Illinois  60603


Telephone:  (312) 853-7061


Facsimile:  (312) 853-7036


Attn:  Perry J. Shwachman, Esq.


Email:  pshwachman@sidley.com


 


and


 


Sidley
Austin LLP


787
Seventh Avenue


New
York, New York  10019


Telephone:  (212) 839-5835


Facsimile:  (212) 839-5599


Attn:  Jonathan J. Kelly, Esq.


Email:  jjkelly@sidley.com


 


109

















 


To
Life Reinsurer:


 


Protective
Life Insurance Company


2801
Highway 280 South


Birmingham,
Alabama 35223


Telephone:
(205) 268-1000


Facsimile:  (205) 268-3597


Attn:  General Counsel


Email:  Debbie.Long@Protective.com


 


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


 


Debevoise &
Plimpton LLP


919
Third Avenue


New
York, New York  10022


Telephone:  (212) 909-6459


Facsimile:  (212) 909-7459


Attn:  Nicholas F. Potter, Esq.


Email:  nfpotter@debevoise.com


 


To
Seller:


 


Two
Little Falls Center


2751
Centerville Road, Suite 212


Wilmington,
DE 19808


Telephone:          (302)
892-5903


Facsimile:            (302) 892-5900


Attn:     Kimberly
L. Wagner


Email:   subsidiarygovernanceoffice@rbc.com


 


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


 


Sullivan &
Cromwell LLP


125
Broad Street


New
York, New York  10004


Telephone:  (212) 558-4000


Facsimile:  (212) 558-3588


Attn:      Donald
J. Toumey, Esq.


Marion C. Leydier, Esq.


Email:    toumeyd@sullcrom.com


leydierm@sullcrom.com


 


To
USA Holdco:


 


One
Liberty Plaza


 


110

















 


New
York, NY 10006


Telephone:  (212) 858-8310


Facsimile:  (212) 428-3056


Attn:     Roger
Blissett


Email:   subsidiarygovernanceoffice@rbc.com


 


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


 


Sullivan &
Cromwell LLP


125
Broad Street


New
York, New York 10004


Telephone:          (212)
558-4000


Facsimile:            (212) 558-3588


Attn:      Donald
J. Toumey, Esq.


Marion C. Leydier, Esq.


Email:    toumeyd@sullcrom.com


leydierm@sullcrom.com


 


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


 


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


 


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


 


111

















 


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


 


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


 


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


 


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


 


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


 


112

















 


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


 


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


 


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


 


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


 


113

















 


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


 


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


 


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


 


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


 


[Next page is a signature page.]


 


114

















 


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


 


	
   

  	
  RBC
  INSURANCE HOLDINGS (USA) INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Rene DeGagne

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Kimberly L. Wagner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ATHENE
  HOLDING LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Zachary Jones

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTIVE
  LIFE INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Carolyn King

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC
  USA HOLDCO CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  D.A. McWilliams

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lisa D. Levey