EXHIBIT (7): COINSURANCE AGREEMENT BETWEEN UNITED OF OMAHA LIFE INSURANCE
COMPANY AND SECURITY BENEFIT LIFE INSURANCE COMPANY.
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COINSURANCE AGREEMENT
BY AND BETWEEN
UNITED OF OMAHA LIFE INSURANCE COMPANY
AND
SECURITY BENEFIT LIFE INSURANCE COMPANY
DATED AS OF FEBRUARY 10, 2004
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS .................................................... 4
ARTICLE II BUSINESS REINSURED ............................................ 6
2.1 General ......................................................... 6
2.2 Liability ....................................................... 6
2.3 Defenses ........................................................ 7
2.4 Declaration of Non-Guaranteed Elements .......................... 7
2.5 Policy Changes .................................................. 7
2.6 Retrocession .................................................... 5
ARTICLE III TRANSFER OF ASSETS ........................................... 7
3.1 Ceding Commission ............................................... 7
3.2 Transfer on the Closing Date .................................... 7
3.3 Other Transfer .................................................. 5
3.4 Security Trust................................................... 6
ARTICLE IV TERRITORY; TERM ............................................... 8
4.1 Territory and Term .............................................. 8
4.2 Reductions ...................................................... 8
ARTICLE V RESERVES ....................................................... 6
5.1 Establishment of General Account Reserves ....................... 6
5.2 Establishment of Separate Account Reserves ...................... 6
5.3 Reserve Reports ................................................. 7
5.4 Reinsurance Reserve Credits ..................................... 9
ARTICLE VI ACCOUNTING AND SETTLEMENT ..................................... 7
6.1 Net Daily Adjustment ............................................ 7
6.2 Benefit Payments ................................................ 9
6.3 Mortality Risk .................................................. 9
6.4 Premium Taxes ................................................... 9
6.5 Monthly Report .................................................. 10
6.6 Monthly Cash Settlement and Accounting .......................... 11
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ARTICLE VII ADMINISTRATION; RECORDS; NOTICES ............................. 12
7.1 Administration .................................................. 12
7.2 Transfer of Books and Records ................................... 12
7.3 Maintenance of Books and Records ................................ 12
7.4 Notices ......................................................... 12
ARTICLE VIII GUARANTY FUND ASSESSMENTS ................................... 12
8.1 Reimbursement of the Company..................................... 12
8.2 Reimbursement of the Reinsurer .................................. 13
ARTICLE IX RECAPTURE ..................................................... 13
9.1 Right of Recapture .............................................. 13
9.2 Effect of Recapture ............................................. 14
9.3 Fees and Expenses ............................................... 14
ARTICLE X RIGHT OF INSPECTION ............................................ 14
ARTICLE XI INDEMNIFICATION ............................................... 15
ARTICLE XII INSOLVENCY ................................................... 15
ARTICLE XIII NO THIRD PARTY RIGHTS ....................................... 15
ARTICLE XIV DUTY OF COOPERATION .......................................... 16
ARTICLE XV ARBITRATION ................................................... 16
15.1 Arbitration ..................................................... 16
15.2 Arbitration Procedures .......................................... 16
ARTICLE XVI DAC TAX ...................................................... 17
16.1 DAC Tax Reimbursement ........................................... 17
ARTICLE XVII GENERAL PROVISIONS .......................................... 19
17.1 Notices ......................................................... 19
17.2 Entire Agreement ................................................ 19
17.3 Expenses ........................................................ 19
17.4 Counterparts .................................................... 19
17.5 No Third Party Beneficiary ...................................... 19
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17.6 Amendment ....................................................... 20
17.7 Assignment; Binding Effect ...................................... 20
17.8 Severability .................................................... 20
17.9 Governing Law ................................................... 20
17.10 Waiver .......................................................... 20
17.11 Headings, etc. .................................................. 20
17.12 Compliance with Laws ............................................ 20
17.13 Errors and Oversights ........................................... 20
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COINSURANCE AGREEMENT
THIS COINSURANCE AGREEMENT (this "Agreement"), dated as of February 10, 2004, is
made by and between United of Omaha Life Insurance Company, a Nebraska insurance
company (the "Company"), and Security Benefit Life Insurance Company, a Kansas
insurance company (the "Reinsurer").
INTRODUCTORY STATEMENTS
The Company, the Reinsurer and Companion Life Insurance Company ("Companion")
have entered into that certain Purchase Agreement, dated as of February 12, 2004
(the "Purchase Agreement"), which agreement calls for, among other things, the
reinsurance transactions described in this Agreement;
Upon the terms and conditions set forth herein, the Company desires to cede, on
a coinsurance or modified coinsurance basis, to the Reinsurer the Company's
rights, liabilities, and obligations in respect of its variable life insurance
and variable annuity products in force on the Effective Date;
Upon the terms and conditions set forth herein, the Reinsurer desires to
reinsure on a coinsurance or modified coinsurance basis all of the rights,
liabilities, and obligations in respect of the Company's products referred to
above; and
The Company desires that the Reinsurer perform certain administrative functions
on behalf of the Company with respect to the Policies, and the Company and the
Reinsurer have entered into an Administrative Services Agreement of even date
herewith pursuant to which the Reinsurer shall provide such administrative
services.
NOW, THEREFORE, in consideration of the mutual covenants and promises, and upon
the terms and conditions, hereinafter set forth, the parties hereto agree as
follows:
DEFINITIONS
Capitalized terms not defined herein shall have the meanings set forth in the
Purchase Agreement:
"Accidental Death Benefit Risk" means any accidental death benefit payable under
a Life Insurance Contract in the event of the insured's accidental death.
"Administrative Services Agreement" has the meaning set forth in Section 6.2.
"Annuity Contracts" means all annuity contracts, binders, policies,
endorsements, riders, and certificates issued by Company on or prior to the
Effective Date and in force on the Effective Date that are on forms identified
in Schedule 1.01(c) attached to the Purchase Agreement, including any such
policies, certificates and contracts that have lapsed and that otherwise would
be eligible for inclusion herein, subject to reinstatement pursuant to
reinstatement procedures contained in such policies, certificates and contracts.
"Business Day" shall mean each day on which a valuation of the Separate Accounts
is required by Applicable Law or the terms of the Policies.
"Ceding Commission" means the total ceding commission paid to the Company by the
Reinsurer, which consists of three components of a total amount of $37.94
million. The three components of the total amount
are, and correspond respectively to, each of: $10.72 million for qualified
Annuity Contracts; $12.58 million for non-qualified Annuity Contracts; and
$14.64 million for non-qualified Life Insurance Contracts.
"Extra Contractual Obligations" shall mean all liabilities and obligations for
compensatory, consequential, extra-contractual, exemplary, punitive, special or
similar damages, and liabilities for fines, penalties and forfeitures (other
than those arising under the express terms and conditions of the Policies),
which relate to or arise from any real or alleged act, error or omission, or
other event whether or not intentional, negligent, in bad faith or otherwise,
including, without limitation, any act, error or omission or other event
relating to (i) the marketing, sale, underwriting, production, issuance,
cancellation or administration of the Policies, (ii) the investigation, defense,
trial, settlement or handling of claims, benefits, or payments under the
Policies, or (iii) the failure to pay or the delay in payment, or errors in
calculating or administering the payment of benefits, claims or any other
amounts due or alleged to be due under or in connection with the Policies.
"General Account Reserves" means, as of any specified time, the aggregate direct
General Account statutory reserves required to be maintained by the Company for
the Policies, calculated consistent with (a) the reserve requirements, statutory
accounting rules and actuarial principles applicable to the Company under the
Applicable Law of each state in which the Policies were issued or delivered, and
(b) otherwise in accordance with the methodologies used by the Company to
calculate the reserves and liabilities for the Policies in accordance with SAP
and sound actuarial principles and any valuation bases and methods of
determining reserves as provided in the forms of Policies, as applicable. Direct
General Account Policy Reserves are included on Page 3, Line 1 of the respective
Seller's Annual Statements and do not include any policy reserves related to
existing reinsurance on the Life Insurance Contracts.
"Life Insurance Contracts" means all insurance policies, binders, endorsements,
riders, certificates and contracts issued by the Company on or prior to the
Effective Date and in force on the Effective Date that are on forms identified
in Schedule 1.01(d) attached to the Purchase Agreement, including any such
insurance policies, certificates and contracts that have lapsed and that
otherwise would be eligible for inclusion herein, subject to reinstatement
pursuant to reinstatement procedures contained in such policies, certificates
and contracts.
"Mortality Risk" means the death benefit (exclusive of any Accidental Death
Benefit Risk and inclusive of any Accelerated Death Benefit) under a Life
Insurance Contract in excess of the account value of the Life Insurance
Contract.
"Policies" means all Annuity Contracts and all Life Insurance Contracts.
"Policy Account" shall mean the portion of the Separate Account liabilities as
shall from time to time relate to the Policies.
"Policy Liabilities" means all liabilities and obligations arising under or
related to the Policies, other than the Excluded Liabilities. Without limiting
the generality of the foregoing, the term "Policy Liabilities" shall include,
without limitation, any and all of the Company's liability:
(1) For liabilities and obligations in respect of the Policies, including
Extra Contractual Obligations of or attributable to the Reinsurer or
any of its Affiliates; provided, however, that the Company shall
retain, and Reinsurer assumes no liability for, any Mortality Risk or
Accidental Death Benefit Risk with respect to the Life Insurance
Contracts; and
(2) For premium Taxes arising on account of premiums paid at or after the
Effective Date (without giving effect to any credits due to the
Company for any guaranty fund assessments paid by the Company prior to
the Effective Date) with respect to the Policies; and
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(3) For guaranty fund assessments and similar charges imposed based upon
premiums paid with respect to the Policies and arising on account of
premiums paid on or after the Effective Date; and
(4) For returns or refunds of premiums (irrespective of when due) under
the Policies payable on or after the Effective Date; and
(5) For commission payments and other compensation, if any, payable on or
after the Effective Date to or for the benefit of agents or brokers;
and
(6) For all liabilities arising out of any changes to the terms or
conditions of the Policies mandated by Applicable Law; and
(7) For all unclaimed property liabilities arising under or relating to
the Policies.
"Qualifying Assets" shall mean assets that qualify as admissible assets of the
Reinsurer under the laws of the State of Nebraska.
"Reinsurance Period" shall mean the period of time from the Effective Date of
this Agreement through the termination of this Agreement.
"SAP" shall mean statutory accounting practices prescribed or permitted by the
insurance regulatory authorities of the State of Nebraska.
"Separate Accounts" shall mean the separate accounts of the Company relating to
the Policies.
"Statutory Reserves" shall mean all reserves and liabilities required to be
maintained by the Company for the Policies issued or reinsured by it, calculated
consistent with (a) the reserve requirements, statutory accounting rules and
actuarial principles applicable to the Company under the Applicable Law of each
state in which the Policies were issued or delivered, and (b) otherwise in
accordance with the methodologies used by the Company to calculate the reserves
and liabilities for the Policies in accordance with SAP and sound actuarial
principles and any valuation bases and methods of determining reserves as
provided in the forms of Policies, as applicable.
BUSINESS REINSURED
2.1 General. Effective as of the Effective Date, the Company hereby cedes
to and reinsures with the Reinsurer, and the Reinsurer hereby assumes and
reinsures from the Company, on an indemnity reinsurance basis, 100% of the
Policy Liabilities. Such indemnity reinsurance shall be based on (i) 100%
coinsurance with respect to the General Account Reserves and (ii) 100% modified
coinsurance with respect to the Policy Account. The Company specifically retains
all Mortality Risk and all Accidental Death Benefit Risk relating to the Life
Insurance Contracts, and will be liable for the payment of the portion of death
benefits under the Life Insurance Contracts attributable to the Mortality Risk
and Accidental Death Benefit Risk as of the date of death of the insured. The
Company does not cede to the Reinsurer any risk in excess of that permitted by
the Mortality Risk Reinsurance Agreements.
2.2 Liability. From and after the Effective Date, as between the parties,
the Reinsurer shall indemnify the Company for all Policy Liabilities. The
Reinsurer hereby agrees to pay directly any Policy Liabilities on behalf of, and
in the name of, the Company pursuant to the terms of the Administrative
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Services Agreement; provided, however, that the Reinsurer shall have no direct
or indirect obligation itself to insureds, claimants, or beneficiaries under any
Policies.
2.3 Defenses. The Reinsurer accepts, reinsures, and assumes the Policy
Liabilities subject to any and all defenses, setoffs, and counterclaims to which
the Company is entitled with respect to the Policy Liabilities, it being
expressly understood and agreed by the parties hereto that no such defenses,
setoffs, or counterclaims are or shall be waived by the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby
and that the Reinsurer is and shall be fully subrogated in and to all such
defenses, setoffs, and counterclaims. The Company agrees to exercise any such
defenses, setoffs and counterclaims for the benefit of the Reinsurer.
2.4 Declaration of Non-Guaranteed Elements. Certain Policies ceded under
this Agreement provide that the Company may in its discretion, from time to
time, as provided in the policy or contract, declare interest rates, cost of
insurance rates or other non-guaranteed elements that are used to determine
policy or contract values. During the Reinsurance Period, the Reinsurer shall
establish non-guaranteed elements of the Policies, including interest rates,
current annuity purchase rates and cost of insurance rates and communicate them
to the Company, along with the basis for the Reinsurer's determination of any
such non-guaranteed elements. These non-guaranteed elements shall not become
effective until approved by the Company, which approval shall not be
unreasonably withheld. If the Company fails to disapprove the non-guaranteed
elements by providing notice to the Reinsurer within five (5) business days
after receipt of communication from the Reinsurer regarding their establishment,
they will be deemed to have been approved by the Company.
2.5 POLICY CHANGES. The Company agrees that it shall not make any changes
after the date of this Agreement in the provisions and conditions of a Policy
except with Reinsurer's prior written consent or to the extent that any change
to the terms of any Policy is required under Applicable Law. The Company further
agrees upon request by the Reinsurer to take all actions reasonably necessary to
facilitate the addition of new investment options to be available under the
Policies or the substitution of new investment options for existing investment
options, including obtaining a substitution order from the Securities and
Exchange Commission, and to the extent necessary or appropriate, assigning,
amending or terminating applicable participation agreements. Reinsurer shall pay
the Company's reasonable expenses incurred in connection with this Section 2.5.
2.6 RETROCESSION. Reinsurer will retain the right to retrocede all or any
portion of the risks assumed by it arising under this Agreement.
TRANSFER OF ASSETS
3.1 CEDING COMMISSION. In accordance with this Agreement and the Purchase
Agreement, concurrently with the execution of this Agreement the Reinsurer is
paying to the Company the Ceding Commission.
3.2 TRANSFER ON THE CLOSING DATE. In consideration of the Reinsurer's
reinsurance of the Policy Liabilities hereunder, the Company agrees to transfer
to the Reinsurer on April 20, 2004 (the "Closing Date") in accordance with the
provisions of Section 2.02(b) of the Purchase Agreement cash in an amount equal
to the excess of the General Account Reserves less the Adjustments to General
Account Reserves over the dollar amount of outstanding Policy Loans (to the
extent such loans constitute admitted
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assets under SAP), each as of December 31, 2003. Such amounts shall be adjusted
in accordance with Section 2.05 of the Purchase Agreement.
3.3 OTHER TRANSFER. The Company hereby also sells, assigns and transfers to
the Reinsurer all Policy Loans, and agrees to pay reinsurance premiums equal to
premiums due or to become due, premiums deferred and uncollected, premium
adjustments and any and all amounts, payments or consideration which are or were
held, received or collected by the Company on or after the Effective Date, or
which are now due or will become due from any source under or in connection with
the Policies except, however, to the extent that any such premiums, adjustments,
amounts, payments or consideration are included within the cash transferred
pursuant to Section 2.02(b) of the Purchase Agreement. Such amounts will be
settled between the parties hereto in accordance with Section 6.3 of this
Agreement. The Company and the Reinsurer acknowledge and agree that the Company
has and will retain sole and absolute title to and possession of the assets held
with respect to the Policy Account, and that the Reinsurer has no right, title,
or interest (whether legal, equitable, secured, or otherwise) in or to any of
the assets held with respect to the Policy Account.
3.4 SECURITY TRUST. On the Closing Date, Reinsurer agrees to deposit an
amount not less than, or transfer assets whose market value is not less than,
the General Account Reserves reinsured on a coinsurance basis, less Adjustments
to General Account Reserves and less the amount of outstanding Policy Loans (to
the extent such loans constitute admitted assets under Applicable SAP), to the
United of Omaha Trust, pursuant to the terms of that certain United of Omaha
Trust Agreement by and among the Company, the Reinsurer and the Trustee, dated
as of the Closing Date. In connection with each Reserve Report prepared in
accordance with Section 5.3, the Reinsurer will submit a report showing the
amount by which the United of Omaha Trust is less than or exceeds the General
Account Reserves, less Adjustments to General Account Reserves and less the
amount of Policy Loans (to the extent such loans constitute admitted assets
under Applicable SAP), held by the Reinsurer.
TERRITORY; TERM
4.1 TERRITORY AND TERM. This Agreement shall apply to Policies covering
lives and risks wherever resident or situated. Subject to Article IX below, this
Agreement shall remain in force and effect until the expiration or termination
of all Policy Liabilities in respect of the Policies and until all obligations
of either party hereunder have been discharged in full.
4.2 REDUCTIONS. If all or any portion of the Company's liability on a
Policy which has been reinsured is reduced, the Reinsurer's liability on such
Policy will be decreased by the same amount.
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RESERVES
5.1 Establishment of General Account Reserves. The Reinsurer shall be
responsible for establishing and maintaining the proper general account
Statutory Reserves for the Policy Liabilities reinsured on a coinsurance basis
as required by Applicable Law. Assets in respect of the general account
Statutory Reserves will be maintained in the United of Omaha Trust in accordance
with the United of Omaha Trust Agreement.
5.2 Establishment of Separate Account Reserves.
(a) Policy Account. For each Policy, an amount equal to the
accumulated value (as defined in the Policies) thereof invested on a variable
basis shall be held by the Company in the Separate Accounts.
(b) Policy Account Reserve. The total Policy Account Statutory Reserve
liability for each Policy relating to the assets held in the Policy Account
pursuant to Section 5.2(a) reinsured on a modified coinsurance basis shall be
shown by the Company on its Separate Account balance sheets, consistent with
SAP.
5.3 Reserve Reports. The Reinsurer or its designee shall provide the
Company, within 10 Business Days after the end of each calendar quarter,
valuation summary reports which shall itemize reserves and contracts in force by
plan code, in a format mutually agreed upon by the Company and the Reinsurer.
Such reports shall reflect 100% of any changes in the reserves described in
Sections 5.1 and 5.2 above which occurred during the accounting period for which
such reports are made. These reports shall include statutory, tax and GAAP
benefit reserves.
5.4 Reinsurance Reserve Credits. If the full statutory reinsurance reserve
credit contemplated by this Agreement is or becomes unavailable to the Company
with respect to any jurisdiction, the Reinsurer shall take any and all action
necessary to make such full statutory reinsurance reserve credit available to
the Company; provided however, the Reinsurer shall not be required to take any
action to the extent that reserve credit is denied to the Company as a result of
the Company's retention of Mortality Risk and Accidental Death Benefit Risk. In
doing so, the Reinsurer shall have the discretion to utilize any means available
in the applicable jurisdiction to make such full statutory reinsurance reserve
credit available to the Company, which may include, but not be limited to,
permitting the Company to withhold funds, establishing a reserve trust account
or posting a letter of credit. If a letter of credit is utilized, it shall be
furnished and maintained by the Reinsurer for the benefit of the Company and be
clean, irrevocable and unconditional and otherwise of such nature and amount as
to satisfy the requirements of the particular jurisdiction for purposes of
establishing full statutory reinsurance reserve credit for the Company.
In the event that the Reinsurer shall fail or refuse to fulfill any of its
obligations under this Agreement relating to the payment of any Policy
Liability, the Company shall be entitled to proceed under the terms and
conditions of any letter of credit, trust agreement or any other agreement
relating to the same and seize and take possession of the funds represented by
the same and apply those funds to reduce the Reinsurer's obligations to the
Company.
ACCOUNTING AND SETTLEMENT
6.1 Net Daily Activity. With respect to any Business Day, the "Net Daily
Activity" shall be the amount calculated by comparing:
(a) the sum of:
the gross premiums and annuity deposits collected on all
Policies;
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the payments made to the Company or its broker-dealer under
distribution agreements and/or participation agreements or other
agreements with any mutual fund organization or affiliate thereof
attributable to the use of such organization's mutual funds as
funding vehicles for the Policies;
the interest payments and principal repayments on all Policy
loans, less new Policy loan amounts paid to contract owners;
any other fees, charges, premiums, costs, or other amounts, or
portion(s) thereof relating to the Business, collected during the
preceding Business Day, which would be payable to the general
account of the Company in the absence of the reinsurance of the
Policies effected by this Agreement.
(b) less the sum of the following:
the total Policy benefits paid, including death benefits,
enhanced annuity death benefits, full or partial cash surrender
benefits, full or partial withdrawal benefits, maturity benefits,
annuity payments, and annuity surrenders for annuitization;
the net amount of funds transferred from the General Account to
the Separate Accounts of the Company in connection with
maintaining the Policy Account including premiums allocated to
the Separate Accounts, contract owner transfers from the General
Account to the Separate Accounts, and policy loan repayments
transferred to the Separate Accounts; less contract owner
transfers from the Separate Accounts to the General Account,
transfers from the Separate Accounts for new policy loans, the
Separate Account portion of benefits paid (per (b)(i)), and fees
and charges originating in the Separate Accounts including cost
of insurance charges, management and expense charges, surrender
charges, and enhanced death benefit charges; and
any other fees, charges, premiums, costs, and other amounts, or
portion(s) thereof relating to the Business, payable on such day
by the general account of the Company under the terms of the
Policies.
Reimbursements listed above shall not be made with respect to items accrued by
the Company prior to the Effective Date.
The net daily activity shall be accumulated for each Business Day and combined
as a total in the aggregate for each calendar month. If the sum of items in
Section 6.1(a) exceeds
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the sum of items in Section 6.1(b), then (subject to the provisions of Section
6.6) such excess (to the extent not already paid to or on behalf of the
Reinsurer) shall be payable by the Company to the Reinsurer and added to the
monthly settlement report (subject to the provisions of Section 6.5).
Conversely, if the sum of the items in Section 6.1(b) exceeds the sum of the
items in Section 6.1(a), then (subject to the provisions of Section 6.6) such
excess (to the extent not already paid to or on behalf of the Company) shall be
payable by the Reinsurer to the Company and subtracted from the monthly
settlement report (subject to the provisions of Section 6.5).
6.2 Benefit Payments. The Reinsurer shall have full responsibility and
authority for all benefit payment determinations or settlements except payments
of death benefits under the Life Insurance Contracts, which will remain the
responsibility of the Company. In all other cases, the Reinsurer shall be solely
responsible for all expenses associated with benefit payment determinations or
settlements pursuant to and in accordance with the Administrative Services
Agreement, dated as of the date of this Agreement, between the Company and the
Reinsurer, as the same may be amended from time to time (the "Administrative
Services Agreement").
6.3 MORTALITY RISK. In consideration of the Mortality Risk retained by the
Company, the Company shall retain premiums received under the Life Insurance
Contracts in an amount that shall be calculated on a monthly basis. The amount
of premium retained by the Company shall be calculated at the beginning of each
calendar month based upon the Mortality Risk of each of its Life Insurance
Contracts in force as of the close of the last Business Day of the prior
calendar month and mortality rates from the 1985-1990 Society of Actuaries
modified Basic Select and Ultimate sex distinct tables on an "age last birthday"
basis ("SOA Tables") multiplied by up to four separate tables of scalar factors.
The SOA Tables and scalar factor tables are attached to the Purchase Agreement
as Exhibit G. The monthly premium for standard business is determined for each
such Life Insurance Contract by multiplying: (1) 1/12th of the rate determined
by reference to the applicable SOA Table; by (2) the applicable scalar factor
from each of the four scalar factor tables; by (3) the Mortality Risk for that
Life Insurance Contract as of the close of the last Business Day of the prior
calendar month. The monthly premium for substandard business is determined for
each such Life Insurance Contract and is the sum of: (1) the monthly premium as
determined for the standard business as described above; and (2) 1/12th of the
rate determined by reference to the applicable SOA Table for standard business,
multiplied by (x) the total mortality rating (i.e., 100% plus any applicable
substandard mortality rating) less 100%; (y) the applicable scalar factor from
each of scalar 1 and scalar 3; and (z) the Mortality Risk for that Life
Insurance Contract as of the close of the last Business Day of the prior
calendar month. In addition to the foregoing amounts, the Company shall retain a
monthly premium for any Accidental Death Benefit Risk in an amount equal to
1/12th of $0.50 per $1,000 of Accidental Death Benefit in force as of the close
of the last Business Day of the prior calendar month. The Accelerated Death
Benefit under the Life Insurance Contracts is an amount equal to 94% of the
death benefit under the Life Insurance Contract (88% in Washington and 96% in
New Jersey). The Company shall pay Reinsurer upon payment of an Accelerated
Death Benefit a portion of the difference between the Accelerated Death Benefit
amount and the death benefit under the Life Insurance Contract if the
Accelerated Death Benefit had not been elected, which is an amount equal to 6%
of the death benefit (12% in Washington and 4% in New Jersey). The portion paid
to Reinsurer shall be equal to a proportional share of the difference based upon
the percentage of the death benefit attributable to account value.
6.4 Premium Taxes. The Reinsurer shall pay the Company on a monthly basis
an amount equal to two percent (2%) of the gross premiums collected by the
Reinsurer on Life Insurance Contracts, as an advance against the Reinsurer's
liabilities for premium taxes with respect to premiums paid on the Policies.
Amounts payable pursuant to this Section 6.4 shall be reflected on the monthly
report as outlined in Section 6.5 and paid pursuant to the provisions of Section
6.6. After the end of each calendar year falling within the term of this
Agreement, the Company shall provide the Reinsurer with an accounting of its
actual premium tax liability with respect to the Policies. The amount of any
excess or shortfall of the advance premium taxes paid to the Company by the
Reinsurer for such calendar year and the actual premium taxes paid by the
Company for such calendar year shall be included in the next following monthly
report and paid
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pursuant to the provisions of Section 6.6. Such amount shall be reflected in
Schedule 6.5 as "an adjustment to prior reports" and shall be to the credit of
Reinsurer in the event of an excess of advance over actual premium taxes and to
the credit of Company in the event of a shortfall advance over actual premium
taxes.
6.5 Monthly Report. At the end of the tenth Business Day next succeeding
the end of each calendar month, the Reinsurer will provide the Company with a
statement for the preceding month; provided that prior to the Service
Commencement Date such statements shall be provided by the Company to Reinsurer.
The statement may reflect a correction or adjustment, in which event the
Reinsurer or the Company, as the case may be, shall make any required payment on
the day following notification thereof in accordance with the method for cash
payments prescribed by Section 6.6(a) below. Any further adjustment as may be
required shall be made promptly following agreement of the parties or completion
of any audit pursuant to Section 6.6(c) below. Monthly statements shall include
the items set forth below and shall be in a form agreed to by the Company and
the Reinsurer in writing being substantially consistent with Schedule 6.5.
(a) the monthly totals of the items included in the Net Daily
Activity, under Section 6.1 for all Policies;
(b) the commissions paid (net of refunds) on behalf of the Company
for all Policies;
(c) the interim services fee paid by the Reinsurer to the Company
during the Interim Service Period;
(d) the amount of any advance premium taxes pursuant to Section 6.4;
(e) the premium retained by the Company for the Mortality Risk under
Section 6.3;
(f) the amount of death benefits paid on life policies, including
accidental death benefits, in excess of policy account values on
the date of death;
(g) the Reinsurer's proportionate share of the difference between the
Accelerated Death Benefit amount and the death benefit under the
Life Insurance Contract if the Accelerated Death Benefit had not
been elected;
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The total net monthly cash settlement payable to the Reinsurer by the
Company shall be calculated as (a) - (b) - (c) - (d) - (e) + (f) + (g);
provided, however, if the result of such calculation is negative, then the
absolute amount of such negative result shall be payable to the Company by
the Reinsurer. Such payments shall be made in accordance with Section 6.6.
6.6 Monthly Cash Settlement and Accounting.
(a) Monthly Cash Settlements. The Reinsurer or the Company, as the
case may be, shall make the required payments within three Business Days
following the receipt of the monthly report under Section 6.5 by wire transfer
of immediately available funds. The Monthly Cash Settlements will reflect any
payments already made under Section 6.1 for accumulated Net Daily Adjustments.
Monthly statements may be based upon reasonable approximations and shall be in a
form substantially consistent with Schedule 6.5.
(b) Form of Statements. All statements provided pursuant to Sections
6.3, 6.4 and 6.5 above shall summarize the items to be settled in reasonable
detail. It is intended that the statements be transmitted by facsimile or other
similar means of convenient written communication, but, in the event that any
statement cannot be transmitted after application of commercially reasonable
efforts, the party preparing the statement may notify the other party of any
settlement due by oral communication, in which case a hard copy of the
settlement statement shall be provided as promptly as practicable.
(c) Right to Audit. With regard to statements, reports, and
settlements contemplated by this Article VI and prepared by the Company or
Reinsurer, as applicable, the other party shall have the right to audit the
amounts contained in any such statements, reports and settlements.. For such
purposes, the Company or Reinsurer, as applicable, and its employees,
professional advisors and agents shall have a right to review and copy the
relevant books and records of the other party and to discuss such matters with
employees of the other party during normal business hours. Each party agrees to
render reasonable assistance to the other party in conducting any such audit and
to instruct its independent public accountants and actuaries to provide
information to the other party.
6.7 GENERAL RIGHT OF OFFSET. Notwithstanding any provision of this
Agreement, any and all amounts due from the Reinsurer to the Company or from the
Company to the Reinsurer under this Agreement may be offset against amounts due
from one party to the other under this Agreement or under any other written
agreement hereafter entered into by and between the parties, in settling and
making payments on a net basis of amounts due under this Agreement and any
subsequent written agreements.
ADMINISTRATION; RECORDS; NOTICES
7.1 Administration. Administration and servicing of all of the Policies
shall be conducted pursuant to the terms and subject to the conditions set forth
in the Administrative Services Agreement. Reports, files, and other records and
information relating to the Policies shall be transferred and maintained
pursuant to the terms and subject to the conditions set forth in the
Administrative Services Agreement.
7.2 Transfer of Books and Records. The Company shall forward to the
Reinsurer all reports, records, underwriting files, policy files, claims files
and information in any form in its possession relating to the Policies pursuant
to and in accordance with the Administrative Services Agreement.
7.3 Maintenance of Books and Records. The Reinsurer agrees to maintain a
true and complete set of books and records relating to all transactions under
this Agreement, including without limitation all such records as may be required
by Applicable Law. The Reinsurer shall maintain such books and records at the
Reinsurer's expense and in accordance with prudent standards of insurance
recordkeeping and all Applicable Laws. The books and records shall be available
(at their place of keeping) for inspection, examination, and audit by the
Company and state and federal regulatory authorities (in each
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case together with their respective representatives) at all reasonable times.
The Reinsurer shall furnish to the Company (i) at the Reinsurer's expense,
copies of any books or records relating to the transactions under this Agreement
as may be reasonably required by the Company in connection with the preparation
of the Company's financial statements, state and federal income and other tax
returns, and any other filings or reports required to be filed with, or
requested by, state or federal regulatory authorities or any rating agencies and
(ii) at the Company's expense, copies of any such books and records for any
other reason. Without limiting the generality of the foregoing, the Reinsurer
shall provide the Company (at the Reinsurer's expense) all information
concerning the Policies required to be included in the Company's state premium
tax returns (in a format suitable for direct insertion therein).
7.4 Notices. The Company agrees that, after the Closing Date, it shall
forward promptly to the Reinsurer all notices and other written communications
received by it relating to the Policies (including without limitation all
inquiries or complaints from state insurance regulators, agents, brokers and
insureds and all notices of claims, suits and actions for which it receives
service of process). The Company shall be entitled to retain copies of all such
materials.
Guaranty fund assessments
8.1 Reimbursement of the Company. In the event the Company is required to
pay any assessment to any insurance guaranty, insolvency, comprehensive health
association or other similar fund maintained by any jurisdiction assessed in
part or whole with respect of premiums paid under the Policies on or after the
Effective Date, the portion, if any, of such assessment that relates to Policies
(the "Related Assessment") shall be reimbursed by the Reinsurer. The Reinsurer
shall not be obligated to reimburse the Company for any such assessment
allocable to premiums paid under the Policies prior to the Effective Date. The
Reinsurer shall pay to the Company any Related Assessment which shall have
become due, promptly on written demand therefor by the Company, submitted
together with documentation evidencing such assessment and the payment therefor
by the Company. If at any time the Company shall subsequently recover all or
part of any such assessment reimbursed by the Reinsurer (e.g., through policy
surcharges or through reduction of or credits against premium taxes as to the
Policies), the portion of any such recovery received or otherwise realized by
the Company attributable to the Related Assessment shall be reimbursed to the
Reinsurer (based upon the total portion of such recovery attributable to
Policies). The Company shall provide the Reinsurer with semi-annual reports of
any such recoveries regardless of the form in which received.
8.2 Reimbursement of the Reinsurer. In the event the Reinsurer is required
to pay any assessment to any insurance guaranty, insolvency, comprehensive
health association or other similar fund maintained by any jurisdiction assessed
in part or in whole with respect of premiums paid under the Policies prior to
the Effective Date, the portion, if any, of such assessment that relates to
Policies (the "Related Prior Period Assessment") shall be reimbursed by the
Company. The Company shall not be obligated to reimburse the Reinsurer for any
such assessment allocable to premiums paid under the Policies after the
Effective Date. The Company shall pay to the Reinsurer any Related Prior Period
Assessment which shall have become due, promptly on written demand therefor by
the Reinsurer, submitted together with documentation evidencing such assessment
and the payment therefor by the Reinsurer. If at any time the Reinsurer shall
subsequently recover
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all or part of any such assessment reimbursed by the Company (e.g., through
policy surcharges or through reduction of or credits against premium taxes as to
the Policies), the portion of any such recovery received or otherwise realized
by the Reinsurer attributable to the Related Prior Period Assessment shall be
reimbursed to the Company (based upon the total portion of such recovery
attributable to Policies). The Reinsurer shall provide the Company with
semi-annual reports of any such recoveries regardless of the form in which
received.
RECAPTURE
9.1 Right of Recapture. At any time after the occurrence (or nonoccurrence,
as the case may be) of either of the following, the Company shall have the
right, upon delivery of written notice to the Reinsurer, to recapture any and
all of the Policies:
(a) if the Reinsurer materially breaches any provision of this
Agreement or the Administrative Services Agreement, which breach
is not cured within 60 days after receipt by the Reinsurer of
notice thereof from the Company; or
(b) if the Reinsurer is placed in receivership, conservatorship,
rehabilitation, or liquidation by any insurance regulatory
authority or becomes (whether voluntarily or involuntarily) the
subject of a proceeding under any local, state, or federal
bankruptcy or insolvency Law.
9.2 Effect of Recapture. Upon the receipt of the Company's notice to
recapture pursuant to Section 9.1 hereof, and without further action by the
Reinsurer, the Reinsurer will be deemed to have ceded, transferred, and assigned
to the Company all Policy Liabilities; and shall transfer and assign to the
Company Qualifying Assets (including all Policy loans) having an aggregate
market value (or book value in the case of Policy loans) as of the date of
recapture equal to the aggregate general account reserve liability amount
established by the Company as of such date with respect to the Policies (without
giving effect to the reinsurance under this Agreement) less any reserves
retained by the Company as of such date relating to the Adjustments to General
Account Reserves, together with all interest, dividend, or other investment
income accrued on such assets from the date of the Reinsurer's receipt of such
recapture notice until the date of the Company's receipt of such assets; and any
and all of the Reinsurer's right, title, and interest in and to all gross
premiums, premium adjustments, amounts recoverable from reinsurers, and other
similar payments and receivables that are or may be due or payable under the
Policies. The Reinsurer shall cooperate with the Company in effecting any
recapture of Policies pursuant to Section 9.1 hereof, including without
limitation by promptly transferring amounts to the Company described above and
by executing and delivering such other documents, instruments and certificates
effectuating the recapture described in this Section and reasonably requested by
the Company.
9.3 Fees and Expenses. (a) Upon the recapture of Policy Liabilities
pursuant to Section 9.1 hereof, (i) the Reinsurer shall pay to the Company an
amount which is a reasonable estimate of the expenses the Company will incur as
a result of the recapture, and (ii) the Company will refund to the Reinsurer a
15
portion of the Ceding Commission based on an appraisal of the Policies as of the
date of termination (which appraisal shall take into consideration the effect of
the termination of this Agreement). The estimate of expenses and the appraisal
of the Policies as of the date of termination will be prepared by a nationally
recognized actuarial firm reasonably acceptable to the parties. Such expense
payment and refund shall be paid promptly with interest at an annual rate of 5%
accruing from the date of termination until the date of payment.
RIGHT OF INSPECTION
Each party hereto and its respective authorized representatives shall have the
right, at all reasonable times during normal business hours, to inspect and
review all books, records, accounts, reports, tax returns, files and information
of the other party hereto relating to the Policies and Policy Liabilities under
such Policies.
INDEMNIFICATION
The Reinsurer agrees to indemnify, defend and hold the Company harmless from and
against all liability, damages, costs and expenses, including attorneys' fees,
arising from Policy Liabilities. The Company agrees to indemnify, defend, and
hold the Reinsurer harmless from and against all liability, damages, costs and
expenses, including attorneys' fees, arising from Extra Contractual Obligations
based on acts, errors or omissions by the Company or any of its officers,
employees, agents or representatives, and any attorneys' fees incurred by the
Company related to such Extra Contractual Obligations. The parties shall follow
the indemnification procedures set forth in Article X of the Purchase Agreement.
INSOLVENCY
The Reinsurer hereby agrees that, as to all reinsurance made, ceded, renewed or
otherwise becoming effective hereunder, the portion of any risk or obligation
assumed by the Reinsurer, when such portion is ascertained, shall be payable
immediately on demand of the Company at the same time as the Company shall pay
its retained portion of such risk or obligation, with reasonable provision for
verification before payment, and the reinsurance shall be payable by the
Reinsurer on the basis of the liability of the Company under the Policy or
Policies reinsured, without diminution because of the insolvency of the Company,
directly to the Company or to its liquidator, receiver, or other statutory
successor. It is agreed that in the event of the insolvency of the Company, the
liquidator, receiver or other statutory successor of the Company shall give
prompt written notice to the Reinsurer of the pendency or submission of a claim
under the Policy or Policies reinsured. During the pendency of such claim, the
Reinsurer may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated
16
any defense available to the Company or its receiver. The expense thus incurred
by the Reinsurer is chargeable against the Company, subject to any court
approval, as a part of the expense of liquidation to the extent of a
proportionate share of the benefit which accrues to the Company solely as a
result of the defense undertaken by the Reinsurer.
NO THIRD PARTY RIGHTS
The Reinsurer's coinsurance of the Policy Liabilities pursuant to this Agreement
with respect to any of the Policies is intended for the sole benefit of the
parties to this Agreement and shall not create any right on the part of any
policyholder, insured, claimant or beneficiary under such Policies against the
Reinsurer or any legal relationship between such policyholders, insureds,
claimants or beneficiaries and the Reinsurer.
DUTY OF COOPERATION
Each party hereto shall cooperate fully with the other party hereto in all
reasonable respects in order to accomplish the objectives of this Agreement.
ARBITRATION
15.1 ARBITRATION.
(a) After the Effective Date, any dispute between the parties under or with
respect to this Agreement (other than disputes relating to calculations relating
to DAC Tax, which shall be resolved in accordance with Article XVI hereof),
including the validity and effectiveness of this Agreement, shall be decided
through negotiation and, if necessary, arbitration as set forth in Section 15.2.
(b) The parties intend this Section 15.1 to be enforceable in accordance with
the Federal Arbitration Act (9 U.S.C., Section 1) including any amendments to
that Act which are subsequently adopted. In the event that either party refuses
to submit to arbitration as required by Section 15.1(a), the other party may
request the court specified in Section 12.06 of the Purchase Agreement to compel
arbitration in accordance with the Federal Arbitration Act.
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15.2 ARBITRATION PROCEDURES.
(a) Except as expressly provided otherwise in Section 15.1(a), the
Company and the Reinsurer intend that any dispute between them under or with
respect to this Agreement be resolved without resort to any litigation.
Accordingly, the Company and the Reinsurer agree that they will negotiate
diligently and in good faith to agree on a mutually satisfactory resolution of
any such dispute; provided, however, that if any such dispute cannot be so
resolved by them within sixty (60) calendar days (or such longer period as the
parties may agree) after commencing such negotiations, the Company and the
Reinsurer agree that they will submit such dispute to arbitration in the manner
specified in, and such arbitration proceeding will be conducted in accordance
with, the Commercial Arbitration Rules of the American Arbitration Association.
(b) The arbitration hearing will be before a panel of three
disinterested arbitrators, each of whom must be a present or former officer of a
life insurance or life reinsurance company or other professional familiar with
the life insurance and reinsurance business. The Company and the Reinsurer will
each appoint one arbitrator by written notification to the other party within
thirty (30) calendar days after the date of the mailing of the notification
initiating the arbitration. These two arbitrators will then select the third
arbitrator within thirty (30) calendar days after the date of the mailing of the
notification initiating arbitration.
(c) If either the Company or the Reinsurer fails to appoint an
arbitrator, or should the two arbitrators be unable to agree upon the choice of
a third arbitrator, the president of the American Arbitration Association or of
its successor organization or (if necessary) the president of any similar
organization designated by lot of the Company and the Reinsurer within thirty
(30) calendar days after the request will appoint the necessary arbitrators.
(d) The arbitrators shall base their decision on the terms and
conditions of this Agreement. However, if the terms and conditions of this
Agreement do not explicitly dispose of an issue in dispute between the parties,
the arbitrators may base their decision on the customs and practices of the life
insurance and life reinsurance industry rather than solely on an interpretation
of Applicable Law. The arbitrators' decision shall take into account the right
to offset mutual debits and credits as provided in this Agreement. The vote or
approval of a majority of the arbitrators will decide any question considered by
the arbitrators. The place of arbitration will be determined by the arbitrators.
Each decision (including, without limitation, each award) of the arbitrators
will be final and binding on all parties and will be nonappealable, and (at the
request of either the Company and the Reinsurer) any award of the arbitrators
may be confirmed by a judgment entered by the court specified in Section 14.08
of the Administrative Services Agreement. In no event, may the arbitrators award
punitive or exemplary damages. Each party will be responsible for paying (a) all
fees and expenses charged by its respective counsel, accountants, actuaries, and
other representatives in conjunction with such arbitration and (b) one-half of
the fees and expenses charged by each arbitrator.
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DAC TAX
16.1 DAC Tax Reimbursement In accordance with Treasury Regulations Section
1.848-2(g)(8), the Company and the Reinsurer hereby elect to determine specified
contract acquisition expenses with respect to this Agreement without regard to
the general deductions limitation of Section 848(c)(1) of the Code.
(a) All uncapitalized terms used herein shall have the meanings set
forth in the regulations under Section 848 of the Code.
(b) The party with net positive consideration under this Agreement for
each taxable year shall capitalize specified contract acquisition expenses with
respect to this Agreement without regard to the general deductions limitation of
Section 848(c)(1) of the Code.
(c) Both parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to ensure
consistency.
(d) The Reinsurer shall submit a schedule to the Company by April 1 of
each year of its calculation of the net consideration under this Agreement for
the preceding taxable year. This schedule of calculations shall be accompanied
by a statement signed by an authorized representative of the Reinsurer stating
that the Reinsurer shall report such net consideration in its federal income tax
return for the preceding taxable year.
(e) The Company may contest such calculation by providing an
alternative calculation to the Reinsurer in writing within thirty (30) calendar
days after the date on which the Company receives the Reinsurer's calculation.
If the Company does not so notify the Reinsurer, the Company shall report the
net consideration under this Agreement as determined by the Reinsurer in the
Company's federal income tax return for the preceding taxable year.
(f) (i) If the Company contests the Reinsurer's calculation of the net
consideration under this Agreement, the parties shall act in good faith to reach
an agreement as to the correct amount of net consideration within thirty (30)
calendar days after the date on which the Company submits its alternative
calculation. If the Company and the Reinsurer reach agreement as to the amount
of net consideration under this Agreement, each party shall report such amount
in its federal income tax return for the preceding taxable year.
(ii) If, during such 30-day period, the Reinsurer and the Company
are unable to reach agreement, they shall promptly thereafter cause
independent accountants mutually agreed to by the Reinsurer and the Company
(who shall not have any material relationship with the Reinsurer or the
Company) promptly to review (which review shall commence no later than five
(5) calendar days after the selection of such independent accountants) this
Agreement and the calculations of the Reinsurer and the Company for the
purpose of calculating the net consideration under this Agreement. In
making such calculation, such independent accountants shall consider only
those items or amounts in the Reinsurer's calculation as to which the
Company has disagreed. Such
19
independent accountants shall deliver to the Reinsurer and the Company, as
promptly as practicable (but no later than sixty (60) calendar days after
the commencement of their review), a report setting forth such calculation,
which calculation shall result in a net consideration between the amount
thereof shown in the Reinsurer's calculation and the amount thereof shown
in the Company's calculation. Such report shall be final and binding upon
the Reinsurer and the Company. The fees, costs and expenses of such
independent accountant shall be borne (i) by the Reinsurer if the
difference between the net consideration as calculated by the independent
accountants and the Reinsurer's calculation is greater than the difference
between the net consideration as calculated by the independent accountants
and the Company's calculation, (ii) by the Company if the first such
difference is less than the second such difference, and (iii) otherwise
equally by the Reinsurer and the Company.
(g) This election shall be effective for the taxable year ending
December 31, 2004 and for all subsequent taxable years for which this Agreement
remains in effect.
(h) Both parties agree to attach a schedule to their respective
federal income tax returns for the first taxable year ending after the date on
which this election becomes effective which identifies this Agreement as a
reinsurance agreement for which an election has been made under Treasury
Regulations Section 1.848-2(g)(8).
GENERAL PROVISIONS
17.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission (and immediately after transmission confirmed by
telephone) or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally or sent by
facsimile transmission (and immediately after transmission confirmed by
telephone) or, if mailed, on the date shown on the receipt therefor, as follows:
If to the Reinsurer: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President and Chief Financial Officer
One Security Benefit ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President, Comptroller and Treasurer
Mutual of ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by notice given in accordance with this Section to the other
party, designate another address or Person for receipt of notices hereunder.
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17.2 Entire Agreement. This Agreement, the Purchase Agreement and the other
Related Agreements contain the entire agreement between the Company and the
Reinsurer with respect to the transactions contemplated hereby, and supersede
all prior agreements and understandings, written or oral, with respect thereto.
17.3 Expenses. Except as may be otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
each of the parties hereto shall pay its own costs and expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
17.4 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto. Each
counterpart may be delivered by facsimile transmission, which transmission shall
be deemed delivery of an originally executed document.
17.5 No Third Party Beneficiary. Except as otherwise expressly set forth in
any provision of this Agreement, nothing in this Agreement is intended or shall
be construed to give any Person, other than the parties hereto, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
17.6 Amendment. This Agreement may only be amended or modified by a written
instrument executed on behalf of both parties hereto.
17.7 Assignment; Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns and
legal representatives, whether by merger, consolidation or otherwise. This
Agreement may not be assigned by any party without the prior written consent of
the other party hereto.
17.8 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction, so long as the economic
or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. If any provision of this Agreement
is so broad as to be unenforceable, that provision shall be interpreted to be
only so broad as is enforceable.
17.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Nebraska, regardless of the Laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
17.10 Waiver. Any term or condition of this Agreement may be waived in
writing at any time by the party that is entitled to the benefit thereof. A
waiver on one occasion shall not be deemed to be a waiver of the same or any
other breach or nonfulfillment on a future occasion. All remedies, either under
the terms of this Agreement, or by Law or otherwise afforded, shall be
cumulative and not alternative, except as otherwise provided by Law.
17.11 Headings, etc. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement. Unless the context of
this
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Agreement otherwise requires, (a) words using the singular or plural number also
include the plural or singular number, respectively; (b) the terms "hereof,"
"herein," "hereby," "hereto," "hereunder," and derivative or similar words refer
to this entire Agreement (including the exhibits hereto); (c) the term "Article"
refers to the specified Article of this Agreement; and (d) the term "party"
means, on the one hand, the Company, and on the other hand, the Reinsurer.
17.12 Compliance with Laws. The parties hereto shall at all times comply
with all Applicable Laws in performing their obligations under this Agreement.
17.13 Errors and Oversights. Each party to this Agreement will act
reasonably in all matters within the terms of this Agreement. Clerical errors
and oversights occasioned in good faith in carrying out this Agreement will not
prejudice either party, and will be rectified promptly on an equitable basis.
IN WITNESS WHEREOF, the Company and the Reinsurer have each executed this
Agreement as of the date first written above.
UNITED OF OMAHA LIFE INSURANCE COMPANY
By:
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
SECURITY BENEFIT LIFE INSURANCE COMPANY
By:
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President,
Chief Financial Officer and
Treasurer
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