Exhibit 10.24
EXECUTION VERSION
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ADMINISTRATIVE SERVICES AGREEMENT
by and between
LINCOLN BENEFIT LIFE COMPANY
and
ALLSTATE LIFE INSURANCE COMPANY
Effective as of April 1, 2014
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TABLE OF CONTENTS
ARTICLE Page
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ARTICLE I DEFINITIONS 2
Section 1.1 Definitions 2
ARTICLE II AUTHORITY; RETAINED SERVICES 6
Section 2.1 Authority 6
Section 2.2 Violations of Applicable Law and Applicable Contracts 6
Section 2.3 Retained Services 7
Section 2.4 Power of Attorney 7
ARTICLE III STANDARD FOR SERVICES; FACILITIES; SUBCONTRACTING, ETC. 8
Section 3.1 Services; Standard for Services 8
Section 3.2 Facilities and Personnel 8
Section 3.3 Subcontracting 8
Section 3.4 Independent Contractor 9
Section 3.5 Limitation on Services 9
Section 3.6 Disaster Recovery 9
ARTICLE IV UNDERWRITING; CONVERSION AND REPLACEMENT; PRODUCERS 9
Section 4.1 Post-Closing Contracts 9
Section 4.2 Parties' Responsibilities 10
Section 4.3 Conversion and Replacement 11
Section 4.4 Producers 13
ARTICLE V COLLECTIONS 13
Section 5.1 Collection Services 13
ARTICLE VI CLAIMS HANDLING 14
Section 6.1 Claim Administration Services 14
Section 6.2 Description of Claim Administration Services 14
ARTICLE VII REGULATORY AND LEGAL PROCEEDINGS 15
Section 7.1 Notice of Action 15
Section 7.2 Defense of Regulatory Complaints and Actions 15
Section 7.3 Other Actions 16
Section 7.4 Cooperation 17
ARTICLE VIII SEPARATE ACCOUNT ADMINISTRATIVE SERVICES 18
Section 8.1 Separate Account Administrative Services 18
Section 8.2 Changes to Fund Options 18
Section 8.3 Changes to Separate Account Fees 19
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ARTICLE IX MISCELLANEOUS SERVICES 20
Section 9.1 Ceded Reinsurance Contracts 20
Section 9.2 Amendments and Replacements 21
Section 9.3 Vermont Captive Reinsurance Agreement 21
Section 9.4 Non-Guaranteed Elements 21
Section 9.5 Contractholder Services 22
Section 9.6 Principal Underwriting Agreement 22
Section 9.7 Other Services 22
ARTICLE X NOTIFICATION TO CONTRACTHOLDERS 23
Section 10.1 Notification to Contractholders 23
ARTICLE XI QUARTERLY PREMIUM TAX AND INSOLVENCY FUND ACCOUNTINGS 23
Section 11.1 Quarterly Accountings 23
Section 11.2 Adjustments Regarding Quarterly Accountings 23
ARTICLE XII CERTAIN ACTIONS BY COMPANY 24
Section 12.1 Filings 24
Section 12.2 Annual Adjustment 24
ARTICLE XIII REGULATORY MATTERS AND REPORTING 24
Section 13.1 Regulatory Compliance and Reporting 24
Section 13.2 Additional Reports and Updates 26
Section 13.3 Additional Reports 26
ARTICLE XIV BOOKS AND RECORDS 26
Section 14.1 Maintenance of Books and Records 26
ARTICLE XV COOPERATION 27
Section 15.1 Cooperation 27
ARTICLE XVI PRIVACY REQUIREMENTS 28
Section 16.1 Confidentiality Obligations 28
Section 16.2 Security Incidents 28
ARTICLE XVII CONSIDERATION FOR ADMINISTRATIVE SERVICES 29
Section 17.1 Consideration for Administrative Services 29
ARTICLE XVIII BANK ACCOUNTS; TRADEMARKS 29
Section 18.1 Establishment of Bank Accounts 29
Section 18.2 Trademarks 30
ARTICLE XIX INDEMNIFICATION 32
Section 19.1 Administrator's Obligation to Indemnify 32
Section 19.2 Company's Obligation to Indemnify 33
Section 19.3 Definitions 34
Section 19.4 Applicability of Stock Purchase Agreement 34
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Section 19.5 No Duplication 34
ARTICLE XX DURATION; TERMINATION 35
Section 20.1 Duration 35
Section 20.2 Termination 35
ARTICLE XXI GENERAL PROVISIONS 36
Section 21.1 Schedules and Exhibits 36
Section 21.2 Notices 37
Section 21.3 Interpretation 38
Section 21.4 Entire Agreement; Third Party Beneficiaries 38
Section 21.5 Governing Law 38
Section 21.6 Assignment 38
Section 21.7 Jurisdiction; Enforcement 38
Section 21.8 Severability; Amendment; Modification; Waiver 39
Section 21.9 Specific Performance 40
Section 21.10 Counterparts 40
Section 21.11 Survival 40
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ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement"), effective as of
April 1, 2014 (the "Inception Date"), is entered into by and between LINCOLN
BENEFIT LIFE COMPANY, a Nebraska domiciled stock life insurance company (the
"Company"), and ALLSTATE LIFE INSURANCE COMPANY, an Illinois domiciled stock
life insurance company (the "Administrator", and together with the Company, the
"Parties", and each a "Party").
RECITALS:
WHEREAS, the Administrator owns 100% of the issued and outstanding capital
stock of the Company;
WHEREAS, the Administrator, Resolution Life Holdings, Inc., a corporation
organized under the laws of the State of Delaware (the "Buyer") and, solely for
the purposes of Section 5.25 and Article X thereof, Resolution Life L.P., a
Bermuda limited partnership, have entered into a Stock Purchase Agreement dated
as of July 17, 2013, as amended (the "Stock Purchase Agreement"), pursuant to
which the Administrator proposes to sell, and the Buyer proposes to purchase,
100% of the issued and outstanding capital stock of the Company;
WHEREAS, the Stock Purchase Agreement provides, among other things, for the
Company and the Administrator to enter into this Agreement;
WHEREAS, pursuant to the Amended and Restated Reinsurance Agreement entered
into between the Company and the Administrator, effective as of 12:01 a.m.
Central Time on April 1, 2014 (the "Reinsurance Agreement"), the Administrator
(in its capacity as Reinsurer) has agreed to indemnify the Company for (i) on a
coinsurance basis, one hundred percent (100%) of the General Account
Liabilities of the Company, (ii) on a modified coinsurance basis, one hundred
percent (100%) of the Separate Account Liabilities of the Company and (iii) one
hundred percent (100%) of the Reinsurer Extra Contractual Obligations (each as
defined in the Reinsurance Agreement);
WHEREAS, the Company wishes to appoint the Administrator to provide the
administrative services with respect to the LBL Contracts, the Ceded
Reinsurance Contracts and the Shared Separate Account (each as defined below)
set forth in this Agreement, and the Administrator desires to provide such
administrative services;
WHEREAS, the Company and the Administrator are parties to the General
Account Reinsurance Agreement and the Variable Annuity Reinsurance Agreement,
pursuant to which the Administrator reinsures liabilities in respect of the
variable annuity contracts written by the Company (the "VA Business"), and the
VA ASA, pursuant to which the Administrator is obligated to provide
administrative services to the Company in respect of the VA Business, and such
agreements will continue in full force and effect in accordance with its terms
following the Inception Date;
WHEREAS, the Company is also a party to a reinsurance agreement, effective
September 30, 2012 (the "Vermont Captive Reinsurance Agreement"), pursuant to
which the Company
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cedes to its current Affiliate, Lincoln Benefit Reinsurance Company, a Vermont
domiciled captive insurance company (the "Vermont Captive"), one hundred
percent (100%) of the policy benefits under specified universal life insurance
policies written by the Company with issue dates within the range set forth in
the Vermont Captive Reinsurance Agreement (the "Vermont Captive Contracts");
WHEREAS, the Company also wishes to appoint the Administrator to provide the
administrative services with respect to the Vermont Captive Contracts and the
Vermont Captive Reinsurance Agreement set forth in this Agreement, and the
Administrator desires to provide such administrative services.
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Any capitalized term used but not defined herein,
unless otherwise indicated, shall have the meaning set forth in the Reinsurance
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Action" shall have the meaning specified in the Stock Purchase Agreement.
"Administered Business" shall mean the LBL Contracts, the Shared Separate
Account, the Vermont Captive Contracts, the Vermont Captive Reinsurance
Agreement and the portion of the Ceded Reinsurance Contracts that relates to
LBL Contracts.
"Administrative Services" shall have the meaning specified in Section 2.1.
"Administrator" shall have the meaning specified in the Preamble.
"Administrator Breach" shall have the meaning specified in Section 19.1.
"Administrator Indemnified Parties" shall have the meaning set forth in
Section 19.2.
"Affiliate" shall have the meaning specified in the Stock Purchase
Agreement.
"Agreement" shall have the meaning specified in the Preamble.
"Annual Adjustment" shall have the meaning specified in Section 12.2.
"Applicable Law" shall have the meaning specified in the Stock Purchase
Agreement.
"Business Day" shall have the meaning specified in the Stock Purchase
Agreement.
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"Buyer" shall have the meaning specified in the Preamble.
"Cap" shall have the meaning specified in Section 19.3.
"Capped Losses" shall have the meaning specified in Section 19.1.
"Claims" shall have the meaning specified in the Section 6.1.
"Claimants" shall have the meaning specified in the Section 6.2.
"Company" shall have the meaning specified in the Preamble.
"Company Breach" shall have the meaning specified in Section 19.2.
"Company Business" shall have the meaning specified in the Stock Purchase
Agreement.
"Company Indemnified Parties" shall have the meaning specified in
Section 19.1.
"Covered Insurance Policies" means the LBL Contracts and the Vermont
Captive Contracts.
"Customer Information" shall have the meaning specified in the
Section 16.1.
"Customers" shall have the meaning specified in the Section 16.1.
"Designated Company Conversion Policies" means (i) Underwriting Period
Conversion Policies and (ii) Post-Underwriting Period Conversion Policies.
"Disaster Recovery Policies" shall have the meaning specified in the
Section 3.6.
"Excluded Conversion Policies" means policies issued from and after the
Inception Date as a result of the exercise of a policyholder of any
conversion right in a Pre-Closing Policy or a Post-Closing Policy, other
than Designated Company Conversion Policies.
"Final True-Up Period" shall have the meaning specified in Section 8.4.
"Governmental Entity" shall have the meaning specified in the Stock
Purchase Agreement.
"Inception Date" has the meaning specified in the Preamble.
"Information Security Program" shall have the meaning specified in the
Section 16.1.
"Insolvency Fund Quarterly Accounting" shall have the meaning specified
in Section 11.1.
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"LBL Agreed Replacement Form" shall have the meaning specified in
Section 4.3(f).
"LBL Contracts" shall have the meaning specified in the Reinsurance
Agreement; provided, however, that for purposes of this Agreement, LBL
Contracts shall not include any Post-Underwriting Period Conversion Policies.
"LBL Convertible Policy" shall have the meaning specified in
Section 4.3(f).
"LBL Reinsured Replacement Policy" shall have the meaning specified in
Section 4.3(f).
"LBL Replacement Policy" shall have the meaning specified in
Section 4.3(f).
"LBL Replacement Policy Reinsurance Agreements" shall have the meaning
specified in Section 4.3(f).
"Liability" shall have the meaning specified in the Stock Purchase
Agreement.
"Licensed Names and Marks" shall have the meaning specified in
Section 18.2.
"Licensor Standards" shall have the meaning specified in Section 18.2.
"Materials" shall have the meaning specified in Section 18.2.
"Monthly Separate Account Administrative Fee" shall have the meaning
specified in Schedule A.
"New Conversion Policy Form" shall have the meaning specified in
Section 4.3(b).
"New York Court" shall have the meaning specified in Section 21.7.
"Person" shall have the meaning specified in the Stock Purchase Agreement.
"Post-Inception Date Assessments" shall have the meaning specified in
Section 11.1.
"Post-Underwriting Period Conversion Policies" shall have the meaning
specified in Section 4.3(b).
"Pre-Closing Date Period" shall have the meaning specified in Section 8.4.
"Premium Tax Credits" shall have the meaning specified in Section 12.2.
"Principal Underwriting Agreement" shall have the meaning specified in
the Stock Purchase Agreement.
"Quarterly Accountings" shall have the meaning specified in Section 11.1.
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"Quarterly Premium Tax Accounting" shall have the meaning specified in
Section 11.1.
"Reinsurance Agreement" shall have the meaning specified in the Preamble.
"Reinsured Convertible Policy" shall have the meaning specified in
Section 4.3(a).
"Reinsurer" means the Administrator in its capacity as reinsurer under
the Reinsurance Agreement.
"Replacement Policy" shall have the meaning specified in Section 4.3(a).
"Retained Services" shall have the meaning specified in Section 2.3.
"Security Incident" shall have the meaning specified in Section 16.2.
"Shared Separate Account" means the Lincoln Benefit Life Variable Life
Account 40 Act File No. 811-9154.
"Stock Purchase Agreement" shall have the meaning specified in the
Preamble.
"Subcontractor" shall have the meaning specified in Section 3.3.
"Tax Return" shall have the meaning specified in the Stock Purchase
Agreement.
"Taxes" shall have the meaning specified in the Stock Purchase Agreement.
"Transaction Agreements" shall have the meaning specified in the Stock
Purchase Agreement.
"True-Up Period" shall have the meaning specified in Section 8.4.
"True-Up Sum" shall have the meaning specified in Section 8.4.
"Underwriting Period Conversion Policy" shall have the meaning specified
in Section 4.1(a).
"Underwriting Termination Date" means (i) with respect to annuity
contracts, December 31, 2013, (ii) with respect to life insurance policies
other than variable universal life insurance policies, December 31, 2015 and
(iii) with respect to variable universal life insurance policies,
December 31, 2016.
"VA ASA" means the Administrative Services Agreement by and between the
Administrator and the Company, effective as of June 1, 2006.
"VA Business" shall have the meaning specified in the Preamble.
"Variances" shall have the meaning specified in Section 8.4.
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"Variance Limit" shall have the meaning specified in Section 8.4.
"Vermont Captive" shall have the meaning specified in the Preamble.
"Vermont Captive Bank Accounts" shall have the meaning specified in
Section 18.2.
"Vermont Captive Contracts" shall have the meaning specified in the
Preamble.
"Vermont Captive Reinsurance Agreement" shall have the meaning specified
in the Preamble.
ARTICLE II
AUTHORITY; RETAINED SERVICES
Section 2.1 Authority. Subject to Section 2.3, the Company hereby appoints
the Administrator, and the Administrator hereby accepts appointment, to provide
as an independent contractor of the Company, from and after the Inception Date,
on the terms and subject to the limitations as set forth in this Agreement, all
administrative services necessary or appropriate with respect to the
Administered Business, including those provided by or on behalf of the
Administrator specifically with respect to the Administered Business prior to
the Inception Date (unless the Administrator and the Company mutually decide
any such services are no longer necessary or appropriate, which decision of
each of the Parties shall not be unreasonably withheld, conditioned or
delayed), and those set forth in this Agreement and on Schedule A, other than
the Retained Services (the "Administrative Services"). At all times during the
term of this Agreement, the Administrator shall hold, possess and maintain,
either directly or through the appointment of Subcontractors permitted pursuant
to Section 3.3, any and all licenses, franchises, permits, privileges,
immunities, approvals and authorizations from any Governmental Entity that are
necessary to perform the Administrative Services.
Section 2.2 Violations of Applicable Law and Applicable Contracts.
Notwithstanding any other provision of this Agreement to the contrary, the
Company shall have the right to direct the Administrator to perform any action
necessary for the Administered Business or the administration thereof to comply
with Applicable Law or the terms of the LBL Contracts, Ceded Reinsurance
Contracts or Vermont Captive Contracts, or to cease performing any action that
constitutes a violation of Applicable Law or the terms of the LBL Contracts,
Ceded Reinsurance Contracts or Vermont Captive Contracts, to the extent such
action, inaction or administration is within the control of the Administrator,
taking into account the recommendations of the Administrator provided to the
Company hereunder, which the Company shall only reject in good faith and in
light of the intent of the parties to and the stated purposes of the Stock
Purchase Agreement, this Agreement and the other Transaction Agreements. The
Administrator shall have the right to direct the Company to perform any action
necessary for the Administered Business or the administration thereof to comply
with Applicable Law or the terms of the LBL Contracts, Ceded Reinsurance
Contracts or Vermont Captive Contracts, or to cease performing any action that
constitutes a violation of Applicable Law or the terms of the LBL Contracts,
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Ceded Reinsurance Contracts or Vermont Captive Contracts, in either case to the
extent such action, inaction or administration constitutes a Retained Service.
Section 2.3 Retained Services. The Parties hereby agree that,
notwithstanding anything herein to the contrary, the Company shall, for the
term of this Agreement, continue to provide on its own behalf (i) those
administrative services described in Schedule B, (ii) those administrative
services that the Company is required by Applicable Law to perform without the
Administrator or a third party acting on its behalf and (iii) the preparation
of accounting reports, tax returns, guaranty fund reports, and other reports
and certifications contemplated in Articles XI and XII, in each instance, where
applicable, based on information with respect to the LBL Contracts and Vermont
Captive Contracts provided by the Administrator as contemplated therein
(collectively, the "Retained Services"), in each case, (i) in accordance with
the applicable terms of this Agreement, (ii) in compliance with Applicable Law,
(iii) in a professional, competent and workmanlike manner, with the skill,
diligence and expertise that would reasonably be expected from experienced and
qualified personnel performing such duties in like circumstances, and (iv) at a
level no lower than the service standards applied by the Company to other
comparable insurance business administered by the Company for its own account.
The Administrator shall have no obligation to provide such Retained Services
but shall provide assistance with respect to the Administered Business
reasonably requested by the Company in connection therewith in a timely manner
to enable the Company to perform such Retained Services. The Company shall not
be deemed to be in breach of this Agreement as a result of any failure to
perform, or inadequacy in the performance of, Retained Services hereunder to
the extent the performance of such Retained Services is reasonably dependent
upon Administrative Services or the performance by the Administrator or its
Affiliates of their obligations under the Transaction Agreements that have not
been performed. The Administrator shall promptly reimburse the Company for any
documented and reasonable out-of-pocket costs or expenses incurred by it in the
performance of the Retained Services to the extent (a) such Retained Services
(1) relate solely to the Administered Business but not the Company Business,
(2) do not constitute entity-level services required to be performed by or on
behalf of the Company and (3) are not in the ordinary course of business of the
Company, and (b) such out-of-pocket costs and expenses in aggregate exceed
$15,000 in the calendar month for which such costs and expenses are being
sought for reimbursement or $120,000 in the calendar year for which such costs
and expenses are being sought for reimbursement. For the avoidance of doubt,
but subject to the other terms and conditions of this Agreement, the
Administrator shall have no obligation under this Agreement to perform any
services other than with respect to the Administered Business (which includes
the services with respect to the Shared Separate Account set forth in
Schedule A).
Section 2.4 Power of Attorney. Subject to the terms and conditions herein,
the Company hereby appoints and names the Administrator, acting through its
authorized Subcontractors, and each of their respective officers and employees,
as the Company's lawful attorney-in-fact, from and after the Inception Date for
so long as the Administrator is authorized to perform the Administrative
Services and solely to the extent necessary to provide the Administrative
Services, (a) to do any and all lawful acts that the Company might have done
with respect to the Administered Business, and (b) to proceed by all lawful
means (i) to perform any and all of the Company's obligations with respect to
the Administered Business, (ii) to enforce any right and defend (in the name of
the Company, when necessary) against any liability arising with respect to the
Administered Business, (iii) to ▇▇▇ or defend (in the name of the
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Company, when necessary) any Action arising from or relating to the
Administered Business, (iv) to collect any and all Recoveries due or payable
under or relating to the LBL Contracts, the Shared Separate Account with
respect to the LBL Contracts, and the Ceded Reinsurance Contracts; (v) to
collect any and all amounts due or payable to the Company under or relating to
the Vermont Captive Contracts; (vi) to sign (in the Company's name, when
necessary) vouchers, receipts, releases and other papers in connection with any
of the foregoing matters, (vii) to enforce the rights and perform the
obligations of the Company under any agency, distribution or service
arrangements to the extent related to the LBL Contracts or the Vermont Captive
Contracts; (viii) to take actions necessary, as may be reasonably determined by
the Administrator, to maintain the Administered Business in compliance with
Applicable Law; (ix) to request rate and form changes for the LBL Contracts in
accordance with Article IV herein; and (x) to do everything lawful in
connection with the satisfaction of the Administrator's obligations and the
exercise of its rights under this Agreement.
ARTICLE III
STANDARD FOR SERVICES; FACILITIES; SUBCONTRACTING, ETC.
Section 3.1 Services; Standard for Services. Subject to Article II, from and
after the Inception Date and thereafter during the term of this Agreement
(unless otherwise specified), the Administrator shall perform the
Administrative Services, and the Administrator's performance of the
Administrative Services shall comply with and be subject in all events to the
standards set forth in this Section 3.1. The Administrator shall provide the
Administrative Services in all material respects in accordance with the terms
of the LBL Contracts, the Ceded Reinsurance Contracts, the Vermont Captive
Contracts and the Vermont Captive Reinsurance Agreement and, if applicable,
their respective registration statements. In addition, the Administrator shall
provide the Administrative Services (i) in accordance with the applicable terms
of this Agreement, (ii) in compliance with Applicable Law, (iii) in a
professional, competent and workmanlike manner, with the skill, diligence and
expertise that would reasonably be expected from experienced and qualified
personnel performing such duties in like circumstances, and (iv) at a level no
lower than the service standards applied by Administrator to other comparable
insurance business administered by the Administrator for its own account.
Section 3.2 Facilities and Personnel. The Administrator shall at all times
maintain either directly or through the appointment of Subcontractors,
sufficient facilities and trained personnel of the kind necessary to perform
its obligations under this Agreement in accordance with the performance
standards set forth herein.
Section 3.3 Subcontracting. The Administrator may subcontract for the
performance of any Administrative Service to: (a) any Person if the service to
be subcontracted is primarily a routine task or function; (b) an Affiliate of
the Administrator; (c) any reinsurer under a Ceded Reinsurance Contract or an
▇▇▇▇ Outward Reinsurance Contract or its Affiliates; (d) an existing
subcontractor that was providing such service to the Company immediately before
the Closing Date; (e) any subcontractor to which Administrator or an Affiliate
subcontracts the same or similar services for business administered for its own
account; and (f) any other Person with the prior written consent of the
Company, such consent not to be unreasonably withheld, conditioned or delayed
(each such subcontracting party, a "Subcontractor"), provided that no such
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subcontracting shall relieve the Administrator from any of its obligations or
liabilities hereunder, and the Administrator shall remain responsible for all
obligations or liabilities of such Subcontractor with respect to the providing
of such service or services as if provided by the Administrator.
Section 3.4 Independent Contractor. For all purposes hereof, except as
explicitly set forth herein, the Administrator shall at all times act as an
independent contractor and the Administrator and its Affiliates, on the one
hand, and the Company and its Affiliates, on the other hand, shall not be
deemed an agent, lawyer, employee, representative, joint venturer or fiduciary
of one another, nor shall this Agreement or the Administrative Services or any
activity or any transaction contemplated hereby be deemed to create any
partnership or joint venture between the Parties or among their Affiliates.
Section 3.5 Limitation on Services. The Administrator shall not be deemed to
be in breach of this Agreement as a result of any failure to perform, or
inadequacy in the performance of, Administrative Services hereunder to the
extent the performance of such Administrative Services is reasonably dependent
upon Retained Services or the performance by Buyer or its Affiliates of their
obligations under the Transaction Agreements (other than the Company's
obligations under the Principal Underwriting Agreement with respect to the LBL
Contracts, solely to the extent that the Administrator is responsible hereunder
for the Company's performance of such obligations) that have not been
performed. This Section 3.5 shall not be construed to limit the rights and
remedies otherwise available to the Administrator or its Affiliates in the
event of any breach by the Company, Buyer or any of their Affiliates of any of
the Transaction Agreements.
Section 3.6 Disaster Recovery. The Administrator has made available to the
Company its backup, business continuation and disaster recovery plans
applicable to the business of the Administrator (the "Disaster Recovery
Policies") in effect as of the Inception Date. From time to time upon the
Company's written request, the Administrator shall deliver a copy of its
then-current Disaster Recovery Policies to the Company. For as long as
Administrative Services are provided hereunder, the Administrator shall, and
shall cause its Affiliates to, abide by the Disaster Recovery Policies with
respect to the Administered Business. At all times during the term of this
Agreement, the Disaster Recovery Policies applicable to the Administered
Business shall be no less protective of the Administered Business than the
backup, business continuation and disaster recovery plans applicable to
insurance business administered by the Administrator for its own account.
ARTICLE IV
UNDERWRITING; CONVERSION AND REPLACEMENT; PRODUCERS
Section 4.1 Post-Closing Contracts. Subject to the terms of this Article IV:
(a) from the Inception Date until the first to occur of (i) the
Underwriting Termination Date or (ii) the termination of this Agreement, the
Administrator shall be authorized to (x) issue, in the name of the Company,
life insurance policies and annuity contracts of the types included in, and
utilizing the same forms, rates and prospectuses as are in use for, the Pre-
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Closing Policies, with amendments to such forms, rates and prospectuses from
time to time as are necessary for the issuance of such policies or contracts to
comply with Applicable Law or for any other business purpose, and shall be
authorized to file and seek necessary approvals from applicable Governmental
Entities, in the name of the Company, with respect to any such amendments;
provided that the Administrator's authority to file amendments to any such
rates shall be subject to the prior written consent of the Company (not to be
unreasonably withheld, conditioned or delayed), and (y) withdraw such products,
forms, rates and prospectuses. Life insurance policies issued by the
Administrator pursuant to this Section 4.1(a) upon conversion of a Pre-Closing
Policy or a Post-Closing Policy produced by an Exclusive Producer are referred
to herein as "Underwriting Period Conversion Policies".
(b) the Administrator shall be authorized to issue, in the name of the
Company from and after the Inception Date, solely to the extent required to
comply with Applicable Law, life insurance policies and annuity contracts as
required to replace or remediate LBL Contracts or Vermont Captive Contracts.
Section 4.2 Parties' Responsibilities.
(a) The Administrator, at its sole cost and expense (but without
duplication of amounts payable under the Reinsurance Agreement), shall assume
all responsibility for (i) the provision of all applications and other
contractholder materials to agents and persons seeking to apply for
Post-Closing Policies (other than the Post-Underwriting Period Conversion
Policies), (ii) all underwriting necessary or appropriate with respect to such
applicants pursuant to the underwriting guidelines utilized by the Company as
of the Inception Date, or as may be otherwise agreed by the Parties (the
agreement of the Company not to be unreasonably withheld, conditioned or
delayed), (iii) the processing of underwriting-related transactions in respect
of the Post-Closing Policies (other than the Post-Underwriting Period
Conversion Policies) and (iv) the issuance of Post-Closing Policies (other than
the Post-Underwriting Period Conversion Policies).
(b) The Company shall assume all responsibility for (i) the provision of
all applications and other contractholder materials to agents and persons
seeking to apply for Post-Underwriting Period Conversion Policies and Excluded
Conversion Policies, (ii) with respect to Post-Underwriting Period Conversion
Policies, all underwriting necessary or appropriate with respect to such
applicants pursuant to the underwriting guidelines as may be agreed by the
Parties (the agreement of the Parties not to be unreasonably withheld,
conditioned or delayed), (iii) if needed, with respect to Excluded Conversion
Policies, all underwriting necessary or appropriate with respect to such
applicants, (iv) the processing of underwriting-related transactions in respect
of the Post-Underwriting Period Conversion Policies and Excluded Conversion
Policies and (v) the issuance of Post-Underwriting Period Conversion Policies
and Excluded Conversion Policies. Without limiting the generality of Article XV
or any other provision of this Agreement, the Administrator shall reasonably
cooperate and provide all assistance, information and records reasonably
available to it as may reasonably be requested by the Company in connection
with the Company's performance of the foregoing obligations.
(c) The Administrator shall promptly notify the Company of all revisions
to the LBL Contracts and Vermont Captive Contracts made pursuant to Section 4.1
and shall, on
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behalf of the Company, prepare and provide to Contractholders all such
revisions to the LBL Contracts and Vermont Captive Contracts to be made by the
Company.
Section 4.3 Conversion and Replacement.
(a) From and after the Inception Date, the Administrator shall be
entitled, to the extent permitted by Applicable Law, to offer to any holder of
a Pre-Closing Policy or a Post-Closing Policy, in each case that entitles the
holder thereof to convert such policy to another policy written by the Company
(a "Reinsured Convertible Policy"), the opportunity to convert such Reinsured
Convertible Policy into a policy written by the Administrator or one of its
Affiliates (a "Replacement Policy"). If such offer is not accepted, or if no
such offer is timely made, then subject to the terms of this Article IV,
(i) the Administrator shall issue, in the name of the Company, an Underwriting
Period Conversion Policy upon exercise by the policyholder of a Reinsured
Convertible Policy, on or prior to December 31, 2015, of such policyholder's
right to receive a conversion policy issued by the Company, and (ii) the
Company shall issue a Post-Underwriting Period Conversion Policy upon exercise
by the policyholder of a Reinsured Convertible Policy, on or after January 1,
2016, of such policyholder's right to receive a conversion policy issued by the
Company, as applicable.
(b) From and after January 1, 2016 with respect to life insurance
policies other than variable universal life insurance policies, and from and
after January 1, 2017 with respect to variable universal life insurance
policies, the Company may (i) amend any of its policy forms, rates and
prospectuses from time to time, (ii) cease offering any such policy forms,
rates and prospectuses and (iii) withdraw any such product, form, rate or
prospectus, provided, however, that until such time as no Reinsured Convertible
Policies are outstanding, the Company shall maintain in effect at least one
(1) new life policy form and associated rate filing developed jointly by the
Parties, that meets the requirements of each Reinsured Convertible Policy for a
conversion policy issued by the Company. In connection with the Company's
requirement to maintain such policy form and associated rate filings, after the
Inception Date the Parties will work together to develop and submit to
appropriate Governmental Entities, as soon as practicable, a life insurance
policy form and associated rate filing that meets the requirements of each
Reinsured Convertible Policy for a conversion policy (the "New Conversion
Policy Form"), provided, that if such form and associated rate filings have not
been agreed to by the Parties by September 30, 2014 then the Administrator's
approval of any such policy form and associated rate filing developed in good
faith by the Company (after providing the Administrator reasonable opportunity
to comment thereon and taking into account the recommendations of the
Administrator) shall not be unreasonably withheld, conditioned or delayed. Any
policy issued on a New Conversion Policy Form to meet the conversion
requirements of a Reinsured Convertible Policy originally produced by an
Exclusive Producer shall constitute a "Post-Underwriting Period Conversion
Policy." Any amendments to the New Conversion Policy Form (including the
associated rate filing) shall require the prior written consent of each Party
in order for any such amended policy to continue to be eligible for issuance as
a Post-Underwriting Period Conversion Policy. For the avoidance of doubt:
(x) other than the New Conversion Policy Form, no policy issued to satisfy the
conversion requirements of a Reinsured Convertible Policy produced by an
Exclusive Producer shall constitute a Post-Underwriting Period Conversion
Policy, and (y) subject to the Administrator's rights pursuant to
Section 4.1(a), nothing contained herein shall be construed to limit the
Company's right to develop and maintain
11
policy forms, rates and prospectuses other than the New Conversion Policy Form,
or require the Company to discontinue offering any policy form, associated rate
or prospectus; provided, however, that if, after the Inception Date, the
Company chooses to issue new variable products, it shall form a new registered
separate account of the Company for the issuance of such products and shall not
issue such products through the Shared Separate Account.
(c) Subject to the foregoing, the Administrator will share equally with
the Company the reasonable costs associated with the Company and
Administrator's joint development, filing, approval and maintenance of a New
Conversion Policy Form, for use from and after December 31, 2015, which costs
to the Administrator shall not exceed five hundred thousand dollars ($500,000).
(d) The Company shall not, and shall cause each of its Affiliates not
to, target any LBL Contract for replacement with another policy written by the
Company or any other Person other than in accordance with the terms of this
Article IV, provided, however, that the restrictions in this Section 4.3(d)
shall not restrict general marketing and solicitation activities (i) not
specifically targeted or directed to holders of LBL Contracts or (ii) subject
to clause (i), targeted or directed to holders of insurance policies and
contracts included in the Company Business regardless of whether such holders
are also holders of LBL Contracts. From and after the Inception Date, Company
shall not, directly or indirectly, sell, convey or transfer all or
substantially all of its properties or assets to, any Person, in one
transaction or a series of transactions that are part of a common plan, or any
transaction that constitutes the functional equivalent of any of the foregoing,
unless the acquiring Person in such transaction or transactions expressly
agrees to assume all of the obligations of the Company under this
Section 4.3(d).
(e) Upon a specific written request by the Administrator, and at the
Administrator's sole cost and expense, the Company shall provide such
information to Administrator for the use of the Exclusive Producers as is
reasonably necessary to permit Exclusive Producers to offer Designated Company
Conversion Policies on behalf of the Company to the holders of Reinsured
Convertible Policies.
(f) If, after the Inception Date, any holder of a term life policy that
was included in the Company Business as of the Inception Date and that entitles
the holder thereof to convert such policy into another policy written by the
Company (an "LBL Convertible Policy") desires to convert such policy into a
conversion policy issued by the Company, the Administrator shall offer, or
shall cause one or more of its Affiliates, as applicable, to offer, to the
holder thereof the opportunity to convert such LBL Convertible Policy into any
of the Replacement Policies that are then being offered to the holders of the
Reinsured Convertible Policies. The Administrator's obligation to offer a
holder of an LBL Convertible Policy the opportunity to convert such policy into
a Replacement Policy shall be subject to receipt by the Administrator of any
required policyholder information from the Company as contemplated in this
Section 4.3(f). Any Replacement Policy issued by the Administrator or one of
its Affiliates to a holder of an LBL Convertible Policy pursuant to this
Section 4.3(f) (an "LBL Replacement Policy") shall be issued through an
Exclusive Producer. Within 30 days following the Inception Date, the
Administrator shall, or shall cause its Affiliates to, as applicable, provide
the Company with copies of the policy forms of all Replacement Policies
available as of the Inception Date to be offered to the holders of the
Reinsured Convertible Policies. If and when the Administrator or its
12
Affiliates contemplate offering new Replacement Policies to holders of the
Reinsured Convertible Policies, the Administrator shall, or shall cause its
Affiliates to, provide the Company with copies of the policy forms of such new
Replacement Policies. The Company shall have 30 days following receipt of a
copy of a form of Replacement Policy to notify the Administrator in writing
that it approves the form of such Replacement Policy (any such form that is so
approved, an "LBL Agreed Replacement Form"). Any LBL Replacement Policy issued
on an LBL Agreed Replacement Form shall constitute an "LBL Reinsured
Replacement Policy". The Company shall reinsure all liabilities relating to the
LBL Reinsured Replacement Policies pursuant to one or more 100% quota share
reinsurance agreements on such terms and conditions as are mutually agreed by
the Parties consistent with the provisions of this Section 4.3(f) (the "LBL
Replacement Policy Reinsurance Agreements"). The Parties agree to, and the
Administrator agrees to cause its applicable Affiliates to, negotiate in good
faith the terms of the LBL Replacement Policy Reinsurance Agreements following
the Inception Date, such terms to include LBL's payment of a ceding commission
to compensate the Administrator or its Affiliates, as applicable, for Exclusive
Producer commissions and other policy acquisition costs incurred by the
Administrator or its applicable Affiliates in connection with the issuance of
the LBL Reinsured Replacement Policies. The Parties agree that the
Administrator or its Affiliates issuing the LBL Reinsured Replacement Policies
will retain administration of the LBL Reinsured Replacement Policies in
exchange for an expense allowance from the Company to be negotiated between the
Parties in good faith following the Inception Date. Subject to any limitations
under Applicable Law or contractual obligations and subject to obtaining any
required consents from policyholders, the Company shall provide such
information to the Administrator for the use of the Exclusive Producers as is
reasonably necessary to permit Exclusive Producers to offer Replacement
Policies to the holders of LBL Convertible Policies as contemplated in this
Section 4.3(f). The timing and format of such reporting shall be negotiated by
the Parties in good faith following the Inception Date.
Section 4.4 Producers. From and after the Inception Date, the Administrator
shall have the sole and exclusive right and obligation, on behalf of the
Company, to (i) appoint and enter into agreements with Exclusive Producers for
the LBL Contracts, (ii) monitor the performance and licensing of the Exclusive
Producers for the LBL Contracts to the extent required by Applicable Law,
(iii) calculate and pay all commissions to Exclusive Producers in respect of
the LBL Contracts and (iv) terminate Exclusive Producers' authority and
agreements with Exclusive Producers with respect to the LBL Contracts,
provided, that the Administrator shall indemnify and hold harmless the Company
Indemnified Parties from and against any and all Indemnifiable Losses incurred
by any of them in connection with such actions.
ARTICLE V
COLLECTIONS
Section 5.1 Collection Services. From and after the Inception Date and
subject to Section 2.3, the Administrator shall assume all responsibility for
the receipt and processing of all premiums, deposits, policy loan interest or
repayments and other Recoveries with respect to the LBL Contracts and the
Vermont Captive Contracts and the allocation of such amounts between the
General Account of the Company and, if applicable, the Shared Separate Account
in accordance with the terms of the LBL Contracts, the Vermont Captive
Contracts, the
13
Reinsurance Agreement and this Agreement. The Administrator, on behalf of the
Company, shall process payment of any amounts to be paid out of the Shared
Separate Account in accordance with the terms of the applicable LBL Contract or
Vermont Captive Contract, to the extent of sufficient funds therein. The
Parties shall cooperate to establish procedures to prevent the commingling of
assets attributable to the Administered Business, on the one hand, and the
business of the Company that is not Administered Business, on the other hand,
including by establishment of separate lockboxes with respect to the LBL
Contracts and Vermont Captive Contracts, on the one hand, and the business of
the Company that is not Administered Business, on the other hand, and otherwise
to ensure that funds are traceable to the appropriate Company insurance policy.
(a) The Company shall promptly remit to the Administrator all premiums,
deposits, policy loan interest and repayments, claims expenses, expense
allowance and all other Recoveries received by it with respect to the LBL
Contracts, the Shared Separate Account with respect to the LBL Contracts, the
Vermont Captive Contracts or the Vermont Captive Reinsurance Agreement and the
Administrator shall promptly remit to the Company all premiums, deposits,
policy loans, interest and repayments received by it with respect to the
Company Business.
ARTICLE VI
CLAIMS HANDLING
Section 6.1 Claim Administration Services. From and after the Inception
Date, subject to Section 2.3, the Administrator shall acknowledge, consider,
review, investigate, deny, settle, pay or otherwise dispose of each claim for
benefits and disbursements reported under each LBL Contract and Vermont Captive
Contract (each, a "Claim" and collectively the "Claims").
Section 6.2 Description of Claim Administration Services. Without limiting
the foregoing, the Administrator shall:
(i) provide claimants under the LBL Contracts and Vermont Captive
Contracts and their authorized representatives (collectively, "Claimants")
with Claim forms and provide reasonable explanatory guidance to Claimants in
connection therewith;
(ii) establish, maintain and organize Claim files and maintain and
organize other Claims-related records;
(iii) review all Claims and determine whether the Claimant is eligible
for benefits and if so, the nature and extent of such benefits;
(iv) prepare and distribute to the appropriate recipients and
Governmental Entities any Claims reports as required by Applicable Law;
(v) respond to all written or oral Claims-related communications that the
Administrator reasonably believes to require a response;
14
(vi) maintain a complaint log with respect to the LBL Contracts and
Vermont Captive Contracts in accordance with applicable requirements of
Governmental Entities, and at the Company's request, provide a copy of such
log; and
(vii) respond to and manage any Claims-related matters pursuant to
Article VII.
ARTICLE VII
REGULATORY AND LEGAL PROCEEDINGS
Section 7.1 Notice of Action. If the Company or the Administrator receives
notice of or otherwise becomes aware of any examination or Action instituted or
threatened in writing against the Company that relates exclusively or in part
to the Administered Business, such Party shall promptly notify the other Party
thereof, and in no event more than five (5) Business Days after receipt of
notice thereof, and shall promptly furnish to such other Party copies of all
pleadings in connection therewith.
Section 7.2 Defense of Regulatory Complaints and Actions.
(a) From and after the Inception Date, with respect to any examination
or Action initiated by a Governmental Entity with respect to the Administered
Business, the Administrator shall supervise and control the investigation,
contest, defense and/or settlement of all such Actions at its own cost and
expense, in the name of the Company when necessary, subject to Sections 2.3 and
clauses (b), (c) and (d) below. The Administrator's supervision and control of
such examinations and Actions shall not constitute a waiver of any right to
indemnification or payment that it may have under the terms of the Stock
Purchase Agreement, the Reinsurance Agreement, this Agreement or any other
Transaction Agreement.
(b) The Company authorizes the Administrator to prepare, with a copy to
the Company, a response to any such examination or Action initiated by a
Governmental Entity with respect to the Administered Business within the
Governmental Entity's requested time frame for response or, if no such time
frame is provided, within the time frame as allowed by Applicable Law;
provided, that, subject to meeting such time frames, the Administrator shall
provide its proposed response to the Company for its prior review and comment;
provided, further, that with respect to such examinations or Actions that
relate in part to the Company Business, the Administrator shall not respond to
any such examinations or Actions without taking into account in good faith any
recommendations of the Company provided to the Administrator with respect to
such matters and shall not unreasonably reject such recommendations.
(c) Notwithstanding anything in this Agreement to the contrary, the
Company, upon written notice to the Administrator and at its own cost and
expense, shall have the right at any time to supervise and exclusively control
the defense and/or settlement of any examination or Action initiated by a
Governmental Entity that, if successful, would reasonably be expected to
materially interfere with the business, financial condition or reputation of
the Company or any of its Affiliates; provided, however, the Company shall not
respond to any such examinations or Actions that relate to the Administered
Business without taking into account in good faith any recommendation of the
Administrator provided to the Company with respect to
15
such matters and shall not unreasonably reject such recommendation, and shall
not settle or compromise any such examinations or Actions without the
Administrator's prior written consent (which consent shall not be unreasonably
withheld, delayed or conditioned). The Company's supervision and control of
such examinations and Actions shall not constitute a waiver of any right to
indemnification or payment that it may have under the terms of the Stock
Purchase Agreement, the Reinsurance Agreement, this Agreement or any other
Transaction Agreement.
(d) The Administrator shall not settle or compromise any examination or
Action described in Section 7.2(a) without the Company's prior written consent
(which consent shall not be unreasonably withheld, delayed or conditioned)
unless (i) there is no finding or admission of any violation of Applicable Law
or any violation of the rights of any Person by the Company or any of its
Affiliates, (ii) the sole relief provided is monetary damages that are paid in
full by the Administrator or its Affiliates and a full and complete release is
provided to the Company and its Affiliates and (iii) the settlement does not
encumber any of the assets of the Company or its Affiliates or contain any
restriction or condition that would materially adversely affect the Company or
its Affiliates.
Section 7.3 Other Actions.
(a) From and after the Inception Date, with respect to any Action with
respect to the Administered Business by any Person other than a Governmental
Entity, the Administrator shall:
(i) subject to Sections 2.3 and clauses (b), (c) and (d) below, supervise
and control the investigation, contest, defense and/or settlement of all
such Actions at its own cost and expense, in the name of the Company when
necessary; and
(ii) keep the Company fully informed of the progress of all Actions
supervised or controlled by the Administrator in which the Company is a
named party and, at the Company's request, provide to the Company a report
summarizing the nature of such Action, the alleged actions or omissions
giving rise to such Actions and copies of any files or other documents that
the Company may reasonably request in connection with its review of such
matters, in each case other than such files, documents and other information
as would, in the judgment of counsel to the Administrator, lead to the loss
or waiver of legal privilege.
The Administrator's supervision and control of such Actions shall not
constitute a waiver of any right to indemnification or payment that it may have
under the terms of the Stock Purchase Agreement, the Reinsurance Agreement,
this Agreement or any other Transaction Agreement.
(b) The Company shall have the right to engage its own separate legal
representation, at its own expense, and to participate fully in the defense of
any Action (other than Actions brought by a Governmental Entity, which are the
subject of Section 7.2) relating to the Administered Business with respect to
which the Company is a named party if such Action, if successful, reasonably
could be expected to materially interfere with the business, financial
condition or reputation of the Company or any of its Affiliates, without
waiving any right to
16
indemnification or payment that it may have under the terms of the Stock
Purchase Agreement, the Reinsurance Agreement, this Agreement or any other
Transaction Agreement.
(c) The Administrator shall not settle or compromise any Action
described in Section 7.3(b) without the Company's prior written consent (which
consent shall not be unreasonably withheld, delayed or conditioned) unless
(i) there is no finding or admission of any violation of Applicable Law or any
violation of the rights of any Person by the Company or any of its Affiliates,
(ii) the sole relief provided is monetary damages that are paid in full by the
Administrator or its Affiliates and a full and complete release is provided to
the Company and its Affiliates, (iii) the settlement does not encumber any of
the assets of the Company or its Affiliates or contain any restriction or
condition that would materially adversely affect the Company or its Affiliates
and (iv) the Action neither is certified, nor seeks certification, as a class
action.
(d) The Company, upon written notice to the Administrator and at its own
cost and expense, shall have the right at any time to assume sole and exclusive
control over the response, defense, settlement or other resolution of any
Action (other than Actions brought by a Governmental Entity, which are the
subject of Section 7.2) that, if successful, reasonably could be expected to
materially interfere with the business, financial condition or reputation of
the Company or any of its Affiliates; provided, however, the Company shall not
respond to any such Actions without taking into account in good faith any
recommendation of the Administrator provided to the Company with respect to
such Actions and shall not unreasonably reject such recommendation, and shall
not settle or compromise any such Actions without the Administrator's prior
written consent (which consent shall not be unreasonably withheld, delayed or
conditioned). The Company's supervision and control of such examinations and
Actions shall not constitute a waiver of any right to indemnification or
payment that it may have under the terms of the Stock Purchase Agreement, the
Reinsurance Agreement, this Agreement or any other Transaction Agreement.
Section 7.4 Cooperation. Each Party hereto shall cooperate with and assist
the controlling Party in responding to, defending, prosecuting and settling any
examination or Action under this Article VII; provided, that neither Party
shall be required to waive any applicable attorney-client, attorney work
product or other evidentiary privileges, and provided, further that neither
Party shall be required to provide the other Party access to any federal,
state, or local consolidated income Tax Return that includes the responding
Party or its Affiliates. Without limiting the generality of the foregoing, each
of the Parties shall assist each other and cooperate with the other Party in
doing all things necessary, proper or advisable in a commercially reasonable
manner in connection with any and all market conduct or other Governmental
Entity examinations to the extent related to the Administered Business.
Notwithstanding anything to the contrary contained in this Agreement, neither
the Company nor the Administrator shall have the authority to institute,
prosecute or maintain any regulatory proceeding on behalf of the other Party
without the prior written consent of such other Party, except as expressly
contemplated in this Agreement.
17
ARTICLE VIII
SEPARATE ACCOUNT ADMINISTRATIVE SERVICES
Section 8.1 Separate Account Administrative Services. From and after the
Inception Date, subject to Section 2.3, in addition to the services described
in any Article of this Agreement, the Administrative Services with respect to,
or as a result of, the Shared Separate Account shall include those services set
forth on Schedule A attached hereto.
Section 8.2 Changes to Fund Options.
(a) From and after the Inception Date, the Administrator may make
recommendations to the Company as to changes in Fund options for the Shared
Separate Account from and after the Inception Date and the Company shall not
unreasonably reject such recommendations, but the Administrator will not change
Fund options for the Shared Separate Account unless such changes are made:
(a) with the prior written consent of the Company, such consent not to be
unreasonably withheld, conditioned or delayed, (b) in fulfillment of the
fiduciary obligations of the Company or (c) by the Board of Trustees of a Fund
to liquidate, merge or remove a Fund pursuant to the terms of the then-existing
fund participation agreements or through a regulatory process. If the
Administrator makes a change in the LBL Contracts or the Shared Separate
Account in connection with the change of a Fund option as permitted above, the
Administrator shall, at its own expense, prepare for signature by the Company
and transmit on behalf of the Company to the appropriate Governmental Entity
any SEC exemptive application, no-action letter or other regulatory filing
necessary to reflect or implement such change; provided however, that the
Administrator shall give the Company a reasonable opportunity to review and
comment thereon.
(b) From and after the Inception Date, the Company will not change Fund
options for the Shared Separate Account unless such changes are made: (a) with
the prior written consent of the Administrator, such consent not to be
unreasonably withheld, conditioned or delayed, (b) in fulfillment of the
fiduciary obligations of the Company or (c) by the Board of Trustees of a Fund
to liquidate, merge or remove a Fund pursuant to the terms of the then-existing
fund participation agreements or through a regulatory process. If the Company
makes a change in the Company Business or the Shared Separate Account in
connection with the change of a Fund option as permitted above, the Company
shall, at its own expense, prepare and transmit to the appropriate Governmental
Entity any SEC exemptive application, no-action letter or other regulatory
filing necessary to reflect or implement such change; provided however, that
the Company shall give the Administrator a reasonable opportunity to review and
comment thereon. In the event that the Company adds any Fund options to the
Shared Separate Account, the Monthly Separate Account Administrative Fee shall
be adjusted to reflect any changes in the Administrator's costs of
administration of the Shared Separate Account resulting from the new Fund
option, in accordance with Schedule A.
(c) In the event that the Parties mutually agree (such agreement not to
be unreasonably withheld, conditioned or delayed) that it is impracticable for
the Shared Separate Account to continue to include assets in respect of LBL
Contracts and Company Business, the Company and the Administrator shall
cooperate in the formation of a new registered separate
18
account of the Company and the transfer from the Shared Separate Account to
such new separate account of all assets and amounts held in the Shared Separate
Account in respect of the LBL Contracts (the "Separate Account Separation"). In
such event, the Company and the Administrator shall mutually discuss in good
faith and agree on (i) how the Parties will share the fees, costs and expenses
associated with the Separate Account Separation and (ii) revisions to this
Agreement (including the Schedules hereto) to define their respective rights
and obligations with respect to the Shared Separate Account and the newly
formed separate account from and after the Separate Account Separation.
Section 8.3 Changes to Separate Account Fees. From and after the Inception
Date, either Party may propose changes to any fees or other amounts receivable
from or in respect of Fund options for the Shared Separate Account for approval
by the other Party, which approval shall not be unreasonably withheld,
conditioned or delayed. In the event of any such changes in fees or other
amounts, the Monthly Separate Account Administrative Fee shall be adjusted to
reflect any changes in the Administrator's costs of administration of the
Shared Separate Account resulting therefrom, in accordance with Schedule A .
Nothing in this Section 8.3 shall apply to any changes to any Non-Guaranteed
Elements, which changes shall be made solely in accordance with Section 3.2 of
the Reinsurance Agreement.
Section 8.4 Variances. Until termination or expiration of the Transition
Services Agreement, Section 2.4 of the Transition Services Agreement will
govern the rights of the Parties with respect to Variances (as defined below)
occurring while such agreement is in effect. Upon termination or expiration of
the Transition Services Agreement, Administrator shall provide to the Company
(a) such daily reports as the Administrator and/or its Affiliates produced
during the nine (9) months prior to the Inception Date (the "Pre-Closing Date
Period") summarizing (i) the discrepancies arising in the execution and
recording of investment transactions with respect to Company Business that are
caused by Administrator's errors, and (ii) gains or losses to the Company
resulting from late or incorrect prices being sent to the Company, if such late
or incorrect prices were caused by an Administrator error (collectively, the
items summarized in (a)(i) and (a)(ii) are the "Variances"), and (b) such
weekly and monthly reconciliation reports as the Administrator and/or its
Affiliates produce during the Pre-Closing Date Period. The Administrator shall
notify the Company within twenty-four (24) hours of identifying any Variance.
At the end of every twelve (12) month period following the termination or
expiration of the Transition Services Agreement (each, a "True-Up Period") and
once at the termination of this Agreement (the "Final True-Up Period"),
Administrator shall aggregate the Variances over the months occurring during
the applicable True-Up Period or Final True-Up Period (such aggregate being the
"True-Up Sum"). If the True-Up Sum for a True-Up Period or the Final True-Up
Period, as applicable, is negative and the absolute value of such negative
amount exceeds an amount equal to the product of ten thousand dollars ($10,000)
per month times the number of months of such True-Up Period or Final True-Up
Period (the "Variance Limit"), the Administrator shall remit such amount in
excess of the Variance Limit to the Company but not in excess of the Cap
(determined as of the last day of the applicable True-Up Period or the Final
True-Up Period, as applicable).
19
ARTICLE IX
MISCELLANEOUS SERVICES
Section 9.1 Ceded Reinsurance Contracts.
(a) From and after the Inception Date, subject to Section 2.3, the
Administrator shall have the authority and responsibility to, and shall, manage
and administer the portion of the Ceded Reinsurance Contracts that relates to
the LBL Contracts, including providing all reports and notices that relate to
the LBL Contracts required with respect to the Ceded Reinsurance Contracts to
the reinsurers within the time required by the applicable Ceded Reinsurance
Contract and doing all other things necessary to comply with the terms and
conditions of the Ceded Reinsurance Contracts. Without limiting the foregoing,
the Administrator shall timely pay all reinsurance premiums due to reinsurers
under the Ceded Reinsurance Contracts with respect to the LBL Contracts, and
collect from such reinsurers all reinsurance recoverables due thereunder with
respect to the LBL Contracts. The Administrator shall also have the authority
to exercise any of the Company's rights with respect to trust accounts, letters
of credit or other security posted for the benefit of the Company in respect of
the LBL Contracts under any Ceded Reinsurance Contract that is not a Shared
Reinsurance Agreement. Notwithstanding the foregoing, in the event that the
Administrator materially fails to perform its obligations under this
Section 9.1(a) with respect to any Shared Reinsurance Agreement, then upon
written notice to the Administrator, the Company may assume the authority and
responsibility to manage and administer the portion of such Shared Reinsurance
Agreement that relates to the LBL Contracts, and the Administrator shall use
reasonable best efforts timely to provide any data, information, premiums and
other amounts necessary in connection with such management and administration
and shall otherwise cooperate in good faith with the Company in connection
therewith. Notwithstanding the foregoing, the Company shall reasonably
cooperate with Administrator, at Administrator's expense, in the administration
of the Ceded Reinsurance Contracts to the extent that the Company's
participation is required thereunder or is reasonably requested by the
counterparty to any Ceded Reinsurance Contract.
(b) The Company shall have the authority and responsibility to, and
shall, manage and administer the portion of the Shared Reinsurance Agreements
that does not relate to the LBL Contracts, including providing all reports and
notices that relate to policies other than the LBL Contracts required with
regard to such Shared Reinsurance Agreements to the reinsurer within the time
required by such Shared Reinsurance Agreements and doing all other things
necessary to comply with the terms and conditions of such Shared Reinsurance
Agreements. Without limiting the foregoing, the Company shall timely pay all
reinsurance premiums due to the reinsurer under such Ceded Reinsurance
Contracts with respect to the policies other than LBL Contracts, and collect
from such reinsurer all reinsurance recoverables due thereunder with respect to
the policies other than the LBL Contracts. Notwithstanding the foregoing, in
the event that the Company materially fails to perform its obligations under
this Section 9.1(b) with respect to such Shared Reinsurance Agreement, then
upon written notice to the Company, the Administrator may assume the authority
and responsibility to manage and administer the portion of such Shared
Reinsurance Agreement that does not relate to the LBL Contracts, and the
Company shall use reasonable best efforts timely to provide any data,
information, premiums and other amounts necessary in connection with such
management and administration and shall
20
otherwise cooperate in good faith with the Administrator in connection
therewith. In the event that (i) the Company has not materially failed to
perform its obligation under this Section 9.1(b) with respect to a Shared
Reinsurance Agreement but (ii) the Company is determined to be obligated to
provide consolidated reporting with respect to such Shared Reinsurance
Agreement, the Parties shall cooperate in good faith to develop a mutually
agreeable method to manage and administer such Shared Reinsurance Agreement.
The Company shall have the right to exercise all of its rights with respect to
trust accounts, letters of credit or other security posted for the benefit of
the Company under any Shared Reinsurance Agreement; provided that it shall hold
in trust for the benefit of the Administrator, and transfer to the
Administrator, any amounts withdrawn by the Company from any such trust
accounts, letters of credit or other security that relate to the LBL Contracts
(which amounts constitute Recoveries under the Reinsurance Agreement);
provided, however, that the Company shall honor Administrator's requests for
collateral draws with respect to the LBL Contracts to the extent permitted
under such Shared Reinsurance Agreement.
Section 9.2 Amendments and Replacements. From and after the Inception Date,
the Administrator shall have the right to terminate, amend or replace with a
new reinsurance agreement between the Administrator and the applicable
reinsurer, in whole or in part, any of the Ceded Reinsurance Contracts to the
extent such termination, amendment or replacement relates to the LBL Contracts
or Vermont Captive Contracts, respectively; provided such termination,
amendment or replacement does not affect the reinsurance coverage or other
reinsurance terms provided thereunder with respect to the Company Business. The
Company shall, upon the Reinsurer's request, cooperate with the Administrator
and take all actions reasonably requested by the Administrator to cause such
terminations, amendments or replacements of Ceded Reinsurance Contracts or to
cause such new Ceded Reinsurance Contracts to be entered into. The
Administrator shall reimburse the Company for all reasonable and documented
out-of-pocket costs and expenses incurred by the Company or its Affiliates in
connection with such terminations, amendments or replacements of Ceded
Reinsurance Contracts or the entering into of such new Ceded Reinsurance
Contracts.
Section 9.3 Vermont Captive Reinsurance Agreement. The Administrator shall
have the authority and responsibility on behalf of the Company to manage and
administer the Vermont Captive Reinsurance Agreement, including providing all
reports and notices required thereunder to be provided by the Company within
the time required thereby.
Section 9.4 Non-Guaranteed Elements.
(a) With respect to the LBL Contracts, in accordance with the terms of
the Reinsurance Agreement, the Administrator may provide recommendations to the
Company as to the setting of all Non-Guaranteed Elements.
(b) With respect to the Vermont Captive Contracts, the Administrator, in
consultation with the Vermont Captive, may, from time to time, make
recommendations to the Company with respect to Non-Guaranteed Elements so long
as the recommendations comply with the written terms of the Vermont Captive
Contracts, Applicable Law and Actuarial Standards of Practice promulgated by
the Actuarial Standard Board governing redetermination of non-guaranteed
charges. The Company shall establish Non-Guaranteed Elements, taking into
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account the recommendations of the Administrator (in consultation with the
Vermont Captive) with respect thereto. The Company shall fully consider any
such recommendations and act reasonably and in good faith in determining
whether any such recommendations should be accepted and shall not unreasonably
delay implementation of any accepted recommendations after such recommendations
are provided in writing, except to the extent that an applicable Governmental
Entity finally determines that Applicable Law would require the implementation
of such recommendations to apply to any policy or contract that constitutes
Company Business.
(c) Notwithstanding anything to the contrary contained herein, in the
event that an applicable Governmental Entity finally determines that Applicable
Law would require the implementation of Administrator's recommendations with
respect to one or more LBL Contracts or Vermont Captive Contracts to apply to
any policy or contract that constitutes Company Business (a) the Parties shall
cooperate in good faith to develop a mutually agreeable plan to set
Non-Guaranteed Elements with respect to such LBL Contracts or Vermont Captive
Contracts and such Company Business, and the Parties shall implement any such
plan so agreed and (b) the Company shall not be liable for any Indemnified
Losses incurred by the Administrator as a result of the Company's failure to
implement Administrator's recommendations. In the event that the Company is
notified by an applicable Governmental Entity that it proposes making a
determination that Applicable Law would require the implementation of such
recommendations to apply to any policy or contract that constitute Company
Business, the Company shall promptly notify the Administrator of such
notification. The Parties will thereafter cooperate in good faith and use their
reasonable best efforts to reach agreements with such Governmental Entity that
will avoid a final determination to such effect. The Administrator acknowledges
that the Company has certain indemnification rights under the Reinsurance
Agreement for Indemnifiable Losses resulting from the Company's acceptance and
implementation of the Administrator's recommendations in accordance with this
Section 9.4.
Section 9.5 Contractholder Services. From and after the Inception Date
subject to Section 2.3, the Administrator shall provide all contractholder
services in connection with the LBL Contracts and Vermont Captive Contracts.
Section 9.6 Principal Underwriting Agreement. The Administrator shall have
the authority and responsibility on behalf of the Company to perform the
services and other obligations required of the Company, and to enforce the
Company's rights, under (a) the Principal Underwriting Agreement and (b) that
certain Selling Agreement dated August 2, 1999 by and between the Company,
Allstate Life Financial Services, Inc. and Allstate Financial Services, LLC
(f/k/a LSA Securities, Inc.), as amended, in each case to the extent relating
to the LBL Contracts and the Shared Separate Account covered thereunder;
provided, however, that the Administrator shall have no responsibility to
perform any indemnification obligations of the Company under the Principal
Underwriting Agreement or such Selling Agreement to the extent such obligations
arise out of any act or omission of the Company (other than an act or omission
for which Administrator is responsible hereunder).
Section 9.7 Other Services. Subject to Section 2.3, the Administrator shall
provide such other administrative services as are necessary or appropriate to
fully effectuate the purpose of the Reinsurance Agreement, the Vermont Captive
Reinsurance Agreement and this Agreement, including such services as are not
performed by or on behalf of Company on the date
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hereof but the need for which may arise due to changes or developments in
Applicable Law and are consistent with the allocation of the services set forth
herein between the Administrator and the Company.
ARTICLE X
NOTIFICATION TO CONTRACTHOLDERS
Section 10.1 Notification to Contractholders. If required by Applicable Law,
the Administrator shall send to applicable contractholders under the LBL
Contracts and the Vermont Captive Contracts a written notice prepared by the
Administrator and reasonably acceptable to the Company to the effect that the
Administrator has been appointed by the Company to provide the Administrative
Services with respect to the LBL Contracts and the Vermont Captive Contracts,
as applicable. The Administrator shall send such notice by first class U.S.
mail at a time reasonably acceptable to the Company and the Administrator and
in all events in accordance with Applicable Law. Unless otherwise required by
Applicable Law, the Administrator may include such notice in a regularly
scheduled mailing to such contractholders in lieu of a separate mailing.
ARTICLE XI
QUARTERLY PREMIUM TAX AND INSOLVENCY FUND ACCOUNTINGS
Section 11.1 Quarterly Accountings. Subject to Section 2.3, from and after
the Inception Date, within ten (10) Business Days after the end of each
calendar quarter that this Agreement is in effect (or more frequently as
mutually agreed by the Parties), the Company shall submit to the Administrator
a written statement of accounting in a form and containing such information to
be agreed upon by the Parties hereto (each, an "Insolvency Fund Quarterly
Accounting") setting forth the insolvency fund amounts assessed against or
payable by the Company, to the extent that such assessments constitute the
Company's General Account Liabilities in respect of the LBL Contracts and the
Vermont Captive Contracts (collectively, the "Post-Inception Date
Assessments"). In addition, within twenty (20) Business Days after the last day
of each calendar quarter that this Agreement is in effect (or more frequently
as mutually agreed by the Parties), the Administrator shall submit to the
Company a written statement of accounting in a form and containing such
information to be agreed upon by the Parties hereto (each, a "Quarterly Premium
Tax Accounting", and together with the Insolvency Fund Quarterly Accountings,
the "Quarterly Accountings") setting forth the estimated premium taxes due with
respect to the LBL Contracts and the Vermont Captive Contracts as a result of
premiums collected or annuitizations occurring during such quarter. Concurrent
with the delivery of each Quarterly Premium Tax Accounting, the Administrator
shall remit to the Company the amount set forth on such Quarterly Premium Tax
Accounting with respect to such estimated premium taxes due and the amount set
forth in such Insolvency Fund Quarterly Accounting with respect to the
Post-Inception Date Assessments, and any other amounts owed to the Company
pursuant to this Agreement.
Section 11.2 Adjustments Regarding Quarterly Accountings. In the event that
subsequent data or calculations require revision of any of the Quarterly
Accountings, the
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required revision and appropriate payments thereunder shall be made within
twenty (20) Business Days after the Parties hereto mutually agree as to the
appropriate revision.
ARTICLE XII
CERTAIN ACTIONS BY COMPANY
Section 12.1 Filings. Subject to Section 2.3, the Company shall prepare and
timely file any filings required to be made with any Governmental Entity that
relate to the Company generally and not just to the LBL Contracts or the
Vermont Captive Contracts, including filings with guaranty associations and
filings and premium tax returns with taxing authorities. The Administrator
shall timely provide to the Company upon request all information in the
possession of the Administrator with respect to the LBL Contracts and the
Vermont Captive Contracts that may be reasonably required for the Company to
prepare such filings and tax returns.
Section 12.2 Annual Adjustment. The Company shall pay or provide to the
Administrator the benefit of any Post-Inception Date Assessments which have
been applied to reduce the Company's premium tax liability ("Premium Tax
Credits"). The Company shall provide to the Administrator by April 15 of each
year a statement of the amount (the "Annual Adjustment") of (i) premium taxes
(including retaliatory taxes) paid with respect to premiums collected or
annuitizations occurring during the prior calendar year (to the extent that
such taxes constitute the Company's General Account Liabilities), less
(ii) estimated premium taxes paid by the Administrator to the Company with
respect to such premiums under the provisions of Article XI, less (iii) Premium
Tax Credits for the prior calendar year. By May 31 of each year the
Administrator shall pay to the Company the Annual Adjustment, if a positive
amount, and the Company shall pay or credit to the Administrator the absolute
value of the Annual Adjustment, if a negative amount.
ARTICLE XIII
REGULATORY MATTERS AND REPORTING
Section 13.1 Regulatory Compliance and Reporting. Subject to Section 2.3,
upon the timely and reasonable request of the Company, the Administrator shall
provide to the Company such information with respect to the LBL Contracts and
the Vermont Captive Contracts as is reasonably required to enable the Company
timely to comply with regulatory and financial reporting requirements
applicable to the Company from time to time, other than such regulatory and
financial reporting requirements that are required because the Company or its
Affiliates are subject to non-U.S. legal or regulatory requirements and
industry standards. Without limiting the foregoing, the Administrator shall
provide the reports and information set forth on Schedule A within the
timeframes indicated therein. In addition, and without limiting the
Administrator's obligation to provide the Administrative Services hereunder,
upon the timely and reasonable request of the Company, the Administrator shall
promptly provide to the Company copies of all existing records relating to the
Administered Business (including, with respect to records maintained in machine
readable form, hard copies) that are reasonably necessary to satisfy any
requirements imposed by Applicable Law or any Governmental Entity upon the
Company with
24
respect to the Administered Business. All (i) such information and (ii) such
records furnished in the ordinary course of business relating to the
Administered Business shall be furnished at the Administrator's sole cost and
expense. Without limiting the generality of the foregoing, upon the timely and
reasonable request of the Company, the Administrator shall promptly prepare and
furnish to Governmental Entities, to the extent permitted by Applicable Law,
all reports and related summaries (including statistical summaries),
certificates of compliance and other reports required or requested by any such
Governmental Entity with respect to the Administered Business, other than such
reports, summaries and certificates that are required or requested because the
Company or its Affiliates are subject to non-U.S. legal or regulatory
requirements and industry standards. Without limiting the foregoing:
(i) As soon as practicable but not more than ten (10) Business Days after
the end of each month that this Agreement is in effect (or, with respect to
any January, within fifteen (15) Business Days after the end of such month),
the Administrator shall provide to the Company reports and summaries of
transactions (and upon the reasonable request of the Company, detailed
supporting records) related to the LBL Contracts and the Vermont Captive
Contracts as may be reasonably required for use in connection with the
preparation of the Company's GAAP financial statements (or any consolidated
GAAP financial statements of the Company or its Affiliates, as applicable),
including all premiums received and all benefits paid. The Parties shall
cooperate in good faith to establish the manner for the providing of such
reports.
(ii) As soon as practicable but not more than twelve (12) Business Days
after the end of each calendar quarter that this Agreement is in effect, (or
more frequently as mutually agreed by the Parties), the Administrator shall
timely provide to the Company reports and summaries of transactions (and
upon the reasonable request of the Company, detailed supporting records)
related to the LBL Contracts and the Vermont Captive Contracts as may be
reasonably required for use in connection with the preparation of the
Company's statutory financial statements, U.S. tax returns and other
required U.S. financial reports and to comply with the requirements of the
U.S. regulatory authorities having jurisdiction over the Company (or any
consolidated statutory financial statements, U.S. tax returns or other U.S.
financial reports of the Company or its Affiliates, as applicable),
including all premiums received and all benefits paid. The Parties shall
cooperate in good faith to establish the manner for the providing of such
reports.
(iii) The Administrator shall promptly provide notice to the Company of
any changes in the reserve methodology used by the Administrator in
calculating statutory reserves for the LBL Contracts and the Vermont Captive
Contracts.
(iv) Within thirty (30) Business Days after each calendar year end (or
such longer time as may be agreed by the Parties) that this Agreement is in
effect, the Administrator shall provide to the Company an actuarial analysis
of statutory reserves for the LBL Contracts and the Vermont Captive
Contracts, reasonably adequate to support opinions prepared according to
accepted actuarial standards of practice to be issued by the Company, and as
otherwise required for regulatory reporting purposes. The Administrator
shall also provide supporting documentation as reasonably requested by the
Company or as required by Governmental Entities or actuarial standards of
practice.
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In the event that Applicable Law imposes (a) a legal requirement on the
Administrator, in its capacity as reinsurer under the Reinsurance Agreement
or administrator under this Agreement, to provide an actuarial opinion as to
the adequacy of statutory reserves for the LBL Contracts or the Vermont
Captive Contracts, or (b) a legal requirement on the Company to obtain such
an actuarial opinion from the Administrator in any such capacity, the
Administrator shall timely provide such opinion directly to the applicable
Governmental Entity in substantially the form required by Applicable Law.
Section 13.2 Additional Reports and Updates. For so long as this Agreement
remains in effect, upon reasonable notice, each Party shall from time to time
furnish to the other such other reports and information related to Administered
Business as may be reasonably required by such other Party for regulatory, tax
or similar purposes and reasonably available to it, and such reports or
information shall be prepared and delivered on a timely basis in order for the
receiving Party to comply with any filing deadlines required by Applicable Law
or by contract.
Section 13.3 Additional Reports. The Administrator shall provide such
subcertifications with respect to the LBL Contracts and the Vermont Captive
Contracts to enable the Company to meet its requirements under Section 302 of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or any Applicable Law requiring the making of
certifications by an unaffiliated third party, in a form to be mutually agreed
upon by the Parties hereto.
ARTICLE XIV
BOOKS AND RECORDS
Section 14.1 Maintenance of Books and Records.
(a) As of and following the Inception Date, the Administrator shall
maintain books and records of all transactions pertaining to the Administered
Business (i) in accordance with any and all Applicable Laws, (ii) in accordance
with the Administrator's internal record retention procedures and policies, and
(iii) in a format accessible by the Company and its representatives. All
original books and records with respect to the LBL Contracts and Vermont
Captive Contracts shall be or remain the property of the Company and shall not
be destroyed without the consent of the Company; provided, that the
Administrator shall continue to have custody of such books and records for so
long as is reasonably required for the Administrator to carry out its duties
under this Agreement.
(b) During the term of this Agreement, upon any reasonable request from
the Company or its representatives, the Administrator shall (i) provide to the
Company and its representatives reasonable access during normal business hours
to the books and records under the control of the Administrator pertaining to
the Administered Business; provided that such access shall not unreasonably
interfere with the conduct of the business of the Administrator, (ii) permit
the Company and its representatives to make copies of such records and provide
reasonable access to employees concerning the information in such records and
(iii) permit the Company and its representatives to review or copy any Tax
Returns for which the Administrator is responsible that relate to the
Administrative Services. Nothing herein shall require the Administrator to
disclose any information to the Company or its representatives to the extent
26
such information does not pertain to the Administered Business or if such
disclosure would jeopardize any attorney-client privilege, the work product
immunity or any other legal privilege or similar doctrine or contravene any
Applicable Law or any contract (including any confidentiality agreement to
which the Administrator or any of its Affiliates is a party) (it being
understood that the Administrator shall use its reasonable best efforts to
enable such information to be furnished or made available to the Company or its
representatives without so jeopardizing privilege or contravening such
Applicable Law or contract) or require the Administrator to disclose any
personnel or related records.
(c) During the term of this Agreement, upon any reasonable request from
the Administrator or its representatives, the Company shall (i) provide to the
Administrator and its representatives reasonable access during normal business
hours to the books and records under the control of the Company pertaining to
the Administered Business or the Retained Services; provided that such access
shall not unreasonably interfere with the conduct of the business of the
Company, and (ii) permit the Administrator and its representatives to make
copies of such records. Nothing herein shall require the Company to disclose
any information to the Administrator or its representatives if such disclosure
would jeopardize any attorney-client privilege, the work product immunity or
any other legal privilege or similar doctrine or contravene any Applicable Law
or contract (including any confidentiality agreement to which the Company or
any of its Affiliates is a party) (it being understood that the Company shall
use its reasonable best efforts to enable such information to be furnished or
made available to the Administrator or its representatives without so
jeopardizing privilege or contravening such Applicable Law or contract) or
require the Company to disclose its tax records (other than premium tax
filings) or any personnel or related records.
(d) The Administrator shall maintain facilities and procedures that are
in accordance with Applicable Law and commercially reasonable standards of
insurance recordkeeping for safekeeping the books and records maintained by the
Administrator or its Affiliates that pertain to the Administered Business. The
Administrator shall back up all of its computer files relating to the
Administered Business or otherwise used in the performance of the
Administrative Services under this Agreement on a daily basis and shall
maintain back-up files in an off-site location.
ARTICLE XV
COOPERATION
Section 15.1 Cooperation. Each Party hereto shall cooperate fully with the
other in all reasonable respects in order to accomplish the objectives of this
Agreement including making available to each their respective officers and
employees for interviews and meetings with Governmental Entities and furnishing
any additional assistance, information and documents as may be reasonably
requested by a Party from time to time.
27
ARTICLE XVI
PRIVACY REQUIREMENTS
Section 16.1 Confidentiality Obligations. In providing the Administrative
Services provided for under this Agreement, and in connection with maintaining,
administering, handling and transferring the data of the Contractholders and
other recipients of benefits under the LBL Contracts and Vermont Captive
Contracts, the Administrator shall, and shall cause its Affiliates to, comply
with any Applicable Law and/or regulations with respect to privacy or data
security relative to Customer Information (as defined below), and shall
implement and maintain an effective information security program (the
"Information Security Program") designed to protect Customer Information in
compliance with all applicable privacy laws and other Applicable Law:
(i) to ensure the security, integrity and confidentiality of Customer
Information;
(ii) to protect against any anticipated threats or hazards to the
security or integrity of such Customer Information; and
(iii) to protect against unauthorized access to or use of Customer
Information which could result in substantial harm or inconvenience to the
owner thereof or its Affiliates, or to Customers or potential Customers
thereof.
The Administrator has made a copy of such Information Security Program in
effect as of the Inception Date available to the Company. From time to time
upon the Company's written request, the Administrator shall deliver a copy of
its then-current Information Security Program to the Company. For as long as
Administrative Services are provided hereunder, the Administrator shall, and
shall cause its Affiliates to, abide by the Information Security Program with
respect to the Administered Business. At all times during the term of this
Agreement, the Information Security Program shall be no less protective of the
Administered Business than the information security program of the
Administrator applicable to the insurance business administered by the
Administrator for its own account.
"Customer Information" is defined as all tangible and intangible information
provided or disclosed hereunder about present or former contract holders,
annuitants, or other beneficiaries (collectively, hereinafter "Customers") or
potential Customers of any Party or its Affiliates, including, but not limited
to, name, address, telephone number, email address, account or policy
information, and any list, description, or other grouping of Customers or
potential Customers, and any medical records or other medical information of
such Customers or potential Customers and any other type of information deemed
"nonpublic" and protected by privacy laws and any other Applicable Law.
Section 16.2 Security Incidents.
(a) In the event that any Party discovers a security breach that has
resulted or may reasonably result in unauthorized access to or disclosure of,
or have any material adverse effect on, the security of any Customer
Information related to the LBL Contracts or the Vermont Captive Contracts (a
"Security Incident") such Party shall (i) within 24 hours, notify the other
28
Party of said Security Incident; and (ii) work with the other Party to take all
measures reasonably necessary to restore the security of such Customer
Information. The Company shall have the exclusive right to provide notice of
any Security Incident to any Customers of the LBL Contracts or the Vermont
Captive Contracts, any law enforcement Person or any other Governmental
Authorities and to determine the content and timing of any such notice;
provided, any such notice shall be subject to review and approval by the
Administrator.
(b) Each Party acknowledges that the breach of its obligations under
this Section 16.2 may cause irreparable injury and damages, which may be
difficult to ascertain. Therefore a Party shall be entitled to seek injunctive
relief with respect to any breach or threatened breach of this Section 16.2 by
the other Party and its Affiliates. This provision shall not in any way limit
such other remedies as may be available to any Party at law or in equity.
ARTICLE XVII
CONSIDERATION FOR ADMINISTRATIVE SERVICES
Section 17.1 Consideration for Administrative Services. Except as set forth
herein, with respect to the LBL Contracts, apart from the performance by the
Company of its obligations under the Reinsurance Agreement, there shall be no
fee or other consideration due to the Administrator for the performance of the
Administrative Services and the Administrator's other obligations under this
Agreement. With respect to the Vermont Captive Contracts, the Administrator
shall be entitled to collect and retain all claims expense, expense allowance
or similar amounts due to the Company under the terms of the Vermont Captive
Reinsurance Agreement, and the Company hereby sells, assigns, transfers and
delivers to the Administrator all of its rights, title and interest in one
hundred percent of such amounts actually received or receivable at or after the
Inception Date by the Company or the Administrator. With respect to the
performance by the Administrator of the services in respect of the Shared
Separate Account, the Company shall pay to the Administrator the Monthly
Separate Account Administrative Fee set forth in Schedule A.
ARTICLE XVIII
BANK ACCOUNTS; TRADEMARKS
Section 18.1 Establishment of Bank Accounts.
(a) The Administrator shall have the right to open and maintain the Bank
Accounts in respect of the LBL Contracts in accordance with the terms of the
Reinsurance Agreement, provided that the Administrator shall notify the Company
in writing upon opening any such Bank Account in the name of the Company.
(b) During the term of this Agreement, the Administrator may use such
Bank Accounts or open and maintain one or more additional bank accounts with
banking institutions with respect to the Vermont Captive Contracts (the
"Vermont Captive Bank Accounts"). The Administrator shall have the exclusive
authority over the Vermont Captive Bank Accounts including, without limitation,
the exclusive authority to (a) open the Vermont Captive Bank
29
Accounts in the name of the Company, (b) designate the authorized signatories
on the Vermont Captive Bank Accounts, (c) issue drafts on and make deposits in
the Vermont Captive Bank Accounts in the name of the Company, (d) make
withdrawals from the Vermont Captive Bank Accounts and (e) enter into
agreements with respect to the Vermont Captive Bank Accounts on behalf of the
Company; provided, that in no event shall the Company be responsible for any
fees, overdraft charges or other payments, liabilities or obligations with
respect to any such Bank Accounts or be obligated to provide funding for the
Bank Accounts. The Company shall do all things necessary at the Reinsurer's
expense to (x) enable and authorize the Administrator to use the Company's
existing lockboxes with respect to the Vermont Captive Contracts, if any, and
(y) enable the Administrator to open and maintain the Vermont Captive Bank
Accounts including, without limitation, executing and delivering such
depository resolutions and other documents as may be requested from time to
time by the banking institutions. The Company agrees that without the
Reinsurer's prior written consent it shall not make any changes to the
authorized signatories on the Vermont Captive Bank Accounts nor attempt to
withdraw any funds therefrom.
Section 18.2 Trademarks. Administrator hereby acknowledges that the Company
has adopted and is using the names and marks listed on Schedule C hereto in
connection with the LBL Contracts and Vermont Captive Contracts (collectively,
the "Licensed Names and Marks"). The Company and Administrator agree as follows:
(a) The Company hereby grants to the Administrator and Administrator
hereby accepts a non-exclusive, non-transferable, royalty-free license to use
the Licensed Names and Marks in connection with the Administrative Services,
including Post-Closing Policies, during the term of, and subject to the terms
and conditions set forth in this Agreement. Any of the rights in the foregoing
license may be sublicensed by the Administrator in connection with any contract
permitted by Section 3.3; provided, that such sublicense is limited to the use
of the Licensed Names and Marks in connection with the Administrative Services,
including Post-Closing Policies and does not extend the right to further
sublicense any such Licensed Names and Marks. If the Administrator sublicenses
any of the rights in the foregoing license, the Administrator shall remain
liable for any actions or omissions by the sublicensee. The Administrator is
granted no rights to use the Licensed Names and Marks, other than those rights
specifically described and expressly licensed in this Agreement and no right is
granted hereunder for the use of the Licensed Names and Marks in connection
with any services other than the Administrative Services, including
Post-Closing Policies. Other than in connection with the Administrative
Services, including Post-Closing Policies, none of the rights licensed to the
Administrator under this Section 18.2 may be assigned, sublicensed or otherwise
transferred by the Administrator, nor shall such rights inure to the benefit of
any trustee in bankruptcy, receiver or successor of the Administrator, whether
by operation of law or otherwise, without the prior written consent of the
Company, and any assignment, sublicense or other transfer without such consent
shall be null and void. The merger of Administrator with or into another entity
shall not constitute an assignment or other transfer of the rights licensed to
the Administrator under this Section 18.2.
(b) The Administrator agrees that it will use the Licensed Names and
Marks as the Company used them prior to the Closing and that the nature of such
use on the Materials (as defined below) shall be at least equal to the standard
of quality maintained by the Company
30
in connection with such Licensed Names and Marks immediately prior to the
Closing and consistent with established industry practice (collectively, the
"Licensor Standards"). The Administrator agrees to make available for review,
upon the Company's request, all materials that incorporate the Licensed Names
and Marks including, but not limited to, advertising copy, labels, stickers,
policies, brochures or other materials, including any applicable materials in
connection with the Administrator's performance under this Agreement
(collectively, the "Materials"). If the Company objects to the manner in which
a Licensed Name or ▇▇▇▇ is used in connection with any Materials, the Company
may request that the Administrator take, and the Administrator shall promptly
take, all steps necessary to remedy any such deficiencies within 15 days after
such notification, including to promptly discontinue the use of any such
Materials. The Administrator shall promptly notify the Company of any material
complaints received in writing from third parties regarding the products or
services offered or provided under the Licensed Names and Marks and, at the
request of the Company, shall reasonably cooperate with the Company in
addressing and mitigating the circumstances giving rise to such complaints. The
Administrator shall (a) permit the Company or its representatives reasonable
access to such of the Administrator's facilities and personnel as are actively
involved in use of the Licensed Names and Marks on reasonable prior written
notice, and (b) make available to the Company or its representatives for
inspection specimens demonstrating the Administrator's use of the Licensed
Names and Marks on the Materials or otherwise in connection with the Licensed
Names and Marks, as requested by the Company from time to time for the purpose
of verifying that the Administrator's use complies with Licensor Standards and
to the extent reasonably necessary to maintain the validity of the Licensed
Names and Marks and the valuable goodwill and reputation established by the
Licensed Names and Marks.
(c) The Administrator agrees not to adopt or use any service ▇▇▇▇, logo
or design confusingly similar to the Licensed Names and Marks. It is understood
that the Company retains the right, in its sole discretion, to modify the
Licensed Names and Marks, upon reasonable prior notice to the Administrator.
Any material costs incurred by the Administrator associated with any mailings
to Contractholders required under Applicable Law as a result of such
modification shall be reimbursed by the Company.
(d) The Administrator recognizes the value of the goodwill associated
with the Licensed Names and Marks and acknowledges that, as between the
Administrator and the Company, all proprietary rights therein and the goodwill
attached thereto belong exclusively to the Company. All uses of the Licensed
Names and Marks by the Administrator shall, with respect to service ▇▇▇▇
ownership only, inure solely to the benefit of the Company and any registration
of the Licensed Names and Marks shall be registered by the Company in its name,
it being understood that the present license shall not in any way affect the
ownership by the Company of the Licensed Names and Marks, each of which shall
continue to be the exclusive property of the Company. The Company shall, in its
own name and at its own expense, maintain appropriate service ▇▇▇▇ protection
for the Licensed Names and Marks. The Administrator shall not at any time
during the term of this Agreement or at any time thereafter do or cause to be
done any act contesting the validity of the Licensed Names and Marks,
contesting or in any way impairing or tending to impair the Company's entire
right, title and interest in the Licensed Names and Marks and the registrations
thereof or adversely affecting the value of the Licensed Names and Marks or the
reputation and goodwill of the Company. The Administrator shall not represent
that it has any right, title or interest in the reputation and good will of the
Company.
31
The Administrator shall not represent that it has any right, title or interest
in the Licensed Names and Marks other than the rights expressly granted by this
Agreement.
(e) Subject to the provisions of Article XIX hereof, except with respect
to any uses of the Licensed Names and Marks not authorized under this
Agreement, the Company will indemnify, defend and hold the Administrator
harmless from any Losses from claims that the Licensed Names and Marks infringe
on the rights of third parties. Subject to the provisions of Article XIX, the
Administrator will indemnify, defend and hold the Company harmless from any
Losses that arise in connection with the Administrator's use of the Licensed
Names and Marks other than as authorized under this Agreement. This
Section 18.2 shall survive the termination or expiration of this Agreement.
(f) The right to institute and prosecute actions for infringement of the
Licensed Names and Marks is reserved exclusively to the Company, and the
Company shall have the right to join the Administrator in any such actions as a
formal party. The Company may also request, and the Administrator shall
provide, assistance with respect to any such infringement action. Any such
action shall be conducted at the Company's expense. The Administrator shall
provide prompt written notice to the Company of any infringement or
unauthorized use of the Licensed Names and Marks of which it is aware, and
agrees to assist the Company at the Company's expense in any such action
brought by the Company. It is understood, however, that the Company is not
obligated to institute and prosecute any such actions in any case in which it,
in its sole judgment, may consider it inadvisable to do so. Any recovery
obtained by the Company as a result of any such action shall belong solely to
Company.
(g) The agreements and covenants contained in this Section 18.2 shall
continue in effect until such time as this Agreement is terminated. Upon
termination of this Agreement, the Administrator shall discontinue all use of
the Licensed Names and Marks (but in no event will such use extend beyond sixty
(60) calendar days after termination). Upon any such termination, the
Administrator shall take all commercially reasonable actions necessary to
effect such discontinuance. Upon termination, all of the Administrator's rights
to the Licensed Names and Marks shall revert to and continue to reside with and
be owned exclusively by the Company.
ARTICLE XIX
INDEMNIFICATION
Section 19.1 Administrator's Obligation to Indemnify. The Administrator
shall indemnify, defend and hold harmless the Company and its Affiliates and
their respective officers, directors, stockholders, employees, representatives,
successors and assigns (collectively, the "Company Indemnified Persons") from
and against any and all Indemnifiable Losses incurred by the Company
Indemnified Persons to the extent arising from (i) any breach by the
Administrator of the covenants and agreements of the Administrator contained in
this Agreement (an "Administrator Breach"), (ii) any violations of Applicable
Law by the Administrator or its Affiliates or Subcontractors (including without
limitation under the Securities Act of 1933) or otherwise arising from any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made,
32
not misleading, contained in any registration statement or prospectus or other
product materials relating to an LBL Contract or Vermont Captive Contract or
any interest offered under an LBL Contract or Vermont Captive Contract or any
amendment thereof, but only to the extent prepared or updated by Administrator
and excluding any such statement or omission made in reliance upon and in
conformity with information furnished in writing to Administrator by LBL or its
Affiliates after the date hereof expressly for use therein, (iii) any
indemnification payment by the Company pursuant to the Principal Underwriting
Agreement in respect of LBL Contracts covered thereunder (except to the extent
arising out of any act or omission of the Company for which Administrator is
not responsible pursuant to this Agreement) and (iv) any successful enforcement
of this indemnity; provided that, the Administrator shall have no obligation to
indemnify any Company Indemnified Party to the extent such Indemnifiable Loss
results from (i) any act or omission resulting from the negligence or willful
misconduct of the Company after the Inception Date, or (ii) any Company Breach;
and provided, further, that with respect to any Indemnifiable Losses under this
Agreement (other than any Indemnifiable Losses to the extent arising from the
Administrator's gross negligence or willful misconduct) arising from the
Administrator's provision of Administrative Services for the Shared Separate
Account in respect of the Company Business (such Indemnifiable Losses, the
"Capped Losses"), the liability of the Administrator to the Company Indemnified
Persons for any such Capped Losses shall be the Cap, determined as of the date
the applicable Indemnifiable Losses were incurred.
Section 19.2 Company's Obligation to Indemnify. The Company hereby agrees to
indemnify, defend and hold harmless the Administrator and its Affiliates and
their respective officers, directors, stockholders, employees, representatives,
successors and assigns (collectively, the "Administrator Indemnified Persons")
from and against any and all Indemnifiable Losses incurred by the Administrator
Indemnified Persons to the extent arising from (i) any breach by the Company of
the covenants and agreements of the Company contained in this Agreement (a
"Company Breach"), (ii) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading,
contained in any registration statement or prospectus or other product
materials relating to an LBL Contract, Vermont Captive Contract, or the Company
Business that is associated with the Shared Separate Account, or any interest
offered under an LBL Contract, Vermont Captive Contract or the Company Business
that is associated with the Shared Separate Account or any amendment thereof,
in each case, that is made in reliance upon and in conformity with information
provided in writing by the Company or an Affiliate after the Inception Date
expressly for use by the Administrator in the preparation of such registration
statement or prospectus, including audited financial statements for the Company
or the Shared Separate Account, but excluding any such information to the
extent contained in or derived from any data or report furnished to the Company
by or on behalf of the Administrator or its Affiliates after the date hereof in
accordance with this Agreement; and (iii) any successful enforcement of this
indemnity; provided that, the Company shall have no obligation to indemnify any
Administrator Indemnified Party to the extent such Indemnifiable Loss results
from (i) any act or omission resulting from the negligence or willful
misconduct of the Administrator or a Subcontractor, or (ii) any Administrator
Breach.
33
Section 19.3 Definitions. As used in this Agreement:
"Cap" means, as of any date of determination, an amount equal to the
Monthly Separate Account Administrative Fee actually paid by the Company to the
Administrator under this Agreement in respect of the twelve (12) calendar
months prior to such date of determination (or, if twelve (12) months have not
yet elapsed since the Inception Date, then twelve (12) times the average
Monthly Separate Account Administrative Fee during such shorter period),
reduced by the sum of the Capped Losses actually paid by the Administrator to
the Company Indemnified Persons and the amount actually paid by the
Administrator to the Company in respect of any Variances pursuant to
Section 8.4, in each case, that were incurred during the twelve (12) calendar
months prior to such date of determination (or, if less than twelve (12) months
have elapsed since the Inception Date, then since the Inception Date).
"Indemnitee" means any Person entitled to indemnification under this
Agreement;
"Indemnitor" means any Person required to provide indemnification under
this Agreement;
"Indemnifiable Losses" means any and all damages, losses, Liabilities,
obligations, costs and expenses (including reasonable attorneys' fees and
expenses); provided, that any Indemnity Payment (x) shall in no event include
any amounts constituting punitive damages relating to the breach or alleged
breach of this Agreement (except to the extent actually paid to a third party
in connection with a Third Party Claim) and (y) and shall be net of any amounts
recovered by or recoverable by the Indemnitee for the Indemnifiable Losses for
which such Indemnity Payment is made under any insurance policy, reinsurance
agreement, warranty or indemnity or otherwise from any Person other than a
Party hereto, and the Indemnitee shall promptly reimburse the Indemnitor for
any such amount that is received by it from any such other Person with respect
to an Indemnifiable Losses after any indemnification with respect thereto has
actually been paid pursuant to this Agreement;
"Indemnity Payment" means any amount of Indemnifiable Losses required to
be paid pursuant to this Agreement; and
"Third Party Claim" means any claim, action, suit, or proceeding made or
brought by any Person that is not an Indemnitee.
Section 19.4 Applicability of Stock Purchase Agreement. The procedures set
forth in Section 7.5 of the Stock Purchase Agreement shall apply to Losses
indemnified under this Article XIX.
Section 19.5 No Duplication. To the extent that an Indemnitee has received
payment in respect of an Indemnifiable Loss pursuant to the provisions of any
other Transaction Agreement, such Indemnitee shall not be entitled to
indemnification for such Indemnifiable Loss under this Agreement to the extent
of such payment.
34
ARTICLE XX
DURATION; TERMINATION
Section 20.1 Duration. This Agreement shall commence on the Inception Date
and continue with respect to each LBL Contract and each Vermont Captive
Contract until no further Administrative Services in respect of such LBL
Contract or Vermont Captive Contract are required, unless this Agreement is
earlier terminated under Section 20.2.
Section 20.2 Termination.
(a) This Agreement is subject to immediate termination at the option of
the Company, upon written notice to the Administrator, upon the occurrence of
any of the following events:
(i) A voluntary or involuntary proceeding is commenced in any
jurisdiction by or against the Administrator for the purpose of conserving,
rehabilitating or liquidating the Administrator, and such proceeding shall
continue undismissed for 60 days; or
(ii) There is a material and continuing breach by the Administrator of
this Agreement and such breach is not cured within twenty (20) Business Days
following receipt by Administrator of written notice of such breach from the
Company; provided, however, if such material breach is not curable within
such twenty (20) Business Day period, the Company may not terminate the
Administrator's performance of the Administrative Services if the
Administrator has, within such twenty (20) Business Day period, provided the
Company with a detailed, written description of the Administrator's good
faith plan to cure such material and continuing breach; provided, further,
if such material and continuing breach is not cured within forty-five
(45) days following the Administrator's delivery to the Company of such
plan, the Company may terminate the Administrator's performance of the
Administrative Services.
(b) This Agreement may be terminated at any time upon the mutual written
consent of the Parties hereto, which writing shall state the effective date of
termination.
(c) In the event that this Agreement is terminated under any of the
provisions of Section 20.2(a):
(i) the Administrator and the Company shall each cooperate in the prompt
transfer of the applicable Administrative Services and any books and records
and other materials maintained by the Administrator related to such
Administrative Services (or, where required by Applicable Law, copies
thereof) to the Company or the Company's designee reasonably acceptable to
the Administrator;
(ii) in the event there has occurred a Change in Control at or prior to
such termination, the Administrator shall use its reasonable best efforts to
provide the Company or a replacement servicer designated by the Company with
a license to, or seek to obtain consents of third parties for the use of,
software and systems used by the
35
Administrator in performing the Administrative Services as reasonably
necessary to permit the Company or such replacement servicer to perform the
Administrative Services for a reasonable period following such termination,
such that the Company or such replacement servicer shall be able to perform
the applicable Services without interruption following termination of this
Agreement; and
(iii) the Administrator shall reimburse the Company for (A) reasonable
out-of-pocket costs for transitioning the Administrative Services to a
substitute provider reasonably acceptable to the Company (provided that in
the event the Reinsurance Agreement is in effect at the time of such
termination, the Company shall obtain the Administrator's consent to such
substitute provider, such consent not to be unreasonably withheld,
conditioned or delayed, and the Administrator shall notify the Company of
its decision with respect to such consent as soon as reasonably practicable
and in any event within thirty (30) days following delivery of the Company's
request for such consent), (B) any reasonable fees paid to any such
substitute provider in connection with the performance of any Administrative
Services and (C) any reasonable out-of-pocket costs incurred by the Company
with respect to the Administrative Services after termination of this
Agreement; provided, however, that the Administrator shall not be liable for
the fees and expenses set forth in clauses (B) and (C) of this
Section 20.2(c)(iii) that are incurred following the termination of the
Reinsurance Agreement.
ARTICLE XXI
GENERAL PROVISIONS
Section 21.1 Schedules and Exhibits. The Schedules and Exhibits to this
Agreement that are specifically referred to herein are a part of this Agreement
as if fully set forth herein. Promptly following the occurrence of a Change of
Control, the Administrator and the Company shall negotiate in good faith and
use commercially reasonable efforts to agree upon an amended and restated
Schedule A, which schedule shall contain a more detailed list of services
theretofore provided by the Administrator hereunder and any services otherwise
necessary or appropriate with respect to the Administered Business, including,
without limitation, services relating to policy administration, claims
handling, policyholders settlements and communications, administration of ceded
reinsurance, regulatory and financial reporting, Shared Separate Account
matters, regulatory and legal matters, actuarial matters, information
technology, treasury functions and Tax matters. Promptly upon such agreement
(as reflected in a writing signed by each of the Administrator and the
Company), such amended and restated schedule shall become Schedule A for all
purposes hereof.
36
Section 21.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally or by overnight courier (providing proof of delivery) to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):
(a)if to the Company:
Lincoln Benefit Life Company
Suite 300
Columbia Centre I
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
with copies (which shall not constitute notice) to:
Debevoise & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(b)if to the Administrator:
Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Email: ▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
with copies to:
Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Email: ▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
and
Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
with copies (which shall not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇
37
Notice given by personal delivery or overnight courier shall be effective upon
actual receipt.
Section 21.3 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. All
references herein to any agreement, instrument, statute, rule or regulation are
to the agreement, instrument, statute, rule or regulation as amended, modified,
supplemented or replaced from time to time (and, in the case of statutes,
includes any rules and regulations promulgated under said statutes) and to any
section of any statute, rule or regulation including any successor to said
section. The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Whenever the singular is used herein, the same
shall include the plural, and whenever the plural is used herein, the same
shall include the singular, where appropriate. Whenever the word "Dollars" or
the "$" sign appear in this Agreement, they shall be construed to mean United
States Dollars, and all transactions under this Agreement shall be in United
States Dollars. This Agreement has been fully negotiated by the Parties hereto
and shall not be construed by any Governmental Entity against either Party by
virtue of the fact that such Party was the drafting Party.
Section 21.4 Entire Agreement; Third Party Beneficiaries. This Agreement
(including all exhibits and schedules hereto) and the other Transaction
Agreements constitute the entire agreement, and supersede all prior agreements,
understandings, representations and warranties, both written and oral, among
the Parties with respect to the subject matter of this Agreement. Except as set
forth in Article XIX with respect to the Administrator Indemnified Parties and
the Company Indemnified Parties, this Agreement is not intended to confer upon
any Person other than the Parties hereto and their successors and permitted
assigns any rights or remedies.
Section 21.5 Governing Law. This Agreement and any dispute arising hereunder
shall be governed by, and construed in accordance with, the laws of the State
of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
Section 21.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise (other than by operation of law in a
merger), by either Party without the prior written consent of the other Party,
and any such assignment that is not consented to shall be null and void.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the Parties and their respective
successors and assigns.
Section 21.7 Jurisdiction; Enforcement.
(a) Each of the Parties hereto hereby irrevocably and unconditionally
submits to the exclusive jurisdiction of any court of the United States or any
state court, which in either case is located in the City and County of New York
(each, a "New York Court") for purposes of
38
enforcing this Agreement or determining any claim arising from or related to
the transactions contemplated by this Agreement. In any such action, suit or
other proceeding, each of the Parties hereto irrevocably and unconditionally
waives and agrees not to assert by way of motion, as a defense or otherwise any
claim that it is not subject to the jurisdiction of any such New York Court,
that such action, suit or other proceeding is not subject to the jurisdiction
of any such New York Court, that such action, suit or other proceeding is
brought in an inconvenient forum or that the venue of such action, suit or
other proceeding is improper; provided, that nothing set forth in this sentence
shall prohibit any of the Parties hereto from removing any matter from one New
York Court to another New York Court. Each of the Parties hereto also agrees
that any final and unappealable judgment against a Party hereto in connection
with any action, suit or other proceeding will be conclusive and binding on
such Party and that such award or judgment may be enforced in any court of
competent jurisdiction, either within or outside of the United States. A
certified or exemplified copy of such award or judgment will be conclusive
evidence of the fact and amount of such award or judgment. Any process or other
paper to be served in connection with any action or proceeding under this
Agreement shall, if delivered or sent in accordance with Section 21.2,
constitute good, proper and sufficient service thereof.
(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES
SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 21.7.
Section 21.8 Severability; Amendment; Modification; Waiver.
(a) Whenever possible, each provision or portion of any provision of
this Agreement will be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any Applicable Law in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement will be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(b) This Agreement may be amended or a provision hereof waived only by a
written instrument signed by each of the Administrator and the Company.
(c) No delay on the part of any Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any Party of any right, power or privilege, nor any single or
partial exercise of any such right, power
39
or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege.
Section 21.9 Specific Performance. The Parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that the Parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement or to enforce specifically
the performance of the terms and provisions hereof in any court of competent
jurisdiction, in addition to any other remedy to which they are entitled at law
or in equity. The Parties hereby waive, in any action for specific performance,
the defense of adequacy of a remedy at law and the posting of any bond or other
security in connection therewith.
Section 21.10 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the Parties and
delivered to the other Party. Each Party may deliver its signed counterpart of
this Agreement to the other Party by means of electronic mail or any other
electronic medium utilizing image scan technology, and such delivery will have
the same legal effect as hand delivery of an originally executed counterpart.
Section 21.11 Survival. Articles XVI, XIX, XX and XXI shall survive the
termination of this Agreement.
[Remainder of page intentionally left blank]
40
IN WITNESS WHEREOF, the Company and the Administrator have caused this
Agreement to be signed by their respective duly authorized officers, all as of
the date first written above.
LINCOLN BENEFIT LIFE COMPANY
By: ----------------------------------
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY
By: ----------------------------------
Name:
Title:
By: ----------------------------------
Name:
Title:
[Administrative Services Agreement]
SCHEDULE A
CERTAIN ADMINISTRATIVE SERVICES; SEPARATE ACCOUNT
ADMINISTRATIVE FEE
Separate Account
The Administrator will perform the following services in respect of the
Shared Separate Account, including the pricing and trading activities described
below for the Shared Separate Account assets. The Parties agree and acknowledge
that both the LBL Contracts and the Company Business are issued out of the
Shared Separate Account, however, the policy administration of the LBL
Contracts will be provided by the Administrator in accordance with this
Agreement, and the policy administration of the Company Business will be
retained by the Company on a separate administration system from that used by
the Administrator. Accordingly, the Parties agree to cooperate fully with each
other in all reasonable respects in order to ensure the proper administration
of the Shared Separate Account.
1. Nightly Pricing
Upon receipt of nightly prices from underlying mutual fund (the "Funds")
companies, Administrator shall calculate AUV prices for both the LBL
Contracts and the Company Business. Administrator will then forward AUV
prices to the Company or its designated agent by 8:00 p.m. (Central
Time) on each day that the New York Stock Exchange is open for business.
This process will remain in place to ensure the prices on the
administration systems in use by each of the Administrator and the
Company remain in alignment at all times. In the event that on any such
day Administrator does not receive a price or prices from one or more
Fund companies, or Administrator receives its pricing transmissions
after 8:00 p.m. (Central Time), Administrator will take commercially
reasonable steps to generate AUV prices for the LBL Contracts and the
Company Business and forward them to the Company or its designated agent
by 9:00 p.m. (Central Time) with the understanding that a re-pricing
will likely be necessary the following Business Day. This situation may
incur gain/loss for Administrator and/or the Company. In this case,
Administrator and the Company will work together to attempt to be made
whole by the Fund company in question. If collection efforts are
unsuccessful, the Administrator and the Company will each absorb the
gain/loss and any associated costs of correcting the problem in the same
proportion to the US dollar amount of the transactions related to their
respective blocks of business.
In the event Administrator calculates and/or provides an erroneous AUV
price to the Company or its designated agent as a result of an incorrect
or missing NAV price, dividend, and/or short or long-term capital gain
factor from a Fund company, Administrator shall have no financial
responsibility for the error. In this case, Administrator and the
Company will work together to attempt to be made whole by the Fund
company in question. If collection efforts are unsuccessful,
Administrator and the Company will each absorb the gain/loss and
Sch. A-1
any associated costs of correcting the problem in the same proportion to
the dollar amount of the transactions related to their respective blocks
of business.
In the event of a Fund re-pricing, Administrator will notify the Company
or its designated agent as soon as practicable, and will recalculate the
affected AUV price(s) and forward it/them to the Company or its
designated agent as soon as practicable. Administrator and the Company
will take the steps outlined above in an attempt to make themselves
whole for any gain/loss incurred due to the re-pricing.
Administrator shall review AUV prices, through system checks, manual
recalculations or comparison to NAV prices. Such review process shall be
mutually agreed by the Company and the Administrator.
2. Trading and Investing
(a)Allocating to the Shared Separate Account (i) premiums and loan
repayments received under the LBL Contracts and allocated to the Shared
Separate Account, and (ii) amounts transferred to the Shared Separate
Account from other options under LBL Contracts (including fixed
options), and forwarding such funds and other necessary and appropriate
information to the appropriate Funds for investment on behalf of the
Shared Separate Account or sub-accounts thereof, in each case in
accordance with the terms of the LBL Contracts, the current prospectus
and/or statement of additional information (as each may be amended from
time to time) for the relevant LBL Contracts, Applicable Law, and any
applicable agreement, including but not limited to any applicable fund
participation agreement, provided by the Company to Administrator.
(b)Administrator will be the primary "Trader" for the Shared Separate
Account. To accomplish this, the Administrator will consolidate daily
trades from its administration system with respect to the LBL Contracts
with trades received from the Company's or its designated agent's
administration system with respect to the Company Business as set forth
below, for consolidation and submission to the Fund companies every day
on which the New York Stock Exchange is open for business. The Company
must provide to the Administrator aggregate trades for the Company
Business by 5:00 a.m. (Central Time) on each trading day. In the event
Administrator does not receive the trades for the Company Business by
such time, Administrator shall have the right to submit trades with
respect to the LBL Contracts to the Fund companies without penalty. If
for any reason Administrator is unable to submit trades with respect to
the LBL Contracts to the Fund companies due to a delay by the Company or
its designated agent with respect to trades for the Company Business,
Administrator shall be entitled to collect compensation from the Company
(and the Company shall so indemnify and hold the Administrator harmless)
to cover any gain/loss and costs to correct the problem due to the
delayed trades.
Sch. A-2
Subject to the foregoing and receipt by Administrator from the Company
of timely balances in respect of the Company Business, Administrator
shall place trades with the Fund companies to keep the assets in the
Shared Separate Account in continual balance with the LBL Contracts and
the Company Business. Administrator shall be allowed to place trades
with respect to the LBL Contracts and the Company Business in any manner
it chooses, subject to acceptance by the Fund companies.
Administrator shall coordinate the daily wires between the Fund
companies and each of the Company's and the Administrator's bank
accounts to cover the trades with respect to the Company Business and
the LBL Contracts, respectively.
There may be cases where Administrator places a trade with the Fund
company in accordance with the terms of this Agreement but the Fund
company does not process the trade or processes it incorrectly. This
situation may incur gain/loss for Administrator and/or the Company. In
this case, Administrator and the Company will work together to attempt
to be made whole by the Fund company in question. If collection efforts
are unsuccessful, Administrator and the Company will each absorb the
gain/loss and any associated costs of correcting the problem in the same
proportion to the dollar amount of the transactions related to their
respective blocks of business.
(c)Processing of purchases and redemptions of Fund shares on behalf of the
Shared Separate Account in respect of the LBL Contracts and the Company
Business, and withdrawal of the proceeds from the Shared Separate
Account. The Administrator shall pay to (i) the Reinsurer policy charges
in accordance with the LBL Contracts, and (ii) the Company policy
charges in accordance with the Company Business.
(d)Coordinating with the Company in performing monthly reconciliation of
investment by Shared Separate Account in Funds and liability to holders
of LBL Contracts and Company Business to confirm that Shared Separate
Account net assets are sufficient to cover liabilities to policy
holders; if the assets of the Shared Separate Account are found to be
insufficient and shortfall relates to the LBL Contracts, the
Administrator will cause funding to be added to the Separate Account to
the extent so related in accordance with the Reinsurance Agreement;
otherwise, the Company will cause funding to be provided.
(e)Administrator shall prepare additional periodic fund reconciliations
(frequency and method to be determined by the Parties) for both the LBL
Contracts and the Company Business.
(f)Administrator will maintain the Company's cash settlement account and
coordinate a settlement process to support trading within the Shared
Separate Account.
Sch. A-3
(g)Administrator will coordinate with the Company's auditor to provide the
necessary information to audit the Shared Separate Account and prepare
information for financial statements.
3. Market Timing
(a)Provide information required by Rule 22c-2 upon request as required by
any existing agreements with Funds or as otherwise required by
Applicable Law ("Rule 22c-2 Requirements") with respect to the LBL
Contracts and the Company Business. Administrator shall act as the
primary facilitator for the Shared Separate Account as it relates to
market timing. From time to time Fund companies may make inquiries or
may request periodic reports available to them as outlined by SEC Rule
22c-2. Since the trades in respect of the Company Business will be
processed on a separate administration system from the trades in respect
of the LBL Contracts, the Parties shall cooperate fully with each other
in all reasonable respects in order to assist the Administrator in
satisfying all Rule 22c-2 Requirements.
After receipt of notice of a Rule 22c-2 Requirement, Administrator will
timely notify the Company of the need for certain information in respect
of the Company Business. This will include information relating to the
Fund and trading days in question. The Company shall timely provide the
requested information to Administrator in a pre-agreed upon format for
consolidation with Administrator's own trades in respect of the LBL
Contracts and submission to the Fund company.
The Company shall strive to provide to Administrator the requested trade
information with respect to the Company Business within 3 days of
receipt of a request from Administrator, and Administrator shall strive
to provide to the Fund companies the consolidated trade information with
respect to the LBL Contracts and the Company Business within 10 days of
receipt of the initial request from the Fund Companies.
Administrator shall be allowed to respond to the Fund companies in any
format it desires as long as said format is accepted by the Fund
companies.
4. Fund Changes
(a)Keeping the LBL Contracts in alignment with the Fund companies as it
relates to Fund changes, mergers and closures.
5. Recordkeeping
(a)Maintaining and preserving records with respect to the Administrative
Services that it performs for the Shared Separate Account as required by
Rules 31a-1 and 31a-2 under the 1940 Act, the Exchange Act and rules
promulgated by FINRA. The Administrator acknowledges and agrees that
such records as are required to be maintained by Rules 3la-1 and 31a-2
under the 1940 Act are the property of the Company and shall be
surrendered promptly upon the request of the Company; provided that
Administrator shall be entitled to keep a copy of such records.
Sch. A-4
6. 5% Holders
(a)Furnishing information regarding holders of the Company Business (to the
extent provided by the Company) and/or LBL Contracts (e.g., 5% holders)
to the Funds and other service providers to comply with Applicable Law.
For the avoidance of doubt, such 5% threshold applies to the LBL
Contracts and the Company Business, collectively.
7. Fund Company Proxy Voting
(a)As reasonably necessary or as otherwise required by Applicable Law,
cooperate with Fund companies and their agents in connection with
soliciting voting instructions from contractowners of the LBL Contracts
and the Company Business and vote Fund shares held in the Shared
Separate Account in accordance with the instructions received by
contractowners or as otherwise required by Applicable Law. Administrator
will coordinate with the Company to receive from the Company voting
instructions with respect to the Company Business for consolidation with
voting instructions of the LBL Contracts and submission to the Fund
companies. The Parties shall cooperate fully with each other in all
reasonable respects, and the Company shall timely provide to
Administrator such instructions with respect to the Company Business.
8. Revenue Sharing
(a)Administrator shall be responsible for calculating the revenue sharing
and 12b-1 payments owed to the Company from the Fund companies, split
the estimates into those related to the LBL Contracts and the Company
Business, prepare and communicate accruals to the Company, invoice Fund
companies (when necessary) and collect revenue sharing and 12b-1
payments, and forward the appropriate amount to the Company.
Administrator shall be allowed to continue to estimate revenue sharing
payments in a manner similar to how it is estimated on the date hereof.
In the event Administrator has used commercially reasonable efforts to
collect payments owed by the Fund companies but has been unsuccessful or
the revenue sharing / 12b-1 payment estimates overstate the actual
amount received, Administrator and the Company will jointly share in
such payment shortfall proportionally to the amount expected. For the
avoidance of doubt, the Company bears all collection risk on revenue
sharing and 12b-1 payments in respect of the Company Business.
Once payments are received by Administrator, Administrator will timely
communicate to the Company any difference between the actual payments
and the accruals so that the Company can "true-up" its accounting
records.
Sch. A-5
9. Participation Agreements and Fund Certifications
(a)Managing the Company's relationships with the Funds to the extent
applicable to the LBL Contracts, including the agreements with the Funds
and their affiliates and maintaining, entering into and/or facilitating,
on behalf of the Company, any necessary amendments to existing
agreements with the Funds and their affiliates, including amendments
necessary to effect changes in the Fund options for LBL Contracts and
the Shared Separate Account, as permitted by this Agreement.
(b)Act as the primary point of contact for the Fund companies as it
pertains to certifications and other miscellaneous forms. The Parties
shall cooperate fully with each other in all reasonable respects in
connection with the preparation of such certifications and other
miscellaneous forms. The Company shall timely provide to Administrator
such certifications and other miscellaneous forms with respect to the
Company Business in order that Administrator can prepare a consolidated
response with respect to the LBL Contracts and the Company Business.
10.Policy Administration (for the LBL Contracts)
(a)Maintaining the administrative systems utilized in connection with the
Administrative Services so as to reflect any change to the LBL Contracts.
(b)Processing and recording transfer requests from one subaccount to
another, or to or from a fixed account option to a subaccount, in all
cases in accordance with the relevant LBL Contracts and within such time
periods as are specified by Applicable Law.
(c)Calculating, when and as needed, the policy charges under the LBL
Contracts in accordance with the terms thereof and their respective
prospectuses and statements of additional information ("SAIs").
(d)Obtaining and distributing to holders of LBL Contracts copies of the
Funds' current summary prospectuses, or prospectuses, SAIs as requested
by the contract holder and any post effective amendments or supplements
thereto, annual and semi-annual reports to shareholders and other
disclosure documents and communications to Fund shareholders that are
required to be provided by the Company to owners of LBL Contracts.
(e)To the extent not otherwise covered in the Agreement or this Schedule A,
performing the Company's obligations and exercising the Company's
rights, in the name of and on behalf of the Company, under agreements
with underwriters, distributors and the Funds relating to the LBL
Contracts, in each case to the extent that the Company has provided
complete copies of such agreements (including any amendments thereto) to
the Administrator, in each case, to the extent consistent with
Applicable Law.
Sch. A-6
11.Regulatory Filings
(a)With respect to the Shared Separate Account, prepare for filing with
state insurance departments and the SEC any reports or registrations, or
amendments thereto required to be filed, including, as appropriate,
registration statements, annual updates of registration statement,
prospectuses and SAIs, interim supplement/sticker filings, Form N-SAR
and Form 24F-2, provided that the Company shall provide for inclusion in
such registrations and reports all information as the Administrator
shall reasonably request relating to the Company Business or the Company
as a whole, including without limitation audited financial statements
for the Company and the Shared Separate Account or information derived
therefrom.
(b)Upon reasonable prior notice by the Administrator to the Company, the
Administrator may cease preparing updates to, and the Company will cease
updating, registration statements, prospectuses and SAIs for the LBL
Contracts and the Shared Separate Account in reasonable reliance on the
SEC no-action letter dated October 23, 1990 issued to Great-West Life &
Annuity Insurance Company and any subsequent related no-action letters,
or the Administrator may begin preparing updates to, and the Company
will update, registration statements, prospectuses and SAIs for the LBL
Contracts or the Shared Separate Account that the Company has previously
stopped updating.
(c)Providing the Company and its independent auditors with any information
and documentation necessary or reasonably appropriate in connection with
the preparation and audit of the financial statements of the Shared
Separate Account or the Company for inclusion in SEC filings, including
registration statements for the LBL Contracts, or in reports filed with
state insurance regulatory authorities, with costs in relation thereto
allocated between the Company and the Administrator as mutually
determined by the Parties.
(d)Providing the Company with each registration statement prior to filing
so that the Company can review the filing and arrange for in-house or
outside counsel to provide the Legal Opinion Letter required as an
exhibit to such registration statement, and Company can cause the
appropriate filing to be made with the SEC.
12.Compliance Procedures
(a)During the term of this Agreement, for as long as the Company is
required to maintain a compliance program pursuant to Rule 38a-1 under
the 1940 Act with respect to the Shared Separate Account and the
Administrator continues to act as an "administrator" (as defined in the
Investment Company Act of 1940, as amended) with respect to the Shared
Separate Account, the Administrator will implement and, throughout the
term of this Agreement, maintain in effect, policies and procedures
reasonably designed to prevent, detect, and correct violations of
"federal securities laws" (as defined in Rule 38a-1) in the provision
Sch. A-7
of the Administrative Services by the Administrator and its employees,
officers, agents and Affiliates under this Agreement, and will designate
a compliance officer who will be responsible for Administrator's
compliance program under this provision, but who will not be the "chief
compliance officer", as that term is defined in Rule 38a-1, for the
Company's compliance program for the Shared Separate Account under Rule
38a-l. The Administrator will promptly provide true and complete copies
of such policies and procedures (or summaries thereof) and related
information required by Applicable Law upon reasonable request including
but not limited to, control reports, incident reports, exception
reports, compliance check-lists and internal audit reports. The
Administrator will cooperate with periodic reviews by the Company's
personnel of such policies and procedures, their operation and
implementation, including visual inspection of the Administrator's
facilities and processes, and provide such additional information,
quarterly reports, and annual certifications to the Company in respect
of such policies and procedures, compliance with federal securities laws
and related compliance matters as the Company may reasonably request.
The Administrator will promptly notify the Company in the event that it
becomes aware of any "material compliance matter" (as defined in Rule
38a-l) arising with respect to the Administrative Services provided
hereunder and will provide documentation with respect to pricing errors
quarterly. For the avoidance of doubt and notwithstanding anything
contained in this Agreement to the contrary, (i) the Administrator's
compliance program required herein will apply only to the LBL Contracts
and the Shared Separate Account (to the extent provided herein) and not
to the policy administration of the Company Business, which shall remain
the sole responsibility of the Company and (ii) the Company shall retain
responsibility for the Shared Separate Account's compliance program
under Rule 38a-1.
Additional Services
1. Information and Reports
a) Provide a general ledger data feed, within fifteen (15) Business Days of
the end of each calendar month, of all accounting transactions for the
Administered Business, including cash receipts, from the disbursement
systems, reinsurance systems, or any other system or data feed that
generates accounting transactions for the Administered Business, to the
Company's general ledger.
b) Assist with the preparation by the Company of the annual management
discussion and analysis, footnote disclosures, supplements, annual
statement market conduct survey, and other relevant filings with respect
to the Company's statutory financial statements, to the extent related
to the Administered Business.
c) Provide necessary information related to the Administered Business for
the Company to complete all required state filings, including the direct
business state pages. Information to be provided will include number of
policies, amounts for each of these categories, unpaid death benefits,
incurred amount, and settlements (payment in full, payment on
compromised claims, reduction by compromise,
Sch. A-8
amounts rejected). Administrator will also provide policy exhibit roll
forward information, including amounts issued during the year, and other
changes to in force and in force end of current year.
d) Assistance as reasonably required for annual Risk Based Capital
calculation by the Company to the extent related to the Administered
Business.
e) Provide supplemental accounting and actuarial information related to the
Administered Business as reasonably required for the Company to prepare
the Company's annual Form S-1, on a basis consistent with the
Administrator's GAAP assumptions and reserves. Information to be
provided in an appropriate format and time frame to enable the Company
to meet required US GAAP filing guidelines.
f) If the Company makes variable product changes that result in a
requirement to file an amendment to the Form S-1 related to the Covered
Insurance Policies requiring interim financial statements and
information, provide supplemental accounting and actuarial information
related to the Administered Business as reasonably required for the
Company to (i) prepare the Company's interim US GAAP Financial
Statements and Footnotes, and (ii) prepare the Company's amendment to
its annual Form S-1, in each case on a basis consistent with the
Administrator's GAAP assumptions and reserves, and in an appropriate
format and time frame to enable the Company to meet required US GAAP
filing guidelines.
g) Cooperate, as reasonably requested by the Company and its independent
auditors in their conduct of annual audits of the Company's Statutory
Financial Statements, and the Company's financial statements prepared
pursuant to GAAP to the extent related to the Administered Business,
including reasonable access to the books and records relating to the
performance of the Services by Administrator and other information
reasonably deemed relevant to the audit.
h) Support reasonable requirements for information relating to the
Administered Business in connection with rating agency surveys,
including: AM Best, S&P, ▇▇▇▇▇'▇ and Fitch.
i) Support reasonable requests in connection with the Company's preparation
of federal and state income, franchise, and excise tax accruals and
returns, to the extent related to the Administered Business. Support
reasonable requests by the Company in connection with its preparation of
the Company's annual 1099 and related tax reporting, reconciliation of
tax withholding accounts, filing of Form 945 and state withholding
returns, and withholding tax deposit requirements.
j) Providing the Company with information related to (i) the portion of the
Ceded Reinsurance Contracts that relate to the LBL Contracts unless and
until such Ceded Reinsurance Contracts (or such portions of such Ceded
Reinsurance Contract) are novated to the Administrator and (ii) the
Vermont Captive Ceded Reinsurance Agreement, to complete internal and
external reporting related to
Sch. A-9
reinsurance, including (to the extent available using commercially
reasonable efforts) (a) quarterly in-force files from any applicable
reinsurance administration system used by Administrator in respect of
the Covered Insurance Policies and (b) current data files used as inputs
in any applicable reinsurance administration system used by
Administrator with respect to the Covered Insurance Policies and output
from system cycle runs (Billing and Inforce) related to Covered
Insurance Policies.
k) In conjunction with the delivery of a general ledger feed as described
above, provide a balance control report ("Control Report") that
validates the general ledger feed as provided to the Company to the
Administrator's general ledger in sufficient detail that allows for
validation by the Company to properly compare amounts to the
Administrator's general ledger. The Administrator agrees that amounts
noted in the Control Report are reconciled to the support maintained by
the Administrator. In the event that amounts do not match the Company's
general ledger as a result of an error or omission by the Administrator,
the Administrator will be asked to provide an written explanation for
the variance.
2. Regulatory/Legal
a) Drafting of endorsements, amendments, contracts and other legal
documents, including rate and form filings with respect to the Covered
Insurance Policies.
b) Providing on a monthly basis a list of all reported and discovered
deaths of insureds under Covered Insurance Policies to enable the
Company to comply with state death claim sharing requirements.
c) Providing information to the Company related to the Covered Insurance
Policies upon request in order to allow the Company to timely comply
with state unclaimed property laws and submit escheat filings.
d) Preparing, signing and filing on the Company's behalf with insurance
regulatory authorities all applications and regulatory filings for
endorsements, amendments, contracts and other legal documents, including
rate and form filings, with respect to the Covered Insurance Policies.
e) Providing all reasonable and appropriate cooperation and assistance to
the Company in connection with its anti-money laundering (AML) and
Office of Foreign Assets Control (OFAC) Procedures to the extent related
to the Administered Business, as the same may be amended from time to
time by the Company to comply with applicable laws and regulations.
3. Actuarial
a) Providing guidance to the Company with respect to any material changes
in the reserve basis or reserve methodology for the Covered Insurance
Policies.
Sch. A-10
Separate Account Administrative Fee
As compensation for Administrator's performance hereunder of services in
respect of the Shared Separate Account for the first year after the Inception
Date, the Company shall pay to Administrator a monthly fee equal to $25,500.00
(the "Monthly Separate Account Administrative Fee").
As of January 1 of each subsequent year, the Administrator shall calculate the
aggregate annual expense of the Administrator and its Affiliates in connection
with administration of Variable Universal Life separate accounts in existence
at the Inception Date (the "Aggregate VUL Separate Accounts"). The
Administrator shall also calculate a percentage equal to the ratio of the
assets held in the Shared Separate Account in respect of the Company Business
to all assets held in the Aggregate VUL Separate Accounts, as of January 1 of
the applicable year. Subject to the succeeding paragraph, the Monthly Separate
Account Administrative Fee for such year shall be one twelfth (1/12) of such
percentage of such aggregate annual expense.
In the event that the services provided by the Administrator hereunder with
respect to the Shared Separate Account are modified, increased or reduced due
to changes in applicable Law or otherwise in accordance with the terms hereof,
including changes or additions to Fund options, the Monthly Separate Account
Administrative Fee shall be equitably increased or decreased, as applicable, to
reflect any additional or reduced costs borne by the Administrator in providing
such modified, reduced or additional services. Any costs associated with the
implementation of such modified, reduced or additional services, will be borne
by the requesting party. To the extent that such requested changes reduce the
overall administrative costs, the parties will negotiate in good faith on how
to share the reduction in such costs. Notwithstanding anything contained in
this Agreement to the contrary, the Administrator has the right to refuse
changes to its services provided hereunder that increase the Administrator's
operational risk, other than risk that is immaterial to the administration of
the Shared Separate Account.
Within fifteen (15) days following the end of each month during the term of
this Agreement, Administrator shall provide the Company with an invoice, which
shall set forth a calculation of the Monthly Separate Account Administrative
Fee for the prior month. Payment in full of the amounts so invoiced shall be
made by the Company by electronic transfer of immediately available funds or
other method satisfactory to Administrator within thirty (30) days after the
date of receipt of the monthly invoice.
Sch. A-11
SCHEDULE B
COMPANY RETAINED SERVICES
1. Nightly Pricing
(a)Reviewing and maintaining information received from Administrator and
accounting and reporting servicers on a timely basis with respect to the
Shared Separate Account and the Policies issued through the Shared
Separate Account (including LBL Contracts), including review and
maintenance of daily pricing reconciliations to ensure that AUV's are
accurate and that significant fluctuations are investigated and
documented.
2. Trading and Investing
(a)Allocating to the Shared Separate Account (i) premiums and loan
repayments received under the Company Business and allocated to the
Shared Separate Account, and (ii) amounts transferred to the Shared
Separate Account from other options under Company Business (including
fixed options), and (b) forwarding such funds and other necessary and
appropriate information to the Administrator for investment on behalf of
the Shared Separate Account or sub-accounts thereof, in each case in
accordance with the terms of this Agreement, the Company Business, the
current prospectus and/or statement of additional information (as each
may be amended from time to time) for the relevant Company Business,
Applicable Law, and any applicable agreement, including but not limited
to any applicable fund participation agreement.
(b)The Company shall provide Administrator all daily trades from its
administration system with respect to the Company Business in accordance
with Schedule A and provide to the Administrator aggregate trades for
the Company Business by 5:00 a.m. (Central Time) on each trading day.
The only exception to this would be if Administrator was unable to
provide the Company with the nightly AUV prices in accordance with the
standards set forth in Schedule A.
(c)Coordinating with the Administrator in performing monthly reconciliation
of investment by Shared Separate Account in Funds and liability to
holders of LBL Contracts and Company Business to confirm that Shared
Separate Account net assets are sufficient to cover liabilities to
policy holders; if the assets of a Shared Separate Account are found to
be insufficient and shortfall relates to the LBL Contracts,
Administrator will cause funding to be added to the Shared Separate
Account to the extent so related in accordance with the Reinsurance
Agreement; otherwise, the Company will cause funding to be provided.
Sch. B-1
3. Market Timing
(a)The Company will establish, or have its agent establish, procedures and
processes to identify and limit potential market timing activity within
the Company Business. These procedures will be subject to review by
Administrator and must meet a minimum standard of effectiveness as
reasonably determined by Administrator to limit potential market timing
activity.
(b)Upon receiving a market timing request from Administrator, the Company
will provide trade data relating the Fund(s) and trading days in
question in accordance with Schedule A. The Company will provide the
information to Administrator in a pre-agreed upon format for
consolidation with Administrator's own trades in respect of the LBL
Contracts and submission to the Fund company.
(c)The Company shall strive to provide to Administrator the requested trade
information with respect to the Company Business within 3 days of
receipt of a request from Administrator, and Administrator shall strive
to provide to the Fund companies the consolidated trade information with
respect to the LBL Contracts and the Company Business within 10 days of
receipt of the initial request from the Fund Companies.
4. Fund Changes
(a)Keeping the Company Business in alignment with the Fund companies as it
relates to Fund changes, mergers and closures.
(b)Responding to the Administrator's recommendations as to changes to Fund
options, as permitted pursuant to the terms of this Agreement.
5. Record Keeping
(a)Maintaining copies of any board resolution, plan of operations or other
document establishing the Shared Separate Account or sub-accounts
thereof and any by-laws or amendments thereto; preparing amendments
thereto or other necessary documentation, for consideration and approval
by the Administrator, with respect to changes to such documents relating
to the Administered Business, including without limitation changes
relating to changes in the Fund investment options in accordance with
this Agreement (other than changes to Fund options recommended by
Administrator pursuant to the terms of this Agreement).
6. 5% Holders
(a)Furnishing information regarding holders of Company Business (e.g., 5%
holders) to Administrator that is necessary for Administrator to report
to the Funds and other service providers to comply with Applicable Law.
The Parties shall cooperate fully with each other in all reasonable
respects in order to assist the Administrator in satisfying these
requirements. For the avoidance of doubt, such 5% threshold applies to
the LBL Contracts and the Company Business, collectively.
Sch. B-2
7. Fund Company Proxy Voting
(a)Once Administrator notifies the Company of a Fund proxy, cooperate with
Administrator and Fund companies and their agents in connection with
soliciting voting instructions from contractowners of the Company
Business in accordance with the instructions received by contractowners
or as otherwise required by Applicable Law. The Company shall organize a
data extraction from its or its agent's administration system to pull
the contractholder information in respect of the Company Business
necessary for Administrator to organize with its own contractholder
information in respect of the LBL Contracts to submit a consolidated
file to the Fund company. The Company shall provide the information
above to Administrator in a predetermined format no later than 2 days
after the record date.
8. Policy Administration
Except for the services explicitly provided in this Agreement to be
performed by Administrator with respect to the Shared Separate Account, the
Company will perform all policy administration with respect to the Company
Business, including,
(a)Maintaining the administrative systems utilized in connection with the
Company Business so as to reflect any change to the Company Business.
(b)Processing and recording transfer requests from one subaccount to
another, or to or from a fixed account option to a subaccount, in all
cases in accordance with the relevant Company Business and within such
time periods as are specified by Applicable Law.
(c)Calculating, when and as needed, the policy charges under the Company
Business in accordance with the terms thereof and their respective
prospectuses and SAIs.
(d)Obtaining and distributing to holders of Company Business copies of the
Funds' current summary prospectuses, or prospectuses, SAIs as requested
by the contract holder and any post effective amendments or supplements
thereto, annual and semi-annual reports to shareholders and other
disclosure documents and communications to Fund shareholders that are
required to be provided by the Company to owners of Company Business.
9. Regulatory Filings
(a)With respect to the Shared Separate Account, providing for inclusion in
registrations and reports prepared by Administrator pursuant to Schedule
A all information as the Administrator shall reasonably request relating
to the Company Business or the Company as a whole, including without
limitation audited financial statements for the Company and the Shared
Separate Account or information derived therefrom; signing and filing,
or authorizing the Administrator to file, such registrations and reports.
Sch. B-3
(b)Arranging for in-house or outside counsel to provide the Legal Opinion
Letter required as an exhibit to each registration statement or
amendment thereto with respect to an LBL Contract, Company Business or
Shared Separate Account.
(c)Provide access to, and maintain, all ▇▇▇▇▇ access codes, including CIK,
CCC and passwords.
(d)Maintain all licenses, permits and registrations of the Company, its
Affiliates and the Shared Separate Account necessary for the operation
of the Administered Business.
10.Compliance Procedures
(a)During the term of this Agreement, for as long as the Company is
required to maintain a compliance program pursuant to Rule 38a-1 under
the 1940 Act with respect to the Shared Separate Account, the Company
will implement and, throughout the term of this Agreement, maintain in
effect, policies and procedures reasonably designed to prevent, detect,
and correct violations of "federal securities laws" (as defined in Rule
38a-1) by the Shared Separate Account and by the Company and its
employees, officers, agents and Affiliates in connection with the Shared
Separate Account, and to provide for oversight of compliance by the
Shared Separate Account's service providers, including the
Administrator, and the Company will designate a chief compliance officer
who will be responsible for Company's compliance program under this
provision.
(b)Appoint and maintain a "chief compliance officer" (as defined in Rule
38a-1) and adopt compliance guidelines from time to time as required by
Rule 38a-1, and provide such compliance guidelines to the Administrator.
(c)Providing the Administrator with copies of all of its Rule 38a-1
policies and procedures with which it expects Administrator to comply in
connection with the provision of Administrative Services under this
Agreement.
(d)Advising the Administrator of any material compliance matter, as defined
in Rule 38a-1 under the 1940 Act, relating to the Company, the Shared
Separate Account or the Company Business issued through the Share
Separate Account.
Sch. B-4
SCHEDULE C
TRADEMARKS
Country ▇▇▇▇ Owner Classes Class Description Filing Date App. No. Reg. Date Reg. No.
------- -------------- ------------- ------- ----------------- ----------- ---------- --------- ---------
United States ACHIEVER LINCOLN 36 Life Insurance 4/5/1984 73/473,921 1/8/1985 1,313,879
BENEFIT LIFE Underwriting
COMPANY Services
United States BUILD, ENJOY & LINCOLN 36 Issuance and 9/4/2007 77/271,212 5/13/2008 3,426,490
SHARE BENEFIT LIFE administration
COMPANY of variable
annuities
United States CONSULTANT LINCOLN 36 Investment 8/9/2002 78/152,826 4/19/2005 2,942,884
ACCUMULATOR BENEFIT LIFE management,
COMPANY issuance and
administration
of annuities
United States CONSULTANT LINCOLN 36 Investment 8/9/2002 78/152,860 4/19/2005 2,942,885
PROTECTOR BENEFIT LIFE management,
COMPANY issuance and
administration
of annuities
United States DESIGNED FOR LINCOLN 36 Insurance 9/12/2007 77/277,408 5/20/2008 3,430,654
GROWTH. BENEFIT LIFE services,
DESTINED TO COMPANY namely,
PROVIDE. underwriting,
issuing and
administration
of life
insurance
Sch. C-1
Country ▇▇▇▇ Owner Classes Class Description Filing Date App. No. Reg. Date Reg. No.
------- ----------- ------------- ------- ----------------- ----------- ---------- ---------- ---------
United States DESIGNED LINCOLN 36 Insurance 9/12/2007 77/277,415 5/20/2008 3,430,656
TO PROTECT. BENEFIT LIFE services,
DESTINED COMPANY namely,
TO PROVIDE. underwriting,
issuing and
administration
of life
insurance
United States DIVERSIMAX LINCOLN 36 Financial 1/12/2009 77/647,493 11/24/2009 3,716,763
BENEFIT LIFE services related
COMPANY to retirement,
namely,
investing and
administering
the funds of
others,
investment
advisory
services, and
issuance and
administration
of annuities
United States ECHELON LINCOLN 36 Insurance 6/6/2007 77/199,311 7/22/2008 3,470,506
BENEFIT LIFE services,
COMPANY namely,
underwriting,
issuing and
administration
of life
insurance
United States ESTATE LINCOLN 36 Life insurance 2/18/1997 75/243,019 3/10/1998 2,142,503
EXECUTOR BENEFIT LIFE underwriting
COMPANY and
administration
services
Sch. C-2
Country ▇▇▇▇ Owner Classes Class Description Filing Date App. No. Reg. Date Reg. No.
------- ---------------- ------------- ------- ----------------- ----------- ---------- --------- ---------
United States GUARD AGAINST LINCOLN 36 Issuance and 9/24/2007 77/287,305 8/18/2009 3,670,018
THE EFFECTS OF BENEFIT LIFE administration
INFLATION. COMPANY of annuities
ADAPT TO YOUR
LIFE SITUATIONS.
United States LEGACY SECURE LINCOLN 36 Life 4/14/2005 78/608,980 8/1/2006 3,124,925
SL BENEFIT LIFE insurance
COMPANY underwriting
and
administration
services
United States LEGACY SECURE LINCOLN 36 Life 4/19/2005 78/611,497 4/11/2006 3,079,531
UL BENEFIT LIFE insurance
COMPANY underwriting
and
administration
services
United States LINCOLN BENEFIT LINCOLN 36 Life 10/9/2001 76/322,876 7/15/2008 3,464,853
LIFE BENEFIT LIFE insurance
COMPANY underwriting
and
administration
services;
Annuity
underwriting,
namely,
group and
individual
annuity
underwriting;
and long-term
care
insurance
United States REACH FURTHER. LINCOLN 36 Issuance and 9/4/2007 77/271,210 5/13/2008 3,426,489
PROTECT MORE. BENEFIT LIFE administration
CHART YOUR COMPANY of annuities
WAY.
Sch. C-3
Country ▇▇▇▇ Owner Classes Class Description Filing Date App. No. Reg. Date Reg. No.
------- -------------- ------------- ------- ----------------- ----------- ---------- --------- ---------
United States SAVER'S INDEX LINCOLN 36 Annuity 6/15/1995 74/690,007 1/14/1997 2,029,668
BENEFIT LIFE underwriting,
COMPANY namely group
and
individual
annuity
contractor
United States SELECTBALANCE LINCOLN 36 Investment 1/2/2008 77/362,369 5/26/2009 3,629,021
BENEFIT LIFE advisory
COMPANY services,
namely, asset
allocation in
the field of
life insurance
United States SELECTSTRATEGY LINCOLN 42 Providing a 1/24/2008 77/379,570 7/21/2009 3,658,911
BENEFIT LIFE life
COMPANY assessment
planning
tool, namely,
providing on-
line non-
downloadable
software for
use in
assessing life
insurance
plans and for
use in
planning for
life insurance
investment
United States SUREHORIZON LINCOLN 36 Issuance and 12/12/2003 78/340,065 9/4/2007 3,287,786
BENEFIT LIFE administration
COMPANY of fixed
annuities
United States TACTICIAN LINCOLN 36 Underwriting, 2/26/1990 74/032,694 1/8/1991 1,631,087
BENEFIT LIFE issuing and
COMPANY administering
annuities
Sch. C-4
Country ▇▇▇▇ Owner Classes Class Description Filing Date App. No. Reg. Date Reg. No.
------- ------------------ ------------- ------- ----------------- ----------- ---------- --------- ---------
United States TAKE THE INCOME. LINCOLN 36 Issuance 9/4/2007 77/271,204 5/13/2008 3,426,488
ENJOY THE OUTCOME. BENEFIT LIFE and
COMPANY administration
of annuities
United States THE INITIATOR LINCOLN 36 Group and 2/27/1997 75/248,900 3/10/1998 2,142,548
BENEFIT LIFE individual
COMPANY annuity
contract
underwriting
services
United States TOTALACCUMULATOR LINCOLN 36 Insurance 12/14/2007 77/352,218 4/14/2009 3,607,018
BENEFIT LIFE services,
COMPANY namely,
underwriting,
issuing and
administration
of life
insurance
United States ULTRA INDEX LINCOLN 36 Life 2/7/2007 77/101,801 1/15/2008 3,370,085
BENEFIT LIFE insurance
COMPANY underwriting
services
and
providing
ancillary
services
thereto,
namely,
administration
and claims
adjustment
Sch. C-5