EXHIBIT 10.16
USI MARKETING SUPPORT AGREEMENT FOR VOLUNTARY BENEFITS
("AGREEMENT")
This Agreement is entered into as of May 16, 2000, by and between
UnumProvident Corporation, a Delaware corporation located at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Unum") and USI Insurance Services Corp.,
a Delaware corporation located at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ("USI").
W I T N E S S E T H
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WHEREAS, USI wants Unum to pay USI Marketing Service Fees ("MSF") in the
sum of Three Hundred Thirty-Three Thousand Dollars and No Cents ($333,000.00)
("Principal Sum") to be used for the following purpose: Marketing, through its
network of retail insurance brokerage and administrative service companies, Unum
or its subsidiaries' Voluntary Benefits ("VB") products.
WHEREAS, Unum is willing to pay USI the Principal Sum for such purpose with
the understanding that the Principal Sum, or a portion thereof, remains subject
to reimbursement pursuant to the terms and conditions contained herein.
NOW THEREFORE, it is understood and agreed as follows:
l. Marketing Fee Service Advances. Subject to the terms and conditions
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contained herein, Unum shall pay USI the Principal Sum as follows: Sixty-One
Thousand Dollars and No Cents ($61,000.00) on upon execution of this Agreement,
Sixty-One Thousand Dollars and No Cents ($61,000.00) on Monday, July 3, 2000,
Sixty-One Thousand Dollars and No Cents ($61,000.00) on Monday, October 2, 2000,
and when combined with the payment represented by the forgiveness of the Custom
Benefit Programs, Inc. (a Wholly-Owned Subsidiary of USI) Note ( "CBP Note")
executed on October 4, 1999 in the amount of One Hundred Fifty Thousand
Dollars and No Cents ($150,000.00) shall equal the Principal Sum. Unum agrees
that the CBP Note is forgiven upon the execution of this Agreement.
2. Potential Fee Reimbursement. On May 1, 2003 (the "Determination Date")
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Unum shall determine how much of the Principal Sum advanced shall have been
earned by USI pursuant to the following criteria:
a. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Twenty Million Dollars and No
Cents ($20,000,000.00) and there is a 75% or greater persistency level from
January l, 2000 to January 1, 2003, then the Principal Sum is not subject
to reimbursement
b. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Twenty Million Dollars and No
Cents ($20,000,000.00) and there is a less than 75% Persistency level from
January 1, 2000 to January l, 2003, then Two Hundred Ninety-One Thousand
Three Hundred Seventy-Five Dollars and No Cents ($291,375.00) of the
Principal Sum is not subject to reimbursement leaving Forty-One Thousand
Six Hundred Twenty-Five Dollars and No Cents ($41,625.00) in Principal Sum
due and payable to Unum, which shall accrue interest from May 1, 2003.
c. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Eighteen Million Dollars and
No Cents ($18,000,000.00) or greater but less than Twenty Million Dollars
and No Cents ($20,000,000.00) and there is a 75% or greater Persistency
level from January 1, 2000 to January 1, 2003, then Two
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Hundred Ninety-One Thousand Three Hundred Seventy-Five Dollars and No Cents
($291,375.00) of the Principal Sum is not subject to reimbursement leaving
Forty-One Thousand Six Hundred Twenty-Five Dollars and No Cents
($41,625.00) in Principal Sum due and payable to Unum, which shall accrue
interest from May 1, 2003.
d. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Eighteen Million Dollars and
No Cents ($18,000,000.00) or greater but less than Twenty Million Dollars
and No Cents ($20,000,000.00) and there is a less than 75% Persistency
level from January 1, 2000 to January 1, 2003, then Two Hundred Forty-Nine
Thousand Seven Hundred Fifty Dollars and No Cents ($249,750.00) of the
Principal Sum is not subject to reimbursement leaving Eighty-Three Thousand
Two Hundred Fifty Dollars and No Cents ($83,250.00) in Principal Sum due
and payable to Unum, which shall accrue interest from May 1, 2003.
e. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Sixteen Million Dollars and No
Cents ($16,000,000.00) or greater but less than Eighteen Million Dollars
and No Cents ($18,000,000.00) and there is a 75% or greater Persistency
level from January 1, 2000 to January 1, 2003, then Two Hundred Forty-Nine
Thousand Seven Hundred Fifty Dollars and No Cents ($249,750.00) of the
Principal Sum is not subject to reimbursement leaving Eighty-Three Thousand
Two Hundred Fifty Dollars and No Cents ($83,250.00) in Principal Sum due
and payable to Unum, which shall accrue interest from May 1, 2003.
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f. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Sixteen Million Dollars and No
Cents ($16,000,000.00) or greater but less than Eighteen Million Dollars
and No Cents ($18,000,000.00) and there is a less than 75% Persistency
level from January 1, 2000 to January 1, 2003, then One Hundred Sixty-Six
Thousand Five Hundred Dollars and No Cents ($166,500.00) of the Principal
Sum is not subject to reimbursement leaving One Hundred Sixty-Six Thousand
Five Hundred Dollars and No Cents ($166,500.00) in Principal Sum due and
payable to Unum, which shall accrue interest from May 1, 2003.
g. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total Fifteen Million Nine Hundred
Ninety-Nine Thousand Nine Hundred Ninety-Nine Dollars and Ninety-Nine Cents
($15,999,999.99) or less and there is a 75% or greater Persistency level
from January 1, 2000 to January l, 2003, then Eighty-Three Thousand Two
Hundred Fifty Dollars and No Cents ($83,250.00) of the Principal Sum is not
subject to reimbursement leaving Two Hundred Forty-Nine Thousand Seven
Hundred Fifty Dollars and No Cents ($249,750.00) in Principal Sum due and
payable to Unum, which shall accrue interest from May 1, 2003.
h. In the event that the New Premium from VB products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Fifteen Million Nine Hundred
Ninety-Nine Thousand Nine Hundred Ninety-Nine Dollars and Ninety-Nine Cents
($15,999,999.99) and there is a less than 75% Persistency level from
January 1, 2000 to January 1, 2003, then all NO
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principal shall be reimbursable leaving Three Hundred Thirty-Three Thousand
Dollars and No Cents ($333,000.00) in principal due and payable to Unum,
which shall accrue interest from May 1, 2003.
i. New Premium shall mean annualized premiums based on VB applications
received in the Home Office for Unum sold by or enrolled by USI or business
sold with the assistance of USI and designated by Unum as a New Premium
Case in the separate time frames listed above and shall only include
premium for policies on which at least one modal premium is collected and
shall only be for the following products: PS1000, PS2000, PS Enhancer and
Cancer Assistance or any new products introduced by the Voluntary Benefits
area.
j. Persistency is defined as a fraction, the denominator of which is
"Beginning Inforce", as defined herein, and the numerator of which is "Year
End Inforce", as defined herein. The resulting fraction shall be expressed
as a percentage, rounded to the nearest hundredth of a percent.
k. Beginning In-Force shall mean the total individual VB policies
issued and paid for during the first two years of the agreement, and on
which a USI representative is the designated "Broker-of-Record", as defined
herein.
l. Year End In-Force shall mean total individual VB policies issued
and paid for during the first two years of the agreement and remaining
inforce 12 months after their issue date.
m. Broker-of-Record shall mean the broker designated by the
policyholder or contract holder and recognized by Unum as entitled to
receive commissions or service fees on a policy or contract to which this
program applies.
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3. Reimbursable Principal Sum.
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a. In the event that on or before May l, 2003 USI has not produced
sufficient New Premium amounts, the difference between the amounts earned
hereunder and the Principal Sum shall become due and payable on May 1, 2005
with interest thereon commencing on May 1, 2003, payable in monthly
installments of principal and interest to be set on May l, 2003 at a rate
per annum of 2% over the rate of interest publicly announced by SunTrust
Bank, Chattanooga, N.A. or its successor, from time to time in Chattanooga,
Tennessee as its "Base" or "Prime" rate, with payments due on the first
business day of each month thereafter in an amount calculated to fully
amortize the outstanding principal balance over a twenty-four (24) month
period.
b. In the event any monthly payment due and payable herein shall
become overdue for a period in excess of ten (10) days, a charge of 4% of
such overdue payment may be charged by Unum for the purpose of defraying
the expense incident to handling such overdue payment. This provision shall
not be deemed to excuse a late payment or be deemed a waiver of any other
rights Unum may have including the right to declare the entire unpaid
principal and interest due and payable.
4. Additional Marketing Service Fee Payable.
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a. In the event that New Premium production equals or exceeds Twenty
Million Dollars and No Cents ($20,000,000.00) and New Premium from the sale
of Group products generated under the USI Marketing Support Agreement for
Group Products between Unum and USI dated May 16, 2000 ("USI Group
Agreement") (a copy of which is attached hereto as Exhibit "A") equals or
exceeds Forty Million Dollars and
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No Cents ($40,000,000.00) on January 1, 2003, Unum will give USI an
additional MSF of Twelve Thousand Five Hundred Dollars and No Cents
($12,500.00).
b. In the event that New Premium production hereunder and under the
USI Group Agreement equals Sixty-Five Million Dollars and No Cents
($65,000,000.00), but is less than Seventy Million Dollars and No Cents
($70,000,000.00), Unum will give USI an additional MSF of Twenty-Five
Thousand Dollars and No Cents ($25,000.00) on January 1, 2003 if the New
Premium production amounts hereunder equal at least Twenty Million Dollars
and No Cents ($20,000,000.00) and the New Premium generated under the USI
Group Agreement equal at least Forty Million Dollars and No Cents
($40,000,000.00).
c. In the event that New Premium production hereunder and under the
USI Group Agreement equals Seventy Million Dollars and No Cents
($70,000,000.00), but is less than Seventy-Five Million Dollars and No
Cents ($75,000,000.00), Unum will give USI an additional MSF of
Thirty-Seven Thousand Five Hundred Dollars and No Cents ($37,500.00) on
January 1, 2003 if the New Premium production amounts hereunder equal at
least Twenty Million Dollars and No Cents ($20,000,000.00) and the New
Premium amounts under the USI Group Agreement equal at least Forty Million
Dollars and No Cents ($40,000,000.00).
d. In the event that New Premium production hereunder and under the
USI Group Agreement equals Seventy-Five Million Dollars and No Cents
($75,000,000.00) or greater, Unum will give USI an additional MSF of Fifty
Thousand Dollars and No Cents ($50,000.00) on January 1, 2003 if the New
Premium production amounts hereunder equal at least Twenty Million Dollars
and No Cents ($20,000,000.00) and the New
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Premium amounts under the USI Group Agreement equal at least Forty Million
Dollars and No Cents ($40,000,000.00).
It is understood between Unum and USI that the payments described
above shall be a one time additional MSF payment based on the final results as
of January 1, 2003 and there shall be no aggregation from the first level of
payment to the last level.
5. Conditions Precedent. Prior to closing, Unum shall have received from
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USI's Senior Vice President and General Counsel, in form and content acceptable
to Unum, the following:
a. an internal memorandum confirming USI's good standing; and
b. an internal memorandum confirming that the Agreement is valid and
enforceable against USI according to its terms.
6. Methods of Payment. Payments of principal and interest shall be payable
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in lawful money of the United State of America and shall be delivered to
UnumProvident Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Vice President, National Marketing Organization, or
such other location as Unum may designate from time to time.
7. Prepayment. USI shall have the right to prepay the reimbursable amount
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in whole or in part, without penalty, plus accrued interest, at any time before
May 1, 2005. All such prepayments will be applied upon installments of most
remote maturity.
8.Representations. USI hereby warrants and represents to Unum that:
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a. All necessary administrative and governmental approvals, if any,
have been obtained regarding the transaction for which USI will use the
proceeds of the payment hereunder.
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b. The execution, delivery and performance by USI of this Agreement,
has been duly authorized by the necessary and appropriate parties and are
within the corporate power of USI, and this Agreement is enforceable in
accordance with its terms and will not result in a breach of any term or
condition of USI's charter or by-laws or any indenture, mortgage, deed of
trust, loan agreement or any other agreement to which USI is a party.
c. USI's network of retail insurance brokerage companies are
fully-licensed agencies under the laws of the state in which they are
located and are corporations duly organized and validly existing under
those laws.
d. There are no proceedings, litigations, or investigations pending,
or to the knowledge of USI threatened, against or affecting USI in or
before any court, governmental authority, agency, arbitration board or
tribunal that individually or in the aggregate involve the reasonable
possibility of materially and adversely affecting the condition (financial
or otherwise) of USI or the ability of USI to perform this Agreement.
e. There has been no change in the business prospects, profits,
property or condition (financial or otherwise) of USI in the last six
months, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
f. Financial statements were supplied to Unum by USI. USI understands
that Unum has relied on such financial statements in making the advance
hereunder, and such financial statements contain no material errors or
omissions and correctly state the financial position of USI.
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9. Covenants. USI covenants that so long as the Principal Sum and any
---------
interest thereon is subject to reimbursement :
a. USI shall furnish such financial information as, from time to time,
Unum may request, including, but not limited to, certified financial
statements on an annual basis.
b. USI shall continue to be contracted with Unum to write the types of
insurance for which it is presently contracted with Unum, subject to Unum's
right to terminate any or all of the agency agreement(s) between USI and
Unum or any of its affiliated companies, as provided in those agreements,
at any time during the term of this Agreement. In the event of a
termination of any agency agreement, USI and Unum agree that such
terminated agency's production and persistency level for the prior periods
will be credited through the Determination Date for the purpose of
determining any reimbursable amount due to Unum under this Agreement.
c. USI shall comply in all material aspects with the provisions of
ERISA.
d. USI shall not change its legal name or operate or do business
under, as, or in any name other than the name represented in this Agreement
without prior written notice to Unum.
10. Events of Default. Upon the occurrence of any of the following events
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("Events of Default"), and notwithstanding Unum's previous knowledge thereof,
the principal unpaid balance of the Principal Sum, together with the interest
thereon, shall become due and payable on
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demand of Unum without presentation, demand for payment, notice of dishonor,
protest or notice of protest of any kind, all of which are hereby expressly
waived by USI:
a. Any default by USI in the payment, when due, of any part of the
principal of or interest on the Principal Sum.
b. Any warranty or representation by USI contained in this Agreement
or in any instrument furnished in compliance with this Agreement is false
or incorrect in any material respect.
c. USI fails to perform or observe any covenant contained in this
Agreement.
d. USI fails to comply with any other provision of this Agreement and
such failure continues for more than thirty (30) days after USI has
knowledge or notice of such failure.
e. USI shall (i) become insolvent or bankrupt, or cease, be unable, or
admit in writing its inability to pay its debts as they mature, or make a
general assignment for the benefit of, or enter into any composition or
arrangement with, creditors; (ii) apply for, or consent (by admission of
material allegations of a petition or otherwise) to the appointment of a
custodian, receiver, trustee or liquidator of it or of a substantial part
of its assets, or authorize such application or consent; (iii) permit or
suffer proceedings seeking such appointment to be commenced against it
without such authorization, consent or application; (iv) authorize or file
a voluntary petition in bankruptcy or apply for or consent (by admission of
material allegations of a petition or otherwise) to the application of any
bankruptcy, reorganization, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorize such
application or consent; (v) permit or suffer proceedings to such end to be
instituted
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against it without such authorization, application or consent; or (vi)
permit or suffer all or any substantial part of its property to be
sequestered or attached by court order.
f. Any attachment, seizure, garnishment, or levy with respect to any
property of USI by any creditor.
g. USI's failure to remit payables consisting of collected insurance
premiums to Unum or any of its affiliates in accordance with each such
company's requirements.
h. Any failure by USI to hold collected insurance premiums in trust
for Unum or any of its affiliates in accordance with each such company's
requirements.
11. Remedies. Upon the occurrence of an Event of Default, and
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notwithstanding Unum's previous knowledge thereof, Unum and any of its
affiliates may without notice to USI:
a. Take any action to enforce payment of the Principal Sum or
performance of any of the covenants contained in this Agreement.
b. Withhold and apply to amounts due Unum hereunder:
(1) Insurance commissions due USI; and
(2) Sums due USI earned through any excess commission or
marketing support programs.
c. USI will pay to Unum such amount as shall be sufficient to cover
the cost and expense of collection, including, without limitation,
reasonable attorneys' fees, expenses and disbursements, and any
out-of-pocket costs and expenses of Unum incurred in connection with
analyzing, evaluating, protecting, ascertaining, defending or enforcing any
of its rights as set fourth herein.
12. Waiver. Neither the failure nor any delay on the part of USI or Unum to
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exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or
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partial exercise of any such right, power or privilege preclude any other or
further exercise thereof, or the exercise of any other right, power or
privilege.
13. Benefits. This Agreement shall be binding upon and inure to the benefit
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of USI and Unum, and their respective successors and assigns, and any
subsidiaries or affiliates of either, whether now or hereafter formed.
14. Construction. This Agreement shall be governed by and construed in
------------
accordance with the laws of the State of Tennessee. In the event any portion of
this Agreement shall be unenforceable under the laws of the State of Tennessee,
the remaining portion of this Agreement shall remain in effect.
15. Notices. Any notices or communications required to be given hereunder
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shall be in writing and sent postage prepaid, certified mail - return receipt
requested - to the other part at the address on the first page of this Agreement
or as designated by USI or Unum. Such notices shall be deemed delivered when
sent. Each such notice shall be marked to the attention of "Vice President,
National Marketing Organization" if to Unum and "President" if to USI.
16. Rating, Underwriting and Marketing Practices. This Agreement and any
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other documents related thereto ("these Agreements") are not contingent upon
Unum's rating, underwriting or marketing practices. These Agreements do not
expressly or impliedly obligate Unum to accept insurance business from USI that
does not comply with Unum's rating, underwriting or marketing practices as they
may exist and change from time to time during the term of these Agreements. USI
agrees that changes in rating, underwriting or marketing practices may be made
within Unum's sole discretion and that such changes shall not impair or in any
way affect USI's obligations under these Agreements. USI also agrees that Unum
may terminate any or all of the agency agreements between USI and Unum, or any
of its affiliated companies, as
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provided in said agreements, at any time during the term of these Agreements and
that such termination will not impair or in any way affect USI's obligations
under this Agreement.
17. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties relating to the matters contained herein and supersedes all
previous communications, representations or agreements, either oral or written,
with respect to the subject matter hereof. Any modification to this Agreement
must be in writing and signed by authorized officers of both parties.
18. Headings. The section headings herein are included for convenience only
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and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of May 16,
2000.
UNUMPROVIDENT CORPORATION USI INSURANCE SERVICES CORP.
("Unum") ("USI")
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------- ------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇ Name: Illegible
Title: National Marketing Organization Title: President and COO
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EXHIBIT A
USI MARKETING SUPPORT AGREEMENT FOR GROUP PRODUCTS
("AGREEMENT")
This Agreement is entered into as of May 16, 2000, by and between
UnumProvident Corporation, a Delaware corporation located at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Unum") and USI Insurance Services Corp.,
a Delaware corporation located at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ("USI").
W I T N E S S E T H
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WHEREAS, USI wants Unum to pay USI Marketing Service Fees ("MSF") in the
sum of Six Hundred Sixty-Seven Thousand Dollars and No Cents ($667,000.00)
("Principal Sum") to be used for the following purpose: Marketing, through its
network of retail insurance brokerage and administrative service companies, Unum
or its subsidiaries' Group products.
WHEREAS, Unum is willing to pay USI the Principal Sum for such purpose with
the understanding that the Principal Sum, or a portion thereof, remains subject
to reimbursement pursuant to the terms and conditions contained herein.
NOW THEREFORE, it is understood and agreed as follows:
1. Marketing Fee Service Payment. Subject to the terms and conditions
-----------------------------
contained herein, Unum shall pay USI the Principal Sum as follows: Two Hundred
Twenty-Three Thousand Dollars and No Cents ($223,000.00) upon execution of this
Agreement and thereafter Two Hundred Twenty-Two Thousand Dollars and No Cents
($222,000.00) on Monday, July 3, 2000 and Two Hundred Twenty-Two Thousand
Dollars and No Cents ($222.000.00) on Monday, October 2, 2000.
2. Potential Fee Reimbursement. On May 1, 2003 (the "Determination Date")
---------------------------
Unum shall determine how much, if any, of the Principal Sum paid to USI is
subject to reimbursement pursuant to the following criteria:
a. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Forty Million Dollars and No
Cents ($40,000,000.00) and there is a 90% or greater persistency level from
January 1, 2000 to January 1, 2003, then the Principal Sum is not subject
to reimbursement.
b. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Forty Million Dollars and No
Cents ($40,000,000.00) and there is a less than 90% Persistency level from
January 1, 2000 to January l, 2003, then Five Hundred Eighty-Three Thousand
Six Hundred Twenty-Five Dollars and No Cents ($583,625.00) of the Principal
Sum is not subject to reimbursement leaving Eighty-Three Thousand Three
Hundred Seventy-Five Dollars and No Cents ($83,375.00) in Principal Sum due
and payable to Unum, which shall accrue interest from May 1, 2003.
c. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Thirty-Six Million Dollars and
No Cents ($36,000,000.00) or greater but less than Forty Million Dollars
and No Cents ($40,000,000.00) and there is a 90% or greater Persistency
level from January 1, 2000 to January 1, 2003, then Five Hundred
Eighty-Three Thousand Six Hundred Twenty-Five
2
Dollars and No Cents ($583,625.00) of the Principal Sum shall not be
subject to reimbursement leaving Eighty-Three Thousand Three Hundred
Seventy-Five Dollars and No Cents ($83,375.00) in Principal Sum due and
payable to Unum, which shall accrue interest from May 1, 2003.
d. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Thirty-Six Million Dollars and
No Cents ($36,000,000.00) or greater but less than Forty Million Dollars
and No Cents ($40,000,000.00) and there is a less than 90% Persistency
level from January l, 2000 to January 1, 2003, then Five Hundred Thousand
Two Hundred Fifty Dollars and No Cents ($500,250.00) of the Principal Sum
shall not be subject to reimbursement leaving One Hundred Sixty-Six
Thousand Seven Hundred Fifty Dollars and No Cents ($166,750.00) in
Principal Sum due and payable to Unum, which shall accrue interest from May
1, 2003.
e. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Thirty-Two Million Dollars and
No Cents ($32,000,000.00) or greater but less than Thirty-Six Million
Dollars and No Cents ($36,000,000.00) and there is a 90% or greater
Persistency level from January l, 2000 to January 1, 2003, then Five
Hundred Thousand Two Hundred Fifty Dollars and No Cents ($500,250.00) of
the Principal Sum shall not be subject to reimbursement leaving One Hundred
Sixty-Six Thousand Seven Hundred Fifty Dollars and No Cents ($166,750.00)
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in Principal Sum due and payable to Unum, which shall accrue interest from
May 1, 2003.
f. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total at least Thirty-Two Million Dollars and
No Cents ($32,000,000.00) or greater but less than Thirty-Six Million
Dollars and No Cents ($36,000,000.00) and there is less than a 90%
Persistency level from January 1, 2000 to January 1, 2003, then Three
Hundred Thirty-Three Thousand Five Hundred Dollars and No Cents
($333,500.00) of the Principal Sum shall not be subject to reimbursement
leaving Three Hundred Thirty-Three Thousand Five Hundred Dollars and No
Cents ($333,500.00) in Principal Sum due and payable to Unum, which shall
accrue interest from May l, 2003.
g. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a New Premium Case total Thirty-One Million Nine Hundred
Ninety-Nine Thousand Nine Hundred Ninety-Nine Dollars and Ninety-Nine Cents
($31,999,999.99) or less and there is a 90% or greater Persistency level
from January l, 2000 to January l, 2003, then One Hundred Sixty-Six
Thousand Seven Hundred Fifty Dollars and No Cents ($166,750.00) of the
Principal Sum shall not be subject to reimbursement leaving Five Hundred
Thousand Two Hundred Fifty Dollars and No Cents ($500,250.00) in Principal
Sum due and payable to Unum, which shall accrue interest from May 1, 2003.
h. In the event that the New Premium from Group products sold by or
enrolled by USI or business sold with the assistance of USI and designated
by Unum as a
4
New Premium Case total Thirty-One Million Nine Hundred Ninety-Nine Thousand
Nine Hundred Ninety-Nine Dollars and Ninety-Nine Cents ($31,999,999.99) or
less and there is a less than 90% Persistency level from January 1, 2000 to
January 1, 2003, then NO principal shall not be subject to reimbursement
leaving Six Hundred Sixty-Seven Thousand Dollars and No Cents ($667,000.00)
in principal due and payable to Unum, which shall accrue interest from May
1, 2003.
i. New Premium shall mean annualized premiums based on new group
business submitted and received by UNUM in the Home Office, sold by USI
producers and designated by UNUM as a New Premium Case, in the time frames
listed above and shall only be for the following products: UNUM Group Basic
Accidental Death & Dismemberment, UNUM Group Life, UNUM Group Long Term
Care, UNUM Long Term Income Protection, UNUM Short Term Income Protection,
UNUM Short Term Disability - New York, UNUM Group Travel, UNUM Group
Universal Life, UNUM Voluntary Group Accidental Death & Dismemberment - New
York, or any new products introduced by the group benefits area.
j. Persistency is defined as a fraction, the denominator of which is
"Beginning In-force," as defined herein, and the numerator of which is
"Year End Inforce," as defined herein. The resulting fraction shall be
express as a percentage, rounded to the nearest hundredth of a percent.
k. Beginning In-force shall mean the aggregate annualized product
premium from cases that are in force on January 1 of the calendar
production year, and on which a USI representative is the designated
"Broker-of-Record," as defined herein.
5
l. Year End In-Force shall mean "Beginning In-Force" minus the
aggregate annualized product premium which is lost from Beginning In-Force
during calendar year production year due to termination, cancellation, or
other discontinuance of insurance, and excluding any new product premium
produced in such calendar production year.
m. Broker-of-Record shall mean the broker designated by the
policyholder or contract holder and recognized by UNUM as entitled to
receive commissions or service fees on a policy or contract to which this
program applies.
3. Reimbursable Principal Sum.
--------------------------
a. In the event that on or before May 1, 2003 USI has not produced
sufficient New Premium amounts, the difference between the amounts not
subject to reimbursement hereunder and the Principal Sum shall become due
and payable on May 1, 2005 with interest thereon commencing on May 1, 2003
and payable in monthly installments of principal and interest to be set on
May 1, 2003 at a rate per annum of 2% over the rate of interest publicly
announced by SunTrust Bank, Chattanooga, N.A. or its successor, from time
to time in Chattanooga, Tennessee as its "Base" or "Prime" rate, with
payments due on the first business day of each month thereafter in an
amount calculated to fully amortize the outstanding principal balance over
a twenty-four (24) month period.
b. In the event any monthly payment due and payable herein shall
become overdue for a period in excess of ten (10) days, a charge of 4% of
such overdue payment may be charged by Unum for the purpose of defraying
the expense incident to handling such overdue payment. This provision
6
shall not be deemed to excuse a late payment or be deemed a waiver of any
other rights Unum may have including the right to declare the entire unpaid
principal and interest due and payable.
4. Conditions Precedent. Prior to closing, Unum shall have received from
--------------------
USI's Senior Vice President and General Counsel, in form and content acceptable
to Unum, the following:
a. an internal memorandum confirming USI's good standing; and
b. an internal memorandum confirming that the Agreement is valid and
enforceable again USI according to its terms.
5. Methods of Payment. Payments of principal and interest shall be payable
------------------
in lawful money of the United State of America and shall be delivered to
UnumProvident Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Vice President, National Marketing Organization, or
such other location as Unum may designate from time to time.
6. Prepayment. USI shall have the right to prepay the reimbursable amount
----------
in whole or in part, without penalty, plus accrued interest, at any time before
May 1, 2005. All such prepayments will be applied upon installments of most
remote maturity.
7. Representations. USI hereby warrants and represents to Unum that:
---------------
a. All necessary administrative and governmental approvals, if any,
have been obtained regarding the transaction for which USI will use the
proceeds of the payment hereunder.
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b. The execution, delivery and performance by USI of this Agreement,
has been duly authorized by the necessary and appropriate parties and are
within the corporate power of USI, and this Agreement is enforceable in
accordance with its terms and will not result in a breach of any term or
condition of USI's charter or by-laws or any indenture, mortgage, deed of
trust, loan agreement or any other agreement to which USI is a party.
c. USI's network of retail insurance brokerage companies are
fully-licensed agencies under the laws of the state in which they are
located and are corporations duly organized and validly existing under
those laws.
d. There are no proceedings, litigations, or investigations pending,
or to the knowledge of USI threatened, against or affecting USI in or
before any court, governmental authority, agency, arbitration board or
tribunal that individually or in the aggregate involve the reasonable
possibility of materially and adversely affecting the condition (financial
or otherwise) of USI or the ability of USI to perform this Agreement.
e. There has been no change in the business prospects, profits,
property or condition (financial or otherwise) of USI in the last six
months, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
f. Financial statements were supplied to Unum by USI. USI understands
that Unum has relied on such financial statements in making the advance
hereunder, and such financial statements contain no material errors or
omissions and correctly state the financial position of USI.
8
8. Covenants. USI covenants that so long as the Principal Sum and any
---------
interest thereon is subject to reimbursement:
a. USI shall furnish such financial information as, from time to time,
Unum may request, including, but not limited to, certified financial
statements on an annual basis.
b. USI shall continue to be contracted with Unum to write the types of
insurance for which it is presently contracted with Unum, subject to Unum's
right to terminate any or all of the agency agreement(s) between USI and
Unum or any of its affiliated companies, as provided in those agreements,
at any time during the term of this Agreement. In the event of a
termination of any agency agreement, USI and Unum agree that such
terminated agency's production and persistency level for the prior periods
will be credited through the Determination Date for the purpose of
determining any reimbursement amount due to Unum under this Agreement.
c. USI shall comply in all material aspects with the provisions of
ERISA.
d. USI shall not change its legal name or operate or do business
under, as, or in any name other than the name represented in this Agreement
without prior written notice to Unum.
9. Events of Default. Upon the occurrence of any of the following events
-----------------
("Events of Default"), and notwithstanding Unum's previous knowledge thereof,
the principal unpaid balance of the Principal Sum, together with the interest
thereon, shall become due and payable on demand of Unum without presentation,
demand for payment, notice of dishonor, protest or notice of protest of any
kind, all of which are hereby expressly waived by USI:
9
a. Any default by USI in the payment, when due, of any part of the
principal of or interest on the Principal Sum.
b. Any warranty or representation by USI contained in this Agreement
or in any instrument furnished in compliance with this Agreement is false
or incorrect in any material respect.
c. USI fails to perform or observe any covenant contained in this
Agreement.
d. USI fails to comply with any other provision of this Agreement and
such failure continues for more than thirty (30) days after USI has
knowledge or notice of such failure.
e. USI shall (i) become insolvent or bankrupt, or cease, be unable, or
admit in writing its inability to pay its debts as they mature, or make a
general assignment for the benefit of, or enter into any composition or
arrangement with, creditors; (ii) apply for, or consent (by admission of
material allegations of a petition or otherwise) to the appointment of a
custodian, receiver, trustee or liquidator of it or of a substantial part
of its assets, or authorize such application or consent; (iii) permit or
suffer proceedings seeking such appointment to be commenced against it
without such authorization, consent or application; (iv) authorize or file
a voluntary petition in bankruptcy or apply for or consent (by admission of
material allegations of a petition or otherwise) to the application of any
bankruptcy, reorganization, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorize such
application or consent; (v) permit or suffer proceedings to such end to be
instituted against it without such authorization, application or consent;
or (vi) permit or suffer all or any substantial part of its property to be
sequestered or attached by court order.
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f. Any attachment, seizure, garnishment, or levy with respect to any
property of USI by any creditor.
g. USI's failure to remit payables consisting of collected insurance
premiums to Unum or any of its affiliates in accordance with each such
company's requirements.
h. Any failure by USI to hold collected insurance premiums in trust
for Unum or any of its affiliates in accordance with each such company's
requirements.
10. Remedies. Upon the occurrence of an Event of Default, and
--------
notwithstanding Unum's previous knowledge thereof, Unum and any of its
affiliates may without notice to USI:
a. Take any action to enforce payment of the Principal Sum or
performance of any of the covenants contained in this Agreement.
b. Withhold and apply to amounts due Unum hereunder:
(1) Insurance commissions due USI; and
(2) Sums due USI earned through any excess commission or
marketing support programs.
c. USI will pay to Unum such amount as shall be sufficient to cover
the cost and expense of collection, including, without limitation,
reasonable attorneys' fees, expenses and disbursements, and any
out-of-pocket costs and expenses of Unum incurred in connection with
analyzing, evaluating, protecting, ascertaining, defending or enforcing any
of its rights as set forth herein.
11. Waiver. Neither the failure nor any delay on the part of USI or Unum to
------
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or
11
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof, or the exercise of any other right, power or
privilege.
12. Benefits. This Agreement shall be binding upon and inure to the benefit
--------
of USI and Unum, and their respective successors and assigns, and any
subsidiaries or affiliates of either, whether now or hereafter formed.
13. Construction. This Agreement shall be governed by and construed in
------------
accordance with the laws of the State of Tennessee. In the event any portion of
this Agreement shall be unenforceable under the laws of the State of Tennessee,
the remaining portion of this Agreement shall remain in effect.
14. Notices. Any notices or communications required to be given hereunder
-------
shall be in writing and sent postage prepaid, certified mail - return receipt
requested - to the other part at the address on the first page of this Agreement
or as designated by USI or Unum. Such notices shall be deemed delivered when
sent. Each such notice shall be marked to the attention of "Vice President,
National Marketing Organization" if to Unum and "President" if to USI.
15. Rating, Underwriting and Marketing Practices. This Agreement and any
--------------------------------------------
other documents related thereto ("these Agreements") are not contingent upon
Unum's rating, underwriting or marketing practices. These Agreements do not
expressly or impliedly obligate Unum to accept insurance business from USI that
does not comply with Unum's rating, underwriting or marketing practices as they
may exist and change from time to time during the term of these Agreements. USI
agrees that changes in rating, underwriting or marketing practices may be made
within Unum's sole discretion and that such changes shall not impair or in any
way affect USI's obligations under these Agreements. USI also agrees that Unum
may terminate any or all of the agency agreements between USI and Unum, or any
of its affiliated companies, as
12
provided in said agreements, at any time during the term of these Agreements and
that such termination will not impair or in any way affect USI's obligations
under this Agreement.
16. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties relating to the matters contained herein and supersedes all
previous communications, representations or agreements, either oral or written,
with respect to the subject matter hereof. Any modification to this Agreement
must be in writing and signed by authorized officers of both parties.
17. Headings. The section headings herein are included for convenience only
--------
and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of May 16,
2000.
UNUMPROVIDENT CORPORATION USI INSURANCE SERVICES CORP.
("Unum") ("USI")
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------- -----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: National Marketing Organization Title: President & Coo
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