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ANNEX E
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ADMINISTRATION AGREEMENT
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▇▇▇▇ ▇▇▇▇▇▇▇
MUTUAL LIFE INSURANCE COMPANY
and
UNICARE LIFE & HEALTH INSURANCE COMPANY
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................. 2
ARTICLE II APPOINTMENT................................................. 3
ARTICLE III TERM........................................................ 3
ARTICLE IV STANDARDS OF PERFORMANCE.................................... 3
A. Generally....................................................... 3
B. Standards of Performance........................................ 4
ARTICLE V SERVICES PROVIDED BY THE SERVICE PROVIDER................... 5
A. Generally....................................................... 5
B. Policy and Contract Issuance.................................... 7
C. Claims Administration........................................... 8
D. Policy and Contract Administration;
Reimbursements; Regulatory Matters .................................... 10
E. Premium Rate Formulas........................................... 11
F. Financial, Statistical and Tax Services......................... 12
ARTICLE VI. REGULATORY MATTERS.......................................... 13
A. Financial Obligations........................................... 13
B. Responses to Regulatory Authorities............................. 13
C. Reviews and Audits by Regulatory Authorities.................... 14
D. Cooperation..................................................... 14
E. Notice to Insureds.............................................. 15
ARTICLE VII OTHER SERVICES AND FURTHER AGREEMENTS....................... 15
A. Specific Actions................................................ 15
B. Fees for Services; Reimbursement of Expenses.................... 15
ARTICLE VIII BANK ACCOUNTS............................................... 16
A. Accounts........................................................ 16
B. Escheat......................................................... 16
C. Banking Functions............................................... 16
D. Assignment...................................................... 16
ARTICLE IX REPORTS AND RECORDS......................................... 17
A. Records and Access to Records................................... 17
B. Ownership....................................................... 20
C. Audit........................................................... 20
ARTICLE X LEGAL ACTIONS............................................... 21
A. Generally....................................................... 21
B. Notification.................................................... 21
ARTICLE XI TERMINATION................................................. 21
A. Termination of Administration Agreement......................... 21
B. Events of Default............................................... 21
C. Termination Upon Event of Default............................... 23
D. Transition Following Termination
Upon Event of Default ................................................... 23
E. Return of Files................................................. 24
F. Partial Termination............................................. 24
G. Continuation of Certain Obligations............................. 24
ARTICLE XII CONFIDENTIALITY............................................. 24
ARTICLE XIII INDEMNIFICATION............................................. 25
A. The Service Provider............................................ 25
B. The Company..................................................... 25
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C. Indemnification Procedures...................................... 26
ARTICLE XIV ARBITRATION................................................. 26
A. General......................................................... 26
ARTICLE XV GENERAL PROVISIONS.......................................... 26
A. Cooperation..................................................... 26
B. Amendment; Waivers.............................................. 27
C. Entire Agreement................................................ 27
D. Relationship.................................................... 27
E. Errors and Omissions............................................ 28
F. Best Efforts.................................................... 28
G. Governing Law................................................... 28
H. Invalidity...................................................... 28
I. Counterparts.................................................... 28
J. No Third Party Beneficiaries.................................... 28
K. Assignment...................................................... 29
L. Headings........................................................ 29
M. Preparation..................................................... 29
N. Reasonableness.................................................. 29
O. Notices......................................................... 29
P. Offset.......................................................... 31
Annex A -- Form of Agent Fee Agreement .................................. A-1
Annex B -- Information and data to be provided
by the Service Provider ........................................... B-1
Annex C -- Bank Accounts ................................................ C-1
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ADMINISTRATION AGREEMENT
This Administration Agreement dated as of January , 1997 (hereinafter
referred to as the "Administration Agreement") is made and entered into by and
between ▇▇▇▇ ▇▇▇▇▇▇▇ MUTUAL LIFE INSURANCE COMPANY (the "Company"), a mutual
life insurance company organized under the laws of the Commonwealth of
Massachusetts, and UNICARE LIFE & HEALTH INSURANCE COMPANY (the "Service
Provider"), a stock life insurance company organized under the laws of the State
of Delaware.
WHEREAS, the Company and WellPoint Health Networks Inc., a California
Corporation ("WellPoint") and the indirect parent of the Service Provider, have
entered into a Purchase and Sale Agreement, dated as of October 10, 1996 (the
"Purchase Agreement"), pursuant to which the Company is selling and WellPoint
and the Service Provider are acquiring the GBO Included Business (as therein
defined);
WHEREAS, the Company and the Service Provider have entered into a
Coinsurance Agreement, effective as of January , 1997, (the "Coinsurance
Agreement"), pursuant to which the Company will cede, and the Service Provider
will reinsure, the Coinsured Policies (as therein defined);
WHEREAS, the Service Provider desires to provide any and all
administrative and other services in respect of Coinsured Policies, ASO
Contracts and Network Contracts (as hereinafter defined) to the Company in
accordance with the terms of this Administration Agreement;
WHEREAS, the Company will cooperate in a commercially reasonable manner
with the Service Provider in the provision by the Service Provider of such
administrative and other services in respect of Coinsured Policies, ASO
Contracts and Network Contracts in accordance with the provisions of this
Administration Agreement;
WHEREAS, the Company and the Service Provider have entered into a
Service Agreement pursuant to which the Company agrees to provide certain
services to the Service Provider, on an interim basis to facilitate the orderly
transition of the GBO Included Business from the Company to the Service Provider
from and after the Closing Date (the "Service Agreement"); and
WHEREAS, this Administration Agreement is intended to implement the
provisions of the Purchase Agreement providing for all administrative and other
services with respect to the Coinsured Policies, ASO Contracts and Network
Contracts being performed by the
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Service Provider and an orderly transition of the GBO Included Business from the
Company to the Service Provider from and after the Closing Date under the
Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises of
the parties hereto, they hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
Terms not defined herein shall have the meanings ascribed to them in
the Purchase Agreement or the Coinsurance Agreement, as the case may be. In the
event of a conflict or difference in the definitions of any term in the Purchase
Agreement and the Coinsurance Agreement, the definitions of the Purchase
Agreement shall be used.
The following terms, when used in this Administration Agreement, shall
have the meanings set forth below, and shall be deemed to refer to the singular
or plural as the context requires:
"Administered Contracts" shall have the meaning set forth in Article II.
"Administrative Services" shall have the meaning set forth in Article
V.A.2.(a).
"ASO Contract" shall have the meaning set forth in the Purchase
Agreement.
"Claim" shall mean a claim for benefits by or on behalf of a
policyholder, certificate holder, beneficiary, plan participant, member,
provider or other Person that has received an assignment of benefits, under an
Administered Contract.
"Claimant" shall mean any Person who has a Claim.
"Event of Default" shall have the meaning set forth in Article XI.
"GBO Fees" shall have the meaning set forth in Article VII.C.1.
"Network Contract" means a contract with a health care provider or
health care facility, or with an entity which has a contract with health care
providers and/or health care facilities, under which the Company, its Affiliates
or its client(s) is/are entitled to the benefit of negotiated rates of
reimbursement for health care services.
ARTICLE II
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APPOINTMENT
The Company hereby appoints the Service Provider as its exclusive
provider of Administrative Services with respect to all (i) Coinsured Policies,
(ii) ASO Contracts and (iii) Network Contracts (collectively the "Administered
Contracts"), all on the terms, and subject to the limitations and conditions,
set forth in this Administration Agreement. The Service Provider hereby accepts
such appointment by the Company as its exclusive provider of Administrative
Services with respect to all Administered Contracts, and agrees to perform the
Administrative Services, all on the terms, and subject to the limitations and
conditions, set forth in this Administration Agreement. Subject to the
limitations set forth herein, the Service Provider shall have any and all
required power, both express and implied, to carry out its duties and
obligations under this Administration Agreement, including, without limitation,
the power and authority to execute documents in the name of the Company.
ARTICLE III
TERM
Subject to the provisions of Article XI hereof, this Administration
Agreement shall become effective as of the Effective Time and shall continue in
effect until it terminates automatically upon the termination of all of the
Company's liabilities and obligations under the Administered Contracts and the
termination of all of the Company's and the Service Provider's obligations under
the Coinsurance Agreement and this Administration Agreement.
ARTICLE IV
STANDARDS OF PERFORMANCE
A. Generally. Subject to the provisions of this Administration
Agreement, the Service Provider agrees that in providing the services under this
Administration Agreement, it shall: (i) conduct itself in accordance with all
reasonable commercial and professional standards of care, diligence and good
faith which are substantially equal in quality to the standards the Company
applied prior to the Effective Time, provided that such standards are not
inconsistent with prudent management practices in the life and health insurance
industry generally, and shall generally act in such a way as to preserve
goodwill toward the Company on the part of the general public, customers, and
all those having business relations with the Company; (ii) comply with all
material laws, regulations and orders applicable to the Company with respect to
the Administered Contracts and to
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the conduct of the activities contemplated hereby; (iii) comply with all
standards of performance, terms and conditions of all Administered Contracts;
and (iv) with respect to the Administered Contracts, carry on its affairs in the
ordinary course of business and not make or institute any unusual method of
doing business, GAAP or SAP accounting or operation. Notwithstanding the
foregoing, the failure of the Service Provider to provide such services in
accordance with the standards set forth above, to the extent due to the failure
of the Company to provide information or services to the Service Provider as
required under the Transaction Documents, shall not be deemed to be a breach of
this Administration Agreement.
B. Standards of Performance. Prior to the Effective Time, the Company
shall provide the Service Provider access to all of the Company's standards,
procedures, policies, operating guidelines, practices and instructions
(collectively, the "Standards"), which are in effect on the Effective Time, and
which the Company has established and employed to administer the Administered
Contracts, and the Service Provider shall acknowledge receipt of such Standards;
provided, however, the parties hereby agree that after the Effective Time,
subject to the provisions of this Administration Agreement the Service Provider
may, adopt or reject, maintain, update, change or alter such Standards, if such
changes in the Standards are not inconsistent with prudent management practices
observed from time to time in the life and health insurance industry generally;
further provided, however, that for purposes of applying the foregoing standard,
the parties hereto agree to recognize the unique nature of the transactions
contemplated by this Administration Agreement and the other Transaction
Documents, including but not limited to the transfer of GBO Included Business
from the Company to the Service Provider during the Transition Period. The
Service Provider shall be solely liable for all claims, liabilities, demands,
actions, proceedings, damages, including punitive, consequential or
extracontractual obligations and obligations in excess of original policy
limits, losses, deficiencies, fines, penalties, costs or expenses, including
reasonable attorneys' fees ("Demands") relating to or arising out of any act or
omission of the Service Provider with respect to the adoption, rejection,
modification or application of
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such Standards by the Service Provider.
ARTICLE V
SERVICES PROVIDED BY THE SERVICE PROVIDER
A. Generally.
1. While this Administration Agreement is in effect, except as provided
herein, the Service Provider shall provide all Administrative Services (as
hereinafter defined) with respect to the Administered Contracts.
2. (a) "Administrative Services" shall mean all services or duties
necessary, customary or advisable in the conduct of the GBO Included Business
with respect to the Administered Contracts, including without limitation all
services and duties relating to the issuance, administration or renewal of all
Administered Contracts and the services more fully described in this Article V;
provided, however, that Administrative Services shall not include any services
which applicable law or regulatory requirement prohibit or otherwise do not
permit the Service Provider to provide under this Administration Agreement; and
provided, further, that any such services not permitted to be provided under
this Administration Agreement shall be provided by the Company with the
cooperation and assistance of the Service Provider, and the Service Provider
shall reimburse the Company for its reasonable out-of-pocket expenses incurred
in connection therewith. The Company will provide copies of and access to all
books, records, documents and other information("Records") as requested by the
Service Provider with respect to any such services provided by the Company
hereunder.
(b) The Administrative Services provided hereunder by the Service
Provider shall include without limitation: underwriting; pricing of risk;
premium and fee administration; policy and contract administration; policyholder
and customer services; provider and related policyholder and customer services,
including but not limited to, medical cost management, case management and
medical review utilization management; claims administration, including the
provision of benefit statements and of certain tax reporting data relating to
the benefit payments; network development and network management services; the
issuance, preparation and amending of contracts, forms and documents relating to
any Administered Contract; maintenance of files (including, without limiting the
foregoing, financial and tax information relating to any Administered Contract
in accordance with applicable law and SAP and GAAP consistently applied, where
applicable); calculation of
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book and tax reserves; maintenance of agent records and lists, and transmittal
to agents of all required communications, all as related to any Administered
Contract, including but not limited to, rate revision notices; agents'
compensation calculation and support as related to the Administered Contracts;
provision of other information and data; electronic data processing; regulatory
compliance; office services; accounting, financial and other record-keeping
services; management of relationships with third party vendors and others that
provide services with respect to any Administered Contract; and any and all
other services incidental to the administration of any Administered Contract.
3. In performing the Administrative Services, the Service Provider
agrees, subject to the provisions of Article V.A.2, to comply in all material
respects with the terms of the Administered Contracts, provided, however, that
the Service Provider shall have no liability for the failure to comply with any
terms of the Administered Contracts relating to or associated with the
non-transferability or non-assignment provisions of such Administered Contracts.
4. In performing the Administrative Services, the Service Provider
agrees to use commercially reasonable efforts to keep informed of and comply in
all material respects with applicable laws, rules and regulations relating to
the Administered Contracts and the performance by the Service Provider of its
duties and obligations under this Administration Agreement.
5. The Service Provider agrees to use commercially reasonable efforts
to maintain a staff of competent and trained personnel and sufficient equipment
and supplies to perform the activities covered by this Administration Agreement
in accordance with the standards required by this Administration Agreement;
provided, however, that for purposes of this Article V.A.5., the parties hereto
agree to recognize the unique nature of the transactions contemplated by this
Administration Agreement and the other Transaction Documents, including but not
limited to the transfer of GBO Included Business from the Company to the Service
Provider during the Transition Period. Whenever the Service Provider utilizes
its employees to perform Administrative Services for the Company pursuant to
this Administration Agreement, such
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employees shall at all times remain subject to the direction and control of the
Service Provider.
6. The Service Provider shall provide Administrative Services in
accordance with and subject to the terms of this Administration Agreement. At
the request of the Service Provider, the Company shall provide commercially
reasonable cooperation to the Service Provider in connection with the provision
of such services under this Administration Agreement.
7. The Company and the Service Provider each shall from time to time
appoint one or more individuals who shall serve as authorized representative(s)
of such party for the purpose of carrying out this Administration Agreement.
Such persons shall be authorized to act on behalf of their respective parties as
to matters pertaining to this Administration Agreement. Each party shall notify
the other, in writing, as to the name, address, and telephone number for any
such authorized representative, and of any replacement thereof.
B. Policy and Contract Issuance.
1. The Service Provider shall have authority to solicit the sale of
Transition GBO Policies through the use of marketing and advertising materials
in a form, content and circumstances as have been generally used by the Company
prior to the Effective Time or as have been otherwise approved by the Company
prior to the use thereof, which approval shall not be unreasonably withheld;
provided, however, that each such solicitation, use of marketing and advertising
materials must be made in compliance in all material respects and subject to the
limitations of all applicable laws and regulations, the terms and conditions of
the Coinsurance Agreement, and the terms and conditions of the License
Agreement.
2. The Service Provider shall have authority to underwrite Transition
GBO Policies (including certificates, endorsements and binders), subject to the
standards set forth in Article IV A.1 and in the Coinsurance Agreement.
3. The Service Provider shall have authority to issue, deliver and
arrange for execution or countersignature of Transition GBO Policies (including
certificates, endorsements and binders), on forms generally used by the Company
prior to the Effective Time and any new forms approved by the Company, which
approval shall not be unreasonably withheld, and approved by appropriate
regulatory authorities as required by law, consistent with the terms and
conditions of the Coinsurance Agreement.
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4. The Service Provider is authorized to enter into fee agreements with
agents on behalf of the Company to the extent necessary to sell, market and
service the Administered Contracts. The form of the fee agreement for such
agents shall be substantially the form attached hereto as Annex A, unless
otherwise agreed to by the parties hereto.
C. Claims Administration.
1. The claims administration obligations of the Service Provider under
this Administration Agreement shall include all obligations with respect to
claims set forth in the Administered Contracts and the following:
(a) the provision of standard forms necessary for submission and
processing of Claims;
(b) the receipt of notices of and review of all Claims, and creation
and maintenance of files with respect to, and administration to final
disposition of, each Claim made to or received by the Service Provider with
respect to or arising out of any Administered Contract;
(c) timely acknowledgment of the receipt of notices received from
Claimants in connection with any such Claim;
(d) timely investigation of any Claim, as necessary, to determine
its validity and compensability, including verification of coverage and
status information and utilization of any relevant documents and/or
information made available to the Service Provider;
(e) coordination of benefits in accordance with the provisions of
Administered Contracts, if applicable;
(f) performance of all administrative and clerical work in
connection with any such Claim including computation and verification of
the amounts of benefits, and furnishing to each Claimant an appropriate
statement of the amounts of benefits, including to the extent permitted by
law, and furnishing copies of benefit statements prepared for Claimants;
(g) notification to Claimants of declined Claims and the reasons for
the declinations;
(h) provision to the appropriate ERISA plan fiduciary of all
available information and documents
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within the control of the Service Provider which are necessary to enable
such ERISA plan fiduciary to provide a review of a disputed Claim or a
Claim on appeal;
(i) maintenance and updating of sufficient statistical data to
enable the Service Provider to effectively administer the Company's fee
basis, if applicable, for benefit payments, as well as fees negotiated
under Network Contracts, provided, however, that to the extent that the
condition or sufficiency of the statistical data provided to the Service
Provider by the Company under this Administration Agreement or the Service
Agreement causes circumstances that would constitute a breach by the
Service Provider of its obligations under this Administration Agreement,
the Service Provider will be deemed not to be in default under this
Administration Agreement;
(j) reasonable response to any inquiry, complaint or request
received from any Claimant, agent, broker, regulator or other interested
party pertaining to or regarding any such Claim, and proper recordation of
such complaints in separate complaint logs to be maintained by the Service
Provider;
(k) provision of such special telephone arrangements, including
access to toll-free telephone lines, as is required by the Service
Provider's obligations and responsibilities under the Administered
Contracts;
(l) provision of the services of claim consultants to advise and
assist on matters relating to Claims, as needed;
(m) to the extent required by law, provision for withholding of
FICA, federal, state and/or local income taxes from benefit payments, and
for remittance of amounts withheld to the Internal Revenue Service and/or
appropriate state or local tax authorities;
(n) to the extent required by law, provision of reports on taxable
benefits, and the amounts withheld on account of FICA, federal, state
and/or local income taxes, both as payments of benefits are made, and as of
the end of each calendar or fiscal year;
(o) to the extent required by law, preparation of individual income
tax reports indicating taxable benefits paid and amounts withheld, and
distributions required;
(p) compliance with Claims file maintenance, record retention and
reconciliation requirements in
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conformity in all material respects with applicable law and regulation and
the provisions of the Administered Contracts and the performance standards
set forth in this Administration Agreement or as otherwise agreed upon by
the parties;
(q) engagement and direction, as necessary, of attorneys,
consultants or other professionals in connection with the processing and
handling of any such Claim; and
(r) generally, subject to the provisions of Section 7.9 of the
Coinsurance Agreement, all such other acts and things reasonably necessary
in the administration and settlement of all such Claims and processing and
submission to reinsurers of all claims relating to reinsurance agreements
with respect to the Coinsured Policies, including all other matters
relating to coverage determination, investigation, compromise, settlement,
negotiation, denial, defense or payment of Claims.
2. As soon as is reasonably practicable, the Service Provider
will make arrangements with policyholders and contractholders under Administered
Contracts to report all Claims directly to the Service Provider. The Company
will promptly forward any Claim and Claim material that are received by the
Company or its Affiliates directly to the Service Provider.
3. The Service Provider shall adjudicate Claims within a reasonable
period after the date on which all necessary documents and information are
received by the Service Provider and in accordance with the terms of the
Administered Contracts and applicable law and regulations.
D. Policy and Contract Administration; Reimbursements; Regulatory
Matters.
1. The policy and contract administration obligations of the Service
Provider under this Administration Agreement shall include all services required
with respect to the administration of the Administered Contracts, including,
without limitation:
(a) administration of premiums and fees (including billing,
payment, reimbursement and collection) and general policyholder and
contract holder services (including processing of experience refunds or
similar payments); and
(b) The Service Provider's reasonable estimates
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of the calculation, establishment or recommendation of applicable reserves
and appropriate reporting to the Company of such reserves; and
2. (a) To the extent that the Company pays costs for which the Service
Provider is liable pursuant to this Article, the Service Provider shall
reimburse the Company for such amounts paid by the Company, net of any offset,
credit or return that directly reduces such costs. To the extent that the
Service Provider pays or reimburses the Company for any costs, and the Company
obtains an offset, credit or return that directly reduces such costs, the
Company shall reimburse the Service Provider for such amounts if not previously
netted.
(b) To the extent the Service Provider pays costs or expenses for which
the Company is liable pursuant to this Article, the Company shall reimburse the
Service Provider for such amounts paid by the Service Provider, net of any
offset, credit or return that directly reduces such costs. To the extent that
the Company pays or reimburses the Service Provider for any costs, and the
Service Provider obtains an offset, credit or return that directly reduces such
costs, the Service Provider shall reimburse the Company for such amounts if not
previously netted.
(c) A party shall reimburse the other party within ten (10) Business
Days of the delivery of any request for reimbursement, together with any
necessary supporting documentation therefor. A party shall reimburse the other
party within ten (10) Business Days of the receipt of any offset, credit or
return for which the other party is entitled to reimbursement. Any amount not
paid within such ten-day period shall bear simple interest at the daily average
of the 30-day commercial paper rates as reported in Federal Reserve Publication
H-15 (the "30-Day C.P. Rate") until the date of payment.
E. Premium Rate Formulas.
The Service Provider shall provide the Company with its premium rate
formulas that are currently used to develop premium rates applicable to the
Coinsured Policies. The Service Provider shall have the right to propose and
implement changes to such premium rate formulas, subject to all required
regulatory approvals and the Service Provider shall prepare any necessary rate
submissions with respect to the changes to premium rate formulas under the
Coinsured Policies. Where required by law, the Company shall execute and forward
any necessary rate submissions prepared by the Service Provider with
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respect to permitted changes in premium rate formulas to the applicable state
insurance departments, on its own behalf, in accordance with state regulatory
requirements. The parties agree that the Company's right to disapprove any
proposed premium rate formula will be exercised only if such formula would be
violative of applicable laws or regulations, or would be grossly commercially
unreasonable or, with respect to a particular Existing GBO Policy form, would
represent a 15% or greater reduction in pricing.
F. Financial, Statistical and Tax Services.
1. To the extent applicable, the Service Provider shall use
commercially reasonable efforts to collect, administer and provide to the
Company the information and data required for the Company to:
(a) continue to maintain financial, statistical and tax data with respect
to its Administered Contracts;
(b) comply with any and all federal, state, and local laws including,
without limitation, all statutory insurance reporting requirements and
tax filing requirements;
(c) meet all applicable regulatory requirements, annual and quarterly
statement data (by statutory line of business; direct, acquired, ceded;
by state, etc.) in accordance with both SAP and GAAP consistently
applied, which are necessary to prepare the detailed supporting
statutory exhibits and schedules; and
(d) provide reports to Third Party Reinsurers of Administered Contracts;
provided, however, that to the extent that the condition or sufficiency of the
financial, statistical, tax or other data provided to the Service Provider by
the Company under the Service Agreement causes circumstances that would
constitute a breach by the Service Provider of its obligations under this
Administration Agreement, the Service Provider will be deemed not to be in
default under this Administration Agreement. All information and data provided
by the Service Provider to the Company pursuant to this Article V.F. will be
provided in accordance with Annex A.
2. The Service Provider will provide such other information relating to
the Coinsured Policies as may be reasonably requested from time to time by the
Company.
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3. Nothing herein shall be construed to require the Service Provider to
prepare any tax return, SAP filing or any other report required to be filed by
the Company. The Company shall be solely responsible for preparing and filing
such reports.
ARTICLE VI
REGULATORY MATTERS
A. Financial Obligations.
1. The Company shall be solely liable for any governmental or other
regulatory complaints or regulatory proceedings to the extent they arise from
facts, actions, omissions or occurrences which arise or were initiated prior to
the Effective Time. Such responsibility shall include, without limiting the
foregoing, all fines, penalties, obligations, liabilities, costs and expenses
including but not limited to liability for all legal expenses incurred by the
Service Provider after the Effective Time with respect to such complaints or
proceedings, and all amounts payable in settlement of such complaints or
proceedings.
2. The Service Provider shall be solely liable for any governmental or
other regulatory complaints or regulatory proceedings to the extent that they
arise from facts, actions, omissions or occurrences which arise or were
initiated on or after the Effective Time. Such responsibility shall include,
without limiting the foregoing, all fines, penalties, obligations, liabilities,
costs and expenses including but not limited to liability for all legal expenses
incurred by the Service Provider, and all amounts payable in settlement of such
complaints or proceedings.
B. Responses to Regulatory Authorities. The Company (with respect to
matters affecting its license and liability) or the Service Provider (with
respect to matters affecting its license and liability), as the case may be,
agrees to provide a prompt initial response to inquiries received from state
insurance departments or other governmental or regulatory authorities regarding
policyholder, contractholder, provider and consumer concerns or otherwise
arising out of or in connection with any activity or omission with respect to
the Administered Contracts which occurred prior to, on, or after the Effective
Time. Notwithstanding the foregoing, the Company and the Service Provider shall
consult with one another prior to providing such response or entering into any
other communications with regulators regarding such inquiries, and they shall
both act in good faith and cooperate with each other in attempting to agree on
the
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form and substance of such response or communication. The Company and the
Service Provider shall both have the right to participate in meetings and
conversations with such governmental or regulatory authorities to discuss such
inquiries. The Service Provider or the Company, as the case may be, will provide
the other party with all information necessary for such other party to conduct
whatever investigation is reasonable under the circumstances in order to respond
to such inquiries. Each party shall notify in writing the other of any such
inquiry within two (2) Business Days of receipt of such inquiry and provide
copies of all relevant documents related thereto. After such consultation and
cooperation, the Company shall have the right to control the resolution
(including entering into settlements) with respect to any inquiry that could
lead to the restriction or revocation of its license. The Service Provider shall
have the right to control the resolution (including entering into settlements)
with respect to any inquiry that could lead to the restriction or revocation of
its license.
C. Reviews and Audits by Regulatory Authorities. Each party agrees to
notify in writing the other party within two (2) Business Days upon receipt of
any written or oral communication from any state insurance department or any
other government or regulatory department or agency of such department's or
agency's intention to commence any market conduct or similar examination or
review or to proceed with any administrative action, such as a hearing, fine,
penalty, license suspension or revocation or similar action, against the Service
Provider or the Company, which examination, review or administrative action
relates in any way to the Service Provider's performance under this
Administration Agreement or which otherwise relates solely to any of the
Administered Contracts. The Service Provider and the Company agree to cooperate
fully with each other and to use their reasonable good faith efforts in jointly
resolving any such issue or matter raised by a state insurance department or any
other government or regulatory department or agency.
D. Cooperation. The Company and the Service Provider agree to cooperate
fully with each other and use their reasonable good faith efforts in dealing
with the various state insurance departments and other regulatory
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authorities in maintaining the Administered Contracts in compliance in all
material respects with existing and future laws and regulations. If the Service
Provider determines that any of the Administered Contracts are materially not in
compliance with such laws and regulations, the Service Provider shall so notify
the Company. The Service Provider shall prepare and file any necessary
amendments to such Administered Contracts and other filings or documents
required and shall prepare any necessary filings for submission by the Company.
E. Notice to Insureds. Where required by law, the Service Provider,
with the Company's cooperation, shall give written notice to insureds of the
identity of the Service Provider and the relationship between the Service
Provider, the Company and the insured. The Service Provider shall provide the
Company with an advance copy of such notice prior to any distribution of the
notice.
ARTICLE VII
OTHER SERVICES AND FURTHER AGREEMENTS
A. Specific Actions.
1. The Company shall take no action with respect to the Administered
Contracts without obtaining the prior written consent of the Service Provider,
which consent shall not be unreasonably withheld, except to the extent required
by applicable law or regulatory authority or as required by the provisions of
the applicable Administered Contract.
2. The Company shall make no change, modification, amendment or renewal
of any of its Administered Contracts or any other arrangements with a third
party to provide services relating to the Administered Contracts without the
prior written consent of the Service Provider, which consent shall not be
unreasonably withheld, except to the extent required by applicable law or
regulatory authority or as required by the provisions of the applicable
Administered Contract. Notwithstanding anything to the contrary herein, the
Company agrees that upon the request of the Service Provider, the Company will
not renew an Administered Contract unless required to do so by applicable law or
regulation or the provisions of an Administered Contract.
B. Fees for Services; Reimbursement of Expenses.
1. As consideration for the purchase by WellPoint of the GBO Included
Business from the Company pursuant to the Purchase Agreement and the provision
of Administrative Services hereunder, the Service Provider
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shall be entitled to any and all consideration arising out of the Administered
Contracts, including, without limitation, all premium and other fees received by
the Company in respect of such Administered Contracts (collectively, "GBO
Fees"). The Service Provider shall provide all Administrative Services pursuant
to this Administration Agreement with respect to the Administered Contracts at
its own expense.
2. All GBO Fees shall be paid to bank accounts established or
maintained pursuant to Article VIII, and the Service Provider shall be permitted
to withdraw the GBO Fees as provided in Annex C.
ARTICLE VIII
BANK ACCOUNTS
A. Accounts.
1. Consistent with their respective obligations to pay Claims with
respect to the Administered Contracts, the Company and the Service Provider
shall establish or maintain disbursement and claims paying accounts owned by and
in the name of the Company or the Service Provider, as the case may be.
2. As between the parties, the rights, responsibilities and obligations
of each party with respect to such bank accounts shall be as set forth on Annex
C, attached hereto.
B. Escheat. Each party shall retain responsibility for all
applicable escheat administration services with respect to such bank accounts
established by it, including check escheat and related record keeping. Each
party agrees to provide such information available to it to the other party and
to maintain and transmit such records with respect to such bank accounts to
reflect such information as may be required by the other party with respect to
escheatable amounts.
C. Banking Functions. Each party shall retain responsibility for all
banking functions with respect to all such bank accounts of such party, and the
Service Provider shall retain responsibility for all banking functions with
respect to all such bank accounts of clients, including performing daily
operational activities, account maintenance and contracts with the respective
banks, and bank reconciliations. These functions shall be performed in
accordance with the applicable standards set forth herein.
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D. Assignment. At the Effective Time, the Company shall assign, or
cause the Service Provider's name to be added to, all bank accounts theretofore
established by the Company pursuant to this Article VIII.
ARTICLE IX
REPORTS AND RECORDS
A. Records and Access to Records.
1. The Service Provider agrees to use commercially reasonable efforts
to perform all data processing activities and to keep and maintain identifiable,
orderly, accurate, complete and timely records and accounts of all business and
transactions pertaining thereto and Claims administered under this
Administration Agreement including complete underwriting and claims files;
provided, however, that to the extent that the condition or sufficiency of the
statistical data, books, records, accounts and files provided to the Service
Provider by the Company under this Administration Agreement or the Service
Agreement causes circumstances that would constitute a breach by the Service
Provider of its obligations under this Administration Agreement, the Service
Provider will be deemed not to be in default under this Administration
Agreement. The Service Provider agrees to keep such records and accounts
available at such locations as required by applicable state law. All books,
records and files established and maintained by the Service Provider by reason
of its performance under this Administration Agreement shall be subject to
examination at all reasonable times upon reasonable notice by the Company and
persons authorized by it or any governmental agency having jurisdiction over the
Company.
2. The Company shall on the Closing Date, or as soon thereafter as is
practicable:
(a) transfer to the Service Provider in a commercially reasonable manner
and form the files, or copies thereof, owned by it that relate
exclusively to each Administered Contract or, if not exclusively so
relating, copies of those portions of such files applicable to each
Administered Contract will be transferred to the Service Provider to
the extent reasonable and practicable; and
(b) if a file or portion thereof relating to an Administered Contract
cannot be transferred or a copy cannot be provided to the Service
Provider pursuant to Article IX B hereof, then it will be made
available for inspection by the Service Provider.
3. (a) If the transfer of any files requires the
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consent of any Person, the Company shall use commercially reasonable
efforts to secure such consent on or prior to the date such transfer is to
be made. Where such consent cannot be obtained, the Company shall not be
required to transfer the applicable files to the Service Provider but shall
provide copies of such files unless the absence of such consent prohibits
providing copies, in which case the Company shall provide the Service
Provider with access to such files.
(b) Nothing in this Article shall require the Company to transfer to the
Service Provider any original files which the Company is required by any
applicable laws or regulations or contractual obligations to retain,
provided that the Company shall provide true and complete copies of such
original files to the Service Provider.
4. For so long as there are Administered Contracts issued or renewed by
the Company (or thereafter, if required by law or regulation or the provisions
of the applicable Administered Contract), the Service Provider shall retain all
files transferred by the Company or produced by the Service Provider on behalf
of the Company to the extent such files are required by applicable law or
regulation or the provisions of the applicable Administered Contract to be
retained by either the Service Provider or the Company.
5. To the extent permitted or not prohibited by applicable law or
regulation, from the date hereof until the date on which the Company has
fulfilled all of its obligations to transfer files to the Service Provider under
this Administration Agreement, and at any time (without limitation) as may be
required in the Service Provider's reasonable judgment in order for the Service
Provider to comply with any law or regulation or to perform its obligations or
responsibilities under this Administration Agreement, the Service Provider and
its authorized representatives may from time to time reasonably request, and the
Company shall provide, at reasonable times during normal business hours, full
and open access to examine all such files to be transferred and all files under
the control of the Company pertaining to any of the Administered Contracts and
to the services to be provided
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by the Service Provider under this Administration Agreement and to discuss any
matters relating to any of the Administered Contracts and the services to be
provided by the Service Provider under this Administration Agreement with the
employees and agents of the Company who are knowledgeable therewith, so that the
Service Provider shall have sufficient opportunity to make whatever
investigation it shall deem necessary and desirable in connection with the
transactions contemplated by this Administration Agreement. Such access and
opportunity shall be exercised by the Service Provider and such authorized
representatives in a manner that shall not interfere unreasonably with the
operations of the Company. Such access shall include the right of the Service
Provider to make and retain copies of any files to the extent that the Service
Provider reasonably determines that it requires copies of such files in order to
carry out the transactions contemplated by this Administration Agreement or for
any legitimate business purpose related to this Administration Agreement.
Notwithstanding the first sentence of this subparagraph, no request by the
Service Provider shall diminish or otherwise affect any of the obligations or
responsibilities of the Company under this Administration Agreement.
6. To the extent permitted or not prohibited by applicable law or
regulation, from the date hereof until the date on which the Service Provider
has fulfilled all its obligations to perform services for the Company under this
Administration Agreement, and at any time (without limitation) as may be
required in the reasonable judgment of the Company for the Company to comply
with any law or regulation or to perform its obligations or responsibilities
under this Administration Agreement, the Company and its authorized
representatives may from time to time reasonably request, and the Service
Provider shall provide, at reasonable times during normal business hours, full
and open access to examine the files of the Service Provider pertaining to any
of the Administered Contracts and to the services to be provided by the Service
Provider under this Administration Agreement (including, but not limited to, the
files transferred to the Service Provider pursuant to this Article and still
then retained by the Service Provider) and to discuss such services with the
employees and agents of the Service Provider who are knowledgeable therewith, so
that the Company shall have sufficient opportunity to make whatever
investigation it shall deem necessary and desirable in connection with the
transactions contemplated by this Administration Agreement. Such access and
opportunity shall be exercised by the
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Company and such representatives' in a manner that shall not interfere
unreasonably with the operations of the Service Provider. Such access shall
include the right of the Company to make and retain copies of any files to the
extent that the Company reasonably determines that it requires copies of such
files in order to carry out the transactions contemplated by this Administration
Agreement or for any legitimate business purpose contemplated by this
Administration Agreement. Notwithstanding the first sentence of this
subparagraph, no request by the Company shall diminish or otherwise affect any
of the obligations or responsibilities of the Service Provider under this
Administration Agreement.
7. During the term of this Administration Agreement (or thereafter, if
required by law or regulation), the Service Provider shall retain all files
transferred by the Company or produced by the Service Provider on behalf of the
Company to the extent such files are required by applicable law or regulation or
the terms of an Administered Contract to be retained by either the Service
Provider or the Company and to the extent such files have not been transferred
to the Company. Any files which are not transferred to the Service Provider
shall be retained by the Company to the extent such files are required by
applicable law or regulation or the terms of an Administered Contract to be
retained by either the Service Provider or the Company.
8. Each party hereto shall pay all storage and related expenses
associated with any files, and copies thereof, which it retains in its
possession.
B. Ownership. All original files or suitable copies, which are
transferred to the Service Provider by the Company or produced by the Service
Provider for the benefit of the Company pursuant to this Administration
Agreement, shall be or remain the property of the Service Provider unless it is
otherwise required by applicable law or regulations that the Company retain
ownership. At such time as the Service Provider determines it is no longer
necessary under applicable law or regulation or the terms of an Administered
Contract to retain any file or copy thereof which is the property of the
Company, it may elect to return such file or copy thereof to the Company.
Notwithstanding anything herein to the contrary, the Service Provider shall have
the right
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to retain suitable copies of all files (originals and copies) transferred by the
Company to the Service Provider pursuant to this Administration Agreement.
C. Audit. For so long as there are Coinsured Policies or ASO Contracts
issued or renewed by the Company, the Company may, at its own expense,
reasonably conduct (or have conducted on its behalf) an audit of the Service
Provider with respect to such files and other relevant documents in the
possession of the Service Provider upon reasonable written notice to the Service
Provider during normal business hours and solely for the purpose of:
(i) responding to or facilitating any regulatory investigation or inquiry, or
(ii) investigating or defending a Claim or a complaint by a third party against
the Company relating to an Administered Contract.
ARTICLE X
LEGAL ACTIONS
A. Generally. Subject to the provisions of the Purchase Agreement,
neither the Company nor the Service Provider shall have the authority to
institute, prosecute or maintain any legal or regulatory proceedings on behalf
of the other party without the prior written consent of such other party, which
consent shall not be unreasonably withheld. Notwithstanding any other provision
of this Administration Agreement, no defense shall be interposed and no
settlement shall be entered into or agreed to by either party without the prior
written consent of the other party which consent shall not be unreasonably
withheld except that such party in its sole discretion may withhold consent, if
such defense or settlement could materially affect such party's licenses, its
relationship with any regulatory or governmental authority, or such party's
ability to conduct the GBO Included Business, or the Company's ability to
conduct the GBO Excluded Business.
B. Notification. Each party shall promptly notify the other party of
any claim which may reasonably be expected to exceed $250,000 by reason of an
extracontractual obligation, a judgment in excess of policy limits, bad faith or
punitive damages.
ARTICLE XI
TERMINATION
A. Termination of Administration Agreement. This Administration
Agreement may be terminated by mutual agreement of the parties. This
Administration Agreement will, unless earlier terminated by the Company pursuant
to this Article XI, terminate automatically upon the termination of all of the
Company's
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liabilities and obligations under the Administered Contracts and the termination
of all of its and the Service Provider's obligations under the Coinsurance
Agreement and this Administration Agreement. Notwithstanding any other provision
of this Administration Agreement, the Service Provider may not terminate this
Agreement for any reason whatsoever.
B. Events of Default. Any one or more of the following shall constitute
an Event of Default:
1. The Service Provider fails to perform or observe any material
covenant, term or condition contained herein, including, but not limited to,
material breach of performance or payment requirements, and such failure or
breach shall (i) not have been cured within one hundred twenty (120) days, or
such lesser period as shall be necessary to avert any imminent revocation of the
Company's license to do an insurance business in any Permitted Jurisdiction,
after notice by the Company of such failure or breach, (ii) have caused
revocation of the Company's license to do an insurance business in any Permitted
Jurisdiction or a Material Adverse Effect with respect to the Company, and (iii)
have been finally decided pursuant to the procedures referenced in Article XIV
hereof, provided, however, that this subparagraph (iii) shall not apply if the
Company's license to do an insurance business in a Permitted Jurisdiction would
be revoked before the entry of a final arbitration decision pursuant to the
procedures referenced in Article XIV hereof. Any notice delivered by the Company
pursuant to this subparagraph shall be accompanied by a demand for a plan of
cure, which plan of cure shall be delivered by the Service Provider to the
Company within fifteen (15) days of the receipt of such demand.
2. The termination of the Coinsurance Agreement;
3. If the Service Provider shall (i) commence a voluntary case or other
proceeding seeking rehabilitation, reorganization, liquidation or other relief
with respect to itself or its debts under any insolvency, conservatorship,
receivership, rehabilitation, liquidation or other similar law now or hereafter
in effect that authorizes the rehabilitation, reorganization or liquidation of
the Service Provider or its debt or the appointment of a trustee, receiver,
liquidator, custodian
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or other similar official of it or any substantial part of its property, or (ii)
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or (iii) make a general assignment for the benefit of creditors, or (iv) fail
generally to pay its debts as they became due, or (v) take any corporate action
to authorize any of the foregoing;
4. Any involuntary case or other proceeding shall be commenced against
the Service Provider seeking rehabilitation, reorganization, liquidation or
other relief with respect to it or its debts under any insolvency,
conservatorship, receivership, rehabilitation, liquidation or other similar law
now or hereafter in effect seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or
5. An order is entered by a court of competent jurisdiction affecting
substantially all of the property or affairs of the Service Provider under
insolvency, conservatorship, receivership, rehabilitation, liquidation or other
similar laws as now or hereafter in effect and such order shall remain
undismissed and unstayed of a period of sixty (60) days.
C. Termination Upon Event of Default. Upon the occurrence of an Event
of Default as described in paragraph B above, the Company may, at its option,
terminate this Administration Agreement by giving written notice to the Service
Provider of its termination of this Administration Agreement.
D. Transition Following Termination Upon Event of Default. In the event
of termination under paragraph B above, the Service Provider and the Company
shall effect a transition and an orderly transfer of responsibilities as
follows:
1. Transition. If this Administration Agreement is terminated by the
Company pursuant to paragraph B above, the Service Provider will take all
such action reasonably requested by the Company (including without
limitation continuing to provide such services as are necessary until
transfer of administration to another service provider or the Company), and
will reasonably cooperate with the Company, to facilitate the transition of
the services to another service provider selected by the Company or to the
Company.
2. Transfer of Information to the Company. Upon
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termination of this Administration Agreement under paragraph B above, at
the Company's option and request, the Service Provider shall perform all
steps necessary, at the expense of the Service Provider, to transfer all
Company property and information to the Company or a party designated by
the Company, including, but not limited to, insurance policies, financial
and technical information and data, and the Service Provider shall promptly
deliver all such property and information to the Company or the Company's
designee.
3. Obligations Regarding Covered Policies. Upon termination of this
Administration Agreement for any reason, the Company shall assume all of
the obligations of the Service Provider hereunder relating to the provision
of administrative services with respect to the Administered Contracts.
E. Return of Files. Upon termination of this Administration Agreement,
under paragraph A above at the request of a party, any files obtained by the
other party from the requesting party or produced by the other party for the
benefit of the requesting party shall be returned or transferred to such
requesting party in a commercially reasonable manner at the expense of the
requesting party promptly after written request therefor shall have been
received from such requesting party, provided, however, that such other party
shall be permitted to make copies of such files as may be required for such
party to meet its obligations and responsibilities and engage in the
transactions contemplated by the Purchase Agreement, the Coinsurance Agreement,
this Administration Agreement or for other good and valid business reasons
contemplated by such agreements, including but not limited to the obligations of
such other party to comply with applicable law or regulatory requirements or the
requirements of Administered Contracts. If a party has not requested return of
any file within one hundred eighty (180) days after the termination under
paragraph A above; such party shall be deemed to have waived its rights to
return of such file.
F. Partial Termination. If, as a result of the loss of any license,
authorization or accreditation, the Service Provider is unable to perform its
obligations hereunder, then this Administration Agreement shall be terminated as
to the affected obligations only; provided,
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however, that in such event, the Service Provider shall have obtained the
services of a third party to perform such affected obligations.
G. Continuation of Certain Obligations. Notwithstanding the termination
of this Administration Agreement, the obligations of the Service Provider or of
the Company, as the case may be, under Article IX.A.7., Article IX.C., Article
XI.D., Article XI.G., Article XII, Article XIII, Article XIV and Article XV,
paragraphs B,G and O shall remain in full force and effect. In addition,
notwithstanding the termination of this Administration Agreement, the Service
Provider shall pay to the Company all amounts due and owing to the Company
pursuant to Article V.A.2. through the termination of this Administration
Agreement.
ARTICLE XII
CONFIDENTIALITY
This Administration Agreement and the information provided thereunder
shall be subject to the confidentiality provisions of Section 16.1 of the
Purchase Agreement. Notwithstanding the foregoing, disclosure of confidential or
proprietary information with respect to any individual covered for benefits with
respect to an Administered Contract may be made at the request of such
individual or his or her legal representative. Confidential and proprietary
information may also be disclosed with the consent of both parties, which
consent will not be unreasonably withheld. The Service Provider and the Company
will continue to comply with the provisions of the Confidentiality Agreement
dated April 25, 1995.
ARTICLE XIII
INDEMNIFICATION
A. The Service Provider. The Service Provider hereby agrees on demand
to indemnify and hold harmless the Company and its Affiliates, and their
respective officers, directors and employees (each an "Indemnified Party") from
and against any and all demands, actions, proceedings, suits (by any Person,
entity or group, including, without limitation, any Governmental Entity) and
Liabilities, paid or incurred (including reasonable attorneys' fees), resulting
from or arising out of (i) the breach of or failure to perform any of the
duties, obligations, covenants or agreements of the Service Provider contained
in this Administration Agreement, (ii) any claim made against any Indemnified
Party by any person to the extent relating to the Service Provider's performance
of, or failure to perform, the
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terms of this Administration Agreement, (iii) the Service Provider's
failure to comply with all laws, regulations and orders applicable to the
Company with respect to the Administered Contracts and to the conduct of the
activities contemplated hereby and (iv) any failure to comply with the standards
of performance, terms or conditions of all Administered Contracts; provided,
however, that this subparagraph (iv) shall not apply to the extent that such
failure to comply arises out of or is based on (x) any terms of the Administered
Contracts relating to or associated with the non-transferability or
non-assignment provisions of such Administered Contracts, or (y) any bad faith
claims practices, willful misconduct, fraud or gross negligence of the Company
or its Affiliates (without attributing to the Company or its Affiliates the
actions of the Service Provider or its Affiliates).
B. The Company. The Company hereby agrees on demand to indemnify and
hold harmless the Service Provider and its Affiliates, and their respective
officers, directors and employees from and against any and all demands, actions,
proceedings, suits (by any Person, entity or group, including, without
limitation, any Governmental Entity) and Liabilities, paid or incurred
(including reasonable attorneys' fees), resulting from or arising out of the
breach of or failure to perform any of the duties, obligations, covenants or
agreements of the Company contained in this Administration Agreement.
C. Indemnification Procedures. Indemnification under Section XIII.A.
and XIII.B. shall be made using the procedures, terms and conditions contained
in Sections 14.2 and 14.3 of the Purchase Agreement as if fully set forth
herein, with (i) references in Section 14.2(a) to "indemnification under Section
14.1 of this Agreement" changed to refer to "indemnification under Section
XIII.A. or XIII.B., as the case may be, of this Administration Agreement", (ii)
the phrase "except as provided in Section 14.1(g) and" deleted in Section
14.2(c), (iii) references in Section 14.3 to "this Article XIV" shall be changed
to refer to "this Section XIII.A." or "this Section XIII.B.", as the case may
be, and (iv) the phrases "and, in any event, within the time period referred to
in Section 14.1(g)" and "So long as Indemnitee provides the Indemnity Notice
within the time period referred to in Section 14.1(g)," deleted from the text of
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Section 14.3.
ARTICLE XIV
ARBITRATION
A. General. Any dispute or difference between the parties with respect
to the operation or interpretation of, or arising from or relating to, this
Administration Agreement on which an amicable understanding cannot be reached
shall be decided by binding arbitration. Arbitration hereunder shall be pursuant
to and in accordance with the terms, conditions and procedures set forth in
Article XV of the Purchase Agreement.
ARTICLE XV
GENERAL PROVISIONS
A. Cooperation. The parties shall cooperate in a commercially
reasonable manner in order that the duties assumed by the Service Provider will
be effectively, efficiently and promptly discharged, and will not take any
actions which would frustrate the intent of the transactions contemplated by
this Administration Agreement, the Purchase Agreement or the Coinsurance
Agreement. Each party shall, at all reasonable times during normal business
hours under the circumstances, make available to the other party properly
authorized personnel for the purpose of consultation and decision. As soon as
practicable after the Effective Time, the Company shall make available to the
Service Provider copies of all policy forms and examples of all other forms,
including drafts and checks, used by the Company in its administration of the
Administered Contracts as reasonably requested by the Service Provider.
B. Amendment; Waivers. This Administration Agreement may be amended or
modified, and any of the terms or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition, or of
the breach of any provision or term contained in this Administration Agreement,
in any one or more instances, shall not be deemed to be nor construed as a
further or continuing waiver of any such condition, or of the breach of any
other provision or term of this Administration Agreement. The failure of the
Company or the Service Provider to insist on strict compliance with this
Administration Agreement, or to exercise any right or remedy under this
Administration Agreement, shall not constitute a waiver of any rights provided
under this Administration Agreement, nor estop the parties from thereafter
demanding full and
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complete compliance nor prevent the parties from exercising such a right or
remedy in the future.
C. Entire Agreement. Except as otherwise provided in the Purchase
Agreement and the Annexes and Schedules attached thereto, this Administration
Agreement, including all Annexes or Schedules attached hereto, and the other
Transaction Documents contain the entire understanding between the parties
hereto with respect to the transactions contemplated hereby and supersedes and
replaces all prior and contemporaneous agreements and understandings, oral or
written with regard to such transactions. All Annexes or Schedules delivered
pursuant to any provision hereof are expressly made a part of this Agreement as
fully as though completely set forth herein.
D. Relationship. The Company and the Service Provider are and shall
remain independent contractors and not employees, agents or partners of the
other party. Except as expressly granted in this Administration Agreement or
otherwise by the other party in writing or as may be required by law or as
necessary to perform the services to be provided hereunder or to obtain the
benefits hereof, no party shall have any authority, express or implied, to act
as an agent of the other party or its subsidiaries or affiliates under this
Administration Agreement. Except as otherwise provided by any agreement between
the parties, the Service Provider shall be responsible for, and the Company
shall have no liability for, the payment of all employment, income and social
security taxes arising in connection with the compensation payable to the
Service Provider's personnel involved in the provision of the services
hereunder.
E. Errors and Omissions. Any delays, errors or omissions on the part of
a party occurring in connection with this Administration Agreement or any
transaction hereunder shall not relieve any other party from any liability to
the first party which would have otherwise attached, had such delay, error or
omission not occurred, provided that such error or omission is rectified as soon
as reasonably practicable after discovery thereof.
F. Best Efforts. No reference in this Administration Agreement to "best
efforts" or "commercially reasonable efforts" shall require a person obligated
to use its best or commercially reasonable efforts to incur substantial
out-of-pocket expenses, to
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incur indebtedness or, except as expressly provided herein, to institute
litigation or to consent generally to service of process in any jurisdiction.
G. Governing Law. This Administration Agreement shall be deemed to have
been made under and governed by the laws of the State of Delaware without regard
to Delaware's choice of law rules.
H. Invalidity. Unless the invalidity or unenforceability of any
provision or portion thereof frustrates the intent of the parties or the purpose
of this Administration Agreement, such invalidity or unenforceability shall not
affect the validity or enforceability of the other provisions or portions
thereof. In the event that such provision shall be declared unenforceable by a
court of competent jurisdiction, such provision or portion thereof, to the
extent declared unenforceable, shall be stricken. However, in the event any such
provision or portion thereof shall be declared unenforceable due to its scope,
breadth or duration, then it shall be modified to the scope, breadth or duration
permitted by law and shall continue to be fully enforceable as so modified
unless such modification frustrates the intent of the parties or the purpose of
this Administration Agreement.
I. Counterparts. This Administration Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
J. No Third Party Beneficiaries. Nothing in this Administration
Agreement is intended to confer any rights or remedies under or by reason of
this Administration Agreement on any persons other than the Company and the
Service Provider and their respective successors and assigns. Nothing in this
Administration Agreement is intended to relieve or discharge the obligations or
liability of any third persons to the Company or the Service Provider. No
provision of this Administration Agreement shall give any third persons any
right of subrogation or action over or against the Company or the Service
Provider.
K. Assignment. The Service Provider may assign its rights and
obligations under this Administration Agreement to a wholly-owned subsidiary or
an Affiliate which is directly or indirectly wholly-owned by the Service
Provider's ultimate parent, after giving written notice of such assignment to
the Company, provided, however, that the Service Provider shall remain primarily
liable for any obligations which it assigns, delegates or
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out sources. Except as so permitted, neither party shall assign this
Administration Agreement or any rights or obligations hereunder without the
prior written consent of the other party hereto, and any such attempted
assignment without such prior written consent shall be void and of no force and
effect; provided, however, that no such assignment shall reduce or otherwise
vitiate any of the obligations of any other party hereunder. This Administration
Agreement shall inure to the benefit of and shall be binding upon the successors
and permitted assigns of the parties hereto.
L. Headings. The headings in this Administration Agreement are for the
convenience of reference only and shall not affect its interpretation.
M. Preparation. This Administration Agreement has been jointly prepared
by the parties hereto and the terms hereof will not be construed in favor of or
against any such party by reason of its participation in such preparation.
N. Reasonableness. Each of the parties will act reasonably and in good
faith on all matters within the terms of this Administration Agreement.
O. Notices. All notices, requests, demands, approvals and other
communications under this Administration Agreement shall be in writing and shall
be deemed duly given upon delivery if delivered personally, upon confirmation of
transmission if sent by telex or facsimile, upon the third Business Day after
mailing if sent by certified or registered mail, postage prepaid, and upon
receipt if sent by reputable overnight carrier, as follows:
If to the Company:
▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With copies to:
▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.,
Vice President and Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Service Provider:
WellPoint Health Networks Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman
and Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
WellPoint Health Networks Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Notices shall be sent by United States mail, by registered or certified mail,
and shall be deemed to have been received three (3) Business Days after deposit
in the mail. Notices may also be sent by hand, by telefax, or by overnight
delivery service, and if so given, shall be deemed received when delivered if a
receipt of delivery is obtained.
Any party may, by notice given in accordance with this
32
35
Administration Agreement to the other parties, designate another address or
person for receipt of notices hereunder.
P. Offset. Notwithstanding any provision of this Administration
Agreement to the contrary, any offset, credit or return permitted by this
Agreement is limited to amounts arising from or in connection with the
Administered Contracts and shall exclude any other amounts including but not
limited to amounts payable pursuant to the Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Administration
Agreement to be executed by their respective officers thereunto duly authorized,
as of the day and year first above written.
▇▇▇▇ ▇▇▇▇▇▇▇ MUTUAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
UNICARE LIFE & HEALTH INSURANCE COMPANY
By:
Name:
Title:
1
36
ANNEX A
Form of Agent Fee Agreement
A-1
37
ANNEX B
Information and data to be provided by the Service Provider Information, data,
and access to supporting records and documentation on book and tax basis, as
appropriate, for the following:
premium receipts on state, local and municipal basis
due and unpaid premiums, deferred premiums and uncollected premiums
book and tax reserves, tax/statutory reserve differences, and reconciliation of
tax reserves with statutory reserves
minimum premium plan (MPP) and administrative services only book and tax
adjustments and premiums; reserves disclosed in Exhibits 9 and 11 to
statutory financial statements
deferred acquisition costs
policyholder dividends and experience refunds
commissions payable
Section 807(f) 10-year spread items
life company tax adjustments (retired lives reserves, non-MPP experience
refunds.)
information for reinsurance accounting
guaranty fund assessments
other information reasonably requested by the Company or necessary or
appropriate to comply with laws, rules or regulations
When information is to be provided
Information to be provided on a basis which permits timely completion of tax and
other required regulatory filings. See the attached example of the timing for
tax and financial information preparation.
Format in which information to be provided
Information to be provided in substantially the format currently provided, or in
a format mutually agreed upon by the parties, which format may include tapes,
disks, hardcopy and other media.
Persons to whom information to be provided
Information to be provided to persons designated, and from time to time updated
by, the Company. For example, consistent with past practices, the timing for
preparation of tax and other financial information for a calendar year is as
follows.
1. Estimated Tax Return Information provided by the following March 31, with
final Tax Return data provided by
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38
August 15.
2. Statutory financial information to prepare Balance Sheet, Income Statement,
Cash Flow and footnotes by January 15.
3. Statutory financial data to prepare the NAIC Life Company Convention Blank
for the Mutual Company by January 30.
4. Statutory financial data to prepare the Canadian Convention Blank for the
Mutual Company by February 5.
5. Supporting detail Canadian policyholder and contractholder financial data for
record purposes at our Toronto office by February 28.
6. Subsequent Statutory financial data to prepare MD&A by February 15; A&H
Experience Exhibit March 1.
7. Financial information prepared in accordance with generally accepted
accounting principles provided January 31.
In addition, consistent with past practices, the timing for preparation of SAP
financial information for each quarter is within fifteen (15) days after the end
of each calendar quarter.
B-1
39
ANNEX C
BANK ACCOUNTS
The Company and the Service Provider shall establish bank accounts for
purposes of fulfilling their respective obligations under this Administration
Agreement and the Coinsurance Agreement as follows:
PREMIUM ACCOUNTS
The Service Provider shall establish and own premium accounts for the
collection of premium and fee payments with respect to the Administered
Contracts. Premiums paid with respect to Coinsured Policies and fees paid with
respect to ASO Contracts and Network Contracts shall be for the account of the
Service Provider.
COMMISSION AND OTHER EXPENSE DISBURSEMENT ACCOUNTS
The Service Provider shall establish and own accounts for the payment
of commissions and other expenses with respect to the Administered Contracts and
shall be responsible for funding such accounts. The Service Provider shall be
liable for payment of commissions and other expenses with respect to the
Administered Contracts.
CLAIMS PAYING ACCOUNTS
Coinsured Policies The Service Provider shall establish and own
accounts for the payment of Claims for Coinsured Policies and for the receipt or
payment of all other amounts to be received or paid after the Effective Time
with respect to the Coinsured Policies under the Coinsurance Agreement. The
Service Provider shall be responsible for funding and administering such
accounts with respect to the payment of claims for Coinsured Policies.
ASO Contracts The Service Provider shall be responsible for obtaining
from the client the proper funding of all disbursement accounts and for
administering client funding of associated client accounts with respect to ASO
Contracts, but shall not otherwise be responsible for proper funding of said
accounts.
OTHER
The parties shall establish and administer such other bank accounts as
they shall mutually determine to be appropriate.
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