EXHIBIT LIST
(8) (e) Purchase Agreement dated February 11, 1998 between
Charter National Life Insurance Company, Leucadia
National Corporation and Allstate Life Insurance Company
(8) (f) Form of Coinsurance Agreement between Charter National
Life Insurance Company and Allstate Life Insurance
Company
(8) (g) Form of Administrative Services Agreement between Charter
National Life Insurance Company and Allstate Life
Insurance Company
(9) (b) Written consent of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
(9) (c) Written consent of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, General Counsel of
Charter National Life Insurance Company
(10) Written consent of Independent Accountants
(14) Power of Attorney
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made this 11th
day of February, 1998, by and among Allstate Life Insurance
Company, an Illinois insurance corporation ("Buyer"), Allstate
Life Insurance Company of New York, a New York insurance company
("Buyer Subsidiary"), Charter National Life Insurance Company, a
Missouri insurance company ("Charter"), Intramerica Life
Insurance Company, a New York insurance company ("ILIC"), and
Leucadia National Corporation, a New York corporation ("Leucadia"
and, together with Charter and ILIC, the "Sellers").
RECITALS:
WHEREAS, Charter and ILIC are engaged in the business of
underwriting, issuing and administering variable life insurance
products, variable annuity products and certain other life
insurance products (the "Business");
WHEREAS, CNL, Inc., a Missouri corporation and wholly owned
subsidiary of Leucadia ("CNL"), acts as principal underwriter for
Charter and ILIC in connection with the Business;
WHEREAS, Sellers wish to sell to Buyer and Buyer Subsidiary,
and Buyer and Buyer Subsidiary wish to purchase from Sellers, the
Business effective as of January 1, 1998 (the "Effective Time")
and Leucadia wishes to sell to Buyer, and Buyer wishes to
purchase from Leucadia, all of the outstanding capital stock of
CNL (collectively, the "Transaction");
WHEREAS, in connection with the Transaction, Charter desires
to cede to Buyer, and Buyer desires to reinsure from Charter, all
of Charter's rights, liabilities and obligations in respect of
Charter's variable life insurance products, variable annuity
products and certain other life insurance and annuity products
identified in the Charter Coinsurance Agreement and the Charter
Reinsurance Agreement (as such terms are defined below)
(collectively, the "Charter Policies") effective as of the
Effective Time;
WHEREAS, in connection with the Transaction, ILIC desires to
cede to Buyer Subsidiary, a wholly owned subsidiary of Buyer and
Buyer Subsidiary desires to reinsure from ILIC, all of ILIC's
rights, liabilities and obligations in respect of ILIC's variable
annuity products identified in the ILIC Coinsurance Agreement (as
such term is defined below) (the "ILIC Policies" and together
with the Charter Policies, the "Policies") effective as of the
Effective Time;
WHEREAS, in connection with the Transaction, Leucadia
desires to sell to Buyer, and Buyer desires to purchase from
Leucadia, all of the issued and outstanding shares of common
stock, no par value, of CNL (the "Common Stock"), all in
accordance with the provisions of this Agreement;
WHEREAS, in connection with the Transaction, the parties
hereto desire that Buyer or Buyer Subsidiary, as appropriate, (i)
pay all costs and expenses associated with the administration of
the Business from the Effective Time through the Closing Date and
(ii) assume and provide all support and administrative services
relating to the Business effective from and after the Closing
Date;
WHEREAS, in connection with the Transaction, (i) Charter and
Buyer intend to enter into the Charter Administrative Services
Agreement (as defined in Section 6.1) and (ii) ILIC and Buyer
Subsidiary intend to enter into the ILIC Administrative Services
Agreement (as defined in Section 6.1); and
WHEREAS, each of Buyer, Buyer Subsidiary, Charter, ILIC, and
Leucadia desire to make certain representations, warranties and
agreements in connection with the Transaction and also desire to
set forth various conditions precedent thereto.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I.
THE TRANSACTION
SECTION 1.1 Reinsurance and Administration. On the terms
and subject to the conditions hereof, at the Closing (as
hereinafter defined), Buyer and Charter shall execute and deliver
each of the Charter Coinsurance Agreement and the Charter
Reinsurance Agreement (as such terms are defined in Section 6.1),
and Buyer Subsidiary and ILIC shall execute and deliver the ILIC
Coinsurance Agreement (as such term is defined in Section 6.1).
SECTION 1.2 Purchase and Sale of Common Stock. On the
terms and subject to the conditions hereof, at the Closing,
Leucadia will sell, assign, transfer and convey to Buyer, and
Buyer will purchase and acquire from Leucadia, all right, title
and interest of Leucadia in and to the Common Stock, free and
clear of all liens, claims, pledges, encumbrances and security
interests ("Liens").
SECTION 1.3 Payment of Consideration. The aggregate
consideration payable by Buyer and Buyer Subsidiary in respect of
the Transaction shall be $30.25 million (the "Purchase Price").
The Purchase Price shall be allocable to the Transaction as set
forth in Exhibit A attached hereto. The Purchase Price shall be
payable in accordance with Exhibit A-1 attached hereto which
exhibit contains a schedule of payments and transfers
contemplated under this Agreement, the Charter Coinsurance
Agreement, Charter Reinsurance Agreement, and ILIC Coinsurance
Agreement. Such schedule is intended to transfer to Buyer all of
the income of the Business (excluding CNL) from and after the
Effective Time to the Closing Date and to compensate Sellers
fully for all expenses of the Business from and after the
Effective Time to the Closing Date. If and to the extent that
any items are inadvertently omitted from Exhibit A-1, such items
shall be, for all purposes of this Agreement, the Charter
Coinsurance Agreement, Charter Reinsurance Agreement, and ILIC
Coinsurance Agreement, deemed to have been included therein. On
the Closing Date, Buyer and Buyer Subsidiary shall pay, in the
aggregate, that amount shown on Exhibit A-1 as "Total Cash Due
Sellers at Closing" (the "Closing Payment") by wire transfer of
immediately available funds to such account or accounts as
Sellers shall have designated at least two days prior to the
Closing Date.
SECTION 1.4 Post-Closing Adjustment. As promptly as
practicable after Closing (but in no event more than 30 days
thereafter), Sellers shall recalculate each item under the "Post
Effective Time Cash Flows" on Exhibit A-1 for the period
beginning with the first day of the quarter in which the Closing
took place through the Closing Date (the "Adjustment Period").
Once the total of such items (as provided for in Exhibit A-1) has
been calculated, Sellers shall send an exhibit in the same form
as Exhibit A-1 for the Adjustment Period to Buyer, Buyer shall
have five business days to review Sellers' calculation.
Following such review period, Buyer and Buyer Subsidiary or
Sellers (as applicable) shall pay the total amount due for the
Adjustment Period to the appropriate party by wire transfer of
immediately available funds to such account or accounts as Buyer
and Buyer Subsidiary or Sellers (as applicable) shall have
designated.
SECTION 1.5 Closing.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Weil,
Gotshal & ▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, at 10:00 a.m., local time on the later of (a) the last day
of the month in which the last remaining condition set forth in
ARTICLES V and VI hereof has been satisfied or waived, or (b)
such other date as Buyer and Sellers may agree upon in writing
(the "Closing Date").
(b) At the Closing, Buyer and Buyer Subsidiary shall (i)
pay the Closing Payment to Sellers by wire transfer of
immediately available funds to such accounts as Sellers specify
to Buyer and Buyer Subsidiary; and (ii) deliver to Sellers such
documents and instruments required to be delivered by Buyer and
Buyer Subsidiary under the terms of this Agreement (including
without limitation the documents described in Section 6.2
required to be executed and delivered by Buyer and Buyer
Subsidiary (the "Buyer Documents")).
(c) At the Closing, Sellers shall deliver to Buyer and
Buyer Subsidiary such documents and instruments required to be
delivered by Sellers under the terms of this Agreement (including
without limitation the documents described in Section 6.1
required to be executed and delivered by Sellers (the "Seller
Documents")).
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, jointly and not severally, makes the following
representations and warranties to Buyer and Buyer Subsidiary:
SECTION 2.1 Organization and Good Standing. Sellers and
CNL are corporations duly organized, validly existing and in good
standing under the Laws (as defined below) of their respective
jurisdictions of incorporation. Sellers and CNL have all
requisite corporate power and authority to own, lease or
otherwise hold their respective assets and to conduct their
respective portions of the Business as presently conducted. Each
Seller and CNL is duly qualified as a foreign corporation and is
in good standing in each jurisdiction which its respective
ownership, lease or use of assets or property or conduct of
business makes such qualification necessary, except where the
failure to be so qualified does not have and cannot reasonably be
expected to have a Material Adverse Effect (as defined below).
As used in this Agreement, the term "Laws" shall mean all laws,
statutes, and regulations of the United States of America or any
state or commonwealth thereof. As used in this Agreement, the
term "Material Adverse Effect" shall mean a material adverse
effect on (i) the Business, (ii) the validity or enforceability
of this Agreement, or (iii) on Sellers' ability to perform their
respective obligations under this Agreement.
SECTION 2.2 Authorization of Agreement; Binding Obligation.
Sellers have all requisite corporate power and authority to
execute and deliver this Agreement and the Seller Documents and
to perform their obligations hereunder and thereunder. The
execution and delivery by Sellers of this Agreement and the
Seller Documents and the performance by Sellers of their
obligations hereunder and thereunder have been duly authorized by
all necessary corporate and stockholder action on the part of
Sellers. This Agreement has been (and the Seller Documents will
be) duly executed and delivered by duly authorized officers of
Sellers and, assuming the due execution and delivery of this
Agreement and the Seller Documents by the other parties hereto
and thereto, constitutes (and each of the Seller Documents will
constitute) valid and binding obligations of Sellers enforceable
against them in accordance with their respective terms, except to
the extent enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting
creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
SECTION 2.3 No Conflicts. The execution and delivery of
this Agreement and the Seller Documents by Sellers do not, and
the performance by Sellers of their obligations hereunder and
thereunder will not, (a) conflict with the articles or
certificate of incorporation or by-laws of any Seller, (b) except
as otherwise previously disclosed in writing to Buyer, conflict
with, result in any violation of, constitute a default (with or
without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration under, any
contract, permit, order, judgment or decree to which any Seller
is a party other than those that individually or in the aggregate
with other such conflicts, violations, defaults, and rights of
termination, cancellation, and acceleration, do not have and
cannot reasonably be expected to have a Material Adverse Effect,
(c) subject to obtaining the approvals and making the filings
described on Schedule 2.3, constitute a violation of any Law
applicable to any Seller other than those that, individually or
in the aggregate with other such violations, do not have and
cannot reasonably be expected to have a Material Adverse Effect,
(d) require any Seller to obtain or make any consent, approval,
order or authorization of, or registration, declaration or filing
with, any domestic or foreign court, government, governmental
agency, authority, entity or instrumentality ("Governmental
Entity") or other person or entity (a "Person"), other than (i)
as described on Schedule 2.3 and (ii) those which the failure to
obtain, make, or give individually or in the aggregate with other
such failures do not have and cannot reasonably be expected to
have a Material Adverse Effect.
SECTION 2.4 Capitalization of CNL. The authorized capital
stock of CNL consists of 30,000 shares, all of which are
designated Common Stock. As of the date hereof, CNL has 10,000
shares of Common Stock issued and outstanding, all of which have
been validly issued, are fully paid and non-assessable and were
not issued in violation of any preemptive rights. There are no
options, warrants, calls, subscriptions, conversion or other
rights, agreements or commitments obligating CNL to issue any
additional shares of capital stock or any other securities
convertible into, exchangeable for or evidencing the right to
subscribe for any shares of capital stock of CNL.
SECTION 2.5 Title to Common Stock of CNL. Leucadia is the
holder of record and owns beneficially all of the shares of
Common Stock free and clear of any Liens.
SECTION 2.6 Licenses.
(a) Sellers and CNL own or hold all licenses,
permits and authorizations required in connection with the
conduct of their respective portions of the Business other than
those that the failure to own or hold individually or in the
aggregate with other such failures do not have and cannot
reasonably be expected to have a Material Adverse Effect.
(b) Sellers and CNL have complied with the material
terms and conditions of each license, permit and authorization
required in connection with the conduct of their respective
portions of the Business, and all such licenses, permits and
authorizations are valid, binding and in full force and effect.
(c) Charter has the right to use, free and clear of
any royalty or other payment obligations, claims of infringement
or alleged infringement or other liens, the Transferred Software
(as defined in Section 4.8); and none of the Sellers is in
conflict with or violation or infringement of, nor has any Seller
received any notice of any such conflict with or violation or
infringement of, any asserted rights of any other Person with
respect to the Transferred Software.
SECTION 2.7 Reinsurance. Set forth on Schedule 2.7 is a
list of all reinsurance agreements relating to all or any portion
of the Business. Each such reinsurance agreement is in full
force and effect and constitutes a legal, valid, and binding
obligation of each party thereto. Neither Seller has received
any notice, whether written or oral, of termination or intention
to terminate from any other party to such reinsurance agreements.
Neither Seller nor, to the best knowledge of Sellers, any other
party to such reinsurance agreements is in violation or breach of
or default under any such reinsurance agreements (or with or
without notice or lapse of time or both, would be in violation or
breach of or default under any such reinsurance agreements) other
than those violations, breaches, or defaults that individually or
in the aggregate with other such violations, breaches, or
defaults do not have and cannot reasonably be expected to have a
Material Adverse Effect.
SECTION 2.8 Litigation. There are no actions, suits,
investigations, arbitrations, or similar proceedings pending, or
(to the knowledge of Sellers) threatened, against any Seller or
CNL or any of their respective assets or properties, at law or in
equity, in, before, or by any Governmental Entity other than
actions, suits, investigations, arbitrations or proceedings that
individually or in the aggregate with other such actions, suits,
investigations, arbitrations or proceedings do not have and
cannot reasonably be expected to have a Material Adverse Effect.
There is no order, writ, judgment, injunction or decree
outstanding against any Seller or CNL or any of their respective
assets or properties other than orders, writs, judgments,
injunctions or decrees that individually or in the aggregate with
other such orders, writs, judgments, injunctions or decrees do
not have and cannot reasonably be expected to have a Material
Adverse Effect.
SECTION 2.9 Compliance with Laws. Sellers and CNL are not
in violation (or with or without notice or lapse of time or both,
would be in violation) of any Law, order, writ, judgment,
injunction or decree applicable to their respective business,
operations, affairs, assets or properties other than such
violations which individually or in the aggregate with other such
violations do not have and cannot reasonably be expected to have
a Material Adverse Effect.
SECTION 2.10 Seller Financial Statements. Sellers have
previously delivered or made available to Buyer true and complete
copies of the following:
(a) the annual statements for Charter and ILIC as
of and for the years ended December 31, 1995 and 1996; and
(b) the quarterly statements for Charter and ILIC
as of and for the quarters ended March 31, 1997, June 30, 1997,
and September 30, 1997.
Each such statement (i) was prepared in all material
respects in accordance with the accounting practices required or
permitted by the insurance regulatory authority in the applicable
state, consistently applied throughout the specified period and
in the comparable period in the immediately preceding year and
(ii) presents fairly in all material respects the financial
position of Charter or ILIC (as appropriate) as of the respective
dates thereof and the related summary of operations and changes
in capital and surplus and in cash flows of Charter or ILIC (as
appropriate) for and during the respective periods covered
thereby (subject, in the case of the quarterly statements, to
normal year-end adjustments).
SECTION 2.11 CNL Financial Statements.
(a) Sellers have previously delivered or made
available to Buyer true and complete copies of the CNL's audited
statements of financial condition as of December 31, 1995 and
1996, together with the related audited statements of income,
changes in stockholders' equity and cash flows for the calendar
years then ended. Each such statement (i) was prepared in all
material respects in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout
the specified period and in the comparable period in the
immediately preceding year and (ii) presents fairly in all
material respects the financial position of CNL as of the
respective dates thereof and the related results of operations
and changes in cash flows of CNL for and during the respective
periods covered thereby.
(b) Sellers have previously delivered or made
available to Buyer true and complete copies of CNL's unaudited
FOCUS Reports - Part II(A) containing statements of assets,
liabilities, and ownership equity as of March 31, 1997, June 30,
1997, and September 30, 1997, together with the related income
statements for the respective quarters ended on such dates. The
totals presented in the statements of assets, liabilities,
ownership equity, and income contained therein (i) were prepared
in all material respects in accordance with GAAP consistently
applied throughout the specified period and in the comparable
period in the immediately preceding year and (ii) present fairly
in all material respects the financial position of CNL as of the
respective dates thereof and the related results of operations of
CNL for and during the respective periods covered thereby.
SECTION 2.12 Material Changes. Except as disclosed in
Schedule 2.12 or as permitted or otherwise contemplated by this
Agreement, since September 30, 1997:
(a) there has not been, occurred, or arisen any
change, event (including without limitation any damage,
destruction, or loss, whether or not covered by insurance),
condition, circumstance, or development of any character other
than those that individually or in the aggregate with other such
changes, events, conditions, circumstances, and developments do
not have and cannot reasonably be expected to have a Material
Adverse Effect; and
(b) Sellers and CNL have conducted their respective
portions of the Business solely in the ordinary course of
business and consistent with past practice.
SECTION 2.13 Brokers' Fees and Commissions. None of
Sellers (or any of their respective directors, officers,
employees or agents) has employed any investment banker, broker
or finder in connection with the transactions contemplated
hereby.
SECTION 2.14 Tax Matters.
(a) Except as set forth on Schedule 2.14(a)(i),
Sellers have filed or caused to be filed, or will file or cause
to be filed on or prior to the Closing Date, all Tax Returns (as
defined in Section 2.14(c) below) that are required to be filed
by, or with respect to, any subsidiaries included with the
affiliated group that includes or included CNL on or prior to the
Closing Date (collectively, the "Seller Returns"); (ii) CNL has
filed or caused to be filed, or will file or cause to be filed on
or prior to the Closing Date, all Tax Returns that are required
to be filed by, or with respect to CNL on or prior to the Closing
Date (collectively, the "CNL Returns"); (iii) the Seller Returns
and CNL Returns are true, complete and accurate in all material
respects; (iv) all Taxes (as defined in Section 2.14(c) below)
due and payable by or with respect to CNL have been, or prior to
the Closing Date will be, timely paid or adequate reserves have
been or will have been established therefor; (v) there is no
claim, audit, action, suit, proceeding or investigation now
pending or, to the knowledge of Sellers, threatened against or
with respect to CNL with respect to any Tax for which CNL could
be liable; (vi) there are no requests for rulings or
determinations in respect of any Tax pending between CNL and any
taxing authority; (vii) CNL has not been a member of an
affiliated, consolidated, combined or unitary group other than
the one of which any of Sellers is the common parent; (viii) CNL
is not currently under any obligation to pay any amounts as a
result of being party, or having been a party, to any tax sharing
agreement other than the tax sharing agreement between Sellers
and CNL; (ix) to the knowledge of Sellers, there are no Liens for
Taxes upon the assets of CNL; (x) CNL will not be required to
include any adjustment in taxable income for any tax period
ending after the Closing Date under Section 481(c) of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
similar provision of the Tax laws of any jurisdiction), as a
result of a change in method of accounting for a taxable period
ending before, or beginning before and ending after, the Closing
Date or pursuant to the provisions of any agreement entered into
with any taxing authority with regard to the Tax liability of
CNL; and (xi) all Taxes that CNL is required by Law to withhold
or collect have been duly withheld or collected, and have been
paid over to the appropriate authorities to the extent due and
payable.
(b) Except to the extent that the tax treatment of
any Policy is not materially less favorable than the tax
treatment of substantially similar products sold or offered by
other insurance companies, the tax treatment under the Code of
all Policies is and at all times has been the same to the
purchaser, policyholder or intended beneficiaries thereof as the
tax treatment under the Code for which such Policies were
purported to qualify or were treated as qualifying, and Sellers
have complied in all respects with all requirements of the Code
with respect to the Policies, including without limitation
withholding and reporting requirements. For purposes of this
Section 2.14(b), the provisions of the Code relating to the tax
treatment of such contracts shall include, but not be limited to,
Sections 72, 79, 101, 401, 408, 457, 818, 7702 and 7702A.
(c) For purposes of this Agreement, (i) the term
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes
including any schedule or attachment thereto; and (ii) the term
"Taxes" means (A) any federal, foreign, state or local income,
business, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, transfer
gains, net worth, franchise, profits, license, withholding,
payroll, employment, salaries, interest, production, excise,
severance, stamp, occupation, premium, property (real or
personal), environmental or windfall profit tax, custom, duty or
other tax, governmental fee, or other like assessment or charge
of any kind whatsoever, together with any interest, penalty,
addition to tax, or additional amount imposed by any governmental
or taxing authority and (B) any liability of the relevant Person
or any subsidiary of the relevant Person for the payment of any
amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group,
or being a party to any agreement or arrangement whereby
liability of the relevant Person or any subsidiary of the
relevant Person for payment of such amounts was determined or
taken into account with reference to the liability of any other
Person.
SECTION 2.15 CNL Closing Date Equity. On the Closing Date,
CNL will have net shareholders' equity (determined on a GAAP
basis) of not less than $250,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to
each Seller:
SECTION 3.1 Organization and Qualification. Each of Buyer
and Buyer Subsidiary is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction
of its incorporation, with all requisite corporate power and
authority to own, lease and operate its properties and to carry
on its businesses as now being conducted. Each of Buyer and
Buyer Subsidiary is qualified or licensed to do business and is
in good standing in each jurisdiction in which the ownership or
leasing of property by it or the conduct of its business requires
such licensing or qualification, except where the failure to be
so qualified or licensed does not have and cannot reasonably be
expected to have a Buyer Material Adverse Effect (as defined
below). As used in this Agreement, the term "Buyer Material
Adverse Effect" shall mean a material adverse effect on (i) the
validity or enforceability of this Agreement or (ii) on Buyer's
and/or Buyer Subsidiary's ability to perform its obligations
under this Agreement
SECTION 3.2 Authorization of Agreement; Binding Obligation.
Each of Buyer and Buyer Subsidiary has all requisite corporate
power and authority to execute and deliver this Agreement and the
Buyer Documents to which it is a party and to perform its
obligations hereunder and thereunder. The execution and delivery
by Buyer and Buyer Subsidiary of this Agreement and the Buyer
Documents to which it is a party and the performance by it of its
obligations hereunder and thereunder have been duly authorized by
all necessary corporate action on the part of Buyer and Buyer
Subsidiary. This Agreement has been (and the Buyer Documents to
which it is a party will be) duly executed and delivered by Buyer
and Buyer Subsidiary and, assuming the due execution and delivery
of this Agreement and the Buyer Documents by the other parties
hereto and thereto, constitutes (and each of the Buyer Documents
to which it is a party will constitute) valid and binding
obligations of Buyer and Buyer Subsidiary, enforceable against
Buyer and Buyer Subsidiary in accordance with their terms, except
to the extent enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws
affecting creditors' rights in general and subject to general
principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
SECTION 3.3 No Conflicts. The execution and delivery of
this Agreement and the Buyer Documents by Buyer and Buyer
Subsidiary do not, and the performance by Buyer and Buyer
Subsidiary of their respective obligations hereunder and
thereunder will not, (a) conflict with the articles or
certificate of incorporation or by-laws of Buyer or Buyer
Subsidiary, (b) conflict with, result in any violation of,
constitute a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation
or acceleration under, any contract, permit, order, judgment or
decree to which Buyer or Buyer Subsidiary is a party other than
those which individually or in the aggregate with other such
conflicts, violations, defaults, and rights of termination,
cancellation, and acceleration do not have and cannot reasonably
be expected to have a Buyer Material Adverse Effect, (c) subject
to obtaining the approvals described on Schedule 3.3, constitute
a violation of any Law applicable to Buyer or Buyer Subsidiary,
other than violations which individually or in the aggregate with
other such violations do not have and cannot reasonably be
expected to have a Buyer Material Adverse Effect, (d) require
Buyer or Buyer Subsidiary to obtain or make any consent,
approval, order or authorization of, or registration, declaration
or filing with, any Governmental Entity or other Person, other
than (i) as described on Schedule 3.3 and (ii) those which the
failure to obtain, make, or give individually or in the aggregate
with other such failures do not have and cannot reasonably be
expected to have a Buyer Material Adverse Effect.
SECTION 3.4 Licenses.
(a) Each of Buyer and Buyer Subsidiary owns or
holds all licenses, permits and authorizations required in order
to perform its obligations under this Agreement and the Buyer
Documents to which it is a party other than those that the
failure to own or hold individually or in the aggregate with
other such failures do not have and cannot reasonably be expected
to have a Buyer Material Adverse Effect.
(b) Each of Buyer and Buyer Subsidiary has complied
with the material terms and conditions of each license, permit
and authorization required in order to perform its obligations
under this Agreement and the Buyer Documents to which it is a
party, and all such licenses, permits and authorizations are
valid, binding and in full force and effect.
SECTION 3.5 Brokers' Fees and Commissions. Except for
Global Reinsurance Intermediaries (all of the fees, expenses, and
other liabilities of which will be paid by Buyer), neither Buyer
nor Buyer Subsidiary nor any of their respective directors,
officers, employees or agents has employed any investment banker,
broker or finder in connection with the transactions contemplated
hereby.
SECTION 3.6 Litigation. There are no actions, suits,
investigations, arbitrations, or similar proceedings pending, or
(to the knowledge of Buyer or Buyer Subsidiary) threatened,
against Buyer or Buyer Subsidiary or any of their respective
assets or properties, at law or in equity, in, before, or by any
Governmental Entity other than actions, suits, investigations,
arbitrations, or proceedings that individually or in the
aggregate with other such actions, suits, investigations,
arbitrations, and proceedings do not have and cannot reasonably
be expected to have a Buyer Material Adverse Effect. There is no
order, writ, judgment, injunction or decree outstanding against
Buyer or Buyer Subsidiary or any of their respective assets or
properties other than orders, writs, judgments, injunctions or
decrees that individually or in the aggregate with other such
orders, writs, judgments, injunctions or decrees do not have and
cannot reasonably be expected to have a Buyer Material Adverse
Effect.
SECTION 3.7 Compliance with Laws. Neither Buyer nor Buyer
Subsidiary is in violation (or with or without notice or lapse of
time or both, would be in violation) of any Law, order, writ,
judgment, injunction or decree applicable to its business,
operations, affairs, assets or properties other than such
violations which individually or in the aggregate with other such
violations do not have and cannot reasonably be expected to have
a Buyer Material Adverse Effect.
SECTION 3.8 Certain Agreements. Buyer has received and
reviewed (i) the Marketing and Solicitation Agreement dated
September 30, 1988 by and among ▇▇▇▇▇▇▇ Fund Distributors, Inc.
("▇▇▇▇▇▇▇"), Charter, Charter National Variable Annuities Account
and CNL and (ii) the Marketing and Solicitation Agreement dated
October 25, 1989 by and among Scudder, ILIC, ILIC Variable
Annuities Account and CNL (collectively, the "▇▇▇▇▇▇▇
Agreements"). Buyer understands and acknowledges that the
services under the ▇▇▇▇▇▇▇ Agreements are not exclusive and that
each party thereunder is free to render similar services to
others. In addition, Buyer understands and acknowledges that the
▇▇▇▇▇▇▇ Agreements (i) are not assignable without the consent of
the parties thereto and (ii) may be terminated by ▇▇▇▇▇▇▇,
Charter, or ILIC at any time upon 90 days written notice.
Buyer has also received and reviewed (i) the
Participation Agreement dated September 3, 1993 by and between
▇▇▇▇▇▇▇ Variable Life Investment Fund (the "Fund Organization")
and Charter and (ii) the Participation Agreement dated May 11,
1994 by and between the Fund Organization and ILIC (collectively,
the "Participation Agreements"). Buyer understands and
acknowledges that the Participation Agreements (i) are not
assignable without the consent of the parties thereto and (ii)
may be terminated by any of the parties thereto at any time upon
120 days written notice.
ARTICLE IV.
COVENANTS
Each of the parties hereto covenants and agrees that it
shall comply with all covenants and provisions of this ARTICLE IV
applicable to it, except to the extent (i) Buyer may otherwise
consent in writing, (ii) otherwise required by applicable Law, or
(iii) otherwise required or permitted by this Agreement.
SECTION 4.1 Access to Information. Prior to the Closing,
Charter and ILIC will (and Leucadia will cause CNL to) provide to
the officers, employees, attorneys, accountants and other
representatives of Buyer full access during normal business hours
to the employees, agents, facilities and books and records of
such entities reasonably related to this Agreement and the
transactions contemplated hereby. Buyer will be permitted to
make copies of such books and records at Buyer's sole expense as
may be reasonably necessary in connection therewith.
SECTION 4.2 Conduct of Business. Except as otherwise
provided by this Agreement, during the period from the date of
this Agreement and continuing until the Closing Date:
(a) Charter and ILIC shall carry on their
respective portions of the Business in the usual, regular and
ordinary course as presently conducted and consistent with past
practice;
(b) Charter and ILIC shall use all commercially
reasonable efforts to (i) maintain in full force and effect all
licenses, permits and authorizations necessary to conduct their
respective portions of the Business, (ii) keep available the
services of the present employees of their respective portions of
the Business, and (iii) maintain the goodwill associated with
their respective portions of the Business, including but not
limited to preserving the relationships with policyholders,
agents, suppliers and others having business dealings with
Charter and ILIC;
(c) Charter and ILIC shall refrain from taking any
action to terminate the ▇▇▇▇▇▇▇ Agreements or the Fund
Distribution Agreements; and
(d) Leucadia shall cause CNL to refrain from (i)
paying any dividends or other distributions to Leucadia
(provided, however, that Leucadia may cause CNL to pay one or
more dividends to Leucadia at or prior to the Closing so long as
CNL's shareholders' equity (determined in accordance with GAAP)
on the Closing Date is not less than $250,000) or (ii) entering
into any agreements of any kind outside of the ordinary usual,
regular and ordinary course of business as presently conducted
and consistent with past practice.
SECTION 4.3 Consents. Each party hereto will (a) use all
commercially reasonable efforts to obtain before Closing all
consents, approvals, orders and authorizations of (and prepare
and submit all filings and notifications to) every Governmental
Entity and other Person necessary for such party to perform its
obligations hereunder; and (b) cooperate with the other parties
hereto in obtaining before Closing all consents, approvals,
orders and authorizations of (and preparing and submitting all
filings and notifications to) every Governmental Entity and other
Person necessary for such other parties to perform their
obligations hereunder.
SECTION 4.4 Public Announcements and Employee
Communications. At all times prior to the Closing Date, Buyer
and Sellers will consult with each other and will mutually agree
(the agreement of each party not to be unreasonably withheld)
upon the content and timing of any press release or any written
or oral communication with employees with respect to the
Transaction, and shall not issue any such press release or
employee communication prior to such consultation and agreement,
except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any securities exchange or
any stock exchange regulations; provided, however, that, if
possible, Buyer and Sellers will give prior notice to the other
party as promptly as practicable under the circumstances of the
content and timing of any such press release or employee
communication required by applicable Law or by obligations
pursuant to any listing agreement with any securities exchange or
any stock exchange regulations.
SECTION 4.5 Disclosure Supplements. From time to time
prior to the Closing, each of the parties hereto will supplement
or amend the schedules delivered in connection herewith with
respect to any matter which, if existing or occurring at or prior
to the date of this Agreement, would have been required to be set
forth or described in any such schedule or which is necessary to
correct any information in such schedule which has been rendered
inaccurate thereby. If the Closing occurs, Buyer waives any
right or claim it may otherwise have or have had on account of
any matter so disclosed in such supplement or amendment.
SECTION 4.6 Financial Statements.
(a) As promptly as practicable until the Closing
Date, Sellers shall deliver to Buyer true and complete copies of
(i) the annual statement filed by Charter and ILIC with their
respective states of domicile for the year ended December 31,
1997; and (ii) each quarterly statement filed by Charter and ILIC
with their respective states of domicile for calendar quarters
ended after December 31, 1997. Each such statement will be
prepared in all material respects in accordance with the
accounting practices required or permitted by the insurance
regulatory authority in the applicable state, consistently
applied throughout the specified period and in the comparable
period in the immediately preceding year.
(b) As promptly as practicable until the Closing
Date, Sellers shall deliver to Buyer true and complete copies of
CNL's audited statement of financial condition as of December 31,
1997, together with the related audited statements of income,
changes in stockholders' equity and cash flows for the calendar
year then ended. Such statement will be prepared in all material
respects in accordance with GAAP consistently applied throughout
the specified period and in the comparable period in the
immediately preceding year.
(c) As promptly as practicable until the Closing
Date, Sellers shall deliver to Buyer true and complete copies of
CNL's unaudited FOCUS Reports - Part II(A) containing statements
of assets, liabilities, and ownership equity as of the last day
of each calendar quarter after December 31, 1997, together with
the related income statements for the respective quarters ended
on such dates.
SECTION 4.7 Administration.
(a) Administration of the Business. From and after
the Closing Date, Buyer and Buyer Subsidiary shall administer the
Business pursuant to and in accordance with the terms of the
Charter Administrative Services Agreement and the ILIC
Administrative Services Agreement, respectively. At the Closing,
in accordance with Section 1.3 above, Buyer and Buyer Subsidiary
shall pay Sellers an amount of cash equal to the sum of all
expenses incurred by Sellers for costs relating to Sellers'
operations conducted at the Facility and for all amounts paid to
third parties in administering the Business, in each case from
the Effective Time through the end of the last quarter preceding
the Closing Date (collectively, "Administrative Expenses"). The
term "Administrative Expenses" shall include without limitation
the following expense categories: employee benefits, payroll,
taxes, rent, supplies and other overhead expenses.
(b) Employee Matters. (i) Effective as of the
Closing, (x) Buyer shall offer employment to the employees of
Sellers identified on Schedule 4.7 (the "Employees") at annual
salaries not less than those identified on such schedule and (y)
Buyer shall grant or make available (as appropriate) to such
Employees all employee benefits granted or made available to
other employees of Buyer employed in comparable positions at
comparable locations; (ii) on or before February 18, 1998, Buyer
will give each of the Employees individual letters detailing (x)
the severance program for such Employee, which for the two
Employees identified on Schedule 4.7 with an asterisk (the
"Identified Employees") will at least equal 26 weeks of
severance, and which for each of the other Employees shall not
exceed two weeks of severance for each year of service as an
employee of Charter or Buyer, and (y) the terms of a retention
bonus for each such Employee which shall be mutually acceptable
to Buyer and Sellers; (iii) Sellers shall be responsible for all
items listed on the May 5, 1997 letter to each of the Identified
Employees (previously provided to Buyer), other than the
severance provisions outlined in the first bullet point of each
such letter for which Buyer's severance program shall be
substituted; and (iv) in no event shall Buyer be liable or
responsible for accrued liabilities under any of Seller's
employee benefit plans. Nothing in this Agreement shall be
construed as limiting in any way the rights of Buyer as the
employer of the Employees on and after the Closing Date,
including, but not limited to the right to change salary or wages
or to modify benefits or other terms and conditions of employment
of Employees to the extent that any such changes are done in
accordance with Buyer's normal practices and to the further
extent that any modification to benefits or other terms and
conditions of employment of any Employee apply generally to
employees of Buyer.
(c) Facility Matters. At Closing, Buyer shall
assume from Charter, and Charter shall assign to Buyer, all of
Charter's rights and obligations under that certain lease
agreement, dated April 1, 1994, between ▇▇▇▇▇▇ ▇▇▇▇▇▇ Properties,
Inc. and Charter (as amended through the Closing Date) relating
to Charter's offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "Facility").
(d) Sale of Facility Assets. At the Closing, Buyer
shall purchase from Charter all of the furniture, fixtures, and
other assets located at the Facility and described on Schedule
4.7(d) (the "Facility Assets") at the net book value thereof
(determined in accordance with GAAP) as of December 31, 1997 (the
"Assets Payment"), the consideration for which will be paid
pursuant to Section 1.3.
(e) Transition Services. To the extent that
Sellers' Employees are reasonably able to perform such services,
Sellers shall provide to Buyer reasonable and normal services
relating to the effectuation of an orderly transition of the
operation and administration of the Business to Buyer (the
"Transition Services"). To the extent that Sellers' employees
are not reasonably able to perform Transition Services requested
by Buyer, Sellers shall promptly offer to arrange for the
provision of such Transition Services by one or more third
parties (a "Third Party Provider"). Such offer shall be made by
means of a written notice to Buyer indicating the estimated fees
and expenses of such Third Party Provider to perform such
services. Should Buyer respond in writing to Sellers that Buyer
desires the Third Party Provider to provide such services,
Sellers shall arrange for the provision of such services by the
Third Party Provider and Buyer shall be solely responsible for
all fees, expenses, and other costs of such Third Party Provider.
In addition, prior to the Closing Date, Sellers shall provide to
Buyer copies of all policy forms, and all other related forms,
including drafts and check stock, used by Sellers in its
administration of the Reinsured Policies.
Buyer agrees to provide reasonable expense
reimbursement to Sellers in the event that Sellers are requested
by Buyer to provide services beyond the reasonable and normal
Transition Services described in Section 2(e) above, such
reimbursement to be negotiated by the parties in advance which
shall be reasonable and customary under industry standards. In
addition, Buyer shall reimburse Sellers for any amounts paid by
Sellers to Third Party Providers in connection with Section 2(e)
above.
If and to the extent that Buyer requests that Sellers
perform Transition Services, on or before the 15th day of each
month, Sellers shall provide Buyer with a reasonably detailed
invoice setting forth amounts due from Buyer with respect to
Transition Services provided hereunder during the immediately
preceding month. Within ten business days after receipt by Buyer
of each such invoice, Buyer shall pay to Sellers in cash the
amounts reflected on such invoice to the extent that such amounts
have not already been paid to Sellers.
SECTION 4.8 Transfer of Software Licenses. At Closing,
Charter shall assign and transfer to Buyer, and Buyer shall
assume from Charter, all of Charter's right, title, and interest
in and to the software licenses described on Schedule 4.8 hereto
(the "Transferred Software").
SECTION 4.9 Termination and Recapture of Reinsurance. From
and after the Closing Date, Sellers shall use all commercially
reasonable efforts to terminate all reinsurance agreements
relating to the Business and recapture all policy liabilities
thereunder (other than the Charter Coinsurance Agreement, Charter
Reinsurance Agreement, and ILIC Coinsurance Agreement).
Notwithstanding the foregoing, Sellers shall not be obligated to
terminate any reinsurance agreement if the costs and expenses
associated with such termination, together with the costs and
expenses associated with all other such terminations, is
reasonably estimated to exceed 10% of the reinsurance reserve
credits under such reinsurance agreements. Buyer shall reimburse
Sellers for any costs and expenses incurred by Sellers in
connection with such terminations, but in no event shall such
costs and expenses exceed 10% of the reinsurance reserve credits
under such reinsurance agreements. Upon termination of each such
reinsurance agreement, Buyer shall reinsure (pursuant to and in
accordance with the Charter Coinsurance Agreement and the Charter
Reinsurance Agreement) all obligations under the portions of the
Business that were covered by such agreement. To the extent that
Sellers are unable to terminate any such reinsurance agreement on
or before the first anniversary of the Closing Date, Sellers
shall use all commercially reasonable efforts to assign all of
Sellers' rights and obligations under such reinsurance agreement
to Buyer. To the extent that any termination or recapture
amounts are paid to Sellers as a result of any termination or
recapture effected pursuant to this Section 4.9, Sellers shall
promptly pay such amounts to Buyer.
SECTION 4.10 New Policies. Pursuant to and in accordance
with the Charter Coinsurance Agreement, Charter will, at Buyer's
request, continue to underwrite and issue new annuity contracts
at and after the Closing Date to residents of certain states
until the earlier to occur of (i) 90 days after receipt by
Charter of a written notice from Buyer requesting that Charter
cease underwriting and issuing such contracts or (ii) the third
anniversary of the Closing Date. Pursuant to and in accordance
with the ILIC Coinsurance Agreement, ILIC will, at Buyer
Subsidiary's request, continue to underwrite and issue new
annuity contracts at and after the Closing Date to residents of
the State of New York until the earlier to occur of (i) 90 days
after receipt by ILIC of a written notice from Buyer Subsidiary
requesting that ILIC cease underwriting and issuing such
contracts or (ii) the third anniversary of the Closing Date.
SECTION 4.11 ▇▇▇▇▇▇▇ and Participation Agreements. The
parties agree that: (i) neither the ▇▇▇▇▇▇▇ Agreements nor the
Participation Agreements will be assigned to Buyer or Buyer
Subsidiary and (ii) under the Administrative Services Agreements,
Buyer and Buyer Subsidiary shall administer, perform and enforce
the ▇▇▇▇▇▇▇ Agreements and the Participation Agreements, insofar
as they relate to the Business, on behalf of Sellers, and will
bear the cost of such administration, performance and
enforcement. Buyer shall have the right to cause Sellers to
effect the termination of any ▇▇▇▇▇▇▇ Agreement and/or
Participation Agreement and/or to enter into new marketing and/or
participation agreements relating to the Business or underlying
funding media for the Separate Accounts. Any such termination
shall be on terms and conditions acceptable to Buyer at no cost
to Sellers. Without the prior written consent of Buyer, Sellers
shall not agree to any amendment or termination of any of the
▇▇▇▇▇▇▇ Agreements or Participation Agreements or any other
agreements or arrangements with ▇▇▇▇▇▇▇ or the Fund Organization.
SECTION 4.12 Principal Underwriter Agreements. Immediately
after Closing, Buyer shall cause CNL to enter into, and Sellers
shall enter into, any agreements (the "New CNL Underwriter
Agreements") between CNL and Sellers that are required for CNL to
perform, commencing on the Closing Date, the functions of a
principal underwriter (as such term is defined in the Investment
Company Act of 1940, as amended, together with related rules,
regulations, interpretations, and releases thereunder) of the
Policies and any New Policies sold pursuant to the Charter
Coinsurance Agreement and the ILIC Coinsurance Agreement. Any
such agreements shall contain terms substantially similar to
those contained in the Principal Underwriter Agreements to which
CNL is currently a party with Charter and ILIC.
SECTION 4.13 Disclosure. Buyer and Sellers shall (i) draft
disclosure materials describing the transactions contemplated by
this Agreement to be distributed to policyholders and
contractholders of Charter and ILIC in accordance with applicable
Law and (ii) ensure that such materials are finalized by the
Closing Date. As promptly as practicable after the Closing Date
(but in no event more than 10 Business Days thereafter), Buyer
and Buyer Subsidiary shall distribute such materials by first
class U.S. mail to all holders of insurance policies and annuity
contracts constituting part of the Business. In addition to the
foregoing, Buyer, Buyer Subsidiary and Sellers shall draft post
effective amendments to the registration statements as may be
necessary for the Policies describing the transactions
contemplated by this Agreement. Such post effective amendments
shall include as exhibits material documents relating to the
Transaction, including the Charter Coinsurance Agreement, the
Charter Reinsurance Agreement, the Charter Administrative
Services Agreement, the ILIC Coinsurance Agreement, and the ILIC
Administrative Services Agreement.
SECTION 4.14 Post-Closing Form BD. As promptly as
practicable following the Closing Date (but in any event within
the time prescribed therefor by applicable requirements of the
National Association of Securities Dealers ("NASD")), Buyer shall
cause CNL to file an amended FORM BD for CNL with the NASD
reflecting the change in ownership of CNL resulting from the
consummation of the transactions contemplated by this Agreement.
SECTION 4.15 Cooperation; Contest. From and after the
Closing Date, each of Sellers and Buyer agrees to provide or
cause its affiliates to provide at no cost and within a
reasonable time any information reasonably necessary for the
preparation of any Tax Returns or for addressing any audit
issues. Each of Sellers, on the one hand, and Buyer, on the
other hand, shall promptly notify the other (the "Other Party")
in the event it becomes aware of any claim, audit, examination or
proceeding relating to any Tax for which the Other Party would be
responsible under the terms of this contract. The Other Party
shall control every aspect of any such claim, examination or
proceeding, including the contest, disposition and settlement
thereof.
SECTION 4.16 Other Tax Matters. Without limiting the
generality of Section 10.4 below, Buyer shall promptly notify
Sellers of any claim, audit, examination, or proceeding of which
it becomes aware relating to the matters described in Section
2.14 above. Responses to any such claim, audit, examination, or
proceeding shall be subject to the prior review and approval of
Sellers. Sellers shall file (or prior to the Closing Date cause
CNL to file) (i) all federal tax returns for CNL for the period
commencing on the Effective Time and ending on the Closing Date
and (ii) all other tax returns for CNL that are required to be
filed prior to the Closing Date. From and after the Closing
Date, Buyer shall file (or cause CNL to file) all other tax
returns for CNL that are required to be filed on and after the
Closing Date. Sellers and Buyer shall cooperate fully with each
other and make available to each other in a timely fashion such
Tax data and other information as may be reasonably required by
Sellers or Buyer in connection with the preparation or filing of
any Tax Return and any audit, claim, examination, or proceeding
in respect of Taxes.
SECTION 4.17 Transfer of Administration. From and after
the date hereof, Buyer and Sellers shall use all commercially
reasonable efforts to (i) set up in the Facility information
systems of Buyer to be used in providing administrative services
under the Charter Administrative Services Agreement and the ILIC
Administrative Services Agreement and (ii) transfer all data
necessary to administer the Business to such information systems.
SECTION 4.18 Interim Administrative Platform. If the
Closing does not occur on or before the date of termination of
Charter's temporary license (the "Continuum License") with CSC
Continuum, Inc., as such may, at Buyer's sole expense, be (i)
extended beyond June 30, 1998, (ii) modified or (iii) replaced
with a permanent license or another temporary license, in each
case upon consultation with Buyer (the "Expiration Date"), from
and after the Expiration Date until the Closing Date, Buyer shall
provide, to the extent permitted under Buyer's licenses (at
Buyer's sole cost and expense), all software and information
systems which, together with the Transferred Software, will
enable Sellers to continue to administer the Business during such
period in compliance with applicable Law and Sellers'
administrative practices in effect as of the date hereof
(collectively, the "Interim Administrative Platform"). Buyer
shall make such software and information systems available to
Sellers at the Facility. In the event that this Agreement is
terminated for any reason, Buyer shall (i) continue to provide
the Interim Administrative Platform to Sellers for a period of
one year following the termination of this Agreement, (ii) assist
and cooperate with Sellers to effectuate a prompt and orderly
transfer to Sellers or its designee(s) of all data and other
materials transferred to the Interim Administrative Platform
pursuant to this Section and Section 4.17, and (iii) otherwise
assist and cooperate with Sellers in transitioning the
administration of the Business from the Interim Administrative
Platform to a platform of Sellers' choice. In the event that
this Agreement is terminated for any reason, Sellers shall (i)
pay Buyer an aggregate fee of $10,000 per month for each month
from the Expiration Date through the first anniversary of the
termination of this Agreement and (ii) reimburse Buyer for any
reasonable out-of-pocket costs and expenses incurred by Buyer in
connection with such transition.
If Buyer is unable to provide the Interim
Administrative Platform under Buyer's software licenses then in
effect, from and after the Expiration Date to the Closing Date
(or, if this Agreement shall be terminated, from and after the
Expiration Date to the first anniversary of the date of
termination of this Agreement), Buyer shall pay all costs of
obtaining licenses necessary to permit Sellers to continue to
administer the Business in compliance with applicable Law and
Sellers' administrative practices in effect on the date hereof.
SECTION 4.19 Books and Records. On the Closing Date,
Sellers will deliver to Buyer all books and records of CNL. If
(at any time after the Closing) any of Sellers discovers in its
possession or under its control any other books and records of
CNL, such Seller will promptly deliver such books and records to
Buyer.
SECTION 4.20 CNL True-Up. Within 30 days after the Closing
Date, either (i) Buyer shall pay Leucadia an amount of cash equal
to the excess of the net shareholders' equity (determined on a
GAAP basis) of CNL as of the Closing Date over $250,000 or (ii)
Leucadia shall pay Buyer an amount of cash equal to the
deficiency of the net shareholders' equity (determined on a GAAP
basis) of CNL as of the Closing Date under $250,000.
ARTICLE V.
CONDITIONS TO CLOSING
SECTION 5.1 Conditions Precedent to Obligations of Buyer
and Buyer Subsidiary. The obligations of Buyer and Buyer
Subsidiary under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or
prior to Closing, of all of the following conditions, any one or
more of which may be waived in whole or in part at the option of
Buyer:
(a) Representations, Warranties and Covenants.
(i) All representations and warranties of Sellers
contained in this Agreement (or in any exhibit, schedule,
certificate or document delivered pursuant to this Agreement)
that are qualified as to materiality shall be true and correct
and all representations and warranties of Sellers made in this
Agreement (or in any exhibit, schedule, certificate or document
delivered pursuant to this Agreement) that are not so qualified
shall be true and complete in all material respects, in each case
as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date (except to the extent that
they expressly relate only to an earlier time, in which case they
shall have been true and complete as of such earlier time).
(ii) All of the terms, covenants and conditions
to be complied with and performed by Sellers on or prior to the
Closing Date shall have been complied with or performed in all
materials respects.
(iii) Buyer and Buyer Subsidiary shall have
received a certificate, dated as of the Closing Date, executed by
Sellers, certifying that the conditions specified in Sections
5.1(a)(i) and (ii) have been satisfied.
(b) Closing Documents. Sellers shall have executed
and delivered the Seller Documents.
(c) No Injunction. There shall not be in effect on
the Closing Date any writ, judgment, injunction, decree, or
similar order of any court or governmental or regulatory
authority restraining, enjoining, or otherwise preventing
consummation of any of the transactions contemplated by this
Agreement in accordance with the terms of this Agreement.
(d) Consents. The consents, approvals, orders,
authorizations, filings, and notifications described on Schedules
2.3 and 3.3 shall have been obtained or made.
(e) ▇▇▇▇▇▇▇ Agreements. Buyer and ▇▇▇▇▇▇▇ and
Buyer Subsidiary and ▇▇▇▇▇▇▇ shall have entered into marketing
and solicitation agreements in form and substance reasonably
satisfactory to Buyer.
(f) Termination of Tax Allocation Agreement. Any
tax allocation or tax sharing agreement that may have been
entered into by CNL,Inc. shall be terminated as of the Closing
Date.
SECTION 5.2 Conditions Precedent to Obligations of Sellers.
The obligations of Sellers under this Agreement to consummate the
transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of all the following
conditions, any one or more of which may be waived at the option
of Sellers:
(a) Representations, Warranties and Covenants.
(i) All representations and warranties of Buyer
contained in this Agreement (or in any exhibit, schedule,
certificate or document delivered pursuant to this Agreement)
that are qualified as to materiality shall be true and correct
and all representations and warranties of Buyer made in this
Agreement (or in any exhibit, schedule, certificate or document
delivered pursuant to this Agreement) that are not so qualified
shall be true and complete in all material respects, in each case
as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date (except to the extent that
they expressly relate only to an earlier time, in which case they
shall have been true and complete as of such earlier time).
(ii) All of the terms, covenants and conditions
to be complied with and performed by Buyer and Buyer Subsidiary
on or prior to the Closing Date shall have been complied with or
performed in all material respects.
(iii) Sellers shall have received a certificate,
dated as of the Closing Date, executed by Buyer, certifying that
the conditions specified in Sections 5.2(a)(i) and (ii) have been
satisfied.
(b) Closing Documents. Each of Buyer and Buyer
Subsidiary shall have executed and delivered the Buyer Documents
to which it is a party.
(c) No Injunction. There shall not be in effect on
the Closing Date any writ, judgment, injunction, decree, or
similar order of any court or governmental or regulatory
authority restraining, enjoining, or otherwise preventing
consummation of any of the transactions contemplated by this
Agreement in accordance with the terms of this Agreement.
(d) Consents. The consents, approvals, orders,
authorizations, filings, and notifications described on Schedules
2.3 and 3.3 shall have been obtained or made.
ARTICLE VI
DOCUMENTS TO BE DELIVERED AT THE CLOSING
SECTION 6.1 Documents to be Delivered by Sellers. At the
Closing, Sellers shall deliver to Buyer and Buyer Subsidiary, as
applicable, the following:
(a) Officer's Certificate. The certificate, dated
the Closing Date, duly executed by Sellers as required by Section
5.1(a)(iii).
(b) Stock Certificates. A certificate or
certificates representing all the shares of Common Stock in
appropriate form for transfer to Buyer or accompanied by stock
powers duly executed in blank.
(c) Charter Coinsurance Agreement. A coinsurance
agreement, in the form attached hereto as Exhibit B (the "Charter
Coinsurance Agreement"), duly executed by Charter.
(d) Charter Reinsurance Agreement. A reinsurance
agreement, in the form attached hereto as Exhibit C (the "Charter
Reinsurance Agreement"), duly executed by Charter.
(e) Charter Administrative Services Agreement. An
administrative services agreement, in the form attached hereto as
Exhibit D (the "Charter Administrative Services Agreement"), duly
executed by Charter.
(f) ILIC Coinsurance Agreement. A coinsurance
agreement, in the form attached hereto as Exhibit E (the "ILIC
Coinsurance Agreement"), duly executed by ILIC.
(g) ILIC Administrative Services Agreement. An
administrative services agreement, in the form attached hereto as
Exhibit F (the "ILIC Administrative Services Agreement"), duly
executed by ILIC.
(h) Evidence of Approvals. Evidence of receipt of
the consents and approvals described on Schedule 2.3 and Section
4.3.
(i) ▇▇▇▇ of Sale. A ▇▇▇▇ of sale in a form
mutually acceptable to the parties hereto effecting the sale of
the Facility Assets to Buyer in exchange for the Assets Payment
pursuant to Section 4.7(d), duly executed by Charter.
SECTION 6.2 Documents to be Delivered by Buyer. At the
Closing, Buyer and Buyer Subsidiary, as applicable, will deliver
to Sellers the following:
(a) Closing Payment. Evidence of a wire transfer
in the amount of the Closing Payment in accordance with Section
1.3.
(b) Officer's Certificate. The certificate, dated
the Closing Date, duly by Buyer as required by Section
5.2(a)(iii).
(c) Other Buyer Documents. The Charter Coinsurance
Agreement, the Charter Reinsurance Agreement, and the Charter
Administrative Services Agreement, each duly executed by Buyer.
(d) Other Buyer Subsidiary Documents. The ILIC
Coinsurance Agreement and the ILIC Administrative Services
Agreement, each duly executed by Buyer Subsidiary.
(e) Evidence of Approvals. Evidence of receipt of
the consents and approvals described on Schedule 3.3 and Section
4.3.
ARTICLE VII.
TERMINATION AND ABANDONMENT
SECTION 7.1 Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any
time prior to the Closing:
(a) by mutual consent of Sellers and Buyer; or
(b) by any Seller or Buyer:
(i) if a court of competent jurisdiction or
Governmental Authority shall have issued an order, decree or
ruling or taken any other action (which order, decree or ruling
the parties hereto shall use their reasonable best efforts to
lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall
have become final and nonappealable; or
(ii) if the Closing shall not have occurred on or
before September 30, 1998; provided, however, that (A) Sellers
shall have the right, in their sole discretion, to extend the
time period in this Section 7.1(b)(ii) for an additional 60 days
and (B) the right to terminate this Agreement shall not be
available to any party whose breach of this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur
on or before such date.
SECTION 7.2 Procedure and Effect of Termination. In the
event of termination and abandonment of the transactions
contemplated hereby pursuant to Section 7.1, written notice
thereof shall be given to the other parties to this Agreement and
this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided
herein:
(a) Upon request therefor, each party will
redeliver all documents, work papers and other material of any
other party relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the
party furnishing the same; and
(b) No party hereto shall have any liability or
further obligation to any other party to this Agreement resulting
from such termination except (i) that the provision of this
Section 7.2 and Sections 4.18, 11.4, 11.11 and 11.13 shall remain
in full force and effect, and (ii) no party waives any claim or
right against a breaching party to the extent that such
termination results from the breach by a party hereto of any of
its representations, warranties, covenants or agreements set
forth in this Agreement.
ARTICLE VIII.
NON-COMPETITION
SECTION 8.1 Non-Competition. In consideration of the
benefits of this Agreement to Leucadia and in order to induce
Buyer and Buyer Subsidiary to enter into this Agreement, Leucadia
hereby covenants and agrees that for a period of (a) three years
following the Closing Date neither Leucadia nor any of its
affiliates under actual control of Leucadia shall commence
selling any variable annuity contracts or variable life insurance
policies in the United States and (b) ten years following the
Closing Date, neither Leucadia nor any of its affiliates under
actual control of Leucadia will enter into any form of a
marketing and solicitation agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Investments, Inc., ▇▇▇▇▇▇▇ Fund Distributors, Inc., ▇▇▇▇▇▇▇
Variable Life Investment Fund, or any successor thereto for the
sale of variable annuity products and variable life insurance
products. Notwithstanding the foregoing, Leucadia retains the
right to acquire insurance companies that are not engaged
primarily in the business of offering variable annuity contracts
or variable life insurance policies. Leucadia specifically
agrees that this covenant is an integral part of the inducement
of Buyer to enter into this Agreement and that Buyer (or its
successor assigns) shall be entitled to injunctive relief in
addition to all other legal and equitable rights and remedies
available to it in connection with a breach by Leucadia or any of
its affiliates of any provision of this Section 8.1 and that,
notwithstanding the foregoing, no right, power or remedy
conferred upon or reserved or exercised by Buyer in this Section
8.1 is intended to be exclusive of any other right, power or
remedy, each and every one of which (now or hereafter existing at
law, in equity, by status or otherwise) shall be cumulative and
concurrent. Each of Leucadia and Buyer agrees that in the event
that either the length of time or area set forth herein is deemed
too restrictive by any governmental entity of competent
jurisdiction, the covenants and agreements in this Section 8.1
shall be enforceable for such time and within such geographical
area as such governmental entity may deem reasonable under the
circumstances.
ARTICLE IX.
SURVIVAL OF PROVISIONS
SECTION 9.1 Survival. The representations and warranties
required to be made by the Sellers and Buyer in this Agreement or
in any certificate delivered pursuant hereto will survive until
the second anniversary of the Closing Date, except that (i) the
representations and warranties of Sellers set forth in Sections
2.4, 2.5, 2.13, and 2.14 hereof will survive until 30 days after
the expiration of all statutes of limitation applicable to each
such Section and (ii) the representations and warranties of Buyer
set forth in Section 3.5 hereof will survive until 30 days after
the expiration of all statutes of limitation applicable to such
Section. Notwithstanding the foregoing, any representation or
warranty shall survive the time it would otherwise terminate
pursuant to this Section to the extent that notice of a breach
thereof giving rise to a right of indemnification shall have been
given by a party hereto prior to the expiration of the relevant
survival period in accordance with Article X below.
ARTICLE X.
INDEMNIFICATION
SECTION 10.1 Indemnification by Sellers. Subject to the
provisions of Sections 9.1, 10.3, and 10.4 hereof, the Sellers
shall indemnify and hold harmless Buyer and Buyer Subsidiary for
(a) any and all monetary damages, charges, losses, deficiencies,
liabilities, obligations, costs, fees, and expenses (including,
without limitation, reasonable fees and disbursements of counsel
incident to the enforcement of rights under Section 10.1 or 10.2
hereof) (collectively, "Damages") resulting from or relating to
any breach by the Sellers of any representation, warranty,
covenant, or agreement made by the Sellers in this Agreement,
(b)(i) any Taxes of CNL with respect to taxable periods ending on
or before the Closing Date; (ii) any Taxes imposed on or in
respect of CNL with respect to taxable periods including but not
ending on the Closing Date which are allocable to the portion of
such taxable period ending on the Closing Date; and (iii) any
Taxes imposed on or in respect of any corporation (other than any
Taxes imposed on CNL or Buyer or any affiliate of Buyer for any
Tax period) with which CNL filed a Tax Return on a combined or
consolidated basis for any taxable period that includes the
Closing Date, or that ends on, as of the close of or before the
Closing Date (including, without limitation, any Taxes for which
CNL would be liable pursuant to the provisions of Treasury
Regulation Section 1.1502-6), and (c) any Direct Economic Loss
(as defined below) suffered by Buyer as a result of the rejection
by Charter or ILIC of a recommendation of Buyer or Buyer
Subsidiary, as the case may be (a "Recommendation"), pursuant to
Article II(D) of the Charter Coinsurance Agreement, Article II(D)
of the ILIC Coinsurance Agreement or Article II(D) of the Charter
Reinsurance Agreement. Notwithstanding the foregoing, Sellers
shall have no liability under clause (c) above if (i) following
the Recommendation would create a violation of any applicable Law
(a "Violation"), (ii) following the Recommendation would cause a
breach of any Policy (a "Policy Breach"), or (iii) Buyer does not
cause to be delivered to Sellers (within 30 days after receipt by
Buyer of a request therefor based upon Sellers' good faith belief
that implementation of such Recommendation could result in a
Violation or a Policy Breach) an opinion of counsel reasonably
acceptable to Sellers to the effect that following the
Recommendation would neither create a Violation nor a Policy
Breach. The term "Direct Economic Loss" shall mean the amount
due to holders of Policies in respect of the period to which such
Recommendation relates in excess of the amount due to such
holders in respect of such period if Charter or ILIC (as
applicable) had followed such Recommendation.
SECTION 10.2 Indemnification by Buyer. Subject to the
provisions of Sections 9.1, 10.3, and 10.4 hereof, Buyer shall
indemnify and hold harmless each Seller (a) in respect of any and
all Damages resulting from or relating to any breach by Buyer of
any representation, warranty, covenant, or agreement made by
Buyer in this Agreement and (b)(i) any Taxes of CNL with respect
to taxable periods that begin on or after the Closing Date, and
(ii) any Taxes imposed on or in respect of CNL with respect to
taxable periods including but not ending on the Closing Date
which are allocable to the portion of such period beginning after
the Closing Date.
SECTION 10.3 Limitations on Indemnification.
(a) No claim by any Person for indemnification
under this Article X (an "Indemnitee") against any Person (an
"Indemnifying Party"), which claim relates to a breach of a
representation or warranty made in this Agreement, may be made
unless notice of such breach is given in accordance with this
Article X prior to the time the survival period for such
representation or warranty expired.
(b) Notwithstanding anything to the contrary
contained in this Agreement, (i) Sellers will not be liable under
any circumstances for indemnification under Section 10.1 hereof
in an aggregate amount in excess of $2,000,000 and (ii) Buyer
will not be liable under any circumstances for indemnification
under Section 10.2 hereof in an aggregate amount in excess of
$2,000,000.
(c) If an Indemnitee recovers from any third party
(including insurers) all or any part of any amount paid to it by
an Indemnifying Party pursuant to Section 10.1 or 10.2 hereof,
such Indemnitee will promptly pay over to the Indemnifying Party
the amount so recovered (after deducting therefrom the full
amount of the expenses incurred by it in procuring such recovery,
including any taxes and net of any tax benefit resulting from
such recovery and payment), but not in excess of any amount
previously so paid by the Indemnifying Party. If an Indemnitee
recovers from any third party (including insurers) any amount as
to which indemnification may be claimed pursuant to Section 10.1
or 10.2 hereof, such Indemnitee will have no right to claim
indemnification for such amount from the Indemnifying Party.
(d) The Indemnitee shall prosecute diligently and
in good faith any claim for indemnification with any applicable
third party (including insurers) prior to collecting any
indemnification payment pursuant to Section 10.1 or 10.2 hereof.
SECTION 10.4 Notice of Defense of Claims. Promptly after
receipt of notice of any claim or Damages for which an Indemnitee
seeks indemnification under this Article, such Indemnitee shall
give written notice thereof to the Indemnifying Party, but such
notification shall not be a condition to indemnification
hereunder except to the extent of actual prejudice to the
Indemnifying Party. The notice shall state the information then
available regarding the amount and nature of such claim or
Damages and shall specify the provision or provisions of this
Agreement under which the right to indemnification is asserted.
If within 30 days after receiving such notice the Indemnifying
Party gives written notice to the Indemnitee stating that it
intends to defend against such claim or Damages at its own cost
and expense, then defense of such matter, including selection of
counsel (subject to the consent of the Indemnitee which consent
shall not be unreasonably withheld), shall be by the Indemnifying
Party and the Indemnitee shall make no payment in respect of such
claim or Damages as long as the Indemnifying party is conducting
a good faith and diligent defense. Notwithstanding the
foregoing, the Indemnitee shall at all times have the right to
fully participate in such defense at its own expense directly or
through counsel; provided, however, if the named parties to the
action or proceeding include both the Indemnifying Party and the
Indemnitee and representation of both parties by the same counsel
would be inappropriate under applicable standards of professional
conduct, the expenses of one separate counsel for the Indemnitee
shall be paid by the Indemnifying Party. If no such notice of
intent to dispute and defend is given by the Indemnifying Party,
or if such diligent good faith defense is not being or ceases to
be conducted, the Indemnitee shall, at the expense of the
Indemnifying Party, undertake the defense of such claim or
Damages with counsel selected by the Indemnitee, and shall have
the right to compromise or settle the same exercising reasonable
business judgment with the consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. The Indemnitee
shall make available all information and assistance that the
Indemnifying Party may reasonably request and shall cooperate
with the Indemnifying Party in such defense. Notwithstanding
anything herein to the contrary, the Indemnifying Party shall
have the right to settle all claims of third parties for which
indemnification is payable hereunder without the consent of the
Indemnitee so long as such settlement releases the Indemnitee
from all liability for or in connection with such action and does
not materially and adversely impair the ability of the Indemnitee
to carry on its business and does not contain any admission of
wrong doing on the part of the Indemnitee.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
SECTION 11.1 Amendment and Modification. This Agreement
may be amended, modified or supplemented by a written instrument
signed by the parties hereto.
SECTION 11.2 Waiver of Compliance; Consents. Any failure
of Buyer or Buyer Subsidiary, on the one hand, or of Sellers on
the other hand, to comply with any obligation, covenant,
agreement or condition contained herein may be waived in writing
by Sellers or Buyer, respectively, but such waiver or failure to
insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any other failure.
SECTION 11.3 Validity. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity
or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.
SECTION 11.4 Expenses and Obligations. All costs and
expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement by Buyer or Buyer
Subsidiary shall be paid by Buyer or Buyer Subsidiary, and all
costs and expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement by Sellers
shall be paid by Sellers.
SECTION 11.5 Notices. Any notice or other communication
given pursuant to this Agreement must be in writing and (a)
delivered personally, (b) sent by telefacsimile or other similar
facsimile transmission, (c) delivered by overnight express, or
(d) sent by registered or certified mail, postage prepaid, as
follows:
If to Buyer or Buyer Subsidiary, to:
Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Allstate Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Sellers, to:
Charter National Life Insurance Company
Intramerica Life Insurance Company
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Empire Insurance Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Leucadia National Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications required or permitted under
this Agreement that are addressed as provided in this Section
will (A) if delivered personally or by overnight express, be
deemed given upon delivery; (B) if delivered by telefacsimile or
similar facsimile transmission, be deemed given when
electronically confirmed; and (C) if sent by registered or
certified mail, be deemed given when received. Any party from
time to time may change its address for the purpose of notices to
that party by giving a similar notice specifying a new address,
but no such notice will be deemed to have been given until it is
actually received by the party sought to be charged with the
contents thereof.
SECTION 11.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the Laws of the
State of New York.
SECTION 11.7 No Third Party Beneficiary. The terms and
provisions of this Agreement are intended solely for the benefit
of Sellers, Buyer, Buyer Subsidiary, and their respective
successors and permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any
other Person.
SECTION 11.8 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same agreement.
SECTION 11.9 Headings. The article and section headings
contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall
not affect in any way the meaning or interpretation of this
Agreement.
SECTION 11.10 Entire Agreement. This Agreement and the
exhibits and schedules attached hereto embody the entire
agreement and understanding of the parties hereto in respect of
the subject matter contained herein or therein. There are no
agreements, representations, warranties or covenants other than
those expressly set forth herein or therein. This Agreement and
the exhibits and schedules attached hereto supersede all prior
agreements and understandings between the parties with respect to
such subject matter.
SECTION 11.11 Assignment. Neither this Agreement nor any
right or obligation hereunder or part hereof may be assigned by
any party hereto without the prior written consent of the other
party hereto (and any attempt to do so will be void), except as
otherwise specifically provided herein.
SECTION 11.12 Jurisdiction and Venue. The parties hereto
agree that any suit, action or proceeding arising out of or
relating to this Agreement shall be instituted only in the County
of New York in the State of New York. Each party waives any
objection it may have now or hereafter to the laying of the venue
of any such suit, action or proceeding, and irrevocably submits
to the jurisdiction of any such court in any such suit, action or
proceeding.
SECTION 11.13 Confidentiality. Subject to Section 4.13
hereof, for the three years following the Effective Time, Buyer
shall refrain, and shall cause its officers, directors,
employees, agents, auditors, counsel, affiliates and other
representatives (collectively, "Representatives") to refrain,
from directly or indirectly:
(a) disclosing to any Person, other than
Representatives of Buyer or Buyer Subsidiary ("Buyer's
Representatives") the terms and conditions of this Agreement or
any records, files, documents, data (including without limitation
claims or loss data), or information concerning any of Sellers or
CNL or their respective affiliates that the Buyer or Buyer
Subsidiary prepares, maintains, uses, or receives in connection
with the transactions contemplated by this Agreement, unless (i)
disclosure is compelled by any court or administrative agency or
by other applicable requirements of law or (ii) such records,
files, documents, data, or information can be shown to have been
(x) generally available to the public other than as a result of a
disclosure by Buyer, Buyer Subsidiary or Buyer's Representatives
or (y) available to Buyer on a non-confidential basis from a
source other than Sellers or their Representatives, provided that
such source is not known by Buyer or Buyer Subsidiary to be bound
by a confidentiality agreement with, or other obligation of
secrecy of, any Seller or another party; or
(b) using such records, files, documents, data or
information for any purpose (including without limitation
directly or indirectly competing with Sellers or any affiliate
thereof) except pursuant to this Agreement.
Notwithstanding the foregoing, from and after the Closing
Date, Buyer and Buyer Subsidiary shall be entitled to use
information concerning, derived from, or related to the Business
for any lawful purpose in connection with the transaction of
Buyer's or Buyer Subsidiary's business under the Charter
Coinsurance Agreement, the Charter Reinsurance Agreement, and the
ILIC Coinsurance Agreement, provided that Buyer and Buyer
Subsidiary shall comply with all Laws applicable to the use of
such information (including, without limitation, Laws relating to
the use of such information that would otherwise be applicable to
Charter or ILIC, as applicable, as the issuers of the insurance
policies and annuity contracts constituting the Business).
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be signed on its behalf by its duly
authorized officers, all as of the day and year first above
written.
ALLSTATE LIFE INSURANCE COMPANY
By: /S/
▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
CHARTER NATIONAL LIFE INSURANCE
COMPANY
By: /S/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman and Chief Executive Officer
INTRAMERICA LIFE INSURANCE
COMPANY
By: /S/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman and Chief Executive Officer
LEUCADIA NATIONAL CORPORATION
By: /S/
▇▇▇▇▇▇ ▇. Orlando,
Vice President and Chief Financial Officer
ALLSTATE LIFE INSURANCE COMPANY OF
NEW YORK
By: /S/
▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
DAFS01...:\30\76830\0137\1170\AGRD157T.55L
COINSURANCE AGREEMENT
THIS COINSURANCE AGREEMENT (this "Agreement"), dated as of
, 1998 (the "Closing Date"), is made by and between CHARTER NATIONAL
LIFE INSURANCE COMPANY, a Missouri stock insurance company (the "Company"),
and ALLSTATE LIFE INSURANCE COMPANY, an Illinois insurance company (the
"Reinsurer").
WHEREAS, the Company, the Reinsurer, Allstate Life Insurance
Company of New York, a New York insurance company, Intramerica Life
Insurance Company, a New York insurance company, and Leucadia National
Corporation, a New York corporation, have entered into that certain
Purchase Agreement, dated as of February 11, 1998 (the "Purchase
Agreement"), which agreement calls for, among other things, the reinsurance
transactions described in this Agreement;
WHEREAS, upon the terms and conditions set forth herein, the
Company desires to cede, on a coinsurance or modified coinsurance basis (as
specified herein), to the Reinsurer the Company's rights, liabilities, and
obligations in respect of its variable life insurance and variable annuity
products; and
WHEREAS, upon the terms and conditions set forth herein, the
Reinsurer desires to reinsure on a coinsurance or modified coinsurance
basis all of the rights, liabilities, and obligations in respect of the
Company's products referred to above;
NOW, THEREFORE, in consideration of the mutual covenants and
promises, and upon the terms and conditions, hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Unless otherwise defined herein, capitalized terms used herein
shall have the meanings given them in Exhibit A
ARTICLE II.
BUSINESS REINSURED
A. General. Effective as of 12:01 a.m., Eastern Time, on January
1, 1998 (the "Effective Time"), the Company hereby cedes to and reinsures
with the Reinsurer, and the Reinsurer hereby assumes and reinsures from the
Company, on an indemnity reinsurance basis, 100% of the Policy Liabilities
under any and all Policies. Such indemnity reinsurance shall be based on
(i) 100% coinsurance with respect to general account Statutory Reserve
liabilities established by the Company with respect to the Policies and
(ii) 100% modified coinsurance with respect to separate account Statutory
Reserve liabilities established with respect to the Policies.
B. Liability. From and after the Effective Time, as between the
parties, the Reinsurer shall bear and shall have responsibility for paying
all Policy Liabilities, including but not limited to liabilities for
surrenders, withdrawals, and claims for benefits incurred on or after the
Effective Time. The Reinsurer hereby agrees to pay directly any Policy
Liabilities under the Policies on behalf of, and in the name of, the
Company; provided, however, that the Reinsurer shall have no direct or
indirect obligation itself to insureds, claimants, or beneficiaries under
such Policies.
C. Defenses. The Reinsurer accepts, reinsures, and assumes the
Policy Liabilities subject to any and all defenses, setoffs, and
counterclaims to which the Company would be entitled with respect to the
Policy Liabilities, it being expressly understood and agreed by the parties
hereto that no such defenses, setoffs, or counterclaims are or shall be
waived by the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby and that the Reinsurer is and shall
be fully subrogated in and to all such defenses, setoffs, and
counterclaims.
D. Declaration of Non-Guaranteed Elements. Some of the Policies
ceded under this Agreement provide that the Company may in its discretion,
from time to time, as provided in the policy or contract, declare interest
rates, cost of insurance rates or other non-guaranteed elements that are
used to determine policy or contract values. During the Reinsurance
Period, the Company agrees to set such discretionary interest rates, cost
of insurance rates or other non-guaranteed elements to be declared on the
Policies and the effective dates thereof, taking into account the
recommendations of the Reinsurer with respect thereto. With respect to the
Policies, the Company shall, in its discretion after giving due
consideration to such recommendations of the Reinsurer, either (i) follow
such recommendations or (ii) reject such recommendations. To the extent
permitted by applicable Law, the Company agrees to allow the Reinsurer to
notify policyholders and contractholders of such changes and the effective
dates thereof. To the best of the Company's knowledge, the Company has
complied and is in compliance with all contract provisions, laws and
regulations associated with interest rates, cost of insurance rates or
other non-guaranteed elements concerning the Policies, and all supporting
documents requested by the Reinsurer relating to historical changes and
pricing formulas for prospective changes have been provided to the
Reinsurer.
ARTICLE III.
NEW POLICIES
A. Issuance of New Policies. The parties hereto acknowledge and
agree that the Company shall, at the Reinsurer's request, continue to
underwrite and issue new policies, endorsements, riders, certificates, and
other contracts of insurance and annuity contracts on forms identified on
Exhibit C hereto (the "New Policies") at and after the Closing Date to
residents of the jurisdictions listed on Exhibit D hereto until the earlier
to occur of (i) 90 days after receipt by the Company of a written notice
from the Reinsurer requesting that the Company cease underwriting and
issuing New Policies or (ii) the third anniversary of the Closing Date (the
"Transition Termination Date"). In no event shall the Company be required
to underwrite or issue new policies, endorsements, riders, certificates and
other contracts of insurance or annuity contracts after the Transition
Termination Date.
B. Reinsurance of New Policies. Notwithstanding any provision in
this Agreement to the contrary, (i) the terms "Policy" and "Policies" shall
be deemed to include all New Policies and (ii) all New Policies shall be
immediately ceded by the Company to the Reinsurer, and reinsured by the
Reinsurer from the Company, on a 100% coinsurance or modified coinsurance
basis (as appropriate under Article I above) under the terms of this
Agreement.
C. New Policy Marketing. Any and all New Policies shall be
marketed, sold, underwritten, and issued in accordance with standards,
guidelines, procedures, and practices of the Company and CNL, Inc. in
existence immediately prior to the Closing Date and in accordance with all
applicable Laws.
D. Policy Expenses. The Reinsurer shall be solely responsible for
all costs and expenses incurred by the Company in connection with the
Policies issued from and after the Effective Time through the Closing Date
(collectively, "Policy Expenses"), including, without limitation, the
marketing, underwriting, issuance, and administration thereof and all legal
and compliance expenses relating thereto. On the Closing Date, an amount
equal to the sum of all Policy Expenses incurred by the Company and its
affiliates from the Effective Time through and including the end of the
last quarter preceding the Closing Date shall be payable by the Reinsurer
to the Company in accordance with the provisions of Section 1.3 of the
Purchase Agreement. As promptly as practicable after the Closing Date (but
in no event more than 30 days thereafter), an amount equal to the sum of
all Policy Expenses incurred by the Company and its affiliates from the
first day of the quarter in which the Closing occurred through and
including the Closing Date shall be payable by the Reinsurer to the Company
in accordance with the provisions of Section 1.4 of the Purchase Agreement.
E. Reinsurer Policies. The Reinsurer agrees to use all
commercially reasonable efforts to obtain or receive as promptly as
practicable (but in no event later than the Transition Termination Date)
all regulatory approvals, licenses, and other qualifications necessary to
permit the Reinsurer (or a wholly owned subsidiary thereof) to market,
sell, underwrite, and issue policies, riders, endorsements, certificates,
and contracts of insurance, and annuity contracts, generally similar to the
Policies to residents of the jurisdictions listed on Exhibit D hereto
directly in its own right. The Reinsurer shall keep the Company fully
informed with respect to such efforts.
ARTICLE IV.
GUARANTY FUND ASSESSMENTS
A. Reimbursement of the Company. In the event the Company is
required to pay any assessment to any insurance guaranty, insolvency,
comprehensive health association or other similar fund maintained by any
jurisdiction allocable to any insurer insolvency that occurs on or after
the Effective Time, the portion, if any, of such assessment that relates to
Policies (the "Related Assessment") shall be reimbursed by the Reinsurer.
The Reinsurer shall not be obligated to reimburse the Company for any such
assessment allocable to any insurer insolvency that occurs at any time
prior to the Effective Time. The Reinsurer shall pay to the Company any
Related Assessment which shall have become due, promptly on written demand
therefor by the Company, submitted together with documentation evidencing
such assessment and the payment therefor by the Company. If at any time
the Company shall subsequently recover all or part of any such assessment
reimbursed by the Reinsurer (e.g., through policy surcharges or through
reduction of or credits against premium taxes as to the Policies), the
portion of any such recovery received or otherwise realized by the Company
attributable to the Related Assessment shall be reimbursed to the Reinsurer
(based upon the total portion of such recovery attributable to Policies).
The Company shall provide the Reinsurer with semi-annual reports of any
such recoveries regardless of the form in which received.
B. Reimbursement of the Reinsurer. In the event the Reinsurer is
required to pay any assessment to any insurance guaranty, insolvency,
comprehensive health association or other similar fund maintained by any
jurisdiction allocable to any insurer insolvency that occurs prior to the
Effective Time, the portion, if any, of such assessment that relates to
Policies (the "Related Prior Period Assessment") shall be reimbursed by the
Company. The Company shall not be obligated to reimburse the Reinsurer for
any such assessment allocable to any insurer insolvency that occurs at any
time after the Effective Time. The Company shall pay to the Reinsurer any
Related Prior Period Assessment which shall have become due, promptly on
written demand therefor by the Reinsurer, submitted together with
documentation evidencing such assessment and the payment therefor by the
Reinsurer. If at any time the Reinsurer shall subsequently recover all or
part of any such assessment reimbursed by the Company (e.g., through policy
surcharges or through reduction of or credits against premium taxes as to
the Policies), the portion of any such recovery received or otherwise
realized by the Reinsurer attributable to the Related Prior Period
Assessment shall be reimbursed to the Company (based upon the total portion
of such recovery attributable to Policies). The Reinsurer shall provide
the Company with semi-annual reports of any such recoveries regardless of
the form in which received.
ARTICLE V.
TERRITORY; TERM
This Agreement shall apply to Policies covering lives and risks
wherever resident or situated. Subject to Article X below, this Agreement
shall remain in force and effect until the expiration or termination of all
Policy Liabilities in respect of the Policies and until all obligations of
either party hereunder have been discharged in full.
ARTICLE VI.
RESERVES
A. Establishment of General Account Reserves. The Reinsurer shall
be responsible for establishing and maintaining the proper general account
Statutory Reserves for the Policies as required by state insurance
regulatory authorities.
B. Establishment of Separate Account Reserves.
(1) Policy Account. For each Policy, an amount equal to the
accumulated value (as defined in the Policies) thereof invested on a
variable basis shall be held by the Company in the Separate Accounts.
(2) Policy Account Reserve. The total Policy Account
Statutory Reserve liability for each Policy relating to the assets held in
the Policy Account pursuant to Article VI(B)(1) shall be shown by the
Company on its Separate Account balance sheets, consistent with SAP.
C. Reserve Reports. The Reinsurer or its designee shall provide
the Company, within 20 Business Days after the end of each calendar
quarter, valuation summary reports which shall itemize reserves and
contracts in force by plan code, in a format mutually agreed upon by the
Company and the Reinsurer. Such reports shall reflect 100% of any changes
in the reserves described in Articles VI(A) and VI(B) above which occurred
during the accounting period for which such reports are made. These
reports shall include statutory, tax and GAAP reserves.
D. Reinsurance Reserve Credits. If the full statutory reinsurance
reserve credit contemplated by this Agreement is or becomes unavailable to
the Company with respect to any jurisdiction, the Reinsurer shall take any
and all action necessary to make such full statutory reinsurance reserve
credit available to the Company. In doing so, the Reinsurer shall have the
discretion to utilize any means available in the applicable jurisdiction to
make such full statutory reinsurance reserve credit available to the
Company, which may include, but not be limited to, permitting the Company
to withhold funds, establishing a reserve trust account or posting a letter
of credit. If a letter of credit is utilized it shall be furnished and
maintained by the Reinsurer for the benefit of the Company and be clean,
irrevocable and unconditional and otherwise of such nature and amount as to
satisfy the requirements of the particular jurisdiction for purposes of
establishing full statutory reinsurance reserve credit for the Company.
In the event that the Reinsurer shall fail or refuse to fulfill
any of its obligations under this Agreement relating to the payment of
liability, the Company shall be entitled to proceed under the terms and
conditions of any letter of credit, trust agreement or any other agreement
relating to the same and seize and take possession of the funds represented
by the same and apply those funds to reduce the Reinsurer's obligations to
the Company.
ARTICLE VII.
ACCOUNTING AND SETTLEMENT
A. Net Daily Adjustment. With respect to any day, the "Net Daily
Adjustment" shall be the amount calculated by comparing:
(1) the sum of:
(i) the gross premium collected on all Policies, net
of net premiums (as defined in the Policies) to be allocated to the
Separate Accounts pursuant to contract owner instructions;
(ii) the interest payments and principal repayments on
all Policy loans;
(iii) the mortality and expense risk, administrative,
cost of insurance, and other charges deducted under the Policies and/or
from the Separate Accounts (whether through the calculation of unit values
or by direct deduction);
(iv) the amount of funds transferred from the Separate
Accounts to the general account of the Company in connection with (a) the
payment of Policy benefits, including without limitation death benefits
(net of reimbursements under Third Party Reinsurance Agreements), full or
partial cash surrender benefits, full or partial withdrawal benefits,
maturity benefits, annuity payments, Policy loan benefits, and premium (or
other) refunds, (b) annuitization, or (c) in connection with a transfer to
a fixed account option within a Policy;
(v) the amount of any net gain from any investment or
disinvestment in the Separate Accounts, whenever occurring, having resulted
in a value other than the corresponding value charged or credited under the
Policies (i.e., breakage); and
(vi) any other fees, charges, premiums, costs, or other
amounts, or portion(s) thereof, collected during the preceding Business
Day, which would be payable to the general account of the Company in the
absence of the reinsurance of the Policies effected by this Agreement.
(2) with the sum of the following:
(i) the Policy benefits paid, including death benefits
(net of reimbursements under Third Party Reinsurance Agreements), full or
partial cash surrender benefits, full or partial withdrawal benefits,
maturity benefits, annuity payments, Policy loan benefits and premium (or
other) refunds;
(ii) the amount of funds transferred from the general
account of the Company to the Separate Accounts in connection with
maintaining the Policy Account (including without limitation transfers to a
Separate Account from a fixed account option within a Policy);
(iii) the amount of any net loss from any investment or
disinvestment in the Separate Accounts, whenever occurring, having resulted
in a value other than the corresponding value charged or credited under the
Policies (i.e., breakage); and
(iv) any other fees, charges, premiums, costs, and other
amounts, or portion(s) thereof, payable on such day by the general account
of the Company under the terms of the Policies.
Reimbursements listed above shall not be made with respect to
items accrued (other than claims incurred but not reported as of the
Effective Time and claims in course of settlement as of the Effective Time)
by the Company prior to the Effective Time.
If the sum of items in Article VII(A)(1) exceeds the sum of items
in Article VII(A)(2) for the preceding Business Day, then (subject to the
provisions of Article VII(C)) such excess (to the extent not already paid
to or on behalf of the Reinsurer) shall be paid by the Company to the
Reinsurer by wire transfer of immediately available funds before the end of
business on the current Business Day. Conversely, if the sum of the items
in Article VII(A)(2) exceeds the sum of the items in Article VII(A)(1) for
the preceding Business Day, then (subject to the provisions of Article
VII(C)) such excess (to the extent not already paid to or on behalf of the
Company) shall be paid by the Reinsurer to the Company by wire transfer of
immediately available funds before the end of business on the current
Business Day.
B. Benefit Payments. The Reinsurer shall have full responsibility
and authority for all benefit payment determinations or settlements, and
shall be solely responsible for all expenses associated with benefit
payment determinations or settlements pursuant to and in accordance with
the Administrative Services Agreement, dated as of the date of this
Agreement, between the Company and the Reinsurer, as the same may be
amended from time to time (the "Charter Administrative Services
Agreement").
C. Cash Settlement and Accounting.
(1) Daily Cash Settlements. At the end of each Business Day,
the Reinsurer shall notify the Company of the payments required the next
Business Day under Article VII(A) above. The Reinsurer or the Company, as
the case may be, shall make the required payments on such next Business Day
by wire transfer of immediately available funds. Daily statements may be
based upon reasonable approximations. Daily statements shall be in a form
agreed to by the Company and the Reinsurer in writing.
(2) Monthly Cash Statements. At the end of the twentieth
Business Day next succeeding the end of each calendar month, the Reinsurer
will provide the Company with a statement for the month. Monthly
statements shall be in a form agreed to by the Company and the Reinsurer in
writing. The statement may reflect a correction or adjustment, in which
event the Reinsurer or the Company, as the case may be, shall make any
required payment on the day following notification thereof in accordance
with the method for cash payments prescribed by Article VII(C)(1) above.
Any further adjustment as may be required shall be made promptly following
agreement of the parties or completion of any audit pursuant to Article
VII(C)(4) below.
(3) Form of Statements. All statements provided pursuant to
Articles VII(C)(1) and (2) above shall summarize the items to be settled in
reasonable detail. It is intended that the statements be transmitted by
facsimile or other similar means of convenient written communication, but,
in the event that any statement cannot be transmitted after application of
commercially reasonable efforts, the Reinsurer may notify the Company of
any settlement due by oral communication, in which case the Reinsurer shall
provide hard copy of the settlement statement as promptly as practicable.
(4) Right to Audit. The Company shall have the right to
audit the amounts contained in any statements delivered under Article
VII(C)(3). For such purposes, the Company and its employees, professional
advisors and agents shall have a right to review and copy the relevant
books and records of the Reinsurer and to discuss such matters with
employees or the Reinsurer during normal business hours. The Reinsurer
agrees to render reasonable assistance to the Company in conducting any
such audit and to instruct its independent public accountants and actuaries
to provide information to the Company.
(5) General Right of Offset. Notwithstanding any provision
of this Agreement, any and all amounts due from the Reinsurer to the
Company or from the Company to the Reinsurer under this Agreement may be
offset against amounts due from one party to the other under this Agreement
or under any other written agreement hereafter entered into by and between
the parties, in settling and making payments on a net basis of amounts due
under this Agreement and any subsequent written agreements.
(D) Monthly Report. At the end of the twentieth Business Day next
succeeding the end of each calendar month, the Reinsurer shall provide the
Company with a statement for the month setting forth the following
information:
(1) the commissions paid (net of refunds) on behalf of the
Company for all Policies;
(2) the amount of any state, municipal or other premium or
gross receipts taxes paid on behalf of the Company with respect to Policy
premiums collected;
(3) the amount of brokerage and any similar charges paid on
behalf of the Company in connection with the purchases, sale, redemption or
maintenance of Separate Account assets;
(4) the premiums (net of refunds) paid on behalf of the
Company under the Third Party Reinsurance Agreements;
(5) any amounts paid on behalf of the Company pursuant to the
existing participation agreements or any other agreement or arrangement
between the Company and the mutual fund organization in which assets of the
Separate Accounts are invested (net of any amounts paid to the Company
pursuant to such agreements and arrangements); and
(6) any other amounts paid on behalf of the Company with
respect to the Policies.
E. Closing Date True-Up. On the Closing Date, settlement shall be
made of all amounts (not previously paid to the applicable party) owed
under this Agreement by the Company to the Reinsurer or by the Reinsurer to
the Company (as applicable) for the period commencing on the Effective Time
and ending on the last day of the calendar quarter immediately preceding
the Closing Date, in accordance with the provisions of Section 1.3 of the
Purchase Agreement. Such settlement shall be made in satisfaction of the
parties' respective obligations under this Article with respect to such
period.
As promptly as practicable after the Closing Date (but in no
event more than 30 days thereafter), the Company shall prepare a post
closing accounting for the period commencing on the first day of the
calendar quarter in which the Closing takes place through the Closing Date,
in accordance with the provisions of Section 1.4 of the Purchase Agreement.
Settlement shall be made of all amounts (not previously paid to the
applicable party) owed under this Agreement by the Company to the Reinsurer
or by the Reinsurer to the Company (as applicable). Such settlement shall
be made in satisfaction of the Parties' respective obligations under this
Article with respect to such period. All settlements of account between
the Company and the Reinsurer shall be made in cash or its equivalent.
ARTICLE VIII
ADMINISTRATION; RECORDS; NOTICES
A. Administration. Administration and servicing of all of the
Policies shall be conducted pursuant to the terms and subject to the
conditions set forth in the Charter Administrative Services Agreement.
Reports, files, and other records and information relating to the Policies
shall be transferred and maintained pursuant to the terms and subject to
the conditions set forth in the Charter Administrative Services Agreement.
B. Transfer of Books and Records. The Company shall forward to
the Reinsurer all reports, records, underwriting files, policy files,
claims files and information in any form in its possession relating to the
Policies pursuant to and in accordance with the Charter Administrative
Services Agreement.
C. Maintenance of Books and Records. The Reinsurer agrees to
maintain a true and complete set of books and records relating to all
transactions under this Agreement, including without limitation all such
records as may be required by applicable Law. The Reinsurer shall maintain
such books and records at the Reinsurer's expense and in accordance with
prudent standards of insurance recordkeeping and all applicable Laws. The
books and records shall be available (at their place of keeping) for
inspection, examination, and audit by the Company and state and federal
regulatory authorities (in each case together with their respective
representatives) at all reasonable times. The Reinsurer shall furnish to
the Company (i) at the Reinsurer's expense, copies of any books or records
relating to the transactions under this Agreement as may be reasonably
required by the Company in connection with the preparation of the Company's
financial statements, state and federal income and other tax returns, and
any other filings or reports required to be filed with, or requested by,
state or federal regulatory authorities or any rating agencies and (ii) at
the Company's expense, copies of any such books and records for any other
reason. Without limiting the generality of the foregoing, the Reinsurer
shall provide the Company (at the Reinsurer's expense) all information
concerning the Policies required to be included in the Company's state
premium tax returns (in a format suitable for direct insertion therein).
D. Notices. The Company agrees that, after the Effective Time, it
shall forward promptly to the Reinsurer all notices and other written
communications received by it relating to the Policies (including without
limitation all inquiries or complaints from state insurance regulators,
agents, brokers and insureds and all notices of claims, suits and actions
for which it receives service of process). The Company shall be entitled
to retain copies of all such materials.
ARTICLE IX
TRANSFER OF ASSETS
As to Policies in force on the Effective Time, the Company shall
transfer to the Reinsurer on the Closing Date amounts in accordance with
the provisions of Section 1.3 of the Purchase Agreement with respect to the
general account Statutory Reserve liabilities established by the Company
with respect to the Policies (as set out in Exhibit E).
The Company hereby also transfers to the Reinsurer all Policy
loans and due and accrued Policy premiums outstanding on the Closing Date.
The Company and the Reinsurer acknowledge and agree that the Company has
and will retain sole and absolute title to and possession of the separate
account Statutory Reserves, and that the Reinsurer has no right, title, or
interest (whether legal, equitable, secured, or otherwise) in or to any of
the separate account Statutory Reserves.
ARTICLE X
RECAPTURE; TRUST
A. Right of Recapture or Trust. At any time after the occurrence
(or nonoccurrence, as the case may be) of any of the following, the Company
shall have the right, upon delivery of written notice to the Reinsurer, to
(i) recapture any and all of the Policies or (ii) require that the
Reinsurer establish a trust reasonably acceptable to the Company (the
"Trust") and deposit Qualifying Assets therein having a fair market value
equal to the amount of the general account Statutory Reserves:
(1) if the Reinsurer materially breaches any provision of
this Agreement or the Charter Administrative Services Agreement, which
breach is not cured within 60 days after receipt by the Reinsurer of notice
thereof from the Company;
(2) if the Reinsurer files an RBC Report that indicates that
its Adjusted Capital is less than 2.5 times its authorized control level
RBC, as each such term is defined in Article 11A of the Illinois Insurance
Code in effect on the Effective Time; or
(3) if the Reinsurer or its direct parent company is placed
in receivership, conservatorship, rehabilitation, or liquidation by any
insurance regulatory authority or becomes (whether voluntarily or
involuntarily) the subject of a proceeding under any local, state, or
federal bankruptcy or insolvency Law.
B. Effect of Recapture. Upon the receipt of the Company's notice
to recapture pursuant to Article X(A) hereof, and without further action by
the Reinsurer, the Reinsurer will be deemed to have (i) ceded, transferred,
and assigned to the Company all Policy Liabilities; (ii) transferred and
assigned to the Company Qualifying Assets (including all Policy loans)
having an aggregate market value (or book value in the case of Policy
loans) as of the date of recapture equal to the aggregate general account
reserve liability amount established by the Company as of such date with
respect to the Policies (without giving effect to the reinsurance under
this Agreement), together with all interest, dividend, or other investment
income accrued on such assets from the date of the Reinsurer's receipt of
such recapture notice until the date of the Company's receipt of such
assets; and (iii) sold, transferred, and assigned to the Company any and
all of the Reinsurer's right, title, and interest in and to all gross
premiums, premium adjustments, amounts recoverable from reinsurers, and
other similar payments and receivables that are or may be due or payable
under the Policies. The Reinsurer shall cooperate with the Company in
effecting any recapture of Policies pursuant to Article X(A) hereof,
including without limitation by promptly transferring amounts to the
Company described in clause (ii) above and by executing and delivering such
other documents, instruments and certificates effectuating the recapture
described in this Article and reasonably requested by the Company.
C. Trust. Upon the receipt of the Company's notice to require the
establishment of a trust pursuant to Article X(A) hereof, and without
further action by the Reinsurer, the Reinsurer will be deemed to have
transferred and assigned to the Trust assets of the Reinsurer having an
aggregate market value as of the effective date of such notice equal to the
aggregate general account reserve liability amount established by the
Company as of such date with respect to the Policies (without giving effect
to the reinsurance under this Agreement), together with all interest,
dividend, or other investment income accrued on such assets from the date
of the Reinsurer's receipt of such recapture notice until the date of the
Trust's receipt of such assets. The Reinsurer shall cooperate with the
Company in effecting the creation and funding of the Trust pursuant to
Article X(A) hereof, including without limitation by promptly transferring
amounts to the Trust described in the preceding sentence and by executing
and delivering such other documents, instruments and certificates
effectuating the establishment, funding, and maintenance of the Trust
described in this Article and reasonably requested by the Company.
D. Liquidated Damages. Upon the recapture of all Policies or
establishment of the Trust pursuant to Article X(A) hereof, the Reinsurer
shall pay to the Company (within five Business Days after the Reinsurer's
receipt of the Company's notice under Article X(A)) actual damages, which
amount shall not exceed $800,000.
E. Termination by the Reinsurer. This Agreement may be terminated
by the Reinsurer (1) if the Company materially breaches this Agreement or
the Charter Administrative Services Agreement, which breach is not cured
within 60 days after receipt by the Company of written notice from the
Reinsurer describing such breach; or (2) if the Reinsurer assumes on a
novation basis or replaces all of the Policies pursuant to Article XVII of
this Agreement.
F. Refund of Purchase Price. In the event of termination of this
Agreement or recapture pursuant to paragraph A or E.(1) of this Article X,
the Company shall refund to Reinsurer a portion of the Purchase Price based
on an appraisal of the Policies as of the date of termination (which
appraisal shall take into consideration the effect of the termination of
this Agreement) prepared by Milliman & ▇▇▇▇▇▇▇▇▇, Inc., or another
nationally recognized actuarial firm reasonably acceptable to the parties.
Such refund shall be paid promptly with interest at an annual rate of 7%
accruing from the date of termination until the date of payment.
ARTICLE XI
RIGHT OF INSPECTION
Each party hereto and its respective authorized representatives
shall have the right, at all reasonable times during normal business hours,
to inspect and review all books, records, accounts, reports, tax returns,
files and information of the other party hereto relating to the Policies
and Policy Liabilities under such Policies.
ARTICLE XII
INDEMNIFICATION
The Reinsurer agrees to indemnify, defend and hold the Company
harmless from and against all liability, damages, costs and expenses,
including attorneys' fees, arising from Policy Liabilities. The Company
agrees to indemnify, defend, and hold the Reinsurer harmless from and
against all liability, damages, costs and expenses, including attorneys'
fees, arising from Extra Contractual Obligations based on acts, errors or
omissions by the Company or any of its officers, employees, agents or
representatives, and any attorneys' fees incurred by the Company related to
such Extra Contractual Obligations. Within ten days after receipt by an
indemnified party of notice of any demand, claim, suit or proceeding
indemnified under this Article, or such shorter period as may be necessary
to enable the indemnifying party to respond timely thereto, the indemnified
party shall give notice to the indemnifying party of such demand, claim,
suit or proceeding and the indemnifying party shall at its expense assume
the defense of any such demand, claim, suit or proceeding; provided,
however, that the failure by the indemnified party to give timely notice as
provided herein shall not relieve the indemnifying party of its
indemnification obligations under this Agreement except to the extent that
such failure results in a failure of actual notice to the indemnifying
party and the indemnifying party is damaged as a result of the failure to
receive such notice. In the event that the indemnifying party has not
assumed the defense of any matter within a reasonable period of time after
timely notice as above provided, the indemnified party, at the cost and
expense of the indemnifying party, shall have a full right to defend
against any such claim, suit or proceeding and shall be entitled to settle
or agree to pay in full such claim or demand, in its sole discretion.
ARTICLE XIII
INSOLVENCY
The Reinsurer hereby agrees that, as to all reinsurance made,
ceded, renewed or otherwise becoming effective hereunder, the portion of
any risk or obligation assumed by the Reinsurer, when such portion is
ascertained, shall be payable immediately on demand of the Company at the
same time as the Company shall pay its retained portion of such risk or
obligation, with reasonable provision for verification before payment, and
the reinsurance shall be payable by the Reinsurer on the basis of the
liability of the Company under the Policy or Policies reinsured, without
diminution because of the insolvency of the Company, directly to the
Company or to its liquidator, receiver, or other statutory successor. It
is agreed that in the event of the insolvency of the Company, the
liquidator, receiver or other statutory successor of the Company shall give
prompt written notice to the Reinsurer of the pendency or submission of a
claim under the Policy or Policies reinsured. During the pendency of such
claim, the Reinsurer may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated any
defense available to the Company or its receiver. The expense thus
incurred by the Reinsurer is chargeable against the Company, subject to any
court approval, as a part of the expense of liquidation to the extent of a
proportionate share of the benefit which accrues to the Company solely as a
result of the defense undertaken by the Reinsurer.
ARTICLE XIV
NO THIRD PARTY RIGHTS
The Reinsurer's coinsurance of the Policy Liabilities pursuant to
this Agreement with respect to any of the Policies is intended for the sole
benefit of the parties to this Agreement and shall not create any right on
the part of any policyholder, insured, claimant or beneficiary under such
Policies against the Reinsurer or any legal relationship between such
policyholders, insureds, claimants or beneficiaries and the Reinsurer.
ARTICLE XV
DUTY OF COOPERATION
Each party hereto shall cooperate fully with the other party
hereto in all reasonable respects in order to accomplish the objectives of
this Agreement.
ARTICLE XVI
ARBITRATION
In the event any dispute arises between the parties hereto with
reference to any aspect of this Agreement, such dispute may be submitted
for resolution by arbitration if both parties hereto agree in writing.
Within 30 days after such agreement, each party shall select one arbitrator
(for a total of two), and such selected arbitrators shall select a third
arbitrator within 60 days after such agreement. If either party fails to
select an arbitrator within such time period, the arbitrator that was
timely selected by the other party shall serve as the sole arbitrator. All
arbitrators shall have had experience serving as an arbitrator for
reinsurance disputes or shall have served as an officer of a life, accident
or health insurance or reinsurance company. No arbitrator shall be or have
been affiliated with or employed by any party hereto or their respective
affiliates. The arbitration shall occur in a mutually acceptable location
and be governed pursuant to the rules of commercial arbitration of the
American Arbitration Association and the Laws of the State of Missouri.
The arbitrators shall make their determination within 30 days after the
appointment of the last arbitrator. Judgment may be entered upon the final
decision of the arbitrators in any court having jurisdiction, and
notwithstanding any provision in this Agreement to the contrary, such
arbitration determination shall be final and conclusive for all legal
purposes and may not be appealed to any court or other forum. Each party
shall pay the expenses incurred by it and by the one arbitrator selected by
it. Each party shall pay one-half of the fees and out-of-pocket expenses
of the American Arbitration Association (if any) and the third arbitrator.
ARTICLE XVII
NOVATION; REPLACEMENT
At the option of the Reinsurer, the Reinsurer may at any time (i)
assume the Policies on a novation basis pursuant to an assumption
reinsurance agreement to be entered into by the Company and the Reinsurer
at such time having terms mutually acceptable to such parties or (ii)
replace the Policies pursuant to replacement offers made to the owners of
such Policies. The Reinsurer is responsible for paying all costs and
obtaining all approvals. Each party hereto shall cooperate with the other
in effecting any assumption or replacement under this Article.
ARTICLE XVIII
GENERAL PROVISIONS
A. DAC Tax Reimbursement. On a quarterly basis, the Reinsurer
shall reimburse (or be reimbursed by, as the facts may provide) the Company
for DAC Taxes incurred on Policies issued on or after the Effective Time
and on additional premiums paid on Policies on or after the Effective Time.
The DAC Tax reimbursement shall be computed by multiplying the DAC Tax
Factor by the net consideration earned by the Company for Policies issued
on or after the Effective Time and for additional premiums paid on Policies
on or after the Effective Time that is subject to DAC tax pursuant to the
provisions of Section 848 of the Internal Revenue Code of 1986, as amended
(the "Code"), and its related Treasury Regulations. The "DAC Tax Factor"
shall mean 0.215% for "annuities," 0.252% for "group life" contracts, and
0.94% for "other life and accident and health" contracts, as such terms are
defined in Section 848 of the Code. The Company and the Reinsurer mutually
agree to prospectively adjust the DAC Tax Factor to reflect any changes in
the Federal income tax rate applicable to the Company or changes to Section
848 of the Code or to the related Treasury Regulations.
B. DAC Tax Election. With respect to this Agreement, the Company
and the Reinsurer hereby make the election provided for in Section
1.848-2(g)(8) of the Treasury Regulations issued under Section 848 of the
Code, and as set forth in Exhibit F. Each of the parties hereto agrees to
take such further actions as may be necessary to ensure the effectiveness
of such election.
C. Notices. Any notice or communication given pursuant to this
Agreement must be in writing and (a) delivered personally, (b) sent by
facsimile transmission, (c) delivered by overnight express, or (d) sent by
registered or certified mail, postage prepaid, as follows:
If to the Reinsurer: Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Allstate Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: Charter National Life Insurance Company
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Empire Insurance Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Leucadia National Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications required or permitted under the terms
of this Agreement that are addressed as provided in this Article shall (i)
if delivered personally or by overnight express, be deemed given upon
delivery; (ii) if delivered by facsimile transmission, be deemed given when
electronically confirmed; and (iii) if sent by registered or certified
mail, be deemed given when received. Any party from time to time may
change its address for notice purposes by giving a similar notice
specifying a new address, but no such notice shall be deemed to have been
given until it is actually received by the party sought to be charged with
the contents thereof.
D. Entire Agreement. This Agreement (including the Exhibits
hereto) contains the entire agreement and understanding between the parties
with respect to the transactions contemplated hereby, and supersedes all
prior agreements and understandings, written or oral, with respect thereto.
E. Expenses. Except as may be otherwise expressly provided in
this Agreement, whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall pay its own costs and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
F. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties.
G. No Third Party Beneficiary. Except as otherwise provided
herein, the terms and provisions of this Agreement are intended solely for
the benefit of the parties hereto, and their respective successors or
permitted assigns, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other person, and no such rights
shall be conferred upon any person or entity not a party to this Agreement.
H. Amendment. This Agreement may only be amended or modified by a
written instrument executed on behalf of both parties hereto.
I. Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by any of the parties hereto without the
prior written consent of the other party, and any such assignment that is
attempted without such consent shall be null and void. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
successors and permitted assigns.
J. Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under any present or future Law,
and if the rights or obligations of the parties hereto under this Agreement
will not be materially and adversely affected thereby, (a) such provision
shall be fully severable; (b) this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and (c) the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance herefrom.
K. Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Missouri, regardless
of the Laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
L. Waiver. Any term or condition of this Agreement may be waived
in writing at any time by the party that is entitled to the benefit
thereof. A waiver on one occasion shall not be deemed to be a waiver of
the same or any other breach or nonfulfillment on a future occasion. All
remedies, either under the terms of this Agreement, or by Law or otherwise
afforded, shall be cumulative and not alternative, except as otherwise
provided by Law.
M. Headings, etc. The headings used in this Agreement have been
inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words using the singular or plural number
also include the plural or singular number, respectively; (b) the terms
"hereof," "herein," "hereby," "hereto," "hereunder," and derivative or
similar words refer to this entire Agreement (including the exhibits
hereto); (c) the term "Article" refers to the specified Article of this
Agreement; and (d) the term "party" means, on the one hand, the Company,
and on the other hand, the Reinsurer.
N. Offset. Any debits or credits incurred after the Effective
Time in favor of or against either the Company or the Reinsurer with
respect to this Agreement are deemed mutual debits or credits, as the case
may be, and shall be set off, and only the balance shall be allowed or
paid.
O. Compliance with Laws. The parties hereto shall at all times
comply with all applicable Laws in performing their obligations under this
Agreement.
P. Errors and Oversights. Each party to this Agreement will act
reasonably in all matters within the terms of this Agreement. Clerical
errors and oversights occasioned in good faith in carrying out this
Agreement will not prejudice either party, and will be rectified promptly
on an equitable basis.
IN WITNESS WHEREOF, the Company and the Reinsurer have each
executed this Agreement as of the date first written above.
ALLSTATE LIFE INSURANCE COMPANY
By:
Name:
Title:
CHARTER NATIONAL LIFE INSURANCE
COMPANY
By:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman and Chief Executive Officer
DAFS02...:\30\76830\0137\1170\AGR1158T.26H
CNLIC Exhibit D
to Purchase
Agreement
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made
this ____ day of ________, 1998 (the "Closing Date"), by and between
CHARTER NATIONAL LIFE INSURANCE COMPANY, a Missouri insurance company (the
"Company"), and ALLSTATE LIFE INSURANCE COMPANY, an Illinois insurance
company (the "Service Provider").
RECITALS:
WHEREAS, the Company, the Service Provider, Allstate Life
Insurance Company of New York, a New York insurance company, Intramerica
Life Insurance Company, a New York insurance company, and Leucadia National
Corporation, a New York corporation ("Leucadia"), have entered into that
certain Purchase Agreement, dated as of February 11, 1998 (the "Purchase
Agreement"), which agreement calls for, among other things, the provision
of administrative services described in this Agreement (unless otherwise
defined herein, capitalized terms used herein shall have the meanings given
them in the Purchase Agreement);
WHEREAS, the Company and the Service Provider are entering into
the Charter Coinsurance Agreement, pursuant to which the Company shall cede
to the Service Provider, on a 100% coinsurance or modified coinsurance
basis (as indicated therein), the Company's rights, liabilities, and
obligations in respect of the variable life insurance products and variable
annuity contracts identified in the Charter Coinsurance Agreement
(including, without limitation, the New Policies (as defined in the Charter
Coinsurance Agreement)) (the "Variable Policies");
WHEREAS, the Company and the Service Provider are entering into
the Charter Reinsurance Agreement, pursuant to which the Company shall cede
to the Service Provider, on a 100% coinsurance basis, the Company's rights,
liabilities, and obligations in respect of the life insurance products and
annuity contracts identified in the Charter Reinsurance Agreement
(collectively with the Variable Policies, the "Reinsured Policies");
WHEREAS, in connection with the Charter Coinsurance Agreement and
the Charter Reinsurance Agreement, the parties hereto desire that the
Service Provider perform all services required for complete support and
administration of the Reinsured Policies on behalf of the Company in
accordance with the terms and subject to the conditions of this Agreement;
and
NOW, THEREFORE, in consideration of the transactions contemplated
pursuant to the Purchase Agreement, the Charter Coinsurance Agreement, and
the Charter Reinsurance Agreement, and the mutual covenants and promises
contained herein and for other good and valuable consideration, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. TERM
This Agreement shall be effective as of the Closing Date, and
shall remain in full force and effect until terminated in accordance with
Section 10 below.
2. SERVICES
(a) Services. From and after the Closing Date, the Service
Provider shall provide to the Company all services required for complete
support and administration of all Reinsured Policies, including without
limitation the services set forth on Exhibit A hereto (the "Services").
(b) Performance Standards. The Service Provider shall
perform the Services (i) at a level of accuracy and responsiveness not less
favorable than the practices of the Service Provider in administering
products comparable to the Reinsured Policies issued by it or serviced by
it for other companies during the term of this Agreement, (ii) in
accordance with all applicable Laws and insurance department requirements,
(iii) in accordance with recognized industry standards, and (iv) as the
parties may agree in writing from time to time.
(c) Authority. The Service Provider shall perform the
Services in the name and on behalf of the Company only as provided in this
Agreement or as directed by the Company in writing. Except as specifically
set forth in this Agreement or authorized by the Company in writing, the
Service Provider shall not have authority to issue new insurance policies
or annuity contracts in the name of the Company or enter into any
agreements on the Company's behalf. None of the terms or provisions of
this Agreement shall prohibit the Service Provider or any of its affiliates
from conducting business of whatever nature in their own names and on
behalf of any person or entity other than the Company. The Company shall
take all actions necessary to grant the Service Provider the authority to
disburse funds from bank accounts on the Company's draft or check stock for
the purpose of carrying out the Service Provider's responsibilities under
this Agreement.
3. COMPENSATION
The Service Provider shall provide the Services in consideration
of the execution and delivery by the Company of the Purchase Agreement, the
Charter Coinsurance Agreement, and the Charter Reinsurance Agreement and
the consummation of the transactions contemplated thereby, and the Service
Provider shall neither impose on the Company nor otherwise be entitled to
receive any additional or separate consideration for the provision of
Services in accordance with this Agreement.
4. PERSONNEL, FACILITIES, AND COSTS
(a) Personnel. The Service Provider shall furnish all
personnel necessary to provide the Services.
(b) Facilities. The Services shall be performed by Service
Provider using furniture, fixtures, and equipment (including computer
hardware) owned or leased by the Service Provider (collectively, the
"Facilities"). All Facilities owned by Service Provider shall remain the
property of Service Provider, and the Company acknowledges and agrees that
it shall not have any right, title, or interest in or to the Facilities.
(c) Systems. The Service Provider shall furnish all Systems
(as hereinafter defined) that are necessary for the Service Provider to
provide the Services. The term "Systems" shall mean all computer programs
and programming aids (together with supporting documentation), including
without limitation input and output formats, program listings, systems flow
charts, narrative descriptions, operating instructions, and the tangible
media upon which such programs are recorded.
(d) Costs. The Service Provider shall pay all personnel and
other costs and expenses to provide the Services (including without
limitation all applicable filing and similar fees).
5. COMPLIANCE WITH APPLICABLE LAWS
Each of the parties hereto agrees to comply with all applicable
Laws as they apply to the performance of such party's obligations under
this Agreement.
6. LICENSING
The Service Provider hereby represents and warrants to the
Company that the Service Provider has all licenses, qualifications, and
other authorizations necessary to provide the Services to or on behalf of
the Company. At all times during the term of this Agreement, the Service
Provider shall maintain in full force and effect all licenses,
qualifications, and other authorizations necessary under applicable Laws to
provide the Services to or on behalf of the Company. The Service Provider
agrees to provide the Company with copies of any such documents upon
request.
7. SUPERVISION BY BOARD OF DIRECTORS
The Service Provider acknowledges that the Board of Directors of
the Company is vested with the power, authority and responsibility for
managing the business and affairs of the Company, including administrative
services. The Service Provider acknowledges that any and all actions or
services, whether supervisory or ministerial, taken or provided pursuant to
this Agreement by the Service Provider shall be subject to the continuous
supervision of the Board of Directors of the Company and, to the extent
designated by such Board of Directors, the appropriate designated officers
of the Company.
8. MAINTENANCE OF RECORDS
The Service Provider agrees to (a) maintain a true and complete
set of books and records relating to all transactions under this Agreement
and (b) preserve such books and records for the term of this Agreement plus
five years thereafter (or such longer period as may be required by
applicable Law). The Service Provider shall maintain such books and
records and the Transferred Records (as defined in Section 13 below) at the
Service Provider's expense and in accordance with prudent standards of
insurance recordkeeping and all applicable Laws. The books and records
shall be available (at their place of keeping) for inspection, examination,
and audit by the Company and state and federal regulatory authorities (in
each case together with their respective representatives) at all reasonable
times. The Service Provider shall furnish to the Company (i) at the
Service Provider's expense, copies of any books or records relating to the
transactions under this Agreement as may be reasonably required by the
Company in connection with the preparation of the Company's financial
statements, state and federal income and other tax returns, and any other
filings or reports required to be filed with, or requested by, state or
federal regulatory authorities or any rating agencies and (ii) at the
Company's expense, copies of any such books and records for any other
reason.
9. POWER OF ATTORNEY
The Company grants to the Service Provider authority in all
matters relating to risk management and administration of the Policies to
the extent such authority (a) may be granted pursuant to applicable Law and
(b) is reasonably necessary for the Service Provider to provide the
Services hereunder. In order to assist and to more fully evidence this
authority, the Company hereby nominates, constitutes, and appoints the
Service Provider as its attorney-in-fact with respect to the rights,
duties, privileges, and obligations of the Company in, to and under the
Reinsured Policies, with full power and authority to act in the name,
place, and stead of the Company with respect to the Reinsured Policies,
including, without limitation, the power, without reservation, to service
all Reinsured Policies, to adjust, to defend, to settle, and to pay all
claims and benefits, to administer the Separate Accounts, and to take such
other and further actions as may be reasonably necessary to effect the
transactions contemplated by this Agreement, the Charter Coinsurance
Agreement, and the Charter Reinsurance Agreement.
10. TERMINATION
(a) Termination by the Company. The Company may terminate
this Agreement immediately, by delivery of written notice to the Service
Provider, upon the occurrence of any of the following events:
(1) The Service Provider pursuant to or within the
meaning of Title 11, U.S. Code, or any similar Federal, state or foreign
Law for the relief of debtors, including without limitation any state
insolvency or rehabilitation statutes (collectively, "Bankruptcy Laws"):
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding;
(C) consents to the appointment of a Custodian of
it or for all or for a substantial part of its property;
(D) makes a general assignment for the benefit of
its creditors; or
(E) fails to contest any involuntary case or
proceeding filed against it within the time period fixed by any applicable
rules, and any extensions granted by the court where such involuntary case
or proceeding is pending;
(2) A court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that remains unstayed and in effect for 60
days and that:
(A) is for relief against the Service Provider in
an involuntary case or proceeding;
(B) appoints a custodian of the Service Provider or
a custodian for all or for a substantial part of the property of the
Service Provider; or
(C) orders the liquidation of the Service Provider;
or
(3) Failure by the Service Provider to comply with any
material provision of this Agreement which has not been corrected within 60
days after written notice thereof is delivered to the Service Provider by
the Company.
(b) Effect of Termination. Upon termination of this
Agreement, (i) no party hereto shall be relieved of any liability for any
breach of any provision of this Agreement, (ii) any amounts owing hereunder
by either party hereto to the other party hereto shall be immediately due
and payable (pro-rated for any partial periods), and (iii) all rights and
obligations hereunder will terminate except that Sections 8 [maintenance of
records], 10(b) [effect of termination], 11 through 14 [indemnification,
confidentiality, transfer of records, and notification], and 17 [expenses]
hereof will continue to survive any such termination.
11. INDEMNIFICATION
(a) Indemnification by the Company. Subject to the provisions of
Sections 11(c) and 11(d) hereof, the Company shall indemnify and hold
harmless the Service Provider for any and all monetary damages, charges,
losses, deficiencies, liabilities, obligations, costs, fees, and expenses
(including, without limitation, reasonable fees and disbursements of
counsel incident to the enforcement of rights under Section 11(a) or 11(b)
hereof but net of any tax benefit) (collectively, "Damages") resulting from
or relating to (i) any breach by the Company of any representation,
warranty, covenant or agreement made by the Company in this Agreement or
(ii) the Company's administration of the Policies prior to the Closing
Date.
(b) Indemnification by the Service Provider. Subject to the
provisions of Sections 11(c) and 11(d) hereof, the Service Provider shall
indemnify and hold harmless the Company in respect of any and all Damages
resulting from or relating to any breach by the Service Provider of any
representation, warranty, covenant or agreement made by the Service
Provider in this Agreement.
(c) Limitations on Indemnification.
(A) If a person claiming indemnification under this Section
(an "Indemnitee") against any person (an "Indemnifying Party") recovers
from any third party (including insurers) all or any part of any amount
paid to it by an Indemnifying Party pursuant to Section 11(a) or 11(b)
hereof, such Indemnitee will promptly pay over to the Indemnifying Party
the amount so recovered (after deducting therefrom the full amount of the
expenses incurred by it in procuring such recovery, including any taxes and
net of any tax benefit resulting from such recovery and payment), but not
in excess of any amount previously so paid by the Indemnifying Party. If
an Indemnitee recovers from any third party (including insurers) any amount
as to which indemnification may be claimed pursuant to Section 11(a) or
11(b) hereof, such Indemnitee will have no right to claim indemnification
for such amount from the Indemnifying Party.
(B) The Indemnitee shall prosecute diligently and in good
faith any claim for indemnification with any applicable third party
(including insurers) prior to collecting any indemnification payment
pursuant to Section 11(a) or 11(b) hereof.
(d) Notice of Defense of Claims. Promptly after receipt of notice
of any claim or Damages for which an Indemnitee seeks indemnification under
this Section, such Indemnitee shall give written notice thereof to the
Indemnifying Party, but such notification shall not be a condition to
indemnification hereunder except to the extent of actual prejudice to the
Indemnifying Party. The notice shall state the information then available
regarding the amount and nature of such claim or Damages and shall specify
the provision or provisions of this Agreement under which the right to
indemnification is asserted. If within 30 days after receiving such notice
the Indemnifying Party gives written notice to the Indemnitee stating that
it intends to defend against such claim or Damages at its own cost and
expense, then defense of such matter, including selection of counsel
(subject to the consent of the Indemnitee which consent shall not be
unreasonably withheld), shall be by the Indemnifying Party and the
Indemnitee shall make no payment in respect of such claim or Damages as
long as the Indemnifying party is conducting a good faith and diligent
defense. Notwithstanding the foregoing, the Indemnitee shall at all times
have the right to fully participate in such defense at its own expense
directly or through counsel; provided, however, if the named parties to the
action or proceeding include both the Indemnifying Party and the Indemnitee
and representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
expenses of one separate counsel for the Indemnitee shall be paid by the
Indemnifying Party. If no such notice of intent to dispute and defend is
given by the Indemnifying Party, or if such diligent good faith defense is
not being or ceases to be conducted, the Indemnitee shall, at the expense
of the Indemnifying Party, undertake the defense of such claim or Damages
with counsel selected by the Indemnitee, and shall have the right to
compromise or settle the same exercising reasonable business judgment with
the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. The Indemnitee shall make available all information
and assistance that the Indemnifying Party may reasonably request and shall
cooperate with the Indemnifying Party in such defense. Notwithstanding
anything herein to the contrary, the Indemnifying Party shall have the
right to settle all claims of third parties for which indemnification is
payable hereunder without the consent of the Indemnitee so long as such
settlement releases the Indemnitee from all liability for or in connection
with such action and does not materially and adversely impair the ability
of the Indemnitee to carry on its business and does not contain any
admission of wrong doing on the part of the Indemnitee.
(e) Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in this Section is
for any reason held to be unavailable from the Service Provider or is
insufficient to hold harmless a party indemnified hereunder, the Service
Provider, on the one hand, and the Company, on the other hand, shall
contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provision
(including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted) to which the Service Provider and the
Company may be subject, in such proportion as is appropriate to reflect the
relative fault of the Service Provider, on the one hand, and the Company,
on the other hand, in connection with the acts, statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault of
the Service Provider, on the one hand, and of the Company, on the other
hand, shall be determined by reference to, among other things, whether the
act, statement or omission relates to acts taken or omitted or information
supplied by or not provided by the Service Provider or the Company and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such act, statement or omission.
The Service Provider and the Company agree that it would not be
just and equitable if contribution pursuant to this Section 16(d) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
above. Notwithstanding the provisions of this Section 16(d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act of 1933, as amended (the "Act")) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 16(d), (A) each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (B) the respective officers, directors, partners, employees,
representatives and agents of the Company or any controlling person thereof
shall have the same rights to contribution as the Company, and each person,
if any, who controls the Service Provider within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as the Service Provider, subject in each case to the last
sentence of the preceding paragraph.
Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against
another party or parties under this paragraph, notify such party or parties
from whom contribution may be sought, but the failure to so notify such
party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under
this paragraph or otherwise. No party shall be liable for contribution
with respect to any action or claim settled without its prior written
consent; provided, however, that such written consent was not unreasonably
withheld.
12. CONFIDENTIALITY
Subject to Section 4.13 of the Purchase Agreement, for a period
of three years after the date hereof, the Service Provider shall refrain,
and shall cause its officers, directors, employees, agents, auditors,
counsel, affiliates and other representatives (collectively,
"Representatives") to refrain, from directly or indirectly:
(a) disclosing to any person or entity (other than the Service
Provider's Representatives) the terms and conditions of this Agreement or
any records, files, documents, data (including without limitation claims or
loss data), or information concerning the Company or its affiliates that
the Service Provider prepares, maintains, uses, or receives in connection
with the transactions contemplated by this Agreement, unless (i) disclosure
is compelled by any court or administrative agency or by other applicable
requirements of Law or (ii) such records, files, documents, data, or
information can be shown to have been (x) generally available to the public
other than as a result of a disclosure by the Service Provider or its
Representatives or (y) available to the Service Provider on a non confidential
basis from a source other than the Company or the Company's
Representatives, provided that such source is not known by the Service
Provider to be bound by a confidentiality agreement with, or other
obligation of secrecy of, the Company or another party; or
(b) using such records, files, documents, data or information for
any purpose (including without limitation directly or indirectly competing
with the Company or any affiliate thereof) except pursuant to this
Agreement.
Notwithstanding the foregoing, from and after the Closing Date,
the Service Provider shall be entitled to use information concerning,
derived from, or related to the Business for any lawful purpose in
connection with the transaction of the Service Provider's business under
the Charter Coinsurance Agreement and the Charter Reinsurance Agreement,
provided that the Service Provider shall comply with all Laws applicable to
the use of such information (including, without limitation, Laws relating
to the use of such information that would otherwise be applicable to the
Company as the issuer of the Reinsured Policies).
For a period of three years after the date hereof, the Company
shall refrain, and shall cause its Representatives to refrain, from
directly or indirectly:
(A) disclosing to any person or entity (other than the
Company's Representatives) the terms and conditions of this Agreement or
any records, files, documents, data (including without limitation claims or
loss data), or information concerning the Service Provider or its
affiliates that the Company prepares, maintains, uses, or receives in
connection with the transactions contemplated by this Agreement, unless
(i) disclosure is compelled by any court or administrative agency or by
other applicable requirements of Law or (ii) such records, files,
documents, data, or information can be shown to have been (x) generally
available to the public other than as a result of a disclosure by the
Company or its Representatives or (y) available to the Company on a non
confidential basis from a source other than the Service Provider or the
Service Provider's Representatives, provided that such source is not known
by the Company to be bound by a confidentiality agreement with, or other
obligation of secrecy of, the Service Provider or another party; or
(B) using such records, files, documents, data or information
for any purpose (including without limitation directly or indirectly
competing with the Company or any affiliate thereof) except pursuant to
this Agreement.
13. TRANSFER OF RECORDS
On the Closing Date or as soon thereafter as the parties shall
agree is reasonably practical, the Company shall forward to the Service
Provider (at the Service Provider's expense) all reports, records,
underwriting files, policy files, claims files and information in any form
in its possession relating to the Reinsured Policies (the "Transferred
Records"). All of such Transferred Records shall remain the property of
the Company or the party on whose behalf the Company is maintaining such
records, as applicable. Such Transferred Records shall be available (at
their place of keeping) for inspection, examination, and audit by the
Company (and its representatives) at all reasonable times. The Service
Provider shall provide to the Company (a) at the Service Provider's
expense, copies of such Transferred Records as may be reasonably required
in connection with the preparation of the Company's financial statements,
state and federal income and other tax returns, and any other filings or
reports required to be filed with, or requested by, state or federal
regulatory authorities or any rating agencies and (b) at the Company's
expense, copies of such Transferred Records for any other reason.
14. NOTIFICATION
The Company shall forward promptly to the Service Provider all
notices and other written communications received by or served upon the
Company relating to the Services or the Reinsured Policies, including,
without limitation (a) all inquiries or complaints from state insurance
regulators, agents, brokers and insureds and (b) all notices of claims,
suits and actions for which the Company receives service of process. The
Company shall be entitled to retain copies of all such materials.
The Service Provider shall forward promptly to the Company copies
of all notices and other written communications received by or served upon
the Service Provider relating to the Services or the Reinsured Policies
including, without limitation (a) all inquiries or complaints from state
insurance regulators, agents, brokers and insureds and (b) all notices of
claims (excluding routine claim notices), suits and actions for which the
Service Provider receives service of process.
15. ALTERNATIVE DISPUTE RESOLUTION
(a) Any dispute arising out of or relating to this Agreement
shall be resolved in accordance with the procedures specified in this
Section 15, which shall be the sole and exclusive procedures for the
resolution of any such disputes.
(b) The parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by
negotiation between executives who have authority to settle the controversy
and who are at a higher level of management than the persons with direct
responsibility for administration of this Agreement. Any party may give
the other party written notice of any dispute not resolved in the normal
course of business. Within 30 days after delivery of the notice, the
receiving party shall submit to the other a written response. The notice
and the response shall include: (a) a statement of each party's position
and a summary of arguments supporting that position, and (b) the name and
title of the executive who will represent that party and of any other
person who will accompany the executive. Within 30 days after delivery of
the disputing party's notice, the executives of both parties shall meet at
the Company's headquarters, or at such other location as mutually agreed by
the parties, at a mutually convenient time, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other will be
honored.
(c) If the matter has not been resolved within 60 days of the
disputing party's notice, or if the parties fail to meet within 30 days,
either party may initiate litigation of the controversy.
(d) All negotiations, discussions, and communications made or
conducted pursuant to the procedures set forth in paragraph (b) above are
confidential and shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence and any other applicable
rules of evidence.
16. NOTICE
Any notice or communication given pursuant to this Agreement must
be in writing and (a) delivered personally, (b) sent by facsimile
transmission, (c) delivered by overnight express, or (d) sent by registered
or certified mail, postage prepaid, as follows:
Service Provider: Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Allstate Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Company: Charter National Life Insurance Company
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Empire Insurance Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Leucadia National Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section shall (i) if
delivered personally or by overnight express, be deemed given upon
delivery; (ii) if delivered by facsimile transmission, be deemed given when
electronically confirmed; and (iii) if sent by registered or certified
mail, be deemed given when received. Any party from time to time may
change its address for notice purposes by giving a similar notice
specifying a new address, but no such notice shall be deemed to have been
given until it is actually received by the party sought to be charged with
the contents thereof.
17. EXPENSES
Except as otherwise expressly provided herein, each of the
parties hereto shall pay its own costs and expenses in connection with this
Agreement and its respective obligations hereunder.
18. GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the Laws of the State of New York, regardless of the Laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
19. INTEGRATION
This Agreement (including the Exhibits hereto), together with
Purchase Agreement, the Charter Coinsurance Agreement, and the Charter
Reinsurance Agreement, contain the entire agreement and understanding
between the parties with respect to the transactions contemplated hereby,
and supersede all prior agreements and understandings, written or oral,
with respect thereto.
20. ASSIGNMENT; BINDING EFFECT
Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
any of the parties hereto without the prior written consent of the other
party in its sole discretion, and any such assignment that is attempted
without such consent shall be null and void. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of,
and be enforceable by the parties and their respective successors and
permitted assigns.
21. AMENDMENT
This Agreement may only be amended or modified by a written
instrument executed on behalf of both parties hereto.
22. INDEPENDENT CONTRACTORS
The Service Provider shall be deemed an independent contractor of
the Company for all purposes hereunder. This Agreement shall not be
construed to create an employment, partnership, or joint venture
relationship between the parties hereto.
23. HEADINGS; INTERPRETATION
The headings used in this Agreement have been inserted for
convenience and do not constitute matter to be construed or interpreted in
connection with this Agreement. Unless the context of this Agreement
otherwise requires, (a) words using the singular or plural number also
include the plural or singular number, respectively; (b) the terms
"hereof," "herein," "hereby," "hereto," and derivative or similar words
refer to this entire Agreement (including the exhibits hereto); (c) the
term "Section" refers to the specified Section of this Agreement; (d) the
term "party" means, on the one hand, the Company, and on the other hand,
the Service Provider; and (e) with respect to any party, the term
"affiliate" shall include, without limitation, any person or entity that
becomes an affiliate of such party after the date of this Agreement.
24. REMEDIES
Any term or condition of this Agreement may be waived in writing
at any time by the party that is entitled to the benefit thereof. A waiver
on one occasion shall not be deemed to be a waiver of the same or any other
breach or nonfulfillment on a future occasion. All remedies, either under
this Agreement, or by Law or otherwise afforded, shall be cumulative and
not alternative.
25. SEVERABILITY
If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under any present or future Law, and if the
rights or obligations of the parties hereto under this Agreement will not
be materially and adversely affected thereby, (a) such provision shall be
fully severable; (b) this Agreement shall be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised a
part hereof; and (c) the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.
26. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which shall constitute one
and the same instrument and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the
other parties.
27. NO THIRD PARTY BENEFICIARY
Except as otherwise provided herein, the terms and provisions of
this Agreement are intended solely for the benefit of the parties hereto,
and their respective successors or permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon any
other person, and no such rights shall be conferred upon any person or
entity not a party to this Agreement.
28. GOOD FAITH
Each party shall act reasonably and in good faith in all matters
within the terms of this Agreement. Clerical errors and oversights
occasioned in good faith in the administration of the Agreement shall not
prejudice any party hereto and shall be rectified appropriately.
29. FORCE MAJEURE
Each party shall be excused from performance for any period and
to the extent that the party is prevented from performing any of its
responsibilities, in whole or in part, as a result of an act of God, war,
civil disturbance, court order, labor dispute, or causes beyond that
party's reasonable control including, but not limited to, failures or
fluctuation in electric power, heat, light, air conditioning, or
telecommunications equipment, and such nonperformance shall not constitute
a default.
IN WITNESS WHEREOF, the parties have executed this Agreement by
their duly authorized officers as of the date first set forth above.
CHARTER NATIONAL LIFE INSURANCE
COMPANY
By:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman and Chief Executive Officer
ALLSTATE LIFE INSURANCE COMPANY
By:
▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
EXHIBIT A
SERVICES
The Service Provider shall provide the following services to the Company:
1. Premium Collection. The Service Provider shall ▇▇▇▇ and collect all
premiums due under the Reinsured Policies, return any unearned premiums or
other premiums to be refunded, and reconcile amounts paid with returned
billing statements or other remittance media. The Service Provider shall
update the contract owner master records and all other records to reflect
payments received.
2. Premium Auditing. The Service Provider shall audit premium payments
with respect to the Reinsured Policies to ensure the accuracy and
acceptability of such payments.
3. Records Maintenance. The Service Provider shall maintain
applications, policyholder, annuitant, participant, contract owner,
premium, and other necessary records, including all computer records, to
determine the true and accurate status of the Reinsured Policies. Such
records on any Reinsured Policy are and shall remain the property of the
Company. The Service Provider shall maintain and preserve records with
respect to the Separate Accounts as required by Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, as amended, the Securities Exchange Act
of 1934, as amended, and the rules promulgated by the National Association
of Securities Dealers (the "NASD"). Upon request of the Company or any
state or federal regulatory authorities, the Service Provider shall forward
a complete copy of any record to the requesting party by overnight
delivery.
4. Lapse of Coverage. The Service Provider shall inform policyholders
of any lapse in coverage under the Reinsured Policies.
5. Provision of Forms. The Service Provider shall provide, at the
Service Provider's own expense, forms and supplies necessary to the
performance of the Service Provider's obligations under this Agreement
including, without limitation, confirmation statements and issue-related
forms, contracts, endorsements, and adoption agreements.
6. Performance of Obligations. The Service Provider shall perform all
of the Company's obligations under (i) the participation agreement between
the Company and the mutual fund organization in which assets of the
Separate Accounts are invested (the "Participation Agreement"), (ii) the
Principal Underwriting Agreement to be entered into by the Company and CNL,
Inc. pursuant to the Purchase Agreement, and (iii) the Marketing and
Solicitation Agreement dated September 30, 1988 by and among ▇▇▇▇▇▇▇ Fund
Distributors, Inc., the Company, Charter National Variable Annuities
Account and CNL, Inc.
7. Claims Administration. The Service Provider shall administer claims
on the Reinsured Policies as appropriate, including the following:
(a) Reviewing and paying all claims for benefits which the Service
Provider's review determines to be qualified for payment in accordance with
applicable Reinsured Policy provisions. Any such payments shall be made
within the time periods and in the manner prescribed by applicable Law.
Each payment made by the Service Provider with respect to claims subject to
this Agreement shall, where appropriate, be made in full and final
discharge of the obligations of the Company or the Service Provider under
the applicable Reinsured Policy with respect to such payment;
(b) Reviewing and compromising or denying, as is appropriate based
on the guidelines of the Company and CNL, Inc. in effect immediately prior
to the Effective Time, all claims for benefits which the Service Provider's
review determines to be qualified for such denial or compromise, in
reliance on applicable Reinsured Policy provisions. In the event of non
payment of claims on account of incomplete or insufficient data, the
Service Provider shall acknowledge such fact to the claimant by the earlier
of (i) ten working days from date of receipt of the claim or (ii) the
number of days provided by applicable Law;
(c) Communicating with claimants with respect to the submission,
approval and payment, compromise or denial of claims made under the
Reinsured Policies administered under this Agreement;
(d) Maintaining such files and records as are necessary to enable
the Company, at any time, to determine the true and accurate claim
experience on the Reinsured Policies. Said files and records on any
Reinsured Policy are and shall remain the property of the Company;
(e) Conforming to the reasonable requirements set by the Company
for monthly submission of claims reports; and
(f) Performing such other claim services as may be reasonably
required in connection with the support and administration of the Reinsured
Policies.
(g) Preparing all required Federal tax reports, including without
limitation 1099-R, W-2P, W-2 and 5498 for contract owners and beneficiaries
as required and distributing the same to contract owners and beneficiaries
and appropriate authorities.
(h) Responding to any requests from plan administrators or
trustees for policy information affecting the plan or participants for
qualified plans.
(i) Responding to requests for calculations applicable to annuity
payments as may be necessary for tax calculations.
8. Litigation.
(a) The Service Provider shall defend and prosecute in a manner
consistent with all applicable Law, at its sole cost and expense, all
suits, actions and proceedings arising out of underwriting of the Reinsured
Policies and claims for benefits thereunder. The Company shall have the
right, at its sole cost and expense, to participate in any suit, action or
proceeding arising under the Reinsured Policies. Notwithstanding any
provision in this Agreement to the contrary, the Service Provider shall
have final authority with respect to such defense and prosecution,
including any settlement or compromise thereof without the consent of the
Company, so long as all amounts for which the Company may be held liable
are 100% reinsured under the Charter Coinsurance Agreement or the Charter
Reinsurance Agreement and any such settlement or compromise releases the
Company from all liability for or in connection with such suit, action or
proceeding and does not materially and adversely impair the ability of the
Company to carry on its business and does not contain any admission of
wrongdoing on the part of the Company.
(b) As soon as practicable after receipt by the Service Provider
of notice or threat of the commencement of any suit, action or proceeding
naming the Company as a party, the Service Provider shall provide a copy of
all documentation received in respect thereof (with, where appropriate,
notation as to time and place of service and the identity of the person
served) to the Company. If the Company receives notice or threat of the
commencement of any suit, action or proceeding naming the Service Provider
as a party, the Company shall promptly deliver all documentation received
in respect thereof (with, where appropriate, notation as to time and place
of service and the identity of the person served) to the Service Provider.
The Company shall have the right, at its sole cost and expense, to examine
all files and papers relating to all claims, suits, actions or proceedings
arising under the Reinsured Policies, and the Service Provider shall
cooperate in such examination and consultation. The parties shall provide
each other with a quarterly statement of litigation in progress. The
Service Provider shall not file any complaint or initiate any legal
proceeding in the name of the Company without the written consent of the
Company.
9. Policyholder Services. The Service Provider shall provide general
policyholder services to individuals under the Reinsured Policies,
including, but not limited to, the following:
(a) Responding to inquiries with respect to the scope and amounts
of coverage provided under the Reinsured Policies;
(b) Supplying claimants, policyowners and insureds with
appropriate instructions and forms for reporting claims and for submitting
relevant information;
(c) Issuing timely reports, statements, and confirmations as
required by the Reinsured Policies or the Company's practices in effect
immediately prior to the Effective Time;
(d) Issuing tax reporting forms and other information as required
by applicable regulatory rules;
(e) Processing and recording changes in the Reinsured Policies
(such changes may include but are not limited to, (i) changes of ownership,
beneficiary, amount of insurance, options under the Reinsured Policies, and
(ii) changes in name, changes in address and changes in other data related
to the policyowners and insureds under the Reinsured Policies),
reissuances, and transfer requests (i.e., from one subaccount to another);
(f) Processing policy loans, surrenders, policy conversions and
reinstatements;
(g) Complying with Company guidelines in effect immediately prior
to the Effective Time (subject to adjustment as required by applicable Law)
with respect to replacements and exchange requests;
(h) Calculating (on a daily basis) the net asset value and the
accumulation unit value of each subaccount of the Separate Accounts that
are funding options for the Reinsured Policies in accordance with the
provisions of the Reinsured Policies, as well as with the prospectus and
statement of additional information disclosure on any day when such
calculation is required by the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(i) Calculating (on a daily basis) the mortality and expense
charges, administrative charges, and cost of insurance in accordance with
the provisions of the Reinsured Policies, as well as with the prospectus
and statement of additional information disclosure.
(j) Transmitting orders pursuant to the Participation Agreement
for the purchase or redemption of shares in the investment companies in
which the assets of the Separate Account are invested to such investment
companies or their authorized agents and paying and receiving funds in
connection with such purchases or redemptions as required by any applicable
agreement.
(k) Providing all administrative services required in connection
with the Third Party Reinsurance Agreements (as defined in the Charter
Coinsurance Agreement).
10. Agent Compensation. The Service Provider shall, on behalf of the
Company, pay the compensation due from the Company to the agents or brokers
of record for the Reinsured Policies as determined pursuant to any
agreements under which any payments become due after the Effective Time.
11. Accounting and Reporting Services. With respect to the Reinsured
Policies, the Service Provider shall perform all accounting and reporting
of direct and ceded premiums, claims and other policyholder disbursements,
reserves, policy loans, commissions, and premium tax payments and accruals.
Such services shall include all accounting and reporting necessary to
provide the Company with all required statutory, regulatory, and GAAP data
needed for financial statements and filings and state and federal income
and premium tax reporting and filings.
12. Agent Licensing. The Service Provider shall (i) maintain the
appointment of all necessary resident/countersignature and other agents
used by the Company and (ii) remit compensation to such agents in
accordance with the terms and provisions of their agreements with the
Company.
13. Actuarial Services. The Service Provider shall provide the Company
with the following actuarial services:
(a) Experience analysis (loss ratios, persistency, mortality, and
special studies);
(b) Calculation of all actuarial reserves and liabilities and
other actuarial items necessary to prepare SAP and GAAP financial
statements and supporting exhibits and tax filings and schedules;
(c) Determination of rate changes;
(d) Calculation of tax reserves;
(e) Preparation of all necessary actuarial opinions, memoranda
and/or certifications for annual and quarterly statements;
(f) Maintenance of product files on system;
(g) Ongoing support, as necessary, to compliance function;
(h) Providing responses to state regulators as required;
(i) Providing miscellaneous support to policyowner service; and
(j) Providing the formal actuarial opinions and related reports
required by the NAIC Annual Statement blank and other state requirements,
the Securities and Exchange Commission (the "SEC"), the NASD, any other
regulatory authorities, and external auditors.
14. Compliance Services. The Service Provider shall provide the Company
with the following compliance services:
(a) Federal and state regulatory review and compliance;
(b) Subject to the restrictions set forth in Section 2(c) of the
Agreement, the development and filing of policy forms, riders,
endorsements, and disclosure statements as may be required from time to
time by applicable Law;
(c) Filing of rate changes, as required;
(d) Preparation and submission of (and provision of financial data
required for) all reports required by the SEC (including without limitation
forms N-SAR and 24f-2 Notices), the NASD, and the states (in each case only
after review and approval thereof by the Company);
(e) Review and approval of customer communications;
(f) Coordination of special mailings; and
(g) Handling complaints;
With respect to the Reinsured Policies:
(i) The Service Provider shall advise the Company of any
customer complaint threatening the commencement of legal action or
regulatory action or of any inquiry or complaint received from or forwarded
by a state insurance department or other government agency, better business
bureau or an attorney representing any customer (collectively, a "customer
complaint") within 24 hours of receipt, if possible, but in no instance
later than five business days after receipt thereof, and shall, if
requested by the Company, provide the Company with copies of all pertinent
files and correspondence relating thereto.
(ii) The Service Provider shall be responsible for the
investigation and preparation of responses to all customer complaints and
regulatory inquiries or complaints, provided that no response to a customer
complaint threatening the commencement of legal action or regulatory action
or an inquiry or complaint received from or forwarded by a state insurance
department or other government agency, better business bureau or any
attorney representing any customer shall be sent to said customer,
government agency, better business bureau or attorney if the Company
promptly notifies the Service Provider that the Company intends to respond
to such complaint.
(iii) Subject to the foregoing, all customer complaints shall
be handled in accordance with applicable Law (including without limitation
any response time requirements applicable thereto). With respect to each
customer complaint, the Service Provider shall use all commercially
reasonable efforts to resolve or acknowledge such customer complaint by the
fifth business day after receipt thereof (with respect to customer
complaints from state insurance departments, other regulatory agencies, or
attorneys threatening legal or regulatory action) or by the tenth business
day after receipt thereof (with respect to customer complaints from
consumers or others). A record of all customer complaints shall be
maintained in a log showing the date received, the nature of the complaint,
the action taken (if any) and the date of the response.
(iv) As used herein, a "customer complaint" shall be deemed
to include any written communication primarily expressing a grievance
against the Company or the Service Provider.
Notwithstanding the foregoing, with respect to the Variable
Policies, all complaints and other grievances shall be handled by the
Service Provider in accordance with NASD requirements.
(h) Drafting and filing registration statements and other SEC
related documents, where required, and perform services necessary to meet
SEC requirements with respect to any of the Variable Policies. In
addition, the Service Provider shall distribute at its expense to policy
owners all required prospectuses, post-effective amendments or supplements
to the registration statements of the Separate Account or of any underlying
funds as well as annual and semi-annual reports.
(i) Making all filings and obtaining all regulatory approvals
required with regard to advertising of the Reinsured Policies, including
without limitation all filings and approvals required by applicable Laws
and NASD requirements (except to the extent that such services are
performed by other entities pursuant to written agreements with the
Company).
(j) Providing regulatory supervision and compliance, to the extent
the Reinsurer is legally permitted, as to all servicing functions
contemplated by this Agreement.
(k) Ensuring SEC and NASD compliance for variable contracts,
prospectuses, and registration statements including the submission of any
required information, conducting annual compliance audits, quarterly
complaint reporting, registering and terminating representatives and
monitoring continuing education requirements; and
(l) Monitoring statutes and regulations of the insurance
departments in the various states in which the policy owners or Reinsured
Policies are located to ensure compliance therewith and to ensure that any
actions or communications required by such regulations or statutes are
properly made.
(m) Monitoring the federal securities statutes and the rules,
regulations, orders, and interpretations thereunder and the securities
statutes and rules, regulations, orders, and interpretations thereunder of
the various states in which policy owners or Reinsured Policies are located
to ensure compliance therewith and to ensure that any actions or
communications required thereby are properly made.
(n) Monitoring the federal tax and labor statutes and the rules,
regulations, orders, and interpretations thereunder and the tax and labor
statutes and rules, regulations, orders, and interpretations thereunder of
the various states in which policy owners or Reinsured Policies are located
to ensure compliance therewith and to ensure that any actions or
communications required thereby are properly made.
(o) Providing such services as the Company may require under its
direction in connection with responding to inquiries from the SEC, NASD,
NAIC or the insurance or securities departments of the various states in
which the policy owners or the Reinsured Policies are located.
15. Data Processing. The Service Provider shall provide all data
processing services, software, and facilities necessary to provide the
Services.
16. General Services and Oversight. The Service Provider shall provide
appropriate management oversight of the financial performance and monitor
significant activities relating to the Reinsured Policies, providing
appropriate data to the Company in an agreed-upon format, including the
following:
(a) Making all records relating to the Reinsured Policies
available to the Company for audit upon reasonable notice and during the
regular business hours of the Service Provider. Such records shall
include, but not be limited to, federal tax documentation, policyholder
records, in-force listings, premium records, claim forms, itemized
▇▇▇▇▇▇▇▇, eligibility documentation, and agent records and files; and
(b) Performing such other administrative services as may be
reasonably required in connection with the support and administration of
the Reinsured Policies.
17. Contract Issue and Underwriting.
a. The Service Provider shall (i) review each application for a
New Policy and (ii) apply the Company's issue and underwriting criteria to
such application. Such criteria shall be the issue and underwriting
criteria of the Company on the Effective Time, and such criteria may be
amended only by mutual written agreement of the Company and the Reinsurer.
The Service Provider shall cause to have printed and maintain an adequate
supply of forms of Company insurance and annuity contracts that may be
issued as New Policies.
b. The Service Provider shall (i) prepare contract data pages,
(ii) issue contracts for paid business and (iii) mail such materials to
contract owners or agents, as appropriate.
18. Proxy Processing.
a. The Service Provider shall receive record date information and
proxy solicitation from underlying investment vehicle(s).
b. The Service Provider shall prepare proxy ballots.
c. The Service Provider shall mail solicitation and
resolicitations, if necessary.
d. The Service Provider shall maintain all proxy registers and
other required proxy material.
DAFS02...:\30\76830\0137\1170\AGRD177W.08J
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
April 22, 1998
VIA EDGARLINK
Board of Directors
Charter National Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of Post
-Effective Amendment No. 17 to the registration statement on Form N-4 for
Charter National Variable Annuity Account (File No. 33-22925). In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
BY:____________________________________
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
April 15, 1998
Board of Directors
Charter National Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
With reference to Post Effective Amendment No. 17 to the Registration
Statement on Form N 4, soon to be filed by Charter National Life Insurance
Company (the "Company"), and Charter National Variable Annuity Account (the
"Account") with the Securities and Exchange Commission covering the
registration under the Securities Act of 1933 of certain variable annuity
contracts (the "Contracts") to be funded by the Account, I have examined
such documents and such law as I considered necessary and appropriate, and
on the basis of such examination it is my opinion that:
1. The Company is duly organized and validly existing under the laws of the
State of Missouri and has been duly authorized to issue Variable Annuity
Contracts by the Department of Insurance of the State of Missouri.
2. The Contracts, when issued after the Post Effective Amendment becomes
effective and in the manner contemplated by the Post Effective Amendment,
will be, under Missouri law, legally issued and will represent binding
obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the heading "Legal
Matters" in the Registration Statement.
Sincerely,
/S/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President, General Counsel
& Corporate Secretary
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Charter National Life Insurance Company
We consent to the inclusion of the following in the Post-Effective
Amendment No. 16 to the Registration Statement of the Charter National
Variable Annuity Account on Form N-4 (File No. 811-5279 and Registration
No. 33-22925):
- Our report dated March 20, 1998, on our audits of the financial
statements of Charter National Variable Annuity Account as of December 31,
1997 and for each of the two years in the period ended December 31, 1997.
- Our report dated March 20, 1998, on our audits of the consolidated
financial statements of Charter National Life Insurance Company and
Subsidiaries as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997.
- Our report dated March 20, 1998, of our audits of the consolidated
financial statement schedules of Charter National Life Insurance Company as
of December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997.
- The reference to our Firm under the caption "Independent
Accountants".
/S/
COOPERS AND ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
April 22, 1998
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each Officer/Director whose signature
appears below hereby constitutes and appoints ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and A.
Sales ▇▇▇▇▇▇ of Charter National Life Insurance Company, and each of them
(with power to each of them to act alone), as such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such person and in such person's name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the Registration Statements on Form ▇-▇,
(▇▇▇▇ ▇▇. ▇▇-▇▇▇▇), ▇▇▇▇ ▇-▇, (▇▇▇▇ No. 33-16482) and Form N-4, (File No.
33-22925) filed under the Securities Act of 1933 and the Investment Company
Act of 1940, and to file all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully and to all intents and purposes as such person might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or a substitute or substitutes, may or shall lawfully do or cause
to be done by virtue hereof.
Signature Date Signature Date
______________________ 2/23/98 ______________________ 2/23/98
/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /S/▇▇▇ ▇. ▇▇▇▇▇▇▇
______________________ 2/23/98 ______________________ 2/23/98
/S/▇▇▇▇ ▇▇▇▇▇▇▇▇▇ /S/▇▇▇▇▇ ▇▇▇▇▇▇
______________________ 2/23/98 ______________________ 2/23/98
/S/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III /S/▇▇▇▇▇▇ ▇. Orlando
______________________ 2/23/98 ______________________ 2/23/98
/S/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /S/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
______________________ 2/23/98 ______________________ 2/23/98
/S/▇▇▇▇ ▇▇▇▇▇ /S/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
______________________ 2/23/98 ______________________ 2/23/98
/S/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /S/▇▇▇▇▇ ▇▇▇▇▇▇▇▇