Exhibit 10.2
Service and Expense Agreement
among
ALLSTATE INSURANCE COMPANY
and
THE ALLSTATE CORPORATION
and
Certain Insurance Subsidiaries
This Agreement made and effective as of this 1st day of January, 1999, among
ALLSTATE INSURANCE COMPANY, an Illinois insurance company ("Allstate"), THE
ALLSTATE CORPORATION, a Delaware corporation and parent of Allstate ("Allcorp"),
and Certain Insurance Subsidiaries identified as follows: ALLSTATE COUNTY MUTUAL
INSURANCE COMPANY, a Texas county mutual insurance company, ALLSTATE TEXAS
LLOYD'S, a Texas Lloyds plan insurer, LINCOLN BENEFIT LIFE COMPANY, a Nebraska
insurance company, SURETY LIFE INSURANCE COMPANY, a Nebraska insurance company,
ALLSTATE INDEMNITY COMPANY, an Illinois insurance company, ALLSTATE PROPERTY AND
CASUALTY INSURANCE COMPANY, an Illinois insurance company, DEERBOOK INSURANCE
COMPANY, an Illinois insurance company, FORESTVIEW MORTGAGE INSURANCE COMPANY, a
California insurance company, ALLSTATE LIFE INSURANCE COMPANY, an Illinois
insurance company, NORTHBROOK LIFE INSURANCE COMPANY, an Arizona insurance
company, GLENBROOK LIFE AND ANNUITY COMPANY, an Arizona insurance company,
ALLSTATE FLORIDIAN INDEMNITY COMPANY, an Illinois insurance company, ALLSTATE
FLORIDIAN INSURANCE COMPANY, an Illinois insurance company, ALLSTATE NEW JERSEY
INSURANCE COMPANY, an Illinois insurance company, AMERICAN SURETY & CASUALTY
COMPANY, a Florida insurance company, CHARTER NATIONAL LIFE INSURANCE COMPANY,
an Illinois insurance company, AMERICAN HERITAGE LIFE INSURANCE COMPANY, a
Florida insurance company, FIRST COLONIAL REINSURANCE COMPANY, a Florida
insurance company, COLUMBIA UNIVERSAL LIFE INSURANCE COMPANY, a Texas insurance
company, KEYSTONE STATE LIFE INSURANCE COMPANY, a Pennsylvania insurance
company, CONCORD HERITAGE LIFE INSURANCE COMPANY, INC., a New Hampshire
insurance company, and AHL SELECT HMO, INCORPORATED, a Florida insurance
company. For purposes of this agreement, the Insurance Subsidiaries shall be
referred to herein, individually as "Affiliate" and collectively as
"Affiliates."
W I T N E S S E T H:
WHEREAS, Allcorp and each Affiliate desire that Allstate furnish or cause to be
furnished to them certain services and facilities.
NOW, THEREFORE, it is agreed as follows:
1. Allstate shall furnish or cause to be furnished, at cost and in the same
manner as such services and facilities are furnished to its other
affiliates, (a.) to each Affiliate that is a property and casualty insurer,
services and facilities listed on Exhibit A; (b.) to each Affiliate that is
a life insurer, services and facilities listed on Exhibit B; (c.) to
ALLCORP such services and facilities as are required; and (d) to Allcorp
and each Affiliate the investment services as described in Exhibit E, each
attached hereto. Allstate and any Affiliate may from time to time agree
that only certain of the listed services and facilities will be provided by
Allstate.
2. Costs are defined as Allstate's actual costs and expenses incurred which
are attributable to the services and facilities provided under this
Agreement, such as: salaries and benefits; space rental; overhead expenses
which may include items such as electricity, heat, and water; building
maintenance services; furniture and other office equipment; supplies and
special equipment such as reference libraries, electronic data processing
equipment and the like.
3. Allocations for the above services and facilities shall be made by Allstate
in accordance with the general provisions contained in Exhibits A through
E. Exhibits A and B are based upon NAIC expense classification and
allocation guidelines. In the event such guidelines are amended, Exhibits A
and B shall be deemed amended to conform thereto. Allstate will exercise
reasonable judgment in appropriately revising these Exhibits, maintain
proper documentation for revisions and communicate changes in allocation
requirements to affected Affiliates or Allcorp parties in a timely manner.
Exhibit C provides a narrative overview of the expense management process
and Exhibit D provides certain definitions used throughout.
4. Notwithstanding anything contained in this Agreement to the contrary, the
amount charged to any Affiliate or Allcorp shall not exceed the cost to
Allstate. Allstate will exercise reasonable judgement in periodically
reviewing the expenses incurred and the percentage thereof allocated. Any
Affiliate or Allcorp may request a review of such expenses and their
allocation and such review will occur promptly thereafter.
5. Allstate will charge Allcorp and each Affiliate for all the services and
facilities provided pursuant to this Agreement via the monthly expense
allocation process, and payments will be through the monthly intercompany
settlement process. The process will be completed by Allstate personnel in
the most timely and effective method available.
6. Allstate shall maintain such records as may be required relating to the
accounting system of Allstate, Allcorp and its Affiliates. Each Affiliate
and Allcorp understand and accept the financial records generated by this
system which utilizes the concepts detailed in the addenda attached to
Exhibits A and B, respectively.
7. Upon reasonable notice, and during normal business hours, each Affiliate
and Allcorp shall be entitled to, at its own expense, inspect records which
pertain to the computation of charges for the facilities or services
provided pursuant to this Agreement. Allstate shall at all times maintain
correct and complete books, records and accounts of all services and
facilities furnished pursuant to this Agreement. Each Affiliate and Allcorp
shall have unconditional right of ownership of any records prepared on its
behalf under this Agreement.
8. Certain agreements relating to reinsurance and other service and expense
sharing exist by and among Allstate and certain of its Affiliates. Except
for those Agreements listed on Exhibit F, nothing in this Agreement shall
be deemed to amend any such previously executed agreement between the
parties.
9. Allstate employees performing duties hereunder at all times during the term
of this Agreement shall be in the employment, under the supervision and
control of Allstate and shall not be deemed employees of Allcorp or any
Affiliate.
10. The scope of, and the manner in which, Allstate provides facilities and
services to Allcorp and the Affiliates shall be reviewed periodically by
Allstate, Allcorp and each Affiliate. All services and facilities shall be
of good quality and suitable for the purpose for which they are intended.
11. Allstate shall not assign its obligations or rights under this Agreement
without the written consent of each Affiliate and Allcorp. Allstate may
terminate this Agreement in its entirety, and Allcorp or any Affiliate may
cancel its participation in the arrangements under this Agreement, each by
giving six months written notice to the other parties to this Agreement;
provided, however, that in the event that the affiliate relationship ceases
to exist with respect to any Affiliate, this Agreement shall terminate
immediately with respect to such Affiliate. Under no circumstances will the
initial term of this Agreement exceed five (5) years.
12. All communications provided for hereunder shall be in writing, and if to an
Affiliate, mailed or delivered to such Affiliate at its office at the
address listed in such Affiliate's Statutory Annual Statement Blank,
Attention: Secretary, or if to Allcorp or Allstate, mailed or delivered to
its office at 0000 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000, Attention:
Controller, or addressed to any party at the address such party may
hereafter designate by written notice to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
as of the day and year above written.
ALLSTATE INSURANCE COMPANY
By /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Group Vice President and Controller
ALLSTATE COUNTY MUTUAL INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE TEXAS LLOYDS, INC.
On behalf of ALLSTATE TEXAS LLOYDS
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Controller
LINCOLN BENEFIT LIFE COMPANY
By /s/ Xxxxxx X. Xxxxxx, XX
Xxxxxx X. Xxxxxx, XX
Chief Executive Officer
SURETY LIFE INSURANCE COMPANY
By /s/ Xxxxxx X. Xxxxxx, XX
Xxxxxx X. Xxxxxx, XX
Chief Executive Officer
ALLSTATE INDEMNITY COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE PROPERTY AND CASUALTY
INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
DEERBROOK INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
FORESTVIEW MORTGAGE INSURANCE
COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Treasurer
NORTHBROOK LIFE INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Treasurer
GLENBROOK LIFE AND ANNUITY COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Treasurer
THE ALLSTATE CORPORATION
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Treasurer
ALLSTATE FLORIDIAN INDEMNITY COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE FLORIDIAN INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE NEW JERSEY INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
AMERICAN SURETY & CASUALTY COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
CHARTER NATIONAL LIFE INSURANCE COMPANY
By /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Treasurer
AMERICAN HERITAGE LIFE INSURANCE COMPANY
By /s/ C. Xxxxxxx Xxxxxxxx
Name: C. Xxxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
FIRST COLONIAL INSURANCE COMPANY
By /s/ C. Xxxxxxx Xxxxxxxx
Name: C. Xxxxxxx Xxxxxxxx
Title: President and Treasurer
COLUMBIA UNIVERSAL LIFE INSURANCE COMPANY
By /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: President
KEYSTONE STATE LIFE INSURANCE COMPANY
By /s/ Xxxx X. Athens
Name: Xxxx X. Athens
Title: Chief Financial Officer
CONCORD HERITAGE LIFE INSURANCE COMPANY, INC.
By /s/ Xxxxxxxx X. Xxxxxx
Name: Xxxxxxxx X. Xxxxxx
Title: President & CEO
AHL SELECT HMO INCORPORATED
By /s/ Xxxxx X. Xxxx
Name: Xxxxx X. Xxxx
Title: President
EXHIBIT A
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE INSURANCE COMPANY AND PROPERTY & CASUALTY AFFILIATES
---------------------------- ----------------------------------------------------- -----------------------------------------------
Expense Line Item Per U&I Basis of Expense Allocation***
Exhibit* Expense Classification Description**
---------------------------- ----------------------------------------------------- -----------------------------------------------
---------------------------- ----------------------------------------------------- -----------------------------------------------
1. Claim Adjustment Investigation and adjustment of policy claims for No allocation - direct charge to company
Services direct, reinsurance assumed and ceded business.
The more significant expenses and fees related to:
(1) all outside costs associated with independent
adjusters, (2) lawyers for legal services in the
defense, trial, or appeal of suits, (3) general
court costs, (4) medical testimony, (5) expert and
lay witnesses, (6) medical examinations for the
purpose of trial and resolution of liability and
(7) miscellaneous (appraisals, surveys, detective
reports, audits, character reports, etc.).
---------------------------- ----------------------------------------------------- -----------------------------------------------
---------------------------- ----------------------------------------------------- -----------------------------------------------
2. Commission and All payments, reimbursements and allowances (on No allocation - direct charge to company based
Brokerage direct and reinsurance assumed and ceded business) no agent contract
to managers, agents, brokers, solicitors or other
producer types.
---------------------------- ----------------------------------------------------- -----------------------------------------------
* Expense classifications per the statutory Underwriting and Investment
Exhibit, Part 4, Expenses. The company uses these twenty-one classifications
to record its operating expenses incurred. As described in Exhibit C,
expenses for these classifications are also spread to three distinct
functional expense groups: loss adjustment, other underwriting and
investment expenses.
** This description provides only a synopsis of the types of expenses for each
classification. Parties to the Agreement will utilize the NAIC Examiners
Handbook in expense handling.
*** Before consideration of any applicable reinsurance agreement.
---------------------------- ----------------------------------------------------- -----------------------------------------------
Expense Line Item Per U&I Basis of Expense Allocation***
Exhibit* Expense Classification Description**
---------------------------- ----------------------------------------------------- -----------------------------------------------
---------------------------- ----------------------------------------------------- -----------------------------------------------
4. Advertising Typical expenses would include services of: (1) Direct charge by company where known.
advertising agents, (2) public relations counsel, Allocated items handled as follows:
(3) advertisements in newspapers, periodicals, See Exhibit A Appendix at B; C 1; D 1 and
billboards, pamphlets and literature issued for E 1 for explanation of allocation by type
advertising or promotional purposes, (4) related of office
paper and printing charges for advertising
purposes, (5) radio broadcasts, (6) prospect and
mailing lists, (7) signs and medals for agents and
(8) television commercials.
---------------------------- ----------------------------------------------------- -----------------------------------------------
---------------------------- ----------------------------------------------------- -----------------------------------------------
5. Boards, Bureaus and Various dues, assessments, fees and charges for No allocation - direct charge to company
Associations items such as: (1) underwriting boards, rating
organizations, statistical agencies, inspection and
audit bureaus, (2) underwriters' advisory and
service organizations, (3) accident and loss
prevention organizations, (4) claim organizations,
(5) underwriting syndicates, pools and
associations, assigned risk plans.
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
6. Surveys and Costs to support the business including: (1) See Exhibit A Appendix
Underwriting Reports survey, credit, moral hazard, character reports for at B; D 1; and E 1 for explanation of allocation
underwriting, (2) appraisals for underwriting, (3) by type of office
fire records, (4) inspection and engineering billed
specifically, (5) medical examiner services
relating to underwriting.
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
7. Audit of Assured's Auditing fees and expenses of independent auditors No
allocation - direct charge to company Records for auditing payroll and
other premium bases.
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
8. Salary and Related Salaries, bonus, overtime, contingent compensation, See Exhibit A Appendix
Items and other compensation of employees. This would at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1,
include commission and brokerage to employees when 2, 3, 4 for explanation by type of office
the activities for which the commission is paid are
a part of their duties as employees.
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
9. Employee Relations This category includes a variety of pension and See Exhibit A Appendix
and Welfare insurance benefits for employees, as well as some at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1,
miscellaneous expenditures. The first area 2, 3, 4 for explanation by type of office
entails: (1) cost of retirement insurance, pensions
or other retirement allowances and funds
irrevocably devoted to the payment of pensions or
other employees' benefits, and (2) accident, health
and hospitalization insurance, group life insurance
and workers' compensation insurance. The
miscellaneous category may include the following
items (1) training and welfare; (2) physical exams
for employees or candidates; (3) gatherings,
outings and entertainment; (4) supper money; and
(5) donations to or on behalf of employees.
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
Expense Line Item Per U&I Basis of Expense Allocation***
Exhibit* Expense Classification Description**
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
10. Insurance Costs of insurance for employee/agent fidelity or See Exhibit A Appendix
surety bonds, public liability, burglary and at D 1; E 1; and F 1, 2, 3, 4 for explanation by
robbery, automobiles and office contents. type of office
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
12. Travel and Travel Major expense subcategories include: (1) See Exhibit A Appendix
Items transportation, hotel, meals, telephone and other at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1,
related costs associated for employees traveling, 2, 3, 4 for explanation by type of office
(2) expense for transfer of employees,
(3) automobile rental and license plates,
depreciation, repairs and other operating costs of
automobiles (4) transportation, hotel and
meals/entertainment of guests, (5) dues and
subscriptions to accounting, legal, actuarial or
similar societies and associations.
---------------------------- ----------------------------------------------------- ------------------------------------------------
---------------------------- ----------------------------------------------------- ------------------------------------------------
13. Rent and Rent Items Rent of home office and branch offices, space Direct charges by company are based on square
occupied in company owned buildings, storage and footage.
warehouse space, safe deposit boxes and post office
boxes. Related expenses for: (1) light, heat, Allocated expenses handled per Exhibit A
power and water, (2) interest, taxes, (3) cost of Appendix at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5;
alterations and repairs to leased properties, and and F 1, 2, 3, 4
(4) costs of cleaning and general maintenance.
---------------------------- ----------------------------------------------------- -----------------------------------------------
---------------------------- ----------------------------------------------------- -----------------------------------------------
14. Equipment Rent and repair of furniture, equipment, and office See Exhibit A Appendix
machines, including the related depreciation at A; B; C 1, 2; D 1, 2, 3, 4; E 1, 2, 3, 4;
charges. and F 1, 2, 3, 4
---------------------------- ----------------------------------------------------- -----------------------------------------------
---------------------------- ----------------------------------------------------- -----------------------------------------------
15. Printing and Generally, printing, stationery and office supplies See Exhibit A Appendix
Stationery (paper stock, printed forms and manuals, Photostat at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1,
copies, pens and pencils, etc.). Also included 2, 3, 4
would be policies and policy forms, in-house
employee publications, books, newspapers and
periodicals including investment, tax and legal
publications and services.
---------------------------- ----------------------------------------------------- -----------------------------------------------
---------------------------- ------------------------------------------------------------------ -----------------------------------
Expense Line Item Per U&I Basis of Expense Allocation***
Exhibit* Expense Classification Description**
---------------------------- ------------------------------------------------------------------ -----------------------------------
---------------------------- ------------------------------------------------------------------ -----------------------------------
16. Postage, Telephone, All express, freight and cartage expenses, postage, and See Exhibit A Appendix
etc. telephone. at A; B; C 1, 2; D 1, 2, 3, 4; E
2, 5; and F 1, 2, 3, 4
---------------------------- ------------------------------------------------------------------ -----------------------------------
---------------------------- ------------------------------------------------------------------ -----------------------------------
17. Legal & Auditing Legal fees and retainers excluding
loss and salvage related, See Exhibit A Appendix
auditing fees of independent auditors for examining
records, at A; D 2, 3, 4; E 2; services of tax
experts and investment counsel, custodian fees, and
F 1, 2 notary and trustees' fees.
---------------------------- ------------------------------------------------------------------ -----------------------------------
---------------------------- ------------------------------------------------------------------ -----------------------------------
18. Taxes, Licenses and Several categories comprise this expense classification: (1) No allocation - direct charge to
Fees state and local insurance taxes; (2) Insurance Department company
licenses and fees; (3) payroll taxes; and (4) all
other, excluding real estate and federal income.
Taxes, licenses and fees based on premiums and
payments to state industrial commissions for
administration of workers' compensation or other
state benefit acts would be in the first
classification. Expenses relating to the Insurance
Department would include agents' licenses, filing
fees, certificates of authority and fees and
expenses of examination. Payroll related expenses
normally include old age benefit and unemployment
insurance taxes. More significant expenses in the
all other section would be financial statement
publication fees, legally mandated advertising and
personal property and state income taxes.
---------------------------- ------------------------------------------------------------------ -----------------------------------
---------------------------- ------------------------------------------------------------------ -----------------------------------
19. Real Estate Expenses Salaries, wages and other compensation of maintenance workers in Direct charges by company are
connection with owned real estate. Other expense items assigned based on square footage.
to this category may also include expenses associated with:
operations; maintenance; insurance and advertising. Allocated expenses handled per
Exhibit A
Appendix at A; B; C 1, 2; D 1,
2, 3, 4; E 1, 2, 3, 4; and
F 1, 2, 3, 4
---------------------------- ------------------------------------------------------------------ -----------------------------------
---------------------------- -------------------------------------------------------------- ---------------------------------------
Expense Line Item Per U&I Basis of Expense Allocation***
Exhibit* Expense Classification Description**
---------------------------- -------------------------------------------------------------- ---------------------------------------
---------------------------- -------------------------------------------------------------- ---------------------------------------
20. Real Estate Taxes Taxes, licenses and fees on owned real estate. Direct charges by company are based on
square footage.
Allocated expenses handled per
Exhibit A Appendix at A; B; C 1,
2; D 1, 2, 3, 4; E 1, 2, 3, 4;
and F 1, 2, 3, 4
---------------------------- -------------------------------------------------------------- ---------------------------------------
Note: Expense classification for lines 3, 11 and 20a are not applicable for the Allstate Group.
EXHIBIT A
APPENDIX
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE INSURANCE COMPANY AND AFFILIATES
A. Offices 001 (Corporate Home Office), 201 (Investment Shared Services), 203
(Research Center Shared Services), 204 (Human Resources Shared Service),
205 (Corporate Relations Shared Services), 206 (Technical Shared Services),
207 (Law and Regulation Shared Services), 208 (Finance Shared Services) and
209 (Market Brand Development) factors are based on Service Level
Agreements. These Agreements are written documents detailing services and
associated costs performed by the provider for the benefit of the recipient
and are generated and approved through extensive discussions between
service providers and service recipients.
B. Support Centers, Data Centers, and Output Processing Centers (OPC) factors
are based on Stat Policies in Force and Time and Effort studies that
roll-up to the Support Center/Data Center/OPC.
C. P&C Head Office (Office 032) factors are based on:
1. Total agents' compensation
2. Time and effort studies
D. Regional Office factors are based on the following methodologies:
1. Agent compensation
2. Gross policies issued (GPI)
3. Notice counts
4. Time and effort studies
5. System capacity studies
E. Regional Commercial Centers factors are based on the following
methodologies:
1. Agent compensation
2. Gross policies issued (GPI)
3. Notice counts
4. Time and effort studies
5. General office compensation
F. Claim Service Areas factors are based on the following:
1. Headcount (Property vs. Auto)
2. Notice counts
3. Incurred loss
4. Claim legal matter counts
EXHIBIT B
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES
---------------------------- --------------------------------------------------------------- ----------------------------------
Expense Line Item Per Basis of Expense Allocation***
General Expense Exhibit* Expense Classification Description**
---------------------------- --------------------------------------------------------------- ----------------------------------
---------------------------- --------------------------------------------------------------- ----------------------------------
1. Rent Rent for all premises occupied by the company, including any Direct charges by company are
adequate rent for occupancy of its own buildings, in whole or based on square footage.
in part, except to the extent that allocation to other Allocated expenses are handled
expense classifications on a functional basis is permitted per Exhibit B Appendix at A; B
and used. 1, 2; C 1, 2 and D 1, 2, 3
---------------------------- --------------------------------------------------------------- ----------------------------------
---------------------------- --------------------------------------------------------------- ----------------------------------
2. Salaries and wages Salaries and wages, bonuses and incentive compensation to Agents' compensation is a direct
employees, overtime payments, continuation of salary during charge to company. The
temporary short-term absences, dismissal allowances, payments remaining expenses in this
to employees while in training and other compensation to category are allocated per
employees not specifically designated herein, except to the Exhibit B Appendix at
extent that allocation to their expense classifications is A; B 1, 2; C 1, 2; and D 1, 2, 3
permitted and used.
---------------------------- --------------------------------------------------------------- ----------------------------------
* Expense classifications per Statutory Exhibits 5 & 6. The company uses these
classifications to record its operating expenses incurred. This expense data
is also captured by four distinct functional expense groups: life, accident
and health, all other lines of business and investment expenses.
** These descriptions were written using the NAIC Life Annual Statement
Instructions. Refer to this publication for a complete breakdown of the
expenses included in each line item.
*** Before consideration of any applicable reinsurance agreement.
---------------------------- --------------------------------------------------------------- --------------------------------
Expense Line Item Per Basis of Expense Allocation***
General Expense Exhibit* Expense Classification Description**
---------------------------- --------------------------------------------------------------- --------------------------------
---------------------------- --------------------------------------------------------------- --------------------------------
3.11 Contributions for Contributions by company for pension and total permanent See Exhibit B Appendix
benefit plans for disability benefits, life insurance benefits, accident, at A; B 1, 2; C 1, 2; and
employees health, hospitalization, medical, surgical, or other D 1, 2, 3
temporary disability benefits under a
self-administered or trusteed plan or for the
purchase of annuity or insurance contracts.
Appropriation of any other assignment of funds by
company in connection with any benefit plan of the
types enumerated herein.
---------------------------- --------------------------------------------------------------- --------------------------------
---------------------------- --------------------------------------------------------------- --------------------------------
3.12 Contributions for Contributions by company for pension and total permanent See Exhibit B Appendix
benefit plans for disability benefits, life insurance benefits, accident, at C 1, 2; and D 1, 2, 3
agents health, hospitalization, medical, surgical, or other
temporary disability benefits under a
self-administered or trusteed plan or for the
purchase of annuity or insurance contracts.
Appropriation of any other assignment of funds by
company in connection with any benefit plan of the
types enumerated herein.
---------------------------- --------------------------------------------------------------- --------------------------------
---------------------------- --------------------------------------------------------------- --------------------------------
3.21 Payments to Payments by company under a program for pension and total and No allocation - direct charge
employees under permanent disability benefits, death benefits, accident, to company
non-funded benefit health, hospitalization, medical, surgical or other temporary
plans disability benefits where no contribution or appropriation is
made prior to the payment of the benefit.
---------------------------- --------------------------------------------------------------- --------------------------------
---------------------------- --------------------------------------------------------------- --------------------------------
3.22 Payments to agents Payments by company under a program for pension and total and No allocation - direct charge
under non-funded permanent disability benefits, death benefits, accident, to company
benefit plans health, hospitalization, medical, surgical or other temporary
disability benefits where no contribution or appropriation is
made prior to the payment of the benefit.
---------------------------- --------------------------------------------------------------- --------------------------------
---------------------------- --------------------------------------------------------------- --------------------------------
3.31 Other employee The net periodic postretirement benefit cost, meals to Agents' compensation is a
welfare employees, contribution to employee associations or clubs, direct charge to company. The
dental examinations, medical dispensary or convalescent home remaining expenses in this
expenses for employees. category are allocated per
Exhibit B Appendix at A; B 1, 2;
C 1, 2; and D 1, 2, 3
---------------------------- --------------------------------------------------------------- --------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
Expense Line Item Per Basis of Expense Allocation***
General Expense Exhibit* Expense Classification Description**
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
3.32 Other agent welfare The net periodic postretirement benefit cost, meals to Agents' compensation is a direct
employees, contribution to employee associations or clubs, charge to company. The
dental examinations, medical dispensary or convalescent home remaining expenses in this
expenses for agents. category are allocated per
Exhibit B Appendix at C 1, 2;
and D 1, 2, 3
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
4.1 Legal fees and Court costs, penalties and all fees or retainers for legal No allocation - direct charge to
expenses services or expenses in connection with matters before company
administrative or legislative bodies.
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
4.2 Medical examination Fees to medical examiners in connection with new business See Exhibit B Appendix
fees reinstatements, policy changes and applications for at D 1, 2
employment.
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
4.3 Inspection report Fee for inspection reports in connection with new business, See Exhibit B Appendix
fees reinstatements, policy changes and applications for at D 1, 2
employment. Cost of services furnished by the Medical
Information Bureau.
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
4.4 Fees of public Include expenses relating to this category except exclude See Exhibit B Appendix
accountants and examination fees made by State Departments and internal at A; B 1, 2; C 1, 2; and D 1, 2
consulting actuaries audits by company employees.
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
4.6 Expense of Payment to other than employees of fees and expenses for the See Exhibit B Appendix
investigation and investigation, litigation and settlement of policy claims. at D 1, 2
settlement of
policy claims
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
5.1 Traveling expenses Traveling expense of officers, other employees, directors See Exhibit B Appendix
and agents, including hotel, meals, telephone, telegraph and at A; B 1, 2; C 1, 2; and D 1,
postage charges incurred while traveling. Also include 2, 3
amounts allowed employees for use of their own cars on
company business and the cost of, or depreciation on, and
maintenance and running expenses of company-owned
automobiles.
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
Expense Line Item Per Basis of Expense Allocation***
General Expense Exhibit* Expense Classification Description**
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
5.2 Advertising Newspaper, magazine and trade journal advertising for the See Exhibit B Appendix
purpose of solicitation and conservation of business. at B 1, 2; C 1; and D 1, 2
Billboard, sign and telephone directory, television, radio
broadcasting and motion picture advertising, excluding
subjects dealing wholly with health and welfare. All
canvassing or other literature, such as pamphlets,
circulars, leaflets, policy illustration forms and other
sales aids, printed material, etc., prepared for
distribution to the public by agents or through the mail for
the purposes of solicitation and conservation of business.
All calendars, blotters, wallets, advertising novelties,
etc., for distribution to the public. Printing, paper
stock, etc. in connection with advertising. Prospect and
mailing lists when used for advertising purposes. Fees and
expenses of advertising agencies related to advertising.
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
5.3 Postage, express, Freight and cartage, cables, radiograms and teletype. Also See Exhibit B Appendix
telegraph and charges for use, installation and maintenance of related at A; B 1, 2; C 1, 2; and D 1,
telephone equipment if not included elsewhere. 2, 3
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
5.4 Printing and Policy forms, riders, supplementary contracts, applications, See Exhibit B Appendix
stationery etc., rate books, instruction manuals, punch-cards, house at A; B 1, 2; C 1, 2; and D 1,
organs, and all other printed material which is not
required 2, 3 to be included in any other expense
classification. Office supplies and pamphlets on
health, welfare and education subjects. Also
include annual reports to policyholders and
stockholders if not included in Line 5.2.
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
5.5 Cost or The cost or depreciation of office machines except for such See Exhibit B Appendix
depreciation of charges as may be reported in Line 5.3. at A; B 1, 2; C 1, 2; and D 1,
furniture and 2, 3
equipment
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
5.6 Rental of equipment Rental of office machines except for such charges as may be See Exhibit B Appendix
reported in Line 5.3. at A; B 1, 2; C 1, 2; and D 1,
2, 3
---------------------------- -------------------------------------------------------------- ----------------------------------
---------------------------- -------------------------------------------------------------- ----------------------------------
6.1 Books and Books, newspapers, periodicals, etc., including investment See Exhibit B Appendix
periodicals tax and legal publications and information services, and at A; B 1, 2; C 1, 2; and D 1,
including all such material for company's law department and 2, 3
libraries.
---------------------------- -------------------------------------------------------------- ----------------------------------
----------------------------- -------------------------------------------------------------- ---------------------------------
Expense Line Item Per Basis of Expense Allocation***
General Expense Exhibit* Expense Classification Description**
----------------------------- -------------------------------------------------------------- ---------------------------------
----------------------------- -------------------------------------------------------------- ---------------------------------
6.2 Bureau and All dues and assessments of organizations of which the No allocation - direct charge
association fees company is a member. All dues for employees' and agents' to company
memberships on the company's behalf.
----------------------------- -------------------------------------------------------------- ---------------------------------
----------------------------- -------------------------------------------------------------- ---------------------------------
6.3 Insurance, except on Premiums for Workers' Compensation, burglary, holdup, See Exhibit B Appendix
real estate forgery and the public liability insurance, fidelity or at A; B 1, 2; C 1, 2;
surety bonds, insurance on contents of company-occupied and D 1, 2, 3
buildings and all other insurance or bonds not included
elsewhere.
----------------------------- -------------------------------------------------------------- ---------------------------------
----------------------------- -------------------------------------------------------------- ---------------------------------
6.4 Miscellaneous losses Uncollectible losses due to deficiencies, defalcations, Primarily a direct charge to
robbery, or forgery, except those offset by bonding company. Remaining expenses
companies' payments. Also include Worker's Compensation are allocated per Exhibit B
benefits not covered by insurance and other uninsured losses Appendix at A; D 1, 2, 3
not included elsewhere.
----------------------------- -------------------------------------------------------------- ---------------------------------
----------------------------- -------------------------------------------------------------- ---------------------------------
6.5 Collection and bank Collection charges on checks and drafts and charges for See Exhibit B Appendix
service charges checking accounts and money orders. at A; and D 1, 2, 3
----------------------------- -------------------------------------------------------------- ---------------------------------
----------------------------- -------------------------------------------------------------- ---------------------------------
6.6 Sundry general Direct expense of local agency meetings, luncheons and See Exhibit B Appendix
expenses dinners, tabulating service rendered by outside at A; B 1, 2; C 1, 2; and
organizations, gifts and donations. Any portion of D 1, 2, 3
commissions and expense allowances on
reinsurance assumed for group business which
represents specific reimbursement of expenses.
Reimbursement to another insurer for expense of
jointly underwritten group contracts.
----------------------------- -------------------------------------------------------------- ---------------------------------
----------------------------- -------------------------------------------------------------- ---------------------------------
6.7 Group service and Administration fees, service fees, or any other form of See Exhibit B Appendix
administration fees allowance, reimbursement of expenses, or compensation (other at D 1, 2
than commissions) to agents, brokers, applicants,
policyholders or third parties in connection with
the solicitation, sale, issuance, service and
administration of group business.
----------------------------- -------------------------------------------------------------- ---------------------------------
----------------------------- ------------------------------------------------------------- ----------------------------------
Expense Line Item Per Basis of Expense Allocation***
General Expense Exhibit* Expense Classification Description**
----------------------------- ------------------------------------------------------------- ----------------------------------
----------------------------- ------------------------------------------------------------- ----------------------------------
6.8 Reimbursements by Report as a negative amount administrative fees, direct No allocation - direct charge
uninsured accident reimbursement of expenses, or other similar receipts or to company
and health plans credits attributable to uninsured accident and health plans
and the uninsured portion of partially insured accident and
health plans.
----------------------------- ------------------------------------------------------------- ----------------------------------
----------------------------- ------------------------------------------------------------- ----------------------------------
7.1 Agency expense All bona fide allowance for agency expense, but not No allocation - direct charge to
allowance allowances constituting additional compensation. company
----------------------------- ------------------------------------------------------------- ----------------------------------
----------------------------- ------------------------------------------------------------- ----------------------------------
7.2 Agents' balances Agents' balances charged off less any amounts recovered No allocation - direct charge to
charged off during the year. company
----------------------------- ------------------------------------------------------------- ----------------------------------
----------------------------- ------------------------------------------------------------- ----------------------------------
7.3 Agency conferences Cost of banquets and rental of meeting rooms. Expenses of Primary dollars are a direct
other than local all persons traveling to conferences and their expenses at charge to company. The
meetings conferences. remaining expenses in this
category are allocated per
Exhibit B Appendix at C 1; and D
1
----------------------------- ------------------------------------------------------------- ----------------------------------
----------------------------- ------------------------------------------------------------- ----------------------------------
9.1 Real estate expenses The cost of repairs, maintenance, service, and operation of Direct charges by company are
all real estate properties including insurance whether based on square footage.
occupied by the company or not; salaries and other Allocated expenses are handled
compensation of managing agents and their employees; per Exhibit B Appendix at A;
expenses incurred in connection with rental of such B 1, 2; C 1, 2; and D 1, 2, 3
properties; legal fees specifically associated with real
estate transactions other than sale; rent, salaries and
wages, and other direct expenses of any branch of Home
Office until engaged solely in real estate work (not real
estate and mortgages combined).
----------------------------- ------------------------------------------------------------- ----------------------------------
----------------------------- ------------------------------------------------------------- ----------------------------------
9.2 Investment expenses Only items for which no specific provisions has been made See Exhibit B Appendix
not included elsewhere, e.g., contributions or assessments for at A; and D 1, 2, 3
elsewhere bondholders' protective committees, fees of investment
counsel, custodian and trustee fees.
----------------------------- ------------------------------------------------------------- ----------------------------------
Note: Line 9.3, Aggregate write-ins for expenses, was not detailed in this
exhibit. The types of expenses, if any, and the corresponding
allocation basis are completely variable year-to-year. The Cost
Management Department will maintain appropriate records for this line
item.
---------------------------- ------------------------------------------------------- ------------------------------------
Expense Line Item Per Basis of Expense Allocation***
Taxes, Licenses and Fees Expense Classification Description**
Exhibit*
---------------------------- ------------------------------------------------------- ------------------------------------
---------------------------- ------------------------------------------------------- ------------------------------------
1. Real estate taxes Those taxes directly assessed against property owned Direct charges by company are
by the company. Canadian and other foreign taxes based on square footage.
should be included appropriately. Allocated expenses are handled per
Exhibit B Appendix at A; B 1, 2;
C 1, 2; and D 1, 2, 3
---------------------------- ------------------------------------------------------- ------------------------------------
---------------------------- ------------------------------------------------------- ------------------------------------
2. State insurance Assessments to defray operating expenses of any state No allocation - direct charge to
department licenses insurance department. Canadian and other foreign company
and fees taxes should be included appropriately. Fees for
examinations by state departments.
---------------------------- ------------------------------------------------------- ------------------------------------
---------------------------- ------------------------------------------------------- ------------------------------------
3. State taxes on State taxes based on policy reserves, if in lieu of No allocation - direct charge to
premiums premium taxes. Canadian and other foreign taxes company
should be included appropriately. Any portion of
commissions or allowances on reinsurance assumed
for group business which represents specific
reimbursement of premium taxes. Deduct any portion
of commissions or allowances on reinsurance ceded
for group business which represents specific
reimbursement of premium taxes.
---------------------------- ------------------------------------------------------- ------------------------------------
---------------------------- ------------------------------------------------------- ------------------------------------
4. Other state taxes Assessments of state industrial or other boards for No allocation - direct charge to
operating expenses or for benefits to sick unemployed company
persons in connection with disability benefit laws or
similar taxes levied by states. Canadian and other
foreign taxes are to be included appropriately.
Advertising required by law, regulation or ruling,
except in connection with investments. State sales
taxes, if company does not exercise option of
including such taxes with the cost of goods and
services purchased. State income taxes.
---------------------------- ------------------------------------------------------- ------------------------------------
---------------------------- ------------------------------------------------------- ------------------------------------
5. U.S. Social Security Company's contribution is based on the current tax See Exhibit B Appendix
taxes rate, which is applied to all wages, salary or at A; B 1, 2; C 1, 2; and D 1, 2, 3
compensation entered on the employees earning record
and federal unemployment tax.
---------------------------- ------------------------------------------------------- ------------------------------------
---------------------------- ------------------------------------------------------- ------------------------------------
6. All other taxes Guaranty fund assessments and taxes of Canada or of No allocation - direct charge to
any other foreign country not specifically provided company
for elsewhere. Sales taxes, other than state sales
taxes, if company does not exercise option of
including such taxes with the cost of goods and
services purchased.
---------------------------- ------------------------------------------------------- ------------------------------------
EXHIBIT B
APPENDIX
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES
A. Office 001, 201, 203, 204, 205, 206, 207, 208 and 209 factors to the Life
Parent Company are based on Service Level Agreements. Once expenses are
charged to the Life Parent Company a second and third tier of allocation
occurs, which allocates expenses to Profit Centers and Life Affiliates.
B. P&C Head Office (Office 032) allocations to the Life Parent Company are
based on:
1. Agents' compensation
2. Time and effort studies
C. Regional Office allocations to the Life Parent Company are based on:
1. Agents' compensation
2. Time and effort/usage studies
3. System capacity studies
D. Life Parent Company allocations to Life Affiliates are based on:
1. Expenses are direct coded to the appropriate company.
2. Determination of how expense is to be allocated to profit center is
based on time studies, project activity, required capital and
invested assets.
The intercompany factors are based on the following methodology:
Profit Center Methodology Company
------------- ----------- -------
Allstate Agent Policies in force 030, 000
Xxxxxxxxxx/Xxxxxxxxx Xxxxxxxx in force 031, 036,038
Structured Settlements Premium income 030, 036
Direct Response Premium income 030, 036
Lincoln Benefit Time and effort studies direct to 034
Surety Life Time and effort studies direct to 032
Group Pensions Time and effort studies direct to 030
3. Any Investment Expense is based on Invested Assets.
EXHIBIT C
EXPENSE PROCESS OVERVIEW
ALLSTATE INSURANCE GROUP
For purposes of operational analysis and financial reporting, functional expense
groups are made up of three primary categories: (1) Loss adjustment expenses,
(2) Other underwriting expenses; and (3) Investment expenses. A more detailed
description of expense items, which comprise these categories, is provided in
Exhibits A and B. These exhibits are the framework for reporting expenses
required by the NAIC. The expense categories, in turn, flow into the financial
records based on the following cost allocation methods: a direct charge basis;
an allocated or shared basis; or in accordance with the terms of one or several
reinsurance agreements. The combined expense process ultimately provides for
financial records that reflect the financial performance of the business.
On a day-to-day basis, expenses are incurred directly by companies within the
Allstate Group. The expenses are charted numerically by account. Formalized
procedures are used in order to ensure that the expenses are accurately recorded
and allocated to the appropriate office, company, cost center and cost element.
Allocations are also provided for various support costs, which include: company,
cost center and general ledger account (cost element) level with the objective
of providing for an accurate means of tracking expenses..
A brief description of each of the three expense categories follows:
o Loss adjustment expenses are various costs associated with the claim
handling process. These costs, which comprise all aspects of the claims
handling function, include: the adjustment, factual investigation, defense
and recordkeeping functions. Salaries of claim personnel and allocated
executive salaries, as well as other basic costs associated with the claim
function (accounting, data processing, rent, utilities, etc.) are grouped
in this category. Generally, these expenses may be either direct charged,
allocated, or flow to an entity by means of a separate reinsurance
agreement.
o Other underwriting expenses include acquisition, general expenses, taxes,
licenses and fees. The larger piece, acquisition expenses, is comprised of
agent commissions, various expenses related to underwriting (motor vehicle
reports, home inspections, etc.), salaries, marketing and other allocations
of expenses which support the production of new and renewal business.
General expenses are typically administrative in nature and do not fit
cleanly in any other expense grouping. Taxes, licenses and fees pertain to:
taxes (income and franchise) and licenses fees levied by state and local
government; insurance department expenses; and guaranty fund assessments.
These expense categories are charged to an entity in any of the same three
methods shown above for Loss adjustment expenses.
o Investment expenses for research, purchase and sale activities,
safekeeping, accounting and data support are the bulk of expenses in this
bucket. Generally, these expenses will flow to an entity by direct charges
to an entity or on an allocated basis.
The mechanism for recording expenses can occur by means of one of the following
three methods:
o Direct Charges - This method is used where the expenses are unique to the
company incurring them. These types of expenses are not allocated to
another Allstate Company due to their unique relationship to the company
incurring them. Expense payments are classified to the responsible company
through an accounting coding expense system involving charge company, cost
center, and cost element (See Exhibits A and B for more detail). By way of
example: agents' commissions, taxes, licenses and fees, and bad debt
expense are company specific, and therefore, coded directly to the
appropriate company.
o Allocations
The expense allocation process can be divided into 3
subcategories:
1. Office - The objective of this phase of the allocation process is to
properly transfer various support costs performed by one organization to
another organization that they directly relate to. The basic justification
for this cost transfer is efficiency gain, which is mutually beneficial to
both parties. Certain processes are centrally performed on behalf of a
number of entities, then allocated to the office/company being supported.
Routine expenses of this nature often include support activities from the
following functional areas: Accounting; Systems; Investments; Corporate
Relations; Law and Regulation; and Human Resources. These costs cannot be
directly expensed, it is necessary to provide for an appropriate method of
allocation. An example of this method of allocation would relate to the
accounting treatment of costs and expenses attributable to Allstate's
Internal Audit Department (IAD). As part of the Allstate Corporate Home
Office structure, IAD salaries and related expenses are allocated to other
Affiliates companies and/or offices (i.e. data and profit centers) based on
time and effort studies. The terms for this allocation are delineated in a
separate agreement between the parties which is referred to as a Shared
Service Agreement (SSA). The SSA is a vehicle which allows the parties to
agree in advance on certain essential terms and conditions which include: a
description of the services to be provided; the period covered; costs and
standards. The SSA concept can be used to transfer expenses between Brands
(e.g., Allstate, Indemnity, Life), between Shared Services (e.g., Finance,
Investments, Human Resources, Technical) or between a Brand and Shared
Service.
The Accounting Department database is programmed to perform the allocation
process on a monthly basis. The process begins with the extraction of
direct costs for each office, company, cost center and general ledger
account. Varying premium and claim statistics (e.g., policies in force,
claim counts) as well as other common factors (e.g., number of employees,
number of retirees) are then entered into the program. The resulting data
provides the bases, or allocation drivers, for transferring expenses from
an office/cost center /general ledger account level of detail to other
charge offices/cost centers /general ledger accounts. Detail records are
generated in order to provide the source and recipient of the allocated
expenses.
A separate process has been initiated in order to periodically review the
accuracy of the factors or drivers of the allocations. The accuracy of
service provider time and effort studies may be taken into account (i.e.
projected v. actual). Other factors that may be considered include an
inventory of activities and customers in order to ensure that allocations
are accurate. Intensive discussions and management agreement between the
provider and customer are also an integral part of the process. Flexibility
in the overall allocation process must routinely occur to provide for
changes in the business activities or organizational structure.
2. Company - This step in the expense allocation process is similar the office
expense allocation process described above in that allocations are charged
to other affiliates . For instance, both Allstate Insurance Company and
Allstate Life Insurance Company incur expenses on a direct basis for
themselves and on behalf of their affiliates. A portion of these expenses
may be transferred to the affiliated companies, as appropriate. Fixed
factors are normally based on internal time and effort studies, agents'
compensation, or statistical criteria such as gross policies issued or
claim notice counts.
3. Uniform Accounting Transfer (UAT) - The next step in the process is to
reclassify all of the general office expenses addressed in the direct
charges and expense allocation (office and company) sections above, having
been recorded on a management basis, to their required statutory expense
classifications. The use of a consistent basis for reporting expenses, as
dictated by the NAIC, allows the Regulators to better compare various
insurance companies' operations. On the property/casualty side, broad
expense categories and detail breakouts are required for both the Expense
Exhibit in the annual Statutory Statement as well as the Supplemental
Expense Filing, which is contained in the Insurance Expense Exhibit. For
Life companies, the General Expense and the Taxes, Licenses and Fees
Exhibits from the annual Statutory Statement have distinct expense
categories. A synopsis of these required expense categories, along with a
description of each expense category and the basis of allocation presently
used by Allstate is contained in Exhibit A and appendix (Property &
Casualty affiliates) and Exhibit B and appendix (Life Company affiliates).
In order to provide for accurate summarization and reporting, each general
ledger account (cost element) included in the Chart of Accounts is assigned
a statutory expense classification. Loss adjustment, other underwriting and
investment expenses are the broad classifications that UAT applies to. By
way of example, a systems function, whether relating to claims, sales, or
investments, is initially classified as a general office expense on a
management basis. Based on the UAT process, these expenses are reclassified
for statutory reporting purposes to loss adjustment, other underwriting or
investments. Taxes, licenses and fees, although included in the other
underwriting expense category, are not used in the UAT calculation process.
These expenses are directly charged to the appropriate statutory
classification within company.
Reinsurance Agreements - Separate arrangements exist between the
property/casualty parent, Allstate Insurance Company, and certain
affiliates, and the life parent, Allstate Life Insurance Company, and
certain affiliates that drive expenses. Terms and conditions relating to
methods of expense classification are contained in each of the individual
reinsurance agreements. Typically, the reinsurer will be liable for a pre
determined pro-rata share of all underwriting related expenses to support
the assumed business. However, the reinsurer is not generally liable for
the investment expenses.
EXHIBIT D
DEFINITIONS
The following terms shown by "process flow" and "general" categories are
commonly used in explanation of the Allstate Group's overall expense process.
Presentation of the "process flow" section follows the same hierarchical order
of our current expense processing methodology.
PROCESS FLOW
Company - Identifies legal entity that expense is charged to and may be
disbursed from. Each entity who is a party to this agreement is assigned a
separate three digit company code (e.g., Allstate Insurance Company - 010,
Allstate Life Insurance Company - 030). A "charged company" is the Allstate
entity charged with the expense under review and whose Statement of Income would
be ultimately impacted.
Cost Centers -- Describe where specific costs were incurred. Cost Centers will
be the most common object used. Cost centers are areas of organizational
responsibility in which costs are incurred and planned. Identifies
administrative grouping within an office and duties as well as the manager
responsible. Regional Office Departments include: Underwriting; Sales; Human
Resources; and Claims. Each Regional Office is assigned a distinct four digit
number.
Cost Elements -- They describe what specific costs have occurred. They are used
to plan and incur direct expenses for cost objects representing a unique item or
category of expense to the company.
Internal Orders -- A short-term cost collector used to collect, identify and
allocate costs associated with a process, event or activity.
Office --Typically, office codes identify high level responsibility for the
expenses charged. Office level configuration (by type or geographical location)
is a key building block in the accumulation of Allstate's expenses. This data is
used in preparing the various expense analyses/reports prepared. A "charged
office" is the office within an Allstate entity charged with the expense under
review. The decision regarding which office to charge with an expense is based
on Statement of Income impact analysis. Offices may include various high level
types, such as Profit Centers (Midwest Regional Office - 002), , Data Centers
(Atlantic - 136), Shared Services (Human Resources - 204), and Home Offices
(Corporate Home Office - 001, PP&C Head Office - 032). Each Office is designated
by a three-digit code.
Profit Center -- Aligns expense to a distribution channel, geographic location
and product grouping (i.e. Denver Region, Colorado, Standard Auto).
GENERAL
Assessments/Allocated Expenses -- which are incurred by one Allstate Company or
office and charged, or allocated, to other companies or offices on the basis of
mutual benefit. Examples of the types of allocated expenses include: Loss
Adjustment, Other Underwriting and Investment Expenses. These expenses include
allocations in Cost Centers from Cost Elements to Secondary Cost Elements and
are described in Exhibit C. Criteria for cost allocation "drivers" are based on
the implementation of management objectives. The assessments can use all three
methods of allocations: Field Percentage; Fixed Amount; and Variable Portions
which contain Statistical Key Figures. Additional information is included in the
Exhibits and Appendixes attached. Allocation drivers agreed to by Management are
used to allocate expenses, and these are described in detail in the various
exhibits and appendixes.
Reinsurance Agreement - An agreement between two parties where one insurer
spreads its risk (premium, loss and expense) of losses with other insurers.
EXHIBIT E
INVESTMENT SERVICES
A. Appointment. The Board of Directors of Affiliate (the "Board") has appointed
Allstate as the investment advisor and manager of its investment assets (the
"Account"). Pursuant to the Service and Expense Agreement of which this is
Exhibit E (the "Agreement"), AFFILIATE grants Allstate the power and authority
to advise, manage, and direct the investment and reinvestment of the assets of
the Account for the period and on the terms and conditions set forth herein,
subject to the supervision of the Board. Such Activities shall be conducted
subject to and in accordance with the investment objectives, restrictions, and
strategies set forth in the of Investment Policy and Investment Plan (the
"Policy") adopted by the Board, and in accordance with such other limitations
and guidelines as may be established from time to time for the Account by the
Board (such investment objectives, restrictions, strategies, limitations, and
guidelines herein referred to collectively as the "Investment Guidelines").
Allstate hereby accepts such responsibility and agrees during such period to
render the services and to assume the obligations herein set forth.
B. Allstate as Agent. Allstate shall, for purposes of this Agreement, be granted
and exercise full investment discretion and authority in buying, selling or
otherwise disposing of or managing the investment of the assets held in the
Account and in the performance of the services rendered hereunder, and shall do
so as AFFILIATE's agent only, subject to Allstate's adherence to the policy
stated in Item A, above. AFFILIATE hereby authorizes Allstate to exercise all
such powers with respect to the assets of the Account as may be necessary or
appropriate for the performance by Allstate of its obligations under this
Agreement, subject to the supervision of the Board and any limitations contained
herein.
C. Investment Advisory Services. In furtherance of the foregoing, and in
carrying out its obligations to manage the investment and reinvestment of the
assets in the Account, Allstate shall, as appropriate and consistent with the
Investment Guidelines: (a) perform research and obtain and evaluate such
information relating to the economics, industries, businesses, markets and new
investment structures, techniques, practices, and financial data as Allstate
deems appropriate in its discharge of its duties under this Agreement; (b)
consult with and furnish to the Board recommendations with respect to overall
investment strategies for the Account; (c) seek out and implement specific
investment opportunities, consistent with such overall investment strategies
approved by the Board, including making and carrying out day-to-day decisions to
acquire or dispose of permissible investments, managing the investment of the
assets of the Account, and providing or obtaining such services as may be
necessary in managing, acquiring or disposing of investments; (d) regularly
report to the Board with respect to the implementation of investment strategies
and any other activities in connection with management of the Account's assets,
including furnishing to the Board, within 45 days after the end of each quarter,
a report including a summary of investment activity during the quarter; (e)
maintain all required accounts, records, memoranda, instructions or
authorizations relating to the acquisition or disposition of investments for the
Account; (f) determine the securities to be purchased or sold by the Account and
place orders either directly with the issuer, with any broker-dealer or
underwriter that specializes in the securities for which the order is made, or
with any other broker or dealer that Allstate selects; and (g) perform the
services hereunder in a manner consistent with investment objectives and
policies of AFFILIATE as detailed in the Investment Guidelines, as amended from
time to time, and in compliance with the applicable provisions of the insurance
laws and regulations of AFFILIATE's domicile, as amended and any other
applicable insurance laws.
D. Allocation of Brokerage. Allstate is authorized in its sole discretion to
select the brokers or dealers that will execute the purchases and sales of
securities for the Account. In making such selection, Allstate shall use its
best efforts to obtain for the Account the most favorable net price and
execution available taking into account all appropriate factors, including
price, dealer spread or commission, if any, and size and difficulty of the
transaction.
If, in the judgment of Allstate, AFFILIATE would be benefited by supplemental
investment research, Allstate is authorized, but not obligated, to select
brokers or dealers on the basis of research information, materials, or services
they could furnish to Allstate for potential use in supplementing Allstate's own
information and in making investment decisions for the Account. The expenses of
Allstate and the charges to AFFILIATE may not necessarily be reduced as a result
of receipt of such supplemental information. Subject to the above requirements,
nothing shall prohibit Allstate from selecting brokers or dealers with which it
or AFFILIATE is affiliated.
E. Service to Other Clients. AFFILIATE acknowledges that Allstate may perform
services for clients other than AFFILIATE which are similar to the services to
be performed pursuant to this Agreement, and that Allstate is free to do so
provided that its services pursuant to this Agreement are not in any way
impaired. AFFILIATE agrees that Allstate may provide investment advice to any of
its other clients that may differ from advice given to AFFILIATE, or take action
with respect to assets owned by it or its other clients that may differ from the
action taken with respect to the Account and/or assets held therein, so long as
Allstate, to the extent reasonable and practicable, allocates investment
opportunities to the Account on a fair and equitable basis relative to
Allstate's other clients. It is understood that Allstate shall have no
obligation to purchase or sell, or to recommend for purchase or sale for the
Account, any security which Allstate, its affiliates, employees or agents may
purchase or sell for its or their own accounts or for the account of any other
client, if, in the opinion of Allstate, such transaction or investment appears
unsuitable, impractical or undesirable for the Account. It is agreed that
Allstate may use any supplemental investment research obtained for the benefit
of AFFILIATE in providing investment advice to its other clients or its own
accounts. Conversely, such supplemental information obtained by the placement of
business for Allstate or other entities advised by Allstate will be considered
by and may be useful to Allstate in carrying out its obligations to AFFILIATE.
F. Allocation of Trades. It is acknowledged that securities held by AFFILIATE
may also be held by separate investment accounts or other funds for which
Allstate may act as a manager or by Allstate or its other affiliates. If
purchases or sales of securities for AFFILIATE or other entities for which
Allstate or its affiliates act as investment manager arise for consideration at
or about the same time, AFFILIATE agrees that Allstate may make transactions in
such securities, insofar as feasible, for the respective entities in a manner
deemed equitable to all. To the extent that transactions on behalf of more than
one client of Allstate during the same period may increase the demand for
securities being purchased or the supply of securities being sold, AFFILIATE
recognizes that there may be an adverse effect on price.
It is agreed that, on occasions when Allstate deems the purchase or sale of a
security to be in the best interests of AFFILIATE as well as other accounts or
companies, it may, to the extent permitted by applicable laws and regulations,
but will not be obligated to, aggregate the securities to be so sold or
purchased for AFFILIATE with those to be sold or purchased for other accounts or
companies in order to obtain favorable execution and lower brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by Allstate in
the manner it considers to be most equitable and consistent with its obligations
to AFFILIATE and to such other accounts or companies. AFFILIATE recognizes that
in some cases this procedure may adversely affect the size of the position
obtainable for AFFILIATE.
G. Contracts; Authorized Signatories. Allstate shall have the full power, right
and authority, as AFFILIATE's agent, in accordance with this Agreement and the
Investment Guidelines, to negotiate, apply for, enter into, execute, deliver,
amend, modify and/or terminate legal documents of every kind and nature relating
to or required by the investment of the assets of the Account. All such
documents may be entered into in AFFILIATE's name or in Allstate's name (as
agent for AFFILIATE), as Allstate shall determine, and all such documents shall
be legally binding on AFFILIATE. Those certain employees and officers of
Allstate who are authorized to execute transactions and sign documentation
pursuant to the Policies and Procedures and Investment Guidelines adopted
pursuant to authorization of the Investment Committee of Allstate, as they may
be amended from time to time, shall also be authorized to the same extent to
execute transactions and sign documentation on behalf of AFFILIATE and/or
Allstate in connection with transactions entered into on behalf of the assets of
the Account pursuant to this Agreement.
H. Compliance with Legal Requirements. Allstate shall make all reasonable
efforts to comply with and cause to be complied with all applicable laws, rules,
and regulations of the AFFILIATE's domicile, and any federal, state or municipal
authority governing this Agreement, the services rendered hereunder, the Account
and the assets held therein. Without limiting the foregoing, Allstate shall
comply with all securities laws and other laws applicable to the services
provided under this Agreement.
I. Transaction Procedures. The assets of the Account are or will be held in
custody by the bank custodian(s) appointed by AFFILIATE from time to time.
Allstate shall not act as custodian for the assets of the Account and shall not
under any circumstances have or be deemed to have ownership, custody or physical
control of any of the assets of the Account. Allstate may, however, issue
instructions to, and communicate with, the bank custodian for the Account as may
be necessary and appropriate in connection with provision of its services
pursuant to this Agreement. At the option of Allstate, instructions by Allstate
to the bank custodian may be made orally or by computer, electronic instruction
systems or telecommunications terminals. Allstate will confirm that the bank
custodian has effected such instructions either by access to the bank's
computerized identification system or by telephonic confirmation. The bank
custodian will confirm with Allstate receipt of trade instructions orally or by
computer for the Account. Allstate will instruct all brokers, dealers and
counterparties executing orders on behalf of the assets of the Account to
forward to Allstate and AFFILIATE copies of all confirmations.
J. Standard of Performance. Allstate shall discharge its duties hereunder at all
times in good faith and with that degree of prudence, diligence, care and skill
which a prudent person rendering services as an institutional investment manager
and adviser would exercise under similar circumstances. The provisions of this
Agreement shall not be interpreted to imply any obligation on the part of
Allstate to observe any standard of care other than as set forth in this Section
J.
K. Recordkeeping. Allstate shall keep and maintain an accurate and detailed
accounting of each transaction concerning the assets of the Account and of all
receipts, disbursements, and other transactions relating to the purchase and
sale transactions arising hereunder. Allstate agrees to preserve such records
for the greater of (i) six years; (ii) the required period pursuant to the
insurance laws of AFFILIATE's domicile and related regulations; or (iii) such
other time period that AFFILIATE may from time to time request. Allstate
acknowledges that all such records shall be the property of AFFILIATE and shall
be made available, within five (5) business days of a written request, to
AFFILIATE, its accountants, auditors or other representatives of AFFILIATE for
inspection and/or copying (at AFFILIATE's expense) during regular business
hours. In addition, Allstate shall provide any materials, reasonably related to
the investment advisory services provided hereunder, as may be reasonably
requested in writing by the directors or officers of AFFILIATE or as may be
required by any governmental agency with jurisdiction hereunder.
Allstate further agrees to prepare and furnish to AFFILIATE and to other persons
designated by AFFILIATE, at such regular intervals and other times as may be
specified by AFFILIATE from time to time (i) such balance sheets, income and
expense statements and other financial statements and reports, and (ii) such
other statements, reports and information, in each case regarding the assets of
the Account as AFFILIATE shall from time to time reasonably require.
In the event of termination for any reason, all such records or copies thereof
shall be returned promptly to AFFILIATE, free from any claim or retention of
rights by Allstate.
L. Liability of Allstate. In the absence of Allstate's willful or negligent
misconduct (or the willful or negligent misconduct of its officers, directors,
agents, employees, controlling persons, shareholders, and any other person or
entity affiliated with Allstate or retained by it to perform or assist in the
performance of its obligations under this Agreement), neither Allstate nor any
of its officers, directors, employees or agents shall be subject to liability to
AFFILIATE for any act or omission in the course of, or connected with, rendering
services hereunder.
M. Independent Contractor. Allstate shall for all purposes be deemed to be an
independent contractor. Allstate shall have no power or authority to bind
AFFILIATE or to assume or create an obligation or responsibility, express or
implied, on behalf of AFFILIATE, nor shall it represent to anyone that it has
such power or authority, except as expressly provided in this Agreement. Nothing
in this Agreement shall be deemed to create a partnership between or among the
parties, whether for purposes of taxation or otherwise.
EXHIBIT F
TO INCLUDE A LIST OF AGREEMENTS WHICH WILL TERMINATE AS OF THE EFFECTIVE DATE OF
THE MASTER SERVICE AND EXPENSE AGREEMENT. /
Investment Advisory and Management Agreement between Allstate Insurance Company
and Lincoln Benefit Life Company effective as of January 1, 1996 pursuant to
which Allstate Insurance Company provides investment advisory services to
Lincoln Benefit Life Company, as amended effective January 1, 1996. (Form D-1
filed with Illinois Insurance Department on April 5, 1996 and Forms D filed in
April and May 1996 with the Department of Insurance of Nebraska.)
Investment Advisory and Management Agreement between Allstate Insurance Company
and Surety Life Insurance Company effective as of January 1, 1996 pursuant to
which Allstate Insurance Company provides investment advisory services to Surety
Life Insurance Company, as amended effective January 1, 1996. (Form D-1 filed
with Illinois Insurance Department on April 5, 1996 and Forms D filed in April
and May 1996 with the Department of Insurance of Utah.)
Investment Advisory and Management Agreement effective as of August 21, 1996
between Allstate Floridian Insurance Company and Allstate Insurance Company,
pursuant to which Allstate Insurance provides investment advisory and management
services to Allstate Floridian. (See Form D-1 dated July 23, 1996 filed with the
Illinois Department of Insurance. See also letter dated January 23, 1997 from
Florida Department of Insurance.)
Services Agreement executed September 25, 1996 and effective as of June 25, 1996
between Allstate Insurance Company and Allstate Floridian Insurance Company
pursuant to which Allstate Insurance provides Allstate Floridian underwriting,
claims, actuarial, policy processing, tax, legal, systems, accounting and
customer support services. (See Form D-1 dated July 23, 1996 filed with the
Illinois Department of Insurance. See also letter dated January 23, 1997 from
Florida Department of Insurance.)
Service and Expense Agreement between Allstate Insurance Company and certain of
its Subsidiaries and Affiliates effective June 16, 1997. (See Form D-1 filed
with the Illinois Department of Insurance in May 1997 and other prior
notification forms filed with the insurance departments of California, Nebraska,
Texas and Utah in May 1997. Texas HCS# 27286.)
Investment Advisory and Management Agreement effective as of January 1, 1998
between Allstate Insurance Company and Allstate Floridian Indemnity Company
pursuant to which Allstate Insurance provides investment services to Allstate
Floridian Indemnity.
Investment Advisory and Management Agreement effective as of January 1, 1998
between Allstate Insurance Company and Allstate New Jersey Insurance Company
pursuant to which Allstate Insurance provides investment services to Allstate
New Jersey.
Investment Advisory and Management Agreement between American Surety and
Casualty Company ("ASCC") and Allstate Insurance Company ("Allstate") dated
January 1, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to ASCC for those assets so designated by ASCC
(Form D-1 filed with Illinois Department of Insurance on November 17, 1998 and
accepted pursuant to a letter dated December 3, 1998).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and American Heritage Life Insurance Company ("AHL") dated October
31, 1999 pursuant to which Allstate will provide investment management services,
investment advisory services, and certain other operational and administrative
support services to AHL for those assets so designated by AHL (Form D-1 filed
with the Illinois Department of Insurance in October 1999 and other prior
notification forms filed with the Florida Department of Insurance in October
1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and AHL Select HMO Incorporated ("AHL Select") dated October 31,
1999 pursuant to which Allstate will provide investment management services,
investment advisory services, and certain other operational and administrative
support services to AHL Select for those assets so designated by AHL Select
(Form D-1 filed with the Illinois Department of Insurance in October 1999 and
other prior notification forms filed with the Florida Department of Insurance in
October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and First Colonial Insurance Company ("First Colonial") dated
October 31, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to First Colonial for those assets so designated
by First Colonial (Form D-1 filed with the Illinois Department of Insurance in
October 1999 and other prior notification forms filed with the Florida
Department of Insurance in October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and Columbia Universal Life Insurance Company ("Columbia") dated
October 31, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to Columbia for those assets so designated by
Columbia (Form D-1 filed with the Illinois Department of Insurance in October
1999 and other prior notification forms filed with the Texas Department of
Insurance in October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and Concord Heritage Life Insurance Company, Inc. ("Concord") dated
October 31, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to Concord for those assets so designated by
Concord (Form D-1 filed with the Illinois Department of Insurance in October
1999 and other prior notification forms filed with the New Hampshire Department
of Insurance in October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and Keystone Life Insurance Company ("Keystone") dated October 31,
1999 pursuant to which Allstate will provide investment management services,
investment advisory services, and certain other operational and administrative
support services to Keystone for those assets so designated by Keystone (Form
D-1 filed with the Illinois Department of Insurance in October 1999 and other
prior notification forms filed with the Pennsylvania Department of Insurance in
October 1999).
Exhibit 10.3
Investment Management Agreement
And
Amendment to Certain Service and Expense Agreements
Among
ALLSTATE INVESTMENTS, LLC
And
ALLSTATE INSURANCE COMPANY
And
THE ALLSTATE CORPORATION
And
Certain Affiliates
This Agreement made and effective as of January 1, 2002, among ALLSTATE
INVESTMENTS, LLC, a Delaware limited liability company ("ALLSTATE INVESTMENTS"),
ALLSTATE INSURANCE COMPANY, an Illinois insurance company ("Allstate"), THE
ALLSTATE CORPORATION, a Delaware corporation and parent of Allstate and ALLSTATE
INVESTMENTS ("Allcorp"), and those additional subsidiaries of Allcorp whose
signatures appear below (individually an "Affiliate" and collectively with
Allstate and Allcorp, the "Allstate Affiliates").
W I T N E S S E T H:
Allstate currently provides investment management services to Allcorp and
certain insurance Affiliates pursuant to a Service and Expense Agreement, dated
as of January 1, 1999 (the "Insurance Affiliates Service Agreement") and to
certain non-insurance Affiliates pursuant to a Service and Expense Agreement,
dated as of January 1, 2000 (the "Non-Insurance Affiliates Service Agreement,"
and, collectively with the Insurance Affiliates Service Agreement, the "Service
Agreements").
It has been determined that such investment management services in the future
will be more appropriately provided to the Allstate Affiliates by a separate
entity performing only investment management activities rather than by a
department of Allstate, resulting in benefits to the Allstate Affiliates.
Therefore, subject to obtaining all required regulatory approvals, effective
January 1, 2002, Allstate's Investment Department will cease providing
investment management services pursuant to the Service Agreements. All
investment management services will instead be provided to the Allstate
Affiliates by ALLSTATE INVESTMENTS, an Allcorp subsidiary.
To accomplish this change, the Allstate Affiliates desire to amend the Service
Agreements to terminate the provision of investment management services by
Allstate. They also desire to contract with ALLSTATE INVESTMENTS for the
rendering of investment management services by ALLSTATE INVESTMENTS subject to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
ARTICLE 1
AMENDMENT OF EXISTING SERVICE AGREEMENTS
1.1 Insurance Affiliates Service Agreement. Allcorp, Allstate, and each
insurance Affiliate hereby agree to amend the Insurance Affiliates Service
Agreement by deleting Exhibit E and all references thereto such that Allstate no
longer provides investment management services to Allcorp or any insurance
Affiliate.
1.2 Non-Insurance Affiliates Service Agreement. Allstate and each non-insurance
Affiliate hereby agree to amend the Non-Insurance Affiliates Service Agreement
by deleting Exhibit B and all references thereto such that Allstate no longer
provides investment management services to any non-insurance Affiliate.
ARTICLE 2
INVESTMENT MANAGEMENT SERVICES
3. 2.1 Appointment. Each Allstate Affiliate hereby engages ALLSTATE INVESTMENTS
as the investment manager of its investment assets and grants ALLSTATE
INVESTMENTS the power and authority to advise, manage, and direct the investment
and reinvestment of such assets for the period and on the terms and conditions
set forth herein. Such activities shall be conducted subject to and in
accordance with the investment objectives, restrictions, and strategies set
forth in the Investment Policy and Investment Plan (the "Policy") adopted by the
Board of Directors of each such Allstate Affiliate with respect to its
respective investment portfolios, and in accordance with such other limitations
and guidelines as may be established from time to time for such portfolios by
such Boards (such investment objectives, restrictions, strategies, limitations,
and guidelines herein referred to collectively as the "Investment Guidelines").
ALLSTATE INVESTMENTS hereby accepts such responsibility and agrees during such
period to render the services and to assume the obligations herein set forth,
all as more fully described in Exhibit A, attached hereto (the "Services"). Each
of the Allstate Affiliates may from time to time reach agreement with ALLSTATE
INVESTMENTS that only certain of the listed Services will be provided.
2.2 Charges and Expenses. Each Allstate Affiliate agrees to pay ALLSTATE
INVESTMENTS a fee for the Services equal to ALLSTATE INVESTMENTS' fully burdened
basis point charge for the management of such Allstate Affiliate's portfolio.
The fully burdened basis point charge is ALLSTATE INVESTMENTS's actual cost of
managing the portfolios in which such Allstate Affiliate invests, including the
provision of all administrative, reporting or other services required to manage
the portfolios and provide the Services. To the extent any of ALLSTATE
INVESTMENTS's costs are determined by allocations from any Allstate Affiliate,
the allocation shall be made in accordance with the general provisions of the
NAIC expense classification and allocation guidelines applicable to all
inter-company allocations between Allstate and its insurance affiliates.
ALLSTATE INVESTMENTS shall maintain and make available for review by any
Allstate Affiliate, or any regulator having jurisdiction over such Allstate
Affiliate, documentation showing the calculation of all such charges. Any
Allstate Affiliate may request a review of such charges for the Services and
such review will occur promptly thereafter. All brokerage commissions and other
direct transaction charges payable to third parties shall be in addition to any
fees payable to ALLSTATE INVESTMENTS for Services and may be paid on each
Allstate Affiliate's behalf from the assets in the such entities portfolio or
may be paid by ALLSTATE INVESTMENTS and reimbursed by such Allstate Affiliate.
2.3 Payment. ALLSTATE INVESTMENTS will charge each Allstate Affiliate for the
Services via the monthly expense allocation process, and payments will be
through the monthly intercompany settlement process. The process will be
completed by personnel of ALLSTATE INVESTMENTS and each of the Allstate
Affiliates in the most timely and effective method available.
ARTICLE 3
MISCELLANEOUS PROVISIONS
3.1 Previous Agreements. Except for the amendments to the Service Agreements
pursuant to Article 1 above, nothing in this Agreement shall be deemed to amend
any previously executed agreement between the parties.
3.2 Scope of Services. The scope of, and the manner in which, ALLSTATE
INVESTMENTS provides the Services to the Allstate Affiliates shall be reviewed
periodically by ALLSTATE INVESTMENTS and the Allstate Affiliates.
3.3 Standard of Performance. ALLSTATE INVESTMENTS shall discharge its duties
hereunder at all times in good faith and with that degree of prudence,
diligence, care and skill which a prudent person rendering services as an
institutional investment manager would exercise under similar circumstances. The
provisions of this Agreement shall not be interpreted to imply any obligation on
the part of ALLSTATE INVESTMENTS to observe any standard of care other than as
set forth in this Section 3.3.
3.4 Books and Records. Upon reasonable notice, and during normal business hours,
each Allstate Affiliate shall be entitled to, at its own expense, inspect
records that pertain to the computation of charges for the Services. ALLSTATE
INVESTMENTS shall at all times maintain correct and complete books, records and
accounts of all Services. Each Allstate Affiliate shall have unconditional right
of ownership of any records prepared on its behalf under this Agreement.
3.5 Liability of ALLSTATE INVESTMENTS. In the absence of ALLSTATE INVESTMENTS's
willful or negligent misconduct (or the willful or negligent misconduct of its
officers, directors, agents, employees, controlling persons, shareholders, and
any other person or entity affiliated with ALLSTATE INVESTMENTS or retained by
it to perform or assist in the performance of its obligations under this
Agreement), neither ALLSTATE INVESTMENTS nor any of its officers, directors,
employees or agents shall be subject to liability to any Allstate Affiliate for
any act or omission in the course of, or connected with, rendering services
hereunder.
3.6 Independent Contractor. ALLSTATE INVESTMENTS shall for all purposes be
deemed to be an independent contractor. All persons performing duties hereunder
at all times during the term of this agreement shall be under the supervision
and control of ALLSTATE INVESTMENTS, and shall not be deemed employees of any
Allstate Affiliate as a result of this Agreement and the Services provided
hereunder. ALLSTATE INVESTMENTS shall have no power or authority to bind any
Allstate Affiliate or to assume or create an obligation or responsibility,
express or implied, on behalf of any Allstate Affiliate, nor shall it represent
to anyone that it has such power or authority, except as expressly provided in
this Agreement. Nothing in this Agreement shall be deemed to create a
partnership between or among the parties, whether for purposes of taxation or
otherwise.
3.7 Assignment. ALLSTATE INVESTMENTS shall not assign its obligations or rights
under this Agreement without the written consent of each Allstate Affiliate.
ALLSTATE INVESTMENTS may terminate this Agreement in its entirety, and each
Allstate Affiliate may cancel its participation in the arrangements under this
Agreement, each by giving six months written notice to the other parties to this
Agreement; provided, however, that in the event that the affiliate relationship
ceases to exist with respect to any Affiliate, this Agreement shall terminate
immediately with respect to such Allstate Affiliate. Under no circumstances will
the initial term of this Agreement exceed five (5) years.
3.8 Notices. All communications provided for hereunder shall be in writing, and
if to an Allstate Affiliate, mailed or delivered to such Allstate Affiliate at
its office at the address listed in such Affiliate's Statutory Annual Statement
Blank, Attention: Secretary, or if to an entity not filing a statutory Annual
Statement Blank, mailed or delivered to its office at 0000 Xxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, Attention: Controller, or addressed to any party at
the address such party may hereafter designate by written notice to the other
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
as of the day and year above written.
The Allstate Corporation
By: ______________________
Xxxxx X. Xxxx
Treasurer
Allstate Insurance Company
By: ______________________
Xxxxx x. Xxxx
Vice President and Treasurer
Allstate Investments, LLC
By: ______________________
Xxxxx X. Xxxxx
Chairman of the Board and President
AHL Select HMO, Inc.
By: ______________________
Xxxx. Xxxxxxxx, Jr.
Secretary and Treasurer
Allstate Assurance Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Allstate County Mutual Insurance Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate Enterprises, Inc.
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate Financial, LLC
By: ______________________
Xxxxx X. Xxxx
Treasurer
Allstate Financial Corporation
By: ______________________
Xxxxx X. Xxxx
Treasurer
Allstate Fire and Casualty Insurance Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate Floridian Indemnity Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate Floridian Insurance Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate Holdings, LLC
By: ______________________
Xxxxx X. Xxxx
Executive Vice President and Treasurer
Allstate Indemnity Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate International Inc.
By: ______________________
Xxxxx X. Xxxx
Executive Vice President and Treasurer
Allstate International Insurance Holdings, Inc.
By: ______________________
Xxxxx X. Xxxx
Executive Vice President and Treasurer
Allstate Life Insurance Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Allstate Motor Club, Inc.
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate New Jersey Holdings, LLC
By: ______________________
Xxxxx X. Xxxx
Executive Vice President and Treasurer
Allstate New Jersey Insurance Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate Non-Insurance Holdings, Inc.
By: ______________________
Xxxxx X. Xxxx
Treasurer
Allstate North American Insurance Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Allstate Property and Casualty Insurance
Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
American Heritage Life Insurance Company
By: ______________________
Xxxx X. Xxxxxxxx, Xx.
Executive Vice President, Treasurer,
Chief Financial Officer and
Corporate Secretary
American Heritage Life Investment Corporation
By: ______________________
Xxxxx X. Xxxx
Treasurer
Allstate Texas Lloyd's. Inc.
By:_______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Charter National Life Insurance Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Columbia Universal Life Insurance Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Concord Heritage Life Insurance Company Inc.
By: ______________________
Xxxxx X. Xxxx
Treasurer
Deerbrook Insurance Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Direct Marketing Center Inc.
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Encompass Holdings, LLC
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Encompass Indemnity Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Enterprises Services Corporation
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
First Colonial Insurance Company
By: ______________________
Xxxx X. Xxxxxxxx, Xx.
Senior Vice President and Secretary
Glenbrook Life and Annuity Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Ivantage Group, LLC
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Ivantage Select Agency, Inc.
By: ______________________
Xxxxx X. Xxxx
Treasurer
Ivory Holdings, LLC
By: ______________________
Xxxx X. Xxxxxxxx, Xx.
Secretary
Keystone State Life Insurance Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Lincoln Benefit Life Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Northbrook Indemnity Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Northbrook Life Insurance Company
By: ____________________
Xxxxx X. Xxxx
Treasurer
Northbrook Services, Inc.
By: ______________________
Xxxxx X. Xxxx
Treasurer
Pembridge America Inc.
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Rescue Express, Inc.
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Roadway Protection Auto Club, Inc.
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Sterling Collision Centers, Inc.
By: ______________________
Xxxxx X. Xxxx
Treasurer
Surety Life Insurance Company
By: ______________________
Xxxxx X. Xxxx
Treasurer
Tech-Cor, Inc.
By: ______________________
Xxxxx X. Xxxx
Treasurer
The Northbrook Corporation
By: ______________________
Xxxxx X. Xxxx
Treasurer
USF&G Business Insurance Company
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Willow Insurance Holdings Inc.
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Willow Lake Holdings, LLC
By: ______________________
Xxxxx X. Xxxx
Vice President and Treasurer
Exhibit A
INVESTMENT SERVICES
A. Appointment. This Exhibit A details the Services to be provided by
ALLLSTATE INVESTMENTS pursuant to the Investment Management Agreement among
ALLSTATE INVESTMENTS and certain Allstate Affiliates to which this Exhibit A is
attached. For purposes of this Exhibit A, the investment portfolio of each
Allstate Affiliate will be referred to as an Account
B. ALLSTATE INVESTMENTS as Agent. ALLSTATE INVESTMENTS shall be granted and
exercise full investment discretion and authority in buying, selling or
otherwise disposing of or managing the investment of the assets held in each
Account and in the performance of the services rendered hereunder, and shall do
so as each Allstate Affiliate's agent only, subject to ALLSTATE INVESTMENTS'
adherence to the Policies and Investment Guidelines. Each Allstate Affiliate
hereby authorizes ALLSTATE INVESTMENTS to exercise all such powers with respect
to the assets of its respective Account as may be necessary or appropriate for
the performance by ALLSTATE INVESTMENTS of its obligations under the Agreement,
subject to the supervision of the Board of Directors of such Allstate affiliate
(the "Board"), and any limitations contained herein.
C. Investment Advisory Services. In furtherance of the foregoing, and in
carrying out its obligations to manage the investment and reinvestment of the
assets in each Account, ALLSTATE INVESTMENTS shall, as appropriate and
consistent with the Investment Guidelines:
(a) perform research and obtain and evaluate such information relating
to the economics, industries, businesses, markets and new investment
structures, techniques, practices, and financial data as ALLSTATE
INVESTMENTS deems appropriate in the discharge of its duties under this
Agreement; (b) consult with and furnish to each Board recommendations with
respect to overall investment strategies for each respective Account; (c)
seek out and implement specific investment opportunities, consistent with
such overall investment strategies approved by each Board, including making
and carrying out day-to-day decisions to acquire or dispose of permissible
investments, managing the investment of the assets of each Account, and
providing or obtaining such services as may be necessary in managing,
acquiring or disposing of investments; (d) regularly report to the Boards
with respect to the implementation of investment strategies and any other
activities in connection with management of each Account's assets,
including furnishing to each Board, within 45 days after the end of each
quarter, a report concerning investment activity during the quarter; (e)
maintain all required accounts, records, memoranda, instructions or
authorizations relating to the acquisition or disposition of investments
for each Account; (f) determine the securities to be purchased or sold by
each Account and place orders either directly with the issuer, with any
broker-dealer or underwriter that specializes in the securities for which
the order is made, or with any other broker or dealer that ALLSTATE
INVESTMENTS selects; and (g) perform the services hereunder in a manner
consistent with investment objectives and policies of each Allstate
Affiliate as detailed in the respective Investment Guidelines, as amended
from time to time, and in compliance, as appropriate, with the applicable
provisions of the insurance laws and regulations of each Allstate
Affiliate's domicile, as amended and any other applicable laws.
D. Allocation of Brokerage. ALLSTATE INVESTMENTS is authorized in its sole
discretion to select the brokers or dealers that will execute the purchases and
sales of securities for each Account. In making such selection, ALLSTATE
INVESTMENTS shall use its best efforts to obtain for each Account the most
favorable net price and execution available taking into account all appropriate
factors, including price, dealer spread or commission, if any, and size and
difficulty of the transaction. If, in the judgment of ALLSTATE INVESTMENTS, an
Allstate Affiliate would be benefited by supplemental investment research,
ALLSTATE INVESTMENTS is authorized, but not obligated, to select brokers or
dealers on the basis of research information, materials, or services they could
furnish to ALLSTATE INVESTMENTS for potential use in supplementing ALLSTATE
INVESTMENTS' own information and in making investment decisions for each
Account. The expenses of ALLSTATE INVESTMENTS and the charges to an Allstate
Affiliate may not necessarily be reduced as a result of receipt of such
supplemental information. Subject to the above requirements, nothing shall
prohibit ALLSTATE INVESTMENTS from selecting brokers or dealers with which it or
any Allstate Affiliate is affiliated.
E. Service to Other Clients. Each Allstate Affiliate acknowledges that
ALLSTATE INVESTMENTS may perform services for clients other than the Allstate
Affiliates that are similar to the services to be performed pursuant to this
Agreement, and that ALLSTATE INVESTMENTS is free to do so provided that its
services pursuant to this Agreement are not in any way impaired. Each Allstate
Affiliate agrees that ALLSTATE INVESTMENTS may provide investment advice to any
of its other clients that may differ from advice given to such Allstate
Affiliate, or take action with respect to assets owned by it or its other
clients that may differ from the action taken with respect to any Account and/or
assets held therein, so long as ALLSTATE INVESTMENTS, to the extent reasonable
and practicable, allocates investment opportunities to each Account on a fair
and equitable basis relative to ALLSTATE INVESTMENTS' other clients. It is
understood that ALLSTATE INVESTMENTS shall have no obligation to purchase or
sell, or to recommend for purchase or sale for any Account, any security that
ALLSTATE INVESTMENTS, its affiliates, employees or agents may purchase or sell
for its or their own accounts or for the account of any other client, if, in the
opinion of ALLSTATE INVESTMENTS, such transaction or investment appears
unsuitable, impractical or undesirable for such Account. It is agreed that
ALLSTATE INVESTMENTS may use any supplemental investment research obtained for
the benefit of an Allstate Affiliate in providing investment advice to its other
clients or its own accounts. Conversely, such supplemental information obtained
by the placement of business for ALLSTATE INVESTMENTS or other entities advised
by ALLSTATE INVESTMENTS will be considered by and may be useful to ALLSTATE
INVESTMENTS in carrying out its obligations to each Allstate Affiliate.
F. Allocation of Trades. It is acknowledged that securities held by an
Allstate Affiliate may also be held by separate investment accounts or other
funds for which ALLSTATE INVESTMENTS may act as a manager. If purchases or sales
of securities for an Allstate Affiliate or other entities for which ALLSTATE
INVESTMENTS acts as investment manager arise for consideration at or about the
same time, each such Allstate Affiliate agrees that ALLSTATE INVESTMENTS may
make transactions in such securities, insofar as feasible, for the respective
entities in a manner deemed equitable to all. To the extent that transactions on
behalf of more than one client of ALLSTATE INVESTMENTS during the same period
may increase the demand for securities being purchased or the supply of
securities being sold, each Allstate Affiliate recognizes that there may be an
adverse effect on price.
It is agreed that, on occasions when ALLSTATE INVESTMENTS deems the
purchase or sale of a security to be in the best interests of an Allstate
Affiliate as well as other accounts or companies, it may, to the extent
permitted by applicable laws and regulations, but will not be obligated to,
aggregate the securities to be so sold or purchased for such Allstate Affiliate
with those to be sold or purchased for other accounts or companies in order to
obtain favorable execution and lower brokerage commissions. In that event,
allocation of the securities purchased or sold, as well as the expenses incurred
in the transaction, will be made by ALLSTATE INVESTMENTS in the manner it
considers to be most equitable and consistent with its obligations to such
Allstate Affiliate and to such other accounts or companies. Each Allstate
Affiliate recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for such Allstate Affiliate.
G. Contracts; Authorized Signatories. ALLSTATE INVESTMENTS shall have the
full power, right and authority, as each Allstate Affiliate's agent, in
accordance with this Agreement and the Investment Guidelines, to negotiate,
apply for, enter into, execute, deliver, amend, modify and/or terminate legal
documents of every kind and nature relating to or required by the investment of
the assets of each Account. All such documents may be entered into in an
Allstate Affiliate's name or in ALLSTATE INVESTMENTS' name (as agent for such
Allstate Affiliate), as ALLSTATE INVESTMENTS shall determine, and all such
documents shall be legally binding on such Allstate Affiliate. Those certain
employees and officers of ALLSTATE INVESTMENTS who are authorized to execute
transactions and sign documentation pursuant to the Policies and Procedures
adopted pursuant to authorization of the ALLSTATE INVESTMENTS' Board of
Directors, as they may be amended from time to time, shall also be authorized to
the same extent to execute transactions and sign documentation on behalf of any
Allstate Affiliate and/or ALLSTATE INVESTMENTS in connection with transactions
entered into on behalf of the assets of any Account pursuant to this Agreement.
H. Compliance with Legal Requirements. ALLSTATE INVESTMENTS shall make all
reasonable efforts to comply with and cause to be complied with all applicable
laws, rules, and regulations of the each Allstate Affiliate's domicile, and any
federal, state or municipal authority governing this Agreement, the services
rendered hereunder, each Account and the assets held therein. Without limiting
the foregoing, ALLSTATE INVESTMENTS shall comply with all securities laws and
other laws applicable to the services provided under this Agreement.
I. Transaction Procedures. The assets of each Account are or will be held
in custody by the bank custodian(s) appointed by each Allstate Affiliate from
time to time. ALLSTATE INVESTMENTS shall not act as custodian for the assets of
any Account and shall not, under any circumstances, have or be deemed to have
ownership, custody or physical control of any of the assets of any Account.
ALLSTATE INVESTMENTS may, however, issue instructions to, and communicate with,
the bank custodian for each Account as may be necessary and appropriate in
connection with provision of its services pursuant to this Agreement. At the
option of ALLSTATE INVESTMENTS, instructions by ALLSTATE INVESTMENTS to the bank
custodian may be made orally or by computer, electronic instruction systems or
telecommunications terminals. ALLSTATE INVESTMENTS will confirm that the bank
custodian has effected such instructions either by access to the bank's
computerized identification system or by telephonic confirmation. The bank
custodian will confirm with ALLSTATE INVESTMENTS receipt of trade instructions
orally or by computer for the Account. ALLSTATE INVESTMENTS will instruct all
brokers, dealers and counterparties executing orders on behalf of the assets of
an Account to forward to ALLSTATE INVESTMENTS copies of all confirmations.
J. Recordkeeping. ALLSTATE INVESTMENTS shall keep and maintain an accurate
and detailed accounting of each transaction concerning the assets of each
Account and of all receipts, disbursements, and other transactions relating to
the purchase and sale transactions arising hereunder. ALLSTATE INVESTMENTS
agrees to preserve such records for the greater of (i) six years; (ii) the
required period pursuant to the insurance laws of an Allstate Affiliate's
domicile and related regulations; or (iii) such other time period that an
Allstate Affiliate may from time to time request. ALLSTATE INVESTMENTS
acknowledges that all such records shall be the property of each Allstate
Affiliate and shall be made available, within five (5) business days of receipt
of a written request, to an Allstate Affiliate, its accountants, auditors or
other representatives of the Allstate Affiliate for inspection and/or copying
(at such Allstate Affiliate's expense) during regular business hours. In
addition, ALLSTATE INVESTMENTS shall provide any materials, reasonably related
to the investment advisory services provided hereunder, as may be reasonably
requested in writing by the directors or officers of an Allstate Affiliate, or
as may be required by any governmental agency with jurisdiction hereunder.
ALLSTATE INVESTMENTS further agrees to prepare and furnish to each Allstate
Affiliate and to other persons designated by such Allstate Affiliate, at such
regular intervals and other times as may be specified by such Allstate Affiliate
from time to time (i) such balance sheets, income and expense statements and
other financial statements and reports, and (ii) such other statements, reports
and information, in each case regarding the assets of its Account as such
Allstate Affiliate shall from time to time reasonably require.
In the event of termination of this Agreement for any reason, all such records
or copies thereof shall be returned promptly to the respective Allstate
Affiliate, free from any claim or retention of rights by ALLSTATE INVESTMENTS.
Exhibit 10.4
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement"), dated as of this 12th day
November, 1996, and effective for consolidated federal income tax returns filed
after June 30, 1996, is entered into by and among The Allstate Corporation
("Parent") and the undersigned corporations, as includible corporations in the
affiliated group (the "Allstate Group") of which Parent is the common parent (as
such terms are used or defined in section 1504 of the Internal Revenue Code of
1986 (the "Code")).
WHEREAS the Allstate Group has filed a consolidated federal income tax
return for the taxable year ended December 31, 1995 and intends to continue
filing consolidated federal income tax returns in subsequent years; and
WHEREAS the parties hereto desire to enter into this agreement to
fairly allocate among themselves the federal tax liabilities, credits, refunds,
benefits, and similar items related to the consolidated federal income tax
return for the taxable year ended December 31, 1995 and subsequent years;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I - REGULAR TAX
1.1 Subject to the adjustments provided in section 1.2 of this
Agreement, the regular federal income tax liability of each member shall be
determined pursuant to the principles used to determine earnings and profits
under section 1552(a)(2) of the Code and Treasury Regulation section
1.1502-33(d)(3) using a fixed percentage of one hundred. Accordingly, each
member shall, subject to the adjustments in section 1.2, generally be liable for
the amount of tax it would ordinarily pay on a separate return basis.
1.2 In determining the separate return tax liability of each member for
purposes of this Article, only the regular tax liability (without regard to the
alternative minimum tax or alternative minimum tax credits) shall be taken into
account. Additionally, items of income, deductions, credits and other similar
items that may be limited or recharacterized on a consolidated basis (e.g.,
foreign tax credits, charitable contributions, section 1231 gains, etc.) shall
be included in the determination of separate return liability as so limited or
recharacterized. For purposes of this determination, any item that is limited on
a consolidated basis shall be allocated to each member according to the ratio of
(i) the amount of such item generated by a member to (ii) the total amount of
such items generated by the Allstate Group.
ARTICLE II - ALTERNATIVE MINIMUM TAX
2.1 If the Allstate Group has an alternative minimum tax ("AMT")
liability for any year, such liability shall be allocated to each member
according to the ratio of (i) the excess of any member's separate return
tentative minimum tax for the year (whether such amount is positive or negative)
over the member's separate return regular tax for such year (whether such amount
is positive or negative) to (ii) the sum of such excess amounts for all members
of the group. In determining each member's tentative minimum tax and regular
tax, the adjustments provided in section 1.2 of this Agreement shall be made.
2.2 AMT credits originating in a tax year shall be allocated to each
member according to the amount of AMT liability allocated for such year.
Utilization of such credits shall be determined on a FIFO basis (i.e., AMT
credits from the earliest available year shall be deemed utilized before credits
from a later year are utilized). If only part of the amount of AMT paid for any
year is utilized as a credit, such amount shall be allocated to the members in
proportion to the amounts of AMT liability allocated to members for such year.
ARTICLE III - OTHER TAXES AND CREDITS
Other taxes (e.g., the environmental tax), credits (e.g., the foreign
tax credit or the general business credit) or similar items paid, incurred or
received by the Allstate Group shall be allocated to each member according to
the ratio of the amount of any such item generated by the member on a separate
return basis to the total of such item generated on a separate return basis by
all members of the Allstate Group.
ARTICLE IV - TAX RETURN ADJUSTMENTS
4.1 As agent for the Allstate Group, Parent shall have the right to
control in its sole discretion any audit of returns filed by the Group. However,
Parent shall, in its reasonable discretion, permit any member that might have a
liability or refund as a result of an adjustment to participate in the
proceedings relating to such issue. In the event any member of the group wishes
to amend its portion of any filed return, Parent shall have discretion, taking
into account the consequences to the entire group, to file an amended return, to
present the adjustments to be included on such amended return at the audit of
the consolidated return to which the adjustments relate, or to take any other
reasonable action.
4.2 In the event of adjustments to taxes (as a result of audits, filing
of amended returns, carrybacks, or other similar items), allocations under this
Agreement shall be redetermined as if the adjustments were included in the
returns as originally filed. Interest or penalties related to such adjustments
shall be allocated to the member which generated the adjustment.
4.3 In the event an adverse adjustment with respect to income or items
of one member is offset by a favorable adjustment for another member, thereby
resulting in either a smaller deficiency for the Allstate Group or smaller
refund for the group, the member with the adverse adjustment shall pay interest
at the overpayment rate specified in section 6621(a)(1) to the member with the
favorable adjustment to compensate the member with the favorable adjustment for
interest not received from the Government as a result of the adverse adjustment.
4.4(a) Any member may make a deposit or payment of any tax
liability to stop the running of interest by paying such amount to Parent and
providing written directions to transfer the amount to the Government. Parent
shall transfer the amount as so directed as soon as practical but in no event
later than fifteen business days after the amount has been received by Parent.
Notwithstanding the foregoing, Parent may refuse to deposit any such amount with
the Government if Parent determines in its sole discretion that it is not in the
best interest of the group, taken as a whole, to make such a deposit. In such an
event, Parent shall inform the member of its decision and return the amount
received within fifteen business days of receipt.
(b) In the event a member which has made a deposit in the nature
of a cash bond (the "original depositing member") wishes to secure a return of
such deposit, such member shall notify Parent of its desire to have the deposit
returned. Within ten business days of such notification, Parent shall determine
whether other members of the Allstate group might utilize such deposit. Parent
shall within such period notify any members who might have use of such deposit,
and, if such members desire to assume all or any portion of the deposit, the
members shall inform Parent within ten business days of notification of the
amount of the deposit they wish to assume. Parent shall allocate the deposit
among the members wishing to assume the deposit within twenty-five business days
of the receipt of the notice from the original depositing member. If more than
one member wishes to assume all or part of the deposit and the amounts requested
to be assumed exceed the amount of the available deposit, Parent shall allocate
the deposit to members in its reasonable discretion. Within five business days
after allocation of the deposit to assuming members, such members shall pay to
the original depositing member the respective portion of the deposit they
assumed. Thereafter, the assuming member shall be treated as the original
depositing member with respect to the portion of the deposit assumed. To the
extent a deposit is not assumed under this procedure, Parent shall within
thirty business days of the receipt of the notice from the original depositing
member take steps to secure the return of the deposit, and shall pay to the
original depositing member the amount returned from the Government within three
business days of receipt by Parent. Parent shall not be liable for any failure
to identify a member as a potential user of the original depositing member's
deposit or for any delays in securing the return of a deposit.
(c) In the event a deposit is applied by the Government to a
liability of the Allstate Group without the consent of the original depositing
member (such event is hereinafter referred to as a "misapplication" of the
deposit), the member receiving the benefit of the misapplication of the deposit
shall within fifteen business days of receipt of the earlier of actual knowledge
of the misapplication of the deposit or notice from Parent of the misapplication
of the deposit pay to the original depositing member (i) the amount of the
deposit so misapplied and (ii) any interest saved by such member as a result of
the misapplication of the deposit. If the member whose deposit was misapplied
incurs additional interest costs (in excess of the interest paid pursuant to the
previous sentence) that would not have been incurred absent the misapplication
of the deposit, the member receiving the benefit of the misapplication shall
also be liable to the original depositing member for such additional interest
costs. The amount of such interest shall not exceed the interest incurred for
the period from the time the deposit was originally made until the payment was
made to the original depositing member pursuant to the first sentence of this
subparagraph.
ARTICLE V - CARRYFORWARDS
The utilization of any carryforwards available to the Allstate Group
and not expressly covered elsewhere in this Agreement shall be determined under
the principles of the consolidated return regulations in effect at the time the
carryforwards are used by the group.
ARTICLE VI - RETURNS AND PAYMENTS
6.1 Information required from members for the completion of tax returns
(including estimated payments, extensions of time, and other required filings)
shall be provided by each member according to the schedule reasonably determined
by Parent. Payments of tax or liabilities allocated hereunder shall be made at
the time and in the manner reasonably determined by Parent. Settlements of tax
payments or refunds hereunder may at the reasonable discretion of Parent be made
on an estimated basis, but final settlement for any return filed shall be made
no later than 30 days after such return is filed except that, where a refund is
due from the Government to the Parent, payment by the parent to the appropriate
member shall be made within 5 business days of the receipt of the refund. Parent
may, in the interest of convenience, net payments due to and from a member or
make payment to a member's direct or indirect parent, which shall then promptly
make payment to the appropriate member. All payments shall be made in
immediately available funds.
6.2 To the extent permitted by law, all tax returns shall be filed
using accounting methods and practices consistent with those used in prior
periods.
ARTICLE VII - ALLSTATE LIFE OF NEW YORK
7.1 This article shall apply solely with respect to the allocation and
settlement of federal tax liabilities between Parent and Allstate Life Insurance
Company of New York ("ALICNY"). The other provisions of this Agreement shall
continue to apply to ALICNY except to the extent they are inconsistent with the
provisions of this Article VII.
7.2 The method of allocating tax liability provided in other articles
of this Agreement are intended to comply with part (B) of paragraph 3 of New
York Insurance Department Circular Letter No. 33 (the "Circular"). To the extent
the other articles of this Agreement result in a tax charge to ALICNY greater
than the amount ALICNY would have paid if it had filed a separate return (as
defined in paragraph 4 of the Circular), the amount due from ALICNY shall be
limited to the separate return amount. To the extent the other articles of this
Agreement provide for a payment to ALICNY for credits (as defined in part B of
paragraph 3 of the Circular) generated by ALICNY in an amount less than the
savings actually generated by the use of such credits on a consolidated basis,
such payment shall be increased to the amount of the savings generated on a
consolidated basis.
7.3 In order to help assure ALICNY's right to recoup federal taxes in
the event of future net losses, Parent shall establish and maintain an escrow
account consisting of assets eligible as an investment by ALICNY in an amount
equal to the excess of the amount paid hereunder by ALICNY to Parent for any
year over the actual payment made by Parent to the Government for such year.
Escrow assets may be released to Parent at such time as the permissible period
for loss carrybacks has expired.
7.4 All settlements under this Agreement shall be in cash or securities
(at market value) eligible as investments for ALICNY. ALICNY agrees to record on
its books payments received hereunder as contributed surplus.
7.5 This Agreement shall be terminated with respect to ALICNY if (a)
the parties agree in writing to such termination, (b) ALICNY's membership in the
affiliated group or consolidated group ceases or is terminated for any reason,
or (c) the affiliated group fails to file a consolidated return for any taxable
year. Notwithstanding the termination of the Agreement, the provisions of this
Agreement shall remain in effect for any time period during the taxable year in
which termination occurs for which the income of the terminating party must be
included in the consolidated return. Additionally, notwithstanding the
termination of this agreement, all materials, including, but not limited to,
returns, supporting schedules, workpapers, correspondence and other documents
related to the consolidated return shall be made available to and by ALICNY
during regular business hours.
7.6 This Agreement shall not be assignable without the prior written
consent of the other parties hereto.
7.7 ALICNY and Parent agree to negotiate in good faith to settle any
dispute involving the interpretation of this Agreement. If any such dispute
cannot be settled, such dispute shall be submitted to binding arbitration as
follows:
(a) Parent and ALICNY shall select an arbitrator, who is a partner at
a national accounting firm that has not represented either party
in the preceding five years. If the parties are unable to agree
upon an arbitrator, Parent's independent accountant shall select
as the arbitrator a partner at a national accounting firm that
has not represented either party in the preceding five years.
(b) The arbitration shall be conducted pursuant to the rules of the
American Arbitration Association.
(c) The decision of the arbitrator shall be final and binding on
Parent and ALICNY.
(d) Parent and ALICNY agree to pay their own costs of the arbitration
proceeding, except that costs and fees of the arbitrator shall be
shared equally.
7.8 To the extent that this Agreement pertains to ALICNY, it shall be
governed under the laws of the State of New York.
ARTICLE VIII - MISCELLANEOUS
8.1 Any dispute with respect to the interpretation of this Agreement or
the treatment of any tax item not expressly covered by this Agreement shall be
conclusively determined by Parent according to the basic principles of this
Agreement.
8.2 All parties shall cooperate in the exchange of information needed
to fulfill the purposes of this Agreement. Each member agrees to cause its
proper officers and employees to execute documents, statements, elections,
certificates, schedules, and other similar items deemed necessary by Parent in
order to carry out the intent of the provisions of applicable law and
regulations.
8.3 This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns. No assignment, however,
shall relieve any party's obligations hereunder without the consent of the other
parties.
8.4 Each member that acquires after the date of this Agreement an
ownership interest in an entity that results in such entity becoming a member of
the Allstate Group shall promptly cause such entity to adopt the provisions of
this Agreement.
8.5 This Agreement may be modified only by written agreement of members
affected by the modification. This Agreement shall be terminated with respect to
any member as of the end of the day on which such member ceases to be a member
of the Allstate Group, provided, however, that such member shall be subject to
the obligations, duties and other terms and conditions of this Agreement for any
period in which the terminating member's items were included in the consolidated
federal income tax return of the Allstate Group. To the extent a company whose
items of income and loss were included in the consolidated federal income tax
return of the Allstate Group is determined not to be an includible member of the
Allstate Group, this Agreement shall not apply to such company for any period in
which it is not an includible member, and any payments, liabilities incurred,
benefits received and other similar items under this Agreement shall be
redetermined and repaid in a fair and equitable manner.
8.6 This Agreement shall be governed under the laws of the State of
Illinois, except as provided otherwise in section 7.8 of this Agreement.
8.7 This Agreement may be executed in counterparts, each of which shall
be considered an original.
IN WITNESS HEREOF, the parties have executed this Agreement on the date
indicated:
The Allstate Corporation
By __________________________________ Date _______________
Allstate Insurance Company
By __________________________________ Date _______________
Allstate Life Insurance Company
By __________________________________ Date _______________
Allstate Texas Lloyd's, Inc.
By __________________________________ Date _______________
AEI Group, Inc. (Name changed to Allstate Enterprises, Inc.)
By __________________________________ Date _______________
Allstate Investment Management Company
By __________________________________ Date _______________
Allstate Motor Club, Inc.
By __________________________________ Date _______________
Rescue Express, Inc.
By __________________________________ Date _______________
Roadway Protection Auto Club, Inc.
By __________________________________ Date _______________
Direct Marketing Center, Inc.
By __________________________________ Date _______________
Enterprises Services Corporation
By __________________________________ Date _______________
General Underwriters Agency, Inc.
By __________________________________ Date _______________
Tech-Cor, Inc.
By __________________________________ Date _______________
Allstate International, Inc.
By __________________________________ Date _______________
Forty-Fifth & Main Redevelopment Corporation
By __________________________________ Date _______________
Omnitrus Merging Corporation
By __________________________________ Date _______________
Truswal Systems Corporation
By __________________________________ Date _______________
Xxxxxx Industries, Inc.
By __________________________________ Date _______________
Karelian Timber Associates, Inc.
By __________________________________ Date _______________
Allstate Settlement Corporation
By __________________________________ Date _______________
Allstate Life Financial Services, Inc. (Name changed to ALFS, Inc.)
By __________________________________ Date _______________
Lincoln Benefit Financial Services, Inc. (Name changed to AFD, Inc.)
By __________________________________ Date _______________
The Northbrook Corporation
By __________________________________ Date _______________
Xxxxxxxx Group Holdings, Inc.
By __________________________________ Date _______________
The Xxxxxxxx Group, Inc. (Name changed to AFDW, Inc.)
By __________________________________ Date _______________
Bank Insurance Services, LLC
By __________________________________ Date _______________
Xxxxxxxx Financial Services, Inc.
By __________________________________ Date _______________
Investors Financial Services, Inc.
By __________________________________ Date _______________
Key Investor Services, Inc. (WV)
By __________________________________ Date _______________
Key Investor Services, Inc. (PA)
By __________________________________ Date _______________
Key Investor Services, Inc. (MD)
By __________________________________ Date _______________
Xxxxxxxx Analytics, Inc.
By __________________________________ Date _______________
Xxxxxxxx Educational Services, Inc.
By __________________________________ Date _______________
Xxxxxxxx Group Advisors, Inc.
By __________________________________ Date _______________
Xxx Financial Services, Inc.
By __________________________________ Date _______________
Security Financial Network, Inc. (GA)
By __________________________________ Date _______________
Security Financial Network, Inc. (FL)
By __________________________________ Date _______________
Xxxxxxxx Direct Advantage Agency, Inc.
By __________________________________ Date _______________
Provest Insurance Services, Inc. (IN)
By __________________________________ Date _______________
Provest Insurance Services, Inc. (KY)
By __________________________________ Date _______________
Provest Insurance Services, Inc. (PA)
By __________________________________ Date _______________
Lifemark Insurance Services of California, Inc.
By __________________________________ Date _______________
Lifemark Financial & Insurance Services, LLC.
By __________________________________ Date _______________
Lifemark Financial & Insurance Services, Inc.
By __________________________________ Date _______________
After Six Holding Corporation
By __________________________________ Date _______________
A. S. Licensing Corporation
By __________________________________ Date _______________
After Six, Ltd.
By __________________________________ Date _______________
Allstate Indemnity Company
By __________________________________ Date _______________
Allstate Property & Casualty Insurance Company
By __________________________________ Date _______________
Allstate Holdings, Inc. (Changed to Allstate Holdings, LLC)
By __________________________________ Date _______________
Allstate Floridian Insurance Company
By __________________________________ Date _______________
Forestview Mortgage Insurance Company (Name changed to Allstate Fire
and Casualty Insurance Company)
By __________________________________ Date _______________
Pinebrook Mortgage Insurance Company
By __________________________________ Date _______________
Allstate Texas Lloyds
By __________________________________ Date _______________
Glenbrook Life Insurance Company
By __________________________________ Date _______________
Deerbrook Insurance Company
By __________________________________ Date _______________
Northbrook Life Insurance Company
By __________________________________ Date _______________
Allstate Life Insurance Company of New York
By __________________________________ Date _______________
Surety Life Insurance Company
By __________________________________ Date _______________
Lincoln Benefit Life Company
By __________________________________ Date _______________
Allstate New Jersey Holdings, Inc. (Changed to Allstate New Jersey
Holdings, LLC)
By __________________________________ Date _______________
Allstate New Jersey Insurance Company
By __________________________________ Date _______________
Allstate Floridian Indemnity Company
By __________________________________ Date _______________
Allstate International Insurance Holdings, Inc.
By __________________________________ Date _______________
Glenbrook Life and Annuity Company
By __________________________________ Date _______________
Northbrook Services, Inc.
By __________________________________ Date _______________
Allstate Federal Savings Bank (Name changed to Allstate Bank)
By __________________________________ Date _______________
CNL, Inc.
By __________________________________ Date _______________
Allstate Reinsurance Ltd.
By __________________________________ Date _______________
Pembridge America, Inc.
By __________________________________ Date _______________
American Surety & Casualty Company (Name changed to Encompass
Indemnity Company)
By __________________________________ Date _______________
American Heritage Life Investment Corporation
By __________________________________ Date _______________
Florida Associated Services, Inc.
By __________________________________ Date _______________
Realty Advisors Corporation
By __________________________________ Date _______________
American Heritage Service Company
By __________________________________ Date _______________
Amherst Investment Company
By __________________________________ Date _______________
American Heritage Insurance Services (a/k/a ERJ Insurance Group, Inc.)
By __________________________________ Date _______________
Colonial Reinsurance, Ltd.
By __________________________________ Date _______________
Willow Insurance Holdings, Inc. (Name changed to Ivantage Group, LLC)
By __________________________________ Date _______________
Kennett Capital, Inc.
By __________________________________ Date _______________
Allstate Non-Insurance Holdings, Inc.
By __________________________________ Date _______________
Willow Lake Holdings, LLC
By __________________________________ Date _______________
Encompass Holdings, LLC
By __________________________________ Date _______________
Northbrook Indemnity Company
By __________________________________ Date _______________
Allstate Assignment Company
By __________________________________ Date _______________
Allstate North American Insurance Company
By __________________________________ Date _______________
USF&G Business Insurance Company
By __________________________________ Date _______________
Allstate Financial, LLC
By __________________________________ Date _______________
Allstate Financial Corporation
By __________________________________ Date _______________
Allstate Investments, LLC
By __________________________________ Date _______________
LSA Asset Management, LLC
By __________________________________ Date _______________
Allstate Financial Advisors, LLC
By __________________________________ Date _______________
Allstate Financial Services, LLC
By __________________________________ Date _______________
Deerbrook General Agency, Inc.
By __________________________________ Date _______________
Ivantage Select Agency, Inc.
By __________________________________ Date _______________
Sterling Collision Center, Inc.
By __________________________________ Date _______________
Xxx Xxxxxxxx Enterprises, Inc.
By __________________________________ Date _______________
Pacific Painters, Inc.
By __________________________________ Date _______________
Champions Pride Electronics & Trim, Inc.
By __________________________________ Date _______________
JSI Collision Centers, Inc.
By __________________________________ Date _______________
Westborn Collision, Inc.
By __________________________________ Date _______________
Exhibit 10.5
ALLSTATE INSURANCE COMPANY
Home Office - Northbrook, Illinois
AGREEMENT OF GENERAL INDEMNITY
KNOW ALL MEN BY THESE PRESENTS, that whereas the undersigned,
hereinafter called Indemnitors, have requested and do hereby request Allstate
Insurance Company hereinafter referred to as the Surety, to execute or procure
the execution of such Bonds, undertakings or recognizances (all of which are
hereinafter included within the term "Bond or Bonds") as have been and such as
may hereafter be applied for directly or through an agent, attorney or other
representative or required, solely or as co-adventurer with others, by any of
the Indemnitors or by any person, firm, corporation or association whose name
shall, for that purpose, have been furnished to the Surety by any of the
Indemnitors, or to refrain from canceling any such Bond or Bonds, it being
understood and agreed that this instrument shall cover all Bonds so applied for,
executed, continued or renewed, whether or not this instrument is referred to or
mentioned in connection therewith.
WHEREAS, the Indemnitors understand that the Surety expressly requires
the delivery of this Indemnity Agreement as part of the consideration for the
execution by the Surety of such Bonds which may hereafter be furnished, or for
the refraining from canceling such Bonds; and
WHEREAS, the Indemnitors have a substantial, material and beneficial
interest in the obtaining of Bonds or in the Surety's refraining from canceling
such Bonds.
NOW, THEREFORE, in consideration of the premises and of the execution
or continuance of such Bonds, the Indemnitors for themselves, their heirs,
executors, administrators, successors and assigns, do hereby jointly and
severally, covenant and agree with the Surety, its successors and assigns as
follows:
PREMIUMS 1. The Indemnitors will pay, when due, all premiums for each of such
Bonds in accordance with the Surety's regular manual rates in effect on the date
such Bond becomes effective as long as liability thereunder shall continue, and
until the Surety is furnished with evidence satisfactory to the Surety of its
discharge or release from the Bonds, or of all liability by reason thereof.
INDEMNITY 2. The Indemnitors will indemnify the Surety against any and all
liability, loss, costs, damages, fees of attorneys and other expenses which the
Surety may sustain or incur by reason of, or in consequence of the execution of
such Bonds and any renewal, continuation or successor thereof, including but not
limited to, sums paid or liabilities incurred in settlement of, and expenses
paid or incurred in connection with claims, suits, or judgments under such
Bonds, expenses paid or incurred in enforcing the terms hereof, in procuring or
attempting to procure release from liability, or in recovering or attempting to
recover losses or expenses paid or incurred, as aforesaid.
The Indemnitors will furnish to the Surety such information as it may request
from time to time concerning the financial condition of the Indemnitors, the
status of work under any contract covered by a Bond, the condition of the
performance of any such contract and the payment of obligations incurred in
connection therewith. The Surety may at reasonable times and places and from
time to time, examine and copy the books, records and accounts of the
Indemnitors. The Surety may obtain information concerning the affairs and
operations of the Indemnitors and any transaction between or among the
Indemnitors from any banks, depositories, obliges of the Bonds material men,
supply houses, credit reporting agencies or other persons, who are hereby
expressly authorized to furnish such information to the Surety.
If the Indemnitors become aware of any demand, notice or proceeding which may
result in liability to the Surety under any Bond, the Indemnitors shall notify
the Surety immediately thereof in writing. The Indemnitors will, at any time
upon the request of the Surety, procure the discharge of the Surety from any
Bond and from all liability by reason thereof. The Surety may, at any time, take
such action as it deems necessary or proper to obtain its release from any and
all liability under any Bond. Upon such discharge or release, the Surety shall
return to the Principal any portion of any premium paid which is unearned as a
result of such discharge or release.
RESERVE FOR LOSS 3. If the Surety shall set up a reserve to cover any liability,
claim asserted, suit or judgment under any such Bond, the Indemnitors will,
immediately upon demand and whether or not the Surety shall have made any
payment therefore, deposit with the Surety a sum of money equal to such reserve
and any increase thereof as collateral security on such Bond, and such sum and
any other money or property which shall have been or shall hereafter be pledged
as collateral security on any such Bond shall be available, in the discretion of
the Surety, as collateral security on all Bonds coming within the scope of this
instrument or for any other indebtedness of the Indemnitors to the Surety; and
any such collateral security shall be held subject to the terms of the Surety's
regular form of receipt for collateral, which is by reference made a part
hereof.
The Surety shall have the right to use the deposit, or any part thereof, in
payment or settlement of any liability, loss or expense for which the
Indemnitors would be obligated to indemnify the Surety under the terms of this
Agreement. Surety shall have no obligation to invest, or to provide a return on,
the deposit. The Indemnitors shall be entitled to the return of any unused
portion of the deposit upon termination of the liability of the Surety on the
Bonds and the performance by the Indemnitors of all obligations to the Surety
under the terms of this Agreement. The Surety's demand shall be sufficient if
sent by Registered or Certified Mail to the Indemnitors at the addresses stated
herein, or at the addresses of the Indemnitors last known to the Surety, whether
or not actually received.
CHANGE IN CONTRACT-LOANS-POSSESSION 4. If any such Bond be given in connection
with a contract, the Surety in its sole discretion is hereby authorized, but not
required, (a) to consent to any change in the contract or in the plans and
specifications relating thereto; (b) to make or guarantee advances or loans for
the purposes of the contract without any obligation to see to the application
thereof, and the Indemnitors shall be obligated to indemnify the Surety in
accordance with the terms of this Agreement for the amount of all such advances
and loans, notwithstanding that the proceeds or any part thereof have not been
so used by the Principal; (c) in the event of any default in the performance of
the contract, or the breach of this Agreement or of any Bond connected
therewith, or the failure to diligently prosecute the work under any contract or
pay for labor and materials used in the prosecution of the contract, or in the
event work has ceased or been suspended on any contract or contracts covered by
any said Bonds, to take possession of the work under the contract, and, at the
expense of the Indemnitors, to complete the contract or cause the same to be
completed or to consent to the completion thereof, and to take any other action
which the Surety may deem appropriate. In the event that the Surety takes
possession of the work as above provided, the Indemnitors hereby release and
discharge the Surety, in this connection, from all liability for all its actions
and omissions except for deliberate malfeasance.
ASSIGNMENT 5. The Indemnitors hereby assign, transfer, pledge and convey to the
Surety (effective as of the date of each such Bond, but only in the event of
default, breach or failure as referred to in preceding Section 4), as collateral
security, to secure the obligations hereunder and any other indebtedness and
liabilities of the Indemnitors to the Surety, all of their rights under the
contracts, referred to in such Bonds, including their right, title and interest
in and to (1) all subcontracts let in connection therewith and such
subcontractors' surety Bonds, (2) all machinery, plant, equipment, tools and
materials which shall be upon the site or sites of the work or elsewhere for the
purposes of the contracts, including al materials ordered for the contracts, and
(3) any and all sums due or which may thereafter become due under such contracts
and all sums due or to become due on all other contracts, bonded or unbonded, in
which any or all of the Indemnitors have an interest.
FILING OR RECORDING 6. The Surety may at its option, file or record this
Agreement or any other document executed by any or all of the Indemnitors,
individually or jointly, in connection with application, issuance or execution
of any Bond or Bonds, as a security Agreement or as part of a financing
statement or as notice of its prior interest and assignment under the provisions
of the Uniform Commercial Code or any other statute or regulation of any
jurisdiction or agency, but that the filing or recording of such document shall
be solely at the option of the Surety and that the failure to do so shall not
release or impair any of the obligations of the Indemnitors under this
Agreement.
ASSIGNMENT OF PROCEEDS 7. If any of the Bonds are executed in connection with a
contract which by its terms or by law prohibits assignment of contract proceeds,
or any part thereof, the Indemnitors covenant and agree to hold all money or
other proceeds of the contract, whether received as payment or loan, as a trust
for the benefit of the Surety and to use such money or other proceeds for the
purpose of performing the contract and discharging the obligation of the Bond,
and for no other purpose, until the Bond is completely exonerated.
CLAIMS-PAYMENTS 8. The Surety shall have the exclusive right to decide and
determine whether any claim, liability, suit or judgment made or brought against
the Surety or the Indemnitors or any one of them on any such Bond shall or shall
not be paid, compromised, resisted, defended, tried or appealed, and the
Surety's decision thereon, if made in good faith shall be final and binding upon
the Indemnitors, unless the Indemnitors shall request the Surety to litigate
such claim or demand, or to defend such suit, or to appeal from such judgment,
and shall deposit with the Surety, at the time of such request, cash or
collateral satisfactory to the Surety in kind and amount, to be used in paying
any judgment or judgments rendered or that may be rendered, with interest,
costs, expenses and attorneys fees, including those of the Surety. An itemized
statement of payments made by the Surety for any of the purposes specified
herein, sworn to by an officer of the Surety, or the voucher or vouchers for
such payments, shall be prima facie evidence of the liability of the Indemnitors
to reimburse the Surety for such payments, with interest.
CHANGES IN BONDS 9. The Indemnitors hereby authorize the Surety in its sole
discretion to do the following: (a) from time to time to make or consent to any
change in, or issue any substitute for or renewal of, any such Bond, or in any
contract referred to in any such Bond, and this instrument shall apply to such
substituted or changed Bond or renewal; (b) if any such Bond be given in an
action or proceeding in any court, to recognize any attorney of record in such
action or proceeding for any party thereto at the date of the execution of such
Bond as the authorized representative of such party until the Surety shall have
been fully discharged from liability under such Bond; (c) to take such steps as
the Surety may deem necessary or proper to obtain release from liability from
any such Bond.
NOTICE TO INDEMNITORS 10. The Indemnitors hereby waive notice of the execution
of any such Bonds or of any act, fact or information coming to the notice or
knowledge of the Surety concerning or affecting its rights or liabilities under
any such Bond or rights or liabilities of the Indemnitors hereunder, notice of
all such being hereby expressly waived.
PROTECTION TO REINSURER AND CO-SURETY 11. If the Surety shall procure any other
company or companies to execute or join with it in executing, or to reinsure,
any such Bonds, this instrument shall inure to the benefit of such other company
or companies, its or their successors and assigns, so as to give to it or them a
direct right of action against the Indemnitors to enforce this instrument and,
in that event, the word "Surety", wherever used herein, shall be deemed to
include such company or companies, as their respective interests may appear.
SEVERABILITY OF INDEMNITORS 12. The liability of the Indemnitors hereunder shall
not be affected by the failure of any party to sign any such Bond nor by any
claim that other indemnity or security was to have been obtained nor by the
release of any indemnity, or Indemnitor, nor the return or exchange of any
collateral that may have been obtained; and if any party signing this instrument
is not bound for any reason this obligation shall still be binding upon each and
every other party.
SUITS 13. Separate suits may be brought hereunder as causes of action accrue,
and suit may be brought against any or all of the Indemnitors; and suit or suits
upon one or more causes of action, or against one or more of the Indemnitors,
shall not prejudice or bar subsequent suits against any other or all of the
Indemnitors on the same or any other cause or causes of action, whether
theretofore or thereafter accruing.
The Surety is hereby expressly authorized to settle any claim based upon this
Agreement with any one or more of the Indemnitors individually, and such
settlement or compromise shall not affect the liability of any of the rest of
the Indemnitors. If any proceeding is brought against the Surety in which the
Surety desires to join any one of the Indemnitors by reason of the undertakings
in this Agreement, each of the Indemnitors agrees that he will, upon written
notice of the Surety to do so voluntarily appear in such proceedings and accept
service of process and other papers either personally or by an attorney of the
Indemnitors' choice. If any of the Indemnitors fail upon such notice from the
Surety so to appear, such Indemnitors hereby designate the Secretary of the
State or territory in which such proceedings are pending as his agent for the
service of process in any such proceedings.
With respect to any action brought by the Surety on this Agreement in a
jurisdiction in which one or more of the Indemnitors reside, are domiciled, are
doing business or are found, each of the Indemnitors not in the jurisdiction
hereby designates each of the Indemnitors in such jurisdiction as his agent to
receive on his behalf service of process in such action.
PRIOR BONDS 14. The Indemnitors waive any defense that this instrument was
executed subsequent to the date of any such Bond, admitting and covenanting that
such Bond was executed pursuant to the Indemnitors' request and in reliance on
the Indemnitors' promise to execute this instrument.
DECLINE EXECUTION 15. The Surety, at its option, may decline to execute or
participate in or procure the execution of any such Bonds, without incurring any
liability whatever to the Indemnitors. If the Surety shall execute a bid or
proposal Bond, or any similar undertaking, it may nevertheless decline to
execute any and all Bonds that may be required in connection with any award made
on the proposal for which the Bond or undertaking is given, and the Principal
shall have the right to procure from another surety any Bonds that may be
required in connection with any award under the proposal for which the Bond or
undertaking is given.
DEFINITIONS 16. As used in this Agreement, words in the singular include the
plural and words in the plural include the singular. The masculine pronoun shall
be read as feminine or neuter as circumstances require. The word "person" shall
mean and include individuals, partnerships, corporations and associations.
The terms "contract" shall include all documents comprising the contract
documents including general and special conditions, specifications and drawings.
The word "Bond" shall mean a contract of suretyship, guaranty or indemnity, an
agreement or consent to provide such a contract and the continuation, extension,
alteration, renewal or substitution of such a contract, agreement or consent.
NOMINEE 17. The Indemnitors hereby irrevocably nominate, constitute, appoint and
designate the Surety or its designee as their Attorney in Fact with the right,
but not the obligation, to exercise all of the rights of Indemnitors assigned,
transferred and set over to the Surety in this Agreement, and in the name of the
Indemnitors or any of them to make, execute and deliver any and all additional
or other assignments, documents or papers, including but not limited to the
execution of instruments referred to in Section 5, and the endorsement of checks
or other instruments representing payment of contract monies, deemed necessary
and proper by the Surety in order to give full effect not only to the intent and
meaning of the within assignments, but also to the full protection intended to
be herein given to the Surety under all other provisions of this Agreement. The
Indemnitors hereby ratify and affirm all acts and actions taken and done by the
Surety or its designee as such Attorney in Fact.
WAIVE EXEMPTIONS 18. The Indemnitors hereby waive and abandon, so far as their
respective obligations under this agreement are concerned, all rights to claim
any of the property, including the respective homesteads, as exempt from levy,
execution, sale or other legal process under the laws of any country, state,
province, territory or possession.
TERMINATION 19. The obligation of the Indemnitors hereunder shall be continuous;
provided, however, that any of the Indemnitors may give the Surety not less than
thirty days written notice by registered mail of his desire to terminate this
agreement but any such notice of termination shall not operate to modify, bar,
discharge, limit, affect or impair his liability hereunder on or by reason of
any such Bond executed prior to the termination of such thirty days, or with
respect to Bonds executed after the date of such termination (i) upon the award
of a contract to the Principal on a bid or proposal with respect to which the
Surety has executed a bid or proposal Bond or similar undertaking prior to such
date, or (ii) which the Surety has become obligated, prior to such date, to
execute. Further, such notice of termination shall operate only with respect to
those of the Indemnitors upon whose behalf such notice of termination shall have
been given.
CHANGES 20. This Agreement may not be changed or modified orally. No change or
modification shall be effective unless specifically agreed in writing.
SEVERABILITY AND ELECTION OF REMEDY 21. All rights and remedies of the Surety
under this Agreement shall be cumulative, and the exercise of or failure to
exercise, any right or remedy at any time shall not be an election of remedy or
a waiver of any other right or remedy. Failure of the Surety to pursue any
remedy against any one or more of the Indemnitors shall not release or waive any
right against any other of the Indemnitors.
The Surety is not required to exhaust its remedies or rights against the
Principal or to await receipt of any dividends from the legal representatives of
the Principal before asserting its rights under this Agreement against the
Indemnitors.
The rights, powers and remedies given to the Surety by this Agreement shall be
and are an addition to, and not in lieu of, any and all other rights, powers,
and remedies which the Surety may have or acquire against the Indemnitors or
others whether by the terms of any other agreement, by operation of law or
otherwise.
In the event any part of this indemnity Agreement shall be void under the law of
the place governing the construction hereof, then such part only shall be
considered as deleted and the remainder of this Agreement shall endure in full
force and effect.
OTHER INDEMNITY 22. The Indemnitors shall continue to remain bound under this
Agreement even though the Surety may, from time to time and with or without
notice to or knowledge of the Indemnitors, have heretofore accepted or released,
or shall hereafter accept or release, other Agreements of indemnity or
collateral in connection with the execution of the Bonds from the Indemnitors or
from others.
23. THE INDEMNITORS HAE READ THIS AGREEMENT OF INDEMNITY CAREFULLY. THERE ARE NO
SEPARATE AGREEMENTS OR UNDERSTANDINGS WHICH IN ANY WAY LESSEN THE OBLIGATIONS AS
ABOVE SET FORTH. THE INDEMNITORS FURTHER AGREE TO EXECUTE AND DELIVER TO THE
SURETY SUCH FURTHER INSTRUMENTS AS THE SURETY DEEMS NECESSARY TO GIVE EFFECT TO
THE TERMS OF THIS AGREEMENT.
24. In compliance with Public Law 91-508 this constitutes notice that an
investigation may be made as to the character, general reputation, personal
characteristics and mode of living of any non-business applicant or indemnitor.
Information as to nature and scope of any investigation requested will be
furnished upon written request.
IN TESTIMONY WHEREOF, the Indemnitors, intending to be legally bound hereby,
have hereunto set their hands and affixed their seals this _________________ day
of _________________ , 19 _____.
--------------------------------------------- ----------------------------------------
By _________________________________ (Seal)
Address _________________________________
---------------------------------------------- ----------------------------------------
____________________________________ (Seal)
Address _________________________________
______________________________________________ By ______________________________________
____________________________________ (Seal)
Address __________________________________
---------------------------------------------- -----------------------------------------
____________________________________ (Seal)
Address __________________________________
---------------------------------------------- -----------------------------------------
____________________________________ (Seal)
Address __________________________________
INDIVIDUAL(S) ACKNOWLEDGMENT
STATE OF __________________________________
COUNTY OF ________________________________ ss:
On this ______________________________ day of ______________________ ,
19 ____ , before me personally came
__________________________________________________________________________ , to
me known and known to me to be the individual(s) who executed the foregoing
instrument, and acknowledged that ___ he ___ executed same.
---------------------------------------
(Notary Public)
PARTNER(S) ACKNOWLEDGMENT
STATE OF __________________________________
COUNTY OF ________________________________ ss:
On this ______________________________ day of ______________________ ,
19 ____ , before me personally came
__________________________________________________________________________ , to
me known, and stated that ___ he ___ is (are) partner(s) in the firm of
_____________________________
---------------------------------------------------------------------------------------
and acknowledged that ___ he ___ executed the foregoing instrument as the act of the said firm.
---------------------------------------
(Notary Public)
CORPORATE ACKNOWLEDGMENT(S)
STATE OF __________________________________
COUNTY OF ________________________________ ss:
On this ______________________________ day of ______________________ ,
19 ____ , before me personally came
__________________________________________________________________________ , to
me known, who, being by me duly sworn, did depose and say that he resides in
_____________________ that he is the
_____________________________________________________________________________ of
the
___________________________________________________________________________________
the corporation which executed the foregoing instrument; that he knows the seal
of the said corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of the
said corporation, and that he signed his name to the said instrument by like
order.
---------------------------------------
(Notary Public)
STATE OF __________________________________
COUNTY OF ________________________________ ss:
On this ______________________________ day of ______________________ ,
19 ____ , before me personally came
__________________________________________________________________________ , to
me known, who, being by me duly sworn, did depose and say that he resides in
_____________________ that he is the
_____________________________________________________________________________ of
the
___________________________________________________________________________________
the corporation which executed the foregoing instrument; that he knows the seal
of the said corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of the
said corporation, and that he signed his name to the said instrument by like
order.
---------------------------------------
(Notary Public)
STATE OF __________________________________
COUNTY OF ________________________________ ss:
On this ______________________________ day of ______________________ ,
19 ____ , before me personally came
__________________________________________________________________________ , to
me known, who, being by me duly sworn, did depose and say that he resides in
_____________________ that he is the
_____________________________________________________________________________ of
the
___________________________________________________________________________________
the corporation which executed the foregoing instrument; that he knows the seal
of the said corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of the
said corporation, and that he signed his name to the said instrument by like
order.
---------------------------------------
(Notary Public)
