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INDEMNITY REINSURANCE AGREEMENT
by and between
UNUM LIFE INSURANCE COMPANY OF AMERICA
and
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Dated as of October 1, 1996
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................... 1
ARTICLE II BUSINESS REINSURED............................................. 5
ARTICLE III NOVATED CONTRACTS.............................................. 6
ARTICLE IV TERMINATION AND RECAPTURE...................................... 6
Section 4.01. Termination................................................ 6
Section 4.02. Recapture.................................................. 6
ARTICLE V TERRITORY...................................................... 9
ARTICLE VI CHANGES; CREDITING RATES....................................... 9
Section 6.01. Contract Changes or Reserve Assumption Changes............. 9
Section 6.02. Crediting Rates............................................ 9
ARTICLE VII TRANSFER OF ASSETS; CONTRACT
LOANS.......................................................... 9
Section 7.01. Asset Transfer............................................. 9
Section 7.02. Contract Loans............................................. 10
ARTICLE VIII PREMIUMS; RECOVERIES........................................... 10
ARTICLE IX CUSTODIAN ACCOUNT.............................................. 10
Section 9.01. General Account Reserves................................... 10
Section 9.02. Custodian Account.......................................... 11
ARTICLE X INSOLVENCY..................................................... 13
ARTICLE XI OFFSETS........................................................ 13
ARTICLE XII RIGHTS WITH RESPECT TO GENERAL
ACCOUNT LIABILITIES............................................ 13
ARTICLE XIII ERRORS AND OMISSIONS........................................... 14
ARTICLE XIV DUTY OF COOPERATION............................................ 14
ARTICLE XV ARBITRATION.................................................... 14
ARTICLE XVI MISCELLANEOUS PROVISIONS....................................... 15
Section 16.01. Notices................................................... 15
Section 16.02. Amendment................................................. 16
Section 16.03. Counterparts.............................................. 16
Section 16.04. No Third Party Beneficiaries.............................. 16
Section 16.05. Assignment................................................ 16
Section 16.06. Governing Law............................................. 17
Section 16.07. Entire Agreement.......................................... 17
SCHEDULES
Schedule 1.01 Insurance Contracts
Schedule 1.02 Seller Separate Account
Schedule 10.02 Authorized Investments
EXHIBITS
Exhibit A Substitution Certificate
Exhibit B Withdrawal Certificate
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INDEMNITY REINSURANCE AGREEMENT
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THIS INDEMNITY REINSURANCE AGREEMENT (this "Agreement"), dated as of
October 1, 1996, is made by and between UNUM Life Insurance Company of America,
a Maine domiciled stock life insurance company ("Seller"), and Lincoln Life &
Annuity Company of New York, a New York domiciled stock life insurance company
("LLANY").
WHEREAS, Seller has agreed to cede and transfer to LLANY the Insurance
Contracts (as defined below) and LLANY has agreed to reinsure the rights,
obligations and liabilities of Seller under the Insurance Contracts; and
WHEREAS, Seller and LLANY are, concurrently with the execution of this
Agreement, entering into an Assumption Reinsurance Agreement (the "Assumption
Reinsurance Agreement") whereby LLANY agrees to assume the Insurance Contracts
on an assumption reinsurance basis; and
WHEREAS, Seller and LLANY are entering into this Agreement whereby
LLANY will reinsure the general account obligations of Seller under the
Insurance Contracts on the terms and conditions set forth herein pending
assumption of the Insurance Contracts by LLANY on a novation basis pursuant to
the Assumption Reinsurance Agreement;
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and upon the terms and conditions set forth herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
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The following terms shall have the respective meanings set forth below
throughout the Agreement:
"Acquisition Agreement" means the Second Amended and Restated Asset
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Transfer and Acquisition Agreement entered into by and between Purchaser (as
defined below) and Seller, dated as of January 24, 1996, to which LLANY has been
added as a party.
"Affiliate" means, with respect to any Person, at the time in
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question, any other Person controlling, controlled by or under common control
with such Person.
"Agreement" means this Indemnity Reinsurance Agreement.
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"Annual Rate" means the value of r in the expression (1 + r)/n/365/ -
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1, where "n" is equal to the number of days for which interest is to be computed
and the result of the expression is the interest factor for computing the
applicable interest amounts.
"Assumption Reinsurance Agreement" shall have the meaning set forth in
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the second recital hereof.
"Baseline Balance Sheet" shall have the meaning set forth in the
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Acquisition Agreement.
"Business Day" means any day other than a Saturday, Sunday, a day on
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which banking institutions in any of the States of Maine, New York or Indiana
are permitted or obligated by law to be closed or a day on which the New York
Stock Exchange is closed for trading.
"Cash Amount" means an amount equal to the result of 2.1824%
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multiplied by the Customer Asset Value calculated as of a particular date.
"Cash Equivalents" means, as of any particular date, money market
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funds, marketable obligations issued or guaranteed by the United States
Government, certificates of deposit, bankers' acceptances and other similar
liquid investments, in each case, with a maturity date of not more than 90 days
from the date on which any such instrument is transferred pursuant to the terms
of this Agreement, the market value of which on the date of transfer will be
counted as equivalent to cash for purposes of satisfying the aggregate amount of
cash and Cash Equivalents required to be transferred as described in Article IV
and/or Article VII hereof.
"Certificateholders" means the certificateholders under the group
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annuity contracts included within the Insurance Contracts.
"Contractholders" shall have the meaning set forth in Article III
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hereof.
"Custodian" means Bankers Trust Company and any successor appointed as
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such pursuant to the terms of the Custodian Agreement.
"Custodian Account" shall have the meaning set forth in Section 9.02
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hereof.
"Custodian Agreement" means the custodian agreement entered into by
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and among Seller, LLANY and the Custodian dated as of the date hereof.
"Custodian Asset Value" shall have the meaning set forth in Section
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9.02 hereof.
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"Customer Asset Value" means, at any time, an amount equal to the
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aggregate reserves with respect to the Non-Novated Contracts in effect at such
time that would be shown on a balance sheet of Seller as at such time prepared
in accordance with GAAP applied in the same manner as applied in the preparation
of the Baseline Balance Sheet.
"Effective Date" shall have the meaning set forth in Article II
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hereof.
"Extra Contractual Obligations" means all liabilities for
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consequential, exemplary, punitive or similar damages which relate to or arise
in connection with any alleged or actual act, error or omission by Seller or any
of its Affiliates prior to the date hereof, whether intentional or otherwise, or
from any reckless conduct or bad faith by Seller or any of its Affiliates, in
connection with the handling of any claim under any of the Insurance Contracts
or in connection with the issuance, delivery, cancellation or administration of
any of the Insurance Contracts (provided that no liability with respect to which
Purchaser or LLANY shall be entitled to indemnification under Section
10.01(a)(ii) of the Acquisition Agreement shall be deemed to be an Extra
Contractual Obligation).
"Final Recapture Statement" shall have the meaning set forth in
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Section 4.02 hereof.
"General Account Liabilities" means all general account liabilities
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and obligations arising under the Insurance Contracts, including, without
limitation: (i) all liability for premium taxes arising on account of premiums
paid or annuities purchased on or after the Effective Date, (ii) all amounts
payable on or after the Effective Date for returns or refunds of premiums under
the Insurance Contracts, (iii) all liability for commission payments and other
fees or compensation payable with respect to the Insurance Contracts to or for
the benefit of brokers and service providers, to the extent that such amounts
are or become payable on or after the Effective Date and (iv) all guaranty fund
assessments and similar charges imposed with respect to the Insurance Contracts
based on premiums paid on or after the Effective Date; excluding (i) the Seller
Separate Account Liabilities, (ii) any Extra Contractual Obligations and (iii)
any general account liabilities which relate to (A) amounts transferred from the
Seller Separate Account to the general account of Seller pending distribution to
holders of the Insurance Contracts, (B) amounts held in the general account of
Seller pending transfer to the Seller Separate Account and (C) guaranteed death
benefits under the Seller Separate Account in excess of account values.
"General Account Reserves" means the general account statutory
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reserves of Seller (without regard to this Agreement) with respect to the Non-
Novated Contracts determined pursuant to New York SAP, as such reserves would
have been included in lines 1, 10.2 or 10.3 of the Liabilities, Surplus and
Other Funds page of the NAIC Annual Statement Blank (1994 format), including
(for the avoidance of doubt) any general account statutory reserve adjustments
in relation to Seller Separate Account Liabilities.
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"General Account Reserves Statement" shall have the meaning set forth
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in Section 9.01 hereof.
"Insurance Contracts" means all group annuity contracts issued by
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Seller that are listed on Schedule 1.01 hereto and in effect on the Effective
Date and all certificates and participation agreements in effect as of the
Effective Date issued in accordance with the terms of such group annuity
contracts (including all supplements, endorsements, riders and ancillary
agreements in connection therewith).
"LLANY" shall have the meaning set forth in the introductory paragraph
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hereof.
"NAIC" means the National Association of Insurance Commissioners.
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"New York SAP" means the statutory accounting principles and practices
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prescribed or permitted by the Insurance Department of the State of New York.
"90-Day Treasury Rate" means the annual yield rate, on the date to
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which 90-Day Treasury Rate relates, of actively traded U.S. Treasury securities
having a remaining duration to maturity of three months, as such rate is
published under "Treasury Constant Maturities" in Federal Reserve Statistical
Release H.15(519).
"Non-Novated Contracts" means Insurance Contracts that are not Novated
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Contracts.
"Novated Contract" shall have the meaning set forth in Article III
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hereof.
"Person" means any individual, corporation, partnership, firm, joint
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venture, association, joint-stock company, trust, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other
entity.
"Preliminary Recapture Statement" shall have the meaning set forth in
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Section 4.02 hereof.
"Proposed Recapture Statement" shall have the meaning set forth in
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Section 4.02 hereof.
"Purchaser" means The Lincoln National Life Insurance Company, an
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Affiliate of LLANY.
"Recapture Date" shall have the meaning set forth in Section 4.02
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hereof.
"Required Amount" shall have the meaning set forth in Section 9.02
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hereof.
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"Seller" shall have the meaning set forth in the introductory
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paragraph hereof.
"Seller Custodian" means the custodian named in the Seller Custodian
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Agreement (as defined below) and any successor custodian appointed as such
pursuant to the terms of the Seller Custodian Agreement.
"Seller Custodian Account" means the custodian account established
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under the Seller Custodian Agreement.
"Seller Custodian Agreement" means the custodian agreement entered
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into between Seller (as the successor to UNUM Life Insurance Company) and The
Bank of New York, approved by the Superintendent on the 24th day of December,
1991.
"Seller Separate Account" means the separate account of Seller
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described on Schedule 1.02 hereto.
"Seller Separate Account Liabilities" means those insurance
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liabilities that are reflected in the Seller Separate Account and that relate to
the Insurance Contracts.
"Substitution Certificate" means a substitution certificate in
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substantially the form of Exhibit A hereto.
"Superintendent" means the Superintendent of Insurance of the State of
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New York.
"Third Party Accountant" shall have the meaning set forth in Section
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4.02 hereof.
"Transfer Request" means a transfer request substantially in the form
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of Exhibit C to the Custodian Agreement.
"Withdrawal Certificate" means a withdrawal certificate in
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substantially the form of Exhibit B hereto.
ARTICLE II
BUSINESS REINSURED
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Upon the terms and subject to the conditions and other provisions of
this Agreement and any required governmental and regulatory consents and
approvals, effective as of 12:01 a.m., Eastern Time, on October 1, 1996 (the
"Effective Date"), Seller hereby
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cedes to LLANY and LLANY hereby accepts and indemnity reinsures, on a
coinsurance basis, 100% of the General Account Liabilities.
ARTICLE III
NOVATED CONTRACTS
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Pursuant to and in accordance with the terms of the Assumption
Reinsurance Agreement, LLANY will prepare and mail Notices (as defined in the
Assumption Reinsurance Agreement) and certificates of assumption to the holders
of the Insurance Contracts (the "Contractholders") in order to attempt to
effectuate novations of the Insurance Contracts (each Insurance Contract which
is so novated being referred to herein as a "Novated Contract"). To the extent
LLANY does not assume by novation any Insurance Contracts, whether due to
rejection of assumption by Contractholders, the existence of Certificateholders
who are not residents of New York, or otherwise, or if any attempted novation is
subsequently finally determined in a judicial proceeding or by regulatory action
or otherwise agreed by LLANY and Seller to be ineffective or reversed for any
reason, such Insurance Contracts shall not be regarded as Novated Contracts and
LLANY shall continue to reinsure the General Account Liabilities associated with
such Insurance Contracts, on an indemnity basis, in accordance with the terms
and conditions of this Agreement.
ARTICLE IV
TERMINATION AND RECAPTURE
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Section 4.01. Termination. The reinsurance provided under this
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Agreement shall terminate as to each Insurance Contract on the earlier of the
effective date of the novation of such Insurance Contract pursuant to the
Assumption Reinsurance Agreement or the date as of which such Insurance
Contract, if a Non-Novated Contract, is recaptured as provided below in this
Article IV.
Section 4.02. Recapture. (a) In the event that (i) the Standard &
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Poor's Corporation Claims-Paying Ability rating of Purchaser becomes less than A
or the Xxxxx'x Investors Service, Inc. Financial Strength rating of Purchaser
becomes less than A2, or (ii) Purchaser files an RBC report with the
Commissioner of Insurance of the State of Indiana which indicates that its Total
Adjusted Capital is less than 160 percent of its Company Action Level RBC (as
such capitalized terms are defined in the NAIC Life Risk-Based Capital Report
Including Overview and Instructions for Companies, dated as of December 31,
1994), Seller shall have the right, on 10 days' written notice to LLANY, to
recapture the Non-Novated Contracts, effective as of the first day of the month
following the month in which the notice period ends (the "Recapture Date"). In
the event that the Non-Novated Contracts
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are recaptured pursuant to this Article IV, a net accounting and settlement with
respect to the General Account Liabilities relating to Non-Novated Contracts
shall be undertaken by the parties hereto pursuant to the provisions set forth
below in this Section 4.02.
(b) On the Recapture Date, LLANY will deliver to Seller a statement
of the General Account Reserves, the amount of any contract loans under the Non-
Novated Contracts and the amount of the Cash Amount, each as of the end of the
second month preceding the month in which the Recapture Date falls (the
"Preliminary Recapture Statement"), together with a certification of the chief
financial officer of LLANY that (i) the Preliminary Recapture Statement was
prepared in accordance with New York SAP, and (ii) the General Account Reserves
set forth therein (A) were determined in accordance with generally accepted
actuarial standards consistently applied, (B) were fairly stated in accordance
with sound actuarial principles, (C) were based on actuarial assumptions that
were appropriate for Seller's obligations under the related Insurance Contracts,
and (D) met the requirements of New York SAP.
(c) On the Recapture Date, LLANY shall, with the written approval by
or in the name of the Superintendent, direct the Custodian to transfer to the
Seller Custodian Account cash and Cash Equivalents from the Custodian Account in
an amount equal to 100% of the General Account Reserves less (i) the amount of
any contract loans under the Non-Novated Contracts and (ii) the Cash Amount,
each as determined by LLANY and set forth on the Preliminary Recapture
Statement. In the event that the amount held in the Custodian Account is less
than the amount to be transferred to the Seller Custodian Account as specified
in the preceding sentence, LLANY shall transfer an amount equal to the amount of
such difference to the Seller Custodian Account. Cash shall be transferred to
the Seller Custodian Account by wire transfer of immediately available funds in
U.S. Dollars. Cash Equivalents shall be transferred by such instruments of
transfer as are reasonably acceptable to Seller and the Seller Custodian. In
addition, as specified in Section 7.02 hereof, Seller shall, from and after the
Recapture Date, be entitled to receive and retain all contract loan repayments
under the Non-Novated Contracts. Recapture shall be deemed to occur upon the
receipt by the Seller Custodian Account of such cash and Cash Equivalents, free
of all liens or other encumbrances.
(d) LLANY shall, on or before the date that is 30 days after the
Recapture Date, prepare a statement of the General Account Reserves, the amount
of any contract loans under the Non-Novated Contracts and the Cash Amount, each
as of the close of business on the last day of the month preceding the month in
which the Recapture Date falls (the "Proposed Recapture Statement"), together
with a certification of the chief financial officer of LLANY to the same effect
with respect to the Proposed Recapture Statement as of the date thereof as the
certification provided by such officer with respect to the Preliminary Recapture
Statement as of the date thereof pursuant to Section 4.02(b). Promptly after
its preparation, LLANY shall deliver copies of the Proposed Recapture Statement
to Seller. Seller shall have the right to review the Proposed Recapture
Statement and comment thereon
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for a period of 45 days after receipt thereof. LLANY agrees that Seller and its
accountants may have access to the accounting records of LLANY relating to its
preparation of the Proposed Recapture Statement for the purpose of conducting
its review. Any changes in the Proposed Recapture Statement that are agreed to
by LLANY and Seller within 45 days of the aforementioned delivery of such
statement by LLANY shall be incorporated into a final recapture statement as of
the close of business on the last day of the month preceding the month in which
the Recapture Date falls (the "Final Recapture Statement"). In the event that
LLANY and Seller are unable to agree on the manner in which any item or items
should be treated in the preparation of the Final Recapture Statement within
such 45-day period, separate written reports of such item or items shall be made
in concise form and shall be referred to KPMG Peat Marwick (the "Third Party
Accountant"). The Third Party Accountant shall determine within 14 days the
manner in which such item or items shall be treated on the Final Recapture
Statement; provided, however, that the dollar amount of each item in dispute
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shall be determined between the range of dollar amounts proposed by Seller and
LLANY, respectively. The determinations by the Third Party Accountant as to the
items in dispute shall be in writing and shall be binding and conclusive on the
parties and shall be so reflected in the Final Recapture Statement. The fees,
costs and expenses of retaining the Third Party Accountant shall be allocated by
the Third Party Accountant between the parties, in accordance with the Third
Party Accountant's judgment as to the relative merits of the parties' proposals
in respect of the disputed items. Such determination shall be binding and
conclusive on the parties. Following the resolution of all disputed items, LLANY
shall prepare the Final Recapture Statement and shall deliver copies of such
statement to Seller.
(e) In the event the aggregate amount of cash and Cash Equivalents
reflected on the Preliminary Recapture Statement and transferred to the Seller
Custodian Account on the Recapture Date is less than an amount equal to 100% of
the General Account Reserves less (i) the amount of any contract loans under the
Non-Novated Contracts and (ii) the Cash Amount, each as reflected on the Final
Recapture Statement, LLANY shall, with the written approval by or in the name of
the Superintendent, direct the Custodian to transfer to the Seller Custodian
Account additional cash or Cash Equivalents from the Custodian Account, equal to
the amount of such difference, together with interest thereon from and including
the Recapture Date to but not including the date of such transfer computed at an
Annual Rate equal to the 90-Day Treasury Rate in effect as of the Recapture
Date. In the event that the amount held in the Custodian Account is less than
the amount to be transferred to the Seller Custodian Account as specified in the
preceding sentence, LLANY shall transfer to the Seller Custodian Account an
amount equal to the amount of such difference, together with interest thereon
from and including the Recapture Date to but not including the date of such
transfer computed at an Annual Rate equal to the 90-Day Treasury Rate in effect
as of the Recapture Date. In the event the aggregate amount of cash and Cash
Equivalents reflected on the Preliminary Recapture Statement and transferred to
the Seller Custodian Account on the Recapture Date is more than an amount equal
to 100% of the General Account Reserves less (i) the amount of any contract
loans under the Non-Novated Contracts and (ii) the Cash Amount, each as
reflected on the Final Recapture
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Statement, Seller shall, with the written approval by or in the name of the
Superintendent, direct the Seller Custodian to transfer to the Custodian Account
cash or Cash Equivalents from the Seller Custodian Account in the amount of such
difference, together with interest thereon computed at an Annual Rate as
specified above from and including the Recapture Date to but not including the
date of such transfer.
ARTICLE V
TERRITORY
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This Agreement shall apply to Insurance Contracts covering lives and
risks wherever resident or situated.
ARTICLE VI
CHANGES; CREDITING RATES
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Section 6.01. Contract Changes or Reserve Assumption Changes.
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Seller, on its own initiative, shall not change (a) the terms and conditions of
any Insurance Contracts or (b) the assumptions and methods used by Seller to
establish the General Account Reserves. LLANY shall share proportionately, on a
100% coinsurance basis, in any contract changes or changes in the assumptions
and methods used to establish the General Account Reserves that are required by
any regulatory authority having jurisdiction over Seller or that are otherwise
required by law, provided that prior to effectuating any such change Seller
shall promptly notify LLANY of such proposed change.
Section 6.02. Crediting Rates. Seller shall set crediting rates with
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respect to the Non-Novated Contracts from and after the Effective Date, taking
into account the recommendations of LLANY with respect thereto.
ARTICLE VII
TRANSFER OF ASSETS; CONTRACT LOANS
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Section 7.01. Asset Transfer. As consideration for the indemnity
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reinsurance of the General Account Liabilities by LLANY hereunder and in
accordance with the terms of the Acquisition Agreement, Seller shall transfer to
the Custodian Account cash, Cash Equivalents and other assets in an amount equal
to (a) 100% of the amount of the General Account Reserves as of the close of
business on the last day of the month preceding the
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month in which the Effective Date falls less (b) the amount of any contract
loans under the Insurance Contracts as of such date.
Section 7.02. Contract Loans. (a) As further consideration for the
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indemnity reinsurance of the General Account Liabilities hereunder, LLANY shall,
subject to the provisions of this Section 7.02, be entitled to all contract loan
repayments (including both principal and interest) under the Non-Novated
Contracts, payable in accordance with Article VIII hereof. However, as security
for the payment of LLANY's obligations hereunder, Seller shall be entitled to
withhold actual ownership of such contract loans.
(b) Seller shall have the right to retain or otherwise receive
contract loan repayments under the Non-Novated Contracts, and LLANY shall have
an obligation to pay to Seller all such contract loan repayment amounts
collected by LLANY, upon the occurrence of any of the events specified in
Section 9.02 hereof that would entitle Seller to request the approval of the
Superintendent for a transfer of amounts from the Custodian Account to the
Seller Custodian Account, subject to the limitations specified therein on the
use of funds withdrawn from the Custodian Account.
(c) In addition, Seller shall, from and after the Recapture Date,
have the right to retain or otherwise receive all contract loan repayments under
the Non-Novated Contracts.
ARTICLE VII
PREMIUMS; RECOVERIES
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Subject to the provisions of Section 7.02 hereof, as further
consideration for the indemnity reinsurance of the General Account Liabilities,
LLANY shall be entitled to all premiums, contract loan repayments and other
amounts payable on and after the Effective Date with respect to the general
account portion of the Non-Novated Contracts. Seller shall promptly pay to
LLANY any such amounts actually received by Seller.
ARTICLE IX
CUSTODIAN ACCOUNT
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Section 9.01. General Account Reserves. Seller agrees that it will
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establish General Account Reserves as of the last day of each month during the
term of this Agreement and will forward to LLANY and the Superintendent a
statement showing such General Account Reserves and the aggregate amount of
contract loans under the Non-
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Novated Contracts (the "General Account Reserves Statement") within ten Business
Days after the end of each calendar month during the term of this Agreement.
Section 9.02. Custodian Account. (a) LLANY has entered into the
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Custodian Agreement and has established a Custodian Account (the "Custodian
Account") thereunder for the benefit of the policyholders of Seller resident in
New York. LLANY agrees that, subsequent to the transfer of assets to the
Custodian Account as described in Article VII above, LLANY will thereafter
maintain in the Custodian Account assets having a market value not less than an
amount equal to 100% of the amount of the General Account Reserves, less the
aggregate amount of contract loans under the Non-Novated Contracts (the
"Required Amount"), to be held by the Custodian. Following the receipt of each
General Account Reserves Statement, LLANY shall, to the extent that the market
value of the assets held in the Custodian Account on the last day of the month
just ended (the "Custodian Asset Value") is less than the Required Amount so
calculated, within five Business Days of its receipt of such General Account
Reserves Statement, transfer to the Custodian Account assets with a market value
on the date of transfer at least equal to the difference between the Required
Amount and the Custodian Asset Value.
(b) The assets placed in the Custodian Account will consist only of
cash (U.S. legal tender), certificates of deposit (issued by U.S. banks and
payable in U.S. legal tender), and investments of the types specified in
subsection (a)(1) and subsection (a)(2) (excluding preferred shares) of Section
1405 of the New York Insurance Law, that are of investment grade, provided that
such investments are issued by an institution that is not the parent, a
subsidiary or an affiliate of LLANY or Seller. Assets in the Custodian Account
will be valued at market value.
(c) LLANY and Seller agree that the assets in the Custodian Account
shall be transferred from the Custodian Account to the Seller Custodian Account
in accordance with the procedures set forth in the Custodian Agreement under the
following circumstances and for the following purposes:
(i) in the event the Non-Novated Contracts are recaptured pursuant
to Article IV, to transfer to the Seller Custodian Account the recapture
amounts determined in accordance with Article IV;
(ii) in the event that (A) the Standard & Poor's Corporation
Claims-Paying Ability rating of Purchaser becomes less than A+ or the
Xxxxx'x Investors Service, Inc. Financial Strength rating of Purchaser
becomes less than A1 or (B) Purchaser becomes the subject of a delinquency
proceeding within the meaning of Section 27-9-1-2 of the Indiana Insurance
Law, in each case to reimburse Seller for LLANY's share of surrenders,
contract loans and benefits paid by Seller pursuant to the provisions of
the
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Insurance Contracts, to the extent not paid directly by LLANY when due;
or
(iii) in the event that the Standard & Poor's Corporation
Claims-Paying Ability rating of Purchaser becomes less than A or the
Xxxxx'x Investors Service, Inc. Financial Strength rating of Purchaser
becomes less than A2, in addition to the purposes set forth above, to
transfer to the Seller Custodian Account assets in an amount equal to the
Required Amount;
provided that any such transfer, or any other withdrawal of amounts from the
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Custodian Account by the Superintendent, shall reduce the obligations of LLANY
under this Agreement in an amount equal to the market value of the assets so
transferred. LLANY hereby agrees to execute and deliver to the Custodian each
Transfer Request presented to it by Seller that is accompanied by evidence
reasonably satisfactory to LLANY that the amount requested to be transferred in
such Transfer Request has been properly determined.
(d) LLANY and Seller agree that assets may be withdrawn by LLANY from
the Custodian Account in accordance with the procedures set forth in the
Custodian Agreement, and, with respect to clause (i) below, only after or
simultaneously with delivery to Seller of a Substitution Certificate signed by a
duly authorized officer of LLANY and, with respect to clause (ii) below, only
after or simultaneously with delivery to Seller of a Withdrawal Certificate
signed by a duly authorized officer of LLANY, provided that either:
(i) LLANY shall, prior to any such withdrawal, replace the withdrawn
assets with other assets of a type permitted in Section 9.02(b) above,
having a market value at least equal to the market value of the assets so
withdrawn, in order to maintain in the Custodian Account assets having a
market value at least equal to the Required Amount, or
(ii) after such withdrawal, the market value of the assets remaining
in the Custodian Account is not less than the Required Amount;
provided, however, that LLANY may make withdrawals pursuant to subsection
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(d)(ii) of this Section 9.02(d) only once in any month, only after the receipt
of the General Account Reserves Statement showing General Account Reserves and
contract loans under the Non-Novated Contracts, each as of the end of the
previous month, and only with the written approval of the Superintendent.
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ARTICLE X
INSOLVENCY
----------
LLANY hereby agrees that, as to all reinsurance made, ceded, renewed
or otherwise becoming effective hereunder, the reinsurance shall be payable by
LLANY on the basis of the liability of Seller under the Insurance Contract or
Contracts reinsured on an indemnity basis, without diminution because of the
insolvency, liquidation or rehabilitation of Seller or the appointment of a
conservator, receiver, liquidator or statutory successor of Seller, directly to
Seller or to its conservator, liquidator, receiver or other statutory successor.
It is agreed that any conservator, receiver, liquidator or statutory successor
of Seller shall give prompt written notice to LLANY of the pendency or
submission of a claim under any such Insurance Contract or Contracts. During
the pendency of such claim, LLANY may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any
defense available to Seller or its conservator, receiver, liquidator or
statutory successor. The expense thus incurred by LLANY is chargeable against
Seller as a part of the expense of insolvency, liquidation or rehabilitation to
the extent of a proportionate share of the benefit which accrues to Seller
solely as a result of the defense undertaken by LLANY.
ARTICLE XI
OFFSETS
-------
Any debts or credits between Seller and LLANY arising under this
Agreement are deemed mutual debts or credits, as the case may be, and shall be
netted or set off, as the case may be, and only the balance shall be allowed or
paid hereunder.
ARTICLE XII
RIGHTS WITH RESPECT TO GENERAL ACCOUNT LIABILITIES
--------------------------------------------------
LLANY's reinsurance of the General Account Liabilities is intended for
the sole benefit of the parties to this Agreement and shall not create any right
on the part of any other party, including, without limit, any Contractholder,
insured, claimant or beneficiary, against LLANY or any legal relation between
any Contractholders, insureds, claimants or beneficiaries and LLANY.
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ARTICLE XII
ERRORS AND OMISSIONS
--------------------
Inadvertent delays, errors or omissions made by either Seller or LLANY
in connection with this Agreement or any transaction hereunder shall not relieve
the other party from any liability which would have attached to such party had
such delay, error or omission not occurred, provided that the party causing such
delay, error or omission rectifies the same as soon as possible after its
discovery thereof. If, as a result of any such delay, error or omission, there
is a delay in the transfer of funds to be transferred pursuant hereto, the party
responsible for such delay, error or omission shall pay, to the party to whom
such funds are to be transferred, interest on the amount of funds to be
transferred from the date of such delay, error or omission to and including the
date of such transfer of funds at a rate equal to the average rate of earnings
on assets held in the Custodian Account during such period.
ARTICLE XIV
DUTY OF COOPERATION
-------------------
Each party hereto shall cooperate fully with the other in all
reasonable respects in order to accomplish the objectives of this Agreement.
The duty of cooperation shall apply, but not be limited, to regulatory and
litigation matters.
ARTICLE XV
ARBITRATION
-----------
It is the intention of the parties hereto that customs and usages of
the business of indemnity reinsurance and assumption reinsurance shall be given
full effect in the interpretation of this Agreement other than to the extent
that the unique aspects of the transaction render such customs and usages
inapplicable. The parties hereto shall act in all things with the highest good
faith. Any dispute or difference with respect to the operation or
interpretation of this Agreement on which an amicable understanding cannot be
reached shall be submitted to arbitration, which shall be mandatory and binding.
The arbitrators shall be free to reach their decision from the standpoint of
equity and customary practices of the insurance and reinsurance industry rather
than from that of strict legal principles.
The arbitration shall be held in Portland, Maine and shall consist of
three arbitrators who must be active or retired executive officers of life
insurance companies other than the parties to this Agreement, their Affiliates
or subsidiaries. Seller shall appoint one arbitrator and LLANY the second.
Such arbitrators shall then select the third arbitrator
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before arbitration commences. Should one of the parties decline to appoint an
arbitrator or should the two arbitrators be unable to agree upon the choice of a
third, such appointment shall be left to the President of the American Academy
of Actuaries.
Decisions of the arbitrators shall be by majority vote. The cost of
arbitration, including the fees of the arbitrators, shall be borne as the
arbitrators shall decide. Judgment on any award granted by the arbitrators may
be entered in a Federal court of competent jurisdiction located in Portland,
Maine.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
------------------------
Section 16.01. Notices. Any notice required or permitted hereunder
-------
shall be in writing and shall be delivered personally (by courier or otherwise),
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, three days after the date of deposit in the United
States mails, as follows:
(1) If to LLANY to:
Lincoln Life & Annuity Company of New York
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
With concurrent copies to:
The Lincoln National Life Insurance Company
0000 Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx
Telecopier No.: (000) 000-0000
Xxxxxxxxxx, Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
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(2) If to Seller to:
UNUM Life Insurance Company of America
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
With a concurrent copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Xx.
Telecopier No.: (000) 000-0000
Any party may, by notice given in accordance with this Agreement to
the other party, designate another address or person for receipt of notices
hereunder.
Section 16.02. Amendment. This Agreement may not be modified,
---------
changed, discharged or terminated, except by an instrument in writing signed by
an authorized officer of each of the parties hereto.
Section 16.03. Counterparts. This Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all, of
the parties hereto.
Section 16.04. No Third Party Beneficiaries. Nothing in this
----------------------------
Agreement is intended or shall be construed to give any Person, other than the
parties hereto, their successors and permitted assigns, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
Section 16.05. Assignment. This Agreement shall be binding upon and
----------
inure to the benefit of the parties hereto and their respective successors,
permitted assigns and legal representatives. Neither this Agreement, nor any
right hereunder, may be assigned by either party (in whole or in part) without
the prior written consent of the other party hereto.
Section 16.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MAINE, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
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Section 16.07. Entire Agreement. This Agreement, together with the
----------------
Acquisition Agreement and the other Ancillary Agreements (as defined in the
Acquisition Agreement), constitutes the entire agreement between the parties
relating to the indemnity reinsurance of the Insurance Contracts, and there are
no other agreements between the parties hereto, either existing or contemplated,
written or oral, relating thereto.
IN WITNESS WHEREOF, Seller and LLANY have executed this Agreement as
of the date first above written.
UNUM LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
and General Counsel
LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
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