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INDEMNITY REINSURANCE AGREEMENT
by and between
UNUM LIFE INSURANCE COMPANY OF AMERICA
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
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.............................................. 5
ARTICLE IV TERMINATION AND RECAPTURE.................................. 6
Section 4.01. Termination................................................ 6
Section 4.02. Recapture.................................................. 6
ARTICLE V TERRITORY...................................................... 8
ARTICLE VI ADMINISTRATION; CHANGES; CREDITING RATES....................... 8
Section 6.01. Administration............................................. 8
Section 6.02. Contract Changes or Reserve Assumption Changes............. 8
Section 6.03. Crediting Rates............................................ 9
ARTICLE VII TRANSFER OF ASSETS; CONTRACT LOANS............................. 9
Section 7.01. Asset Transfer............................................. 9
Section 7.02. Contract Loans.............................................. 9
ARTICLE VIII PREMIUMS; RECOVERIES........................................... 10
ARTICLE IX ACCOUNTING..................................................... 10
ARTICLE X TRUST ACCOUNT.................................................. 10
Section 10.01. General Account Reserves.................................. 10
Section 10.02. Trust Fund................................................ 10
ARTICLE XI INSOLVENCY..................................................... 13
ARTICLE XII OFFSETS........................................................ 13
ARTICLE XIII RIGHTS WITH RESPECT TO GENERAL ACCOUNT
LIABILITIES.................................................... 13
ARTICLE XIV ERRORS AND OMISSIONS........................................... 14
ARTICLE XV DUTY OF COOPERATION............................................ 14
ARTICLE XVI ARBITRATION.................................................... 14
ARTICLE XVII MISCELLANEOUS PROVISIONS....................................... 15
Section 17.01. Notices................................................... 15
Section 17.02. Amendment................................................. 16
Section 17.03. Counterparts.............................................. 16
Section 17.04. No Third Party Beneficiaries.............................. 16
Section 17.05. Assignment................................................ 16
Section 17.06. Governing Law............................................. 16
SCHEDULES
Schedule 1.01 Insurance Contracts
Schedule 1.02 Seller Separate Account
Schedule 3.01 Notices and Consents
Schedule 10.02 Authorized Investments
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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 The Lincoln
National Life Insurance Company, an Indiana domiciled stock life insurance
company ("Purchaser").
WHEREAS, Seller has agreed to cede and transfer to Purchaser the
Insurance Contracts (as defined below) and Purchaser has agreed to reinsure the
rights, obligations and liabilities of Seller under the Insurance Contracts; and
WHEREAS, Seller and Purchaser are, concurrently with the execution of
this Agreement, entering into an Assumption Reinsurance Agreement (the
"Assumption Reinsurance Agreement") whereby Purchaser agrees to assume the
Insurance Contracts on an assumption reinsurance basis; and
WHEREAS, Seller and Purchaser are entering into this Agreement whereby
Purchaser 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 Purchaser on a novation basis pursuant
to the Assumption Reinsurance Agreement; and
WHEREAS, Seller desires that Purchaser perform all administrative
functions on behalf of Seller after the date hereof with respect to the
Insurance Contracts and the Seller Separate Account (as defined below), and
Purchaser has agreed to provide such services pursuant to the terms of the
Administrative Services Agreement (as defined below);
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 and
Seller dated as of January 24, 1996, to which LLANY (as defined herein) has been
added as a party.
"Administrative Services Agreement" means the Administrative Services
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Agreement entered into by and between Purchaser and Seller dated as of the date
hereof.
"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 (l + 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.
"Calculated Asset Value" shall have the meaning set forth in Section
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10.02 hereof.
"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.
"Coinsurance and Assumption Agreement" means the Coinsurance and
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Assumption Agreement entered into by and between Seller and Purchaser dated as
of the date hereof.
"Contractholders" shall have the meaning set forth in Article III
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hereof.
"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.
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"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 Maine 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.
"General Account Reserves Statement" shall have the meaning set forth
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in Section 10.01 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
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terms of such group annuity contracts (including all supplements, endorsements,
riders and ancillary agreements in connection therewith).
"LLANY" means Lincoln Life & Annuity Company of New York, an Affiliate
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of Purchaser.
"Maine SAP" means the statutory accounting principles and practices
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prescribed or permitted by the Bureau of Insurance of the State of Maine.
"NAIC" means the National Association of Insurance Commissioners.
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"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.
"Post-Closing Indemnity Reinsurance Agreement" means the Post-Closing
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Indemnity Reinsurance Agreement entered into by and between Purchaser and Seller
dated as of the date hereof.
"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" shall have the meaning set forth in the introductory
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paragraph hereof.
"Purchaser Certificate" means a certificate substantially in the form
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of Exhibit B-1 to the Trust Agreement.
"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 10.02
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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 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.
"Termination Certificate" means a certificate substantially in the
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form of Exhibit C to the Trust Agreement.
"Third Party Accountant" shall have the meaning set forth in Section
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4.02 hereof.
"Trust Account" shall have the meaning set forth in Section 10.02
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hereof.
"Trust Agreement" means the Trust Agreement entered into by and among
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Purchaser, Seller and Trustee dated as of the date hereof.
"Trustee" means the trustee named in the Trust Agreement and any
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successor trustee appointed as such pursuant to the terms of the Trust
Agreement.
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 cedes to Purchaser and Purchaser 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, Purchaser 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 Purchaser is unable for any reason to assume by novation any Insurance
Contracts, or if any attempted novation is subsequently finally
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determined in a judicial proceeding or by regulatory action or otherwise agreed
by Purchaser and Seller to be ineffective or reversed for any reason, such
Insurance Contracts shall not be regarded as Novated Contracts and Purchaser
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. The parties generally intend to mail Notices and
to seek consents as described on Schedule 3.01 hereto.
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 Purchaser, 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 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, Purchaser 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 Purchaser that (i) the Preliminary Recapture
Statement was prepared in accordance with Maine 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 Maine SAP.
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(c) On the Recapture Date, Purchaser shall transfer to Seller cash
and Cash Equivalents in an amount equal to 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 Purchaser and set forth on the Preliminary
Recapture Statement. Cash shall be transferred by Purchaser to Seller 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. 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 Seller of such cash and Cash Equivalents, free of all
liens or other encumbrances.
(d) Purchaser 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 Purchaser 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, Purchaser shall deliver copies of the Proposed
Recapture Statement to Seller. Seller shall have the right to review the
Proposed Recapture Statement and comment thereon for a period of 45 days after
receipt thereof. Purchaser agrees that Seller and its accountants may have
access to the accounting records of Purchaser 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 Purchaser and
Seller within 45 days of the aforementioned delivery of such statement by
Purchaser 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
Purchaser 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
Purchaser, 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,
Purchaser shall prepare the Final Recapture Statement and shall deliver copies
of such statement to Seller.
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(e) In the event the aggregate amount of cash and Cash Equivalents
reflected on the Preliminary Recapture Statement and transferred to the Seller
on the Recapture Date is less than an amount equal to the General Account
Reserves less (i) the amount of any contract loans under the Non-Novated
Contract and (ii) the Cash Amount, each as reflected on the Final Recapture
Statement, Purchaser shall transfer to Seller additional cash or Cash
Equivalents 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 Seller on the Recapture Date is more than an amount equal to the
General Account Reserves less (i) the amount of any contract loans under the
Non-Novated Contract and (ii) the Cash Amount, each as reflected on the Final
Recapture Statement, Seller shall transfer to Purchaser cash or Cash Equivalents
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
ADMINISTRATION; CHANGES; CREDITING RATES
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Section 6.01. Administration. Pursuant to the Administrative
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Services Agreement, Seller has appointed Purchaser to perform all administrative
services with respect to the Non-Novated Contracts and the Seller Separate
Account and Purchaser has agreed to perform such services on behalf of Seller,
including, but not limited to, the collection of premiums and other amounts due
from Contractholders, the direct payment of all General Account Liabilities, the
direct disbursement of all contract loans and the administration of claims. In
the event of the termination of the Administrative Services Agreement pursuant
to Section 8.02(a) thereof, Seller will re-assume all administrative services
with respect to the Non-Novated Contracts and the Seller Separate Account and
Purchaser will pay to Seller a monthly expense allowance in accordance with the
terms of the Administrative Services Agreement in respect of the Non-Novated
Contracts that have not been recaptured pursuant to Article IV hereof.
Section 6.02. 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.
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Purchaser 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 in the ordinary course of such authority's exercise of
its powers or otherwise required by law, provided that prior to effectuating any
such change Seller shall promptly notify Purchaser of such proposed change and
afford Purchaser the opportunity, to the extent practical under applicable law,
to object to such change under applicable administrative procedures (both formal
and informal).
Section 6.03. Crediting Rates. Seller shall set crediting rates with
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respect to the Non-Novated Contracts from and after the Effective Date as
directed by Purchaser after consultation with Seller.
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 Purchaser hereunder and in
accordance with the terms of the Acquisition Agreement and the Trust Agreement,
Seller hereby agrees to transfer to the Trust Account cash, Cash Equivalents and
other assets in an amount equal to (a) the General Account Reserves as of the
close of business on the last day of the month preceding the 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, Purchaser
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 Purchaser's obligations hereunder, Seller shall be
entitled to withhold actual ownership of such contract loans.
(b) Seller shall have the right to retain contract loan repayments
under the Non-Novated Contracts, and to direct Purchaser to pay to Seller all
such contract loan repayment amounts collected by Purchaser pursuant to the
Administrative Services Agreement, upon the occurrence of any of the events
specified in Section 10.02 hereof that would entitle Seller to withdraw amounts
from the Trust Account, subject to the limitations specified therein on the use
of funds withdrawn from the Trust Account.
(c) In addition, Seller shall, from and after the Recapture Date,
have the right to retain all contract loan repayments under the Non-Novated
Contracts, and to direct Purchaser to pay to Seller all such contract loan
repayment amounts collected by Purchaser pursuant to the Administrative Services
Agreement.
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ARTICLE VIII
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,
Purchaser shall, pursuant to the Administrative Services Agreement, collect and
retain 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 Purchaser any such amounts
actually received by Seller.
ARTICLE IX
ACCOUNTING
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Pursuant to and in accordance with the terms of the Administrative
Services Agreement, Purchaser will provide to Seller accounting and settlement
reports as to the Insurance Contracts.
ARTICLE X
TRUST ACCOUNT
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Section 10.01. 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 Purchaser a statement showing such
General Account Reserves and the aggregate amount of contract loans under the
Non-Novated Contracts (the "General Account Reserves Statement") within five
Business Days after receipt from Purchaser of the monthly accounting statement
for such month pursuant to the terms of the Administrative Services Agreement.
Section 10.02. Trust Fund. (a) Purchaser has entered into the Trust
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Agreement and has established a trust account (the "Trust Account") thereunder
for the benefit of Seller with respect to the General Account Reserves.
Purchaser agrees that, subsequent to Seller's transfer of cash, Cash Equivalents
and other assets to the Trust Account as described in Article VII above,
Purchaser will thereafter maintain in the Trust Account (in addition to any
assets required to be maintained in the Trust Account under the Coinsurance and
Assumption Agreement or the Post-Closing Indemnity Reinsurance Agreement) assets
having a market value not less than an amount equal to the General Account
Reserves less the aggregate amount of contract loans under the Non-Novated
Contracts (the "Required Amount"), to be held in trust by Trustee for the
benefit of Seller as security for the payment of Purchaser's obligations to
Seller under this Agreement. Following the receipt of each General Account
Reserves Statement, Purchaser shall, to the
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extent that the market value of the assets held in the Trust Account on the last
day of the month just ended (the "Calculated 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 Trust Account assets with a
market value on the date of transfer at least equal to the difference between
the Required Amount and the Calculated Asset Value.
(b) Purchaser agrees that the assets so deposited shall be valued
according to their current fair market value and shall consist only of
investments of the type specified on Schedule 10.02 hereto and that the
investment and reinvestment thereof shall be consistent with Purchaser's
investment strategy in connection with its general account.
(c) Purchaser and Seller, prior to depositing assets with Trustee,
shall execute all assignments, endorsements in blank, or transfer legal title to
Trustee of all shares, obligations or any other assets requiring assignments, in
order that Trustee may whenever necessary negotiate any such assets without
consent or signature from Purchaser, Seller or any other Person.
(d) Purchaser and Seller agree that the assets in the Trust Account
may be withdrawn by Seller in accordance with the procedures set forth in the
Trust Agreement, provided such assets are applied and utilized by Seller (or any
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successor of Seller by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator of Seller) solely on the
basis of the liability of Seller under the Non-Novated Contracts, without
diminution because of the insolvency of Seller or the Purchaser, under the
following circumstances and for the following purposes:
(i) in the event the Non-Novated Contracts are recaptured
pursuant to Article IV, to pay Seller the recapture amounts determined in
accordance with Article IV, to the extent such recapture amounts are not
paid directly to Seller by Purchaser; and
(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:
(x) to reimburse Seller for Purchaser's share of
surrenders, contract loans and benefits paid by Seller
pursuant to the provisions of the Insurance Contracts, to
the extent not paid directly by Purchaser when due pursuant
to the terms of the Administrative Services Agreement;
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(y) to pay Seller the expense allowance described in
Section 6.01 hereof, to the extent not paid directly to
Seller by Purchaser when due; and
(z) to pay any other amounts due Seller under this
Agreement to the extent not paid directly to Seller by
Purchaser when due; and
(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 fund
accounts specifically established by Seller to cover loss exposures of
Seller in an amount equal to the Required Amount.
In the event that Seller withdraws assets from the Trust Account in excess of
actual amounts required to meet Purchaser's obligations to Seller, Seller will
return such excess to the Trust Account, plus interest in an amount equal to the
actual earnings on the assets withdrawn from the Trust Account during the period
that the amounts were withdrawn.
(e) Purchaser and Seller agree that the assets of the Trust Account
may be withdrawn by Purchaser in accordance with the procedures set forth in the
Trust Agreement, provided that either:
(i) Purchaser shall, at the time of any such withdrawal and
transfer, replace the withdrawn assets with other assets of a type
permitted in Section 10.02 (b) above, having a market value at least equal
to the market value of the assets so withdrawn, in order to maintain in the
Trust Account assets having a market value at least equal to the Required
Amount, or
(ii) after such withdrawal and transfer, the market value of the
assets remaining in the Trust Account is not less than the Required Amount;
provided, however, that Purchaser may make withdrawals pursuant to subsection
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(e)(ii) of this Section 10.02(e) only once in any month and 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.
(f) Seller hereby agrees to execute each Purchaser Certificate
presented to it for execution, as contemplated by Section 2.09(b) of the Trust
Agreement, which is executed by a duly authorized officer of Purchaser and
accompanied by evidence reasonably satisfactory to Seller that the withdrawal
requested therein is permitted under Section 10.02(e). Seller hereby also
agrees to execute a Termination Certificate presented to it for
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execution which is executed by a duly authorized officer of Purchaser and
accompanied by evidence reasonably satisfactory to Seller of the validity of the
statements set forth therein.
ARTICLE XI
INSOLVENCY
----------
Purchaser hereby agrees that, as to all reinsurance made, ceded,
renewed or otherwise becoming effective hereunder, the reinsurance shall be
payable by Purchaser 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 Purchaser of
the pendency or submission of a claim under any such Insurance Contract or
Contracts. During the pendency of such claim, Purchaser 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 Purchaser 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 Purchaser.
ARTICLE XII
OFFSETS
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Any debts or credits between Seller and Purchaser 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
--------------------------------------------------
Purchaser'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 Purchaser or any legal
relation between any Contractholders, insureds, claimants or beneficiaries and
Purchaser.
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ARTICLE XIV
ERRORS AND OMISSIONS
--------------------
Inadvertent delays, errors or omissions made by either Seller or
Purchaser 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 Trust Account during such period.
ARTICLE XV
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 XVI
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,
provided, however, that this Article XVI shall not apply in the event Purchaser
shall become subject to a delinquency proceeding as defined in Section 27-9-1-2
of the Indiana Insurance Law. 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 Purchaser 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 17.01. 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 Purchaser to:
The Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx
Telecopier No.: (000) 000-0000
With a concurrent copy to:
Xxxxxxxxxx, Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
(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
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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 17.02. 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 17.03. 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 17.04. 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 17.05. 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 17.06. 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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IN WITNESS WHEREOF, Seller and Purchaser 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
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
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