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ADMINISTRATIVE SERVICES 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
ARTICLE I DEFINITIONS..................................................... 2
ARTICLE II APPOINTMENT; STANDARDS; NOTIFICATION OF
CONTRACTHOLDERS; GUARANTEE...................................... 5
Section 2.01. Appointment and Acceptance of Appointment................. 5
Section 2.02. Standards................................................. 5
Section 2.03. Notification of Contractholders........................... 5
Section 2.04. Service Standards for Novated Contracts; Access to Records
Relating to Novated Contracts............................. 6
Section 2.05. Guarantee................................................. 6
ARTICLE III COLLECTIONS; DISBURSEMENTS...................................... 6
Section 3.01. Collection Services....................................... 6
Section 3.02. Processing of Disbursements............................... 7
Section 3.03. Payment of Disbursements.................................. 7
Section 3.04. Denied Disbursements...................................... 7
ARTICLE IV BOOKS AND RECORDS; REPORTS...................................... 8
Section 4.01. Maintenance of Books and Records.......................... 8
Section 4.02. Exchange Act Undertaking.................................. 8
Section 4.03. Transaction Report........................................ 9
Section 4.04. Novation Data............................................. 9
Section 4.05. Novation Report........................................... 9
Section 4.06. Final Balance Sheet....................................... 9
ARTICLE V INABILITY TO PERFORM SERVICES; ERRORS........................... 9
Section 5.01. Inability to Perform Services............................. 9
Section 5.02. Errors.................................................... 9
ARTICLE VI REGULATORY MATTERS; REPRESENTATIONS............................. 10
Section 6.01. Corporate Power of Purchaser.............................. 10
Section 6.02. Responsibilities of Purchaser............................. 10
Section 6.03. Representation of Seller.................................. 10
ARTICLE VII INDEMNIFICATION................................................. 10
Section 7.01. Indemnification........................................... 10
Section 7.02. Notice of Asserted Liability.............................. 11
Section 7.03. Right to Contest Claims of Third Parties.................. 11
Section 7.04. Indemnification Payments.................................. 12
ARTICLE VIII DURATION; TERMINATION........................................... 12
Section 8.01. Duration.................................................. 12
Section 8.02. Termination............................................... 13
Section 8.03. Monthly Expense Allowance................................. 13
ARTICLE IX ARBITRATION..................................................... 14
Section 9.01. Agreement to Arbitrate.................................... 14
Section 9.02. Location.................................................. 14
Section 9.03. Appointment of Arbitrators................................ 14
Section 9.04. Decision.................................................. 14
Section 9.05. Costs of Arbitration...................................... 14
Section 9.06. Survival of Article....................................... 14
Section 9.07. Enforcement............................................... 14
ARTICLE X INSURANCE....................................................... 14
Section 10.01. Liability Insurance....................................... 14
Section 10.02. Fidelity Bond............................................. 15
ARTICLE XI MISCELLANEOUS................................................... 15
Section 11.01. Headings, Schedules and Exhibits.......................... 15
Section 11.02. Notices................................................... 15
Section 11.03. Amendments................................................ 16
Section 11.04. Execution in Counterpart.................................. 16
Section 11.05. Limited Authority......................................... 16
Section 11.06. Assignment................................................ 16
Section 11.07. No Third Party Beneficiaries.............................. 16
Section 11.08. Subcontracting............................................ 17
Section 11.09. Change in Status.......................................... 17
Section 11.10. Survival.................................................. 17
Section 11.11. Further Assurances........................................ 17
Section 11.12. Governing Law............................................. 17
SCHEDULES
SCHEDULE 1.01 INSURANCE CONTRACTS
SCHEDULE 1.02 SELLER SEPARATE ACCOUNT
SCHEDULE 1.03 ADMINISTRATIVE SERVICES
SCHEDULE 1.04 TIMING STANDARDS
EXHIBITS
EXHIBIT A SERVICES AGREEMENT
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ADMINISTRATIVE SERVICES AGREEMENT
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THIS ADMINISTRATIVE SERVICES 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, pursuant to an indemnity reinsurance agreement between Seller
and Purchaser that is being executed concurrently with this Agreement (the
"Indemnity Reinsurance Agreement"), Purchaser has agreed to indemnify Seller for
100% of the general account insurance liabilities under the Insurance Contracts
(as defined below) in effect as of the date hereof (such general account
insurance liabilities are referred to herein as the "General Account
Liabilities") until such time (if ever) that each such Insurance Contract shall
be transferred to Purchaser through assumption reinsurance and become a novated
contract pursuant to the Assumption Reinsurance Agreement (as defined below);
and
WHEREAS, pursuant to an assumption reinsurance agreement between
Seller and Purchaser that is being executed concurrently with this Agreement
(the "Assumption Reinsurance Agreement"), Purchaser has agreed to assume by
novation the General Account Liabilities and the separate account liabilities
under each Insurance Contract in effect as of the date hereof (the "Separate
Account Liabilities"); and
WHEREAS, pursuant to a coinsurance and assumption agreement that is
being executed concurrently with this Agreement (the "Coinsurance and Assumption
Agreement") and a post-closing indemnity reinsurance agreement that is being
executed concurrently with this Agreement (the "Post-Closing Indemnity
Reinsurance Agreement"), Seller has agreed to issue additional Insurance
Contracts to be initially indemnity reinsured by Purchaser and subsequently
assumed by Purchaser by novation; and
WHEREAS, Seller wishes to appoint Purchaser to provide all
administrative services with respect to the Insurance Contracts and the Seller
Separate Account (as defined below) pending the assumption by Purchaser of such
liabilities pursuant to the Assumption Reinsurance Agreement or the Coinsurance
and Assumption Agreement, as applicable, and Purchaser desires to provide such
administrative services in consideration for Seller entering into the Asset
Transfer and Acquisition Agreement (as defined below); and
WHEREAS, pursuant to an intercompany service agreement between
Purchaser and LLANY (as defined herein), Purchaser has agreed to perform certain
of the obligations of LLANY under (i) an administrative services agreement
between Seller and LLANY that is being executed concurrently with this Agreement
and (ii) an administrative services agreement between LLANY and First UNUM Life
Insurance Company that is being executed concurrently with this Agreement (the
agreements described in clauses (i) and (ii) being referred to herein
collectively as the "LLANY Agreements");
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and upon the terms and conditions set forth herein, the parties
to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
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The following terms shall have the respective meaning set forth below
throughout the Agreement:
"Administrative Services" shall have the meaning set forth in Section
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2.01 hereof.
"Asserted Liability" shall have the meaning set forth in Section 7.03
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hereof.
"Asset Transfer and Acquisition Agreement" means the Second Amended
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and Restated Asset Transfer and Acquisition Agreement entered into by and
between Seller and Purchaser dated as of January 24, 1996, to which LLANY has
been added as a party.
"Assumption Reinsurance Agreement" shall have the meaning set forth in
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the second recital hereof.
"Business" means the issuance and administration of the Insurance
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Contracts and the other business activities of Seller related thereto.
"Business Day" means any day on which the unit value of the Seller
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Separate Account is required to be calculated.
"Coinsurance and Assumption Agreement" shall have the meaning set
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forth in the third recital hereof.
"Commission" means the Securities and Exchange Commission.
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"Effective Date" means the Effective Date as defined in the Indemnity
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Reinsurance Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"First UNUM Asset Transfer and Acquisition Agreement" means the
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Amended and Restated Asset Transfer and Acquisition Agreement entered into by
and between First UNUM Life Insurance Company and Purchaser dated as of March
20, 1996, to which LLANY has been added as a party.
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"General Account Liabilities" shall have the meaning set forth in the
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first recital hereof.
"Indemnified Party" shall have the meaning set forth in Section 7.02
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hereof.
"Indemnifying Party" shall have the meaning set forth in Section 7.02
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hereof.
"Indemnity Reinsurance Agreement" shall have the meaning set forth in
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the first recital hereof.
"Insurance Contracts" means all group annuity contracts issued by
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Seller that are listed on Schedule 1.01 hereto and all additional group annuity
contracts issued by Seller after the date hereof that are reinsured by Purchaser
pursuant to the terms of the Coinsurance and Assumption Agreement or the Post-
Closing Indemnity Reinsurance Agreement (as defined below) and all certificates
and participation agreements issued in accordance with the terms of such group
annuity contracts (including all supplements, endorsements, riders and ancillary
agreements in connection therewith).
"Intermediary" means an individual or entity designated by a
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contractholder as its broker of record or as the individual or entity that will
act on such contractholder's behalf, in some or all respects, in connection with
such contractholder's Insurance Contract.
"License Agreements" shall have the meaning set forth in the Asset
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Transfer and Acquisition Agreement.
"LLANY" means Lincoln Life & Annuity Company of New York, an affiliate
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of Purchaser.
"LLANY Agreements" shall have the meaning set forth in the fifth
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recital hereof.
"Monthly Rate" shall have the meaning set forth in Section 8.03
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hereof.
"NAIC" means the National Association of Insurance Commissioners.
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"NASD" means the National Association of Securities Dealers, Inc.
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"Non-Novated Contracts" means the Insurance Contracts that are not
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Novated Contracts.
"Novated Contracts" means the Insurance Contracts assumed by Purchaser
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under the Assumption Reinsurance Agreement, the Coinsurance and Assumption
Agreement or the Post-Closing Assumption Reinsurance Agreement (as defined
below), as applicable.
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"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 Assumption Reinsurance Agreement" means the Post-Closing
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Assumption Reinsurance Agreement entered into by and between Purchaser and
Seller dated as of the date hereof.
"Post-Closing Indemnity Reinsurance Agreement" shall have the meaning
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set forth in the third recital hereof.
"Purchaser" shall have the meaning set forth in the introductory
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paragraph hereof.
"Purchaser Losses" shall have the meaning set forth in Section 7.01
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hereof.
"Reserves" means the general account statutory reserves with respect
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to the Insurance Contracts (without regard to the Indemnity Reinsurance
Agreement) reported by Seller on its NAIC Convention Blanks (annual and
quarterly) filed with the Insurance Department of the State of Maine.
"Seller" shall have the meaning set forth in the introductory
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paragraph hereof.
"Seller Losses" shall have the meaning set forth in Section 7.01
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hereof.
"Seller Separate Account" means the separate account of Seller
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described on Schedule 1.02 hereto.
"Separate Account Liabilities" shall have the meaning set forth in the
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second recital hereof.
"Service Provider" means an individual or entity, other than an
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Intermediary, that provides services to holders of Insurance Contracts or
certificateholders thereunder.
"Third Party Claimant" shall have the meaning set forth in Section
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7.03 hereof.
"Transition Services Agreement" shall have the meaning set forth in
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the Asset Transfer and Acquisition Agreement.
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ARTICLE II
APPOINTMENT; STANDARDS;
NOTIFICATION OF CONTRACTHOLDERS; GUARANTEE
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Section 2.01. Appointment and Acceptance of Appointment. Seller
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hereby appoints Purchaser to provide, with respect to the Insurance Contracts
and the Seller Separate Account, the administrative services specified herein
and in Schedule 1.03 hereto and any other administrative services specified in
or necessary to administer the provisions of the Insurance Contracts
(collectively, the "Administrative Services") for the period specified in
Section 8.01 of this Agreement, and Purchaser hereby accepts such appointment.
Section 2.02. Standards. Purchaser acknowledges that the performance
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of the Administrative Services in an accurate and timely manner is of paramount
importance to Seller. Purchaser agrees to perform the Administrative Services
with the skill, diligence and expertise commonly expected from experienced and
qualified personnel performing such duties and in accordance with (i) the timing
standards set forth on Schedule 1.04 hereto, (ii) industry standards in effect
as of the Effective Date, to the extent not superseded by the timing standards
set forth on Schedule 1.04 hereto, and (iii) all relevant federal, state and
local laws, rules and regulations (as reasonably interpreted by Seller during
the first 12 months after the Effective Date, and as interpreted by Purchaser
thereafter).
Notwithstanding the foregoing obligations, in recognition of the fact
that Purchaser is taking over the administrative procedures used prior to the
Effective Date by Seller, Purchaser shall not be obligated by this Agreement or
any schedule hereto to perform during the first 12 months after the Effective
Date the services required by this Agreement in a manner different from the
manner in which such services are being provided by Seller immediately prior to
the Effective Date; provided, however, that after the Effective Date Purchaser
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shall make any changes required by changes in law (or the interpretation
thereof) subsequent to the Effective Date and any changes required by changes in
industry standards; and provided, further, that Purchaser shall administer the
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Non-Novated Contracts utilizing standards of service that are no lower than
those utilized by Purchaser in the administration of the Novated Contracts. In
addition, Purchaser shall not be required to fulfill the timing standards set
forth on Schedule 1.04 hereto to the extent that, from time to time, Seller is
in breach of its obligations under the License Agreements or the Transition
Services Agreement, if Purchaser has notified Seller within three Business Days
of such breach.
Section 2.03. Notification of Contractholders. Purchaser agrees to
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send to (i) contractholders of the Insurance Contracts, (ii) Intermediaries, and
(iii) Service Providers, a written notice prepared by Seller and reasonably
acceptable to Purchaser to the effect that Purchaser has been appointed by
Seller to provide Administrative Services. Purchaser shall send such notice
promptly after receipt thereof, but in no event more than 10 Business Days
thereafter, by first class U.S. mail.
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Section 2.04. Service Standards for Novated Contracts; Access to
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Records Relating to Novated Contracts. (a) Purchaser hereby agrees that it
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will provide the same level and quality of service with respect to the Novated
Contracts as it provides hereunder with respect to the Insurance Contracts prior
to their assumption by novation.
(b) Purchaser agrees that Seller will be entitled to conduct
examinations of Purchaser's books, records and operations pertaining to the
Novated Contracts if such examination is reasonably necessary in connection with
fulfilling any of Seller's legal obligations, at reasonable times and upon
reasonable notice, for so long as any Novated Contracts shall be in effect.
This Section 2.04 shall survive the termination of this Agreement.
Section 2.05. Guarantee. Purchaser hereby guarantees the full and
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timely performance of each and every obligation of LLANY under each of the LLANY
Agreements including, without limitation, the indemnification obligations of
LLANY under such agreements in the event that LLANY fails to perform or satisfy
any of such obligations when and as required to be performed or satisfied. In
such event, Purchaser shall promptly perform or satisfy or cause to be performed
or satisfied such obligations in place of LLANY. Purchaser shall pay, reimburse
and indemnify Seller for any and all damages, costs, expenses, losses and other
liabilities that Seller may sustain that result from the failure of Purchaser to
perform or satisfy any of such obligations.
ARTICLE III
COLLECTIONS; DISBURSEMENTS
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Section 3.01. Collection Services. Purchaser agrees to perform the
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following services with respect to amounts due from contractholders under the
Insurance Contracts:
(a) Collect deposits and other remittances from contractholders
(including payments of principal or interest on contract loans) and from any
collection facility, including Intermediaries and other persons or institutions
that receive remittances with respect to the Insurance Contracts, and process
the remittances in a manner reasonably acceptable to Seller taking into account,
among other factors, that the remittances may include monies with respect to
both Novated Contracts and Non-Novated Contracts.
(b) Maintain records pertaining to the collection and processing of
deposits or other remittances in the format utilized by Seller on the Effective
Date or as otherwise agreed by the parties.
(c) Promptly invest in the Seller Separate Account deposits collected
which relate to the separate account portions of Insurance Contracts (including
transfers from fixed options under the Insurance Contracts), and forward funds
and required information to the underlying investment management companies in
accordance with any applicable agreements.
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Section 3.02. Processing of Disbursements. Purchaser agrees to
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perform the following services with respect to disbursements made in respect of
the Insurance Contracts for payment of death benefits, annuity benefits,
withdrawals, surrenders, transfers, policy loans, returns of deposits, and any
other disbursement.
(a) Receive and process requests for disbursements.
(b) Evaluate requests for disbursements and either pay any such
request for disbursement, in accordance with Section 3.03 hereof, or propose to
deny any such request for disbursement in full or in part, in accordance with
Section 3.04 hereof, (i) within five Business Days after receipt of all
documentation required to process any such disbursement, with respect to any
request for a disbursement relating to the general account portion of an
Insurance Contract, and (ii) within the time period specified in the applicable
contract, with respect to any request for a disbursement relating to the
separate account portion of an Insurance Contract, or, in the case of either
clause (i) and clause (ii) above, within any shorter time provided by applicable
statute, rule or regulation. In the event that Purchaser is unable to make a
determination as to whether any such request for disbursement should be paid or
denied within the specified period, it shall notify Seller immediately in
writing and shall state in such notice the reasons for such delay.
Section 3.03. Payment of Disbursements. Purchaser agrees to pay all
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disbursements from its own funds under the Non-Novated Contracts in the name of
Seller. Purchaser's disbursements payment authority under this Agreement will
terminate immediately upon written notice from Seller, in which case Purchaser's
obligations as to payment of disbursements shall be limited to notifying Seller
of amounts payable and the identities of the relevant payees.
Section 3.04. Denied Disbursements. (a) Purchaser agrees to
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promptly notify Seller if it proposes to deny any disbursement request. The
notice required under this Section 3.04 will contain the basis for Purchaser's
decision to deny such disbursement request. Purchaser may not deny a
disbursement request if Seller objects to such denial in writing within 10
Business Days of Seller's receipt of the notice required under this Section 3.04
(or within such shorter period as may be required to permit the relevant
disbursement to be made within the time period required by any applicable law or
regulation). In the event that Purchaser notifies Seller of a proposed denial
on the Business Day that the disbursement would be required to be made and
Seller objects to such proposed denial, then the disbursement shall be made as
soon as practicable thereafter, and Seller acknowledges that such disbursement
may be made later than the date otherwise required by this Agreement.
(b) Purchaser agrees to immediately notify Seller of any litigation
that has been instituted or threatened, or of any complaint which any person has
filed or has threatened to file with any state insurance department or other
regulatory agency, with respect to any denied disbursement request or any
disbursement request-handling procedure in connection with an Insurance
Contract, regardless of whether the disbursement request was paid or denied, or
with respect to any other matter relating to an Insurance Contract.
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Such notice shall contain a report summarizing the nature of the litigation or
complaint, the alleged actions or omissions giving rise to the litigation or
complaint and copies of any files that Seller may require to respond to the
litigation or complaint.
(c) Purchaser shall pay the expenses of any litigation or regulatory
proceeding with respect to the Insurance Contracts (subject to any
indemnification rights of Purchaser under this Agreement or any other agreement
between Purchaser and Seller).
ARTICLE IV
BOOKS AND RECORDS; REPORTS
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Section 4.01. Maintenance of Books and Records. (a) For the
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duration of this Agreement, Purchaser shall maintain, at a location to be agreed
upon by Purchaser and Seller, books and records of all transactions pertaining
to the Insurance Contracts, including, but not limited to, any disbursement
requests submitted in respect of the Insurance Contracts and any documents
relating thereto, any communications relating to any Insurance Contract, any
communication with any regulatory authority, complaint logs and all data used by
Purchaser in the performance of services required under this Agreement. These
books and records shall be maintained (i) in accordance with any and all
applicable statutes, rules and regulations and (ii) in a format no less
accessible than the format in which such books and records are maintained on the
date hereof. All such books and records pertaining to an Insurance Contract
shall be the property of Seller until such Insurance Contract is novated
pursuant to the Assumption Reinsurance Agreement or the Coinsurance and
Assumption Agreement, as applicable, and shall be made available to Seller, its
auditors or other designees, and regulatory agencies, during normal business
hours and at any other time on reasonable notice, for review, inspection,
examination and reproduction. Upon termination of this Agreement, all books and
records pertaining to Insurance Contracts which have not been novated shall be
delivered promptly to Seller or such other person or entity as Seller shall
designate in writing.
(b) Purchaser shall back up all of its computer files used in the
performance of services under this Agreement on a daily basis and shall maintain
back-up files in an off-site location.
(c) Purchaser shall maintain facilities and procedures reasonably
acceptable to Seller for safekeeping all records used in the performance of
services under this Agreement.
Section 4.02. Exchange Act Undertaking. Purchaser or its affiliated
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broker-dealer shall file with the Commission the undertaking required by Rule
17a-4(i) under the Exchange Act with respect to any records that either
Purchaser or such affiliated broker-dealer maintains that are required to be
maintained under the provisions of the Exchange Act by UNUM Sales Corporation or
by any other broker-dealers that are authorized to sell the Insurance Contracts.
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Section 4.03. Transaction Report. Within five Business Days of the
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end of each calendar month during the term of this Agreement, Purchaser shall
provide Seller with a summary report and accounting of all transactions,
including receipts, payments, policy loans, surrenders and other matters, that
have occurred during that month, in a form acceptable to Seller. Purchaser
shall provide a final accounting to Seller within five Business Days following
the end of the month during which the termination of this Agreement occurs.
Section 4.04. Novation Data. Within five Business Days after the end
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of each week during the term of this Agreement, Purchaser shall provide to
Seller data, in electronic format compatible with Seller's systems, indicating
all Insurance Contracts assumed by novation by Purchaser during the prior week.
Section 4.05. Novation Report. Within five Business Days after the
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end of each month during the term of this Agreement, Purchaser shall provide to
Seller a report, in a form reasonably acceptable to Seller, showing all
contractholders of the Insurance Contracts and certificateholders under the
Insurance Contracts and their current novation status.
Section 4.06. Final Balance Sheet. Purchaser shall assist Seller, as
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reasonably requested by Seller, in the preparation of the Proposed Balance Sheet
and the Final Balance Sheet, as such terms are defined in the Asset Transfer and
Acquisition Agreement and the First UNUM Asset Transfer and Acquisition
Agreement.
ARTICLE V
INABILITY TO PERFORM SERVICES; ERRORS
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Section 5.01. Inability to Perform Services. Purchaser shall notify
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Seller of any interruption in Purchaser's performance of any of the services
required under this Agreement for a period of more than one day. In the event
that Purchaser shall be unable to perform services as required by this Agreement
for any reason for a period that can reasonably be expected to exceed one day,
Purchaser shall cooperate with Seller in obtaining an alternative means of
providing such services. Purchaser will be responsible for all costs incurred
in either restoring services or obtaining an alternative source of services.
Section 5.02. Errors. Purchaser shall, at its own expense,
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immediately correct any errors in Administrative Services (including, without
limitation, failure to comply with any of the timing standards specified in
Schedule 1.04 hereto) caused by it upon receiving notice thereof from Seller or
otherwise. This obligation includes, without limitation, reimbursement to the
Seller Separate Account and the management investment companies underlying that
account for any dilution or other adverse effect due to transactions made
effective as of an earlier date, commonly referred to as "breakage."
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ARTICLE VI
REGULATORY MATTERS; REPRESENTATIONS
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Section 6.01. Corporate Power of Purchaser. Purchaser represents and
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warrants that it has the corporate power to perform the services required under
this Agreement.
Section 6.02. Responsibilities of Purchaser. Purchaser, on behalf of
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Seller, shall be responsible for all state insurance department filings
(including, but not limited to, filings of riders and amendments) and for any
and all licensing requirements (other than Seller's licenses) with respect to or
in connection with the Non-Novated Contracts.
Section 6.03. Representation of Seller. Seller represents and
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warrants that, immediately prior to the Effective Date, Seller is providing the
services required by this Agreement and the Schedules hereto, except those
services which arise as a result of the consummation and implementation of the
Asset Transfer and Acquisition Agreement.
ARTICLE VII
INDEMNIFICATION
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Section 7.01. Indemnification. (a) Purchaser agrees to indemnify
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and hold harmless Seller and any of its directors, officers, employees, agents
or affiliates from any and all losses, costs, claims, demands, compensatory,
extracontractual and/or punitive damages, fines and penalties (collectively,
"Seller Losses") arising out of or caused by: (i) fraud, theft or embezzlement
by officers, employees or agents of Purchaser during the term of this Agreement;
(ii) the failure, either intentional or unintentional, of Purchaser to properly
perform the services required by this Agreement, including, without limitation,
the failure to properly process, evaluate and pay disbursement requests in
accordance with the terms of this Agreement; (iii) any other act of negligence
or willful misconduct committed by officers, agents or employees of Purchaser
during the term of this Agreement; (iv) the breach of any representation or
warranty of Purchaser; (v) any failure of Purchaser to comply with applicable
laws, rules and regulations during the term of this Agreement other than, during
the first 12 months after the Effective Date, Seller Losses arising out of or
caused by actions or inactions of Purchaser consistent with the manner in which
such services are being provided by Seller immediately prior to the Effective
Date, except if changes are required pursuant to Section 2.02 hereof; or (vi)
the failure of any Person described in clause (ii) of Section 11.08 to properly
perform the services that Purchaser is to provide hereunder.
(b) Seller agrees to indemnify and hold harmless Purchaser and any of
its directors, officers, employees, agents or affiliates from any and all
losses, costs, claims, demands, compensatory, extracontractual and/or punitive
damages, fines and penalties
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(collectively, "Purchaser Losses") arising out of or caused by: (i) fraud, theft
or embezzlement by officers, employees or agents of Seller during the term of
this Agreement; (ii) any other act of negligence or willful misconduct committed
by officers, agents or employees of Seller during the term of this Agreement;
(iii) any breach of any representation or warranty of Seller; or (iv) any
failure of Seller to comply with applicable laws, rules and regulations during
the term of this Agreement, other than any failure caused by the action or
inaction of Purchaser not in compliance with the terms of this Agreement.
Section 7.02. Notice of Asserted Liability. In the event that either
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party hereto asserts a claim for indemnification hereunder, such party seeking
indemnification (the "Indemnified Party") shall give written notice to the other
party (the "Indemnifying Party") specifying the facts constituting the basis
for, and the amount (if known) of, the claim asserted.
Section 7.03. Right to Contest Claims of Third Parties. (a) If an
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Indemnified Party asserts a claim for indemnification hereunder because of a
claim or demand made, or an action, proceeding or investigation instituted, by
any Person not a party to this Agreement (a "Third Party Claimant") that may
result in a Purchaser Loss with respect to which Purchaser is entitled to
indemnification pursuant to Section 7.01(a) hereof or a Seller Loss with respect
to which Seller is entitled to indemnification pursuant to Section 7.01(b)
hereof (an "Asserted Liability"), the Indemnified Party shall give the
Indemnifying Party reasonably prompt notice thereof, but in no event shall such
notice be given later than 30 Business Days after such Asserted Liability is
actually known to the Indemnified Party. Failure to deliver notice with respect
to an Asserted Liability in a timely manner shall not be deemed a waiver of the
Indemnified Party's right to indemnification for Losses in connection with such
Asserted Liability but the amount of reimbursement to which the Indemnified
Party is entitled shall be reduced by the amount, if any, by which the
Indemnified Party's losses would have been less had such notice been timely
delivered.
(b) The Indemnifying Party shall have the right, upon written notice
to the Indemnified Party, to investigate, contest, defend or settle the Asserted
Liability; provided, that the Indemnified Party may, at its option and at its
own expense, participate in the investigation, contesting, defense or settlement
of any such Asserted Liability through representatives and counsel of its own
choosing. The failure of the Indemnifying Party to respond in writing to proper
notice of an Asserted Liability within 20 days after receipt thereof shall be
deemed an election not to defend the same. Unless and until the Indemnifying
Party elects to defend the Asserted Liability, the Indemnified Party shall have
the right, at its option and at the Indemnifying Party's expense, to do so in
such manner as it deems appropriate, including, but not limited to, settling
such Asserted Liability (after giving notice of the settlement to the
Indemnifying Party) on such terms as the Indemnified Party deems appropriate.
(c) Except as provided in the immediately preceding sentence, the
Indemnified Party shall not settle or compromise any Asserted Liability for
which it seeks indemnification
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hereunder without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld) during the twenty (20) day period specified
above.
(d) The Indemnifying Party shall be entitled to participate in (but
not to control) the defense of any Asserted Liability which it has elected, or
is deemed to have elected, not to defend, with its own counsel and at its own
expense. If the Indemnifying Party seeks to question (i) the manner in which
the Indemnified Party defended an Asserted Liability with respect to which the
Indemnifying Party elected, or is deemed to have elected, not to defend or (ii)
the amount or nature of any settlement entered into by the Indemnified Party in
connection with such Asserted Liability, the Indemnifying Party shall have the
burden to prove by a preponderance of the evidence that the Indemnified Party
did not defend or settle such Asserted Liability in a reasonably prudent manner.
(e) Except as provided in the first sentence of paragraph (b) of this
Section 7.03, the Indemnifying Party shall bear all costs of defending any
Asserted Liability and shall indemnify and hold the Indemnified Party harmless
against and from all costs, fees and expenses incurred in connection therewith.
(f) Purchaser and Seller shall make mutually available to each other
all relevant information in their possession relating to any Asserted Liability
and shall cooperate with each other in the defense thereof.
Section 7.04. Indemnification Payments. Subject to a party's right
------------------------
to defend pursuant to Section 7.03 hereof, an Indemnifying Party hereunder shall
make an indemnification payment with respect to a Loss promptly after notice of
such Loss to the Indemnifying Party. All such payments shall be made by wire
transfer of immediately available funds to such account or accounts as the
Indemnified Party shall designate to the Indemnifying Party in writing.
ARTICLE VIII
DURATION; TERMINATION
---------------------
Section 8.01. Duration. This Agreement shall commence on the date of
--------
its execution and continue until such time as all of the liabilities under the
Insurance Contracts have been novated to Purchaser pursuant to the Assumption
Reinsurance Agreement or the Coinsurance and Assumption Agreement, as
applicable, unless earlier terminated pursuant to Section 8.02 below, and,
except with respect to Section 2.04 hereof, shall terminate as to each Insurance
Contract on the effective date of the novation of such Insurance Contract
pursuant to the Assumption Reinsurance Agreement or the Coinsurance and
Assumption Agreement, as applicable. Upon any termination of this Agreement
pursuant to Section 8.02, the services performed by Purchaser shall be assumed
by Seller or Seller's designee. Purchaser shall cooperate fully in the transfer
of services and the books and records maintained by Purchaser pursuant to
Section 4.01 hereof to Seller or Seller's designee, so
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that Seller or its designee will be able to perform the services required under
this Agreement without interruption following termination of this Agreement.
Section 8.02. Termination. (a) This Agreement is subject to
-----------
immediate termination at the option of Seller, upon written notice to Purchaser,
on the occurrence of any of the following events:
(i) A voluntary or involuntary proceeding is commenced in any
state by or against Purchaser for the purpose of conserving, rehabilitating or
liquidating Purchaser, or Purchaser shall lose its authority to perform services
hereunder;
(ii) There is a material breach by Purchaser of any term or
condition of this Agreement, or there occurs a material act of dishonesty by any
of Purchaser's officers, employees or agents in the performance of services
hereunder, that is not cured by Purchaser within 30 days of receipt of written
notice from Seller of such breach or act;
(iii) Purchaser or its successor is dissolved or merged or there
occurs a change in control of Purchaser or its successor requiring the
permission of the Indiana Insurance Department, other than a change of control
which is preceded by a permitted assignment of this Agreement pursuant to the
terms of Section 11.06 hereof;
(iv) Any liability policy or bond required pursuant to Article X
of this Agreement is canceled, terminated or substantially revised; or
(v) Purchaser is unable to perform the services required under
Articles III, IV and V of this Agreement for a period of 30 days for any reason.
(b) This Agreement may be terminated at any time upon the mutual
written consent of the parties hereto, which writing shall state the effective
date of termination.
Section 8.03. Monthly Expense Allowance. Purchaser agrees that, in
-------------------------
the event this Agreement is terminated, it shall pay to Seller a monthly expense
allowance in an amount equal to the Monthly Rate multiplied by the mean level of
(i) Reserves with respect to the Non-Novated Contracts and (ii) Separate Account
Liabilities for each month, as reimbursement for the costs which Seller will
incur in administering the Insurance Contracts following such termination.
During the first 12 months after the Effective Date, the Monthly Rate (if
applicable) will be 2.5 basis points and, commencing 12 months after the
Effective Date, the Monthly Rate will be 5.0 basis points.
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ARTICLE IX
ARBITRATION
-----------
Section 9.01. Agreement to Arbitrate. The parties hereto shall act
----------------------
in all things with the highest good faith. In the event of any disputes or
differences arising hereafter between the parties hereto with reference to any
transaction under or relating in any way to this Agreement as to which agreement
between the parties hereto cannot be reached, the same shall be submitted to
arbitration, which shall be mandatory and binding; provided, however, that this
Article IX shall not apply in the event Purchaser shall become subject to a
delinquency proceeding as defined in Section 29-9-1-2 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.
Section 9.02. Location. The arbitration shall be held in Portland,
--------
Maine.
Section 9.03. Appointment of Arbitrators. The arbitration panel
--------------------------
shall consist of three arbitrators who must be officers of life insurance
companies other than the parties to this Agreement or their respective
affiliates or subsidiaries. Seller shall appoint one arbitrator and Purchaser
the second. Such arbitrators shall then select the third arbitrator 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.
Section 9.04. Decision. Decisions of the arbitrators shall be by
--------
majority vote.
Section 9.05. Costs of Arbitration. The costs of arbitration,
--------------------
including the fees of the arbitrators, shall be borne as the arbitrators shall
decide.
Section 9.06. Survival of Article. This Article IX shall survive
-------------------
the termination of this Agreement.
Section 9.07. Enforcement. Judgment upon any award granted by the
-----------
arbitrators may be entered in a Federal court of competent jurisdiction located
in Portland, Maine.
ARTICLE X
INSURANCE
---------
Section 10.01. Liability Insurance. Purchaser shall maintain errors
-------------------
and omissions liability coverages in commercially prudent amounts, to cover any
loss arising as a
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result of any real or alleged negligence, errors or omissions on the part of
Purchaser's officers, agents or employees in any aspect of the performance of
services under this Agreement.
Section 10.02. Fidelity Bond. Purchaser shall maintain fidelity bond
-------------
coverage in commercially prudent amounts to cover any loss due to the misdeeds
of Purchaser's officers, employees or agents.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.01. Headings, Schedules and Exhibits. Headings used
--------------------------------
herein are not a part of this Agreement and shall not affect the terms hereof.
The attached Schedules and Exhibits are a part of this Agreement.
Section 11.02. 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:
(a) 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
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(b) 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 parties, designate another address or person for receipt of notices
hereunder.
Section 11.03. Amendments. This Agreement cannot be modified,
----------
changed, discharged or terminated, except by an instrument in writing signed by
an authorized officer of each of the parties hereto.
Section 11.04. Execution in Counterpart. 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 11.05. Limited Authority. Seller and Purchaser are not
-----------------
partners or joint venturers, and no employee or agent of either party shall be
considered an employee or agent of the other. Purchaser's authority shall be
limited to that which is expressly stated in this Agreement.
Section 11.06. 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, which consent shall not be
unreasonably withheld.
Section 11.07. No Third Party Beneficiaries. Except as otherwise
----------------------------
specifically provided for herein, 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.
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Section 11.08. Subcontracting. Purchaser may not subcontract for the
--------------
performance of any services that Purchaser is to provide hereunder, except as
permitted in writing by Seller, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing sentence, Purchaser shall be permitted
to subcontract for the performance of any of such services with (i) any Person
that is performing such services as a subcontractor for Seller as of the date
hereof, without obtaining the consent of Seller so long as Purchaser notifies
Seller of such subcontract on or prior to the effective date thereof or (ii) any
Person that is performing such services as a subcontractor for Purchaser with
respect to all or substantially all of Purchaser's insurance business that is
similar to the insurance business to be administered hereunder.
Section 11.09. Change in Status. Purchaser shall notify Seller
----------------
immediately of any "change of control" filing, the adoption of any plan to
liquidate, merge or dissolve Purchaser, or of any proceeding or lawsuit which
effects Purchaser's ability to perform this Agreement, including, but not
limited to, insolvency or rehabilitation proceedings.
Section 11.10. Survival. The provisions of Section 2.04 hereof and
--------
Article IX hereof shall survive the termination of this Agreement.
Section 11.11. Further Assurances. Each of the parties hereto shall
------------------
execute such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions of this Agreement. Without
limiting the generality of the foregoing, Seller shall (a) execute all documents
necessary to grant Purchaser the disbursement payment authority contemplated by
Section 3.03 of this Agreement, (b) make any Seller regulatory filings or
broker appointments that Purchaser is required to make on behalf of Seller
hereunder and (c) grant any licenses to Purchaser with respect to any logos,
trademarks, service marks or copyrights necessary for Purchaser to comply with
the terms of this Agreement.
SECTION 11.12. 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, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives 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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