CORE ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
AND
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
DATED
DECEMBER 30, 2005
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS 1
1.01 Definitions 1
ARTICLE II TERM 2
2.01 Term 2
ARTICLE III SERVICES; STANDARDS; AUTHORITY 2
3.01 Services 2
3.02 Service Standards 2
3.03 Authority 2
3.04 Agreements Regarding Use of FAFLIC's Name 3
ARTICLE IV COMPENSATION 5
4.01 Service Provider 5
ARTICLE V PERSONNEL, FACILITIES AND COSTS 6
5.01 Personnel 6
5.02 Facilities 6
5.03 Systems 6
5.04 Costs 7
5.05 Delegation 7
ARTICLE VI COMPLIANCE WITH APPLICABLE LAWS 7
6.01 Legal Compliance 7
6.02 Licensing 7
6.03 Supervision 8
ARTICLE VII MAINTENANCE OF RECORDS 8
7.01 Maintenance 8
7.02 Availability and Access 9
ARTICLE VIII POWER OF ATTORNEY 9
8.01 General 9
8.02 Appointment 10
ARTICLE IX TERMINATION 10
9.01 Termination 10
9.02 Effect of Termination 11
ARTICLE X INDEMNIFICATION 12
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10.01 Indemnification by FAFLIC 12
10.02 Indemnification by the Service Provider 13
10.03 Limitations on Indemnification 13
10.04 Notice of Defense of Claims 14
ARTICLE XI CONFIDENTIALITY 15
11.01 Service Provider's Obligations 15
11.02 FAFLIC's Obligations 16
11.03 Obligations with Respect to Consumer Privacy Regulation 16
ARTICLE XII TRANSFER OF RECORDS 17
12.01 Transfer 17
12.02 Ownership; Access 17
ARTICLE XIII NOTIFICATION 18
13.01 FAFLIC's Obligations 18
13.02 Service Provider's Obligations 18
ARTICLE XIV ARBITRATION 18
14.01 Arbitration 18
ARTICLE XV MISCELLANEOUS 20
15.01 Notice 20
15.02 Expenses 22
15.03 Governing Law 22
15.04 Entire Agreement 22
15.05 No Assignment; Binding Effect 22
15.06 Amendment; Waiver 22
15.07 Relationship of Parties 23
15.08 Jurisdiction 23
15.09 Headings 23
15.10 Severability 23
15.11 Counterparts 23
15.12 No Third Party Beneficiary 24
15.13 Good Faith; Errors And Oversights 24
15.14 Force Majeure 24
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CORE ADMINISTRATIVE SERVICES AGREEMENT
THIS
CORE ADMINISTRATIVE SERVICES AGREEMENT (this "AGREEMENT") is made this
30th day of December, 2005 by and between FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY, a
Massachusetts insurance company ("FAFLIC"), and ALLMERICA
FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY, a
Massachusetts insurance company
(the "SERVICE PROVIDER").
RECITALS:
WHEREAS, The Hanover Insurance Group, Inc. (formerly known as Allmerica
Financial Corporation) (the "Seller") and The Xxxxxxx Xxxxx Group, Inc. have
entered into that certain Stock Purchase Agreement, dated as of August 22, 2005
(the "SPA"), which agreement calls for, among other things, the provision of
administrative services by the Service Provider to FAFLIC, as described in this
Agreement;
WHEREAS, FAFLIC and the Service Provider are entering or may hereafter
enter (as applicable) into the Core Coinsurance Agreement, pursuant to which
FAFLIC shall cede to the Service Provider, on a 100% coinsurance or modified
coinsurance basis (as indicated therein) all the Contracts; and
WHEREAS, in connection with the SPA and, if applicable, the Core
Coinsurance Agreement, the parties hereto desire that the Service Provider
perform all services required for complete support and administration of the
Contracts on behalf of FAFLIC in accordance with the terms and subject to the
conditions of this Agreement;
NOW, THEREFORE, in consideration of the transactions contemplated pursuant
to the SPA, and the mutual covenants and promises contained herein and for other
good and valuable consideration, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings given them in EXHIBIT B hereto.
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ARTICLE II
TERM
2.01 TERM. This Agreement shall be effective as of the Closing Date and
shall remain in full force and effect until terminated in accordance
with Article IX below.
ARTICLE III
SERVICES; STANDARDS; AUTHORITY
3.01 SERVICES. THE Service Provider shall provide or cause to be
provided to FAFLIC all services required for complete support and administration
of all Contracts to the same extent such services are provided to the Service
Provider's own Core Business (as defined in the SPA), including, without
limitation, the services set forth on EXHIBIT A hereto (the "SERVICES"), as of
(i) the Closing Date with respect to each Service not subject to the Transition
Services Agreement, and (ii) as of the date on which each Service subject to the
Transition Services Agreement is no longer provided pursuant to the Transition
Services Agreement.
3.02 SERVICE STANDARDS. The Service Provider shall perform the Services
or ensure that any services provided by an Authorized Administrator under
Section 5.05 are (a) at a level of accuracy and responsiveness not less
favorable than the practices of the Service Provider or its Authorized
Administrator in administering the Service Provider's own comparable products
during the term of this Agreement, (b) in accordance with all Applicable Laws
and applicable insurance department requirements and (c) as otherwise specified
herein or as the parties may agree in writing from time to time.
3.03 AUTHORITY.
(a) The Service Provider shall perform the Services in the name and on
behalf of FAFLIC only as provided in this Agreement or as directed by FAFLIC in
writing and as agreed to by the Service Provider, such agreement not to be
unreasonably withheld or delayed. Except as specifically set forth in this
Agreement or authorized by FAFLIC in writing, the Service Provider shall not
have authority to issue new insurance policies or annuity contracts in the name
of FAFLIC or enter into any agreements on FAFLIC's behalf. Notwithstanding the
foregoing, the Service Provider shall have the authority to issue in the name of
FAFLIC, and in conjunction with the Service Provider's performance of the
Services hereunder, Contracts of the types identified in clauses (i)(C)(I)
through (i)(C)(IV) in the definition of "Core Business" in the SPA. None of the
terms or provisions of this Agreement shall prohibit the Service Provider or any
of its Affiliates from conducting business of whatever nature in their own names
and on behalf
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of any person or entity other than FAFLIC. FAFLIC shall take such actions as are
reasonably necessary to ensure that the Service Provider has the authority to
accept funds on behalf of FAFLIC and to disburse funds from bank accounts on
FAFLIC's draft or check stock for the purpose of carrying out the Service
Provider's responsibilities under this Agreement. FAFLIC shall, upon the request
of the Service Provider, take all actions necessary to execute amendments, in
form and substance reasonably acceptable to FAFLIC, to the Contracts prepared
from time to time by the Service Provider to conform such policies to the extent
required by any change in law. Notwithstanding anything in this Agreement to the
contrary, FAFLIC shall retain the authority to make all final decisions with
respect to the administration of the Contracts and the Contract Liabilities with
respect to which the Service Provider is providing the Services, taking into
account the recommendations of the Service Provider provided to FAFLIC
hereunder, which FAFLIC shall only reject in good faith and in light of the
intent of the parties to and the stated purposes of the SPA, the Core
Coinsurance Agreement and this Agreement.
(b) The Service Provider shall give policyholders written notice of
any changes related to policyholder servicing, including without limitation
any new address or phone number for customer contact. The notice must be
approved by FAFLIC, which approval shall not be unreasonably withheld or
delayed, and any applicable state insurance regulatory authorities before
distribution.
3.04 AGREEMENTS REGARDING USE OF FAFLIC'S NAME. Except as provided
herein and in Section 7.09 of the SPA and the IP License Agreement, the Service
Provider shall not use the name, logo or other service or trade names, marks or
domain names of FAFLIC or its Affiliates, whether or not used in the
administration of the Contracts (collectively, the "FAFLIC NAMES AND MARKS") in
any way or manner not specifically authorized in writing by FAFLIC. Subject to
the foregoing general limitation, FAFLIC and the Service Provider agree as
follows:
(a) FAFLIC hereby grants to the Service Provider and the Service
Provider hereby accepts a non-exclusive, non-transferable (other than as
provided in subsection (f) in connection with the delegation of Services),
worldwide royalty-free license to use FAFLIC Names and Marks that are used in
connection with the administration of the Contracts (the "LICENSED NAMES AND
MARKS") in connection with the Services rendered by the Service Provider under
this Agreement, subject to the terms and conditions set forth in this Agreement.
The Service Provider shall obtain FAFLIC's written consent prior to registration
of any domain names that include the Licensed Names and Marks, which consent
shall not be unreasonably withheld. The Service Provider shall not use the
Licensed Names and Marks in any way that may confuse or mislead third parties as
to the source of Services. No right is granted hereunder for the use of the
Licensed Names and Marks (or any FAFLIC Names and Marks) in connection with any
services other than the Services. If FAFLIC decides to discontinue any of the
Licensed Names and Marks or create any new Licensed Names and Marks ("NEW
XXXX"), in each case at FAFLIC's
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expense, it shall provide written notice to the Service Provider at least six
months in advance so that the Service Provider can phase out the discontinued
Licensed Name and Xxxx or phase in the New Xxxx in an orderly fashion, and
FAFLIC shall reimburse the Service Provider for any costs reasonably incurred
pursuant thereto. Any New Xxxx shall, upon FAFLIC's notice, be deemed a Licensed
Name and Xxxx hereunder.
(b) Without limiting the generality of the foregoing subsection (a),
FAFLIC hereby further grants, and the Service Provider hereby accepts a
non-exclusive, nontransferable (other than as provided in subsection (f) in
connection with the delegation of Services), worldwide royalty-free right and
license to use the Licensed Names and Marks as part of any Uniform Resource
Locators ("URLs") used in connection with the Services rendered by the Service
Provider under this Agreement, subject to the terms and conditions set forth in
this Agreement.
(c) The Service Provider agrees to maintain the quality of the
Services provided using the Licensed Names and Marks at no less than
substantially the same levels as maintained by FAFLIC during the six (6) months
prior to the date hereof or as may be agreed to by FAFLIC and the Service
Provider from time to time (the "QUALITY STANDARDS"). FAFLIC may reasonably
amend the Quality Standards upon 30 days written notice to the Service Provider,
provided that any such amended Quality Standards shall not require the Service
Provider to maintain a higher level of quality of the Services provided using
the Licensed Names and Marks than the level of quality maintained by FAFLIC.
Upon FAFLIC's request from time to time, the Service Provider shall provide to
FAFLIC representative samples of Service Provider's uses of the Licensed Names
and Marks. In the event FAFLIC notifies the Service Provider of its failure to
maintain the Quality Standards with respect to its uses of the Licensed Names
and Marks, the Service Provider shall use reasonably diligent efforts to cure
such failure (and the causes thereof). The Service Provider shall be deemed to
have maintained the Quality Standards if: (j) FAFLIC does not object to any such
uses within 30 days of its actual receipt of representative samples of such
uses; or (ii) the quality of such uses is not materially different from uses
previously approved by FAFLIC under similar circumstances. Any use of Licensed
Names and Marks inures to the benefit of FAFLIC
(d) The rights and license granted in this Section 3.04 shall
continue in effect until such time as this Agreement is terminated pursuant to
Article IX. Upon the Service Provider's receipt of notice of termination of this
Agreement, the Service Provider shall discontinue all use of the Licensed Names
and Marks in accordance with Applicable Law (but in no event will such use
extend beyond 60 days after termination) and shall not thereafter use any names
or marks that are confusingly similar to the Licensed Names and Marks; provided,
however, that Service Provider shall have 60 days after termination in which to
use-up or remove material bearing the Licensed Names and/or Marks. Following any
such notice of termination, FAFLIC and the Service Provider shall cooperate to
take all action reasonably necessary to effect such discontinuance including,
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without limitation, notifying policyholders, producers, suppliers, service
providers, regulatory agencies and other relevant Persons of the discontinuance.
Upon termination, except as provided in this Section 3.04(d), all of the Service
Provider's rights to the Licensed Names and Marks shall revert to and continue
to reside with and be owned exclusively by FAFLIC.
(e) FAFLIC represents and warrants that it owns the Licensed Names and
Marks and has the right to grant the rights and license granted herein. The
rights and license granted herein will not conflict with the rights of any third
party and the use of the Licensed Names and Marks in connection with the
Services as licensed hereunder will not infringe or violate the rights of any
third party.
(f) None of the rights licensed to the Service Provider under this
Section 3.04 may be assigned, sublicensed or otherwise transferred by the
Service Provider (other than in connection with the delegation of Services to an
Authorized Administrator in accordance with this Agreement), and any assignment,
sublicense or other transfer without such consent shall be null and void.
(g) Without limiting the right of FAFLIC hereto to pursue all other
legal and equitable rights available to it for violation of this Section 3.04 by
the Service Provider or any of its Affiliates, the Service Provider acknowledges
and agrees that other remedies cannot fully compensate FAFLIC for such a
violation by the Service Provider or such Affiliates and that FAFLIC shall be
entitled to injunctive relief or other equitable remedies to prevent the
violation or continuing violation thereof.
ARTICLE IV
COMPENSATION
4.01 SERVICE PROVIDER. The Service Provider shall provide the Services
in consideration of the execution and delivery of the SPA and, if applicable,
the Core Coinsurance Agreement and the consummation of the transactions
contemplated thereby. Until and unless there is a Core Coinsurance Termination,
the Service Provider shall neither impose on FAFLIC nor otherwise be entitled to
receive any additional or separate consideration for the provision of Services
in accordance with this Agreement, except to the extent otherwise provided in
Section 7.02. In the event the SPA is terminated, solely with respect to the
transactions to be consummated at the Core Coinsurance Closing, at any time
prior to the Core Coinsurance Closing, pursuant to Section 11.02 of the SPA (the
"Core Coinsurance Termination"): (a) the Service Provider shall be entitled to
receive a refund, with interest at a rate per annum equal to the LIBOR rate (as
defined in the SPA), of that portion of the fees paid by the Service Provider
under the Transition Services Agreement and the costs paid by the Service
Provider to a third party administrator in connection with the conversion of the
operations of the Service Provider
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as is determined by mutual agreement of the Service Provider and FAFLIC to
reasonably relate to the provision of Services with respect to the Contracts and
the conversion with respect to the operations of the Core Business; (b) FAFLIC
shall reimburse the Service Provider for the Service Provider's Actual Cost,
with interest at a rate per annum equal to the LIBOR rate, of providing the
Services in accordance with this Agreement on and after the Effective Date to
the Core Coinsurance Termination date (if any); and (c) the Service Provider and
FAFLIC shall negotiate in good faith such other modifications of this Agreement
as are reasonably necessary and appropriate to reflect the failure of the Core
Coinsurance Closing to occur, provided, however, that the parties intend that
the Service Provider shall continue to provide the Services until such time as
all obligations under the Contracts have been terminated or the other
termination events in Article IX. "ACTUAL COST" shall mean (i) all reasonable
actual out-of-pocket expenses incurred by the Service Provider attributable to
the provision of the Services and (ii) corporate overhead to the extent directly
related and required to perform the Services, including without limitation an
allocated portion of salaries of personnel and other reasonable direct cost;
provided, however, that no Actual Cost shall have a profit component. Actual
Cost shall be reasonably detailed and invoiced for the entire period from the
Closing Date to the date of the Core Coinsurance Termination and monthly
thereafter.
ARTICLE V
PERSONNEL, FACILITIES AND COSTS
5.01 PERSONNEL. The Service Provider shall furnish or cause to be
furnished sufficient personnel to provide the Services.
5.02 FACILITIES.
The Services shall be performed by the Service Provider using furniture,
fixtures and equipment (including computer hardware) owned or leased by or
otherwise provided to or on behalf of the Service Provider (collectively, the
"FACILITIES"). All Facilities owned by the Service Provider shall remain the
property of the Service Provider and FAFLIC acknowledges and agrees that it
shall not have any right, title or interest in or to the Facilities.
5.03 SYSTEMS.
The Service Provider shall furnish or cause to be furnished all Systems (as
hereinafter defined) that are necessary for the Service Provider to provide the
Services. The term "SYSTEMS" shall mean all computer programs and programming
aids (together with supporting documentation) and hardware, including, without
limitation, input and output formats, program listings, systems flow charts,
narrative descriptions, operating instructions and the tangible media upon which
such programs are recorded.
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5.04 COSTS.
Except as otherwise set forth herein, in the SPA or any other Ancillary
Agreement, the Service Provider shall pay all personnel and other costs and
expenses to provide the Services (including, without limitation, all applicable
filing and similar fees).
5.05 DELEGATION. Notwithstanding any other provision of this Agreement,
the Service Provider may, at its option, delegate or subcontract any of its
obligations under this Agreement (a) to an Affiliate without the consent of
FAFLIC, (b) to a non-affiliated Person reasonably satisfactory to FAFLIC with
the prior consent of FAFLIC, which consent shall not be unreasonably withheld or
delayed or (c) to SE2, a division of Security Benefit Life Insurance Company,
and its affiliate Security Distributors, Inc.; Princeton Financial Systems, a
State Street company; Xxxxxxxx USA, Inc.; or assignees or successors in interest
to any of the companies named in this clause (c) in the event of a merger. Any
third party administrator to which the Service Provider is authorized to
delegate or subcontract its obligations under this Agreement shall be referred
to as an "AUTHORIZED ADMINISTRATOR." Each Authorized Administrator, as a
condition precedent to acting under delegated or subcontracted authority under
this Section 5.05, shall agree to abide by the applicable confidentiality
provisions of Article XI hereof. Any delegation, sub-delegation or subcontract
shall be effected in a manner that does not interrupt or impair the performance
of the Services. In any event, no delegation, sub-delegation or subcontract,
whether or not consented to by FAFLIC, will release the Service Provider from
responsibility to FAFLIC under this Agreement with respect to the performance of
the Services. Any provision of Services or other actions by an Authorized
Administrator delegated pursuant to this Section 5.05 shall be deemed to have
been provided by the Service Provider for such provision of Services or other
action.
ARTICLE VI
COMPLIANCE WITH APPLICABLE LAWS
6.01 LEGAL COMPLIANCE. Each of the parties hereto agrees to comply
with all Applicable Laws as they apply to the performance of such party's
obligations under this Agreement.
6.02 LICENSING.
The Service Provider hereby covenants to FAFLIC that the Service Provider
and its personnel have, and shall ensure that any Authorized Administrator and
its personnel under Section 5.05 have, all licenses, registrations,
qualifications and other authorizations necessary to provide the Services to or
on behalf of FAFLIC, including, without limitation, any licenses as a third
party administrator or registration as a broker-dealer. At all times during the
term of this Agreement, the Service Provider and its personnel
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shall maintain, and shall ensure that any Authorized Administrator and its
personnel under Section 5.05 shall maintain, in full force and effect all such
licenses, registrations, qualifications and other authorizations necessary under
Applicable Law to provide the Services to or on behalf of FAFLIC. The Service
Provider agrees to use reasonable best efforts to provide FAFLIC with copies of
any such documents upon request.
6.03 SUPERVISION. The Service Provider acknowledges that the board of
directors of FAFLIC is vested with the power, authority and responsibility for
managing the business and affairs of FAFLIC, including administrative services.
The Service Provider acknowledges that any and all actions or services, whether
supervisory or ministerial, taken or provided pursuant to this Agreement by the
Service Provider shall be subject to the continuous supervision of the board of
directors of FAFLIC and, to the extent designated by such board of directors,
the appropriate designated officers of FAFLIC. Without limiting the generality
of the foregoing, in the event that any denial of a claim under any Contract by
the Service Provider appears likely in the reasonable judgment of the Service
Provider to result in the taking of any action adverse to FAFLIC by any
regulatory authority, the Service Provider shall submit to FAFLIC all
information relevant to the denial of such claim and the Service Provider and
FAFLIC shall thereafter cooperate in good faith and use their respective
commercially reasonable efforts to determine whether such claim or any portion
thereof should be paid or amount offered in settlement of such claim. The
Service Provider shall indemnify, defend and hold FAFLIC harmless against any
losses asserted against, imposed upon or incurred by FAFLIC as a result of the
Service Provider's denial of a claim under a Contract, which denial was
recommended by the Service Provider under this Section 6.03 and agreed to or
acquiesced in by FAFLIC under this Section 6.03.
ARTICLE VII
MAINTENANCE OF RECORDS
7.01 MAINTENANCE. The Service Provider agrees to (a) maintain an
appropriate set of Service Provider Books and Records (as defined below)
relating to all transactions under this Agreement, including, without
limitation, all such records as may be required by Applicable Law, and shall
maintain such Books and Records at its principal administrative office or at
such other location as may be permitted by Applicable Law, and (b) preserve such
Service Provider Books and Records for the term of this Agreement (or such
longer period as may be required by Applicable Law). The Service Provider shall
maintain such Service Provider Books and Records and the Transferred Records (as
defined in Section 12.01 below) at the Service Provider's expense and in
accordance with the Service Provider's own standards of insurance record keeping
and all Applicable Laws, including without limitation New York Insurance
Department Reg. 152. For the avoidance of doubt, all records produced by Service
Provider for FAFLIC shall be the property of FAFLIC. For purposes of this
Agreement, the "SERVICE PROVIDER BOOKS AND
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RECORDS" shall mean appropriate records and all other data and information (in
whatever form maintained) of Service Provider reasonably necessary for the
administration of the Contracts, including administrative records, claim
records, policy files, sales records, files and records relating to regulatory
and compliance matters, reinsurance records, tax reporting and tax computational
records relating to the Contracts including 1099 reports to contract holders and
7702/7702A policy qualification testing information, underwriting records and
accounting records, but excluding any Tax returns of Service Provider and work
papers relating to any Tax returns of Service Provider; provided, however, that
if any such financial or accounting records contain information which does not
relate to the Contracts, such information shall not constitute Service Provider
Books and Records.
7.02 AVAILABILITY AND ACCESS.
The Service Provider Books and Records shall be available (at their place of
keeping) for inspection, examination and audit by FAFLIC, its auditors and state
and federal regulatory authorities and applicable self-regulatory organizations
(in each case together with their respective representatives) during normal
business hours upon reasonable notice to the Service Provider and without undue
disruption to the operations of the Service Provider. The Service Provider shall
furnish to FAFLIC (i) at the Service Provider's expense, copies of any Service
Provider Books and Records relating to the transactions under this Agreement as
may be reasonably required by FAFLIC in connection with the preparation of
FAFLIC's financial statements, state and federal income and other Tax returns
and any other filings or reports required to be filed with, or requested by,
state or federal regulatory authorities or any rating agencies, or otherwise
required to be held or maintained under Applicable Law, and (ii) at FAFLIC's
expense, copies of any such Service Provider Books and Records for any other
reason. Without limiting the generality of the foregoing, the Service Provider
shall provide FAFLIC (at the Service Provider's expense) all information
concerning the Contracts required to be included in FAFLIC's state premium Tax
returns (in a format suitable for direct insertion therein, provided, however
that the Service Provider shall not be required to incur any material costs or
expenses in so doing).
ARTICLE VIII
POWER OF ATTORNEY
8.01 GENERAL. FAFLIC grants to the Service Provider authority in all
matters relating to administration of the Contracts to the extent such authority
(a) may be granted pursuant to Applicable Law and (b) is reasonably necessary
for the Service Provider to provide the Services hereunder (including, without
limitation, to make filings required by Applicable Law). For the avoidance of
doubt, FAFLIC shall have final authority with respect to claim decisions, and
such decisions shall be binding upon the Reinsurer.
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8.02 APPOINTMENT. Subject to and in furtherance of Section 8.01, FAFLIC
hereby nominates, constitutes and appoints the Service Provider as its
attorney-in-fact solely with respect to the rights, duties, privileges and
obligations of FAFLIC in, to and under the Contracts, with full power and
authority to act in the name, place and stead of FAFLIC with respect to the
Contracts, including, without limitation, the power, without reservation, to
provide all services to all Contracts, to adjust, to defend, to settle and to
pay all claims and benefits, to administer the Separate Accounts hereunder and
to take such other and further actions as may be reasonably necessary to effect
the transactions contemplated by this Agreement, the SPA and, if applicable, the
Core Coinsurance Agreement, during the term of this Agreement and until its
termination in accordance with Article IX below. FAFLIC will, when and as
requested by the Service Provider, execute and provide to the Service Provider
written Powers of Attorney (in form and substance reasonably acceptable to
FAFLIC) or other documents that are necessary or appropriate to carry out the
objectives of this Article VIII.
ARTICLE IX
TERMINATION
9.01 TERMINATION BY FAFLIC. FAFLIC may terminate this Agreement
immediately, by delivery of written notice to the Service Provider, upon the
occurrence of any of the following events:
(a) The Service Provider, pursuant to or within the meaning of Title
11, U.S. Code, or any similar Federal, state or foreign law for the relief of
debtors, including, without limitation, any state insolvency or rehabilitation
statutes (collectively, "BANKRUPTCY LAWS"):
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
(iii) consents to the appointment of a custodian of it or for all
or for a substantial part of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) fails to contest any involuntary case or proceeding filed
against it within the time period fixed by any applicable rules, and any
extensions granted by the court where such involuntary case or proceeding
is pending.
(b) A court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that remains unstayed and in effect for 60 days and that:
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(i) is for relief against the Service Provider in an involuntary
case or proceeding;
(ii) appoints a custodian of the Service Provider or a custodian
for all or for a substantial part of the property of the Service Provider; or
(iii) orders the liquidation of the Service Provider.
(c) The Service Provider fails to comply with any material provision of
this Agreement, which failure has not been corrected within 60 days after
written notice thereof is delivered to the Service Provider by FAFLIC.
9.02 TERMINATION BY SERVICE PROVIDER. In the event of the Core
Coinsurance Termination such that reimbursement of the Service Provider's Actual
Cost is required pursuant to Section 4.01 hereof, the Service Provider may
terminate this Agreement upon the failure of FAFLIC to pay any monies owing to
the Service Provider under this Agreement, which failure has not been corrected
or disputed in accordance with Article XIV within thirty (30) days after written
notice thereof(the "DEFAULT NOTICE") is delivered to FAFLIC by the Service
Provider. Such termination shall be effective not less than ten (10) days
following Service Provider's provision to FAFLIC of notice thereof(the
"TERMINATION NOTICE") unless FAFLIC shall have cured such default within the
10-day period between receipt of the Termination Notice and the effective date
of termination. In the event of a dispute by FAFLIC with respect to any payment
due under Section 4.01 hereof, FAFLIC shall have the right to pay under protest.
Notwithstanding any of the foregoing, the Service Provider shall not have the
right to terminate this Agreement while amounts are being paid into escrow
pursuant to Section 14.01(b).
9.03 AUTOMATIC TERMINATION. This Agreement shall terminate at such time
as all Contract Liabilities have been terminated and all obligations of both
parties under the Core Coinsurance Agreement have been discharged in full.
9.04 EFFECT OF TERMINATION.
(a) Upon termination of this Agreement, (i) no party hereto shall be
relieved of any liability for any breach of any provision of this Agreement,
(ii) any amounts owing hereunder by either party hereto to the other party
hereto shall be immediately due and payable pro-rated for any partial periods)
and (iii) all rights and obligations hereunder will terminate except that the
provisions of Articles VII, X, XI, XII, XIII and XIV and this Section 9.04,
Section 15.02 and Section 15.03 shall survive the termination of this Agreement.
(b) Following any termination of this Agreement, the Service Provider
shall cooperate fully with FAFLIC in effecting the prompt transfer of the
Services, the bank accounts and lockboxes maintained by the Service Provider
hereunder and all Service
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Provider Books and Records maintained by the Service Provider (or, where
appropriate, copies thereof) to FAFLIC or FAFLIC's designee, so that FAFLIC or
its designee will be able to perform the Services without interruption following
any such termination. Cooperation of the Service Provider shall include the
provision of its personnel and access to its systems for purposes of assisting
in the conversion and transfer of data and information (in customary electronic
format) to a replacement administrator. In this regard, the Service Provider
shall work with the replacement administrator to promptly formulate a transition
plan, including assistance with respect to data format and data conversion, data
interface and methods of transferring responsibility for the Services with as
little interruption in service as possible.
(c) In the event of a termination pursuant to Section 9.01, the Service
Provider shall reimburse FAFLIC for any out-of-pocket cost arising as a result
of such termination, including, without limitation, (i) the cost of
transitioning the Services to a substitute provider or FAFLIC, (ii) any fees
paid to any such substitute provider and (iii) to the extent not duplicative of
services provided by a substitute provider, costs incurred by FAFLIC with
respect to the Services after termination of this Agreement. In the event of a
termination pursuant to Section 9.02, FAFLIC shall reimburse the Service
Provider for any out-of-pocket cost arising as a result of such termination,
including, without limitation, (i) the cost of transitioning the Services to a
substitute provider or FAFLIC, (ii) any fees paid to any such substitute
provider and (iii) to the extent not duplicative of services provided by a
substitute provider, costs incurred by Service Provider with respect to the
Services after termination of this Agreement.
ARTICLE X
INDEMNIFICATION
10.01 INDEMNIFICATION BY FAFLIC.
(a) Until and unless a Core Coinsurance Termination occurs, subject
to the provisions of Sections 10.03 and 10.04 hereof, FAFLIC agrees to
indemnify, defend and hold harmless the Service Provider and its directors,
officers, employees, Affiliates and assigns from and against all damages, loss
and expense (including, without limitation, reasonable expenses of investigation
and reasonable attorneys' fees and expenses in connection with any action, suit
or proceeding involving a third party claim) (collectively, "LOSSES," and
individually a "LOSS"), asserted against, imposed upon or incurred by them,
directly or indirectly, by reason of or arising out of or in connection with any
breach or nonfulfillment by FAFLIC of, or any failure by FAFLIC to perform, any
of the covenants, terms or conditions of, or any duties or obligations under,
this Agreement.
12
(b) Following any Core Coinsurance Termination, subject to the provisions of
Sections 10.03 and 10.04 hereof, FAFLIC agrees to indemnify, defend and hold
harmless the Service Provider and its directors, officers, employees,
Affiliates, subcontractors and assigns from and against all Losses asserted
against, imposed upon or incurred by them, directly or indirectly, arising out
of or in connection with the Service Provider's provision of Services under this
Agreement; PROVIDED that FAFLIC shall not be responsible for any Losses of any
such person to the extent resulting from such person's gross negligence, bad
faith, willful misconduct, violation of Applicable Law (other than violations of
Applicable Law arising from actions or inactions taken by such person upon the
explicit written instruction or direction of FAFLIC) or material breach of such
person's obligations under this Agreement, in each case in connection with any
of the Services referred to above.
10.02 INDEMNIFICATION BY THE SERVICE PROVIDER.
(a) Until and unless a Core Coinsurance Termination occurs, subject to
the provisions of Sections 10.03 and 10.04 hereof, the Service Provider agrees
to indemnify, defend and hold harmless FAFLIC and its directors, officers,
employees, Affiliates and assigns from and against all Losses asserted against,
imposed upon or incurred by them, directly or indirectly, by reason of or
arising out of or in connection with any breach or nonfulfillment by Service
Provider of, or any failure by Service Provider to perform, any of the
covenants, terms or conditions of, or any duties or obligations under, this
Agreement.
(b) Following any Core Coinsurance Termination, subject to the
provisions of Sections 10.03 and 10.04 hereof, the Service Provider agrees to
indemnify, defend and hold harmless FAFLIC and its directors, officers,
employees, Affiliates, subcontractors and assigns from and against all Losses
asserted against, imposed upon or incurred by them, directly or indirectly,
arising out of or in connection with the Service Provider's or an Authorized
Administrator's (i) gross negligence, bad faith or willful misconduct, (ii)
violation of Applicable Law (other than violations of Applicable Law arising
from actions or inactions taken by the Service Provider upon the explicit
written instruction or direction of FAFLIC) or (iii) material breach of its
obligations under Section 3.04, 11.01 or 11.03, in each case in connection with
performing the Service Provider's obligations under this Agreement.
10.03 LIMITATIONS ON INDEMNIFICATION.
(a) If a person claiming indemnification under this Section 10.03 (an
"INDEMNITEE") against any person (an "INDEMNIFYING PARTY") recovers from any
third party (including insurers) all or any part of any amount paid to it by an
Indemnifying Party pursuant to Section 10.01 or 10.02 hereof, such Indemnitee
will promptly pay over to the Indemnifying Party the amount so recovered (after
deducting therefrom the full
13
amount of the expenses incurred by it in procuring such recovery, including any
Taxes), but not in excess of any amount previously so paid by the Indemnifying
Party. If an Indemnitee recovers from any third party (including insurers) any
amount as to which indemnification may be claimed pursuant to Section 10.01 or
10.02 hereof, such Indemnitee will have no right to claim indemnification for
such amount from the Indemnifying Party.
(b) The Indemnitee shall prosecute diligently and in good faith any
claim for indemnification with any applicable third party (including insurers)
prior to collecting any indemnification payment pursuant to Section 10.01 or
10.02 hereof.
(c) Notwithstanding any provision of this Agreement to the contrary,
nothing herein shall affect the rights and obligations of the parties thereto
under Article 10 of the SPA).
10.04 NOTICE OF DEFENSE OF CLAIMS. Promptly after receipt of notice of
any claim for Losses for which an Indemnitee seeks indemnification under this
Section 10.04, such Indemnitee shall give written notice thereof to the
Indemnifying Party, but such notification shall not be a condition to
indemnification hereunder except to the extent of actual prejudice to the
Indemnifying Party. The notice shall state the information then available
regarding the amount and nature of such claim or Losses and shall specify the
provision or provisions of this Agreement under which the right to
indemnification is asserted. If within 30 days after receiving such notice the
Indemnifying Party gives written notice to the Indemnitee stating that it
intends to defend against such claim or Losses at its own cost and expense, then
defense of such matter, including selection of counsel (subject to the consent
of the Indemnitee which consent shall not be unreasonably withheld), shall be by
the Indemnifying Party and the Indemnitee shall make no payment in respect of
such claim or Losses as long as the Indemnifying Party is conducting a good
faith and diligent defense. Notwithstanding the foregoing, the Indemnitee shall
at all times have the right to fully participate in such defense at its own
expense directly or through counsel; provided, however, if the named parties to
the action or proceeding include both the Indemnifying Party and the Indemnitee
and representation of both parties by the same counsel would be inappropriate
under applicable standards of professional conduct, the expenses of one separate
counsel for the Indemnitee shall be paid by the Indemnifying Party. If no such
notice of intent to dispute and defend is given by the Indemnifying Party, or if
such diligent good faith defense is not being or ceases to be conducted, the
Indemnitee shall, at the expense of the Indemnifying Party, undertake the
defense of such claim or Losses with counsel selected by the Indemnitee, and
shall have the right to compromise or settle the same exercising reasonable
business judgment with the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. The Indemnitee shall make available all
information and assistance that the Indemnifying Party may reasonably request
and shall cooperate with the Indemnifying Party in such defense. Notwithstanding
anything herein to the contrary, the Indemnifying
14
Party shall have the right to settle all claims of third parties for which
indemnification is payable hereunder without the consent of the Indemnitee so
long as such settlement (a) releases the Indemnitee from all liability for or in
connection with such action, (b) provides for payment of any amounts relating to
such settlement solely by the Indemnifying Party, at its own cost and for its
own account, (c) does not materially and adversely impair the ability of the
Indemnitee to carry on its business and (d) does not contain any admission
of wrong doing on the part of the Indemnitee.
ARTICLE XI
CONFIDENTIALITY
11.01 SERVICE PROVIDER'S OBLIGATIONS.
(a) Subject to Section 3.03(b) hereof and Section 7.03 of the SPA,
during the term of this Agreement (or for such longer period as may be required
by Applicable Law or by FAFLIC's privacy policy as in effect on the Closing Date
or any prior date, as applicable, and as hereafter updated for changes in
Applicable Law, to the extent such privacy policy is provided to the Service
Provider) the Service Provider and any Authorized Administrator shall refrain,
and shall cause its officers, directors, employees, agents, auditors, counsel,
Affiliates and other representatives (including, in the case of the Service
Provider, its Authorized Administrator) (collectively, "REPRESENTATIVES") to
refrain, from directly or indirectly:
(i) disclosing to any person or entity (other than the Service
Provider's Representatives) the terms and conditions of this Agreement or any
records, files, documents, data (including, without limitation, claims or loss
data or customer information), or information concerning FAFLIC or its
Affiliates that the Service Provider prepares, maintains, uses, or receives in
connection with the transactions contemplated by this Agreement, unless (i)
disclosure is compelled by any court or administrative agency or by other
requirements of Applicable Law or (ii) such records, files, documents, data, or
information can be shown to have been (x) generally available to the public
other than as a result of a disclosure by the Service Provider or its
Representatives, (y) available to the Service Provider on a non-confidential
basis from a source other than FAFLIC or FAFLIC's Representatives, provided that
such source is not known by the Service Provider to be bound by a
confidentiality agreement with, or other obligation of secrecy of, FAFLIC or
another party or (z) developed independently by the Service Provider; or
(ii) using such records, files, documents, data or information for
any purpose (including, without limitation, directly or indirectly competing
with FAFLIC or any Affiliate thereof) except pursuant to this Agreement.
15
(b) Notwithstanding the foregoing, the Service Provider shall be
entitled to use information concerning, derived from, or related to the
administration of the Contracts for any lawful purpose in connection with the
transaction of the Service Provider's business under the SPA, any Ancillary
Agreement and, if applicable, the Core Coinsurance Agreement, provided that the
Service Provider shall comply with all laws applicable to the use of such
information (including, without limitation, Applicable Laws relating to the use
of such information that would otherwise be applicable to FAFLIC as the issuer
of the Contracts).
11.02 FAFLIC'S OBLIGATIONS. During the term of this Agreement (or such
longer period as may be required by Applicable Law or by FAFLIC's privacy policy
as in effect on the Closing Date or any prior date, as applicable, and as
hereafter updated for changes in Applicable Law, to the extent such privacy
policy is provided to the Service Provider), FAFLIC shall refrain, and shall
cause its Representatives to refrain, from directly or indirectly:
(a) disclosing to any person or entity (other than FAFLIC's
Representatives) the terms and conditions of this Agreement or any records,
files, documents, data (including, without limitation, claims or loss data or
customer information) or information concerning the Service Provider or its
Affiliates or Authorized Administrators that FAFLIC prepares, maintains, uses or
receives in connection with the transactions contemplated by this Agreement,
unless (i) disclosure is compelled by any court or administrative agency or by
other applicable requirements of law or (ii) such records, files, documents,
data or information can be shown to have been (x) generally available to the
public other than as a result of a disclosure by FAFLIC or its Representatives
or (y) available to FAFLIC on a non-confidential basis from a source other than
the Service Provider or the Service Provider's Representatives, provided that
such source is not known by FAFLIC to be bound by a confidentiality agreement
with, or other obligation of secrecy of, the Service Provider or another party
or (z) developed independently by FAFLIC; or
(b) using such records, files, documents, data or information for any
purpose (including, without limitation, directly or indirectly competing with
the Service Provider or any Affiliate thereof) except pursuant to this
Agreement.
11.03 OBLIGATIONS WITH RESPECT TO CONSUMER PRIVACY REGULATION.
(a) Each of the Service Provider and FAFLIC shall, and shall cause its
respective Representatives to, keep confidential the nonpublic personal
information of any individual customer under a Contract in accordance with
applicable consumer privacy laws and regulations subject to any applicable
exceptions contained within such consumer privacy laws and regulations and
related privacy policies of the Service Provider or FAFLIC, as the case may be.
Notwithstanding the foregoing, nothing in this
16
Section 11.03(a) shall limit the rights of the Service Provider set forth in
Section 11.01(b).
(b) Each of the Service Provider and FAFLIC agree to cooperate, and to
cause its respective Representatives to cooperate, in providing information
necessary to be included in any consumer privacy notice to an individual
customer under a Contract required under applicable consumer privacy laws and
regulations. Each of the Service Provider and FAFLIC further agree to endeavor
to deliver any such consumer privacy notices in accordance with applicable
consumer privacy laws and regulations. FAFLIC shall be responsible for provision
to the Service Provider of a copy of applicable notices; the Service Provider
will be responsible for mailing or other distribution or filing. Notwithstanding
the foregoing, if FAFLIC elects to share the nonpublic personal information of
its individual policyowners other than as required by Applicable Law in such a
manner that FAFLIC is obligated under Applicable Law either to obtain
affirmative policyowner consent or to effect an opt-out and deemed consent
procedure, then FAFLIC will be responsible for mailing or otherwise
administering such affirmative consent or opt-out procedures and the Service
Provider will have no responsibility or liability therefor.
ARTICLE XII
TRANSFER OF RECORDS
12.01 TRANSFER. Subject to Section 8.03(f) of the SPA with regard to
certain tax matters and to Section 4.01 of the Restructuring Agreement, on the
Closing Date, FAFLIC shall forward to the Service Provider (at FAFLIC's expense)
all FAFLIC Books and Records (as defined below) relating to the Contracts (or
copies thereof) (the "TRANSFERRED RECORDS"). For purposes of this Agreement,
"FAFLIC BOOKS AND RECORDS" shall mean the appropriate records and all other data
and information (in whatever form maintained) of FAFLIC necessary for the
administration of the Contracts, including administrative records, claim
records, policy files, sales records, files and records relating to regulatory
and compliance matters, reinsurance records, tax reporting and tax computational
records relating to the Contracts, underwriting records and accounting records,
but excluding any Tax returns of FAFLIC and work papers relating to any Tax
returns of FAFLIC; provided, however, that if any such financial or accounting
records contain information which does not relate to the Contracts, such
information shall not constitute FAFLIC Books and Records.
12.02 OWNERSHIP; ACCESS. Subject to Section 7.01, all the Transferred
Records shall be the property of FAFLIC or the party on whose behalf FAFLIC is
maintaining such records, as applicable. The Transferred Records shall be
available (at their place of keeping) for inspection, examination and audit by
FAFLIC (and its representatives) during normal business hours upon reasonable
notice to the Service Provider and without
17
undue disruption to the operations of the Service Provider. The Service Provider
shall provide to FAFLIC (a) at the Service Provider's expense, copies of the
Transferred Records as may be reasonably required in connection with the
preparation of FAFLIC's financial statements, state and federal income and other
Tax returns and any other filings or reports required to be filed with, or
requested by, state or federal regulatory authorities or any rating agencies and
(b) at FAFLIC's expense, copies of such Transferred Records for any other
reason.
ARTICLE XIII
NOTIFICATION
13.01 FAFLIC'S OBLIGATIONS. Following the Closing Date, FAFLIC shall
forward promptly to the Service Provider all notices and other written
communications received by or served upon FAFLIC relating to the Services or the
Contracts, with respect to (a) inquiries or complaints from state insurance
regulators, state and federal securities regulators (including, without
limitation, the National Association of Securities Dealers, Inc. (the "NASD"))
and complaints from agents, brokers, insureds and other persons, (b) claims and
(c) suits and actions for which FAFLIC receives service of process. FAFLIC shall
be entitled to retain copies of all such materials.
13.02 SERVICE PROVIDER'S OBLIGATIONS. Subject to EXHIBIT A, the Service
Provider shall forward promptly to FAFLIC copies of all notices and other
written communications received by or served upon the Service Provider relating
to the Services or the Contracts with respect to (a) inquiries or complaints
from state insurance regulators, state and federal securities regulators
(including, without limitation, the NASD), (b) complaints from agents, brokers
and insureds as required by Applicable Law or as mutually agreed to by the
parties, such agreement not to be unreasonably withheld, and (c) suits and
actions for which the Service Provider receives service of process; provided,
however, that the parties acknowledge that FAFLIC is ultimately responsible for
the resolution of the inquiries, complaints, suits and actions described in
clauses (a) through (c) of this sentence.
ARTICLE XIV
ARBITRATION
14.01 ARBITRATION.
(a) Any dispute that arises out of or is related to this Agreement or
any transaction governed by this Agreement, shall be submitted to senior
executives of the parties, vested with authority to settle the dispute, who will
meet and attempt in good faith to resolve the dispute. The meeting will be held
reasonably promptly at the request
18
of the affected party in the offices of the party requesting the meeting, or if
agreed, at another designated location.
(b) Following the Core Coinsurance Termination, in the event of a good
faith dispute between FAFLIC and the Service Provider regarding this Agreement
pursuant to which FAFLIC in good faith believes it is entitled to withhold
payment, FAFLIC shall promptly notify the Service Provider of such dispute, and
shall, upon request by the Service Provider and on the date on which any Actual
Cost are required to be made during the pendency of such dispute, deposit the
amount solely associated with the services, fees or costs to which the dispute
relates in an interest-bearing escrow account in the bank or depository
specified by the Service Provider, furnish evidence of such deposit to the
Service Provider and pay any undisputed amounts due for payment.
(c) Any party may submit such dispute to the arbitration provisions set
forth herein within thirty (30) days of the deposit of the funds into the escrow
account. For as long as FAFLIC makes such escrow deposits during the pendency of
such dispute, the Service Provider shall continue to provide the Services to
FAFLIC. Upon resolution of the dispute, the funds in the escrow account shall be
paid to the party or parties entitled to such funds, or such portion thereof as
shall be applicable, in the amount(s) set forth in the resolution of the dispute
pursuant to this Section 14.01, plus any interest earned on such money; PROVIDED
that excess funds in the escrow account, if any, will be remitted to FAFLIC.
(d) Any dispute arising out of or relating to this Agreement,
including its formation and validity, which is not resolved in accordance with
Section 14.01(a) hereof, shall be referred to arbitration. Arbitration shall be
initiated by the delivery of a written demand for arbitration by one party to
the other. The arbitration shall be held in New York, New York or such other
place as the parties may mutually agree. Arbitration shall be conducted before a
three-person arbitration panel appointed as follows: each party shall appoint
one arbitrator qualified to conduct the arbitration as set forth herein, and the
two arbitrators so appointed shall then appoint a neutral umpire before
proceeding. If either party fails to appoint an arbitrator within thirty (30)
days after it receives a written request by the other party to do so, the
requesting party may appoint both arbitrators. Should the two arbitrators fail
to choose an umpire within thirty (30) days of the appointment of the second
arbitrator, the parties shall appoint the umpire pursuant to the XXXXX U.S.
Umpire Selection Procedure. The arbitrators and umpire shall be either present
or former executive officers of life or life and annuity insurance or life or
life and annuity reinsurance companies other than the Service Provider, FAFLIC
or any of their respective Affiliates. The arbitrators and umpire shall not be
under the control of either party, and shall have no financial interest in the
outcome of the arbitration.
(e) The arbitrators and umpire shall interpret this Agreement as an
honorable engagement and shall not be obligated to follow the strict rules of
law or evidence. In
19
making their award, the arbitrators and umpire shall apply the custom and
practice of the insurance and reinsurance industry, with a view to effecting the
intent of the parties as set forth in the terms of this Agreement and the
general purpose of this Agreement. The decision of a majority of the arbitration
panel shall be Final and Binding, except to the extent otherwise provided in the
Federal Arbitration Act. For purposes of this Agreement, "FINAL AND BINDING"
shall mean that the aforesaid determinations shall have the same preclusive
effect for all purposes as if such determinations had been embodied in a
final judgment, no longer subject to appeal, entered by a court of competent
jurisdiction. The arbitration panel shall render its award in writing, setting
forth the facts underlying, and the reasons for determining, such award.
Judgment upon the award may be entered in any court having jurisdiction,
pursuant to the Federal Arbitration Act. The non-prevailing party shall
reimburse the prevailing party for (i)the fees and expenses of the arbitrators,
(ii)the fees and expenses of the umpire, and (iii)the other reasonable expenses
of the arbitration, unless (with respect to the foregoing clauses (i) to (iii)
the arbitration panel determines that the non-prevailing party had reasonable
good faith grounds for asserting its position in such arbitration proceeding, in
which case the fees shall be allocated as determined by the arbitrators. In the
event that either party to this Agreement refuses to submit to arbitration as
required by this Section 14.01, the other party may request the court specified
in Section 15.08 to compel arbitration in accordance with the Federal
Arbitration Act.
(f) At the request of either party, any arbitration under this Section
14.01 may be combined with pending arbitration, if any, between the Service
Provider and FAFLIC or their respective assigns under the Core Coinsurance
Agreement or the Transition Services Agreement so that resolution of disputes
under this Agreement and the Core Coinsurance Agreement or the Transition
Services Agreement may be resolved in a single arbitration proceeding.
(g) Notwithstanding the preceding provisions of this Section 14.01,
any Party may enforce the confidentiality terms of this Agreement by commencing
an action for injunctive or other equitable relief, damages or any other
applicable judicial remedy.
ARTICLE XV
MISCELLANEOUS
15.01 NOTICE. Any notice or other communication required or permitted
hereunder shall be in writing (including facsimile transmission) and shall be
given:
If to the Service Provider: Allmerica Financial Life Insurance and Annuity
Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
20
Attention: President
Facsimile No.: (508) 855-6641
And with copies, with respect to notices and
communications under this Agreement, to:
The Xxxxxxx Xxxxx Group, Inc.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
Xxxxxxx Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx xxx Xxxxxx
Facsimile No.: (000) 000-0000
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
If to FAFLIC: The Hanover Insurance Group, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile No.: (508) 855-4640
With a copy to:
The Hanover Insurance Group, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (508) 926-1926
And with copies, with respect to notices and
communications under this Agreement, to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
00
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: E. Xxxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
Any party may, by notice given in accordance with this Section 15.01 to the
other parties, designate such other address or facsimile number as such party
may hereafter specify for the purpose by notice to the other parties hereto. All
such notices, requests and other communications shall be deemed effective only
upon (i) mailing of such notice, request or other communication and the actual
receipt thereof by the relevant party, or (ii) a facsimile transmission of such
notice, request or other communication and the acknowledgement by the relevant
party of receipt thereof.
15.02 EXPENSES. Except as may be otherwise expressly provided in this
Agreement, the SPA or any Ancillary Agreement, each of the parties hereto shall
pay its own costs and expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
contemplated hereby.
15.03 GOVERNING LAW. EXCEPT AS PROVIDED IN SECTION 14.01, THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF
MASSACHUSETTS WITHOUT REGARD TO ANY LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
15.04 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto),
together with the SPA and the Ancillary Agreements, contain the entire agreement
between the parties with respect to the transactions contemplated hereby, and
supersede all prior agreements, written or oral, with respect thereto.
15.05 NO ASSIGNMENT; BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors, assigns
and legal representatives, whether by merger, consolidation or otherwise. Except
as otherwise expressly provided herein, this Agreement may not be assigned by
any party without the prior written consent of the other party hereto.
15.06 AMENDMENT; WAIVER. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by all of the parties or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege
22
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any right, power, remedy or privilege, nor any single or partial
exercise of any such right, power, remedy or privilege, preclude any further
exercise thereof or the exercise of any other such right, remedy, power or
privilege. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party may otherwise have at law or
in equity.
15.07 RELATIONSHIP OF PARTIES. The Service Provider shall be deemed an
independent contractor of FAFLIC for all purposes hereunder. This Agreement
shall not be construed to create an employment, partnership or joint venture
relationship between the parties hereto.
15.08 JURISDICTION. Each of the parties hereto irrevocably and
unconditionally submits to the jurisdiction of the United States District Court
for the District of
Massachusetts or, if such court does not have jurisdiction,
the Commonwealth of
Massachusetts courts situated in the County of Worcester,
for purposes of enforcing this Agreement. In any such action, suit or other
proceeding, each of the parties hereto irrevocably and unconditionally waives
and agrees not to assert by way of motion, as a defense or otherwise, any claims
that it is not subject to the jurisdiction of the above court, that such action
or suit is brought in an inconvenient forum or that the venue of such action,
suit or other proceeding is improper. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 15.01 shall
be deemed effective service of process on such party.
15.09 HEADINGS. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
15.10 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction, so long as the economic
or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. If any provision of this Agreement
is so broad as to be unenforceable, that provision shall be interpreted to be
only so broad as is enforceable.
15.11 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. Each
counterpart may be delivered by
23
facsimile transmission, which transmission shall be deemed delivery of an
originally executed document.
15.12 NO THIRD PARTY BENEFICIARY. Except as otherwise provided herein,
the terms and provisions of this Agreement are intended solely for the benefit
of the parties hereto, and their respective successors or permitted assigns, and
it is not the intention of the parties to confer third-party beneficiary rights
upon any other person, and no such rights shall be conferred upon any person or
entity not a party to this Agreement.
15.13 GOOD FAITH; ERRORS AND OVERSIGHTS. Each party to this Agreement
will act reasonably in all matters within the terms of this Agreement. If either
of the parties to this Agreement fails to comply with any of the provisions of
this Agreement because of an unintentional oversight or misunderstanding, the
underlying status of this Agreement will not be changed. Both parties will be
restored to the position they would have occupied had no such oversight or
misunderstanding occurred, and such oversight or misunderstanding will be
rectified promptly on an equitable basis.
15.14 FORCE MAJEURE. Each party shall be excused from performance for any
period and to the extent that the party is prevented from performing any of its
responsibilities, in whole or in part, as a result of an act of God, war, civil
disturbance, court order, labor dispute or causes beyond that party's reasonable
control including, without limitation, failures or fluctuation in electric
power, heat, light, air conditioning or telecommunications equipment, and such
nonperformance shall not constitute a default.
24
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the date first set forth above.
FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxx, III
-------------------------------------
Name: Xxxxxx X. Xxxxx, III
Title: Chief Financial Officer
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
By: /s/ Xxxxxxxx xxx Xxxxxx
-------------------------------------
Name: Xxxxxxxx xxx Xxxxxx
Title: VP, Chief Operating Officer
EXHIBIT A
SERVICES
NOTE: In general, the Service Provider shall maintain or make available a
staff of competent and trained administrative personnel, supplies,
systems and equipment to perform its duties and responsibilities under
this Agreement. Provision of a service by a delegated representative of
the Service Provider shall be deemed to be provision of a service by the
Service Provider. Further, services shall be performed in accordance
with the time frames specified and in cases where a time frame is not
specified, in accordance with the Service Provider's current practice
for its own business and Applicable Law. In all cases, the Service
Provider's obligation to meet its obligations set forth herein is
subject to FAFLIC taking such actions as are reasonably necessary for
the Service Provider to do so.
1. PREMIUM COLLECTION. The Service Provider shall xxxx and collect all
premiums due under the Contracts, return any unearned premiums or other
premiums to be refunded, and reconcile amounts paid with returned billing
statements or other remittance media. The Service Provider shall update the
contract owner master records and all other records to reflect payments
received.
2. AUDITING. The Service Provider shall audit premium payments and other
policy transactions with respect to the Contracts to ensure the accuracy
and acceptability of such payments or transactions, including, without
limitation, an SAS 70 audit report and reliance opinion (which may be a SAS
70 audit report based on audits conducted by the Service Provider's third
party administrator, with respect to such third party administrator). Such
auditing includes all applicable guideline, cash value accumulation, XXXXX
and Modified Endowment Contract ("MEC") testing, in accordance with
Sections 7702 and 7702A of the Internal Revenue Code of 1986, as amended
(the "Code") as well as review and testing of product specifications to
ensure payments received may be accepted and diversification testing, in
accordance with Section 817(h) of the Code. Life insurance premiums
exceeding guideline premium limits under the Code will be timely refunded
to policyholders, along with any required interest, as required by Section
7702(f)(l)(B) of the Code. In the event of premium payments causing a
contract to become a MEC, the policyholder will be notified and given the
opportunity to receive a timely refund of any excess premium according to
Section 7702A(e)(1)(B) of the Code.
3. RECORDS MAINTENANCE. The Service Provider shall maintain applications,
policyholder, annuitant, participant, contract owner, premium, tax basis,
and other
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necessary records, including all statements, confirmations and computer
records, to determine the true and accurate status of the Contracts. The
Service Provider shall maintain and preserve records with respect to the
Registered Separate Accounts as required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, the Securities Exchange Act of
1934, as amended, and the rules promulgated by the NASD. The Service
Provider's obligation to maintain and preserve all of the foregoing records
is subject to FAFLIC furnishing to it all information and records
reasonably necessary for the Service Provider to do so. Upon request of
FAFLIC or any state or federal regulatory authorities, the Service Provider
shall forward a complete copy of any record reasonably requested to the
requesting party promptly and in a format reasonably useable by them. The
Service Provider shall not be required to incur any non-immaterial costs to
provide such records in a format other than as provided prior to the
Closing Date. Historical claims information will be maintained for the
period required by Applicable Law or remains relevant to a pending or
threatened legal action that is not time barred.
4. LAPSE OF COVERAGE. The Service Provider shall inform policyholders of any
lapse in coverage under the Contracts as well as grace period notices
indicating a lapse may be forthcoming, in each case as required by the
Contract or by Applicable Law.
5. PROVISION OF FORMS. The Service Provider shall provide, at the Service
Provider's own expense, forms and supplies necessary to the performance of
the Service Provider's obligations under this Agreement including, without
limitation, confirmation statements and issue-related forms, contracts,
endorsements and agreements.
6. PERFORMANCE OF OBLIGATIONS. The Service Provider shall perform all of
FAFLIC's obligations under (i) each participation agreement between FAFLIC
and any mutual fund organizations in which assets of the Registered
Separate Accounts are invested (the "Participation Agreements"), (ii) the
principal Underwriting and Administrative Services Agreement dated November
26, 1997 between FAFLIC and VeraVest Investments, Inc., the principal
underwriter of the Contracts, or any replacement underwriting or other
distribution agreement; provided, however, that the Service Provider shall
at all times select the same principal underwriter for FAFLIC as for its
own business. The Service Provider may, however, at its discretion, send
add-on coupons and reminder XXX statement stuffers or footnotes or similar
communications to policyholders. The Service Provider shall be responsible
for all communications with mutual fund organizations, including, without
limitation, any negotiation of extensions or modification of the
Participation Agreements; FAFLIC shall not unreasonably
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withhold, delay or condition its consent to any such extensions or
modifications negotiated and recommended by the Service Provider.
7. CLAIMS ADMINISTRATION. The Service Provider shall administer claims on the
Contracts as appropriate, including the following:
(a) Reviewing and paying all claims for benefits which the Service
Provider's review determines to be qualified for payment in
accordance with applicable Contract provisions. Any such
payments shall be made within the time periods and in the manner
prescribed by Applicable Law. Each payment made by the Service
Provider with respect to claims subject to this Agreement shall,
where appropriate, be made in full and final discharge of the
obligations of FAFLIC or the Service Provider under the
applicable Contract with respect to such payment;
(b) Reviewing and (subject to Section 6.03 of this Agreement)
compromising or denying, as is appropriate based on a level of
accuracy and responsiveness not less favorable than the practices
of the Service Provider in administering its own products, all
claims for benefits which the Service Provider's review
determines to be qualified for such denial or compromise, in
reliance on applicable Contract provisions and Applicable Law. In
the event of non-payment of claims on account of incomplete or
insufficient data, the Service Provider shall acknowledge such
fact to the claimant by the earlier of(i) ten (10) Business Days
from date of receipt of the claim or (ii) the number of days
provided by Applicable Law;
(c) Communicating with claimants with respect to the submission,
approval and payment, compromise or denial of claims made under
the Contracts;
(d) Maintaining such files and records as are necessary to enable
FAFLIC, at any time, to reasonably determine the true and accurate
claim experience on the Contracts;
(e) Conforming to the reasonable requirements set by FAFLIC for monthly
submission of claims reports, but only the extent such reports were
produced by FAFLIC prior to the Closing Date;
(f) Performing such other claim services as may be reasonably required
in connection with the support and administration of the Contracts;
(g) Preparing all Federal Tax reports and state tax reports required by
Applicable Law, including, without limitation, 1099-R, 1099-INT,
1O99MISC, W-2P, W-2 and 5498 for policyholders and beneficiaries as
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required, and distributing the same to policyholders and
beneficiaries and appropriate authorities;
(h) Responding to any requests from plan administrators or trustees for
policy information affecting the plan or participants for
qualified plans;
(i) Responding to reasonable requests for calculations applicable to
annuity payments as may be necessary for Tax calculations;
(j) Responding to reasonable requests for partial claims, including,
without limitation, with respect to waiver of premium riders,
nursing home provisions, and waiver of monthly deduction; and
(k) Reasonable cooperation with FAFLIC efforts to facilitate fraud
detection and investigation that may relate to the Contracts.
(1) Administering payouts on annuity contracts in conformity with
contract provisions and the applicable provisions of the Code.
8. REINSURANCE ADMINISTRATION AND FINANCIAL REPORTING. With respect to the
Reinsurance Agreements or any other third party reinsurance which applies
to the Contracts, the Service Provider shall provide appropriate
reinsurance administration and financial reporting.
9. LITIGATION.
(a) Notwithstanding any other provision of this Agreement to the
contrary, nothing herein shall affect the rights and obligations
of the parties thereto under Article 10 of the SPA or, if
applicable, Article 12 of the Core Coinsurance Agreement,
including, without limitation, any obligations that the Service
Provider may have under Article 10 of the SPA or, if applicable,
Article 12 of the Core Coinsurance Agreement with respect to
Claims and Warranty Breaches (as each term is defined in the
SPA), and control, defense and settlement of claims. Subject to
the foregoing, the Service Provider shall defend and prosecute in
a manner consistent with all Applicable Law, at its sole cost,
expense and for its own account, all suits, actions and
proceedings arising out of underwriting of the Contracts and
claims for benefits thereunder. FAFLIC shall have the right, at
its sole cost and expense, to participate in any suit, action or
proceeding arising under the Contracts. Notwithstanding any
provision in this Agreement to the contrary, FAFLIC shall have
final authority with respect to such defense and prosecution.
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(b) As soon as practicable (and in all cases within five (5) Business
Days) after receipt by the Service Provider of notice or threat
of the commencement of any suit, action or proceeding naming
FAFLIC as a party, the Service Provider shall provide a copy of
all documentation received in respect thereof (with, where
appropriate, notation as to time and place of Service and the
identity of the person served) to FAFLIC. As soon as practicable
(and in all cases within five (5) Business Days) after receipt by
FAFLIC of notice or threat of the commencement of any suit,
action or proceeding naming the Service Provider as a party,
FAFLIC shall provide a copy of all documentation received in
respect thereof (with, where appropriate, notation as to time and
place of service and the identity of the person served) to the
Service Provider. FAFLIC shall have the right, at its sole cost
and expense, to examine all files and papers relating to all
claims, suits, actions or proceedings arising under the
Contracts, and the Service Provider shall reasonably cooperate in
such examination and consultation. The Service Provider shall
provide FAFLIC with a reasonably detailed statement of litigation
in progress upon request, but in no event less than quarterly.
The Service Provider shall not file any complaint or initiate any
legal proceeding in the name of FAFLIC without the written
consent of FAFLIC, unless otherwise agreed, such agreement not to
be unreasonably withheld, conditioned or delayed.
10. POLICYHOLDER SERVICES. The Service Provider shall provide general
policyholder services to individuals under the Contracts, including,
without limitation, the following:
(a) Responding to inquiries with respect to the scope and amounts of
coverage or benefits provided under the Contracts;
(b) Supplying claimants, policyholders, annuitants and insureds with
appropriate instructions and forms for reporting claims and for
submitting relevant information;
(c) Issuing timely reports, statements, and confirmations as required
by the Contracts and Applicable Law and at a level of accuracy
and responsiveness not less favorable than the practices of the
Service Provider in administering its own products (subject to
adjustment as required by Applicable Law);
(d) Timely processing and recording of changes in the Contracts (such
changes may include, without limitation, (i) changes of ownership,
beneficiary, amount of insurance, options under the Contracts, and
(ii) changes in name, changes in address and changes in other data
related to
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the policyholders and insureds under the Contracts), reissuances,
and all financial transactions (e.g. transfer requests, from one
subaccount to another), in all cases within time intervals
necessary to meet Securities and Exchange Commission (the "SEC"),
NASD, and other legal and regulatory requirements;
(e) Processing Contract Loans, surrenders and reinstatements as
required by the Contracts and Applicable Law and at a level of
accuracy and responsiveness not less favorable than the practices
of the Service Provider in administering its own products (subject
to adjustment as required by Applicable Law);
(f) Applying a level of accuracy and responsiveness not less favorable
than the practices of the Service Provider in administering its own
products (subject to adjustment as required by Applicable Law) with
respect to replacements and exchange requests;
(g) Obtaining (on a daily basis) the net asset value and computing the
accumulation unit value of each subaccount of the Registered
Separate Accounts that are funding options for the Contracts in
accordance with the provisions of the Contracts, as well as with
the prospectus and statement of additional information disclosure
on any day when such calculation is required by the Investment
Company Act of 1940, as amended, and the rules and regulations
there under;
(h) Calculating (on a daily basis) the mortality and expense charges,
administrative charges, and (on a monthly basis) cost of insurance
in accordance with the provisions of the Contracts, as well as with
the prospectus and statement of additional information disclosure;
(i) Transmitting orders for the purchase or redemption of shares to the
subject fund manager or their authorized agents and paying and
receiving funds in connection with such purchases or redemptions as
required by any applicable agreement;
(j) Providing all administrative services required in connection with
any Reinsurance Agreements;
(k) Preparing contract data pages and other inserts or additions to the
Contracts and mailing such items to policyholders or agents, as
appropriate;
(1) Responding to all inquiries received (whether by telephone,
electronic transmission, facsimile, mail or otherwise) from agents,
insureds,
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policyholders, beneficiaries and annuitants or their authorized
agents or representatives in accordance with Applicable Law and at
a level of accuracy and responsiveness not less favorable than the
practices of the Service Provider in administering its own products
(subject to adjustment as required by Applicable Law);
(m) Maintaining a toll-free telephone number for inquiries by agents,
policyholders and claimants or their authorized agents or
representatives, with properly licensed staffing sufficient to
handle inquiries on a prompt basis;
(n) Determining amounts of death benefit and annuity payments
(including the taxable portion of such payments) and promptly
processing such payments;
(o) Processing any required or permitted changes in non-guaranteed
elements (e.g. costs of insurance for life policies and crediting
rates on certain general account fund options) and satisfying all
related notice or approval requirements in connection with such
required or permitted changes; and
(p) Making available all required in-force policy illustrations to
customers and agents.
11. AGENT COMPENSATION. The Service Provider shall, on behalf of FAFLIC, pay
the compensation due from FAFLIC to the broker/dealers of record or the
former career agent for the Contracts as determined pursuant to any written
agreements under which any payments become due after the Closing Date and
provided to the Service Provider, and administer and pay any compensation
due under the "Trail Program" in accordance with its terms and as set forth
in Item 4 of Schedule 7.07 to the SPA. In connection therewith, the Service
Provider shall also give effect to any debit balances and/or overpayments
that are recoverable or deductible from current or future commission
payments. The Service Provider shall assure compliance with all reasonable
commission accounting standards.
12. ACCOUNTING AND REPORTING SERVICES. With respect to the Contracts, except as
otherwise set forth herein, the Service Provider shall perform all
accounting and reporting of direct and ceded premiums, claims and other
policyholder disbursements, reserves, Contract Loans, commissions, and
premium Tax payments and accruals. Such services shall include all
accounting and reporting necessary to provide FAFLIC with all required
statutory, regulatory data, and with respect to GAAP data, such information
as would be available to the Service Provider and required by FAFLIC to
determine its GAAP reserves, needed for financial statements and filings
and state and federal income and premium Tax
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reporting and filings. Without limiting the generality of the foregoing,
the Service Provider shall provide the following reports to FAFLIC in a
format mutually agreed upon between FAFLIC, and the Service Provider:
(a) Monthly, within the time period after the end of each month
indicated below, the Service Provider shall furnish FAFLIC with:
(i) All monthly cash activity for the general account, by
state, for premiums, premium taxes, claims, surrenders and
policy loan transactions - within four (4) Business Days;
(ii) Detailed trail balance for Separate Accounts - by the fourth
(4th) Business Day, including all accounts comprising
insurance, investment, and special reserve activity such as
AMF and Adjustments for Contract Guarantees related to
payout values.
(iii) Accrual, GAAP and statutory transactions - by the sixth
(6th) Business Day;
(iv) Actuarial reporting: By the sixth (6th) Business Day,
Tax, SAP and GAAP reserves. SAP reserves will be calculated
in accordance with the definition of Statutory Reserves as
defined in the Core Coinsurance Agreement. GAAP reserves
will be calculated consistent with the reserving factors and
methods to be provided to the Service Provider by FAFLIC and
otherwise in accordance with standard actuarial practices
and guidelines.
(v) Contract Loan activity report - by the fourth (4th) Business
Day.
(b) Quarterly, within the time period after the end of each quarter,
the Service Provider shall, in addition to the normal monthly
reporting (which shall also reflect GAAP reporting including
reserves and reserve components), furnish FAFLIC with:
(i) By the sixth (6th) Business Day, Reserve, Premium, and
In Force report, with itemization of paid amounts, including
but not limited to:
(A) Account values,
(B) Benefits,
(C) Separate Accounts activity and balances,
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(D) Death claims pending,
(E) Total Contract Loans outstanding,
(F) Interest due and accrued on Contract Loans, and
(G) Claims by state.
(ii) By the sixth (6th) Business Day, GAAP reporting (including
reserves, GMDB, IBNR and pending claims); and
(iii) Schedule T information - within four (4) Business Days,
including but not limited to:
(A) First year premium,
(B) Renewal premium,
(C) Premium waived,
(D) Death claims and other benefits,
(E) Reserves released on death,
(F) Interest on claims,
(G) Surrenders,
(H) Contract Loan interest, and
(I) Change in Contract Loans.
(c) Annually, within the time period indicated below, the Service
Provider shall in addition to the normal monthly and quarterly
reporting furnish FAFLIC with the following:
(i) Information necessary to complete the Annual Statement
("Blue Book"), the Separate Account Annual Statement ("Green
Book"), and state required quarterly and supplemental
filings (including without limitation NOLHGA filings, New
York State Supplement, rating agency surveys and risk-based
capital report), including the following - within twenty
(20) Business Days following the last day of the applicable
reporting period:
1) Schedule S;
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2) Schedule T;
3) Exhibit of Life Insurance;
4) Exhibits: Exhibit 1 - Part 1- Premiums and Annuity
Considerations for Life and Accident and Health
Policies and Contracts, Exhibit 1 - Part 2 - Dividends
and Coupons Applied, Reinsurance Commissions and
Expense Allowances and Commissions Incurred (direct
business only), Exhibit 5 - Aggregate Reserve for Life
Contracts, Exhibit 7 - Deposit Type Contracts, Exhibit
8 - Claims for Life and Accident and Health Contracts;
5) Analysis of Increase in Reserves;
6) Schedule F (Resisted claims), if any;
7) Applicable note information;
8) Tax reserves as described in Section 14(d); and
9) Separate Account Annual Statement Schedule D, IMR, AVR,
Schedule E, and all Liability and Reserve schedules
required to complete Green Book filings.
(d) The Service Provider shall segregate data in the reports in
Sections 12 a., b. and c. of this Exhibit by product lines to the
extent required for statutory filings applicable to FAFLIC.
(e) The Service Provider shall, upon the reasonable request of
FAFLIC, provide timely support for reasonable ad hoc tax requests
for the purpose of filing the FAFLIC state and federal tax returns
and for calculation of the federal tax provision, particularly
related to separate account dividend and capital gain activity.
With respect to premium Taxes, the Service Provider's reporting shall be
broken out on a state-by-state basis and shall also be broken out between
life insurance policies and annuities. Service Provider shall break out
such information into such other categories as FAFLIC may reasonably
request. In addition, monthly reporting in forms mutually acceptable to the
parties shall be provided by Service Provider with respect to premiums,
paid and pending claims, and compliance within the timeframe standards set
forth in this Agreement.
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13. BROKER/DEALER TRANSFER AND LICENSING. Service Provider shall, on behalf of
the Company, provide the following support for third party annuity and life
broker/dealers and broker changes, including with respect to:
(a) Broker transfers
(b) Business transfers
(c) Broker setup
(d) Broker/dealer setup
(e) Confirmation of licensing for broker/dealers
The Service Provider shall periodically reimburse FAFLIC for actual
cost of any renewal and appointment fees paid to states for the
foregoing. Reimbursement shall commence on the effective date of
this Agreement.
14. ACTUARIAL SERVICES. The Service Provider shall provide FAFLIC with the
following actuarial services:
(a) Experience analysis (loss ratios, persistency,
mortality, and special studies), if any, required by
Applicable Law (including legally required reporting);
(b) Calculation of all actuarial reserves and liabilities
and other actuarial items necessary to prepare SAP
financial statements and supporting exhibits and Tax
filings and schedules, and in the case of GAAP financial
statements, information available to the Service
Provider and necessary for FAFLIC to make such
calculations, with both: (i) segregation of policy
activity into general ledger accounts to track the
necessary premium, claim, commissions, policy benefits,
etc. by product line as defined by the applicable
statutory annual statements, and (ii) certifications of
policyholder in force data and reserves as required for
valuation purposes;
(c) Determination of rate changes;
(d) Calculation of Tax reserves meeting the requirements of
Section 807 of the Code, including, without limitation,
under CARVM or CRVM, as applicable;
(e) Ongoing support, as reasonable, to compliance function;
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(f) Providing responses to state regulators as required to the
extent specified herein;
(g) Providing miscellaneous support to policyholder service; and
(h) Providing the information, as specified by FAFLIC and
available to the Service Provider, and/or certifications
necessary for the formal actuarial opinions and related
reports required by the NAIC Annual Statement blank and
other state requirements, the SEC, the NASD, any other
regulatory authorities, and external auditors.
15. COMPLIANCE SERVICES. The Service Provider shall provide FAFLIC with the
following compliance services:
(a) Subject to any restrictions set forth in the Agreement, the
development and filing of policy forms, riders, endorsements,
and disclosure statements as may be required from time to time
by Applicable Law;
(b) Filing of rate changes, as required;
(c) Subject to receiving all information and records from FAFLIC
reasonably necessary to prepare such data, preparation and
submission of(and provision of financial data required for) all
reports required by or data requests of the SEC (including,
without limitation, forms N-SAR and N-CSR, 485(b) registration
statement updates, fund and Registered Separate Account annual
reports and 24f-2 Notices), the NASD (including, without
limitation, compilation of information, if any, related to the
Contracts that would be reflected in any quarterly schedule 1 or
Customer Complaints Rule 3070 Report), and the states (in each
case only after review and approval thereof by FAFLIC), with all
of the foregoing to be accomplished within such time periods as
are necessary to comply with Applicable Law after giving
allowance, in the cases of information relevant to reports of
filings of FAFLIC that are not specific to the Contracts, for
time periods reasonably specified by FAFLIC to permit
integration of the subject information related to the Contracts;
(d) Provide data to Xxxx Xxxx Investments, Inc. ("Xxxx Xxxx")
reasonably necessary for Xxxx Xxxx, and available to the Service
Provider, to prepare and submit quarterly FOCUS II/IIA and annual
FOCUS reports.
(e) Review and approval of customer communications by appropriately
licensed personnel;
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(f) Coordination of mailings in respect of Contracts required by
Applicable Law or contract forms, including, among other things,
the periodic mailing of privacy notices;
(g) Subject to the provisions of Section 10.03 of the SPA, handling any
written communication primarily expressing a grievance against
FAFLIC or the Service Provider with respect to the Contracts, as
follows:
(i) The Service Provider shall advise FAFLIC of any written
customer complaint threatening the commencement of legal
action or regulatory action or of any inquiry or complaint
received from or forwarded by a state insurance department
or other government agency, better business bureau or an
attorney representing any customer within five (5) Business
Days from receipt thereof, and shall, if requested by
FAFLIC, provide FAFLIC with copies of all pertinent files
and correspondence relating thereto;
(ii) The Service Provider shall be responsible for the
investigation and preparation of responses to all customer
complaints and regulatory inquiries or complaints, provided
that no response (other than acknowledging receipt of the
complaint) to a customer complaint threatening the
commencement of legal action or regulatory action or an
inquiry or complaint received from or forwarded by a state
insurance department or other government agency, better
business bureau or any attorney representing any customer
shall be sent to said customer, government agency, better
business bureau or attorney if FAFLIC promptly notifies the
Service Provider that FAFLIC intends to respond to such
complaint and the Service Provider receives such
notification prior to responding;
(iii) Subject to the foregoing, all customer complaints shall be
handled in accordance with Applicable Law (including,
without limitation, NASD requirements and any response time
requirements applicable thereto); the Service Provider shall
provide written acknowledgment of such customer complaint
within one (1) Business Day after receipt thereof and shall
use best efforts to provide final response within ten (10)
Business Days, unless otherwise required by Applicable Law
or Order or the terms of the complaint; and a record of all
customer complaints shall be maintained in a log showing the
date received, the nature of the complaint, the action taken
(if any) and the date of the response;
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(h) Drafting and filing registration statements and other SEC related
documents, where required, and performing services necessary to
meet SEC requirements and distributing all required prospectuses,
post-effective amendments or supplements to the registration
statements of the Registered Separate Accounts or of any underlying
funds as well as annual and semi-annual reports;
(i) Making all filings and obtaining all regulatory approvals required
with regard to advertising of the Contracts, including, without
limitation, all filings and approvals required by Applicable Laws
and NASD requirements (except to the extent that such services are
performed by other entities pursuant to written agreements with
FAFLIC);
(j) Providing regulatory supervision and compliance with respect to the
Service Provider's employees, to the extent the Service Provider is
legally permitted, as to all servicing functions contemplated by
this Agreement;
(k) Ensuring SEC and NASD compliance for variable contracts,
prospectuses, and registration statements including the submission
of any required information; quarterly complaint reporting; and,
the Service Provider and FAFLIC shall work together to develop
appropriate practical procedures in light of the fact that FAFLIC
is the legal owner of the Separate Accounts, to comply with Section
38a-1 of the Investment Company Act of 1940 and provisions
requiring annual compliance audits, in each case either by or at
the expense of the Service Provider, but in any case only with
respect to the Contracts and to the extent permitted by Law;
(1) Monitoring statutes and regulations of the insurance departments in
the various states in which the policyholders or the Contracts are
located to ensure compliance therewith and to ensure that any
actions or communications required by such regulations or statutes
are properly made;
(m) Monitoring the federal securities statutes and the rules,
regulations, orders, and interpretations thereunder and the
securities statutes and rules, regulations, orders, and
interpretations thereunder of the various states in which
policyholders are located to ensure compliance therewith and to
ensure that any actions or communications required thereby are
properly made;
(n) Compliance with OFAC and money "laundering" restrictions,
including, without limitation, those adopted under the U.S. Patriot
Act; and
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(o) Providing such other reasonable assistance as FAFLIC may require
under its direction in connection with responding to inquiries from
the SEC, NASD, NAIC or the insurance or securities departments of
the various states in which the policyholders are located.
16. DATA PROCESSING. The Service Provider shall provide all data processing
services, software, staffing and facilities necessary to provide the
Services in accordance with this Agreement and Applicable Law, including,
without limitation, enhancement support for regulatory changes, break/fix
support for software and hardware, business continuity, a secure
environment (including, without limitation, such security as shall ensure
the integrity of the data and the prevention of unauthorized access),
backups of data and disaster recovery.
17. GENERAL SERVICES AND OVERSIGHT. The Service Provider shall provide
appropriate management oversight of the financial performance and monitor
significant activities relating to the Contracts, providing appropriate
data to FAFLIC in an agreed-upon format, including the following:
(a) To the extent and under the conditions set forth in the Agreement,
making all records relating to the Contracts available to FAFLIC
for audit in a format appropriate to the request, upon reasonable
notice and during the regular business hours of the Service
Provider (including, without limitation, federal Tax documentation
(which, for the avoidance of doubt, does not include any Tax
returns of the Service Provider or work papers relating to Tax
returns of the Service Provider), policyholder records, in force
listings, premium records, claim forms, itemized xxxxxxxx,
eligibility documentation, and agent records and files).
(b) Performing such other administrative services as may be reasonably
required in connection with the support and administration of the
Contracts.
18. PROXY PROCESSING.
(a) The Service Provider shall receive record date information and
proxy solicitation materials and other applicable information from
underlying investment vehicle(s).
(b) The Service Provider shall prepare proxy ballots.
(c) The Service Provider shall mail solicitation and resolicitations,
if necessary.
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(d) The Service Provider shall maintain all proxy registers and other
required proxy material.
(e) The Service Provider shall vote as per instructed by applicable
policyholder in accordance with Contract provisions and related
prospectus and other disclosure materials.
19. WEB SITE. Service Provider shall maintain a web site that gives
policyholders of Contracts and their respective authorized agents view
access to policy data, including, as applicable, daily account values, unit
values and transaction confirmations to the extent and in such manner as
provided by Service provider in administering its own comparable products.
Such web site shall be maintained in accordance with service Provider's
standards for customer information access and on-line customer
transactions, with such standards including commercially reasonable
firewalls and other reasonable protections assuring: (a) the security of
the web site and of individual policyholder information and transactions,
and (b) the privacy of and limited access to, the policyholder's account
and account related information (or other personal or personally
identifying information). Information obtained or derived from the
operation of the web site relating to the Contracts shall not be used for
any purpose other than performance of the Services under this Agreement.
Further, the operation and maintenance of the web site shall be conducted
in accordance with Applicable Law and the requirements and applicable
standards set forth in this Agreement.
20. UNDERWRITING. Conducting all underwriting (whether related to
reinstatements or increases in coverage that may be required under the
terms of a Contract) in accordance with Applicable Law, including any and
all restrictions upon discrimination.
A-16
EXHIBIT B
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the following
definitions:
"ACTUAL COST" shall have the meaning set forth in Section 4.01.
"AFFILIATE" shall mean, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person;
PROVIDED that the Service Provider shall not be considered an Affiliate of
Seller for any period from and after the Closing.
"AGREEMENT" shall mean this
Core Administrative Services Agreement.
"ANCILLARY AGREEMENTS" shall mean the Restructuring Agreement, the Core
Coinsurance Agreement (including the related trust agreement), the Non-Core
Coinsurance Agreement, this Agreement, the Non-Core Administrative Agreement,
the Transition Services Agreement, the AIT Reorganization Agreement, the IP
License Agreement, the employee-related side letter entered into on the date
hereof and any other document that by its terms expressly constitutes an
Ancillary Agreement.
"APPLICABLE LAW" shall mean (i) any applicable statute, law (including
principles of common law), ordinance, rule, regulation or binding circular,
binding bulletin or binding and published written opinion by any Governmental
Entity and (ii) all applicable Orders (as defined in the SPA) and written
recommendations of Insurance Regulators binding on FAFLIC (relating to the Core
Business (as defined in the SPA)).
"AUTHORIZED ADMINISTRATOR" shall have the meaning set forth in Section 5.05.
"BANKRUPTCY LAWS" shall have the meaning set forth in Section 9.01(a).
"BUSINESS DAY" shall mean each day on which a valuation of the Separate Accounts
is required by Applicable Law or the terms of the Contracts, which as of the
Effective Date was each day that the New York Stock Exchange is open for
trading.
"CLOSING DATE" shall mean the closing date of the SPA.
"CONTRACTS" shall mean all Insurance Contracts (as defined in the SPA) issued by
FAFLIC or to which FAFLIC is a party, either prior to or if following the
Effective Date, limited to the types identified in clauses (i)(C)(I) through
(i)(C)(IV) in the definition of "Core Business" (as defined in the SPA).
B-1
"CONTRACT LIABILITIES" shall have the meaning set forth in the Core Coinsurance
Agreement.
"CONTRACT LOANS" shall mean loans under the Contracts, with the
dollar amount of Contract Loans at any time being the amount of principal
indebtedness plus accrued and unpaid interest, all calculated on a basis
consistent with SAP and the terms of the Contracts.
"CORE COINSURANCE AGREEMENT" shall have the meaning set forth in the SPA.
"CORE COINSURANCE CLOSING" shall have the meaning set forth in the SPA.
"CORE COINSURANCE TERMINATION" shall have the meaning set forth in Section 4.01.
"DEFAULT NOTICE" shall have the meaning set forth in Section 9.02.
"FACILITIES" shall have the meaning set forth in Section 5.02.
"FAFLIC" shall have the meaning set forth in the Preamble.
"FAFLIC BOOKS AND RECORDS" shall have the meaning set forth in Section 12.01.
"FAFLIC NAMES AND MARKS" shall have the meaning set forth in Section 3.04.
"FINAL AND BINDING" shall have the meaning set forth in Section 14.01(e).
"GAAP" shall mean generally accepted accounting principles in the United States.
"GOVERNMENTAL ENTITY" shall mean any governmental or regulatory authority,
agency, commission, court, tribunal, body or other governmental or
quasi-governmental or self regulatory entity, or any arbitral body.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 10.03(a).
"INDEMNITEE" shall have the meaning set forth in Section 10.03(a).
"IP LICENSE AGREEMENT" shall have the meaning set forth in the SPA.
"LICENSED NAMES AND MARKS" shall have the meaning set forth in Section 3.04(a).
"LOSSES" shall have the meaning set forth in Section 10.01.
"NASD" shall have the meaning set forth in Section 13.01.
B-2
"NEW XXXX" shall have the meaning set forth in Section 3.04(a).
"PERSON" shall mean an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"REGISTERED SEPARATE ACCOUNTS" shall mean the separate accounts of FAFLIC
identified as such on Schedule 1.01(a) hereto.
"REINSURANCE AGREEMENTS" shall have the meaning set forth in the SPA.
"REPRESENTATIVES" shall have the meaning set forth in Section 10.01(a).
"SAP" shall mean the statutory accounting principles and practices prescribed or
permitted by the applicable Insurance Regulators (as defined in the SPA).
"SELLER" shall have the meaning set forth in the Recitals.
"SEPARATE ACCOUNTS" shall mean the Registered Separate Accounts and the
Unregistered Separate Accounts.
"SERVICE PROVIDER" shall have the meaning set forth in the Preamble.
"SERVICE PROVIDER BOOKS AND RECORDS" shall have the meaning set forth in
Section 7.01.
"SERVICES" shall have the meaning set forth in Section 3.01.
"SPA" shall have the meaning set forth in the Recitals.
"SYSTEMS" shall have the meaning set forth in Section 5.03.
"TAX" shall have the meaning set forth in the SPA.
"TERMINATION NOTICE" shall have the meaning set forth in Section 9.02.
"TRANSAMERICA REINSURANCE AGREEMENTS" shall mean the reinsurance agreements,
effective January 1, 1998 and January 1, 1999, respectively, between
Transamerica Occidental Life Insurance Company ("Transamerica") and FAFLIC,
pursuant to which FAFLIC reinsures certain individual variable universal life
insurance policies of Transamerica.
"TRANSFERRED RECORDS" shall have the meaning set forth in Section 12.01.
B-3
"TRANSITION SERVICES AGREEMENT" shall have the meaning set forth in the SPA.
"UNREGISTERED SEPARATE ACCOUNTS" shall mean the separate accounts of FAFLIC
identified as such on Schedule 1.01(a) hereto.
"URLs" shall have the meaning set forth in Section 3.04(b).
B-4
SCHEDULE 1.01(a)
SEPARATE ACCOUNTS
REGISTERED SEPARATE ACCOUNTS
Annuity Products:
Separate Account VA-P
Separate Account KGC
Separate Account KG
Separate Account VA-K
Fulcrum Separate Account
Allmerica Select
Separate Account I
Life Products:
VEL Account II
Separate Account SPVL
Group VEL Account
Inheiritage Account
Allmerica Select Separate Account II
Separate Account IMO
UNREGISTERED SEPARATE ACCOUNTS
SEP ACCT A
SEP ACCT B
SEP ACCT C
SEP ACCT D
SEP ACCT G
SEP ACCT H
SEP ACCT J
SEP ACCT Y (Y FUNDS)
