EXECUTION ORIGINAL
THIRD PARTY ADMINISTRATOR AGREEMENT
BY AND AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
SECURITY DISTRIBUTORS, INC.
AND
THE XXXXXXX XXXXX GROUP, INC.
AUGUST 22, 2005
THIRD PARTY ADMINISTRATOR AGREEMENT
This Third Party Administrator Agreement is made as of the twenty second day of
August, 2005, by and between The Xxxxxxx Sachs Group, Inc., a Delaware
corporation ("GS GROUP"), together with its Affiliates identified in the
applicable Work Assignments entered into hereunder from time to time (each such
Affiliate, a "CLIENT" and collectively, the "CLIENTS"), Security Benefit Life
Insurance Company, a Kansas insurance company ("ADMINISTRATOR"), and Security
Distributors, Inc., a Kansas corporation ("SDI"), an Affiliate of ADMINISTRATOR,
for the limited purposes set forth herein.
The undersigned have executed and delivered this agreement as among themselves,
and ADMINISTRATOR and SDI agree to be bound by any Work Assignment entered into
as contemplated hereby, as set forth more fully in Article 1.
SECURITY BENEFIT LIFE SECURITY DISTRIBUTORS, INC.
INSURANCE COMPANY ONE SECURITY BENEFIT PLACE
ONE SECURITY BENEFIT PLACE TOPEKA, KANSAS 66636-0061
XXXXXX, XXXXXX 00000-0000
By: By:
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[signature] [signature]
Name: Name:
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[printed] [printed]
Title: Title:
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THE XXXXXXX XXXXX GROUP, INC.
00 XXXXX XXXXXX, XXX XXXX, XX 00000
By:
------------------------------------
[signature]
Name:
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[printed]
Title:
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INDEX OF EXHIBITS AND ANNEXES
EXHIBIT NAME
------- ----
Exhibit A [Reserved]
Exhibit B [Reserved]
Exhibit C [Reserved]
Exhibit D Off-Site Facilities
Exhibit E Disqualifying Standards
Exhibit F Business Resumption Plan
Exhibit G Outsourced Work
Exhibit H Key Personnel
Exhibit I Service Centers
Exhibit J [Reserved]
Exhibit K [Reserved]
Exhibit L [Reserved]
Exhibit M [Reserved]
Exhibit N Security Management Procedures
Exhibit O [Reserved]
Exhibit P Other State TPA Requirements
ANNEXES
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Annex 3.1(c) Form of Transition Planning Agreement
Annex 3.19(g) The Security Benefit Group of Companies Code of
Business Conduct and Ethics
Annex 8.2 Form of GS GROUP Guaranty
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GENERAL TERMS AND CONDITIONS
WHEREAS, GS GROUP is a holding company domiciled in the State of New York,
engaged through its Affiliates and subsidiaries in insurance, annuity,
broker-dealer, investment management and related businesses;
WHEREAS, ADMINISTRATOR provides certain services as a third party administrator
with respect to life insurance policies and annuity contracts issued in the
United States;
WHEREAS, SDI provides certain securities brokerage services in the United States
related to the services provided by ADMINISTRATOR;
WHEREAS, ADMINISTRATOR and SDI possess certain software equipment, facilities,
and contract rights (collectively "Facilities and Systems") and employ or
otherwise engage the services of persons, necessary to provide and support the
administrative processing, maintenance of records, processing of information and
generation of output with respect to life insurance policies and annuity
products in the United States;
WHEREAS, GS GROUP desires that ADMINISTRATOR provide Services (as defined
herein) to CLIENTS, upon engagement by them, with respect to certain life
insurance policies and annuity products issued, reinsured, administered or
serviced by such CLIENTS, in each case, as specified in the applicable Work
Assignment as may be entered into hereunder from time to time (such life
policies and contracts, collectively, the "Contracts"), and ADMINISTRATOR
desires to accept such engagements; and
WHEREAS, each CLIENT desires that SDI will provide broker-dealer services in
connection with such engagement, and SDI desires to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
Parties hereto agree as follows:
1. STRUCTURE OF THIS AGREEMENT
A Work Assignment to which a CLIENT is a party describes the Services, in the
case of the ADMINISTRATOR, and the Brokerage Services, in the case of SDI, that
ADMINISTRATOR and SDI respectively agree to provide to such CLIENT, and may
contain special terms related to such CLIENT. (For the avoidance of doubt,
nothing in this Agreement shall obligate ADMINISTRATOR to perform Brokerage
Services.) These General Terms and Conditions and the Exhibits and Annexes
hereto, as applicable, state terms that apply to all dealings among
ADMINISTRATOR, SDI and the CLIENTS pursuant to this Agreement. These General
Terms and Conditions and the Exhibits and Annexes hereto, as applicable, state
terms that apply to all dealings among ADMINISTRATOR, SDI and GS GROUP. By
entering into a Work Assignment hereunder, a CLIENT shall be deemed to have
accepted and agreed to these General Terms and Conditions and the Exhibits and
Annexes hereto, but no CLIENT shall be deemed to be a party to any Work
Assignment to which it is not a signatory. Each Work Assignment, as supplemented
by the General Terms and Conditions and the Exhibits and Annexes hereto, shall
constitute a separate and distinct agreement, and, as among ADMINISTRATOR, SDI
and GS GROUP, these General Terms and Conditions and the Exhibits and Annexes
hereto shall constitute an agreement separate and distinct from any Work
Assignment. The term "Agreement" as used herein shall refer to each and every
agreement so constituted as described in the foregoing sentence. If there is any
conflict between an Exhibit, Annex or Work Assignment and these General Terms
and Conditions, the Exhibit, Annex or Work Assignment shall control. If there is
any conflict between an Exhibit or an Annex and a Work Assignment, the Work
Assignment shall control.
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2. DEFINITIONS
This section defines some capitalized terms that may be used in this Agreement.
2.1 ACCOUNT GUIDELINES has the meaning set forth in Section 6.3.
2.2 ADDITIONAL RECORDS has the meaning set forth in Section 4.8.
2.3 ADMINISTRATOR has the meaning set forth in the Preamble.
2.4 ADMINISTRATOR INDEMNIFIED PARTY has the meaning set forth in Section
12.1.
2.5 AFFILIATE means, with respect to a Person, any other Person that
directly, or indirectly, through one or more intermediaries, Controls
or is Controlled by, or is under common Control with, such Person.
2.6 AFLIAC has the meaning set forth in Section 3.1(b).
2.7 AGREEMENT has the meaning set forth in Article 1.
2.8 APPLICABLE LAW means all laws, common laws, rules, regulations, codes,
statutes, judgments, injunctions, orders, agreements, decrees, policies
and other requirements of all Governmental Entities applicable to the
Person, place and situation in question.
2.9 APPLICABLE LEVELS OF SERVICE means the levels of service applicable to
the Services and Brokerage Services as set forth in the applicable Work
Assignment.
2.10 BACK-UP COPIES has the meaning set forth in Section 3.9.
2.11 BOOKS AND RECORDS has the meaning set forth in Section 4.2.
2.12 BROKERAGE SERVICES has the meaning set forth in Section 3.14.
2.13 BUSINESS DAY means any day that is not a Saturday, Sunday or a day on
which banks in the State of New York are authorized or required to
close.
2.14 BUSINESS RESUMPTION PLAN has the meaning set forth in Section 3.10.
2.15 CAUSE has the meaning set forth in Section 7.5.
2.16 CLAIM means any civil, criminal or administrative claim, demand,
litigation, action, suit, hearing, investigation or proceeding
commenced by a third party.
2.17 CLAIMS NOTICE has the meaning set forth in Section 12.3.
2.18 CLIENT or CLIENTS has the meaning set forth in the Preamble.
2.19 CODE means the Internal Revenue Code of 1986, as amended.
2.20 CONFIDENTIAL INFORMATION means
a. with respect to a CLIENT,
i. the terms of this Agreement,
ii. any Nonpublic Information of such CLIENT,
iii. Nonpublic Information of third parties in the possession
of CLIENT
iv. the Books and Records of such CLIENT, and
v. any Nonpublic Personal Information of such CLIENT,
b. with respect to ADMINISTRATOR and SDI,
i. the terms of this Agreement,
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ii. any Nonpublic Information of ADMINISTRATOR and SDI,
respectively,
iii. Nonpublic Information of third parties in the possession
of ADMINISTRATOR or SDI, and
c. with respect to GS GROUP,
i. the terms of this Agreement,
ii. any Nonpublic Information of GS GROUP, and
iii. Nonpublic Information of third parties in the possession
of GS GROUP.
"Nonpublic Information" shall consist of all trade secrets and
information of any kind, including designs, concepts, ideas,
requirements, specifications, calculations, drawings, diagrams, maps,
charts, software, network structures, configurations, interfaces,
components, processes, practices, reports, lists, analyses,
compilations, data, studies, and other similar materials, in whatever
from maintained or furnished, whether documentary, orally, visually,
electronically, or by physical delivery or permitted observation or
inspection, or otherwise, regarding the property, products, services,
customers, or the exiting or planned businesses or operations or any
parts thereof of a Party and/or any one or more of its Affiliates,
including any information furnished prior to the date of this
Agreement, disclosed by such Party to the other Party in connection
herewith by whatever means, including orally, visually, electronically
or by physical delivery or permitted observation or inspection or
otherwise, regardless of whether specifically identified as
"confidential" but which the receiving Party knows or reasonably ought
to know is confidential, together with any reports, analyses, data,
studies, interpretations, forecasts, compilations, memoranda, notes and
any other writings (regardless of form) prepared by the other Party to
the extent such writings contain such information.
"Confidential Information" shall not include the categories of
information described in Section 14.4(a).
2.21 CONTINUING CLIENT RESPONSIBILITIES has the meaning set forth in Section
3.4.
2.22 CONTRACTS has the meaning set forth in the Recitals.
2.23 CONTROL and its derivatives mean, with respect to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or voting interests, by
contract or otherwise.
2.24 DISCLOSER has the meaning set forth in Section 14.1.
2.25 ERISA means the United States Employee Retirement Income Security Act
of 1974, as amended.
2.26 FACILITIES AND SYSTEMS has the meaning set forth in the Recitals.
2.27 GLB means the Xxxxx-Xxxxx-Xxxxxx Act, codified as 15 U.S.C. Section
6801 et seq., and its implementing regulations, as may be amended from
time to time.
2.28 GOVERNMENTAL ENTITY means any federal, state, local or foreign
government, any court, administrative, regulatory or other governmental
agency, commission or authority or any self-regulatory organization,
including without limitation the National Association of Securities
Dealers.
2.29 GS GROUP has the meaning set forth in the Preamble.
2.30 GS GROUP INDEMNIFIED PARTY has the meaning set forth in Section 12.2.
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2.31 IDEAS has the meaning set forth in Section 5.3(b).
2.32 INDEMNIFIED PARTY has the meaning set forth in Section 12.3.
2.33 INDEMNIFYING PARTY has the meaning set forth in Section 12.3.
2.34 INITIAL WORK ASSIGNMENT has the meaning set forth in Section 3.1(b).
2.35 INSOLVENT OR BANKRUPT PARTY has the meaning set forth in Section 7.6.
2.36 INSURED means a policyholder, annuityholder or certificateholder of a
Contract issued, reinsured, administered or serviced by a CLIENT.
2.37 LOSSES has the meaning set forth in Section 12.1
2.38 NET LOSS has the meaning set forth in Section 3.16.
2.39 NONPUBLIC INFORMATION has the meaning set forth in Section 2.20.
2.40 NONPUBLIC PERSONAL INFORMATION means personally identifiable financial
information, as defined by Title V of the GLB, and personally
identifiable health or medical information pertaining to any Insured,
or any past or future policyholder, annuityholder or certificateholder.
2.41 NSCC has the meaning set forth in Section 6.3(b).
2.42 OFF-SITE FACILITY has the meaning set forth in Section 3.9.
2.43 OTHER SOFTWARE LIST has the meaning set forth in Section 5.4.
2.44 PARTY means, as to the Agreement among GS GROUP, ADMINISTRATOR and SDI,
each of GS GROUP, ADMINISTRATOR and SDI (or ADMINISTRATOR and SDI
collectively, as the context requires), and as to an Agreement among
CLIENT, ADMINISTRATOR and SDI constituted by a Work Assignment, each of
CLIENT, ADMINISTRATOR and SDI (or ADMINISTRATOR and SDI collectively,
as the context requires).
2.45 PERSON means an association, firm, individual, partnership (general or
limited), corporation, limited liability company, trust, financial
institution, unincorporated organization or other entity.
2.46 PERSON-HOUR means the services of one Qualified person for one full
hour.
2.47 QUALIFIED means, with respect to an individual and a given service,
that such service is within the customary expertise of such individual
and that such individual is duly trained, licensed, certified or
registered if necessary to perform such service.
2.48 RECIPIENT has the meaning set forth in Section 14.1.
2.49 RECORDS RETENTION POLICY has the meaning set forth in Section 3.9.
2.50 REGULATORY AUTHORITY means a state department of insurance or other
governmental body that has the authority to regulate ADMINISTRATOR or
SDI or their performance of Services or Brokerage Services under this
Agreement.
2.51 REIMBURSABLE EXPENSES means (i) all reasonably incurred, documented and
necessary expenses with respect to pre-approved travel (including
lodging and meal expenses), (ii) all reasonably incurred out-of-pocket
costs and (iii) all reasonably incurred pass-through expenses, in each
of cases (ii) and (iii) as described in the applicable Work Assignment,
and, in the case of (iii), any other such expenses as are approved by
CLIENT.
2.52 RESTRICTED GROUP has the meaning set forth in Section 17.11.
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2.53 SALES TAX or SALES TAXES has the meaning set forth in Section 8.5.
2.54 SDI has the meaning set forth in the Preamble.
2.55 SERVICE CENTER has the meaning set forth in Section 3.19.
2.56 SERVICE PLATFORM has the meaning set forth in Section 5.3(b).
2.57 SERVICES has the meaning set forth in Section 3.1.
2.58 SOFTWARE means the software utilized by ADMINISTRATOR to perform the
Services and SDI to provide the Brokerage Services, including object
code and documentation.
2.59 STANDARD TIME AND MATERIALS RATES means, for a Person-hour and computer
usage, the rates stated in ADMINISTRATOR's rate schedule as set forth
in a Work Assignment and otherwise at its published rates. "Standard
Time and Materials Rates" for "materials" means the rates stated on
ADMINISTRATOR's rate schedule for materials, if any, as set forth in a
Work Assignment and otherwise at its published rates.
2.60 STOCK PURCHASE AGREEMENT has the meaning set forth in Section 3.1(b).
2.61 TERM has the meaning set forth in Section 7.1.
2.62 TERMINATION CHARGE means the applicable termination charge set forth in
a Work Assignment.
2.63 THIRD-PARTY INDEMNITOR has the meaning set forth in Section 12.3.
2.64 TIME AND MATERIALS BASIS: if a Work Assignment states that Services or
Brokerage Services will be provided on a "Time and Materials Basis,"
charges for said Services or Brokerage Services will be determined by
the amount of ADMINISTRATOR's or SDI's, as the case may be,
Person-hours and Reimbursable Expenses in respect of materials used in
providing the Service or Brokerage Service, rather than by the results
achieved. The CLIENT bears the risk of cost overruns and delays on work
performed on a Time and Materials Basis. Services, Brokerage Services
and services provided in connection with estimates (as contemplated by
Section 3.12) may be billed by the Person-hour or any other unit agreed
on in writing. Services, Brokerage Services and services provided in
connection with estimates (as contemplated by Section 3.12) will be
provided on a Time and Materials Basis and billed by the Person-hour at
Standard Time and Materials Rates, unless the controlling Work
Assignment specifies a different arrangement.
2.65 TRANSFER ASSISTANCE SERVICES has the meaning set forth in Section 7.9.
2.66 TRANSITION PLANNING AGREEMENT has the meaning set forth in Section
3.1(c).
2.67 TYPE A VARIANCE has the meaning set forth in Section 3.16.
2.68 TYPE B VARIANCE has the meaning set forth in Section 3.16.
2.69 UNAUTHORIZED ACTS has the meaning set forth in Section 14.5.
2.70 VARIANCE has the meaning set forth in Section 3.16.
2.71 WITHHOLDING TAXES has the meaning set forth in Section 8.5.
2.72 WORK ASSIGNMENT has the meaning set forth in Section 3.1.
3. TERMS OF APPOINTMENT/SERVICES
3.1 THIRD PARTY ADMINISTRATOR SERVICES.
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a. As of the effective date of each Work Assignment entered into
hereunder (each, a "Work Assignment"), the CLIENT party to such Work
Assignment hereby engages ADMINISTRATOR to perform the third party
administration services described herein (as applicable) and therein
(the "Services"), and SDI to perform the Brokerage Services, in each
case for and on behalf of such CLIENT on the terms and conditions set
forth in the Agreement constituted by such Work Assignment, these Terms
and Conditions and the Annexes and Exhibits hereto, and ADMINISTRATOR
hereby accepts such engagement by such CLIENT and agrees to perform the
Services, and SDI agrees to perform the Brokerage Services, in
accordance with and on the terms and conditions set forth in the
Agreement. The Services and Brokerage Services shall be performed in a
commercially reasonable manner. ADMINISTRATOR and SDI shall have only
those powers expressly granted and set forth in the Agreement, those
powers that shall be agreed in writing from time to time and powers
that are reasonably necessary and incidental to so perform their
obligations under the Agreement. ADMINISTRATOR and SDI shall have no
power or authority on lines of business or insurance or annuity
products or policy or contract forms other than those specifically
listed and set forth in the Agreement.
b. On the date hereof, GS GROUP has entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") with Allmerica Financial
Corporation, which provides, among other things, for the acquisition by
GS GROUP of all of the outstanding capital stock of Allmerica Financial
Life Insurance and Annuity Company ("AFLIAC") on the terms and subject
to the conditions set forth therein. It is the intent of the Parties
that upon the closing of the Stock Purchase Agreement, AFLIAC will
become a CLIENT hereunder and will receive Services and Brokerage
Services from ADMINISTRATOR and SDI respectively, pursuant to a Work
Assignment to be negotiated and agreed to by the Parties (the "Initial
Work Assignment"). Subject to the closing of the Stock Purchase
Agreement, GS GROUP agrees to cause AFLIAC to execute and deliver, and
ADMINISTRATOR and SDI agree to execute and deliver, the Initial Work
Assignment on the date of such closing, whereupon the Initial Work
Assignment shall be a binding Agreement among the Parties thereto.
c. Following the execution and delivery of this Agreement as among
GS GROUP, ADMINISTRATOR and SDI, such Parties will enter into an
agreement substantially in the form attached hereto as ANNEX 3.1(c)
(the "Transition Planning Agreement") providing for the preparation of
a transition plan by ADMINISTRATOR and SDI with respect to AFLIAC. The
Transition Planning Agreement shall be governed by these Terms and
Conditions as applicable to such Parties. From time to time such
Parties may enter into similar transition planning agreements, in
substantially the same form as the Transition Planning Agreement, with
respect to prospective CLIENTS proposed to be administered by
ADMINISTRATOR and SDI. Unless otherwise stated therein, such transition
planning agreements shall be governed by these General Terms and
Conditions as applicable to such Parties.
3.2 CHANGE ORDERS.
a. From time to time a CLIENT may request changes in the Services
and Brokerage Services rendered by ADMINISTRATOR or SDI under an
Agreement, or in the manner thereof. ADMINISTRATOR and/or SDI agree to
implement changes as may be requested by a CLIENT after ADMINISTRATOR
and/or SDI and such CLIENT have agreed in writing on the changes to be
made (which ADMINISTRATOR and/or SDI shall make reasonable efforts to
do) and additional or reduced charges under the applicable Work
Assignment, if any, attributable to the change. ADMINISTRATOR and/or
SDI shall have no responsibility or liability for such requested
changes unless and until
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ADMINISTRATOR and/or SDI and such CLIENT have so agreed in writing. Any
changes in any Services or Brokerage Services shall become effective
only in the event that a written amendment to this Agreement is
executed by the applicable CLIENT and ADMINISTRATOR and/or SDI, as
applicable.
3.3 FACILITIES. Except as otherwise provided in this Agreement,
ADMINISTRATOR and SDI shall furnish at their expense the facilities and
resources necessary to provide the Services and Brokerage Services
under this Agreement in accordance with the Applicable Levels of
Service, including, without limitation, necessary physical facilities,
Qualified personnel, office furniture, computer equipment and office
supplies necessary to provide the Services, in the case of
ADMINISTRATOR, and Brokerage Services, in the case of SDI. All such
personnel shall comply with the procedures and policies set forth on
EXHIBIT N, as in effect from time to time.
3.4 CONTINUING CLIENT RESPONSIBILITIES AS TO CONTRACTS. Except as set forth
herein, each CLIENT shall continue to be at all times solely
responsible for all matters related to the Contracts of such CLIENT
("Continuing CLIENT Responsibilities"). To the extent required by
Applicable Law, CLIENT acknowledges that it is solely responsible for
securing reinsurance and for the competent administration of its
benefit programs. Except as set forth herein, no CLIENT shall
subcontract, delegate or attempt to subcontract or delegate to
ADMINISTRATOR and SDI (and ADMINISTRATOR and SDI shall have no
responsibility and no liability for) any Continuing CLIENT
Responsibilities. ADMINISTRATOR and SDI assume no obligation or
responsibility for CLIENT's business or operations hereby other than as
contemplated hereby or as may arise from ADMINISTRATOR'S and SDI's
performance of their respective obligations under the Agreement.
3.5 UNDERWRITING. The Contracts are solely underwritten by CLIENTS, and
ADMINISTRATOR shall not be called upon to (and shall have no
responsibility to) establish any underwriting criteria, benefits or
premium rates, or to perform or conduct any services related to
underwriting other than to the extent set forth in the Agreement.
ADMINISTRATOR will perform only such underwriting services as are
contained in written procedures provided to it by the applicable
CLIENT, and, subject to changes in Applicable Law governed by Section
3.13(d), (a) in no event shall ADMINISTRATOR be called upon in such
procedures to provide any underwriting services that would require
ADMINISTRATOR to be registered with any Governmental Entity other than
such registration or licensure as is otherwise required to perform the
Services, and (b) ADMINISTRATOR may refuse to perform a service set
forth in such procedures if it reasonably concludes that performing
such service would require additional registration or licensure.
3.6 CLAIMS. ADMINISTRATOR shall have only such authority to pay claims as
is set forth in written procedures provided to it by the applicable
CLIENT and as more fully described in the Agreement. ADMINISTRATOR
shall not be called upon to (and shall have no responsibility to)
establish any claims payment procedures, and shall have only such
authority with respect to claims as is set forth in written procedures
provided to it by the applicable CLIENT. Subject to changes in
Applicable Law governed by Section 3.13(d), (a) in no event shall
ADMINISTRATOR be called upon in such procedures to provide services
with respect to claims that would require ADMINISTRATOR to be
registered with any Governmental Entity other than such registration or
licensure as is otherwise required to perform the Services, and (b)
ADMINISTRATOR may refuse to perform a service set forth in such
procedures if it reasonably concludes that performing such service
would require additional registration or licensure.
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3.7 RELATIONSHIPS WITH INSUREDS. To the extent required by Applicable Law,
ADMINISTRATOR shall, at the applicable CLIENT's expense, provide a
written notice approved by CLIENT, such approval not to be unreasonably
withheld, delayed, denied or conditioned, to each Insured advising them
of the identity of and the applicable relationship among ADMINISTRATOR,
SDI, the Insured and such CLIENT. If ADMINISTRATOR and/or SDI collect
funds from an Insured for a CLIENT, ADMINISTRATOR and/or SDI shall
provide the Insured or cause the Insured to be provided with all
required and appropriate written notices and disclosures, including
disclosure of the premium, deposit or other consideration charged or
received by such CLIENT for the applicable insurance coverage or
annuity product and all required confirmations under Rule 10b-10 under
the Securities Exchange Act of 1934, as amended, or any successor
provision, and any interpretations thereunder; PROVIDED that
ADMINISTRATOR and/or SDI shall have no responsibility for determining
what notices or disclosures are required or appropriate to be provided
by CLIENT under such circumstances. Rather, such determinations shall
be made by the CLIENT and communicated reasonably promptly to
ADMINISTRATOR and/or SDI. Any Contracts, certificates, booklets,
termination notices or other written communications delivered by such
CLIENT to ADMINISTRATOR for delivery to its Insureds shall be delivered
by ADMINISTRATOR reasonably promptly after receipt of instructions from
such CLIENT to do so, unless otherwise so instructed by such CLIENT.
3.8 ERROR CORRECTION. Each CLIENT shall promptly notify ADMINISTRATOR
and/or SDI, and ADMINISTRATOR and/or SDI shall promptly notify the
applicable CLIENT, in writing of any error or mistake in any record,
report, data, information or output related to this Agreement of which
CLIENT, on the one hand, or ADMINISTRATOR or SDI, on the other hand,
becomes aware and of which the other party reasonably should be made
aware. To the extent practicable, such notice shall provide details of
such error or mistake necessary for ADMINISTRATOR and/or SDI or the
CLIENT, as the case may be, to identify and recreate such error or
mistake. Upon discovery of any such error or mistake or receipt of any
such notice, ADMINISTRATOR and/or SDI or the CLIENT, as the case may
be, shall promptly correct such reported error or mistake. In the event
that a CLIENT shall become aware that it has erroneously transmitted
data or transmitted incorrect data, such CLIENT shall correct such data
and retransmit the same. Each CLIENT shall be responsible and liable
for the cost or expense of regenerating any output if such CLIENT shall
have failed to transmit any such data. The Parties understand that many
tasks to be performed hereunder have shared responsibility between the
Parties and the Parties will cooperate in good faith to facilitate the
performance of such tasks.
3.9 BACK-UP. ADMINISTRATOR shall make tapes, microfiche, images or other
hardcopy backups containing copies of any and all CLIENT Books and
Records (the "Back-Up Copies") and shall maintain the Back-Up Copies,
each in accordance with the policies and procedures and for the time
periods set forth in the records retention policy to be agreed upon by
GS GROUP and ADMINISTRATOR ("Records Retention Policy"). GS GROUP, on
the one hand, or ADMINISTRATOR or SDI, on the other hand, may from time
to time amend or supplement such Records Retention Policy with the
consent of the other Party, which consent shall not be unreasonably
withheld, delayed, denied or conditioned, PROVIDED that the amending or
supplementing Party shall bear all reasonable and documented costs and
expenses incurred by the other Party in complying with such policy as
so amended or supplemented, and PROVIDED, FURTHER, that no such
amendment or modification by ADMINISTRATOR or SDI may lessen the
protections afforded by EXHIBIT N as then in effect or adversely affect
the applicable levels of service to be furnished hereunder. The Records
Retention Policy shall set forth record retention requirements no less
stringent than those imposed by Applicable Law so as to permit the
Parties to be in
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compliance with Applicable Law relating to record retention, and shall
require ADMINISTRATOR or SDI to retain records subject thereto, even if
otherwise not required to do so because of the passage of time or
otherwise, in the event of notice from GS GROUP or a CLIENT to the
effect that retention is necessary in connection with a legal or
regulatory action, proceeding or inquiry involving GS GROUP or a
CLIENT. ADMINISTRATOR shall send the Back-Up Copies to the off-site
storage facilities set forth in EXHIBIT D (collectively, the "Off-Site
Facilities", each, an "Off-Site Facility"), and as amended and
supplemented by ADMINISTRATOR and provided to CLIENTS from time to
time, in compliance with such Records Retention Policy or to any other
facility which ADMINISTRATOR may select to replace a current Off-Site
Facility; PROVIDED, HOWEVER, that (1) ADMINISTRATOR shall notify each
affected CLIENT of any proposed change in the location of or
establishment of a new Off-Site Facility and (2) each new Off-Site
Facility shall maintain at least the same level of security and
security procedures which were maintained at the replaced Off-Site
Facility and shall otherwise comply with the provisions of this
Agreement and the Records Retention Policy. Upon any CLIENT's
reasonable request, authorized personnel or designated representatives
of such CLIENT shall be permitted access to the Off-Site Facilities
during normal business hours subject to any reasonable security
procedures or other restrictions in effect at the Off-Site Facilities
at the time of the access. Upon the request of any CLIENT,
ADMINISTRATOR shall as promptly as reasonably practicable, and in the
case of paper records within 10 Business Days, make available to CLIENT
a copy of such of the Back-Up Copies as such CLIENT shall request. The
costs of producing any Back-Up Copies for such CLIENT shall be paid to
ADMINISTRATOR by CLIENT as a Reimbursable Expense.
3.10 BUSINESS RESUMPTION PLAN. In accordance with EXHIBIT N, EXHIBIT F sets
forth the procedures to be followed with respect to the continued
provision of the Services and Brokerage Services in the event any
facility, including for the avoidance of doubt any call center, used by
ADMINISTRATOR in providing the Services or by SDI in providing the
Brokerage Services is unavailable for use by ADMINISTRATOR or SDI
because it has been destroyed, significantly damaged or is otherwise
the subject of a disaster (the "Business Resumption Plan") to such an
extent that ADMINISTRATOR is unable and expects for a substantial and
material amount of time, as covered by its Business Resumption Plan, to
be unable to provide any portion of one or more of the Services or
Brokerage Services. ADMINISTRATOR and/or SDI may modify or change the
Business Resumption Plan at any time; PROVIDED, HOWEVER, that such
change or modification shall be reasonably acceptable to the GS GROUP
and shall not adversely affect ADMINISTRATOR's or SDI's ability to
restore or resume the provision of the Services or Brokerage Services.
ADMINISTRATOR and/or SDI shall (1) test the Business Resumption Plan at
least once every calendar year during the Term, beginning with calendar
year 2006, and promptly advise CLIENTS of the test results, (2) consult
with the GS GROUP regarding the priority to be given to the Services,
in the case of ADMINISTRATOR, and Brokerage Services, in the case of
SDI, during the pendency of any such disaster and (3) implement the
Business Resumption Plan as and when relevant in the event of a
disaster. ADMINISTRATOR and SDI agree to use best efforts to resume as
promptly as practicable functions identified by CLIENT as critical to
the Services or Brokerage Services. In the event that, at any time,
ADMINISTRATOR is required to resume the businesses of other clients of
ADMINISTRATOR in addition to that of any CLIENT hereunder, CLIENT's
business shall, insofar as reasonable, either be the first to be
resumed, or be included in the first group of businesses resumed
simultaneously by ADMINISTRATOR. In the event that there are multiple
CLIENTS as to which a business interruption has occurred as
contemplated by this Section, the CLIENTS shall be resumed
12
in a sequence to be determined by GS GROUP in its reasonable discretion
and communicated to ADMINISTRATOR.
3.11 MODIFICATION.
a. Subject to the express limitations hereof, ADMINISTRATOR shall
have the right, at any time, and from time to time, to alter and modify
its Facilities and Systems and any systems, programs, procedures or
facilities used or employed in performing its duties and obligations
hereunder and providing the Services, provided that no such alterations
or modifications: (i) shall adversely affect levels of service being
provided under an Agreement, or (ii) shall require CLIENT to incur any
material additional expenses without the prior written consent of such
CLIENT, subject to subsection (b) below. ADMINISTRATOR shall consult
with CLIENT about any alternations or modifications that will require
changes to CLIENT's facilities or systems.
b. If ADMINISTRATOR's proposed alterations or modifications are the
result of changes or requirements made by ADMINISTRATOR's suppliers or
vendors (including changes in software or hardware), and ADMINISTRATOR
has no commercially reasonable alternatives other than to make such
alterations or modifications, CLIENT agrees, on 60 days' written notice
to it from ADMINISTRATOR, to make such changes in its facilities or
systems as are lawful and reasonably necessary to conform to
ADMINISTRATOR's alterations and modifications.
c. If ADMINISTRATOR's proposed alterations or modifications are not
the result of changes or requirements made by its suppliers or vendors,
CLIENT shall, upon 60 days' written notice to it from ADMINISTRATOR,
make such changes in its facilities and systems to the extent that they
are lawful and will not impose material cost on CLIENT.
3.12 ESTIMATES.
a. If ADMINISTRATOR provides GS GROUP or a CLIENT with an estimate
of the cost or timeframe for any third party administrator services to
be provided by ADMINISTRATOR with respect to a prospective reinsured or
otherwise acquired block of life insurance policies and/or annuity
contracts or a prospective new life insurance or annuity subsidiary
pursuant to this Agreement, the estimate will be made in good faith
based on the information known to ADMINISTRATOR at the time of the
estimate. However, except as otherwise agreed to by the Parties hereto,
ADMINISTRATOR does not warrant or promise that estimates will be
accurate, and estimates are not intended as price or performance
guarantees. Quotations for prospective Work Assignments provided by
ADMINISTRATOR to GS GROUP or a CLIENT will be considered furnished for
a period of 120 days, following which the quotation will not be deemed
operative and may not be relied upon by GS GROUP or the CLIENT, unless
otherwise agreed by the Parties.
b. Notwithstanding the foregoing, unless the Parties otherwise
agree, ADMINISTRATOR guarantees that for any new reinsured or otherwise
acquired block of life insurance and/or annuity contracts, or the life
insurance and/or annuity business of a new CLIENT, to be administered
by ADMINISTRATOR pursuant to this Agreement, assuming ADMINISTRATOR has
had the opportunity to perform an amount of due diligence that
ADMINISTRATOR reasonably considers satisfactory on such business, it
will provide conversion services at costs that do not exceed by more
than 10% the estimated cost and timeframe provided by ADMINISTRATOR at
the conclusion of due diligence.
c. Subject to Section 8.7, the Initial Work Assignment shall serve
as a baseline for purposes of fee and charge quotations to be furnished
by ADMINSTRATOR and SDI on
13
new Work Assignments prior to the seventh anniversary of the date of
this Agreement as among GS GROUP, ADMINISTRATOR and SDI. ADMINISTRATOR
shall make reasonable efforts to quote fees and charges that are no
higher than the fees or charges provided for under the baseline then in
effect, if any. Notwithstanding the foregoing, in the event that
ADMINISTRATOR provides a quotation that is materially higher than the
baseline then in effect, if any, ADMINISTRATOR shall provide the GS
GROUP with a reasonably detailed explanation, reasonably satisfactory
to GS GROUP, of all such proposed adjustments relative to the baseline
(and such other preceding Work Assignments as may be helpful for
purposes of comparison) in connection with each quotation. For purposes
of this subsection, it shall not be deemed unreasonable for a quoted
fee or charge to exceed the applicable baseline, if any then be in
effect, to the extent such excess is due to increases in
ADMINISTRATOR's or SDI's input costs relative to those associated with
the baseline, provided such increases can be documented to GS GROUP's
reasonable satisfaction. Agreement upon a Work Assignment shall be
conclusive evidence of agreement that adjustments reflected therein
relative to the baseline are appropriate.
d. ADMINISTRATOR may adjust its fees and charges upward for purposes
of quotations on new Work Assignments relative to the baseline fees and
charges to account for the effects of inflation insofar as they could
have increased the fees and charges under the relevant baseline
pursuant to the terms of Section 8.6 of this Agreement.
e. CLIENT shall be entitled to a discount of the fees (excluding
charges due pursuant to any list of standard rates set forth in a Work
Assignment) that would otherwise apply by the following percentages
based on the number of variable annuity and/or variable universal life
insurance contracts that Affiliates of GS GROUP, including but not
limited to CLIENT, contract with ADMINISTRATOR to administer following
the Initial Work Assignment:
ADDITIONAL NEW GS GROUP PRICE REDUCTION ON CUMULATIVE PRICE
VA OR VUL CONTRACTS CONTRACTS REDUCTION ON CONTRACTS
------------------- --------- ----------------------
100,000 - 250,000 1.25% 1.25%
250,001 - 500,000 2.50% 3.75%
500,001 - above 3.25% 7.00%
Such discounts shall be applied to fees in effect at the given time,
and shall apply both to Work Assignments then in effect and Work
Assignments entered into subsequently. Contracts shall count for
purposes of the foregoing reduction as of the beginning of the calendar
month following the actual transition of them for administration by
ADMINISTRATOR.
f. Unless otherwise agreed and specified by the Parties at the time
of such due diligence, in performing its due diligence for an estimate
in connection with a prospective Work Assignment, ADMINISTRATOR and SDI
shall not be responsible for any factual investigation, including
without limitation any investigation into the lawfulness of the design,
offer, sale, issuance or prior administration of any Contract, on
behalf of CLIENT or GS GROUP other than that required to develop the
estimate in accordance with this Agreement and to determine the
appropriate pricing for converting and administering the relevant
business.
g. Unless otherwise expressly stated, estimates shall be presumed to
be based on the assumption and expectation that life insurance policies
and/or annuity contracts the subject
14
thereof will continue to be maintained on substantially the same basis
as may be observed by ADMINISTRATOR for purposes of furnishing the
estimate, and in any event on a reasonably current basis. Any costs
reasonably incurred by ADMINISTRATOR and/or SDI as a result of the
inaccuracy of such presumption shall be charged to CLIENT on a Time and
Materials Basis.
3.13 CONFORMITY TO LAWS AND REGULATIONS; CHANGES IN APPLICABLE LAW.
a. Each of ADMINISTRATOR and SDI shall comply with Applicable Law to
the extent applicable to the Services (in the case of ADMINISTRATOR) or
Brokerage Services (in the case of SDI). Each CLIENT shall comply with
Applicable Law to the extent applicable to its obligations with respect
to the provision of the Services and Brokerage Services. ADMINISTRATOR
and SDI shall be responsible for identifying, interpreting and
complying with the requirements of Applicable Law that apply to,
respectively, ADMINISTRATOR in its capacity as the provider of Services
and SDI in its capacity as the provider of Brokerage Services (E.G.,
licensing and registration and associated reporting requirements
applicable to third-party administrators or broker-dealers). Each
CLIENT shall be responsible for identifying, interpreting and complying
with the requirements of Applicable Law that apply to such CLIENT's
business activities, including those activities performed for such
CLIENT by ADMINISTRATOR or SDI (E.G., premium collection, claims
payment, regulatory filing) other than such requirements that are
applicable to ADMINISTRATOR in its capacity as provider of Services and
those applicable to SDI in its capacity as provider of Brokerage
Services, and shall provide appropriate direction to ADMINISTRATOR and
SDI with respect to ADMINISTRATOR's and SDI's compliance with such
requirements.
b. From time to time, any Party may present the other Parties with
amendments to this Agreement required to maintain such Party's status
as a third party administrator, broker-dealer or insurer, reinsurer, or
servicer, as the case may be, or to conform this Agreement to
Applicable Law. To the extent reasonable, the other Parties shall
promptly execute and return such amendments; PROVIDED, HOWEVER, that
any proposed amendment that provides for a reduction in the Applicable
Level of Service shall be deemed not to be reasonable.
c. ADMINISTRATOR and SDI, on the one hand, and each CLIENT, on the
other hand, shall endeavor promptly to notify the other Party in
writing of any changes in Applicable Law of which it becomes aware that
apply to the other Party's business activities, it being understood
that (i) such endeavor shall not impose upon any Party any duty of
inquiry with respect to such changes affecting another Party, (ii) such
Party shall not incur any liability for not providing such notification
and (iii) failure to provide such notification shall not constitute a
breach of this Agreement by such Party or release or excuse any Party
from performance of any obligation under this Agreement or a Work
Assignment. ADMINISTRATOR shall promptly notify each affected CLIENT in
writing upon learning of any changes with respect to compliance
requirements resulting from changes in Applicable Law that apply to (i)
ADMINISTRATOR in its capacity as a third party administrator, or SDI in
its capacity as a broker dealer, and that affect the Contracts, or (ii)
the Services, in the case of ADMINISTRATOR, or Brokerage Services, in
the case of SDI, and ADMINISTRATOR and SDI shall take all actions
necessary to satisfy such requirements, subject to the terms of this
Agreement. Each CLIENT shall promptly notify ADMINISTRATOR in writing
upon learning of any changes with respect to compliance requirements
resulting from changes in Applicable Law that apply to the Contracts of
such CLIENT and that affect the provision of Services or Brokerage
Services, and shall take all actions necessary to satisfy such
requirements, subject to the terms of this Agreement.
15
d. ADMINISTRATOR and SDI shall be responsible for any additional
costs, charges or expenses, both one-time and recurring or ongoing,
resulting from any change in Applicable Law applicable to (i)
ADMINISTRATOR in its capacity as a third party administrator, or SDI in
its capacity as a broker-dealer, or (ii) ADMINISTRATOR's provision of
Services or SDI's provision of Brokerage Services to the extent
affecting a discretionary determination by ADMINISTRATOR to provide the
Services, or SDI to provide the Brokerage Services, in a particular
manner, PROVIDED that, in the event of any change in Applicable Law
materially restricting the ability of ADMINISTRATOR or SDI to outsource
any part of the Services or Brokerage Services under a Work Assignment
to locations outside of the United States, the Parties agree to
negotiate in good faith a reasonable allocation of such costs, charges
and expenses, to the extent that ADMINISTRATOR can reasonably
demonstrate that the ability to outsource was a material factor in
setting the rates under the Work Assignment. CLIENT shall be
responsible for any such charges or expenses applicable to the
Contracts, other than the fees and charges for which ADMINISTRATOR or
SDI is responsible hereunder and any fees and charges applicable to
such CLIENT in its capacity, if any, as insurer, reinsurer,
administrator or servicer of the applicable Contracts.
3.14 BROKERAGE SERVICES. SDI shall perform any and all services to be
provided pursuant to this Agreement that require registration as a
broker-dealer so registered. Subject to changes in Applicable Law
governed by Section 3.13(d), SDI shall not be required to provide any
such services as would render it liable in any respect whatever as an
underwriter or prime broker, it being understood that SDI's services
shall generally consist of effecting transactions with mutual funds on
behalf of CLIENTS (the "Brokerage Services"). The Brokerage Services to
be provided by SDI to a CLIENT shall be set forth in the applicable
Work Assignment.
3.15 OTHER STATE TPA REQUIREMENTS. The Parties to this Agreement acknowledge
and understand that state insurance laws may provide additional rights
to, and/or impose additional duties and obligations on, the Parties.
EXHIBIT P sets forth each such state law not reflected in these General
Terms and Conditions and describes the scope of the application of that
state law to the Parties to this Agreement. To the extent an Applicable
Law is inconsistent or conflicts with any other provision of this
Agreement, the Applicable Law shall apply to its application to this
Agreement.
3.16 VARIANCES.
a. With respect to variable Contracts administered pursuant to a
Work Assignment, in the event of a discrepancy or other error arising
in the execution or recording of an investment transaction during the
term, including a portfolio allocation or reallocation transaction (a
"Variance"), ADMINISTRATOR shall, promptly upon learning of the
Variance, (i) with respect to Variances resulting in a loss to an
Insured, reconcile the Variance by crediting the applicable Insured's
account such that the Insured shall not have lost any amounts as a
result of the Variance (I.E., so that, following such reconciliation,
the account has the same value that it would have had if the
transaction had initially been processed correctly) and (ii) with
respect to Variances resulting in a gain to an Insured, take such
lawful actions as directed by CLIENT's then-current policy as to such
Variances; PROVIDED, that, in the event that such policy is different
in effect from ADMINISTRATOR's standard policy, such direction shall be
treated as a change order under Section 3.2.
b. Promptly after the end of each calendar month, ADMINISTRATOR
shall furnish CLIENT a detailed, itemized report listing (a) Variances
due to ADMINISTRATOR errors
16
(each, a "Type A Variance") and (b) Variances that are not due to
ADMINISTRATOR errors (each, a "Type B Variance"); provided that
ADMINISTRATOR shall promptly notify CLIENT of any Variance from any
discrepancy or other error that results in a net gain or net loss in
excess of $5,000, whether a Type A Variance or a Type B Variance.
c. Following the end of each calendar quarter, if there shall be a
Net Loss, as defined below, from the Type A Variances that occurred
during the quarter, then ADMINISTRATOR shall credit CLIENT for such
amount of Net Loss on the next succeeding monthly invoice. "Net Loss"
means the excess, if any, of losses from the Type A Variances that
occur during a period over (i) gains from the Type A Variances that
occur during the period (regardless of how gains are addressed for
purposes of Section 3.16(a)) or (ii) if specified in the applicable
Work Assignment, a threshold amount. A Type A Variance shall be deemed
to occur on the date on which the transaction occurs that results in
the discrepancy or other error. ADMINISTRATOR shall, as reasonably
requested by CLIENT, assist CLIENT to recover Type B Variances that are
the fault of a mutual fund unaffiliated with CLIENT.
3.17 TAX QUALIFICATION. ADMINISTRATOR shall monitor all payments received
from Contract holders with respect to Contracts that are life insurance
contracts to identify any such payments that might cause such a
Contract to fail to satisfy the requirements of Code Section 7702(a).
ADMINISTRATOR shall provide notices to Contract holders with respect to
potential failures to satisfy such requirements in accordance with the
applicable policies and procedures provided to ADMINISTRATOR by the
applicable CLIENTS. ADMINISTRATOR shall notify the applicable CLIENTS
of any changes to ADMINISTRATOR's systems and procedures used to
monitor and notify Contract holders and shall provide CLIENTS with an
opportunity to review such changes.
3.18 ADVERTISING. ADMINISTRATOR shall not, without the prior written consent
of GS GROUP in each instance, use in advertising, publicity, or
otherwise the name of the GS GROUP, any CLIENT, or any Affiliate of GS
GROUP or any CLIENT, or any managing director, partner or employee of
GS GROUP or any CLIENT, nor any trade name, trademark, trade device,
service xxxx, symbol or any abbreviation, contraction or simulation
thereof owned by GS GROUP or a CLIENT or any Affiliate of GS GROUP or
any CLIENT; or represent, directly or indirectly, any product or any
service provided by ADMINISTRATOR as utilized, approved or endorsed by
GS GROUP or any CLIENT or any of their Affiliates. Notwithstanding the
foregoing, ADMINISTRATOR and SDI may, in administering any call center
and sending communications to Insureds in connection with Services (in
the case of ADMINISTRATOR) or Brokerage Services (in the case of SDI),
use the CLIENT name and related trade names.
3.19 PERSONNEL; SERVICE CENTERS
a. The persons enumerated on a schedule of authorized personnel to
be furnished to ADMINISTRATOR by each CLIENT upon execution of a Work
Assignment (and included in or appended to such Work Assignment), as
may be amended from time to time in writing by such CLIENT, are
authorized to provide ADMINISTRATOR and SDI with instructions or
directions on behalf of such CLIENT relating to the normal day-to-day
provisions of the Services and Brokerage Services to be performed under
the applicable Agreement. CLIENT shall promptly provide ADMINISTRATOR
with written notice of any change of authority such persons.
b. Set forth on EXHIBIT H are the positions of key personnel that
will represent ADMINISTRATOR in dealings with CLIENTS and GS GROUP in
connection with this Agreement. Prior to adding or removing individuals
to or from the positions set forth on
17
such EXHIBIT H, or adding or removing, or changing the nature of
responsibilities of, positions listed on EXHIBIT H, from time to time,
ADMINISTRATOR shall promptly provide GS GROUP with prior notice in
writing of its proposal to add or remove such individuals or make such
other changes and (in the case of additions of individuals or
positions) shall give CLIENTS a reasonable opportunity to meet,
investigate and interview such individuals, and such individuals shall
not be added or removed without the prior written consent of the
CLIENTS, which consent shall not unreasonably be withheld. In the event
of an emergency (E.G., the sudden death of a person holding such a
position), ADMINISTRATOR shall provide GS GROUP as prompt notice of
such occurrence as reasonably practicable, may and shall appoint a
Qualified person to the position or assign the duties of the position
to one or more other positions on an interim basis so as to mitigate
against interruption in service, and shall commence diligently to work
to nominate a replacement for the position and/or seek the consent of
GS GROUP permanently to reassign one or more of the duties of the
position to one or more other positions.
c. The Services shall be provided from the service centers
identified in EXHIBIT I, which exhibit shall be modified from time to
time to reflect changes in service centers occurring pursuant to
Section 3.19(d) (each such service center, a "Service Center"), at the
times specified in the applicable Work Assignments.
d. ADMINISTRATOR may, at any time during the Term, provide the
Services from another location or locations selected by ADMINISTRATOR
(including, to the extent permitted by Applicable Law and after
notifying and obtaining consent from the affected CLIENT as specified
in Section 3.19(f), locations outside of the United States) that meet
the security regulations contemplated by Section 3.19(e) and subject to
the Business Resumption Plan contemplated by Section 3.10, as long as
ADMINISTRATOR continues to perform Services in accordance with the
Applicable Levels of Service. In the event that ADMINISTRATOR moves
offshore operations back to the United States, ADMINISTRATOR shall bear
all associated costs, unless such movement back to the United States is
pursuant to a change in Applicable Laws as described in Section
3.13(d), in which case Section 3.13(d) shall apply.
e. During the Term, ADMINISTRATOR shall maintain and enforce
security regulations at the Service Centers that are (i) in accordance
with the procedures set forth in EXHIBIT N, as amended and supplemented
by CLIENTS and provided to ADMINISTRATOR from time to time, and (ii) at
least as rigorous as those security procedures in effect at the Service
Centers as of the date of this Agreement as among ADMINISTRATOR, SDI
and GS GROUP. GS GROUP on the one hand, or ADMINISTRATOR or SDI on the
other hand, may from time to time amend or supplement EXHIBIT N with
the consent of the other Party, which consent shall not be unreasonably
withheld, delayed, denied or conditioned, PROVIDED that the amending or
supplementing Party shall bear all reasonable and documented costs and
expenses incurred by the other Party in complying with such Exhibit as
so amended or supplemented, and no such amendment or supplement made by
ADMINISTRATOR or SDI may lessen the protections afforded by EXHIBIT N
as in effect up to the time of such amendment or supplement or
adversely affect the applicable levels of service to be furnished
hereunder.
f. ADMINISTRATOR and SDI shall neither provide the Services, in the
case of ADMINISTRATOR, nor the Brokerage Services, in the case of SDI,
from locations outside of the United States nor outsource any of the
Services or Brokerage Services to third parties without the prior
written consent of the GS GROUP, which consent shall not be
unreasonably withheld, it being acknowledged by the GS GROUP that
ADMINISTRATOR will outsource the performance of a portion of the work
required to
18
deliver the Services, as set forth on EXHIBIT G, to persons employed by
a third party in India, who would remotely access the Facilities and
Systems in order to perform such work, and that the price of Services
hereunder is dependent on such outsourcing to the extent contemplated
by ADMINISTRATOR. Notwithstanding the foregoing, no customer call
center administered by ADMINISTRATOR or SDI under a Work Assignment
shall be provided from any non-United States location or outsourced to
any third party. If for any reason, ADMINISTRATOR shall at any time not
be permitted by a CLIENT to outsource work to persons employed by a
third party in India as set forth on EXHIBIT G, the Parties agree to
negotiate in good faith a reasonable allocation of resultant increases
in fees and costs.
g. ADMINISTRATOR and SDI shall conduct, either directly or through
independent investigation firms, background checks on prospective new
personnel of ADMINISTRATOR and SDI in accordance with the procedures
set forth in EXHIBIT N, and shall undertake the other actions set forth
in EXHIBIT N in relation thereto. ADMINISTRATOR and SDI shall require
all new employees to execute and be bound by the Code of Business
Conduct and Ethics of Security Benefit Corporation and its affiliated
companies, in the form attached hereto as ANNEX 3.19(g), as the same
may be amended by the board of directors of Security Benefit
Corporation from time to time; PROVIDED, that ADMINISTRATOR agrees to
share any such proposed amendments with GS GROUP in advance and to
consult with GS GROUP regarding any such proposed amendments. Neither
ADMINISTRATOR nor SDI may hire any new prospective employee who is
disqualified for any reason set forth in EXHIBIT E.
h. ADMINISTRATOR and SDI acknowledge that GS GROUP maintains
restrictions regarding the personal securities and commodities
transactions and private investments of employees and certain of its
vendors. As reasonably requested by GS GROUP from time to time,
ADMINISTRATOR and SDI agree to use commercially reasonable efforts to
obtain compliance by its employees and independent contractors who will
be engaged in providing Services and Brokerage Services with all such
reasonable restrictions as are communicated in writing from time to
time by GS GROUP to ADMINISTRATOR.
4. BOOKS AND RECORDS
4.1 COPY OF WRITTEN AGREEMENT. The original or a copy of the Agreement and
all Work Assignments shall be retained as part of the official records
of ADMINISTRATOR, SDI and CLIENTS for the duration of this Agreement
and at least six years thereafter or such longer period as may be
required under Applicable Law.
4.2 BOOKS AND RECORDS. ADMINISTRATOR and SDI shall establish and maintain
facilities and procedures for the safekeeping of complete books and
records of all transactions performed by ADMINISTRATOR and SDI on
behalf of each CLIENT, including premiums or deposits received for the
Contracts, premium taxes, agents' commissions for the Contracts,
exchanges, changes in investment elections, additional contributions or
investments, redemptions, administrators' fees, premium accounting,
Contract billing and collections, financial accounting with respect to
the Contracts, Contract services fees, policyholder claims and annuity
payments paid on behalf of such CLIENT, withdrawals made with respect
to Contracts, the Contract forms as supplied to ADMINISTRATOR by the
CLIENT from time to time, check forms and facsimile signature
imprinting devices, as supplied to ADMINISTRATOR by the CLIENT from
time to time, if any, records required to be maintained under Rule
31a-1 and Rule 31a-2 under the Investment Company Act of 1940, as
amended, and the identity and addresses of policyholders,
annuityholders and certificateholders (collectively, "Books and
Records"). All such Books and Records shall
19
be maintained in accordance with Applicable Law, including, if
applicable, in accordance with ERISA, and to enable each CLIENT to
complete its statutory annual financial statement filed with insurance
regulators and to satisfy all other applicable regulatory requirements
and prudent standards of insurance and broker-dealer record keeping.
ADMINISTRATOR and SDI shall give CLIENTS written notice of at least 10
Business Days prior to the destruction of any Books and Records other
than in accordance with the Records Retention Policy. Copies of Books
and Records shall be maintained by ADMINISTRATOR and SDI for the longer
of any period that may be required by Applicable Law and/or the Records
Retention Policy, but for not less than seven (7) years from the end of
the Term, unless a replacement third party administrator assumes, in
writing and on terms reasonably acceptable to ADMINISTRATOR,
responsibility to maintain such records for such period of time.
Promptly following termination or expiration of an Agreement,
ADMINISTRATOR shall deliver to the CLIENT, or to such other person as
the CLIENT may designate, all Books and Records of all transactions
performed in connection with such Agreement, provided that
ADMINISTRATOR shall retain copies in accordance with the previous
sentence. Such Books and Records shall be in a reasonably catalogued or
indexed and reasonably accessible format when so delivered to the
CLIENT. Notwithstanding the foregoing, ADMINISTRATOR need not make
effort to return copies of materials, records, documents or property in
electronic format insofar as stored on archival back-up tapes according
to its normal electronic system back-up practices, on the condition
that its personnel whose functions are not primarily information
technology in nature shall not access such retained copies and its
personnel whose functions are primarily information technology in
nature shall access such copies only as reasonably necessary to restore
information systems, except that such access limitation shall not apply
insofar as access may reasonably be necessary for ADMINISTRATOR or SDI
to prosecute or defend against any action related to its provision of
Services or Brokerage Services under the Agreement.
4.3 OWNERSHIP OF BOOKS AND RECORDS. It is expressly understood and agreed
that the Books and Records, but excluding information confidential to
ADMINISTRATOR and SDI, shall be the sole property of the applicable
CLIENT and that such property shall be held by ADMINISTRATOR or SDI, as
agent, during the Term.
4.4 REGULATOR ACCESS TO BOOKS AND RECORDS. Notwithstanding the provisions
of Article 14, any applicable federal or state regulator or
self-regulatory organization (or other proper authority), including any
Regulatory Authority, shall have full and free on-site access, during
ordinary business hours, to review and audit the Books and Records,
which shall be furnished to them in a form reasonably usable by them or
as otherwise required by Applicable Law. Any trade secrets contained
within the Books and Records shall remain confidential, but
(notwithstanding Article 14 of this Agreement) may be used by a
Regulatory Authority in proceedings instituted against ADMINISTRATOR.
Notwithstanding Article 14 of this Agreement, a Regulatory Authority
may (1) share nonpublic documents, materials or other information with
other state, federal and international regulatory agencies, with the
National Association of Insurance Commissioners and its affiliates and
subsidiaries and with state, federal and international law enforcement
authorities if the recipient agrees and warrants that it has the
authority to maintain the confidentiality and privileged status of the
documents, materials or other information; (2) receive documents,
materials and other information from the National Association of
Insurance Commissioners and its affiliates and subsidiaries and from
regulatory and law enforcement officials of other jurisdictions and
shall maintain as confidential or privileged any document, material or
other information received with notice or the understanding that it is
confidential or privileged under the laws of the jurisdiction
20
that is the source of the document, material or other information; and
(3) enter into agreements that govern the sharing and use of documents,
materials and other information. A disclosure to or by the Regulatory
Authority pursuant to this Section or as a result of sharing
information pursuant to this Section is not a waiver of any applicable
privilege or claim of confidentiality in the documents, materials or
other information disclosed or shared. A Regulatory Authority may
require ADMINISTRATOR to provide, on a quarterly basis in a form
acceptable to the Regulatory Authority, additional information that is
necessary for the protection of the public. Nothing herein shall
prohibit a Regulatory Authority from releasing final, adjudicated
actions including for cause terminations that are open to public
inspection pursuant to state law to a database or other clearinghouse
service maintained by the National Association of Insurance
Commissioner or its affiliates; PROVIDED, HOWEVER, that CLIENT shall
reimburse ADMINISTRATOR for the reasonable costs incurred by it or SDI
of obtaining the requested information where the information is not
readily available without research or generation of data or reports
that is or are not normally generated by ADMINISTRATOR or SDI in the
ordinary course of business.
4.5 CONTRACT TO TRUSTEE. When a Contract is issued to a trustee, a copy of
the trust agreement and any amendments to the trust agreement shall be
furnished to the applicable CLIENT by ADMINISTRATOR and shall be
retained as part of the official records of ADMINISTRATOR and such
CLIENT for a period of five (5) years after termination of the trust
agreement, or for such longer period as may be required by Applicable
Law.
4.6 SEGREGATION. ADMINISTRATOR and SDI shall at all times keep logically
segregated the CLIENT data, Books and Records and items in process from
those of ADMINISTRATOR's and SDI's other customers and from those of
ADMINISTRATOR and SDI themselves.
4.7 ADDITIONAL INFORMATION. Each CLIENT shall, from time to time, provide
ADMINISTRATOR with current forms of the Contracts, prospectuses,
applications, and other related documents, the names and jurisdictions
of license and/or registration of all insurance agents and
representatives and broker-dealers authorized to sell or solicit the
Contracts and such other additional information as ADMINISTRATOR shall
reasonably request in connection with its provision of Services or
SDI's provision of Brokerage Services.
4.8 ADDITIONAL RECORDS. ADMINISTRATOR and SDI shall keep detailed accounts
and records of all activities carried out, and all costs and expenses
incurred, by them in their performance of their obligations under this
Agreement, including (a) records of Reimbursable Expenses and
authorized expenses paid on behalf of CLIENTS, (b) records required to
be made with respect to transactions performed on behalf of CLIENTS
pursuant to Rule 17a-3 and Rule 17a-4 under the Securities Exchange Act
of 1934, as amended, or any successor provisions to the foregoing, and
(c) all other documents, reports, records, books, files, and other
materials not included within the Books and Records which are created
by ADMINISTRATOR and SDI to document their performance of this
Agreement and the Services and Brokerage Services hereunder or
regarding CLIENT's policyholders, annuityholders and certificateholders
(collectively the "Additional Records"). ADMINISTRATOR and SDI shall
preserve the Additional Records described in (b) for the periods
required by such rules or such longer period as reasonably requested by
CLIENT or in the event of any action, claim or proceeding to which a
CLIENT is subject involving such records and shall preserve the
Additional Records described in (a) and (c) during the Term and for a
period of at least three years following the Term.
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4.9 CLIENT ACCESS TO BOOKS AND RECORDS AND ADDITIONAL RECORDS. CLIENT shall
have full and free on-site access, upon twenty-four (24) hours notice
to ADMINISTRATOR, during ordinary business hours, to review, in
accordance with the provisions set forth in EXHIBIT N, Books and
Records and Additional Records, which shall be furnished to the CLIENT
in a form reasonably usable by the CLIENT or as otherwise required by
Applicable Law. A CLIENT may conduct such reviews itself or with the
assistance of a third party organization (PROVIDED, that the third
party organization executes a confidentiality agreement that contains
protections for Confidential Information comparable to this Agreement,
and PROVIDED, FURTHER that such third party organization shall not be
any Person that ADMINISTRATOR deems in its reasonable discretion to be
a competitor in its third party administrator business or SDI's
broker-dealer business). All such reviews shall be at CLIENT's expense
and shall be performed in a manner intended to minimize disruption to
the ADMINISTRATOR's and/or SDI's respective business. This Section 4.9
shall not create any right to conduct an audit of ADMINISTRATOR or SDI,
and the rights of audit under the Agreement shall be governed by
Article 16, PROVIDED that a CLIENT may utilize knowledge learned in
exercise of its rights under this Section 4.9 as the basis for any
audit pursuant to said Article 16, including an audit for good cause in
addition to the maximum number of audits permitted for any time period.
5. SYSTEMS AND PROPRIETARY RIGHTS
5.1 CLIENT'S PROPERTY. All documentation, records, information, materials
and data of every kind and description that ADMINISTRATOR or SDI
receives, directly or indirectly, from a CLIENT, a third party on
behalf of CLIENT, or a customer of CLIENT is and shall remain the
property of such CLIENT. All records and data of every kind and
description that ADMINISTRATOR or SDI or a third party subcontractor
generates in regard to transactions performed by ADMINISTRATOR and SDI
on behalf of each CLIENT, or which are of a nature that would have been
created by each CLIENT if the Services and Brokerage Services had not
been outsourced pursuant to a Work Assignment, as opposed to records
and data created by ADMINISTRATOR or SDI for the conduct of its own
business (E.G., for management, operations, financial, accounting, or
legal purposes), shall be the property of CLIENT.
5.2 ADMINISTRATOR'S PROPERTY. All documentation, records, information,
materials and data of every kind that GS GROUP or a CLIENT receives,
directly or indirectly, from ADMINISTRATOR, SDI or a third party on
behalf of ADMINISTRATOR or SDI, other than CLIENT property pursuant to
the terms of Section 5.1, is and shall remain the property of
ADMINISTRATOR or SDI, as applicable.
5.3 INTELLECTUAL PROPERTY.
a. Except as otherwise expressly provided herein, as between CLIENT
and GS GROUP on the one hand and ADMINISTRATOR and SDI on the other,
each Party shall remain (or shall be, whichever is applicable) the sole
owner of all right, title and interest in all intellectual property,
including all patents, copyrights, trademarks, service marks, trade
names, trade secrets, and know-how, that has been or is developed or
otherwise acquired by it, and no sharing of such intellectual property
between the Parties shall confer upon the other Party ownership thereof
or therein.
b. If GS GROUP or CLIENT furnishes any suggestions, requests, ideas,
designs, concepts, inventions, techniques, discoveries, improvements,
or the like (collectively, "Ideas") to ADMINISTRATOR or SDI, and such
Ideas are thereafter incorporated into the Software, systems,
methodology and/or practices utilized by or on behalf of ADMINISTRATOR
or SDI to conduct business (the "Service Platform"), GS GROUP or
22
CLIENT shall retain all intellectual property rights, to the extent
they exist, in such Ideas; PROVIDED, HOWEVER, that except in the case
where GS GROUP or CLIENT provides ADMINISTRATOR or SDI notice prior to
such incorporation that the Idea is patented, copyrighted or a trade
secret, GS GROUP or CLIENT hereby grants ADMINISTRATOR or SDI a
worldwide, fully-paid, royalty-free, perpetual license to use such Idea
in connection with such incorporation into the Service Platform and the
provision of services using the Service Platform to other clients of
ADMINISTRATOR and SDI (including Security Benefit Life Insurance
Company and First Security Benefit Life Insurance and Annuity Company
of New York).
5.4 LICENSING MATTERS; ESCROW.
a. In the event that a CLIENT terminates a Work Assignment by reason
of ADMINISTRATOR'S or SDI's insolvency pursuant to Section 7.6 hereof,
by reason of a change of Control pursuant to Section 7.7 or for Cause
pursuant to Section 7.5, ADMINISTRATOR and SDI do hereby grant to GS
GROUP and CLIENT, subject to the provisions of Article 14 hereof, a
non-exclusive license (with right of sublicense, except, in the case of
a termination for change of Control pursuant to Section 7.7, to a
Person reasonably considered by ADMINISTRATOR to be a competitor in its
third party administration business) to use the Software which
ADMINISTRATOR or SDI owns or has a license to use with right of
sublicense for (i) in the case of insolvency, the longer of the
remainder of the Term or one year and (ii) in the case of termination
for change of Control or for Cause, one year, to perform the Services
and Brokerage Services for the CLIENT with respect to the Contracts;
PROVIDED, HOWEVER, that in the case of Software covered hereby as to
which ADMINISTRATOR or SDI has a license, the license created by this
subsection shall not extend beyond the remaining term of the license
held by ADMINISTRATOR or SDI, as the case may be. To the extent that
ADMINISTRATOR either owns or has the right to the source code for an
element of the Software, this license grant includes the source code.
Such license is intended by the Parties to fall within the scope of
Section 365(n) of the United States Bankruptcy Code (Title 11 of U.S.
Code). As to the Software which ADMINISTRATOR or SDI does not own or
have a license with right to sublicense (including without limitation
third party tools such as compilers and utilities used by ADMINISTRATOR
and SDI in connection therewith), a list of such Software (the "Other
Software List") will be maintained in escrow pursuant to Section
5.4(b). As to the Navisys Home Office Administration System,
ADMINISTRATOR and SDI shall use commercially reasonable efforts
(excluding the payment of additional license fees) to obtain from
Navisys the right for GS GROUP and CLIENT to be able to use the version
of such Software then used by ADMINISTRATOR for no less than one year,
in the event of a termination as described above, to administer the
Contracts. In connection with such use of the Navisys Software, CLIENT
agrees to (i) pay any reasonable charges of Navisys for a new,
additional copy of such Software, and (ii) comply with the terms of
either (a) the applicable license agreement between ADMINISTRATOR and
Navisys, or (b) such other license agreement as may be agreed between
Navisys and CLIENT.
b. ADMINISTRATOR and SDI shall maintain in escrow, pursuant to an
escrow arrangement sponsored by ADMINISTRATOR (at ADMINISTRATOR's
expense) with a mutually acceptable escrow agent, and participation or
beneficiary agreements consistent herewith signed by GS GROUP and
CLIENTS, no later than the date on which Contracts are being
administered by ADMINISTRATOR (I.E., have been converted), the Other
Software List, and a copy, as described in the next sentence, of the
Software as to which ADMINISTRATOR or SDI owns or has a license to use
with right of sublicense, in the
23
form used by ADMINISTRATOR and SDI from time to time to provide
Services and Brokerage Services, and the source code from which such
executable copy was compiled (except with respect to any third-party
Software for which ADMINISTRATOR or SDI does not have source code). The
escrow shall include Software source code (in the case of Software
licensed by ADMINISTRATOR or SDI, to the extent possessed by
ADMINISTRATOR or SDI), the Other Software List, the hardware used by
ADMINISTRATOR or SDI and configurations thereof and any other
components and other information that reasonably skilled programmers
and other technicians would need to build and utilize the same
applications in the same manner as ADMINISTRATOR or SDI in its
provision of Services, in the case of ADMINISTRATOR, and Brokerage
Services, in the case of SDI, to CLIENTS. All of the foregoing
components (including the source and object code and the Other Software
List) of the escrow shall be updated in escrow on each major release
cycle and in any event not less frequently than once every 12 months.
GS GROUP will bear all costs and expenses associated with their
participation in the escrow arrangement to be established by
ADMINISTRATOR pursuant to this Section 5.4(b). The escrow participation
agreement shall provide that in the event of a termination upon change
of Control of ADMINISTRATOR or SDI pursuant to Section 7.7, the CLIENT
shall have the option of receiving a distribution of the escrowed
property or requiring ADMINISTRATOR and SDI to provide Transfer
Assistance Services in accordance with Section 7.9. In the event that
Software that ADMINISTRATOR has a license to use, with right of
sublicense, is distributed to GS GROUP pursuant to the escrow agreement
contemplated hereby, GS GROUP agrees to be responsible for all
licensing fees accruing from the date of such distribution to GS GROUP.
5.5 SOFTWARE. The Software is either owned by ADMINISTRATOR or SDI, or is
under validly subsisting license to ADMINISTRATOR or SDI from third
parties. ADMINISTRATOR and SDI shall be responsible for procuring and
maintaining all Software used by ADMINISTRATOR and SDI in the
performance of the Services and Brokerage Services.
6. PAYMENTS AND COLLECTIONS
6.1 EFFECT OF ADMINISTRATOR'S RECEIPT OF PAYMENTS. The payment to
ADMINISTRATOR or SDI of any premiums or charges for insurance or
annuity contributions or investments by or on behalf of an Insured
shall be deemed to have been received by the applicable CLIENT with
respect to such Insured, and the payment of return premium, other
consideration, claims or other contract payments or other amounts by
such CLIENT to ADMINISTRATOR shall not be deemed payment to the Insured
or claimant until such payments are received by such Insured or
claimant.
6.2 PREMIUM AND OTHER DEPOSIT ACCOUNTS.
a. CLIENT shall establish and maintain, as determined in
consultation with ADMINISTRATOR and SDI in connection with transfer of
the administration of the Contracts to ADMINISTRATOR and SDI, one or
more bank accounts into which ADMINISTRATOR and SDI shall deposit, or
cause to be deposited, all premiums, contributions, investments, and
charges and other moneys collected or received by it on behalf of, for
or as agent of CLIENT with respect to the Contracts. Neither
ADMINISTRATOR nor SDI shall have any right under any circumstance to
make any disbursements or withdrawals from any such deposit account,
except to the extent that any account(s) contemplated to receive moneys
as a result of the settlement of fund trades may also be designated by
CLIENT as disbursement accounts for purposes of the making of payments
in connection with the settlement of fund trades. For the avoidance of
doubt,
24
the return of deposits to ADMINISTRATOR or SDI because the related
check did not clear shall not be regarded as withdrawals or
disbursements from deposit accounts by ADMINISTRATOR or SDI.
b. In the event CLIENT for any reason requests ADMINISTRATOR to
establish, and ADMINISTRATOR agrees to and does establish, a fiduciary
bank account for CLIENT, ADMINISTRATOR shall withdraw funds from such
account only for the following purposes: (i) remittance to CLIENT of
funds to which CLIENT is entitled; (ii) deposit in an account
maintained in the name of CLIENT; (iii) transfer to and deposit in a
claims paying account with claims to be paid as required under
Applicable Law and Section 6.3 of this Agreement; (iv) payment to a
group policyholder for remittance to the insurer entitled to the funds;
or (v) remittance of return premiums to the persons entitled to the
funds; provided that in no event may ADMINISTRATOR pay any claim with
funds withdrawn from a fiduciary bank account into which premiums or
charges are deposited.
c. If ADMINISTRATOR is required to be licensed or registered as a
third party administrator in Nevada, then, funds relating to Nevada
policyholders, annuityholders or certificateholders shall be deposited
in an account established and maintained by CLIENT and located at a
financial institution located in Nevada. CLIENT and ADMINISTRATOR shall
cooperate with one another in good faith as may reasonably be necessary
to comply with such requirement, potentially including establishing a
deposit account in Nevada and consenting to ADMINISTRATOR's
establishment of a related lockbox arrangement in Nevada.
6.3 DISBURSEMENT ACCOUNTS AND NSCC SECURITIES CLEARING ACCOUNT.
a. CLIENT shall establish and maintain, as determined in
consultation with ADMINISTRATOR and SDI, one or more bank accounts from
which ADMINISTRATOR and/or SDI shall be authorized to, and shall
(insofar as such accounts are funded by CLIENT), make disbursements and
withdrawals, according to such written account guidelines as shall be
reasonably agreed by the ADMINISTRATOR, SDI, and CLIENT in connection
with transfer of the administration of the Contracts to ADMINISTRATOR
and SDI, for purposes of performing the Services (E.G., to pay claims
as directed by CLIENT pursuant to written instructions furnished
pursuant to Section 3.6 or as CLIENT may otherwise direct, and to
return premium overpayments) and Brokerage Services, respectively, for
and on behalf of CLIENT (the "Account Guidelines") and otherwise as
CLIENT may instruct in writing.
b. CLIENT shall in addition be a member of and maintain a securities
clearing account with the National Securities Clearing Corporation (the
"NSCC") and shall, subject to NSCC consent, authorize SDI to effect
transactions for CLIENT via such account in respect of mutual funds
that both (1) settle through the NSCC and (2) serve as the investment
vehicles for the variable Contracts.
c. ADMINISTRATOR and/or SDI shall from time to time instruct CLIENT
regarding funding of such disbursement accounts as necessary to ensure
that sufficient funds are in the appropriate accounts to pay claims and
other disbursements, and to settle mutual fund trades, all in respect
of the Contracts. CLIENT shall fund such accounts as reasonably
instructed by ADMINISTRATOR and/or SDI. Such instructions shall be
furnished by ADMINISTRATOR and/or SDI, and such funding shall be
effected by CLIENT, according to such procedures, including advance
notice requirements, as ADMINISTRATOR, SDI, and CLIENT shall reasonably
agree in connection with transfer of the administration of the
Contracts to ADMINISTRATOR and SDI. Neither ADMINISTRATOR nor SDI shall
be obligated to cover on behalf of a CLIENT any
25
disbursement account funding shortfalls that result from a CLIENT's
failure sufficiently to fund a disbursement account in accordance with
their reasonable and timely funding instructions to the CLIENT;
PROVIDED that a CLIENT shall, upon request, immediately reimburse, by
wire, in accordance with wiring instructions furnished for such
purpose, ADMINISTRATOR and SDI for any moneys they may elect to advance
to cover a disbursement account funding shortfall, without interest.
6.4 FORM OF PAYMENTS. All claims, disbursements or payments paid by
ADMINISTRATOR from funds collected on behalf of a CLIENT shall be paid
only on checks, drafts or wire transfers of and as authorized in
accordance with the Account Guidelines.
6.5 OPERATION OF ACCOUNTS. ADMINISTRATOR and SDI shall operate all
disbursement accounts in accordance with the Account Guidelines.
6.6 RECORDS OF RECEIPTS. ADMINISTRATOR and SDI shall maintain a cash
receipts register of all premiums or contributions or investments
received. The minimum detail required in the register shall be date
received and deposited, the mode of payment, the Contract number, name
of policyholder, certificate-holder or annuityholder, individual
premium or other consideration, other contributions or investment
amounts and agent or other selling representative.
6.7 RECORDS OF DISBURSEMENTS. The description of a disbursement shall be in
sufficient detail to identify the source document substantiating the
purpose of the disbursement, and shall include all of the following:
(i) the check number; (ii) the date of disbursement; (iii) the Person
to whom the disbursement was made; (iv) the amount disbursed; and (v)
ledger account number. If the amount disbursed does not agree with the
amount billed or authorized, ADMINISTRATOR shall prepare a written
record as to the application for the disbursement.
6.8 MONTHLY ACCOUNTING. ADMINISTRATOR shall render accounts to each CLIENT
detailing all Contract-related transactions and remit all money due to
such CLIENT under this Agreement to such CLIENT at least monthly.
ADMINISTRATOR will periodically render an accounting to each CLIENT
detailing all transactions performed by the ADMINISTRATOR pertaining to
the business relating to the CLIENT. ADMINISTRATOR shall prepare and
maintain monthly financial institution account reconciliations if such
service is requested by a CLIENT.
6.9 CURRENCY. All transactions will be paid and reported in U.S. dollars.
ADMINISTRATOR is under no obligation to accept premium or annuity
payments, fees and charges in any currency other than U.S. dollars.
7. TERM AND TERMINATION
7.1 TERM.
The term of the Agreements (in each case, the "Term") shall be as set
forth in this Section.
a. This Agreement as among ADMINISTRATOR, SDI and GS GROUP shall
remain in force and effect for so long as a Work Assignment is in
effect or a prospective Work Assignment is the subject of active
discussion by the Parties as a result of an estimate made pursuant to
Section 3.12; PROVIDED, that notwithstanding the foregoing such
Agreement shall remain in force and effect for a minimum period of two
years from the date hereof.
b. As among ADMINISTRATOR, SDI and a CLIENT party to a particular
Work Assignment, the applicable Agreement shall have an initial term of
ten (10) years commencing on the date of execution and delivery of the
Work Assignment, unless a longer or shorter initial term shall be
specified therein, and subject to early termination as
26
hereinafter provided or as provided in the Work Assignment, and subject
also to renewal of the Agreement. In the event of such early
termination, the Term shall end on the effective date of such
termination.
7.2 RENEWAL OF A WORK ASSIGNMENT.
a. At least 15 months prior to the end of an Agreement (whether at
the end of the initial term or a renewal term), ADMINISTRATOR shall
give GS GROUP and the applicable CLIENT(s) written notice if
ADMINISTRATOR and/or SDI desire to change any of the terms and
conditions of or applicable to the Agreement. If CLIENT does not object
at least one year prior to the end of the Agreement, the Agreement
shall automatically renew for a period of three years following the end
of the then-current term, amended as set forth in such notice. If a
CLIENT objects and ADMINISTRATOR and SDI and the CLIENT do not reach a
mutual written agreement on the changes proposed by ADMINISTRATOR and
SDI, and/or any changes desired by the CLIENT, at least one year before
the end of the Agreement, then the Agreement shall terminate at the end
of the then applicable initial or renewal term thereof. If
ADMINISTRATOR does not give GS GROUP and the applicable CLIENT(S)
timely written notice of a desired change in terms and conditions as
specified in this subsection, and neither Party elects to terminate the
Agreement pursuant to Section 7.3, the Agreement shall automatically
renew, on the same terms and conditions, for a period of one year
following the end of the then-current initial or renewal term.
b. At any time during the Term of an Agreement, a CLIENT and
ADMINISTRATOR and SDI may renew the Agreement, subject to any changes
upon which they may agree, at the end of the then-current term as
mutually agreed by the Parties in writing.
7.3 ELECTION OF NON-RENEWAL AT END OF TERM. Any Party to an Agreement may
affirmatively elect against renewal thereof as of the end of the then
applicable initial or renewal term thereof by furnishing one year's or
more advance written notice of non-renewal to the other Party.
7.4 CLIENT TERMINATION FOR CONVENIENCE AND REDUCTION OF SCOPE.
a. Each CLIENT may terminate any applicable Agreement without cause
prior to the scheduled end of the initial or renewal term of such
Agreement only on notice to ADMINISTRATOR or SDI and on such terms as
may be set forth in the applicable Agreement, and upon payment of the
applicable Termination Charge set forth in the applicable Work
Assignment. In the event that all Agreements in effect at any time have
been so terminated, and no other prospective Work Assignment is the
subject of active discussion by the parties as a result of estimates
made pursuant to Section 3.12 hereof, this Agreement shall
automatically terminate with no further action of any Party required.
b. Notwithstanding the foregoing, any CLIENT may reduce the scope of
any Service or Brokerage Service provided hereunder or pursuant to an
Agreement, or remove specified Contracts or blocks of Contracts from
the provision of one or more Services or Brokerage Services without
payment of any Termination Charge, provided that the aggregate of all
fees and charges payable under an Agreement shall not be less than the
minimum set forth in the applicable Work Assignment notwithstanding any
such reduction of Contracts, Services or Brokerage Services.
7.5 TERMINATION FOR CAUSE: EXTENSION OF TERMINATION DATE.
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a. Any Party may terminate an Agreement (with respect to a Work
Assignment) for Cause upon written notice sent by certified mail to the
other Party. Such termination shall be effective as of the date
specified in such notice, which date shall be no later than the date
that the then-current initial or renewal term would otherwise end;
PROVIDED that in no event may ADMINISTRATOR's notice of termination be
effective less than seven Business Days after CLIENT's receipt of such
notice. "Cause" means the material breach of this Agreement by a Party
or the material default by a Party in any of its duties and obligations
hereunder, which breach or default remains uncured for thirty (30) days
after the receipt of written notice thereof by the breaching or
defaulting Party; provided, for the sake of clarity, that breach of or
default in the performance of any Applicable Level of Service shall not
be material unless and until (i) to the extent that the applicable Work
Assignment sets forth a standard for "significant and chronic" breaches
of Applicable Levels of Service, such standard has been breached, or
(ii) if no such standard is set forth in the Work Assignment, the
frequency or severity of such breaches or failures would reasonably be
expected to materially adversely affect CLIENT's expected benefits from
this Agreement, it being agreed that it shall constitute such a
condition if such frequency or severity has caused or would reasonably
be expected to cause (A) GS GROUP's or CLIENT's cost savings expected
from the engagement of ADMINISTRATOR and SDI to be materially
diminished, as reasonably demonstrated to ADMINISTRATOR, (B) material
non-compliance with Applicable Law or (C) a material adverse change in
Insured activity with respect to Contracts (such as lapses or
surrenders). In addition, if any Party has one or more of its state or
federal licenses suspended or revoked, or an event has occurred that is
reasonably likely to result in suspension, revocation, impairment or
limitation of any such license and, in either case, such suspension or
revocation causes or would reasonably be likely to cause that Party not
to be able to materially and lawfully perform its obligations
hereunder, then any other Party may, by giving written notice,
terminate a Work Assignment for Cause.
b. In the event of a termination of a Work Assignment by
ADMINISTRATOR or SDI for Cause, as a result of a change of Control
pursuant to Section 7.7, or as a result of insolvency pursuant to
Section 7.6, CLIENT may extend the effective date of termination for a
single period of not more than one year by (a) delivering notice of
such extension to ADMINISTRATOR and SDI (which notice, in the event of
termination for Cause, must discuss the efforts made and to be made to
cure the breach or default or to renew or obtain reinstatement of any
license in question and must specify the period of extension of the
termination date), and together therewith (b) tendering all amounts due
to ADMINISTRATOR and SDI, plus two months' estimated fees and charges
and Reimbursable Expenses (or, if a shorter period, estimated fees,
charges and Reimbursable Expenses in respect of the period by which the
Work Assignment is to be extended), both not less than two (2) Business
Days prior to the date on which the Work Assignment would otherwise
terminate. The CLIENT must thereafter continue diligently to cure and
otherwise to perform under the Agreement and shall be required to pay
estimated fees, charges and Reimbursable Expenses to ADMINISTRATOR for
the Services and Brokerage Services in advance as ADMINISTRATOR shall
reasonably determine and invoice, as well as any actual amounts due in
excess of such estimates, failing any of which ADMINISTRATOR and/or SDI
may terminate the Work Agreement immediately upon notice without
further right of cure. CLIENT may suspend any underwriting authority of
ADMINISTRATOR during the pendency of a dispute regarding the cause for
termination of this Agreement.
7.6 TERMINATION FOR INSOLVENCY. If GS GROUP, any CLIENT or ADMINISTRATOR or
SDI becomes or is declared insolvent or bankrupt, is the subject of any
proceedings relating to
28
its liquidation, its insolvency or for the appointment of a receiver or
similar officer for it, makes an assignment for the benefit of all or
substantially all of its creditors or enters into an agreement for the
composition, extension, or readjustment of all or substantially all of
its obligations (such Party, the "Insolvent or Bankrupt Party"), then,
unless the Insolvent or Bankrupt Party immediately gives adequate
assurance of the future performance of this Agreement (including, in
the case of GS GROUP, its guaranty pursuant to Section 8.2 hereof) to
the reasonable satisfaction of the other Party, ADMINISTRATOR (in the
event that a CLIENT is an Insolvent or Bankrupt Party) or the CLIENT(S)
(in the event that ADMINISTRATOR is the Insolvent or Bankrupt Party),
as applicable, may, by giving written notice thereof to the Insolvent
or Bankrupt Party, terminate the applicable Agreement as of the date
specified in such notice of termination; PROVIDED, HOWEVER, that in the
event that a CLIENT is the Insolvent or Bankrupt Party, such
termination shall not affect any other CLIENT, and the Agreements
applicable to such CLIENTS shall remain in full force and effect in
respect of all other such CLIENTS, and PROVIDED FURTHER that in the
event that ADMINISTRATOR or SDI is the Insolvent or Bankrupt Party, and
any CLIENT gives notice of termination under this Section 7.6, such
notice shall be deemed to be delivered on behalf of all CLIENTS, and
all Agreements shall be terminated. Such termination shall be effective
as of the date specified in such notice, which date shall be no later
than the date that the then-current initial or renewal term would
otherwise end; PROVIDED that in no event may ADMINISTRATOR's notice of
termination be effective less than seven (7) Business Days after
CLIENT's receipt of such notice. For the purposes of this Section 7.6,
voluntary filing of bankruptcy, or the involuntary filing of a petition
of bankruptcy or commencement of insolvency proceedings not dismissed
for ninety (90) days shall be considered becoming "bankrupt".
7.7 TERMINATION ON CHANGE OF CONTROL OR DIVESTITURE.
a. In the event that ADMINISTRATOR or SDI undergoes a direct or
indirect change of Control (a) to any entity deemed by the GS GROUP in
its reasonable discretion to be a direct competitor of the insurance
business and operations of any Affiliate of GS GROUP or with which an
Affiliate of GS GROUP is at such time engaged in a material dispute,
other than a change of Control to an Affiliate of ADMINISTRATOR or SDI
not resulting in a change in ultimate Control of ADMINISTRATOR, or (b)
that results, in the reasonable discretion of GS GROUP, in a material
increase in credit or performance risk for GS GROUP or the CLIENTS, any
CLIENT may elect to terminate the applicable Agreement by giving notice
within thirty (30) days of its becoming aware of such change of
Control. Such termination shall be effective as of the date specified
in such notice, which date shall be no later than the date that the
then-current initial or renewal term would otherwise end.
b. In the event that CLIENT undergoes a direct or indirect change of
Control (a) to any entity deemed by the ADMINISTRATOR in its reasonable
discretion to be a direct competitor of the third party administration
business and operations of ADMINISTRATOR, other than a change of
Control to an Affiliate of CLIENT not resulting in a change in ultimate
Control of CLIENT, or (b) that results, in the reasonable discretion of
ADMINISTRATOR, in a material increase in credit or
regulatory-compliance risk for ADMINISTRATOR or SDI, ADMINISTRATOR may
elect to terminate the applicable Agreement by giving notice within
thirty (30) days of its becoming aware of such change of Control. Such
termination shall be effective as of the date specified in such notice,
which date shall be no later than the date that the then-current
initial or renewal term would otherwise end; provided that in no event
may ADMINISTRATOR's notice of
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termination be effective less than seven (7) Business Days after
CLIENT's receipt of such notice.
7.8 EFFECT OF EXPIRATION OR TERMINATION. Upon the effectiveness of
termination or expiration of the applicable Agreement, ADMINISTRATOR
and SDI shall, as soon as reasonably practicable, invoice CLIENT for
fees and expenses outstanding thereunder, and CLIENT shall pay
ADMINISTRATOR and SDI all such outstanding fees and expenses promptly
upon receipt of such invoice(s).
7.9 TRANSFER ASSISTANCE.
a. During any period commencing (i) on the date of notice of
non-renewal of an Agreement pursuant to Section 7.3, (ii) the date that
is one year prior to the expiration of an Agreement, where
ADMINISTRATOR has given GS GROUP and a CLIENT timely notice of a desire
to change terms of the Agreement pursuant to Section 7.2(a) and no
mutual written agreement has been made as to changes by such date as
contemplated by such subsection, or (iii) notice of early termination
of an Agreement, whichever is applicable, of a Work Assignment, and
expiring at the end of the Term of such Agreement, ADMINISTRATOR and
SDI shall provide to the relevant CLIENT all Services, in the case of
ADMINISTRATOR, and Brokerage Services, in the case of SDI, (subject to
terms and conditions set forth in this Agreement) and all reasonable
assistance requested by such CLIENT in promptly and orderly moving all
Services and Brokerage Services to such CLIENT or to a third party
selected by such CLIENT, including providing CLIENT or its designee
with services including unloading CLIENT's data from databases,
delivering the data to CLIENT or its designee in a commercially
reasonable electronic format, assisting with the loading of CLIENT's
databases, assisting with any telecommunications turn-over, and
assisting in the execution of a parallel operation until the
commencement of services by the new administrator, and answering
questions regarding the Services (collectively, the "Transfer
Assistance Services"). Transfer Assistance Services provided by
ADMINISTRATOR and SDI during the period specified above shall be at no
cost to CLIENT; PROVIDED, HOWEVER, that if any Transfer Assistance
Services provided by ADMINISTRATOR or SDI require ADMINISTRATOR or
SDI to utilize resources or expend effort that ADMINISTRATOR or SDI
would not otherwise have utilized or expended in the performance of
Services or Brokerage Services for CLIENT, CLIENT shall pay
ADMINISTRATOR for such usage or effort at ADMINISTRATOR's then-current
commercially available costs for such Transfer Assistance Services.
ADMINISTRATOR will invoice Transfer Assistance Services costs to CLIENT
separately from the fees, charges, and Reimbursable Expenses payable
with respect to Services or Brokerage Services under Article 8 hereof.
If and to the extent CLIENT paid ADMINISTRATOR for Transfer Assistance
Services in advance, ADMINISTRATOR will invoice CLIENT to the extent
its actual costs of providing Transfer Assistance Services exceeded its
estimate and shall promptly reimburse CLIENT to the extent its estimate
exceeded its actual costs. As set forth in Section 5.4, in the event of
a termination by a CLIENT because of a change of Control of
ADMINISTRATOR or SDI pursuant to Section 7.7, the CLIENT shall have the
option of receiving a distribution of the list of Software and other
property escrowed thereunder or receiving Transfer Assistance Services
hereunder.
b. ADMINISTRATOR and SDI shall work in good faith, assist and
cooperate, during the Transfer Assistance Services period, with third
party service providers and consultants as reasonably requested and
necessary so that administration of the Contracts can be transferred to
the new administrator of the Contracts as of the end of the Term;
PROVIDED THAT neither ADMINISTRATOR nor SDI shall be required to
disclose any of its
30
Confidential Information to any such third parties or consultants nor
to permit them access to its Facilities and Systems unless (i) such
disclosure or access is necessary because there is no reasonable
alternative to convert administration of the Contracts to their systems
absent such disclosure or access, (ii) such disclosure or access is
limited to that so necessary, and (iii) such limited disclosure or
access is the subject of a confidentiality agreement reasonably
satisfactory in all respects to ADMINISTRATOR and/or SDI, as
applicable.
c. Each CLIENT shall pay ADMINISTRATOR for all Services and
Brokerage Services performed through the final date of the performance
of such Services and Brokerage Services.
d. Each Party shall be required to make all further payments payable
to the other Party.
e. Upon CLIENT's request, ADMINISTRATOR and/or SDI may, but shall
not be required to, provide CLIENT with Transfer Assistance Services
following the Term of an Agreement. All such post-expiration or
-termination assistance shall be chargeable to CLIENT in accordance
with a new Work Assignment to be entered into by the relevant Parties.
7.10 NOTICE OF TERMINATION AS REQUIRED BY APPLICABLE LAW. CLIENTS shall give
ADMINISTRATOR such advance written notice of any termination or
cancellation of an Agreement as required by Applicable Law. In
addition, CLIENTS shall provide fifteen (15) days advance written
notice to the Director of the Department of Insurance for the State of
Arizona of any termination or cancellation or any other change in an
Agreement as required by Arizona law (or any other state requiring
similar notification).
7.11 SURVIVAL. All rights and liabilities accrued under an Agreement shall
survive the expiration or termination of the Agreement. In addition,
all provisions of an Agreement that by their terms provide for the
exercise of rights or impose continuing obligations to perform after
the expiration or termination of the Agreement, such as Sections 4.1,
4.2, 4.5, 4.8, 7.8, and 17.11 and Article 16, shall survive the
expiration or termination of the Agreement for the periods, if any, set
forth therein. Further, the following provisions shall also survive the
expiration or termination of an Agreement: Sections 4.3, 4.4, 4.6, 5.1,
5.2, 5.3, 5.4, 8.1, 8.3, 8.4 and 8.5 and Articles 2, 9, 12, 13, 14
(excluding Section 14.10), 15, and 17 (excluding Sections 17.1, 17.10
and 17.11 (except that Section 17.11 shall survive pursuant to the
preceding sentence for the period specified therein)).
8. FEES AND EXPENSES
8.1 FEES. Each CLIENT shall pay to ADMINISTRATOR upon receipt of
ADMINISTRATOR's statement the fees and charges in the amounts as set
out in the applicable Work Assignment in respect of Services and
Brokerage Services furnished during the Term of the applicable
Agreement. ADMINISTRATOR shall not receive commissions, fees, or
charges contingent upon savings obtained in the adjustment, settlement
and payment of losses covered by a CLIENT's obligations, but
ADMINISTRATOR may receive compensation based on premiums or charges
collected or the number of claims paid or processed. ADMINISTRATOR
shall not receive from any CLIENT or any covered individual or
beneficiary under a plan any compensation or other payments except as
expressly set forth in a Work Assignment; PROVIDED, HOWEVER, that
additional charges to Insureds may not be made by ADMINISTATOR for
services to the extent those services have been paid for by a CLIENT.
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8.2 GS GROUP GUARANTY. GS GROUP shall enter into a guaranty substantially
in the form attached hereto as ANNEX 8.2.
8.3 REIMBURSABLE EXPENSES. In addition to all other specified fees and
charges herein, CLIENTS will reimburse ADMINISTRATOR for expenditures
for Reimbursable Expenses incurred by ADMINISTRATOR or SDI. With
respect to Reimbursable Expenses, as an agent of each CLIENT,
ADMINISTRATOR shall disclose to such CLIENT all charges, fees,
commissions, rebates, discounts and other payments directly received by
ADMINISTRATOR or SDI from service providers in connection with the
provision of the Services or Brokerage Services for such CLIENT, and
any such payments shall be credited to such CLIENT.
8.4 INVOICING; PAYMENT TERMS. ADMINISTRATOR shall invoice CLIENT on or
about the first business day of each month for all fees due for
Services and Brokerage Services to be rendered in that month and, to
the extent then known, for all Reimbursable Expenses not previously
invoiced. Each invoice shall state the basis for such fees and expenses
included thereon, and shall comply with the requirements of Section
8.5(g). Such CLIENT shall pay the undisputed portion of all invoices
within 45 days of receipt excluding amounts disputed in good faith by
such date. Amounts not paid when due shall accrue a late charge at the
rate of the prime interest rate published by THE WALL STREET JOURNAL in
its most recent edition prior to CLIENT's receipt of such invoice plus
two percentage points, prorated per month (but in no event to exceed
the highest lawful rate of interest), calculated from the date that
such payment is due until date of payment, unless disputed in good
faith. Neither the failure of ADMINISTRATOR to deliver an invoice for
charges incurred in respect of an Agreement nor any error in the amount
billed by ADMINISTRATOR for such charges shall constitute a waiver by
ADMINISTRATOR of a CLIENT's obligation to pay such charges.
8.5 TAXES.
a. Prices in Agreements do not include any applicable sales, use, ad
valorem or similar taxes (each, a "Sales Tax" and collectively, "Sales
Taxes") regardless of the taxing authority. Each CLIENT shall pay
applicable Sales Taxes on the fees payable under an Agreement unless
there is an applicable exemption from such Sales Tax. To the extent
ADMINISTRATOR or SDI is required by law to collect such Sales Taxes,
one hundred percent (100%) of such Sales Taxes shall be added to
invoices as separately stated charges and paid in full by the CLIENT,
unless such CLIENT is exempt from such Sales Taxes and furnishes
ADMINISTRATOR with a certificate of exemption. ADMINISTRATOR and SDI
shall be responsible for all taxes imposed on their respective income,
franchise or property and ADMINISTRATOR and SDI shall be responsible
for all taxes and all obligations to withhold taxes with respect to
their respective employees providing Services, in the case of
ADMINISTRATOR, and Brokerage Services, in the case of SDI, to a CLIENT.
b. If a CLIENT disagrees with ADMINISTRATOR's or SDI's determination
that any Sales Tax is due with respect to Services or Brokerage
Services provided hereunder, such CLIENT shall have the right to seek
an administrative determination from the applicable taxing authority,
or, alternatively, such CLIENT shall have the right to contest any
asserted claim for such Sales Taxes, subject to its agreeing to
indemnify ADMINISTRATOR and SDI for the entire amount of such contested
Sales Tax (including any associated interest and/or late penalties)
should such Sales Tax be deemed applicable. ADMINISTRATOR and SDI agree
to reasonably cooperate with a CLIENT in the event such CLIENT
determines to contest any such Sales Taxes.
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c. A CLIENT, on the one hand, and ADMINISTRATOR and SDI, on the
other hand, shall promptly inform each other in writing of any
assertion by a taxing authority of additional tax liability with
respect to said Services or Brokerage Services provided hereunder. Any
legal proceedings or any other action against ADMINISTRATOR or SDI and
with respect to such asserted liability shall be under ADMINISTRATOR's
direction, PROVIDED that ADMINISTRATOR informs such CLIENT of all
material developments and FURTHER PROVIDED, that if the resolution or
settlement of such proceeding or action could cause such CLIENT to pay
any additional Sales Taxes or other amounts under this Agreement, such
CLIENT may at its option and expense participate in and jointly control
with ADMINISTRATOR such proceeding or action with ADMINISTRATOR's
cooperation. Any legal proceedings or any other action against such
CLIENT and with respect to such asserted liability shall be under such
CLIENT's direction, provided such CLIENT informs ADMINISTRATOR of all
material developments; and FURTHER PROVIDED that, if the resolution or
settlement of such a proceeding or action could cause ADMINISTRATOR or
SDI to pay any amounts, ADMINISTRATOR may at its option and expense
participate in and jointly control with the CLIENT such proceeding or
action with CLIENT's cooperation. In any event, the CLIENT and
ADMINISTRATOR and/or SDI, as appropriate, shall fully cooperate with
each other as to the asserted liability. Each Party shall bear all the
reasonable costs of any action undertaken by the other at that Party's
request.
d. If any Sales Taxes payable by a CLIENT that are required to be
collected by ADMINISTRATOR or SDI pursuant to Section 8.5(a) are not
invoiced by ADMINISTRATOR or SDI (or are invoiced on a date such that
such CLIENT and ADMINISTRATOR or SDI are not reasonably able to deliver
the amount of such Sales Taxes to the relevant taxing authority in a
timely fashion), and it is ultimately determined that such Sales Taxes
are due and payable, then such CLIENT shall reimburse ADMINISTRATOR for
the amount of such Sales Taxes; PROVIDED that in such event
ADMINISTRATOR shall indemnify such CLIENT from any and all interest and
other penalties assessed as a result of such Sales Taxes not being paid
in a timely manner.
e. No CLIENT shall be required to pay or otherwise be liable or
responsible for, and ADMINISTRATOR shall indemnify, defend and hold
harmless such CLIENT against, any penalty, additional tax, costs or
interest that may be assessed or levied by any taxing authority as a
result of the failure of ADMINISTRATOR to file any return, form, or
information statement that may be duly required from ADMINISTRATOR by
such taxing authority or to pay any tax amounts collected from such
CLIENT hereunder, unless such failure is caused by failure of such
CLIENT to provide necessary information, upon request, to ADMINISTRATOR
or to timely pay any Sales Tax amounts, upon request, to ADMINISTRATOR
that such CLIENT is required to pay to ADMINISTRATOR pursuant to this
Section 8.5 for payment to the applicable taxing authority. No CLIENT
shall be required to pay or otherwise be liable or responsible for, and
SDI shall indemnify, defend and hold harmless each CLIENT against, any
penalty, additional tax, cost or interest that may be assessed or
levied by any taxing authority as a result of the failure of SDI (1) to
file any return, form, or information statement that may be duly
required from SDI by such taxing authority or (2) to pay any tax
amounts collected from such CLIENT, unless such failure is caused by
failure of such CLIENT to provide necessary information, upon request,
to SDI or timely to pay any Sales Tax amounts, upon request, to SDI
that such CLIENT is required to pay to SDI pursuant to this Section 8.5
for payment to the applicable taxing authority.
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f. If ADMINISTRATOR or SDI receives a refund as a result of a
payment by a CLIENT under this Section 8.5, then ADMINISTRATOR shall
credit CLIENT an amount equal to such refund on its next invoice to
CLIENT for fees and charges.
g. Any and all invoices from ADMINISTRATOR to a CLIENT shall comply
with the requirements of each relevant taxing authority and shall
contain data sufficient under applicable law to enable the CLIENT to
obtain appropriate credit if available under the law for any Sales
Taxes charged on such invoices. Each invoice from ADMINISTRATOR to a
CLIENT shall set forth separately, the per-Contract fees, the amounts
due for any Services or Brokerage Services provided for which payment
is not covered by the per-Contract fees, a description of such other
services provided, the date or dates on which such services were
provided, the amount of Sales Taxes that ADMINISTRATOR and SDI are
collecting and the amounts upon which Sales Taxes are collected and the
basis thereof. If any Sales Taxes are assessed on ADMINISTRATOR's
provision of Services and/or SDI's provision of Brokerage Services to a
CLIENT, ADMINISTRATOR shall segregate all invoices between taxable and
nontaxable services. ADMINISTRATOR is responsible for collecting any
Sales Taxes from CLIENT in accordance with applicable law and remitting
such Sales Taxes to the applicable taxing authority in accordance with
Applicable Law.
h. If a CLIENT believes that it is required under applicable law to
deduct or withhold any taxes ("Withholding Taxes") from or in respect
of a payment to ADMINISTRATOR or SDI hereunder, it will notify
ADMINISTRATOR or SDI, as appropriate, in a timely manner. The CLIENT
may deduct and withhold any Withholding Tax that such CLIENT reasonably
determines is required by Applicable Law to be deducted and withheld at
the lowest rate statutorily permitted, and may make any payment to
ADMINISTRATOR or SDI pursuant to an Agreement net of such Withholding
Tax. Any Withholding Tax so deducted and withheld shall be treated for
all purposes of an Agreement as a payment duly and timely made by such
CLIENT to ADMINISTRATOR or SDI, as appropriate. ADMINISTRATOR and/or
SDI, as appropriate, shall provide such CLIENT such forms or other
documentation as may be required to establish any reduction in or
exemption from any such Withholding Tax.
8.6 INCREASES TO FEES AND CHARGES. Unless otherwise expressly specified in
a Work Assignment with respect to fees and charges that apply to the
Agreement constituted by that Work Assignment, ADMINISTRATOR reserves
the right on thirty (30) days' written notice to a CLIENT to increase
any fees and charges charged by ADMINISTRATOR or SDI under the
Agreement, subject to this Section 8.6. ADMINISTRATOR or SDI may not
increase its fees or charges pursuant to this section more frequently
than once every twelve (12) months, and no such increase shall occur
prior to December 31, 2006. No fee increases pursuant to this section
shall exceed the increase in the United States Department of Labor
Consumer Price Index -- All Urban Consumers (1982-84 = 100) since the
later of (a) the date of the Agreement or (b) the date of the last
increase for such fee pursuant to this section.
8.7 MOST FAVORED CUSTOMER. ADMINISTRATOR shall treat GS GROUP and/or the
CLIENTS as its most favored customers in connection with bids by
ADMINISTRATOR to GS GROUP and/or CLIENTS, on the one hand, and to one
or more other clients or prospective clients, on the other hand, on the
same prospective new third party administration business, in the
following manner: In the event ADMINISTRATOR or SDI is engaged to
provide bid assistance services to an un-Affiliated third party similar
to those being provided to GS GROUP or a CLIENT in connection with the
same block of U.S. annuity contracts and/or variable life insurance
policies, they shall reasonably and endeavor in good faith to quote the
GS GROUP fees and charges at least as favorable to the prospective
client on a new
34
Work Assignment with respect thereto that they quote for such other
party, as determined without giving effect to such adjustments as shall
be appropriate, including the baseline limitation set forth in Section
3.12 and any volume discounts to which the GS GROUP may be entitled and
to which the third party may not be entitled. If the GS GROUP has
reason to believe that ADMINISTRATOR and SDI may have breached their
duty to the GS GROUP under the preceding sentence, the GS GROUP may
designate an independent, qualified third party (who may not be a
competitor of ADMINISTRATOR, SDI or any of their Affiliates and who
shall otherwise be reasonably acceptable to ADMINISTRATOR and SDI) to
audit compliance by ADMINISTRATOR and SDI with their obligations to the
GS GROUP under such sentence; PROVIDED that such designee must first
agree in writing, to the reasonable satisfaction of ADMINISTRATOR and
SDI, to maintain any and all information disclosed to it in connection
with such audit strictly confidential, even from the GS GROUP insofar
as such information relates to any agreement ADMINISTRATOR or SDI may
have with any third party or any services they may have performed for,
including any quotation they may have given to, a third party or
disclosure of which to a third party or the GS GROUP might otherwise
cause ADMINISTRATOR or SDI to violate a duty of confidentiality to a
third party; and PROVIDED FURTHER that the right of GS GROUP to cause
an audit to be commenced pursuant hereto shall be limited to quotations
furnished within the twenty four (24) months preceding notice of the
audit, and PROVIDED YET FURTHER that no quotation shall be subject to
audit more than once.
9. ADJUSTMENTS TO CHARGES
9.1 AUDIT OF CHARGES. In addition to any CLIENT's rights under Article 16
hereof (but subject to the limitations therein as to assistance by
third party organizations with an audit and to Section 16.5), upon at
least thirty (30) days' notice from such CLIENT and no more than once
during any calendar year (unless the previous audit revealed a material
discrepancy), ADMINISTRATOR and SDI shall provide such CLIENT with
access to all applicable financial records and supporting documentation
in respect of its charges to such CLIENT pursuant to Agreements for
that CLIENT during the preceding twenty four (24) months (excluding any
that were earlier furnished by ADMINISTRATOR and SDI for audit) that
are reasonably necessary to verify such charges for such months
(excluding any already audited). If, as a result of such an audit, such
CLIENT determines that ADMINISTRATOR or SDI has overcharged such
CLIENT, such CLIENT shall notify ADMINISTRATOR of the amount of such
overcharge and ADMINISTRATOR shall promptly pay to such CLIENT the
amount of the overcharge, plus interest at the rate of the prime rate
published by THE WALL STREET JOURNAL in its most recent edition prior
to the time of such payment plus two percentage points, prorated per
month (but in no event to exceed the highest lawful rate of interest),
calculated from the date of payment of the overcharged amount until the
date of payment to such CLIENT, unless disputed in good faith. All
Confidential Information of ADMINISTRATOR and/or SDI obtained as a
result of any monitoring, audits or inspections pursuant to this
Section 9.1 shall be held by such CLIENT in accordance with the
provisions of Article 14. CLIENTS shall not have access to
ADMINISTRATOR's, SDI's or their Affiliates' locations or proprietary
data or to ADMINISTRATOR's or SDI's customer locations or proprietary
data; PROVIDED that any CLIENT may have access to appropriate portions
of ADMINISTRATOR's or SDI's locations or proprietary data used to
perform the Services, in the case of ADMINISTRATOR, and Brokerage
Services, in the case of SDI, and to the Off-Site Facilities, to the
extent reasonably necessary to audit ADMINISTRATOR's and/or SDI's
charges pursuant to a Work Assignment.
35
9.2 UNDERCHARGES. If, as a result of an internal audit of its charges to
any CLIENT, ADMINISTRATOR determines that it has undercharged such
CLIENT for Services provided by it or Brokerage Services provided by
SDI performed within twenty four (24) months of such internal audit,
ADMINISTRATOR or SDI, as appropriate, may provide such CLIENT with an
invoice in respect of such amount. Any such invoice shall include
evidence that the amount was not charged to such CLIENT previously.
Upon receipt of this information and evidence, CLIENT shall promptly
pay to ADMINISTRATOR the amount of the undercharge.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ADMINISTRATOR AND SDI
10.1 CORPORATE EXISTENCE. Each of ADMINISTRATOR and SDI represents and
warrants to GS GROUP and the respective CLIENTS that it is a
corporation duly organized and existing and in good standing under the
laws of its jurisdiction of incorporation.
10.2 CORPORATE CAPACITY. Each of ADMINISTRATOR and SDI represents and
warrants to GS GROUP and the respective CLIENTS that it is empowered
under Applicable Laws and by its charter and bylaws to enter into and
perform each Agreement constituted hereby or by a Work Assignment(s),
and the Services, in the case of ADMINISTRATOR, and Brokerage Services,
in the case of SDI, contemplated therein and herein.
10.3 CORPORATE AUTHORITY. Each of ADMINISTRATOR and SDI represents and
warrants to GS GROUP and the respective CLIENTS that all requisite
corporate proceedings have been taken to authorize it to enter into and
perform each Agreement constituted hereby or by a Work Assignment(s),
and the Services, in the case of ADMINISTRATOR, and Brokerage Services,
in the case of SDI, contemplated herein.
10.4 GOVERNMENTAL ENTITIES. Each of ADMINISTRATOR and SDI represents and
warrants to GS GROUP and the respective CLIENTS that no approval,
authorization or consent of any Governmental Entity is required to be
obtained or made by it in order for such party to enter into and
perform any of its obligations under any Agreement constituted hereby
or by a Work Assignment(s) other than those that have already been
obtained.
10.5 AUTHORIZATIONS. ADMINISTRATOR and SDI represent, warrant and covenant
to GS GROUP and the respective CLIENTS that each of it has and shall
have all necessary rights, registrations, authorizations and/or
licenses to perform all of its obligations under this Agreement,
including all such rights, authorizations and/or licenses necessary to
use and incorporate any third party software used in the performance of
the Services, in the case of ADMINISTRATOR, and Brokerage Services, in
the case of SDI, for such CLIENT. ADMINISTRATOR and SDI have made
available to GS GROUP and the respective CLIENTS true and complete
copies of all such licenses and registrations for their review, and
covenants that, upon the request of GS GROUP or any CLIENT from time to
time during the Term of an Agreement, it shall make available, at
reasonable times and locations, true and complete copies of all such
licenses and registrations as in effect at such time, for such CLIENT's
review.
10.6 COMPLIANCE. ADMINISTRATOR and SDI represent, warrant and covenant to GS
GROUP and the respective CLIENTS that each of ADMINISTRATOR and SDI has
complied and will continue to comply with all Applicable Laws,
including all laws and regulations with respect to the operation of its
business, and in the administration of the Contracts and the provision
of the Services, in the case of ADMINISTRATOR, and Brokerage Services,
in the case of SDI, and it has and will continue to make all required
filings with regulatory agencies in connection with their status as a
third-party administrator or broker-dealer, as
36
the case may be, except where the failure to so comply or to make such
filings would not reasonably be expected to materially impair such
Party's ability to perform its obligations hereunder.
10.7 PERSONNEL. ADMINISTRATOR and SDI represent, warrant and covenant to GS
GROUP and the respective CLIENTS that the Services, in the case of
ADMINISTRATOR, and Brokerage Services, in the case of SDI, shall be
rendered by personnel reasonably qualified by training and experience,
and if necessary, duly licensed, to perform the tasks assigned to them.
10.8 ACCESS TO EMPLOYEES. Each of ADMINISTRATOR and SDI covenants to GS
GROUP and the respective CLIENTS that it shall provide upon request of
any CLIENT reasonable access to its knowledgeable employees and
independent contractors that may be required in the performance or
receipt of the Services, in the case of ADMINISTRATOR, and Brokerage
Services, in the case of SDI. The CLIENT shall reimburse ADMINISTRATOR
for all reasonable and documented out-of-pocket costs and expenses
incurred by ADMINISTRATOR or SDI in providing such access.
ADMINISTRATOR and SDI shall not be required to provide access hereunder
if to do so would be materially disruptive to their provision of
Services or Brokerage Services under the Agreements.
10.9 SERVICES AND BROKERAGE SERVICES WILL NOT INFRINGE. ADMINISTRATOR and
SDI represent, warrant and covenant to GS GROUP and the respective
CLIENTS that, to the best of their knowledge, the Services, in the case
of ADMINISTRATOR, and Brokerage Services, in the case of SDI, do not
and will not infringe upon or otherwise violate the intellectual
property or proprietary rights of any person.
10.10 SOFTWARE WILL NOT INFRINGE. ADMINISTRATOR and SDI represent, warrant
and covenant to GS GROUP and the respective CLIENTS that to the best of
their knowledge the Software does not and will not infringe upon or
otherwise violate the intellectual property or proprietary rights of
any third party.
10.11 FACILITIES. ADMINISTRATOR and SDI represent, warrant and covenant to GS
GROUP and the respective CLIENTS that ADMINISTRATOR and SDI have and
will continue to have and maintain reasonably necessary personnel and
Facilities and Systems to perform its duties and obligations as set
forth under this Agreement and as required by this Agreement.
10.12 BOND AND INSURANCE REQUIREMENTS. ADMINISTRATOR and SDI represent,
warrant and covenant to GS GROUP and the respective CLIENTS that
whenever required by Applicable Law or regulation to maintain a bond or
deposit with a regulatory authority, ADMINISTRATOR and SDI shall
maintain a deposit or a bond in favor of such authority, to be held in
trust for the benefit and protection of CLIENTS and the Insureds whose
monies ADMINISTRATOR and SDI, or such other assignee handles, and, in
addition, shall comply with any other bond and insurance requirements
of Applicable Law.
10.13 ERRORS AND OMISSIONS; FIDELITY BOND; OTHER INSURANCE.
a. ADMINISTRATOR and SDI each represent, warrant and covenant that
it now has and will maintain, throughout the Term of this Agreement,
insurance coverage for errors and omissions liability in amounts not
less than $5 million per claim and not less than $5 million in the
aggregate, with an insurer rated A or above by A.M. Best & Co. that is
authorized (whether on an admitted or non-admitted basis) to do
business in the jurisdictions from which ADMINISTRATOR or SDI is
performing the Services and Brokerage Services, respectively.
37
b. ADMINISTRATOR and SDI will maintain a fidelity bond covering all
employees, in an amount of $5,000,000, with an insurer rated A, or
above, that is authorized (whether on an admitted or non-admitted
basis) to do business in the jurisdictions from which ADMINISTRATOR or
SDI is performing the Services and Brokerage Services, respectively.
c. ADMINISTRATOR and SDI will maintain (i) Commercial General
Liability Insurance (including contractual liability coverage) in an
amount not less than $1,000,000 each occurrence and not less than
$1,000,000 in the aggregate, (ii) Excess Liability Insurance (Umbrella
Form) in an amount not less than $9,000,000 each occurrence and not
less than $9,000,000 in the aggregate, (iii) Commercial Automobile
Liability Insurance in an amount not less than $1,000,000 combined
single limit, (iv) Workers' Compensation Insurance in the amount
required by Applicable Law and (v) Employer's Liability in an amount
not less than $100,000 bodily injury each accident and not less than
$100,000 bodily injury by disease, each employee, $500,000 disease
policy limit. Each of the coverages mentioned in this Section 10.13(c)
shall be with an insurer rated A, or above, that is authorized (whether
on an admitted or non-admitted basis) to do business in the
jurisdictions from which ADMINISTRATOR or SDI is performing the
Services and Brokerage Services, respectively.
d. ADMINISTRATOR and SDI shall furnish or cause to be furnished each
CLIENT with a certificate of insurance showing coverage in such amounts
and, if the policies are to be cancelled, renewed or materially altered
as to affect coverage for ADMINISTRATOR or SDI, provide at least thirty
(30) days' written notice prior to any such cancellation, renewal or
alteration. Any CLIENT's failure to notify ADMINISTRATOR or SDI or
otherwise take remedial action following ADMINISTRATOR's or SDI's
failure to deliver satisfactory evidence of coverage shall not be
construed as a waiver of its right under this Section 10.13(d) to have
such insurance in place or a release of ADMINISTRATOR or SDI from its
obligation to provide the required insurance coverage hereunder.
Receipt by a CLIENT of a non-conforming certificate of insurance does
not constitute acceptance. ADMINISTRATOR's or SDI's failure to comply
with the terms of this Section 10.13(d) shall be considered a material
breach of this Agreement.
e. Any such required insurance coverage may be in the form of
coverage maintained by a parent corporation under which ADMINISTRATOR
or SDI is covered as an insured.
11. REPRESENTATIONS, WARRANTIES AND COVENANTS OF GS GROUP AND CLIENTS
11.1 CORPORATE EXISTENCE. Each of GS GROUP and CLIENT represents and
warrants to ADMINISTRATOR and SDI that it is a corporation or other
legal entity duly organized and existing and in good standing in its
jurisdiction of organization.
11.2 CORPORATE CAPACITY. Each of GS GROUP and CLIENT represents and warrants
to ADMINISTRATOR and SDI that it is empowered under the Applicable Laws
and by its charter and bylaws to enter into and perform each Agreement
constituted hereby or by a Work Assignment to which it is a Party.
11.3 CORPORATE AUTHORITY. Each of GS GROUP and CLIENT represents and
warrants to ADMINISTRATOR and SDI that all requisite corporate
proceedings have been taken to authorize it to enter into and perform
each Agreement constituted hereby or by a Work Assignment to which it
is a Party.
11.4 GOVERNMENTAL ENTITIES. Each of GS GROUP and CLIENTS represents and
warrants to ADMINISTRATOR and SDI that no approval, authorization or
consent of any
38
Governmental Entity is required to be obtained or made by it in order
for such Party to enter into and perform any of its material
obligations under any Agreement constituted hereby or by a Work
Assignment to which it is a Party, other than those that have already
been obtained.
11.5 AUTHORIZATIONS. Each of GS GROUP and CLIENTS represent, warrant and
covenant to ADMINISTRATOR and SDI that each of it has and shall have
all necessary rights, registrations, authorizations and/or licenses to
perform all of its material obligations under each Agreement
constituted hereby or by a Work Assignment to which it is a Party.
11.6 LEGAL COMPLIANCE. Each CLIENT represents, warrants and covenants to
ADMINISTRATOR that such CLIENT has and will continue to comply with all
laws and regulations with respect to the operation of its business, and
in the design, underwriting, solicitation, sale and administration of
the Contracts, and it has and will continue to make all required
filings with regulatory agencies in connection with the offer, sale, or
administration of the Contracts, except where the failure to so comply
or to make such filings would not reasonably be expected to materially
impair such CLIENT's, ADMINISTRATOR's or SDI's ability to perform its
obligations hereunder.
11.7 ACCESS TO EMPLOYEES. Each CLIENT represents, warrants and covenants to
ADMINISTRATOR that such CLIENT shall provide upon request of
ADMINISTRATOR reasonable access to its knowledgeable employees and
independent contractors that may be required in the performance or
receipt of the Services or Brokerage Services. ADMINISTRATOR shall
reimburse the CLIENT for all reasonable and documented out-of-pocket
costs and expenses incurred by the CLIENT in providing such access.
CLIENT shall not be required to provide access hereunder if to do so
would be materially disruptive to the conduct of its business as it
relates to the Contracts.
12. INDEMNIFICATION
12.1 INDEMNIFICATION OF ADMINISTRATOR AND SDI. Anything to the contrary
herein notwithstanding, and notwithstanding the Limitation of Liability
provision contained in Article 13, each of GS GROUP and CLIENT shall
defend, indemnify and hold harmless ADMINISTRATOR and/or SDI and their
respective Affiliates, officers, directors, employees, agents and
representatives (each, an "ADMINISTRATOR Indemnified Party") from and
against any and all costs, expenses, losses, damages, charges,
reasonably incurred counsel fees, payments, and liability
(collectively, the "Losses") which may be asserted against any of them
by an Insured or other third party or for which it may be held liable
by an Insured or other third party, arising out of or attributable to
(a) GS GROUP's or such CLIENT's willful misconduct, gross negligence or
breach of any provision of (i) an Agreement; (ii) a selling,
commission, agency or other sales or distribution agreement or
reinsurance agreement (other than as a result of breach thereof insofar
as caused by ADMINISTRATOR or SDI); (iii) a fund participation
agreement, (iv) any agreement relating to a Contract, (v) a Contract
(other than as a result of a breach thereof insofar as caused by
ADMINISTRATOR or SDI), (b) the failure to comply with Applicable Law by
(v) such CLIENT or GS GROUP, (w) any issuer of a Contract in relation
to the design, offer, sale issuance or administration of such Contract,
(x) a previous administrator of a Contract that is not Affiliated with
ADMINISTRATOR in administering such Contract, (y) a broker-dealer,
agent, representative, or other Person in relation to the offer, sale
or issuance of such Contract, or (z) any Person in maintaining the
records required to be maintained with respect to Contracts, (c) any
failure of a Contract issued, reinsured, administered or serviced by a
CLIENT to qualify as a life insurance contract or annuity contract, as
applicable, under Section 101(f), 817(h), 7702 or 72 of the Code, any
similar provision of the Code relating to such qualification or any
successor provision to the foregoing, or the qualification of a
Contract issued, reinsured, administered or serviced by a CLIENT as a
modified endowment contract within the meaning of Section 7702A of the
Code, any similar
39
provision of the Code relating to such qualification or any successor
provision to the foregoing (except in either case insofar as a result
of breach of the Agreement by ADMINISTRATOR or SDI), (d) action (other
than the performance of the Services or Brokerage Services or other
action required to be taken under an Agreement or by any state or
federal regulator) taken by ADMINISTRATOR or SDI at the written
direction of GS GROUP or a CLIENT, including written procedures
supplied by a CLIENT pursuant to Section 3.5 or 3.6, (e) inaction by
ADMINISTRATOR or SDI as a result of failure by GS GROUP or a CLIENT to
furnish direction, following reasonable request therefor in writing, if
ADMINISTRATOR or SDI reasonably believed that it lacked the authority
to take the action in question absent direction by GS GROUP or a
CLIENT, or (f) (i) bodily injury, including death, to any person, or
(ii) damage to the property of any Person (not including software or
data) to the extent that such injury or damage results from the willful
misconduct or negligence of GS GROUP or CLIENT or any of their officers
or employees in connection with ADMINISTRATOR's or SDI's performance of
their obligations under an Agreement, unless in each case such Losses
are due to the negligence or willful misconduct of an ADMINISTRATOR
Indemnified Party, in which case such Losses shall be apportioned.
12.2 INDEMNIFICATION OF CLIENT AND GS GROUP. Anything to the contrary herein
notwithstanding, and notwithstanding the Limitation of Liability
provision contained in Article 13, none of the CLIENTS or GS GROUP
shall be responsible for, and ADMINISTRATOR and SDI shall jointly and
severally indemnify and hold harmless each CLIENT and GS GROUP and
their respective Affiliates, officers, directors, employees, agents and
representatives (each, a "GS GROUP Indemnified Party") from and against
any and all Losses which may be asserted against any of them by a third
party, or for which such CLIENT or GS GROUP may be held liable by a
third party, arising out of or attributable to (a) ADMINISTRATOR's or
SDI's willful misconduct or gross negligence, (b) breach of any
provision of an Agreement, (c) (i) bodily injury, including death, to
any person, or (ii) damage to the property of any person, firm or
corporation (not including software or data) to the extent that such
injury or damage results from the willful misconduct or negligence of
ADMINISTRATOR or SDI or any of their officers or employees in
connection with performing ADMINISTRATOR's or SDI's obligations under
this Agreement, (d) any claim, action or proceeding alleging that
personnel of ADMINISTRATOR performing Services hereunder are employees
of any CLIENT or GS GROUP or their assignees for any purpose, (e) any
claim, action or proceeding in connection with any termination,
dismissal, demotion or reduction in benefits by ADMINISTRATOR or its
affiliates with respect to an employee of ADMINISTRATOR engaged or
proposed to be engaged in providing services under an Agreement; and
(f) any infringement of any patent, trademark, copyright, trade secret
or other intellectual property or proprietary right of any third party
arising out of the performance of an Agreement by ADMINISTRATOR or SDI,
unless, in each case, such Losses are due to the negligence or willful
misconduct of a GS GROUP Indemnified Party, in which case such Losses
shall be apportioned.
12.3 INDEMNIFICATION PROCEDURES INVOLVING THIRD-PARTY CLAIMS. If any third
party makes a Claim covered by Section 12.1 or Section 12.2 against an
ADMINISTRATOR Indemnified Party or a GS GROUP Indemnified Party (an
"Indemnified Party") with respect to which such Indemnified Party
intends to seek indemnification under Section 12.1 or Section 12.2,
such Indemnified Party shall promptly deliver to the indemnifying Party
(GS GROUP or
40
any such CLIENT, on the one hand, or ADMINISTRATOR and SDI, on the
other hand, as applicable, an "Indemnifying Party") a written notice (a
"Claims Notice"), including a brief description of the amount and basis
of the Claim, if known. Upon giving such Claims Notice, the
Indemnifying Party shall be obligated to defend such Indemnified Party
against such Claim, PROVIDED that, in the event that any CLIENT is an
Indemnifying Party with respect to a Claim asserted hereunder, and such
CLIENT is entitled to indemnification from a third party (a "Third
Party Indemnitor") in respect of the same underlying subject matter,
facts or circumstances as such Claim, the Indemnifying Party may, upon
notice to the Indemnified Party, assign the defense of such Claim
hereunder to such Third Party Indemnitor. The Indemnified Party (except
as provided below) shall cooperate fully with, and assist, the
Indemnifying Party or Third Party Indemnitor in its defense against
such Claim at the Indemnifying Party's expense. The Indemnifying Party
or Third Party Indemnitor shall keep the Indemnified Party apprised at
all times as to the status of the defense; PROVIDED, HOWEVER, that the
failure of the Indemnified Party to give prompt notice or to keep
Indemnifying Party or Third Party Indemnitor reasonably apprised shall
not relieve the Indemnifying Party of any of its obligations hereunder
except to the extent such failure prejudices the Indemnifying Party.
The Indemnifying Party shall be entitled to assume and control the
defense of any such Claim on Indemnified Party's behalf by written
notice to the Indemnified Party within thirty (30) days after receipt
of a Claims Notice; PROVIDED that, notwithstanding anything in this
Article 12 to the contrary, in the event the Claim is an action,
proceeding, inquiry or investigation commenced by a Governmental
Entity, the Indemnified Party shall have the right to control the
defense of such Claim. If so specified in such notice, the Indemnifying
Party, in the event that the Indemnifying Party is entitled to
indemnification from a Third Party Indemnitor in respect of the same
underlying subject matter, facts or circumstances as the Claim
asserted, may assign the defense of such Claim hereunder to such Third
Party Indemnitor. The Indemnified Party shall cooperate fully with, and
assist the Indemnifying Party or Third Party Indemnitor in the defense
and all related settlement negotiations of such Claim. The Indemnifying
Party shall pay all reasonable outside costs incurred by the
Indemnified Party related to the Indemnified Party's or Third Party
Indemnitor's assistance in defense of a Claim. The Indemnified Party
shall have the right to join in the defense of such Claim and employ
its own separate counsel in any action, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party;
PROVIDED, HOWEVER, that (1) if the Parties agree that it is
advantageous to the defense for the Indemnified Party to employ its own
counsel or (2) if the Indemnified Party shall have reasonably concluded
that there may be a conflict of interest between the Indemnifying Party
and the Indemnified Party in the conduct of the defense of such Claim
(in which case the Indemnifying Party shall not have the right to
direct or participate in the defense of such Claim on behalf of the
Indemnified Party), then, in each such instance, the reasonable fees
and expenses of counsel for such Indemnified Party shall be borne by
the Indemnifying Party.
If the Indemnifying Party shall fail to notify the Indemnified Party of
its desire to assume the defense of any such Claim within the
prescribed period of time or shall notify the Indemnified Party that it
will not assume the defense of any such Claim, then the Indemnified
Party shall defend such Claim in any such manner as it may deem
appropriate, subject to the right of the Indemnifying Party to assume
the defense of such Claim (including the right to assign the defense to
a Third Party Indemnitor under the circumstances described above) any
time prior to its final determination or settlement. The Indemnifying
Party shall also be permitted to join in the defense of such Claim and
employ counsel at its own expense. Neither the Indemnifying Party nor
any Indemnified Party
41
shall be liable for any settlement of any Claim effected without its
prior written consent, which consent shall not be unreasonably
withheld, except as set forth below.
Notwithstanding the foregoing, the Indemnified Party shall retain,
assume or reassume sole control over, and all expenses relating to,
every aspect of the defense that it believes is not the subject of the
indemnification provided for in Section 12.1 or 12.2 and upon such
retention, assumption or reassumption, the Indemnifying Party will be
relieved of responsibility for indemnifying the Indemnified Party for
such defense or the Claim to which such defense relates.
In any Claim as to which the Indemnifying Party is entitled pursuant to
this Section 12.3 to assume and control the defense thereof, until both
(i) the Indemnified Party receives notice from the Indemnifying Party
that it will defend or, as permitted, assign such defense to a Third
Party Indemnitor; and (ii) the Indemnifying Party assumes or so assigns
such defense, the Indemnified Party may, at any time after ten (10)
days from notifying the Indemnifying Party of the Claim, resist the
Claim or, after consultation with and the consent of the Indemnifying
Party, settle or otherwise compromise or pay the Claim. The
Indemnifying Party shall pay all reasonable outside costs of the
Indemnified Party actually incurred arising out of or relating to that
defense and any such settlement, compromise or payment.
Following indemnification as provided in Section 12.1 or 12.2, the
Indemnifying Party shall be subrogated to all rights of the Indemnified
Party with respect to the matters from which indemnification has been
made.
13. LIMITATION OF LIABILITY
13.1 CURE.
a. Other than in connection with a Claim as to which Article 12
applies, where GS GROUP's or a CLIENT's claim relates to a defect in
any Service or Brokerage Service, or any breach of this Agreement, such
CLIENT or GS GROUP shall give ADMINISTRATOR or SDI, as the case may be,
a reasonable opportunity to correct the defect. If ADMINISTRATOR or SDI
is able to correct the defect within 30 days, and PROVIDED that such
CLIENT or GS GROUP has not sustained any actual damages, ADMINISTRATOR
or SDI, as the case may be, shall not be liable for any damages.
b. Other than in connection with a Claim as to which Article 12
applies, where ADMINISTRATOR's or SDI's claim relates to a breach of
this Agreement by a CLIENT or GS GROUP, ADMINISTRATOR or SDI shall give
the applicable CLIENT or GS GROUP, as the case may be, reasonable
opportunity to correct the defect. If the CLIENT or GS GROUP is able to
correct the defect within 30 days, and PROVIDED that ADMINISTRATOR and
SDI have not sustained any actual damages, the CLIENT or GS GROUP, as
the case may be, shall not be liable for any damages.
13.2 LIMITATION OF LIABILITY. In case of any claim by a CLIENT against
ADMINISTRATOR or SDI or by ADMINISTRATOR or SDI against a CLIENT
related to an Agreement or any transaction under an Agreement,
regardless of the basis of the claim, the other Party will be liable
only for the amount of actual loss or damage suffered by ADMINISTRATOR,
SDI or such CLIENT, up to cumulative aggregate of the fees paid or
payable to ADMINISTRATOR by the applicable CLIENT in the aggregate
under the Agreement during the 12 months immediately preceding the date
when the claim was first notified in writing to the liable Party. For
purposes of interpreting this Section, the aggregate fees paid or
payable in the twelve months preceding the notification of a claim
shall be treated as a damage limitation pool from which damages may be
drawn. To the extent that pool is
42
drawn down to satisfy one claim it will not be available to satisfy
other claims that apply to the same period. Amounts drawn shall be
deemed to be drawn first from the most remote month in time, then from
the next most remote month, and so on, with the pool being reset on a
monthly basis (and no more frequently) to take into account fees paid
or payable in succeeding months.
13.3 EXCLUSION OF DAMAGES. EXCEPT AS MAY BE PROVIDED FOR HEREIN, IN NO EVENT
SHALL ANY PARTY BE LIABLE TO ANOTHER PARTY FOR ANY CLAIM, DAMAGE OR
OTHER CAUSE OF ACTION, WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE,
FOR INDIRECT, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES. THIS
EXCLUSION SHALL NOT APPLY TO ANY CLAIM PROPERLY ASSERTED UNDER ARTICLE
12 (INDEMNIFICATION) OF THIS AGREEMENT.
13.4 EXCEPTIONS TO LIMITATION OF LIABILITY. Notwithstanding Sections 13.2
and 13.3, no limitation on liability or exclusion of damages shall
apply with respect to any claims based on: (a) failure of any CLIENT to
pay fees and charges when due, (b) Article 14 (Confidentiality) of this
Agreement, (c) a Party's bad faith or willful misconduct, or (d) any
Claim properly asserted pursuant to Article 12 (Indemnification) of
this Agreement.
13.5 FORCE MAJEURE. In the event ADMINISTRATOR or SDI is unable to perform
its obligations under the terms of this Agreement because of natural
disaster, strikes, failure of or damage to public utility equipment or
transmission, or other causes beyond its control, such Party will use
its best efforts to mitigate the impact of the force majeure or to
assist the CLIENT or GS GROUP, as the case may be, to obtain alternate
sources of service. Except with respect to its failure to meet its
obligations under Section 3.10 (Business Resumption Plan), neither
ADMINISTRATOR nor SDI will be liable for any damages resulting from
such causes. If any force majeure endures more than 30 days, the
Parties shall meet and review in good faith the desirability and
conditions of this Agreement, and the applicable CLIENT may determine
to terminate without further liability to ADMINISTRATOR or SDI. Such
CLIENT shall have the right to cover and seek a third party source for
Services and Brokerage Services, at its own expense, during any event
of force majeure without liability to ADMINISTRATOR for any Service, or
SDI for any Brokerage Service, affected by the force majeure.
13.6 ENFORCEMENT. The limitations of liability in this Article 13 will be
enforced even if any exclusive remedy fails of its essential purpose.
14. CONFIDENTIALITY
14.1 CONFIDENTIAL INFORMATION.
a. Each Party (the "Recipient") acknowledges that it may, in the
course of performing its responsibilities under this Agreement, be
exposed to or acquire Confidential Information of the other Party (the
"Discloser").
b. Except as otherwise provided herein or except as directed or
consented to by the Discloser, Recipient agrees to hold the other
Party's Confidential Information in strict confidence and not to copy,
reproduce, sell, assign, license, market, transfer or otherwise dispose
of, give or disclose such information to third parties.
c. Except as otherwise provided herein or except as directed or
consented to by the Discloser, no Party shall use any Confidential
Information for any purposes whatsoever other than the performance of
this Agreement; nor may any Party use any Confidential Information to
engage in any business transaction or relationship other than those
with the
43
other Parties contemplated by this Agreement. In the event that
ADMINISTRATOR and/or SDI are granted a license under Section 5.3(b),
ADMINISTRATOR and/or SDI shall exercise its or their rights under such
license in such a manner as not to disclose Confidential Information to
third parties in violation of Section 14.1(b) above.
d. Except as expressly instructed by CLIENT in writing, neither
ADMINISTRATOR nor SDI shall, in any manner, use Confidential
Information directly or indirectly to induce or encourage customers of
any CLIENT to redeem or replace Contracts during the Term; provided
that merely processing, causing to be processed, paying or causing to
be paid customer-initiated redemptions or replacements, or answering
questions related thereto, shall not constitute a prohibited inducement
or encouragement under this Section.
14.2 DISCLOSURE ORDER. If Recipient is requested to disclose all or any part
of any Confidential Information under a subpoena, or inquiry issued by
a court of competent jurisdiction or by a judicial or administrative
agency or legislative body or committee, Recipient shall (to the extent
permitted by Applicable Law) (i) immediately notify Discloser of the
existence, terms and circumstances surrounding such request; (ii)
consult with Discloser on the advisability of taking legally available
steps to resist or narrow such request and cooperate with Discloser on
any such steps it considers advisable; (iii) if disclosure of the
Confidential Information is required or deemed advisable, exercise its
best efforts to obtain an order, stipulation or other reliable
assurance acceptable to Discloser that confidential treatment shall be
accorded to such portion of the Confidential Information to be
disclosed and (iv) limit disclosure to only that information required
to be disclosed pursuant to the subpoena or inquiry. Where a Recipient
is required to disclose information relating to itself or other
Persons, but not the Discloser, Recipient shall use its commercially
reasonable efforts to separate all Confidential Information from tapes,
files or other records containing the requested information, so that
Confidential Information is not disclosed. Discloser shall reimburse
Recipient for reasonable out-of-pocket legal fees and expenses incurred
in Recipient's effort to comply with this provision.
14.3 RETURN OF INFORMATION AND BOOKS AND RECORDS AFTER TERMINATION.
a. Following the Term of this Agreement as among ADMINISTRATOR, SDI
and a CLIENT (or earlier if requested by the CLIENT), ADMINISTRATOR
shall at its cost return to the CLIENT or CLIENT's designee all
Confidential Information of CLIENT (excluding, for purposes of this
Section 14.3, this Agreement), which to ADMINISTRATOR's or SDI's
knowledge is in ADMINISTRATOR's or SDI's possession or control,
together, if requested by the CLIENT, with a certificate signed by
ADMINISTRATOR in form and substance satisfactory to the CLIENT, stating
that all the Confidential Information of CLIENT has been returned as
required by this Section. Notwithstanding the foregoing, ADMINISTRATOR
and SDI shall maintain copies of Books and Records in accordance with
Section 4.2.
b. Following the Term of this Agreement as among ADMINISTRATOR, SDI
and a CLIENT (or earlier if requested by ADMINISTRATOR), such CLIENT
shall at its cost return to ADMINISTRATOR or ADMINISTRATOR's designee
all Confidential Information of ADMINISTRATOR or SDI (excluding, for
purposes of this Section 14.3, this Agreement or any Work Assignment),
which to such CLIENT's knowledge is in CLIENT's possession or control,
together, if requested by the ADMINISTRATOR, with a certificate signed
by CLIENT in form and substance satisfactory to the ADMINISTRATOR,
stating that all the Confidential Information of ADMINISTRATOR has been
returned as required by this Section.
44
c. Following the Term of this Agreement as among ADMINISTRATOR, SDI
and GS GROUP (or earlier if requested by GS GROUP), ADMINISTRATOR shall
at its cost return to GS GROUP or GS GROUP's designee all Confidential
Information of GS GROUP (excluding, for purposes of this Section 14.3,
this Agreement), which to ADMINISTRATOR's or SDI's knowledge is in
ADMINISTRATOR's or SDI's possession or control, together, if requested
by the CLIENT, with a certificate signed by ADMINISTRATOR in form and
substance satisfactory to GS GROUP, stating that all the Confidential
Information of GS GROUP has been returned as required by this Section.
Notwithstanding the foregoing, ADMINISTRATOR and SDI shall maintain
copies of Books and Records in accordance with Section 4.2.
d. Following the Term of this Agreement as among ADMINISTRATOR, SDI
and GS GROUP (or earlier if requested by ADMINISTRATOR), GS GROUP shall
at its cost return to ADMINISTRATOR or ADMINISTRATOR's designee all
Confidential Information of ADMINISTRATOR or SDI (excluding, for
purposes of this Section 14.3, this Agreement or any Work Assignment),
which to GS GROUP's knowledge is in GS GROUP's possession or control,
together, if requested by the ADMINISTRATOR, with a certificate signed
by GS GROUP in form and substance satisfactory to the ADMINISTRATOR,
stating that all the Confidential Information of ADMINISTRATOR has been
returned as required by this Section.
e. Each Party agrees to allow the other Party reasonable access to,
including the right to make copies of, all such returned materials in
the event such access is requested by the other Party for any
reasonable and legitimate purpose, including but not limited to, as a
result of any administrative or regulatory request or action,
litigation or any similar proceeding.
14.4 EXCEPTIONS.
a. Confidential Information shall not include information that is:
i. in or becomes part of the public domain other than by disclosure
by Recipient in violation of this Agreement;
ii. demonstrably known to Recipient previously, without a duty of
confidentiality;
iii. independently developed by Recipient outside of this Agreement;
or
iv. rightfully obtained by Recipient from third parties without a
duty of confidentiality.
b. Notwithstanding anything in this Article 14 to the contrary, if a
Regulatory Authority so requires, a copy of this Agreement shall be
filed with the Regulatory Authority at such time as ADMINISTRATOR
applies for or renews any insurance administrator's license (or the
equivalent) required under Applicable Law.
14.5 UNAUTHORIZED ACTS. Each Party shall, upon learning of any unauthorized
access, use, knowledge or possession, or an attempt to obtain or
achieve unauthorized access, use, knowledge or possession, of the other
Party's Confidential Information while in the possession of such Party
(an "Unauthorized Act"), promptly: (1) notify the other Party of the
Unauthorized Act, (2) furnish to the other Party full details known to
it of the Unauthorized Act and assist the other Party in investigating
or preventing the reoccurrence of any Unauthorized Act, (3) use
reasonable efforts to cooperate with the other Party in any litigation
and investigation against third parties reasonably deemed necessary by
the other Party to protect its proprietary rights and (4) use all
reasonable efforts to prevent a reoccurrence of any such Unauthorized
Act. As between the Parties, a Party responsible
45
for such Unauthorized Acts as contemplated in this Section 14.5 shall
pay the reasonable external costs incurred by any of the other Parties
to bring the responsible Party into compliance with this Agreement,
including any costs incurred in connection with seeking a
confidentiality agreement, protective order, or any other protection of
the confidentiality of the Confidential Information as contemplated in
Section 14.1.
14.6 ACTION BY PARTIES. No Party shall commence any legal action or
proceeding against a third party in respect of any Unauthorized Act
purported to have been committed by the third party without the prior
written consent of the other Party or Parties.
14.7 GLB COMPLIANCE. ADMINISTRATOR and SDI agree to maintain and hold in
confidence all Nonpublic Personal Information obtained by them from any
of the CLIENTS or any Insured, or any past or future policyholder,
annuityholder or certificateholder in the performance of their duties
and obligations under this Agreement, to the extent required by law.
Neither ADMINISTRATOR nor SDI shall (i) use such information or (ii)
disclose such information to any third party, in either case without
the express prior written consent of the CLIENT whose information may
be used or disclosed, except as required under Applicable Law and as
reasonably necessary for the performance of ADMINISTRATOR's or SDI's
duties under this Agreement.
14.8 BREACH. It is understood and agreed that in the event of a breach of
this Article 14, damages may not be an adequate remedy and the
non-breaching Party shall be entitled to apply for injunctive and other
equitable relief to restrain any such breach, threatened or actual.
14.9 INFORMATION SECURITY MANAGEMENT PROCEDURES. ADMINISTRATOR and SDI shall
implement measures reasonably designed to (i) safeguard the security
and confidentiality of the Nonpublic Personal Information; (ii) protect
against any anticipated threats or hazards to the security or integrity
of such information and; (iii) protect against unauthorized access to
or use of the Nonpublic Personal Information that could result in
substantial harm or inconvenience to the individual policyholder,
annuityholder or certificateholder to whom such information relates.
Without limiting the generality of the foregoing, ADMINISTRATOR and SDI
shall implement and maintain the information security management
procedures and obligations detailed in EXHIBIT N during the Term.
14.10 CHINESE WALL. ADMINISTRATOR and SDI agree that they and their
Affiliates' in-house compliance department shall maintain on a
confidential basis lists of potential transactions involving blocks of
annuity contracts and variable universal life insurance policies with
respect to which (a) the GS GROUP has contacted ADMINISTRATOR about a
bid assistance assignment under Section 3.12(c) (which contacts
ADMINISTRATOR shall promptly report to such compliance department) and
(b) one or more of ADMINISTRATOR's Affiliates or other clients may have
begun or determined to begin considering for acquisition themselves.
Such lists shall include the persons assigned to which side -- (a) or
(b) -- and such persons shall be instructed to disclose information
only to persons on the same side and to guard against inadvertent
disclosure to persons who may be on the other side.
15. DISPUTE RESOLUTION
15.1 EXECUTIVE RESOLUTION. If any dispute arises related to this Agreement
or any transaction governed by this Agreement, senior executives of all
affected Parties, vested with authority to settle the dispute, will
meet and attempt in good faith to resolve the dispute before resorting
to court. The meeting will be held reasonably promptly at the request
of any
46
affected Party in the offices of the Party requesting the meeting, or
if agreed, at another designated location.
15.2 CONTINUED PERFORMANCE. In the event of a good faith dispute between any
of the CLIENTS and ADMINISTRATOR or SDI regarding this Agreement
pursuant to which such CLIENT in good faith believes it is entitled to
withhold payment, such CLIENT shall promptly notify ADMINISTRATOR of
such dispute, and shall, upon request by ADMINISTRATOR and on or after
the date on which any fees or charges in dispute would otherwise be
required to be paid during the pendency of such dispute, deposit the
amount solely associated with the fees or charges to which the dispute
relates in an interest-bearing escrow account in the bank or depository
specified by ADMINISTRATOR, furnish evidence of such deposit to
ADMINISTRATOR and pay any undisputed amounts due for payment. The
Parties shall escalate the resolution of any such dispute within 30
days of the deposit of the funds into the escrow account. For as long
as such CLIENT makes such escrow deposits during the pendency of such
dispute, ADMINISTRATOR shall continue to provide the Services, and SDI
shall continue to provide the Brokerage Services, to such CLIENT. Upon
resolution of the dispute, the prevailing Party or Parties shall be
entitled to money in the amount set forth in the resolution in the
escrow account, plus any interest earned on such money; PROVIDED,
HOWEVER, that any excess funds in the escrow account will be remitted
to such CLIENT.
15.3 JUDICIAL REMEDY TO ENFORCE CONFIDENTIALITY. Notwithstanding the
preceding provisions of this Article 15, 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.
16. AUDIT AND INSPECTION
16.1 AUDIT RIGHT. Upon twenty-four (24) hours' notice to ADMINISTRATOR and
during normal business hours, but not more often than twice in any
twelve (12) month period, absent good cause, in which case an audit as
set forth herein may be conducted regardless of such limits, any CLIENT
or its designee has the right, in accordance with the provisions set
forth in EXHIBIT N and herein, as amended and supplemented, to audit
and verify the matters relating to ADMINISTRATOR and SDI set forth in
Section 16.4. A CLIENT may conduct audit and verification reviews
itself or with the assistance of a third party organization (PROVIDED
that the third party organization executes a confidentiality agreement
that contains protections for Confidential Information comparable to
those set forth in this Agreement and PROVIDED, FURTHER that such third
party organization shall not be any Person that ADMINISTRATOR deems in
its reasonable discretion to be a competitor in its third party
administrator business or SDI's broker-dealer business), at such
CLIENT's expense, subject to Section 16.6 below. All audits shall be
performed in a manner intended to minimize disruption to the Parties'
respective businesses. All such audits and verifications may be
conducted during the term of this Agreement and for a period of three
years after the end of the Term of this Agreement.
16.2 ACCESS. Without limiting the foregoing, during any audit in relation
hereto, ADMINISTRATOR and SDI shall provide reasonable access, without
limitation, to CLIENT, its auditors (including internal audit staff),
inspectors, regulators, consultants, and other representatives, to: (i)
facilities where the Services or Brokerage Services are being
performed; (ii) personnel and subcontractors providing any of the
Services or Brokerage Services; and (iii) data and records in the
possession of ADMINISTRATOR and SDI relating to any of the Services or
Brokerage Services. CLIENT and its designees shall adhere to
ADMINISTRATOR's and SDI's customary security and safety policies.
47
16.3 COOPERATION. ADMINISTRATOR and SDI shall assist CLIENT's auditors
(including internal audit staff), inspectors, regulators, consultants
and other representatives in connection with any audit in relation
hereto as is reasonably required. ADMINISTRATOR and SDI shall cooperate
fully with CLIENT or its designees in connection with audits in
relation hereto and with regard to examinations by regulatory
authorities and shall, on a timely basis, furnish each with information
reasonably requested; PROVIDED, HOWEVER, that CLIENT shall reimburse
ADMINISTRATOR for the reasonable costs incurred by it or SDI of
obtaining the requested information where the information is not
readily available without research or generation of data or reports
that is or are not normally generated by ADMINISTRATOR or SDI in the
ordinary course of business.
16.4 CATEGORIES OF AUDITS. Audits and inspections shall be limited to
information relating to the Services, in the case of ADMINISTRATOR, and
Brokerage Services, in the case of SDI, and may include: (i)
ADMINISTRATOR's and SDI's practices and procedures, including
procedures to maintain the confidentiality of the CLIENT's Confidential
Information; (ii) ADMINISTRATOR's and SDI's computer systems; (iii)
ADMINISTRATOR's and SDI's controls and security measures and
procedures; (iv) ADMINISTRATOR's and SDI's disaster recovery and
back-up procedures; (v) any matter necessary to enable a CLIENT to meet
requirements of law; (vi) ADMINISTRATOR's and SDI's compliance with
Applicable Levels of Service; and (vii) Books and Records.
16.5 NO INTERFERENCE. In no event shall any CLIENT while conducting audits
and investigations materially interfere with ADMINISTRATOR's or SDI's
ability to perform its obligations under this Agreement or conduct its
other operations in the ordinary course of business.
16.6 AUDIT EXPENSES. Each CLIENT shall bear its expenses relating to any
audit performed under this provision; PROVIDED, HOWEVER, if any such
inspection reveals that any invoice or payment has not been rendered or
made in accordance with the terms of this Agreement and has resulted in
a material overcharge to such CLIENT which results in a refund or
credit of the overcharge as provided in Section 9.1, ADMINISTRATOR
shall reimburse such CLIENT for its reasonable internal costs and
external expenses in connection with the portion of the audit relating
to the invoice and/or payment resulting in such material overcharge,
without prejudice to any other remedies or claims of such CLIENT. In no
event shall a CLIENT be obligated to pay to ADMINISTRATOR or SDI any
costs or expenses incurred by ADMINISTRATOR or SDI in assisting the
completion of the audits contemplated under this provision other than
the reasonable costs of obtaining information as referred to, and under
the circumstances described, in the proviso of Section 16.3.
16.7 EXIT CONFERENCE. Following an audit or examination by a CLIENT, such
CLIENT shall conduct (in the case of an internal audit), or request its
external auditors or examiners to conduct, (a) a conference to discuss
their preliminary conclusions with ADMINISTRATOR, followed by (b) an
exit conference with ADMINISTRATOR to obtain ADMINISTRATOR's factual
concurrence with issues identified in the review.
17. MISCELLANEOUS
17.1 TRANSFER. No CLIENT may assign or sublicense or otherwise transfer
voluntarily, or by operation of law, any rights or obligations under
this Agreement without ADMINISTRATOR's and SDI's prior written consent,
such consent not to be unreasonably withheld; PROVIDED, HOWEVER, that
any CLIENT may assign or otherwise transfer its rights and obligations
to an Affiliate or to a successor to substantially all of its assets as
long as the rights and obligations of ADMINISTRATOR and SDI are not
materially affected and as long as there is no material increase in the
credit or regulatory-compliance risk of ADMINISTRATOR, in its
reasonable discretion. ADMINISTRATOR
48
or SDI may not assign or sublicense or otherwise transfer voluntarily,
or by operation of law, any rights or obligations under this Agreement
without GS GROUP's prior written consent; PROVIDED, HOWEVER, that
ADMINISTRATOR may assign or otherwise transfer its rights and
obligations to an Affiliate or to a successor to substantially all of
its assets as long as the rights and obligations of the CLIENTS are not
materially affected; PROVIDED, FURTHER, that any effect on any right or
obligation of a CLIENT that results because an assignee or transferee
of ADMINISTRATOR's rights and obligations under this Agreement is
required to be licensed or registered with any Government Entity as a
third party administrator shall be deemed immaterial; PROVIDED,
FURTHER, that ADMINISTRATOR remains liable for the performance of this
Agreement by its assignee. In the event of any such assignment or
transfer, if regulatory approval is required in order for ADMINISTRATOR
to remain liable under and subject to this Agreement, ADMINISTRATOR
agrees to diligently seek such regulatory approval. An assignment or
transfer in connection with any corporate reorganization or other
transaction requiring regulatory approval to be obtained by
ADMINISTRATOR or an Affiliate will be subject to ADMINISTRATOR's (i)
seeking regulatory approval to remain subject to this Agreement
concurrently with its seeking the other approval, and obtaining such
approval, and (ii) execution and delivery to GS GROUP and CLIENT a
guaranty in form and substance reasonably satisfactory to them, subject
to any requirements imposed by any Regulatory Authority under
Applicable Law. This Agreement shall inure to the benefit of and be
binding upon the Parties hereto and their respective successors and
permitted assigns. GS GROUP and each CLIENT acknowledge that
ADMINISTRATOR intends to perform Services hereunder through its se(2)
division unless or until such division is reorganized into a separate
legal entity, although ADMINISTRATOR acknowledges that this Agreement
is enforceable against it with full recourse. Any assignment,
sublicense or other transfer in violation of this Agreement shall be
void.
17.2 INDEPENDENT CONTRACTOR. Nothing in this Agreement will be construed a
creating the relationship of employer and employee, partners or joint
venturers between ADMINISTRATOR or SDI on the one hand, and CLIENTS or
GS GROUP on the other hand, or between any of the Parties' employees or
representatives. No Party shall represent that it is (or that any of
its employees are) an employee, partner or joint venturer with any
other Party. It is the express intent of the Parties that neither
ADMINISTRATOR nor SDI is an employee, partner or joint venturer of any
CLIENT or GS GROUP for any purpose and that all Services and Brokerage
Services performed hereunder by ADMINISTRATOR and SDI, respectively
shall be as an "independent contractor" as that term is defined by
Applicable Law, and that ADMINISTRATOR and SDI shall be free to
exercise independent judgment as to the time, place and manner (such
manner not being inconsistent with ADMINISTRATOR's and SDI's
obligations hereunder) of performing its duties as to all of the
Services, in the case of ADMINISTRATOR, and Brokerage Services, in the
case of SDI, under this Agreement.
17.3 ENTIRE AGREEMENT. This Agreement (including Exhibits, Annexes and
written amendments hereto) constitutes the entire agreement between the
applicable Parties hereto and supersedes any prior agreement with
respect to the subject matter hereof, whether oral or written, and this
Agreement may not be modified or amended except in a written instrument
executed by duly authorized representatives of the applicable Parties
hereto. Any modification or amendment of the Agreement constituted
hereby among GS GROUP, ADMINISTRATOR and SDI shall bind such Parties as
well as all CLIENTS which at the time of such amendment or modification
are Affiliates of GS GROUP. Any modification or amendment of a Work
Assignment by the Parties thereto, assuming the CLIENT that is a Party
thereto is an Affiliate of GS GROUP at such time, shall bind the
applicable CLIENT,
49
ADMINISTRATOR and SDI. In the event that a CLIENT that is Party to a
Work Assignment is not an Affiliate of GS GROUP, (a) GS GROUP shall
have no obligation under these Terms and Conditions to the extent they
would otherwise be applicable to such CLIENT or Work Assignment, (b)
neither the CLIENT nor any Affiliate of the CLIENT shall have any
rights against GS GROUP hereunder and (c) GS GROUP shall continue to be
entitled to the benefits of this Agreement as among itself,
ADMINISTRATOR and SDI, including without limitation the terms of
Sections 3.12 and 8.7.
17.4 NOTICE, SERVICE OF PROCESS AND REGULATORY NOTICES. All notices and
other communications required or permitted under this Agreement to be
given in writing shall be deemed to have been duly given on the date
delivered by hand, by nationally recognized overnight courier service
or by messenger, or upon receipt by facsimile transmission, or upon
delivery by registered or certified mail (return receipt requested)
postage prepaid (except, in the case of a notice of breach or
termination for Cause under Section 7.5, in which case certified mail
or nationally recognized overnight courier service shall be the
required method), to any Party at the following addresses and facsimile
numbers, or to such other address or facsimile number as a Party to
receive the notice or request so designates by written notice to the
other:
If to ADMINISTRATOR or SDI--
Security Benefit Life Insurance Company
One Security Benefit Place
Topeka, Kansas 66636-0061
Attention: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
With a copy to--
Security Benefit Corporation
One Security Benefit Place
Topeka, Kansas 66636-0061
Attention: General Counsel
Facsimile: (000) 000-0000
If to the GS GROUP--
The Xxxxxxx Sachs Group, Inc.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Operating Officer, Reinsurance Group
Facsimile: (000) 000-0000
With a copy to--
The Xxxxxxx Xxxxx Group, Inc.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
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If to CLIENTS, as set forth in the applicable Work Assignment.
In the event any legal process or notice is served on a Party to this
Agreement in a suit or proceeding against any of the other Parties, the
Party served shall promptly forward such process or notice on to the
appropriate other Party at the address specified above.
In the event any regulatory notices or correspondence pertaining to
this Agreement is received by a Party, the Party receiving same shall
promptly forward a copy to the other Parties at the address specified
above.
17.5 GOVERNING LAW. The laws of the State of New York govern this Agreement,
without regard to its principles governing the conflicts of laws. The
Parties unconditionally consent to the exclusive jurisdiction of and
venue in the state and federal courts located in New York, New York.
17.6 COUNTERPARTS. The signatures of the Parties need not appear on the same
copy of this Agreement, so long as each Party signs at least one copy
of this Agreement and the copies contain the same terms.
17.7 CONSTRUCTION. The headings used herein are inserted only as a matter of
convenience and for reference and shall not affect the construction or
interpretation of this Agreement. Where context so indicates, a word in
the singular form shall include the plural, a word in the masculine
form the feminine, and vice versa. The word "including" and similar
constructions (such as "for example", "such as", and "E.G.") shall mean
"including, without limitation," throughout this Agreement. The Parties
agree that the terms and conditions of this Agreement are the result of
negotiations between the Parties and that this Agreement shall not be
construed in favor of or against any Party by reason of the extent to
which the Party or its professional advisors participated in the
preparation of this Agreement.
17.8 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such a determination, the Parties
shall negotiate in good faith to modify this Agreement so as to affect
the original intent of the Parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
17.9 THIRD PARTY BENEFICIARIES. Each Party intends that this Agreement shall
not benefit, or create any right or cause of action in or on behalf of,
any Person or entity, including without limitation any Governmental
Entity or Regulatory Authority, other than GS GROUP, the CLIENTS,
ADMINISTRATOR and SDI, as the case may be.
17.10 COVENANT OF FURTHER ASSURANCES. Each Party covenants and agrees that,
subsequent to the execution and delivery of this Agreement and without
any additional consideration, each shall execute and deliver any
further legal instruments and perform any acts which are or may become
necessary to effectuate the purposes of this Agreement.
17.11 NO SOLICITATION OF EMPLOYEES. During the Term and for a period of one
year after the Term, GS GROUP or CLIENT, as applicable, on the one
hand, and ADMINISTRATOR and SDI, on the other hand, agree that each of
the following (each a "Restricted Group"):
(a) in the case of GS GROUP, its internal business unit known as the
Xxxxxxx Sachs Reinsurance Group and any other internal employees of GS
GROUP involved in evaluating
51
ADMINISTRATOR and/or SDI as a potential providers of the Services or
Brokerage Services, respectively, or who may interact personally with
employees of ADMINISTRATOR or SDI in connection with ADMINISTRATOR's or
SDI's performance hereunder;
(b) in the case of CLIENT, its units, departments, and personnel
which or who may interact (in the case of personnel, personally) with
employees of ADMINISTRATOR or SDI in connection with ADMINISTRATOR's or
SDI's performance hereunder for CLIENT;
(c) in the case of ADMINISTRATOR and SDI, as to GS GROUP,
ADMINISTRATOR's and SDI's annuity and life insurance business process
outsourcing services units and any other of their internal employees
involved in evaluating the potential relationship with GS GROUP herein
or who may interact personally with employees of GS GROUP in connection
with ADMINISTRATOR's or SDI's performance hereunder; and
(d) in the case of ADMINISTRATOR and SDI, as to a CLIENT,
ADMINISTRATOR's and SDI's annuity and life insurance business process
outsourcing services units and any other of their internal employees
involved in evaluating the potential relationship with CLIENT hereunder
or who may interact personally with employees of CLIENT in connection
with ADMINISTRATOR's or SDI's performance hereunder
shall not, without the other Party's prior written consent, DIRECTLY OR
INDIRECTLY solicit for employment any individual employed by the other
Party (in a non-clerical position) at any time during the Term with
whom the Restricted Group has contact in connection with evaluating the
establishment of the relationships reflected herein and/or in the
applicable Work Assignment or in connection with the ADMINISTRATOR's
and/or SDI's performance hereof or hereunder; provided that this
prohibition shall not apply in respect of (i) any such employee who
responds to general advertisements or solicitations or recruitment
searches not specifically targeted by the Party or any of its
Affiliates at any of the other Party's employees or who is referred by
search firms or employment agencies or similar entities so long as such
entities have not been instructed by the Party or any of its Affiliates
or representatives to solicit such employees, (ii) who approaches the
Party of his or her own initiative, without any direct or indirect
solicitation by the Restricted Group, (iii) who has been given notice
of termination by the other Party prior to commencement of employment
discussions between the Party and such specific employees, or (iv) with
whom the Party or any of its Affiliates are currently having employment
discussions prior to the date of this Agreement, or any hires made by
the Party pursuant to any of the foregoing.
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