1
SERVICES AGREEMENT EXHIBIT 10.18 (1)
This Services Agreement is between LINCOLN NATIONAL CORPORATION, an Indiana
corporation with its principal place of business in Fort Xxxxx, Indiana, on
behalf of itself and its subsidiaries and affiliates (hereinafter referred to
collectively as "LNC"), and
American States Financial Corporation, an Indiana corporation with its
principal place of business in Indianapolis, Indiana, on behalf of itself and
its subsidiaries and affiliates (hereinafter referred to collectively as
"ASFC").
WITNESSETH:
WHEREAS, ASFC is planning to sell a portion of its capital stock in an initial
public offering;
WHEREAS, it is the intention of the parties to this agreement to provide an
orderly transition of services currently provided by LNC to ASFC.
NOW THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereby agree as follows:
ARTICLE I
SCOPE OF AGREEMENT
1.01 SCOPE. LNC will continue to provide to ASFC on and after the Closing
Date the specified services, systems and equipment (collectively referred to
herein as "Services") on the terms and conditions outlined in this Agreement.
1.02 CLOSING DATE. The "Closing Date" referenced in this Agreement is the
date ASFC sells capital stock to the public in an initial public offering.
1.03 EFFECTIVE DATE. The effective date of this Agreement is the Closing
Date defined in Section 1.02. Should the Closing Date not occur, this
Agreement shall become null and void and shall have no effect whatsoever on any
previous agreement, express or implied, between LNC and ASFC.
1.04 TERM. The term of this agreement shall be continual until mutually
terminated by both parties hereto in accordance with the terms of this
Agreement.
ARTICLE II
SYSTEMS
2.01 SYSTEMS ACCESS. The systems covered by this Agreement are shown in
Attachment A. The parties agree that the covered systems as set out in
Attachment A are not exhaustive and
173
2
that charges will be made from LNC to ASFC for those systems, if any, accessed
by ASFC and not listed on Attachment A at costs allocable to ASFC's usage
thereof.
2.02 SOFTWARE LICENSES. To the extent it is necessary to secure licenses for
the use of computer software from third party vendors, LNC and ASFC will work
together to secure those licenses from the third party vendor(s). ASFC will
pay the vendor costs associated with securing such licenses allocable to ASFC's
usage of the system associated with the license.
2.03 BACKUP AND DISASTER RECOVERY. For any systems which LNC operates for
ASFC, backup and disaster recovery are the responsibility of LNC. As systems
supporting ASFC are moved from LNC operations or are discontinued from LNC
operations, ASFC will assume responsibility for backup and disaster recovery.
2.04 MUTUAL ACCESS. The parties agree to allow each other terminal access to
the systems (mainframe and other) shown in Attachment A in order to administer
ASFC's business. Access to all other systems will be terminated as of the
Closing Date, except as otherwise agreed to by the parties hereto.
2.05 SYSTEM SECURITY. LNC and ASFC may institute system security protocols at
their discretion to ensure the integrity of their systems and data.
2.06 TECHNICAL SUPPORT. LNC will provide ASFC with technical support for the
systems listed in Attachment A of this Agreement at costs allocable to ASFC's
usage thereof, unless otherwise agreed by the parties hereto.
2.07 DISCONTINUANCE OF SYSTEMS BY ASFC. For each of the systems listed in
Attachment A, ASFC will provide 30 days advance notice to LNC prior to
terminating the use of a particular system.
2.08 DISCONTINUANCE OF SYSTEMS BY LNC. For each of the systems listed in
Attachment A, LNC will provide 30 days advance notice to ASFC prior to
terminating the use of a particular system. However, LNC shall continue to
make the systems available to ASFC at ASFC's request if all costs for such
systems, including overhead, are borne by ASFC.
ARTICLE III
EQUIPMENT, SERVICES AND CORPORATE PLANES
3.01 EQUIPMENT AND SERVICES COVERED. LNC and ASFC agree that certain
equipment and services provided by LNC are to be covered by this Agreement as
shown in Attachment A. The parties further agree that the covered equipment
and services as set out in Attachment A are not exhaustive and that charges
will be made from LNC to ASFC for those non-recurring items, if any, used by
ASFC and not listed on Attachment A at costs allocable to ASFC's usage thereof.
174
3
3.02 CORPORATE PLANES. ASFC will continue to be allowed use of LNC's
corporate planes on and after the Closing Date to the extent such aircraft are
available. The use of the corporate planes will be provided pursuant to the
terms and costs set out on Attachment A.
3.03 DISCONTINUANCE OF EQUIPMENT AND SERVICES. For each of the items listed
in Attachment A, ASFC will provide 30 days advance notice to LNC, and LNC will
provide 30 days advance notice to ASFC, prior to terminating use of a
particular item. Upon the expiration of any such 30 day period, lease payments
relating to future use of that equipment will automatically cease. At that
time, ASFC will either return the equipment to LNC or purchase the equipment
for a price agreed upon by both parties.
ARTICLE IV
RECORD RETENTION AND ACCESS
4.01 RETENTION. The parties will continue to retain records related to
Services provided to ASFC pursuant to this Agreement for a period of seven
years from the effective date of this Agreement.
4.02 ACCESS. Each party will have access to records retained by the other
party which relate to ASFC. The party in possession of the records will
provide access to records requested by the other party within three (3)
business days of receiving said request. Such access will be provided to the
other party at cost.
4.03 DESTRUCTION. Prior to destroying any records related to ASFC, a party
wishing to destroy documents covered by this Agreement will notify the other
party of its intention to do so. The party not possessing the documents shall
have the right to take possession of the documents in lieu of their destruction
and will pay the actual costs associated with taking possession of the
documents.
ARTICLE V
PAYMENT FOR SERVICES
5.01 PAYMENTS. All payments for Services will be made within 30 days of the
date of the invoice, unless otherwise agreed upon by the parties. Invoices for
Services will be generated monthly. The costs for the Services are shown in
Attachment A.
5.02 PAYMENT ADJUSTMENTS. The charges for Services as shown on the
attachments to this Agreement reflect projected expenses and usages of the
Services for the year 1996. The charges will be based on actual usage of the
Services and costs therefor will be as invoiced. For each successive year
through the term of this Agreement, projected expenses and usages of the
Services will be made and charges therefor will be adjusted and invoiced based
on actual usages.
5.03 TERMINATION FOR NONPAYMENT. If either party fails to make payment for
Services as described in this Agreement, the other party shall have the right
to terminate the respective Service on fifteen (15) days notice to the
breaching party.
175
4
5.04 BILLING ERRORS. Any charge for Services which is disputed shall be paid
by the paying party 90% of full cost per the terms of this Agreement until the
dispute shall have been resolved and settled. Either party has the right to
correct any billing errors for a period of up to one year after the date of the
relevant invoice.
5.05 LAWFUL CURRENCY. All payments required under this Agreement shall be in
U.S. currency.
ARTICLE VI
USE OF NAME
6.01 USE OF NAME AND LINCOLN SILHOUETTE LOGO ("LOGO") ON FORM STOCK. ASFC can
continue to use any marketing brochures and forms in stock with the name of
"The Lincoln National Life Insurance Company," "Lincoln National Life",
"Lincoln Life", "Lincoln National Corporation" and "Lincoln National" or any
reference to LNC or its subsidiaries or affiliates, or with the logo, until the
ownership of ASFC by LNC is less than 80%, whereupon, ASFC may continue to use
the names and logo for the lesser of six (6) months or until current stock runs
out. Any use of such names or logo will be deleted from such brochures or
forms as they are reprinted in the ordinary course of business within six
months after the date of such ownership change. ASFC will hold LNC harmless
and defend LNC from any claims or causes of action related to its continued use
of such name or the names of any LNC subsidiaries or affiliates and the logo.
6.02 OTHER AGREEMENTS. This Article VI shall control the use of LNC's name by
ASFC unless otherwise agreed upon in writing by LNC and ASFC.
ARTICLE VII
TERMINATION AND AMENDMENT
7.01 TERMINATION. Neither party shall terminate this Agreement so long as LNC
owns at least 50% of the capital stock of ASFC.
7.02 AMENDMENT. The parties to this Agreement may mutually agree, in writing,
to amend any provision of this Agreement.
ARTCLE VIII
NOTICES
8.01 NOTICES. Any notice required to be given pursuant to the terms of this
Agreement shall be sent by certified mail, return receipt requested, postage
prepaid.
If sent to LNC: Lincoln National Corporation
000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
ATTN: Xxxxxxx X. Xxxxxxxxx, Senior Vice President
176
5
Corporate Planning & Development
With a copy to: Xxxx X. Xxxxxx, Esquire, General Counsel
Lincoln National Corporation
000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
If sent to ASFC: American States Financial Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
P. O. Xxx 0000
Xxxxxxxxxxxx, XX 00000-0000
ATTN: Xxxxxx X. Xxxx, Esquire, General Counsel
ARTICLE IX
ALTERNATIVE DISPUTE RESOLUTION
9.01 NEGOTIATION BETWEEN EXECUTIVES. The parties shall attempt in good faith
to resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between executives who have authority to settle the controversy.
Any party may give the other party written notice of any dispute not resolved
in the normal course of business. Within 20 days after delivery of said
notice, executives of both parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the matter has
not been resolved within 60 days of the disputing party's notice, or if the
parties fail to meet within 20 days, either party may initiate mediation of
the controversy or claims as provided hereinafter.
If a negotiator intends to be accompanied at a meeting by an attorney, the
other negotiator shall be given at least three working days' notice of such
intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
9.02 MEDIATION. If the dispute has not been resolved by negotiation as
provided herein, the parties shall endeavor to settle the dispute by mediation
under the then current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes. The neutral third party will be selected from
the CPR Panel of Neutrals. If the parties encounter difficulty in agreeing on
a neutral, they will seek the assistance of CPR in the selection process.
9.03 ARBITRATION UNDER THE CPR RULES. Any dispute arising out of or relating
to this Agreement or the breach, termination or validity thereof, which has
not been resolved by non-binding means as provided in Section 9.02 above within
60 days of the initiation of such procedure (unless the parties mutually agree
to extend such timeframe), shall be finally settled by arbitration conducted
expeditiously in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes by three independent and
impartial arbitrators, of whom each party shall appoint one, provided, however,
that if one party has requested the other to participate in a non-binding
procedure and the other has failed to
177
6
participate, the requesting party may initiate arbitration before expiration of
the above period. Any arbitrator not appointed by a party shall be selected
from the CPR Panels of Neutrals. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. 1-16, and judgment upon the award
rendered by the Arbitrator may be entered by any court having jurisdiction
thereof. The arbitrators are not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives any arbitration
damages in excess of compensatory damages.
ARTICLE X
MISCELLANEOUS
10.01 FORCE MAJEURE. Neither LNC nor ASFC shall be liable for damages for
failure to perform due to an act of God, fire, explosion or other casualty,
power failure, strike, electronic data processing equipment failure not due to
negligence of the party involved, or any other occurrence not within the
control of LNC or ASFC. In the event of any such occurrence, LNC and ASFC will
use their best efforts to restore the services provided under this Agreement.
Changes in law or regulation shall not constitute force majeure under this
Agreement.
10.02 MAIL. If for any reason ASFC or LNC incorrectly receives the mail of
the other party, such mail will be promptly forwarded to the other party within
24 hours. If it can be determined that time is of the essence with mail
incorrectly received, the receiving party will notify and then telefax said
mail to the other party.
10.03 HEADINGS. Section headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
10.04 WAIVER OF BREACH. The failure of either party to assert any breach or
to insist upon strict compliance with any provision of this Agreement shall not
operate or be construed as a waiver of such provision or any other provision.
If any party waives or is deemed to have waived a provision in a particular
instance or circumstance, such waiver shall not apply to any other instance or
circumstance.
10.05 SEVERABILITY. If any part, term, or provision of this Agreement shall
be held void, illegal or unenforceable, the validity of the remaining portions
or provisions shall not be affected or impaired thereby.
10.06 CONTROLLING LAW. This Agreement shall be subject to and construed under
the laws of the State of Indiana.
10.07 ASSIGNMENT. Except as otherwise expressly authorized in this Agreement,
neither party shall assign or transfer any rights or duties under this
Agreement without the prior written consent of the other party.
10.08 FIDELITY BONDS. Each party shall maintain adequate fidelity bonding and
errors and omissions coverage of their employees and agents to protect in the
event of a covered loss hereunder.
178
7
10.09 COOPERATION BETWEEN PARTIES. The parties agree that they will provide
such cooperation as may be reasonably requested by the other party and that
they will take such actions and execute and/or deliver such additional
documents as may reasonably be requested by the other party in order to perfect
and complete the transactions described herein.
10.10 NOTICE OF SUIT OR REGULATORY ACTION. The parties will, upon receipt of
any summons and complaint or other notice of suit wherein the other party is
named a party defendant, in any manner, forward any and all such summons and
complaint or other notice of suit to the other party by overnight mail to the
address specified in Article VIII of this Agreement. The parties will, upon
receipt of any regulatory body inquiry with respect to the other party, forward
said inquiry to the other party by overnight mail to the address specified in
Article VIII of this Agreement.
ARTICLE XI
ENTIRE AGREEMENT
11.01 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between LNC and ASFC with respect to the matters referred
herein, and no prior representations, promises, agreements or understanding,
written or oral not herein contained, shall be of any force or effect. No
waiver, modification, addendum or amendment of any covenant, condition or
limitation herein contained shall be valid or binding unless the same is in
writing and duly executed by both parties hereto. No waiver or modification of
any provision of this Agreement shall be valid or shall be offered or received
in evidence in the course of any proceedings between the parties arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless the same is in writing and signed by the party against whom
such waiver is sought to be enforced.
Moreover, no valid waiver or any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement.
ARTICLE XII
COUNTERPARTS
12.01 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, and all of which taken
together shall constitute one and the same agreement.
179
8
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of
the day and year below written:
LINCOLN NATIONAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxx Dated: September 26, 1996
---------------------------- -------------------------
Title: Senior Vice President
----------------------------
AMERICAN STATES FINANCIAL CORPORATION
By: /s/ Xxxx X. Xxxxxxxxxx Dated: September 20, 1996
---------------------------- --------------------------
Title: Senior Vice President
----------------------------
180
9
ATTACHMENT A
SYSTEM, EQUIPMENT AND
SERVICES PROVIDED BY LNC TO ASFC CHARGE
-------------------------------- ------
Insurance Premiums (1) includes: As allocated based on:
Crime/Employee Fidelity Number of employees
D&O Liability Revenue
Professional Liability Claims, as primary determinant
COBRA Invoiced by insurer
Automobile Number of covered automobiles
Commercial General Liability Size and number of commercial
locations
Excess Umbrella Number of employees
Property Insurable values
Split Dollar Age, salary and number of covered
employees
Restricted Stock Based on fair market value of LNC
stock awarded to ASFC employees
Corporate Plane $1000 per flight hour
'96 Hyperion Maintenance As invoiced by vendor
Industry Exam Dues: includes LOMA, HIAA Based on number of exams/employees
Benefit Plan Services (Buck Consultants) As invoiced by Buck Consultants
Allocated Expenses and Usage Fees See Attachment B for Detail--
Each provider of these
Services develops a
methodology to determine costs
of providing Services, by
methods such as employee or
item count, hourly rates,
proportion of invested equity,
etc. These costs are then
proportionately charged to the
users of the Services.
(1) Credits may be given upon reconciliation of claims incurred and premiums
paid.
181
10
ATTACHMENT A (CONTINUED)
SYSTEM, EQUIPMENT AND
SERVICES PROVIDED BY ASFC TO LNC CHARGE
-------------------------------- ------
Insurance coverages, includes: As negotiated by LNC and ASFC
D&O Liability " "
Professional Liability " "
Commercial General Liability " "
Automobile " "
Workers Compensation " "
AM Best Software (property/casualty blanks) As allocated based on number of
companies reporting
182
