EXHIBIT 10.5
PRIVATE LABEL AND ADMINISTRATIVE
SERVICE AGREEMENT
-between-
BT Reinsurance Limited
and
Scottish Life Assurance (Cayman) Ltd.
Dated as of June 11, 1998
TABLE OF CONTENTS
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Page
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ARTICLE I: Private Label Services.......................................... 1
1.1 Responsibilities of BT Re......................................... 1
1.2 Responsibilities of the Insurer................................... 2
ARTICLE II: Administrative Services........................................ 2
2.1 Services of BT Re................................................. 2
2.2 Services of the Insurer........................................... 2
ARTICLE III: Payments by the Insurer....................................... 2
3.1 Service Fee....................................................... 2
ARTICLE IV: Standards of Service........................................... 2
4.1 General Standard.................................................. 2
4.2 Records and Reports............................................... 3
4.3 Delegation of Authority........................................... 3
ARTICLE V: Indemnification................................................. 3
5.1 In General........................................................ 3
5.2 BT Re Special Indemnification..................................... 3
5.3 BT Re Exceptions.................................................. 4
5.4 Insurer Exceptions................................................ 4
ARTICLE VI: Confidentiality................................................ 4
6.1 In General........................................................ 4
ARTICLE VII: Covenants..................................................... 4
7.1 Covenants of the Insurer; Identification of BT Re................. 4
7.2 Covenants of the Insurer; Disclosures............................. 5
ARTICLE VIII: Term and Termination......................................... 5
8.1 Effective Date of the Agreement................................... 5
8.2 Termination of the Agreement...................................... 5
8.3 Effect of Termination............................................. 6
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ARTICLE IX: Miscellaneous.................................................. 6
9.1 Services to Other Clients......................................... 6
9.2 Notices........................................................... 7
9.3 Governing Law..................................................... 7
9.4 No Waiver......................................................... 7
9.5 Counterparts...................................................... 8
9.6 Severability...................................................... 8
9.7 Assignment and Third Party Beneficiaries.......................... 8
9.8 Amendments........................................................ 8
9.9 Interpretation of Headings........................................ 8
9.10 Relationship of the Parties....................................... 8
9.11 Examination of Records............................................ 8
9.12 Force Majeure..................................................... 9
9.13 Integration....................................................... 9
TABLE OF SCHEDULES
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2.1 BT Re Administrative Services
2.2 Insurer Administrative Services
3.1 Service Fee
ii
PRIVATE LABEL AND ADMINISTRATIVE SERVICE AGREEMENT (the "Agreement"), dated
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as of June 11, 1998 (the "Effective Date") between BT REINSURANCE LIMITED, a
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corporation incorporated in Jersey, Channel Islands ("BT Re"), and SCOTTISH LIFE
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ASSURANCE (CAYMAN) LTD., a Cayman Islands corporation (the "Insurer").
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W I T N E S S E T H:
WHEREAS, BT Re has developed certain variable life insurance policies which
the Insurer wishes to market, issue and sell under its own name and reinsure
such risks with reinsurers arranged by BT Re under this Agreement (the "Private
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Label Policies");
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WHEREAS, BT Re and the Insurer wish to cooperate with one another in
marketing, underwriting and administering the Private Label Policies; and
WHEREAS, BT Re will provide certain services to the Insurer in connection
with such marketing, underwriting and administration of the Private Label
Policies as set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
ARTICLE I: PRIVATE LABEL SERVICES
1.1 RESPONSIBILITIES OF BT RE. BT Re will provide the following services to
the Insurer (the "BT Re Private Label Services"):
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(a) Make available to the Insurer its form of variable life insurance
policies together with its related private placement memorandum, underwriting
questionnaire, application for insurance, medical information authorization and
qualified investor questionnaire (the "Insurance Forms") to be used and revised
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as appropriate by the Insurer in the sale of variable life insurance to be
issued by the Insurer.
(b) Assist the Insurer in modifying the Insurance Forms to meet the
requirements of the Insurer and the laws of the jurisdiction of incorporation of
the Insurer, provided that any services of legal counsel required to so modify
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the Insurance Forms will be arranged for and paid for directly by the Insurer.
1.2 RESPONSIBILITIES OF THE INSURER. The Insurer will, at its sole expense:
(a) Review and approve the Insurance Forms made available and modified
pursuant to Section 1.1.
(b) Market, issue and sell under its own name the Private Label Policies
either directly or through its employees, agents and consultants.
(c) Print all Insurance Forms.
(d) Promptly submit to BT Re true, correct and complete copies of any side
letters that are entered into by the Insurer relating to Private Label Policies
that affect the BT Re Services to be provided by BT Re under this Agreement.
ARTICLE II: ADMINISTRATIVE SERVICES
2.1 SERVICES OF BT RE. BT Re agrees to provide the Insurer with the services
set forth in Schedule 2.1 with respect to the Private Label Policies (the "BT Re
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Administrative Services").
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2.2 SERVICES OF THE INSURER. The Insurer shall provide and be solely
responsible for all other functions with respect to the Private Label Policies
other than the BT Re Administrative Services, including, without limitation, the
services set forth in Schedule 2.2 (the "Insurer Administrative Services").
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ARTICLE III: PAYMENTS BY THE INSURER
3.1 Service Fee. In consideration for providing the BT Re Private Label
Services and the BT Re Administrative Services (collectively, the "BT Re
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Services"), the Insurer shall pay BT Re a fee (the "Service Fee") in the amount
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and in the manner as set forth in Schedule 3.1. The Service Fee with respect to
the BT Re Private Label Services shall be fully earned when received by BT Re.
ARTICLE IV: STANDARDS OF SERVICE
4.1 GENERAL STANDARD. BT Re will provide the BT Re Services under this
Agreement with professional knowledge, skill and judgment as applied to normal
insurance business practices. BT Re will be responsible for all acts and
omissions by it pursuant to this Agreement or otherwise in connection with the
BT Re Services, provided that BT Re shall not be responsible for failure to
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perform any BT Re
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Administrative Services if such failure is caused in whole or in part from
inaccurate or incomplete Fund accounting by the Insurer or any other
irregularities caused by Fund investment managers (the "Fund Errors").
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4.2 RECORDS AND REPORTS. BT Re will maintain all records with regard to the
BT Re Administrative Services separately from the records of its other
businesses, provided that BT Re may use identical computer and other systems so
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long as information with regard to the BT Re Administrative Services is
maintained separately and in an identifiable manner.
4.3 DELEGATION OF AUTHORITY. The Insurer authorizes BT Re to subcontract any
of its services to be performed hereunder to any entity or individual without
the prior consent of the Insurer, provided that (a) the subcontractor is one
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that also provides services to BT Re in its capacity as a direct insurer of
variable life insurance policies, and (b) BT Re is responsible for each
subcontractor meeting the standards of service set forth in Section 4.1.
ARTICLE V: INDEMNIFICATION
5.1 IN GENERAL. BT Re and the Insurer agree to hold each other harmless and
to indemnify each other, and each other's directors, officers, employees and
agents (collectively, the "Indemnified Parties" for purposes of this Article V),
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against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the other party) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements occur as a result of or on account of any act or
omission of the indemnifying party in performance of this Agreement; or
resulting from or arising out of the dishonest or fraudulent acts of the
indemnifying party, or its employees acting alone or in concert with themselves
or others.
5.2 BT RE SPECIAL INDEMNIFICATION. The Insurer agrees to hold BT Re harmless
and to indemnify BT Re, and BT Re's directors, officers, employees and agents
(collectively, the "BT Re Indemnified Parties" for purposes of this Article V),
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against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the other party) or litigation
(including legal and other expenses), to which the BT Re Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements occur as a result of or on account of (a)
practices of the Insurer, its agents or representatives, in the marketing, sale,
issuance, cancellation or administration of any Private Label Policy, including
but
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not limited to, liability arising from advertising claims, errors or omissions
relating to policy information disclosure, engaging in unfair methods of
competition or deceptive acts or practices and replacement transactions, (b)
Fund Errors, or (c) the Insurer giving any information or making any
representations on behalf of or concerning BT Re, including but not limited to
identification of BT Re in any written sales materials or other documents.
5.3 BT RE EXCEPTIONS. BT Re shall not be liable under the indemnification
provision set forth in this Article V with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from (a) such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
functions or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement, or (b) Fund Errors.
5.4 INSURER EXCEPTIONS. The Insurer shall not be liable under the
indemnification provision set forth in the Article V with respect to any losses,
claims, damages, liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement.
ARTICLE VI: CONFIDENTIALITY
6.1 IN GENERAL. Except as otherwise provided in this Agreement, all
information communicated to one party by the other party pursuant to or in
connection with the performance of any duties under this Agreement whether
occurring before or after the Effective Date, shall be received in confidence
and shall be used only for the purposes of this Agreement. No such information,
including, without limitation, the terms of this Agreement specific to the
nonrecipient party, shall be disclosed by the recipient party, its agents or
employees without the prior consent of the nonrecipient party except as may be
necessary by reason of legal, accounting or regulatory requirement beyond the
reasonable control of the recipient party.
ARTICLE VII: COVENANTS
7.1 COVENANTS OF THE INSURER; IDENTIFICATION OF BT RE. The Insurer shall not
give any information or make any representations on behalf of or concerning BT
Re, including but not limited to identification of BT Re in any written sales
materials or other documents, except with the permission of BT Re. Subject to
the preceding sentence, the Insurer may orally disclose the identity of BT Re,
provided that the Insurer
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does not represent BT Re as having any privity of contract with any person other
than the Insurer, including but not limited to a prospective purchaser of or a
proposed insured under a Private Label Policy or a policyholder of or an insured
or beneficiary under a Private Label Policy.
7.2 COVENANTS OF THE INSURER; DISCLOSURES. The Insurer shall promptly give
notice to BT Re of the following: (a) any notice or other communication
(written, oral or otherwise) by a governmental authority relating to the
solvency of the Insurer; (b) any notice or other communication (written, oral or
otherwise) by a governmental authority relating to the marketing, issuance and
sale of the Private Label Policies; and (c) any actual or threatened action by a
governmental authority against the Insurer.
ARTICLE VIII: TERM AND TERMINATION
8.1 EFFECTIVE DATE OF THE AGREEMENT. This Agreement shall commence as of the
Effective Date and will continue until terminated pursuant to Section 8.2.
8.2 TERMINATION OF THE AGREEMENT. This Agreement will terminate on the
earlier of the following:
(a) On the next December 31 after the party terminating the Agreement as of
such date provides at least 90 days prior written notice to the other party.
(b) Immediately upon delivery of written notice by either party to the other
party following:
(i) bankruptcy or insolvency of the other party; or
(ii) fraud or embezzlement on the part of an executive officer of the
other party related to the services to be provided hereunder, provided that
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such termination shall not release, diminish or affect any liability on the
part of such party with respect thereto.
(c) Upon delivery of prior written notice by the other party to the
other party effective not less than 30 days after delivery of such written
notice for failure of the other party to comply with any agreement, condition or
covenant under this Agreement, provided that such termination shall not be
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effective if, during such 30 day or other notice period, such failure has been
cured, or, in the case of any failure to comply other
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than nonpayment of the Service Fee, if the cure will require more than 30 days,
if the cure has been commenced and is being pursued in good faith.
8.3 EFFECT OF TERMINATION. (a) If this Agreement is terminated, the Service
Fee with respect to the BT Re Administrative Services will be prorated to the
effective date of termination and will be based on the value of all of the BT Re
Administrative Services through the termination date.
(b) In the event of termination of this Agreement, the Insurer shall have the
right to collect from BT Re any and all claim files, records and other documents
relating to the Private Label Policies subject to this Agreement and BT Re shall
return same to the Insurer within 90 days following receipt of a written request
by the Insurer for same. The Insurer shall bear the cost of delivery of such
claim files, records and other documents.
(c) In the event that BT Re reinsures risks under the Private Label Policies
pursuant to a separate reinsurance agreement, termination of this Agreement
shall not permit the Insurer to recapture any risks under such reinsurance
agreement absent an express provision in such reinsurance agreement.
(d) The provisions of Articles III, V and VI and Section 9.1 shall survive
the term and termination of this Agreement.
ARTICLE IX: MISCELLANEOUS
9.1 SERVICES TO OTHER CLIENTS. (a) BT Re provides services to other clients
and may give advice and take action with respect to any of those clients that
may differ from the advice given, or the time or nature of action taken, with
respect to the Insurer. Nothing in this Agreement shall in any way be deemed to
restrict the right of BT Re, to perform services for any other person or entity
and to collect fees for such services, and the performance of such services for
others shall not be deemed to violate or give rise to any duty or obligation to
the Insurer.
(b) BT Re will not share with or distribute to other insurers, without the
consent of the Insurer, documents created for the Insurer under Section 1.1 and
bearing the Insurer's name, provided that this Section 9.1(b) shall not prohibit
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the Insurer from providing services to other clients as set forth in Section
9.1(a).
(c) BT Re acknowledges that it also offers life insurance policies directly
as an insurer that may be the same as or similar to the Private Label Policies.
BT Re
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agrees that it will not solicit such life insurance policies from persons by
using customer information obtained from the Insurer under this Agreement.
9.2 NOTICES. Any notice, demand, request or approval shall be in writing and
shall be sufficiently given when personally delivered or if sent by facsimile or
certified mail to the other party and actually received at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
(a) If to BT Re:
BT Reinsurance Limited
00 Xxxxxxxxx
Xx. Xxxxxx, Xxxxxx
XX0 0XX
Channel Islands
Attention: Xxxxxxx X. Xxxxxx
Tel: 000-00-0000-000-000
Fax: 000-00-0000-000-000
(b) If to the Insurer:
Scottish Life Assurance
(Cayman) Ltd.
X.X. Xxx 00000 XXX
0xx Xxxxx, Xxxxxx House
Xxxxxx Town, Grand Cayman
Cayman Islands, BWI
Attention: Xxxxxxxx X. Xxxxxxx
Tel: 000-000-0000
Fax: 000-000-0000
9.3 GOVERNING LAW. This Agreement shall be administered, construed, and
enforced according to the laws of the Island of Jersey (without regard to any
conflict of laws provisions).
9.4 NO WAIVER. Failure of any party to enforce any provision of this
Agreement shall not constitute a course of conduct or waiver in the future of
the right to enforce the same or any other provision.
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9.5 COUNTERPARTS. This Agreement may be signed in multiple counterparts. Each
counterpart shall be considered an original instrument, but all of them in the
aggregate shall constitute one agreement.
9.6 SEVERABILITY. In the event that any word, sentence, paragraph provision
or article of this Agreement is found to be void or voidable, the remainder of
this Agreement shall nevertheless be legal and binding with the same force and
effect as though the void or voidable parts were deleted.
9.7 ASSIGNMENT AND THIRD PARTY BENEFICIARIES. This Agreement is entered into
for the benefit of the parties hereto and their respective successors, legal
representatives and assigns. No other person or entity shall obtain an interest
herein or be deemed to be a beneficiary of the provisions contained herein
except as specifically set forth herein. This Agreement may not be assigned by
any party without the written consent of the other parties.
9.8 AMENDMENTS. This Agreement may be amended at any time by written
agreement among the parties hereto.
9.9 INTERPRETATION OF HEADINGS. The headings, exhibit names and captions, if
any, provided herein are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this document,
and shall not be used in construing this instrument. This Agreement shall be
interpreted and enforced in accordance with the provisions hereof without the
aid of any canon, custom or rule of law requiring or suggesting constitution
against the party causing the drafting of the provision in question. Whenever
the singular number is used in this Agreement and when required by the context,
the same shall include the plural, and the masculine gender shall include the
feminine and neutral genders.
9.10 RELATIONSHIP OF THE PARTIES. The Insurer and BT Re are independent of
one another. Nothing in this Agreement shall be deemed to create: a joint
venture or partnership between the parties; a relationship of employer and
employee; a relationship of principal and agent; or any relationship other than
independent parties contracting with each other solely for the purpose of
carrying out the provisions of this Agreement.
9.11 EXAMINATION OF RECORDS. BT Re or its representatives shall have the
right to examine at any reasonable time any and all of the Insurer's books and
records relating to the Private Label Policies, including but not limited to the
policy account values of the Private Label Policies, provided that such right
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shall not be exercised for any reason other than the proper operation of this
Agreement. At BT Re's option, in lieu
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of BT Re or its representatives examining such books and records at the
Insurer's place or places of business where such books and records are
maintained by the Insurer, the Insurer agrees to promptly provide copies of such
books and records to BT Re on receipt of a written request from BT Re. The
Insurer shall cooperate fully with any such examination and provide all such
books and records requested by BT Re or its representatives, subject to the
confidentiality provisions set forth in Section 6.1.
9.12 FORCE MAJEURE. Each party shall be excused from the performance for any
period to the extent that that party is prevented from performing services, in
whole or in part, as a result of delays caused by the other party, an act of God
or war, civil disturbance, court order, labor dispute, third party
nonperformance or other cause beyond that party's reasonable control, including
failures or fluctuation in electric power, heat, light, air conditioning or
telecommunications equipment. Such nonperformance shall not be a default of this
Agreement.
9.13 INTEGRATION. This Agreement and the schedules attached hereto shall be
the complete and total understanding of the parties and shall not be amended
except in writing executed by the parties. This Agreement supersedes all prior
or contemporaneous agreements, letters of intent, discussions or understandings
between the parties concerning the Private Label Policies or any other subject
matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BT REINSURANCE LIMITED
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Joint Managing Director
SCOTTISH LIFE ASSURANCE
(CAYMAN) LTD.
By: /s/ Xxxxxxxx Xxxxxxx
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Name: Xxxxxxxx Xxxxxxx
Title: Director
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SCHEDULE 2.1 - BT RE ADMINISTRATIVE SERVICES
NAME OF BT RE DESCRIPTION OF BT RE ADMINISTRATIVE SERVICE
ADMINISTRATIVE SERVICE
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Policy Illustration Service Prepare policy illustrations for prospective
purchasers of the Private Label Policies
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Section 7702 Testing Test the Private Label Policies to determine if
Service they qualify as life insurance under Section
7702 of the Internal Revenue Code of 1986, as
amended (the "Code") and determine whether the
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Private Label Policy is a modified endowment
contract under Code Section 7702A. Monitor
ongoing Section 7702 compliance and promptly
notify Insurer of return of premiums or other
amounts to assure compliance with Section 7702.
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Medical Information Arrange for collection of medical information
Service and medical examinations for prospective
insureds under the Private Label Policies for
purposes of underwriting the risks of
prospective purchasers of the Private Label
Policies
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Reinsurance Service Use its best efforts to either (a) place
reinsurance of the net amount at risk under the
Private Label Policies with third party
reinsures, or (b) seek to engage BT Re to
reinsure the net amount at risk under the
Private Label Policies with BT Re retroceding
the risk to one or more third party reinsurers
acceptable to BT Re. BT Re contemplates
reinsuring the net amount at risk under the
Private Label Policies and retroceding the
entire risk to a retrocessionnaire. BT Re
contemplates that the reinsurance agreement for
such reinsurance will be put in place before any
Private Label Policies are issued by the
Insurer. Such reinsurance will be available on a
facultative basis (i.e. each risk is subject to
individual underwriting by the reinsurer and/or
retrocessionnaire).
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2.1-1
NAME OF BT RE DESCRIPTION OF BT RE ADMINISTRATIVE SERVICE
ADMINISTRATIVE SERVICE
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Underwriting Service If BT Re reinsures the net amount at risk under
the Private Label Policies, then BT Re will
underwrite the risks proposed to be insured
under the Private Label Policies using
underwriting guidelines approved by BT Re and
provided to the Insurer. If one or more
reinsurers other than BT Re reinsure the net
amount at risk under the Private Label Policies,
then BT Re will prepare the underwriting
submission to such reinsurers and one or more of
such reinsurers will underwrite the risks
proposed to be insured under the Private Label
Policies using underwriting guidelines approved
by such reinsurer(s) and BT Re and provided to
the Insurer
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Death Benefit Service Review death claims under the Private Label
Policies and calculate the death benefit
required under the Private Label Policies
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2.1-2
SCHEDULE 2.2 - INSURER ADMINISTRATIVE SERVICES
NAME OF INSURER SERVICE DESCRIPTION OF INSURER SERVICE
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Qualified Purchaser Determination that prospective purchaser of
Qualification Service Private Label Policy is a qualified purchaser
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Insurable Interest Service Determination that the prospective policyowner
of a Private Label Policy has an insurable
interest in the proposed insured
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Fund Investment Identification of, investigation of and
Manager Service appointment of investment managers for
investment funds in which the Private Label
Policies are invested (the "Funds"), including
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but not limited to contracting with investment
managers and revisions to private placement
memorandum relating to additions and deletions
of Funds
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Asset/Fund Accounting Investment fund accounting for the Private Label
Service Policies
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817 Compliance Service Monitor compliance with the diversification,
investor control and other requirements of Code
Section 817
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Policy Negotiation Negotiate the sale of the Private Label
Service Policies
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Underwriting Arrange for completion by proposed insured under
Questionnaire and Private Label Policy of all forms required for
Medical Authorization policy underwriting, including but not limited
Service to an underwriting questionnaire and a medical
information authorization
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Policy Issuance and Issue and deliver each Private Label Policy
Delivery Service
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Policy Service Provide all policyholder services for Private
Label Policies after policy issuance, including
but not limited to premium billing, preparation
and delivery of monthly policy account
statements, processing of policy loans,
processing of change of policyowner and
beneficiary requests, processing of transfers
among Funds and policy surrenders (total and
partial)
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Payment of Death Benefit Following calculation of the death benefit under
a Private Label Policy by BT Re, payment of
death benefit under a Private Label Policy
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2.2-1
NAME OF INSURER SERVICE DESCRIPTION OF INSURER SERVICE
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Policy Litigation Engagement of counsel and payment of fees and
disbursements for defense of any litigation
brought under a Private Label Policy, including
but not limited to claims litigation
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2.2-2
SCHEDULE 3.1 - SERVICE FEE
Service Fee
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BT Re Private Label Services U.S. $75,000, due on the Effective Date
(Section 1.1(a) & (b))
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BT Re Administrative Services For each Private Label Policy that is issued by
(Section 2.1) the Insurer from and after the Effective Date,
an amount, payable in U.S. dollars, equal to the
lesser of (a) the product of 50 basis points per
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annum and the policy account value under the
Private Label Policy measured at the end of a
policy year of the Private Label Policy, and (b)
the product of 0.50 and the mortality and
expense or other administrative charge payable
to the Insurer under the Private Label Policy,
provided that such amount shall not be less than
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U.S.$15,000. Payment shall be made by the
Insurer to BT Re within 10 days of the date the
Insurer deducts each mortality and expense or
other administrative charge under the Private
Label Policy, provided that any amount to be
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paid by the Insurer other than from mortality
and expense or other administrative charge
deductions under the Private Label Policy shall
be paid by the Insurer within 10 days of the
date the Insurer deducts the last mortality and
expense or other administrative charge under the
Private Label Policy during the policy year in
which the U.S.$15,000 minimum amount is in
effect.
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BT Re Administrative Services Fee for collection of medical information and
(Section 2.1) medical examinations for prospective insureds
under the Private Label Policies for purposes of
underwriting the risks of prospective purchasers
of the Private Label Policies: U.S.$2,000 each
such prospective insured, payable with
submission of underwriting questionnaire or
application for insurance for each prospective
insured.
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3.1-1
