Exhibit 7
COINSURANCE AGREEMENT
between
XXXXXX INVESTORS LIFE INSURANCE COMPANY
(referred to as the Company)
and
FEDERAL XXXXXX LIFE ASSURANCE COMPANY
(referred to as the Reinsurer)
Dated as of May 29, 2003
Table of Contents.
Page
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ARTICLE I. DEFINITIONS..........................................................................1
1.1. Definitions...........................................................................1
ARTICLE II. BASIS OF COINSURANCE, MODIFIED COINSURANCE AND BUSINESS COINSURED..................12
2.1. Coinsurance and Modified Coinsurance.................................................12
2.2. Reinstatements, Conversions and Exchanges............................................12
2.3. Certain Recommendations..............................................................12
2.4. Reserves.............................................................................13
2.5. Separate Account Reserves............................................................13
2.6. Policy Changes or Reductions.........................................................13
ARTICLE III. TRANSFER OF ASSETS................................................................14
3.1. Transfer of Assets at Closing and Balance Sheets.....................................14
3.2. Additional Consideration.............................................................14
3.3. Ceding Commission....................................................................15
ARTICLE IV. RESERVE ADJUSTMENTS AND ACCOUNTINGS................................................15
4.1. Modified Coinsurance Adjustment on Separate Account Business.........................15
4.2. Monthly Accountings..................................................................15
4.3. Monthly Payments.....................................................................16
4.4. Delayed Payments.....................................................................16
4.5. Offset Rights........................................................................16
ARTICLE V. POLICY AND SEPARATE ACCOUNT ADMINISTRATION..........................................16
5.1. Appointment and Acceptance of Appointment............................................16
5.2. Notification of Policyholders........................................................16
5.3. Administrative Services..............................................................16
5.4. Services With Respect to Registered Separate Accounts and Registered Policies........20
5.5. Claims Review and Litigation.........................................................25
5.6. Legally Required Company Actions.....................................................26
5.7. Power of Attorney....................................................................26
5.8. Subsequent Rate and Form Filings.....................................................27
5.9. Policy Changes or Reserve Assumption Changes.........................................27
5.10. Bank Accounts........................................................................27
5.11. Compensation.........................................................................27
5.12. Standards............................................................................28
5.13. Agreements Regarding Use of the Company's Name.......................................29
5.14. Books and Records....................................................................30
5.15. Capacity.............................................................................31
5.16. Inability to Perform Services........................................................31
5.17. Errors...............................................................................31
5.18. Regulatory Matters: Responsibilities of the Reinsurer................................31
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Table of Contents
(continued)
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5.19. Duration.............................................................................32
5.20. Termination..........................................................................32
5.21. Insurance............................................................................34
5.22. Limited Authority....................................................................34
5.23. Subcontracting.......................................................................34
5.24. BOLI Services........................................................................34
5.25. Destinations Services................................................................37
5.26. Survival.............................................................................37
ARTICLE VI. OVERSIGHTS.........................................................................37
6.1. Oversights...........................................................................37
ARTICLE VII. DUTY OF COOPERATION AND OTHER AGREEMENTS..........................................37
7.1. Cooperation..........................................................................37
7.2. Third Party Reinsurance Agreements...................................................37
7.3. Option for Assumption Reinsurance....................................................38
ARTICLE VIII. DAC TAX..........................................................................38
8.1. Election.............................................................................38
8.2. Separate Account DAC Tax Reimbursement...............................................38
ARTICLE IX. INDEMNIFICATION....................................................................39
9.1. Reinsurer's Obligation to Indemnify..................................................39
9.2. Company's Obligation to Indemnify....................................................39
9.3. Certain Definitions and Procedures...................................................40
9.4. Security Trust Account...............................................................40
9.5. Recapture Rights.....................................................................43
ARTICLE X. DISPUTE RESOLUTION..................................................................45
10.1. Other Disputes over Calculations.....................................................45
10.2. Arbitration..........................................................................46
10.3. Award and Enforcement................................................................48
ARTICLE XI. INSOLVENCY.........................................................................48
11.1. Insolvency Clause....................................................................48
ARTICLE XII. DURATION..........................................................................48
12.1. Duration.............................................................................48
12.2. Reinsurer's Liability................................................................49
12.3. Survival.............................................................................49
ARTICLE XIII. MISCELLANEOUS....................................................................49
13.1. Notices..............................................................................49
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Table of Contents
(continued)
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13.2. Confidentiality......................................................................50
13.3. Entire Agreement.....................................................................50
13.4. Waivers and Amendments...............................................................51
13.5. No Third Party Beneficiaries.........................................................51
13.6. Assignment...........................................................................51
13.7. Governing Law........................................................................51
13.8. Counterparts.........................................................................51
13.9. Severability.........................................................................51
13.10. Schedules, Exhibits and Paragraph Headings...........................................51
13.11. Expenses.............................................................................51
13.12. No Prejudice.........................................................................52
13.13. Credit for Ceded Reinsurance.........................................................52
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INDEX OF SCHEDULES AND EXHIBITS
Schedule 1.1 BOLI Business Agreements
Schedule 1.1(A) BOLI Contracts
Schedule 1.1(B) Destinations Annuity Contracts
Schedule 1.1(C) Intentionally Omitted
Schedule 1.1(D) Policies
Schedule 1.1(E) Post-Closing Ceding Commission
Schedule 1.1(F) Separate Accounts
Schedule 1.1(G) Guaranty Fund Assessment Methodology
Exhibit A Intentionally Omitted
Exhibit B Form of Security Trust Agreement
Exhibit C Intentionally Omitted
Exhibit D Form of Monthly Accounting
Exhibit E Calculation of Recapture Fee
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COINSURANCE AGREEMENT
THIS COINSURANCE AGREEMENT (this "Agreement") is made and entered into
as of May 29, 2003 by and between Xxxxxx Investors Life Insurance Company, an
Illinois domiciled stock insurance company (the "Company") and Federal Xxxxxx
Life Assurance Company, an Illinois domiciled stock life insurance company (the
"Reinsurer").
WHEREAS, the Company, Xxxxxx Corporation, Zurich Holding Company of
America, Zurich Financial Services, Banc One Insurance Holdings, Inc. and Bank
One Corporation have entered into a Stock and Asset Purchase Agreement, dated as
of May 29, 2003 (the "Purchase Agreement"), pursuant to which, prior to the
other Closing transactions contemplated by the Purchase Agreement and in
accordance with Section 2.1 hereof, the Company, among other things, has agreed
to enter into this Coinsurance Agreement to cede and transfer to the Reinsurer
certain liabilities arising under the Policies (as defined below), the
Post-Closing Policies (as defined below), and the Separate Accounts (as defined
below) for the consideration specified herein and the Reinsurer has agreed to
enter into this Coinsurance Agreement to reinsure such liabilities on the terms
and conditions set forth herein; and
WHEREAS, the Company desires that the Reinsurer perform certain
administrative functions on behalf of the Company with respect to the Policies,
the Post-Closing Policies, the Separate Accounts, the Destinations Annuity
Contracts (as defined below) and the BOLI Contracts (as defined below).
NOW, THEREFORE, in consideration of the mutual and several promises
and undertakings herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Company and the Reinsurer agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement and not
defined herein shall have the respective meanings assigned to them in the
Purchase Agreement. The following terms shall have the respective meanings set
forth below throughout this Agreement:
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"1940 Act" shall mean the Investment Company Act of 1940, as amended
from time to time.
"Administrative Services" means the administrative functions with
respect to the Policies and Post-Closing Policies described in Section 5.3
hereof.
"Agreement" means this Agreement.
"Annual Statement" means the Company's 2002 convention form statutory
annual statement, together with all required schedules and supplements thereto,
as filed with the Insurance Department of the State of Illinois.
"Agents Debit Balances" means the aggregate of all Producer balances
and advanced Commissions owed to the Company with respect to the Policies and
Post-Closing Policies.
"Applicable Law" means any domestic or foreign federal, state or local
statute, law, ordinance or code, or any written rules, regulations or
administrative interpretations issued by any Government Entity pursuant to any
of the foregoing, and any order, writ, injunction, directive, judgment or decree
of a court of competent jurisdiction applicable to the parties hereto.
"Arbitration Tribunal" shall have the meaning given to such term under
Section 10.2(a) of this Agreement.
"Assigned Third Party Reinsurance Agreements" means Third Party
Reinsurance Agreements that have been novated and assigned to the Reinsurer upon
receipt of necessary third party consents on the same terms applicable to the
Company.
"Bank Accounts" shall have the meaning given to such term under
Section 5.10 of this Agreement.
"BOLI Business Agreements" means the agreements set forth on Schedule
1.1 hereto as amended to include any changes to such schedule prior to the
Closing Date.
"BOLI Contracts" means the insurance contracts and policies set forth
on Schedule 1.1(A) hereto, including related letter agreements, private
placement memoranda and other supplementary material with respect to such
contracts and policies as amended to include (i) other policies and contracts
providing BOLI coverage issued by the Company prior to the Closing Date, and
(ii) the Pipeline Policies (as that term is defined in the Purchase Agreement).
"BOLI DAC Tax Credit" means an amount equal to (A) the current period
amortization deduction based on the amount capitalized under Section 848 of the
Code, times (B) (i) the marginal tax rate for such period applicable to the
consolidated taxable income of the group of which the Company's income and loss
is includible for the relevant period, divided by (ii) 1 minus the marginal tax
rate for such period applicable to the consolidated taxable income of the group
of which the Company's income and loss is includable for the relevant period.
The term "BOLI DAC Tax Credit" shall apply only with respect to (x) those BOLI
Contracts marked with a ++ on Schedule 1.1(A) and (y) any other BOLI Contract
and BOLI Business Agreement where, upon a policyholder's surrender of such
contract, the Company is permitted to retain the BOLI DAC Tax Credit under the
terms of the BOLI Contracts and the BOLI Business Agreements.
"BOLI Policyholder" means policyholders, insureds and assignees under
the BOLI Contracts.
"BOLI Revenues" means (A) with respect to the BOLI Contracts that are
not Pipeline Policies, the aggregate of the product of (i) the average daily
Investment Value for each BOLI Contract set forth on Schedule 1.1(A) hereto, as
amended, and (ii) the daily equivalent of the applicable corresponding
percentage set forth next to such BOLI Contract and any changes thereto arising
out of amendments to the BOLI Contracts or BOLI Business Agreements, and (B)
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with respect to BOLI Contracts that are Pipeline Policies, fifty percent (50%)
of the amount determined for such Pipeline Policy in part (A) of this definition
on and after the Closing Date.
"BOLI Services" means the administrative functions with respect to the
BOLI Contracts described in Section 5.24 hereof.
"Book Value" shall have the meaning given to such term under the
Purchase Agreement.
"Business Day" means any day other than a Saturday, Sunday, a day on
which banking institutions in the State of Illinois are permitted or obligated
by Applicable Law to be closed or a day on which the New York Stock Exchange is
closed for trading.
"Ceding Commission" means $120 million minus the Market Value
Adjustment.
"Claims" shall mean any and all claims, requests, demands or notices
made by or on behalf of Policyholders for the payment of death benefits, annuity
benefits, partial withdrawals, surrenders, loans, returns of Premiums or any
other payments or benefits alleged to be due under or in connection with the
Policies or Post-Closing Policies including, without limitation, interest
payable thereon in accordance with Applicable Law.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
"Commissions" mean all commissions, expense allowances, benefit
credits and other fees and compensation payable to Producers.
"Destinations Annuity Contracts" means those contracts and policies
that are issued on the policy forms set forth on Schedule 1.1(B) hereto.
"Destinations Service Costs" shall have the meaning given to such term
under Section 5.11(c) hereof.
"Destinations Service Period" shall be the period commencing on the
Closing Date and ending on the earlier of (i) the one year anniversary of the
Closing Date and (ii) thirty (30) Business Days after the Company provides
written notice of termination of the Destinations Services to the Reinsurer.
"Destinations Services" means the administrative functions with
respect to the Destinations Annuity Contracts described in Section 5.25 hereof.
"Disclosure Controls and Procedures" shall mean the definition stated
in Rule 30a-2(c) under the 1940 Act with respect to the Registered Separate
Accounts and Rule 13a-14(c) under the 1934 Act with respect to the Company.
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"Election Notice" means a notice given by the Company to the Reinsurer
with respect to the exercise of its recapture remedy pursuant to Section 9.5
hereof.
"Event of Default" shall have the meaning given to such term in
Section 9.4(b) hereof.
"Extra Contractual Obligations" means all liabilities or obligations
arising under or with respect to the Policies and Post-Closing Policies, whether
or not incurred before or after the Closing Date, exclusive of liabilities or
obligations arising under the express terms and conditions of the Policies and
Post-Closing Policies and the other General Account Liabilities, but including,
without limitation, any liability for fines, penalties, forfeitures, punitive,
special, exemplary or other form of extra-contractual damages, which liabilities
or obligations arise from any act, error or omission, whether or not
intentional, negligent, or in bad faith.
"Final Closing Balance Sheet" shall have the meaning given to such
term in the Purchase Agreement.
"Fund Agreements" shall have the meaning set forth in Section
5.4(d)(iii) hereof.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"General Account Liabilities" means all gross liabilities and
obligations arising under or relating to the Policies and Post-Closing Policies,
except for such liabilities and obligations specifically identified in the
definition of Retained Liabilities. The General Account Liabilities shall
include, without limitation, each of the following with respect to the Policies
and Post-Closing Policies: (a) all liabilities for incurred but not reported
claims, benefits, interest on death claims or other payments arising under or
relating to the Policies and Post-Closing Policies, whether or not included
within the General Account Reserves; (b) all liabilities arising out of any
changes to the terms and conditions of the Policies and Post-Closing Policies
mandated by Applicable Law or agreed by the parties hereto; (c) premium Taxes
due in respect of Premiums received on or after the Closing Date, Way Out
Premium Taxes due in respect of Premiums received before the Closing Date
(except such Way Out Premium Taxes that were payable prior to the Closing Date
that, as of the Closing Date, have not been paid or for which a liability has
not been accrued as required by Illinois SAP on the Final Closing Balance Sheet)
(in each case without giving effect to any credits due to the Company for any
guaranty fund assessments paid by the Company prior to Closing), and all other
Tax liabilities arising out of or relating to the Policies or Post-Closing
Policies for periods commencing on or after the Closing Date (except for income
Taxes imposed on the Company under Subtitle A of the Code); (d) assessments and
similar charges in connection with participation by the Company or Reinsurer,
whether voluntary or involuntary, in any guaranty association established or
governed by any state or other jurisdiction except such amounts that, as of the
Closing Date, have not been accrued for in accordance with the accrual
methodology set forth in Schedule 1.1(G) on the Final Closing Balance Sheet; (e)
Commissions payable with respect to the Policies and Post-Closing Policies to or
for the benefit of the Producers who marketed or produced the Policies or
Post-Closing Policies, except such Commissions payable prior to the Closing Date
that, as of the Closing Date, have not been paid or for which a liability has
not been accrued as required by
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Illinois SAP on the Final Closing Balance Sheet; (f) premiums, payments, fees or
other consideration or amounts due under all Third Party Reinsurance Agreements,
except for such amounts due prior to the Closing Date that, as of the Closing
Date, have not been paid or for which a liability has not been accrued as
required by Illinois SAP on the Final Closing Balance Sheet; (g) all general
account liabilities for amounts payable for returns or refunds of Premiums,
except for such amounts due prior to the Closing Date, that as of the Closing
Date, have not been paid or for which a liability has not been accrued as
required by Illinois SAP on the Final Closing Balance Sheet; (h) all Extra
Contractual Obligations except for Extra Contractual Obligations that arise out
of acts or omissions of the Company, its Affiliates or their respective
directors, officers, employees, agents or representatives which acts or
omissions occur (or in the case of omissions fail to occur) prior to the Closing
Date or that arise out of the Company's breach of the terms and conditions of
this Agreement on or after the Closing Date; provided, however, the General
Account Liabilities shall not include (y) the Net Retained Liability or (z) the
Separate Account Liabilities or general account liabilities related to amounts
transferred from the Separate Accounts to the general account of the Company
pending distribution to holders of the Policies and Post-Closing Policies and
amounts held in the general account for the Company pending transfer to the
Separate Accounts.
"General Account Receivables" means the aggregate amount of accruals
with respect to the Policies and Post Closing Policies determined in accordance
with Illinois SAP and included on lines 5, 12.1, 16 and 18 of the Assets page of
the Annual Statement (or comparable successor NAIC blank).
"General Account Reserves" means the aggregate amount of policy
reserves and liabilities with respect to the Policies and Post-Closing Policies
determined in accordance with Illinois SAP and included on lines 1, 3, 4.1, 8,
9.4 and 19 of the Liabilities page of the Annual Statement (or comparable
successor NAIC statement blank), net of inuring reinsurance under the Third
Party Reinsurance Agreements, except with respect to the Company's Net Retained
Liability under the Restricted Third Party Reinsurance Agreements, and the
Unassigned Third Party Reinsurance Agreements (without regard to the
transactions contemplated by this Agreement) less the absolute value of the
accrued expense allowances recognized in the Separate Account Reserves with
respect to the Policies and Post-Closing Policies, as applicable, determined in
accordance with Illinois SAP and included on line of 13 of the Liabilities page
of the Annual Statement (or comparable successor NAIC statement of blank).
"Government Entity" shall mean any federal, state, local, municipal,
county, foreign or other governmental, quasi-governmental, administrative or
regulatory authority, body, agency, court, tribunal, commission or other similar
governmental entity (including any branch, department, agency or political
subdivision thereof) or any self-regulating body of similar standing.
"Illinois SAP" means the statutory accounting principles and practices
prescribed or permitted by the Illinois Department of Insurance.
"Income Tax Regulations" means the temporary and final regulations
issued under the Code. Any citation to a section of the Income Tax Regulations
includes a citation to any successor regulatory provision.
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"Interest Rate" shall have the meaning given such term in the Purchase
Agreement.
"Interest Maintenance Reserve" shall mean the Company's interest
maintenance reserve as of the Closing Date excluding interest maintenance
reserve as a result of the realization of the gain associated with transferring
the Transferred Coinsurance Assets at Market Value rather than at Book Value.
"Investment Value" shall, with respect to each BOLI Contract, have the
meaning given to such term or substantially comparable term under the applicable
private placement memorandum for such BOLI Contract.
"KILICO Retained Investments" shall have the meaning given to such
term in the Purchase Agreement.
"Legally Required Company Actions" means any actions the Company is
required by Applicable Law or Governmental Entities to take without the
Reinsurer acting on its behalf.
"Loss" shall have the meaning given to such term in Section 9.3
hereof.
"Market Value" means as of any date:
(i) With respect to a financial instrument, the fair value at which it
could be exchanged in a current transaction between willing parties. Where
available, a quoted market price by a third party broker/dealer shall be used.
If such a quoted market price by a third party broker-dealer cannot be obtained,
then the Market Value shall be calculated as a best estimate based on a
securities industry recognized valuation technique, which technique may include
the use of the quoted price of a close substitute asset, proxy or benchmark that
reflects similar characteristics and risks of the financial instrument for which
Market Value is being determined;
(ii) With respect to collateral loans, the value determined using a
sound and accepted valuation methodology that takes into account the prevailing
yield curve and credit quality applicable to such loans; and
(iii) With respect to the Other KILICO Assets, Book Value as of the
Closing Date.
"Market Value Adjustment" means (A) the Market Value of the
Transferred Coinsurance Assets as of the Closing Date minus the Book Value of
the Transferred Coinsurance Assets as of the Closing Date, times (B) the Market
Value of the Transferred Coinsurance Assets as of the Closing Date divided by
the Book Value of the Transferred Coinsurance Assets as of the Closing Date.
"Monthly Accounting" shall mean a monthly accounting prepared in
accordance with Illinois SAP and delivered by the Reinsurer to the Company in
accordance with the provisions of Section 4.2 hereof.
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"NAIC" means the National Association of Insurance Commissioners.
"Net Retained Liability" means (a) all liability that, under a
Restricted Third Party Reinsurance Agreement, the Company is required to retain
unreinsured and for its own account and all liability ceded by the Company under
any Restricted Third Party Reinsurance Agreement, and (b) all liability ceded by
the Company under any Unassigned Third Party Reinsurance Agreement.
"New Investment Option" shall have the meaning set forth in Section
2.3(c) of this Agreement.
"Non-Guaranteed Elements" means cost of insurance charges, loads and
expense charges, credited interest rates, mortality and expense charges,
administrative expense risk charges, variable premium rates and variable paid-up
amounts, as applicable, under the Policies and Post-Closing Policies.
"Other KILICO Assets" means (i) all of the issued and outstanding
shares of the KILICO Subsidiaries, and (ii) the assets set forth on Schedule F
of the Purchase Agreement.
"Permitted Assets" shall have the meaning given to such term in
Section 9.4(a)(ii) hereof.
"Permitted Encumbrance" shall have the meaning given to such term in
the Purchase Agreement.
"Person" means any individual, corporation, partnership, limited
liability company, limited liability partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other
entity of any kind or nature.
"Policies" means all of the Company's individual fixed annuity
contracts, individual and group variable annuity contracts, individual term and
universal life and individual and group variable life policies together with all
related binders, slips and certificates (including applications therefor and all
supplements, endorsements, riders and agreements in connection therewith) that:
(i) were effected, bound or issued prior to the Closing Date;
(ii) (A) are in force as of the Closing Date, (B) are subject to being
reinstated in accordance with their terms on or after the Closing Date, or (C)
are issued after the Closing Date pursuant to an exchange or conversion option
existing under the terms of such policies or contracts in force as of the
Closing Date; and
(iii) are issued on the policy forms set forth on Schedule 1.1(D);
provided, however, Policies shall in no circumstances include any Destinations
Annuity Contracts or BOLI Contracts.
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"Policy Loan Receivables" means the aggregate principal and accrued
interest thereon of all policy loans with respect to Policies and Post-Closing
Policies, determined in accordance with Illinois SAP and appropriately
includable on lines 5 and 18 of the Assets page of the Annual Statement or in
comparable line items in successor NAIC annual statement blanks.
"Policyholders" means policyholders, insureds and assignees under the
Policies and Post-Closing Policies.
"Post-Closing Ceding Commission" shall mean the ceding commission
specified on Schedule 1.1(E) hereto with respect to the Post-Closing Policies.
"Post-Closing Policies" means the policies together with all related
binders, slips and certificates (including applications therefor and all
supplements, endorsements, riders and agreements in connection therewith) issued
by the Company during the Post-Closing Policy Period pursuant to Section 5.20 of
the Purchase Agreement.
"Premiums" means premiums, considerations, deposits and similar
receipts with respect to the Policies or Post-Closing Policies.
"Premiums Receivable" means the aggregate of all Premiums receivable
(including any due and deferred premiums) with respect to the Policies and
Post-Closing Policies, determined in accordance with Illinois SAP and
appropriately includable on lines 16 and 17 of the Assets page of the Annual
Statement or in comparable line items in successor NAIC annual statement blanks.
"Producers" shall mean any insurance producer, agency, agent, managing
general agent, wholesaler, distributor, broker, solicitor, adjuster or customer
representative for the Company with respect to the Policies, Post Closing
Policies, BOLI Contracts or Destinations Annuity Contracts, as applicable.
"Purchase Agreement" shall have the meaning set forth in the recitals.
"Recapture Date" shall have the meaning set forth in Section 9.5(b)
hereof.
"Recapture Event" shall have the meaning set forth in Section 9.5(a)
hereof.
"Recapture Fee" shall have the meaning set forth in Exhibit F.
"Registered Policy" shall mean any Policy or Post-Closing Policy that
is registered pursuant to the Securities Act of 1933, as amended. The SEC file
numbers for the Registered Policies are listed on Schedule 1.1(F).
"Registered Policyholder" shall mean the owner of a Registered Policy.
"Registered Separate Account" shall mean any Separate Account that is
registered with the United States Securities and Exchange Commission as an
investment company pursuant to the 1940 Act. The SEC file numbers for the
Registered Separate Accounts are listed on Schedule 1.1(D).
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"Reinsurance Recoverables" means the aggregate of all amounts
recoverable from reinsurers except under Restricted Third Party Reinsurance
Agreements and Unassigned Third Party Reinsurance Agreements with respect to the
Policies and Post-Closing Policies, determined in accordance with Illinois SAP
and appropriately includable on lines 12.1, 12.2, 12.3 and 12.4 of the Assets
page of the Annual Statement (or in comparable line items in successor NAIC
annual statement blanks).
"Reinsured Liabilities" means the General Account Liabilities and the
Separate Account Liabilities, in each case other than the Net Retained Liability
under Policies or Post-Closing Policies; provided, however the Reinsured
Liabilities shall not include any Retained Liabilities.
"Required Balance" means an amount equal to one hundred percent (100%)
of the General Account Reserves, less the Premiums Receivable and less the
Policy Loan Receivables.
"Restricted Third Party Reinsurance Agreement" means any Third Party
Reinsurance Agreement under which the Company is required to maintain a portion
of the liability for covered Policies for its own account and for which the
Company has not received third party consent to reinsure such liabilities under
this Agreement on the same terms applicable to the Company.
"Retained Liabilities" means the Company's liabilities or obligations
that are not General Account Liabilities or Separate Account Liabilities. The
Retained Liabilities include, without limitation, each of the following: (a) all
liabilities, obligations or indemnities expressly assumed by the Company under
the terms of the Purchase Agreement, this Agreement or any Transaction
Agreement; (b) premium Taxes due in respect of Premiums received before the
Closing Date, (except Way Out Premium Taxes), and all other Tax liabilities
arising out of or relating to the Policies or Post-Closing Policies incurred
before the Closing Date; (c) assessments and similar charges in connection with
participation by the Company, whether voluntary or involuntary, in any guaranty
association established or governed by any state or other jurisdiction, that, as
of the Closing Date, have not been accrued for in accordance with the accrual
methodology set forth in Schedule 1.1(G) on the Final Closing Balance Sheet; (d)
Commissions payable with respect to the Policies and Post-Closing Policies to or
for the benefit of the Producers who marketed or produced the Policies or
Post-Closing Policies payable prior to the Closing Date that, as of the Closing
Date, have not been paid or for which a liability has not been accrued as
required by Illinois SAP on the Final Closing Balance Sheet; (e) all liabilities
for Claims including, without limitation, incurred but not reported Claims,
arising under the Company's Net Retained Liability for the Policies or
Post-Closing Policies; (f) all premiums, payments, fees or other consideration
or amounts due under all Third Party Reinsurance Agreements, (other than
Restricted Third Party Reinsurance Agreements and Unassigned Third Party
Reinsurance Agreements) prior to the Closing Date that, as of the Closing Date,
have not been paid or for which a liability has not been accrued as required by
Illinois SAP on the Final Closing Balance Sheet; (g) all premiums, payments,
fees or other consideration or amounts due under all Restricted Third Party
Reinsurance Agreements and Unassigned Third Party Reinsurance Agreements; (h)
all Extra Contractual Obligations that arise out of the acts or omissions of the
Company, its Affiliates or their respective directors, officers, employees,
agents or representatives which acts or omissions occur (or in the case of
omissions fail to occur) prior
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to the Closing Date or that arise out of the Company's breach of the terms and
conditions of this Agreement on or after the Closing Date; (i) any increase in
the General Account Liabilities or decrease in Premiums caused by the Company
unreasonably withholding approval or disapproving a Non-Guaranteed Element
recommended by the Reinsurer under Section 2.3(a)(i) hereof; (j) any Excluded
Items (as defined in the Purchase Agreement); and (k) any Taxes of the Company
resulting from the transfers contemplated by this Agreement.
"SEC" shall mean the United States Securities and Exchange Commission.
"Security Trust Account" means a trust account established with a
Trustee for the purpose of securing the Reinsurer's obligations to the Company
in accordance with Section 9.4 hereof.
"Security Trust Agreement" means the trust agreement governing the
Security Trust Account, which shall be substantially in the form of Exhibit B
hereto.
"Separate Account Annual Statement" means the Company's 2002 separate
account convention form statutory annual statement, together with all required
schedules and supplements thereto, as filed with the Insurance Department of the
State of Illinois.
"Separate Account Assets" means the assets held in the Separate
Accounts equal to the Separate Account Liabilities as set forth on line 15
(total liabilities) of the Separate Account Annual Statement.
"Separate Account Liabilities" means those insurance liabilities that
are reflected in the Separate Accounts and that relate to the Policies and
Post-Closing Policies; provided, however, the Separate Account Liabilities shall
not include any Retained Liabilities.
"Separate Account Receivables" means the aggregate amount owed by the
Separate Accounts to the Company determined in accordance with Illinois SAP.
"Separate Account Reserves" means the reserves for Separate Account
Liabilities, determined in accordance with Illinois SAP.
"Separate Account Revenues" means for all Policies and Post-Closing
Policies issued in connection with the Separate Accounts, the net cash flows
(including any change in the Separate Account Receivables) associated with the
Separate Accounts, including, without limitation all (i) administrative expense
and deposit charges deducted by the Company from the remittance of Premiums,
asset charges collected, market value adjustments collected, back-end loadings
collected and any other fees, charges or expenses under the Policies and
Post-Closing Policies, (ii) revenues and fees received by the Company from fund
managers under all participation agreements, advisory agreements and similar
agreements or arrangements relating to the Separate Accounts and (iii) any other
economic benefits arising out of or relating to the Separate Accounts; provided,
however that Separate Account Revenues shall not include Premiums and Policy
Loan Receivables.
"Separate Accounts" means the specific separate accounts of the
Company identified in Schedule 1.1(F) hereto.
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"Tax" (or "Taxes" as the context may require) shall mean any federal,
state, local or foreign net income, gross income, gross receipts, severance,
property, production, sales, use, license, excise, franchise, employment,
payroll, withholding, premium, alternative or add-on minimum, ad valorem,
value-added, transfer, stamp, or environmental (including taxes under Section
59A of the Code) tax, or any other similar tax, customs duty, withholding,
charge, fee, levy or other assessment, including any interest, penalty or
addition imposed on such taxes by any Taxing Authority.
"Taxing Authority" shall mean any agency or political subdivision of
any foreign, federal, state, local or municipal Government Entity with the
authority to impose any Tax.
"Termination Date" shall mean the date on which this Agreement is
terminated in accordance with the terms and conditions of Article XII hereof.
"Third Party Reinsurance Agreements" means the reinsurance agreements
identified on Schedule 3.15(b) to the Purchase Agreement under which the Company
has ceded liabilities to reinsurers with respect to the Policies.
"Transaction Agreement" shall have the meaning given to such term
under the Purchase Agreement.
"Transferred Coinsurance Assets" means Other KILICO Assets,
Transferred Investment Assets and cash or cash equivalents having an aggregate
Market Value equal to the amount as of the Closing Date of the General Account
Reserves plus the Interest Maintenance Reserve less the General Account
Receivables. Under no circumstances shall the Transferred Coinsurance Assets
include any part of the Separate Account Assets or KILICO Retained Investments.
"Transferred Investment Assets" shall have the meaning given to such
term under the Purchase Agreement.
"Trustee" means a bank or trust company reasonably acceptable to the
parties to this Agreement, which acts as trustee of a Security Trust Account
pursuant to the terms and conditions of a Security Trust Agreement; provided,
however, that such bank or trust company shall not be an Affiliate of the
Reinsurer and shall (a) possess assets of at least $10 billion; (b) be rated at
least A1 by each of Xxxxx'x Investors Services, Inc. and A+ by Standard & Poor's
Corporation; (c) be a bank or trust company that is a member of the Federal
Reserve System of the United States of America; and (d) be a qualified United
States financial institution as defined in Section 173.1(3)(B) of the Illinois
Insurance Code.
"Unassigned Third Party Reinsurance Agreements" means any Third Party
Reinsurance Agreement for which consent required from any party to such
agreement was not obtained, on the same terms applicable to the Company.
"Underlying Fund" shall mean a management investment company
registered with the SEC pursuant to the 1940 Act, or a series thereof, in which
a Registered Separate Account invests to fund an investment option under a
Registered Policy.
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"Way Out Premium Taxes" means premium Taxes on the Policies payable
upon annuitization under Applicable Law.
ARTICLE II
BASIS OF COINSURANCE, modified coinsurance AND BUSINESS COINSURED
2.1. Coinsurance and Modified Coinsurance. Subject to the terms and
conditions of this Agreement, the Company hereby cedes to the Reinsurer as of
12:01 a.m. Central Time on the Closing Date, and the Reinsurer hereby accepts
and agrees to indemnity reinsure one hundred percent (100%) of the Reinsured
Liabilities, with all General Account Liabilities included in the Reinsured
Liabilities being reinsured on a coinsurance basis and all Separate Account
Liabilities included in the Reinsured Liabilities being reinsured on a modified
coinsurance basis. This Agreement shall not continue or create any legal
relationship whatsoever between the Reinsurer and Persons who own or are insured
under the Policies and the Post-Closing Policies. The reinsurance effected under
this Agreement shall be maintained in force, without reduction, unless such
reinsurance is terminated, reduced or recaptured as provided herein.
2.2. Reinstatements, Conversions and Exchanges. Upon the reinstatement
of any lapsed or surrendered Policy or Post-Closing Policy, or the issuance of
any exchange or converted Policy or Post-Closing Policy, such Policy or
Post-Closing Policy shall be automatically reinsured hereunder. If the Company
collects Premiums in arrears from a Policyholder of a reinstated Policy or
Post-Closing Policy, the Company shall pay to the Reinsurer all Premiums so
collected.
2.3. Certain Recommendations.
(a) From and after the Closing Date and during the term of this
Agreement, the Reinsurer may make recommendations to the Company with respect to
(i) the Non-Guaranteed Elements of the Policies and the Post-Closing
Policies;
(ii) the reserving methodology related to the Policies and the
Post-Closing Policies (including changes required by Applicable Law, GAAP or
Illinois SAP); and
(iii) with respect to those Policies and Post-Closing Policies that
are issued in connection with the Separate Accounts, the addition or
substitution of investment options to the extent permitted under the terms of
such Policies and Post-Closing Policies (a "New Investment Option").
(b) The Company shall set all Non-Guaranteed Elements, reserves and,
as applicable, New Investment Options for the Policies and the Post-Closing
Policies, taking into account the Reinsurer's recommendations with respect to
the setting of such items. The Company shall, within a commercially reasonable
period after receipt (which in no case shall exceed ten (10) Business Days for
Non-Guaranteed Elements and Reserves and thirty (30) days for New Investment
Options), provide the Reinsurer with written notice of the Company's election to
approve or disapprove the Reinsurer's recommendations as to Non-Guaranteed
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Elements, reserves and New Investment Options which approval shall not be
unreasonably withheld; provided, however, the Company shall be deemed to have
unreasonably withheld its approval if it fails to approve the Reinsurer's
recommendations with respect to Non-Guaranteed Elements where, along with the
recommendation, the Reinsurer has provided the Company with (i) a statement from
the Reinsurer's general counsel that such recommendation complies with
Applicable Law and the terms of the applicable Policies or Post Closing
Policies, and (ii) a statement from the Reinsurer's chief actuary that such
recommendation complies with ASOP No.1. If the Company approves such
recommendations, the Company shall, at the Reinsurer's expense, use commercially
reasonable efforts to effect the Reinsurer's recommendations, including entering
into new agreements with investment managers.
2.4. Reserves. On and after the Closing Date, the Reinsurer shall
establish and maintain as a liability on its statutory financial statements
reserves for the Policies and the Post-Closing Policies ceded hereunder,
calculated consistent with (a) Illinois SAP; and (b) otherwise in accordance
with sound actuarial principles and any valuation bases and methods of
determining reserves as provided in the forms of Policies and Post-Closing
Policies. The Reinsurer shall provide the Company, not less than annually, with
copies of all actuarial opinions and actuarial memoranda and all reserve
evaluations pertaining to the reserves for the Policies and Post-Closing
Policies, including, without limitation, any actuarial opinions and reserve
evaluations performed by independent actuaries, auditors or other outside
consultants. At the option of the Company, the Company may, at its own cost at
any time following the Closing, examine the books and records with respect to
the Policies and Post-Closing Policies maintained by the Reinsurer and review
its reserve procedures. If the results of such examination are not reasonably
satisfactory to the Company, the Reinsurer shall obtain and deliver to the
Company an actuarial opinion as to the adequacy of the reserves, produced by an
independent actuary who is a member of the American Academy of Actuaries
acceptable to the Company. If such actuarial opinion reasonably indicates an
inadequacy in the reserves or in the Reinsurer's reserve procedures the
Reinsurer shall be responsible for the cost and expense of such actuarial
opinion and shall promptly adjust the amount of the reserves and implement
appropriate changes to its reserve procedures. If such actuarial opinion does
not indicate an inadequacy in the reserves or the Reinsurer's reserve
procedures, the Company shall be responsible for the cost and expense of such
actuarial opinion and the Reinsurer shall not be required to implement any
adjustment in the amount of the reserves or any change in reserve procedures.
2.5. Separate Account Reserves. The Company and the Reinsurer
acknowledge and agree that the Separate Account Reserves will not be transferred
to the Reinsurer in connection with the transaction contemplated under this
Agreement and that the Company shall retain, maintain, control and own all
Separate Account Assets and Separate Account Reserves.
2.6. Policy Changes or Reductions. In the event of a change in the
provisions or conditions of a Policy or a Post-Closing Policy or the assumptions
and methods used to establish the General Account Reserves or the Separate
Account Reserves, the Reinsurer shall share proportionately (i) on a 100%
coinsurance basis, in any changes in the terms or conditions of any Policies or
Post-Closing Policies or changes in the assumptions and methods used to
establish the General Account Reserves and (ii) on a 100% modified coinsurance
basis, in any changes in the terms or conditions of any Policies or Post-Closing
Policies or changes in the
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assumptions and methods used to establish the Separate Account Reserves
(provided, in each case, that such change is not in violation of Section 5.3
hereof), a corresponding change in the related coinsurance and appropriate cash
adjustments shall be made consistent with the policy change rules of the
Company.
ARTICLE III.
TRANSFER OF ASSETS
3.1. Transfer of Assets at Closing and Balance Sheets.
Pursuant to the terms of the Purchase Agreement, on the Closing Date,
the Company shall sell, assign and transfer to the Reinsurer the Transferred
Coinsurance Assets minus the Ceding Commission pursuant to Section 2.3(g) of the
Purchase Agreement and subject to a post closing adjustment pursuant to Section
2.4 of the Purchase Agreement.
3.2. Additional Consideration. (a) As additional consideration for
Reinsurer entering into this Agreement, the Company hereby, transfers, conveys,
assigns and delivers to the Reinsurer free and clear of all claims, liens,
interests or encumbrances other than Permitted Encumbrances, the following items
received by or on behalf of the Company after the Closing with respect to the
Policies and Post-Closing Policies except to the extent such amounts are
necessary to pay the Company's obligations for Net Retained Liability under
Restricted Third Party Reinsurance Agreements and Unassigned Third Party
Reinsurance Agreements; provided, however, that the Company shall assign to the
Reinsurer, Premiums, Premiums Receivables, Policy Loan Receivables and
Reinsurance Recoverables with respect to Unassigned Third Party Reinsurance
Agreements and Restricted Third Party Reinsurance Agreements only for the
purpose of performing the Administrative Services set forth in Section 5.3(l)
hereof:
(i) Premiums;
(ii) Premiums Receivable;
(iii) Policy Loan Receivables;
(iv) Reinsurance Recoverables;
(v) Agents Debit Balances;
(vi) Separate Account Revenues; and
(vii) all other fees, charges and amounts, including, without
limitation, payments of policy loan principal and interest.
(b) The Company agrees to execute and deliver to the Reinsurer any
further instruments or assurances that the Reinsurer may reasonably request for
more effectual vesting of the Reinsurer's right, title and interest in the items
set forth in Section 3.2(a) above with the exception of Premiums for Policies
and Post-Closing Policies covered by the Separate Accounts. Such action shall
include, without limitation, the Company's execution and delivery of any
financing statements reasonably requested by the Reinsurer to the extent that it
may appear
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appropriate to the Reinsurer to file such financing statements under Article 9
of the Uniform Commercial Code. However, (i) upon the expiration of the duration
of this Agreement as set forth in Section 12.1 hereof, (ii) upon the occurrence
of a Recapture Event, or (iii) in the event that it shall be determined in
accordance with Article IX hereof that the Company is entitled to retain or
receive the benefits of, or that the Reinsurer is not otherwise entitled to, the
foregoing items set forth in Section 3.2(a) or any portion thereof, then the
Reinsurer shall, at its expense and upon the request of the Company, execute and
deliver to the Company any instruments or assurances that the Company may
reasonably request to evidence the Company's right, title and interest in any
such items or portion thereof. Such action shall include, without limitation,
the Reinsurer's execution and delivery to the Company of any proper instrument
or instruments reasonably requested by the Company to the extent that it may
appear appropriate to the Company (including Uniform Commercial Code termination
statements) to evidence the foregoing.
(c) The Company will promptly endorse and remit to the Reinsurer any
Premiums, loan repayments and other amounts under the Policies or Post Closing
Policies received by the Company on or after the Closing Date. The Company shall
treat any such amounts as the property of the Reinsurer to be held for the sole
benefit of the Reinsurer.
3.3. Ceding Commission. For each Post-Closing Policy issued by the
Company, the Reinsurer shall pay to the Company the Post-Closing Ceding
Commission.
ARTICLE IV.
RESERVE ADJUSTMENTS AND ACCOUNTINGS
4.1. Modified Coinsurance Adjustment on Separate Account Business.
With respect to the Policies and Post-Closing Policies issued in connection with
the Separate Accounts, if as of the month's end reflected in a Monthly
Accounting, the amount reflected on the Summary of Operations of the Company's
Annual Statement (or comparable successor NAIC annual statement blank), Line 26
(Net transfers to or (from) Separate Accounts) related to the Policies and the
Post-Closing Policies is greater than the amount reflected on Line 8.1 (Income
from fees associated with investment management, administration and contract
guarantees from Separate Accounts) related to the Policies and Post-Closing
Policies, the excess shall be credited by Reinsurer to the Company on the
Monthly Accounting. If the amount reflected on Line 8.1 related to the Policies
and Post-Closing Policies is greater than the amount reflected on Line 26
related to the Policies and Post-Closing Policies, the excess shall be credited
by the Company to the Reinsurer on the Monthly Accounting.
4.2. Monthly Accountings. On a monthly basis, commencing with the
month in which the Closing Date occurs, the Reinsurer shall provide the Company
with a Monthly Accounting as of the end of each calendar month, no later than
fifteen (15) Business Days after the end of such month; provided, however, that
the Reinsurer shall deliver the final Monthly Accounting no later than fifteen
(15) Business Days after the Termination Date; provided, further, that in the
event that subsequent data or calculations require revision of the final Monthly
Accounting, the required revision and any appropriate payments shall be made in
cash by the parties five (5) Business Days after they mutually agree as to the
appropriate revision. The Reinsurer shall provide each Monthly Accounting in the
form attached as Exhibit D hereto.
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4.3. Monthly Payments. If a Monthly Accounting reflects a balance due
the Company and/or the Security Trust Account, if applicable, the amount(s)
shown as due shall be paid within five (5) Business Days of the delivery of the
Monthly Accounting. If (a) a Monthly Accounting reflects a balance due the
Reinsurer or the Security Trust Account, if applicable, and (b) the Company does
not object to the Monthly Accounting within five (5) Business Days of its
delivery, the amount(s) shown as due shall be paid within five (5) Business Days
after the date on which the Monthly Accounting was delivered. Any dispute over
any amount shown on a Monthly Accounting that cannot be amicably resolved by the
parties shall be resolved pursuant to the procedures set forth in Article X.
4.4. Delayed Payments. If there is a delayed settlement of any payment
due hereunder, interest will accrue on such payment at the Interest Rate. For
purposes of this Section 4.4, a payment will be considered overdue, and such
interest will begin to accrue, on the date which is five (5) Business Days after
the date such payment is due.
4.5. Offset Rights. Any debts or credits incurred on and after the
Closing Date in favor of or against either the Company or Reinsurer with respect
to this Agreement are deemed mutual debts or credits, as the case may be, and
shall be set off, and only the balance shall be allowed or paid.
ARTICLE V.
POLICY AND SEPARATE ACCOUNT ADMINISTRATION
5.1. Appointment and Acceptance of Appointment. Except as expressly
provided herein, or unless specifically required by Applicable Law, the Company
hereby appoints the Reinsurer, on an exclusive basis and (except as otherwise
provided in section 5.25 with respect to the duration of the Destinations
Services) for the period specified in Section 5.19 hereof, to provide (a)
administrative services with respect to (i) the Policies and Post-Closing
Policies and (ii) the Separate Accounts, in each case, as of the Closing Date,
including, without limitation, the administrative services specified in Section
5.3 hereof (collectively, the "Administrative Services"), (b) with respect to
the BOLI Contracts the services specified in Section 5.24 hereof as of the
Closing Date, (collectively the "BOLI Services"); and (c) the Destinations
Services as of the Closing Date, and the Reinsurer hereby accepts such
appointment and agrees to perform or cause to be performed such Administrative
Services, BOLI Services and Destinations Services.
5.2. Notification of Policyholders. The Reinsurer agrees to send to
all Policyholders and Producers a written notice, prepared by the Reinsurer and
reasonably acceptable to the Company, advising that the Reinsurer has been
appointed by the Company to provide the Administrative Services. The Reinsurer
shall send such notice, by first class U.S. mail, at its own expense, within
thirty (30) calendar days following the Closing Date.
5.3. Administrative Services. From and after the Closing Date, the
Reinsurer agrees to perform all Administrative Services and is authorized to do
so in the name (subject to Section 5.13 hereof and Section 5.8 of the Purchase
Agreement) or on behalf of the Company where appropriate; provided, however,
that its performance of the Administrative Services shall comply with, and be
subject in all events to, all Applicable Laws, the terms and conditions of the
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Policies and Post-Closing Policies and the provisions of all actuarial, rating
or other filings with Governmental Entities relating to the Policies and
Post-Closing Policies made by or on behalf of the Company; provided, further,
that in the case of all Administrative Services which constitute Legally
Required Company Actions, the Reinsurer shall comply with Section 5.6. Except
for Legally Required Company Actions, Retained Liabilities or unless
specifically provided for in this Agreement, the Company shall not be obligated
to provide any services and agrees not to take any actions, relating to the
Policies, Post-Closing Policies or the Separate Accounts. The Administrative
Services include, without limitation, the following:
(a) preparing and mailing all necessary and appropriate Policyholder
statements, reports and communications including, without limitation, (i)
Premium notices to Policyholders at a reasonable time in advance of applicable
due dates; (ii) advance notice of potential lapse of the Policyholder's
coverage; (iii) in force reprojections as requested by a Policyholder; (iv)
annual policy statements; (v) confirmation statements; (vi) lapse notices; and
(vii) illustrations for Post-Closing Policies;
(b) collecting Premiums, loan repayments and loan interest and other
amounts due under the Policies and Post-Closing Policies, including but not
limited to such amounts paid through Producers and other persons or institutions
that receive remittances with respect to the Policies and Post-Closing Policies;
(c) receiving, processing, investigating and evaluating Claims filed
by or on behalf of Policyholders, paying such Claims in accordance with the
terms and conditions of the Policies and Post-Closing Policies and Applicable
Law or proposing, in accordance with the terms and conditions of Policies and
Post-Closing Policies and Applicable Law to deny such Claims, in whole or part,
(i) within a reasonable time after receipt of all documentation reasonably
required to evaluate Claims relating to the general account portion of a Policy
or Post Closing Policy, and (ii) within the time period specified in the
applicable contract with respect to Claims for withdrawals from the Separate
Account under a Policy or Post-Closing Policy, or, in the case of either clause
(i) or (ii) above, within any shorter time period required by Applicable Law;
provided, however, that the Reinsurer may make such further investigation of the
Claim as may be necessary or appropriate under Applicable Law;
(d) providing claimants and as permitted by Applicable Law,
representatives of Policyholders with written notice of approval or disapproval
of Claims, including, in the case of disapproval, a specific explanation of the
reasons for the denial of the Claim as required by Applicable Law, and
discharging other contractual obligations under the Policies and Post-Closing
Policies;
(e) providing usual and customary services for Policyholders,
including, without limitation, processing loans and loan requests under the
Policies and Post-Closing Policies, providing information concerning the
Policies and Post-Closing Policies, and processing assignments, waivers of
premium, transfers, non-forfeitures, lapses, reinstatements, cancellations,
conversions or other changes provided for under the Policies and Post-Closing
Policies;
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(f) processing all necessary Policyholder Tax reporting, customer
notifications and collection in connection with the Policies and Post-Closing
Policies and the Separate Accounts, including, without limitation, (i) the
preparation of all Form 1099s and compliance with any and all applicable
withholding and Tax reporting requirements of the Tax laws in connection with
payments of benefits and any other amounts due under the Policies and
Post-Closing Policies; (ii) notifications to customers concerning Tax matters
together with available options; and (iii) administration and testing of the
Policies and Post-Closing Policies to assure compliance with all applicable Tax
requirements including, but not limited to, Sections 101(f), 817, 7702 and 7702A
of the Code; provided, however, such administration and testing obligation is
not intended to limit Reinsurer's indemnification rights under Section
6.3(a)(iv) of the Purchase Agreement for any Loss in connection with or arising
from any breach of any representations or warranties under Section 3.17(c)(v or
vi) of the Purchase Agreement;
(g) complying with any and all Applicable Laws that are material with
respect to the Administrative Services; provided, however, the Reinsurer's
obligations with respect to all statutory insurance reporting requirements and
tax filing requirements shall be governed by Section 5.6;
(h) calculating and paying all Commissions to Producers entitled
thereto, if any;
(i) with respect to the Policies and Post-Closing Policies, providing
to the Company all information necessary to comply with any and all withholding
and Tax reporting requirements of the Tax laws in connection therewith;
(j) monitoring and complying, as applicable, with all applicable
licensing requirements relating to the Reinsurer, appointing Producers for the
Policies and Post-Closing Policies as required by Applicable Law and monitoring
the performance and licensing of all Producers with respect to the Policies and
Post-Closing Policies to the extent required by Applicable Law;
(k) terminating a Producer's authority and agreements with such
Producers with respect to the Policies and Post-Closing Policies;
(l) preparing all accounting and actuarial information related to the
Policies and Post-Closing Policies and the Separate Accounts that is necessary
for the Company to timely meet Illinois SAP, Tax, or GAAP accounting
requirements (other than discretionary calculations under GAAP), including, but
not limited to, preparation of quarterly and annual financial statement data in
a format mutually agreed to by the parties, for the Company to prepare the
Company's Illinois SAP and GAAP financial statements and delivery of such data
in a form usable by the Company within thirty (30) calendar days after the end
of each calendar quarter or year, as applicable;
(m) administering all Restricted Third Party Reinsurance Agreements
and Unassigned Third Party Reinsurance Agreements including, without limitation,
taking all steps necessary to maintain such reinsurance coverage, paying all
reinsurance premiums, collecting all reinsurance recoverables due the Company
thereunder and enforcing all rights of the Company
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under the Restricted Third Party Reinsurance Agreements and Unassigned Third
Party Reinsurance Agreements;
(n) providing the Company with all accountings and other information
pursuant to the terms of this Agreement;
(o) maintaining the Company's current (i.e., as of Closing) rate and
form filings for the Policies and Post-Closing Policies with Governmental
Entities; provided, however, that the Reinsurer shall have the authority to make
changes to the Company's rates or forms in accordance with Section 5.8;
(p) making recommendations to the Company with respect to (i) the
Non-Guaranteed Elements of the Policies and Post-Closing Policies; (ii) the
reserving methodology related to the Policies and Post-Closing Policies
(including changes required by Applicable Law, GAAP or Illinois SAP) and (iii) a
New Investment Option;
(q) handling all regulatory compliance and market conduct matters in
accordance with Section 5.18;
(r) performing all services and functions set forth in Section 5.4
hereto;
(s) subject to prior review and consent by the Company and to the
provisions of Section 5.4 hereto, complying with Securities and Exchange
Commission filing and other regulatory requirements applicable to those Policies
and Post-Closing Policies which are registered products;
(t) consulting with the Company and providing all financial,
accounting and other data reasonably requested by the Company (i) regarding cash
flow testing for the Policies and Post-Closing Policies subject to the
Coinsurance Agreement; and (ii) establishing the recommended Non-Guaranteed
Elements;
(u) maintaining a post office box or other commercially reasonable
alternative for the purpose of receiving and collecting correspondence related
to the administration of the Policies and Post-Closing Policies;
(v) fulfilling all escheat filing responsibilities to any Governmental
Entity or other Person relating to the Policies and Post-Closing Policies;
(w) managing all investments in the Company's non-unitized separate
accounts;
(x) responding to Policyholder complaints relating to Policies and
Post-Closing Policies in accordance with Applicable Laws;
(y) with respect to the Separate Accounts that are not Registered
Separate Accounts to the extent they relate to the Policies, updating and
finalizing disclosure documents and related materials for distribution to high
net worth customers.
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5.4. Services With Respect to Registered Separate Accounts and
Registered Policies.
(a) Legal Compliance. The Reinsurer shall perform all services
necessary to maintain the compliance in all material respects of the Registered
Policies and the operations of the Registered Separate Accounts to the extent
they relate to such Registered Policies with applicable securities law
requirements until termination of the Administrative Services pursuant to
Section 5.20 of this Agreement. This obligation shall not include the following
services, which shall be the responsibility of the Company:
(i) The preparation of annual audited financial statements of the
Registered Separate Accounts of the Company;
(ii) The preparation and filing with the SEC of quarterly and annual
reports as required under the 1934 Act;
(iii) The preparation and filing with the SEC of an annual report on
Form N-SAR with respect to each Registered Separate Account, in accordance
with 30a-1 under the 1940 Act;
(iv) The preparation and filing with the SEC of an annual notice of
securities sold on Form 24F-2 with respect to each Registered Separate
Account, in accordance with Rule 24f-2 under the 1940 Act.
(b) Additional Services Relating to Legal Compliance.
(i) Subject to the consent of the Company, which will not be
unreasonably withheld, the Reinsurer, on behalf of the Company, shall
prepare and file such post-effective amendments and supplements to the
registration statements for the Registered Policies and Registered Separate
Accounts to the extent they relate to such policies, as may be necessary to
keep such registration statements in effect and current for such periods as
such filings are required under Applicable Law or then current SEC written
interpretation. Subject to the consent of the Company, which shall not be
unreasonably withheld, the Reinsurer, on behalf of the Company, may respond
to any SEC comment on such post-effective amendments and supplements. Where
a filing is required under Applicable Law to be signed by an officer or
director of the Company, the Company shall cooperate in a timely manner in
obtaining such person's signature. The Reinsurer shall provide the Company
with such information as the signatory may reasonably require to confirm
that the filing is accurate and complete in all material respects. The
Company shall provide the Reinsurer such information regarding the
Registered Separate Accounts to the extent they do not relate to the
Registered Policies as is required to be included in any such filing. The
Company shall certify to the Reinsurer the accuracy of such information.
(ii) The Reinsurer shall provide the Company with such reports and
information concerning the Administrative Services as may be reasonably
required to enable the Company to prepare and file the following reports
and notices with the SEC for such
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periods as such filings are required under applicable law or then current
SEC written interpretations:
(A) An annual report on Form N-SAR with respect to each Registered
Separate Account, in accordance with 30a-1 under the 1940 Act.
(B) An annual notice of securities sold on Form 24F-2 with respect to
each Registered Separate Account, in accordance with Rule 24f-2
under the 1940 Act. If a registration fee is required to be paid
to the SEC with a Form 24F-2 notice, pursuant to Rule 24f-2 under
the 1940 Act, the Reinsurer shall pay a share of such fee equal
to the ratio of net unit sales of such Registered Separate
Account attributable to Registered Policies divided by the total
net unit sales of such Registered Separate Account.
(C) SEC quarterly and annual reports with respect to the Company as
required under the 1934 Act.
(iii) To the extent the Reinsurer initiates a change in the Registered
Policies or Registered Separate Accounts to the extent permitted under this
Section 5.4, or otherwise deems it necessary or appropriate, the Reinsurer
shall at its own expense prepare an SEC exemptive application, no-action
letter or other regulatory filing necessary to reflect or implement such
change.
(iv) Subject to the oversight and control of the Company, the
Reinsurer shall establish and maintain Disclosure Controls and Procedures
with respect to the Administrative Services. The Reinsurer shall cooperate
with the Company in implementing such Disclosure Controls and Procedures.
The Reinsurer shall provide the Company with reasonable access to its
personnel, books and records, and such other information as the Company may
deem necessary to enable its designated officers to evaluate the
effectiveness of such Disclosure Controls and Procedures in accordance with
Rule 30a-2(b)(4)(ii) under the 1940 Act, with respect to the Registered
Separate Accounts, and Rule 13a-15(b) under the 1934 Act, with respect to
the Company. In addition, the Reinsurer shall provide the Company with such
other reports and information concerning the Administrative Services as may
be necessary for the designated officers of the Company to certify the
Registered Separate Accounts' Form N-SAR filings as required by Rule 30a-2
under the 1940 Act and to certify the Company's Forms 10-K and 10-Q filings
as required by Rule 13a-4 under the 1934 Act. Thirty (30) days after the
end of each calendar quarter the Reinsurer shall provide the Company with a
certification of its compliance with the then applicable Disclosure
Controls and Procedures.
(v) The Reinsurer shall provide any legal support services needed to
carry out its responsibilities under this Agreement with respect to the
Registered Policies and the Registered Separate Accounts to the extent they
relate to the Registered Policies. The Reinsurer shall handle, or cooperate
with the Company in handling, any regulatory compliance matters relating to
the Registered Policies or the Registered Separate
-21-
Accounts to the extent they relate to the Registered Policies arising from
or relating to events after the Closing Date, including without limitation
responses to any regulatory inspection or any regulatory inquiry relating
to transactions arising after the effective date of this Agreement.
(vi) Subject to the oversight of the Company, the Reinsurer shall
establish and maintain compliance procedures to monitor that the
Administrative Services are provided in compliance in all material respects
with applicable provisions of the securities laws and the Code. The
Reinsurer shall take prompt steps to correct any material errors or
deficiencies found through such procedures or otherwise. The Reinsurer
shall certify to the Company quarterly in writing that it has complied in
all material respects with these requirements.
(vii) The Reinsurer shall process complaints relating to Registered
Policies in accordance with Applicable Law. The Reinsurer shall maintain
logs and other records of such complaints and the disposition thereof as
required under Applicable Law. The Reinsurer shall investigate and resolve
such complaints promptly. The Reinsurer shall promptly notify the
distributor of the Registered Policies of any complaint relating to such
Policies. The Reinsurer shall cooperate with the distributor in the
investigation and resolution of such complaints.
(c) Accounting.
(i) The Reinsurer shall prepare and maintain full and accurate
accounting records and process accounting transactions relating to the
Registered Policies, including transactions of the Registered Separate
Accounts relating to the Registered Policies, in accordance with GAAP.
(ii) The Reinsurer shall prepare and maintain all books and records
required to be maintained by the Registered Separate Accounts with respect
to the Registered Policies under Applicable Law, including without
limitation Section 31 of the 1940 Act and applicable rules thereunder. The
Reinsurer shall keep such records for the periods required under Applicable
Law. Such records shall be the property of the Company and the Reinsurer
shall provide such records to the Company promptly upon request in
accordance with Rule 31a-3 under the 1940 Act.
(iii) The Reinsurer shall calculate policy values, benefits and unit
values with respect to the Registered Policies in accordance with the terms
of the Registered Policies, the then current prospectuses for the
Registered Policies, and Applicable Law.
(iv) The Reinsurer shall provide the Company with such reports and
other information relating to the Administrative Services as may be
reasonably necessary to enable the Company to prepare quarterly and annual
financial statements for the Company and annual statements for the
Registered Separate Accounts, all in accordance with GAAP.
(v) The Reinsurer shall cooperate with the Company and the independent
auditors selected by the Company in their conduct of the annual audit of
the financial
-22-
statements of the Company and the Registered Separate Accounts. The
Reinsurer shall provide the auditors with access to the books and records
maintained hereunder and with such other information as the auditors may
deem relevant to the audit. The Reinsurer shall bear such portion of the
cost of the audit of the Registered Separate Accounts as the Reinsurer and
the Company may agree.
(vi) The Reinsurer shall provide the Company with such information as
the Company's Audit Committee may reasonably deem necessary to determine
whether an auditing firm is "independent" under applicable securities law.
(d) Relationship with the Underlying Funds.
(i) The Reinsurer shall be responsible for servicing and maintaining
relationships with the Underlying Funds with respect to the Registered
Policies. The Reinsurer may discontinue the purchase of shares of an
Underlying Fund for one or more classes of Registered Policies as permitted
under and in accordance with Applicable Law and the terms of the affected
Registered Policies. However, the Reinsurer may not terminate a Registered
Separate Account's relationship with an Underlying Fund without the
Company's consent, (which will not be unreasonably withheld) unless
Registered Policies are the only policies offered through such Registered
Separate Account for which such Underlying Fund funds an investment option.
(ii) Subject to the consent of the Company, which will not be
unreasonably withheld, the Reinsurer may (a) substitute shares of new or
existing Underlying Funds for the shares of one or more of the Underlying
Funds attributable to investment under Registered Policies; or (b) combine,
or eliminate subaccounts of the Registered Separate Accounts attributable
to investment under Registered Policies. Any such transaction shall be
effected as permitted and in accordance with applicable law and the terms
of the affected Registered Policies. The Company shall cooperate in
effecting such changes.
(iii) In administering the Registered Policies, the Reinsurer shall
have the power to exercise the Company's rights under the participation
agreements and any service or other agreement between the Company and the
Funds, their advisers, or any other affiliate governing transactions with
respect to the Registered Policies (the "Fund Agreements"). Among other
things, the Reinsurer is authorized to aggregate and place orders to
purchase and redeem Underlying Fund shares as necessary to effectuate the
instructions of Policyholders and to pay benefits under the Registered
Policies.
(iv) The Company shall cooperate with the Reinsurer so as to enable
the Reinsurer to receive separate notification of the Underlying Funds' net
asset value per share, distributions, and other information necessary for
the administration of the Registered Policies, at the times and in the
manner that such notification is to be provided to the Company under the
participation agreements.
(v) Any fees due the Company from the Underlying Funds or any
affiliate under the Fund Agreements in connection with investment by
Registered Separate Accounts attributable to Registered Policies shall be
paid to the Reinsurer.
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(vi) The Reinsurer shall monitor compliance by the Underlying Funds
with provisions of the Code relating to variable life insurance policies
and variable annuity contracts. The Reinsurer shall notify the Company
promptly upon receiving notice of any deficiency in Code compliance by an
Underlying Fund.
(e) Policyholder Servicing.
(i) The Reinsurer shall deliver to Policyholders prospectuses and
statements of additional information for Registered Policies and Underlying
Funds, as required under the Registered Policies and Applicable Law.
(ii) The Reinsurer shall forward to Policyholders proxy statements,
periodic reports, and other communications from the Underlying Funds.
Periodic reports of the Underlying Funds shall be delivered in accordance
with Rule 30e-2 under the 1940 Act.
(iii) The Reinsurer shall provide for personnel and equipment to
provide personal contact and communications with Policyholders and
beneficiaries of Registered Policies. All such personnel shall have
appropriate insurance and securities licenses, as necessary.
(iv) The Reinsurer shall provide a toll free number which
Policyholders and beneficiaries of Registered Policies may call for
information.
(v) The Reinsurer shall process claims and premium payments and
implement Policyholder instructions as to allocation of premiums and policy
values and the exercise of rights under the Registered Policies.
(vi) The Reinsurer shall have the power to exercise the Company's
rights under contracts with custodians, transfer agents and others with
respect to the Registered Policies and the Registered Separate Accounts to
the extent they relate to the administration of the Registered Policies.
(vii) Notwithstanding any other provision of this Agreement, the
Reinsurer shall process premium payments, claims and other transactions
under Registered Policies in accordance with the relevant Registered
Policy, Applicable Law, and the then current prospectus and/or statement of
additional information for such Policy, as it may be amended from time to
time.
(f) Sales and Distribution Compliance.
(i) The Reinsurer shall cooperate with the distributor for the
Registered Policies in the performance of its duties. The Reinsurer shall
provide such reports reasonably requested by the distributor as may be
necessary for the distributor to carry out its duties and comply with its
regulatory responsibilities.
(ii) The Reinsurer, on behalf of the distributor, shall prepare and
send to Policyholders confirmations of transactions under Registered
Policies and periodic statements, in compliance with and to the extent
required by Rule 10b-10 under the Securities and Exchange Act of 1934, as
amended.
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(iii) Subject to Section 5.23 hereof, the Reinsurer may arrange for an
Affiliate appropriately registered with the Securities and Exchange
Commission as a broker-dealer to provide any of the foregoing services, to
the extent that such service may only be provided by a registered
broker-dealer or a registered representative of such a broker-dealer.
(iv) The Reinsurer shall separately account for any commission payable
with respect to the Registered Policies and shall pay such commissions, on
behalf of the distributor, in accordance with Applicable Law and SEC
interpretations.
5.5. Claims Review and Litigation.
(a) In accordance with procedures agreed to from time to time by the
Company and the Reinsurer, the Reinsurer shall promptly notify the Company if it
proposes to deny any Claim under the Policies or Post-Closing Policies. If the
Company requests additional information concerning such a Claim, the Reinsurer
shall promptly provide the Company with a copy of its Claim file and any other
information concerning the Claim reasonably requested in writing by the Company.
(b) The Reinsurer shall immediately notify the Company in writing of
any litigation that has been instituted or threatened in writing with respect to
(i) any denied Claim or any claim-handling regardless of whether the Claim was
paid or denied; or (ii) any other matter relating to a Policy or Post-Closing
Policy or the Reinsurer's administration thereof. Such notice shall include a
report summarizing the nature of the threatened or pending litigation, the
alleged actions or omissions giving rise to such litigation or threatened
litigation and copies of any files that the Company may reasonably require in
order to review such litigation.
(c) The Reinsurer shall xxx or defend, at its own expense and in the
name of the Company when necessary (subject to Section 5.13 hereof), any action
brought upon a Policy or Post-Closing Policy; provided, however, the Reinsurer's
defense of any such action shall not affect its indemnification rights under the
Purchase Agreement, nor limit the Company's rights under the indemnification
provisions of the Purchase Agreement to participate or associate in such
defense. The Reinsurer shall make recommendations to and consult with the
Company concerning its litigation strategy or settlement plans with respect to
any such action. The Company shall have the right, at its own expense, to engage
its own separate legal representation in any litigation in which the Company is
a named party; provided, however, that the Reinsurer shall exercise control and
direction over litigation defended pursuant to this Section 5.5(c) and shall
have the authority to settle or consent to judgment in any such litigation
subject to obtaining the Company's prior consent, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the Reinsurer shall have
the authority to settle or consent to judgment in any litigation without the
Company's consent if (i) all settlement amounts with respect thereto are
Reinsured Liabilities; (ii) the settlement or judgment does not impose equitable
remedies on the Company or involve any restriction or condition which could
reasonably be expected to have a material adverse effect on the Company or its
Affiliates or on any business of the Company or its Affiliates; and (iii) the
Reinsurer obtains a complete release of, or a dismissal with prejudice of
claims, against the Company with respect to such litigation.
-25-
(d) Reinsurer shall promptly notify the Company of Claims made under
the Policies or Post Closing Policies that involve Retained Liabilities. The
parties shall mutually agree on an appropriate response to any Claims under the
Policies or Post Post-Closing Policies that involve both Retained Liabilities
and Reinsured Liabilities and hereby agree to cooperate and coordinate in
resolving any and all such Claims. Notwithstanding anything in this Agreement to
the contrary, without the Company's prior written consent, the Reinsurer shall
not pay any portion of or settle any Claim involving Retained Liabilities or
admit liability on the part of the Company with respect to such Claim.
5.6. Legally Required Company Actions. The Reinsurer will give the
Company timely notice of any Legally Required Company Actions, including,
without limitation, filings with insurance regulators, other Governmental
Entities and guaranty associations and filings and premium and other Tax returns
with taxing authorities, which, in each case, relate to the Policies and
Post-Closing Policies, and the Separate Accounts. The Reinsurer will, reasonably
prior to the date on which such filings are required, provide to the Company all
information with respect to the Policies and Post-Closing Policies and the
Separate Accounts that may be required for the Company to prepare such filings
and Tax returns in a timely fashion. However, all such information necessary for
the preparation of any federal or state income Tax return will be provided no
later than May 31st following the end of the taxable year. In addition, the
Reinsurer will be responsible for complying with all applicable reporting,
withholding and disclosure requirements under the Code and state and local Tax
laws with respect to the Policies and Post-Closing Policies and the Separate
Accounts, and the Company will cooperate with the Reinsurer to the extent
necessary to allow the Reinsurer to fulfill its responsibilities.
5.7. Power of Attorney. Subject to the provisions of Section 5.5(c) of
this Agreement regarding the handling of claims involving Retained Liabilities
and consistent with the terms, limitations and restrictions of this Agreement,
the Company does hereby appoint and name the Reinsurer, acting through its
authorized officers and employees, as the Company's lawful attorney in fact with
respect to the rights, duties, privileges and obligations of the Company and the
Separate Account(s), respectively, relating to the Policies and Post-Closing
Policies, (i) to do any and all lawful acts that the Company and the Separate
Account(s) might have done with respect to the Policies and Post-Closing
Policies, and (ii) to proceed by all lawful means (A) to perform any and all of
the Company's obligations under the Policies and Post-Closing Policies, (B) to
enforce any right and defend against any liability arising under the Policies
and Post-Closing Policies on or after the Closing Date, (C) to xxx or defend (in
the name of the Company, when necessary) any action arising under the Policies
and Post-Closing Policies on or after the Closing Date, (D) to collect any and
all sums due or payable to the Company under the Policies and Post-Closing
Policies and to quit and release for same, (E) to collect any and all Premiums
due or payable under the Policies and Post-Closing Policies through any
automatic charge authorizations or otherwise of persons who own or hold Policies
and Post-Closing Policies, (F) to sign (in the Company's name, when necessary)
vouchers, receipts, releases and other papers in connection with any of the
foregoing matters, (G) to request rate and form changes for the Policies and
Post-Closing Policies pursuant to Section 5.8 hereof, (H) to undertake the
necessary duties in connection with payment of Commissions in connection with
the Policies and Post-Closing Policies and Destinations Annuity Contracts; (I)
to manage the investments in the Company's non-unitized separate accounts; and
(J) to do everything lawful in
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connection with the satisfaction of the Reinsurer's obligations and the exercise
of its rights under this Agreement.
5.8. Subsequent Rate and Form Filings. Subject to the Company's rights
as set forth in Section 5.6 hereof, Reinsurer shall have the authority to make
filings with applicable insurance regulatory authorities, in the name of and on
behalf of the Company, to (i) apply for increases in the premium rates that may
be charged for the Policies and Post-Policies from time to time and make related
amendments to the applicable policy forms including, without limitation,
applications, endorsements and riders; provided that a copy of the generic rate
increase and related generic policy form filing shall be delivered to the
Company at least ten (10) Business Days in advance of the date that Reinsurer
begins making state specific filings; provided, further, that Reinsurer shall
deliver copies of rate increase and related policy form filings it made with
state regulatory authorities promptly upon the request of the Company; and (ii)
apply for other amendments to the applicable Policy and Post-Closing Policy
forms including applications, endorsements and riders, provided that Reinsurer
shall deliver copies of policy form filings it made with state regulatory
authorities promptly upon the request of the Company. The Company shall
cooperate with the Reinsurer, at the Reinsurer's expense, in seeking approval of
any reasonable filing made pursuant to this Section 5.8.
5.9. Policy Changes or Reserve Assumption Changes. Except as provided
in Sections 2.3 and 5.8, neither the Company nor the Reinsurer shall make any
changes to the Company's policy forms, including, without limitation,
withdrawing or terminating a policy form, or assumptions and methods used to
establish the General Account Reserves or Separate Account Reserves except with
the express written consent of the other party (which consent shall not be
unreasonably withheld) or if the changes are required by Applicable Law.
5.10. Bank Accounts. During the term of this Agreement, the Reinsurer
may establish and maintain accounts with banking institutions to provide the
Administrative Services for the Policies and Post-Closing Policies (the "Bank
Accounts"). To the extent such Bank Accounts are established, the Reinsurer
shall have the exclusive authority over the Bank Accounts including, without
limitation, the exclusive authority to (i) open the Bank Accounts in the name of
the Company, (ii) designate the authorized signatories on the Bank Accounts,
(iii) issue drafts on and make deposits in the Bank Accounts in the name of the
Company, and (iv) make withdrawals from the Bank Accounts, in every instance
solely to provide the Administrative Services. The Company shall do all things
necessary to (A) enable and authorize the Reinsurer to use the Company's
existing accounts and lock boxes with respect to the Policies and Post-Closing
Policies and (B) to enable the Reinsurer to open and maintain the Bank Accounts
including, without limitation, executing and delivering such depository
resolutions and other documents as may be requested form time to time by the
banking institutions. The Company agrees that without the Reinsurer's prior
written consent it shall not make any changes to the authorized signatories on
the Bank Accounts nor attempt to withdraw any funds therefrom.
5.11. Compensation.
(a) Administrative Services. The Reinsurer's compensation for all
Administrative Services provided by the Reinsurer to the Company shall be
included in the consideration paid by the Company to the Reinsurer pursuant to
Section 3.1 hereof and the
-27-
Company shall not be obligated to pay any additional consideration to the
Reinsurer for such services.
(b) BOLI Services.
(i) In consideration for the Reinsurer's performance of the BOLI
Services, the Company hereby agrees to pay to the Reinsurer the BOLI
Revenues plus any BOLI DAC Tax Credits. The Company will promptly endorse,
if applicable, and remit to the Reinsurer any BOLI Revenues and BOLI DAC
Tax Credits received by the Company on or after the Closing Date. The
Company shall treat such amounts as the property of the Reinsurer to held
for the sole benefit of the Reinsurer.
(ii) All BOLI DAC Tax Credits for the quarter, along with any BOLI
Revenues the Company has received directly during such quarter, shall be
paid by the Company to the Reinsurer within thirty (30) days after the end
of the quarter. Any delayed payment by the Company shall be treated in
accordance with Section 4.4 hereof. Any dispute over any such amounts that
cannot be amicably resolved by the parties shall be resolved pursuant to
the procedures set forth in Article X.
(iii) After the date hereof, the Company shall not without the
Reinsurer's consent, which consent shall not be unreasonably withheld,
terminate or make any material amendment to a BOLI Contract or BOLI
Business Agreement that would affect the BOLI Revenues. Further, the
Company shall not without the Reinsurer's consent, which shall not be
unreasonably withheld, enter into any new agreements that would affect the
applicable corresponding percentage set forth next to each BOLI Contract on
Schedule 1.1(A).
(iv) The Company represents and warrants to the Reinsurer that
Schedule 1.1 (BOLI Business Agreements) and Schedule 1.1(A) (BOLI
Contracts) are complete and accurate in all material respects as of the
date hereof.
(c) Destinations Services.
(i) In consideration for the Reinsurer's performance of the
Destinations Services, the Company shall pay to the Reinsurer an amount
equal (i) to the actual costs incurred by the Reinsurer in its performance
of the Destinations Services (the "Destinations Service Costs") plus (ii)
an amount equal to ten percent (10%) of the Destinations Service Costs.
(ii) The Reinsurer shall send the Company a monthly invoice for the
amounts set forth in Section 5.11(c)(i). The Company shall pay the amount
shown on each such invoice within thirty (30) days of its delivery to the
Company. Any delayed payment by the Company shall be treated in accordance
with Section 4.4 hereof. Any dispute over any amount shown on such invoice
that cannot be amicably resolved by the parties shall be resolved pursuant
to the procedures set forth in Article X.
5.12. Standards. The Reinsurer acknowledges that the performance of
the Administrative Services including, but not limited to, all reporting
obligations to the Company
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and Policyholders required by this Agreement, in an accurate and timely manner
is of critical importance to the Company. The Reinsurer agrees to perform the
Administrative Services with the skill, diligence and expertise commonly
expected from experienced and qualified personnel performing such duties and in
conformance with industry standards and Applicable Law. The Reinsurer further
agrees to adhere to any written guidelines and procedures regarding
Administrative Services as may reasonably be agreed to by the parties from time
to time. Without limiting the generality of the foregoing, the Reinsurer shall
administer and service the Policies and Post-Closing Policies and Separate
Accounts in a manner that provides a commercially reasonable level of service,
including standards of IT automation, adheres to all Applicable Laws, the terms
and conditions of the Policies and Post-Closing Policies, Separate Accounts, and
the provisions of all actuarial, rating or other filings with Governmental
Entities relating to the Policies and Post-Closing Policies and Separate
Accounts, as applicable, made by the Company prior to the Closing Date or by the
Company or the Reinsurer on the Company's behalf at any time prior to or after
the Closing Date.
5.13. Agreements Regarding Use of the Company's Name.
(a) The parties shall abide by and adhere to, in all respects, the
provisions of section 5.8 of the Purchase Agreement. In addition, the Company
hereby grants Reinsurer a limited, non-exclusive, terminable, revocable,
royalty-free license, during the term that the Company is performing any of the
Administrative Services, BOLI Services or Destinations Services, with no right
to sublicense or assign without the Company's express written consent, for
Reinsurer to display and refer to the Company's name and trademark ("Company
Xxxx") as may be necessary or appropriate for Reinsurer to perform the
Administrative Services, the BOLI Services and Destinations Services.
(b) It is acknowledged that the Company Xxxx indicates to the public
that the products and services provided under the Company Xxxx are of
commercially consistent quality and standards. Reinsurer shall use the Company
Xxxx at a level of quality at least as high as that established prior to the
date of this Agreement. Reinsurer shall comply with all applicable marking
statutes and shall, where appropriate, designate the Company Xxxx as registered.
Reinsurer may also use its own marks in connection with the limited license
grant to the Company Xxxx. Reinsurer agrees to furnish Company an example of
each use of the Company Xxxx upon written request of Company, and Company,
acting reasonably, shall have the right to disapprove such use and require
Reinsurer to cease or revise such use.
(c) All rights in the Company Xxxx other than those specifically
licensed to Reinsurer herein are reserved to the Company for all purposes, and
nothing herein set forth shall be deemed to be an assignment, transfer or
conveyance by Company to Reinsurer of any right, title, proprietorship, goodwill
or interest in or to the Company Xxxx. Except as otherwise provided under
Section 5.8 of the Purchase Agreement, Reinsurer shall not acquire any other
rights of any kind in the Company's trade names, trademarks, product name or
marks by the use authorized in this Section 5.13.
(d) Reinsurer shall cease to use the Company Xxxx and any similar or
derivative markings, in any manner immediately upon the termination of the
Reinsurer's performance of the Administrative Services. Company shall have the
right to terminate this
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license immediately if Reinsurer is in material breach of a representation or
warranty under this Agreement.
5.14. Books and Records.
(a) For the duration of this Agreement, the Reinsurer shall maintain,
in machine readable format and at a location selected by the Reinsurer and
reasonably acceptable to the Company, books and records of all transactions
pertaining to the Policies and Post-Closing Policies and the Separate Accounts,
including, but not limited to, any Claims and litigation files submitted or
generated in respect of the Policies and Post-Closing Policies and any documents
relating thereto, any communications relating to any Policy or Post-Closing
Policy, any communication with any Governmental Entity, complaint logs and all
data used by the Reinsurer in the performance of services required under this
Agreement. These books and records shall be maintained (i) in accordance with
prudent standards of insurance record-keeping and any and all Applicable Laws;
and (ii) in a format no less accessible than the format in which such books and
records are maintained by the Company or its designee immediately prior to the
Closing Date. All such books and records pertaining to a Policy or Post-Closing
Policy, including those generated by the Reinsurer after the Closing Date, shall
continue to be owned by the Company and shall be made available to the Company,
its auditors or other designees, upon reasonable written notice, during normal
business hours for review, inspection, examination and reproduction at Company's
sole expense. Upon any termination of this Agreement, all books and records
pertaining to Policies and Post-Closing Policies shall be delivered, in an
orderly and timely manner, to the Company or such other person or entity as the
Company shall designate in writing. All books and records and other information
pertaining to Policyholders shall be maintained and processed by the Reinsurer
with due and careful regard for the Policyholder's rights of confidentiality.
(b) The Reinsurer shall back up all of its computer files used in the
performance of Administrative Services in a commercially reasonable manner.
(c) The Reinsurer shall maintain facilities and procedures as required
by Applicable Law for safekeeping all records used in the performance of
Administrative Services.
(d) The Reinsurer shall maintain all books and records required to be
maintained pursuant to this Section 5.14 in accordance with Applicable Law and
all applicable provisions of the Purchase Agreement and this Agreement and, in
any event, until such time as the Company gives written permission for their
destruction which (i) with respect to a given Policy, Post-Closing Policy or
Separate Account shall not be unreasonably withheld if the Policy or
Post-Closing Policy to which such books and records relate has been expired for
longer than three (3) years; (ii) with respect to books and records relating to
Taxes, shall not be unreasonably withheld if all applicable statutes of
limitations under applicable Tax laws have expired and (iii) with respect to
copies of books and records relating to the Company upon the termination of this
Agreement, after delivering the books and records to the Company or such other
person or entity as the Company shall have designated in writing pursuant to
section 5.14(a) hereof, shall not be unreasonably withheld.
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5.15. Capacity. The Reinsurer shall at all times during the term of
this Agreement keep, maintain or subcontract for (as permitted by Section 5.23)
sufficient personnel, appropriately trained, and obtain and maintain all
material licenses, authorizations, permits and qualifications from Governmental
Entities under Applicable Laws (including, if required, an independent adjuster
license or third party administrator license) as necessary to perform the
Administrative Services in the manner required by this Agreement.
5.16. Inability to Perform Services. In the event that the Reinsurer
shall be unable to perform services as required by this Agreement for any reason
for a period that can reasonably be expected to exceed five (5) Business Days,
the Reinsurer shall provide notice to the Company of its inability to perform
the services and shall cooperate with the Company in obtaining an alternative
means of providing such services. The Reinsurer will be responsible for all
costs incurred in restoring services.
5.17. Errors. The Reinsurer shall, at its own expense, correct any
errors in Administrative Services caused by it within a reasonable time after
receiving notice thereof from the Company or other Person. With respect to the
Policies and Post-Closing Policies, this obligation includes, without
limitation, reimbursement to the Separate Accounts and the management investment
companies underlying that account for any dilution or other adverse effect due
to transactions made effective as of an earlier date, commonly referred to as
"breakage."
5.18. Regulatory Matters: Responsibilities of the Reinsurer. On and
after the Closing Date, the Reinsurer, on behalf of the Company, shall be
responsible for all state insurance department and, subject to prior review and
approval by the Company, federal and state securities law filings (including,
but not limited to, filings of riders and amendments), compliance with all
regulatory requirements and the taking of all required actions with respect to
Governmental Entities relating to the Policies and Post-Closing Policies and the
Separate Accounts; provided, however, the Reinsurer shall have no obligation or
liability with respect to any such matter to the extent such matter involves
Retained Liabilities; provided further, to the extent that any such matter
involves Retained Liabilities and Reinsured Liabilities, the Company and the
Reinsurer shall cooperate in good faith to resolve such matter in a mutually
satisfactory manner and shall act reasonably in light of the parties' respective
interests in the matter at issue. Nevertheless, if the Company or the Reinsurer
receive notice of, or otherwise become aware of any inquiry, investigation,
examination, audit or proceeding by Governmental Entities, relating to the
Policies and Post-Closing Policies, or the Separate Accounts, the Company or the
Reinsurer, as applicable, shall promptly notify the other party thereof,
whereupon the parties shall cooperate in good faith to resolve such matter in a
mutually satisfactory manner and shall act reasonably in light of the parties'
respective interests in the matter at issue. Notwithstanding the immediately
preceding sentence, the Reinsurer shall not be relieved or discharged from any
liability or obligation which it has incurred or assumed in connection with such
matter under the terms of this Agreement or any of the Purchase Agreement, this
Agreement or other Transaction Agreements. Notwithstanding the provisions of
this Section 5.18, the Reinsurer's responsibilities with respect to Legally
Required Company Actions shall be governed by Section 5.6 of this Agreement.
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5.19. Duration. The Reinsurer's performance of the Administrative
Services and the BOLI Services shall commence on the Closing Date and shall
continue until it is terminated under Section 5.20.
5.20. Termination. (a) Subject to the provisions regarding
survivability set forth in Section 5.24 hereof, the Reinsurer's performance of
the Administrative Services or BOLI Services shall terminate:
(i) at any time upon the mutual written consent of the parties hereto,
which writing shall state the effective date of termination;
(ii) automatically upon the recapture of the Policies and Post-Closing
Policies by the Company pursuant to Section 9.5 of this Agreement;
(iii) with respect to the Administrative Services, automatically at
such time as none of the Policies or Post-Closing Policies remains in force
and no further Administrative Services in respect of the Policies,
Post-Closing Policies and the Separate Accounts are required; or
(iv) at the option of the Company, upon written notice to the
Reinsurer, on the occurrence of any of the following events:
(A) Reinsurer becomes subject to dissolution, supervisory
liquidation, conservation, rehabilitation, bankruptcy, statutory
reorganization, receivership, compulsory composition, or similar
proceedings in any jurisdiction, or if creditors of Reinsurer
take over its management, or if Reinsurer otherwise enters into
any arrangement with creditors, or makes an assignment for the
benefit of creditors, or if any significant part of Reinsurer's
undertakings or property is impounded or confiscated by action of
any Governmental Entity; or
(B) there is a material breach by the Reinsurer of this Agreement
regarding the Administrative Services or the BOLI Services, as
applicable, that is not cured by the Reinsurer within thirty (30)
days of receipt of written notice from the Company of such breach
or act; provided, however, if such material breach is not curable
within such thirty (30) day period, the Company may not terminate
the Reinsurer's performance of the Administrative Services or
BOLI Services, as applicable, if the Reinsurer has, within such
thirty (30) day period, provided the Company with a detailed,
written description of the Reinsurer's good faith plan to cure
such material breach; provided further, if such material breach
is not cured within a commercially reasonable period of time
following the Reinsurer's delivery to the Company of such plan,
the Company may terminate the Reinsurer's performance of the
Administrative Services or BOLI Services, as applicable;
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(C) any liability policy or bond required pursuant to Section 5.21 of
this Agreement is canceled, terminated or substantially revised
and not replaced by the Reinsurer in a commercially reasonable
period; or
(D) the Reinsurer is unable to perform the Administrative Services or
BOLI Services, as applicable, for a period of thirty (30)
consecutive days for any reason.
(b) Upon termination of the Reinsurer's performance of the
Administrative Services subject to subsections (i), (ii) or (iv) of Section
5.20(a) of this Agreement, the BOLI Services and the Destinations Services shall
be terminated at the Company's option. Notwithstanding anything else stated
herein, the termination of the BOLI Services shall in no way affect the
Company's rights with respect to the continued receipt of the BOLI Revenues and
BOLI DAC Tax Credit as contemplated by Section 5.11.
(c) Following any termination of the Administrative Services or the
BOLI Services, as applicable, other than under Section 5.20(a)(iii) with respect
to the Administrative Services, the Reinsurer shall cooperate fully with the
Company in effecting, in an orderly and timely manner, the transfer of the
Administrative Services or BOLI Services, as applicable, and all books and
records maintained by the Reinsurer pursuant to Section 5.14 hereof or other
applicable provisions of the Purchase Agreement or Transaction Agreements (or,
where appropriate, copies thereof) to the Company or the Company's designee, so
that the Company or its designee will be able to perform the services required
under this Agreement without interruption following any such termination.
Following any termination of the Destinations Services, the Reinsurer shall
cooperate fully with the Company in effecting, at the Company's cost and expense
and in a commercially reasonable time frame, the transfer of the Destinations
Services and all books and records maintained by the Reinsurer pursuant to
Section 5.14 hereof or other applicable provisions of the Purchase Agreement or
Transaction Agreements (or, where appropriate, copies thereof) to the Company or
the Company's designee, so that the Company or its designee will be able to
perform the services required under this Agreement without interruption
following any such termination, provided, however, that the Company's obligation
to compensate the Reinsurer for such costs and expenses shall be limited to the
Reinsurer's actual out of pocket costs and expenses.
(d) Upon termination of the Reinsurer's performance of the
Administrative Services or BOLI Services, as applicable, pursuant to subsection
(a)(iv)(A), (a)(iv)(B), (a)(iv)(C) or (a)(iv)(D) of this Section 5.20, the
Reinsurer shall be obligated to reimburse the Company for any and all reasonable
costs and expenses incurred by the Company directly or indirectly as a result of
such termination, including but not limited to costs and expenses reasonably
incurred in the performance of the Administrative Services for the Policies,
Post-Closing Policies, Separate Accounts and performance of the BOLI Services.
The Reinsurer shall effect all reimbursements required to be made under this
Section 5.20(c) within thirty (30) calendar days of the Company's written
request therefor.
(e) Notwithstanding anything else stated herein, the Reinsurer's
obligation shall be solely to perform (i) the Administrative Services in respect
of the Policies and Post-
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Closing Policies, (ii) the BOLI Services in respect of the BOLI Contracts and
(iii) the Destinations Services in respect of the Destinations Annuity
Contracts. At the time a Policy or Post-Closing Policy is assumed by the
Reinsurer and becomes a novated Policy thereunder, the Reinsurer's obligation to
perform the Administrative Services shall immediately terminate in respect of
such novated Policy.
5.21. Insurance.
(a) Liability Insurance. The Reinsurer shall maintain errors and
omissions liability coverages with limits in commercially prudent amounts, to
cover any loss arising as a result of any real or alleged negligence, errors or
omissions on the part of the Reinsurer's officers, agents or employees in any
aspect of the performance of Administrative Services under this Agreement.
(b) Fidelity Bond. The Reinsurer shall maintain fidelity bond coverage
in a commercially prudent bond amount to cover any loss due to the misdeeds of
the Reinsurer's officers, employees or agents in any aspect of the performance
of Administrative Services under this Agreement.
(c) Qualifying Insurers. The Reinsurer shall obtain the coverages
specified in Sections 5.21(a) and 5.21(b) hereof from insurers having an A.M.
Best Company rating of at least A-, a Standard & Poor's Corporation insurer
financial strength rating of at least BBB+ and/or a Xxxxx'x Investors Services,
Inc. claims-paying ability rating of at least Baa1. In the event that the
ratings of an insurer which has issued one or more of the coverages specified in
Sections 5.21(a) and 5.21(b) are downgraded so that such insurer would no longer
qualify to issue such coverage under the provisions of the preceding sentence,
the Reinsurer shall promptly obtain replacement coverage from another insurer
that so qualifies.
5.22. Limited Authority. The Company and the Reinsurer are not
partners or joint venturers, and no employee or agent of either party shall be
considered an employee or agent of the other. The Reinsurer's authority shall be
limited to that which is expressly stated in this Agreement.
5.23. Subcontracting. The Reinsurer may not subcontract for the
performance of any Administrative Services that the Reinsurer is to provide
hereunder without prior written approval by the Company, which approval shall
not be unreasonably withheld; provided, however, without obtaining the consent
of the Company, the Reinsurer shall be permitted to subcontract for the
performance of any Administrative Service with (i) an Affiliate of the Reinsurer
or (ii) any Person that is performing such services as a subcontractor for the
Company as of the date hereof, so long as Reinsurer notifies the Company of such
subcontract on or prior to the effective date thereof and the Reinsurer
continues to retain full responsibility to the Company for the satisfactory
completion, pursuant to this Agreement, of the duties so delegated.
5.24. BOLI Services. From and after the Closing Date, the Reinsurer
agrees to perform all BOLI Services and is authorized to do so in the name
(subject to Section 5.13 hereof and Section 5.8 of the Purchase Agreement) or on
behalf of the Company where appropriate; provided, however, that its performance
of the BOLI Services shall (a) be provided in a manner
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that is not inconsistent with the applicable terms and conditions of the BOLI
Business Agreements and (b) comply with, and be subject in all events to, all
Applicable Laws, the terms and conditions of the BOLI Contracts the Company
previously provided to the Reinsurer with respect to the applicable BOLI
Services, and the provisions of all actuarial, rating or other filings with
Governmental Entities relating to the BOLI Contracts made by or on behalf of the
Company; provided, further, that in the case of all BOLI Services which
constitute Legally Required Company Actions, the Reinsurer shall comply with
Section 5.6. Notwithstanding the foregoing or anything else stated herein,
including, without limitation Section 5.12: (i) Reinsurer shall not be obligated
to perform any service with respect to the BOLI Services other than those
services that the Company is consistently performing as of the Closing Date,
(ii) Reinsurer shall not be obligated to meet any service standards with respect
to the BOLI Services beyond those service standards that the Company is
consistently meeting as of the Closing Date; and (iii) the Reinsurer shall have
no liability or obligation whatsoever to the Company to the extent that the
Reinsurer's failure to perform the BOLI Services is a result of the failure of
Bancorp (as defined below), BFP (as defined below), ZBF (as defined below), ZC
Resource LLC, Zurich Centre Group LLC, ZIBB (as defined below), Zurich Insurance
Company, State Street Bank and Trust Company, Zurich Xxxxxxx Investments, Inc.,
Xxxxxxx Sachs Asset Management, BlackRock Financial Management, Inc., Salomon
Brothers Asset Management, Inc., Fidelity Management Trust Company, Benefit
Finance Securities, LLC, BFP Securities, LLC ("BFPS"), Wachovia Securities, Inc.
Old Kent Insurance Group KeyCorp Insurance Agency USA Inc., KeyCorp Insurance
Agency USA Inc., KeyCorp Insurance Agency USA Inc., Xxxxxxx X. Xxxxx, Wheat
Insurance Services, Inc., First Union Mortgage Corporation, First Union
Insurance Agency of FL, Inc., Old York Agency, Inc., First Union Insurance
Agency of NC, Inc., Bancorp Services, LLC, Zurich Capital Markets Securities
Inc. Investors Brokerage Services, Inc., Federal Xxxxxx Life Assurance Company,
ESB Bank, Xxxxxxx Xxxxx Asset Management and Zurich Insurance Company, AIG
Global Investment Corp. and Zurich Insurance Company, Xxxxxx Stanley, Peoples,
Inc., Precision Castparts Corp., Provident Bank of Maryland, Liberty Federal
Bank, Washington Mutual Bank, Allegiant Bank, US Trust Bank, Old Kent Bank,
Xxxxxx River Bancorp, Inc., St. Xxxx Federal Bank for Savings, Parker Hannifin
Corporation, Catskill Savings Bank, FirstBancorp, Inc., Xxxxxxxx & Xxxxxx
Corporation, F.N.B. Corporation, Mercantile Bank, Xxxxxx Bankcorp, Xxxxxx Trust
and Savings Bank, KeyCorp, Centier Bank, BFP Securities, LLC, Charter One Bank,
F.S.B., Charter One Financial, Inc. and its affiliates, Xxxxxx Xxxxxxx & Co.
Incorporated or The Nottingham Management Company to provide Reinsurer with any
reporting or other service that such party is contractually obligated to provide
to Company as of the Closing Date. Subject to the preceding sentence, the BOLI
Services include, without limitation, the following:
(a) preparing all accounting and actuarial information related to the
BOLI Contracts directly received or developed by the Reinsurer or provided to
the Reinsurer by ZBF, Bancorp or BFP, necessary to timely meet Illinois SAP,
Tax, or GAAP accounting requirements, including, but not limited to, preparation
of quarterly and annual financial statement data in a format mutually agreed to
by the parties as necessary for inclusion in the Company's Illinois SAP and GAAP
financial statements and delivery of such data in a form usable by the Company
within thirty (30) calendar days after the end of each calendar quarter or year,
as applicable;
(b) coordinating the provision of all required information to Zurich
Insurance Company, Bermuda branch office ("ZIBB") regarding the mortality
reinsurance of the BOLI
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Contracts and related financial reporting to ensure consistency in treatment and
reporting between the Company and ZIBB and cooperate with Zurich Financial
Services' auditors;
(c) maintaining all of the books and records for the KILICO Variable
Series I Separate Account and providing the Company all information necessary to
be able to prepare both the statutory accounting reports that require separate
account financial information and the annual audited financials for the KILICO
Variable Series I Separate Account;
(d) performing necessary calculations, processing and where
appropriate initiating all wire transfers related to the BOLI Contracts for
death benefits, death benefit adjustments, cost of insurance related
redemptions, asset-based charge redemptions, partial withdrawals, premium
rescissions, loans, income assignments, total surrenders and/or exchanges based
upon instructions from the holder of a BOLI Contract, Bancorp Services, LLC
("Bancorp"), Benefit Finance Partners, LLC ("BFP") and/or Zurich Benefit Finance
LLC ("ZBF");
(e) allocating all net premiums from the Company's general account to
the KILICO Variable Series I Separate Account divisions based upon instructions
from the holder of a BOLI Contract and/or ZBF, Bancorp or BFP;
(f) allocating all mortality experience credits from the Company's
general account to the KILICO Variable Series I Separate Account divisions as
directed by ZBF, ZIBB and based upon instructions from the holder of a BOLI
Contract and/or Bancorp or BFP;
(g) allocating all DAC expense credits from the Company's general
account to the KILICO Variable Series I Separate Account divisions based upon
instructions from the holder of a BOLI Contract and/or ZBF, Bancorp or BFP;
(h) reallocating all Investment Value among the KILICO Variable Series
I Separate Account divisions based upon instructions from the holder of a BOLI
Contract and/or ZBF, Bancorp or BFP and, if involving an SVP Division, as
approved by ZIBB;
(i) providing advance notification to all investment managers
regarding significant redemptions/purchases of the KILICO Variable Series I
Separate Account divisions in accordance with terms of any existing investment
management agreements, participation agreements or operational guidelines based
on instructions from ZBF, Bancorp or BFP;
(j) in conjunction with ZBF, BFP, Bancorp, Benefit Finance Securities,
LLC and BFPS, handling all regulatory compliance and market conduct matters in
accordance with Section 5.18;
(k) appointing Producers for the BOLI Contracts as required by
Applicable Law (initial licensing support and renewals/appointments) in states
where the Company is licensed and BOLI Contracts are approved for sale, as
directed by BFP, BFPS and/or ZBF;
(l) in conjunction with ZBF, BFP, BFPS and Bancorp, supporting all
aspects of the Company's Electronic Delivery Program for holders of BOLI
Contracts (electronic delivery of Private Placement Memorandums, Addendums,
prospectuses and annual or semi-
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annual reports for any underlying insurance dedicated registered investment fund
held by a division of the KILICO Variable Series I Separate Account and any
other offering related materials); and
(m) providing to the Company, in respect of the BOLI Contracts, each
of the services to be performed by the Reinsurer in respect of the Policies and
Post-Closing Policies under sections 5.6, 5.10, 5.12, 5.13, 5.14, 5.15, 5.16,
5.17, 5.18, , 5.21, 5.22 and 5.23.
5.25. Destinations Services. During the Destinations Service Period,
the Reinsurer hereby agrees to provide to the Company in respect of the
Destinations Annuity Contracts each of the services to be performed by the
Reinsurer in respect of the Policies under Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7
(to the extent applicable), 5.10, 5.12, 5.13, 5.14, 5.15, 5.16, 5.17, 5.18,
5.21, 5.22 and 5.23 hereof. Notwithstanding anything else stated herein, the
Reinsurer shall have no obligation to perform any of the Destinations Services
after the Destinations Services Period has ended.
5.26. Survival. The provisions of Sections 5.14, 5.20(b), 5.21 and
5.22 shall survive the termination of this Agreement.
ARTICLE VI.
OVERSIGHTS
6.1. Oversights. Inadvertent delays, errors or omissions made in
connection with this Agreement or any transaction hereunder shall not relieve
either party from any liability which would have attached had such delay, error
or omission not occurred, provided always that such error or omission is
rectified as soon as possible after discovery, and provided that the party
making such error or omission or is otherwise responsible for such delay shall
be responsible for any additional liability which attaches as a result.
ARTICLE VII.
DUTY OF COOPERATION and other agreements
7.1. Cooperation. Each party hereto shall cooperate fully with the
other in all reasonable respects in order to accomplish the objectives of this
Agreement.
7.2. Third Party Reinsurance Agreements. The Company shall use its
commercially reasonable efforts to obtain prior to the Closing Date the consent
of third parties to the Third Party Reinsurance Agreements to novate and assign
the Third Party Reinsurance Agreements to the Reinsurer. From and after the
Closing Date, the Company and Reinsurer shall use their commercially reasonable
efforts to obtain such consent. Prior to the Closing the Company shall use its
commercially reasonable efforts to amend each Restricted Third Party Reinsurance
Agreement to delete the applicable restriction or prohibition on ceding and
after the Closing the Company and the Reinsurer shall use their commercially
reasonable efforts to obtain such consents. As between the Reinsurer and the
Company, the Reinsurer shall have the sole benefit of, and right to collect all
reinsurance recoveries under, the Assigned Third Party Reinsurance Agreements.
As between the Reinsurer and the Company, the Reinsurer shall be at risk for the
collection of all recoveries under the Assigned Third Party Reinsurance
Agreements with no recourse against the Company.
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7.3. Option for Assumption Reinsurance. From time to time, the
Reinsurer may, at its sole option, elect to novate certain or all of the
Policies and Post-Closing Policies by assumption reinsurance. Reinsurer shall
promptly notify the Company prior to pursuing any such a novation and the
Reinsurer shall be solely and exclusively responsible for the costs and expenses
of such assumption reinsurance and novation. Notwithstanding the foregoing, the
Reinsurer shall have no obligation to seek such a novation.
ARTICLE VIII.
DAC TAX
8.1. Election.
(a) Each of the Company and the Reinsurer hereby makes the election
contemplated by Section 1.848-2(g)(8) of the Income Tax Regulations with respect
to this Agreement. Each of the Company and the Reinsurer (i) agrees that such
election is effective for the taxable year of each party that includes the
Closing Date and for all subsequent years during which this Agreement remains in
effect and (ii) warrants that it will take no action to revoke the election.
(b) Pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations,
each of the Company and the Reinsurer hereby agrees (i) to attach a schedule to
its federal income tax return for its first taxable year ending on or after the
Closing Date that identifies this Agreement as a reinsurance agreement for which
the joint election under Section 1.848-2(g)(8) has been made, (ii) that the
party with net positive consideration, as defined in Section 1.848-2(f)(2) of
the Income Tax Regulations thereunder, for this Agreement for each taxable year
will capitalize its specified policy acquisition expenses with respect to this
Agreement without regard to the general deductions limitation of Section
848(c)(1) of the Code, and (iii) to exchange information pertaining to the
amount of net consideration, as defined in Section 1.848-2(f) of the Income Tax
Regulations thereunder, under this Agreement each year to ensure consistency.
The Reinsurer shall prepare, execute and submit to the Company for execution
duplicate copies of the schedule described in the preceding sentence as soon as
possible after the Closing Date, and on or before May 1 each year thereafter.
The Company shall execute the copies and return one of them to the Reinsurer
within thirty (30) days of the Company's receipt of such copies.
8.2. Separate Account DAC Tax Reimbursement.
(a) On a quarterly basis, the Reinsurer shall reimburse the Company
for the DAC taxes incurred with respect to Premiums received with respect to the
Separate Accounts portion of the Policies. Each quarterly DAC tax reimbursement
shall be equal to the product obtained by multiplying (i) the DAC Tax Factor
(defined below) by (ii) the net consideration earned by the Company during such
quarter with respect to the Separate Account portion of the Policies that are
subject to the provisions of Section 848 of the Code, and the related Treasury
Regulations.
(b) For purposes hereof, the "DAC Tax Factor" shall mean (i) 0.185%
for "annuity contracts," (ii) 0.217% for "group life contracts," and (iii)
0.814% for specified insurance contracts which are not "annuities" or "group
life contracts," in each case, as such
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terms are defined in Section 848 of the Code. The Company and the Reinsurer
mutually agree to prospectively adjust the DAC Tax Factor to reflect any changes
in the Federal income tax rate applicable to the Company or changes to Section
848 of the Code or to the related Treasury Regulations.
ARTICLE IX.
INDEMNIFICATION
9.1. Reinsurer's Obligation to Indemnify. Without limiting any of the
provisions of Article II hereof, the Reinsurer hereby agrees to indemnify,
defend and hold harmless the Company, its Affiliates and their respective
stockholders, directors, officers, employees, representatives (excluding the
Producers), Affiliates, successors and permitted assigns (collectively, the
"Company Indemnified Parties") from and against all Losses asserted against,
imposed upon or incurred by any Company Indemnified Party in connection with or
arising from: (i) the Reinsured Liabilities; (ii) any breach or nonfulfillment
by Reinsurer of, or any failure by Reinsurer to perform, any of the covenants,
terms or conditions of, or any duties or obligations under, this Agreement;
(iii) the Company's actions taken at the written recommendation or direction of
the Reinsurer, including to the extent the Company has complied with the terms
of Section 2.3, the Reinsurer's recommendations pursuant to Section 2.3 hereof;
(iv) any failure of the Separate Accounts to comply with Applicable Law to the
extent caused by the Reinsurer's actions or omissions; (v) any fraud, theft or
embezzlement by officers, employees or agents of the Reinsurer affecting the
Policies, Post-Closing Policies, BOLI Contracts, Destinations Annuity Contracts
or the Separate Accounts during the term of this Agreement; and (vi) any
enforcement of this indemnity; provided, however, that with respect to the
reinsurance provided under this Agreement, the indemnification procedures set
forth in the Purchase Agreement shall not apply.
9.2. Company's Obligation to Indemnify. The Company hereby agrees to
indemnify, defend and hold harmless the Reinsurer, its Affiliates, and their
respective stockholders, directors, officers, employees, representatives
(excluding the Producers), successors and permitted assigns (collectively, the
"Reinsurer Indemnified Parties") from and against all Losses asserted against,
imposed upon or incurred by any Reinsurer Indemnified Party in connection with
or arising from: (i) the Retained Liabilities; (ii) any Net Retained Liability;
(iii) any breach or nonfulfillment by the Company of, or any failure by the
Company to perform, any of the covenants, terms or conditions of, or any duties
or obligations under, this Agreement; (iv) any fraud, theft or embezzlement by
officers, employees or agents of the Company affecting the Policies,
Post-Closing Policies, BOLI Contracts, Destinations Annuity Contracts or
Separate Accounts during the term of this Agreement; (v) any failure of the
Separate Accounts to comply with Applicable Law to the extent caused by the
Company's actions or omissions; (vi) the Reinsurer's actions taken with respect
to Administrative Services, BOLI Services or Destinations Services at the
Company's written direction to the extent the Reinsurer has complied with such
direction; (vii) breach or infringement by the Reinsurer, the Company or the
Subsidiaries (as that term is defined the Purchase Agreement) of any third
party's intellectual property rights with respect to such intellectual property
used by the Reinsurer, the Company or their respective Affiliates immediately
prior to the Closing Date and arising from Reinsurer's use of such intellectual
property to provide the Destinations Services; and (viii) any enforcement of
this indemnity.
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9.3. Certain Definitions and Procedures. For purposes of this Article
X, "Loss" or "Losses" shall have the meaning set forth in the Purchase
Agreement. In the event either Reinsurer or the Company shall have a claim for
indemnity against the other party under the terms of this Agreement, the parties
shall follow the procedures set forth in Sections 9.3, 9.4 and 9.5 of the
Purchase Agreement; provided, however, that with respect to the reinsurance
provided under this Agreement, the indemnification procedures at forth in the
Purchase Agreement shall not apply.
9.4. Security Trust Account.
(a) Security Trust Account.
(i) Establishment of the Security Trust Account. On the Closing Date,
the Reinsurer shall execute the Security Trust Agreement and deposit into
an account with the Trustee (the "Security Trust Account"), naming the
Company as the sole beneficiary thereof, assets having a Market Value in an
amount no less than the Required Balance, for the purpose of securing the
Reinsured Liabilities other than the Separate Account Liabilities under the
Policies and Post Closing Policies. The Security Trust Agreement shall be
substantially in the form of Exhibit B hereto. The Reinsurer shall
establish and maintain investment guidelines applicable to the assets
maintained in the Security Trust Account consistent with the terms of
Section 5.24 of the Purchase Agreement.
(ii) Trust Assets. The assets held in the Security Trust Account shall
at all times be Permitted Assets (as defined below); provided, however that
after an Event of Default, such investments shall consist solely of cash
and securities listed by the Securities Valuation Office of the National
Association of Insurance Commissioners that are authorized investments and
admitted assets under the insurance laws in the Company's state of domicile
and that are not issued by the Company or any of its Affiliates, or by the
Reinsurer or any of its Affiliates; provided that Reinsurer shall have ten
(10) Business Days after such Event of Default to cause Permitted Assets in
the Security Trust Account to satisfy the requirements of this sentence.
Such assets held in the Security Trust Account may be invested in
accordance with the Reinsurer's investment directions. The aggregate Market
Value of the assets held in the Security Trust Account shall at all times
be at least equal to the Required Balance. As long as the Security Trust
Agreement remains in force, the Reinsurer shall calculate the Required
Balance as of the last day of each calendar quarter and report the amount
of the Required Balance to the Company and the Trustee within thirty (30)
days after the end of such quarter. In connection with such calculation,
the Company shall direct the Trustee to pay to the Reinsurer any amounts in
the Security Trust Account which exceed the Required Balance, and Reinsurer
shall promptly deposit such additional Permitted Assets as may be necessary
to increase the Market Value of the Security Trust Account assets to the
Required Balance. The form and duration of assets to be held in the
Security Trust Account shall be appropriate in light of the Reinsured
Liabilities other than the Separate Account Liabilities under the Policies
and Post Closing Policies. Prior to delivering any assets for deposit into
the Security Trust Account, the Reinsurer shall execute assignments or
endorsements in blank of all of the Reinsurer's right, title and interest
in such assets (according to procedures set forth in the Security Trust
Agreement), so that the Company, or the
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Trustee upon the Company's direction, may whenever necessary negotiate
title to any such assets without consent or signature from the Reinsurer or
any other entity. The Reinsurer's books and records with regard to the
Permitted Assets (as defined below) maintained in the Security Trust
Account shall be made available to the Company, its auditors or other
designees, upon reasonable written notice, during normal business hours for
review, inspection, examination and reproduction at the Company's sole
expense. "Permitted Assets" means (i) cash (United States legal tender),
certificates of deposit (issued by a United States bank and payable in
United States legal tender), and investments of the types permitted by the
Illinois Insurance Code or any combination of the above, provided that such
investments (A) are issued by an institution that is not the parent, a
subsidiary or an affiliate of either the grantor or the beneficiary of the
Security Trust Account and (B) are consistent with the investment
guidelines established and maintained by the Reinsurer consistent with the
terms of Section 5.24 of the Purchase Agreement and as in effect from time
to time during the term of this Agreement.
(iii) Permitted Withdrawals. The Company may withdraw assets from the
Security Trust Account at any time and from time to time, notwithstanding
any other provisions of the Purchase Agreement, this Agreement or any other
Transaction Agreement (and such assets may be utilized and applied by the
Company, or any successor by operation of law of the Company, including,
without limitation, any liquidator, rehabilitator, receiver or conservator
of the Company, without diminution because of insolvency on the part of the
Company or Reinsurer) only for one or more of the following purposes:
(A) to pay or reimburse the Company for any Reinsured Liabilities
other than the Separate Account Liabilities under the Policies
and Post Closing Policies paid by the Company to the extent not
paid by the Reinsurer when due;
(B) to make payent to the Reinsurer of any amounts that exceed the
Required Balance; or
(C) to pay any other amounts that are due to the Company under this
Agreement to the extent not paid directly to the Company by the
Reinsurer when due.
(iv) Termination of the Security Trust Account. When the Reinsurer's
calculation of the Required Balance as provided in Section 9.4(a)(ii) shows
a Required Balance of $400,000,000 or less, and if there has not been an
Event of Default, the Reinsurer and Company shall direct the Trustee to
transfer to the Reinsurer all assets in the Security Trust Account, and the
Security Trust Account shall then terminate.
(b) Events of Default. From and after the Closing Date and while there
are any outstanding liabilities or obligations arising out of the Policies and
Post-Closing Policies reinsured under this Agreement, any of the following
occurrences shall constitute an event of default (individually or collectively,
as the context indicates, an "Event of Default"):
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(i) the Reinsurer ceases to maintain any of (A) an A.M. Best Company
rating of at least B++ (or its equivalent), (B) a Standard & Poor's
Corporation insurer financial strength rating of at least BBB- (or its
equivalent), and (C) a Xxxxx'x Investors Services, Inc. claims paying
ability rating of at least Baa3 (or its equivalent); or
(ii) the Reinsurer fails to maintain a ratio of (i) Total Adjusted
Capital (as defined in the Risk-Based Capital (RBC) Model Act or in the
rules and procedures prescribed by the NAIC with respect thereto, in each
case as in effect as of December 31 of the year immediately preceding) to
(ii) the Company Action Level RBC (as defined in the Risk-Based Capital
(RBC) Model Act or in the rules and procedures prescribed by the NAIC with
respect thereto, in each case as in effect as of December 31 of the year
immediately preceding) of at least 185 percent; or
(iii) unless already cured pursuant to Section 13.13 of this
Agreement, (A) the Reinsurer ceases to be licensed as a life insurer or
ceases to qualify as an accredited reinsurer in a particular jurisdiction
under circumstances that would cause the Company to be denied credit for
reinsurance ceded hereunder on the financial statements filed by the
Company in said jurisdiction, or (B) the Company is denied credit for
reinsurance ceded hereunder on the financial statements filed by the
Company in any jurisdiction; or
(iv) a petition for insolvency, rehabilitation, conservation,
supervision, liquidation or similar proceeding is filed by or against the
Reinsurer or its statutory representative in any jurisdiction.
Upon occurrence of any Event of Default, if the Security Trust Account
established pursuant to Section 9.4(a)(i) has terminated pursuant to Section
9.4(a)(iv), Reinsurer shall execute a new Security Trust Agreement and deposit
into an account with the Trustee, naming the Company as the sole beneficiary
thereof, assets having a Market Value in an amount no less than the Required
Balance at that time, for the purpose of securing the Reinsured Liabilities
other than the Separate Account Liabilities under the Policies and Post Closing
Policies. The Security Trust Agreement shall be substantially in the form of
Exhibit B hereto, except that Section 5(a) of the Security Trust Agreement
attached as Exhibit B shall not be a part of a Security Trust Agreement executed
pursuant to this provision.
(c) Notice to The Company. The Reinsurer shall provide the Company
with:
(i) written notice of any downgrade in the Reinsurer's A. M. Best
Company rating or its Standard & Poor's Corporation insurer financial
strength rating or its Xxxxx'x Investors Services, Inc. claims-paying
ability rating within three (3) Business Days after the Reinsurer's receipt
of notice of such adjustment;
(ii) a written report of the calculation of the Reinsurer's Total
Adjusted Capital and Authorized Control Level RBC (based on the Risk-Based
Capital (RBC) Model Act and/or the rules and procedures in effect as of the
date of the report) as of the end of each calendar quarter within
forty-five (45) days after the end of such quarter;
(iii) written notice of the occurrence of any Event of Default or
Recapture Event within two (2) Business Days after Reinsurer has knowledge
of its occurrence; and
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(iv) not less than annually, a written report, in form reasonably
satisfactory to the Company, certifying that no Event of Default or
Recapture Event has occurred during the period covered by such report or is
continuing as of the last day of such period, together with the appropriate
calculations and back up reasonably necessary to substantiate the basis of
the Reinsurer's certification. The Company may, at its own expense, review
the Reinsurer's books and records to confirm the risk based capital
calculations provided by the Reinsurer pursuant to Section 9.4(c)(ii) if
the Company provides the Reinsurer with written notice specifying a
reasonable basis to question such calculations. In addition, Reinsurer
shall (A) cooperate fully with the Company and promptly respond to the
Company's reasonable inquiries from time to time concerning the Reinsurer's
financial condition, operating results and any events, occurrences or other
matters which arise on and after the Closing Date and which reasonably
relate to the Policies or Post-Closing Policies or Reinsurer's ability to
perform and discharge its obligations under this Agreement and (B) provide
to the Company such financial statements, reports, internal control letters
and reports prepared by auditors and other third parties, SAS-70 reports
and other documents of the Reinsurer as the Company may reasonably request
from time to time.
(d) Resort to Collateral. Notwithstanding the remedies contemplated by
this Section 9.4, the other Transaction Agreements and the Purchase Agreement,
the Company may, in its sole discretion, require direct payment by the Reinsurer
of any sum in default under this Agreement in lieu of exercising the remedies in
this Section 9.4, and it shall be no defense to any such claim that the Company
might have had recourse to the Security Trust Account.
(e) Certain Remedies. The Company and Reinsurer acknowledge that any
damage caused to the Company by reason of the breach by the Reinsurer or any of
its successors in interest of this Section 9.4 could not be adequately
compensated for in monetary damages alone; therefore, each party agrees that, in
addition to any other remedies at law or otherwise, the Company shall be
entitled to specific performance of this Section 9.4 or an injunction to be
issued by a court of competent jurisdiction restraining and enjoining any
violation of this Section 9.4, in addition to such other equitable or legal
remedies as such court may determine. The Company and Reinsurer hereby release,
waive and discharge any and all claims and causes of action asserting in any way
that: (a) any Security Trust Account is not valid, binding or enforceable; and
(b) any remedy of the Company including, without limitation, the Company's
Security Trust Account remedy hereunder is not valid, binding or enforceable.
The Company and the Reinsurer are forever estopped and barred from making any
such assertion in any context or forum whatsoever.
9.5. Recapture Rights.
(a) Recapture Events. From and after the Closing Date, and whether or
not an Event of Default has occurred, any of the following occurrences shall
constitute an event that entitles the Company to exercise the recapture remedy
set forth in this Section 9.5 (individually or collectively, as the context
indicates, a "Recapture Event"):
(i) Reinsurer ceases to maintain any of (A) an A.M. Best Company
rating of at least B+, (B) a Standard & Poor's Corporation insurer
financial strength rating of at least
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BB+, and (C) a Xxxxx'x Investors Services, Inc. claims-paying ability
rating of at least Ba1; or
(ii) Reinsurer fails to maintain a ratio of (i) Total Adjusted Capital
(as defined in the Risk-Based Capital (RBC) Model Act or in the rules and
procedures prescribed by the NAIC with respect thereto, in each case as in
effect as of December 31 of the year immediately preceding) to (ii) the
Company Action Level RBC (as defined in the Risk-Based Capital (RBC) Model
Act or in the rules and procedures prescribed by the NAIC with respect
thereto, in each case as in effect as of December 31 of the year
immediately preceding) of at least 160 percent; or
(iii) a petition for insolvency, rehabilitation, conservation,
supervision, liquidation or similar proceeding is filed by or against the
Reinsurer or its statutory representative in any jurisdiction; or
(iv) within thirty (30) calendar days of the termination of the
Administrative Services in accordance with Section 5.20 of this Agreement,
(A) Reinsurer does not take all steps necessary to arrange for a
third-party administrator reasonably acceptable to the Company, to provide
all administrative services to be provided pursuant to the terminated
Administrative Services at the cost of Reinsurer (provided that the
transfer of the Administrative Services to such third-party administrator
does not need to occur during such thirty (30) day period so long as such
transfer proceeds in an orderly and timely manner after such period) or (B)
such third-party administrator fails to enter into an administrative
service agreement with the Company, reasonably satisfactory in form and
substance to the Company; or
(v) a judgment or order is entered by a court of competent
jurisdiction declaring the invalidity of the Security Trust Account or
finding that the assets held in a Security Trust Account are general assets
of Reinsurer or otherwise do not constitute a "secured claim" within the
meaning of the laws of Reinsurer's domiciliary state; or
(vi) the Company is denied credit on its financial statements filed in
any jurisdiction with respect to the reinsurance provided by the Reinsurer,
and the Reinsurer does not take all steps necessary to enable the Company
to obtain credit on its financial statements within thirty (30) calendar
days of the Reinsurer's receipt of written notice from the Company as to
the occurrence described herein; or
The occurrence of any Recapture Event shall entitle the Company to elect
recapture remedies hereunder regardless of whether such an occurrence also
constitutes an Event of Default.
(b) Election of Remedy. Upon the occurrence of any Recapture Event,
the Company may elect to recapture, subject to the terms and conditions set
forth below all, but not less than all, of the Policies and the Post-Closing
Policies ceded hereunder. The Company shall give the Reinsurer written notice of
its election (the "Election Notice") specifying the grounds for the exercise of
its remedies pursuant to this Section 9.5 and if it elects to recapture all of
the Policies and Post-Closing Policies, the fact of recapture, and the effective
date of recapture which shall be (i) the last day of the month in which the
Election Notice is delivered, if delivered
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prior to the fifteenth (15th) day of such month, or (ii) the last day
of the month immediately following the month in which the Recapture Notice is
delivered, if delivered on or after the fifteenth (15th) day of such month (the
"Recapture Date").
(c) Recapture. Any recapture by the Company shall not be deemed to
have been consummated until (i) the Company has given the Reinsurer an Election
Notice pursuant to Section 9.5(b); and (ii) the Company has received payment of
the entire Recapture Fee as determined in accordance with Exhibit F or an amount
equal to the General Account Reserves from the Security Trust Account on the
Recapture Date subject to adjustment pursuant to Exhibit E. The Company may, in
its sole discretion, withdraw assets from the Security Trust Account having an
aggregate Market Value (determined pursuant to the Security Trust Agreement) not
to exceed the amount of the Recapture Fee or an amount equal to the General
Account Reserves from the Security Trust Account on the Recapture Date subject
to adjustment pursuant to Exhibit F. The Reinsurer shall promptly pay the
Company the full amount of the Recapture Fee, reduced by the amount, if any,
withdrawn from the Security Trust Account. To the extent that the amount, if
any, that the Company withdraws from the Security Trust Account exceeds the
Recapture Fee, the Company shall promptly pay the excess to the Reinsurer.
Following the consummation of the recapture of Policies and Post-Closing
Policies pursuant to this Section 9.5(c), no additional premiums, deposits or
other amounts payable under such Policies and Post-Closing Policies shall be
ceded to the Reinsurer hereunder.
ARTICLE X.
DISPUTE RESOLUTION
10.1. Other Disputes over Calculations.
(a) After the Closing Date, notwithstanding the provisions of Section
11.2 hereof, if any dispute between the parties with respect to the calculation
of amounts which are to be calculated, reserved, reported, or which may be
audited pursuant to this Agreement (other than disputes relating to the Closing
Balance Sheet, which shall be resolved in accordance with the Purchase
Agreement) cannot be resolved by the parties within sixty (60) calendar days,
then the Company and the Reinsurer shall prepare separate written reports
regarding the calculation(s) in dispute and refer such reports to two
Independent Consultants (as that term is defined in the Purchase Agreement),
selected in accordance with the procedures set forth in Section 2.4 of the
Purchase Agreement, within ten (10) Business Days after the expiration of the
sixty (60) day period. The Independent Consultants shall determine as promptly
as practicable the manner in which such calculation(s) should be treated;
provided, however, that the dollar amount of each calculation in dispute shall
be determined within the range of dollar amounts proposed by the Company, on the
one hand, and the Reinsurer, on the other hand.
(b) If the Independent Consultants cannot agree as to the manner in
which the disputed calculation(s) should be treated, then the Independent
Consultants shall select an Additional Consultant (as that term is defined in
the Purchase Agreement), in accordance with procedures set forth in Section 2.4
of the Purchase Agreement, within ten (10) Business Days after expiration of the
prior ten (10) Business Day period. The Additional Consultant then shall
determine within ten (10) Business Days the manner in which such disputed
calculation(s) shall
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be treated; provided, however, that the dollar amount of each
calculation in dispute shall be determined within the range of dollar amounts
proposed by the Company and the Reinsurer.
(c) The determination by the Independent Consultants, or Additional
Consultant, as to the calculation(s) in dispute shall be in writing and shall be
Final and Binding (as that term is defined in the Purchase Agreement) on the
parties. The fees, costs and expenses of each Independent Consultant shall be
paid by the party retaining the Independent Consultant, and the fees, costs and
expenses of retaining the Additional Consultant shall be shared 50% by the
Company and 50% by the Reinsurer.
10.2. Arbitration.
(a) As a condition precedent to any right of action under this
Agreement, except as provided by Section 11.1 hereof, any difference arising
between the parties to this Agreement with reference to any transaction under
this Agreement, including its formation and validity, shall be referred to an
Arbitration Tribunal in the manner hereinafter set out. "Arbitration Tribunal"
shall mean the three arbitrators, selection of whom is defined in this Section.
(b) Unless the parties agree upon a single arbitrator within thirty
(30) days of one receiving a written request from the other for arbitration, the
claimant (the party requesting arbitration) shall appoint its arbitrator and
give written notice thereof to the respondent. Within thirty (30) days of
receiving such notice the respondent shall appoint its arbitrator and give
written notice thereof to the claimant, failing which the claimant may nominate
an arbitrator on behalf of the respondent.
(c) The two arbitrators shall appoint a third arbitrator to be called
the "umpire" within thirty (30) days after both have been appointed. Should the
arbitrators fail to agree on an umpire, each arbitrator shall select one name
from a list of three names submitted by the other arbitrator and the umpire
shall be selected by lot between the two names chosen.
(d) The list of three names shall be submitted in writing to each
party's arbitrator within thirty (30) days after failure to appoint the umpire.
The selection of one name from each list shall be completed thirty (30) days
after both lists have been received. Failure to submit or select names within
the designated time by either party will forfeit such right of that party and in
the case of such default, the other party may nominate the umpire.
(e) The lot will be drawn automatically utilizing the Dow Xxxxx
Industrial Average on the third Business Day after both names have been chosen
in writing. A Dow Xxxxx Industrial Average ending in an even number before the
decimal point shall be deemed to be the selection of the claimant's name and the
Dow Xxxxx Industrial Average ending in an odd number before the decimal point
shall be deemed to be the selection of the respondent's name. The three
arbitrators shall decide by majority. The umpire will also act as chair of the
Arbitration Tribunal and, in the event that no majority can be reached, the
verdict of the umpire will prevail.
(f) Unless otherwise agreed by the parties, the Arbitration Tribunal
shall consist of persons with not less than ten years experience in the fields
of life and annuity
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insurance or reinsurance. All arbitrators shall be active or former
disinterested officers or principals of insuring or reinsuring entities not
under the control of either party.
(g) The Arbitration Tribunal shall interpret this Agreement with due
regard to the industry practice of the parties and not as merely a legal
obligation. The arbitrators shall conduct the arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and with a
view to effecting the general purpose of this Agreement in a reasonable manner.
(h) The Arbitration Tribunal shall have power to fix procedural rules
for the holding of the arbitration subject to the following guidelines:
(i) The arbitration shall be conducted in the language in which the
Agreement was written.
(ii) After the tribunal has been selected, the parties will submit, in
quadruplicate, briefs on the matters at issue within thirty (30) days after
notice of the tribunal's selection.
(iii) All other papers and documents submitted in connection with the
hearing will be provided in quadruplicate to the tribunal for distribution
to the adverse party and the tribunal members.
(iv) At the expiration of thirty (30) days from the date on which the
tribunal is selected, whether or not briefs have been submitted, the
arbitrating parties shall receive a minimum of two weeks notice of the
hearing date, which will be set within thirty (30) days after the
expiration of the time for filing briefs.
(v) All correspondence between the parties and the tribunal shall be
by certified mail, return receipt requested.
(vi) The Arbitration Tribunal shall make its decision within thirty
(30) days following the final hearing.
(vii) The arbitration decision shall be in writing and shall include
any findings of fact and conclusions of law.
(viii) All costs of the arbitration shall be at the discretion of the
Arbitration Tribunal which may direct to and by whom and what manner such
costs shall be paid. The Arbitration Tribunal shall award interest to the
prevailing party, specifying the amount in writing, if deemed appropriate
by the tribunal. The Arbitration Tribunal may award attorney's fees and
other expenses at its discretion. The Arbitration Tribunal may not award
any punitive, exemplary, multiple or consequential damages of any nature.
(ix) The arbitration shall take place in Chicago, Illinois and the
Arbitration Tribunal to the extent it looks to applicable law shall apply
the laws of the State of Illinois.
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(i) The arbitration shall be subject to the Federal Arbitration Act.
In addition, nothing contained in this Agreement shall prevent the Company or
the Reinsurer from seeking an injunction from a court of competent jurisdiction
to enforce the provisions of this Agreement pending dispute resolution of the
conclusion of arbitration.
10.3. Award and Enforcement. The award of the Arbitration Tribunal
shall be in writing, final, and binding upon the parties who covenant to carry
out the same. If either of the parties should fail to carry out any award, the
other may apply for its enforcement to a court of competent jurisdiction in any
territory in which the party in default is domiciled or has assets or carries on
business and such defaulting party shall submit to the jurisdiction of any court
of competent jurisdiction in such territory and all matters arising hereunder
shall be determined in accordance with the practice of such court.
ARTICLE XI.
INSOLVENCY
11.1. Insolvency Clause. In the event of the insolvency of the
Company, all coinsurance made, ceded, renewed or otherwise becoming effective
under this Agreement shall be payable by the Reinsurer directly to the Company
or to its liquidator, receiver or statutory successor except (a) where this
Agreement specifically provides another payee of such reinsurance in the event
of the insolvency of the Company or (b) where the Reinsurer, in its sole
discretion has elected to obtain the consent of the direct policyholders has
assumed such policy obligations of the Company as direct obligations of the
Reinsurer to the beneficiaries under such Policies or Post-Closing Policies and
in substitution for the obligations of the Company to such beneficiaries on the
basis of the liability of the Company under the Policies and Post-Closing
Policies, without diminution because of the insolvency of the Company. It is
understood, however, that in the event of the insolvency of the Company, the
liquidator or receiver or statutory successor of the Company shall give written
notice of the pendency of a claim against the Company on a Policy or
Post-Closing Policy within a reasonable period of time after such claim is filed
in the insolvency proceedings and that during the pendency of such claim the
Reinsurer may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated any defense or defenses which
it may deem available to the Company or its liquidator or receiver or statutory
successor. It is further understood that the expense thus incurred by the
Reinsurer shall be chargeable, subject to court approval, against the Company as
part of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer.
ARTICLE XII.
DURATION
12.1. Duration. This Agreement shall continue in force until the
earlier of (a) such time that the Reinsurer's liability with respect to all
Policies and Post-Closing Policies reinsured hereunder is terminated pursuant to
Section 12.2 and (b) such time that the Reinsurer has elected, at its sole
option, to assume all liabilities under all then outstanding Policies and
Post-Closing Policies.
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12.2. Reinsurer's Liability. The liability of the Reinsurer under this
Agreement with respect to any Policy or Post-Closing Policy will begin
simultaneously with that of the Company, but not prior to the Closing Date. The
Reinsurer's liability with respect to any Policy or Post-Closing Policy will
terminate on the earliest of (a) the date such Policy or Post-Closing Policy is
recaptured in accordance with Section 9.5 or (b) the date the Company's
liability on such Policy or Post-Closing Policy is terminated in accordance with
its terms. Termination of the Reinsurer's liability under clauses (a) and (b)
herein is subject to the Company's actual receipt of payments which discharge
such liability in full in accordance with the provisions of this Agreement. In
no event shall the interpretation of this Section 12.2 imply a unilateral right
of the Reinsurer to terminate this Agreement.
12.3. Survival. Notwithstanding the other provisions of this Article
XII, the terms and conditions of Article I, VIII, IX and X, Section 12.2 shall
remain in full force and effect after the Termination Date.
ARTICLE XIII.
MISCELLANEOUS
13.1. Notices. Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given when (a) mailed by United States registered or certified mail, return
receipt requested, (b) mailed by overnight express mail or other nationally
recognized overnight or same-day delivery service or (c) delivered in person to
the parties at the following addresses:
If to the Company, to:
Xxxxxx Investors Life Insurance Company
0000 XxXxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Chief Financial Officer
With copies (which shall not constitute notice) to:
Xxxxxx Corporation
0000 XxXxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
Zurich Holding Company of America
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
Telecopier: (000) 000-0000
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 1019
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Attention: Xxxxxx X. Xxxxxxxx
If to the Reinsurer, to:
Federal Xxxxxx Life Assurance Company
0000 XxXxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Chief Financial Officer
With a copy (which shall not constitute notice) to:
Bank One
0000 Xxxxxxx Xxxxxxx XXX-0000
Xxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxxxx
Telecopier: (000) 000-0000
And To:
Lord, Bissell & Brook
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telecopier: (000) 000-0000
Either party may change the names or addresses where notice is to be given by
providing notice to the other party of such change in accordance with this
Section 13.1.
13.2. Confidentiality. Each of the parties shall maintain the
confidentiality of all Confidential Information (as that term is defined in the
Purchase Agreement)in accordance with Section 11.2 of the Purchase Agreement.
The parties hereto agree that when disclosing nonpublic personal information to
another party, ("NPI"), as defined in the Xxxxx-Xxxxx-Xxxxxx Act ("GLB") or as
defined by an applicable state privacy statute, rule or regulation,
(collectively, "State Privacy Laws"), the disclosing party will only do so
pursuant to an exception set forth in both GLB and whatever, if any, State
Privacy Laws may be applicable. The receiving party will maintain physical,
electronic and procedural safeguards that comply with applicable state and
federal regulations to guard all NPI. The receiving party's handling of any NPI,
and the purpose for which the information may be used or disclosed by the
receiving party, shall be in compliance with Applicable Law, including, but not
limited to GLB and the Federal Fair Credit Reporting Act. The parties hereto
also agree that a violation of the covenants described in this paragraph may
cause irreparable and substantial damage and that no adequate remedy may be
available at law or in equity. As a result, such violation may be enjoined
through injunctive proceedings in addition to any other rights and remedies
available at law or in equity.
13.3. Entire Agreement. This Agreement, the other Transaction
Agreements, the Purchase Agreement, the other agreements contemplated hereby and
thereby, and the exhibits and the schedules hereto and thereto contain the
entire agreement among the parties with respect
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to the subject matter hereof and supersede all prior agreements, written or
oral, with respect thereto.
13.4. Waivers and Amendments. Any term or condition of this Agreement
may be waived at any time by the party that is entitled to the benefit thereof.
Such waiver must be in writing and must be executed by an executive officer of
such party. A waiver on one occasion shall not be deemed to be a waiver of the
same or any other term or condition on a future occasion. This Agreement may be
modified or amended only by a writing duly executed by an executive officer of
the Company and the Reinsurer, respectively.
13.5. No Third Party Beneficiaries. This Agreement constitutes an
indemnity reinsurance agreement solely between the Company and the Reinsurer,
and is intended solely for the benefit of the parties hereto and their permitted
successors and assigns, and it is not the intention of the parties to confer any
rights as a third-party beneficiary to this Agreement upon any other Person as
to any term, condition or provision of this Agreement.
13.6. Assignment. This Agreement shall not be assigned by either of
the parties hereto, by operation of law or otherwise, without the prior written
approval of the other party.
13.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO ITS
CONFLICTS OF LAW DOCTRINE. ALL ISSUES RELATING TO VENUE AND JURISDICTION SHALL
BE GOVERNED BY SECTION 11.4 OF THE PURCHASE AND SALE AGREEMENT.
13.8. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
13.9. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law or if
determined by a court of competent jurisdiction to be unenforceable, and if the
rights or obligations of the Company or the Reinsurer under this Agreement will
not be materially and adversely affected thereby, such provision shall be fully
severable, and this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Agreement,
and the remaining provisions of this Agreement shall remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
13.10. Schedules, Exhibits and Paragraph Headings. Schedules and
exhibits attached hereto are made a part of this Agreement. Paragraph headings
are provided for reference purposes only and are not made a part of this
Agreement.
13.11. Expenses. Except as explicitly provided to the contrary herein
or in the Purchase Agreement, each party shall be solely responsible for all
expenses it incurs in connection with this Agreement or in consummating the
transactions contemplated hereby or performing the obligations imposed hereby,
including, without limitation, the cost of its attorneys, accountants and other
professional advisors.
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13.12. No Prejudice. The parties agree that this Agreement has been
jointly negotiated and drafted by the parties hereto and that the terms hereof
shall not be construed in favor of or against any party on account of its
participation in such negotiations and drafting.
13.13. Credit for Ceded Reinsurance. The Reinsurer shall take, at its
own expense, all reasonable actions, including but not limited to, establishing
security for its obligations under this Agreement in the form of a trust fund or
letter of credit reasonably acceptable to the Company and the Illinois Director
of Insurance, and maintain all licenses, permits and authorizations as are
necessary in order for the Company to receive credit for reinsurance ceded
hereunder, as reported in the Company's financial statements.
-52-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
XXXXXX INVESTORS LIFE INSURANCE COMPANY
----------------------------------------
By:
Title:
FEDERAL XXXXXX LIFE ASSURANCE COMPANY
----------------------------------------
By:
Title:
-53-
Schedule 1.1
BOLI Business Agreements
BOLI POLICY ADMINISTRATION
. Administrative Services Agreement, dated as of October 1, 1998, by and
between the Company and Life Insurance Solutions, L.L.C.
. Amendment No. 1 to Administrative Services Agreement, dated to be
effective as of April 1, 2000, by and between the Company and Benefit
Finance Partners, LLC
. Amendment No. 2 to Administrative Services Agreement, dated as of
October 1, 2001, by and between the Company and Benefit Finance
Partners, LLC
. Amendment No. 3 to Administrative Services Agreement, dated as of
January 2, 2002, by and between the Company and Benefit Finance
Partners, LLC
. Amended and Restated Administrative Services Agreement, dated as of
October 1, 2001, by and among the Company, Bancorp Services, L.L.C.
and Zurich Benefit Finance LLC
PRODUCT AND TECHNOLOGY SUPPORT AGREEMENT
. Amendment No. 1 to the Second Amended and Restated Product and
Technology Support Agreement, dated as of September 16, 2002, by and
among Bancorp Services, L.L.C., Zurich Benefit Finance LLC and the
Company
. Second Amended and Restated Product and Technology Support Agreement,
effective as of October 1, 2001, by and between the Company and Zurich
Benefit Finance LLC
SERIES I TECHNOLOGY LICENSE AND SERVICE AGREEMENT
. Second Amended and Restated Series I Technology License and Service
Agreement, effective as of October 1, 2002, by and among Bancorp
Services, L.L.C., Zurich Benefit Finance LLC and the Company
REINSURANCE AGREEMENTS
. Second Amended and Restated Group Variable Life Program Yearly
Renewable Term Reinsurance Agreement (excluding Series I-XDC, Series
I-XDR, Series I-NQP, Series I-W and non-experience rated cases),
executed on January 11, 2002, between the Company and Zurich Insurance
Company, Bermuda Branch Office, as amended by Amendment No. 1, entered
into on January 29, 2002 and effective January 25, 2002
. Amended and Restated Group Variable Life Program 2000 Yearly Renewable
Term Reinsurance Agreement (including Series I-XDC, Series I-XDR,
Series I-NQP, Series I-W and non-experience rated cases), executed on
January 11, 2002, between the Company
and Zurich Insurance Company, Bermuda Branch Office, as amended by
Amendment No. 1, entered into on January 29, 2002 and effective
January 25, 2002
. Second Amended and Restated Individual Variable Life Program Yearly
Renewable Term Reinsurance Agreement, executed on January 11, 2002,
between the Company and Zurich Insurance Company, Bermuda Branch
Office, as amended by Amendment No. 1, entered into on January 29,
2002 and effective January 25, 2002
. Amended and Restated Trust Agreement, dated as of June 28, 2002, by
and among Zurich Insurance Company, the Company and State Street Bank
and Trust Company
SVP AGREEMENTS
. Stable Value Protection Option Master Agreement (excluding Series
I-XDC, Series I-XDR, Series I-NQP and Series I-W), dated as of October
1, 1999, as amended and restated as of October 1, 2001, by and between
Zurich Insurance Company, Bermuda branch office and the Company
. Stable Value Protection Option Master Agreement (including Series
I-XDC, Series I-XDR, Series I-NQP and Series I-W), dated as of June
26, 2000, as amended and restated as of October 1, 2001, by and
between Zurich Insurance Company, Bermuda branch office and the
Company
INVESTMENT MANAGEMENT AGREEMENT
. Amendment One to Second Amended and Restated Investment Management
Agreement, dated as of January 31, 2002, between Zurich Xxxxxxx
Investments, Inc. and the Company
. Second Amended and Restated Investment Management Agreement, dated as
of December 10, 2001, between Zurich Xxxxxxx Investments, Inc. and the
Company
. Second Amendment to Investment Management Agreement, dated as of June
19, 2002, between Xxxxxxx Xxxxx Asset Management and the Company
. First Amendment to Investment Management Agreement, dated as of July
25, 2001, between Xxxxxxx Sachs Asset Management and the Company
. Investment Management Agreement, dated as of June 28, 2000, between
Xxxxxxx Xxxxx Asset Management and the Company
. Amended and Restated Investment Management Agreement, dated as of
December 12, 2002, between BlackRock Financial Management, Inc. and
the Company
. Third Amendment to Investment Management Agreement, dated as of
January 23, 2003, between Salomon Brothers Asset Management, Inc. and
the Company
. Second Amendment to Investment Management Agreement, dated as of June
1, 2002, between Salomon Brothers Asset Management, Inc. and the
Company
. First Amendment to Investment Management Agreement, dated as of August
1, 2000, between Salomon Brothers Asset Management, Inc. and the
Company
. Investment Management Agreement, dated as of June 28, 2000, between
Salomon Brothers Asset Management, Inc. and the Company
. Investment Management Agreement, dated as of March 2, 1999, between
Fidelity Management Trust Company and the Company (and the related
Operational Guidelines)
. Operational Guidelines for the Company Variable Series I Separate
Account, dated as of March 2, 1999, between Fidelity Management Trust
Company and the Company
BFP SECURITIES, LLC DISTRIBUTION AGREEMENT
. Second Amended and Restated Distribution Agreement, date as of March
8, 1999, by and between the Company and Life Insurance Solutions,
L.L.C.
. Notice of Assignment of Second Amended and Restated Distribution
Agreement, dated March 24, 2000 from Life Insurance Solutions, L.L.C.
to the Company.
BENEFIT FINANCE SECURITIES, LLC LIMITED DISTRIBUTION AGREEMENT
. Distribution Agreement, dated as of October 1, 1999, by and between
the Company and Benefit Finance Securities, LLC (subsidiary of Bancorp
Services, LLC)
BENEFIT FINANCE SECURITIES, LLC LIMITED DISTRIBUTION AGREEMENT
. Limited Distribution Agreement, dated as of August 16, 1999, by and
between the Company and Benefit Finance Securities, LLC (subsidiary of
Bancorp Services, LLC)
. Amendment No. 1 to Limited Distribution Agreement, effective as of
October 1, 1999, by and between the Company and Benefit Finance
Securities, LLC
. Assignment of Limited Distribution Agreement, dated as of September
30, 1999, by Benefit Finance Securities, LLC
. Consent and Agreement (Limited Distribution Agreement), dated as of
September 30, 1999, by and between the Company and Life Insurance
Solutions, L.L.C.
. Assignment and Assumption Agreement, dated as of April 3, 2000, by and
between Benefit Finance Partners, LLC (f/k/a Life Insurance Solutions,
L.L.C., BFP Securities, LLC, the Company and Benefit Finance
Securities, LLC
. Assignment of Distributor's Compensation and Consent, dated as of
April 10, 2003, by and among BFP Securities, LLC, the Company, and
Wachovia Securities, Inc.
ZCM DISTRIBUTION AGREEMENT
. Distribution Agreement, dated March 4, 1999, KILICO and Zurich Capital
Markets Securities Inc.
FUND ACCOUNTING AND ADMINISTRATION
. Second Amendment to Accounting & Administration Agreement, made and
entered into as of December 11, 2002, by and between the Company and
The Nottingham Management Company
. First Amendment to Accounting & Administration Agreement, made and
entered into as of December 28, 2001, by and between the Company and
The Nottingham Management Company
. Accounting & Administration Agreement, made and entered into as of
July 31, 2001, by and between the Company and The Nottingham
Management Company
GENERAL AGENCY AGREEMENTS
. General Agent Agreement, dated August 17, 1999, between KILICO and Old
Kent Insurance Group
. General Agent Agreement, dated December 10, 1998, between KILICO,
KeyCorp Insurance Agency USA Inc., an Idaho Company, KeyCorp Insurance
Agency USA Inc., a Washington Company and KeyCorp Insurance Agency USA
Inc., an Ohio Company
. General Agent Agreement, dated December 16, 1998, between KILICO and
Xxxxxxx X. Xxxxx
. General Agent Agreement, dated July 30, 1999, between KILICO and Wheat
Insurance Services, Inc.
. General Agent Agreement, dated November 20, 1998, between KILICO,
First Union Mortgage Corporation, First Union Insurance Agency of FL,
Inc., Old York Agency, Inc. and First Union Insurance Agency of NC,
Inc.
. General Agent Agreement, dated December 18, 1998, between KILICO and
Bancorp Services, LLC
. General Agent Agreement, dated December 9, 1998, between KILICO and
Zurich Capital Markets Securities, Inc.
WACHOVIA ASSIGNMENT
.. Assignment of Distributor's Compensation and Consent, dated as of April 10,
2003 by and among BFP Securities, LLC, the Company and Wachovia Securities,
Inc.
ADDITIONAL AGREEMENTS
.. Distribution Agreement, dated October 27, 1997, between Investors Brokerage
Services, Inc. and KILICO (KILICO Variable Series I Separate Account).
.. Letter Agreement, dated February 14, 2001 between FKLA and KILICO.
. Letter Agreement, February 22, 2001, between ESB Bank and KILICO.
.. Amended and Restated Investment Management Agreement, dated as of June 28,
2002, between Xxxxxxx Sachs Asset Management and Zurich Insurance Company.
.. Investment Management Agreement, dated as of June 28, 2002, between AIG
Global Investment Corp. and Zurich Insurance Company. . Futures Account
Agreement, between Xxxxxx Xxxxxxx and KILICO.
.. Letter Agreement, dated December 21, 2000, between Peoples, Inc. and Xxxxxx
Investors Life Insurance Company.
.. Letter Agreement, dated December 7, 2000, between Precision Castparts Corp.
and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated August 15, 2000, between Provident Bank of Maryland
and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated August 18, 2000, between Liberty Federal Bank and
Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated June 28, 2000, between Washington Mutual Bank and
Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated March 15, 2000, between Allegiant Bank and Xxxxxx
Investors Life Insurance Company.
.. Letter Agreement, dated December 30, 1999, between US Trust Bank and Xxxxxx
Investors Life Insurance Company.
.. Letter Agreement, dated December 22, 1998, between Old Kent Bank and Xxxxxx
Investors Life Insurance Company, as amended December 22, 1998.
.. Letter Agreement, dated December 21, 1999, between Xxxxxx River Bancorp,
Inc. and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated October 1, 1999, between St. Xxxx Federal Bank for
Savings and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated April 28, 1999, between Parker Hannifin Corporation
and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated December 30, 1998, between Catskill Savings Bank
and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated December 22, 1998, between FirstBancorp, Inc. and
Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated December 21, 1998, between Xxxxxxxx & Ilsley
Corporation and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated December 8, 1998, between F.N.B. Corporation and
Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated August 14, 1998, between Mercantile Bank and Xxxxxx
Investors Life Insurance Company.
.. Letter Agreement, dated May 1, 1998, between Xxxxxx Bankcorp and Xxxxxx
Investors Life Insurance Company.
.. Letter Agreement, dated May 1, 1998, between Xxxxxx Trust and Savings Bank
and Xxxxxx Investors Life Insurance Company.
.. Letter Agreement, dated December 30, 1997, between KeyCorp and Xxxxxx
Investors Life Insurance Company.
.. Letter Agreement, dated June 30, 2000, between Centier Bank and Xxxxxx
Investors Life Insurance Company.
.. Selling Group Agreement, between BFP Securities, LLC and Xxxxxx Investors
Life Insurance Company.
.. Amended and Restated Letter Agreement, dated as of October 1, 1999, between
Charter One Bank, F.S.B., Charter One Financial, Inc. and its affiliates,
and Xxxxxx Investors Life Insurance Company.
.. Commodity Futures Customer Agreement, dated December 17, 2002, between
Xxxxxx Xxxxxxx & Co. Incorporated and Xxxxxx Investors Life Insurance
Company.
Schedule 1.1(A)
BOLI Contracts
Fee Retained
by KILICO on
In-Force Policies'
Investment Value
---------------------------
All Divisions
(Except
Policy Strategic Strategic
Group Issue Income Income
No Policy No Date Policy Owner Divisions)* Divisions**
----- --------------- -------- ---------------------------------------------------------- ------------- -----------
1 KI9001-S01 06/06/97 Star Banc Corporation Rabbi Trust 0.085% 0.105%
1 KI9002-S01 10/08/97 Strongsville Savings Bank 0.085% 0.105%
1 KI9003-S01 10/29/97 First Union National Bank, Charlotte North Carolina
Revocable Trust 0.085% 0.105%
1 KI9004-S01 10/29/97 First Union National Bank, Avondale Pennsylvania
Revocable Trust 0.085% 0.105%
1 KI9006-S01 12/19/97 First Bank Revocable Trust 0.085% 0.105%
1 KI9007-S01 12/18/97 First Union National Bank, Charlotte North Carolina
Revocable Trust 0.085% 0.105%
1 KI9008-S01 12/18/97 First Union National Bank, Avondale Pennsylvania Revocable
Trust 0.085% 0.105%
1 KI9009-S01-A 12/19/97 BankBoston, National Assoc. BOLI Grantor Trust 0.085% 0.105%
1 KI9010-S01 12/30/97 KeyBank National Association Trust 0.085% 0.105%
1 KI9012-S01 02/27/98 First Bank Revocable Trust 0.085% 0.105%
1 KI9014-S01 05/01/98 Xxxxxx Trust And Savings Bank 0.085% 0.105%
1 KI9021-S01 12/22/98 Old Kent Bank Business Life Insurance Grantor Trust 0.085% 0.105%
1 KI9022-S01 12/21/98 Xxxxxxxx & Xxxxxx Business Life Insurance Trust 0.085% 0.105%
4 KI9032-S01++ 12/30/99 USTrust Bank Owned Life Insurance Grantor Trust 0.085% 0.105%
1 KI9035-S01-W++ 06/28/00 Washington Mutual Bank, FA Grantor Trust 0.085% 0.105%
1 KI9036-S01-W++ 06/28/00 Washington Mutual Bank, Grantor Trust 0.085% 0.105%
2 KI9011-S01-B 12/17/97 Hickory Springs Manufacturing Company Revocable Life 0.100% 0.120%
Insurance Trust
2 KI9011a-S01-B 12/17/97 Hickory Springs Manufacturing Company Revocable Life 0.100% 0.120%
Insurance Trust
2 KI9015-S01-B 08/14/98 Mercantile Bank Revocable Trust 0.100% 0.120%
2 KI9016-S01-B 12/08/98 FNB Revocable Trust 0.100% 0.120%
2 KI9017-S01-F 12/22/98 FirstBancorp, Inc. Revocable Trust 0.100% 0.120%
2 KI9020-S01-I 12/30/98 Catskill Savings Bank, Revocable Trust 0.100% 0.120%
2 KI9025-S01-K 03/05/99 Sterling, Inc., 1996 Exec. Benefit Plan 0.100% 0.120%
2 KI9027-S01-K 04/28/99 Parker Hannifin Corp Rev Trust 0.100% 0.120%
2 KI9031-S01-F++ 12/21/99 Xxxxxx River Bancorp, Inc. Rev. Trust 0.100% 0.120%
2 KI9033-S01-F++ 03/15/00 Allegiant Bank Revocable Trust 0.100% 0.120%
2 KI9034-S01-XDC 06/30/00 Centier Bank Revocable Trust 0.080% 0.100%
2 KI9037-S01-XDC 08/18/00 Liberty Federal Bank Revocable Trust 0.080% 0.100%
2 KI9037a-S01-XDC 11/21/00 Liberty Federal Bank Revocable Trust 0.080% 0.100%
2 KI9039-S01-XDC 08/15/00 Provident Bank of Maryland Revocable Trust 0.080% 0.100%
2 KI9041-S01-XDR++ 02/14/01 Federal Xxxxxx Life Assurance, Co. Rev. Trust 0.080% 0.100%
2 KI9042-S01-NQP 12/07/00 Precision Castparts Corp., Umbrella Trust 0.080% 0.100%
2 KI9042a-S01-NQP 12/07/00 Precision Castparts Corp., Umbrella Trust 0.080% 0.100%
2 KI9043-S01-NQP 12/18/00 Lincoln Electric Co. Exec. Benefit Plan Rev. Trust 0.080% 0.100%
2 KI9044-S01-NQP 12/18/00 Lincoln Electric Co. Exec. Benefit Plan Rev. Trust 0.080% 0.100%
2 KI9045-S01-NQP 12/18/00 Lincoln Electric Co. Exec. Benefit Plan Rev. Trust 0.080% 0.100%
2 KI9046-S01-NQP 12/18/00 Lincoln Electric Co. Rev. Trust 0.080% 0.100%
2 KI9050-S01-XDC 12/21/00 Peoples Banks Rev. Trust 0.080% 0.100%
Schedule 1.1(A)
BOLI Contracts
Fee Retained
by KILICO on
In-Force Policies'
Investment Value
---------------------------
All Divisions
(Except
Policy Strategic Strategic
Group Issue Income Income
No Policy No Date Policy Owner Divisions)* Divisions**
----- --------------- -------- ---------------------------------------------------------- ------------- -----------
2 KI9050a-S01-XDC 12/21/00 Peoples Banks Rev. Trust 0.080% 0.100%
2 KI9050b-S01-XDC 09/06/01 Peoples Banks Rev. Trust 0.080% 0.100%
2 KI9051-S01-XDC 02/22/01 ESB Bank Supplemental Exec. Ret. Plan Trust 0.080% 0.100%
2 KI9052-S01-XDC 02/22/01 ESB Bank Revocable Trust 0.080% 0.100%
2 KI9053-S01-XDC 10/23/01 Centier Bank Revocable Trust 0.100% 0.120%
2 KI9054-S01-XDC 12/28/01 AmericanWest Bank 0.100% 0.120%
2 KI9055-S01-XDC 01/16/02 FirstBancorp, Inc. Revocable Trust 0.100% 0.120%
4 KI9019-S01E 12/17/98 USTrust Bank Owned Life Insurance Grantor Trust 0.100% 0.120%
4 KI9024-S01-EF 12/22/98 Time Warner Entertainment Company, L.P. 0.100% 0.120%
4 KI9024a-S01-EF 12/22/98 Time Warner Inc. 0.100% 0.120%
4 KI9026-S01-BFS 03/09/99 Charter One Bank, F.S.B. Business Life Insurance
Grantor Trust 0.100% 0.120%
4 KI9028-S01-BFS 06/01/99 S&T Bank Business Life Insurance Trust 0.100% 0.120%
4 KI9029-S01-BFS 10/01/99 St. Xxxx Federal Bank For Savings Life Insurance Trust 0.100% 0.120%
* Equals the In-Force Policies Company Fee in Section 4.5 of the Second
Amended and Restated Product and Technology Support Agreement, dated as of
March 4, 2002 and effective as of October 1, 2001
** Equals the In-Force Policies SID Company Fee in Section 4.5 of the Second
Amended and Restated Product and Technology Support Agreement, dated as of
March 4, 2002 and effective as of October 1, 2001
*** With respect to New Policies issued after October 1, 2001 (subject to
clarification provided in Amendment No. 1 to the Second Amended and
Restated Product and Technology Support Agreement) the fee retained by the
Company on Investment Value (excluding Investment Value of Strategic Income
Divisions) is 0.100% and the fee retained by the Company on Investment
Value of Strategic Income Divisions is 0.120%.
Schedule 1.1(B)
Destinations Annuity Contracts
Individual Policy Forms L-1550
L-1550 FL
L-1550 MD
L-1550 NC
L-1550 OR
L-1550 UT
X-0000 XX
X-0000 XX
Group Xxxxxxxx Xxxxx X-0000
X-0000 XX
X-0000 CT
L-8166 ID
X-0000 XX
X-0000 MO
X-0000 XX
X-0000 XX
X-0000 XX
L-8166 ND
L-8166 TX
L-8166 WI
Group Certificate Forms L-8165
L-8165 CT
L-8165 MO
X-0000 XX
X-0000 SC
L-8165 TX
L-8165 WI
GRIB Rider, Version A L-8181 (contract endorsement)
L-8167 (certificate endorsement)
GRIB Rider, Version B L-8198
L-8199
L-8205
L-8206
GRIB Endorsement L-8390
L-8390 MD
Schedule 1.1(C)
Intentionally Omitted
Schedule 1.1(D)
Policies
Xxxxxx Investors Life Insurance Company
Life and Annuity Policies
Form Number Title Marketing Name
-----------------------------------------------------------------------------------------------------------------------------
S-6001 Term Life Insurance to Age 95 WMA Term
-----------------------------------------------------------------------------------------------------------------------------
S-6002 Flexible Premium Adjustable Life Insurance Power TUL
-----------------------------------------------------------------------------------------------------------------------------
S-6003 Flexible Premium Variable Life Insurance Policy Power V; WMA VUL
-----------------------------------------------------------------------------------------------------------------------------
L-8152 One Year Term Life Insurance Policy PS 58
-----------------------------------------------------------------------------------------------------------------------------
L-8513R/ Group Term Life Insurance Policy/Certificate Swift Term
L-8514R
-----------------------------------------------------------------------------------------------------------------------------
S-7004 Individual Flexible Premium Variable Life Insurance Policy Series II, Series III (replaced by
L-8172)
-----------------------------------------------------------------------------------------------------------------------------
S-7005 Survivorship, Flexible Premium Variable Life Insurance Policy Series V, Series VI (replaced by
L-8174)
-----------------------------------------------------------------------------------------------------------------------------
S-7006 Individual Flexible Premium Variable Life Insurance Policy Series IV (replaced by L-8173)
-----------------------------------------------------------------------------------------------------------------------------
S-7007 Survivorship, Flexible Premium Variable Life Insurance Policy Series VII (replaced by L-8175)
-----------------------------------------------------------------------------------------------------------------------------
L-8144/ Individual Flexible Premium Variable Life Insurance Policy PCG I, previously Offitbank
L-8144CV
-----------------------------------------------------------------------------------------------------------------------------
L-8145/ Survivorship, Flexible Premium Variable Life Insurance Policy PCG I, previously Offitbank
L-8145CV
-----------------------------------------------------------------------------------------------------------------------------
L-8161/ Individual Flexible Premium Variable Life Insurance Policy First Foundation
L-8161CV
-----------------------------------------------------------------------------------------------------------------------------
L-8162/ Survivorship, Flexible Premium Variable Life Insurance Policy First Foundation
L-8162CV
-----------------------------------------------------------------------------------------------------------------------------
L-8172 Individual Flexible Premium Variable Life Insurance Policy QPi; (previously: Series II & Series
III), Series VIII, Series X
-----------------------------------------------------------------------------------------------------------------------------
L-8173 Individual Flexible Premium Variable Life Insurance Policy Series IV
-----------------------------------------------------------------------------------------------------------------------------
L-8174 Survivorship, Flexible Premium Variable Life Insurance Policy QPs; (previously: Series V & Series
VI), Series IX
-----------------------------------------------------------------------------------------------------------------------------
L-8175 Survivorship, Flexible Premium Variable Life Insurance Policy Series VII
-----------------------------------------------------------------------------------------------------------------------------
L-8189 Individual Flexible Premium Variable Life Insurance Policy Series 1A (individual BOLI)
-----------------------------------------------------------------------------------------------------------------------------
L-8358/ Individual Flexible Premium Variable Life Insurance Policy PCG II
L-8358CV
-----------------------------------------------------------------------------------------------------------------------------
L-8359/L-8359CV Survivorship, Flexible Premium Variable Life Insurance Policy PCG II
-----------------------------------------------------------------------------------------------------------------------------
L-8387 Individual Modified Premium Variable Universal Life Insurance Destinations Life, previously SPVUL
Policy
-----------------------------------------------------------------------------------------------------------------------------
L-8388 Survivorship, Modified Premium Variable Universal Life Insurance Destinations Life, previously SPVUL
Policy
-----------------------------------------------------------------------------------------------------------------------------
L-8408/ Individual Flexible Premium Variable Life Insurance Policy guaranteed and simplified issue First
L-8408CV Foundation
-----------------------------------------------------------------------------------------------------------------------------
L-8521 Flexible Premium Variable Life Insurance Policy Lifeinvestor
-----------------------------------------------------------------------------------------------------------------------------
L-8594/ Individual Flexible Premium Variable Life Insurance Policy PCG III
L-8594CV
-----------------------------------------------------------------------------------------------------------------------------
L-8595/ Survivorship, Flexible Premium Variable Life Insurance Policy PCG III
L-8595CV
-----------------------------------------------------------------------------------------------------------------------------
L-8232/ Group Flexible Premium Variable Deferred Annuity/Certificate Series XV, previously PPVA
L-8233
L-1000 (6/89) Fixed and Variable Deferred Annuity Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-1000 (6/93) Fixed and Variable Deferred Annuity Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-1600 (9/91) Group Flexible Premium Modified Guaranteed And Passport
/L-1650 (9/91) Variable Deferred Annuity Contract/Certificate
-----------------------------------------------------------------------------------------------------------------------------
L-1600 (10/93) Group Flexible Premium Modified Guaranteed And Passport
/L-1650 (10/93) Variable Deferred Annuity Contract/Certificate
-----------------------------------------------------------------------------------------------------------------------------
L-1750 (5/91) Single Premium Deferred Annuity Bonus
-----------------------------------------------------------------------------------------------------------------------------
L-1750 (6/93) Single Premium Deferred Annuity Bonus
-----------------------------------------------------------------------------------------------------------------------------
L-8481R Flexible Premium Deferred Annuity Zurich Classic; previously Taxsaver II
-----------------------------------------------------------------------------------------------------------------------------
L-8589/ Individual Flexible Premium Modified Guaranteed, Fixed and Zurich Preferred
L-8613/ Variable Deferred Annuity/Group Contract/Certificate
L-8614
-----------------------------------------------------------------------------------------------------------------------------
L8696/ Group Flexible Premium Modified Guaranteed, Fixed and Variable Zurich Preferred Plus
L-8697/ Deferred Annuity Contract/ /Certificate/Individual
L-8698 Contract
-----------------------------------------------------------------------------------------------------------------------------
L-8761/ Group Flexible Premium Modified Guaranteed, Fixed Deferred Classic II
L-8762/ Annuity Contract/Certificate/Individual Contract
L-8763
-----------------------------------------------------------------------------------------------------------------------------
L-8823/ Group Flexible Premium Modified Guaranteed, Fixed and Variable L Share/Archway/ZS4
L-8824/ Deferred Annuity Contract/ /Certificate/Individual
L-8825 Contract
-----------------------------------------------------------------------------------------------------------------------------
L-8881/ Group Flexible Premium Fixed Deferred Annuity Discover
L-8880/ Contract/Certificate/ Individual Contract
L-8882
-----------------------------------------------------------------------------------------------------------------------------
L-9001 (9/88) Flexible Premium Deferred Annuity Allsavers
-----------------------------------------------------------------------------------------------------------------------------
L-9001 (6/93) Flexible Premium Deferred Annuity Allsavers
-----------------------------------------------------------------------------------------------------------------------------
L-8843 Single Premium Fixed Deferred Annuity w/MVA Zurich Elite
-----------------------------------------------------------------------------------------------------------------------------
L-5695 (8/82) Flexible Premium Adjustable Life Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6101 (4/83) Single Premium Whole Life - Interest sensitive TEFRA corridor Single Prem. Whole Life
-----------------------------------------------------------------------------------------------------------------------------
L-6192 (9/83) Single Premium Universal Life Living Life
-----------------------------------------------------------------------------------------------------------------------------
L-8001 (1/87) Variable Universal Life Xxxxxx Select VUL
-----------------------------------------------------------------------------------------------------------------------------
L-8002 (3/87) Variable Universal Life Xxxxxx Select VUL II
-----------------------------------------------------------------------------------------------------------------------------
L-6424 (11/84) Flexible Premium Deferred Annuity TaxSaver
-----------------------------------------------------------------------------------------------------------------------------
L-6086A (7/84) Single Premium Deferred Annuity Choice
-----------------------------------------------------------------------------------------------------------------------------
L-6086 (2/83) Single Premium Deferred Annuity Choice
-----------------------------------------------------------------------------------------------------------------------------
L-6086 (12/82) Single Premium Deferred Annuity Choice
-----------------------------------------------------------------------------------------------------------------------------
L-5856 (1/82) Individual Periodic Premium Deferred Fixed Annuity and Advantage III
Variable Annuity
-----------------------------------------------------------------------------------------------------------------------------
L-5857 Deferred Fixed and Variable Annuity Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-1100, L-1150, Xxxxxx Renuity
L-1175
-----------------------------------------------------------------------------------------------------------------------------
Xxxxxx Investors Life Insurance Company
Riders and Benefits for Life and Annuities
Form Number Description Used With
-----------------------------------------------------------------------------------------------------------------------------
S-9201 (5/94) Other Insured Rider WMA Term
-----------------------------------------------------------------------------------------------------------------------------
S-9202 (5/94) Accidental Death Benefit Rider WMA Term
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxxxx of Premium Rider WMA Term
-----------------------------------------------------------------------------------------------------------------------------
S-9204 Dependent Children's Rider WMA Term
-----------------------------------------------------------------------------------------------------------------------------
S-9205 Accelerated Death Benefit Rider WMA Term
-----------------------------------------------------------------------------------------------------------------------------
S-9207 (2/95) Waiver of Monthly Deduction Rider Power TUL, Power V
-----------------------------------------------------------------------------------------------------------------------------
S-9212 Accidental Death Rider Power TUL
-----------------------------------------------------------------------------------------------------------------------------
S-9213 (2/95) Other Insured Rider Power TUL, Power V, LifeInvestor
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
S-9216 (2/95) Dependent Children's Rider Power TUL, Power V, LifeInvestor
-----------------------------------------------------------------------------------------------------------------------------
S-9217 Accelerated Death Benefit Rider Power TUL
-----------------------------------------------------------------------------------------------------------------------------
S-9218 Accelerated Death Benefit Rider First Foundation, LifeInvestor, PCG III
-----------------------------------------------------------------------------------------------------------------------------
L-8163 Extended Maturity Option Rider QPi, Series IV, First Foundation (ind),
PCG II (ind), PCG III (ind), Lifeinvestor
-----------------------------------------------------------------------------------------------------------------------------
L-8164 Extended Maturity Option Rider QPs, Series VII, First Foundation (sur),
PCG II (sur), PCG III (sur)
-----------------------------------------------------------------------------------------------------------------------------
L-8168 Disability Waiver Rider Destinations Life
-----------------------------------------------------------------------------------------------------------------------------
L-8182 Disability Waiver Rider Destinations Life
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxxxx of Selected Premium Rider LifeInvestor
-----------------------------------------------------------------------------------------------------------------------------
L-8590 Accelerated Death Benefit Rider Destinations Life
-----------------------------------------------------------------------------------------------------------------------------
L-8602 Nursing Care Waiver Rider Destinations Life
-----------------------------------------------------------------------------------------------------------------------------
L-8670 ZKL Employee/Broker Bonus Program Destinations Life
-----------------------------------------------------------------------------------------------------------------------------
L-8671 ZKL Employee/Broker Bonus Program Destinations Life
-----------------------------------------------------------------------------------------------------------------------------
L-8860 Endorsement - Reduction of Premium Charges Lifeinvestor
-----------------------------------------------------------------------------------------------------------------------------
L-8870 No Lapse Guarantee Period Extension Endorsement Power V
-----------------------------------------------------------------------------------------------------------------------------
L-1002 (6/93) Sex Distinct Option Table Advantage III, Passport ('93 version),
Bonus, Allsavers, Classic
-----------------------------------------------------------------------------------------------------------------------------
L-1003 (6/93) Unisex Option Table Advantage III, Passport ('93 version),
Bonus, Allsavers, Classic
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxxxxxxxx Charge Waiver Endorsement Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-1070 (6/93) Qualified Plan Supplemental Rider Advantage III, Allsavers, Bonus,
Passport, Destinations I
-----------------------------------------------------------------------------------------------------------------------------
L-1080 Transfer Amendment Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-1551 Sex Distinct Option Table Destinations I
-----------------------------------------------------------------------------------------------------------------------------
L-1552 Unisex Option Table Destinations I
-----------------------------------------------------------------------------------------------------------------------------
L-1606 (9/91) Sex Distinct Option Table Passport ('91 version)
-----------------------------------------------------------------------------------------------------------------------------
L-1607 (9/91) Unisex Option Table Passport ('91 version)
-----------------------------------------------------------------------------------------------------------------------------
L-1627/ Miscellaneous Endorsement Passport
L-1628
-----------------------------------------------------------------------------------------------------------------------------
L-1629 Miscellaneous Endorsement Passport
-----------------------------------------------------------------------------------------------------------------------------
L-1630 Miscellaneous Endorsement Passport
-----------------------------------------------------------------------------------------------------------------------------
L-1665 (11/91) Annuity Option Endorsement Passport
-----------------------------------------------------------------------------------------------------------------------------
L-1712 (5/91) Sex Distinct Option Table Bonus (PA)
-----------------------------------------------------------------------------------------------------------------------------
L-1713 (5/91) Unisex Option Table Bonus (PA)
-----------------------------------------------------------------------------------------------------------------------------
L-1720/L-1721 Transfer Restrictions Amendment Passport
-----------------------------------------------------------------------------------------------------------------------------
L-1772 (12/93) Qualified Plan Loan Rider Allsavers, Bonus, Passport, Destinations I
-----------------------------------------------------------------------------------------------------------------------------
L-1775 Qualified Plan Loan Rider Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-5501 (2/83) Texas Optional Retirement Program Endorsement Advantage III, Bonus, Allsavers,
Passport, Classic, Destinations II
-----------------------------------------------------------------------------------------------------------------------------
L-6741 (9/93) Arkansas Alternate Retirement Plan Endorsement Advantage III, Bonus, Allsavers,
Passport, Classic, Destinations II
-----------------------------------------------------------------------------------------------------------------------------
L-7042 (5/91) Nursing Home Endorsement all products except Classic II,
Destinations II & L Share
-----------------------------------------------------------------------------------------------------------------------------
L-7065 (9/93) XXX Xxxxx (to be replaced by L-8749) all products offered as IRAs
-----------------------------------------------------------------------------------------------------------------------------
L-8150 SIMPLE XXX Xxxxx all products offered as SIMPLE IRAs
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxx XXX Rider all products offered as Xxxxx
-----------------------------------------------------------------------------------------------------------------------------
L-8198 (2/99)/ Guaranteed Retirement Income Benefit Destinations I
L-8199 (2/99)
-----------------------------------------------------------------------------------------------------------------------------
L-8330/ XXX Xxxxx Destinations I, Preferred, Preferred
L-8331 Plus, Classic II
-----------------------------------------------------------------------------------------------------------------------------
L-8341 457 Deferred Compensation Rider all products offered under 457 plans
-----------------------------------------------------------------------------------------------------------------------------
L-8457/ Qualified Plan Supplemental Rider Destinations I
L-8458
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
L-8459/L-8460 ERISA Loan Rider Destinations I, Preferred, Preferred Plus
-----------------------------------------------------------------------------------------------------------------------------
L-8496 Qualified Plan Rider Classic
-----------------------------------------------------------------------------------------------------------------------------
L-8620 Unisex Rider (includes unisex option table) Preferred, Preferred Plus, Classic II
-----------------------------------------------------------------------------------------------------------------------------
L-8621 Qualified Plan Rider Preferred, Preferred Plus
-----------------------------------------------------------------------------------------------------------------------------
L-8622 Qualified Plan Rider Preferred, Preferred Plus
-----------------------------------------------------------------------------------------------------------------------------
L-8668 ZKL Employee/Broker Bonus Program Destinations I
-----------------------------------------------------------------------------------------------------------------------------
L-8717 Disability Waiver Rider Destinations II & L Share
-----------------------------------------------------------------------------------------------------------------------------
L-8718 Nursing Care Waiver Rider Destinations II & L Share
-----------------------------------------------------------------------------------------------------------------------------
L-8739(80)/ Guaranteed Retirement Income Benefit Destinations II
L-8739(85)
-----------------------------------------------------------------------------------------------------------------------------
L-8740 Earnings Based Death Benefit Rider Destinations II
-----------------------------------------------------------------------------------------------------------------------------
L-8741 Value Credit Rider Destinations II
-----------------------------------------------------------------------------------------------------------------------------
L-8749 XXX Xxxxx all products offered as IRAs
-----------------------------------------------------------------------------------------------------------------------------
L-8750 Employee/Broker Bonus Credit Program Destinations II
-----------------------------------------------------------------------------------------------------------------------------
L-8781 Disability Waiver Endorsement Classic II
-----------------------------------------------------------------------------------------------------------------------------
L-8782 Nursing Care Waiver Endorsement Classic II
-----------------------------------------------------------------------------------------------------------------------------
L-8784 Guaranteed Minimum Death Benefit Endorsement Advantage III, Preferred, Preferred Plus
-----------------------------------------------------------------------------------------------------------------------------
L-8785 Guaranteed Retirement Income Benefit Endorsement Advantage III, Preferred, Preferred Plus
-----------------------------------------------------------------------------------------------------------------------------
L-8786 Earnings Based Death Benefit Endorsement Advantage III, Preferred, Preferred Plus
-----------------------------------------------------------------------------------------------------------------------------
L-8818 Endorsement - Market Value Adjustment Rider Classic II
-----------------------------------------------------------------------------------------------------------------------------
L-8819 Amendment to Master Policy - Market Value Adjustment
Waiver Classic II
-----------------------------------------------------------------------------------------------------------------------------
L-8827 Unisex Rider L Share, Elite
-----------------------------------------------------------------------------------------------------------------------------
L-8829 Purchase Payment Bonus Endorsement Discover
-----------------------------------------------------------------------------------------------------------------------------
L-8830 1st Year Interest Rate Bonus Endorsement Discover
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxxxxxx Death Benefit Rider L Share
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxxxxxx Death Benefit Rider L Share
-----------------------------------------------------------------------------------------------------------------------------
L-8861 ERISA Loan Rider Classic II, Elite
-----------------------------------------------------------------------------------------------------------------------------
L-8868 Qualified Plan Rider Classic II, Elite
-----------------------------------------------------------------------------------------------------------------------------
X-0000/ Xxxxxxxxxx Endorsement (certificate/policy) Preferred Plus
L-8872
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxxxx of Withdrawal Charge upon Terminal Illness Discover
Endorsement
-----------------------------------------------------------------------------------------------------------------------------
X-0000 Xxxxxx of Withdrawal Charge upon Unemployment Compensation Discover
Endorsement
-----------------------------------------------------------------------------------------------------------------------------
L-9004 (9/88) Sex Distinct Option Table Allsavers (OR)
-----------------------------------------------------------------------------------------------------------------------------
L-9005 (9/88) Unisex Option Table Allsavers (OR)
-----------------------------------------------------------------------------------------------------------------------------
L-9006 (9/88) Unisex Amendment all products offered under qualified
plans except Preferred, Preferred Plus &
Classic II, Renuity
-----------------------------------------------------------------------------------------------------------------------------
L-8851 XXX Xxxxx Zurich Elite
-----------------------------------------------------------------------------------------------------------------------------
L-8844 Extended Care Zurich Elite
-----------------------------------------------------------------------------------------------------------------------------
L-8845, L-8846, MVA Riders Zurich Elite
L-8848
-----------------------------------------------------------------------------------------------------------------------------
L-5777 (05/83) Table of Guaranteed Max. Ins. Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6564 (12/85) Endorsement - Minimum Interest Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6176 (9/84) Table of Min. Death Benefit Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6398 (9/84) Endorsement - Periodic premium Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6083 (12/82) Endorsement - Interest Rates Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6211 (9/83) Table of Max Ins rates Living Life
-----------------------------------------------------------------------------------------------------------------------------
L-6220 (9/83) A Table of Death Benefits Living Life
-----------------------------------------------------------------------------------------------------------------------------
L-6220 (9/83) B Table of Death Benefits Living Life
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
L-6205 (10/83) Endorsement Living Life
-----------------------------------------------------------------------------------------------------------------------------
L-6216 (9/83) Endorsement Living Life
-----------------------------------------------------------------------------------------------------------------------------
L-8050 (6/87) Endorsement Xxxxxx Select VUL
-----------------------------------------------------------------------------------------------------------------------------
L-8027 (1/87) Table of COI Rates - Non-Smoker Xxxxxx Select VUL
-----------------------------------------------------------------------------------------------------------------------------
L-8028 (1/87) Table of COI Rates - Smoker Xxxxxx Select VUL
-----------------------------------------------------------------------------------------------------------------------------
L-8080 (1/91) Endorsement Xxxxxx Select VUL (not TX)
-----------------------------------------------------------------------------------------------------------------------------
L-8033 (3/87) Table of Guar Max COI Rates Xxxxxx Select VUL II
-----------------------------------------------------------------------------------------------------------------------------
L-6155 (4/83) Endorsement - Surrender Charge Single Premium Whole Life
-----------------------------------------------------------------------------------------------------------------------------
L-6992 (10/90) Endorsement TaxSaver
-----------------------------------------------------------------------------------------------------------------------------
L-6846 (1/89) Endorsement TaxSaver
-----------------------------------------------------------------------------------------------------------------------------
L-6206 (8/83) Endorsement TaxSaver, Choice
-----------------------------------------------------------------------------------------------------------------------------
L-7024 (3/91) Endorsement TaxSaver
-----------------------------------------------------------------------------------------------------------------------------
L-6803 (12/87) Endorsement TaxSaver
-----------------------------------------------------------------------------------------------------------------------------
L-6410 (11/84) Endorsement Choice
-----------------------------------------------------------------------------------------------------------------------------
L-6623 (4/86) Endorsement Choice
-----------------------------------------------------------------------------------------------------------------------------
L-6846 (1/89) Endorsement Choice
-----------------------------------------------------------------------------------------------------------------------------
L-6907 (4/89) Endorsement Choice
-----------------------------------------------------------------------------------------------------------------------------
L-6917 (4/89) Endorsement Choice
-----------------------------------------------------------------------------------------------------------------------------
L-6992 (10/90) Endorsement Choice
-----------------------------------------------------------------------------------------------------------------------------
L-1043 (1/91) Endorsement Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-1045 (2/91) Endorsement Advantage III
-----------------------------------------------------------------------------------------------------------------------------
L-5395 (7/79) Endorsement - Contingent Owner Living Life/Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-5175 (2/78) Child Rider Living Life/Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-5723 (9/81) Waiver of Cost of Ins. Living Life/Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-5768 (9/81) Endorsement - Add. Specified Amount Living Life/Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6148 (4/83) ADB Rider Living Life/Individualist
-----------------------------------------------------------------------------------------------------------------------------
L-6156 (4/83) Spouse Level Term Rider Living Life/Individualist
-----------------------------------------------------------------------------------------------------------------------------
Schedule 1.1(E)
Post-Closing Ceding Commission
Annuities: One time fee equal to fifty basis points (0.5%) of initial Premium.
Life Insurance Policies: One percent (1.0%) of all Premium.
Schedule 1.1(F)
Separate Accounts
KILICO Variable Annuity Separate Account (SEC File No. 811-03199)
KILICO Variable Separate Account (SEC File No. 811-05025)
KILICO Variable Separate Account-2 (SEC File No. 811-08347)
Xxxxxx Investors Life Insurance Company Variable Annuity Acct. C (SEC File No.
811-02965)
KILICO MVA Separate Account No. 1 (non-unitized)
KILICO MVA Separate Account No. 2 (non-unitized)
KILICO Variable Annuity Separate Account-2
KILICO Variable Separate Account-3
KILICO Variable Separate Account-4
KILICO Variable Separate Account-5
KILICO Variable Series I Separate Account
KILICO Variable Series II Separate Account
KILICO Variable Series III Separate Account
KILICO Variable Series V Separate Account
KILICO Variable Series VI Separate Account
Schedule 1.1(G)
Guaranty Fund Assessment Accrual Methodology
The Company receives the National Organization of Life and Health Insurance
Guaranty Associations (NOLHGA) survey annually. This survey provides data
regarding insolvency costs, to assist in establishing GFA accruals. Specific
insolvency costs are given by company and by state, split by Life and Annuity.
The Company calculates its portion of each company's (insolvent companies) costs
by taking our premiums produced in that state over total industry premiums in
that state (once again split between Life and Annuity) and multiplying that
times the total estimated insolvency costs (by state) of that company (by Life
and Annuity). The Company does this for each insolvent company to determine the
total estimated ultimate GFA liability. Payments already made for each
individual insolvency are then deducted from each companies ultimate liability
and these net costs are aggregated to get our total estimated GFA liability
(i.e., the Company's estimated future fundings). The Company's existing accrual
is trued up to this new estimated liability.
Exhibit A
Intentionally Omitted
Exhibit B
Form of Security Trust Agreement
Attached hereto.
Exhibit C
Intentionally Omitted
Exhibit D
Form of Monthly Accounting (Coinsurance)
--------------------------------------------------------------------------------
Amounts due to FKLA (reinsurer):
Premiums received
Net policy loan activity
--------------------
Amounts due to KILICO (reinsured):
Benefits paid
Commissions paid
Ceding Commission (Post-Closing Policies)
Premium taxes paid
Guarantee fund assessments paid
--------------------
--------------------
Net amount due to/(from) FKLA
====================
--------------------------------------------------------------------------------
Form of Monthly Accounting (Modified Coinsurance)
--------------------------------------------------------------------------------
Amounts due to FKLA (reinsurer):
Premiums received
Net policy loan activity
--------------------
Amounts due to KILICO (reinsured):
Benefits paid
Commissions paid
Ceding Commission (Post-Closing Policies)
Premium taxes paid
Guarantee fund assessments paid
--------------------
Net Mod-Co adjustment
====================
Net amount due to/(from) FKLA
====================
--------------------------------------------------------------------------------
Exhibit E
Recapture Fee
The Recapture Fee shall equal:
i) The General Account Reserves as of the Recapture Date; minus
ii) Any amounts payable under the Final Monthly Accounting pursuant to
Section 4.2. In this regard, amounts payable to the Reinsurer will be treated as
positive and those payable to the Company as negative; minus
iii) The Termination Fee, determined as set forth below, provided, however,
that with respect to a Recapture Date occurring within a period of three (3)
years following the Closing Date, the Termination Fee shall be zero.
Interest, at the Interest Rate, shall be payable on amounts payable hereunder
and shall accrue from the Recapture Date.
The above items will be as of the Recapture Date. In the event that an item
cannot be determined exactly a best estimate will be used and corrected as soon
as it is practical to do so. Until such time as all of items (ii) and (iii), and
the interest payable, are based on final amounts, the Company will set up an
amount equal to the estimates of these three amounts which is payable to the
Reinsurer, but withheld from payment.
The Termination Fee shall equal the present value of all future profits for the
Policies and Post-Closing Policies reinsured as of the Recapture Date, as
determined by an actuarial appraisal. To this end, the Reinsurer will perform
such an appraisal following the Recapture Date and communicate an actuarial
report (which includes the results) to the Company, which will have thirty (30)
days from the receipt of the report to agree with the results or suggest changes
to the Reinsurer's appraisal. If no agreement can be reached within ninety (90)
days after the Recapture Date, this issue will be submitted for dispute
resolution in accordance with Section 10.1 hereof.
The actuarial appraisals used to determine the Termination Fee will follow the
principles of Actuarial Standard of Practice 19 and will reflect the in-force
business and underlying assets of the Policies and Post-Closing Policies as of
the Recapture Date. The discount rate used shall be an after-tax rate equal to
the greater of (a) 12%, or (b) the 10-year interest rate swap yield (as of the
termination date) times 0.65 plus 6%. The assumed ongoing expenses in the
appraisal shall be based on industry standard expense factors from the NAIC's
Life Insurance Illustrations Model Regulation or its successor. These appraisals
shall include recognition of required surplus at a level of 225% times the NAIC
company action level risk based capital based on the characteristics of the
assets and liabilities being recaptured.
