EXHIBIT 10.16
ADMINISTRATION AND MARKETING AGREEMENT
ENTERED INTO BY AND BETWEEN
LIFEUSA INSURANCE COMPANY
OF MINNEAPOLIS, MINNESOTA
(THE "COMPANY")
AND
LTCAMERICA HOLDING, INC.
OF MINNEAPOLIS, MINNESOTA
( "HOLDING")
DATED AS OF JANUARY 1, 1999
WHEREAS, Holding, through its subsidiary, Capitol Bankers Life
Insurance Company ("Insurance"), proposes to offer a line of life insurance,
annuity and health insurance products, and the Company desires to provide
similar products utilizing Holding's skills in product design and underwriting;
NOW, THEREFORE, in consideration for the mutual promises and
undertakings set forth herein and for other good and valuable consideration, the
parties hereby agree as follows:
SECTION 1 - DEFINITIONS
1.1 "Covered Products" shall mean ordinary life insurance policies,
annuities and health insurance issued on Exhibit 1 hereto. It is expressly
understood and agreed that Exhibit 1 may be amended from time to time to add New
Insurance Products.
1.2 "Marketing Services" shall mean identifying prospective agents
("Prospective Agents") of the Company for purposes of marketing the Covered
Products and New Insurance Products, notifying the Company of Prospective
Agents, and processing agent appointments and cancellations on behalf of the
Company, and training and supervising all agents appointed with respect to the
Covered Products and New Insurance Products. "Marketing Services" shall also
include, subject to such limitations as the Company may from time to time deem
appropriate, seeking approval on behalf of the Company by appropriate insurance
departments, wherever required, of appointments of Prospective Agents.
1.3 "New Insurance Products" shall be life insurance, annuity products
and health insurance developed by Holding or its subsidiary, Insurance, which
are, with the approval of the Company added to those listed on Exhibit 1. New
Insurance Products shall be products similar to those of Insurance written on
the Company's paper.
1.4 "Operating Manuals" shall mean all written rules, regulations,
instructions and directives of the Company regarding its operations, as are in
effect from time to time.
1.5 "Policy Administration Services" shall mean, with respect to the
Covered Products and New Insurance Products, (a) preparation and filing with
state insurance departments, as appropriate all policy form filings, including
premium rates, subject to such limitations as the Company may from time to time
deem appropriate, (b) provision of full administration services, including
billing and collecting premium, monthly processing, loan processing, valuation,
policyholder statements, maintenance of policy records, processing policy
cancellations, policy changes, contractual changes, reinstatements and customer
inquiries, (c) designing, printing and distribution of administrative forms as
they become necessary, and (d) all other administrative activities in connection
with the Covered Products and New Insurance Products, including, but not limited
to, maintaining necessary records and the producing of required reports such
that the cash payments made between Holding and the Company, and between the
Company and its reinsurers, can be accurately computed and recorded. "Policy
Administrative Services" shall not include any activities related to (i)
adjusting or paying claims or (ii) negotiating reinsurance on behalf of the
Company.
1.6 "Services" shall mean Underwriting Services, Policy Administration
Services and Marketing Services.
1.7 "Underwriting Guidelines" shall mean the Company's underwriting
guidelines as in effect from time to time. Holding may recommend changes to the
Underwriting Guidelines, which changes shall be subject to the Company's
approval, which approval shall not be unreasonably withheld.
1.8 "Underwriting Services" shall mean, with respect to the Covered
Products and New Insurance Products, processing and accepting applications and
proposals for insurance, underwriting (including determination of appropriate
rates), policy issuance, policy printing, processing of unscheduled policy
changes, policy cancellations, routing of applications and other papers required
in the underwriting process, routing of issued policies for delivery to
policyholders, and all other related services.
SECTION 2 - SERVICES
2.1 Holding shall provide the Services in the name of and on behalf of
the Company with respect to the Covered Products and New Insurance Products in
the states listed in Schedule A hereto. Holding shall provide the Services in
the name of and on behalf of the Company only as provided in this Agreement or
as directed by the Company in writing. Except as specifically set forth in this
Agreement or as authorized by the Company in writing, Holding shall not have
authority to enter into any agreements on the Company's behalf or to alter or
amend any of the policies relating to the Covered Products and New Insurance
Products or to modify, waive or extend any of their provisions.
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2.2 In connection with the Policy Administration Services provided by
Holding under this Agreement, Holding shall:
a. be responsible for all Company policies entrusted to it whether
issued or not, and shall only issue policies in series;
b. be responsible for making, or causing to be made, any
modifications to administrative systems required for the ongoing
administration of all policies in force or new policies being issued;
c. maintain all records, including but not limited to statistical
and accounting records, that a life and health insurance company would
maintain with respect to the Covered Products and New Insurance
Products so as to allow the Company to make only general ledger entries
in its books and records; and
d. maintain all other data which are necessary to enable the
Company to prepare its annual convention statement and any other
reports required by any governmental agency or reporting bureau or
which are reasonably required by the Company in order that the Company
may properly analyze and manage the business included under this
Agreement, provided that such data will be provided by Holding to the
Company upon request by the Company.
2.3 In connection with the Marketing Services provided by Holding under
this Agreement, and subject to such limitations as the Company may from time to
time determine, Holding shall have the authority, on behalf of the Company, to
appoint agents of the Company for the purpose of soliciting and producing the
Covered Products and New Insurance Products and to remove any of such agents.
The purpose of such agent appointment is to enable the agents to sell the
Covered Products and New Insurance Products in those states in which they are
licensed and authorized to sell products for Insurance in all jurisdictions
listed in Schedule B hereto. Holding will also use its best efforts to cause
such agents to sell the Covered Products and the New Insurance Products. Holding
shall pay all costs of licensing and appointing such agents on behalf of the
Company.
2.4 The Covered Products and the New Insurance Products shall be
differentiated from the Company products through terms as the Company and
Holding mutually agree. The Company will commit to annual first year and single
premium goals for the calendar year during the term of this Agreement. The goal
for 1999 is $10,000,000 in first year and single premium. Six months prior to
the beginning of each calendar year commencing with respect to the calendar year
2000, the Company and Holding will mutually agree to the amount of first year
and single premium which can be written on the Covered Products and the New
Insurance Products for the next calendar year.
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2.5 Holding shall not:
a. accept applications for, bind or issue any insurance covering
any risk prohibited in writing by the Company or excluded (whether by
exclusion or warranty) from Exhibit 1, covering business produced under
this Agreement;
b. have any authority, right or responsibility with respect to any
of the following activities related to the business produced under this
Agreement: (i) adjusting or paying any claims; or (ii) negotiating
reinsurance on behalf of the Company;
c. mass cancel policies in force that are Covered Products or New
Insurance Products except upon written instructions from the Company to
do so;
d. bind the Company in contravention of its Operating Manuals or
Underwriting Guidelines; or
e. issue any advertising or promotional material bearing the
Company's name without first obtaining the written approval of the
Company, except where such material is consistent with agreed upon
written criteria.
2.6 Holding shall provide the Services (a) in accordance with all
applicable laws, regulations, bulletins and insurance department requirements,
(b) in accordance with applicable Operating Manuals, or such other service
standards as the parties shall mutually agree in writing from time to time, and
(c) in accordance with Sections 2.1 through 2.5 of this Agreement.
2.7 Holding shall be liable to the Company for any losses to the
Company caused by negligent or intentional acts of Holding, its officers,
employees or agents.
2.8 Holding agrees to indemnify and hold the Company harmless from and
against any and all losses, costs, damages and expenses (including attorney's
fees) which the Company may incur by reason of any demand or action by any
person arising out of the negligence or intentional acts of Holding, and the
Company agrees to indemnify and hold Holding harmless from and against any and
all losses, costs, damages and expenses (including attorney's fees) which
Holding may incur by reason of any demand or action by any person arising out of
the negligence or intentional acts of the Company.
2.9 If Holding does not perform all of its duties and responsibilities
under this Agreement after written notice and a reasonable opportunity to
perform, the Company may adjust the compensation paid under Section 5 of this
Agreement, or other remittances to Holding, in order to restore the Company to
the position it would have occupied had Holding performed all of its duties and
responsibilities.
2.10 This Agreement is not exclusive. The Company reserves the right to
appoint agents in the territory covered by this Agreement for the purpose of
producing business other than the Covered Products and New Insurance Products.
Holding reserves, on behalf of its
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subsidiaries, the right of such subsidiaries to appoint agents, including agents
appointed with respect to the Covered Products and New Insurance Products
pursuant to this Agreement, for the purpose of producing business for such
subsidiaries.
SECTION 3 - PREMIUMS
3.1 All premiums received by Holding with respect to the Covered
Products and New Insurance Products, either before or after termination of this
Agreement, shall be held by Holding as trustee for the Company. Holding shall
have the authority to draw against said funds held for and on behalf of the
Company, but only for one or more of the following purposes:
a. Payment of return premiums;
b. Payment of policy claims and benefits; or
c. Payment of reinsurance premiums for any related reinsurance the
Company has obtained with respect to any of the Company's policies
issued under this Agreement.
3.2 Premiums temporarily held by Holding as trustee for the Company may
be invested by Holding in demand or time bank accounts as may be authorized by
the Minnesota Insurance Codes as legal bank investments for Life Insurance
Companies, until drawn on for one or more of the purposes set forth in Section
3.1. Holding shall promptly remit all premiums to the Company's reinsurer in
accordance with the terms of the Reinsurance Contract dated as of ____________,
199___, by and between the Company and Allianz Life Insurance Company of North
America, as amended or replaced from time to time (the "Reinsurance Contract").
3.3 The Company hereby assigns to Holding all income derived from
premiums invested on behalf of the Company by Holding pursuant to the authority
granted herein.
3.4 The keeping of an account with Holding on the Company's books in
the form of a debtor-creditor account is to be deemed merely a record of
business transacted. Neither the keeping of an account in such form, nor the
rendering of same, nor failure to enforce prompt remittance, nor alteration in
compensation rate, nor compromise or settlement, shall be held to waive
assertion of the trust relationship as to premiums collected by Holding. It is
further understood and agreed that Holding is responsible for, and guarantees to
the Company, payment of all premiums on policies due and received on behalf of
the Company with respect to the Covered Products and the New Insurance Products.
Should Holding fail to pay the Company any such premiums received when due,
Holding agrees to bear any collection or other expense, including reasonable
attorney's fees and costs, expended by the Company to enforce collection from
Holding.
SECTION 4 - OPERATION AND ACQUISITION EXPENSES
Holding shall be responsible for all operation and acquisition expenses
incurred in connection with the Covered Products and New Insurance Products
subject to this Agreement,
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including, by way of illustration and not of limitation, such items as rentals,
salaries, supplies not furnished by the Company, postage, advertising, local
license fees, attorney's fees, utilities, cost of equipment, agents' fees or
commissions and assessments or assignments, if any, lawfully made by
governmental authority, the sole liability of the Company being payment of
premium taxes and payment to Holding of the compensation stipulated in Section 6
hereof
SECTION 5 - COMPENSATION
5.1 The Company agrees to allow Holding a service fee equal to (a) the
reinsurance allowance or ceding commission (expressed as a percentage) allowed
the Company under the Reinsurance Contract, less 0.1%, multiplied by (b) the
amount of business to which such allowance or commission is applicable. Holding
shall be responsible for paying all commissions due agents appointed by the
Company with respect to business written by the Company and reinsured under the
Reinsurance Contract.
5.2 Holding agrees to reimburse the Company for premium taxes on all
business subject hereto.
5.3 If a policy reinsured under the Reinsurance Contract lapses at any
point in time during the first 13 months, Holding agrees to reimburse the
Company an amount equal to the excess, if any, of the total first year service
fee paid by the Company under Section 5.1 on that policy over the total first
year "initial" premium paid on that policy, as defined in the Reinsurance
Contract.
5.4 The Company will pay all payments assessed by the various state
guaranty associations based on the Covered Products business. The Company and
Holding agree that assessments will be sought to be recovered either through
future premium tax offsets or additional margins or inforce business.
SECTION 6 - REPORTS AND REMITTANCES
6.1 Within 10 days after the end of each month, Holding shall provide
the Company with a copy of the report the Company the reinsurer under the
Reinsurance Agreement.
6.2 Within 10 days after the end of each month, Holding shall report
the net written premium hereunder for the month of account and remit the
provision for premium taxes as stipulated in Section 5.
SECTION 7 - STATUS OF HOLDING, ITS EMPLOYEES AND AGENTS
While performing its authorities granted herein, Holding shall be
deemed an independent contractor, as the Company reserves no authority or right
to control Holding's method of performance of its duties and responsibilities
hereunder. No employees of Holding shall be regarded as employees of the
Company, except as may be required by governing statutes.
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SECTION 8 - EXAMINATION OF BOOKS AND RECORDS
Holding shall, as often as reasonably requested by the Company, submit
all books and records maintained by Holding pursuant hereto for examination and
review by any authorized representative of the Company and/or its quota share
reinsurers; and Holding shall in all things cooperate and render assistance in
such examination. Holding shall make copies of any such books and records and
furnish them to the Company as may be requested by the Company's
representatives.
SECTION 9 - OWNER OF POLICY FORMS, SUPPLIES AND LICENSES
All policy forms, records and supplies furnished by the Company to
Holding, as well as any policy forms or other supplies on which the Company's
name appears, whether supplied by the Company or not, shall be and remain the
property of the Company and shall be turned over to the Company promptly upon
demand. All licenses and other material relating to governmental licensing or
authorization of the Company with respect to this Agreement shall be and remain
the property of the Company and shall be turned over to the Company by Holding
promptly upon demand.
SECTION 10 - COMMENCEMENT AND TERMINATION
10.1 The effective date of commencement of this Agreement shall be
January 1, 1999, and this Agreement shall continue for a minimum of one year and
will be subject to termination upon either party giving one year advance notice
of cancellation. In the event of the termination of this Agreement, the Company
shall not directly or indirectly (through reinsurance or otherwise) sell any
life or annuity products similar to the Covered Products or the New Insurance
Products during the one year following such termination.
In the event of a termination of this Agreement, Holding may not
directly or indirectly (through reinsurance or otherwise) sell any products
similar to products of the Company other than Covered Products during one year
following such termination.
10.2 If either party fails to perform substantially and materially the
duties and responsibilities set forth in this Agreement or fails to make
required payments hereunder and such failure continues for more than 30 days
after written notice delivered by the other party, the other party may terminate
this Agreement notwithstanding any other provisions to the contrary.
SECTION 11 - ACCESS TO AGENTS
The Company hereby grants to Holding and Insurance the right and
privilege of recruiting the agents of the Company for the purpose of contracting
those agents to sell the products of Insurance in all states in which Insurance
is licensed to sell such products, whether or not the Company is licensed to
sell similar products in those states.
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SECTION 12 - MISCELLANEOUS
12.1 This Agreement, and all rights and interests arising herefrom,
shall be binding upon, and shall inure to the benefit of, the parties hereto,
their representatives, successors and assigns, provided that the authorities,
duties and responsibilities of either Holding or the Company may not be assigned
by either of such parties without the written consent of the other.
12.2 This Agreement may not be modified verbally, nor may it be
modified by any subsequent practice or course of dealing by the parties, or in
any manner other than in writing signed by the parties hereto. No forbearance or
neglect on the part of the Company to enforce any of the provisions of this
Agreement shall be construed as a waiver of any of its rights or privileges
hereunder, unless in each instance a written memorandum specifically expressing
such waiver be made and subscribed by the President or a Vice President of the
Company. No such waiver shall modify this Agreement or affect the rights of the
Company with respect to any subsequent default or failure or performance by
Holding.
12.3 This Agreement shall be deemed to be a Minnesota contract and
construed in accordance with the laws of the State of Minnesota.
12.4 This Agreement supersedes all previous agreements with respect to
the subject matter herein, either oral or written, between the parties hereto.
IN WITNESS WHEREOF, the parties hereto by their respective duly
authorized representatives have caused this Agreement to be executed as of
January 1, 1999.
LIFEUSA INSURANCE COMPANY
By: /s/ Xxxx X. Xxxxxxxx
----------------
Its Senior Vice President
LTCAMERICA HOLDING, INC.
By: Xxxxxxx X. Xxxxx
----------------
Its CFO
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EXHIBIT 1
POLICY FORMS
The format of EXHIBIT 1 includes only Policy Forms and Plan Codes. However, this
Agreement shall cover all state variations and qualified and non-qualified
versions of the Policy Forms and Plan Codes in EXHIBIT 1.
PLAN CODE DESCRIPTION
1C-P-Y 1101X Ideal Care - Comprehensive
1F-P-Y 1102X Ideal Care - Facility Care
1H-P-Y 1103X Ideal Care - Home and Community Based
Care
Y = "N" for non-qualified and "Q" for qualified versions
X = State variation code
SCHEDULE A
TO THE
ADMINISTRATION AND MARKETING AGREEMENT
BETWEEN
LIFEUSA INSURANCE COMPANY
AND
LTCAMERICA HOLDING, INC.
The territory covered by this Agreement includes the following jurisdictions:
All states* except: New York
No other jurisdictions shall be included in the territory covered without the
express written agreement of both parties.
*LTCAmerica Holding, Inc. (and its affiliates) will not act as LifeUSA Insurance
Company's general agent for insurance sales in the State of Connecticut and will
not perform duties nor have responsibilities related thereto under this
Agreement.
