Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
ARTICLE I
PARTIES
This Reinsurance and Service Agreement (hereinafter "Agreement") is made between
National Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
ARTICLE II
REINSURANCE COVERAGE
1. On the basis hereinafter stated, NLV's variable universal life insurance
policies and variable annuity contracts and riders (herein referred to as
"the Contracts") thereto solicited by and its Agents on the policy forms
listed in Schedule A shall be reinsured with . The term "accumulated value"
used herein refers to both the accumulated value of the variable universal
life insurance policies and the contract value of the variable annuity
contracts. The term Variable Account used herein refers to the separate
accounts of NLV used for its variable contracts. The separate account used
for the variable annuity is called the National Variable Annuity Account
II. The separate account used for the variable life insurance is called the
National Variable Insurance Account.
2. The reinsurance will consist of (1) a 50% modified coinsurance arrangement,
(2) a term reinsurance arrangement, (3) a reinsurance arrangement with
respect to the Disability Benefit - Payment of Mission Costs (hereinafter
the "Mission Benefit"), and (4) an arrangement whereby an underwriting and
life insurance death claim administration allowance will be paid to for
underwriting and life insurance death claim administration services
provided by .
3. 's liability for any reinsurance under this Agreement begins upon the
effective date of this Agreement as set forth in Article XIX, Execution,
and ends as set forth in Article XV, Duration of Agreement. 's liability to
NLV under this Agreement will be coexisting with NLV's liability under the
Contracts reinsured.
4. The amount of reinsurance under this agreement shall be maintained in force
without reduction so long as the Contracts remain in force without
reduction (except for recapture rights given NLV in the event of a change
in term reinsurance rates as described in Article V and Schedule K).
1
5. shall not accumulate or acquire any interest in Statutory Reserves or
Accumulated Values of the Contracts held by NLV. The liability of , to the
extent of the Agreement, will be in accordance with the provisions of NLV's
policy forms.
6. 's liability to NLV or NLV's liability to will be settled and paid on the
basis of the Settlement Reports NLV prepares in the form of Schedules B1,
B2 and B3. Schedule B1 covers those transactions settled and paid at the
end of each month; Schedule B2 covers those transactions settled and paid
at the end of each quarter; Schedule B3 covers life insurance death claims
settled and paid at time of death. Payment of any amount due to be paid by
either company will be determined on a net basis and will be paid within
ten (10) business days after receipt of the monthly or quarterly report.
ARTICLE III
COMPUTATION OF MODIFIED COINSURANCE NET PREMIUM
NLV shall pay a Modified Coinsurance Net Premium calculated monthly according to
the following (If negative, it shall be paid by to NLV):
1. One-half the Gross Premiums collected for the Contracts during the
month. Gross Premium is the premium paid to NLV by policyholders, minus
any premium returned by NLV to policyholders, prior to any
percent-of-premium charges;
2. Minus one-half of all the Claims, except life insurance death claims
covered in Article VI, of policyholders under the Contracts during the
month (per Schedule E);
3. Minus one-half of the Net Marketing Allowance for Life Insurance for
variable life insurance for the month. The Net Marketing Allowance for
Life Insurance is shown in Schedule F;
4. Minus one-half of the Net Marketing Allowance for Annuities for
variable annuities for the month. The Net Marketing Allowance for
Annuities is shown in Schedule G;
5. Minus one-half of the Premium Tax, including any retaliatory Premium
Tax, incurred on the Contracts during the month. This will be
calculated on an approximate basis each month with an exact "true up"
at the end of each calendar year;
2
6. Minus one-half of the Other Expense Allowances on the Contracts during
the month (per Schedule H). Other Expense Allowances are based on
formula allowances and not the actual costs of underwriting, issuing,
processing claims and administering the Contracts. Therefore, and NLV
retain the expense risk with respect to services that they provide; and
7. Minus one-half of the DAC Tax incurred on the Contracts during the
month. DAC Tax is equal to 1.47% of Gross Premium, collected during the
month, for non-qualified life insurance policies plus 0.33% of Gross
Premium, collected during the month, for non-qualified annuity
contracts.
ARTICLE IV
COMPUTATION OF MODIFIED COINSURANCE ADJUSTMENT
shall pay NLV a Fixed Account Modified Coinsurance Adjustment and
a Loan Account Modified Coinsurance Adjustment calculated quarterly
according to the following (If negative, it shall be paid by NLV to ):
1. One-half of the Fixed Account Modified Coinsurance Reserve Adjustment
and one-half of the Policy Loan Account Modified Coinsurance Reserve
Adjustment on the Contracts during the quarter (per Schedule I). For
the purposes of this Agreement, Statutory Reserves include reserves for
active policies, incurred but not reported reserves, claim reserves and
reserves for rider benefits.
2. Plus one-half of the Fixed Account Modified Coinsurance Target Surplus
Adjustment and one-half of the Policy Loan Account Modified Coinsurance
Target Surplus Adjustment on the Contracts during the quarter (per
Schedule J).
3. Minus one-half the Fixed Account Interest Credit on Modified
Coinsurance Reserve and one-half of the Policy Loan Account Interest
Credit on Modified Coinsurance Reserve for the quarter (per Schedule
C).
4. Minus one-half the Fixed Account Interest Credit on Modified
Coinsurance Target Surplus and one-half of the Policy Loan Account
Interest Credit on Modified Coinsurance Target Surplus for the quarter
(per Schedule D).
shall pay NLV a Variable Account Modified Coinsurance Adjustment
calculated monthly according to the following (If negative, it shall be
paid by NLV to ):
3
1. One-half of the Variable Account Modified Coinsurance Reserve
Adjustment on the Contracts during the month (per Schedule I).
2. Plus one-half of the Variable Account Modified Coinsurance Target
Surplus Adjustment on the Contracts during the month (per Schedule J).
3. Minus one-half the Variable Account Interest Credit on Modified
Coinsurance Reserve for the month (per Schedule C).
4. Minus one-half the Variable Account Interest Credit on Modified
Coinsurance Target Surplus for the month (per Schedule D).
5. Minus one-half of the Investment Management Reimbursement Credit for
the month (per Schedule C)
ARTICLE V
COMPUTATION OF TERM REINSURANCE PREMIUM
The life insurance contracts, excluding survivorship life contracts, will be
subject to a term reinsurance arrangement whereby NLV will cede its one-half of
the mortality risk to . All premiums under this term reinsurance arrangement
will be due at the end of each calendar month based on the activity during the
month.
NLV shall pay a Term Reinsurance Premium calculated according to the following:
1. The Term Reinsurance Premium for the month (per Schedule K).
2. Plus a payment equal to one-half of of the Cost of Insurance charges,
collected during the month, for Guaranteed Insurability Option riders
attached to contracts other than survivorship life contracts. This
payment compensates for the assumption of 100% of the risk under this
rider.
4
ARTICLE VI
DEATH CLAIMS
For each claim for death benefits under the life insurance Contracts, shall pay
NLV the sum of (1) Death Benefits pursuant to the modified coinsurance
arrangement and (2) Death Benefits pursuant to the term reinsurance arrangement,
calculated according to the following:
1. With respect to the modified coinsurance arrangement, one-half
of the Death Benefits paid to policyholders, before diminution
for policy loans and without deduction of accumulated value,
including benefits under the Accidental Death Benefit rider,
without deduction of reserves, and including benefits under
the Accelerated Death Benefit rider, before diminution for
policy loans and without deduction of accumulated value. These
Death Benefits are paid to NLV on a single sum basis; will not
participate in any periodic settlement of these benefits to
policyholders.
2. With respect to the term reinsurance arrangement, one-half of
(a) minus one-half of (b),where:
(a) = Death Benefit, on contracts other than survivorship life
contracts, determined as of the beginning of the policy year
of death, before diminution for policy loans, including
benefits under the Accelerated Death Benefit rider, before
diminution for policy loans, and excluding benefits under the
Accidental Death Benefit rider. These Death Benefits are paid
to NLV on a single sum basis; will not participate in any
periodic settlement for these benefits to policyholders.
(b) = Accumulated Value, determined as of the beginning of the
policy year of death, before diminution for policy loans, with
respect to the Death Benefits in (a) above.
For life contracts other than survivorship life contracts, has assumed 100%
of the mortality risk with respect to the reinsured contracts and will
perform death claim administration services related to the validation of
claims. Therefore, will have unilateral discretion with respect to
decisions regarding claims for death benefits, including decisions to
contest the claim or the policy. will bear all costs associated with the
investigation and settlement of death claims or lawsuits with respect
thereto.
5
For survivorship life contracts, and NLV have each assumed 50% of the
mortality risk with respect to the reinsured contracts, but will perform
death claim administration services related to the validation of claims.
All death claims made on the underlying policies, when settled by in good
faith will be binding on NLV. will notify NLV promptly of such obligations
as they become known to . will give NLV prompt notice of any claim
submitted on any underlying policy and prompt notice of any legal
proceedings as they become known to . will furnish to NLV copies of
documents bearing on such claims or legal proceedings upon request. must
promptly notify NLV of 's intent to contest insurance under any such
contract or to assert defenses to a claim under any such contract. NLV will
reserve the right to examine any materials obtained on any investigation.
If NLV agrees to participate in and share equally in the expenses of the
contest or assertion of defenses, and if such contest or assertion results
in the reduction of liability, NLV and will share in the reduction equally.
If NLV should decline to participate in and share the expenses of the
contest or assertion of defenses, NLV will pay its proportional share of
the claim and NLV will not share in any reduction of liability.
For annuity contracts, and NLV have each assumed 50% of the mortality risk
with respect to the reinsured contracts, but NLV will perform death claim
administration services related to the validation of claims. All death
claims made on the underlying policies, when settled by NLV in good faith
will be binding on . NLV will notify promptly of such obligations as they
become known to NLV. NLV will give prompt notice of any claim submitted on
any underlying policy and prompt notice of any legal proceedings as they
become known to NLV. NLV will furnish to copies of documents bearing on
such claims or legal proceedings upon request. NLV must promptly notify of
NLV's intent to contest the death benefit under any such contract or to
assert defenses to a claim under any such contract. will reserve the right
to examine any materials obtained on any investigation. If agrees to
participate in and share equally in the expenses of the contest or
assertion of defenses, and if such contest or assertion results in the
reduction of liability, and NLV will share in the reduction equally. If
should decline to participate in and share the expenses of the contest or
assertion of defenses, will pay its proportional share of the claim and
will not share in any reduction of liability.
For all life and annuity death claims, NLV will perform death claim
administration services related to the policy and claim administrative
systems, fulfill tax reporting responsibilities, and disburse funds. NLV
will perform all services related to waiver claims.
For all life and annuity death claims, whichever party receives the initial
notice of claim from a policyholder shall promptly notify the other party
of this event.
6
ARTICLE VII
REINSURANCE OF THE MISSION BENEFIT
The Mission Benefit is scheduled to be available on individual variable life
contracts by March 31, 1999. This rider will be 50% reinsured from NLV to on a
modified coinsurance basis. Therefore, Article III and Article IV apply to this
rider. In addition, NLV will cede its one-half of the disability risk with
respect to this rider to by paying monthly to one-half of 100% of the Cost of
Insurance charges for the Mission Benefit collected during the month and by
receiving monthly from reimbursement for NLV's 50% of any benefits paid during
the month pursuant to the Mission Benefit.
The result is that is assuming 100% of the risk under the Mission Benefit and
will administer the claims thereunder.
NLV will calculate the reserves for the Mission Benefit, with reserve factors
supplied by , and report reserves to .
ARTICLE VIII
UNDERWRITING AND DEATH CLAIM ADMINISTRATION SERVICE AGREEMENT
shall perform the underwriting and death claim validation on the variable
life insurance policies and receive an Underwriting Allowance and Death Claim
Administration Allowance for services performed. will receive the Underwriting
Allowance for each life insurance contract that is issued, paid for, and is in
force after the contractual free look period. will receive the Death Claim
Administration Allowance for each life insurance death claim processed. All
payments will be made at the end of each calendar month based on the activity
during the month.
retains the expense risk associated with the underwriting and the death
claim validation of the life insurance policies.
NLV shall perform the death claim validation on the variable annuity policies
and receive a Death Claim Administration Allowance for services performed. NLV
will receive the Death Claim Administration Allowance for each annuity death
claim processed. All payments will be made at the end of each calendar month
based on the activity during the month.
NLV retains the expense risk associated with the death claim validation of the
annuity policies.
Whichever party receives the initial notice of claim from a policyholder shall
promptly notify the other party of this event.
7
In order that NLV has sufficient time to secure third party reinsurance, shall
notify NLV promptly when it is underwriting a survivorship life case in excess
of $2 million. In the event that NLV's retention is exceeded and it cannot
obtain reinsurance under its existing reinsurance treaties, rates and
procedures, based on the underwriting classification of the insureds as
determined by , NLV retains the right to decline the case. As part of the normal
underwriting process, will have discretion to decline cases if it cannot secure
third party reinsurance under its existing reinsurance treaties, rates and
procedures, based on the underwriting classification of the insureds that
assigns.
Under this service agreement the Underwriting Allowance and the Death Claim
Administration Allowance shall be calculated according to Schedule M.
ARTICLE IX
TAX ADJUSTMENTS
Two Tax Adjustments will be paid quarterly:
1. Tax Reserve Adjustment. The Tax Reserve Adjustment, paid quarterly by
to NLV, is equal to one-half of the excess of (a) over (b), multiplied
by the ratio of (c) to (d), where:
(a) The Statutory Reserve with respect to the Contracts at the end of
the current quarter minus the Tax Reserve with respect to the Contracts
at the end of the current quarter; and
(b) The Statutory Reserve with respect to the Contracts at the end of
the preceding quarter minus the Tax Reserve with respect to the
Contracts at the end of the preceding quarter; and
(c) .35, which is the Federal Income Tax rate; and
(d) .65 which is one minus the Federal Income Tax rate of .35.
If this adjustment is negative, then it will be paid by NLV to . In the
event that the Federal Income Tax rate changes, the contracting
companies will adjust the rate used in (c) and (d) above accordingly.
2. DAC Tax Adjustment. The DAC Tax Adjustment, paid quarterly, is equal to
(a) multiplied by the ratio of (b) to (c), plus (d) multiplied by the
ratio of (e) to (f), where:
8
(a) The net sum of all cash flows during the quarter with respect to
life insurance policies. This net sum includes three months of cash
flows under Articles III, V, VI, VII and VIII, plus the quarterly cash
flows under Article IV and this Article IX (1) above; and
(b) .0147, which is the DAC Tax rate for life insurance; and
(c) .9853, which is one minus (b); and
(d) The net sum of all cash flows during the quarter with respect to
annuity contracts. This net sum includes three months of cash flows
under Articles III, plus the quarterly cash flows under Article IV and
this Article IX (1) above; and
(e) .0033, which is the DAC Tax rate for annuities; and
(f) .9967, which is one minus (e).
If the net sum of all cash flows in (a) above is payable by NLV to ,
then (a) multiplied by the ratio of (b) to (c) is payable by NLV to ;
if the net sum of all cash flows in (a) above is payable by to NLV,
then (a) multiplied by the ratio of (b) to (c) is payable by to NLV.
If the net sum of all cash flows in (d) above is payable by NLV to ,
then (d) multiplied by the ratio of (e) to (f) is payable by NLV to ;
if the net sum of all cash flows in (d) above is payable by to NLV,
then (d) multiplied by the ratio of (e) to (f) is payable by to NLV.
In the event that there is a change in the rate used to determine the
amount of capitalized specified policy acquisition expense, or the
number of years over which the capitalized expense may be amortized, as
defined by Internal Revenue Code Section 848, the contracting companies
will adjust the rate used in (b), (c), (e) and (f) above, and Article
III (7) accordingly.
9
ARTICLE X
REPORTING
NLV will provide with information to properly account for the business
reinsured, as follows:
a. Not later than ten (10) business days after the end of each month, NLV
will submit a report substantially in accordance with Schedule B1. NLV
agrees to provide or make available to such documentation as may be
reasonably necessary to support the items reported.
b. Not later than ten (10) business days after xxx xxx xx xxxx xxxxxxxx
xxxxxxx, XXX will submit reports substantially in accordance with
Schedule B2 and Schedule N.
c. As soon as possible after settlement of a death claim, NLV will submit
a report substantially in accordance with Schedule B3.
ARTICLE XI
ACCOUNT PAYABLE LIABILITY
NLV will set up an Account Payable liability in NLV's financial statements
equal to one-half of the excess of the total Accumulated Value associated
with the Variable Account of the reinsured policies over of the Statutory
Reserve associated with the Variable Account of the policies. The Statutory
Reserve associated with the Variable Account is defined as the Statutory
Reserve, minus the reserves for any riders, times the ratio of the Variable
Account Accumulated Value to the Total Accumulated Value. NLV will report
the amount of this Account Payable to quarterly. will set up an Account
Receivable asset equal to the Account Payable liability NLV sets up. If
this amount is negative, then will set up such amount as an Account Payable
liability and NLV will set up such amount as an Account Receivable asset.
10
ARTICLE XII
GENERAL PROVISIONS
1. Reinsurance Conditions. The reinsurance is subject to the same terms,
limitations and conditions as the insurance under the policy or policies
written by NLV on which the reinsurance is based.
2. Extra-Contractual Damages. If extra-contractual damages are rendered
against either or NLV with respect to the contracts reinsured as a result
of acts, omissions or course of conduct committed by either party, the
liability for such damages shall be shared as follows. In general, the
liability for such damages will reside with both parties in proportion to
the impact which the actions of their employees or agents had on the claim
for damages. For the purposes of this section, 's agents and agency
managers will be considered the responsibility of . If the damages were
induced by 's underwriting or life insurance death claim validation, then
the liability will reside with . If the damages were induced by the policy
form, investment management, investment performance of the policy, annuity
death claim administration, or NLV's contract administration and servicing,
then the liability will reside with NLV. The circumstances of such
liability sharing are difficult to define in advance. The extent of such
liability sharing is dependent on a good faith assessment of responsibility
in each case.
3. Errors and Omissions. Any inadvertent delay, omission or error will not
relieve either contracting company from any obligation which would attach
to it hereunder if such delay, omission or error is rectified immediately
upon discovery. Such rectification will include any cost necessary to
restore the non-erring company to the position it would have occupied had
the error not occurred. If the contracting companies mutually agree that
there is an inadvertent error in this Agreement, then the Agreement will be
amended to correct the mistake.
4. Misstatement of Age or Sex. In the event that any obligation arising from
an underlying policy is increased or reduced because of a misstatement of
age or sex of an insured, 's liability with regard to that underlying
policy will be increased or reduced accordingly. Any adjustment in
reinsurance premium will be made on the same basis as the underlying
policy.
5. Reinstatement. If an underlying policy lapses for nonpayment of premium and
is reinstated under NLV's terms and rules, the reinsurance will be
reinstated by . NLV must pay its share of any back reinsurance premiums in
the same manner as NLV received insurance premiums under each reinstated
policy.
11
6. Inspection. At any reasonable time and with reasonable notice, the
contracting companies or their duly authorized representatives may inspect
the original papers and any other books or documents at the Home Office of
the other relating to or affecting reinsurance under this Agreement.
7. Confidentiality. It is mutually agreed by the contracting companies that
any information, documentation and reports that are made available for
inspection under this section of the Agreement will be kept confidential
and under no circumstances may the information, documentation and reports
be disclosed to, or made available for inspection by any third party unless
required by another reinsurer, law, regulation, a self-regulatory
organization or mandated by court order, without the prior consent of the
other contracting company, which consent shall not be unreasonably
withheld. In the event that confidential information is required to be
disclosed under one of the above circumstances, the disclosing company will
promptly give written notice of the disclosure to the other company.
8. Replacements. NLV agrees that it will impose a commission reduction to
agents and managers on life insurance policies as disincentives to the
replacement of in force policies with these Contracts. agrees that it will
impose its regular commission reductions (or a reduction that is
substantially equal to its normal commission reductions) on life insurance
policies to agents and managers as disincentives to the replacement of in
force Contracts with policies or contracts or with -sponsored policies or
contracts. -sponsored policies or contracts will not include other variable
products available to agents through Equity Services, Inc. (hereinafter
"ESI"). NLV agrees that it will impose a commission reduction to agents and
managers on annuity contracts as disincentives to the replacement of in
force annuity contracts with these Contracts. The reduction will be for the
replacement of annuity contracts not subject to a surrender charge and for
annuity contracts subject to a surrender charge. agrees that it will impose
its regular commission reductions (or a reduction that is substantially
equal to its normal commission reductions) on annuity contracts to agents
and managers as disincentives to the replacement of in force Contracts with
policies or contracts or with -sponsored policies or contracts. -sponsored
policies or contracts will not include other variable products available to
agents through ESI.
9. Choice of Law. If any provision of this Agreement is held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby. This Agreement will be construed
and enforced in accordance with the applicable federal law and the laws of
the State of Vermont.
10. Insolvency. For the purpose of this Agreement, NLV or shall be deemed
insolvent when it:
a. applies for or consents to the appointment of a rehabilitator,
conservator, liquidator or statutory successor of its properties or
assets; or
b. makes an assignment for the benefit of its creditors; or
12
c. is adjudicated as bankrupt or insolvent; or
d. files or consents to the filing of a petition in bankruptcy, seeks
reorganization or an arrangement with creditors or takes advantage of
any bankruptcy, dissolution or liquidation, or similar law or statute;
or
e. becomes the subject of an order to rehabilitate or an order to liquidate
as defined by the insurance code of the jurisdiction of the domicile of
NLV or , as the case may be.
In the event of the insolvency of either NLV or , any amounts owed by NLV
to and by to NLV with respect to this agreement shall be offset and only
the balance shall be paid.
In the event of the insolvency of NLV, the reinsurance obligations under
this Agreement shall be payable by directly to NLV, its liquidator,
rehabilitator, conservator or statutory successor, immediately upon demand,
with reasonable provision for verification on the basis of the claims
allowed against NLV by any court of competent jurisdiction or by any
rehabilitator, conservator, liquidator, or statutory successor having
authority to allow such claims without diminution because of the insolvency
of NLV, or because the rehabilitator, conservator, liquidator or statutory
successor has failed to pay all or a portion of any claims.
In the event of the insolvency of , NLV may cancel this Agreement for new
business by promptly providing , its rehabilitator, conservator,
liquidator, or statutory successor with written notice of the cancellation
effective the date on which 's insolvency is established by the authority
responsible for such determination. Any requirement for a notification
period prior to the cancellation of the Agreement would not apply under
such circumstances. In addition, NLV may provide , its rehabilitator,
conservator, liquidator, or statutory successor with 90 days written notice
of its intent to recapture, at a market value acceptable to NLV and 's
rehabilitator, conservator, liquidator, or statutory successor, all
reinsurance in force under this Agreement, except for amounts which
retrocedes to another party, regardless of the duration the reinsurance has
been in force. The effective date of recapture due to insolvency would be
the date on which 's insolvency is established by the authority responsible
for such determination.
13
ARTICLE XIII
ARBITRATION
1. It is the intention of the contracting companies that the customs and
practices of the insurance and reinsurance industry will be given full
effect in the operation and interpretation of this Agreement. The
contracting companies agree to act in all things with the utmost good
faith. If the contracting companies cannot mutually resolve a dispute
arising out of or relating to this Agreement, however, the dispute will be
decided through arbitration, as set forth below. The arbitrators will base
their decision on the terms and conditions of this Agreement plus, as
necessary, on the customs and practices of the insurance and reinsurance
industry rather than solely on a strict interpretation of applicable law.
2. The provisions of this article relate to all aspects of this agreement
(including its formation and execution), and to any disputes or
controversies arising out of, in connection with or relating to this
agreement or performance under this agreement, and shall survive the
termination of this agreement.
3. There must be three arbitrators who will be active, former or retired
officers of life insurance companies other than the contracting companies
or their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either company fails to choose an arbitrator within thirty
(30) days after the other company has given written notice of its
arbitrator appointment, the company which has given written notice may
choose two arbitrators who will, in turn, choose a third arbitrator before
entering arbitration. If the two arbitrators are unable to agree upon the
selection of a third arbitrator within thirty (30) days following
appointment, each arbitrator will nominate three candidates within ten days
thereafter. The final selection will be made by a court of competent
jurisdiction from among the six names submitted by the arbitrators.
4. Arbitration must be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association which will be in effect on
the date of delivery of demand for arbitration. The place of arbitration
shall be Chicago, Illinois.
5. The contracting companies will pay their respective arbitrator and
arbitration expenses. The contracting companies will share the third
arbitrator's expenses equally.
14
6. The award agreed upon by the arbitrators will be final and binding upon the
contracting companies, and judgment may be entered in any court having
competent jurisdiction.
ARTICLE XIV
DAC TAX - SECTION 1.848-2(G)(8) ELECTION
1. and NLV each represents and warrants that it is subject to
taxation under Subchapter "L" of the Internal Revenue Code of 1986
(the "Code").
2. and NLV agree to the following pursuant to Section 1.848-2(g)(8)
of the Income Tax Regulations issued December, 1992, whereby:
a. Each party shall attach a schedule to its federal income tax
return which identifies this reinsurance agreement as one for
which the joint election under the Regulation has been made;
b. The party with net positive consideration, as defined in the
Regulation promulgated under Code Section 848, for this agreement
for each taxable year, shall capitalize specified policy
acquisition expenses with respect to such agreement without regard
to the general deductions limitation of Section 848(c)(1);
3. NLV and agree to exchange information pertaining to the amount of
net consideration under this reinsurance agreement each year to
ensure consistency. They also agree to exchange information which
may be otherwise required by the Internal Revenue Service.
a. NLV shall submit a schedule to by May 1 of each year of its
calculation of the net consideration for the preceding calendar
year. This schedule of calculations shall be accompanied by a
statement signed by an officer of NLV stating that NLV shall
report such net consideration in its tax return for the preceding
calendar year.
b. may contest such calculation by providing an alternative
calculation to NLV in writing within thirty (30) days of 's
receipt of NLV's calculation. If does not so notify NLV, shall
report the net consideration as determined by NLV in 's tax return
for the previous calendar year.
c. If contests NLV's calculation of the net consideration, the
parties shall act in good faith to reach an agreement as to the
correct amount within thirty (30) days of the date submits its
alternative calculation. If NLV and reach an agreement on an
amount of net consideration, each party shall report such amount
in their respective tax returns for the previous calendar year.
15
ARTICLE XV
DURATION OF AGREEMENT
This Agreement shall remain in effect while any policy reinsured hereunder is
still in force. Commencing January 1, 2002, or NLV may terminate this Agreement
without cause only with respect to new policies issued after the effective date
of termination by providing written notice to the other party. The termination
with respect to such new policies shall become effective as provided by the
notice, but in no event earlier than one hundred and eighty (180) days after
written notice is given. In addition, termination with respect to such new
policies will occur automatically if the Marketing Agreement dated June 23, 1998
between and NLV is terminated. The effective date of the termination of this
agreement with respect to such new policies shall be the same as the effective
date of the termination of such Marketing Agreement. Notice under this provision
will be made by certified mail, overnight delivery or hand delivery with proof
of receipt.
ARTICLE XVI
MODIFICATION OF ALLOWANCES AND PRODUCT DESIGN
After December 31, 2001, and NLV may negotiate modifications to the terms of
this Agreement. Requested modifications will only apply to new business and will
be implemented only upon mutual agreement in writing. If new terms are not
mutually agreed to in writing within one hundred and eighty (180) days after the
date of the proposal of the new reinsurance arrangement, this Agreement will
terminate with respect to such new business.
If at any time prior to December 31, 0000, XXX substantively changes product
features or charges for new issues and has done so for the products offered
through its career distribution system, NLV and shall negotiate in good faith
modifications to the terms of this agreement reasonably proportionate to those
applicable for the initial Contracts, taking into account the margins associated
with such changes. If new terms are not mutually agreed to in writing within
ninety (90) days after the date of the proposal of the new reinsurance
arrangement, this Agreement will terminate with respect to the affected product.
NLV expressly agrees that this article will be used in good faith and not as a
method to terminate this reinsurance agreement.
16
ARTICLE XVII
PARTIES TO AGREEMENT
This is an Agreement solely between the contracting companies. 's obligations
under this Agreement are solely to NLV and NLV's obligations are solely to . No
legal relationship exists between and any person having an interest of any kind
in any of the underlying policies.
ARTICLE XVIII
ENTIRE AGREEMENT
1. This Agreement represents the entire agreement between NLV and with
respect to reinsurance and supersedes any prior oral or written
agreements between the parties regarding its subject matter.
2. No modification or waiver of any provision of this agreement shall be
effective unless set forth in a written amendment executed by both
parties.
3. A waiver of a right created by this agreement shall constitute a waiver
only with respect to the particular circumstance for which it is given
and not a waiver in any future circumstance.
4. No failure on the part of any party hereto to exercise, and no delay in
exercising any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder preclude
any further exercise thereof or the exercise of any right.
17
ARTICLE XIX
EXECUTION
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated and will be effective as of September 1, 1998.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 1998. on , 1998.
By: By:
Title: Title
By: By:
Title: Title
18
SCHEDULE A
THE CONTRACTS
The following policy forms and riders thereto and any state variations thereof,
are subject to the reinsurance hereunder:
VariTrak (Variable Universal Life): Form 7206
Riders: Guaranteed Death Benefit Rider: Form 7211: Guarantees Death Benefit
for specified period regardless of fund performance
Rider for Waiver of Monthly Deductions: Form 7208 : Waives monthly
deductions upon disability
Rider for Guaranteed Insurability Options: Form 7210: Provides right
to purchase new insurance without evidence of insurability
Rider For Accidental Death Benefit: Form 7209 : Provides additional
Death Benefit if death results from accident
Rider For Accelerated Death Benefit: Form 0092: Provides for payment
of Death Benefit upon certain terminal illness events in lieu
of payment upon death
Disability Benefit - Payment of Mission Costs (when available)
Sentinel Estate Provider (Survivorship Variable Universal Life): Form 7461
Riders: Continuing Coverage Rider: Form 7462 : Continues coverage
beyond age 100
Additional Protection Benefit Rider: Form 7463: Provides additional
Survivorship Death Benefit
Guaranteed Death Benefit Rider: Form 7464 : Guarantees Death Benefit
for specified period regardless of fund performance
Policy Split Option Rider: Form 7465 : Allows policy to be split
into two individual life policies if federal estate tax law
changes or if the insureds divorce Note: if at the time of
the split, the new
individual policies are subject to a reinsurance agreement between the parties,
then the new policies will be reinsured. therwise the new policies will not be
reinsured.
Enhanced Death Benefit Rider: Form 7466: Provides for increased
Survivorship Death Benefit at a targeted age of the younger
insured
Estate Preservation Rider: Form 7467: Provides four years of
additional Survivorship Death Benefit
Annually Renewable Term Rider: Form 7468: Provides additional
individual term life insurance on either or both of the two
insureds
Automatic Increase Rider: Form 7630: Provides regular increases in
Survivorship Death Benefit
Sentinel Advantage (Variable Annuity): Form 7400
Riders: Enhanced Death Benefit Rider: Form 7417 : Provides Death
Benefit(prior to age 81) in an amount greater than Accumulated
Value.
19
SCHEDULE B1
MONTHLY SETTLEMENT REPORT
A. Due with respect to Modified Coinsurance Net Premium
1) Premiums (per Article III(1))
B. Due NLV with respect to Modified Coinsurance Payment
(1) Marketing and Expense Allowances (per Article III(3), (4), (5), (6) and
(7))
(a) Net Marketing Allowance for Life Insurance(variable life) (per
Schedule F)
(b) Net Marketing Allowance for Annuities (variable
annuity) (per Schedule G)
(c) Premium Tax Expense Allowance
(d) Other Expense Allowance (per Schedule H)
(e) DAC Tax Expense Allowance Subtotal
(2) Claims (per Article III(2) and Schedule E)
(a) Surrenders
(b) Withdrawals
(c) Annuity Death Benefits
Subtotal
(3) Variable Account Modified Coinsurance Adjustment (per Article IV)
(a) Variable Account Modified Coinsurance Reserve Adjustment (per
Schedule I)
(b) Variable Account Modified Coinsurance Target Surplus Adjustment
(per Schedule J)
(c) Variable Account Interest Credits on Modified Coinsurance Reserves
(per Schedule C)
(d) Variable Account Interest Credit on Modified Coinsurance Target
Surplus (per Schedule D)
(e) Investment Management Reimbursement Credit (per Schedule C)
(f) Subtotal
(4) Total Xxxxxx Xxx XXXx (1) + (2) + (3)
C. Due with respect to Term Reinsurance Premium
(1) Term Premium (per Article V and Schedule K)
(2) GIO COI Charges (per Article V)
(3) Total Amount Due = (1) + (2)
D. Due with respect to Mission Benefit (per Article VII)
(1) Rider COI Charges
(2) Rider Benefits
(3) Total Amount Due = (1) - (2)
20
E. Service Allowances Due (per Article VIII and Schedule M)
(1) Underwriting (2) Death Claim Administration (3) Total Allowance Due =
(1) + (2)
F. Balance During the Period = A(1) - B(4) + C(3) + D(3) + E(3)
If positive, the balance is due to be paid by NLV to . If negative, the
balance is due to be paid by to NLV.
NLV will provide the above information on an aggregate basis, separately for
variable life insurance, survivorship variable life insurance, and variable
annuities. The individual policy data will be available to on a computer tape or
diskette upon request.
21
SCHEDULE B2
QUARTERLY SETTLEMENT REPORT
A. Due NLV with respect to Fixed Account Modified Coinsurance Reserve
Adjustment and the Policy Loan Account Modified Coinsurance Reserve
Adjustment (per Article IV and Schedule I)
B. Due NLV with respect to Fixed Account Modified Coinsurance Target Surplus
Adjustment and the Loan Account Modified Coinsurance Target Surplus
Adjustment (per Article IV and Schedule J)
C. Due with respect to Fixed Account Interest Credits and the Loan Account
Interest Credits
(1) With respect to Reserve (per Article IV and Schedule C)
(2) With respect to Target Surplus (per Article IV and Schedule D)
(3) Total amount due = (1) + (2)
D. Tax Reserve Adjustment (per Article IX)
(1) Due NLV, or
(2) Due
E. DAC Tax Adjustment (per Article IX)
(1) Due NLV, or
(2) Due
F. Balance During the Period = A +B -C(3) [+D(1) or -D(2)] [+E(1) or -E(2)]
If positive, the balance is due to be paid by to NLV.
If negative, the balance is due to be paid by NLV to
NLV will provide the above information on an aggregate basis, separately for
variable life insurance, survivorship variable life insurance, and variable
annuities.
22
SCHEDULE B3
DEATH CLAIM REPORT
Due NLV
(1) Life Insurance Death Benefits with respect to modified coinsurance
arrangement (per Article VI(1))
(2) Life Insurance Death Benefits (excluding survivorship life) , net
of Accumulated Value, with respect to term reinsurance arrangement (per
Article VI(2))
(3) Total Amount Due NLV = (1) + (2)
NLV will provide the above information for each individual death claim.
23
SCHEDULE C
INTEREST CREDIT ON MODIFIED COINSURANCE RESERVES
The Interest Credit on Modified Coinsurance Reserves consists of the interest
from the variable account, fixed account, policy loan account and an Investment
Management Reimbursement Credit. The interest from the variable account and the
Investment Management Reimbursement Credit will be calculated and paid monthly.
The interest from the fixed account and the policy loan account will be
calculated and paid quarterly.
VARIABLE ACCOUNT INTEREST CREDIT ON MODIFIED COINSURANCE RESERVES
The amount of the interest credit associated with the Variable Account payable
monthly by NLV to is determined according to the schedule below:
A. Variable Account Accumulated Value as of the end of prior month
B. Increases in Variable Account Accumulated Value during the month
(1) Net Premium allocated to Variable Account for the month* (2) Transfer
from Fixed Account to Variable Account** (3) Total Increase (1) + (2)
* Net Premium is premium after deduction of percent of premium charges.
** Includes transfers as a result of loan repayments and interest credited
on loan collateral.
C. Decreases in Variable Account Accumulated Value during the month
(1) Transfer from Variable Account to Fixed Account* (2) Accumulated Value
Release on Death (3) Accumulated Value Released upon Surrender (4) Gross
Withdrawals allocated to the Variable Account** (5) M&E Charges***# (6)
Monthly## Deductions allocated to the Variable Account (7) Total Decrease
(sum of (1) through (6))
* Includes transfers as a result of a new loan or a loan interest
capitalization.
** For variable life, Gross Withdrawals are before diminution for
Withdrawal Administrative Allowance (per Schedule H). For variable annuity,
Gross Withdrawals are before diminution for deferred sales charges.
*** Includes Administrative Charges for Sentinel Advantage # For Varitrak
and Sentinel Advantage, these charges are equal to the total of all such
charges against the Total Accumulated Value associated with the Variable
Account multiplied by the ratio of the average of beginning and end of
month Accumulated Values associated with the Variable Account for reinsured
Contracts to the average of beginning and end of month Accumulated Values
24
associated with the Variable Account for all Varitrak and Sentinel
Advantage contracts inforce with NLV. This calculation is done for Varitrak
and Sentinel Advantage separately. For Sentinel Estate Provider, M&E
Charges are included in (6) Monthly Deductions. ## Includes annual
deductions on variable annuity contracts.
D. Variable Account Accumulated Value as of the end of the month
E. Variable Account Interest Credit on Modified Coinsurance Reserves
= D - A - B(3) + C(7)
FIXED ACCOUNT INTEREST CREDIT ON MODIFIED COINSURANCE RESERVES
The amount of the interest credit associated with the Fixed Account payable
quarterly by NLV to is determined according to the schedule below:
A. Statutory Reserve associated with the Fixed Account* as of the
end of the prior quarter
B. Average Interest Rate for the quarter on the assets supporting
the Fixed Account (as set forth in Schedule P) _______________
C. Fixed Account Interest Credit on Modified Coinsurance
Reserves = (A x B) _______________
* Statutory Reserve associated with the Fixed Account is defined as the sum of
(a) and (b), where (a) is Statutory Reserves, minus the reserves for riders,
times the ratio of the Fixed Account Accumulated Value to the total Accumulated
Value, and (b) is the reserve for riders.
POLICY LOAN ACCOUNT INTEREST CREDIT ON MODIFIED COINSURANCE RESERVES
The amount of the interest credit associated with the Policy Loan Account
payable quarterly by NLV to is determined according to the schedule below:
A. Policy Loan Collateral as of the end of the prior quarter ______________
B. Average Interest Rate Charged on Policy Loans (.06/4) _____.015_____
C. Policy Loan Account Interest Credit on Modified Coinsurance
Reserves = (A x B) ______________
25
INVESTMENT MANAGEMENT REIMBURSEMENT CREDIT
The amount of Investment Management Reimbursement Credit payable by NLV to is
determined according to the schedule below:
(A) (B) (C) (D) (E)
Subaccount: AV** End of AV** End of Average Credit Reimbursement
Prior Month Current Month ((A+B)/2) Percentage* Credit (C x D)
SENTINEL/MARKET STREET FUNDS
Growth ______________ ______________ _____________ ____________
Aggressive Growth ______________ ______________ _____________ ____________
Managed ______________ ______________ _____________ ____________
Bond ______________ ______________ _____________ ____________
International ______________ ______________ _____________ ____________
Sentinel Growth ______________ ______________ _____________ ____________
Money Market ______________ ______________ _____________ ____________
FIDELITY VIP SERIES
Equity Income ______________ ______________ _____________ ____________
Growth ______________ ______________ _____________ ____________
Overseas ______________ ______________ _____________ ____________
High Income ______________ ______________ _____________ ____________
Index 500 ______________ ______________ _____________ ____________
Contrafund ______________ ______________ _____________ ____________
STRONG VARIABLE PRODUCTS FUNDS
Opportunity Fund II ______________ ______________ _____________ ____________
Growth Fund II ______________ ______________ _____________ ____________
XXXXX AMERICAN FUNDS
Small Cap ______________ ______________ _____________ ____________
Growth ______________ ______________ _____________ ____________
XXX XXX
Worldwide Bond ______________ ______________ _____________ ____________
XX XXXXXX SERIES TRUST II
Int. Opportunities ______________ ______________ _____________ ____________
Small Company ______________ ______________ _____________ ____________
AMERICAN CENTURY VP SERIES
Value ______________ ______________ _____________ ____________
Income & Growth ______________ ______________ _____________ ____________
XXXXXXXXX & XXXXXX ADVISERS MANAGERS TRUST
Partners ______________ ______________ _____________ ____________
XXXXXXX SACHS VARIABLE INSURANCE TRUST
International Equity ______________ ______________ _____________ ____________
Global Income ______________ ______________ _____________ ____________
CORE Small Cap ______________ ______________ _____________ ____________
Mid Cap Equity ______________ ______________ _____________ ____________
TOTAL: _____________
*The credit percentage will change each year based on a schedule for each
subaccount which determines the amount of the credit based on the amount of
policyholder value in the subaccount. See Schedule O for a listing of the
schedules for each portfolio.
**Accumulated Value on the Contracts
26
SCHEDULE D
INTEREST CREDIT ON MODIFIED COINSURANCE TARGET SURPLUS
The Interest Credit on Modified Coinsurance Target Surplus consists of the
interest from the target surplus on the variable account, fixed account and
policy loan account. The interest from the target surplus on the variable
account will be calculated and paid monthly. The interest from the target
surplus on the fixed account and the policy loan account will be calculated and
paid quarterly.
VARIABLE ACCOUNT INTEREST CREDIT ON MODIFIED COINSURANCE TARGET SURPLUS
The amount of the interest credit associated with the Variable Account payable
monthly by NLV to is equal to the Variable Account Interest Credit on Modified
Coinsurance Reserves (from Schedule C) multiplied by %.
FIXED ACCOUNT INTEREST CREDIT ON MODIFIED COINSURANCE TARGET SURPLUS
The amount of the interest credit associated with the Fixed Account payable
quarterly by NLV to is equal to the Fixed Account Interest Credit on Modified
Coinsurance Reserves (from Schedule C) multiplied by %.
POLICY LOAN ACCOUNT INTEREST CREDIT ON MODIFIED COINSURANCE TARGET SURPLUS
The amount of the interest credit associated with the Policy Loan Account
payable quarterly by NLV to is equal to the Policy Loan Account Interest Credit
on Modified Coinsurance Reserves (from Schedule C) multiplied by %.
27
SCHEDULE E
CLAIMS
Claims equal the sum of (1) plus (2), where:
(1) Life Insurance Claims which equal the sum of (a) and (b) and (c),
where:
(a) Surrenders paid, net of any surrender charges but before
diminution for policy loans; and
(b) Withdrawals paid, net of the Withdrawal Administrative
Allowance (set forth in Schedule H) but before diminution for
policy loans; and
(c) Missions Rider claims.
(2) Annuity Claims which equal the sum of (a), (b), and (c), where: (a)
Death Benefits paid, without deduction for accumulated value; and (b) Surrenders
paid, net of any surrender charges; and (c) Withdrawals paid, net of any
surrender charges.
These claims are computed on a single sum basis; will not participate in any
periodic settlement of these benefits to policyholders.
28
SCHEDULE F
NET MARKETING ALLOWANCE FOR LIFE INSURANCE
The Net Marketing Allowance for Life Insurance is equal to the
following percentages of variable life insurance agent and manager
commission paid during the month, (a) up to Commissionable Target
Premium and (b) in excess of Commissionable Target Premium;
(a) (b)
Policy Up to Target In Excess of
Year Premium Target Premium
1
2-5
6-10
11+
plus % percent of agent and manager commissions paid with respect to
any increases in variable life insurance coverage;
minus % of all agent and manager commissions charged back on variable
life insurance during the month;
plus, with respect to charge backs due to early lapse of individual
variable life insurance if the volume there of is material, % of all
agent and manager commissions charged back, such amount to be
determined no earlier than the first anniversary of this agreement;
minus, with respect to term conversions if the volume thereof is
material, a mutually agreed upon amount, such amount to be determined
no earlier than the first anniversary of this agreement;
minus the following percentages of variable life insurance agent and
manager commission paid during the month up to Commissionable Target
Premium with respect to policies which replace inforce policies;
Policy Up to Target
Year Premium
1
2-5
6-10
29
plus the commission reductions occurring upon any replacement of these
Contracts by or sponsored contracts or policies, to the extent that
benefits financially from the commission reduction.
Commissionable Target Premium is that portion of the paid premium
which generates full first year and renewal year compensation to
agents and managers according to tables on file at NLV. Commissionable
Target Premium is reduced for term conversions by the amount of credit
extended to the policyholder. Commissionable Target Premium is reduced
for replacements of or NLV in force policies by a factor of .
30
SCHEDULE G
NET MARKETING ALLOWANCE FOR ANNUITIES
The Net Marketing Allowance for Annuities is (a) minus (b)
plus (c), where:
(a) is the Gross Dealer Concession; (b) is the Replacement Balance;
(c) is the commission reduction occurring upon any
replacement of these Contracts by or sponsored
contracts or policies, to the extent that benefits
financially from the commission reduction.
The Gross Dealer Concession is the amount paid (or charged back) to ESI on
variable annuity production. The Gross Dealer Concession is reduced for
variable annuity contracts which replace annuity contracts. The reduction
is for the replacement of annuity contracts not subject to a surrender
charge and for annuity contracts subject to a surrender charge.
The Replacement Balance is the Unadjusted Gross Dealer Concession minus the
Gross Dealer Concession. The Unadjusted Gross Dealer Concession is the
Gross Dealer Concession that would have been paid had the variable annuity
not resulted from a replacement of a annuity. If the variable annuity is
not a replacement of a annuity, then the Replacement Balance will be zero.
The Unadjusted Gross Dealer Concession is equal to the following
percentages of variable annuity Gross Premiums paid during the month and
variable annuity Contract Values at the end of each calendar quarter for
contracts which have passed their first policy anniversary.
Unadjusted Gross Dealer Concession
Compensation Percent of Quarterly Percent of
Schedule Issue Age Gross Premium Contract Value
1 0-79
80-85
2 0-79
80-85
3 0-79
80-85
31
SCHEDULE H
OTHER EXPENSE ALLOWANCES
Other Expense Allowances are the sum of (1) and (2), where:
(1) Life Insurance Other Expense Allowances equal to the sum of (a),
(b), (c), (d) and (e), where:
(a) An Underwriting Allowance (described in Schedule M) per policy issued,
paid for and in force beyond the contractual free look period; and
(b) An Issue Allowance of per policy issued, paid for and in force beyond
the contractual free look period; and
(c) A monthly Administration Allowance of per policy in force at the end of
the month in calendar years 1998 and 1999 and inflated at per calendar
year with the first increase to occur in the year 2000 ; and
(d) A Withdrawal Administrative Allowance of (or of the withdrawal if less)
per withdrawal processed; and (e) A Death Claim Administration
Allowance (described in Schedule M) per life insurance death claim
processed.
(2) Annuity Other Expense Allowances equal to the sum of (a), (b), (c)
and (d), where:
(a) An Issue Allowance of per contract issued, paid for and in force beyond
the contractual free look period; and
(b) A monthly Administration Allowance of per contract in force at the end
of the month in calendar years 1998 and 1999 and inflated at per
calendar year with the first increase to occur in the year 2000; and
(c) A Development Allowance equal to of Gross Premium paid in the month;
and (d) A Death Claim Administration Allowance (described in Schedule
M) per annuity death claim processed.
32
SCHEDULE I
MODIFIED COINSURANCE RESERVE ADJUSTMENT
The Modified Coinsurance Reserve Adjustment consists of the reserve adjustment
for the variable account, fixed account and policy loan account. The reserve
adjustment on the variable account will be calculated and paid monthly. The
reserve adjustment on the fixed account and the policy loan account will be
calculated and paid quarterly.
VARIABLE ACCOUNT MODIFIED COINSURANCE RESERVE ADJUSTMENT
The amount of the reserve adjustment associated with the Variable Account
payable monthly by to NLV is determined according to the schedule below:
A. Variable Account
(1) Variable Account Accumulated Value
at the beginning of the month
(2) Variable Account Accumulated Value
at the end of the month
(3) Variable Account Modified Coinsurance Reserve Adjustment
(A(2) - A(1))
FIXED ACCOUNT MODIFIED COINSURANCE RESERVE ADJUSTMENT
The amount of the reserve adjustment associated with the Fixed Account payable
quarterly by to NLV is determined according to the schedule below:
B. Fixed Account
(1) Statutory Reserve associated with the Fixed Account*
at the beginning of the quarter
(2) Statutory Reserve associated with the Fixed Account*
at the end of the quarter ______________
(3) Fixed Account Modified Coinsurance Reserve Adjustment
(B(2) - B(1))
* Statutory Reserve associated with the Fixed Account is defined as the sum of
(a) and (b), where (a) is Statutory Reserves, minus the reserves for any riders,
times the ratio of the Fixed Account Accumulated Value to the total Accumulated
Value, and (b) is the reserve for any riders.
POLICY LOAN ACCOUNT MODIFIED COINSURANCE RESERVE ADJUSTMENT
33
The amount of the reserve adjustment associated with the Policy Loan Account
payable quarterly by to NLV is determined according to the schedule below:
C. Policy Loan Account
(1) Policy Loan Collateral at the beginning of the quarter _______________
(2) Policy Loan Collateral at the end of the quarter _______________
(3) Policy Loan Account Modified Coinsurance Reserve
Adjustment (C(2) - C(1)) _______________
34
SCHEDULE J
MODIFIED COINSURANCE TARGET SURPLUS ADJUSTMENT
The Modified Coinsurance Target Surplus Adjustment consists of the target
surplus adjustment for the variable account, fixed account and policy loan
account. The target surplus adjustment on the variable account will be
calculated and paid monthly. The target surplus adjustment on the fixed account
and the policy loan account will be calculated and paid quarterly.
VARIABLE ACCOUNT MODIFIED COINSURANCE TARGET SURPLUS ADJUSTMENT
The Variable Account Modified Coinsurance Reserve Adjustment (from Schedule I
item A(3)) multiplied by ; and
FIXED ACCOUNT MODIFIED COINSURANCE TARGET SURPLUS ADJUSTMENT
The Fixed Account Modified Coinsurance Reserve Adjustment (from Schedule I
item B(3)) multiplied by ; and
POLICY LOAN ACCOUNT MODIFIED COINSURANCE TARGET SURPLUS ADJUSTMENT
The Policy Loan Account Modified Coinsurance Reserve Adjustment (from Schedule I
item C(3)) multiplied by .
35
SCHEDULE K
TERM REINSURANCE PREMIUM
The Term Reinsurance Premium is equal to (1) times (2), where:
(1) The Term Reinsurance Rates shown below; and
(2) The Net Amount at Risk on the policy anniversary for each life
insurance policy, other than a survivorship life insurance policy, which is
commencing a policy year during the current month. The Net Amount at Risk
is equal to (a) minus (b) where:
(a) The Death Benefit, before diminution for policy loans and excluding
benefits under the Accidental Death Benefit rider, at that time; and
(b) The Accumulated Value, before diminution for policy loans, at that
time.
For the purposes of the Net Amount at Risk calculation, the Death Benefit
equals the greater of the Accumulated Value times the corridor factor and
Face Amount for Option A contracts and it equals the greater of the
Accumulated Value times the corridor factor and the Face Amount plus the
Accumulated Value for Option B contracts.
TERM REINSURANCE RATES
The Term Reinsurance Rates are the following percentages of 's Q9495
Mortality Table plus per thousand per year.
SMOKER STATUS FACE AMOUNT UNDERWRITING CLASS PERCENTAGE
-------------- ------------------ ---------------------- -------------
Non-Tobacco $50,000-$99,999 Preferred &Standard
$100,000-$249,999 Preferred
Standard
$250,000+ Preferred
Standard
Tobacco $50,000+ Preferred & Standard
For substandard business, 's Q9495 Mortality Table is multiplied by the
corresponding substandard rating factor (25% per table) and adjusted by
the corresponding flat extra rating.
's Q9495 Mortality Table is attached in Schedule L.
These Term Reinsurance Rates are not guaranteed for more than one year.
On all Contracts reinsured at these rates, however, anticipates
continuing to accept premiums on the basis of these rates. If these
36
rates are changed by with respect to Contracts already reinsured, NLV
has the right to cancel the term reinsurance arrangement with respect
to both Contracts already reinsured and new business. must give NLV a
30 day notice of its intent to change the rates. If NLV decides to
cancel the term reinsurance arrangement, then the reinsurance will be
recaptured no earlier than the date that the new rates are scheduled to
go in to effect. With respect to reinsurance recaptured, there will be
no cash flows associated with Article V and Article VI(2).
37
SCHEDULE M
UNDERWRITING ALLOWANCE
The Underwriting Allowance is equal to (1) plus (2).
1. For the month, for each individual life coverage issued, paid for and
in force after the contractual free look period, the Underwriting
Allowance is equal to the sum of (a), (b) and (c), where:
(a) ;and
(b) multiplied by the issue age of the insured; and (c) multiplied by
the Face Amount of the policy divided by $1,000.
2. For the month, for each joint life coverage issued, paid for and in
force after the contractual free look period, the Underwriting
Allowance is equal to the sum of (a), (b), and (c), where:
(a) ; and
(b) multiplied by the Joint Age of the policy; and (c) times the Face
Amount of the policy divided by $1,000.
DEATH CLAIM ADMINISTRATION ALLOWANCE
The Death Claim Administration Allowance is equal to per death claim processed
during the month, whether paid or not, during calendar years 1998 and 1999 and
inflated at % per calendar year with the first increase to occur in the year
2000.
38
SCHEDULE N
QUARTERLY BUSINESS MANAGEMENT REPORT
Each of the following management reports will be done separately for variable
life insurance, survivorship variable life insurance and variable annuity.
Production Report - Distribution of Premiums by Issue Age* and Risk
Classification Distribution of Face Amount by
Issue Age* and Risk Classification Average
Premium per policy by Issue Age* and Risk
Classification
Reserve Reports - Statutory Reserves**
Tax Reserves
Accumulated Values
The contracting companies will work together in good faith to produce the data
needed for reporting on the payments required by the Agreement, reporting to
third party reinsurers, and other reporting and tracking needs.
* For survivorship policies use the joint age.
** Statutory Reserves will be shown separately for the Mission Benefit and the
Guaranteed Insurability Option.
39
SCHEDULE O
INVESTMENT MANAGEMENT REIMBURSEMENT CREDIT SCHEDULES
SENTINEL/MARKET STREET FUNDS:
With respect to the Market Street Funds (excluding the International portfolio
which is not managed by Sentinel Advisors), the credit will be based on the
Investment Advisor Fee earned in the 12 months ending on December 31st of the
prior year as reported in the Fund's Annual Report. Each of the portfolios earn
an Investment Advisor Fee based on a scale which decreases for amounts in excess
of a threshold as follows:
Growth Less than $20 Million
$20 to $40 Million
$40 Million and Over
Aggressive Growth Less than $20 Million
$20 to $40 Million
$40 Million and Over
Managed Less than $100 Million
$100 Million and Over
Bond Less than $100 Million
$100 Million and Over
Sentinel Growth Less than $20 Million
$20 to $40 Million
$40 Million and Over
Money Market $0 and Over
The threshold amounts are based on the total amount invested in the funds which
include all variable annuity and variable life subaccounts which purchase shares
of the underlying portfolios.
STRONG VARIABLE PRODUCTS FUNDS
The Investment Management Reimbursement Credits for the Opportunity Fund II and
the Growth Fund II are
XXXXX AMERICAN FUNDS
The Investment Management Reimbursement Credits for the Small Cap and the
Growth are .
XXX XXX
The Investment Management Reimbursement Credit for the Worldwide Bond is .
40
XX XXXXXX SERIES TRUST II
The Investment Management Reimbursement Credit schedule for International
Opportunities and the Small Company is as follows:
Less than $50 Million
$50 Million and Over
The threshold amounts must be met individually for each fund and are measured as
the total of all funds in the portfolios from the sale of NLV variable life and
variable annuity products through agents and all other NLV distribution
channels.
AMERICAN CENTURY VP SERIES
The Investment Management Reimbursement Credit schedule for the Value and the
Income & Growth is as follows:
Less than $50 Million
$50 Million and Over
The threshold amounts must be met individually for each fund and are measured as
the total of all funds in the portfolios from the sale of NLV variable life and
variable annuity products through agents and all other NLV distribution
channels.
XXXXXXXXX & XXXXXX ADVISERS MANAGERS TRUST
The Investment Management Reimbursement Credit schedule for the Partners fund is
as follows:
Less than $50 Million
$50 Million and Over
The threshold amounts must be met individually for each fund and are measured as
the total of all funds in the portfolios from the sale of NLV variable life and
variable annuity products through agents and all other NLV distribution
channels.
XXXXXXX SACHS VARIABLE INSURANCE TRUST
The Investment Management Reimbursement Credit schedule for the International
Equity, Global Income, CORE Small Cap Equity and the Mid Cap Value is as
follows:
Less than $50 Million
$50 Million and Over
The threshold amounts must be met individually for each fund and are measured as
the total of all funds in the portfolios from the sale of NLV variable life and
variable annuity products through agents and all other NLV distribution
channels.
41
SCHEDULE P
FIXED ACCOUNT AVERAGE INTEREST RATE
The Fixed Account Average Interest Rate (used in Schedule C) is equal to (A)
plus the ratio of (B) to (C), where:
A. (i.e. product spread of divided by 4) for variable life and (i.e.
product spread of divided by 4) for variable annuity, an estimate
of the average investment spread with respect to the Fixed
Account; and,
B. All interest credited to the Fixed Account of the reinsured
Contracts during the current quarter; and,
C. The Average Accumulated Value in the Fixed Account . The Average
Accumulated Value in the Fixed Account is .5 times the sum of the
Accumulated Value in the Fixed Account as of the end of the prior
quarter and the Accumulated Value in the Fixed Account as of the
end of the quarter.
42
AMENDMENT NUMBER ONE
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
43
--------------------------------------------------------------------------------
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") (thereinafter " ").
AMENDMENTS
The parties have agreed to amend the Agreement as follows:
The text of Article XI, "Account Payable Liability", is removed and replaced by
the following:
NLV will set up an Account Payable liability in NLV's financial statements
equal to one-half of of the excess of the total Accumulated Value
associated with the Variable Account of the reinsured policies over the
Statutory Reserve associated with the Variable Account of the policies.
The Statutory Reserve associated with the Variable Account is defined
as the Statutory Reserve, minus the reserves for any riders, times the
ratio of the Variable Account Accumulated Value to the Total
Accumulated Value. NLV will report the amount of this Account Payable
to quarterly. will set up an Account Receivable asset equal to the
Account Payable liability NLV sets up. If this amount is negative, then
will set up such amount as an Account Payable liability and NLV will
set up such amount as an Account Receivable asset.
Section 8, "Replacements", of Article XII, "General Provisions", is removed and
replaced by the following:
8. REPLACEMENTS. NLV AGREES THAT IT WILL IMPOSE A COMMISSION
REDUCTION TO AGENTS AND MANAGERS ON LIFE INSURANCE POLICIES AS
DISINCENTIVES TO THE REPLACEMENT OF IN FORCE POLICIES WITH THESE
CONTRACTS. AGREES THAT IT WILL IMPOSE ITS REGULAR COMMISSION
REDUCTIONS (OR A REDUCTION THAT IS SUBSTANTIALLY EQUAL TO ITS
NORMAL COMMISSION REDUCTIONS) ON LIFE INSURANCE POLICIES TO AGENTS
AND MANAGERS AS DISINCENTIVES TO THE REPLACEMENT OF IN FORCE
CONTRACTS WITH POLICIES OR CONTRACTS OR WITH -SPONSORED POLICIES
OR CONTRACTS. -SPONSORED POLICIES OR CONTRACTS WILL NOT INCLUDE
OTHER VARIABLE PRODUCTS AVAILABLE TO AGENTS THROUGH EQUITY
SERVICES, INC. (HEREINAFTER "ESI"). NLV AGREES THAT IT WILL IMPOSE
A COMMISSION REDUCTION TO AGENTS AND MANAGERS ON ANNUITY CONTRACTS
AS DISINCENTIVES TO THE REPLACEMENT OF IN FORCE ANNUITY CONTRACTS
WITH THESE CONTRACTS. THE REDUCTION WILL BE FOR THE REPLACEMENT OF
ANNUITY CONTRACTS SUBJECT TO A SURRENDER CHARGE. NO REDUCTION WILL
APPLY TO THE REPLACEMENT OF ANNUITY CONTRACTS NOT SUBJECT TO A
SURRENDER CHARGE. AGREES THAT IT WILL IMPOSE ITS REGULAR
COMMISSION REDUCTIONS (OR A REDUCTION THAT IS SUBSTANTIALLY EQUAL
TO ITS NORMAL COMMISSION REDUCTIONS) ON ANNUITY CONTRACTS TO
AGENTS AND MANAGERS AS DISINCENTIVES TO THE REPLACEMENT OF IN
FORCE CONTRACTS WITH POLICIES OR CONTRACTS OR WITH -SPONSORED
POLICIES OR CONTRACTS. -SPONSORED POLICIES OR CONTRACTS WILL NOT
INCLUDE OTHER VARIABLE PRODUCTS AVAILABLE TO AGENTS THROUGH ESI.
44
The text of Schedule G, "Net Marketing Allowance for Annuities", is removed and
replaced by the following:
THE NET MARKETING ALLOWANCE FOR ANNUITIES IS (A) MINUS (B) PLUS
(C), WHERE:
(C) IS THE GROSS DEALER CONCESSION;
(D) IS THE REPLACEMENT BALANCE;
(C) IS THE COMMISSION REDUCTION OCCURRING UPON ANY
REPLACEMENT OF THESE CONTRACTS BY OR SPONSORED
CONTRACTS OR POLICIES, TO THE EXTENT THAT BENEFITS
FINANCIALLY FROM THE COMMISSION REDUCTION.
THE GROSS DEALER CONCESSION IS THE AMOUNT PAID (OR CHARGED BACK) TO ESI ON
VARIABLE ANNUITY PRODUCTION. THE GROSS DEALER CONCESSION IS REDUCED TO ZERO
FOR VARIABLE ANNUITY CONTRACTS WHICH REPLACE ANNUITY CONTRACTS WHICH ARE
SUBJECT TO A SURRENDER CHARGE.
THE REPLACEMENT BALANCE IS THE UNADJUSTED GROSS DEALER CONCESSION MINUS THE
GROSS DEALER CONCESSION. THE UNADJUSTED GROSS DEALER CONCESSION IS THE
GROSS DEALER CONCESSION THAT WOULD HAVE BEEN PAID HAD THE VARIABLE ANNUITY
NOT RESULTED FROM A REPLACEMENT OF A ANNUITY SUBJECT TO A SURRENDER CHARGE.
IF THE VARIABLE ANNUITY IS NOT A REPLACEMENT OF A ANNUITY SUBJECT TO A
SURRENDER CHARGE, THEN THE REPLACEMENT BALANCE WILL BE ZERO.
THE UNADJUSTED GROSS DEALER CONCESSION IS EQUAL TO THE FOLLOWING
PERCENTAGES OF VARIABLE ANNUITY GROSS PREMIUMS PAID DURING THE MONTH AND
VARIABLE ANNUITY CONTRACT VALUES AT THE END OF EACH CALENDAR QUARTER FOR
CONTRACTS WHICH HAVE PASSED THEIR FIRST POLICY ANNIVERSARY.
UNADJUSTED GROSS DEALER CONCESSION
COMPENSATION PERCENT OF QUARTERLY PERCENT OF
SCHEDULE ISSUE AGE GROSS PREMIUM CONTRACT VALUE
1 0-79
80-85
2 0-79
3 80-85
3 0-79
80-85
Number (2), "Annuity Other Expense Allowances", of Schedule H, "Other Expense
Allowances", is removed and replaced by the following:
(2) Annuity Other Expense Allowances equal to the sum of (a), (b), (c), (d) and
(e), where:
(E) AN ISSUE ALLOWANCE OF PER CONTRACT ISSUED, PAID FOR AND IN FORCE BEYOND
THE CONTRACTUAL FREE LOOK PERIOD; AND
(F) A MONTHLY ADMINISTRATION ALLOWANCE OF PER CONTRACT IN FORCE AT THE END
OF THE MONTH IN CALENDAR YEARS 1998 AND 1999 AND INFLATED AT PER
CALENDAR YEAR WITH THE FIRST INCREASE TO OCCUR IN THE YEAR 2000; AND
45
(G) A DEVELOPMENT ALLOWANCE EQUAL TO OF GROSS PREMIUM PAID IN THE MONTH;
AND
(H) A DEATH CLAIM ADMINISTRATION ALLOWANCE (DESCRIBED IN SCHEDULE M) PER
ANNUITY DEATH CLAIM PROCESSED; AND
(I) A WHOLESALING, SALES SUPPORT AND DISTRIBUTOR ALLOWANCE EQUAL TO OF
GROSS PREMIUM PAID IN THE MONTH.
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and will be effective as of December 31, 1998.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 1999. on , 1999.
By: By:
Title: Title
By: By:
Title: Title
46
AMENDMENT NUMBER TWO
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
47
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
AMENDMENTS
The parties have agreed to amend the Agreement as follows:
The text of Schedule F, "Net Marketing Allowance for Life Insurance", is removed
and replaced by the following:
THE NET MARKETING ALLOWANCE FOR LIFE INSURANCE IS EQUAL TO THE FOLLOWING
PERCENTAGES OF VARIABLE LIFE INSURANCE AGENT AND MANAGER COMMISSION PAID
DURING THE MONTH, (A) UP TO COMMISSIONABLE TARGET PREMIUM AND (B) IN
EXCESS OF COMMISSIONABLE TARGET PREMIUM;
(A) (B)
POLICY UP TO TARGET IN EXCESS OF
YEAR PREMIUM TARGET PREMIUM
1
2-5
6-10
11+
PLUS OF AGENT AND MANAGER COMMISSIONS PAID WITH RESPECT TO ANY INCREASES
IN VARIABLE LIFE INSURANCE COVERAGE;
MINUS OF ALL AGENT AND MANAGER COMMISSIONS CHARGED BACK ON VARIABLE LIFE
INSURANCE DURING THE MONTH;
PLUS, WITH RESPECT TO CHARGE BACKS DUE TO EARLY LAPSE OF INDIVIDUAL
VARIABLE LIFE INSURANCE IF THE VOLUME THERE OF IS MATERIAL, OF ALL AGENT
AND MANAGER COMMISSIONS CHARGED BACK, SUCH AMOUNT TO BE DETERMINED NO
EARLIER THAN THE FIRST ANNIVERSARY OF THIS AGREEMENT;
MINUS, WITH RESPECT TO TERM CONVERSIONS IF THE VOLUME THEREOF IS
MATERIAL, A MUTUALLY AGREED UPON AMOUNT, SUCH AMOUNT TO BE DETERMINED NO
EARLIER THAN THE FIRST ANNIVERSARY OF THIS AGREEMENT;
MINUS THE FOLLOWING PERCENTAGES OF VARIABLE LIFE INSURANCE AGENT AND
MANAGER COMMISSION PAID DURING THE MONTH UP TO COMMISSIONABLE TARGET
PREMIUM WITH RESPECT TO POLICIES WHICH REPLACE INFORCE POLICIES;
POLICY UP TO TARGET
YEAR PREMIUM
1
2-5
6-10
PLUS THE COMMISSION REDUCTIONS OCCURRING UPON ANY REPLACEMENT OF THESE
CONTRACTS BY OR SPONSORED CONTRACTS OR POLICIES, TO THE EXTENT THAT
BENEFITS FINANCIALLY FROM THE COMMISSION REDUCTION.
COMMISSIONABLE TARGET PREMIUM IS THAT PORTION OF THE PAID PREMIUM WHICH
GENERATES FULL FIRST YEAR AND RENEWAL YEAR COMPENSATION TO AGENTS AND
MANAGERS ACCORDING TO TABLES ON FILE AT NLV. COMMISSIONABLE TARGET
PREMIUM IS REDUCED FOR TERM CONVERSIONS BY THE AMOUNT OF CREDIT EXTENDED
TO THE POLICYHOLDER. COMMISSIONABLE TARGET PREMIUM IS REDUCED FOR
REPLACEMENTS OF OR NLV IN FORCE POLICIES BY A FACTOR OF
48
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and will be effective for premium received after November 19,
1999.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 1999. on , 1999.
By: By:
Title: Title
By: By:
Title: Title
49
AMENDMENT NUMBER THREE
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
50
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
AMENDMENTS
The parties have agreed to replace Schedule K with the following Effective
November 15, 2000:
SCHEDULE K
TERM REINSURANCE PREMIUM
The Term Reinsurance Premium is equal to (1) times (2), where:
(1) The Term Reinsurance Rates shown below; and
(2) The Net Amount at Risk on the policy anniversary for each life
insurance policy, other than a survivorship life insurance policy,
which is commencing a policy year during the current month. The
Net Amount at Risk is equal to (a) minus (b) where:
(c) The Death Benefit, before diminution for policy loans and
excluding benefits under the Accidental Death Benefit rider, at
that time; and
(d) The Accumulated Value, before diminution for policy loans, at
that time.
For the purposes of the Net Amount at Risk calculation, the Death
Benefit equals the greater of the Accumulated Value times the corridor
factor and Face Amount for Option A contracts and it equals the greater
of the Accumulated Value times the corridor factor and the Face Amount
plus the Accumulated Value for Option B contracts.
TERM REINSURANCE RATES
The Term Reinsurance Rates are the following percentages of 's Q9495
Mortality Table plus $0.08 per thousand per year.
SMOKER STATUS FACE AMOUNT UNDERWRITING CLASS PERCENTAGE
------------ ----------------- -------------------------- ----------
Non-Tobacco $50,000-$99,999 Elite &Preferred &Standard
$100,000-$249,999 Elite & Preferred
Standard
$250,000+ Elite &Preferred
Standard
Tobacco $50,000+ Preferred & Standard
51
For substandard business, 's Q9495 Mortality Table is multiplied by the
corresponding substandard rating factor (25% per table) and adjusted by
the corresponding flat extra rating.
's Q9495 Mortality Table is attached in Schedule L.
These Term Reinsurance Rates are not guaranteed for more than one year.
On all Contracts reinsured at these rates, however, anticipates
continuing to accept premiums on the basis of these rates. If these
rates are changed by with respect to Contracts already reinsured, NLV
has the right to cancel the term reinsurance arrangement with respect
to both Contracts already reinsured and new business. must give NLV a
30 day notice of its intent to change the rates. If NLV decides to
cancel the term reinsurance arrangement, then the reinsurance will be
recaptured no earlier than the date that the new rates are scheduled to
go in to effect. With respect to reinsurance recaptured, there will be
no cash flows associated with Article V and Article VI(2).
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and will be effective as of November 15, 2000.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 2001. on , 2001.
By: By:
Title: Title
By: By:
Title: Title
52
AMENDMENT NUMBER FOUR
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
53
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
AMENDMENT
The parties have agreed to amend the Agreement as follows, in recognition of the
addition of Compensation Schedule #4 and to clarify the compensation paid as a
percent of the Contract value:
The text of Schedule G, "Net Marketing Allowance for Annuities", is removed and
replaced by the following:
THE NET MARKETING ALLOWANCE FOR ANNUITIES IS (A) MINUS (B) PLUS (C), WHERE:
(E) IS THE GROSS DEALER CONCESSION;
(F) IS THE REPLACEMENT BALANCE;
(C) IS THE COMMISSION REDUCTION OCCURRING UPON ANY REPLACEMENT OF THESE
CONTRACTS BY OR SPONSORED CONTRACTS OR POLICIES, TO THE EXTENT THAT BENEFITS
FINANCIALLY FROM THE COMMISSION REDUCTION.
THE GROSS DEALER CONCESSION IS THE AMOUNT PAID (OR CHARGED BACK) TO ESI ON
VARIABLE ANNUITY PRODUCTION. THE GROSS DEALER CONCESSION IS REDUCED FOR VARIABLE
ANNUITY CONTRACTS WHICH REPLACE ANNUITY CONTRACTS. THE REDUCTION IS FOR THE
REPLACEMENT OF ANNUITY CONTRACTS NOT SUBJECT TO A SURRENDER CHARGE AND FOR
ANNUITY CONTRACTS SUBJECT TO A SURRENDER CHARGE.
THE REPLACEMENT BALANCE IS THE UNADJUSTED GROSS DEALER CONCESSION MINUS THE
GROSS DEALER CONCESSION. THE UNADJUSTED GROSS DEALER CONCESSION IS THE GROSS
DEALER CONCESSION THAT WOULD HAVE BEEN PAID HAD THE VARIABLE ANNUITY NOT
RESULTED FROM A REPLACEMENT OF A ANNUITY. IF THE VARIABLE ANNUITY IS NOT A
REPLACEMENT OF A ANNUITY, THEN THE REPLACEMENT BALANCE WILL BE ZERO.
THE UNADJUSTED GROSS DEALER CONCESSION IS EQUAL TO THE FOLLOWING PERCENTAGES OF
VARIABLE ANNUITY GROSS PREMIUMS PAID DURING THE MONTH AND VARIABLE ANNUITY
CONTRACT VALUES AT THE END OF EACH CALENDAR QUARTER FOR CONTRACTS WHICH HAVE
PASSED THEIR FIRST POLICY ANNIVERSARY.
54
UNADJUSTED GROSS DEALER CONCESSION
COMPENSATION PERCENT OF ANNUALIZED PERCENT OF
SCHEDULE ISSUE AGE GROSS PREMIUM CONTRACT VALUE*
1 0-79
80-85
2 0-79
80-85
3 0-79
80-85
4 0-85
* TO DETERMINE COMPENSATION, THE ABOVE PERCENTAGES DIVIDED BY FOUR SHALL BE
APPLIED TO THE CONTRACT VALUES ON A QUARTERLY BASIS.
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and is effective as of October 1, 1999.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 2002. on , 2002.
By: By:
Title: Title
By: By:
Title: Title
55
AMENDMENT NUMBER FIVE
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
56
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
AMENDMENT
To incorporate riders added after the effective date of the treaty, the parties
have agreed to amend the Agreement as follows:
The text of Schedule A, "The Contracts", is removed and replaced by the
following:
THE FOLLOWING POLICY FORMS AND RIDERS THERETO AND ANY STATE VARIATIONS
THEREOF, ARE SUBJECT TO THE REINSURANCE HEREUNDER:
VARITRAK (VARIABLE UNIVERSAL LIFE): FORM 7206
RIDERS: GUARANTEED DEATH BENEFIT RIDER: FORM 7211 : GUARANTEES DEATH BENEFIT FOR SPECIFIED PERIOD
REGARDLESS OF FUND PERFORMANCE
RIDER FOR WAIVER OF MONTHLY DEDUCTIONS: FORM 7208 : WAIVES MONTHLY
DEDUCTIONS UPON DISABILITY
RIDER FOR GUARANTEED INSURABILITY OPTIONS: FORM 7210 : PROVIDES RIGHT
TO PURCHASE NEW INSURANCE WITHOUT EVIDENCE OF INSURABILITY
RIDER FOR ACCIDENTAL DEATH BENEFIT: FORM 7209 : PROVIDES ADDITIONAL
DEATH BENEFIT IF DEATH RESULTS FROM ACCIDENT
RIDER FOR ACCELERATED DEATH BENEFIT: FORMS 0092, 7490, 7493: PROVIDES FOR PAYMENT OF DEATH
BENEFIT UPON CERTAIN TERMINAL ILLNESS EVENTS IN LIEU OF PAYMENT UPON DEATH
DISABILITY BENEFIT: FORM 7741: PAYMENT OF MISSION COSTS
ADDITIONAL PROTECTION BENEFIT RIDER: FORMS 7956, 7957: PROVIDES EXTRA DEATH BENEFIT
PROTECTION
ACCELERATED CARE RIDER: FORM 9249: PROVIDES FOR PAYMENT OF NON-DISCOUNTED DEATH BENEFIT UPON
CERTAIN CHRONIC ILLNESSES IN LIEU OF PAYMENT UPON DEATH
CHRONIC CARE PROTECTION RIDER: FORMS 9250, 9251: PROVIDES FOR LONG TERM CARE PROTECTION
AFTER THE DEATH BENEFIT HAS BEEN ACCELERATED
NO LAPSE GUARANTEE RIDER: FORM 9422: GUARANTEES THE FACE AMOUNT REGARDLESS OF THE CASH
SURRENDER VALUE IF CERTAIN CONDITIONS ARE MET
SENTINEL ESTATE PROVIDER (SURVIVORSHIP VARIABLE UNIVERSAL LIFE): FORM 7461
RIDERS: CONTINUING COVERAGE RIDER: FORM 7462 : CONTINUES COVERAGE BEYOND
AGE 100
ADDITIONAL PROTECTION BENEFIT RIDER: FORM 7463: PROVIDES ADDITIONAL
SURVIVORSHIP DEATH BENEFIT
GUARANTEED DEATH BENEFIT RIDER: FORM 7464 : GUARANTEES DEATH BENEFIT
FOR SPECIFIED PERIOD REGARDLESS OF FUND PERFORMANCE
POLICY SPLIT OPTION RIDER: FORM 7465 : ALLOWS POLICY TO BE
SPLIT INTO TWO INDIVIDUAL LIFE POLICIES IF FEDERAL
ESTATE TAX LAW CHANGES OR IF THE INSUREDS DIVORCE
NOTE: IF AT THE TIME OF THE SPLIT, THE NEW INDIVIDUAL
POLICIES ARE SUBJECT TO A REINSURANCE AGREEMENT
BETWEEN THE PARTIES, THEN THE NEW POLICIES WILL BE
REINSURED. OTHERWISE THE NEW POLICIES WILL NOT BE
REINSURED.
ENHANCED DEATH BENEFIT RIDER: FORM 7466 : PROVIDES FOR INCREASED
SURVIVORSHIP DEATH BENEFIT AT A TARGETED AGE OF THE YOUNGER INSURED
ESTATE PRESERVATION RIDER: FORM 7467 : PROVIDES FOUR YEARS OF ADDITIONA
SURVIVORSHIP DEATH BENEFIT
ANNUALLY RENEWABLE TERM RIDER: FORM 7468 : PROVIDES ADDITIONAL
INDIVIDUAL TERM LIFE INSURANCE ON EITHER OR BOTH OF THE TWO INSUREDS
AUTOMATIC INCREASE RIDER: FORM 7630 : PROVIDES REGULAR INCREASES IN
SURVIVORSHIP DEATH BENEFIT
SENTINEL ADVANTAGE (VARIABLE ANNUITY): FORM 7400
RIDERS: ENHANCED DEATH BENEFIT RIDER: FORM 7417 : PROVIDES DEATH BENEFIT
(PRIOR TO AGE 81) IN AN AMOUNT GREATER THAN ACCUMULATED VALUE.
ACCELERATED BENEFIT RIDER: FORMS 9304, 9305: PROVIDES FOR PAYMENT OF DEATH BENEFIT UPON
CERTAIN TERMINAL AND CHRONIC ILLNESSES IN LIEU OF PAYMENT UPON DEATH
57
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and is effective as of February 1, 2001.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 2002. on , 2002.
By: By:
Title: Title
By: By:
Title: Title
58
AMENDMENT NUMBER SIX
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
59
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
AMENDMENT
To incorporate the handling of Accelerated Benefit rider (ABR) and Accelerated
Care rider (ACR) benefits, the parties have agreed to amend the Agreement as
follows:
THE TEXT OF THE FIRST THREE PARAGRAPHS OF ARTICLE VI IS REMOVED AND REPLACED BY
THE FOLLOWING:
DEATH CLAIMS
FOR EACH CLAIM FOR DEATH BENEFITS UNDER THE LIFE INSURANCE CONTRACTS, SHALL PAY
NLV THE SUM OF (1) DEATH BENEFITS PURSUANT TO THE MODIFIED COINSURANCE
ARRANGEMENT AND (2) DEATH BENEFITS PURSUANT TO THE TERM REINSURANCE ARRANGEMENT,
CALCULATED ACCORDING TO THE FOLLOWING:
1. WITH RESPECT TO THE MODIFIED COINSURANCE ARRANGEMENT, ONE-HALF
OF THE DEATH BENEFITS PAID TO POLICYHOLDERS BEFORE DIMINUTION
FOR POLICY LOANS AND WITHOUT DEDUCTION OF ACCUMULATED VALUE,
INCLUDING BENEFITS UNDER THE ACCIDENTAL DEATH BENEFIT RIDER,
WITHOUT DEDUCTION OF RESERVES, AND INCLUDING BENEFITS UNDER
THE ACCELERATED DEATH BENEFIT RIDER AND ACCELERATED CARE
RIDER, BEFORE DIMINUTION FOR POLICY LOANS AND WITHOUT
DEDUCTION OF ACCUMULATED VALUE. THESE DEATH BENEFITS ARE PAID
TO NLV ON A SINGLE SUM BASIS; WILL NOT PARTICIPATE IN ANY
PERIODIC SETTLEMENT OF THESE BENEFITS TO POLICYHOLDERS.
3. With respect to NON-ACCELERATED DEATH BENEFITS UNDER the term
reinsurance arrangement, one-half of (a) minus one-half of
(b), where:
(b) = Death Benefit, on contracts other than survivorship life
contracts, determined as of the beginning of the policy year
of death, before diminution for policy loans, excluding
benefits under the Accidental Death Benefit rider. These Death
Benefits are paid to NLV on a single sum basis; will not
participate in any periodic settlement for these benefits to
policyholders.
(b) = Accumulated Value, determined as of the beginning of the
policy year of death, before diminution for policy loans, with
respect to the Death Benefits in (a) above.
60
SHALL ALSO PAY A PORTION OF THE ACCELERATED DEATH BENEFITS UNDER THE
ACCELERATED BENEFIT RIDER AND ACCELERATED CARE RIDER. THE METHOD USED
TO CALCULATE BENEFITS PAID UNDER THESE RIDERS IS SET FORTH IN SCHEDULE
Q.
The text of Schedule E (2) is removed and replaced by the following:
(2) Annuity Claims which equal the sum of (a), (b), and (c),
where:
(D) DEATH BENEFITS PAID, WITHOUT DEDUCTION FOR ACCUMULATED VALUE,
INCLUDING BENEFITS UNDER THE ACCELERATED BENEFIT RIDER; AND
(E) SURRENDERS PAID, NET OF ANY SURRENDER CHARGES; AND (F)
WITHDRAWALS PAID, NET OF ANY SURRENDER CHARGES.
SCHEDULE Q IS APPENDED:
SCHEDULE Q
Calculation of ABR/ACR Benefits under the Term Reinsurance Arrangement
shall pay one-half of the Present Value of Benefits (PVB) minus one-half of
the Present Value of Premiums (PVP), where PVB and PVP are defined as follows:
PVB = the present value of the future Net Amounts at Risk (NAR)
corresponding to the amount of death benefit being accelerated. The
initial NAR will be equal to the NAR at the time of acceleration and
will be graded down linearly to zero at the maturity of the policy.
PVP = the present value of future YRT reinsurance premiums calculated using
the rates that is charging NL at the time of acceleration. The NAR will
be calculated as described above.
Interest and mortality rates used in discounting the above values shall be the
rates used in the calculation of the accelerated benefit to be paid to the
policyholder.
If there are a substantial number of accelerations, this calculation method may
be reviewed at the request of either party.
61
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and is effective as of June 1, 2002.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 2003. on , 2003.
By: By:
Title: Title
By: By:
Title: Title
62
AMENDMENT NUMBER SEVEN
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
63
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
AMENDMENT
To incorporate third party automatic quota share reinsurance, the parties have
agreed to amend the Agreement as follows:
The text of Article III (1) is removed and replaced by the following:
1. ONE-HALF THE GROSS PREMIUMS COLLECTED FOR THE CONTRACTS DURING THE
MONTH MINUS ONE-HALF OF THE REINSURANCE PREMIUMS PAID ON THE CONTRACTS
BY NLV TO THIRD PARTY REINSURERS ON AN AUTOMATIC QUOTA SHARE BASIS PLUS
ONE-HALF OF AMOUNTS PAID BY THIRD PARTY REINSURERS FOR REIMBURSEMENT OF
CLAIMS UNDER THE NO LAPSE GUARANTEE RIDER. GROSS PREMIUM IS THE PREMIUM
PAID TO NLV BY POLICYHOLDERS, MINUS ANY PREMIUM RETURNED BY NLV TO
POLICYHOLDERS, PRIOR TO ANY PERCENT-OF-PREMIUM CHARGES.
The text of Article IV (1) is removed and replaced by the following:
1. ONE-HALF OF THE FIXED ACCOUNT MODIFIED COINSURANCE RESERVE ADJUSTMENT
AND ONE-HALF OF THE POLICY LOAN ACCOUNT MODIFIED COINSURANCE RESERVE
ADJUSTMENT ON THE CONTRACTS DURING THE QUARTER (PER SCHEDULE I). FOR
THE PURPOSES OF THIS AGREEMENT, STATUTORY RESERVES INCLUDE RESERVES FOR
ACTIVE POLICIES, INCURRED BUT NOT REPORTED RESERVES, CLAIM RESERVES AND
RESERVES FOR RIDER BENEFITS, NET OF ANY RESERVE CREDIT ASSOCIATED WITH
THIRD PARTY AUTOMATIC QUOTA SHARE REINSURANCE.
The text of the first paragraph of Article V is removed and replaced by the
following:
ALL SINGLE LIFE INSURANCE CONTRACTS THAT ARE NOT REINSURED ON AN AUTOMATIC QUOTA
SHARE BASIS BY NLV WITH THIRD PARTY REINSURERS WILL BE SUBJECT TO A TERM
REINSURANCE ARRANGEMENT WHEREBY NLV WILL CEDE ITS ONE-HALF OF THE MORTALITY RISK
TO . ALL PREMIUMS UNDER THIS TERM REINSURANCE ARRANGEMENT WILL BE DUE AT THE END
OF EACH CALENDAR MONTH BASED ON THE ACTIVITY DURING THE MONTH.
CRITERIA FOR INCLUSION IN THE THIRD PARTY AUTOMATIC QUOTA SHARE REINSURANCE
PROGRAM:
o STANDARD RATING
o AGES 0-75: MAXIMUM OF $15,000,000 PER LIFE
o AGES 76-80: MAXIMUM OF $5,000,000 PER LIFE
64
THE TEXT OF ARTICLE VI IS REMOVED AND REPLACED BY THE FOLLOWING:
DEATH CLAIMS
FOR EACH CLAIM FOR DEATH BENEFITS UNDER THE LIFE INSURANCE CONTRACTS, SHALL PAY
NLV THE SUM OF (1) DEATH BENEFITS PURSUANT TO THE MODIFIED COINSURANCE
ARRANGEMENT AND (2) DEATH BENEFITS PURSUANT TO THE TERM REINSURANCE ARRANGEMENT,
CALCULATED ACCORDING TO THE FOLLOWING:
1. WITH RESPECT TO THE MODIFIED COINSURANCE ARRANGEMENT, ONE-HALF OF THE
DEATH BENEFITS PAID TO POLICYHOLDERS, MINUS ONE-HALF OF DEATH BENEFITS
PAID BY THIRD PARTY REINSURERS TO NLV UNDER AUTOMATIC QUOTA SHARE
ARRANGEMENTS, BEFORE DIMINUTION FOR POLICY LOANS AND WITHOUT DEDUCTION
OF ACCUMULATED VALUE, INCLUDING BENEFITS UNDER THE ACCIDENTAL DEATH
BENEFIT RIDER, WITHOUT DEDUCTION OF RESERVES, AND INCLUDING BENEFITS
UNDER THE ACCELERATED DEATH BENEFIT RIDER AND ACCELERATED CARE RIDER,
BEFORE DIMINUTION FOR POLICY LOANS AND WITHOUT DEDUCTION OF ACCUMULATED
VALUE. BENEFITS UNDER THE CHRONIC CARE PROTECTION RIDER SHALL BE
EXCLUDED. THESE DEATH BENEFITS ARE PAID TO NLV ON A SINGLE SUM BASIS;
WILL NOT PARTICIPATE IN ANY PERIODIC SETTLEMENT OF THESE BENEFITS TO
POLICYHOLDERS.
2. With respect to NON-ACCELERATED DEATH BENEFITS UNDER the term
reinsurance arrangement, one-half of (a) minus one-half of (b), where:
(c) = Death Benefit, on contracts other than survivorship life
contracts, determined as of the beginning of the policy year
of death, before diminution for policy loans, excluding
benefits under the Accidental Death Benefit rider AND CHRONIC
CARE PROTECTION RIDER. These Death Benefits are paid to NLV on
a single sum basis; will not participate in any periodic
settlement for these benefits to policyholders.
(b) = Accumulated Value, determined as of the beginning of the
policy year of death, before diminution for policy loans, with
respect to the Death Benefits in (a) above.
shall also pay a portion of the accelerated death benefits under the
Accelerated Benefit rider and Accelerated Care rider. The method used
to calculate Benefits paid under these riders is set forth in Schedule
Q.
FOR LIFE CONTRACTS SUBJECT TO THE TERM REINSURANCE ARRANGEMENT, HAS ASSUMED
100% OF THE MORTALITY RISK WITH RESPECT TO THE REINSURED CONTRACTS AND WILL
PERFORM DEATH CLAIM ADMINISTRATION SERVICES RELATED TO THE VALIDATION OF
CLAIMS. THEREFORE, WILL HAVE UNILATERAL DISCRETION WITH RESPECT TO
DECISIONS REGARDING CLAIMS FOR DEATH BENEFITS, INCLUDING DECISIONS TO
CONTEST THE CLAIM OR THE POLICY. WILL BEAR ALL COSTS ASSOCIATED WITH THE
INVESTIGATION AND SETTLEMENT OF DEATH CLAIMS OR LAWSUITS WITH RESPECT
THERETO.
65
FOR LIFE CONTRACTS NOT SUBJECT TO THE TERM REINSURANCE ARRANGEMENT, AND NLV
HAVE EACH ASSUMED 50% OF THE MORTALITY RISK NET OF THIRD PARTY AUTOMATIC
QUOTA SHARE REINSURANCE WITH RESPECT TO THE REINSURED CONTRACTS, BUT WILL
PERFORM DEATH CLAIM ADMINISTRATION SERVICES RELATED TO THE VALIDATION OF
CLAIMS. ALL DEATH CLAIMS MADE ON THE UNDERLYING POLICIES, WHEN SETTLED BY
IN GOOD FAITH WILL BE BINDING ON NLV. WILL NOTIFY NLV PROMPTLY OF SUCH
OBLIGATIONS AS THEY BECOME KNOWN TO . WILL GIVE NLV PROMPT NOTICE OF ANY
CLAIM SUBMITTED ON ANY UNDERLYING POLICY AND PROMPT NOTICE OF ANY LEGAL
PROCEEDINGS AS THEY BECOME KNOWN TO . WILL FURNISH TO NLV COPIES OF
DOCUMENTS BEARING ON SUCH CLAIMS OR LEGAL PROCEEDINGS UPON REQUEST. MUST
PROMPTLY NOTIFY NLV OF 'S INTENT TO CONTEST INSURANCE UNDER ANY SUCH
CONTRACT OR TO ASSERT DEFENSES TO A CLAIM UNDER ANY SUCH CONTRACT. NLV AND
ITS THIRD PARTY REINSURERS WILL RESERVE THE RIGHT TO EXAMINE ANY MATERIALS
OBTAINED ON ANY INVESTIGATION. IF NLV AND ITS THIRD PARTY REINSURERS AGREE
TO PARTICIPATE IN AND SHARE EQUALLY IN THE EXPENSES OF THE CONTEST OR
ASSERTION OF DEFENSES, AND IF SUCH CONTEST OR ASSERTION RESULTS IN THE
REDUCTION OF LIABILITY, NLV, ITS THIRD PARTY REINSURERS, AND WILL SHARE IN
THE REDUCTION IN PROPORTION TO THEIR SHARE OF THE RISK. IF NLV AND ITS
THIRD PARTY REINSURERS SHOULD DECLINE TO PARTICIPATE IN AND SHARE THE
EXPENSES OF THE CONTEST OR ASSERTION OF DEFENSES, NLV AND ITS THIRD PARTY
REINSURERS WILL PAY THEIR PROPORTIONAL SHARE OF THE CLAIM AND WILL NOT
SHARE IN ANY REDUCTION OF LIABILITY.
FOR ANNUITY CONTRACTS, AND NLV HAVE EACH ASSUMED 50% OF THE MORTALITY RISK
WITH RESPECT TO THE REINSURED CONTRACTS, BUT NLV WILL PERFORM DEATH CLAIM
ADMINISTRATION SERVICES RELATED TO THE VALIDATION OF CLAIMS. ALL DEATH
CLAIMS MADE ON THE UNDERLYING POLICIES, WHEN SETTLED BY NLV IN GOOD FAITH
WILL BE XXXXXXX XX . XXX WILL NOTIFY PROMPTLY OF SUCH OBLIGATIONS AS THEY
BECOME KNOWN TO NLV. NLV WILL GIVE PROMPT NOTICE OF ANY CLAIM SUBMITTED ON
ANY UNDERLYING POLICY AND PROMPT NOTICE OF ANY LEGAL PROCEEDINGS AS THEY
BECOME KNOWN TO NLV. NLV WILL FURNISH TO COPIES OF DOCUMENTS BEARING ON
SUCH CLAIMS OR LEGAL PROCEEDINGS UPON REQUEST. NLV MUST PROMPTLY NOTIFY OF
NLV'S INTENT TO CONTEST THE DEATH BENEFIT UNDER ANY SUCH CONTRACT OR TO
ASSERT DEFENSES TO A CLAIM UNDER ANY SUCH CONTRACT. WILL RESERVE THE RIGHT
TO EXAMINE ANY MATERIALS OBTAINED ON ANY INVESTIGATION. IF AGREES TO
PARTICIPATE IN AND SHARE EQUALLY IN THE EXPENSES OF THE CONTEST OR
ASSERTION OF DEFENSES, AND IF SUCH CONTEST OR ASSERTION RESULTS IN THE
REDUCTION OF LIABILITY, AND NLV WILL SHARE IN THE REDUCTION EQUALLY. IF
SHOULD DECLINE TO PARTICIPATE IN AND SHARE THE EXPENSES OF THE CONTEST OR
ASSERTION OF DEFENSES, WILL PAY ITS PROPORTIONAL SHARE OF THE CLAIM AND
WILL NOT SHARE IN ANY REDUCTION OF LIABILITY.
FOR ALL LIFE AND ANNUITY DEATH CLAIMS, NLV WILL PERFORM DEATH CLAIM
ADMINISTRATION SERVICES RELATED TO THE POLICY AND CLAIM ADMINISTRATIVE
SYSTEMS, FULFILL TAX REPORTING RESPONSIBILITIES, AND DISBURSE FUNDS. NLV
WILL PERFORM ALL SERVICES RELATED TO WAIVER CLAIMS.
FOR ALL LIFE AND ANNUITY DEATH CLAIMS, WHICHEVER PARTY RECEIVES THE INITIAL
NOTICE OF CLAIM FROM A POLICYHOLDER SHALL PROMPTLY NOTIFY THE OTHER PARTY
OF THIS EVENT.
The text of Article IX (1) is removed and replaced by the following:
3. TAX RESERVE ADJUSTMENT. THE TAX RESERVE ADJUSTMENT, PAID QUARTERLY BY
TO NLV, IS EQUAL TO ONE-HALF OF THE EXCESS OF (A) OVER (B), MULTIPLIED
BY THE RATIO OF (C) TO (D), WHERE:
66
(A) THE STATUTORY RESERVE WITH RESPECT TO THE CONTRACTS AT THE END OF
THE CURRENT QUARTER MINUS THE TAX RESERVE WITH RESPECT TO THE CONTRACTS
AT THE END OF THE CURRENT QUARTER; AND
(B) THE STATUTORY RESERVE WITH RESPECT TO THE CONTRACTS AT THE END OF
THE PRECEDING QUARTER MINUS THE TAX RESERVE WITH RESPECT TO THE
CONTRACTS AT THE END OF THE PRECEDING QUARTER; AND
(C) .35, WHICH IS THE FEDERAL INCOME TAX RATE; AND
(D) .65 WHICH IS ONE MINUS THE FEDERAL INCOME TAX RATE OF .35.
STATUTORY AND TAX RESERVES SHALL BE NET OF ANY RESERVE CREDIT
ASSOCIATED WITH THIRD PARTY AUTOMATIC QUOTA SHARE REINSURANCE.
IF THIS ADJUSTMENT IS NEGATIVE, THEN IT WILL BE PAID BY NLV TO . IN THE
EVENT THAT THE FEDERAL INCOME TAX RATE CHANGES, THE CONTRACTING
COMPANIES WILL ADJUST THE RATE USED IN (C) AND (D) ABOVE ACCORDINGLY.
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and is effective as of July 1, 2002.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 2003. on , 2003.
By: By:
Title: Title
By: By:
Title: Title
67
AMENDMENT NUMBER EIGHT
to the
Automatic Modified-Coinsurance (Mod-Co) Reinsurance and Service Agreement
Between
NATIONAL LIFE
INSURANCE COMPANY
of Montpelier, Vermont, USA
(REINSURED REFERRED TO AS NLV OR REINSURED)
and
(REINSURER REFERRED TO AS OR REINSURER)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS
EACH COMPANY OR EITHER COMPANY)
68
PARTIES
The Reinsurance and Service Agreement (hereinafter "Agreement") and this
amendment to the Agreement (hereinafter "Amendment") are made between National
Life Insurance Company (hereinafter "NLV") and (hereinafter " ").
AMENDMENT
The parties have agreed to amend the Agreement as follows:
The following text shall be added to Schedule O, " Investment Management
Reimbursement Credit Schedules":
SINCE THE INCEPTION OF THE TREATY, THE FOLLOWING CHANGES HAVE BEEN MADE TO THE
FUNDS OFFERED:
THE FOLLOWING FUNDS HAVE BEEN ADDED:
FUND CREDIT
FIDELITY VIP FUND CONTRAFUND
FIDELITY VIP FUND EQUITY INCOME
FIDELITY VIP FUND GROWTH
FIDELITY VIP FUND HIGH INCOME
FIDELITY VIP FUND INDEX 500
FIDELITY VIP FUND OVERSEAS
FIDELITY VIP FUND INVESTMENT GRADE BOND
SENTINEL VARIABLE PRODUCT TRUST GROWTH INDEX
XXXXX AMERICAN FUND LEVERAGED ALL CAP
DREYFUS SOCIALLY RESPONSIBLE
INVESCO DYNAMICS
INVESCO TECHNOLOGY
INVESCO HEALTH SCIENCES
69
THE FOLLOWING FUNDS HAVE BEEN CLOSED:
XXXXXXX SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY
XXXXXXX XXXXX VARIABLE INSURANCE TRUST GLOBAL INCOME
XXXXXXX SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY
XXXXXXX XXXXX VARIABLE INSURANCE TRUST MID CAP EQUITY
THE MARKET STREET FUND, INC. INTERNATIONAL
XXX XXX WORLDWIDE INSURANCE TRUST WORLDWIDE BOND
THE FOLLOWING FUNDS HAVE BEEN RENAMED:
ORIGINAL NAME NEW NAME
MARKET STREET MONEY MARKET SENTINEL VARIABLE PRODUCT TRUST MONEY MARKET
MARKET STREET GROWTH SENTINEL VARIABLE PRODUCT TRUST COMMON STOCK
MARKET STREET AGGRESSIVE GROWTH SENTINEL VARIABLE PRODUCT TRUST SMALL COMPANY
MARKET STREET SENTINEL GROWTH SENTINEL VARIABLE PRODUCT TRUST MID CAP GROWTH
THE INVESTMENT MANAGEMENT REIMBURSEMENT CREDITS WERE MODIFIED FOR THE FOLLOWING
FUNDS:
FUND CURRENT CREDIT
XXXXXXXXX & XXXXXX ADVISERS MANAGEMENT TRUST PARTNERS
SENTINEL VARIABLE PRODUCT TRUST SMALL COMPANY
SENTINEL VARIABLE PRODUCT TRUST COMMON STOCK
MARKET STREET BOND
MARKET STREET MANAGED
PROSPECTIVE CHANGE TO THE SVPT INVESTMENT MANAGEMENT REIMBURSEMENT CREDITS:
AS OF OCTOBER 1, 2002, THE INVESTMENT MANAGEMENT REIMBURSEMENT CREDITS FOR THE
SVPT FUNDS SHALL BE THE MANAGEMENT FEES AFTER EXPENSE REIMBURSEMENT AS DESCRIBED
IN THE SVPT PROSPECTUS. INITIALLY THESE CREDITS SHALL BE:
FUND CREDIT
SENTINEL VARIABLE PRODUCT TRUST COMMON STOCK
SENTINEL VARIABLE PRODUCT TRUST GROWTH INDEX
SENTINEL VARIABLE PRODUCT TRUST MID CAP GROWTH
SENTINEL VARIABLE PRODUCT TRUST MONEY MARKET
SENTINEL VARIABLE PRODUCT TRUST SMALL COMPANY
THESE CREDITS SHALL BE UPDATED AS NECESSARY TO REFLECT ANY CHANGE IN MANAGEMENT
FEES AFTER EXPENSE REIMBURSEMENT AS PUBLISHED IN THE SVPT PROSPECTUS.
70
EXECUTION
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated and is effective as of September 1, 2002.
NATIONAL LIFE INSURANCE COMPANY
at Montpelier, Vermont, USA,
on , 2002. on , 2002.
By: By:
Title: Title
By: By:
Title: Title
71
