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ASSUMPTION REINSURANCE AGREEMENT
by and between
UNUM LIFE INSURANCE COMPANY OF AMERICA
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Dated as of October 1, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS................................... 1
ARTICLE II BUSINESS ASSUMED.............................. 4
ARTICLE III NOTICES; ASSUMPTION CERTIFICATES; NOVATIONS... 4
ARTICLE IV TERRITORY..................................... 6
ARTICLE V CONTRACT ADMINISTRATION....................... 6
ARTICLE VI PREMIUMS; RECOVERIES.......................... 6
ARTICLE VII TRANSFER OF ASSETS............................ 7
ARTICLE VIII OFFSETS....................................... 7
ARTICLE IX ERRORS AND OMISSIONS.......................... 8
ARTICLE X DUTY OF COOPERATION........................... 8
ARTICLE XI ARBITRATION................................... 8
ARTICLE XII MISCELLANEOUS PROVISIONS...................... 9
Section 12.01. Notices.................................... 9
Section 12.02. Amendment.................................. 10
Section 12.03. Counterparts............................... 10
Section 12.04. No Third Party Beneficiaries............... 10
Section 12.05. Assignment................................. 10
Section 12.06. Governing Law.............................. 10
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EXHIBITS
EXHIBIT A Option Letters
EXHIBIT B Certificates of Assumption
SCHEDULES
SCHEDULE 1.01 Insurance Contracts
SCHEDULE 1.02 Purchaser Separate Account
SCHEDULE 1.03 Seller Separate Account
SCHEDULE 3.01 Notices and Consents
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ASSUMPTION REINSURANCE AGREEMENT
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THIS ASSUMPTION REINSURANCE AGREEMENT (this "Agreement"), dated as of
October 1, 1996, is made by and between UNUM Life Insurance Company of America,
a Maine domiciled stock life insurance company ("Seller"), and The Lincoln
National Life Insurance Company, an Indiana domiciled stock life insurance
company ("Purchaser").
WHEREAS, Seller has agreed to cede and transfer to Purchaser the
Insurance Contracts (as defined below) and Purchaser has agreed to assume the
rights, obligations and liabilities of Seller under the Insurance Contracts; and
WHEREAS, Seller and Purchaser are, concurrently with the execution of
this Agreement, entering into an Indemnity Reinsurance Agreement (the "Indemnity
Reinsurance Agreement") whereby Seller will cede and Purchaser will reinsure, on
an indemnity reinsurance basis, the general account obligations of Seller under
the Insurance Contracts pending the assumption of the Insurance Contracts by
Purchaser under this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and upon the terms and conditions set forth herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
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The following terms shall have the respective meanings set forth below
throughout the Agreement:
"Acquisition Agreement" means the Second Amended and Restated Asset
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Transfer and Acquisition Agreement entered into by and between Purchaser and
Seller dated as of January 24, 1996, to which LLANY (as defined herein) has been
added as a party.
"Administrative Services Agreement" means the Administrative Services
---------------------------------
Agreement entered into by and between Purchaser and Seller dated as of the date
hereof.
"Affiliate" means, with respect to any Person, at the time in
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question, any other Person controlling, controlled by or under common control
with such Person.
"Agreement" means this Assumption Reinsurance Agreement.
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"Certificateholder Notice" shall have the meaning set forth in Article
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III.
"Certificateholders" means the certificateholders under the group
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annuity contracts included within the Insurance Contracts.
"Certificates of Assumption" shall have the meaning set forth in
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Article III hereof.
"Contractholder Notice" shall have the meaning set forth in Article
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III.
"Contractholders" means the holders of the group annuity contracts
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included within the Insurance Contracts.
"Effective Date" means October 1, 1996.
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"Extra Contractual Obligations" means all liabilities for
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consequential, exemplary, punitive or similar damages which relate to or arise
in connection with any alleged or actual act, error or omission by Seller or any
of its Affiliates prior to the date hereof, whether intentional or otherwise, or
from any reckless conduct or bad faith by Seller or any of its Affiliates, in
connection with the handling of any claim under any of the Insurance Contracts
or in connection with the issuance, delivery, cancellation or administration of
any of the Insurance Contracts (provided that no liability with respect to which
Purchaser or LLANY shall be entitled to indemnification under Section
10.01(a)(ii) of the Acquisition Agreement shall be deemed to be an Extra
Contractual Obligation).
"General Account Liabilities" means those Insurance Liabilities which
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are general account obligations of Seller, excluding any general account
liabilities which relate to (i) amounts transferred from the Seller Separate
Account to the general account of Seller pending distribution to holders of the
Insurance Contracts and (ii) amounts held in the general account of Seller
pending transfer to the Seller Separate Account.
"Indemnity Reinsurance Agreement" shall have the meaning set forth in
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the second recital of this Agreement.
"Insurance Contracts" means all group annuity contracts issued by
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Seller that are listed on Schedule 1.01 hereto and in effect on the Effective
Date and all certificates and participation agreements in effect as of the
Effective Date issued in accordance with the terms of such group annuity
contracts (including all supplements, endorsements, riders and ancillary
agreements in connection therewith).
"Insurance Liabilities" means all liabilities and obligations arising
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under the Insurance Contracts (including, without limitation, the Seller
Separate Account Liabilities, but excluding any Extra Contractual Obligations),
including, without limitation: (i) all liability for premium taxes arising on
account of premiums paid or annuities purchased on or after the Effective Date,
(ii) all amounts payable on or after the Effective Date for returns or refunds
of premiums under the Insurance Contracts, (iii) all liability for commission
payments and other fees or compensation payable with respect to the Insurance
Contracts to
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or for the benefit of brokers and service providers, to the extent that such
amounts are or become payable on or after the Effective Date, (iv) all guaranty
fund assessments and similar charges imposed with respect to the Insurance
Contracts based on premiums paid on or after the Effective Date.
"LLANY" means Lincoln Life & Annuity Company of New York, an
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Affiliate of Purchaser.
"Notice" means a Contractholder Notice or a Certificateholder Notice.
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"Novated Contracts" shall have the meaning set forth in Article III
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hereof.
"Person" means any individual, corporation, partnership, firm, joint
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venture, association, joint-stock company, trust, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other
entity.
"Purchaser" shall have the meaning set forth in the introductory
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paragraph of this Agreement.
"Purchaser Separate Account" means the separate account of Purchaser
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described on Schedule 1.02 hereto.
"Seller" shall have the meaning set forth in the introductory
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paragraph of this Agreement.
"Seller Separate Account" means the separate account of Seller
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described on Schedule 1.03 hereto.
"Seller Separate Account Liabilities" means those insurance
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liabilities that are reflected in the Seller Separate Account and that relate to
Insurance Contracts.
"Trust Account" means the Trust Account established pursuant to the
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Trust Agreement.
"Trust Agreement" means the Trust Agreement entered into by and among
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the Purchaser, Seller and Trustee dated as of the date hereof.
"Trustee" means the trustee named as such in the Trust Agreement and
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any successor trustee appointed as such pursuant to the terms of the Trust
Agreement.
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ARTICLE II
BUSINESS ASSUMED
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Upon the terms and subject to the conditions and other provisions of
this Agreement and any required governmental and regulatory consents and
approvals, Seller hereby agrees to cede to Purchaser and Purchaser hereby agrees
to accept and assume the Insurance Contracts. Purchaser agrees to indemnify,
defend and hold harmless Seller (and its directors, officers, employees,
Affiliates, successors and permitted assigns), in accordance with the procedures
set forth in Section 10.02 and Section 10.03 of the Acquisition Agreement, from
and against all Insurance Liabilities assumed by Purchaser pursuant to this
Agreement.
ARTICLE III
NOTICES; ASSUMPTION CERTIFICATES; NOVATIONS
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Purchaser shall prepare for mailing to each Contractholder that is
resident in a state where Seller and Purchaser have obtained all required
regulatory approvals for the assumption of the Insurance Contracts, an option
letter, including a rejection form, substantially in the form attached hereto as
Exhibit A-1 (such option letters are hereinafter referred to as the
"Contractholder Notices"). The Contractholder Notices shall be mailed by
Purchaser to each such Contractholder, at the sole expense of Purchaser, on the
date when all required regulatory approvals have been obtained for the
assumption of each such Insurance Contract by Purchaser or as soon as
practicable thereafter. Each Contractholder Notice shall be dated the date upon
which it is mailed.
Subject to regulatory requirements of the various states with respect
to Contractholders resident in such states, Seller and Purchaser agree that a
Contractholder will remain a Contractholder of Seller if a rejection of the
assumption is delivered by such Contractholder to Seller or Purchaser prior to
the expiration of the 30-day period which will commence on the date that the
Contractholder Notice is sent to such Contractholder. In the event of such
rejection, Certificateholder Notices will not be sent to Certificateholders
under the Insurance Contracts held by such Contractholder (as otherwise provided
for below) and such Certificateholders will remain as Certificateholders of
Seller.
Following the expiration of the 30-day period referred to above (or,
if earlier, following the receipt of any affirmative consent from a
Contractholder), Purchaser shall prepare for mailing to each Certificateholder
under the applicable Insurance Contracts an option letter, including a rejection
form, substantially in the form attached hereto as Exhibit A-2 (such option
letters are hereinafter referred to as the "Certificateholder Notices"). The
Certificateholder Notices shall be mailed promptly by Purchaser to each such
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Certificateholder, at the sole expense of Purchaser. Each Certificateholder
Notice will be dated the date upon which it is mailed.
Subject to regulatory requirements of the various states with respect
to Certificateholders resident in such states, Seller and Purchaser agree that a
Certificateholder will remain a Certificateholder of Seller if a rejection of
the assumption is delivered by such Certificateholder to Seller or Purchaser
prior to the expiration of the 30-day period which will commence on the date
that the Certificateholder Notice is sent to such Certificateholder. Seller and
Purchaser agree further that, where the regulatory requirements of a particular
state provide for a novation procedure different from that set forth in the
preceding sentence, Insurance Contracts owned by a Certificateholder resident in
such state will be novated in accordance with such procedure.
Purchaser shall also prepare and mail certificates of assumption in
the form attached hereto as Exhibit B-1 or B-2, as applicable (the "Certificates
of Assumption").
Insurance Contracts assumed by Purchaser hereunder as provided for
above shall be deemed to have been assumed by novation and shall be defined
herein as "Novated Contracts." Except as set forth below in this Article III,
the effective date of novation of an Insurance Contract shall be the effective
date of novation specified in the Certificateholder Notices sent in respect of
such Insurance Contract, which date shall be (i) if the Certificateholder
Notices are mailed on or prior to the 25th day of any month, the first day of
the second month following the month in which such Certificateholder Notices are
mailed, and (ii) if the Certificateholder Notices are mailed after the 25th day
of any month, the first day of the third month following the month in which such
Certificateholder Notices are mailed. With respect to an Insurance Contract
held by a Contractholder or Certificateholder resident in a state where the
regulatory requirements provide for a novation procedure different from the
novation procedure set forth in the preceding sentence, the effective date of
Novation shall be as set forth in the Notice sent to such Contractholder or
Certificateholder, such Notice to be prepared in accordance with such regulatory
requirements. Notwithstanding the foregoing, the effective date of novation of
an Insurance Contract that has Seller Separate Account Liabilities related
thereto shall be no earlier than the date upon which the assets supporting such
Seller Separate Account Liabilities are transferred to the Purchaser Separate
Account.
Purchaser shall be the successor to Seller under the Novated Contracts
as if the Novated Contracts were direct obligations originally issued by
Purchaser. Purchaser shall be substituted in the place and stead of Seller, and
each Contractholder and Certificateholder under a Novated Contract shall be
entitled to disregard Seller as a party thereto and treat Purchaser as if it had
been originally obligated thereunder. Each such Contractholder and
Certificateholder shall have the right to file claims arising under the Novated
Contracts on or after the effective date of such novation directly with
Purchaser and shall have a direct right of action for Insurance Liabilities
reinsured thereunder against Purchaser, and Purchaser hereby consents to be
subject to direct action taken by any Contractholder or Certificateholder under
a Novated Contract. Purchaser accepts and
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assumes the Novated Contracts subject to any and all defenses, setoffs and
counterclaims to which Seller would be entitled in relation to the Insurance
Liabilities, it being expressly understood and agreed by the parties hereto that
no such defenses, setoffs or counterclaims are waived by the execution of this
Agreement or the consummation of the transactions contemplated hereby and that
Purchaser shall be fully subrogated to all such defenses, setoffs and
counterclaims.
Seller and Purchaser agree that, where the regulatory requirements of
a particular state provide for a novation procedure different from that set
forth in this Article III, Insurance Contracts owned by a Contractholder
resident in such state will be novated in accordance with such procedure. In
addition, notwithstanding the form of the Exhibits referred to above in this
Article III, the parties agree that such Exhibits will be modified for use in
the various states to the extent required to comply with local regulatory
requirements or as agreed by the parties. The parties generally intend to mail
Notices and to seek consents as described in Schedule 3.01 hereto.
ARTICLE IV
TERRITORY
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This Agreement shall apply to Insurance Contracts covering lives and
risks wherever resident or situated.
ARTICLE V
CONTRACT ADMINISTRATION
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Following the respective effective dates of novation of the Novated
Contracts, Purchaser shall have sole direct responsibility for the
administration and servicing of the Novated Contracts. Seller agrees that,
after the respective effective dates of novation of the Novated Contracts, it
will forward to Purchaser immediately upon receipt all notices and other written
communications received by it relating to Novated Contracts (including, without
limitation, all inquiries or complaints from state insurance regulators, agents,
brokers and insureds and all notices of claims, suits and actions for which it
receives service of process).
ARTICLE VI
PREMIUMS; RECOVERIES
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Seller shall remit to Purchaser or Purchaser shall retain, as
applicable, 100% of all premiums, contract loan repayments and other amounts
received by Seller or Purchaser with respect to the Novated Contracts on or
after the respective dates of novation including,
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but not limited to, all administrative expense and deposit charges deducted from
the remittance of premiums or other amounts billed separately, asset charges
collected, market value adjustments collected and back-end loadings collected
under the Novated Contracts.
Effective on the respective effective dates of novation, Purchaser
shall have sole direct responsibility for billing and collecting premiums in
respect of, and principal and interest payments on contract loans under, the
Novated Contracts.
ARTICLE VII
TRANSFER OF ASSETS
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On the respective dates of novation, Seller shall transfer and assign
to Purchaser all contract loans under the Novated Contracts. In addition,
Seller shall, on the effective date of novation specified in the Notice sent in
respect of an Insurance Contract which has Seller Separate Account Liabilities
related thereto, transfer to the appropriate Purchaser Separate Account the
assets of the Seller Separate Account which support the Seller Separate Account
Liabilities arising under each Insurance Contract so novated.
In the event that contract loans are transferred by Seller to
Purchaser or assets are transferred from the Trust Account to Purchaser with
respect to a Novated Contract which is subsequently finally determined in a
judicial proceeding or by regulatory action not to have been novated, Purchaser
shall transfer any contract loans under such Insurance Contract to Seller and
shall transfer to the Trust Account assets with a market value on the date of
transfer in an amount at least equal to the General Account Liabilities (less
any contract loans) arising under such Insurance Contract on the date of
transfer. In the event that assets are transferred to the Purchaser Separate
Account with respect to a Novated Contract which is subsequently determined not
to have been novated, Purchaser shall transfer to the Seller Separate Account
the assets in the Purchaser Separate Account relating to the Purchaser separate
account liabilities arising under such Insurance Contract on the date of
transfer.
ARTICLE VII
OFFSETS
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Any debts or credits between Seller and Purchaser arising under this
Agreement are deemed mutual debts or credits, as the case may be, and shall be
netted or set off, as the case may be, and only the balance shall be allowed or
paid hereunder.
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ARTICLE IX
ERRORS AND OMISSIONS
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Inadvertent delays, errors or omissions made by either Seller or
Purchaser in connection with this Agreement or any transaction hereunder shall
not relieve the other party from any liability which would have attached to such
party had such delay, error or omission not occurred, provided that the party
causing such delay error or omission rectifies the same as soon as possible
after its discovery thereof.
ARTICLE X
DUTY OF COOPERATION
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Each party hereto shall cooperate fully with the other in all
reasonable respects in order to accomplish the objectives of this Agreement.
This duty to cooperate shall include obtaining the governmental and regulatory
consents and approvals and taking the other steps necessary for the assumption
of the Insurance Contracts, as described in Article III hereof.
ARTICLE XI
ARBITRATION
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It is the intention of the parties hereto that customs and usages of
the business of indemnity reinsurance and assumption reinsurance shall be given
full effect in the interpretation of this Agreement other than to the extent
that the unique aspects of the transaction render such customs and usages
inapplicable. The parties hereto shall act in all things with the highest good
faith. Any dispute or difference with respect to the operation or
interpretation of this Agreement on which an amicable understanding cannot be
reached shall be submitted to arbitration, which shall be mandatory and binding;
provided, however, that this Article XI shall not apply in the event Purchaser
shall become subject to a delinquency proceeding as defined in Section 27-9-1-2
of the Indiana Insurance Law. The arbitrators shall be free to reach their
decision from the standpoint of equity and customary practices of the insurance
and reinsurance industry rather than from that of strict legal principles.
The arbitration shall be held in Portland, Maine, and shall consist of
three arbitrators who must be active or retired executive officers of life
insurance companies other than the parties to this Agreement, their Affiliates
or subsidiaries. Seller shall appoint one arbitrator and Purchaser the second.
Such arbitrators shall then select the third arbitrator before arbitration
commences. Should one of the parties decline to appoint an arbitrator or should
the two arbitrators be unable to agree upon the choice of a third, such
appointment shall be left to the President of the American Academy of Actuaries.
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Decisions of the arbitrators shall be by majority vote. The cost of
arbitration, including the fees of the arbitrators, shall be borne as the
arbitrators shall decide.
Judgment upon any award granted by the arbitrators may be entered in a
Federal court of competent jurisdiction in Portland, Maine.
ARTICLE XII
MISCELLANEOUS PROVISIONS
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Section 12.01. Notices. Any notice required or permitted hereunder
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shall be in writing and shall be delivered personally (by courier or otherwise),
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, three days after the date of deposit in the United
States mails, as follows:
(1) If to Purchaser to:
The Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx
Telecopier No.: (000) 000-0000
With a concurrent copy to:
Xxxxxxxxxx, Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
(2) If to Seller to:
UNUM Life Insurance Company of America
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
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With a concurrent copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Xx.
Telecopier No.: (000) 000-0000
Any party may, by notice given in accordance with this Agreement to
the other party, designate another address or person for receipt of notices
hereunder.
Section 12.02. Amendment. This Agreement may not be modified,
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changed, discharged or terminated, except by an instrument in writing signed by
an authorized officer of each of the parties hereto.
Section 12.03. Counterparts. This Agreement may be executed by the
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parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
Section 12.04. No Third Party Beneficiaries. Except as otherwise
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specifically provided for herein, nothing in this Agreement is intended or shall
be construed to give any Person, other than the parties hereto, their successors
and permitted assigns, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
Section 12.05. Assignment. This Agreement shall be binding upon and
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inure to the benefit of the parties hereto and their respective successors,
permitted assigns and legal representatives. Neither this Agreement, nor any
right hereunder, may be assigned by either party (in whole or in part) without
the prior written consent of the other party hereto.
Section 12.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
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AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MAINE, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
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IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement
as of the Effective Date.
UNUM LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President and
General Counsel
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Xxxxx X. Xxxxxxxxx
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Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
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