EXECUTION COPY
COINSURANCE AGREEMENT
by and between
FIDELITY AND GUARANTY LIFE INSURANCE COMPANY
and
KEYPORT LIFE INSURANCE COMPANY
Dated as of July 26, 1996
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . 1
ARTICLE II REINSURANCE COVERAGE. . . . . . . . . . . . . . 7
ARTICLE III GENERAL PROVISIONS. . . . . . . . . . . . . . . 8
ARTICLE IV REINSURANCE PREMIUMS; CEDING COMMISSION . . . . 13
ARTICLE V RESERVES. . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI EXPENSE ALLOWANCE . . . . . . . . . . . . . . . 15
ARTICLE VII DEATH BENEFITS, ANNUITY PAYMENTS AND OTHER
PAYMENTS. . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII ACCOUNTING AND SETTLEMENT . . . . . . . . . . . 19
ARTICLE IX DURATION, RECAPTURE AND TERMINATION . . . . . . 22
ARTICLE X INSOLVENCY. . . . . . . . . . . . . . . . . . . 25
ARTICLE XI ARBITRATION . . . . . . . . . . . . . . . . . . 26
ARTICLE XII SECURITY. . . . . . . . . . . . . . . . . . . . 28
ARTICLE XIII REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY. . . . . . . . . . . . . . . . . 33
ARTICLE XIV REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE REINSURER. . . . . . . . . . . . . . . . 36
ARTICLE XV CONDITIONS TO CLOSING . . . . . . . . . . . . . 39
ARTICLE XVI MISCELLANEOUS PROVISIONS. . . . . . . . . . . . 41
SCHEDULES
SCHEDULE A - REINSURED SPDAs
SCHEDULE B - QUARTERLY PERIOD REINSURANCE REPORTS
SCHEDULE C - ANNUAL REINSURANCE REPORTS
SCHEDULE D - POLICYHOLDER SERVICES TO BE PROVIDED
SCHEDULE E - CONSERVATION AND COMMISSION PAYMENT SERVICES TO BE
PROVIDED AND ASSOCIATED FEES
SCHEDULE F - LIST OF AGENCY AND DISTRIBUTION AGREEMENTS
SCHEDULE G - CONSENTS AND APPROVALS REQUIRED BY THE COMPANY
SCHEDULE H - CONSENTS AND APPROVALS REQUIRED BY THE REINSURER
SCHEDULE I - FORM OF OPINION OF SENIOR VICE PRESIDENT AND
GENERAL COUNSEL FOR THE REINSURER
SCHEDULE J - JOINT ELECTION UNDER IRC REGULATION 1.848-2(g)(8)
COINSURANCE AGREEMENT
THIS COINSURANCE AGREEMENT (this "Agreement"), dated
as of July 26, 1996, is made and entered into by and between
FIDELITY AND GUARANTY LIFE INSURANCE COMPANY, a life insurance
company organized under the laws of the State of Maryland (the
"Company"), and KEYPORT LIFE INSURANCE COMPANY, a life insurance
company organized under the laws of the State of Rhode Island
(the "Reinsurer").
WHEREAS, the Company has agreed to cede to the
Reinsurer, on a coinsurance basis, the Reinsured SPDAs (as
defined below), and the Reinsurer has agreed to reinsure all
liabilities and obligations of the Company arising under the
Reinsured SPDAs, subject to the exclusions set forth in
Section 2.03 below.
NOW, THEREFORE, in consideration of the mutual
covenants and promises and upon the terms and conditions set
forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall
have the following meanings (definitions are applicable to both
the singular and the plural forms of each term defined in this
Article):
"Account Values" means the account value, as defined in the
Reinsured SPDAs, which is not reduced for surrender charges.
"Accounting Period" means a calendar quarter, except that the
initial Accounting Period shall be the period commencing with
the Effective Date and ending with the last day of the then
current calendar quarter, and the final Accounting Period shall
be the period commencing with the first day of the calendar
quarter that includes the Termination Date and ending on the
Termination Date.
"Act" shall have the meaning specified in Section 13.07(b).
"Annual Report" means the report required to be prepared in
accordance with Section 8.03 and providing the data as shown on
Schedule C.
"Benefits" shall have the meaning specified in Section 7.01.
"Blended Rate" means the percentage rate equal to the sum of (i)
two-thirds of the one year Treasury Note rate as of the close of
business on the Business Day immediately preceding the Closing
Date plus (ii) one-third of the three year Treasury Note rate as
of the close of business on the Business Day immediately
preceding the Closing Date.
"Business Day" means any day that is not a Saturday or a Sunday
or a day on which banks in the State of New York are authorized
or required by law to close.
"Cash Equivalents" means, as of any particular date, money
market funds, marketable obligations issued or guaranteed by the
United States Government, certificates of deposit, bankers'
acceptances and other similar liquid investments, in each case,
with a maturity date of not more than 90 days from the date on
which any such instrument is transferred pursuant to the terms
of this Agreement, the market value of which on the date of
transfer will be counted as equivalent to cash for purposes of
satisfying the aggregate amount of cash and Cash Equivalents
required to be transferred under this Agreement.
"Ceding Commission" shall have the meaning specified in Section
4.02.
"Closing" means the closing of the transactions under this
Agreement on the Closing Date.
"Closing Date" means the date which is three Business Days
following the receipt of all required governmental and
regulatory consents and approvals, including the expiration of
any applicable waiting periods, in connection with the
reinsurance of the Reinsured SPDAs, which date shall not be
earlier than August 1, 1996 or later than October 31, 1996.
"Commissions and Expenses" means (i) all sales commissions,
production bonuses or other payments in cash or kind payable to
duly licensed insurance agents or other persons with respect to
any Reinsured SPDAs, whether issued by the Company prior to the
Effective Date or issued by the Company, with the consent of the
Reinsurer, on or subsequent to the Effective Date, (ii) an
administration services fee of $2.00 per month per Reinsured
SPDA in force at the beginning of each month during the term of
this Agreement for providing the policyholder services listed on
Schedule D with respect to the Reinsured SPDAs, (iii) the fees
listed on Schedule E for providing the conservation and
commission payment services included therein, and (iv) all
direct expenses incurred in connection with the Reinsured SPDAs,
including, but not limited to (a) guaranty fund assessments
relating to premiums written on or subsequent to the Effective
Date, (b) premium or other taxes and (c) any charges and
assessments imposed directly on or with respect to the Reinsured
SPDAs.
"Daily Interest Amount" shall have the meaning specified in
Section 7.01(b).
"Effective Date" shall have the meaning specified in
Section 2.01.
"Endorsements" means any endorsements to the SPDAs in force on
the Effective Date and issued pursuant to an offer from the
Company which has been accepted by an owner of a Reinsured SPDA
providing for a new interest rate guarantee period and the
reimposition of surrender charges upon termination of the
initial six-year surrender charge period.
"Extracontractual Liabilities" means all liabilities for
consequential, exemplary, punitive or similar damages which
relate to or arise in connection with any alleged or actual act,
error or omission by the Company, its directors, officers,
employees, agents or any of the Company's affiliates, whether
intentional or otherwise, or from any alleged or actual reckless
conduct or bad faith by the Company, its directors, officers,
employees, agents or any of the Company's affiliates, in
connection with the handling of any claim under any of the
Reinsured SPDAs or in connection with the issuance, delivery,
cancellation or administration of any of the Reinsured SPDAs.
"First Commission Rate" means the percentage rate equal to the
sum of (i) 2.6 percent plus (ii) the product of (a) 1.4 and
(b) the difference between (1) the Blended Rate and (2) 6.06
percent.
"Governmental Authority" means any foreign, federal, state,
local or other court, arbitrator, administrative agency,
commission or division, insurance or securities regulatory or
self-regulatory body or securities or commodities exchange.
"Initial Reinsurance Premium" shall have the meaning specified
in Section 4.01.
"Investment Assets" means the assets that are transferred to the
Reinsurer in connection with the Initial Reinsurance Premium.
"NAIC" means the National Association of Insurance
Commissioners.
"Qualified Financial Institution" shall have the meaning
specified in Section 09.30.97.08 of the Code of Maryland
Regulations.
"Quarterly Report" means the report required to be prepared in
accordance with Section 8.02 and providing the data as shown on
Schedule B.
"Quarterly Settlement" means the net amount due and payable to
either party with respect to any Accounting Period.
"Recapture Event" shall have the meaning specified in
Section 9.03.
"Reinsured SPDAs" means (i) the SPDAs, including any
Endorsements thereto, and (ii) any single premium deferred
annuity contracts replacing SPDAs and any endorsements to SPDAs
issued by the Company on or subsequent to the Effective Date
with the consent of the Reinsurer. Reinsured SPDAs shall not
include Retained Asset Account Funds in existence on the
Effective Date.
"Reserves" means the statutory reserves established by the
Company with respect to the liabilities arising under the
Reinsured SPDAs, including, but not limited to, excess interest
reserves, claim reserves and other statutory liabilities
required to be reported by the Company on its NAIC Annual
Statement Blank filed with the State of Maryland.
"Retained Asset Account Funds" means death benefit funds on
deposit with the Company but not yet paid out or annuitized
under a settlement option at the request of the beneficiary or
the estate, with regard to the Reinsured SPDAs.
"Second Commission Rate" means the percentage rate equal to the
sum of (i) 1.8 percent plus (ii) the product of (a) 1.4 and
(b) the difference between (1) the Blended Rate and (2) 6.06
percent.
"Short Term Rate" means the sum of (i) the Blended Rate and
(ii) 1.0 percent.
"SPDAs" means the single premium deferred annuity contracts in
force on the Effective Date and issued by the Company on the
policy forms listed on Schedule A attached hereto.
"Terminal Accounting and Settlement" shall have the meaning
specified in Section 9.07.
"Termination Date" means the date on which any complete
termination of this Agreement, as provided in Article IX, is
effective, either as a result of an event described in
Article IX, or as designated by the terminating party or
parties.
"Termination Report" means the report required to be prepared in
accordance with Section 9.08 and providing the calculations for
the Terminal Accounting and Settlement.
"Third Commission Rate" means the percentage rate equal to the
sum of (i) 3.0 percent plus (ii) the product of (a) 1.4 and
(b) the difference between (1) the Blended Rate and (2) 6.06
percent.
"Trust" or "Trust Account" shall mean the Trust or Trust Account
established pursuant to Article XII.
ARTICLE II
REINSURANCE COVERAGE
2.01. Coverage. Upon the terms and subject to the
conditions and other provisions of this Agreement and any
required governmental and regulatory consents and approvals,
effective as of 12:01 a.m., Eastern Time, on the Closing Date
or, if the Closing Date is not the first day of the month, then
such date to be the first day of the month in which the Closing
Date occurs (the "Effective Date"), the Company hereby cedes to
the Reinsurer, and the Reinsurer hereby assumes, on a
coinsurance basis, all liabilities and obligations of the
Company arising under the Reinsured SPDAs, subject to the
exclusions set forth in Section 2.03. The liability of the
Reinsurer with respect to the Reinsured SPDAs shall begin on the
Effective Date.
2.02. Conditions. The reinsurance hereunder is subject
to the same limitations, terms and conditions as the Reinsured
SPDAs, except as otherwise provided in this Agreement.
2.03. Exclusions. This Agreement does not apply to and
specifically excludes from coverage hereunder:
(a) any insurance policy or annuity contract
issued by the Company other than the
Reinsured SPDAs; or
(b) any Extracontractual Liabilities.
2.04. Plan of Reinsurance. This reinsurance shall be
on a one hundred percent (100%) coinsurance basis.
2.05. Retrocession. The Reinsurer retains the right to
retrocede all or any portion of the risk on any Reinsured SPDA.
2.06. Other Reinsurance. During the term of this
Agreement, the Company shall not, without the prior written
consent of the Reinsurer, enter into any reinsurance agreement
of any type, other than this Agreement, with respect to the
Reinsured SPDAs.
ARTICLE III
GENERAL PROVISIONS
3.01. Administration and Expenses. The Company or its
designated administrator shall continue to perform or have
performed all policyholder services as more fully described on
Schedule D and the conservation and commission payment services
with respect to the Reinsured SPDAs as more fully described on
Schedule E. The Reinsurer shall pay all administration and
accounting expenses and other expenses related to maintenance of
the Reinsured SPDAs, as part of Commissions and Expenses payable
pursuant to the provisions of Section 6.01 of this Agreement.
3.02. Voluntary Contract Changes or Reserve Assumption
Changes. The Company, on its own initiative, shall not without
the prior consent of the Reinsurer change (i) the terms and
conditions of any Reinsured SPDAs, or (ii) the assumptions,
including the statutory reserve accumulation rate assumption and
the interpretation of NAIC regulations and guidelines relating
to the calculation of statutory reserves, used by the Company to
establish the Reserves with respect to the Reinsured SPDAs. The
Reinsurer shall share, according to the percentage specified in
Section 2.04 of this Agreement, in any contract changes or
Reserve changes required by any regulatory authority having
jurisdiction over the Company in the ordinary course of
exercising its powers or otherwise required by law. In the
event of an increase in the Reserves directly caused by changes
in the Company's interpretation, on its own initiative, of NAIC
regulations and guidelines relating to the calculation of the
Reserves, the Company and the Reinsurer shall attempt in good
faith to determine the cost of holding the additional amount of
Reserves required by such changes; provided, however, that if
the Company and the Reinsurer are unable to resolve any
disagreement with respect to such cost, then the matter shall be
referred to arbitration pursuant to the terms of Article XI, at
the initiative of either party.
3.03. Inspection.
(a) Subject to reasonable advance notice to the Company,
the Reinsurer or its designated representative may inspect, at
the offices of the Company or its designated representative or
wherever such records are located, any and all books, documents
or records of the Company reasonably relating to the Reinsured
SPDAs during normal business hours for such period as this
Agreement is in effect or for as long thereafter as the Company
seeks performance by the Reinsurer pursuant to the terms of this
Agreement. While performing any such inspection, the Reinsurer
or its designated representative shall use its best efforts to
minimize any disruption to the Company's normal business
operations. Upon the Reinsurer's reasonable request, copies of
such records shall be furnished to the Reinsurer, at the expense
of the Reinsurer. The information obtained by the Reinsurer
shall be treated as confidential material and proprietary to the
Company and shall be used by the Reinsurer only for purposes
relating to reinsurance of the Reinsured SPDAs under this
Agreement. The Reinsurer's rights under this Section shall
survive termination of this Agreement.
(b) Subject to reasonable notice to the Reinsurer, the
Company or its designated representative may inspect, at the
offices of the Reinsurer or its designated representative or
wherever such records are located, any and all books, documents,
or records of the Reinsurer reasonably relating to the Reinsured
SPDAs during normal business hours for such period as this
Agreement is in effect or for as long thereafter as Reinsurer
seeks performance by the Company pursuant to the terms of this
Agreement. While performing any such inspection, the Company or
its designated representative shall use its best efforts to
minimize any disruption to the Reinsurer's normal business
operations. Upon the Company's reasonable request, copies of
such records shall be furnished to the Company, at the expense
of the Company. The information obtained by the Company shall
be treated as confidential material and proprietary to the
Reinsurer and shall be used by the Company only for purposes
relating to reinsurance of the Reinsured SPDAs under this
Agreement. The Company's rights under this Section shall
survive termination of this Agreement.
3.04. Misunderstandings and Oversights. If any delay,
omission, error or failure to pay amounts due or to perform any
other act required by this Agreement is unintentional and caused
by misunderstanding or oversight, the Company and the Reinsurer
will adjust the situation to what it would have been had the
misunderstanding or oversight not occurred and the reinsurance
provided hereunder shall not be invalidated. The party first
discovering such misunderstanding or oversight, or act resulting
from the misunderstanding or oversight, will notify the other
party in writing promptly upon discovery thereof, and the
parties shall act to correct such misunderstanding or oversight
within twenty (20) Business Days of receipt of such notice.
However, this Section shall not be construed as a waiver by
either party of its right to enforce strictly the terms of this
Agreement.
3.05. Reinstatements. If a Reinsured SPDA that is or
has been reduced, terminated, or lapsed is reinstated while this
Agreement is in force, the reinsurance for such Reinsured SPDA
shall be reinstated automatically to the amount that would be in
force if the Reinsured SPDA had not been reduced, terminated, or
lapsed. The Company will pay to the Reinsurer all amounts
received or charged by the Company in connection with the
reinstatement.
3.06. Setoff and Recoupment. Any debts or credits,
matured or unmatured, liquidated or unliquidated, regardless of
when they arose or were incurred, in favor of or against either
the Company or the Reinsurer with respect to this Agreement are
deemed mutual debts or credits, as the case may be, and shall be
setoff from any amounts due to the Company or the Reinsurer
hereunder, as the case may be, and only the net balance shall be
allowed or paid. This setoff provision (to the extent permitted
by law) shall not be modified or reconstrued due to the
insolvency, liquidation, rehabilitation, conservatorship, or
receivership of either party.
3.07. Payments. All payments made pursuant to this
Agreement (other than the transfer of Investment Assets in
connection with the Initial Reinsurance Premium described in
Section 4.01 of this Agreement) shall be in cash or Cash
Equivalents and shall be made in immediately available funds or
assets acceptable to the Company (at market value) as agreed by
the parties. If a transfer of assets is agreed upon, the party
making the transfer shall deliver the assets to the other party
along with such deeds, bills of sale, endorsements, assignments
and other good and sufficient instruments of conveyance and
transfer reasonably acceptable to the parties as shall be
effective to vest in the party receiving the assets all of the
right, title and interest of the transferring party in and to
the assets.
3.08. Age, Sex and Other Adjustments. If the Company's
liability under any of the Reinsured SPDAs is changed because of
a misstatement of age or sex or any other material facts, the
Reinsurer shall share, according to the percentage specified in
Section 2.04 of this Agreement, in any such change.
ARTICLE IV
REINSURANCE PREMIUMS; CEDING COMMISSION
4.01. Initial Reinsurance Premium. As consideration
for the assumption by the Reinsurer of the liabilities under
this Agreement, on the Closing Date, the Company shall transfer
to the Reinsurer (i) Investment Assets with an aggregate fair
market value to the Company equal to one hundred percent (100%)
of the Reserves with respect to the Reinsured SPDAs as of the
close of business on the Business Day immediately preceding the
Effective Date plus (ii) an amount equal to the Short Term Rate
per annum on such Investment Assets from the Effective Date
until the close of business on the Business Day immediately
preceding the Closing Date (the "Initial Reinsurance Premium").
The Company shall deliver to the Reinsurer possession of the
Investment Assets and such deeds, bills of sale, endorsements,
assignments and other good and sufficient instruments of
conveyance and transfer in form and substance reasonably
acceptable to the parties as shall be effective to vest in the
Reinsurer all of the right, title and interest of the Company in
and to the Investment Assets. Payment of the Initial
Reinsurance Premium shall be a condition precedent of
reinsurance coverage hereunder.
4.02. Ceding Commission. On the Closing Date, the
Reinsurer shall pay a ceding commission (the "Ceding
Commission") to the Company in an amount equal to the sum of:
(i) the product of (a) the Reserves as of the close of
business on the Business Day immediately preceding the
Effective Date allocated to the SPDAs with sixth year
anniversary dates on or prior to the date which is 45 days
prior to the Effective Date and (b) the First Commission
Rate;
(ii) the product of (a) the Reserves as of the close of
business on the Business Day immediately preceding the
Effective Date allocated to the SPDAs with sixth year
anniversary dates subsequent to the date which is 45 days
prior to the Effective Date for which Endorsements have not
been issued and (b) the Second Commission Rate;
(iii) the product of (a) the Reserves as of the close of
business on the Business Day immediately preceding the
Effective Date allocated to the SPDAs for which
Endorsements have been issued prior to the Effective Date
and (b) the Third Commission Rate; and
(iv) an amount equal to the Short Term Rate per annum on
the sum of the amounts calculated pursuant to subsections
(i), (ii) and (iii) above from the Effective Date until the
close of business on the Business Day immediately preceding
the Closing Date.
Such amount shall be paid in cash or Cash Equivalents by the
Reinsurer and shall be netted against the Initial Reinsurance
Premium in accordance with Section 3.06.
ARTICLE V
RESERVES
5.01. Reserves and Reserve Credits. The Reinsurer
shall establish and maintain adequate Reserves with respect to
the Reinsured SPDAs as necessary to enable the Company to take
full reinsurance reserve credit contemplated by this Agreement
on its statutory balance sheet filed with the Insurance
Department of all states in which the Company files its annual
statement.
ARTICLE VI
EXPENSE ALLOWANCE
6.01. Expense Allowance. The Reinsurer shall pay the
Company, in accordance with Section 8.01(a), an expense
allowance equal to 100.14% of the Commissions and Expenses
incurred and paid by the Company during the term of this
Agreement with respect to the Reinsured SPDAs; provided,
however, the Reinsurer expressly agrees that the Company's right
to receive reimbursement for guaranty fund assessments as part
of Commissions and Expenses shall survive the termination of
this Agreement.
ARTICLE VII
DEATH BENEFITS, ANNUITY PAYMENTS AND OTHER PAYMENTS
7.01. Death Benefits, Annuity Payments and Surrender or
Withdrawal Payments.
(a) The Reinsurer shall reimburse the Company, in
accordance with Sections 7.01(b) and 8.01(b), for an amount
equal to 100.14% of the sum of all (i) death benefits, (ii)
surrender or withdrawal payments and (iii) periodic payments
under annuity settlement options elected by the owner, and paid
by the Company, with respect to Reinsured SPDAs that become due
on or after the Effective Date (such death benefits and other
payments referred to in the foregoing clause (i), (ii) and (iii)
are referred to collectively as "Benefits"). The reimbursement
for Benefits shall be net of surrender charges pursuant to the
terms of the relevant Reinsured SPDAs.
(b) On the Closing Date, the Reinsurer shall reimburse the
Company for an amount equal to the sum of:
(i) 100.14% of any Benefits paid by the Company in respect
of Reinsured SPDAs from the Effective Date until the close
of business on the Business Day immediately preceding the
Closing Date; and
(ii) an amount equal to the sum of the Daily Interest
Amount for each day from and including the Effective Date
until the close of business on the Business Day immediately
preceding the Closing Date. For purposes of this Section,
the Daily Interest Amount means the product of (a) the
cumulative amount of Benefits paid as of the close of
business on each day on or subsequent to the Effective Date
and (b) the Short Term Rate per annum.
The amount calculated pursuant to this Section 7.01(b) shall be
paid in cash or Cash Equivalents by the Reinsurer and shall be
netted against the Initial Reinsurance Premium in accordance
with Section 3.06.
7.02. Liability and Payment. Unless the Reinsurer has
made the election provided in Section 7.03 to participate in the
contest, compromise or litigation of a claim, the Reinsurer will
accept the decision of the Company on payment of a claim on a
Reinsured SPDA. The Reinsurer will pay claims (including
expenses incurred in connection with such claims) for Benefits
(other than for the payment of periodic annuity payments if
elected by the owner or annuitant) attributable to Reinsured
SPDAs in a lump sum to the Company without regard to the form of
claim settlement payable by the Company.
7.03. Contested Claims. The Company will provide
notice to the Reinsurer of its intention to contest, compromise,
or litigate a claim (including interpleader actions) with
respect to a Reinsured SPDA. Within ten (10) Business Days
after receipt of such notice, the Reinsurer may elect to
participate in contesting a claim attributable to a Reinsured
SPDA by submitting a notice of such election to the Company.
The Reinsurer shall be deemed to have elected to not participate
in such contest if it fails to make such election within ten
(10) Business Days. If the Reinsurer elects not to participate
in such contest, it may discharge its liability by payment to
the Company of the lesser of the full amount of the claim or the
full amount of the Reinsured SPDA relating to such claim. In no
event shall the Reinsurer indemnify the Company for any
Extracontractual Liabilities arising with respect to any
Reinsured SPDA, unless such Extracontractual Liabilities result
from an action caused, or specifically consented to, by the
Reinsurer; provided, however, that the Reinsurer's election to
participate in the contest, compromise or litigation of a claim
with respect to a Reinsured SPDA shall not automatically be
deemed to be an action specifically consented to by the
Reinsurer for purposes of the immediately preceding clause. The
Company and the Reinsurer agree to cooperate in the prosecution
of any claim contest.
ARTICLE VIII
ACCOUNTING AND SETTLEMENT
8.01. Amounts Due the Reinsurer or the Company.
(a) The payments required to be made under Section 6.01
shall be paid in cash or Cash Equivalents and shall be made
monthly by wire transfer of funds to an account designated by
the Company by 11 a.m. on the second Business Day following the
end of each month with respect to the Commissions and Expenses
incurred as of the close of business on the last day of each
month (or partial month) during the term of this Agreement;
provided, that the Company notifies the Reinsurer by 2 p.m. on
the first Business Day following the end of each month of the
amounts due from the Reinsurer with respect to such month.
(b) The payments required to be made under Section 7.01
(other than the payment on the Closing Date pursuant to Section
7.01(b)) shall be paid in cash or Cash Equivalents and shall be
made weekly by wire transfer of funds to an account designated
by the Company by 11 a.m. on each Thursday following the Closing
Date with respect to the Benefits paid as of the close of
business on the second Business Day next preceding such
Thursday; provided, that the Company notifies the Reinsurer by
2 p.m. on the Business Day prior to such Thursday of the amounts
due from the Reinsurer with respect to such week.
(c) If amounts due to be paid by the Reinsurer to the
Company pursuant to Section 8.01(a) or 8.01(b) above cannot be
determined at such dates on an exact basis, such payments may be
determined on an estimated basis, and any adjustments
subsequently required to reflect actual data shall be made on
the weekly or monthly payment date, as applicable, following the
date that such actual data is available.
(d) Except as otherwise specifically provided herein, all
other amounts due to be paid to either the Reinsurer or the
Company under this Agreement shall be determined on a net basis,
giving full effect to Section 3.06 hereof, as of the last day of
each Accounting Period. Any net amount due from the Company to
the Reinsurer shall be paid in cash or Cash Equivalents no later
than the day on which the Quarterly Report showing such net
amount, as described in Section 8.02, is due. Any net amount
due from the Reinsurer to the Company shall be paid no later
than ten (10) Business Days following the receipt of such
Quarterly Report from the Company. If amounts due to be paid
cannot be determined at such dates on an exact basis, such
payments may be determined on an estimated basis, and any
adjustments subsequently required to reflect actual data shall
be made at the date upon which any amended report, based on
actual data, is due to be provided pursuant to Section 8.04.
8.02. Quarterly Reports. Within ten (10) Business Days
of the end of each Accounting Period the Company shall supply
the Reinsurer with a report that shall provide the data required
in Schedule B (the "Quarterly Report"), which shall show the net
amount due, if any, by the Company or the Reinsurer, as
appropriate.
8.03. Annual Reports. Within twenty (20) Business Days
after the end of each calendar year the Company shall supply the
Reinsurer with a report that shall provide the data required in
Schedule C (the "Annual Report").
8.04. Best Efforts to Supply Actual Data. In preparing
all reports required in this Agreement, the Company and the
Reinsurer shall make their best efforts to supply the actual
data. If the actual data cannot be supplied with the
appropriate report, the Company shall produce best estimates,
and shall provide amended reports based on actual data no more
than twenty (20) Business Days after such report was originally
due.
8.05. Tax Reserves. In connection with the Annual
Report described in Section 8.03, the Company shall supply the
Reinsurer with information with respect to tax reserves relating
to the Reinsured SPDAs.
8.06. Interest on Delayed Payments. Should any payment
due to either the Reinsurer or the Company be delayed, such
delayed payment (including any amount constituting a difference
between an estimated and actual amount, as described in Section
8.01, shall accrue interest for the period that payment is
overdue at an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) at which dollar deposits
approximately equal in amount to the overdue payments hereunder
for a comparable interest period are offered by the principal
London office of Citibank, N.A. in immediately available funds
in the London Interbank Market at approximately 11 a.m., London
time, two Business Days prior to the commencement of such
interest period; each change in such interest rate shall be
effective on the date such change is announced as effective.
ARTICLE IX
DURATION, RECAPTURE AND TERMINATION
9.01. Duration. Except as otherwise provided herein,
this Agreement shall be unlimited in duration.
9.02. Reinsurer's Liability. The Reinsurer's liability
with respect to any Reinsured SPDA will terminate on the
earliest of: (i) the date the Reinsured SPDA is recaptured;
(ii) the date the Company's liability on such Reinsured SPDA is
terminated; or (iii) the date this Agreement is terminated. In
no event should any interpretation of this Section 9.02 imply a
unilateral right of the Reinsurer to terminate this Agreement.
9.03. Termination Due to Recapture. The Company shall
have the right, on five (5) Business Days' written notice to the
Reinsurer (the "Recapture Election Notice"), to terminate this
Agreement and recapture the Reinsured SPDAs in full, such
recapture and termination to be effective as of the next
Business Day following the end of such notice period, in the
event that (i) the Standard & Poor's Corporation Claims-Paying
Ability rating of the Reinsurer becomes less than BBB- (or other
equivalent rating used by Standard & Poor's Corporation) or the
Xxxxx'x Investors Service, Inc. Financial Strength rating of the
Reinsurer becomes less than Baa3 (or other equivalent rating
used by Xxxxx'x Investors Service, Inc.), or (ii) the Reinsurer
files a Risk-Based Capital Report with the Commissioner of
Insurance of the State of Rhode Island (or the then current
state of domicile of the Reinsurer) which indicates that its
Total Adjusted Capital is less than 150 percent of its Company
Action Level RBC (as such capitalized terms are defined in the
NAIC Life Risk-Based Capital Report Including Overview and
Instructions for Companies, dated as of December 31, 1994), or
(iii) the Reinsurer fails to be duly licensed to conduct a life
insurance business or accredited to act as a reinsurer in the
Company's state of domicile or in any other state or
jurisdiction where failure of the Reinsurer to be so licensed or
accredited would cause the Company to be ineligible for reserve
credit for the reinsurance ceded under this Agreement, unless
the Reinsurer provides security for its obligations under this
Agreement pursuant to the provisions of Article XII, or (iv) the
Reinsurer is the subject of an insolvency, liquidation,
supervision, conservation, rehabilitation or other similar
proceeding (each a "Recapture Event"). The Reinsurer shall
provide written notice to the Company within one Business Day of
the occurrence of any Recapture Event.
9.04. Automatic Termination. If, at the end of an
Accounting Period, none of the Reinsured SPDAs are in force,
this Agreement shall automatically terminate.
9.05. Termination Due to Nonpayment. Either party may
terminate this Agreement if the other party fails to pay, when
due, any amounts due under this Agreement, provided that the
non-delinquent party has given at least twenty (20) Business
Days prior written notice of its intent to terminate for that
reason. The delinquent party may avoid termination pursuant to
this Section 9.05 by paying all amounts that are delinquent and
then due, including any interest owing thereon pursuant to
Section 8.06, on or before the Termination Date specified in the
written notice.
9.06. Termination by Mutual Agreement. The parties may
mutually agree to terminate this Agreement at any time.
9.07. Payments on Termination. In the event that this
Agreement is terminated pursuant to this Article IX, a net
accounting and settlement as to any balance due under this
Agreement shall be undertaken by the parties to this Agreement
(the "Terminal Accounting and Settlement"). Any net payment
required under the Terminal Accounting and Settlement will
become due as of the Termination Date, and shall be paid in cash
or Cash Equivalents by the Reinsurer or the Company, as
appropriate, no later than the day on which the Termination
Report described in Section 9.08 is due to be provided. Net
payments required under the Terminal Accounting and Settlement
shall consist of:
(i) the Quarterly Settlement for the final
Accounting Period, calculated as of the Termination Date,
plus any interest due pursuant to Section 8.06; plus
(ii) the payment by the Reinsurer to the Company
of an amount equal to the Reserves as of the day
immediately prior to the Termination Date with respect to
the Reinsured SPDAs; plus
(iii) in the event of a termination of this
Agreement by the Reinsurer under Section 9.05, the payment
by the Company to the Reinsurer of an amount equal to the
product of (a) a fraction, the numerator of which is the
Reserves as of the Termination Date and the denominator of
which is the Reserves as of the Effective Date and (b) the
Ceding Commission.
9.08. Termination Report. Within ten (10) Business
Days after the Termination Date, the Company shall supply the
Reinsurer with a report that shall show the Terminal Accounting
and Settlement (the "Termination Report"). In the event that,
subsequent to the Terminal Accounting and Settlement, an
adjustment is made with respect to any amount taken into account
pursuant to Schedule B, a supplementary accounting shall take
place in accordance with the procedures set out in Sections 8.04
and 9.07. Any net amount owed to the Reinsurer or the Company
by reason of such supplemental accounting, plus any interest due
pursuant to Section 8.06, shall be paid within ten (10) Business
Days after the completion of such Termination Report or
supplementary accounting, as appropriate.
ARTICLE X
INSOLVENCY
10.01. Payments by Reinsurer. In the event of
insolvency, liquidation or rehabilitation of the Company, the
Reinsurer hereby agrees that, as to all reinsurance made, ceded
or otherwise becoming effective hereunder, the reinsurance shall
be payable to the Company, or to its conservator, receiver,
liquidator or statutory successor on the basis of the liability
of the Company under the Reinsured SPDAs, without diminution
because of the insolvency of the Company or because the
conservator, receiver, liquidator or statutory successor of the
Company has failed to pay all or a portion of any claim.
10.02. Claims. It is agreed that the conservator,
receiver, liquidator or statutory successor of the Company shall
give written notice to the Reinsurer of the pendency or
submission of a claim under any Reinsured SPDAs within a
reasonable time after such claim is filed in the insolvency,
liquidation or rehabilitation proceeding. During the pendency
of such claim, the Reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such
claim is to be adjudicated any defense available to the Company
or its conservator, receiver, liquidator or statutory successor.
The expense thus incurred by the Reinsurer pursuant to this
Section 10.02 shall be chargeable, subject to the approval of
the court, against the Company as a part of the expense of
insolvency, liquidation or rehabilitation to the extent of a
proportionate share of the benefit which accrues to the Company
solely as a result of the defense undertaken by the Reinsurer.
10.03. No Waiver of Defenses. Nothing in this Article X
shall preclude the Reinsurer from asserting any excuse or
defense to payment of this reinsurance other than the excuses or
defenses of the insolvency of the Company and the failure of the
Company's conservator, receiver, liquidator or statutory
successor to pay all or a portion of any claim.
ARTICLE XI
ARBITRATION
11.01. Appointment of Arbitrators. In the event of any
disputes or differences arising hereafter between the
contracting parties with reference to any transaction under or
relating in any way to this Agreement as to which agreement
between the parties hereto cannot be reached, the same shall be
decided by arbitration. Three arbitrators will decide any
dispute or difference. The arbitrators must be disinterested
officers or retired officers of life insurance or life
reinsurance companies other than the two parties to this
Agreement or their affiliates. Each of the contracting parties
agrees to appoint one of the arbitrators with the third, the
"Umpire," to be chosen by the two appointed arbitrators. In the
event that either party should fail to choose an arbitrator
within twenty (20) Business Days following a written request by
the other party to do so, the requesting party may choose the
second arbitrator before entering upon arbitration. In the
event that the two arbitrators shall not be able to agree on the
choice of the Umpire within twenty (20) Business Days following
their appointment, each arbitrator shall nominate five
candidates within five Business Days thereafter. Each
arbitrator shall decline four of the candidates nominated by the
other arbitrator. The Umpire shall be chosen from the two
remaining candidates by drawing lots. Should the chosen Umpire
decline to serve, the candidate whose lot was not drawn shall be
appointed. This process shall continue until a candidate has
agreed to serve.
11.02. Proceedings. The parties will cooperate in good
faith in the voluntary, prompt and informal exchange of non-
privileged information relevant to the arbitration. The parties
will make every effort to conclude the information exchange
process within 30 days after notice that the Umpire has been
selected. Within 14 days after the Umpire is selected, the
parties will provide to each other copies of all documents in
their possession or control on which they will or may rely in
support of their position. On the request of either party, the
arbitrators will conduct a conference for the purpose of
determining additional information to be exchanged. If the
arbitrators determine that the requesting party has a reasonable
need for the information and that the request is not overly
burdensome to the opposing party, the arbitrators may order the
exchange of the additional information.
11.03. Decision. Within 60 days following the
appointment of the Umpire, each party must present its case to
the arbitrators. The arbitrators shall consider customary and
standard practices in the life reinsurance business. Within
sixty (60) days after the arbitration hearing, a decision shall
be reached by a majority vote of the arbitrators. There shall
be no appeal from their written decision, which shall be final
and binding upon the parties. Judgment may be entered on the
decision of the arbitrators by any court having jurisdiction.
11.04. Expenses of Arbitration. Each party shall bear
the expense of its own arbitrator (whether selected by that
party, or by the other party pursuant to the procedures set out
in Section 11.01) and related outside attorneys' fees, and shall
jointly and equally bear with the other party the expenses of
the third arbitrator.
11.05. Applicable Law. Any arbitration instituted
pursuant to this Article shall be held in the City of Baltimore,
State of Maryland, and the laws of the State of Maryland and, to
the extent applicable, the Federal Arbitration Act shall govern
the interpretation and application of this Agreement.
11.06 Survival of Article. This Article shall survive
termination of this Agreement.
11.07. Enforcement. The parties intend this Article to
be enforceable in accordance with the Federal Arbitration Act (9
U.S.C. Section 1 et seq., as amended). In the event that either party
refuses to submit to arbitration as required by this Article,
the other party may request that a United States District Court
compel arbitration in accordance with the Federal Arbitration
Act. Both parties consent to the jurisdiction of such a court
to enforce this Article and to confirm and enforce the
performance of an award of the arbitrators.
ARTICLE XII
SECURITY
12.01. Security. If required in order to give the
Company full reinsurance reserve credit, the Reinsurer shall
comply with any necessary financial security requirements
imposed by insurance laws and regulations of the State of
Maryland and of any other state or jurisdiction with respect to
which the Company is ineligible for reserve credit for the
reinsurance ceded under this Agreement.
12.02. Establishment of Trust. If credit for
reinsurance, as required under this Article XII, is not
otherwise available to the Company with respect to the
reinsurance hereunder, the Reinsurer shall enter into a trust
agreement (the "Trust Agreement") and establish a trust account
for the benefit of the Company with respect to the Reserves on
or before the date of filing of the first financial statement of
the Company for which such credit for reinsurance is required,
with a bank or other financial institution acceptable to the
Company, which shall be a Qualified Financial Institution.
12.03. Purpose of Trust. The Reinsurer agrees to
deposit, on or before the date set forth in Section 12.02, and
maintain in said Trust Account assets to be held in trust by the
Trustee for the benefit of the Company as security for the
payment of the Reinsurer's obligations to the Company under this
Agreement. Such assets shall initially be in an amount that is
equal to or exceeds the Reserves, with respect to the Reinsured
SPDAs, shown on the Company's statutory financial statements as
of the date set forth in Section 12.02, and shall be increased
or decreased, as appropriate, for each Accounting Period in
accordance with the terms of this Agreement and the terms of the
Trust Agreement.
12.04. Trust Assets. The Reinsurer agrees that the
assets so deposited, and assets held in the trust account
thereafter, shall consist only of cash (United States legal
tender), certificates of deposit (issued by a United States bank
and payable in United States legal tender), and investments of
the types permitted by Section 09.30.97.08 of the Code of
Maryland Regulations.
12.05. Title of Assets. The Reinsurer, prior to
depositing assets with the Trustee, shall execute all
assignments and endorsements in blank, and transfer legal title
to the Trustee of all shares, obligations or any other assets
requiring assignments, in order that the Company, or the Trustee
upon direction of the Company, may whenever necessary negotiate
any such assets without consent or signature from the Reinsurer
or any other entity.
12.06. Settlements. All settlements of account under
the Trust Agreement between the Company and the Reinsurer shall
be made in cash or Cash Equivalents.
12.07. Withdrawals by the Company. The Reinsurer and
the Company agree that the assets in the Trust Account may be
withdrawn by the Company at any time, notwithstanding any other
provisions in this Agreement, provided such assets are applied
and utilized by the Company or any successor of the Company by
operation of law, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Company, without
diminution because of the insolvency of the Company or the
Reinsurer, only for the following purposes:
(i) to reimburse the Company for the Reinsurer's
share of surrenders, withdrawals, death benefits or other
amounts specified in Section 7.01 of this Agreement that
have been paid by the Company pursuant to the provisions of
the Reinsured SPDAs;
(ii) to fund an account with the Company in an
amount at least equal to the deduction, for reinsurance
ceded, from the Company's liabilities under Reinsured SPDAs
ceded under this Agreement. Such account shall include,
but not be limited to, amounts for policy reserves, claims
and losses incurred (including losses incurred but not
reported), and unearned premium reserves; and
(iii) to pay any other amounts the Company claims
are due under this Agreement.
12.08 Withdrawals by the Reinsurer. The Reinsurer
shall have the right to seek the Company's approval to withdraw
all or any part of the assets from the Trust Account and
transfer such assets to the Reinsurer, provided that:
(i) the Reinsurer shall, at the time of withdrawal,
replace the withdrawn assets with other assets of a type
permitted hereunder having a market value equal to the
market value of the assets withdrawn, so as to maintain the
Trust Account in the required amount; or
(ii) after such withdrawal and transfer, the market
value of the Trust Account is no less than 102% of the
required amount.
In the event that the Reinsurer seeks the Company's approval
hereunder, the Company shall not unreasonably or arbitrarily
withhold its approval.
12.09. Return of Assets. In the event that the Company
withdraws assets from the Trust Account for the purposes set
forth in Section 12.07(i) or (ii) in excess of actual amounts
required to meet the Reinsurer's obligations to the Company, or
in excess of amounts determined to be due under Section
12.07(iii), the Company shall return such excess to the
Reinsurer, plus interest at the prime (or base) rate of interest
as set forth in Section 8.06 of this Agreement. In the event of
a dispute arising under this Article XII, the arbitration panel
established pursuant to Article XI of this Agreement shall have
the right to award interest at a rate that it determines to be
equitable, and may award attorney's fees, arbitration costs and
other expenses.
12.10. Letters of Credit. At the option of the
Reinsurer, letters of credit meeting the requirements of Section
09.30.97.08 of the Code of Maryland Regulations may be
substituted in whole or in part for the Trust Account in order
to provide the credit for reinsurance required hereunder. The
letter of credit will be procured from a Qualified Financial
Institution, and may be drawn down at any time by the Company,
only for the purposes set forth in Section 12.07(i), (ii) or
(iii) of this Agreement, without diminution because of the
insolvency of the Company or the Reinsurer. If the letter of
credit is drawn down, the provisions of Section 12.09 shall
apply to the amount so drawn.
12.11. Expenses. All expenses of establishing and
maintaining the Trust Account or letter of credit shall be paid
by the Reinsurer.
ARTICLE XIII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
13.01. Organization, Standing and Authority of the
Company. The Company is a life insurance company duly
organized, validly existing and in good standing under the laws
of the State of Maryland and has all requisite corporate power
and authority to carry on the operations of its business as they
are now being conducted. The Company has all requisite
corporate power and authority to own and transfer ownership of
the Investment Assets that are to be transferred in connection
with the Initial Reinsurance Premium.
13.02. Authorization. The Company has all requisite
corporate power and authority to enter into this Agreement and
to perform its obligations hereunder. The execution and
delivery by the Company of this Agreement, and the performance
by the Company of its obligations under this Agreement, have
been duly authorized by all necessary corporate action. This
Agreement, when duly executed and delivered by the Company,
subject to the due execution and delivery by the Reinsurer, will
be a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
13.03. Assets. With respect to each of the Investment
Assets, no consent or other approval is required to be obtained
by the Company to permit the Company to convey, transfer and
sell the Investment Assets to the Reinsurer pursuant to this
Agreement.
13.04. No Conflict or Violation. The execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby in accordance with the
respective terms and conditions hereof will not (a) violate any
provision of the Articles of Incorporation or Bylaws of the
Company, or (b) violate any order, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory
body against, or binding upon, or any agreement with, or
condition imposed by, any governmental or regulatory body,
foreign or domestic, binding upon the Company.
13.05. Intermediaries and Financial Advisors. Except
for Xxxxxxxxxxx & Co., Inc., no reinsurance intermediary or
broker or other advisor has acted directly or indirectly as such
for, or is entitled to any compensation from, the Company in
connection with this Agreement.
13.06. Investigations. The Company will notify the
Reinsurer immediately, in writing, of any and all investigations
of the Company or its directors, principal officers or
shareholders conducted by any Federal, state or local
governmental or regulatory agency other than routine state
insurance department examinations.
13.07. Approvals of Governmental Authorities.
(a) Except as set forth on Schedule G hereto, no consent,
waiver, license, approval, order or authorization of, or
registration, filing or declaration with, or notices to, any
person, entity or Governmental Authority is required to be
obtained, made or given by or with respect to the Company in
connection with (i) the execution and delivery of this Agreement
by the Company, or (ii) the consummation by the Company of the
transactions contemplated hereby.
(b) Except as provided below, the Company shall take, and
shall cause its affiliates to take, all reasonable steps
necessary or appropriate, and shall use, and shall cause its
affiliates to use, all commercially reasonable efforts, to
obtain as promptly as practicable all consents, waivers,
licenses, approvals, orders and authorizations of, or to make as
promptly as practicable all registrations, filings or
declarations with, or notices to, any person, entity or
Governmental Authority listed on Schedule G attached hereto and
required to be obtained by the Company or any of its affiliates
in connection with the consummation of the transactions
contemplated by this Agreement. Within five Business Days of
the earlier of (i) receipt of an interpretation from the
Premerger Notification Office that the transaction anticipated
by this Agreement is not exempt from the regulatory requirements
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "Act")
and (ii) August 2, 1996, the Company shall take, and shall cause
its affiliates to take, all reasonable steps necessary and
appropriate to make all necessary submissions and filings under
the Act and shall request early termination of the waiting
periods under the Act.
(c) The Company shall cooperate with the Reinsurer and its
affiliates in seeking to obtain all such consents, waivers,
licenses, approvals, orders and authorizations, and to make all
such registrations, filings, declarations and notices and shall
provide, and shall cause its affiliates to provide, such
information and communications to any person, entity or
Governmental Authority as such person, entity or Governmental
Authority may reasonably request in connection therewith.
ARTICLE XIV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE REINSURER
14.01. Organization, Standing and Authority of the
Reinsurer. The Reinsurer is a life insurance company duly
organized, validly existing and in good standing under the laws
of the State of Rhode Island and has all requisite corporate
power and authority to own, lease and operate its properties and
assets and to carry on the operations of its business as they
are now being conducted. The Reinsurer is duly licensed and
admitted as an insurer or accredited as a reinsurer under the
laws of all States and jurisdictions of the United States where
failure of the Reinsurer to be so licensed and admitted or
accredited would cause the Company to be ineligible for reserve
credit for the reinsurance ceded under this Agreement, and is
authorized under the laws and regulations of said States and
jurisdictions to reinsure the Reinsured SPDAs under this
Agreement.
14.02. Authorization. The Reinsurer has all requisite
corporate power and authority to enter into this Agreement and
to perform its obligations hereunder. The execution and
delivery by the Reinsurer of this Agreement, and the performance
by the Reinsurer of its obligations under this Agreement, have
been duly authorized by all necessary corporate action. This
Agreement, when duly executed and delivered by the Reinsurer,
subject to the due execution and delivery by the Company, will
be a valid and binding obligation of the Reinsurer, enforceable
against the Reinsurer in accordance with its terms.
14.03. No Conflict or Violation. The execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not (a) violate any
provision of the Articles of Incorporation, Bylaws or other
charter or organizational document of the Reinsurer, or
(b) violate any order, judgment, injunction, award or decree of
any court, arbitrator or governmental or regulatory body
against, or binding upon, or any agreement with, or condition
imposed by, any governmental or regulatory body, foreign or
domestic, binding upon the Reinsurer.
14.04 Intermediaries and Financial Advisors. No
reinsurance intermediary or broker or other advisor has acted
directly or indirectly as such for, or is entitled to any
compensation from, the Reinsurer in connection with this
Agreement.
14.05. Investigations. The Reinsurer will notify the
Company immediately, in writing, of any and all investigations
of the Reinsurer or its directors, principal officers or
shareholders conducted by any Federal, state or local
governmental or regulatory agency other than routine state
insurance department examinations.
14.06. Approvals of Governmental Authorities.
(a) Except as set forth on Schedule H hereto, no consent,
waiver, license, approval, order or authorization of, or
registration, filing or declaration with, or notices to, any
person, entity or Governmental Authority is required to be
obtained, made or given by or with respect to the Reinsurer in
connection with (i) the execution and delivery of this Agreement
by the Reinsurer, or (ii) the consummation by the Reinsurer of
the transactions contemplated hereby.
(b) Except as provided below, the Reinsurer shall take,
and shall cause its affiliates to take, all reasonable steps
necessary or appropriate, and shall use, and shall cause its
affiliates to use, all commercially reasonable efforts, to
obtain as promptly as practicable all consents, waivers,
licenses, approvals, orders and authorizations of, or to make as
promptly as practicable all registrations, filings or
declarations with, or notices to, any person, entity or
Governmental Authority listed on Schedule H attached hereto and
required to be obtained by the Reinsurer or any of its
affiliates in connection with the consummation of the
transactions contemplated by this Agreement. In addition,
within two days after execution of this Agreement, the Reinsurer
shall submit, or cause to be submitted, a letter to the
Premerger Notification Office requesting an interpretation as to
whether the transaction contemplated by this Agreement is exempt
from the reporting requirements of the Act. Within five
Business Days of the earlier of (i) receipt of an interpretation
from the Premerger Notification Office that the transaction
anticipated by this Agreement is not exempt from the regulatory
requirements of the Act and (ii) August 2, 1996, the Reinsurer
shall take, and shall cause its affiliates to take, all
reasonable steps necessary and appropriate to make all necessary
submissions and filings under the Act and shall request early
termination of the waiting periods under the Act.
(c) The Reinsurer shall cooperate with the Company and its
affiliates in seeking to obtain all such consents, waivers,
licenses, approvals, orders and authorizations, and to make all
such registrations, filings, declarations and notices and shall
provide, and shall cause its affiliates to provide, such
information and communications to any person, entity or
Governmental Authority as such person, entity or Governmental
Authority may reasonably request in connection therewith.
14.07. Agency and Distribution Agreements. From the
date of this Agreement through the Termination Date, the
Reinsurer shall not, and shall not permit any of its affiliates
to, take any action or omit to take any action that would cause
the Company to be in breach of or to violate any term or
provision of any of the Agency and Distribution Agreements
listed on Schedule F hereto. The Reinsurer shall indemnify the
Company and its officers, directors, employees, affiliates,
agents, successors and assigns (the "indemnified parties")
against, and hold the indemnified parties harmless from all
losses, claims, damages and liabilities and shall reimburse the
indemnified parties for all expenses of any kind or nature
whatsoever (including reasonable attorneys' fees) as incurred,
that are based upon or arise out of the breach by the Reinsurer
of its covenants and obligations provided for in this Section
14.07.
ARTICLE XV
CONDITIONS TO CLOSING
15.01. Conditions Precedent to Obligation of the
Reinsurer. The obligation of the Reinsurer to consummate the
Closing is subject to satisfaction of the following conditions
at or prior to the Closing (unless expressly waived in writing
by the Reinsurer at or prior to the Closing):
(a) All of the terms, covenants and conditions of this
Agreement to be complied with and performed by the Company at or
prior to the Closing shall have been complied with and performed
by it, and the representations and warranties made by the
Company in this Agreement shall be true and correct at and as of
the Closing, with the same force and effect as though such
representations and warranties had been made at and as of the
Closing.
(b) The Reinsurer shall have received from the Company a
certificate dated the Closing Date and signed by an executive
officer of the Company certifying that the conditions specified
in subsection (a) above have been fulfilled.
(c) All consents, waivers, licenses, approvals, orders and
authorizations of, and registrations, filings and declarations
with, and notices to, any person, entity or Governmental
Authority listed on Schedule H required in connection with the
consummation of the transactions contemplated hereby shall have
been duly obtained, made or given, including the expiration of
any applicable waiting periods, and shall be in full force and
effect at the Closing.
(d) The Company shall have duly executed and delivered to
the Reinsurer the Form of Joint Election Under IRC Regulation
1.848-2(g)(8) substantially in the form attached hereto as
Exhibit J.
15.02. Conditions Precedent to Obligation of the
Company. The obligation of the Company to consummate the
Closing is subject to satisfaction of the following conditions
at or prior to the Closing (unless expressly waived in writing
by the Company at or prior to the Closing):
(a) All of the terms, covenants and conditions of
this Agreement to be complied with and performed by the
Reinsurer at or prior to the Closing shall have been complied
with and performed by it, and the representations and warranties
made by the Reinsurer in this Agreement shall be true and
correct at and as of the Closing, with the same force and effect
as though such representations and warranties had been made at
and as of the Closing.
(b) The Company shall have received from the Reinsurer a
certificate dated the Closing Date and signed by an executive
officer of the Reinsurer certifying that the conditions
specified in subsection (a) above have been fulfilled.
(c) All consents, waivers, licenses, approvals, orders and
authorizations of, and registrations, filings and declarations
with, and notices to, any person, entity or Governmental
Authority listed on Schedule G required in connection with the
consummation of the transactions contemplated hereby shall have
been duly obtained, made or given, including the expiration of
any applicable waiting periods, and shall be in full force and
effect.
(d) The Reinsurer shall have duly executed and delivered
to the Company the Form of Joint Election Under IRC Regulation
1.848-2(g)(8) substantially in the form attached hereto as
Exhibit J.
(e) The Company shall have received the opinion, dated the
Closing Date, of Xxxxxxx X. Xxxxxxxxxxx, Senior Vice President
and General Counsel of the Reinsurer, in form and substance
acceptable to the Company, substantially in the form attached
hereto as Exhibit I.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.01. Headings and Schedules. Headings used herein are
not a part of this Agreement and shall not affect the terms
hereof. The attached Schedules are a part of this Agreement.
16.02. Notices. All notices and communications
hereunder shall be in writing and shall be deemed given if
received three (3) days after mailing, or if by telefax or by
hand, when received, and if by overnight mail, on the next day.
Any written notice shall be by either certified or registered
mail, return receipt requested, or overnight delivery service
(providing for delivery receipt) or delivered by hand. All
notices or communications with the Reinsurer under this
Agreement shall be addressed as follows:
Keyport Life Insurance Company
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx
Attention: Xxxx X. XxXxxxx, Xx.
Fax No.: (000) 000-0000
All notices and communications with the Company under this
Agreement from the date hereof until September 3, 1996 shall be
directed to:
Fidelity and Guaranty Life Insurance Company
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Chief Actuary
Fax No.: (000) 000-0000
All notices and communications with the Company under this
Agreement after September 3, 1996 shall be directed to:
Fidelity and Guaranty Life Insurance Company
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Chief Actuary
with copies to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Fax No.: (000) 000-0000
Changes in notice addresses or recipients may be made
by the Reinsurer or the Company by following the procedure
specified in this section rather than the procedure for
amendment of this Agreement.
16.03. Severability and Governing Law. If any term or
provision of this Agreement shall be held void, illegal, or
unenforceable, the validity of the remaining portions or
provisions shall not be affected thereby. This Agreement shall
be governed by the laws of the State of Maryland, without giving
effect to principles of conflicts of law thereof.
16.04. Successors and Assigns. This Agreement may not
be assigned by either party without the prior written consent of
the other. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns as permitted herein.
16.05. Execution in Counterparts. This Agreement may be
executed by the parties hereto in any number of counterparts,
and by each of the parties hereto in separate counterparts, each
of which counterparts, when so executed and delivered, shall be
deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
16.06. Currency. All payments and accounts shall be
made in United States Dollars, and all fractional amounts shall
be rounded to the nearest whole dollar.
16.07. Entire Agreement. This Agreement supersedes all
prior discussions and written and oral agreements and
constitutes the sole and entire agreement between the parties
with respect to the subject matter hereof.
16.08. Amendment or Waiver. No amendment or waiver of
any provision of this Agreement shall be effective unless set
forth in writing, signed by duly authorized officers of the
parties hereto. A waiver shall constitute a waiver only with
respect to the particular circumstance for which it is given and
not a waiver of any future circumstance.
16.09. Interpretation. For purposes of this Agreement,
the words "hereof," "herein," "hereby," and other words of
similar import refer to this Agreement as a whole unless
otherwise indicated. Whenever the words "include," "includes,"
or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation." Whenever the
singular is used herein, the same shall include the plural, and
whenever the plural is used herein, the same shall include the
singular, where appropriate.
16.10. Survival of Representations, Warranties and
Agreements. The Reinsurer or the Company, as the case may be,
has the right to rely fully upon the representations,
warranties, covenants and agreements of the Company or the
Reinsurer, as the case may be, contained in this Agreement. All
representations and warranties made by the Company or the
Reinsurer in this Agreement shall survive the execution and
delivery hereof. The provisions of Section 3.03, Section 14.07
and Article XI shall survive the termination of this Agreement.
16.11. No Third-Party Beneficiaries. 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.
16.12. Termination of Agreement.
(a) This Agreement may be terminated at any time prior to
the Closing Date: (i) by mutual consent of the Company and the
Reinsurer or (ii) by either the Company or the Reinsurer, if the
Closing Date shall not have occurred on or before October 31,
1996; provided, however, that the right to terminate this
Agreement under this Section 16.12 will not be available to any
party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of
the Closing Date to occur on or before such date.
(b) If this Agreement is terminated pursuant to Section
16.12(a), this Agreement shall become void and of no effect with
no liability on the part of any party hereto.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first above written
by their duly authorized representatives.
FIDELITY AND GUARANTY LIFE
INSURANCE COMPANY
By /s/ Xxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Title: Vice President Chief Actuary
KEYPORT LIFE INSURANCE
COMPANY
By /s/ Xxxx XxXxxxx
Name: Xxxx XxXxxxx
Title: Senior Vice President and Chief
Financial Officer
AMENDMENT NO. 1 TO COINSURANCE AGREEMENT
AMENDMENT NO. 1 TO COINSURANCE AGREEMENT, dated as of
August 8, 1996 (this "Amendment No. 1"), by and between FIDELITY
AND GUARANTY LIFE INSURANCE COMPANY, a life insurance company
organized under the laws of the State of Maryland (the
"Company"), and KEYPORT LIFE INSURANCE COMPANY, a life insurance
company organized under the laws of the State of Rhode Island
(the "Reinsurer").
WHEREAS, the Company and the Reinsurer have entered
into the Coinsurance Agreement, dated as of July 26, 1996 (the
"Coinsurance Agreement"); and
WHEREAS, the Company and the Reinsurer desire to amend
and modify the Coinsurance Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Company and the Reinsurer hereby agree that the Coinsurance
Agreement shall be, and hereby is, amended and modified as
follows:
1. The definition of "Blended Rate" in ARTICLE I is hereby
amended and replaced in its entirety to read as follows:
"Blended Rate" means the percentage rate equal to the
sum of (i) two-thirds of the one year Treasury Note
rate as of 3 p.m. on the Business Day which is two days
prior to the Closing Date plus (ii) one-third of the
three year Treasury Note rate as of 3 p.m. on the
Business Day which is two days prior to the Closing
Date.
2. This Amendment No. 1 shall be effective when executed
and delivered by the parties hereto.
3. Except as amended and modified by this Amendment No. 1,
all other terms of the Coinsurance Agreement shall remain
unchanged.
4. This Amendment No. 1 may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same instrument.
5. This Amendment No. 1 shall be governed by the laws of
the State of Maryland, without giving effect to principles of
conflicts of law thereof.
IN WITNESS WHEREOF, each of the Company and the
Reinsurer has caused this Amendment No. 1 to be executed on its
behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
FIDELITY AND GUARANTY LIFE
INSURANCE COMPANY
/s/ Xxxxxx Xxxxxxxxx
By ____________________________
Name: Xxxxxx Xxxxxxxxx
Title: Vice President-Actuary
KEYPORT LIFE INSURANCE COMPANY
/s/ Xxxx XxXxxxx
By ____________________________
Name: Xxxx XxXxxxx
Title: Senior Vice President
and CFO
AMENDMENT NO. 2 TO COINSURANCE AGREEMENT
AMENDMENT NO. 2 TO COINSURANCE AGREEMENT, dated as of November ______,
1996 (this "Amendment No. 2"), by and between FIDELITY AND GUARANTY LIFE
INSURANCE COMPANY, a life insurance company organized under the laws of the
State of Maryland (the "Company"), and KEYPORT LIFE INSURANCE COMPANY, a
life insurance company organized under the laws of the State of Rhode
Island (the "Reinsurer").
WHEREAS, the Company and the Reinsurer have entered into the
Coinsurance Agreement, dated as of July 26, 1996, as amended by Amendment
No. 1, dated as of August 8, 1996 (as so amended, the "Coinsurance
Agreement"); and
WHEREAS, the Company and the Reinsurer desire to amend and modify the
Coinsurance Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Reinsurer
hereby agree that the Coinsurance Agreement shall be, and hereby is,
amended and modified as follows:
1. The following definition of "Internal Replacement" is hereby
added in ARTICLE I:
"Internal Replacement" means any instance in which a
Reinsured SPDA is surrendered and another annuity contract that
is written by the company is issued to the owner of the Reinsured
SPDA as part of a direct exchange.
2. The definition of "Reinsured SPDA" in ARTICLE I is hereby amended
and replaced in its entirety to read as follows:
"Reinsured SPDAs" means (I) the SPDAs, including any
Endorsements thereto and (ii) any single premium deferred annuity
contracts replacing SPDAs and any endorsements to SPDAs issued by
the Company on or subsequent to the Effective Date with the
consent of the Reinsurer. Reinsured SPDAs shall not include (i)
Retained Asset Account Funds in existence on the Effective Date
and (ii) Internal Replacements issued in accordance with the
terms of Section 9.09 of this Agreement.
3. Section 7.01(a) is hereby amended and replaced in its entirety to
read as follows:
(a) The Reinsurer shall reimburse the Company, in accordance
with Sections 7.01(b) and 8.01(b), for an amount equal to:
(i) 100.14% of the sum of all (A) death benefits, (B)
surrender or (C) withdrawal payments and periodic payments under
annuity settlement options elected by the owner, and paid by the
Company, with respect to Reinsured SPDAs that become due on or
after the Effective Date; and
(ii) 99% of the Surrender Value as of the date of
exchange with respect to Reinsured SPDAs that are surrendered as
an Internal Replacement on or after the Effective Date (such
Account Values, together with the death benefits and other
payments referred to in the foregone clause (i)(A), (i)(B) and
(i)(C) above, are referred to collectively as "Benefits").
The reimbursement for Benefits shall be net of surrender charges
pursuant to the terms of the relevant Reinsured SPDAs.
4. ARTICLE IX is hereby retitled, "DURATION, RECAPTURE, TERMINATION
AND INTERNAL REPLACEMENTS."
5. Section 9.09 is hereby added in ARTICLE IX to read as follows:
"Section 9.09. Internal Replacements. The Company shall
request, on five (5) Business Days' written notice to the
Reinsurer, the right to issue an Internal Replacement upon
exchange of Reinsured SPDAs. Any Reinsured SPDA that is
surrendered or exchanged in connection with an Internal
Replacement shall be treated as surrendered and the Reinsurer
shall pay to the Company, in accordance with Sections 7.01(a)(ii)
and 8.01(b), an amount equal to 99% of the Surrender Value as of
the date of such exchange in respect of such Reinsured SPDA. The
other annuity or insurance contract to which a Reinsured SPDA is
converted or for which it is exchanged as an Internal
Replacement, shall not be a Reinsured SPDA under this Agreement."
6. This Amendment No. 2 shall be effective when executed and
delivered by the parties hereto.
7. Except as amended and modified by this Amendment No. 2, all other
terms of the Coinsurance Agreement shall remain unchanged.
8. This Amendment No. 2 may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
9. This Amendment No. 2 shall be governed by the laws of the State
of Maryland, without giving effect to principles of conflicts of law
thereof.
IN WITNESS WHEREOF, each of the Company and the Reinsurer has caused
this Amendment No. 2 to be executed on its behalf by it officers thereunto
duly authorized, all as of the day and year first above written.
FIDELITY AND GUARANTY
LIFE INSURANCE COMPANY
/s/ Xxxxxx Xxxxxxxxx
By: _______________________________________
Xxxxxx Xxxxxxxxx
Vice President, Chief Actuary
KEYPORT LIFE INSURANCE COMPANY
/s/ Xxxx XxXxxxx
By: _______________________________________
Xxxx XxXxxxx
Senior Vice President and Chief Financial
Officer
