REINSURANCE AGREEMENT
between
TEXAS IMPERIAL LIFE INSURANCE COMPANY
HOUSTON, TEXAS
referred to as the "Company"
and
HANNOVER LIFE REASSURANCE (IRELAND) LIMITED
Dublin, Ireland
referred to as the "Reinsurer"
Treaty #CMC
Co/Mod-co
Life
TABLE OF CONTENTS
Articles
I. BASIS OF REINSURANCE
II. DURATION OF RISK
III. PREMIUMS AND CONSIDERATIONS
IV. BENEFIT PAYMENTS
V. MOD-CO AND CO RESERVES
VI. EXPERIENCE REFUND
VII. ACCOUNTING AND SETTLEMENTS
VIII. RECAPTURE AND TERMINATION SETTLEMENTS
IX. ARBITRATION
X. INSOLVENCY
XI. REPRESENTATIONS AND WARRANTS
XII. GENERAL PROVISIONS
XIII. EXECUTION AND EFFECTIVE DATE
Schedules
A. POLICIES AND RISKS REINSURED
B. NOTICES
C. SEGREGATED ASSET ACCOUNT
D. LETTER OF CREDIT LANGUAGE
PREAMBLE
This Agreement is made and entered into by and between Texas Imperial
Life Insurance Company (hereinafter referred to as the "Company") and
Hannover Life Reassurance (Ireland) Limited (hereinafter referred to
as the "Reinsurer").
The Company and the Reinsurer mutually agree to reinsure on the terms
and conditions stated herein. This Agreement is an indemnity
reinsurance agreement solely between the Company and the Reinsurer and
performance of the obligations of each party under this Agreement
shall be rendered solely to the other party. In no instance shall
anyone other than the Company or the Reinsurer have any rights under
this Agreement, and the Company shall be and remain solely liable to
any insured, policyowner, or beneficiary under any policy reinsured
hereunder.
ARTICLE I
BASIS OF REINSURANCE
1.01 Policies and Risks Reinsured. The Reinsurer agrees to
indemnify, by means of indemnity reinsurance, and the Company agrees
to reinsure with the Reinsurer, according to the terms and conditions
hereof, the portion of the policies described in Schedule A hereto,
which are in force on the Effective Date of this Agreement or which
are thereafter placed in force while this Agreement is in effect. The
intent of this Agreement is to pass all of the underlying risks
assumed on the original policies, including the investment risk, to
the Reinsurer without necessitating the Company to transfer the assets
or their cash equivalents to the Reinsurer.
1.02 Coverage and Exclusions. Only those risks originally assumed by
the Company under the life insurance policies referred to in Schedule
A are eligible to be reinsured under this Agreement. For example, in
the absence of specific language further limiting the Reinsurer's
liability, the only benefits payable by the Reinsurer are the amount
of benefits due and payable by the Company as of the specific
accounting date to its policyholders.
1.03 Plan of Reinsurance. This indemnity reinsurance shall be on a
combination of the coinsurance and modified coinsurance plan. The
purpose of such combination is to allow the Company to retain control
of the assets received from the original policyholder after expenses
(the modified coinsurance portion), which in the early years of this
Agreement will be less than the required statutory reserve for such
policies; and to provide that the Reinsurer contribute the assets
necessary to make up such difference between the modified coinsurance
reserve and the required statutory reserve (the coinsurance portion)
and to allow the Reinsurer to retain control of those assets.
ARTICLE II
DURATION OF RISK
2.01 Duration. This Agreement shall survive until the last benefit
on the last policyholder has occurred and been settled under the terms
contained herein, unless all of the policies reinsured hereunder have
been otherwise recaptured by the Company or terminated by the
Reinsurer, as specifically allowed for by this Agreement.
2.02 Reinsurer's Liability. The liability of the Reinsurer, with
respect to any policy reinsured hereunder, will begin simultaneously
with that of the Company, but not prior to the Effective Date of this
Agreement. The Reinsurer's liability with respect to any policy
reinsured hereunder will end on:
a) the date such policy is recaptured by the Company as specifically
provided for and limited by this Agreement; or
b) the date the Company's liability on such policy is terminated under
the terms of its policy with the policyholder; or
c) the date this Agreement is terminated by the Reinsurer as
specifically provided for and limited by this Agreement; whichever
is earliest.
2.03 Recapture by the Company. Policies reinsured under this
Agreement are eligible for recapture, at the sole option of the
Company, commencing with any calendar quarter after the Fourth (4th)
quarter for which this treaty has been effective, provided the Company
has provided the Reinsurer with at least Ninety (90) calendar days
prior written notice of the Company's intent to effect recapture. In
the event the Company elects to recapture only a percentage of the
total policies reinsured or a percentage of each policy reinsured
hereunder eligible for recapture, then such recapture shall apply to
all policies so eligible. This last sentence is specifically intended
to protect the Reinsurer from the Company selectively recapturing only
those policies that it believes will not experience a claim leaving
any "high risk" policyholders with the Reinsurer, thereby, ensuring
the Reinsurer a loss exposure not originally intended by this
Agreement, otherwise known as anti-selection. Payments required by
the parties upon recapture by the Company are as defined in 8.04,
"Special Cash Flow Settlements."
2.04 Termination by the Reinsurer. The Reinsurer shall only be
allowed to terminate this Agreement, other than for reasons of a
breach, fraud or misrepresentation as provided for and limited by this
Agreement, should the Company, or its successor, fail to pay the
reinsurance premiums or other considerations, due to the Reinsurer, as
provided for in this Agreement. In addition to the considerations
specifically termed "premium," nonpayment, through the netting against
the gross benefit, of the release of the modified coinsurance reserve
upon settlement of any such benefit as provided for by this Agreement
shall constitute a non-payment of premium as envisioned by this
paragraph. Payments required by the parties upon termination by the
Reinsurer are as defined in 8.04, "Special Cash Flow Settlements."
ARTICLE III
PREMIUMS AND CONSIDERATIONS
3.01 Premiums and Considerations Payable by the Company:
a) Initial Premium. On the Effective Date of this Agreement, the
Company agrees to pay the Reinsurer an initial premium equal to
the gross statutory reserve on the portion of the policies reinsured
hereunder, as of the Effective Date of this Agreement.
b) Reinsurance Premiums. The Company shall pay the Reinsurer a
reinsurance premium, for each and every accounting period for the
duration of this Agreement, on all policies in force under this
Agreement in an amount equal to the gross premium collected by the
Company, for such then current accounting period, on the portion of
the policies reinsured hereunder.
c) Consideration for Decrease in Modified Coinsurance Reserve. The
Company shall pay to the Reinsurer, for each and every accounting
period for the duration of this Agreement, the amount by which the
modified coinsurance reserve as defined in 5.01, in the aggregate,
on the portion of the policies reinsured hereunder, has declined
since the beginning of such then current accounting period, if any.
The amount of such decrease for such then current accounting period
shall be determined by subtracting the amount of the modified
coinsurance reserve on the portion of the policies reinsured
hereunder as of the end of the current accounting period; from the
amount of the modified coinsurance reserve on the portion of the
policies reinsured hereunder as of the end of the immediately
preceding accounting period. Should such calculation result in a
positive number, this shall be the amount of decrease for the
current accounting period. Should the result of such calculation
result in a negative result, the amount of decrease for the current
accounting period shall be zero or none.
d) Consideration for Gross Investment Income. The Reinsurer will, in
accordance with 3.02(b), return a portion of the initial
consideration to the Company as an initial modified coinsurance
adjustment. Under coinsurance the Reinsurer would have retained
all of such moneys for his own account and enjoyed the investment
income thereon to help defray the liabilities of the reinsured
policies. However, under modified coinsurance the Reinsurer has
allowed the Company to retain such assets but it is not the intent
of the parties that the Reinsurer should be denied the investment
income on such moneys. Therefore, the Company agrees to remit, for
each and every accounting period for the duration of this
Agreement, as part of the settlements to the Reinsurer, the
investment income on such assets as provided for in the Segregated
Asset Account as set forth in Schedule C attached hereto, and by
this reference made a part hereof.
3.02 Return of Premium and Considerations Payable by the Reinsurer:
a) Initial Ceding Commission. On the execution date of this
Agreement, the Reinsurer shall pay the Company an initial ceding
commission in an amount equal to Three Million Five Hundred
Thousand Dollars ($3,500,000). This payment represents two
elements. First, it represents payment by the Reinsurer for the
amount of acquisition costs that due to statutory accounting
practice must be immediately expensed by the Company at the date of
issue but which in reality have yet to be amortized from future
premiums to still be collected by the Company. Secondly, it
represents a reasonable consideration for the right to receive the
future premiums for such reinsured policies.
b) Initial Modified Coinsurance Adjustment. Simultaneously with the
payment by the Company to the Reinsurer of the initial premium
described in 3.01(a), the Reinsurer will pay to the Company an
initial modified coinsurance adjustment equal to the initial
modified coinsurance reserve as defined in 5.01(a). This payment,
by the Reinsurer, establishes this reinsurance as "modified"
coinsurance. The Reinsurer is fully entitled to retain and invest
the initial consideration on his own account but has forborne doing
so and is allowing the Company to hold and invest such amount for
his sole benefit. This payment is made conditionally upon the
Company remitting such amount to a Segregated Asset Account in
accordance with Schedule C. Failure to properly fund such
Segregated Asset Account or maintain such account, as provided for
herein, for the duration of this Agreement, shall have the effect
of a material breach of this Agreement, allowing the Reinsurer to
immediately terminate this Agreement as of the date of discovery of
such breach and make such payments as provided for in 8.04 under
the non-payment of premium doctrine, because, only if the
Segregated Asset Account is properly funded and maintained will the
Reinsurer be satisfied that the initial premium as defined in
3.01(a) has been paid.
c) Increase in the Modified Coinsurance Reserve. The Reinsurer shall
pay to the Company, for each and every accounting period for the
duration of this Agreement, the amount by which the modified
coinsurance reserve as defined in 5.01, in the aggregate, on the
portion of the policies reinsured hereunder, has increased since
the beginning of such then current accounting period, if any. The
amount of such increase for such then current accounting period
shall be determined by subtracting the amount of the modified
coinsurance reserve on the portion of the policies reinsured
hereunder as of the beginning of the then current accounting period
from the amount of the modified coinsurance reserve on the portion
of the policies reinsured hereunder as of the end of the then
current accounting period. Should such calculation result in a
positive number, this shall be the amount of increase for the
current accounting period. Should the result of such calculation
result in a negative result, the amount of increase for the current
accounting period shall be zero or none.
d) Renewal Commission Allowance. The Reinsurer shall reimburse the
Company for the expenses it incurs from renewal commissions
associated with the portion of the policies reinsured hereunder.
e) Administration Expense Allowance. The Reinsurer shall reimburse
the Company for the expenses it incurs from the on-going costs of
administration on the portion of the policies reinsured hereunder.
Because the Reinsurer has the right to expect the Company to
maintain reasonable controls over such expenses, in effect as his
administrative agent for such policies, the Reinsurer will only
reimburse these costs on a formula approach that approximates the
actual reasonable administrative expenses of the Company. Such
amounts shall be defined as: three and one-half percent (3.5%) of
the statutory reserve on the portion of the policies reinsured
hereunder as of the beginning of the accounting period for which
this calculation is being made plus any actual state, county or
parish premium taxes paid by the Company on the portion of the
premiums reinsured hereunder.
ARTICLE IV
BENEFIT PAYMENTS
4.01 Liability and Payment. The Reinsurer will accept the decision
of the Company on payment of a claim or surrender on a policy
reinsured hereunder under the normal and customary claim adjudication
procedures of the Company in effect at the time this Agreement became
effective. The Reinsurer will pay its proportionate share of such
claim or surrender in a lump sum to the Company without regard to the
form of claim settlement of the Company for all Benefits actually paid
by the Company for the then current accounting period. The term
"Benefit" shall mean all payments by the Company to the policyholder
for all claims arising from death, or surrender, on the portion of the
policies reinsured hereunder.
4.02 Contested Claims. The Company will advise the Reinsurer of its
intention to contest, compromise, or litigate a claim involving a
policy reinsured hereunder. The Reinsurer will pay its share of the
unusual expense of the contest (but in no event to include any extra-
contractual damages, as defined in 12.02) in addition to its share of
the claim itself, or it may choose not to participate. If the
Reinsurer chooses not to participate it will discharge its liability
by payment of the full amount of its liability on the portion of the
policy reinsured to the Company.
ARTICLE V
MOD-CO AND CO RESERVES
5.01 Mod-Co Reserve. The modified coinsurance reserve shall at all
times be an approximation for the amount of assets actually in the
hands of the Company for paying future policyholder claims, or, when
such amount of collected assets equals or exceeds the statutory
reserve on the portion of the policies reinsured hereunder, the
statutory reserve.
a) Initial Modified Coinsurance Reserve. For the purpose of this
Agreement, the initial mod-co reserve held by the Company shall be
defined as the gross statutory reserve on the portion of the
policies reinsured hereunder, as of the Effective Date of this
Agreement, multiplied by the initial mod-co percentage. The
initial mod-co percentage shall be equal to: the statutory reserves
as defined in 12.01 as of the effective date, less, the initial
ceding commission as defined in 302(a) the result of which shall be
divided by the statutory reserve as defined herein multiplied by
100.
b) Subsequent Modified Coinsurance Reserves. Subsequently, the
modified coinsurance portion of this Agreement may increase (but
never to more than the total statutory reserve on the portion of
the policies reinsured hereunder) by the amount of the modified
coinsurance portion of the increase in the statutory reserves plus
the actual profit earned on the portion of the policies reinsured
hereunder, after the Reinsurer has retained his portion of the
profit, and may decrease due to the release of the modified
coinsurance portion of the total statutory reserve on the portion
of the policies reinsured hereunder. The mod-co percentage shall be
determined as the greater of: (a) the mod-co percentage as of the
beginning of such then current accounting period, OR, (b) the
percentage derived by dividing the sum of: the amount of the mod-co
reserve as of the beginning of such then current accounting period,
plus, the reinsurance premium as defined in 3.01(b), plus the
investment income consideration as defined in 3.01(d), less,
benefits as defined in 4.01, less, the renewal commission allowance
as defined in 3.02(d), less, the administration expense allowance
as defined in 3.02(e), less, the Reinsurer's profit retention as
defined in 6.03, less, the experience refund carryforward with
interest as defined in 6.02(I). The numerical result of such sum
shall then be divided by the gross statutory reserves on the
portion of the policies reinsured hereunder as of the end of the
same such then current accounting period multiplied by 100 to
express the resulting decimal as the mod-co percentage (b) above.
The numerical subsequent mod-co reserve as of the end of such
accounting period shall be the whole number derived by multiplying
the gross statutory reserves as of the end of such accounting
period by the above derived mod-co percentage for such same
accounting period.
5.02 Coinsurance Reserve. The coinsurance reserve shall be an amount
equal to the product of the coinsurance percentage as calculated for
the then current accounting period, multiplied by the gross statutory
reserves as of the end of the then current accounting period on the
portion of the policies reinsured hereunder. The coinsurance
percentage shall be equal to 100% minus the mod-co percentage as
defined in 5.01(b), above. The Company shall take a reserve credit,
in accordance with applicable state statutes, for the portion
hereunder of this Agreement that is on a coinsurance basis.
5.03 Letter of Credit. The Reinsurer agrees to apply for and secure
timely delivery to the Company of a clean, irrevocable and
unconditional Letter of Credit containing language substantially
similar to the language contained in Schedule D hereto (with any
changes to such language as may be required to obtain regulatory
approval) issued by a bank acceptable to the Company, and containing
provisions acceptable to the insurance regulatory authorities having
jurisdiction over the Company. Such Letter of Credit shall be issued
for a period of not less than one year, and shall be automatically
extended for one year from its date of expiration or any future
expiration date unless sixty (60) days prior to any expiration date
the issuing bank shall notify the Company by registered mail that the
issuing bank elects not to consider the Letter of Credit extended for
any additional period, in which case Reinsurer shall deliver to the
Company not less than 10 days prior to such expiration date an
equivalent Letter of Credit issued by a bank acceptable to the Company
and the insurance regulatory authorities having jurisdiction over the
Company. The Reinsurer shall pay for all costs, fees and expenses
associated with the procurement and maintenance of such Letter of
Credit.
The Letter of Credit shall be in an amount at least equal to 102% of
the Reinsurer's Coinsurance reserve.
At inception and at the end of each quarterly reporting period the
Company shall prepare a specific statement of the Reinsurer's
Coinsurance reserve for the sole purpose of amending the Letter of
Credit.
Within thirty (30) days after receipt of such a statement, the
Reinsurer shall secure delivery to the Company of an amendment to the
Letter of Credit to the amount equal to at least 102% of the
Reinsurer's Coinsurance reserve.
Such Letter of Credit may be drawn upon at any time, notwithstanding
any other provisions of this Agreement, but only to be utilized by the
Company or its successors in interest for the following purposes:
a) to reimburse the Company for the Reinsurer's share of premiums
returned to the owners of policies reinsured under the Agreement
on account of cancellations of such policies;
b) to reimburse the Company for the Reinsurer's share of surrenders
and benefits or losses paid by the Company under the terms and
provisions of the policies reinsured under the Agreement;
c) in the event of nonrenewal of the Letter of Credit as provided
above, to fund an account with the Company in an amount at least
equal to the deduction, for reinsurance ceded, from the
Company's liabilities for policies ceded under the Agreement
(such amount shall include, but not be limited to, amounts for
policy reserves, claims and losses incurred, and unearned premium
reserves); and
d) to pay any other amounts due to the Company under the reinsurance
agreement.
Any excess amount drawn beyond the amount needed to satisfy the
above shall be promptly returned to the Reinsurer without
diminution because of insolvency on the part of the Company or the
Reinsurer.
ARTICLE VI
EXPERIENCE REFUND
6.01 Experience Refund. Once the Reinsurer has recovered its initial
investment and its minimum return of investment as described below
from the profits on the portion of the policies reinsured hereunder,
if any, the Reinsurer is willing to share with the Company 50% of this
Agreement's subsequent profit, if any, pertaining to each calendar
quarter subsequent to the first quarter in which the modified
coinsurance portion of this Agreement equals 100%. Such profits shall
be computed in accordance with the formula as defined in 6.02, below.
This agreement to share such subsequent profits with the Company in no
way shall obligate the Company to share in any subsequent losses. All
losses on the portion of the policies reinsured hereunder have been
since the effective date of this Agreement, and shall be, for the
duration of this Agreement, the sole responsibility of the Reinsurer.
6.02 Formula. Should the operation of the formula below result in a
positive amount, such amount shall be the experience refund, subject
to the provisions of 6.01, above. Should the operation of the formula
below result in a negative amount, such amount shall be the experience
carryforward. The experience calculation for any quarter shall be
calculated in accordance with the following formula:
a) the reinsurance premium as defined in 3.01(b); plus
b) the decrease in the modified coinsurance reserve as defined in
3.01(c); plus
c) the investment income consideration as defined in 3.01(d); less
d) the benefits as defined in 4.01; less
e) the renewal commission allowance as defined in 3.02(d); less
f) the administration expense allowance as defined in 3.02(e); less
g) the increase in the modified coinsurance reserve as defined in
3.02(c); less
h) the Reinsurer's minimum profit retention as defined in 6.03; less
i) the absolute value (the positive value) of the experience
carryforward from the immediately preceding quarter; less
j) one quarter's interest on i) above at a rate of the gross
investment yield on the segregated asset account for the
corresponding quarter.
6.03 Reinsurer's Minimum Profit Retention. The Reinsurer's minimum
profit retention, shall be equal to Sixty-Nine basis points (0.69%)
of the coinsurance reserve established in accordance with 5.03, at the
Effective Date and at precise quarterly intervals thereafter. This
amount represents the minimum return on investment to which the
Reinsurer is entitled as a result of granting the initial ceding
commission. This profit retention is solely predicated on a profit
materializing on the portion of the policies reinsured hereunder.
6.04 Intent. Except as set forth in 6.01 of this Agreement, the
Reinsurer has no responsibility to provide the Company with any
experience refund whatsoever. All of the profits on the portion of
the policies reinsured hereunder are for the duration of this
Agreement the sole property of the Reinsurer by virtue of having paid
the initial ceding commission to the Company as of the effective date
of this Agreement. Therefore, the manner in which such experience
refund is calculated, if at all, can have no possible bearing on the
risk transfers to the Reinsurer. Furthermore, it is not the intent of
6.03 above, and no interpretation should be construed to have the
effect of guarantying in any way the Reinsurer a profit should the
portion of the policies reinsured hereunder result in a Statutory
loss. The mechanics of this Agreement, in conjunction with 6.03, will
only allow the Reinsurer to retain any profit should the underlying
policies result in the realization of a statutory profit. The
statutory profit realized on the portion of the policies reinsured
hereunder in excess of the Reinsurer's minimum profit retention are
first applied to convert the coinsurance portion of this treaty to
modified coinsurance as provided in 5.01(b) and, should the modified
coinsurance portion equal 100%, the remaining profit, if any, is split
50/50 as provided in 6.01 of this Agreement.
ARTICLE VII
ACCOUNTING AND SETTLEMENTS
7.01 Quarterly Accounting Reports. This Agreement shall be on a
quarterly accounting period for all reports and settlements described
herein. Accounting reports shall be submitted to the Reinsurer by the
Company not later than twenty (20) calendar days after the end of each
calendar quarter. Such reports shall include information on the
amount of reinsurance premium, commission and expense allowances,
benefits, modified coinsurance and coinsurance reserves, and gross
statutory reserve, for the then current calendar quarter. Whenever
the term "the then current accounting period" is used herein it shall
mean the calendar quarter for which the reports contained herein are
being prepared and not the calendar quarter in which the actual
preparation of the report occurs. Whenever the term "beginning or
opening" accounting period is used herein it shall be the 1st day of
such then current accounting period or, for the first accounting
period, the effective date of this Agreement. Furthermore, opening or
beginning reserves shall mean the reserve as of the end of the
immediately preceding calendar quarter. Whenever, the term "ending or
closing" accounting period is used herein it shall mean the last day
of the then current calendar quarter or, in the event of the final
quarter, the date of expiration of this Agreement.
7.02 Quarterly Cash Flow Settlements. Quarterly cash flow
settlements shall be determined on a net basis as of the last day of
each calendar quarter and shall be due and payable as of such date.
The quarterly accounting settlement shall be an amount equal to:
a) the reinsurance premium as defined in 3.01(b), plus,
b) any decrease in the mod-co reserve as defined in 3.01(c), plus,
c) the investment income consideration as defined in 3.01(d), less
d) any increase in the mod-co reserve as defined in 3.02(c), less
e) the renewal commission as defined in 3.02(d), less
f) the administration expense allowance as defined in 3.02(e), less,
g) benefits as defined in 4.02, less,
h) any experience refund payable as defined in 6.01.
Should the above calculation result in a positive cash flow, such net
amount is due and payable to the Reinsurer. Should the above
calculation result in a negative cash flow, such net amount is due and
payable to the Company. All payments shall be considered timely if
such payment is received within thirty (30) calendar days after the
close of the then current accounting period.
7.03 Estimates and Delays. If the amounts cannot be determined at
such dates, as defined in 7.02 above, on an exact basis, such payments
will be paid in accordance with a mutually acceptable formula which
will approximate the actual payments. Should there be a delay in a due
payment, there will be an interest penalty, at the interest rate of
ten percent (10% ) per annum, for the period that the amount is
overdue.
7.04 Annual Accounting Reports. The Company shall provide the
Reinsurer Annual Accounting Reports providing: Exhibit 8 by reserve
basis, Analysis of Increase in Reserves, Exhibit of Life Insurance,
and Schedule S of the NAIC Convention Blank for the contracts
reinsured hereunder within thirty (30) calendar days after the end of
the calendar year for which such report is being prepared.
7.05 Offset of Payments. All moneys due either the Company or the
Reinsurer under this Agreement shall be offset against each other,
dollar for dollar, regardless of any insolvency of either party, or
the appointment of any conservator, liquidator, receiver, statutory
successor of the Company, or other such entity.
ARTICLE VIII
RECAPTURE AND TERMINATION SETTLEMENTS
8.01 Special Accounting and Settlement. In the event that the
reinsurance under this Agreement is prematurely recaptured or
terminated, as provided for herein or if by other mutual agreement of
the parties, other than due to the natural expiration of this
Agreement due to settlement of the last remaining policyholder's
benefit, a special accounting and settlement shall take place.
8.02 Special Accounting Date. The special accounting date shall be
the effective date of recapture or termination pursuant to any notice
of recapture or termination given under this Agreement or such other
date as shall be mutually agreed to in writing.
8.03 Special Accounting Report. The Company shall provide the
Reinsurer a special accounting report providing all of the information
contained in the quarterly accounting report as defined in 7.01 and
the annual accounting report as defined in 7.04, except that for all
reports the close of such accounting period shall be the special
accounting date as defined in 8.02 above.
8.04 Special Cash Flow Settlement. The special cash flow settlement
shall consist of:
a) the customary cash flow settlement as provided for in 7.02, except
that (1) the Reinsurer's minimum profit retention as provided for
in 6.03 will be excluded from any calculations and (2) all amounts
will be calculated as of the instant in time immediately before
this Agreement expires. For example, the ending mod-co reserve for
purposes of this specific paragraph 8.04(a) would be a numerical
value and not the value zero which it will be immediately upon the
expiration of this Agreement; and
b) payment by the Company to the Reinsurer of an amount equal to the
mod-co reserves on the portion of the policies reinsured hereunder
as of the instant in time immediately before the expiration of this
Agreement This payment is the reversal of the initial mod-co
adjustment, returning the Reinsurer's assets for the mod-co portion
of the reserves. It is the intent of the parties that under no
circumstance should this payment not be fully and completely offset
by the payment as set forth in paragraph 8.04(c) below and that the
only reason for making such offsetting payments is to demonstrate
the full release of liability from one another; and
c) payment by the Reinsurer to the Company of a final mod-co reserve
adjustment equal to the mod-co reserves on the portion of the
policies reinsured hereunder as of immediately before expiration
of this Agreement only if the Reinsurer has received full credit
for the payment called for in paragraph 8.04(b) above; and
d) payment by the Company (only upon voluntary recapture by the
Company as provided for in 2.03 or termination by the Reinsurer
solely for non-payment of premiums as specifically provided for in
2.04) of an amount equal to the negative experience refund as
determined in accordance with paragraph 6.01; and
e) if only a portion of the policies are recaptured as described in
Article II, then the settlement described above shall be with
respect to only those policies or percentage of policies
recaptured.
Should the above calculation result in a positive cash flow, such net
amount is due and payable to the Reinsurer. Should the above
calculation result in a negative cash flow, such net amount is due and
payable to the Company. All payments shall be considered timely if
such payment is received within 30 days after the date as defined in
8.02.
ARTICLE IX
ARBITRATION
9.01 Agreement. All disputes and differences between the Company and
the Reinsurer on which an agreement cannot be reached will be decided
by arbitration, regardless of the insolvency of either party, unless
the conservator, receiver, liquidator, or statutory successor is
specifically exempted from an arbitration proceeding by applicable
state law. Either party may initiate arbitration by providing written
notification to the other party. Such written notice shall contain a
brief statement of the issue(s), the failure on behalf of the parties
to reach amicable agreement and the date of demand for arbitration.
The arbitrators will regard this Agreement from the standpoint of
practical business and equitable principles rather than that of strict
law. The arbitrators shall be solely responsible for determining what
shall be considered and what procedure they deem appropriate and
necessary in the gathering of such facts or data to decide such
dispute. Both parties agree that the decision of the arbitrators is
final and binding and that no appeal shall be made from that decision.
Should either party fail to comply with the decision of the
arbitrators, the other party shall have the right to seek and receive
the assistance of an appropriate court to enforce the decision of the
arbitrators. The costs of the arbitration are to be borne equally by
both parties unless the arbitrators decide otherwise.
9.02 Method. Three arbitrators will decide any differences. They
must be, or have been, officers of life insurance companies other than
the two parties to this Agreement or any company owned by, or
affiliated with, either party. One of the arbitrators is to be
appointed by the Company, another by the Reinsurer, and they shall
select a third before arbitration begins. Should one party fail to
comply with the notice to arbitrate and fail to select an arbitrator,
the other party shall have the right to appoint such arbitrator on
their behalf. The appointments shall be made in the following manner:
the Company and the Reinsurer shall each present an initial list of
five prospective arbitrators to the other party within 25 days of the
mailing of the notification initiating the arbitration. The Company
and the Reinsurer shall select one arbitrator each from the list
supplied by the other party. Should the selected arbitrator decline
to serve, another name shall be selected from the respective list.
The party who initiated the list will submit as many additional names
as necessary so that at all times there will be a pool of five names
from which the other party may make its selection. The two
arbitrators, once selected, shall then select the third arbitrator
from the remaining eight names on the two lists. Should the two
arbitrators be unable to agree on a choice for the third arbitrator
the remaining eight names shall be placed in a pool and the final
arbitrator shall be drawn at random from such pool. If the
prospective arbitrator so chosen shall decline to serve as the third
arbitrator, another prospective arbitrator shall be randomly selected
until the original pool is exhausted. The parties shall continue to
replace the pool with an additional eight names until an arbitrator is
found.
ARTICLE X
INSOLVENCY
10.01 Payment of Benefits Under an Insolvency. The portion of any
benefit as defined in 4.01 and assumed by the Reinsurer, when such
portion is ascertained, shall be payable on demand of the Company, at
the same time as the Company shall pay its net retained portion of
such benefit, with reasonable provision for verification before
payment, and the reinsurance shall be payable by the Reinsurer, on the
basis of the liability of the Company under the Policies reinsured
without increase or diminution because of the insolvency of the
Company. In the event of the insolvency and the appointment of a
conservator, liquidator, receiver or statutory successor of the
Company, such portion shall be payable to such conservator,
liquidator, receiver or statutory successor immediately upon demand,
with reasonable provision for verification, on the basis of
policyholder benefits allowed against the Company by any court of
competent jurisdiction or by any conservator, liquidator, receiver or
statutory successor of the Company to allow such policyholder
benefits, without increase or diminution because of such insolvency or
because such conservator, liquidator, receiver or statutory successor
has failed to pay all or a portion of any policyholder benefits due
such policyholders reinsured hereunder.
10.02 Required Notice of and Defense Against Policyholder Benefit
Claims. The conservator, liquidator, receiver or statutory successor
of the Company shall give the Reinsurer written notice of the pendency
of a claim for a policyholder benefit against the Company on any
Policy within a reasonable time after such claim is filed in the
insolvency proceeding. During the pendency of any such claim, the
Reinsurer may investigate such claim and interpose in the Company's
name (or in the name of the Company's conservator, liquidator,
receiver or statutory successor), in the proceeding where such claim
is to be adjudicated, any defense or defenses which the Reinsurer may
deem available to the Company or its conservator, liquidator, receiver
or statutory successor. The expense thus incurred by the Reinsurer
shall be chargeable, subject to court approval, against the Company as
a part of the expense of liquidation to the extent of a proportionate
share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.
10.03 Intent. The operation of this Article is to assure that should
the Company's conservator, liquidator, receiver, or statutory
successor be unable to make full payment of a policyholder benefit as
described in 4.01, to any policyholder reinsured hereunder, due to
lack of adequate funds, or failure on the part of Company's
conservator, liquidator, receiver or statutory successor, this will in
no way reduce or otherwise abrogate the amount of policyholder benefit
payable by the Reinsurer. Furthermore, it is intended to provide for
a methodology for the Reinsurer to assist the Company in ascertaining
or defending policyholders claims of or against the Company's estate,
which does not create a direct relationship to the policyholder so as
to remain in conformity with the preamble to this Agreement. It is
the intent of this Agreement that the operation of this Article is not
to render this Agreement non-executory during any rehabilitation or
liquidation, as may be ordered by any court of competent jurisdiction,
due to the insolvency of the Company. It is not the intent of this
Article to limit, reduce or otherwise abrogate the responsibilities,
duties, or obligations of the parties contained within the corpus of
this Agreement. For example, the Reinsurer would remain liable to the
Company for the other non-benefit payments contained herein and
similarly the Company would remain liable for the payment of premiums
or other considerations contained herein and it is only the net
payment as described in 7.02, taking full account of the offset
provision of 7.05, that shall be ultimately payable. It is further
understood that should a dispute arise as to any of the liabilities or
operation of any provision contained herein, not specifically reserved
by this Article or applicable state law shall be subject to the normal
and customary arbitration provisions as described in 9.01.
ARTICLE XI
REPRESENTATIONS AND WARRANTS
11.01 Representations of the Company. The Company represents and
warrants as follows:
a) it is a corporation duly organized, existing and in good standing
under the laws of the State of Texas; and
b) it is empowered under applicable laws and by its charter and
bylaws to enter into and perform the duties contemplated in this
Agreement; and
c) it has taken all requisite corporate proceedings to authorize it
to enter into and perform the duties contemplated in this
Agreement; and
d) no person under its control shall commit any action that would
violate any state law or regulation, in those jurisdictions
covered hereunder, governing administration or servicing of
insurance as defined thereunder; and
e) it has obtained any and all regulatory approvals as may be
required for the Company to cede the Policies covered hereunder
and to assure whatever reserve credits it may wish to take for
such cession; and
f) it has provided certain data, both oral and written, as part of
the Reinsurer's due diligence process and that such data is
complete and accurately describes the current financial condition
of the Company and the policies eligible for reinsurance
hereunder.
11.02 Representations and Warrants of the Reinsurer. The Reinsurer
represents and warrants as follows:
a) it is a corporation duly organized, existing and in good
standing under the laws of the Republic of Ireland; and
b) it is empowered under applicable laws and by its charter and
bylaws to enter into and perform the duties contemplated in
this Agreement; and
c) it has taken all requisite corporate proceedings to authorize it
to enter into and perform the duties contemplated in this
Agreement; and
d) it has obtained any and all regulatory approvals as may be
required for the Reinsurer to provide the reinsurance covered
hereunder.
11.03 Covenants. The Reinsurer and the Company agree as follows:
a) to indemnify, defend, and hold harmless the other, its directors,
officers, employees and agents from any and all claims, actions,
suits, judgments, damages (including punitive or exemplary
damages), fines and other proceedings, whether civil, criminal
(only to the extent permitted by law or public policy),
administrative, investigative or otherwise, together with all
costs, expenses and other amounts, including attorney's fees,
arising or alleged to have arisen out of any act, error or omission
related to or resulting from the performance of the duties,
obligations or responsibilities of the other party, its directors,
officers, employees and agents, under this Agreement; and
b) the Reinsurer shall have no obligation arising out of any breach of
any duty on the part of the Company to any insured covered
hereunder. The Company shall remain solely liable for all fines,
penalties or other assessments imposed against the Reinsurer by any
Insurance Department or other governmental entity for any conduct
of the Company, its employees or authorized representatives, which
was not expressly authorized, in writing, by the Reinsurer; and
c) any and all materials, information, proposals, studies or other
documents relative to this Agreement are confidential and
proprietary. Neither party shall disclose, directly or indirectly,
any information obtained from the other party, relative to this
Agreement, to any third party without the express written consent
of the other unless applicable statute, law or regulation requires
such disclosure; and
d) that no other agreements other than those contained herein or
incorporated herein by specific reference and attachment herewith
exist between the parties.
11.04 Policy Conservation. The Company warrants that it will take no
unauthorized action that would encourage the policyholders covered
under this Agreement to surrender, reduce or otherwise terminate their
existing coverages either through direct or indirect acts, including
but not limited to, a plan of internal replacement.
11.05 Costs Payable. Each of the parties hereto agrees to pay all
costs incurred by it for actuarial, legal and other services received
or utilized in connection herewith.
ARTICLE XII
GENERAL PROVISIONS
12.01 Statutory Reserves. The term "statutory reserve(s)" or "gross
statutory reserve(s)," whenever used for the purpose of this
Agreement, shall mean the total reserves that would have been required
under Texas regulation and in accordance with accepted actuarial
industry practice on the portion of the policies reinsured hereunder
had this Agreement not have been placed in effect.
12.02 Extra-contractual Damages. The Reinsurer does not indemnify
and shall not be liable for any extra-contractual damages or liability
of any kind whatsoever of the Company's resulting from, but not
limited to: negligent, reckless or intentional wrongs; fraud;
oppression; bad faith; or strict liability.
12.03 Misunderstandings and Oversights. If any 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.
12.04 Reinstatements. If a policy reinsured hereunder that was
reduced, terminated, or lapsed, is reinstated, the reinsurance for
such policy under this Agreement will be reinstated automatically to
the amount that would have been in force if the policy had not been
reduced, terminated, or lapsed.
12.05 Facility of Reinsurance. The Company and the Reinsurer hereby
acknowledge and agree that this cession of the portion of the policies
reinsured hereunder will not alter certain third party reinsurance
agreements that may already be in effect on such policies reinsured
hereunder. Experience refunds paid to the Company as part of any
other reinsurance agreement in force on the portion of the policies
reinsured hereunder while this Agreement is in effect shall be paid to
the Reinsurer as part of the settlements hereunder as an extraordinary
write-in item. Furthermore, the Company shall not enter into any
other reinsurance agreements that would cover the policies reinsured
hereunder including any portion of those policies even if not
reinsured hereunder, without the express written approval of the
Reinsurer. The Reinsurer will not unreasonably withhold its approval
as contemplated within this paragraph.
12.06 Policy Administration. The Company shall administer the
portion of the policies reinsured hereunder and shall perform all
accounting for such policies.
12.07 Policy Changes. Should the Company make any material changes
after the Effective Date of this Agreement in the provisions and
conditions of the policies reinsured hereunder, the Company shall,
within a reasonable time, inform the Reinsurer of such change. There
shall then be a corresponding change in the related reinsurance and
appropriate cash adjustments shall be made consistent with the changed
rules of the Company.
12.08 Audit. The Company or the Reinsurer, their respective
employees or authorized representatives may audit, inspect and
examine, during regular business hours, at the home office of the
Company or the Reinsurer, provided that twenty-four (24) hour advance
notice has been given to the other party, any and all books, records,
statements, correspondence, reports, trust accounts and their related
documents or other documents that relate to the policies covered
hereunder. The audited party agrees to provide a reasonable work space
for such audit, inspection or examination and to cooperate fully and
to faithfully disclose the existence of and produce any and all
necessary and reasonable materials requested by such auditors,
investigators, or examiners. The expense of the respective party's
employee(s) or authorized representative(s) engaged in such activities
shall be borne solely by such party.
12.09 Integration. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter
of this Agreement, and this Agreement, including the Schedules
attached hereto, contains the sole and entire agreement between the
parties with respect to the subject matter hereof.
12.10 Law and Venue. This Agreement has been finally executed in the
State of Texas and is subject to and is to be interpreted in
accordance with the laws of the State of Texas except that it is
agreed that the provisions of Article IX, Arbitration, shall be
governed by the American Arbitration Association.
12.11 Non-waiver. No forbearance on the part of either party to
insist upon compliance by the other party with the terms of this
Agreement shall be construed as, or constitute a waiver of, any of the
terms of this Agreement.
12.12 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
12.13 Severability. In the event that any provision or term of this
Agreement shall be held by any court to be illegal or unenforceable,
all of the other terms and provisions shall remain in full force and
effect, except if the provision or term held to be illegal or
unenforceable is also held to be a material part of this Agreement
such that the party in whose favor the material term or provision was
stipulated herein would not have entered into this Agreement without
such term or provision, then the party in whose favor the material
term or provision was stipulated shall have the right, upon such
holding, to terminate this Agreement
12.14 Amendments. This Agreement shall be amended only by mutual
consent and written agreement of the parties.
12.15 Schedules and Paragraph Headings. Schedules attached hereto
are made a part of this Agreement. Paragraph headings are provided
for reference purposes only and are not made a part of this Agreement.
12.16 Financial Reports. The Company agrees to furnish the Reinsurer
with the Company's NAIC Convention Blank Statements, as required by
the Company's state laws within 15 days after such reports are due to
be filed with that state.
12.17 Survival. The representations, warrants, covenants and
agreements respectively required to be made by the Company and the
Reinsurer in this Agreement shall survive the recapture, termination
or expiration of this Agreement.
12.18 Service of Suit. It is agreed that in the event of the failure
of the Reinsurer to pay any amount claimed to be due under this
Agreement, the Reinsurer, at the request of the Company, will submit
to the jurisdiction of any court of competent jurisdiction within the
United States of America and will comply with all requirements
necessary to give such court jurisdiction, and all matters arising
hereunder shall be determined in accordance with the law and practice
of such court. Nothing in this clause constitutes or should be
understood to constitute a waiver of the Reinsurer's rights to
commence an action in any court of competent jurisdiction in the
United States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted by the
laws of the United States or of any state in the United States.
Service of process in any such suit may be made upon any then duly
elected officer of the Reinsurer at the address specified in Schedule
B (agent for service of process). In any suit instituted against the
Reinsurer upon this Agreement, the Reinsurer will abide by the final
decision of such court or of any appellate court in the event of an
appeal. The agent for service of process is authorized and directed
to accept service of process on behalf of the Reinsurer in any such
suit and/or, upon the request of the Company, to give a written
undertaking to the Company that the agent for service of process will
enter a general appearance on behalf of the Reinsurer in the event
that such a suit shall be instituted.
12.19 Notices. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly
given if delivered personally or mailed, by certified mail, return
receipt requested, first class postage, prepaid, to the addresses and
to the attention of the parties described in Schedule B attached
hereto. Any document delivered via facsimile transmission, including
any signatures contained therein, shall be treated as the original for
all purposes.
12.20 Currency. All monetary amounts referred to in this Agreement,
including all payments called for by this Agreement, shall be in
United States dollars.
ARTICLE XIII
EXECUTION AND EFFECTIVE DATE
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate, with an Effective Date of March 31, 2001.
TEXAS IMPERIAL LIFE INSURANCE COMPANY
By: ----------------------------
Title: ----------------------------
Date: ----------------------------
Attest: -------------------------------
Title: -------------------------------
Date: -------------------------------
HANNOVER LIFE REASSURANCE (IRELAND) LIMITED
By: ----------------------------
Title: ----------------------------
Date: ----------------------------
Attest: -------------------------------
Title: -------------------------------
Date: -------------------------------
SCHEDULE A
POLICIES AND RISKS REINSURED
Under this Agreement, the Reinsurer reinsures a 100% quota share of
the risks on the blocks of insurance policies issued by the Company
and described below:
All policies assumed by Texas Imperial Life Insurance Company from
Family Life Insurance Company of Texas.
All policies assumed by Texas Imperial Life Insurance Company from
Xxxxxx-Xxxxxxx Insurance Company.
All policies assumed by Texas Imperial Life Insurance Company from
Trans-Western Life Insurance Company.
SCHEDULE B
NOTICES
B.01 IF TO THE COMPANY:
Xx. Xxxx X. Xxxxxxx
President
Texas Imperial Life Insurance Company
00000 Xxxxxxxx Xxx., 0xx Xxxxx
Xxxxxxx, XX 00000
B.02 IF TO THE REINSURER:
Xx. Xxxxx X. Xxxxxxx
Managing Director
Hannover Life Reassurance (Ireland) Limited
4 Xxxxxx Xxxxx Xxxxx
XXXX
Xxxxxx 0
Xxxxxxx
SCHEDULE C
SEGREGATED ASSET AGREEMENT
C.0l Purpose. The Company and the Reinsurer agree that assets in the
amount of the modified coinsurance reserve as defined in Article V
shall be housed in a segregated asset account established by the
Company for the purpose of determining the Net Investment Income as
defined in 3.01(d).
C.02 Admissible Assets. The assets used to maintain this segregated
asset account shall consist of cash, certificates of deposit issued by
any national or state chartered bank or savings and loan association
and/or securities, in which the laws of the Company's state of
domicile authorizes domestic insurers to invest. All securities and
assets held in the segregated asset account shall be of the type
specified in the Texas Insurance Code specifying admissible
investments for a life insurance company or any successor section
thereto. All such securities shall:
a) have an NAIC Security Valuation Office (SVO) rating of Class l or
Class 2; and
b) have a current SVO fair market value; and
c) be readily tradable through an established exchange; and
d) be issued by parties unrelated or unaffiliated with the parties to
this Agreement; and
3) not have been subject to, or assigned from, any trust fund or
trust agreement
C.03 Determination of the Segregated Asset Account Balance. As of
the effective date of this Agreement the initial account balance shall
be equal to the initial modified coinsurance reserve as defined in
5.01(a). Subsequently as of the end of every accounting period
thereafter, the account balance shall be equal to the modified
coinsurance reserve as of the end of such then current accounting
period as defined in 5.01(b).
C.04 Management of Account Assets. The Reinsurer agrees to allow the
Company to provide for the management of such assets either directly
by the Company or its duly appointed third party asset manager. The
Reinsurer further agrees to allow the Company to take whatever actions
are necessary with the depository bank to allow for such asset
management as describe herein. The Company, or its designated
investment advisor, may from time to time substitute or exchange
assets contained within this Account provided such assets so
substituted or exchanged are admissible assets as defined herein. The
Reinsurer reserves the right to challenge any so substituted or
exchanged assets within five (5) working days such asset first
appeared in such Account Should the Reinsurer elect to so challenge
any such asset the Company agrees to replace such asset with an
admissible asset acceptable to the Reinsurer, which acceptance shall
not be unreasonably withheld.
C.05 Additions to or Withdrawals from the Account. Should the
statutory financial statement value of the assets contained within the
Account, as of the end of any accounting period, exceed the amount
required by C.03, above, the Company shall be allowed to withdraw such
excess assets. The specific assets to be released shall be those
assets as designated by the Company and the Company shall make such
designation no later than ten (10) working days after the close of
such Statement accounting period for which this comparison is being
made. Should the statutory financial statement value of the assets
contained within the Account, as of the end of any accounting period,
be less than the amount required by C.03, above, the Company shall
deposit cash or its equivalent into this Account in an amount equal to
such deficiency within twelve (12) working days after the close of
such month for which this comparison is being made.
C.06 Calculation of Net Investment Income. For purposes of this
Agreement the term Net Investment Income whenever used shall mean the
result of the following calculation as of the end of the then current
accounting period for which such calculation is required:
a) the amount of gross investment income earned on the segregated
asset account during the month calculated in a manner consistent
with the calculation of such amounts in Column 7, of Exhibit 2
of the Company's NAIC convention blank (2000 format); plus
b) any realized capital gains on such assets or (less) any realized
capital losses on such assets for such then current accounting
period; less
c) the investment expenses as calculated for Exhibit 2, lines 10
and 11 of the Company's NAIC Convention Blank (2000 format)on
such assets; plus
d) the amount of investment income paid to the policyholders by the
Company on the outstanding policy loans on the policies, if any.
SCHEDULE D
LETTER OF CREDIT LANGUAGE
IRREVOCABLE LETTER OF CREDIT
IN FAVOR OF:
Texas Imperial Life Insurance Company
Attn: Xx. Xxxx X. Xxxxxxx, President
00000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
FOR ACCOUNT OF:
AMOUNT:
CREDIT NUMBER:
Gentlemen:
We have established this clean Irrevocable Letter of Credit in your
favor for drawings up to U.S. ---------Dollars ($--------) effective
----------------------. This Letter of Credit issued, presentable,
and payable at our office at ------------ and expires with our close
of business on---------------. Except when the amount of the Letter
of Credit is increased, this Credit cannot be modified or revoked
without your consent.
We hereby undertake to promptly honor your sight draft(s) drawn on us,
indicating our Credit No. -----, for all or any part of this credit if
presented at our office at --------------- on or before the expiry
date or any automatically extended date.
The term "Beneficiary" includes any successor by operation of law of
the named Beneficiary including, without limitation, any liquidator,
receiver, conservator or supervisor. Drawings by any liquidator,
receiver, conservator or supervisor shall be for the benefit of all of
the Beneficiary's policyholders.
The Letter of Credit expires on -----------_, but automatically will
extend for an additional one-year period unless the Beneficiary has
received by registered mail/courier, notification of our intention not
to renew at least thirty (30) days prior to the original expiry date
and each subsequent expiry date.
Except as stated herein, this undertaking is not subject to any
conditions or qualification. This obligation of the Bank under this
Letter of Credit shall be the individual obligation of the Bank, in no
way contingent upon reimbursement with respect thereto.
This Letter of Credit is subject to the "Uniform Customs and Practices
for Documentary Credits" (1993 Revision) fixed by the International
Chamber of Commerce Publication No. 500. Notwithstanding Article 17
of said Publication, in the event that one or more of the occurrences
specified in Article 17 of said Publication occurs, then the Bank
hereby specifically agrees that this Letter of Credit shall be
extended so as not to expire during such interruption of business.
We hereby engage with you that drafts drawn under and in compliance
with the terms of the credit will be duly honored upon presentation
and delivery of the documents as specified.
The original of this Letter of Credit must be presented with any
drawing.