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COINSURANCE AND ASSUMPTION AGREEMENT
by and between
UNUM LIFE INSURANCE COMPANY OF AMERICA
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Dated as of October 1, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS........................................... 1
ARTICLE II BUSINESS REINSURED.................................... 4
ARTICLE III ASSUMPTION OF DIRECT LIABILITY........................ 5
ARTICLE IV TERRITORY............................................. 6
ARTICLE V ADMINISTRATION; CHANGES; CREDITING RATES.............. 6
Section 5.01. Administration.................................... 6
Section 5.02. Contract Changes or Reserve Assumption Changes.... 6
Section 5.03. Crediting Rates................................... 6
ARTICLE VI INDEMNIFICATION....................................... 7
Section 6.01. Obligation to Indemnify........................... 7
Section 6.02. Notice of Asserted Liability...................... 7
Section 6.03. Right to Contest Claims of Third Parties.......... 7
Section 6.04. Indemnification Payments.......................... 8
ARTICLE VII PREMIUMS; RECOVERIES.................................. 8
ARTICLE VIII EXPENSE ALLOWANCE..................................... 9
ARTICLE IX ACCOUNTING............................................ 9
ARTICLE X TRANSFER OF ASSETS.................................... 9
ARTICLE XI TRUST ACCOUNT......................................... 10
Section 11.01. General Account Reserves.......................... 10
Section 11.02. Trust Fund........................................ 10
ARTICLE XII INSOLVENCY............................................ 12
ARTICLE XIII OFFSETS............................................... 12
ARTICLE XIV RIGHTS WITH RESPECT TO COINSURED LIABILITIES.......... 13
ARTICLE XV ERRORS AND OMISSIONS.................................. 13
ARTICLE XVI DUTY OF COOPERATION................................... 13
ARTICLE XVII ARBITRATION........................................... 13
ARTICLE XVIII TERMINATION........................................... 14
ARTICLE XIX MISCELLANEOUS PROVISIONS.............................. 14
Section 19.01. Notices........................................... 14
Section 19.02. Amendment......................................... 15
Section 19.03. Counterparts...................................... 15
Section 19.04. No Third Party Beneficiaries...................... 16
Section 19.05. Assignment........................................ 16
Section 19.06. Governing Law..................................... 16
EXHIBITS
EXHIBIT A - 1 Endorsement - Contractholder
EXHIBIT A - 2 Endorsement - Certificateholder
EXHIBIT B - 1 Certificate of Assumption - Contractholder
EXHIBIT B - 2 Certificate of Assumption - Certificateholder
SCHEDULES
SCHEDULE 1.01 Coinsured Contracts
SCHEDULE 1.02 States in Which Coinsured Contracts May be Issued
SCHEDULE 1.03 Lincoln Separate Account
SCHEDULE 1.04 UNUM Separate Account
SCHEDULE 11.02 Authorized Investments
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COINSURANCE AND ASSUMPTION AGREEMENT
------------------------------------
THIS COINSURANCE AND ASSUMPTION AGREEMENT (this "Agreement"), dated as
of October 1, 1996, is made by and between UNUM Life Insurance Company of
America, a Maine domiciled stock life insurance company ("UNUM"), and The
Lincoln National Life Insurance Company, an Indiana domiciled stock life
insurance company ("Lincoln").
WHEREAS, UNUM has agreed to issue certain group annuity contracts upon
the written request of Lincoln; and
WHEREAS, Lincoln has agreed to reinsure the general account
obligations of UNUM under the group annuity contracts referred to above on the
terms and conditions set forth herein; and
WHEREAS, Lincoln has agreed to assume such group annuity contracts on
a state by state basis upon the receipt of applicable regulatory approvals; and
WHEREAS, UNUM desires that Lincoln perform all administrative
functions on behalf of UNUM with respect to such group annuity contracts and
Lincoln has agreed to provide such services pursuant to the terms of the
Administrative Services Agreement (as defined below);
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and upon the terms and conditions set forth herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
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The following terms shall have the respective meanings set forth below
throughout the Agreement:
"Administrative Services Agreement" means the Administrative Services
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Agreement entered into by and between UNUM and Lincoln, dated as of the date
hereof.
"Affiliate" means, with respect to any Person, at the time in
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question, any other Person controlling, controlled by or under common control
with such Person.
"Agreement" means this Coinsurance and Assumption Agreement.
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"Asserted Liability" shall have the meaning set forth in Section 6.03
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hereof.
"Assumption Date" shall have the meaning set forth in Article III
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hereof.
"Business Day" means any day other than a Saturday, Sunday, a day on
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which banking institutions in either the State of Maine or Indiana are permitted
or obligated by law to be closed or a day on which the New York Stock Exchange
is closed for trading.
"Calculated Asset Value" shall have the meaning set forth in Section
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11.01 hereof.
"Certificate of Assumption" shall have the meaning set forth in
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Article III hereof.
"Claims Notice" shall have the meaning set forth in Section 6.02
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hereof.
"Coinsured Contracts" means all group annuity contracts of the types
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which are described on Schedule 1.01 hereto and issued by UNUM after the date
hereof pursuant to the written request of Lincoln prior to the date which is 18
months from the date hereof (unless extended by the written consent of the
parties hereto) in any of the states listed on Schedule 1.02 hereto, and all
certificates and participation agreements issued in accordance with the terms of
such group annuity contracts (including all supplements, endorsements, riders
and ancillary agreements in connection therewith).
"Coinsured Liabilities" means those Insurance Liabilities which are
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general account obligations of UNUM, excluding any general account liabilities
that relate to (i) amounts transferred from the UNUM Separate Account to the
general account of UNUM pending distribution to holders of the Coinsured
Contracts, (ii) amounts held in the general account of UNUM pending transfer to
the UNUM Separate Account and (iii) guaranteed death benefits under the UNUM
Separate Account in excess of account values.
"Contractholders" means the holders of the Coinsured Contracts and the
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certificateholders under the Coinsured Contracts.
"Expense Allowance" shall have the meaning set forth in Article VIII
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of this Agreement.
"Extra Contractual Obligations" means all liabilities for
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consequential, exemplary, punitive or similar damages which relate to or arise
in connection with any alleged or actual act, error or omission by Lincoln or
any of its Affiliates, whether intentional or otherwise, or from any reckless
conduct or bad faith, in connection with the handling of any claim under any of
the Coinsured Contracts or in connection with the issuance, delivery,
cancellation or administration of any of the Coinsured Contracts.
"General Account Reserves" means the general account statutory
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reserves of UNUM (without regard to this Agreement) with respect to the Non-
Novated Contracts determined pursuant to Maine SAP, as such reserves would be
included in lines 1, 10.2
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or 10.3 of the Liabilities, Surplus and Other Funds page of the NAIC Annual
Statement Blank (1994 format), including (for the avoidance of doubt) any
general account statutory reserve adjustments in relation to UNUM Separate
Account Liabilities.
"General Account Reserves Statement" shall have the meaning set forth
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in Section 11.01 hereof.
"Indemnified Party" shall have the meaning set forth in Section 6.02
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hereof.
"Indemnifying Party" shall have the meaning set forth in Section 6.02
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hereof.
"Indemnity Reinsurance Agreement" means the Indemnity Reinsurance
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Agreement entered into by and between UNUM and Lincoln dated as of the date
hereof.
"Insurance Liabilities" means all liabilities and obligations arising
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under the Coinsured Contracts (including, without limitation, UNUM Separate
Account Liabilities) including without limitation: (i) all liability for
premium taxes, (ii) all liability for returns or refunds of premiums under the
Coinsured Contracts, (iii) all liability for commission payments and other fees
or compensation payable with respect to the Coinsured Contracts to or for the
benefit of agents, brokers and service providers, (iv) Extra Contractual
Obligations and (v) all guaranty fund assessments and similar charges imposed
with respect to the Coinsured Contracts based on premiums paid.
"Lincoln" shall have the meaning set forth in the introductory
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paragraph hereof.
"Lincoln Certificate" means a certificate substantially in the form of
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Exhibit B-2 to the Trust Agreement.
"Lincoln Separate Account" means the separate account of Lincoln
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described on Schedule 1.03 hereto.
"Loss" shall have the meaning set forth in Section 6.01 hereof.
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"Maine SAP" means the statutory accounting principles and practices
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prescribed or permitted by the Bureau of Insurance of the State of Maine.
"Non-Novated Contracts" means Coinsured Contracts that are not Novated
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Contracts.
"Novated Contracts" shall have the meaning set forth in Article III
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hereof.
"Person" means any individual, corporation, partnership, firm, joint
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venture, association, joint-stock company, trust, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other
entity.
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"Post-Closing Indemnity Reinsurance Agreement" means the Post-Closing
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Indemnity Reinsurance Agreement entered into by and between Lincoln and UNUM
dated as of the date hereof.
"Required Amount" shall have the meaning set forth in Section 11.02
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hereof.
"Termination Certificate" means a certificate substantially in the
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form of Exhibit C to the Trust Agreement.
"Third Party Claimants" shall have the meaning set forth in Section
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6.03 hereof.
"Trust Account" shall have the meaning set forth in Section 11.02
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hereof.
"Trust Agreement" means the Trust Agreement entered into by and among
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Lincoln, UNUM and Trustee dated as of the date hereof.
"Trustee" means the trustee named in the Trust Agreement and any
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successor trustee appointed as such pursuant to the terms of the Trust
Agreement.
"UNUM" shall have the meaning set forth in the introductory paragraph
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hereof.
"UNUM Separate Account" means the separate account of UNUM described
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on Schedule 1.04 hereto.
"UNUM Separate Account Liabilities" means the insurance liabilities
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that are reflected in the UNUM Separate Account and that relate to the Coinsured
Contracts.
ARTICLE II
BUSINESS REINSURED
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Upon the terms and subject to the conditions and other provisions of
this Agreement and any required governmental and regulatory consents and
approvals, UNUM hereby agrees to cede and transfer to Lincoln, and Lincoln
hereby agrees to accept and indemnity reinsure, on a coinsurance basis, 100% of
the Coinsured Liabilities.
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ARTICLE III
ASSUMPTION OF DIRECT LIABILITY
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Notwithstanding any other provision in this Agreement to the contrary,
Lincoln agrees to assume the Insurance Liabilities under a Coinsured Contract,
on a state by state basis, at such time as it receives from the insurance
regulatory authority of such state approval for a group annuity contract policy
form which is substantially similar to the form of such Coinsured Contract and
obtains any other regulatory approvals which are required for it to assume such
Coinsured Contracts issued to residents of such state. A rider substantially in
the form attached hereto as Exhibit A-1 or A-2, as applicable, shall be issued
with the original issuance of every Coinsured Contract covered hereunder. Upon
Lincoln receiving approval for a group annuity contract policy form in a
particular state and obtaining any other required regulatory approvals, it shall
promptly provide notice to UNUM of the receipt of such approvals. Lincoln shall
thereafter assume the applicable Coinsured Contracts issued to insureds in such
state as of (i) if such notice is given on or prior to the 25th day of any
month, the first day of the second month following the month in which such
notice is given, and (ii) if such notice is given after the 25th day of any
month, the first day of the third month following the month in which such notice
is given (each such date hereinafter being referred to as the "Assumption Date"
and the Coinsured Contracts so assumed hereinafter being referred to as the
"Novated Contracts"). Lincoln shall issue to the insureds under the Coinsured
Contracts in force in such state a Certificate of Assumption substantially in
the form attached hereto as Exhibit B-1 or B-2, as applicable (the "Certificate
of Assumption").
Lincoln shall be the successor to UNUM under the Novated Contracts as
if the Novated Contracts were direct obligations originally issued by Lincoln.
Lincoln shall be substituted in the place and stead of UNUM, and each
Contractholder under a Novated Contract shall be entitled to disregard UNUM as a
party thereto and treat Lincoln as if it had been originally obligated
thereunder. The Contractholders shall have the right to file claims arising
under the Novated Contracts on or after the effective date of such novation,
directly with Lincoln and shall have a direct right of action for Insurance
Liabilities reinsured thereunder against Lincoln, and Lincoln hereby consents to
be subject to direct action taken by any Contractholder under a Novated
Contract. Lincoln accepts and assumes the Novated Contracts subject to any and
all defenses, setoffs and counterclaims to which UNUM would be entitled in
relation to the Insurance Liabilities, it being expressly understood and agreed
by the parties hereto that no such defenses, setoffs or counterclaims are waived
by the execution of this Agreement or the consummation of the transactions
contemplated hereby and that Lincoln shall be fully subrogated to all such
defenses, setoffs and counterclaims.
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ARTICLE IV
TERRITORY
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This Agreement shall apply to Coinsured Contracts covering lives and
risks wherever resident or situated.
ARTICLE V
ADMINISTRATION; CHANGES; CREDITING RATES
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Section 5.01. Administration. Pursuant to the Administrative
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Services Agreement, UNUM has appointed Lincoln to perform all administrative
services with respect to the Non-Novated Contracts and Lincoln has agreed to
perform such services on behalf of UNUM, including, but not limited to, the
collection of premiums and other amounts due from Contractholders, the direct
payment of all Coinsured Liabilities and the administration of claims. In the
event of the termination of the Administrative Services Agreement pursuant to
Section 8.02(a) thereof, UNUM will assume all administrative services with
respect to the Non-Novated Contracts and Lincoln will pay to UNUM a monthly
expense allowance in accordance with the terms of the Administrative Services
Agreement. In addition, in the event of such termination, UNUM will indemnify
and hold Lincoln harmless against 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 UNUM or any of its Affiliates
subsequent to the date of termination, whether intentional or otherwise, or from
any reckless conduct or bad faith by UNUM or any of its Affiliates, in
connection with the handling of any claim under any of the Non-Novated Contracts
or in connection with the issuance, delivery, cancellation or administration of
any of the Coinsured Contracts.
Section 5.02. Contract Changes or Reserve Assumption Changes. UNUM,
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on its own initiative, shall not change (a) the terms and conditions of any
Coinsured Contracts or (b) the assumptions and methods used by UNUM to establish
the General Account Reserves. Lincoln shall share proportionately, on a 100%
coinsurance basis, in any contract changes or changes in the assumptions and
methods used to establish the General Account Reserves that are required by any
regulatory authority having jurisdiction over UNUM in the ordinary course of
such authority's exercise of its powers or otherwise required by law, provided
that prior to effectuating any such change UNUM shall promptly notify Lincoln of
such proposed change and afford Lincoln the opportunity, to the extent practical
under applicable law, to object to such change under applicable administrative
procedures (both formal and informal).
Section 5.03. Crediting Rates. UNUM shall set crediting rates with
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respect to the Non-Novated Contracts as directed by Lincoln after consultation
with UNUM.
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ARTICLE VI
INDEMNIFICATION
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Section 6.01. Obligation to Indemnify. Lincoln agrees, subject to
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the terms and conditions set forth below in this Article VI, to indemnify,
defend and hold harmless UNUM (and its directors, officers, employees,
affiliates, successors and permitted assigns) from and against all Losses (as
hereinafter defined) arising from Insurance Liabilities assumed by Lincoln
pursuant to this Agreement.
As used in this Article VI, Loss and/or Losses shall mean claims,
losses, liabilities, damages, deficiencies, costs, expenses (including
attorneys' fees), interest, taxes and penalties.
Section 6.02. Notice of Asserted Liability. Subject to Section 6.03,
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in the event that any party hereto wishes to assert a claim for indemnification
hereunder, such party seeking indemnification (the "Indemnified Party") shall
deliver written notice (a "Claims Notice") to the other party (the "Indemnifying
Party") no later than 45 days after such claim becomes known to the Indemnified
Party, specifying the facts constituting the basis for, and the amount (if
known) of, the claim asserted.
Section 6.03. Right to Contest Claims of Third Parties. (a) If an
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Indemnified Party asserts a claim for indemnification hereunder because of a
claim or demand made, or an action, proceeding or investigation instituted, by
any Person not a party to this Agreement (a "Third Party Claimant") that may
result in a Loss with respect to which the Indemnified Party is entitled to
indemnification pursuant to this Article VI (an "Asserted Liability"), the
Indemnified Party shall deliver to the Indemnifying Party a Claims Notice with
respect thereto, which Claims Notice shall, in accordance with the provisions of
Section 6.02 hereof, be delivered no later than 45 days after such Asserted
Liability is actually known to the Indemnified Party. Failure to deliver a
Claims Notice with respect to an Asserted Liability in a timely manner shall not
be deemed a waiver of the Indemnified Party's right to indemnification for
Losses in connection with such Asserted Liability but the amount of
reimbursement to which the Indemnified Party is entitled shall be reduced by the
amount, if any, by which the Indemnified Party's Losses would have been less had
such Claims Notice been timely delivered.
(b) The Indemnifying Party shall have the right, upon written notice
to the Indemnified Party, to investigate, contest, defend or settle the Asserted
Liability; provided, that the Indemnified Party may, at its option and at its
own expense, participate in the investigation, contesting, defense or settlement
of any such Asserted Liability through representatives and counsel of its own
choosing; and provided, further, that the Indemnifying Party shall not settle
any Asserted Liability unless (i) such settlement is on exclusively monetary
terms or (ii) the Indemnified Party shall have consented to the terms of such
settlement, which consent shall not unreasonably be withheld. The failure of
the Indemnifying Party to provide the above-mentioned written notice of an
Asserted Liability
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within 30 days after receipt of a Claims Notice with respect to an Asserted
Liability shall be deemed an election not to defend the same. Unless and until
the Indemnifying Party elects to defend the Asserted Liability, the Indemnified
Party shall have the right, at its option and at the Indemnifying Party's
expense, to do so in such manner as it deems appropriate; provided, however,
that the Indemnified Party shall not settle or compromise any Asserted Liability
for which it seeks indemnification hereunder during such 30 day period without
the prior written consent of the Indemnifying Party (which shall not be
unreasonably withheld).
(c) The Indemnifying Party shall be entitled to participate in (but
not to control) the defense of any Asserted Liability which it has elected, or
is deemed to have elected, not to defend, with its own counsel and at its own
expense. If the Indemnifying Party seeks to question (i) the manner in which
the Indemnified Party defended an Asserted Liability with respect to which the
Indemnifying Party elected, or is deemed to have elected, not to defend or (ii)
the amount or nature of any settlement entered into by the Indemnified Party in
connection with such Asserted Liability, the Indemnifying Party shall have the
burden to prove by a preponderance of the evidence that the Indemnified Party
did not defend or settle such Asserted Liability in a reasonably prudent manner.
(d) Except as provided in the first sentence of paragraph (b) of this
Section 6.03, the Indemnifying Party shall bear all costs of defending any
Asserted Liability and shall indemnify and hold the Indemnified Party harmless
against and from all costs, fees and expenses incurred in connection therewith.
(e) Lincoln and UNUM shall make mutually available to each other all
relevant information in their possession relating to any Asserted Liability and
shall cooperate with each other in the defense thereof.
Section 6.04. Indemnification Payments. Subject to a party's right
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to defend pursuant to Section 6.03 hereof, an Indemnifying Party hereunder shall
make an indemnification payment with respect to a Loss promptly after a Claims
Notice is received. All such payments shall be made by wire transfer of
immediately available funds to such account or accounts as the Indemnified Party
shall designate to the Indemnifying Party in writing.
ARTICLE VII
PREMIUMS; RECOVERIES
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As consideration for the indemnity reinsurance of the Coinsured
Liabilities, Lincoln shall, pursuant to the Administrative Services Agreement,
collect and retain all premiums, contract loan repayments and other amounts
payable with respect to the general account portion of the Non-Novated
Contracts. UNUM shall promptly pay to Lincoln any such amounts actually
received by UNUM. However, as security for the payment of Lincoln's obligations
hereunder, UNUM shall be entitled to withhold actual ownership of
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contract loans under the Non-Novated Contracts. In addition, UNUM shall have the
right to retain contract loan repayments under the Non-Novated Contracts, and
Lincoln shall pay UNUM all such contract loan repayment amounts collected by
Lincoln pursuant to the Administrative Services Agreement, upon the occurrence
of any of the events specified in Section 11.02 hereof that would entitle UNUM
to withdraw amounts from the Trust Account, subject to the limitations specified
therein on the use of funds withdrawn from the Trust Account.
ARTICLE VIII
EXPENSE ALLOWANCE
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Lincoln shall pay UNUM a monthly expense allowance (the "Expense
Allowance") equal to the product of (x) and (y), where (x) is .0001666 and (y)
is the mean level of General Account Reserves with respect to the Coinsured
Contracts for such month; provided, however, that, for purposes of calculating
the Expense Allowance, General Account Reserves shall not be included during the
first six months after the date hereof with respect to Coinsured Contracts for
which either (i) all necessary contract filings have been made by June 1, 1996
or (ii) all necessary contract filings are made at the earliest date permitted
by the Securities and Exchange Commission and/or the New York Insurance
Department (as the case may be) if such earliest date permitted is later than
June 1, 1996.
ARTICLE IX
ACCOUNTING
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Pursuant to and in accordance with the terms of the Administrative
Services Agreement, Lincoln will provide to UNUM accounting and settlement
reports as to the Coinsured Contracts.
ARTICLE X
TRANSFER OF ASSETS
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In consideration of the assumption of the UNUM Separate Account
Liabilities under the Novated Contracts, UNUM shall, on the Assumption Date of
each Coinsured Contract which has UNUM Separate Account Liabilities related
thereto, transfer to the appropriate Lincoln Separate Account the assets of the
UNUM Separate Account which relate to the UNUM Separate Account Liabilities
arising under each Coinsured Contract so novated. In addition, on the
respective Assumption Dates of the Coinsured Contracts, UNUM shall transfer and
assign to Lincoln all contract loans under the Novated Contracts.
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ARTICLE XI
TRUST ACCOUNT
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Section 11.01. General Account Reserves. UNUM agrees that it will
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establish General Account Reserves as of the last day of each month during the
term of this Agreement and will forward to Lincoln a statement showing such
General Account Reserves and the aggregate amount of contract loans under the
Non-Novated Contracts (the "General Account Reserves Statement") within five
Business Days after receipt from Lincoln of the monthly accounting statement for
such month pursuant to the terms of the Administrative Services Agreement.
Section 11.02. Trust Fund. (a) Lincoln has entered into the Trust
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Agreement and has established a trust account (the "Trust Account") thereunder
for the benefit of UNUM with respect to the General Account Reserves. Lincoln
agrees that it will maintain in the Trust Account (in addition to any assets
required to be maintained in the Trust Account under the Indemnity Reinsurance
Agreement and the Post-Closing Indemnity Reinsurance Agreement) assets having a
market value not less than an amount equal to the General Account Reserves less
the aggregate amount of contract loans under the Non-Novated Contracts (the
"Required Amount"), to be held in trust by Trustee for the benefit of UNUM as
security for the payment of Lincoln's obligations to UNUM under this Agreement.
Following the receipt of each General Account Reserves Statement, Lincoln shall,
to the extent that the market value of the assets held in the Trust Account on
the last day of the month just ended (the "Calculated Asset Value") is less than
the Required Amount so calculated, within five Business Days of its receipt of
such General Account Reserves Statement, transfer to the Trust Account assets
with a market value on the date of transfer at least equal to the difference
between the Required Amount and the Calculated Asset Value.
(b) Lincoln agrees that the assets so deposited shall be valued
according to their current fair market value and shall consist only of
investments of the type specified on Schedule 11.02 hereto and that the
investment and reinvestment thereof shall be consistent with Lincoln's
investment strategy in connection with its general account.
(c) Lincoln and UNUM, prior to depositing assets with Trustee, shall
execute all assignments, endorsements in blank, or transfer legal title to
Trustee of all shares, obligations or any other assets requiring assignments, in
order that Trustee may whenever necessary negotiate any such assets without
consent or signature from Lincoln, UNUM or any other Person.
(d) Lincoln and UNUM agree that the assets in the Trust Account may
be withdrawn by UNUM in accordance with the procedures set forth in the Trust
Agreement; provided such assets are applied and utilized by UNUM (or any
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successor of UNUM by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator of UNUM) solely on the basis
of the liability of UNUM under the Non-Novated
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Contracts, without diminution because of the insolvency of UNUM or the Lincoln,
under the following circumstances and for the following purposes:
(i) in the event that (A) the Standard & Poor's Corporation
Claims-Paying Ability rating of Lincoln becomes less than A+ or the
▇▇▇▇▇'▇ Investors Service, Inc. Financial Strength rating of Lincoln
becomes less than A1 or (B) Lincoln becomes the subject of a
delinquency proceeding within the meaning of Section 27-9-1-2 of the
Indiana Insurance Law, in each case:
(x) to reimburse UNUM for Lincoln's share of surrenders,
contract loans and benefits paid by UNUM pursuant to the
provisions of the Coinsured Contracts, to the extent not
paid directly by Lincoln when due pursuant to the terms of
the Administrative Services Agreement;
(y) to pay UNUM the expense allowance described in
Section 5.01 hereof, to the extent not paid directly to UNUM
by Lincoln when due; and
(z) to pay any other amounts due UNUM under this
Agreement, to the extent not paid directly to UNUM by
Lincoln when due.
(ii) in the event that the Standard & Poor's Corporation Claims-
Paying Ability rating of Lincoln becomes less than A or the ▇▇▇▇▇'▇
Investors Service, Inc. Financial Strength rating of Lincoln becomes
less than A2, in addition to the purposes set forth above, to fund
accounts specifically established by UNUM to cover loss exposures of
UNUM in an amount equal to the Required Amount.
In the event that UNUM withdraws assets from the Trust Account in excess of
actual amounts required to meet Lincoln's obligations to UNUM, UNUM will return
such excess to the Trust Account, plus interest in an amount equal to the actual
earnings on the assets withdrawn from the Trust Account during the period that
the amounts were withdrawn.
(e) Lincoln and UNUM agree that the assets of the Trust Account may
be withdrawn by Lincoln in accordance with the procedures set forth in the Trust
Agreement, provided that either:
(i) Lincoln shall, at the time of any such withdrawal and
transfer, replace the withdrawn assets with other assets of a type
permitted in Section 11.02 (b) above, having a market value at least
equal to the market value of the assets so withdrawn, in order to
maintain in the Trust Account assets having a market value at least
equal to the Required Amount, or
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(ii) after such withdrawal and transfer, the market value of the
assets remaining in the Trust Account is not less than the Required
Amount;
provided, however, that Lincoln may make withdrawals pursuant to subsection
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(e)(ii) of this Section 11.02(e) only once in any month and only after the
receipt of the General Account Reserves Statement showing General Account
Reserves and contract loans under the Non-Novated Contracts, each as of the end
of the previous month.
(f) UNUM hereby agrees to execute each Lincoln Certificate presented
to it for execution, as contemplated by Section 2.09(b) of the Trust Agreement,
which is executed by a duly authorized officer of Lincoln and accompanied by
evidence reasonably satisfactory to UNUM that the withdrawal requested therein
is permitted under Section 11.02(e). UNUM hereby also agrees to execute a
Termination Certificate presented to it for execution which is executed by a
duly authorized officer of Lincoln and accompanied by evidence reasonably
satisfactory to UNUM of the validity of the statements set forth therein.
ARTICLE XII
INSOLVENCY
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Lincoln hereby agrees that, as to all reinsurance made, ceded, renewed
or otherwise becoming effective hereunder, the reinsurance shall be payable by
Lincoln on the basis of the liability of UNUM under the Coinsured Contract or
Contracts reinsured on an indemnity basis, without diminution because of the
insolvency, liquidation or rehabilitation of UNUM or the appointment of a
conservator, receiver, liquidator or statutory successor of UNUM, directly to
UNUM or to its conservator, receiver, liquidator or other statutory successor.
It is agreed that any conservator, receiver, liquidator or statutory successor
of UNUM shall give prompt written notice to Lincoln of the pendency or
submission of a claim under any such Coinsured Contract or Contracts. During
the pendency of such claim, Lincoln may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any
defense available to UNUM or its conservator, receiver, liquidator or statutory
successor. The expense thus incurred by Lincoln is chargeable against UNUM as a
part of the expense of insolvency, liquidation or rehabilitation to the extent
of a proportionate share of the benefit which accrues to UNUM solely as a result
of the defense undertaken by Lincoln.
ARTICLE XIII
OFFSETS
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Any debts or credits between UNUM and Lincoln arising under this
Agreement are deemed mutual debts or credits, as the case may be, and shall be
netted or set off, as the case may be, and only the balance shall be allowed or
paid hereunder.
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ARTICLE XIV
RIGHTS WITH RESPECT TO COINSURED LIABILITIES
--------------------------------------------
Lincoln's coinsurance of 100% of the Coinsured Liabilities is intended
for the sole benefit of the parties to this Agreement and shall not create any
right on the part of any other party, including, without limit, any
Contractholder, insured, claimant or beneficiary, against Lincoln or any legal
relation between any Contractholders, insureds, claimants or beneficiaries and
Lincoln.
ARTICLE XV
ERRORS AND OMISSIONS
--------------------
Inadvertent delays, errors or omissions made by either Lincoln or UNUM
in connection with this Agreement or any transaction hereunder shall not relieve
the other party from any liability which would have attached to such party had
such delay, error or omission not occurred, provided that the party causing such
error or omission rectifies the same as soon as possible after discovery
thereof. If, as a result of any such delay, error or omission, there is a delay
in the transfer of funds to be transferred pursuant hereto, the party
responsible for such delay, error or omission shall pay, to the party to whom
such funds are to be transferred, interest on the amount of funds to be
transferred from the date of such delay, error or omission to and including the
date of such transfer of funds at a rate equal to the average rate of earnings
on assets held in the Trust Account during such period.
ARTICLE XVI
DUTY OF COOPERATION
-------------------
Each party hereto shall cooperate fully with the other in all
reasonable respects in order to accomplish the objectives of this Agreement.
This duty to cooperate shall include obtaining the governmental and regulatory
consents and approvals and taking the other steps necessary for the assumption
of the Coinsured Contracts, as described in Article III.
ARTICLE XVII
ARBITRATION
-----------
It is the intention of the parties hereto that customs and usages of
the business of indemnity reinsurance and assumption reinsurance shall be given
full effect in the interpretation of this Agreement other than to the extent the
unique aspects of the transaction
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render such customs and usages inapplicable. The parties hereto shall act in all
things with the highest good faith. Any dispute or difference with respect to
the operation or interpretation of this Agreement on which an amicable
understanding cannot be reached shall be submitted to arbitration, which shall
be mandatory and binding; provided, however, that this Article shall not apply
in the event Lincoln shall become subject to a delinquency proceeding as defined
in Section 27-9-1-2 of the Indiana Insurance Law. The arbitrators shall be free
to reach their decision from the standpoint of equity and customary practices of
the insurance and reinsurance industry rather than from that of strict legal
principles.
The arbitration shall be held in Portland, Maine, and the arbitration
panel shall consist of three arbitrators who must be active or retired executive
officers of life insurance companies other than the parties to this Agreement,
their affiliates or subsidiaries. UNUM shall appoint one arbitrator and Lincoln
the second. Such arbitrators shall then select the third arbitrator before
arbitration commences. Should one of the parties decline to appoint an
arbitrator or should the two arbitrators be unable to agree upon the choice of a
third, such appointment shall be left to the President of the American Academy
of Actuaries.
Decisions of the arbitrators shall be by majority vote. The cost of
arbitration, including the fees of the arbitrators, shall be borne as the
arbitrators shall decide. Judgment on any award granted by the arbitrators may
be entered in a Federal court of competent jurisdiction located in Portland,
Maine.
ARTICLE XVIII
TERMINATION
-----------
Unless extended by written consent of each of the parties hereto, this
Agreement shall terminate automatically with respect to the issuance of new
group annuity contracts 18 months after the date hereof and as to each Coinsured
Contract on the effective date of novation of such Coinsured Contract pursuant
to Article III hereof.
ARTICLE XIX
MISCELLANEOUS PROVISIONS
------------------------
Section 19.01. Notices. Any notice required or permitted hereunder
-------
shall be in writing and shall be delivered personally (by courier or otherwise),
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, three days after the date of deposit in the United
States mails, as follows:
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(1) If to Lincoln to:
The Lincoln National Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(2) If to UNUM to:
UNUM Life Insurance Company of America
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by notice given in accordance with this Agreement to
the other party, designate another address or person for receipt of notices
hereunder.
Section 19.02. Amendment. This Agreement may not be modified,
---------
changed, discharged or terminated, except by an instrument in writing signed by
an authorized officer of each of the parties hereto.
Section 19.03. Counterparts. This Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
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Section 19.04. 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.
Section 19.05. Assignment. This Agreement shall be binding upon and
----------
inure to the benefit of the parties hereto and their respective successors,
permitted assigns and legal representatives. Neither this Agreement, nor any
right hereunder, may be assigned by either party (in whole or in part) without
the prior written consent of the other party hereto.
Section 19.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MAINE, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
IN WITNESS WHEREOF, UNUM and Lincoln have executed this Agreement as
of the date first above written.
UNUM LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
and General Counsel
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
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