Exhibit 10.1
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is entered into and
effective on the 15th day of February, 2003, by and between American National
Insurance Company, hereinafter referred to as "American National," an insurance
company organized under the laws of the state of Texas, and Legacy Marketing
Group, hereinafter referred to as "LMG," a California corporation, with
reference to the following facts:
WHEREAS, American National and LMG have entered into a certain Marketing
Agreement, hereinafter referred to as the "Marketing Agreement," pursuant to
which certain insurance business is to be marketed by LMG;
WHEREAS, that American National desires to have LMG provide services to American
National with respect to this business and LMG is willing to provide such
services, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and mutual promises
hereinafter contained and other good and valuable consideration, the LMG and
American National hereto do agree as follows:
1. SERVICES
From and after the date of this Agreement, LMG agrees to perform certain
American National accounting and contract service functions. Such accounting and
contract service functions shall consist of the activities described in APPENDIX
C but only for the policies recited in APPENDIX A, and policies added by formal
amendment. Consideration for such accounting and service functions is set forth
in APPENDIX B. The term "Policies," as used throughout this Agreement, shall be
deemed to encompass all policies, certificates and contracts issued by LMG on
behalf of American National. Furthermore, the term "Policyholder," as used
throughout this Agreement, shall be deemed to encompass all contract owners,
including policyholders and certificateholders.
2. QUALITY AND LIMITATION OF SERVICES
2.1 All services to be provided by LMG under this Agreement shall be performed
in a professional manner consistent with industry standards and in accordance
with all applicable laws and regulations. With respect to Services described in
Section 1 above, LMG's performance of those activities shall be consistent with
its normal and customary business practices.
2.2 LMG may rely on instructions of any person indicated on American National's
"Schedule of Authorized Personnel," attached hereto as APPENDIX D. Each of such
persons is authorized to give instructions under this Section with respect to
any matter arising in connection with this Agreement.
3. TERM, TERMINATION, ASSIGNMENT AND MODIFICATION OR AMENDMENT
3.1 Subject to termination as hereinafter provided, this Agreement shall remain
in force and effect for a period of five (5) years, the term of this Agreement.
This Agreement shall be renewed by mutual agreement for successive terms of one
(1) year unless terminated by either party as provided herein.
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3.2 The termination of this Agreement is governed by the following provisions:
(a) American National or LMG may terminate this Agreement or any renewal
thereof, without cause, upon twelve (12) months prior written notice
to the other signed by authorized personnel, as provided in APPENDIX
E.
(b) This Agreement may be terminated by mutual agreement of LMG or
American National at any time. Such termination shall be signed by
authorized personnel of both parties, as shown in APPENDIX D.
(c) If either American National or LMG shall materially breach this
Agreement or be materially in default in the performance of any of its
duties and obligations hereunder (the defaulting party), the other
party shall give written notice thereof, as signed by authorized
personnel, as provided in APPENDIX D, to the defaulting party. If such
default or breach is not cured within ninety (90) days after such
written notice is given, then the party giving such written notice may
terminate this Agreement with thirty (30) days notice of such
termination to the defaulting party.
(d) At least ninety (90) days prior to the end of any term hereof, LMG
shall give American National written notice if LMG desires to increase
its fees or charges to American National or to change the manner of
payment or to change any of the other terms and conditions of this
Agreement. American National must respond to such request in writing
within sixty (60) days of receipt. If LMG and American National do not
agree to such changed fees and charges, the manner of payment and/or
the other proposed changes, before the end of the term during which
such notice is given by LMG, or if LMG does not withdraw the proposed
changes, this Agreement may terminate following the provisions
indicated in Section 3.1(a).
(e) Notwithstanding anything herein to the contrary, American National or
LMG may terminate this Agreement or any renewal thereof, with cause,
immediately by written notice, as signed by authorized personnel, as
provided in APPENDIX D, to the other. Cause is defined as fraudulent,
criminal, unethical activity or blatant disregard for the terms and
conditions of this Agreement.
(f) If LMG elects to terminate this Agreement for other than non-payment
of fees and charges and if American National shall so request in
writing, LMG shall continue to provide the services described herein
to American National for a period of up to twelve (12) months
following such termination, such service to be provided in accordance
with the terms of this Agreement and at customary fees in effect at
that time, as set forth in APPENDIX B. Such customary fees shall be
reviewed (and re-negotiated, if required) annually by LMG and American
National.
(g) Termination of this Agreement by default or breach by American
National shall not constitute a waiver of any rights of LMG in
reference to services performed prior to such termination; termination
of this Agreement by default or breach by LMG shall not constitute a
waiver by American National of any other rights it might have under
this Agreement.
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o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC.
(h) In the event that this Agreement is terminated for any reason, LMG
agrees that, in order to assist in providing uninterrupted service to
American National, LMG shall offer all necessary information to
American National's employees or agents that will assist said
employees or agents in effectuating the conversion of the records of
American National from the LMG system to whatever service or system is
selected by American National, subject to reimbursement to LMG for
such assistance at the customary fees in effect at that time, as set
forth in APPENDIX B. Such necessary information shall include, but not
be limited to, providing physical and/or electronic access to:
Actuarial Product Specifications
Product/Plan Table File Definitions & Data
Product/Plan Financial History File Definitions & Data
Product/Plan Premium & COI Rate File Definitions & Data
Product Agent Compensation Schedules
Product/Plan Correspondence
Policy/Contract Master Record File Field Definitions
Policy/Contract Master Record File Data
Policy/Contract Application Files & Related Correspondence
Lapsed Policy History/Archive File Definitions & Data
Agent/Client Complaint Files & Data.
As used herein, the term "Product" includes all related riders and
benefits.
(i) LMG and American National shall provide fifteen (15) days' written
notice of termination or cancellation of the agreement to the
appropriate Departments of Insurance. American National shall fulfill
any lawful obligations with respect to policies affected by the
written agreement, regardless of any dispute between LMG and American
National.
(j) In the event that this Agreement is terminated by American National
pursuant to Paragraphs 3.2(c) or 3.2(e) above, or in the event that
LMG is unable to fulfill its contractual obligations as set forth
herein, due to its subsequent bankruptcy or insolvency, the o shall o
the o, to be executed subsequent to this Agreement. The o utilized by
o block of business, o, for all carriers with which it contracts, o.
The parties recognize that there is no cost effective way to split o
to apply only to o products, and as such, o agrees to use o upon
receipt thereof for the o policies. o agrees not to utilize o for any
other company. Further, o shall maintain the confidentiality of o, not
releasing such without the prior written consent of o. Notwithstanding
the foregoing, o acknowledges and agrees that in addition to
maintaining o, o shall also obtain written consent from o, authorizing
the o to release o to o for use.
(k) In the event that this Agreement is terminated by LMG pursuant to
Paragraphs 3.2(c) or 3.2(e) above, LMG shall immediately retrieve o
from o and LMG shall retain o and LMG shall continue to provide the
services described herein to American National for a period of up to
twelve (12) months following such termination. In addition, o, in its
sole discretion, o will either: (1) effectuate a split of o, which
cost to o, under this provision, for both splitting o and purchasing
the resultant "o," shall be at a significantly
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increased cost, provided that the amount of the increase over the
costs in Paragraph 3.2(l) for the split and purchase does not exceed
100% of the cost in Paragraph 3.2(l) at the time of termination; or
(2) assist o in converting the records of o from the o to whatever o
is selected by o, pursuant to the services and fees identified in
section 3.2(h) above.
Regardless of which option is elected by o, o must agree in writing to
o splitting of o.
(l) In the event that this Agreement terminates for any reason other than
those provided in Paragraphs 3.2(c) and 3.2(e) above, the o shall
retain o, pursuant to o executed herewith. LMG shall continue
processing American National's policies for a period of not less than
12 months, at its customary fees in effect at the time of the
termination. Additionally, during that 12 month period, at the request
of o shall take whatever steps necessary to split o to result in a o
for o only, and a separate o for any other carriers with which o
contracts. If o has so requested, then o shall pay to o the cost
associated with splitting o, for which the established cost for
products existing at this time is o, in addition to paying a fee
totaling o, (such fees shall increase o annually) to obtain the o. The
o will provide all o necessary to either o policies currently o by o
or, if so desired by o, to o, or other o block of business, in the
future, with the costs of such o. o will hold the o until replaced
with the o; thereafter, the o shall be provided to o and o returned to
o, pursuant to the o executed herewith. The cost to split o and to
obtain the o shall not be decreased; however, if, in the future,
additional o are developed o by o, the cost to further split the o and
for the additional o shall be negotiated on a case by case basis for
each additional o required. Once split, o will provide o with the
ability to administer their o to the same extent and standard as does
o; o will not provide o to the o or o. Further, if o is not available
at the time of the split of o, o will not add additional functions
that o does have.
(m) The remedies available to o in Paragraphs 3.1(i) through 3.1(l) above
are contingent upon o obtaining o. Thereafter, o shall be responsible
for providing the o pursuant to the terms of this Agreement.
(n) Termination of this Agreement does not affect in any way the Marketing
Agreement.
3.2 Neither party may assign or delegate all or any part of its rights and/or
duties under this Agreement without the written consent of the other party
signed by authorized personnel as shown in APPENDIX D.
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3.3 This Agreement may be modified or amended at any time by mutual agreement of
LMG and American National, provided the modifications or amendments are in
writing and signed by authorized personnel, as provided in APPENDIX D.
4. INSPECTIONS OF RECORDS AND RECORDS MAINTENANCE
4.1 This Agreement shall be retained as part of the official record of both LMG
and American National for the duration of the agreement and for seven (7) years
after the termination of this Agreement.
4.2 LMG will maintain complete books and records of all transactions between
LMG, American National, and the contract owners. LMG will preserve detailed and
adequate books and records of all administered transactions among LMG, American
National and contract owners, sufficient to permit the insurer to fulfill all of
its contractual obligations to contract owners. These books and records shall be
maintained in accordance with prudent standards generally accepted in business
insurance record keeping. The documentation will contain all pertinent documents
in sufficient detail to maintain complete dates, events, and persons
participating in those insurance events. The books and records shall be
maintained throughout the agreement and for a minimum period of ten (10) years
after the completion of the entire the transaction to which they respectively
relate.
4.3 American National shall own the records generated by LMG pertaining to
American National; however, LMG shall retain the right to continuing access to
records to permit LMG to fulfill all of its contractual obligations. All such
records are proprietary information of American National. American National
shall have continuing right to access and copy all accounts and records
maintained by LMG related to American National's business. Any appropriately
authorized governmental agency shall have access to all books, bank accounts,
and records of LMG and American National for the purpose of examination,
inspection, and audit. All information contained in the aforementioned books and
records, including the identity and addresses of policyholders shall be kept
confidential, except that such information may be used in proceedings instituted
against LMG, or otherwise required to be disclosed by proper federal, state or
regulatory agencies or by court order.
4.4 American National shall have on-line access to the American National policy
information maintained on LMG's policy administration system and on-line access
to its accounting system. LMG will provide policyholder information on request
by American National within a time period mutually agreeable and appropriate
with the request.
4.5 In the event that LMG and American National cancel this Agreement, LMG may,
by written agreement with American National, transfer all records to a successor
administrator or to American National rather than retain them for the
aforementioned period. If LMG transfers the records to a successor administrator
or to American National, LMG is no longer responsible for retaining such
records. Any successor third party administrator shall acknowledge in writing to
LMG that it is responsible for retaining the records for which LMG had
previously been responsible.
5. RIGHTS AND RESPONSIBILITIES OF AMERICAN NATIONAL
5.1 American National shall be responsible for the following:
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(a) It is the sole responsibility of American National to provide for
competent administration of its programs.
(b) Subject to American National's approval in writing, in advance,
American National shall be responsible for researching, obtaining, and
the registration of any service marks issued by the U.S. Patent and
Trademark Office for the products developed by LMG and American
National, and any costs associated therewith.
(c) American National shall be responsible for product filing and any
costs associated therewith. The parties may, by mutual agreement, hire
a product filing consultant for whose fees American National will be
responsible.
(d) American National shall be responsible for the establishment and
maintenance of any group trusts associated with such product filings
and any costs associated therewith.
(e) American National shall be responsible for determining the benefits,
premium rates, underwriting criteria, and claims payment procedures
applicable to such coverage and for securing reinsurance, if any.
(f) American National shall have the sole responsibility for filing
advertising materials in those states that so require prior to
approving their use by LMG. All costs associated with such filings
will be the responsibility of American National.
(g) American National shall, at least semiannually, conduct a review of
operations of LMG. At least one such review will be an on-site audit
of the operations of LMG. American National shall forward an agenda
for such audit at least five (5) days in advance of the scheduled
audit.
(h) American National shall immediately, within five (5) business days,
provide LMG with written notice of any change of authority of persons
authorized and enumerated in APPENDIX D.
(i) American National shall, within five (5) days, provide LMG with
written notice of any change of authority of persons authorized and
enumerated in APPENDIX D to provide LMG with instructions or
directions relating to services to be performed by LMG under this
Agreement.
6. RIGHTS AND RESPONSIBILITIES OF LMG
6.1 LMG shall, in all cases and at all times, observe and obey the rules,
regulations, instructions and directives of American National which are provided
herein or such notice that American National has provided to LMG in writing,
from time to time and at any time, promulgate for its operations, and shall not
bind American National in contravention of any such rules, regulations,
instructions, or directives.
6.2 LMG shall handle all correspondence of a routine nature and other general
functions necessary for satisfactory administration of the insurance and shall
maintain files relative thereto. Specific services are outlined in APPENDIX C.
Subject to American National's right to approve the resolution thereof, LMG
shall handle all insurance department complaints and inquiries and policy owner
and
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o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC.
beneficiary complaints, whether written or oral, and all attorney letters
containing complaints and any other complaints related to the policies
administered hereunder. LMG will notify American National of complaints from
regulatory agencies within twenty-four (24) hours of receipt thereof. Details of
such complaints will be forwarded to American National within five (5) business
days. However, American National will respond to summons and complaints
commencing legal actions on its own behalf.
6.3 LMG will provide written notice, approved in writing by American National,
to policyholders advising them of the identity of American National and LMG, and
the relationship between LMG, the policyholder, and American National.
6.4 When a policy is issued to a trustee or trustees, a copy of the trust
agreement and any amendment thereto, shall be furnished to American National by
LMG and shall be retained as part of the official records of both LMG and
American National for the duration of the policy and for six (6) years
thereafter.
6.5 LMG will only use advertising pertaining to the business underwritten by
American National that American National has approved in writing in advance of
its use. If so required, American National shall obtain the prior approval of
the appropriate Department of Insurance before approving advertising for use by
LMG, as provided for in Section 5.1(f) of this Agreement.
6.6 LMG will act only in the capacity in which it is so licensed. LMG will
comply with all of the relevant provisions contained in applicable Third Party
Administrator statutes. If any provision of this Agreement is in conflict with
the laws of the State which governs this Agreement, such provision will be
deemed to be amended to conform with such laws. Further, if the laws of the
State which govern this Agreement require the inclusion of certain provisions of
relevant statutes, this Agreement shall be deemed to be amended to conform with
such laws.
6.7 o LMG is not responsible for the costs associated for other modifications
that are not necessary to the normal course of business. American National will
reimburse LMG for any system modification costs that are beyond those to the
normal course of business at LMG's standard rates illustrated in APPENDIX B.
Such costs will be mutually agreed upon in writing, as signed by authorized
personnel in APPENDIX D, prior to the commencement of such modifications.
6.8 LMG will possess and maintain an adequate fidelity and/or surety bond as so
required in the states in which it is compelled to do so. LMG will file such
bond, if so required, with the appropriate agency. The bond shall be executed by
a corporate insurer authorized to transact business in the states which mandate
the maintenance of such bond.
6.9 LMG will possess and maintain at all times errors and omissions coverage or
other appropriate liability insurance, written by an insurer authorized to
transact business in the states which mandate the maintenance of such insurance.
Such coverage will comply with the requirements of the states in which such
insurance coverage is required and such coverage shall be in a minimum amount of
o per occurrence/o aggregate in a form acceptable to American National
underwritten by a company rated by A.M. Best as A- or better.
7. GENERAL PROVISIONS
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7.1 LMG and American National agree this Agreement is an honorable undertaking,
and agree to cooperate each with the other in carrying out its provisions.
7.2 If any clause, paragraph, term, or provision of this Agreement shall be
found to be void or unenforceable by any court of competent jurisdiction, such
finding shall have no effect upon any other clause, paragraph, term, or
provision of this Agreement, and same shall be in full force and effect.
7.3 For any notice under this Agreement, notice shall be sufficient
upon receipt if sent via US Mail, postage prepaid, registered or certified,
return receipt requested, or via nationally known courier. Such notice shall be
directed as follows:
To LMG: Legacy Marketing Group
Lynda Regan, Chief Executive Officer
Preston Pitts, President
2090 Marina Avenue
Petaluma, California 94954
With copy to: Stokes Lazarus Carmichael LLP
80 Peachtree Park Drive, N.E.
Atlanta, Georgia 30309
To American National: American National Insurance Company
Richard Ferdinandtsen, President, Chief Operating Officer
Kelly Wainscott, Vice President, Independent Marketing
David Behrens, Executive Vice President, Independent
Marketing
One Moody Plaza
Galveston, Texas 77550-7999
With copy to: Frederick E. Black, Greer, Herz and Adams LLP
One Moody Plaza, 18th Floor
Galveston, Texas 77550-7999
7.4 LMG and American National expressly represent and warrant that each has the
authority to enter into this Agreement and that it is not or will not be, by
virtue of entering into this Agreement or otherwise, in breach of any other
agreement with any other insurance company, association, firm, person, or
corporation.
7.5 The persons signing this Agreement on behalf of American National and LMG
warrant, covenant, and represent that they are authorized to execute this
document on behalf of such corporations pursuant to their bylaws or a resolution
of their boards of directors.
7.6 LMG is an independent contractor. Nothing contained in this Agreement shall
be construed to create the relationship of employer and employee between
American National and LMG, nor shall LMG's employees be considered employees of
American National for any purpose.
7.7 This Agreement is the result of mutual negotiations between the LMG and
American National shall not be deemed to have been prepared by either party, but
by both equally. The headings of the
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several paragraphs contained herein are for convenience only and do not define,
limit, or construe the contents of such paragraph.
7.8 This Agreement, including APPENDICES A, B, C, D, and E and the provisions
thereof, and the separate Marketing Agreement, constitute the entire agreement
entire agreement between the parties. No modifications hereof shall be binding
upon the parties unless such Amendment is in writing and signed by authorized
personnel, as shown in APPENDIX D. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas.
7.9 Any policies, certificates, booklets, termination notices, or other written
communications delivered by American National to LMG for delivery to insured
parties or covered individuals shall be delivered by LMG within ten (10) days
after receipt of instructions from American National to deliver them. Costs
associated with the distribution of items not normally distributed will be
reviewed on a case by case basis to determine the responsible party and will be
mutually agreed upon by American National and LMG.
7.10 Payment to LMG of any premiums or charges for insurance by or on behalf of
the insured party shall be deemed to have been received by American National,
and the payment of return premiums or claim payments forwarded by American
National to LMG shall not be deemed to have been paid to the insured party or
claimant until such payments are received by the insured party or claimant.
7.11 Currently, LMG does not perform underwriting for American National;
however, if granted such authority, LMG will comply with all underwriting
standards established by American National and adhere to all pertinent
provisions contained in applicable Third Party Administrator statutes. American
National shall be responsible for the underwriting or other standards pertaining
to the business underwritten by American National.
7.12 Each party shall be excused from performance for any period and to the
extent that the party is prevented from performing any services, in whole or in
part as a result delays caused by an act of God, war, civil disturbance, court
order, labor dispute, or other cause beyond that parties reasonable control,
including, failures or fluctuations in electrical power, heat, light, air
conditioning, or telecommunications equipment and such non-performance shall not
be a default or a ground for termination of this Agreement.
7.13 In the event a malfunction of the LMG systems causes an error or mistake in
any record, report, data, information or output under the terms of this
Agreement, LMG shall at its expense correct and reprocess such records. In the
event American National discovers any such errors or mistake it shall, within
three (3) days after discovery, notify LMG in writing of such error or mistake
in any record, report, data, information or output received by American
National.
7.14 In the event LMG is unable to perform its obligations under the terms of
this Agreement because of causes beyond LMG's control, including but not limited
to strikes, equipment or transmission failure or damage, LMG will use its best
efforts to assist American National to obtain alternate sources of service. LMG
will not be liable for any damages resulting from such causes. American National
will be the off-premises site for storage of backup computer systems and files.
There will be no charge to LMG for this storage function. At any time that
American National would need to perform backup processing for LMG, LMG will
reimburse American National for its actual processing costs.
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7.15 In no event and under no circumstances, however, shall either party under
this Agreement be liable to the other party under any provision of this
Agreement for lost profits or for exemplary, speculative, special, punitive or
consequential damages.
7.16 Any claim or dispute arising out of or relating to this Agreement, or any
breach thereof, shall be finally determined and settled pursuant to binding
arbitration in Houston, Texas, by one arbitrator, to be agreed upon by the
parties. The arbitrator shall be an attorney licensed to practice law in the
state of Texas. Should the parties fail to agree on an arbitrator then each
party shall appoint one arbitrator who shall then agree to appoint a third
arbitrator. In such an event, the first two arbitrators will not be required to
participate and the final arbitrator may conduct the arbitration as a sole
arbitrator. Should one party fail to appoint an arbitrator as herein
contemplated then the choice of the other party shall be the sole arbitrator. If
the two arbitrators appointed by or on behalf of the parties as contemplated
herein fail to appoint a third arbitrator within ten (10) days after the date of
the appointment of the last arbitrator, then any person sitting as a District
Judge in Houston, Texas, upon application of either party, shall appoint an
arbitrator to fill such position with the same force and effect as though such
arbitrator had been appointed or herein contemplated with the same force and
effect as though such arbitrator had been appointed or herein contemplated.
The arbitration proceeding shall apply the laws of the state of Texas and be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The cost of arbitration (exclusive of attending the
arbitration, and of the fees and expenses of legal counsel to such party, to be
borne by each party) shall be shared equally by American National and LMG unless
such arbitrator deems it just to allow one party to recover such costs from the
other. The arbitration award shall be final and conclusive and shall receive
recognition and judgement upon such award may be entered and enforced in any
court of competent jurisdiction.
7.17 LMG hereby indemnifies and holds harmless American National, its officers,
directors, employees and representatives from any and all claims, damages,
expenses, liabilities, losses, causes of action, costs and obligations, of
whatever kind or nature, whether joint and several or otherwise (including, but
not limited to, attorneys' fees and expenses and amounts paid in settlement of
any claims or liabilities) to any third party, arising out of LMG's fraudulent
or negligent act(s) or omission(s); LMG's failure to comply with the terms of
this Agreement; LMG's failure to comply with any law or regulation with respect
to its duties hereunder except that LMG shall not be required to indemnify or
hold harmless American National for any act or omission of LMG which was
directed orally or in writing by American National, or required by American
National under the Agreement.
American National hereby indemnifies and holds harmless LMG, its officers,
directors, employees and representatives from any and all claims, damages,
expenses, liabilities, losses, causes of action, costs and obligations, of
whatever kind or nature, whether joint and several or otherwise (including, but
not limited to, attorneys' fees and expenses and amounts paid in settlement of
any claims or liabilities) to any third party, arising out of American
National's fraudulent or negligent act(s) or omission(s); American National's
failure to comply with the terms of this Agreement; American National's failure
to comply with any law or regulation with respect to its duties hereunder; and
any actions or omissions of LMG which were directed orally or in writing by
American National, or required by American National under the Agreement.
Without in any way limiting the above reciprocal indemnifications, the parties
hereto expressly agree that neither party shall be prohibited under this section
from seeking such indemnification on the basis that such party seeking
indemnification is itself negligent. Provided, however, that no party shall be
liable for that
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portion of the claims, damages, liabilities, losses or causes of action
resulting from the negligence of the other party, or resulting from the
negligence of any third party, whether or not such third party is named in the
lawsuit.
In lawsuits brought against both parties by a third party, the parties agree
that each shall work together in a good faith effort to defend against and/or
settle such lawsuits brought by a third party. In lawsuits brought against one
but not both parties, to the extent practicable, all efforts will be made to
defend or settle the claim with such third party without bringing the other
party into the initial lawsuit. In any case, each party shall assert and protect
all mutual privileges of one another, including but not limited to the
attorney-client privilege, the joint defense privilege, and the attorney work
product privilege. Notwithstanding the foregoing, nothing herein shall prevent
LMG or American National from seeking indemnification from the other party in a
separate arbitration or other proceeding without the constraints of the joint
defense privilege or joint attorney work product privilege.
The parties hereto expressly agree that, prior to the institution of any action
or the filing of any claim against one another under this section, the parties
will confer directly in good faith to resolve any disputes. For American
National, such discussions shall involve Dave Behrens, Executive Vice President,
or Kelly Wainscott, Vice President, or their successors or designees. For LMG,
such discussions shall involve Lynda Regan, Chief Executive Officer, or Preston
Pitts, President, or their successors or designees.
8. PROPRIETARY, CONFIDENTIALITY AND PRIVACY OF INFORMATION.
8.1 Proprietary and Confidentiality. Each party acknowledges that certain
information received from the other may be proprietary and/or confidential
(referred to herein as "Confidential Information") in nature. All such
Confidential Information shall be used by each party solely for purposes of
soliciting insurance pursuant to this Agreement. Except as required by law or to
inform the appropriate party or its officers, directors, employees, agents,
affiliates or contractors (collectively referred to herein as "Affiliates"), for
the purpose of compliance with or negotiation of or performance under this
Agreement, neither party shall disclose the contents of this Agreement to third
parties (other than Affiliates) without the other's written approval, which
shall not be unreasonably withheld or delayed.
8.2 Privacy. To protect Confidential Information each party shall: (i) keep all
Confidential Information in strict confidence; (ii) prevent disclosure of
Confidential Information to third parties (except for Affiliates with a
need-to-know); (iii) promptly notify the other of any loss or unauthorized use
or disclosure of or access to Confidential Information; and (iv) promptly notify
the other upon receipt of a request or demand pursuant to law to disclose
Confidential Information, so that the appropriate party may seek a protective
order or similar remedy. For the purpose of this Agreement, the term
"Confidential Information" shall not include information that is: (a) in or
becomes part of the public domain other than pursuant to a breach of this
Agreement; (b) independently developed; (c) rightfully obtained from a third
party without an obligation of confidentiality; (d) known prior to date of this
Agreement without obligation of confidentiality; or (e) required to be disclosed
by legal or regulatory authority.
8.3 Non-Public Personal Information. All capitalized terms used in this Section
8 and not otherwise defined shall have the meanings throughout this Agreement
set forth in the Federal "Privacy of Consumer Financial Information" Regulation
(12 CFR Part 40), as amended from time to time (the
Page 11 of 25
"Privacy Regulation"), issued pursuant to Section 504 of the Gramm-Leach-Bliley
Act (15 U.S.C. 6801 et seq.). The parties acknowledge that the Privacy
Regulation governs disclosures of Nonpublic Personal Information about Consumers
and Customers, and that Nonpublic Personal Information is included in the
definition of "Confidential Information" in this Agreement. Each party hereby
agrees that as the party receiving or maintaining Nonpublic Personal Information
(the "Receiving Party") it shall:
(a) comply with the terms and provisions of the Privacy Regulation,
including, without limitation, the provisions regarding the sharing,
collection, access and use of Nonpublic Personal Information, the
provisions regarding notice and opt-out requirements, and the
provisions regarding the limitations on the sharing of account number
information for marketing purposes;
(b) not disclose or use any Nonpublic Personal Information that it obtains
from the other party (the "Disclosing Party") except to carry out the
purposes for which the Disclosing Party provided such Nonpublic
Personal Information;
(c) not make any changes to its security measures that would increase the
risk of unauthorized access, use or disclosure of Nonpublic Personal
Information;
(d) not disclose any Nonpublic Personal Information provided by the
Disclosing Party to any other entity, without the prior written
consent of the Disclosing Party;
(e) at any time, upon the Disclosing Party's request, return to the
Disclosing Party all of the Disclosing Party's Nonpublic Personal
Information. Neither party shall be under any obligation to take any
action, which, within such party's reasonable judgment, would
constitute a violation of the Privacy Regulation or its internal
privacy policies;
(f) safeguard Nonpublic Personal Information by maintaining security and
procedural standards that comply with state and federal regulations to
protect against unauthorized access, use or disclosure (or threatened
access, use or disclosure) of the Disclosing Party's Nonpublic
Personal Information.
8.4 Service Provider Agreements. Each party agrees that when Nonpublic Personal
Information is provided to a nonaffiliated third party ("a Service Provider")
who performs services for or functions on behalf of the party, including
marketing of the party's own products or services, or marketing of financial
products or services pursuant to Joint Agreements between the party and other
Financial Institutions, such party shall disclose to its Consumers and/or
Customers that (a) it will be providing such Nonpublic Personal Information to
the Service Provider and (b) it has entered a contractual agreement with the
Service Provider that requires the Service Provider to maintain the
confidentiality of such Nonpublic Personal Information pursuant to the Privacy
Regulation. LMG agrees to send, on an annual basis, American National form 9186
(or form 4977 as required by state law) to the owner(s) of all American National
insurance and annuity policies administered by LMG.
8.5 Other Privacy Regulations. Each party agrees that compliance with the
Privacy Regulation does not relieve either party of any of its duties and
obligations to comply with other applicable privacy laws, statutes, ordinances
or regulations of the appropriate authorities.
Page 12 of 25
8.6 Remedies. The Receiving Party agrees that (a) any unauthorized access, use
or disclosure (or threatened unauthorized access, use or disclosure) of the
Disclosing Party's Nonpublic Personal Information or other Confidential
Information, (b) other violation of the Privacy Regulation, or (c) violation of
other applicable privacy regulations, may cause immediate and irreparable harm
to the Disclosing Party for which money damages may not constitute an adequate
remedy. In that event, each party agrees that injunctive relief may be warranted
in addition to any other remedies the Disclosing Party may have. In addition,
the Receiving Party agrees promptly to advise the Disclosing Party in writing of
any unauthorized misappropriation, disclosure or use by any person of
Confidential Information (including, without limitation, Nonpublic Personal
Information) which may come to its attention and to take all steps at its own
expense reasonably requested by the Disclosing Party to limit, stop or otherwise
remedy such misappropriation, disclosure or use.
9. SURVIVAL: Sections 7.15, 7.16 and 7.17 shall survive the termination of
this Agreement.
Any similar agreement signed prior to the execution dates below is null and void
and abrogated hereby.
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IN WITNESS HEREOF, the parties hereto have executed this Agreement.
LEGACY MARKETING GROUP
By: /s/ R. Preston Pitts
Title: President
Witness: /s/ Lynn Laub
Date: November 15, 2002
AMERICAN NATIONAL INSURANCE COMPANY
By: /s Kelly M. Wainscott
Title: Vice President
Witness: /s/ Jynx Yucra
Date: November 15, 2002
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APPENDIX A
GEOGRAPHIC TERRITORY:
The District of Columbia and all states other than New York and Alabama.
Products
Periodic Pay Life Products
1. LegacyMaster Whole Life
2. LegacyMaster 5 Pay
3. LegacyMaster Universal Life
4. AmeriMaster, formerly known as the Wealth Master II-WealthMaster with loan
and surrender charge modifications
5. WealthMaster
6. Executive Master Plan I, formerly known as the Personal Retirement Program
I
7. Executive Master Plan II, formerly known as the Personal Retirement Program
II
SPDA Products
1. BenchMark 5 Annuity with premium enhancement, formerly known as the premium
bonus
2. BenchMark 7 Annuity with premium enhancement, formerly known as the premium
bonus
3. BenchMark 10 Annuity with premium enhancement, formerly known as the
premium bonus
4. BenchMark 5 Annuity - No bonus
5. BenchMark 7 Annuity - No bonus
6. BenchMark 10 Annuity No bonus
7. BenchMark 5 Extra Series (0,2,3,4)
8. BenchMark 10 Extra Series (0,2,4,6,8)
9. BenchMark NSC Annuity, formerly known as the ValuMark Annuity
SPWL Products
1. GrowthMaster Single Premium Whole Life
2. ValuMaster Single Premium Whole Life
Page 15 of 25
Riders
1. Periodic Pay Whole Life products
1. Paid Up on First Death
2. First to Die
3. Contemplation of Death
4. Waiver of Scheduled Premium
5. Waiver of COI
6. Death Benefit Option B
7. Split Certificate Rider
8. Term Insurance Rider
2. Universal Life Products
1. Contemplation of Death Rider
2. Waiver of Monthly Deduction Rider
3. Guaranteed Death Benefit Rider
Page 16 of 25
o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC.
APPENDIX B
Processing Fees
1. Single Premium and/or Flexible Deferred Annuities
a. Acquisition Fees: A one time o fee per application received. The
fee is not reversed for Not Takens ("NTO's").
b. Maintenance: Fee per policy inforce per year to be paid
weekly as follows: o annual fee for existing
annuity products referenced in APPENDIX A,
c. Terminations: One time fee of o to be paid at time of
surrender, lapse, election of a settlement
option, maturity, or death claim of each policy.
2. Single Premium Whole Life
a. Acquisition Fees: One time fee of o per application received. Paid
when the policy is put on the system. The fee is
not reversed for NTO's.
b. Maintenance: o annual fee per policy inforce per year to be
paid weekly.
c. Terminations: One time fee of o to be paid at time of
surrender, lapse, election of a settlement
option, maturity, or death claim of each policy.
d. Underwriting Support: o per single life.
3. Periodic Pay Whole Life Products ---- Single & Joint Issues
a. Acquisition Fees: One time fee of o per single life application
received, or o per joint life application
received. Paid when the policy is put on the
system. Not reversed for NTO's.
b. Maintenance: o annual fee per policy per year to be paid
weekly on Legacy Master Whole Life. o annual fee
per policy per year to be paid weekly for all
other policies.
c. Terminations: One time fee of o to be paid at time of
surrender, lapse, election of a settlement
option, maturity, or death claim of each policy.
d. Underwriting Support: o per single life; o per joint life.
4. Universal Life - Single and Joint issues:
Page 17 of 25
o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC.
a. Acquisition Fees: One time fee of o per single life application
received, or o per joint application received.
Paid when the policy is put on the system. Not
reversed for NTO's.
b. Maintenance: o annual fee per policy per year to be paid
weekly.
c. Terminations: One time fee of o to be paid at time of
surrender, lapse, election of a settlement
option, maturity, or death claim of each policy.
d. Underwriting Support: o per single life; o per joint life.
5. Producer Appointment with American National: o per appointment.
6. Out-Of-Pocket Expenses
a. In addition to the fees set forth above, LMG will forward to American
National on a monthly basis an invoice for the out of pocket expenses
incurred the month prior. American National will reimburse LMG within
twenty (20) days of receipt of such invoice. If LMG does not receive
reimbursement within twenty (20) days, American National will pay LMG
interest on the outstanding balance due. Such interest shall be at the
annualized rate of o above the current thirty-year Treasury Bond
yield. Notwithstanding the foregoing, in no event shall the interest
rate be lower than that of LMG's current monthly investment earnings
rate, as evidenced by written documentation. Furthermore, in the event
that American National seeks elucidation for any out of pocket
expense, American National will submit to LMG a written request
specifying clarification within fifteen (15) days. If American
National has provided such notification to LMG, American National is
no longer obligated to pay interest on the specified disputed amounts.
In the event that the disputed amount on the original invoice is later
determined to have been accurate, American National will pay LMG any
applicable interest retroactively. Out-of-pocket expenses are those
expenditures for the items such as those listed below and any other
items agreed to in writing by LMG and American National:
1) Cost of any lines installed for communication between the parties
to this Agreement. Costs of telecommunication lines and equipment
installed to provide primary and back-up support for on-line
access to LMG's system.
2) Cost involved with off-site storage for American National
records, documents, correspondence, and other items, or cost of
shipping those items to American National.
3) Cost of inspections and exams required for underwriting and
underwriting fees, if performed by outside firm. If information
is shared with other companies, the costs will be shared equally
by the companies. Cost of inspections where agreed to by American
National and LMG for the agent appointment process.
Page 18 of 25
o CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC.
4) Costs associated with agent appointment, including but not
limited to, agent background investigations and agent credit
reporting.
5) Expenses incurred to issue and maintain policies and
certificates, including draft books, and check stock.
b. American National will be responsible for cash management of this
disbursement account and LMG agrees to provide American National
records and information to properly perform this function.
7. LIMRA CAP Survey Responses
American National will pay LMG a flat fee of o per reply that LMG prepares
in response to LIMRA CAP survey answers.
8. Payment of Processing Fees.
American National will pay LMG the processing fees from 1, 2, 3, 4, and 5,
above weekly by wire transfer on the same business day or the next business
day of receipt of documentation of units received. Out of Pocket Expenses
will be paid as set forth in Section 6 above.
9. Systems Time and Material Rates*
Under certain conditions set forth in this Agreement, American National
will reimburse LMG for the costs of systems modifications or systems
support at the following rates:
Chief Information Officer o per hour
Information Technology Director o per hour
Senior Programmer Analyst o per hour
Programmer Analyst o per hour
Senior Business Analyst o per hour
Project Manager o per hour
Business Analyst o per hour
Quality Assurance Analyst o per hour
* such rates shall be increased o% annually, commencing on the anniversary
of the execution date of this Agreement.
Page 19 of 25
APPENDIX C
SERVICES TO BE PROVIDED
These services are to be performed subject to guidelines and directions of
American National within applicable law and regulation and reasonable industry
standards and including all expenses and fees related thereto.
1. Direct Services:
a. Clerical processing of Producer appointments with state departments of
insurance
b. Clerical underwriting support including the following: Collecting and
interpreting pertinent underwriting requirements to assist American
National in the underwriting and issue process. LMG will assess an
applicant's anticipated mortality to determine if the applicant may
qualify for a life insurance policy. LMG will commence gathering the
data required for a file, including interpretation of information in
the application to determine when an Attending Physician's Statement,
Exam, Inspection, or other information will be required to make an
accurate underwriting decision. LMG will determine which requirements
will be necessary due to the information developed on the application.
In addition, LMG will determine, in its opinion, which applicants are
not likely to be insurable. Notwithstanding the foregoing, American
National retains the ultimate underwriting authority to approve or
disapprove policies of life insurance issued by American National. c.
Processing and reviewing of applications and premium transfers
d. Contract issue
e. Policyholder service
f. Maintenance of policyholder records
g. Data processing services
h. Producer compensation
i. Premium accounting
j. Billing of life insurance premiums
k. Annual tax reporting to policyholders and vendors except for tax
reporting required on death claims or election of settlement options
l. Collection of Debit Balances
m. Administration of reinsurance on LMG policies; excluding the remission
of premium to the appropriate reinsurance companies.
2. Other Services:
a. Accounting Services
1) Maintenance of general ledger system
2) Reconciliation of all bank statements and cash accounts
3) Furnishing to American National of all applicable data necessary
for preparation of American National NAIC Convention Blank.
4) Furnishing to American National of all applicable data necessary
for preparation of the American National corporate tax return.
Page 20 of 25
5) Furnishing to American National of all applicable data necessary
for preparation of the American National GAAP financial
statements.
6) Furnishing to American National of all applicable data necessary
for the preparation of the American National unclaimed property
reports.
7) Furnishing to American National of monthly datasets of all
applicable data necessary for the preparation of the American
National premium tax returns and payments.
8) Weekly backup tapes
b. Actuarial Services
1) LMG will assist and provide actuarial support to American
National. LMG's responsibilities will vary by each product
jointly developed by LMG and American National and may include:
o Provide initial product specification
o Provide competitive analysis for the product
o Define pricing assumptions
o Provide any necessary support for pricing assumptions
o Share deterministic pricing results
o Perform sensitivity analysis
o Provide final product specifications
o Define actuarial memorandum
o Provide actuarial field support
o Monitor actuarial assumptions
o Assist in ongoing profit/pricing management of the business
2) LMG will draft initial policy forms and applications to be used
for each product jointly developed by LMG and American National.
LMG will assist American National in the completion and
preparation of filing such forms. LMG's responsibilities will
vary with each product jointly developed by LMG and American
National.
3. Collection and Disposition of Funds:
3.1 All insurance charges or premiums collected by LMG on behalf of
American National, and return premiums received from American
National, shall be held by LMG in a fiduciary capacity and will not be
used as general operating funds of LMG. Such funds shall, within two
(2) business days, be remitted to the person or persons entitled to
them or shall be deposited, within two (2) business days, into a
Premium Fiduciary Account established and maintained by American
National in a federally or state insured financial institution,
separate and apart from any funds belonging to LMG or third parties.
3.2 This Premium Fiduciary Account will at all times have a balance equal
to contributions plus any interest earned less authorized
disbursements by American National. If LMG is authorized to draw
checks on the Premium Fiduciary Account this will clearly be indicated
on their face. LMG may retain float with prior written agreement of
American National.
Page 21 of 25
3.3 LMG may not pay any claim by withdrawals from the aforementioned
Premium Fiduciary Account. Withdrawals from the Premium Fiduciary
Account shall be made as provided in this written agreement between
LMG and American National for any of the following: a) Remittance to
American National, if so entitled to such remittance; b) Deposit in an
account maintained in the name of American National; c) Transfer to
and deposit in a claims-paying account, with claims to be paid as
provided by American National.
3.4 LMG will maintain in a fiduciary capacity, a Disbursement Account
where American National will fund the balance and LMG is authorized to
make the following disbursements:
a) Remittance of return premiums to the person or persons entitled
thereto.
b) Any policy/certificate holder disbursements, including
withdrawals, loans, and surrenders.
c) Payment of underwriting expenses
d) Payment of weekly commissions to LMG
LMG shall not disburse funds from the disbursement account for
any other reason without written authorization from American
National.
3.5 If LMG pays claims, it will be from funds collected on behalf of
American National and shall be paid only on drafts of, and as
authorized by, American National. In the event that LMG received
monies to pay claims on behalf of American National, such funds will
be held in a fiduciary capacity. No deposits will be made into or
disbursements made from this fiduciary account except for claims and
claim adjustment expenses. This fiduciary account will at all times
have a balance equal to the amount deposited less claims and claims
adjustment expenses paid.
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4. Settlements / Reports:
a. Within six (6) business days of the end of each calendar month, LMG
shall provide service reports to American National, including but not
limited to, the following items:
1) General ledger report, also referred to as the "Extract File"
(seess.4(b)(2) of APPENDIX C)
2) Premium and commission reports
3) Benefit reports
4) Statutory reserve policy information
5) FAS 97 detail policy information
6) Reinsurance reports
7) Policy exhibit information
b. LMG shall provide to American National, including but not limited to,
the following items:
1) Daily, Cash control reports, beginning the first day of business
2) Weekly, Transmission of general ledger data (also referred to as
the "Extract File"), beginning on a mutually agreeable date after
the volume of business reaches a level determined by American
National to warrant daily updates
3) Monthly, the following items:
a) Extract file
b) Commission accrual for the end of the month
c) Complete trial balance for all accounts
d) Check history reports
e) Updated check inventory log
f) Annuitization log
g) American National check disbursement file and void reports
c. Weekly (Monday, for the previous week's business activity), LMG shall
provide to American National, including but not limited to, the
following items:
1) Copies of check registers, check vouchers, supporting
documentation for check and journal entries with support.
d. Within twenty (20) business days of the end of each calendar month,
LMG shall provide to American National, including but not limited to,
the following items:
1) Copies bank and suspense reconciliations
2) All supplemental financial reporting information as requested by
American National
3) Copies of tax withholding to policyholders
4) Transmission of issued check information.
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5. Compensation Not to be Contingent
5.1 This Administrative Agreement shall not provide for compensation,
commissions, fees, or charges which are contingent upon savings
effected in the adjustment, settlement, and payment of losses (the
loss ratio) covered by American National's obligations. In the event
that LMG adjusts or settles claims on behalf of American National,
such compensation shall in no way be contingent on claims experience.
5.2 This provision does not prevent the compensation of LMG from being
based on premiums or charges collected or the number of claims paid or
processed or performance-based compensation for providing auditing
services. LMG will not receive any administrative compensation except
as expressly set forth in this Agreement between LMG and American
National.
Page 24 of 25
APPENDIX D
SCHEDULE OF AUTHORIZED PERSONNEL
REPRESENTING AMERICAN NATIONAL
Name Title Function
Bruce Pavelka Vice President Administration
Richard Crawford Vice President Reporting/Accounting
& Assistant Controller
Frank Broll Vice President Actuarial Valuation
Rex Hemme Vice President Product and Policy Form
Development
Kelly Wainscott Vice President, Independent Marketing
David Behrens Executive Vice President, Independent Marketing
REPRESENTING LMG
Name Title Function
Preston Pitts President Overall
Steven Taylor Chief Financial Officer Finance
Lynda Regan Chief Executive Officer Overall
Don Dady Vice President of Marketing
Marketing
Bill Hrabik Chief Operations Officer Operations and Compliance
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