ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement (this "Agreement") is made on this
the 28th day of September, 1994, by and between ARM Financial Group, Inc., a
Delaware corporation ("Provider") and National Integrity Life Insurance Company,
a New York life insurance company ("Company").
WHEREAS, Provider's management has experience in life insurance business
operations; and
WHEREAS, Company desires Provider to perform certain administrative and
special services (collectively, "services") for Company in its business
operations and desires further to make use in its day-to-day operations of
certain property, equipment and facilities (collectively, "facilities") of
Provider as Company may request; and
WHEREAS, Company has executed a Commitment Agreement (the "Commitment
Agreement") to the New York Insurance Department dated October 29, 1993
regarding the operations of Company, which contemplates agreements for services;
and
WHEREAS, Provider and Company contemplate that the availability of services
and facilities will achieve certain operating efficiencies and improve services
provided by Company to its policyholders; and
WHEREAS, Provider and Company wish to assure that all charges for services
and the use of facilities incurred hereunder are reasonable and in accordance
with the requirements of the New York Insurance Law and Regulations promulgated
thereunder, reflect actual costs and are arrived at in a fair and equitable
manner; and
WHEREAS, Provider and Company wish to identify the services to be rendered
to Company by Provider and the facilities to be used by Company and to provide a
method of fixing the bases for determining the charges to be made to Company;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
set forth herein, and intending to be legally bound hereby, Provider and Company
agree as follows:
1. PERFORMANCE OF SERVICES AND USE OF FACILITIES. Subject to the
terms, conditions and limitations of this Agreement, Provider agrees to perform
such services for Company as Company determines to be reasonably necessary in
the conduct of its business operations and as set forth in Section Agreements
Agreement.
Subject to the terms, conditions and limitations of this Agreement,
Provider agrees to make available to Company such of its facilities as Company
may determine to be reasonably necessary in the conduct of Company's business
operations, including, without limitation, data processing equipment, office
facilities (whether owned or leased) and communications equipment.
(a) CAPACITY OF PERSONNEL AND STATUS OF FACILITIES. Whenever Provider
utilizes its personnel to perform services for Company pursuant to this
Agreement, such personnel shall at all times remain employees of Provider
subject solely to its direction and control, and Provider shall alone retain
full liability for their compensation, employee benefits, payroll deductions and
legally required employer contributions and withholding tax obligations.
No facility of Provider used in performing services for or subject to
use by Company pursuant to this Agreement shall be deemed to be transferred,
assigned, conveyed or leased by performance or use.
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(b) EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing any
services hereunder which require the exercise of judgment by Provider, Provider
shall perform such services in accordance with standards and guidelines
established by Company and communicated in writing to Provider.
(c) CONTROL. The performance of services by Provider for Company
pursuant to this Agreement shall in no way impair the absolute control of the
business and operations of Company by its Board of Directors. Provider shall act
hereunder so as to assure the separate operating and corporate identity of
Company.
2. SERVICES. It is understood that Company has certain obligations under
the Commitment Agreement and it is agreed that, notwithstanding any other
provisions of this Agreement to the contrary, Provider shall not act or refrain
from acting in any manner to cause Company to breach said obligations. The
performance of Provider under the Agreement with respect to the business and
operations of Company shall at all times be subject to the direction and control
of the Board of Directors of Company.
Subject to the foregoing and to the terms, conditions and limitations of
this Agreement, Provider shall provide on behalf of Company the services set
forth below.
(a) ACCOUNTING, TAX AND AUDITING. Under the general supervision of the
Board of Directors of Company, and subject to the initiation of all vouchers and
accounting records and/or transactions by Company and the verification by
Company that original financial data and accounting transactions have been
accurately prepared and reflected in Company's books of account, bank
reconciliations and reconciliations of EDP print-outs, Provider shall provide
Company with the following accounting services: preparation of accounting
records and the processing of
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accounting transactions, the preparation of financial statements and reports
including annual statements on both statutory and GAAP bases, the preparation of
tax returns, and the preparation of additional financial reports used by Company
in the operations of its business. Provider shall also provide assistance with
respect to tax and auditing matters.
(b) UNDERWRITING. Until October 29, 1998, and subject to underwriting
standards established by Company and communicated in writing to Provider and the
retention by Company of all final underwriting authority, Provider shall provide
Company with the following underwriting services: review of policy applications
and communication of recommendations resulting therefrom to Company and
preparation of actual policies for delivery by Company to insureds.
(c) CLAIMS. Until October 29, 1998 and subject to claims settlement
procedures established by Company and communicated in writing to Provider and
the retention by Company of final approval authority for all claims, Provider
shall provide to Company the following services in connection with the
administration of claims: verification that the applicable policy was in force,
review and investigation of claims and claims adjustment.
(d) MARKETING AND PRODUCT DEVELOPMENT. Until October 29, 1998,
Provider shall provide Company with the following marketing and product
development services: negotiation of arrangements with financial institutions,
broker-dealers and independent general agents, subject to final approval by
Company, and the monitoring and administration of such arrangements;
assistance in the development of sales promotion programs and literature;
and assistance in the development of new products and programs.
(e) FUNCTIONAL SUPPORT SERVICES. Provider will provide Company with
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the following support services: (i) actuarial services and (ii)
telecommunications services and electronic data processing services, including
software programming and documentation and hardware utilization.
(f) PAYROLL FUNCTIONS. Provider shall provide Company with the
following payroll services: (i) maintenance of employer records concerning
benefit and tax data; (ii) computation of amounts to be withheld for benefits
and taxes; (iii) production of employee deposit advices or paychecks; and (iv)
filing of payroll tax returns with appropriate taxing authority.
(g) PERSONNEL FUNCTIONS. Provider will provide Company with the
following personnel services: the maintenance of employee files; assistance in
the hiring and training of personnel; recommendation of levels of compensation;
assistance in the compliance with federal, state and local employment laws; and
the administration of such employee benefits as group insurance plans, savings
and incentive compensation plans and vacation plans.
(h) ADMINISTRATIVE SUPPORT SERVICES. Provider will provide Company
with legal services and assistance with regulatory compliance matters.
3. CHARGES. Company agrees to reimburse Provider for services and
facilities provided by Provider to Company pursuant to this Agreement. The
charge to Company for such services and facilities shall include all direct and
directly allocable expenses, reasonably and equitably determined to be
attributable to Company by Provider, plus a reasonable charge for direct
overhead, the amount of such charge for overhead to be agreed upon by the
parties from time to time.
The bases for determining such charges shall be consistent with New York
Insurance Department Regulation 33 and shall be modified and adjusted by mutual
agreement where necessary
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or appropriate to reflect fairly and equitably the actual incidence of cost
incurred by Provider on behalf of Company.
Cost analyses will be made at least annually by Provider to determine, as
closely as possible, the actual cost of services rendered and facilities made
available to Company hereunder. Provider shall forward to Company the
information developed by these analyses, and such information shall be used to
develop bases for the future distribution of expenses to reflect the actual
incidence of cost incurred by Provider on behalf of Company.
Provider's annual determination of bases for charges hereunder shall be
presented to Company, and if Company objects to any such determination, it shall
so advise Provider within thirty (30) days of receipt of notice of said
determination. Unless the parties can reconcile any such objection, they shall
submit such objection to Ernst & Young, or another firm of independent certified
public accountants mutually acceptable to the parties, which shall determine the
charges properly allocable to Company and shall, within a reasonable time,
submit such determination, together with the bases therefor, in writing to
Provider and Company whereupon such determination shall be binding. The expenses
of such a determination by the independent certified public accountants shall be
borne equally by Provider and Company.
4. PAYMENT. Provider shall submit to Company within thirty (30) days after
the end of each month a written statement of the amount estimated to be owed by
Company for services and the use of facilities pursuant to this Agreement for
that month, and Company shall pay to Provider within five (5) days following
receipt of such written statement the amount set forth in the statement. Within
thirty (30) days after the end of each calendar quarter, Provider will submit to
Company a detailed written statement of the charges due from Company to Provider
in the preceding calendar
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quarter, including charges not included in any previous statements, and any
balance payable or to be refunded as shown in such statement shall be paid or
refunded within fifteen (15) days following receipt of such written statement by
Company.
5. ACCOUNTING RECORDS AND DOCUMENTS. Provider shall be responsible for
maintaining at Company's home office in New York, New York full and accurate
accounts and records of all services rendered and facilities used pursuant to
this Agreement and such additional information as Company may reasonably
request for purposes of its internal bookkeeping and accounting operations.
Provider shall also maintain such accounts and records insofar as they pertain
to the computation of charges hereunder available at its principal offices for
audit, inspection and copying by Company and persons authorized by it or any
governmental agency having jurisdiction over Company during all reasonable
business hours.
With respect to accounting and statistical records prepared by Provider by
reason of its performance under this Agreement, such records shall be delivered
to Company within thirty (30) days from the end of the month to which the
records pertain.
6. OTHER RECORDS AND DOCUMENTS. All other books, records, and files
established and maintained by Provider by reason of its performance of its
obligations under this Agreement which, absent this Agreement, would have been
held by Company, shall be deemed the property of Company, and shall be subject
to examination at all times by Company and persons authorized by it or any
governmental agency having jurisdiction over Company, and the originals or
copies thereof shall be delivered to Company not less frequently than quarterly.
With respect to original documents other than those provided for in Section
5 hereof which
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would otherwise be held by Company and which may be obtained by Provider in
performing under this Agreement, Provider shall deliver such documents to
Company within thirty (30) days of their receipt by Provider except where
continued custody of such original documents is necessary to perform hereunder.
7. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be deemed
to grant Provider an exclusive right to provide services to Company, and
Company retains the right to contract with any third party, affiliated or
unaffiliated, for the performance of services or for the use of facilities as
are available to or have been requested by Company pursuant to this Agreement.
Nothing herein shall be deemed to prohibit Provider from providing any or all
of the services to be provided to Company hereunder to other persons, whether
or not affiliated with Provider.
8. CONTACT PERSON(S). Company and Provider each shall appoint one or more
individuals who shall serve as contact person(s) for the purpose of carrying out
this Agreement. Such contact person(s) shall be authorized to act on behalf of
their respective parties as to the matters pertaining to this Agreement.
Effective upon execution of this Agreement, the initial contact person(s) shall
be those set forth in Appendix A. Each party shall notify the other, in writing,
as to the name, address and telephone number of any replacement for any such
designated contact person or additional contact persons.
9. TERMINATION AND MODIFICATION. This Agreement shall remain in effect
until terminated by either Provider or Company upon giving thirty (30) days or
more advance written notice, provided that electronic data processing services
shall not be terminated by either party until one hundred and eighty (180) days
or more advance written notice of termination. Subject
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to the terms (including any limitations and restrictions) of any applicable
software or hardware licensing agreement then in effect between Provider and any
licensor, Provider shall, upon termination of this Agreement grant to Company a
perpetual license, without payment of any fee, in any electronic data processing
software developed or used by Provider in connection with the services provided
to Company hereunder if such software is not commercially available and is
necessary, in Company's reasonable judgment, for Company to perform subsequent
to the termination of the services provided by Provider hereunder. Upon
termination, Provider shall promptly deliver to Company all books and records
that are, or are deemed by this Agreement to be, the property of Company.
10. INDEPENDENT CONTRACTOR. In rendering its services hereunder, Provider
shall act as an independent contractor, and any duties of Provider arising
hereunder shall be owed exclusively to Company.
11. FORCE MAJEURE. If any cause or condition shall occur beyond the control
of Provider which wholly or partially prevents the performance by Provider of
its obligations hereunder, including, without limitation, any act of God or the
public enemy, fire, explosion, flood, earthquake, war, riot, adverse weather
conditions, breakdowns in equipment or facilities, strike, slowdown, work
stoppage or other labor trouble or delays in receiving or failures to receive
any permits, licenses or approvals from any governmental authority, then
Provider shall be excused to the extent made necessary by such cause or
condition and during the continuance thereof, and Provider shall incur no
liability by reason of its failure to perform the obligations so excused. Such
cause or condition shall not, however, relieve Company of the obligation to pay
to Provider fees and charges due to Provider for services rendered and expenses
incurred hereunder prior to such
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stoppage.
12. SETTLEMENT ON TERMINATION. No later than ninety (90) days after the
effective date of the termination of this Agreement, Provider shall deliver to
Company a detailed written statement for all charges incurred and not included
in any previous statement to the effective date of termination. The amount owed
or to be refunded hereunder shall be due and payable within thirty (30) days of
receipt of such statement.
13. ASSIGNMENT. This Agreement and any rights pursuant hereto shall be
assignable only upon the written consent of the parties. Except as and to the
extent specifically provided in this Agreement, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto, or their respective legal successors, any rights, remedies, obligations
or liabilities, or to relieve any person other than the parties hereto, or their
respective legal successors, from any obligations or liabilities that would
otherwise be applicable. The representations, warranties, covenants and
agreements contained in this Agreement shall be binding upon, extend to and
inure to the benefit of the parties hereto, their, and each of their, successors
and assigns respectively.
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed entirely within that State.
15. ARBITRATION. In the event of any irreconcilable dispute between the
parties in connection with this Agreement, the dispute shall be submitted to
arbitration. Either party may submit the dispute to arbitration by notifying the
other of his submission and naming its arbitrator. The other party shall name
its arbitrator within 30 days after receiving such notice. The arbitrators
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shall choose an umpire through the nomination of three persons by each
arbitrator, the declination by each arbitrator of two of the nominees named by
the other arbitrator and the drawing of lots to choose between the two
arbitrators within thirty days after the arbitrators and umpire, if any, are
chosen. The arbitrators and umpire shall be disinterested insurance company
executives. The arbitrators are relieved from judicial formalities and may
refrain from following strict rules of evidence. The decisions of the
arbitrators and umpire, or the majority of them, shall be final and binding upon
the parties. Each party shall bear the expense of its own arbitrator and
one-half the other expenses of the arbitration proceedings. Any arbitration
shall take place in New York, New York, unless otherwise mutually agreed.
16. NOTICE. All notices, statements or requests provided for hereunder
shall be deemed to have been duly given when delivered by hand to an officer of
the other party, or when deposited with the U.S. Postal Service, as first class
certified or registered mail, postage prepaid, overnight courier service, telex
or telecopier, addressed
(a) If to Provider to:
ARM Financial Group, Inc.
239 South Fifth Street, 12th Floor
Louisville, KY 40202-3271
Attention: Robert H. Scott
(b) If to Company to:
National Integrity Life Insurance Company
551 Madison Avenue
New York, New York 10019
Attention: Josephine Lanzara
or to such other persons or places as each party may from time to time designate
by written notice
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sent as aforesaid.
17. ENTIRE AGREEMENT. This Agreement, together with such amendments as may
from time to time be executed in writing by the parties, constitutes the entire
agreement and understanding between the parties in respect of the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
18. SECTION HEADINGS. Section headings contained herein are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
19. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate by their respective officers duly authorized so to do, as of the
date and year first above written.
ARM FINANCIAL GROUP, INC.
By: /s/ John Franco
-------------------------------
Name: John Franco
Title: Chief Executive Officer
By: /s/ Martin H. Ruby
-------------------------------
Name: Martin H. Ruby
Title: Co-Chief Executive Officer
NATIONAL INTEGRITY LIFE INSURANCE
COMPANY
By: /s/ David E. Ferguson
-------------------------------
Name: David E. Ferguson
Title: President
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APPENDIX A
CONTACT PERSON(S) FOR PROVIDER
Robert H. Scott
ARM Financial Group, Inc.
239 South Fifth Street
Twelfth Floor
Louisville, Kentucky 40202-3271
CONTACT PERSON(S) FOR COMPANY
Josephine Lanzara
National Integrity Life Insurance Company
551 Madison Avenue
New York, New York 10019
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