(9) Form of Administrative Agreement
PRODUCT DEVELOPMENT
AND
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT, effective this 1st day of November, 1997, by and between First
Allmerica Financial Life Insurance Company ("Allmerica Financial"), a life
insurance company organized and existing under the laws of the Commonwealth of
Massachusetts, with a principal place of business at 440 Lincoln Street,
Worcester, Massachusetts 01653 and Transamerica Occidental Life Insurance
Company ("Transamerica"), a life insurance company organized and existing under
the laws of the State of California, with a principal place of business at 1150
South Olive Street, Los Angeles, California 90015.
WHEREAS, Allmerica Financial, directly and through its affiliate, Allmerica
Financial Life Insurance and Annuity Company ("AFLIAC"), has developed and is
marketing various variable universal life insurance policy forms; and
WHEREAS, through such development and marketing efforts Allmerica Financial has
acquired significant expertise in developing, designing and servicing flexible
premium variable universal life insurance products; and
WHEREAS, through such development and marketing efforts Allmerica Financial has
also acquired significant expertise in obtaining necessary state regulatory
approvals for the sale of variable universal life insurance policies; and
WHEREAS, Transamerica and Allmerica Financial have agreed that Allmerica
Financial shall provide assistance to Transamerica in developing and bringing to
market a flexible premium variable universal life insurance policy (the
"Policy", collectively the "Policies") and certain related forms, as described
herein; and
WHEREAS, Transamerica and Allmerica Financial have also agreed that Allmerica
Financial shall contract with Transamerica to provide, on behalf of
Transamerica, Policy underwriting, claims, and Policy and other administrative
services;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
PRODUCT DEVELOPMENT
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1.01 Development of Policy Forms. Prior to the effective date of this
Agreement, Transamerica and Allmerica Financial jointly drafted the
standard Policy, Policy applications and Policy riders, which are
referred to herein collectively as the "Policy Forms". Such Policy
Forms are based on the AFLIAC Policy Forms listed on Schedule 1.01
hereto. Transamerica agrees that it approved the final drafts of the
standard Policy Forms prior to the effective date of this Agreement.
When required, Allmerica Financial shall appropriately modify the
standard Policy Forms for each jurisdiction in which the Policy Forms
will be offered for sale. Such modifications shall represent Allmerica
Financial's best judgment as to what changes to the Policy Forms will
be necessary in order to secure insurance department approval. Because
the Policy Forms include numerous changes requested by Transamerica
which differ from the original AFLIAC Policy Forms which are listed on
Schedule 1.01 hereto, it is understood and agreed by Transamerica that
Allmerica Financial makes no representation that the Policy Forms will
be approved for sale by any particular jurisdiction.
1.02 Policy Form Filings and Submission Dates. All insurance department
filings will be made by Allmerica Financial on behalf of Transamerica.
It is the intent of the parties that the Policy Forms will be filed
with all states of the U.S. except New York and also with the District
of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands and that
Transamerica will be responsible for all insurance department filing
fees, although such fees will be advanced by Allmerica Financial.
Transamerica agrees to reimburse Allmerica Financial for the amount of
any advanced filing fees within 30 days of receipt of a written request
for reimbursement. Transamerica understands and agrees that late
payments of such reimbursements shall be assessed a late payment charge
at the rate of 12% per annum.
Transamerica acknowledges that prior to the effective date of this
Agreement Allmerica delivered and Transamerica received and approved
the following:
(i) The Policy Forms in final print, the Actuarial
Memorandum and all related documents for filing with
the California Insurance Department,
(ii) Sample annual and quarterly statements and
illustration formats, and
(iii) The basic submission letter.
The parties shall comply with the following time frames and delivery
dates:
(a) Not later than the effective date of this Agreement,
Transamerica shall provide Allmerica Financial with the
following:
(i) Final product specifications for the Policy Forms.
The final product specifications are listed on
Schedule 1.02 hereto. The final product
specifications highlight the specifications which
vary from the corresponding AFLIAC Policy Forms,
(ii) A draft policy prospectus, and
(iii) Any other information deemed necessary by Allmerica
Financial for the filing of the Policy Forms which is
not to be prepared by Allmerica Financial.
(b) If Transamerica furnishes the materials described in
paragraph (a) to Allmerica Financial not
later than November 1, 1997, Allmerica Financial agrees
(i) to submit the Policy Forms to all
jurisdictions that do not require California's prior
approval prior to December 1, 1997 and
(ii) to submit the Policy Forms to all jurisdictions
requiring California approval within 10
business days from the date Allmerica Financial
receives notification of California's
approval. To expedite the Policy Form submission
process, Transamerica agrees to grant a
limited Power of Attorney to appropriate Allmerica
Financial personnel to enable them to sign
letters and other correspondence on behalf of Transamerica.
Notwithstanding the above, if Transamerica fails to deliver
the materials described in paragraph (a) by the agreed upon
delivery date or fails to obtain any necessary approvals by
California of the separate account or accounts offered as
funding choices under the Policy, Allmerica Financial cannot
guarantee insurance department submission by the agreed upon
deadlines. However, in the event of any such delay, Allmerica
Financial does agree to make such submissions within 30 days
following receipt of all necessary approvals and other
materials.
1.03 Development and Filing of Policy Prospectus and Registration Statement;
Separate Account State Regulatory Approvals. The parties understand and
agree that the Policy Prospectus and `40 Act Registration Statement
development, printing and filing with the SEC will be the
responsibility of Transamerica, which will also be responsible for all
SEC filing fees. Further, the parties understand and agree that
Transamerica is responsible for obtaining any necessary California
Insurance Department or other state regulatory approvals of the
separate account or accounts that will be offered as funding choices
under the Policy.
1.04 State Submission Follow-Up Assistance. After filing the insurance
department Policy Form submissions contemplated by this Agreement,
Allmerica Financial shall provide all necessary follow-up to insurance
department correspondence in a prompt manner in order to secure
insurance department approvals on behalf of Transamerica. However,
Allmerica Financial makes no representation that Policy Form approvals
will be obtained from all jurisdictions. Allmerica Financial
understands and agrees that Transamerica must approve all material
changes to Policy Forms requested or required by insurance departments.
Allmerica Financial agrees to provide Transamerica weekly written
status reports of the approval status of each state filing.
1.05 Product Development Compensation. For the services described in
Sections 1.01 through 1.04 of this Agreement, Transamerica agrees to
pay Allmerica Financial $840,000 for assistance in developing and
bringing to market the Policy Forms. The $840,000 fee shall be paid to
Allmerica Financial, as follows:
(i) $100,000 shall be paid to Allmerica Financial within five (5)
business days following the date of execution of this
Agreement;
(ii) $100,000 shall be paid to Allmerica Financial within ten (10)
business days after the date of final approval by Transamerica
of the Policy Forms;
(iii) $100,000 shall be paid to Allmerica Financial within ten (10)
business days of notice to Transamerica of Policy approval in
twenty (20) states; and
(iv) the remainder, $540,000, shall be paid by Transamerica in
monthly installments. Each monthly
installment shall be equal to $1.50 multiplied by the
number of Policies in force during the
month, including any Policies surrendered during the month
Such monthly installments shall
only be paid until Allmerica Financial has been paid its
remaining product development fee.
Except as provided below, if this Agreement is terminated for
any reason, including termination
by Transamerica for cause in accordance with Section
11.03 or 11.05, prior to Allmerica
Financial having been paid its total product development
fee of $840,000, Transamerica agrees
to pay the balance in one sum within 30 days following the
date of termination.
Notwithstanding the foregoing, Transamerica reserves the right to
withhold amounts payable to Allmerica Financial pursuant to clause (iv)
above without the payment of any late payment charge if, in good faith,
Transamerica concludes that Allmerica Financial has materially breached
its product development duties and responsibilities, as set forth in
Sections 1.01 through 1.04 hereof. Additionally, Transamerica reserves
the right, to the extent permitted by law, to offset amounts payable to
Allmerica Financial pursuant to clause (iv) above against any damages
payable to Transamerica as a result of a material breach of the
Agreement by Allmerica Financial resulting in Transamerica's
terminating the Agreement for cause pursuant to Section 11.03 or 11.05
hereof.
Transamerica shall not withhold or offset any amounts otherwise payable
to Allmerica Financial under this Section 1.05 unless and until (i)
Transamerica provides Allmerica Financial with written notice
describing in detail the basis for the withholding or offset, such
notice to be provided before the payment is due; (ii) the parties use
their best efforts to resolve any dispute that formed the basis for the
withholding or offset; (iii) in the event the dispute is not resolved
within 90 days, Transamerica immediately pays all amounts due under
this Section 1.05, regardless of the dispute, into an escrow account,
where such amounts shall remain until the dispute is resolved; and (iv)
the dispute is then submitted to binding arbitration, as provided in
Section 12.18 hereof.
Transamerica understands and agrees that, except as provided above,
late payments shall be assessed a late payment charge at the rate of
12% per annum.
1.06 Ownership of Policy Forms. Allmerica Financial hereby transfers all of
its right, title and interest in the Policy Forms, including the
actuarial basis for the Policy Forms, it has developed on behalf of
Transamerica, to Transamerica.
Allmerica Financial warrants that it is the sole developer of the
Policy Forms and, except to the extent that the Policy Forms utilize
Transamerica's logo or Policy provisions or other material provided by
Transamerica, Allmerica Financial warrants that neither the Policy
Forms nor any of their elements will violate or infringe upon any
patent, copyright, trade secret or other property right of any other
person. This warranty shall survive termination of this Agreement.
1.07 New Products, Product Enhancements, etc. At any time and from time to
time while this Agreement remains in force, Transamerica may request
that Allmerica Financial enhance, modify or otherwise change the Policy
Forms ("Product Changes") or develop new variable life insurance
products ("New Products"), including New Products to be developed for
sale in New York State. After receipt of any such request Allmerica
Financial agrees to negotiate in good faith with Transamerica the terms
and conditions (including compensation and delivery time frames) under
which Allmerica Financial shall develop and, if so requested, file with
the various insurance departments the requested Product Changes or New
Products.
Allmerica Financial agrees to promptly review any Product Change or New
Product request and to respond to such request in writing within 30
days of its receipt of the request. In negotiating with Transamerica
the terms and conditions under which Allmerica Financial will comply
with any such request, Allmerica Financial agrees to assign the same
priority to such request, if it concludes that it is able to
accommodate the request, as would be assigned in the event of a similar
Product Change or New Product request related to its own variable life
insurance business.
ARTICLE 2
SERVICES
2.01 In General. During the term of this Agreement, Allmerica Financial
shall provide Transamerica the Policy underwriting, issue, servicing,
claims, computer system and other Policy administrative services
described in detail in Schedule 2.01A, Section 2.02 and in Article 3
(collectively, the "Policy Services") in support of the Policies, the
specifications for which are listed on Schedule 1.02 hereto, subject to
the terms and conditions set forth in this Agreement. The performance
of Policy Services shall occur in three (3) phases described as
follows, in accordance with the schedule of events set forth in
Schedule 2.01B hereto. Throughout each such phase, the parties agree to
discharge their respective obligations as further specified herein. The
phases shall consist of:
(a) The Implementation Phase. This phase will consist of the
recruitment and hiring by Allmerica
--------------------------
Financial of any additional personnel deemed necessary by
Allmerica Financial to perform its
Policy Services obligations hereunder, personnel training
and the installation (including any
necessary modifications) by Allmerica Financial of the
Computer System (as defined in Section
3.01(a)) necessary for Allmerica Financial to perform Policy
Services, Computer System testing,
business workflow testing, financial control and
compliance testing and Allmerica
Financial/Transamerica systems interface testing and
implementation and delivery of the
Computer System, as described in Articles 3 and 8.
Allmerica Financial covenants and agrees that it will use its
best efforts to hire sufficient personnel and devote adequate
resources to meet the planned timetables set forth in this
Agreement.
(b) The Operational Phase. This phase will consist of
Allmerica's performance of Policy Services
-----------------------
utilizing the accepted Computer System, all Policy
Services to be accomplished in accordance
with the Service Standards listed on Schedule 2.01C
hereto. Whenever the parties have not
agreed to a Service Standard for a particular Policy
Service, Allmerica Financial agrees that
the Service shall be performed utilizing the same service
standard as is then applicable to its
own variable life insurance business, but in no event
shall such standard be less than
standards consistent with prudent administrative
practices in the life insurance industry
generally and with any applicable legal and regulatory
requirements.
If at any time Allmerica Financial's performance of a Policy
Service does not meet the applicable Service Standard listed
on Schedule 2.01C or described in the preceding paragraph,
Allmerica Financial shall use its best efforts to take
necessary curative actions to bring its performance into
compliance within thirty (30) days of Transamerica giving
Allmerica Financial written notice of its non-compliance.
Provided, however, that if the non-compliance occurs as a
result of an unanticipated event, such as an unanticipated
increase in new Policy sales above the projections set forth
below or an unanticipated level of Policy Service activity,
the parties understand and agree that even with Allmerica's
best efforts, it may not be possible to cure the problem
within such thirty (30) day period.
Projected New Policy Sales Year
$12.5 million 11/1/97 - 10/31/98
$22.0 million 11/1/98 - 10/31/99
$27.5 million 11/1/99 - 10/31/00
$35.0 million 11/1/00 - 10/31/01
(c) The Conversion Phase. Upon termination of this Agreement for any reason
(including a default --------------------- by either party), Allmerica Financial
and Transamerica shall promptly retur all Property (as defined in Section
3.01(d)) held by the other party, including, but not limited to, data, records,
files, materials and supplies and computer software. A cooperative conversion
work plan and program will be developed by Allmerica Financial and Transamerica
to accomplish the transfer of records and other Property. Each party will work
in good faith to effect the conversion and minimize the cost of business
interruption resulting from the conversion. If and to the extent requested by
Transamerica, during the Conversion Phase Allmerica Financial agrees to continue
to provide Policy Services in accordance with the Service Standards listed on
Schedule 2.01C hereto. If Policy Services are being provided during the
Conversion Phase, Transamerica's rights under the Agreement to receive such
Services and Allmerica Financial's obligations under the Agreement to provide
such Services shall continue and remain in effect on the same basis and to the
same extent as such rights and obligations existed under the Agreement prior to
its termination, including Sections 4.02, 5.02, 5.03, 5.04, 6.02, 6.05, 6.06,
6.08, 6.10, 12.08 and 12.14. If Allmerica Financial continues to provide Policy
Services during the Conversion Phase, Transamerica understands and agrees that
it will continue to compensate Allmerica Financial for such Services as provided
in Section 2.04 hereto, even if the Agreement is being terminated by
Transamerica for cause in accordance with Sections 11.03 or 11.05 hereof.
Notwithstanding Transamerica's rights under Section 2.04 to withhold or offset
amounts payable for Policy Services, Transamerica agrees not to withhold or
offset compensation or reimbursements payable for Policy Services provided by
Allmerica during the Conversion Phase.
All expenses incurred in connection with the return of
Property as a result of termination of this Agreement shall be
borne by the party requesting the termination; provided,
however, that if this Agreement is terminated by a party for
cause, then, except for each party's personnel costs and
expenses, which costs shall be borne by the party incurring
such costs and expenses, any costs or expenses incurred in
connection with any such return of Property shall be borne by
the defaulting party.
Upon completion of the Conversion Phase, each party shall
certify to the other that all records and other Property has
been returned to its owner.
2.02 Policy Underwriting. All Policy underwriting services shall be
performed by Allmerica Financial on behalf of Transamerica. Policies
shall be underwritten based upon Transamerica's underwriting criteria,
requirements and standards ("Underwriting Standards"). Transamerica's
Underwriting Standards relating to the Policies must be satisfactory to
Allmerica Financial, and cannot be changed without Allmerica
Financial's written consent, which consent shall not be unreasonably
withheld. Copies of Transamerica's underwriting manuals and other
relevant materials necessary for Allmerica Financial to perform its
Policy underwriting obligations hereunder shall be furnished to
Allmerica Financial at Transamerica's expense. Transamerica
underwriting personnel (to be specified by Transamerica) shall be made
available at Transamerica's expense to answer any questions that might
arise from Allmerica Financial's underwriters relating to
Transamerica's Underwriting Standards. Vendors used for medical
underwriting services must be acceptable to both parties. The costs of
medical underwriting shall be paid initially by Allmerica Financial.
One hundred percent of such costs shall be reimbursed by Transamerica.
Medical underwriting cost reimbursements shall be paid to Allmerica
Financial as provided in Section 2.04.
In addition to the foregoing, in the case of a proposed underwriting
declination, which declination is not clearly a medical decline
described in Transamerica's underwriting manual, Allmerica Financial
shall communicate the proposed declination to appropriate Transamerica
personnel who must agree with and approve the proposed declination
before the underwriting decision is finalized. Allmerica Financial will
communicate appropriate details of any proposed declination in
accordance with notification procedures to be jointly developed by the
parties. If no response is received within five (5) days of the
transmission, Allmerica Financial shall have the right to proceed on
the basis that Transamerica is in agreement with the decision to
decline the risk.
2.03 Policy Claims. All Policy claims processing services shall be performed
by Allmerica Financial on behalf of Transamerica. All Policy claims
shall be investigated, processed and paid in accordance with
Transamerica's claims processing rules and requirements. Copies of
Transamerica's claims manuals and other relevant materials necessary
for Allmerica Financial to perform its Policy claims investigation,
processing and payment obligations hereunder shall be furnished to
Allmerica Financial at Transamerica's expense. Transamerica claims
personnel (to be specified by Transamerica) shall be made available at
Transamerica's expense to answer any questions that might arise from
Allmerica Financial's claims personnel relating to the investigation,
processing or payment of Policy claims.
In addition to the foregoing, in the case of a decision by Allmerica
Financial that a Policy claim should be denied, Allmerica Financial
shall communicate its proposed action to appropriate Transamerica
personnel who must agree with and approve the proposed claim denial
before the claims decision is finalized. Allmerica Financial will
communicate appropriate details of any proposed Policy claim denial in
accordance with notification procedures to be jointly developed by the
parties. If no response is received within five (5) days of the
transmission, Allmerica Financial shall have the right to proceed on
the basis that Transamerica is in agreement with the decision to deny
the claim.
2.04 Compensation and Reimbursement for Policy Services. For the Policy
Services described in this Agreement, while this Agreement remains in
force Transamerica agrees to pay Allmerica the following amounts:
(a) Reimbursement of 100% of Policy medical underwriting costs,
as described in Section 2.02.
(b) A single one time per Policy issued charge of $166.67.
(c) A monthly policy charge for each policy in force during a
calendar month, including any Policies surrendered during the
month. The total monthly policy charge shall be $4.50.
Provided, however, that commencing with the third calendar
month following the month the first Policy is issued, the
minimum amount payable to Allmerica Financial under this
Subsection (c) shall be $10,000 per calendar month.
Compensation and reimbursements described in this Section 2.04 shall be
payable to Allmerica Financial on such basis and at such time or times
as shall be mutually agreeable to the parties. Provided, however, that
in no event shall compensation and reimbursements payable for a
calendar month be paid later than ten business days from the date of
receipt by Transamerica of Allmerica Financial's bill for the month.
Transamerica understands and agrees that, except as provided below,
late payments shall be assessed a late payment charge at the rate of
12% per annum.
Notwithstanding the foregoing, Transamerica reserves the right to
withhold amounts payable to Allmerica Financial pursuant to this
Section 2.04 without the payment of any late payment charge if, in good
faith, Transamerica disputes Allmerica Financial's right to receive
payment. Additionally, Transamerica reserves the right, to the extent
permitted by law, to offset amounts payable to Allmerica Financial
pursuant to this Section 2.04 against any damages payable to
Transamerica as a result of a material breach of the Agreement by
Allmerica Financial resulting in Transamerica's terminating the
Agreement for cause pursuant to Section 11.03 or 11.05 hereof.
Transamerica shall not withhold or offset any amounts otherwise payable
to Allmerica Financial pursuant to this Section 2.04 unless and until
(i) Transamerica provides Allmerica Financial with written notice
describing in detail the basis for the withholding or offset, such
notice to be provided before the payment is due; (ii) the parties use
their best efforts to resolve any dispute that formed the basis for the
withholding or offset; (iii) in the event the dispute is not resolved
within 90 days, Transamerica immediately pays all amounts then due
under this Section 2.04, regardless of the dispute, into an escrow
account, where such amounts shall remain until the dispute is resolved;
and (iv) the dispute is then submitted to binding arbitration, as
provided in Section 12.18 hereof.
ARTICLE 3
COMPUTER SYSTEM AND PROPRIETARY RIGHTS
3.01 Definitions. As used in this Agreement, the following terms shall have the
following meanings:
(a) "Administrative Computer System" or "Computer System" shall
refer to all computer systems and related materials used by
Allmerica Financial to administer the Policies, including
Allmerica Financial proprietary software and third party
licensed software comprised of computer programs and
supporting documentation, including, but not limited to,
source code, object code input and output formats, program
listings, narrative descriptions and operating instructions
and shall include the tangible media upon which the computer
programs and supporting documentation are recorded as well as
the deliverable forms and documents.
Allmerica Financial's proprietary software and third party
licensed software used to administer the Policies shall be
listed in Schedule 3.01A attached hereto. Such Schedule shall
be updated from time to time to reflect the addition or
deletion of software used in the administration of the
Policies.
The Computer System shall support, administer and process
Transamerica's business and product requirements as outlined
in Schedules 2.01A and 2.01C.
(b) "Functional Outline Documents" shall mean the detailed
description of the functions and features being added to the
Computer System and those necessary changes to be made to the
Computer System, all in support of Transamerica and which are
included in this Agreement in Schedule 3.01B.
(c) "Specifications" shall mean Functional Outline Documents,
Policy Specifications, Policyholder Documents, Variable Life
Prospectus and Policy Forms, Schedules and Reports, as
described in Schedules 1.02, 2.01C and 3.01B.
(d) "Property" shall mean all property of either party including,
but not limited to, data records, materials, supplies,
computer software, customer records, premium information,
underwriting files, customer lists, sales data, policyholder
and insured data, data on agents, agencies and distribution
systems.
3.02 Computer System. The Computer System will be and remain the Property of
Allmerica Financial and Transamerica shall have no rights or interest
in the Computer System except as provided in this Agreement.
Modifications to the Computer System developed for Transamerica that
are mutually agreed to be proprietary to Transamerica shall not be
sold, licensed, transferred, assigned or otherwise distributed without
the express written consent of Transamerica.
(a) The Computer System currently uses the LIFE-COMM III Computer
System, licensed to Allmerica Financial by CSC Continuum Inc.,
("Continuum"), as successo to Informatics, Inc., pursuant to a
License Agreement ("Licensed Software") dated October 15, 1976,
as amended, and Allmerica Financial warrants that it has the
right to use the Licensed Software to provide the Policy Services
described in this Agreement. Transamerica understands and agrees
that, at Allmerica Financial's option, the Licensed Software or
any replacement software may be replaced at any time and from
time to time, at Allmerica Financial's expense, with other
suitable software of Allmerica Financial's choice. Allmerica
Financial agrees that neither the Licensed Software nor any
replacement software shall be replaced without at least six
months' written notice to Transamerica of the pending
replacement.
In the event that Allmerica Financial decides to replace such
licensed software, Allmerica Financial agrees to test the
replacement software prior to its installation to be certain
that it will properly perform the Policy Services contemplated
by this Agreement. The testing standards and the testing
process for any such replacement software must be approved by
Transamerica.
(b) In order for Allmerica Financial to utilize the Licensed
Software to provide the Policy Services contemplated by this
Agreement, Transamerica agrees to execute a Non-Disclosure and
Non-Use Agreement with Continuum and First Allmerica, in the
form set forth in Schedule 3.02.
Allmerica Financial agrees to use its best efforts to convince
Continuum to enter into an agreement with Transamerica. Such
agreement shall provide, in substance, that should this
Agreement terminate for any reason prior to an agreed upon
date, then Continuum shall, at Transamerica's option, issue to
Transamerica, or to a Transamerica affiliate specified by
Transamerica, a license agreement to use the version of the
LIFE-COMM III Computer System then currently used to service
Transamerica's business. Any such agreement shall provide that
the fee for any such license shall not exceed the current
market price for the product. Allmerica Financial further
agrees that it shall not replace the LIFE-COMM III Computer
System with another computer system unless and until the
product vendor enters into a separate agreement with
Transamerica similar to the agreement with Continuum
contemplated by this provision.
In addition, (i) if Transamerica terminates this Agreement for
cause, as described in Section 11.03, or as a result of
Allmerica Financial's insolvency, as described in Section
11.05, or (ii) if Allmerica Financial chooses not to renew or
to terminate this Agreement (other than for cause), then, in
the case of any such event, Allmerica Financial further agrees
to grant Transamerica, at no cost to Transamerica, a license
with respect to all of the modifications and enhancements
Allmerica Financial has made to the LIFE-COMM III Computer
System, or any replacement thereof, which are necessary to
allow Transamerica to continue to provide the Policy Services
contemplated by this Agreement.
Notwithstanding the above, Transamerica understands and agrees
that in no event shall Allmerica Financial provide to
Transamerica during the term of this Agreement or any
extension thereto, access to Continuum proprietary software
source codes, technical design documentation, detailed
business or technical practices or techniques, Continuum
confidential correspondence or documentation.
Allmerica Financial agrees to identify and inventory all
confidential information of Continuum provided to Transamerica
under the terms of this Agreement and shall secure written
acknowledgment from an authorized Transamerica representative
of receipt of such property.
Allmerica Financial warrants that the Computer System is the
Property of Allmerica Financial and utilizes software
developed by or licensed to Allmerica Financial. Allmerica
Financial further warrants that the use of the Computer System
to provide the Policy Services contemplated by this Agreement
will not infringe upon or violate any patent, copyright, trade
secret or other proprietary right of any third party. These
warranties shall survive termination of this Agreement.
ARTICLE 4
CONFIDENTIALITY AND AUDIT RIGHTS
4.01 Confidentiality. Except as otherwise provided in this Agreement, all
information communicated by Transamerica to Allmerica Financial and by
Allmerica Financial to Transamerica shall be and is received in
confidence and shall be used only for purposes of this Agreement. No
such information shall be disclosed by Allmerica Financial, by
Transamerica or by their respective agents or employees without the
prior written consent of the non-disclosing party, except as may be
necessary by reason of legal, accounting, or regulatory requirements
beyond the reasonable control of the disclosing party. The provisions
of this Section 4.01 shall survive termination or expiration of this
Agreement for any reason.
Allmerica Financial and Transamerica each agree not to disclose to any
person, firm or corporation or to utilize or reproduce for their own
use any proprietary or confidential information concerning the business
or data of the other party which it may have acquired pursuant to or in
the course of the performance of its obligations under this Agreement.
Proprietary information shall include, but not be limited to, data,
marketing information and materials, sales data, customer lists,
financial plans, investment strategies, policyholder and insured data,
data on agents, agencies and distribution systems. The foregoing
notwithstanding, the following shall not be considered proprietary
information for purposes of this provision: (i) information publicly
available or generally known within the life insurance industry; (ii)
information obtained from other sources, to the knowledge of Allmerica
Financial or Transamerica, as the case may be, not under a duty of
confidentiality to Transamerica or Allmerica Financial with respect to
such information; and (iii) information that is developed or created
independently by either party without breach of this Agreement.
In addition to the foregoing, Allmerica Financial agrees that during
the term of this Agreement and thereafter it shall not, directly or
indirectly, or through any third party utilize confidential information
obtained pursuant to this Agreement to recruit or attempt to recruit
any Transamerica insurance agents, brokers, general agents or other
producers.
In addition to the foregoing, Transamerica agrees that during the term
of this Agreement and thereafter it shall not, directly or indirectly,
or through any third party utilize confidential information obtained
pursuant to this Agreement to recruit or attempt to recruit any
Allmerica Financial or AFLIAC insurance agents, brokers, general agents
or other producers.
4.02 Audit Rights. Allmerica Financial shall provide reasonable access
during normal business hours to any location from which Allmerica
Financial conducts its business and provides Policy Services to
Transamerica pursuant to this Agreement to auditors designated in
writing by Transamerica for the purposes of performing audits for
Transamerica. Transamerica shall give reasonable advance written notice
of an audit and include in that notice the matters which it will audit.
Allmerica Financial shall provide the auditors any assistance they may
reasonably require. Such auditors shall have the right during normal
business hours to audit any business record, activity, procedure or
operation of Allmerica Financial that is reasonably related to the
provision the Policy Services provided under this Agreement, including
the right to interview any Allmerica Financial personnel involved in
providing or supporting such Policy Services.
If Transamerica determines, following an audit, that errors have been
made in Allmerica Financial's records, procedures or operations,
Allmerica Financial will make prompt correction and forward evidence of
such corrections to Transamerica. Allmerica Financial will use its best
efforts to make all such corrections within thirty (30) business days.
ARTICLE 5
RECORDS AND DATA MAINTENANCE
5.01 Maintenance of Allmerica Financial Records. Allmerica Financial records
relating to Policies and the Policy Services provided under this
Agreement will be maintained at Allmerica Financial's principal
administrative office and at other storage facilities used for
maintenance of records relating to Allmerica Financial's variable life
insurance business. Such records shall be maintained: (i) in the case
of records relating to a particular Policy, while the Policy remains in
force and for a period of seven (7) years following termination of the
Policy and (ii) for all other such records, for the duration of this
Agreement and, for any records not transferred to Transamerica after
termination of this Agreement, for a period of seven (7) years
following such termination.
Notwithstanding the foregoing, voice recording tapes shall only be
maintained for one (1) year from the date of the call.
All such Allmerica Financial records will be maintained in accordance
with prudent standards of recordkeeping as required by state insurance
laws and regulations and the Investment Company Act of 1940, as well as
other federal and state securities laws and regulations.
5.02 Records and Data Management. Allmerica Financial shall:
(i) maintain all Policy paper-based files provided to Allmerica
Financial on behalf of Transamerica, including, but not
limited to, Policy applications, transaction documents and
authorizations, correspondence, beneficiary designations and
all other relevant Policy servicing documents;
(ii) maintain voice recording tapes for all telephone based service
requests. These tapes shall be maintained in a safe and secure
location;
(iii) maintain Policy machine sensible records, including values,
options, status and payments;
(iv) store Transamerica Computer System data under Allmerica
Financial's retention schedule, as mutually agreed upon, on
magnetic tapes and disc packs when in the possession or
custody of Allmerica Financial in accordance with the
confidentiality and security safeguards specified in this
Agreement. In the event a longer retention schedule is desired
by Transamerica, Allmerica Financial shall comply with such
requirements, and Transamerica shall reimburse Allmerica
Financial at an agreed upon rate for any additional costs
reasonably incurred by Allmerica Financial;
(v) maintain all records and files relating to Policies and Policy
Services as the Property of Transamerica and promptly return
such Property to Transamerica upon termination of this
Agreement, as provided in Subsection 2.01(c) hereof;
(vi) maintain all such records and files in an accessible and
useable form; and
(vii) not destroy any such records and files without the approval of
Transamerica and only after 30 days' written notice to
Transamerica of the proposed destruction.
5.03 Transamerica's Records. Transamerica's files, records, and documents
and the data contained therein shall be and remain Transamerica's
Property and shall be returned to Transamerica promptly upon request or
the expiration or termination of this Agreement or, with respect to any
particular data files and data, on the earlier date the data files and
data are no longer required by Allmerica Financial to provide services
to Transamerica pursuant to this Agreement. Transamerica's data is
confidential and proprietary and shall not be utilized by Allmerica
Financial for any purpose other than that of providing services to
Transamerica and shall not be disclosed, sold, assigned, leased or
otherwise disposed of or commercially exploited by or on behalf of
Allmerica Financial or its affiliates or their employees or agents
without the prior written consent of Transamerica.
At any time and from time to time, Transamerica may request Allmerica
Financial for copies of Transamerica's files, records and documents
then in the possession of Allmerica Financial. Unless prohibited by its
license agreement with Continuum or any other agreement with a software
vendor, Allmerica Financial shall promptly comply with any such request
for copies. Transamerica understands and agrees that any costs or
expenses, including personnel costs, incurred by Allmerica Financial in
complying with any such requests for copies shall be reimbursed by
Transamerica. Any such reimbursement shall be paid by Transamerica
within 30 business days of its receipt of a written request for
reimbursement.
5.04 Safeguarding Transamerica Data and Records. In order to properly
safeguard Transamerica data and records in its possession, Allmerica
Financial will establish and maintain full and complete safeguards no
less rigorous than those in effect at Allmerica Financial to protect
its own confidential data and records against destruction, loss,
alteration or unauthorized access.
ARTICLE 6
ALLMERICA FINANCIAL'S OBLIGATIONS
6.01 Implementation Duties and Responsibilities. Commencing on the Effective
Date, Allmerica Financial shall, in accordance with the time schedules
set forth in Article 1 and in Schedule 2.01B: (a) Develop the Policy
Forms and perform its additional duties and responsibilities as set
forth in
Article 1.
(b) Jointly develop with Transamerica the detail requirements and
specifications for each of the Functional Outline Documents to
be included in Schedule 3.01B. These documents will be the
detailed business specifications for all product and service
modifications. Allmerica Financial and Transamerica expect to
complete this task within six (6) weeks from the date the
Agreement is executed by both parties.
(c) Jointly develop with Transamerica the Computer System
interfaces to Transamerica's Home Office and Kansas City
Operational Center. The Allmerica Financial time frames for
completion of such interfaces will be negotiated by the
parties. Transamerica understands and agrees that, to the
extent compatible, Allmerica Financial intends to utilize file
formats currently in use in developing such interfaces.
(d) Modify and implement the Administrative Computer System as
necessary to support the Policy and Policy Services covered by
this Agreement. The time frames for Computer System
modification and implementation will be negotiated by the
parties.
(e) Develop illustration software and illustration formats to be
used with the Policy Forms, as more fully described in Section
6.04.
6.02 Computer System Operation. Upon the successful completion of acceptance
testing and the implementation of the Computer System, Allmerica
Financial shall provide Transamerica the following Computer System
services:
(a) Operate the Computer System and process Transamerica business
and data in accordance with Schedules 2.01A, 2.01B and 3.01B
to achieve the Service Standards called for in Schedule 2.01C.
In the event that the Service Standards in Schedule 2.01C are
not achieved, Allmerica Financial shall institute corrective
action, as described in Section 2.01(b), in order for such
standards to be achieved.
(b) Provide all necessary man-hours to install new releases of the
Computer System and maintain the Computer System in accordance
with the specifications and Functional Outline Documents set
forth in Schedules 2.01A, 2.01B and 3.01B by making routine
corrections and by accomplishing ordinary day-to-day changes
to the computer programs in the Computer System.
(c) Store Transamerica data, as provided in clause (iv) of Section 5.02
hereof.
(d) Use its best efforts to ensure that the Computer System is Year
2000 ready.
6.03 Computer System Maintenance, Changes and Enhancements. Allmerica
Financial agrees to maintain the Computer System in accordance with the
specifications and Functional Outline Documents set forth in this
Agreement at no additional cost to Transamerica. At any time and from
time to time while this Agreement remains in force Transamerica may
request that Allmerica Financial modify, enhance or otherwise make
changes to the Computer System ("System Changes") other than changes
required as part of Allmerica Financial's responsibility to perform
normal Computer System maintenance. After receipt of any such request,
Allmerica Financial agrees to negotiate in good faith with Transamerica
the terms and conditions (including compensation and delivery time
frames) under which Allmerica Financial shall develop and implement any
such requested Systems Change.
Allmerica Financial agrees to promptly review any Systems Change
request and to respond to such request in writing within 30 days of its
receipt of the request. In negotiating with Transamerica the terms and
conditions under which Allmerica Financial will comply with any such
request, Allmerica Financial agrees to assign the same priority to such
request, if it concludes that it is able to accommodate the request, as
would be assigned in the event of a similar Systems Change request
related to its own variable life insurance products.
6.04 Policy Illustrations. Allmerica Financial agrees to develop
illustration software to be used with the Policy Forms. Transamerica
understands and agrees that such software shall be substantially
similar to the illustration software currently used by Allmerica
Financial in its variable life insurance business. Allmerica Financial
agrees to finalize such illustration software within a mutually
agreeable time frame after the date the final specifications for the
Policy Forms are agreed to by the parties.
In addition to the foregoing, Allmerica Financial agrees to modify its
illustration software whenever modifications are necessary to comply
with any regulatory and/or statutory changes applicable to
illustrations used in connection with the sale and servicing of the
Policy Forms.
Allmerica Financial represents and warrants that illustrations produced
by such illustration software shall comply with all applicable state
and federal regulatory and statutory requirements. This warranty shall
survive termination of this Agreement.
6.05 Acknowledgment and Additional Responsibilities of Allmerica Financial.
Allmerica Financial shall have no authority, nor shall it represent
itself as having such authority, other than as specifically set forth
in this Agreement. Without limiting the generality of the foregoing
sentence, Allmerica Financial specifically agrees that it will not do
any of the following without the prior written consent of Transamerica:
(a) Litigation. Institute or prosecute any legal proceedings in
connection with any matter pertaining to the Policy Services
provided pursuant to this Agreement or Transamerica's business
or accept service of process on behalf of Transamerica.
(b) Alterations. Waive, amend, modify, alter, terminate or change
any term, provision or condition stated in any Policy Form or
discharge any contract in the name of Transamerica, except as
otherwise specifically provided in this Agreement.
(c) Advice to Policyholders/Prospective Policyholders. Offer tax,
legal, or investment advice to any Policyholder or prospective
Policyholder of Transamerica under any circumstances, with
respect to a Policy or the Policy Services provided pursuant
to this Agreement.
6.06 Cooperation. Allmerica Financial agrees to cooperate at all times with
Transamerica to ensure that the Policy Services provided pursuant to
this Agreement are provided properly to any Policyholder or prospective
Policyholder of Transamerica. Allmerica Financial shall use its best
efforts to comply with any and all written directives from Transamerica
for the correction of deficiencies or problems associated with
Allmerica Financial's performance of Policy Services or its obligations
hereunder (each, a "Correction Letter"). Such deficiencies or problems
shall include, without limitation, (i) Allmerica Financial's failure to
provide Policy Services in a timely manner, or (ii) Allmerica
Financial's failure to provide Policy Services in accordance with the
Service Standards specified in Schedule 2.01C. Allmerica Financial
shall use its best efforts to comply with a Correction Letter within
thirty (30) days of its receipt of the Letter (or such longer period as
shall be specified in the Correction Letter, in situations where it is
not reasonably possible to comply within such thirty (30) day period).
6.07 Notification of Service Deficiencies. Allmerica Financial shall
promptly notify Transamerica, in writing, of (i) any material
weaknesses relating to the provision of Policy Services under the
Agreement and (ii) any comment of a material nature made pursuant to a
regulatory examination relating to the provision of such Policy
Services. Written notification shall be provided within seven (7) days
of when Allmerica becomes aware, through written notification, of the
material weakness or regulatory comment. If Allmerica has not corrected
the material weakness or material problem that caused the regulatory
comment to the satisfaction of Transamerica within a time frame set
reasonably by Transamerica in writing and agreed to by Allmerica
Financial, Transamerica may then immediately terminate this Agreement
without prejudice to any of Transamerica's rights or remedies against
Allmerica Financial pursuant to Section 11.03 of this Agreement.
6.08 Administrative Services Provided. Allmerica Financial shall perform the
administrative services specified in Schedules 2.01A, 2.01B and 3.01B
within the time frames and Service Standards specified in Schedule
2.01C.
6.09 Records and Data Maintenance. Allmerica Financial shall provide the
records and data maintenance, management and other services described
in Article 5.
6.10 Personnel. Allmerica Financial shall use its best efforts to ensure
that adequate personnel are assigned to perform the services required
under this Agreement, to include a Project/Account Manager and the
staffing levels needed in order to achieve the Service Standards
specified in Schedule 2.01C.
Except for third party vendors used to service Allmerica Financial's
variable life insurance business, Transamerica's business will be
serviced only by employees of Allmerica Financial.
Before Allmerica Financial communicates any confidential information
described in Section 4.01 and relating to Transamerica to a vendor, the
vendor must execute a confidentiality agreement acceptable to
Transamerica.
ARTICLE 7
TRANSAMERICA'S OBLIGATIONS
7.01 Transamerica's Duties and Responsibilities. Transamerica shall:
(a) Assist Allmerica Financial in the development of the Policy
Forms and perform its additional duties and responsibilities
set forth in Article 1.
(b) Jointly develop with Allmerica Financial an implementation
plan and schedule as set forth in Schedule 2.01B.
(c) Provide designated Transamerica personnel dedicated to work
with Allmerica Financial personnel in the performance of this
Agreement and all other reasonable and necessary cooperation
and support.
(d) Develop business specifications and jointly develop with
Allmerica Financial the Functional Outline Documents.
(e) Provide all the requirements for the operation of the
Administrative Computer System at Transamerica's facilities
necessary for Computer System interfaces and output.
(f) Provide necessary input data for the operation of the Computer
System.
(g) Jointly develop with Allmerica Financial the interface
specifications for the Computer System and Transamerica
systems.
(h) Assist Allmerica Financial in the development of the
illustration software and formats described in Section 6.04.
(i) Make all necessary payments due under the terms of this Agreement.
ARTICLE 8
ACCEPTANCE TESTING
8.01 Contents. Allmerica Financial and Transamerica shall conduct tests of
the Computer System. The standard to be used to determine the
successful completion for all tests shall be the Computer System's
performance of the functions and features described in the Functional
Outline Documents set forth in Schedule 3.01B and the specifications
set forth in Schedules 1.02 and 2.01A. The testing standards and the
testing process must be approved by Transamerica, whose approval shall
not be unreasonably withheld.
8.02 Usability Testing. Allmerica Financial and Transamerica shall conduct
a joint usability test as follows:
(a) The test will be performed utilizing Allmerica Financial's existing
test environment.
(b) A test sample of Policies and business transactions shall be
determined and processed by Allmerica Financial and will be
made available to Transamerica for review.
(c) Allmerica Financial and Transamerica will jointly review the
test results to determine completeness, accuracy and
performance.
(d) Transamerica will process all Allmerica Financial generated
system interface files to determine successful use by internal
Transamerica systems.
(e) Allmerica Financial and Transamerica will evaluate overall
business and system processing flow for capability to meet
operational performance standards.
(f) Allmerica Financial and Transamerica will make all necessary
revisions to business and technical systems identified in the
usability test.
(g) In order to satisfy usability testing, the Computer System
must process all sample Policies and related transactions to
such standards as would be acceptable to Allmerica Financial
in the processing of AFLIAC's variable life insurance
business. Transamerica and Allmerica Financial must mutually
agree that usability testing has been successfully
accomplished. Transamerica and Allmerica Financial must also
mutually agree that usability testing has been performed with
true representation of Transamerica sales force illustration
and investment scenarios.
(h) In the event the usability testing has not been successfully
completed within six months from the Effective Date of this
Agreement, unless the parties agree to an extension,
Transamerica and Allmerica Financial shall proceed in
accordance with the provisions of Subsection 2.01(c) of this
Agreement.
ARTICLE 9
ADDITIONAL REPRESENTATIONS AND WARRANTIES
9.01 Corporate Authority, etc. Allmerica Financial represents and warrants:
(a) That it is a corporation duly organized and existing in good
standing under the laws of the Commonwealth of Massachusetts.
(b) That Allmerica Financial has the power and authority under the
laws of the Commonwealth of Massachusetts and under its
charter and by-laws to enter into and perform the Product
Development and Policy Services contemplated in this
Agreement.
(c) That all requisite corporate and other acts or proceedings
required to be taken to authorize the execution, delivery and
performance of this Agreement have been taken.
(d) That in performing the Policy Services contemplated in this
Agreement it will be in compliance with all applicable state
and federal laws and regulations and will use its best efforts
to perform the Policy Services in compliance with
Transamerica's policies and procedures that are designed to
achieve IMSA (Insurance Marketplace Standards Association)
certification.
(e) That it has and will use its best efforts to continue to have
and maintain the necessary facilities to perform Policy
Services in accordance with the provisions of this Agreement.
9.02 Survivability. The warranties provided for in this Article 9
shall survive termination of this
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Agreement.
ARTICLE 10
INDEMNITIES AND LIABILITY
10.01 Cross Indemnity. Each party shall indemnify, defend and hold harmless
the other, and the other's subsidiaries, parent and affiliates, from
and against any and all claims, actions, damages, liabilities, costs
and expenses (including reasonable attorneys' fees and expenses),
arising out of the death or bodily injury of any agent, employee,
customer, business invitee or business visitor of the indemnitor
occurring on premises under the control of the indemnitor or its parent
or one of its subsidiaries or affiliates.
10.02 Allmerica Financial Limitation of Liability; Indemnification by
Transamerica. Allmerica Financial, its subsidiaries, parent, affiliates
and its or their officers, directors, employees and agents
(collectively "Allmerica Indemnitees") shall not be responsible for,
and Transamerica shall indemnify and hold harmless Allmerica
Indemnitees from and against any and all claims, demands, losses,
damages, charges, costs, expenses (including reasonable attorneys' fees
and expenses), judgments, awards and settlements, including any
punitive, consequential, special or indirect damages (herein "Losses")
arising out of or attributable to:
(a) All actions of Allmerica Indemnitees related to Policy
underwriting or the investigation, processing, denial or
payment of Policy claims, including death claims, provided
that:
(i) in the case of an underwriting matter, Allmerica
Financial properly utilized Transamerica's
Underwriting Standards (as described in Section 2.02)
in underwriting, rating or declining an applicant for
insurance and, in the event of the declination of a
proposed insured, which declination is not clearly a
medical decline described in Transamerica's
underwriting manual, that the matter was communicated
to authorized Transamerica personnel who agreed with
and approved the declination; and
(ii) in the case of a Policy claim, Allmerica Financial
followed Transamerica's claims investigation and
processing rules and requirements and, in the event
of the denial of a claim, that the matter was
communicated to authorized Transamerica personnel who
agreed with and approved the denial.
Allmerica Financial will communicate appropriate details of
any required communication described in (a) (i) and (ii) above
in accordance with notification procedures to be jointly
developed by the parties. If no response is received within
five (5) days from the day of the transmission, Allmerica
Financial shall have the right to proceed on the basis that
Transamerica is in agreement with the decision to decline the
risk or deny the payment of the claim and will proceed with
appropriate action.
(b) A claim against an Allmerica Indemnitee by any third party, to
the extent it arises out of or results from any act or
omission of Transamerica, its employees, agents, brokers or
representatives relating to the sale or servicing of any
Policy.
(c) A claim against an Allmerica Indemnitee by any third party, to
the extent it arises out of or results from the reasonable
reliance of an Allmerica Indemnitee on information, records or
documents furnished to it by or on behalf of Transamerica.
(d) A claim against an Allmerica Indemnitee by any third party, to
the extent it arises out of or results from the reasonable
reliance on, or the carrying out of by an Allmerica Indemnitee
of, any instructions of authorized personnel of Transamerica.
10.03 Transamerica Limitation of Liability; Indemnification by Allmerica
Financial. Transamerica, its subsidiaries, affiliates and its or their
officers, directors, employees and agents (collectively "Transamerica
Indemnitees") shall not be responsible for, and Allmerica Financial
shall indemnify and hold harmless Transamerica Indemnitees from and
against any and all Losses arising out of or attributable to:
(a) A breach or negligent failure of Allmerica Financial to
perform any of Allmerica Financial's representations,
warranties, covenants or obligations set forth in this
Agreement.
(b) A claim against a Transamerica Indemnitee by any third party,
to the extent it arises out of or results from the reasonable
reliance of a Transamerica Indemnitee on information, records
or documents furnished to it by or on behalf of Allmerica
Financial.
(c) A claim against a Transamerica Indemnitee by any third party,
to the extent it arises out of or results from the reasonable
reliance on, or the carrying out of by a Transamerica
Indemnitee of, any instructions of authorized personnel of
Allmerica Financial.
In addition to the foregoing, Allmerica Financial shall indemnify and
hold harmless Transamerica Indemnitees from and against any tax,
interest or penalties imposed by the IRS or any state or local taxing
authority on Transamerica, as well as any liability Transamerica may
incur to Policyholders caused by or related to Allmerica Financial's
failure to properly test and apply the life insurance testing rules
under IRC Sections 7702 and 7702A or its failure to perform its tax
withholding and information reporting duties and responsibilities under
this Agreement, including, but not limited to, failures to: (i) deposit
the correct amount of income tax withholding on time; (ii) issue timely
information returns; (iii) issue correct information returns; (iv)
correctly process tax-related transactions related to nonresident
aliens; and (v) correctly process tax-related transactions related to
death claims.
10.04 Notice and Opportunity to Defend. Promptly after receipt by any party
hereto of notice of the assertion of any claim for a Loss with respect
to which such party hereto expects to make a request for
indemnification hereunder, such party shall give the party which may
become obligated to provide indemnification hereunder (the
"Indemnifying Party") written notice describing such claim in
reasonable detail. The Indemnifying Party shall have the right, at its
option and at its own expense and by its own counsel, to participate in
the defense of any such claim, provided that the Indemnifying Party
shall have agreed in writing to indemnify the party seeking
indemnification hereunder (the "Indemnified Party"). Notwithstanding
the foregoing, the Indemnifying Party shall not have the right to
control or to represent the Indemnified Party in the defense of any
claim.
10.05 Processing Liability. Notwithstanding the provisions of Sections 10.02
and 10.03, in the event of any liability incurred by Allmerica
Financial or Transamerica as a result of Policy processing errors made
by Allmerica Financial, Allmerica Financial shall be liable for the
first ten thousand dollars incurred during each twelve (12) month
period from the commencement of the Operational Phase ("Liability
Period") for the term of this Agreement. For liability arising from
Allmerica Financial processing errors incurred in a Liability Period in
excess of ten thousand dollars, Allmerica Financial shall be liable for
40% of such amount and Transamerica shall be liable for 60% of such
amount. Provided, however, that Transamerica shall not be liable with
respect to any Liability Period for any such amount in excess of .35%
of Policy premiums (including first year target and excess premiums and
renewal premiums) paid during the Liability Period. Allmerica Financial
agrees that it shall be responsible for the dollar amount of processing
errors incurred during a Liability Period in excess of such .35% cap.
If such cap is not determined until after the end of a Liability
Period, both parties agree to a true-up by Allmerica Financial (or to a
reimbursement by Transamerica, if appropriate) within 30 days following
the date the cap is both calculated and agreed to by both parties. For
purposes of calculating processing errors, both parties understand and
agree that liabilities shall only mean and include amounts payable or
creditable to Policyholders and their beneficiaries and shall not
include internal costs incurred by either party to correct such errors.
For purposes of this Agreement, the term "processing errors" shall mean
and include:
(i) errors or delays relating to the processing of Policy premium
payments;
(ii) errors or delays relating to the processing of Policy fund
transfer requests;
(iii) errors or delays relating to Policy Services involving Policy
dollar cost averaging or automatic account rebalancing;
(iv) errors or delays related to the processing of Policy changes
(e.g., processing of title changes, beneficiary changes or
insurance increases or decreases);
(v) errors or delays related to the processing of Policy
surrenders, exchanges or withdrawals;
(vi) errors or delays related to the processing of Policy loans; and
(vii) other errors or delays related to the Policy Administration
functions described in Part B of Schedule 2.01C.
Notwithstanding the foregoing, processing errors shall not include
systemic Computer System errors, errors related to Policy underwriting,
Policy claims processing or errors related to Allmerica Financial's
Code Section 7702 and 7702A policy testing and tax withholding and
information reporting duties and responsibilities, as described in the
last paragraph of Section 10.03 hereof.
10.06 Acknowledgment. Allmerica Financial and Transamerica expressly
acknowledge that the limitations contained in this Article 10 represent
the express agreement of the parties with respect to allocation of
risks between the parties, including the level of risk to be associated
with the provision of the Policy Services described herein as related
to the amount of the payments to be made to Allmerica Financial for
such Services, and each party fully understands and accepts such
limitations.
10.07 Survivability. The indemnifications provided for in this Article 10
shall survive termination of this
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Agreement for any reason.
ARTICLE 11
TERM AND TERMINATION
11.01 Term.
(a) The Product Development obligations of the parties and the Policy Services
Implementation Phase shall commence upon the Effective Date of this Agreement.
The Implementation Phase shall expire upon successful completion of all
acceptance testing of the Computer System under Article 8. The Operational Phase
shall commence upon certification by Allmerica Financial that it is ready to
commence production processing of Transamerica data, and shall expire
forty-eight (48) full calendar months from the date of receipt of said
certification from Allmerica Financial, unless terminated earlier or extended in
accordance with the provisions of this Agreement.
(b) A failure to commence the Operational Phase on or before the date which is
six months from the date the Functional Outline Documents have been finalized
and agreed to by the parties shall result in a sixty (60) day cure period during
which Transamerica and Allmerica Financial shall take all necessary steps to
complete the work to commence the Operational Phase. If the Operational Phase is
not commenced by the end of the 60-day cure period, then, at its option, either
party shall have the right to terminate the Agreement. In such event, neither
Allmerica Financial nor Transamerica shall have any further responsibility under
this Agreement except for Transamerica's responsibility to pay the balance of
the Compensation due Allmerica Financial for its Product Development services,
as specified in Section 1.05.
11.02 Extension. This Agreement shall continue in force after the initial
48-month termination date specified in Subsection 11.01(a) unless
either party elects to terminate the Agreement on said initial
termination date by notifying the other party in writing of its
intention to do so. Such notice must be given at least twelve months
prior to said initial termination date unless both parties agree to
accept a later date of notification. If this Agreement is continued
beyond said initial termination date, Transamerica and Allmerica
Financial shall each have the right to cancel this Agreement on any
date thereafter upon twelve months' written notice to the other party.
11.03 Termination for Cause. Except as otherwise provided in this Agreement,
in the event either party defaults in the performance of any of that
party's material duties or obligations under this Agreement, which
default shall not be substantially cured within thirty (30) days after
written notice is given to the defaulting party specifying the default
or, with respect to those defaults which cannot reasonably be cured
within thirty (30) days, should the defaulting party fail to proceed
within sixty (60) days to commence curing the default and thereafter to
proceed with all due diligence to substantially cure the default, the
party not in default may terminate this Agreement for cause by giving
written notice to the defaulting party.
For purposes of this Agreement, material breach shall include, but not
be limited to, the following events: (i) fraud, material
misrepresentation, conversion or unlawful withholding of funds by
either party; (ii) the disqualification by either party to do business
under any applicable state or federal law where its ability to do
business is materially impaired; (iii) any breach of confidentiality by
either party or the use of confidential information by either party in
a competitive manner; and (iv) any failure by Allmerica Financial to
maintain fidelity bond coverage in an amount of at least $10,000,000.
Circumstances described in clauses (i) and (iii) shall not be subject
to the cure provisions described in the preceding paragraph.
In addition to the foregoing, (i) if Allmerica Financial breaches its
agreement with Continuum (or any replacement software vendor), such
that Allmerica Financial's license to use the then current Computer
System is revoked, and (ii) if at the time of such license revocation
the LIFE-COMM III Computer System (or the software of any replacement
vendor whose agreement with Allmerica Financial has been breached by
Allmerica Financial), is being utilized to perform the Policy Services
contemplated by this Agreement, then in such event, Transamerica may
terminate this Agreement for cause.
In the event this Agreement is terminated for cause, the party
materially breaching the Agreement shall be liable for all damages
incurred by the aggrieved party as a result of the breach. In the event
either party terminates the Agreement for cause, Transamerica agrees to
pay Allmerica Financial the balance of any compensation for Product
Development required to be paid to Allmerica Financial under Section
1.05 and to pay compensation for Policy Services rendered, required to
be paid to Allmerica Financial under Sections 2.04. In the event that
either party terminates this Agreement for cause, Allmerica Financial
and Transamerica shall jointly develop and implement a cooperative
conversion workplan under Subsection 2.01(c) of this Agreement.
Notwithstanding the foregoing, if Transamerica terminates this
Agreement for cause, subject to the requirements set forth in Sections
1.05 and 2.04, Transamerica shall have the right to offset amounts
otherwise payable to Allmerica Financial against any damages incurred
by Transamerica as a result of Allmerica Financial's breach of this
Agreement.
11.04 Termination for Nonpayment. In the event Transamerica defaults in the
payment of any amount due Allmerica Financial under this Agreement and
does not cure the default within thirty (30) days after written notice
of the default or unless such payment shall be in dispute, Allmerica
Financial may terminate this Agreement for cause by giving thirty (30)
days written notice to Transamerica.
11.05 Termination for Insolvency. In the event either party becomes or is
declared insolvent or bankrupt, is the subject of any proceedings
relating to its liquidation, insolvency or for the appointment of a
receiver or similar officer for it, makes an assignment for the benefit
of all or substantially all of its creditors, or enters into an
agreement for the continuation, extension, or readjustment of all or
substantially all of its obligations, the other party may immediately
terminate this Agreement for cause.
ARTICLE 12
MISCELLANEOUS
12.01 Binding Nature and Assignment. This Agreement shall be binding on the
parties and their respective successors and assigns. Neither party may
assign this Agreement without the prior written consent of the other,
which shall not be unreasonably withheld.
12.02 Notices. Any notice or other instrument authorized or required by this
Agreement shall be deemed given upon receipt and shall be effective
only if it is in writing and delivered personally, by facsimile
transmission with telephone confirmation, by registered or certified
return receipt mail, postage prepaid, or by nationally recognized
overnight courier service addressed as set forth below or to such other
person or address as each party may from time to time designate by
notice to the other party.
In the case of Allmerica Financial:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Mammen G. Verghis
Vice President
In the case of Transamerica:
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015
Attention: General Counsel
and with copy to:
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015
Attention: Mark Madden
A party may from time to time change its address or designees for
notification purposes by giving the other party prior notice in the
manner specified above of the new address or the new designee and the
subsequent date upon which the change shall be effective.
12.03 Amendment. This Agreement may be amended or modified only by a written
agreement executed by both parties, as evidenced in writings signed by
a Vice President of Allmerica Financial and Transamerica.
12.04 Counterparts. This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
12.05 Certain Construction Rules; Governing Law. All Schedules attached
hereto and referred to herein, are hereby incorporated in and made a
part of this Agreement as if set forth herein. Any matter disclosed on
any Schedule referred to herein shall be deemed also to have been
disclosed on any other applicable Schedule referred to herein. All
Section titles or captions contained in this Agreement or in any
Schedule are for convenience only, shall not be deemed a part of this
Agreement and shall not affect the meaning or interpretation of this
Agreement. Any reference to a "Section" or "Schedule" shall be deemed
to refer to a Section of this Agreement or Schedule attached to this
Agreement. The recitals set forth on the first page of this Agreement
are incorporated into and made a part of this Agreement. Unless the
context clearly indicates, words used in the singular include the
plural, and words in the plural include the singular.
This Agreement is to be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts and without regard to the
conflicts of laws principles thereof.
12.06 Relationship of Parties. Transamerica understands and agrees that
Allmerica Financial in furnishing services to Transamerica is acting
only as an independent contractor. Unless otherwise provided in this
Agreement, Allmerica Financial has the sole right and obligation to
supervise, manage, contract, direct, procure, perform or cause to be
performed all work to be performed by Allmerica Financial pursuant to
this Agreement.
12.07 Approvals and Similar Actions. Where agreement, approval, acceptance,
consent or similar action is required by any provision of this
Agreement, such action shall not be unreasonably delayed or withheld.
12.08 Force Majeure. 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 of delays caused by an
act of God, war, civil disturbance, court order, labor dispute, or
other cause beyond that party's reasonable control, including failures
or fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment and such nonperformance shall not be a
default or a ground for termination. Notwithstanding the above,
Allmerica Financial agrees that it will establish and maintain
reasonable recovery steps, including technical disaster recovery
facilities, uninterruptable power supplies for computer equipment and
communications and that as a result thereof Allmerica Financial will
use its best efforts to ensure that the Computer System shall be
operational within forty-eight (48) hours of a performance failure.
12.09 Severability. The provisions of this Agreement are severable and the
invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision
hereof. In addition, in the event that any provision of this Agreement
(or portion thereof) is determined by a court of competent jurisdiction
to be unenforceable as drafted by virtue of the scope, duration, extent
or character of any obligation contained therein, it is the mutual
agreement of the parties that such provision (or portion thereof)
shall, to the extent equitable, be construed in a manner designed to
effectuate the purposes of such provision to the maximum extent
enforceable under applicable law.
12.10 Construction and Representation by Counsel. The parties hereto
represent that in the negotiation and drafting of this Agreement they
have been represented by and relied upon the advice of counsel of their
choice. The parties affirm that their counsel have had a substantial
role in the drafting and negotiation of this Agreement and, therefore,
the rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any Schedule attached hereto.
12.11 Media Releases. Transamerica and Allmerica Financial shall consult with
each other as to the form, substance and timing of any press release or
other public disclosure of matters related to this Agreement or any of
the transactions contemplated hereby, and no such press release or
other public disclosure shall be made without the consent of the other
party, which shall not be unreasonably withheld or delayed; provided,
however, that either party may make such disclosures as are required by
legal, accounting or regulatory requirements after making reasonable
efforts in the circumstances to consult in advance with the other
party.
12.12 Reinsurance Agreement. The parties understand and agree that certain
policy expenses and mortality risks assumed under the Policies serviced
under this Agreement will be 40% reinsured by Allmerica Financial
pursuant to the terms of a separate Reinsurance Agreement to be
negotiated between the parties.
12.13 Agreement Relating to Additional Services. The parties understand and
agree that certain investment accounting, separate account and treasury
services to be provided by Allmerica Financial will be set forth in a
separate agreement to be negotiated by the parties.
12.14 Waiver. No delay or omission by either party to exercise any right or
power shall impair such right or power or be construed as a waiver. A
waiver by either of the parties of any of the covenants to be performed
by the other or any breach shall not be construed to be a waiver of any
succeeding breach or of any other covenant.
12.15 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. There
are no representations, understandings or agreements which are not
fully expressed in this Agreement. No change, waiver, or discharge
shall be valid unless in writing and signed by an authorized
representative of the party against whom such change, waiver or
discharge is sought to be enforced.
12.16 Hiring of Employees. During the term of this Agreement and for one (1)
year thereafter, Transamerica and Allmerica Financial and any of their
affiliates shall not, directly or indirectly, solicit for employment
any person employed or working on the services provided hereunder
within the preceding twelve (12) months by the other party or any
affiliate of the other party without the prior written consent of the
other party, which shall not be unreasonably withheld; provided,
however, that (i) in the event either party uses the services of a
professional recruiter and provides such recruiter solely with generic
job duties and job descriptions (without making any reference to the
other party or the other party's affiliates) and such recruiter
contacts a qualified candidate who happens to be an employee of the
other party and that candidate initiates contact through the recruiter
with that party, then that party may employ that employee, or (ii) in
the event an employee of the other party responds to a general
advertisement placed by a party, then that party may employ that
employee.
12.17 Taxes. Any taxes or similar assessments charged against Allmerica
Financial or charged in connection with the services provided under
this Agreement shall be the responsibility of Allmerica Financial,
whether such tax or assessment is imposed by the Federal government, a
state, a municipality or an administrative organization thereof.
12.18 Arbitration. All disputes and differences between the parties with
respect to this Agreement will be decided by arbitration, regardless of
the insolvency of either party, unless the conservator, receiver,
liquidator, or statutory successor is specifically exempted from an
arbitration proceeding by applicable state law. Either party may
initiate arbitration by providing written notification to the other
party. Such written notice shall set forth a brief statement of the
issue(s), the failure of the parties to reach agreement, and the date
of the demand for arbitration.
An arbitration panel shall be chosen consisting of three arbitrators.
The arbitrators must be impartial and must be or must have been
officers of life insurance companies other than the parties or their
affiliates. Each party shall select an arbitrator within thirty days
from the date of the demand. If either party shall refuse or fail to
appoint an arbitrator within the time allowed, the party that has
appointed an arbitrator may notify the other party that, if it has not
appointed its arbitrator within the following ten days, the arbitrator
will appoint an arbitrator on its behalf. The two arbitrators shall
select a third arbitrator within thirty days of the appointment of the
second arbitrator. If the two arbitrators fail to agree on the
selection of the third arbitrator within the time allowed, either party
may ask ARIASo US to appoint the third arbitrator. However, if ARIASo
US is unable to appoint an arbitrator who is impartial and who is or
was an officer of a life insurance company other than the parties or
their affiliates, then either party may ask a court to appoint the
third arbitrator pursuant to the Uniform Arbitration Act or any similar
statute empowering the court to appoint an arbitrator.
The arbitration panel shall interpret this Agreement as an honorable
engagement rather than merely a legal obligation, and shall consider
practical business and equitable principles as well as industry custom
and practice. The panel is released from judicial formalities and shall
not be bound by strict rules of procedure and evidence.
The arbitration panel shall determine all arbitration schedules and
procedural rules. Organizational and other meetings shall be held in
Worcester, Massachusetts, unless the panel shall select another
location. The panel shall decide all matters by majority vote.
Decisions of the arbitration panel shall be final and binding on both
parties. The panel may, at its discretion, award costs and expenses it
deems appropriate, including but not limited to attorneys' fees and
interest. Judgment may be entered upon the final decision of the panel
in any court of competent jurisdiction. The panel may not award
exemplary or punitive damages. Unless the panel decides otherwise, each
party will be separately responsible for paying all fees and expenses
charged by its respective counsel, accountants, actuaries, and other
representatives in connection with the arbitration, and the parties
shall bear equally the fees and expenses of the arbitrators and any
ancillary expenses associated with a hearing (e.g., any rental fee for
use of the hearing room, etc.).
12.19 Legal Proceedings and Complaints. If Allmerica Financial receives:
(a) notice of the commencement of any legal proceeding involving
any of Transamerica's customers; or
(b) a communication from any insurance department, other
administrative agency or any other person identifying a
complaint by any Transamerica customer or calling a hearing
involving any Transamerica practice; or
(c) written or oral complaints from customers of Transamerica; or
(d) a demand or request by any court, government agency or
regulatory body to examine any of the books and records of
Transamerica relating to Policies or Policy Services;
Allmerica Financial will use its best efforts to notify Transamerica
within one (1) business day. Allmerica Financial will send copies of
any necessary documentation to Transamerica within two (2) business
days.
Allmerica Financial and Transamerica will jointly develop a complaint
handling process.
Allmerica Financial will maintain a file containing any correspondence
relating to complaints received from Transamerica customers or service
providers for a period of seven (7) years from receipt of the complaint
letter.
12.20 Trademarks and Tradenames. Allmerica Financial will not use
Transamerica's name, trademarks, logo, or the name of any affiliate of
Transamerica in any way or manner not specifically authorized in
writing by Transamerica.
Transamerica will not use Allmerica Financial's name, trademarks, logo
or the name of any affiliate of Allmerica Financial in any way or
manner not specifically authorized in writing by Allmerica Financial.
On August 17, 1997, Transamerica provided Allmerica Financial with
electronic formats of its trademark, pyramid logo and digitized
officers' signatures for use on Policy Forms. Those properties combined
with those Transamerica marks listed on Schedule 12.20 make up the
Transamerica marks and names ("Marks and Names") licensed herein. Any
marketing name or service mark adopted by the parties to identify the
Policy contemplated in this Agreement shall be owned by Transamerica
and considered one of the Marks and Names.
As Transamerica is an owner-authorized user of those Marks and Names,
Transamerica desires to exercise control over the use of said Marks and
Names. Transamerica desires to license the Marks and Names for use by
Allmerica Financial in the underwriting, claims servicing, Policy
servicing and administrative services outlined in this Agreement.
Accordingly the parties agree as follows:
(a) License of Marks and Names. Transamerica hereby grants a
nonexclusive license unto Allmerica Financial to use the Marks
and Names solely in connection with the Services provided
under this Agreement.
(b) Manner of Use. Allmerica Financial shall not use the Marks and
Names in any manner or format which differs from the
electronic versions provided by Transamerica to Allmerica
Financial on August 17, 1997 or as shown in Schedule 12.20. If
Allmerica Financial deems a change in format for its limited
use is necessary, a request for such change must be submitted
in writing to Transamerica for its approval. Said request must
include the version as originally supplied by Transamerica and
the requested change, as well as the reason such a change is
requested. Transamerica's approval of a requested change shall
not be unreasonably withheld.
(c) Quality Control. Allmerica Financial's usage of the Marks and
Names shall be under the quality control of Transamerica as
provided herein and shall comply with Transamerica's
standards. As provided in Section 4.02, Transamerica may
conduct reasonable audits of Allmerica's usage of the Marks
and Names in relation to the Services provided under this
Agreement to ensure compliance with the terms set forth in
this Section.
(d) Indemnification. Transamerica shall protect, indemnify, defend
and hold harmless Allmerica Financial from any and all
liability, damages, costs or expenses, including reasonable
attorneys' fees incurred in connection with any claim or
action arising from Allmerica Financial's use of the Marks and
Names, limited to causes of action sounding in state or
federal trademark infringement and/or state or federal
trademark dilution. This indemnification shall survive
termination of this Agreement.
(e) Termination. The License to use the Marks and Names shall
terminate in accordance with the provisions of Article 11. Any
use of the Marks and Names that does not comply with the terms
as set forth in this Section will be considered a default in
the performance of Allmerica's material duties and or
obligations. Upon termination under Article 11, Allmerica
shall cease and desist use of the Marks and Names, except for
limited use in administering and servicing of Policies issued
prior to the date of termination.
12.21 Advertisement. Allmerica Financial shall not advertise the existence of
this Agreement or announce its existence to other insurance companies
or broker-dealers without the express written consent of Transamerica.
Notwithstanding the foregoing, Transamerica agrees that Allmerica
Financial may disclose the existence of this Agreement to insurance
companies or other organizations that are prospective purchasers of
services similar to the product development and administrative services
to be provided under this Agreement.
12.22 Continuation. Sections 1.05, 1.06, 2.01(c), 2.03, 3.02, 4.01, 5.01,
6.04, 12.15, 12.16, 12.17, 12.18, 12.19, 12.20, and Articles 9 and 10
shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to take
effect on the effective date specified above.
Transamerica Occidental Life
Insurance Company
By: ______________________________
Name: ______________________________
Title: ______________________________
Date: ______________________________
First Allmerica Financial Life
Insurance Company
1025
By: _______________________________
Name: _______________________________
Title: _______________________________
Date: _______________________________
Schedule 1.01 To Product
Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
AFLIAC POLICY FORMS
The Transamerica Policy, Policy Application and related Policy forms
contemplated by the Agreement will be substantially the same as the following
Allmerica Financial Life Insurance and Annuity Company ("AFLIAC") forms:
Name of AFLIAC Form AFLIAC Form Numbers
1. Flexible Premium Variable Life 1027-95
Insurance Policy*
2. Policy Application Forms AS-156, AS-158-95,
AS-159, 1AM-90
3. Children's Insurance Rider 1068-95
4. Guaranteed Insurability Rider 1087-95
5. Waiver of Payment Rider 1086-94
6. Living Benefits Rider 1089.13-95
7. Guaranteed Death Benefit Rider 1099-97
* The Preferred Loan Option in Form 1027-95 will be deleted and the Preferred
Loan Option described in END 260-96 will be substituted.
Schedule 1.02 To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
POLICY FORM SPECIFICATIONS
See Attachment
Schedule 3.01B To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
FUNCTIONAL OUTLINE DOCUMENTS
PRODUCT DIFFERENCES
- Mortality Rates
Mortality rates are extended to age 115
For Montana, male rates will be used instead of unisex rates
- Target Rates on some base cases
Target rates for this product are shown in Attachment 1
- Surrender charges
The surrender charges to be used for this product are shown in
Attachment 2
- Maturity at age 115
Maturity date is the policy anniversary nearest age 115
- Any processes or procedures that differ significantly from
Allmerica's usual and customary procedures will be documented via
memo
[Policy Underwriting, Claims Processing and Escheat procedures
differ significantly - a Memorandum of Understanding needs to be
developed with regard to each such process and procedure].
DOCUMENTS AND REPORTS
- Revisions to reflect Transamerica company name, address,
names and phone numbers in place of
Allmerica information
ELECTRONIC INTERFACES
Allmerica to Transamerica
- Alpha (daily) - Attachment 3
- Reinsurance (monthly) - Attachment 4
- Accounting (daily) - Attachment 5
- Compensation (daily) - Attachment 6
- Sales Reporting (daily) - Attachment 7
Transamerica to Allmerica
- Agency and Agent Data (initial file at conversion and then daily
- Attachment 8
Schedule 3.02 To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company, effective November 1, 1997.
CONTINUUM NON-DISCLOSURE AND NON-USE AGREEMENT
CSC Continuum Inc. ("Continuum"), First Allmerica Financial Life Insurance
Company ("Customer"), and Transamerica
Occidental Life Insurance Company ("Company"), agree as follows:
1. RECITALS
Customer is a licensee of all or part of the following computer
software product: LIFE-COMM III (collectively, the "Software Product").
The Software Product (including the program code, specifications,
logic, and design), all related documentation, and any information
about the Software Product (the "Confidential Information") are
confidential trade secrets of Continuum. Customer has also been granted
limited rights to process the data and files of Company using the
Software Product at Customer's site (the "Services"), which will
require that Company have restricted access to certain of the
Confidential Information in order to use the software product input and
output capabilities.
2. CONSENT
Continuum consents to the disclosure by Customer to Company of only
such Confidential Information as is reasonably necessary for Customer
to perform the Services. However, such disclosure to Customer shall in
no event include the disclosure of or access to any code or
documentation of the Software Products.
3. CONFIDENTIAL RELATIONSHIP
Customer and Company acknowledge that the Confidential Information
contains valuable trade secrets of Continuum. Any disclosures of
Confidential Information to Company shall be made in the strictest
confidence. Company shall take all appropriate action, whether by
instruction, agreement or otherwise, to ensure the protection,
confidentiality and security of any Confidential Information in its
possession.
4. NON-DISCLOSURE
Company may disclose the Confidential Information to its own employees
and to employees of Customer as reasonably necessary for Customer to
provide the Services. Company and its employees shall not otherwise
disclose or permit access to any Confidential Information to anyone
other than such employees of Company and Customer. Before disclosing
any Confidential Information to its employees, Company shall instruct
its employees to comply with the terms of this Agreement.
5. NON-USE
Company shall not use any Confidential Information for any purpose
other than for receiving the benefit of the Services.
6. COPIES
Company shall not copy or record any Confidential Information. Company
shall not remove any materials containing Confidential Information from
Customer's premises. Within ten (10) days after the completion of the
Services, Company shall destroy or deliver to Customer all copies or
records of Confidential Information in Company's possession.
7. CONTINUING OBLIGATIONS
Company's obligations under this Agreement shall survive termination of
this Agreement and shall continue as long as any Confidential
Information disclosed to Company remains confidential. Confidential
Information does not include any information which (a) is known to
Company prior to disclosure to Company by Continuum or Customer; (b)
becomes publicly known in the data processing industry through no
wrongful act of Company; or (c) is approved by release by written
authorization of Continuum. The existence of a copyright notice will
not cause, or be construed as causing, any part of the Software Product
to be a published copyrighted work or to be in the public domain.
8. INDEMNITY
Company agrees that it is fully responsible for the actions of its
employees with respect to the Confidential Information, whether or not
such employee was acting within the scope of his or her employment.
Customer and Company agree to indemnify Continuum for any damages,
costs, or expenses (including court costs and reasonable attorneys'
fees) suffered by Continuum as a result of any breach of this Agreement
by Company.
9. INJUNCTION
Customer and Company agree that, in the event of a breach or threatened
breach of this Agreement, Continuum will have no adequate remedy at law
and shall be entitled to a temporary restraining order and/or a
preliminary injunction without bond, and thereafter to a permanent
injunction.
10. TERM
Continuum's consent granted by this Agreement shall terminate
immediately upon the expiration or termination of the agreement for
processing services between Customer and Company. Company shall have no
access to Confidential Information after such date.
- 2 -
At the termination of the Product Development and Administrative
Services Agreement between First Allmerica Financial Life Insurance and
Annuity Company and Transamerica Occidental Life Insurance Company
effective November 1, 1997, but no later than the expiry of the
48-month initial term of the Agreement, CSC Continuum Inc. would be
willing to: (1) grant to Transamerica Occidental Life Insurance Company
a license for the base release of the version of the software product
LIFE-COMM III used by First Allmerica Financial Life Insurance Company
to service the Company's business at CSC Continuum's then current price
and then current terms, (2) grant to Transamerica Occidental Life
Insurance Company a license for them to use First Allmerica Financial
Life Insurance Company modifications to such base release for no
additional license fee and on the same terms as those for the base
release, but without any indemnity for infringement of intellectual
property by such modifications, and (3) consent to First Allmerica
Financial Life Insurance Company delivery of such base release and
modifications to Transamerica Occidental Life Insurance Company
following execution of foregoing licenses.
Upon execution by all of the parties, this Agreement shall be effective as of
the date of Continuum's signature below.
Transamerica Occidental Life Insurance Company
By: _____________________________________
(Signature)
Name: _____________________________________
(Printed)
Title: _____________________________________
Date: _____________________________________
CSC Continuum Inc.
By: _____________________________________
(Signature)
Name: _____________________________________
(Printed)
Title: _____________________________________
Date: _____________________________________
First Allmerica Financial Life Insurance Company
By: _____________________________________
(Signature)
Name: _____________________________________
(Printed)
Title: _____________________________________
Date: _____________________________________
- 3 -
Schedule 2.01A To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
INVENTORY OF SERVICES AND FUNCTIONS
REGISTERED REPRESENTATIVE LICENSING/SELLING FUNCTIONS (INCLUDING
PRODUCT ILLUSTRATIONS).......................................................................................Transamerica
PRODUCT MARKETING ILLUSTRATION SUPPORT FUNCTIONS...............................................................Transamerica
800-LINE TECHNICAL SUPPORT FOR ILLUSTRATIONS AND ASSET
ALLOCATION SOFTWARE..................................................................................Allmerica Financial
RECEIPT OF INITIAL APPLICATION FOR BUSINESS AND INITIAL PREMIUM.........................................Allmerica Financial
BUSINESS SUITABILITY...........................................................................................Transamerica
UNDERWRITING REVIEW/APPROVAL............................................................................Allmerica Financial
PROCESS INCOMPLETES/DECLINES............................................................................Allmerica Financial
POLICY ISSUE............................................................................................Allmerica Financial
POLICY PRINTING.........................................................................................Allmerica Financial
POLICY MAILING..........................................................................................Allmerica Financial
(POLICY LEVEL) FUND ALLOCATION..........................................................................Allmerica Financial
INITIAL PREMIUM COLLECTION..............................................................................Allmerica Financial
FREE LOOK REFUNDS/NOT TAKENS............................................................................Allmerica Financial
COMMISSION PROCESSING/PAYMENT..................................................................................Transamerica
BILLING (ANNUAL, SEMI-ANNUAL, QUARTERLY)................................................................Allmerica Financial
COLLECTIONS.............................................................................................Allmerica Financial
LOCK BOX MANAGEMENT.....................................................................................Allmerica Financial
MONTHLY AUTOMATIC PREMIUM...............................................................................Allmerica Financial
FUND TRANSFER/REALLOCATIONS.............................................................................Allmerica Financial
800-LINE TELEPHONE CUSTOMER SERVICES....................................................................Allmerica Financial
INVENTORY OF SERVICES AND FUNCTIONS (Continued)
POLICY HISTORY REQUESTS.................................................................................Allmerica Financial
BENEFICIARY AND OWNER CHANGES...........................................................................Allmerica Financial
CUSTOMER CONFIRMATIONS (FINANCIAL TRANSACTIONS).........................................................Allmerica Financial
POLICY CHANGES..........................................................................................Allmerica Financial
ADDRESS CHANGES.........................................................................................Allmerica Financial
LOANS/PARTIAL WITHDRAWALS...............................................................................Allmerica Financial
1035 EXCHANGES..........................................................................................Allmerica Financial
SURRENDERS..............................................................................................Allmerica Financial
CONSERVATION...................................................................................................Transamerica
WRITTEN CORRESPONDENCE
PRE SALE (i.e., BEFORE APPLICATION SIGNED)............................................................Transamerica
POST SALE......................................................................................Allmerica Financial
DEATH AND OTHER POLICY CLAIMS
NOTIFICATION...................................................................................Allmerica Financial
SYSTEM PROCESSING..............................................................................Allmerica Financial
INVESTIGATION/REVIEW...........................................................................Allmerica Financial
SETTLEMENT OPTIONS.............................................................................................Transamerica
ANNUAL STATEMENTS.......................................................................................Allmerica Financial
INSURANCE ACCOUNTING (e.g., POLICY GAAP AND STATUTORY ACCOUNTING)..............................................Transamerica
TAX WITHHOLDING AND INFORMATION REPORTING...............................................................Allmerica Financial
Schedule 2.01B To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
POLICY SERVICES - PROJECT SCHEDULE OF EVENTS
DEVELOPMENT OF DETAILED BUSINESS SPECIFICATIONS........September 15, 1997
LIFE-COMM, ALLMERICA FINANCIAL AND TRANSAMERICA
INTERFACE SYSTEMS PROGRAMMING AND SYSTEM TESTING.........October 3, 1997
BUSINESS ACCEPTANCE AND MODEL OFFICE TESTING.............December 5, 1997
IMPLEMENTATION OF OPERATIONAL PHASE......................December 8, 1997
Schedule 2.01C To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company, effective November 1, 1997.
SERVICE STANDARDS
Service Standard
A. Underwriting
Initial Underwriting Review........................................................................3 Business Days
Pending Underwriting Review........................................................................3 Business Days
Follow-Up..........................................................................................3 Business Days
Final Action.......................................................................................2 Business Days
B. Policy Administration
Premium Payments Applied....................................................98% Applied Within 1 Business Day
Fund Transfers/Reallocations Processed................................................98% Processed Within 1 Business Day
New Business*..............................................................98% Issued Within 2 Business Days
1035 Exchanges*.............................................................98% Mailed Within 3 Business Days
Loans/Partial Withdrawals.....................................................98% Processed Within 2 Business Days
Policy Changes (i.e. increases, decreases
reinstatements)*............................................................98% Processed Within 5 Business Days
Policy Surrenders.............................................................98% Processed Within 5 Business Days
Address Changes...............................................................95% Processed Within 5 Business Days
Beneficiary and Owner Changes.................................................95% Processed Within 5 Business Days
C. Customer Service
Average Speed to Answer.................................................................................20 Seconds
Abandonment Rate................................................................................................3%
Return Calls.........................................................................Within 3 Hours or as Promised
Correspondence............................................Letter to Inquirer within 5 Business Days or as Promised
Complaint Handling...............................................Acknowledge within 1 Business Day, Final Response
to be sent within a mutually acceptable time frame
intended to meet all state regulatory requirements
D. Death and Other Policy Claims......................................Policy claims will be processed within mutually
acceptable time frames intended to meet
all state regulatory requirements
* Measured from date of Policy underwriting approval
Schedule 12.20 To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company, effective November 1, 1997.
Transamerica Marks and Names
Transamerica
Transamerica Occidental
Transamerica Occidental Life
The Pyramid Logo
Schedule 3.01A To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company ("Transamerica"), effective November 1, 1997.
1. LIFE-COMM III - Licensed by CSC Continuum, Inc.
2. Variable Product Administration System - Licensed by Douglas G. Draeseke
3. Triton Valuation System - Licensed by Price Waterhouse
4. R2 Reinsurance System - Licensed by The Actuarial Network
5. Life Underwriting System - Licensed by Lincoln National
6. Illustration - Allmerica Financial**
7. Asset Allocator - Allmerica Financial**
**Software that Allmerica Financial is developing specifically for Transamerica.
Transamerica understands and agrees that the source codes for this software
are proprietary to Allmerica Financial and will not be given to
Transamerica under any circumstances.
LIST OF SCHEDULES
TO
PRODUCT DEVELOPMENT
AND ADMINISTRATIVE SERVICES AGREEMENT
Schedule 1.01 AFLIAC Policy Forms
Schedule 1.02 Policy Form Specifications
Schedule 2.01A Inventory of Services and Functions
Schedule 2.01B Policy Services - Project Schedule of Events
Schedule 2.01C Service Standards
Schedule 3.01A Computer System Software
Schedule 3.01B Functional Outline Documents
Schedule 3.02 Continuum Non-Disclosure and Non-Use Agreement
Schedule 12.20 Transamerica Marks and Names