Document:

lifereagreement.htm

Exhibit 10.13

REINSURANCE AGREEMENT

referred to as the “Agreement”

BETWEEN

UNIVERSAL GUARANTY LIFE INSURANCE COMPANY

OF

SPRINGFIELD, ILLINOIS

#5882-1

referred to in this Agreement as the “Company”

AND

LIFE REASSURANCE CORPORATION OF AMERICA

OF

STAMFORD, CONNECTICUT

referred to in this Agreement as “Life Re”

Effective:  December 1, 1993

TABLE OF CONTENTS

	
ARTICLE I

	
AUTOMATIC REINSURANCE...........................................................................................................................................................................

	
1

	
1.

	
Insurance............................................................................................................................................................................................................

	
1

	
2.

	
Coverages...........................................................................................................................................................................................................

	
2

	
3.

	
Jumbo Risk..........................................................................................................................................................................................................

	
2

	
4.

	
Waiver of Disability Acceptance and Participation Limits.............................................................................................................................................

	
3

	  	  	  
	
ARTICLE II

	
FACULTATIVE REINSURANCE.........................................................................................................................................................................

	
3

	  	  	  
	
ARTICLE III

	
LIABILITY...................................................................................................................................................................................................

	
3

	
1.

	
Automatic Reinsurance Liability..............................................................................................................................................................................

	
3

	
2.

	
Facultative Reinsurance Liability..............................................................................................................................................................................

	
4

	  	  	  
	
ARTICLE IV

	
AMOUNT OF INSURANCE...............................................................................................................................................................................

	
4

	
1.

	
Amounts.............................................................................................................................................................................................................

	
4

	
2.

	
Minimum Amounts...............................................................................................................................................................................................

	
5

	
3.

	
Reductions and Terminations.................................................................................................................................................................................

	
5

	
4.

	
Reinstatements....................................................................................................................................................................................................

	
6

	  	  	  
	
ARTICLE V

	
PROCEDURES FOR REINSURANCE..................................................................................................................................................................

	
6

	
1.

	
Monthly Reports..................................................................................................................................................................................................

	
6

	
2.

	
Facultative Reinsurance.........................................................................................................................................................................................

	
7

	
3.

	
Quarterly Reports.................................................................................................................................................................................................

	
8

	  	  	  
	
ARTICLE VI

	
PREMIUMS..................................................................................................................................................................................................

	
8

	
1.

	
Life Insurance......................................................................................................................................................................................................

	
8

	
2.

	
Disability Benefits.................................................................................................................................................................................................

	
8

	
3.

	
Preliminary Term Insurance....................................................................................................................................................................................

	
9

	
4.

	
Premium Taxes.....................................................................................................................................................................................................

	
9

	
5.

	
Payments............................................................................................................................................................................................................

	
9

	
6.

	
Nonpayment of Reinsurance Premiums.....................................................................................................................................................................

	
9

	
7.

	
Misstatements.....................................................................................................................................................................................................

	
10

	  	  	  
	
ARTICLE VII

	
CLAIMS....................................................................................................................................................................................................

	
10

	
1.

	
Notice................................................................................................................................................................................................................

	
10

	
2.

	
Company’s Decision.............................................................................................................................................................................................

	
10

	
3.

	
Contested Claims..................................................................................................................................................................................................

	
11

	
4.

	
Misstatements.....................................................................................................................................................................................................

	
11

	
5.

	
Payment.............................................................................................................................................................................................................

	
12

	
6.

	
Extra-Contractual Damages.....................................................................................................................................................................................

	
12

	
7.

	
Disability Waiver of Premium Insurance...................................................................................................................................................................

	
12

	  	  	  
	
ARTICLE VIII

	
INSOLVENCY..............................................................................................................................................................................................

	
13

	  	  	  
	
ARTICLE IX

	
ARBITRATION............................................................................................................................................................................................

	
14

	  	  	  
	
ARTICLE X

	
GENERAL PROVISIONS................................................................................................................................................................................

	
15

	
1.

	
Policy Forms and Rates..........................................................................................................................................................................................

	
15

	
2.

	
Reinsurance Conditions.........................................................................................................................................................................................

	
15

	
3.

	
Expenses.............................................................................................................................................................................................................

	
16

	
4.

	
Errors and Omissions.............................................................................................................................................................................................

	
16

	
5.

	
Offset..................................................................................................................................................................................................................

	
16

	
6.

	
Inspection...........................................................................................................................................................................................................

	
16

	  	  	  
	
ARTICLE XI

	
RECAPTURE...............................................................................................................................................................................................

	
17

	  	  	  
	
ARTICLE XII

	
DURATION OF AGREEMENT.............................................................................................................................................................................

	
17

	  	  	  
	
ARTICLE XIII

	
EXECUTION................................................................................................................................................................................................

	
18

	  	  	  
	  	  	  
	
Schedule A

	
Retention and Reinsurance Limits

	  
	
Schedule B

	
Reinsurance Statement and Bulk Reporting Forms

	  
	
Schedule C

	
Premiums

	  

The Company and Life Re mutually agree to reinsure on the terms and conditions set forth below.  This Agreement is solely between the Company and Life Re, and performance of the obligations of each party under this Agreement will be rendered solely to the other party.  In no instance will anyone other than the Company or Life Re have any rights under this Agreement.

The policies and riders set forth in Schedule A that are reinsured under this Agreement are hereinafter referred to collectively as “Reinsured Policies” and individually as a “Reinsured Policy”.

ARTICLE I

AUTOMATIC REINSURANCE

	
1.

	
Insurance

The Company will cede and Life Re will accept reinsurance under the policies and riders written by the Company on citizens of the United States or Canada domiciled in the United States or Canada at the time of policy issue under the plans shown in Part III of Schedule A.  When the Company retains its maximum limit of retention, as shown in Part I of Schedule A, the Company will cede and Life Re will accept automatically reinsurance in amounts not exceeding the amounts per life in Part II of Schedule A of this Agreement.  Where the Company has more than one Agreement with Life Re, the total amount per life automatically ceded to Life Re, under all Agreements combined, will not exceed the automatic binding limits available to the Company under the Agreement with the highest binding authority.  Life Re will accept automatic reinsurance when (a) the Company already has for its own account its maximum limit of retention on the life and for this reason alone is not retaining any portion of the insurance applied for on a current application, and (b) in the Company’s opinion there has been no adverse change in the insurance status of the risk since the Company’s last acceptance for its own retention.  A risk as defined in the following categories is not eligible for reinsurance under this paragraph:

	
(a)

	
A jumbo risk as defined in paragraph 3 below.

 

	
(b)

	
A risk which has been sent to Life Re or any other reinsurer for facultative underwriting consideration.

	
2.

	
Coverages

The coverages or risks reinsured under Article I, 1. is life insurance and waiver of disability benefits to the extent of limits specified in Schedule A.

	
3.

	
Jumbo Risk

A jumbo risk is one where the papers of the Company, including all papers that are part of the current application, indicate that the person to be insured has or will have total insurance in force in all companies greater than:

	  	
Life

	
All Ages

	
$5,000,000

	
4.

	
Waiver of Disability Acceptance and Participation Limits

Life Re’s maximum acceptance limit for waiver of disability benefits is $2,000,000 per life, and the maximum participation limit for such benefits is $3,000,000 per life.

	
5.

	
Regular Limits of Retention

The Company may modify its regular limits or retention, detailed in Schedule A, by giving thirty days’ written notice to Life Re.  The amount of reinsurance to be ceded and accepted automatically after the new limits take effect will be determined by mutual Agreement.

ARTICLE II

FACULTATIVE REINSURANCE

Whether reinsurance is available as Automatic Reinsurance under Article I or not, the Company may submit, for consideration by Life Re, a request for any amount of reinsurance of the coverages in Article I, 2. that the Company may require.

ARTICLE III

LIABILITY

	
1.

	
Automatic Reinsurance Liability

The liability of Life Re on any policy reinsured on an automatic basis under this Agreement begins and ends at the same time as that of the Company.

	
2.

	
Facultative Reinsurance Liability

The liability of Life Re on any policy reinsured on a facultative basis under this Agreement begins and ends at the same time as that of the Company, provided that:

	
(a)

	
Life Re has given the Company an unconditional approval on the application for reinsurance, and

 

	
(b)

	
the Company has notified Life Re of its acceptance of such offer in writing within ninety (90) days.

ARTICLE IV

AMOUNT OF INSURANCE

	
1.

	
Amounts

Life insurance and waiver of disability benefits under this Agreement will be on the Yearly Renewable Term plan for the amount at risk under the policy reinsured.  For the purpose of this Agreement, the amount as risk will be calculated in the following manner:

	  	
R = D – X

 

	
Where:

	
D = Death Benefit

 

	  	
X = The Ceding Company’s Retention

	
2.

	
Minimum Amounts

If the amount to be reinsured with Life Re and the Company’s other excess reinsurers under a policy is less than $25,000, the Company will retain all of the liability for such policy.  If the amount to be reinsured with Life Re land the Company’s other excess reinsurers meets or exceeds $25,000 on any policy, such amount will be reinsured pursuant to this Agreement and the Company’s agreements with its other excess reinsurers.

	
3.

	
Reductions and Terminations

Reinsurance amounts are calculated in terms of coverages on a “per policy” basis.  If any of the Company’s policies or riders on an insured are reduced or terminated, the reinsurance under this Agreement will be reduced by the corresponding amount.  The reduction will not be applied to force the Company to reassume more than its regular retention limit at the time of the reduction for the age of issue, mortality rating and form of  the policy or policies for which reinsurance is being terminated.  The reduction first will be applied to reinsurance, if any, on the particular policy reduced.  If the reduction exceeds the amount of reinsurance on that policy, the reduction will then be applied to reinsurance on other policies on the insured in the order in which the policies were effected, the first  effected will be the first terminated or reduced.  If reinsurance has been ceded to more than one reinsurer, the reduction in Life Re’s reinsurance will be in proportion to the reduction in the total.  After the proportion has been determined, the rules above will be used.

	
4.

	
Reinstatements

	
(a)

	
Automatic Reinsurance

A Reinsured Policy originally ceded under this Agreement on an automatic basis, that is reduced, terminated or lapsed, and later reinstated by the Company pursuant to policy provisions will be accepted for reinsurance by Life Re up to such amount as would be in force if such Reinsured Policy had not been reduced, terminated or lapsed.  The Company will pay to Life Re, Life Re’s Share of any premiums and interest that the Company has received for reinstatement.

 

	
(b)

	
Facultative Reinsurance

A Reinsured Policy originally ceded under this Agreement on a facultative basis, that was reduced, terminated, or lapsed, will require approval by Life Re prior to reinstatement of such a policy, if the Company has retained less than 50% of the risk.  Upon such approval, reinsurance for the policy will be for the amount that would be in force had the policy not been reduced, terminated, or lapsed.

ARTICLE V

PROCEDURES FOR REINSURANCE

	
1.

	
Monthly Reports

Within ten (10) calendar days following the end of each calendar month, the Company will forward to Life Re a report as shown in Part I of Schedule B.  Along with the report, the Company will remit a check to Life Re for the balance indicated plus interest for the number of days since the middle of the preceding month, as if all transactions had occurred in the middle of the month.  If a balance is due the Company, it will be remitted promptly by Life Re, plus interest for the number of days since the middle of the preceding month, as if all transactions had occurred in the middle of the month.  Interest will accrue on such payments at an annual rate equal to 7%.

	
2.

	
Facultative Reinsurance

When a Company requests facultative reinsurance, the application will be made by submitting Life Re Form 2068, Bulk Preliminary Notification, shown in Part II of Schedule B (or a mutually agreeable form).  The Company will send to Life Re any and all information it has about the risk, including specifically, but not limited to, copies of the application, medical examiners’ reports, attending physicians’ statements, inspection reports, and other reports and other papers bearing on the insurability of the risk.  Upon receipt of the application, Life Re will analyze the risk promptly and as soon as possible notify the Company of its decision and its classification of the risk.  If the Company elects to use Life Re for facultative reinsurance and after the Company’s policy has been paid for and delivered, the Company will activate the facultative cession on the Company’s reinsurance system, within 120 days of Life Re’s decision to accept the case.  When the preceding facultative procedures have been satisfied Article V, paragraphs 2 and 4, apply to Facultative as well as Automatic Reinsurance.  A facultative indicator must be present on the monthly reinsurance transaction and inforce reports.

	
3.

	
Quarterly Reports

Within thirty (30) calendar days following the end of each calendar quarter, the Company will forward to Life Re a detailed reserve and inforce run.

ARTICLE VI

PREMIUMS

	
1.

	
Life Insurance

Premiums per $1,000 for life insurance rated standard and substandard are given in Schedule C.  The premiums per $1,000 are applied to the amount of life reinsurance as outlined in Article IV.  A policy fee, when applicable, is charged in each year in addition to the premium based on the amount of life insurance.  Life Re anticipates that these premiums will be continued indefinitely for all business ceded under this Agreement.  For  the purpose of satisfying requirements for deficiency reserves imposed by various state insurance departments, Life Re will guaranty for renewal the greater of the premiums provided in this Agreement or premiums based on the 1980 CSO Table at 2.5% interest.  When the Company charges a flat extra premium, whether alone or in addition to a premium based on a multiple table, the Company will pay this premium on the reinsurance amount in addition to the standard or multiple table premium for the rating and plan of reinsurance.

	
2.

	
Disability Benefits

Premiums for waiver of disability benefits will be paid at the same rate as the Company charges for the benefit on which reinsurance in Life Re is based.

	
3.

	
Preliminary Term Insurance

If the Company issued a policy with preliminary term insurance, the reinsurance premium for the preliminary term period will be paid to Life Re at the same rate the Company charges for the policies on which reinsurance in Life Re is based less commissions at the percentage paid by the Company.

This rule applies to all benefits under the preliminary term insurance.  For the first policy year after the preliminary term period, the premiums for all benefits will be computed at first year.

	
4.

	
Premium Taxes

The Company and Life Re agree that Life Re will not reimburse the Company for state premiums taxes on reinsurance premiums received from the Company.

	
5.

	
Payments

Premiums are payable annually in advance.  If reinsurance is reduced, terminated, increased or reinstated during the year, pro-rata adjustment will be made by Life Re and the Company on all premium items except policy fees.

	
6.

	
Nonpayment of Reinsurance Premiums

Except as provided in Article X, 5., the payment of reinsurance premiums is a condition precedent to the liability of Life Re under Reinsured Policies.  In the event of nonpayment of reinsurance premiums as provided in this Article, Life Re will have the right to terminate the reinsurance under all Reinsured Policies having reinsurance premiums in arrears.

	
7.

	
Misstatements

If the insured’s age or sex was misstated and the amount of insurance on the Company’s policies is adjusted, the Company and Life Re will share the adjustment in proportion to the amount of liability of each at the time of issue of the policies.  Premiums will be recalculated for the correct age or sex and amounts according to the proportion as above and adjusted without interest.  If the insured is still alive, the method above will be used for past years and the amount of reinsurance and premium adjusted for the future to the amount that would have been correct at issue.

ARTICLE VII

CLAIMS

	
1.

	
Notice

The Ceding Company shall give Life Re prompt notice of any claim.  Copies of the proofs obtained by the Ceding Company together with a statement showing the amount due or paid on such claim by the Ceding Company shall be furnished to Life Re at the time payment is requested.

 

	
2.

	
Company’s Decision

Life Re shall accept the decision of the Ceding Company in settling the claim and shall pay its portion to the Ceding Company upon receipt of proof that the Ceding Company has paid the claimant.  It is agreed, however, that if a lesser amount at risk is retained by the Ceding Company than the amount ceded to Life Re, the Ceding Company shall consult with Life Re concerning its investigation and/or payment of the claim, although the final decision shall be that of the Ceding Company.

	
3.

	
Contested Claims

The Ceding Company shall notify Life Re of its intention to contest, compromise, or litigate a claim involving reinsurance, and Life Re shall pay its share or the payment and specific claim expenses therein involved, unless it declines to be a party to the contest, compromise, or litigation in which case it shall pay the full amount of the reinsurance to the Ceding Company.  “Claim expenses” shall be deemed to mean only the reasonable legal and investigative expenses connected with the litigation or settlement of claims.  “Claim expenses” shall not include expenses incurred in connection with a dispute or contest arising out of conflicting claims of entitlement to policy proceeds which the Ceding Company admits are payable or any routine claim administrative expenses, Home Office or otherwise.

	
4.

	
Misstatements

In the event the amount of insurance provided by a policy or policies reinsured hereunder is increased or reduced because of a misstatement of age or sex established after the death of the insured, Life Re shall share in the increase or reduction in the proportion that the net liability of Life Re bore to the sum of the retained net liability of the Ceding Company and the net liability of other reinsurers immediately prior to such increase or reduction.  The reinsurance with Life Re shall be written from commencement on the basis of the adjusted amounts using premiums and reserves at the correct ages and sex.  The adjustment for the difference in premiums shall be made without interest.

	
5.

	
Payment

It is understood and agreed that the payment of a death claim by Life Re shall be made in one sum regardless of the mode of settlement under the policy of the Ceding Company.

	
6.

	
Extra-Contractual Damages

In no event shall Life Re have any liability for any Extra-Contractual damages which are assessed against the Ceding Company as a result of acts, omissions or course of conduct committed by the Ceding Company or its agents, other than a good faith decision to deny claim liability, in connection with insurance reinsured under this Agreement.  It is recognized that there may be special circumstances involved which indicate that Life Re should participate in certain assessed damages.  These circumstances are not amenable to advance specific definition, but could include those situations in which Life Re was an active party in the act, omission or course of conduct which ultimately results in the assessment of such damages.  The extent of such participation will be determined on a good faith assessment of culpability in each case, but all factors being equal, the division of any such assessment will generally be in the proportion of net liability borne by each party.

	
7.

	
Disability Waiver or Premium Insurance

If a claim is approved for disability waiver of premium insurance reinsured under this Agreement, the Ceding Company shall continue to pay reinsurance premiums to Life Re.  Life Re shall reimburse the Ceding Company Life Re’s share of the annual liability.

ARTICLE VIII

INSOLVENCY

All reinsurance under this Agreement will be paid by Life Re directly to the Company, its liquidator, receiver, or statutory successor, on the basis of the liability of the Company under the policy or policies reinsured without diminution because of the insolvency of the Company.  In the event of the insolvency of the Company, the liquidator, receiver, or statutory successor of the Company will give written notice of a pending claim against the Company on any policy reinsured within a reasonable time after the claim is filed in the insolvency proceedings.  While the claim is pending, Life Re may investigate and interpose, at its own expense, in the proceedings where the claim is to be adjudicated , any defenses which it may deem available to the Company or its liquidator, receiver or statutory successor.  The expense incurred by Life Re will be charged, subject to court approval, against the Company as an expense of liquidation to the extent of a proportionate share of the benefit that accrues to the Company as a result of the defenses by Life Re.  Where two or more reinsurers are involved and a majority in interest elect to defend a claim, the expense will be apportioned in accordance with the terms of the Reinsurance Agreement as if the expense had been incurred by the Company.

ARTICLE IX

ARBITRATION

Life Re and the Company intend that any dispute between them under or with respect to this Agreement be resolved without resort to any litigation.  Accordingly, Life Re and the Company agree that they will negotiate diligently and in good faith to agree on a mutually satisfactory resolution of any such dispute; provided, however, that if any such dispute cannot be so resolved by them within sixty calendar days (or such longer period as the parties may agree) after commencing such negotiations, Life Re and the Company agree that they will submit such dispute to arbitration in the manner specified in, and such arbitration proceeding will be conducted in accordance with, the rules of the American Arbitration Association.

The arbitration hearing will be before a panel of three arbitrators, each of whom must be a present or former officer of a life insurance or life reinsurance company.  Life Re and the Company will each appoint one arbitrator by written notification to the other party within thirty calendar days after the date of the mailing of the notification initiating the arbitration.  These two arbitrators will then select the third arbitrator within sixty calendar days after the date of the mailing of the notification initiating arbitration.

If either Life Re or the Company fail to appoint an arbitrator, or should the two arbitrators be unable to agree upon the choice of a third arbitrator, the president of the American Arbitration Association or of its successor organization or (if necessary) the president of any similar organization designated by lot of Life Re and the Company within thirty calendar days after the request will appoint the necessary arbitrators.

The vote or approval of a majority of the arbitrators will decide any question considered by the arbitrators; provided, however, that if no two arbitrators reach the same decision, then the average of the two closest mathematical determinations will constitute the decision of all three arbitrators.  The place of arbitration will be Stamford, Connecticut.  Each decision (including without limitation each award) of the arbitrators will be final and binding on all parties and will be nonappealable, and (at the request of either of Life Re or the Company) any award of the arbitrators may be confirmed by a judgment entered by any court of competent jurisdiction.  No such award or judgment will bear interest.  Each party will be responsible for paying (a) all fees and expenses charged by its respective counsel, accountants, actuaries, and other representatives in conjunction with such arbitration and (b) one-half of the fees and expenses charged by each arbitrator.

ARTICLE X

GENERAL PROVISIONS

	
1.

	
Policy Forms and Rates

The Company will furnish Life Re with a copy of its application forms, policy and rider forms, premium and non-forfeiture value manuals, reserve tables and any other forms or tables needed for proper handling of reinsurance under this Agreement.  It will advise Life Re promptly of any changes or new forms it may adopt from time to time.

	
2.

	
Reinsurance Conditions

The reinsurance is subject to the same limitations and conditions as the insurance under the policy or policies written by the Company on which the reinsurance is based.

	
3.

	
Expenses

The Company will bear the expense of all medical examinations, inspection fees, and other charges in connection with the original policy.

	
4.

	
Errors and Omissions

If either the Company or Life Re fails to perform an obligation under this Agreement, and such failure is the result of an Error on the part of the Company or Life Re, such Error will be corrected by restoring both the Company and Life Re to the positions they would have occupied had no such Error occurred.  For this purpose, “Error” shall mean any clerical mistake made inadvertently, excluding errors of judgement and all other forms of error.  For business reported but not covered under the provisions of this Agreement, Life Re shall be obligated only for the return of premium paid.

	
5.

	
Offset

Any amount which either the Company or Life Re is contractually obligated to pay to the other party may be paid out of any amount which is due and unpaid under this Agreement or under any other agreement heretofore and hereafter entered into between the Company and Life Re.  The application of this offset provision shall not be deemed to constitute diminution in the event of insolvency.

	
6.

	
Inspection

At any reasonable time, Life Re may inspect the original papers and any and all books or documents at the Home Office of the Company relating to or affecting reinsurance under this Agreement.

ARTICLE XI

RECAPTURE

After the Reinsured Policies have been in force for ten (10) years, the Company may recapture all, but not less than all, of the Reinsured Policies under this Agreement.  If the Company elects to recapture, it will notify Life Re in writing at least ninety (90) days before it begins recapturing all Reinsured Policies.  At the next anniversary (or tenth anniversary, if later) of each Reinsured Policy, the reinsurance under this Agreement will be terminated as to that Reinsured Policy.

ARTICLE XII

DURATION OF AGREEMENT

This Agreement will be effective on and after the effective date stated in Article XIII.  It is unlimited in duration but may be amended by mutual consent of the Company and Life Re.  It may be terminated as to new reinsurance by either party giving ninety (90) days’ written notice to the other.  Termination as to new reinsurance does not affect existing reinsurance.  That reinsurance will remain in force until termination of the Company’s policy or policies on which the reinsurance is based in accordance with the terms of this Agreement.

ARTICLE XIII

EXECUTION

In witness of the above, this Agreement is signed in duplicate at  the dates and places indicated with an effective date of December 1, 1993.

UNIVERSAL GUARANTY LIFE INSURANCE COMPANY

	
Date:

	
11/15/93

	  	
By:

	
/s/ James E. Melville

	  	  	  	
Name:

	
James E. Melville

	  	  	  	
Title:

	
President

LIFE REASSURANCE CORPORATION OF AMERICA

	
Date:

	
October 1, 1993

	  	
By:

	
/s/ Stephen D. Poth

	  	  	  	
Name:

	
Stephen D. Poth

	  	  	  	
Title:

	
Senior Vice President

SCHEDULE A

Agreement Number 5882-1

Part I – RETENTION LIMITS OF UNIVERSAL GUARANTY LIFE INSURANCE COMPANY

	
A.

	
LIFE

 

	  	
The Company’s retention:

 

	  	
Life Insurance – All Ratings

	
Ages

 

0 – 65

65 and Over

	
Retention

 

$100,000

   60,000

	
B.

	
WAIVER

 

	  	
Same as Life

Part II – AUTOMATIC BINDING LIMITS (through age 70)

	
A.

	
LIFE

 

	  	
Life Re’s share is 50% of 10 times the Company’s retention to a maximum of $1,000,000; of which the maximum share to Life Re is $500,000.

	  	  
	
B.

	
WAIVER

 

	  	
Same as Life

Part III – PLANS COVERED

The preceding schedules refer to insured lives and riders under the following plans:

	  	
BASE POLICY FORMS

	  	  
	
1200A

	
Funder 1200 10 Year Premium Whole Life Policy

	
1203

	
Non Renewable 10 Year Term Base Plan

	
L-185 (U.G.)

	
Interest Sensitive Whole Life Insurance Policy

	
L-396 (U.G.)

	
5 Year R&C Term Policy

	
L193A

	
Small Whole Life Policy

	
REG-TERM (U.G.)

	
“Term Guard Plus” Term Life Insurance

	
U159385A

	
Universal Life Century 2000

	
UC-120

	
Universal Life Century Series (USL 100-400)

	
UC-150

	
Interest Sensitive Life contracts (ISL 100-300)

	
UL90A (U.G.)

	
Universal Life UL90A

	  	  
	  	
RIDERS & SUPPLEMENTAL BENEFITS

	  	  
	
R-902 (U.G.)

	
Annual Renewable Level Term (UL90A)

	
R-904 (U.G.)

	
Cov Ins Annual Renewable Level Term Rdr (UL90A)

	
R1201

	
Non Renewable 10 Year Term Rider for Funder 1200

	
R904UG93

	
Covered Insured ART Rider (UL Age Last)

	
US-125

	
Annual Renewable Level Term Rider (USL)

	
US-131

	
Annual Renewable Level Term Rider (ISL)

SCHEDULE B - PART I

Life Re Agreement Number 5882-1

LIFE REASSUSRANCE CORPORATION OF AMERICA

SELF ADMINISTERED/BILK REINSURANCE SUMMARY REPORTING FORM

	
Ceding Company

	  	  	
Reinsurer

	  
	
Treaty/Account #

	  	  	
Period Experience is for

	  
	
Coin ___  YRT ___  Mod Co ___  Other _____

	  	
Interest Sensistive:

	
Yes ____

	
No ____

	
Reinsurance premium Mode:

	
Monthly __

	
Quarterly __

	
Annual __

	
In Advance __

	
In Arrears __

	
Reinsurance Reporting Mode:

	
Monthly __

	
Quarterly __

	
Annual __

	  	  
	
Contact

	  	  	
Date

	  	  	
Phone

	  

	
SECTION I - ACCOUNTING

	  	
*** Premiums ***

	
*** Allowances ***

	
Other

Benefit

	
 

Total

	  	
First Year

	
Renewal Year

	
First Year

	
Renewal Year

	
Life

	  	  	  	  	  	  
	
ADB

	  	  	  	  	  	  
	
Waiver of Premium

	  	  	  	  	  	  
	
Other

	  	  	  	  	  	  
	
TOTAL

	  	  	  	  	  	  
	
SECTION II – RESERVE INFORMATION

	
Amount of check

	
Amount of Rein (000)

	
Issue

Year

	
Reserves Reinsured

	
Life

	
ADB

	
Life

	
ADB

	
Waiver

	
Subst’d

	
Deficiency

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  

	
SECTION III – POLICY EXHIBIT INFORMATION

	  	
Current Perod

	  	
Year to Date

	  	
No of       Amt of *

Policies   Rein (000)

	  	
No. of            Amt of *

Policies         Rein (000)

	
A. Inforce Beg, of Period

	  	
A

	  
	
  1. New Business                                                                                                                   Auto

	  	
       1. Auto

	  
	
Fac

	  	
           Fac

	  
	
  2. Conversions/Replacements-On

	  	
2.

	  
	
  3. Reinstatements

	  	
3.

	  
	
  4. Other Increases

	  	
4.

	  
	
  5. Not Taken

	  	
5.

	  
	
     a) Total Inc (1+2+3+4-5)

	  	
              a.

	  
	
  6. Death

	  	
6.

	  
	
  7. Conversions/Replacements-Off

	  	
7.

	  
	
  8.  Lapses

	  	
8.

	  
	
  9. Surrenders

	  	
9.

	  
	
10. Expiry

	  	
10.

	  
	
11. Recapture

	  	
11.

	  
	
12.Other Decreases

	  	
12.

	  
	
    b) Total Dec (6+7+8+9+10+11+12)

	  	
                b.

	  
	
B. Inforce End of Period (A+a-b)

	  	
B.

	  
	
*Specified Reinsurers’s Share of Liability

	  	
Form #TA1(4/91)

SCHEDULE B – PART I

Agreement Number 5882-1

SELF-ADMINISTERED REINSURANCE

POLICY TRANSACTION DETAIL REPORT

	
A.

	
The policy detail report should be broken down into the following categories:

	  	  
	  	
1 – New Business

	  	
2 – First Year Other Than New Business*

	  	
3 - Renewals

	  	
4 – Terminations – (First year/Renewal split optional, subtotals by termination type

      optional).

	  	
5 – Changes - (First year/Renewal split optional, subtotals by change type optional).

	  	  

*If premium mode other than annual.

Subtotals should be provided by plan code for each of the above categories.  Where smokers and non-smokers are not assigned separate plan codes, subtotals for the above should be further broken down to provide totals by smoking habit.

Automatic and facultative business should be shown separately for each of the five categories above.

If more than one currency is involved per treaty, provide separate reports by currency.

If there is any qualified pension business ceded, please provide separate reporting.

	
B.

	
Field Descriptions

	  	  
	  	  	  	  

	  	
1.

	
Insured Information

 

	  	  	
Name

	
Full name (Last, first, middle) for insured

 

	  	  	
DOB

	
Full date of birth (MM/DD/YY) for insured

 

	  	  	
Sex

	
M/F

 

	  	  	
S/N

	
Smoker habit.  Up to three spaces should be allotted for this field to accommodate codes relevant to the treaty reported.  Suggested codes are:

 

	  	  	
S

	
Smoker

	  	  	
N

	
Nonsmoker

	  	  	
A

	
Aggregate (or composite)

	  	  	
PN

	
Preferred nonsmoker

	  	  	
PS

	
Preferred smoker

 

	  	  	
Age

	
Actual age at issue

 

	  	  	
ST

	
State of residence

	  	  	  	  
	  	
2

	
Policy Information

 

	  	  	
Policy No.

	
Ceding Company’s policy number.

	  	  	  	
Policies should be listed in numerical order.

	  	  	  	  
	  	  	
Plan

	
Ceding Company’s plan code.

	  	  	  	  
	  	  	
DOI

	
Full policy date (MM/DD/YY).  This is the date from which renewal processing will be driven.

	  	  	  	  
	  	  	
DRN

	
Duration from original policy date (i.e., where attained scale rates apply to policy conversions or replacements).

	  	  	  	  
	  	  	
A/F

	
Automatic/Facultative indicator.  Business ceded on a fac/ob basis can be indicated by an “0” in this field.

	  	  	  	  
	  	  	
Rating

	
Indicate table if substandard.  100% for standard issues.

	  	  	  	  
	  	  	
Flat

	
Flat extra amount per thousand.

	  	  	  	  
	  	  	
Yrs

	
Duration of flat extra (number of years).

	  	  	  	  
	  	  	
OPT

	
For Universal Life plans only, indicate death benefit Option 1 or 2.  Under Option 1, the level death benefit option, the amount at risk decreases as the cash value accumulates.  Option 2 produces an increasing death benefit, equivalent to the specified amount plus the accumulated cash value.  The Reinsured Net Amount at Risk remains level under this option.

	  	  	  	  
	  	  	
COV

	
L – Basic Coverage

	  	  	  	
WP – Waiver of Premium

	  	  	  	
ADB – Accidental Death Benefit

	  	  	  	  
	  	  	
DIRECT

FACE

	
Full face amount of the coverage at issue.

	  	  	  	  
	  	  	
REINS. FACE

	
Initial amount ceded.

	  	  	  	  
	  	  	
REINS. AAR

	
Current reinsured amount at risk.

	  	  	  	  
	  	  	
Chg. Amt.

	
Any change to the reinsurance amount at risk since previous report should be illustrated here.

	  	  	  	  
	  	  	
Chg. Dt.

	
Effective date of policy changes.  Applies to termination and change reports, may be blank for new business and renewals.

	  	  	  	  
	  	  	
TR

	
Transaction type (see list in Part C below).

	  	  	  	  
	  	  	
Base Prem.

	
Gross premium due for each coverage (excluding substandard premium amounts).

	  	  	  	  
	  	  	
SStd. Prem.

	
Gross substandard premium, i.e., multiple and/or flat extra premiums, if applicable.

	  	  	  	  
	  	  	
Base Allow.

	
Allowance (commission) due on base premium amount.

	  	  	  	  
	  	  	
SStd. Allow.

	
Allowance (commission) due on substandard premium amount.

	  	  	  	  
	  	  	
Net

	
Net amount due per coverage.

	  	  	  	  

	
C.

	
Transaction Types

	  	  
	  	
Suggested alpha codes for each of the various transaction types are:

	  	  
	  	
1.

	
NB

	
New Business

	  	  	  	  
	  	
2.

	
FO

	
First year other than New Business

	  	  	  	  
	  	
3.

	
RL

	
Renewal

	  	  	  	  
	  	
4.

	
Terminations

	  	  	  	  
	  	  	
LP

	
Lapse

	  	  	
NT

	
Not Taken

	  	  	
SR

	
Surrender

	  	  	
EX

	
Expiry

	  	  	
DH

	
Death

	  	  	
RC

	
Recapture

	  	  	  	  
	  	
5.

	
Changes

	  	  	  	  
	  	  	
RS

	
Reinstatement

	  	  	
IC

	
Increase

	  	  	
DC

	
Decrease

	  	  	
CA

	
Conversions on

	  	  	
CO

	
Conversions off

	  	  	
RA

	
Internal Replacements on

	  	  	
RO

	
Internal Replacements off

	  	  	
ET

	
ETI

	  	  	
RP

	
Reduced paid Up

	  	  	
MS

	
Misc. (e.g. names changes, benefit additions)parkaveagrmt.htm

Exhibit 10.14

ASSUMPTION REINSURANCE AGREEMENT

between

UNIVERSAL GUARANTY LIFE INSURANCE COMPANY

and

FIRST INTERNATIONAL LIFE INSURANCE COMPANY

TABLE OF CONTENTS

	  	  	
Page

	
ARTICLE I

 

	
DEFINITIONS.............................................................................................................................................

	
1

	
ARTICLE II

 

	
BUSINESS ASSUMED.................................................................................................................................

	
3

	
ARTICLE III

 

	
ASSUMPTION CERTIFICATES.....................................................................................................................

	
5

	
ARTICLE IV

 

	
GENERAL PROVISIONS...............................................................................................................................

	
7

	
ARTICLE V

 

	
CONSIDERATION FOR ASSUMPTION

   REINSURANCE........................................................................................................................................

 

	
 

10

	
ARTICLE VI

 

	
DUTY OF COOPERATION............................................................................................................................

	
10

	
ARTICLE VII

 

	
ARBITRATION..........................................................................................................................................

	
11

	
ARTICLE VIII

 

	
INDEMNIFICATION....................................................................................................................................

	
11

	
ARTICLE IX

 

	
EXECUTORY CONTRACT AND INSOLVENCY

   SETOFF..................................................................................................................................................

 

	
 

12

	
ARTICLE X

 

	
MISCELLANEOUS PROVISIONS...................................................................................................................

	
13

EXHIBITS

	
A

 

	  	
Policyholder Notice

	
B

 

	  	
Certificate of Assumption

	
C

	  	
Notice of Objection to Assumption

ASSUMPTION REINSURANCE AGREEMENT

This Assumption Reinsurance Agreement (the “Assumption Agreement”), is made and entered into as of September 30, 1996, by and between UNIVERSAL GUARANTY LIFE INSURANCE COMPANY, a life insurance company (the “Company), and FIRST INTERNATIONAL LIFE INSUARNCE COMPANY, a life insurance company (the “Reinsurer”).

WHEREAS, the Company and the Reinsurer have entered into a Coinsurance Agreement, as of the date hereof (the “Coinsurance Agreement”), pursuant to which the Company has agreed to cede to the Reinsurer, and the Reinsurer has agreed to accept the indemnity reinsure, on a 100% coinsurance basis, all of the Reserves and Liabilities (as hereinafter defined), but not reserves for incurred but not reported claims and immediate payment of claims, arising under or with respect to the Reinsured Policies (as hereinafter defined); and

WHEREAS, the Coinsurance Agreement provides that, upon the occurrence of certain events as specified in Article XVI therein, the Reinsurer shall have the right, in its sole discretion, to elect to assumption reinsure the Reinsured Policies, with a concurrent novation and complete release of the Company from any liability under such Reinsured Policies, on a state by state basis after the Effective Date upon the receipt of any and all applicable regulatory approvals and notice to relevant Policyholders followed by expiration of the applicable period with no opt out by such Policyholders or the obtaining of required consents from such Policyholders, as the case may be, under the terms and conditions set forth herein;

NOW THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein, the company and the Reinsurer mutually agree as follows:

ATRICLE I

DEFINITIONS

As used in this Assumption Agreement, the following capitalized terms shall have the following meanings (definitions are applicable to both the singular and the plural  forms of each term defined in this Article I):

“Assumption Date” shall have the meaning set forth in Section 2.4.

“Business Day” means any day other than a Saturday or Sunday or a day on which banking institutions in the States of New York, Ohio and Delaware are permitted or obligated by law to be closed.

“Certificate of Assumption” shall have the meaning set forth in Section 3.1.

“Coinsurance Agreement” shall have the meaning set forth in the first recital hereof.

“Effective Date” shall have the same meaning as in the Coinsurance Agreement.

“Extra Contractual Liabilities” shall have the same meaning as in the Coinsurance Agreement.

“Insolvency Proceedings” shall have the meaning set forth in Section 9.5.

“Notice of Objection” shall have the meaning set forth in Section 3.1.

“Novated Policies” means the Reinsured Policies with respect to which no rejection of assumption has been filed by a Policyholder pursuant to the terms of Section 3.2 of this Assumption Agreement (or with respect to which other applicable regulatory requirements have been met), and with respect to which the terms of Section 3.4 apply.

“Person” means any corporation, individual, joint stock company, joint venture, partnership, unincorporated association, governmental regulatory entity, country, state or political subdivision thereof, trust or other entity.

“Policyholder” means a holder of a Reinsured Policy.

“Policyholder Notice” shall have the meaning set forth in Section 3.1.

“Policy Loans” shall have the same meaning as set forth in the Coinsurance Agreement.

“Reinsured Policies” means all paid-up insurance policies, issued by the Company, that are in force on the Effective Date, except policies offered in settlement to so called “HIV” policyholders and paid-up business associated with the Company’s Jr./Sr. Plan Single Premium Interest Sensitive Whole Life Policies, including, without limitation, policy loans.

“Reserves and Liabilities” means the statutory reserves held by the Company as of the Effective Date in support of the policy liabilities arising under the Reinsured Policies and payable after the Effective Date (determined by reference to lines 1, 5, 7 and 8 on page 3 of its 1995 Annual Statement Blank) less Policy Loans.

“Reinsurance Agreement” shall have the same meaning as in the Coinsurance Agreement.

ATRICLE II

BUSINESS ASSUMED

	
2.1

	
Coverage.  After the Effective Date and upon the terms and subject to the conditions, including Section XVI of the Coinsurance Agreement, and other provisions of this Assumption Agreement and any required governmental and regulatory consents and approvals, the Company, if requested to do so by the Reinsurer, hereby agrees to cede to the Reinsurer and the Reinsurer hereby agrees to accept and reinsure, on an assumption basis, any Reinsured Policy.  Reinsurance pursuant to this Section 2.1 shall occur no less frequently than on a monthly basis until all Reinsured Policies have been assumed pursuant to the provisions of Article III hereunder; provided, however, that reinsurance may occur more frequently if the parties hereto agree.

	  	  
	
2.2

	
Exclusions.  This Assumption Agreement does not apply to and specifically excludes from coverage any Extra Contractual Liabilities.  In addition, the Reinsurer shall not assume, and shall be indemnified by the Comapny for, all guaranty fund assessments and premium taxes or similar charges imposed on or with respect to the Reinsured Policies to the extent that such assessments, taxes or charges are based on premiums remitted prior to the Effective Date.

	  	  
	
2.3

	
Transfer of Reserves.  Notwithstanding the provisions of Section 2.1 hereof, the Reinsurer will not be deemed to have accepted and reinsured, on an assumption basis, any Reinsured Policy unless the Reserves and Liabilities underlying such Reinsured Policy shall have been ceded by the Company to the Reinsurer, and accepted by the Reinsurer, pursuant to Article II of the Coinsurance Agreement, effective as of the Effective Date.

	  	  
	
2.4

	
Assignment of Ceded Reinsurance.

	  	  	  
	  	
(a)

	
Regardless of whether reinsurance novation agreements are entered into between the Reinsurer and any reinsurer, the Reinsurer shall be substituted for and succeed to all of the rights and liabilities of the Company, and shall, as between the parties hereto, be recognized for all purposes as the “Company” thereunder in substitution for the Company, under any Reinsurance Agreements in effect as of the date that the provisions of Section 2.1 hereunder take effect (the “Assumption Date”) with any reinsurer relating to the Reinsured Policies.  For consideration which has already been provided for in Article IV of the Coinsurance Agreement, as of the Assumption Date, the Company shall assign, transfer and convey, and the Reinsurer shall be bound by and assume, any and all rights and obligation of the Company under any Reinsurance Agreement including amounts held by or which may become due from reinsurers for policy liabilities under the Reinsured Policies or for benefits or other amounts paid by the Company prior to the Assumption Date.  The Company and the Reinsurer shall use their best efforts to effect, as promptly as possible, an endorsement to each Reinsurance Agreement substituting the Reinsurer for the Company and to amend the Ceded Reinsurance Agreement to comply with the credit for reinsurance provisions of (i) the Delaware Insurance Law and (ii) any other statute or regulation applicable to the cession of reinsurance by foreign life insurance companies.  The Company agrees to enter into such endorsements and, if reasonably requested by the Reinsurer, aid the Reinsurer, at the Reinsurer’s expense, in obtaining any such endorsement.

 

	  	
(b)

	
From the Assumption Date, the Company hereby agrees that all amounts due the Reinsurer hereunder pursuant to the Reinsurance Agreements shall be paid directly to the Reinsurer by reinsurers and reinsurance brokers.  The Company shall, if reasonably requested by the Reinsurer, aid the Reinsurer, at the Reinsurer’s expense, in collection of all amounts due from reinsurers.  From the Assumption Date, the collectability of such reinsurance shall be the ultimate responsibility of the Reinsurer and shall be at the risk and for the account of the Reinsurer in the event such reinsurance is not collected.

 

	  	
(c)

	
From the Assumption Date, the Reinsurer shall have full power and authority as attorney-in-fact for the Company to act for and on behalf of the Company with respect to any and all letters of credit and trust funds outstanding for the benefit of the Company pursuant to the terms of any of the Reinsurance Agreements.  The Company and the Reinsurer shall, at the expense of the Reinsurer, each use their best efforts to the extent mutually agreed to be necessary, to cause the reinsurers of the Company under the Reinsurance

Agreements to post replacement letters of credit or establish replacement trust funds to be issued or established directly in favor and for the benefit of the Reinsurer in the same or a grater amount and on terms equally as favorable to the Reinsurer, unless the Reinsurer shall otherwise consent.  The Company agrees to transfer to the Reinsurer all funds withheld from reinsurers under the Reinsurance Agreements.

ARTICLE III

ASSUMPTION CERTIFICATES

	
3.1

	
Policyholder Notices.  Upon the request of the Reinsurer to reinsure, on an assumption basis, a Reinsured Policy pursuant to Section 2.1 hereof, and to the extent that the reinsurance of such Reinsured Policy is permitted or approval therefore has been granted under applicable laws, rules or regulations or positions of insurance regulatory authorities, the Reinsurer shall prepare, with the cooperation of the Company, a Policyholder notice (“Policyholder Notice”), certificate of assumption (“Certificate of Assumption”) and objection form (“Objection Form”), and mail them to the Policyholder of such Reinsured Policy.  Subject to regulatory requirements of the various states, the Policyholder Notices, Certificates of Assumption and Objection Forms to be delivered to Policyholders pursuant to this Section 3.1 shall be substantially in the forms attached hereto as Exhibit A, B and C, respectively.

 

	
3.2

	
Right to Object.  Subject to regulatory requirements of the various states, the Company and the Reinsurer agree that a Policyholder will be allowed to remain a Policyholder of the Company if such Policyholder refuses to effect the assumption of its Reinsured Policy in accordance with this Article III during the applicable period set forth in the Policyholder notice, and all of the rights and obligations of the Company and the Policyholder under such Reinsured Policy and of the Company and the Reinsurer under the Coinsurance Agreement with respect to such Reinsured Policy, shall remain the same.

 

	
3.3

	
Novated Policies.  In the event that a Reinsured Policy defined herein as a Novated Policy is determined by applicable regulatory authorities or by judicial decision (in either case, following the exhaustion of all rights of appeal) not to have been novated, such Reinsured Policy shall, for all purposes of this Assumption Agreement, be deemed never to have been a Novated Policy.  Notwithstanding the foregoing, the fact that a Reinsured Policy has not been or cannot be assumed and novated by the Reinsurer pursuant to the terms and conditions of this Assumption Agreement, for whatever reason, shall in no event cause it not to be a Reinsured Policy under the Coinsurance Agreement.

 

	
3.4

	
Direct Obligations.  The Reinsurer shall be the successor to the Company under the Novated Policies as if the Novated Policies were direct obligations originally issued by the Reinsurer.  The Reinsurer shall be substituted in the place and stead of the Company, and each Policyholder, insured or beneficiary under a Novated Policy shall disregard the Company as a party thereto and treat the Reinsurer as if it had been originally obligated thereunder.  Such Persons shall have the right to file claims or take other actions under the Novated Policies on or after the effective date of such novation directly with the Reinsurer, and shall have a direct right of action for insurance liabilities reinsured thereunder against the Reinsurer, and the Reinsurer hereby consents to be subject to direct action taken by any such Persons under a Novated Policy.  The Reinsurer accepts and assumes the Novated Policies subject to any and all defenses, setoffs and counterclaims to which the Company would be entitled with respect to such insurance liabilities, it being expressly understood and agreed by the parties hereto that no such defenses, setoffs or counterclaims are waived by the execution of this Assumption Agreement or the consummation of the transactions contemplated hereby and that the Reinsurer shall be fully subrogated to all such defenses, setoffs and counterclaims.

 

	
3.5

	
Release of Company; Indemnity.  Upon the consummation of the assumption reinsurance of a Reinsured Policy from the Company to the Reinsurer under this Reinsurance Agreement, the Company shall be released from any and all liability, except for Extra Contractual Liabilities, with respect to such Reinsured Policy.  From and after the consummation of the assumption reinsurance of a Reinsured Policy pursuant to this Assumption Agreement, the Reinsurer agrees to indemnify the Company for any and all damages, costs and expenses, including reasonable legal counsel fees and disbursements, arising out of, based upon or relating to such Novated Policy; provided, however, that the Reinsurer shall be under no obligation to indemnify the Company for any Extra Contractual Liabilities.

ARTICLE IV

GENERAL PROVISIONS

	
4.1

	
Policy Administration.  To the extent that such transfers have not already taken place pursuant to the terms and conditions of the Coinsurance Agreement, the Company agrees to cooperate fully with the Reinsurer in the transfer of all books, records, papers or any other documents relating to such Novated Polices.

 

	
4.2

	
Billing and Collections.  Effective on the respective dates on which the novation of any Reinsured Policy is effective, the Reinsurer shall have sole responsibility for billing and collecting policy loan repayments, interest and the making of payments of dividends in respect of the Novated Policies, subject to the terms of any administrative or other agreements between the parties hereto that have been or heretofore may be entered into and the terms of agreements between the Reinsurer and its agents or subcontractors.

 

	
4.3

	
Misunderstandings and Oversights.  If any delay, omission, error or failure to pay amounts due or to perform any other act required by this Assumption Agreement is unintentional and caused by misunderstanding or oversight, the Company and the Reinsurer will adjust the situation to what it would have been had the misunderstanding or oversight not occurred.  The party first discovering such misunderstanding or oversight, or act resulting from the misunderstanding or oversight, will notify the other party in writing promptly upon discovery thereof, and the parties shall act to correct such misunderstanding or oversight within thirty (30) Business Days of receipt of such notice.  However, this Section shall not be construed as a waiver by either party of its right to enforce strictly the terms of this Assumption Agreement.

 

	
4.4

	
Litigation; Claims.  The Reinsurer shall be responsible for the handling of, and all costs and expenses, including legal fees, relating to, litigation or other claims under the Novated Policies.  Notwithstanding the foregoing, the Reinsurer shall have no liability for such costs and expenses to the extent they arise out of or are based on any Extra Contractual Liabilities, and to the extent that the Reinsurer incurs any such costs or expenses, the Reinsurer shall be indemnified by the Company.

 

	
4.5

	
Non-Compete.  The Company shall take no action directly or indirectly to induce any Policyholder of a Novated Policy to terminate, reinstate, lapse or exchange such policy.

 

	
4.6

	
Compliance with Applicable Laws and Regulations.

 

	  	
(a)

	
Intent of Parties.  It is the intention of the parties that this Assumption Agreement shall be interpreted in accordance with the laws as of the date of execution hereof by both parties and comply with all existing applicable state and federal laws and regulations, and as from time to time are or may be in effect, in such a way that the Reinsured Policies remain reinsured on the coinsurance plan and contingent assumption plan.

 

	  	
(b)

	
Procedures to Reflect Changes in Laws or Regulations.  In the event that it is determined by an insurance regulatory authority or the Internal Revenue Service or by either party upon the advise of an insurance regulatory authority or the Internal Revenue Service that this Assumption Agreement fails to conform to the requirements of existing applicable laws and regulations and that the Assumption Agreement may be brought into conformity with said requirements only by means of a material change to the Assumption Agreement, or in the event that such laws or regulations are changed subsequent to the Effective Date and such change has a material adverse affect on either party or requires a material change to the Assumption Agreement in order for the Assumption Agreement to conform with applicable laws and regulations, the parties shall exercise reasonable efforts to reach an agreement to amend the Assumption Agreement so as to return the parties to the economic position that they would have been in had no such change occurred or so that both parties share the economic position that they would have been in had no such change occurred or so that both parties share the economic detriment of such change equally.  If the parties are unable to reach an agreement to amend the Assumption Agreement, then the differences between the parties shall be resolved through arbitration in accordance with the provisions of Article VII.  In the event that any changes required to conform the Assumption Agreement to the requirements of applicable law or regulation is not material, the Assumption Agreement shall be amended accordingly.  In no event, however, shall this provision prevent either party from exercising any right it otherwise has under this Assumption Agreement.  For purposes of this Section 4.6 (b), the word “material” shall mean, when used with respect to (i) any change in law or regulation, or any change into the Assumption Agreement necessary to bring the Assumption Agreement into conformity with the requirements of any law or regulation; or (ii) any delay, omission, error or failure to pay amounts due or to perform any other act required under this Assumption Agreement; or (iii) any default, that the effect or effects of any of (i), (ii) or (iii) above (either individually or cumulatively) results in a deviation from a projected return under this Assumption Agreement (absent the occurrence of (i), (ii) or (III) above, either individually or cumulatively) by at least five percent (5%), measured from the first day that the occurrence of (i), (ii) or (iii) above, or series thereof, taken into account on a cumulative basis, occurred or becomes effective.

 

	  	
(c)

	
Notification of Disapproval or Change in Law.  The Company shall promptly notify the Reinsurer of any disapprovals, recommended changes or statements regarding the Assumption Agreement that are made by any insurance or tax regulatory authorities and of any change in law, regulation or rulings affecting this Assumption Agreement.  The Reinsurer shall be allowed to make its own defense of the Assumption Agreement with said authorities.

 

	
4.7

	
Recoupment and Failure of Consideration.  If either party to this Assumption Agreement fails to perform this Assumption Agreement in full, then the other party has the right to suspend performance, and if the defaults cannot be cured, within one hundred and twenty (120) days following delivery of written notice from the non-defaulting party to the defaulting party, to terminate this Assumption Agreement.  Alternatively, the non-defaulting party can recoup damages (including, without limitation, the amount owned plus interest from the date owed and calculated at the Chase Bank prime rate plus two points) from future settlements between the parties.

ARTICLE V

CONSIDERATION FOR ASSUMPTION REINSURANCE

	
5.1

	
Consideration.  The consideration provided for in Article IV of the Coinsurance Agreement shall be the consideration for the assumption of the Novated Polices (as direct obligations) by the Reinsurer, and there shall be no additional consideration or premium due or payable under this Assumption Agreement.

ARTICLE VI

DUTY OF COOPERATION

	
6.1

	
Duty of Cooperation.  Each party hereto shall cooperate fully with the other in all reasonable respects in order to accomplish the objectives of this Assumption Agreement.  This duty to cooperate shall include obtaining the governmental and regulatory consents and approvals and taking the other steps necessary for the assumption of the Reinsured Policies, as described in Article III hereof.  In addition, this duty to cooperate shall include making available any Reinsured Policy records which either party subsequently may require to resolve issues related to claims or liabilities.  The Company and the Reinsurer agree to perform such additional acts and execute such additional documents and agreements as may be necessary or desirable to carry out the purposes and objectives of this Assumption Agreement; provide however, that Reinsurer shall reimburse the Company for reasonable out-of-pocket expenses incurred by the Company.

ARTICLE VII

ARBITRATION

	
7.1

	
General.  Any dispute or difference between the parties with respect to the operation or interpretation of, or arising from or relating to, this Assumption Agreement on which and amicable understanding cannot be reached shall be decided pursuant to and in accordance with the terms, conditions and procedures set forth in Article X1 of the Coinsurance Agreement.

 

	
7.2

	
Survival.  This Article shall survive termination of this Assumption Agreement.

	  	  

ARTICLE VIII

INDEMNIFICATION

	
8.1

	
The Company.  The Company hereby agrees on demand to indemnify and hold harmless the Reinsurer, and its respective officers, directors and employees from and against any and all demands, actions, proceedings, suits (by any person) and liabilities, paid or incurred (including reasonable attorneys’ fees), resulting from or arising out of the breach of or failure to perform any of the duties, obligations, covenants or agreements of the Company contained in this Assumption Agreement.

 

	
8.2

	
The Reinsurer.  The Reinsurer hereby agrees to indemnify and hold harmless the Company, and its respective officers, directors and employees from and against any and all demands, actions, proceedings, suits (by and Person) and liabilities, paid or incurred (including reasonable attorneys’ fees), resulting from or arising out of the breach of or failure to perform any of the duties, obligations, covenants or agreements of the Reinsurer contained in this Assumption Agreement.

 

	
8.3

	
Survival of Article.  This Article shall survive termination of this Assumption Agreement.

ARTICLE IX

EXECUTORY CONTRACT AND INSOLVENCY-SETOFF

	
9.1

	
Insolvency-Setoff (or Offset).  In the event either party to the Assumption Agreement shall be the subject of insolvency proceedings (“Insolvency Proceedings”) all independent debts on unrelated contracts between the parties shall be setoff to the extent:

 

	  	
(a)

	
the debt from the creditor to the insolvent arose pre-petition.

 

	  	
(b)

	
the debt from the insolvent to the creditor arose pre-petition.

 

	  	
(c)

	
the debts are mutual, meaning they are between the two parties to this Assumption Agreement, and in the same right and the same capacity.

 

	  	
The cash payment due on each reinsurance agreement between the parties shall constitute the “debt” on such agreement.

 

	
9.2

	
Adequate Assurance.  In the event of Insolvency Proceedings involving the Company, the Reinsurer’s future performance is conditioned on receiving adequate assurance of future performance, as defined in the Uniform Commercial Code, §2-206, and the Official Comments thereunder.

 

	
9.3

	
Ipso Facto Clause.  If the receiver, including any liquidator or rehabilitator, of one of the parties assigns the rights or delegates the duties of this Assumption Agreement, and the assignee is the subject of Insolvency Proceedings then the other party may immediately terminate the Assumption Agreement without further performance.

 

	
9.4

	
Executory Contract.  In the event either party to the Assumption Agreement is the subject of Insolvency Proceedings the receiver of the insolvent, with respect to future account settlements, may affirm or reject the Assumption Agreement, but not affirm the rewards and reject the burdens.  If this Assumption Agreement is neither affirmed nor rejected within one hundred and twenty (120) days after a party becomes the subject of Insolvency Proceedings, then the Assumption Agreement shall be deemed to be rejected.

 

	  	
If either party is the subject of Insolvency Proceedings other than liquidation proceedings, then the other party may request adequate assurance of continued performance and the first priority administrative expense with respect to future performance prior to the time the Assumption Agreement is either affirmed or rejected, and if such is not provided, then, after one hundred and twenty (120) days, the other party may treat its future performance as canceled.

 

	
9.5

	
Insolvency Proceedings.  For purposes of this Assumption Agreement the term “Insolvency Proceedings” shall include, but not be limited to, any action by a state insurance regulatory authority to place a party in, or the actual commencement of, delinquency proceedings, including conservatorship, receivership, rehabilitation, reorganization, “adjustment of debts,” “voluntary supervision,” or liquidation.

ARTICLE X

MISCELLANEOUS PROVISIONS

	
10.1

	
No Third Party Beneficiaries.  This Assumption Agreement is between the Company and the Reinsurer, and the performance of the obligations of each party under this Assumption Agreement shall be rendered solely to the other party.  In no instance shall anyone other than the Company or the Reinsurer, or their successors or permitted assigns, have any rights, benefits or remedies under this Assumption Agreement.  Until the Reinsurer has reinsured a Reinsured Policy on an assumption reinsurance basis pursuant to this Assumption Reinsurance Agreement, the Reinsurer shall not be liable to any insured, contract owner, or beneficiary under any Reinsured Policy.

 

	
10.2

	
Heading and Exhibit.  Headings used herein are inserted solely for the convenience of reference and are not a part of this Assumption Agreement and shall not affect the terms hereof.  The attached Exhibits are part of this Assumption Agreement.

 

	
10.3

	
Notices.  All notices and communications hereunder shall be in writing and shall be deemed to have been received three (3) Business Days after mailing, or if by telefax or by hand, when received, and it by overnight mail, on the next Business Day.  Any written notice shall be by either certified or registered mail, return receipt requested, or overnight delivery service (providing for delivery receipt) or delivered by hand.  All notices or communications with the Reinsurer under this Assumption Agreement shall be addressed as follows:

 

	  	  	
First International Life Insurance Company

c/o The Guardian Life Insurance Company of America

201 Park Avenue South

New York, New York  10003

Attention:  Jeremy Starr

Telefax No.:  (212) 598-8659

 

	  	
All notices and communications with the Company under this Assumption Agreement shall be directed to:

 

	  	  	
Universal Guaranty Life Insurance Company

5250 South Sixth Street

Springfield, Illinois  62750-5147

Attention:  James Melville

Telefax No.:  (217) 786-4372

 

	
10.4

	
Severability.  If any term or provision of this Assumption Agreement shall be held void, illegal, or unenforceable, the validity of the remaining portions or provisions of this Assumption Agreement shall not be affected thereby; provided, however, that to the extent that such remaining portions or provisions affect the economic positions of the parties hereunder, this Assumption Agreement shall be amended by the parties so as to return the parties to the economic positions that they would have been in had no such severance occurred or so that both parties share the economic detriment of such severance equally.

 

	
10.5

	
Assignment.  This Assumption Agreement may not be assigned by either party without the prior written consent of the other and any attempted assignment without such consent shall be void.

 

	
10.6

	
Successors and Assigns.  The provisions of this Assumption Agreement shall be binding upon and  inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.

 

	
10.7

	
Execution in Counterparts.  This Assumption Agreement may be executed by the parties hereto in any number of counterparts, and by each of the parties hereto in  separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

 

	
10.8

	
Amendments.  This Assumption Agreement may be amended only by written amendment hereto executed by the parties.

 

	
10.9

	
Waiver.  The failure of the Company or Reinsurer to insist on strict compliance with this Assumption Agreement, or to exercise any right or remedy under this Assumption Agreement, shall not constitute a waiver of any rights provided under this Reinsurance Agreement, nor stop the parties from thereafter demanding full and complete compliance nor prevent the parties from exercising such a right or remedy in the future.

 

	
10.10

	
Interpretation.  No provision of this Assumption Agreement shall be construed against any party on the ground that such party drafted the provision or caused it to be drafted.

 

	
10.11

	
Entire Agreement.  This Assumption Agreement and the Coinsurance Agreement constitute the sole and entire agreement and understanding between the parties hereto, and supersedes all prior agreements, whether oral or written, between the parties, with respect to the subject matter hereof.

 

	
10.12

	
Governing Law and Forum.  This Assumption Agreement shall be governed by the laws of the State of New York, without giving effect to principles of conflicts or law thereof. Both parties hereby irrevocable and unconditionally submit themselves to the exclusive jurisdiction of the Courts of the State of New York for any actions, suits or proceedings of or relating to this Assumption Agreement and the transactions contemplated thereby that cannot be resolved pursuant to the provisions of Article VII hereof.

 

	
10.13

	
Confidentiality.  Except as required by law or regulatory authority, neither the Company nor the Reinsurer shall publicly disclose the purchase price or other terms of the transfer proposed herein, but this restriction shall terminate if such price and terms shall otherwise become public knowledge.  In the event that the Reinsurer or its representative are requested or required by oral questions, interrogatories, requests for information or documents, subpoena, civil investigation, demand or similar process to disclose any terms or information regarding such transfer provided, however, that to the extent practicable under the circumstances the Reinsurer shall give the Company reasonable notice of the order or request before making the disclosure provided that such notice can be provided without cost to the Reinsurer.  This Section 10.13 shall survive termination of this Assumption Agreement and the Coinsurance Agreement.

	  	  
	
IN WITNESS WHEREOF, the parties hereto have caused this Assumption Agreement to be executed by their duly authorized representatives.

UNIVERSAL GUARANTY LIFE INSURANCE COMPANY

	
By

	
/s/ James E. Melville

	  	
Name:  James E Melville

	  	
Title:  President

	  	  
	
ATTEST

	  
	  	
/s/ Theodore C. Miller

	  	
Name:  Theodore C. Miller

	  	
Title:  Vice President

	  	  

FIRST INTERNATIONAL LIFE INSURANCE COMPANY

	
By:

	
/s/ Jeremy Starr

	  	
Name:  Jeremy Starr

	  	
Title:  Vice President, Reinsurance

	  	
October 18, 1996

	  	  
	
ATTEST:

	  
	  	
/s/ Benjamin H Mitchell

	  	
Name:  Benjamin H. Mitchell

	  	
Title:  Actuary

	  	
October 18, 1996

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