Document:

Exhibit 10.1

 

AMENDED AND RESTATED SERVICE AND EXPENSE
AGREEMENT

 

Among

 

ALLSTATE INSURANCE COMPANY

And

THE ALLSTATE CORPORATION

And

Certain Affiliates

 

This Amended and Restated Service and Expense Agreement (this “Agreement”)
made and effective as of the 1st day of January 2004, among ALLSTATE INSURANCE
COMPANY, an Illinois insurance company (“Allstate”), THE ALLSTATE CORPORATION,
a Delaware corporation (“Allcorp”), and those affiliates of Allstate whose
signatures appear below (together with Allcorp, individually, an “Affiliate”
and collectively, the “Affiliates”).

 

WITNESSETH:

 

WHEREAS, Allstate
entered into a Service and Expense Agreement, dated as of January 1, 1999, with
Allcorp and certain of its insurance company affiliates and another Service and
Expense Agreement, dated as of January 1, 2000, with certain of its
non-insurance affiliates, pursuant to which Allstate provided certain services
and facilities (collectively, the “Original Agreements”);

 

WHEREAS, the
parties amended the Original Agreements on January 1, 2002 (the “Amended
Agreements”) and with the establishment of Allstate Investments, LLC,
terminated the provision of investment management services by Allstate;

 

WHEREAS, the
parties desire to consolidate and further amend the Amended Agreements to
include provision by the Affiliates of certain services and facilities to
Allstate and to other Affiliates from time to time, subject to the terms and
conditions hereinafter set forth, and to provide for possible future
alternative methods of costing for facilities and services provided pursuant to
this Agreement; and

 

WHEREAS, the
parties desire to restate the Amended Agreements as amended.

 

NOW, THEREFORE, it
is agreed as follows:

 

1.               Allstate shall
furnish or cause to be furnished, at cost and in the same manner as such
services and facilities are furnished to its other affiliates, those categories
of facilities and services listed on Schedule A, including marketing, claims,
underwriting and

 

 

policyholder services. 
Additional specifications regarding these services and facilities, and
the basis upon which costs to be charged for these services and facilities are
determined: (a) with respect to an Affiliate that is a property and casualty
insurer, are listed on Exhibit A; (b) with respect to an Affiliate that is a
life insurer, are listed on Exhibit B; and (c) with respect to an Affiliate
that is a non-insurance company, in accordance with Generally Accepted
Accounting Principles.  The relevant
parties may from time to time agree that only certain of the listed services
and facilities will be provided by the Providing Party (as defined below).

 

Services
shall be performed in the name of and on behalf of an Affiliate and in a manner
intended to assure the separate operating identity of the Affiliate.  By way of example and without limiting the
foregoing, (i) all forms utilized in connection with an Affiliate’s business
and all correspondence with holders of insurance policies or annuity contracts
(collectively, “policies”) shall bear its name and contain its address; (ii)
all communications with policyholders shall be in such Affiliate’s name; and
(iii) all bank accounts into which such Affiliate’s funds are deposited or from
which its funds are withdrawn shall be such Affiliate’s accounts, except that
premiums collected on behalf of an Affiliate
may be held by Allstate in a fiduciary capacity and transferred to such
Affiliate as soon as practicable subsequent to collection, but in any event
within two (2) business days.

 

Services
shall be provided in accord with all applicable state and federal legal and
regulatory requirements, including those relating to privacy of customer
information.

 

The performance of any
party under this Agreement with respect to the business and operations of an
Affiliate shall at all times be subject to the direction and control of the
Board of Directors of each such Affiliate. 
To the extent required by applicable regulation, such services with
respect to any Affiliate shall be performed under guidelines and procedures
established by that Affiliate.  All
service providers must comply with all licensing provisions applicable to any
Affiliate for which they are providing services under this Agreement.

 

2.               Each Affiliate may
furnish or cause to be furnished to Allstate or to any other Affiliate, at
cost, the services and facilities listed in Schedule A attached hereto or such
other facilities and services as the parties may from time to time agree in
writing.  Any supplemental agreement whereby
any Affiliate provides services to or receives services from another Affiliate
shall be subject to review where required under applicable insurance law.

 

3.               Costs are defined
as the actual costs and expenses incurred by the party providing the services
(each, a “Providing Party”) which are attributable to the services and
facilities provided under this Agreement, such as: salaries and benefits; space
rental; overhead expenses which may include items such as electricity, heat,
and water; building maintenance services; furniture and other office equipment;
supplies and special equipment such as reference libraries, electronic data
processing equipment and the like.

 

2

 

4.               Charges for the
above services and facilities shall be determined by Allstate in accordance
with the general provisions contained in Exhibits A through D.  Exhibits A and B are based upon NAIC expense classification and allocation
guidelines.   In
the event such guidelines are amended, Exhibits A and B shall be deemed amended
to conform thereto.  Allstate’s Corporate
Controller’s Department will exercise reasonable judgment in appropriately
revising these Exhibits, maintain proper documentation for revisions and
communicate changes in allocation requirements to each party receiving services
(each, a “Receiving Party”) in a timely manner. Exhibit C provides a narrative
overview of the expense management process and Exhibit D provides certain
definitions used throughout.  Cost bases
shall be reviewed and adjusted on a prospective basis not less than annually to
reflect the actual costs incurred.

 

5.               The amount charged
to a Receiving Party shall not exceed the cost to the Providing Party with
respect to providing such service or facility.  Notwithstanding this provision or
any other provision contained in this Agreement to the contrary, subject to
obtaining any required regulatory approvals, the parties may agree in writing
that one or more specific services or facilities may be provided on a basis
other than cost.  Each Providing Party
will exercise reasonable judgment in periodically reviewing the expenses
incurred and the percentage thereof allocated to each Receiving Party.   Any Receiving Party
may request a review of such expenses and their allocation and such review will
occur promptly thereafter.  Any basis
other than cost that is utilized shall be intended to reasonably relate to the
cost of the services or facilities involved.

 

6.               A Providing Party
will charge each Receiving Party for all the
services and facilities provided pursuant to this Agreement via
the monthly expense allocation process, and payments
will be through the monthly intercompany settlement process. This process will
be completed by Allstate personnel in the most timely and effective method
available.

 

7.               The Providing
Parties will maintain such records as may be required relating to the
accounting system of Allstate and the Affiliates.  The Affiliates understand and accept the
financial records generated by this system, which utilizes the concepts
detailed in the addenda attached to Exhibits A and B, respectively.

 

All
Affiliate records shall be maintained in accordance with applicable insurance
laws and accepted industry standards.  
Allstate shall maintain processes to provide backup records that will be
available in the event the underlying records are destroyed in a natural or
manmade catastrophe or disaster.

 

In
the event and to the extent that the books and records of an Affiliate are
maintained hereunder in an electronic format, the following requirements shall
apply.  A computer terminal that is
linked to the electronic system that generates the electronic records that
constitute such Affiliate’s books of account as they relate to the business
covered by this Agreement, shall be kept and maintained at such Affiliate’s
principal

 

3

 

office.  During all normal business hours, there shall
be ready availability and easy access through such terminal (either directly by
personnel of such Affiliate’s domestic insurance regulator or indirectly with
the aid of such Affiliate’s employees) to the electronic media used to maintain
the records comprising such Affiliate’s books of account hereunder.  The electronic records shall be in a readable
form.  The Providing Parties shall
maintain format integrity and compatibility of the electronic records that
constitute an Affiliate’s books of account hereunder.  If the electronic system that created such
records is to be replaced by a system with which the records would be incompatible,
the Providing Parties shall convert such pre-existing records to a format that
is compatible with the new system.  The
Providing Parties shall maintain acceptable backup of the records constituting
an Affiliate’s books of account hereunder.

 

8.               Upon reasonable
notice, and during normal business hours, any Receiving Party shall be entitled
to, at its own expense, inspect records that pertain to the computation of
charges for the facilities or services provided pursuant to this Agreement.   The Providing
Parties shall at all times maintain correct and complete books, records and
accounts of all services and facilities furnished pursuant to this
Agreement.  Each Receiving Party shall
have unconditional right of ownership of any records prepared on its behalf
under this Agreement.  The records
maintained by a Providing Party in connection with services provided to an
Affiliate under this Agreement shall be subject to inspection and review by
such Affiliate’s domestic insurance regulator.

 

9.               Any employee of a
Providing Party who is performing duties hereunder at all times during the term
of this Agreement shall be under the supervision and control of such Providing
Party and shall not be deemed an employee of any Receiving Party.

 

10.         The scope of, and the
manner in which, a Providing Party provides facilities and services to a
Receiving Party shall be reviewed periodically by the parties involved in each
transaction under this Agreement.   All
services and facilities shall be of good quality and suitable for the purpose
for which they are intended.

 

11.         No party shall assign its
obligations or rights under this Agreement without the written consent of the
other parties and any required regulatory approvals.  Allstate may terminate this Agreement in its
entirety, and an Affiliate may cancel its participation in the arrangements
under this Agreement, each by giving six months written notice to the other
parties to this Agreement; provided, however, that in the event that the
affiliate relationship ceases to exist with respect to an Affiliate, this
Agreement shall terminate immediately with respect to such Affiliate.  Under no circumstances will the initial term
of this Amended and Restated Agreement exceed five (5) years from its effective
date.

 

12.         All communications
provided for hereunder shall be in writing, and if to an insurance company
Affiliate, mailed or delivered to such Affiliate at its office at the address
listed in such Affiliate’s Statutory Annual Statement Blank, Attention:
Secretary, or if to Allstate or Allcorp, mailed or delivered to its office at
3075 Sanders Road,

 

4

 

Northbrook, Illinois 60062, Attention: Controller, or
addressed to any party at the address such party may hereafter designate by
written notice to the other parties.

 

13.         This Agreement together
with such amendments and supplements as may from time to time be executed in
writing by the parties in accordance with applicable insurance law, constitutes
the entire agreement and understanding between the parties in respect of the
transactions contemplated hereby and supercedes any other agreements
arrangements or understandings between the parties relating to the subject
matter hereof.   Those service and
administrative services agreements between and among any parties to this
Agreement that are listed on Exhibit E are terminated as of the effective date
of this Amended and Restated Agreement.

 

14.         Any unresolved dispute or
difference between the parties arising out of or relating to this Agreement, or
the breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and the
Expedited Procedures thereof.   The award
rendered by the Arbitrator shall be final and binding upon the parties, and
judgment upon the award rendered by the Arbitrator may be entered in any Court
having jurisdiction thereof.

 

15.         This 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.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
effective as of the day and year above written.

 

 

	
   

  	
   

  	
  The
  Allstate Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Samuel H.
  Pilch

  	
   

  
	
   

  	
   

  	
  Samuel H. Pilch

  
	
   

  	
   

  	
  Group Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Samuel H. Pilch

  	
   

  
	
   

  	
   

  	
  Samuel H. Pilch

  
	
   

  	
   

  	
  Group Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AFD, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Assistant Treasurer

  

 

5

 

	
   

  	
   

  	
  AFDW, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ALFS, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Assistant Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate Assignment Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate Assurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate California Holdings, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate California Insurance
  Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  County Mutual Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President and Treasurer

  

 

6

 

	
   

  	
   

  	
  Allstate Distributors, LLC

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  	 

	
   

  	
   

  	
  James P. Zils

  	 

	
   

  	
   

  	
  Assistant Treasurer

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  Allstate
  Financial, LLC

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  	 

	
   

  	
   

  	
  James P. Zils

  	 

	
   

  	
   

  	
  Treasurer

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  Allstate Financial Advisors, LLC

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  	 

	
   

  	
   

  	
  James P. Zils

  	 

	
   

  	
   

  	
  Treasurer

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  Allstate Financial Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate Financial Services, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Fire and Casualty Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Floridian Indemnity Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
							

 

7

 

	
   

  	
   

  	
  Allstate
  Floridian Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Holdings, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate Indemnity Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Insurance Company of Canada

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert J. Young,
  Jr.

  	
   

  
	
   

  	
   

  	
  Robert J. Young, Jr.

  
	
   

  	
   

  	
  Chairman of the Board

  
	
   

  	
   

  	
  Execution Date:

  	
    3/28/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate International Insurance
  Holdings, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Investment Management Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Catherine Winn

  	
   

  
	
   

  	
   

  	
  Catherine Winn

  
	
   

  	
   

  	
  Assistant Vice
  President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate Investments, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
									

 

8

 

	
   

  	
   

  	
  Allstate
  Life Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Life Insurance Company of Canada

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert J. Young, Jr.

  	
   

  
	
   

  	
   

  	
  Robert J. Young, Jr.

  
	
   

  	
   

  	
  Chairman of the
  Board

  
	
   

  	
   

  	
  Execution Date:

  	
   3/28/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Life Insurance Company of New York

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Samuel H. Pilch

  	
   

  
	
   

  	
   

  	
  Samuel H. Pilch

  
	
   

  	
   

  	
  Group Vice
  President and Controller

  
	
   

  	
   

  	
  Execution Date: 

  	
      4/19/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate Motor Club, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate Motor Club, Inc. of Canada

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamin Ejupi

  	
   

  
	
   

  	
   

  	
  Jamin Ejupi

  
	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  	
  Execution Date:

  	
  3/31/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  New Jersey Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Non-Insurance Holdings, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
											

 

9

 

	
   

  	
   

  	
  Allstate
  North American Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Property and Casualty Insurance

  Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Reinsurance Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ James
  P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Settlement Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Allstate
  Texas Lloyd’s, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ James
  P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  American
  Heritage Life Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ James
  P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Assistant
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  American Heritage Life Investment
  Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  

 

10

 

	
   

  	
   

  	
  American
  Heritage Service Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Charter
  National Life Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ James
  P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Concord
  Heritage Life Insurance Company Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Samuel H. Pilch

  
	
   

  	
   

  	
  Group Vice
  President and Controller

  
	
   

  	
   

  	
  Execution Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deerbrook
  General Agency, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deerbrook
  Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Encompass Financial Group, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
						

 

11

 

	
   

  	
   

  	
  Encompass
  Indemnity Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Encompass
  Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Encompass
  Insurance Company of New Jersey

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E.R.J. Insurance Group Incorporated

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fidelity
  International Company Limited

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fidelity
  International Insurance Company

  Limited

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  First
  Colonial Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Assistant
  Treasurer

  
						

 

12

 

	
   

  	
   

  	
  Intramerica
  Life Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Samuel H.
  Pilch

  	
   

  
	
   

  	
   

  	
  Samuel H. Pilch

  
	
   

  	
   

  	
  Group Vice
  President and Controller

  
	
   

  	
   

  	
  Execution Date:

  	
  4/19/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ivantage Select Agency, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kennett Capital, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Keystone
  State Life Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Lincoln
  Benefit Life Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New
  Jersey Holdings, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
							

 

13

 

	
   

  	
   

  	
  Northbrook
  Holdings, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Northbrook
  Indemnity Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Northbrook Services, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pafco
  Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert J. Young,
  Jr.

  	
   

  
	
   

  	
   

  	
  Robert J. Young, Jr.

  
	
   

  	
   

  	
  Chairman of the
  Board

  
	
   

  	
   

  	
  Execution Date:

  	
    3/28/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pembridge
  America Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pembridge
  Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert J. Young,
  Jr.

  	
   

  
	
   

  	
   

  	
  Robert J. Young, Jr.

  
	
   

  	
   

  	
  Chairman of the
  Board

  
	
   

  	
   

  	
  Execution Date:

  	
  3/28/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Roadway
  Protection Auto Club, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
								

 

14

 

	
   

  	
   

  	
  Sterling Collision Centers, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven T.
  Klodzinski

  	
   

  
	
   

  	
   

  	
  Steven T. Klodzinski

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Surety
  Life Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tech-Cor, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P. Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Allstate Foundation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James P.
  Zils

  	
   

  
	
   

  	
   

  	
  James P. Zils

  
	
   

  	
   

  	
  Treasurer

  

 

 

Except as indicated above, executed by the above companies on January
27, 2005.

 

15

 

Schedule A

 

Each of the attached supporting schedules depicts examples of services
to be provided, and are not intended by the parties to be all-inclusive.

 

	
  Description of Service

  	
   

  	
  Schedule

  
	
   

  	
   

  	
   

  
	
  Finance Shared Services

  	
   

  	
  A-1

  
	
   

  	
   

  	
   

  
	
  Technical Shared Service -
  Information Technologies and Field Support

  	
   

  	
  A-2

  
	
   

  	
   

  	
   

  
	
  Human Resource Shared
  Services

  	
   

  	
  A-3

  
	
   

  	
   

  	
   

  
	
  Law and Regulation

  	
   

  	
  A-4

  
	
   

  	
   

  	
   

  
	
  Corporate Relations

  	
   

  	
  A-5

  
	
   

  	
   

  	
   

  
	
  Marketing and
  Research/Planning Center

  	
   

  	
  A-6

  
	
   

  	
   

  	
   

  
	
  Print Communication
  Center

  	
   

  	
  A-7

  
	
   

  	
   

  	
   

  
	
  Real Estate
  & Construction / Facilities

  	
   

  	
  A-8

  

 

 

Schedule A-1

Finance Shared Services

 

Provider Services

 

•                  Accounting:   Provide actual monthly, quarterly and annual
financial results. Specific services include producing financial statements and
consulting on account coding, reporting, accounting research, shared service
administration, expense allocation administration accounting governance and
policies, and maintenance of any required central accounting computer system.

•                  Auditing:   Perform internal audits, which meet
Generally Accepted Auditing Standards (GAAS) at intervals deemed necessary by
Allstate.

•                  Claim
Reserves:  Provide risk management
services including exposure analysis, risk retention and risk financing.

•                  Finance and
Planning:  Provide services related
to the segment of Allstate’s annual operating plan, long-term strategic plan
and capital management allocation.

•                  Finance
Innovation:  Provide reporting and
analysis templates and database support.

•                  General:  Provide financial administrative services to
ensure compliance with Service Provider’s corporate policies

•                  Purchasing:   Provide services related for graphic arts
and printing for internal and external communications.

•                  Tax:   Comply with Federal and State tax filing
requirements along with any tax research needed.

•                  Treasury:   Provide cash management services, including
the pass through of all fees associated with setting up and maintaining bank
accounts.

•                  Procurement:  Strategic sourcing and the procuring of
commodities inclusive of contract negotiation.

 

17

 

Schedule A-2

Technical Shared Service

 

Provider Services

 

Services are divided into two categories: Information Technologies and
Field Support, and include but are not limited to:

 

Information Technologies:

 

•                  Build and maintain
systems necessary to process Affiliate’s business.

 

•                  Support of
online networks and end-user/desktop applications.

 

•                  Technical
architecture design to include application development and end-user equipment
via Technology Asset Management.

 

•                  Enterprise
office tools, software licenses, maintenance, upgrades, Microsoft Office and
client software packages.

 

•                  Telecommunications
support for business applications to include equipment sourcing and voice-mail
solutions.

 

•                  Database
production support and development for mainframe and distributed applications.

 

•                  Enterprise Help
Center for end-user problem resolution, equipment repair, system password
resets.

 

Field Support

 

•                  Process and pay
invoices, expense accounts, and related bills.

 

•                  Maintain necessary
bank accounts. This would include, but would not be limited to, a depository
account, refund account and investment accounts.

 

•                  Deposit and
balance remittance from Affiliate’s clients. 
Process payments against client balances in the billing database.

 

•                  Pay and track
non-computer related fixed asset transactions.

 

•                  Utilize the SAP
general ledger system for financial recording.

 

•                  Perform movement
of funds from depository accounts to investment accounts as needed via wire
transfers or other means.

 

18

 

•                  System
production, job scheduling and runs including technical support.

 

•                  Data processing
support including data storage, data communication solutions, and network
availability.

 

19

 

Schedule A-3

Human Resource Shared
Services

 

Provider Services

 

•                  Disburse
compensation, distribute pay stubs and paychecks, remit payroll taxes,
calculate and remit to vendors benefit contributions (employer/employee), mail
W-2’s, provide lines of expense details and create new company pay system.
These services will be delivered to client within agreed upon timeframes, and
will meet the client’s quality requirements.

 

•                  Design
compensation and incentive structure, provide support services for salary
planning, incentive plan and pay communications.  Provide Affiliate with current market
research/data to structure the most cost effective and competitive compensation
plan.

 

•                  Provide
technical interview with employees to determine skills and tasks necessary to a
particular job function.  This work will
be used to create job descriptions in order to obtain market data to determine
competitive salary structures.

 

•                  Coordinate
participation in technical job fairs to attract qualified individuals, deliver
new employee orientation, coordinate internship programs, provide sources of
qualified candidates for technical recruiter and intern openings, and provide
seven days of training to technical recruiters.

 

•                  Provide timely
coaching and guidance on human resource related issues at Affiliate’s
request.  Accurately assess the
appropriate Center of Excellence within the human resource organization to
assist in all problem resolutions.

 

•                  Provide
Affiliate with the most competitive benefits package for all employees.  Conduct annual election to provide all
employees with the option of changing benefit coverages.

 

•                  Provide all
employees with required services for any payroll or benefit inquiries or
processing.

 

•                  Provide
Affiliate with up to date professional education programs and research.  Provide access to just-in-time training.

 

•                  Provide
Affiliate with accurate and timely payroll stubs, checks and tax remittances.

 

20

 

Schedule A-4

Legal Services

 

Provider Services

 

•                  The Law and
Regulation Department will provide legal advice, assist in the completion of
business transactions, implement compliance programs, assist with dispute
resolution and provide public advocacy for Affiliate.

 

•                  Provide for
legal advice, assist in the completion of business transactions, assist with
dispute resolution and provide for public advocacy.

 

•                  All legal
services will be performed in a manner that is in compliance with all
applicable laws, regulations and Codes of Professional Responsibility.

 

21

 

Schedule A-5

Corporate Relations

 

Provider Services

 

Support and implement communication strategies.

 

•                  Development of
communication packages, scripts, and presentations.

 

•                  Sourcing and
coordination of meetings with internal and external customers.

 

•                  Media
preparation for external use.

 

•                  Coordination of
production and recognition and/or special events as requested.

 

22

 

Schedule A-6

Marketing, Advertising,
and Distribution

 

Provider Services

 

•                  Provide
market research, perform database analysis to identify target customers and
utilize focus groups to determine customer preferences.

 

•                  Support and
implement marketing strategies.

 

•                  Development
of marketing strategies, coordination of print and/or media requirements.

 

•                  Sourcing of
marketing vendors.

 

•                  Coordination
of media/print advertising.

 

•                  Assist in
the development and implementation of distribution policy and practices, and
provide other marketing and distribution support services.

 

•                  Upon request
of a life insurance Affiliate, Allstate shall assist such life insurance
Affiliate in preparation of marketing material, assist in the recruitment,
supervision, and product training of agents, assist in the development and
implementation of distribution policy and practices, and provide other
marketing and distribution support services. 
However, all decisions regarding the approval of marketing material and
the acceptance, appointment or termination of agents shall be made by any such
life insurance Affiliate.

 

23

 

Schedule A-7

Allstate Print
Communication Center

 

Customer Document
Processing

 

Provider Services

 

Provide print services for document processing to include: quick print,
web and sheet-fed print and “laser print stuff mail”.

 

•                  Provide
programming support and consulting along with complete print project
management.

 

•                  Provide for
storage and retention of documents and/or equipment.

 

24

 

Schedule A-8

Real Estate &
Construction / Facilities

 

Provider Services

 

•                  Real Estate
Portfolio Management.

 

•                  Capital
improvement management and construction.

 

•                  Engineering
standards.

 

•                  Building /
Facility compliance to local and governmental codes.

 

•                  Support of
employee moves and relocation.

 

•                  Housekeeping
and Security

 

•                  All other
facilities necessary for the conduct of the business.

 

25

 

EXHIBIT
A

 

INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX

ALLSTATE INSURANCE COMPANY AND PROPERTY & CASUALTY AFFILIATES

 

	
  Expense Line Item

  Per U&I Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  1.      Claim adjustment services

  	
   

  	
  Investigation and
  adjustment of policy claims for direct, reinsurance assumed and ceded
  business. The more significant expenses and fees related to: (1) all outside
  costs associated with independent adjusters, (2) lawyers for legal services in
  the defense, trial, or appeal of suits, (3) general court costs, (4) medical
  testimony, (5) expert and lay witnesses, (6) medical examinations for the
  purpose of trial and resolution of liability and (7) miscellaneous
  (appraisals, surveys, detective reports, audits, character reports, etc.).

  	
   

  	
  No allocation – direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.      Commission and brokerage

  	
   

  	
  All payments,
  reimbursements and allowances (on direct and reinsurance assumed and ceded
  business) to managers, agents, brokers, solicitors or other producer types.

  	
   

  	
  No allocation – direct
  charge to company based on agent contract

  

 

*                                         Expense
classifications per the statutory Underwriting and Investment Exhibit, Part 3,
Expenses.  Parties to the Agreement use
these twenty-one classifications to record their operating expenses
incurred.  As described in Exhibit C,
expenses for these classifications are also spread to three distinct functional
expense groups:  loss adjustment, other
underwriting and investment.

 

**                                  This description provides only a synopsis of the types of
expenses for each classification. 
Parties to the Agreement will utilize the NAIC Property & Casualty
Annual Statement Instructions Appendix in expense handling.

 

***                           Before
consideration of any applicable reinsurance agreement.

 

26

 

	
  Expense Line Item

  Per U&I Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  4.      Advertising

  	
   

  	
  Typical expenses would
  include services of: (1) advertising agents, (2) public relations counsel,
  (3) advertisements in newspapers, periodicals, billboards, pamphlets and
  literature issued for advertising or promotional purposes, (4) related paper
  and printing charges for advertising purposes, (5) radio broadcasts, (6)
  prospect and mailing lists, (7) signs and medals for agents and (8)
  television commercials and production.

  	
   

  	
  Direct charge by
  company where known. Allocated items handled as follows: See Exhibit A
  Appendix at B; C 1; D 1 and E 1 for explanation of allocation by type of
  office

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.      Boards, bureaus and associations

  	
   

  	
  Various dues,
  assessments, fees and charges for items such as: (1) underwriting boards,
  rating organizations, statistical agencies, inspection and audit bureaus, (2)
  underwriters’ advisory and service organizations, (3) accident and loss
  prevention organizations, (4) claim organizations, (5) underwriting
  syndicates, pools and associations, assigned risk plans.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.      Surveys and underwriting reports

  	
   

  	
  Costs to support the
  business including: (1) survey, credit, moral hazard, character reports for
  underwriting, (2) appraisals for underwriting, (3) fire records, (4)
  inspection and engineering billed specifically, (5) medical examiner services
  relating to underwriting.

  	
   

  	
  See Exhibit A Appendix
  at B; D 1; and E 1 for explanation of allocation by type of office

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.      Audit of assureds’ records

  	
   

  	
  Auditing fees and
  expenses of independent auditors for auditing payroll and other premium
  bases.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.      Salary and related items

  	
   

  	
  Salaries, bonus,
  overtime, contingent compensation, and other compensation of employees. This
  would include commission and brokerage to employees when the activities for
  which the commission is paid are a part of their duties as employees.

  	
   

  	
  See Exhibit A Appendix
  at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4 for
  explanation by type of office

  

 

27

 

	
  Expense Line Item

  Per U&I Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  9.      Employee relations and welfare

  	
   

  	
  This category includes a
  variety of pension and insurance benefits for employees, as well as some
  miscellaneous expenditures. The first area entails: (1) cost of retirement
  insurance, pensions or other retirement allowances and funds irrevocably
  devoted to the payment of pensions or other employees’ benefits, and (2)
  accident, health and hospitalization insurance, group life insurance and
  workers’ compensation insurance. The miscellaneous category may include the
  following items (1) training and welfare; (2) physical exams for employees or
  candidates; (3) gatherings, outings and entertainment; (4) education; and (5)
  donations to or on behalf of employees.

  	
   

  	
  See Exhibit A Appendix at
  A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4 for
  explanation by type of office

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.    Insurance

  	
   

  	
  Costs of insurance for
  employee/agent fidelity or surety bonds, public liability, burglary and
  robbery, automobiles and office contents.

  	
   

  	
  See Exhibit A Appendix
  at D 1; E 1; and F 1, 2, 3, 4 for explanation by type of office

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.    Directors fees

  	
   

  	
  Amounts relate to fees
  and other compensation paid to directors for attending Board or committee
  meetings.

  	
   

  	
  Direct charge to
  company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.    Travel and travel items

  	
   

  	
  Major expense
  subcategories include: (1) transportation, hotel, meals, telephone and other
  related costs associated for employees traveling, (2) expense for transfer of
  employees, (3) automobile rental and license plates, depreciation,
  repairs and other operating costs of automobiles (4) transportation, hotel
  and meals/entertainment of guests, (5) dues and subscriptions to accounting,
  legal, actuarial or similar societies and associations.

  	
   

  	
  See Exhibit A Appendix
  at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4 for
  explanation by type of office

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.    Equipment

  	
   

  	
  Rent and repair of
  furniture and equipment, include the related depreciation charges.

  	
   

  	
  See Exhibit A Appendix
  at A; B; C 1, 2; D 1, 2, 3, 4; E 1, 2, 3, 4; and F 1, 2, 3, 4

  

 

28

 

	
  Expense Line Item

  Per U&I Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  15.    Cost or depreciation of EDP equipment and
  software

  	
   

  	
  Rent and repair of
  processing equipment and non-operating systems electronic data software,
  including the related depreciation and amortization.

  	
   

  	
  Charged to companies.
  See Exhibit A, Appendix at A; B; C2; D1, 2, 3, 4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.    Printing and stationery

  	
   

  	
  Generally, printing,
  stationery and office supplies (paper stock, printed forms and manuals,
  Photostat copies, pens and pencils, etc.). Also included would be policies
  and policy forms, in-house employee publications, books, newspapers and
  periodicals including, tax and legal publications and services.

  	
   

  	
  See Exhibit A Appendix
  at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.    Postage, telephone, etc.

  	
   

  	
  All express, freight and
  cartage expenses, postage, and telephone.

  	
   

  	
  See Exhibit A Appendix at
  A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.    Legal & auditing

  	
   

  	
  Legal fees and
  retainers excluding loss and salvage related, auditing fees of independent
  auditors for examining records, services of tax experts and counsel,
  custodian fees, notary and trustees’ fees.

  	
   

  	
  See Exhibit A Appendix
  at A; D 2, 3, 4; E 2; and F 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.    Taxes, licenses and fees

  	
   

  	
  Several categories
  comprise this expense classification: (1) state and local insurance taxes;
  (2) Insurance Department licenses and fees; (3) payroll taxes; and (4) all
  other, excluding real estate and federal income. Taxes, licenses and fees
  based on premiums and payments to state industrial commissions for
  administration of workers’ compensation or other state benefit acts would be
  in the first classification. Expenses relating to the Insurance Department
  would include agents’ licenses, filing fees, certificates of authority and
  fees and expenses of examination. Payroll related expenses normally include
  old age benefit and unemployment insurance taxes. More significant expenses
  in the all other section would be financial statement publication fees,
  legally mandated advertising and personal property and state income taxes.

  	
   

  	
  No allocation - direct
  charge to company

  

 

29

 

	
  Expense Line Item

  Per U&I Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  21.    Real estate expenses

  	
   

  	
  Salaries, wages and
  other compensation of maintenance workers in connection with owned real
  estate. Other expense items assigned to this category may also include
  expenses associated with: operations; maintenance and insurance.

  	
   

  	
  Direct charges by
  company are based on square footage. Allocated expenses handled per Exhibit A
  Appendix at A; B; C 1, 2; D 1, 2, 3, 4; E 1, 2, 3, 4; and F 1, 2,
  3, 4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.    Real estate taxes

  	
   

  	
  Taxes, licenses and
  fees on owned real estate.

  	
   

  	
  Direct charges by
  company are based on square footage. Allocated expenses handled per Exhibit A
  Appendix at A; B; C 1, 2; D 1, 2, 3, 4; E 1, 2, 3, 4; and F 1, 2,
  3, 4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24.    Aggregate write-ins for miscellaneous
  expenses

  	
   

  	
  Items for which no
  pre-printed statutory line exists. Description/title shown in Part 3 will
  vary based on need.

  	
   

  	
  Cost Management will
  develop the most appropriate allocation basis and maintain documentation

  

 

30

 

	
  Expense Line Item

  Per General

  Expense Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  6.5    Collection and bank service charges

  	
   

  	
  Collection charges on
  checks and drafts and charges for checking accounts and money orders.

  	
   

  	
   

  

 

Note:       Expense
classification for lines 3 and 23 are not applicable for the Allstate Group.

 

31

 

APPENDIX
TO EXHIBIT A

 

INTERCOMPANY SERVICE AND EXPENSE ALLOCATION
SUMMARY MATRIX

ALLSTATE INSURANCE COMPANY AND AFFILIATES

 

A.           Offices 001
(Corporate Home Office), 191 (Ivantage Product), 195 (Technology
Support/Appservice), 198 (Broker Dealer), 200 (Procurement Governance), 201
Allstate Investments, LLC), 203 (Research Center Shared Services), 204 (Human
Resources Shared Service), 205 (Corporate Relations Shared Services), 206
(Technical Shared Services), 207 (Law and Regulation Shared Services),
208 (Finance Shared Services) 209 (Market Brand Development), 211
(Facility Services), 212 (Real Estate & Construction), and 304 (Litigation
Services) factors are based on Service Agreements.  These Agreements are written documents
detailing services and associated costs performed by the provider for the
benefit of the recipient and are generated and approved through extensive
discussions between service providers and service recipients.

 

B.             Support Centers, Data Centers, and Output
Processing Centers (OPC) factors are based on Stat Policies in Force,
Statistical Data and Time and Effort studies that roll-up to the Support
Center/Data Center/OPC.

 

C.             P&C Head Office (Office 032) factors are
based on:

 

1.               Compensation

2.               Time and effort studies

3.               Statistical data

 

D. 
Regional Office factors are based on the following methodologies:

 

1.               Compensation

2.               Time and effort studies

3.               System capacity studies

4.               Statistical data

 

E. 
Regional Commercial Centers factors are based on the following
methodologies:

 

1.               Compensation

2.               Time and effort studies

3.               System capacity studies

4.               Statistical data

 

33

 

F. 
Claim Service Areas factors are based on the following:

 

1.               Headcount (Property vs. Auto)

2.               Notice counts

3.               Incurred loss

4.               Claim legal matter counts

5.               Statistical data

 

34

 

EXHIBIT B

 

INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX

ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES

 

	
  Expense Line Item

  Per General

  Expense Exhibit 2*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  1.      Rent

  	
   

  	
  Rent for all premises
  occupied by the company, including any adequate rent for occupancy of its own
  buildings, in whole or in part, except to the extent that allocation to other
  expense classifications on a functional basis is permitted and used.

  	
   

  	
  Direct charges by
  company are based on square footage. Allocated expenses are handled per
  Exhibit B Appendix at A; B 1, 2; C 1, 2 and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.      Salaries and wages

  	
   

  	
  Salaries and wages,
  bonuses and incentive compensation to employees, overtime payments,
  continuation of salary during temporary short-term absences, dismissal
  allowances, payments to employees while in training and other compensation to
  employees not specifically designated herein, except to the extent that
  allocation to their expense classifications is permitted and used.

  	
   

  	
  Agents’ compensation
  is a direct charge to company. The remaining expenses in this category are
  allocated per Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2

  

 

*                                          Expense
classifications per Statutory Exhibits 2 & 3.   Parties to the Agreement use these
classifications to record their operating expenses incurred.  This expense data is also captured by four
distinct functional expense groups: 
life, accident and health, all other lines of business and investment.

 

**                                  These descriptions were written using the
NAIC Life Annual Statement Instructions. 
Refer to this publication for a complete breakdown of the expenses
included in each line item.

 

***                           Before consideration of any applicable
reinsurance agreement.

 

35

 

	
  3.11  Contributions for benefit plans for
  employees

  	
   

  	
  Contributions by
  company for pension and total permanent disability benefits, life insurance
  benefits, accident, health, hospitalization, medical, surgical, or other
  temporary disability benefits under a self-administered or trusteed plan or
  for the purchase of annuity or insurance contracts. Appropriation of any
  other assignment of funds by company in connection with any benefit plan of
  the types enumerated herein.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.12  Contributions for benefit plans for agents

  	
   

  	
  Contributions by
  company for pension and total permanent disability benefits, life insurance
  benefits, accident, health, hospitalization, medical, surgical, or other
  temporary disability benefits under a self-administered or trusteed plan or
  for the purchase of annuity or insurance contracts. Appropriation of any
  other assignment of funds by company in connection with any benefit plan of
  the types enumerated herein.

  	
   

  	
  See Exhibit B Appendix
  at C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.21  Payments to employees under non-funded
  benefit plans

  	
   

  	
  Payments by company
  under a program for pension and total and permanent disability benefits,
  death benefits, accident, health, hospitalization, medical, surgical or other
  temporary disability benefits where no contribution or appropriation is made
  prior to the payment of the benefit.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.22  Payments to agents under non-funded benefit
  plans

  	
   

  	
  Payments by company
  under a program for pension and total and permanent disability benefits,
  death benefits, accident, health, hospitalization, medical, surgical or other
  temporary disability benefits where no contribution or appropriation is made
  prior to the payment of the benefit.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.31  Other employee welfare

  	
   

  	
  The net periodic
  postretirement benefit cost, meals to employees, contribution to employee
  associations or clubs, dental examinations, medical dispensary or
  convalescent home expenses for employees.

  	
   

  	
  Agents’ compensation
  is a direct charge to company. The remaining expenses in this category are
  allocated per Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2

  

 

36

 

	
  Expense Line Item

  Per General

  Expense Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  3.32  Other agent welfare

  	
   

  	
  The net periodic
  postretirement benefit cost, meals to employees, contribution to employee
  associations or clubs, dental examinations, medical dispensary or
  convalescent home expenses for agents.

  	
   

  	
  Agents’ compensation
  is a direct charge to company. The remaining expenses in this category are
  allocated per Exhibit B Appendix at C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1    Legal fees and expenses

  	
   

  	
  Court costs, penalties
  and all fees or retainers for legal services or expenses in connection with
  matters before administrative or legislative bodies.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.2    Medical examination fees

  	
   

  	
  Fees to medical
  examiners in connection with new business reinstatements, policy changes and
  applications for employment.

  	
   

  	
  See Exhibit B Appendix
  at D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.3    Inspection report fees

  	
   

  	
  Fee for inspection
  reports in connection with new business, reinstatements, policy changes and
  applications for employment. Cost of services furnished by the Medical
  Information Bureau.

  	
   

  	
  See Exhibit B Appendix
  at D 1, 2; C

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.4    Fees of public accountants and consulting
  actuaries

  	
   

  	
  Include expenses
  relating to this category except exclude examination fees made by State
  Departments and internal audits by company employees.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.6    Expense of investigation and settlement of
  policy claims

  	
   

  	
  Payment to other than
  employees of fees and expenses for the investigation, litigation and
  settlement of policy claims.

  	
   

  	
  See Exhibit B Appendix
  at D 1, 2

  

 

37

 

	
  Expense Line Item

  Per General

  Expense Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  5.1    Traveling expenses

  	
   

  	
  Traveling expense of
  officers, other employees, directors and agents, including hotel, meals,
  telephone, telegraph and postage charges incurred while traveling. Also
  include amounts allowed employees for use of their own cars on company
  business and the cost of, or depreciation on, and maintenance and running
  expenses of company-owned automobiles.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.2    Advertising

  	
   

  	
  Newspaper, magazine
  and trade journal advertising for the purpose of solicitation and
  conservation of business. Billboard, sign and telephone directory,
  television, radio broadcasting and motion picture advertising, excluding
  subjects dealing wholly with health and welfare. All canvassing or other
  literature, such as pamphlets, circulars, leaflets, policy illustration forms
  and other sales aids, printed material, etc., prepared for distribution to
  the public by agents or through the mail for the purposes of solicitation and
  conservation of business. All calendars, blotters, wallets, advertising
  novelties, etc., for distribution to the public. Printing, paper stock, etc.
  in connection with advertising. Prospect and mailing lists when used for
  advertising purposes. Fees and expenses of advertising agencies related to
  advertising.

  	
   

  	
  See Exhibit B Appendix
  At A, B 1, 2; C 1; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.3    Postage, express, telegraph and telephone

  	
   

  	
  Freight and cartage,
  cables, radiograms and teletype. Also charges for use, installation and
  maintenance of related equipment if not included elsewhere.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.4    Printing and stationery

  	
   

  	
  Policy forms, riders,
  supplementary contracts, applications, etc., rate books, instruction manuals,
  punch-cards, house organs, and all other printed material which is not
  required to be included in any other expense classification. Office supplies
  and pamphlets on health, welfare and education subjects. Also include annual
  reports to policyholders and stockholders if not included in Line 5.2.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.5    Cost or depreciation of furniture and
  equipment

  	
   

  	
  The cost or depreciation
  of office machines except for such charges as may be reported in Line 5.3.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  

 

38

 

	
  Expense Line Item

  Per General

  Expense Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  5.6    Rental of equipment

  	
   

  	
  Rental of office
  machines except for such charges as may be reported in Line 5.3.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.7    Cost or depreciation of EDP equipment and
  software

  	
   

  	
  Include cost,
  depreciation and amortization for EDP equipment and operating and
  non-operating systems software.

  	
   

  	
  Charged to Companies See
  Exhibit B at A; B; C

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.1    Books and periodicals

  	
   

  	
  Books, newspapers,
  periodicals, etc., including investment tax and legal publications and
  information services, and including all such material for company’s law
  department and libraries.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.2    Bureau and association fees

  	
   

  	
  All dues and
  assessments of organizations of which the company is a member. All dues for
  employees’ and agents’ memberships on the company’s behalf.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.3    Insurance, except on real estate

  	
   

  	
  Premiums for Workers’
  Compensation, burglary, holdup, forgery and the public liability insurance,
  fidelity or surety bonds, insurance on contents of company-occupied buildings
  and all other insurance or bonds not included elsewhere.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.4    Miscellaneous losses

  	
   

  	
  Uncollectible losses
  due to deficiencies, defalcations, robbery, or forgery, except those offset
  by bonding companies’ payments. Also include Worker’s Compensation benefits
  not covered by insurance and other uninsured losses not included elsewhere.

  	
   

  	
  Primarily a direct
  charge to company. Remaining expenses are allocated per Exhibit B Appendix at
  A; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.5    Collection and bank service charges

  	
   

  	
  Collection charges on
  checks and drafts and charges for checking accounts and money orders.

  	
   

  	
  See Exhibit B Appendix
  at A; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.6    Sundry general expenses

  	
   

  	
  Direct expense of
  local agency meetings, luncheons and dinners, tabulating service rendered by
  outside organizations, gifts and donations. Any portion of commissions and
  expense allowances on reinsurance assumed for group business which represents
  specific reimbursement of expenses. Reimbursement to another insurer for
  expense of jointly underwritten group contracts.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  

 

39

 

	
  Expense Line Item

  Per General

  Expense Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  6.7    Group service and administration fees

  	
   

  	
  Administration fees,
  service fees, or any other form of allowance, reimbursement of expenses, or
  compensation (other than commissions) to agents, brokers, applicants,
  policyholders or third parties in connection with the solicitation, sale,
  issuance, service and administration of group business.

  	
   

  	
  See Exhibit B Appendix
  at D 1, 2; and B

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.8    Reimbursements by uninsured accident and
  health plans

  	
   

  	
  Report as a negative
  amount administrative fees, direct reimbursement of expenses, or other
  similar receipts or credits attributable to uninsured accident and health
  plans and the uninsured portion of partially insured accident and health
  plans.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1    Agency expense allowance

  	
   

  	
  All bona fide
  allowance for agency expense, but not allowances constituting additional
  compensation.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.2    Agents’ balances charged off

  	
   

  	
  Agents’ balances
  charged off less any amounts recovered during the year.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.3    Agency conferences other than local
  meetings

  	
   

  	
  Cost of banquets and
  rental of meeting rooms. Expenses of all persons traveling to conferences and
  their expenses at conferences.

  	
   

  	
  Primary dollars are a
  direct charge to company. The remaining expenses in this category are
  allocated per Exhibit B Appendix at C 1; and D 1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.1    Real estate expenses

  	
   

  	
  The cost of repairs,
  maintenance, service, and operation of all real estate properties including
  insurance whether occupied by the company or not; salaries and other compensation
  of managing agents and their employees; expenses incurred in connection with
  rental of such properties; legal fees specifically associated with real
  estate transactions other than sale; rent, salaries and wages, and other
  direct expenses of any branch of Home Office until engaged solely in real
  estate work (not real estate and mortgages combined).

  	
   

  	
  Direct charges by
  company are based on square footage. Allocated expenses are handled per
  Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2

  

 

40

 

	
  Expense Line Item

  Per General

  Expense Exhibit*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  9.2    Investment expenses not included elsewhere

  	
   

  	
  Only items for which
  no specific provisions has been made elsewhere, e.g., contributions or
  assessments for bondholders’ protective committees, fees of investment
  counsel, custodian and trustee fees.

  	
   

  	
  See Exhibit B Appendix
  at A; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.3    Aggregate write-ins for expenses

  	
   

  	
  Items for which no
  pre-printed statutory line exists. Description title shown in Exhibit 2 will
  vary based on need.

  	
   

  	
  Cost Management will
  develop the most appropriate allocation basis and maintain documentation

  

 

41

 

	
  Expense Line Item

  Per Taxes,

  Licenses and Fees

  Exhibit 3*

  	
   

  	
  Expense Classification Description**

  	
   

  	
  Basis of Expense

  Allocation***

  
	
  1.      Real estate taxes

  	
   

  	
  Those taxes directly
  assessed against property owned by the company. Canadian and other foreign
  taxes should be included appropriately.

  	
   

  	
  Direct charges by
  company are based on square footage. Allocated expenses are handled per
  Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.      State insurance department licenses and
  fees

  	
   

  	
  Assessments to defray
  operating expenses of any state insurance department. Canadian and other
  foreign taxes should be included appropriately. Fees for examinations by
  state departments.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.      State taxes on premiums

  	
   

  	
  State taxes based on policy
  reserves, if in lieu of premium taxes. Canadian and other foreign taxes
  should be included appropriately. Any portion of commissions or allowances on
  reinsurance assumed for group business which represents specific
  reimbursement of premium taxes. Deduct any portion of commissions or
  allowances on reinsurance ceded for group business which represents specific
  reimbursement of premium taxes.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.      Other state taxes

  	
   

  	
  Assessments of state
  industrial or other boards for operating expenses or for benefits to sick
  unemployed persons in connection with disability benefit laws or similar
  taxes levied by states. Canadian and other foreign taxes are to be included
  appropriately. Advertising required by law, regulation or ruling, except in
  connection with investments. State sales taxes, if company does not exercise
  option of including such taxes with the cost of goods and services purchased.
  State income taxes.

  	
   

  	
  No allocation - direct
  charge to company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.      U.S. Social Security taxes

  	
   

  	
  Company’s contribution
  is based on the current tax rate, which is applied to all wages, salary or
  compensation entered on the employees earning record and federal unemployment
  tax.

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and D 1, 2

  

 

42

 

	
  6.      All other taxes

  	
   

  	
  Guaranty fund
  assessments and taxes of Canada or of any other foreign country not
  specifically provided for elsewhere. Sales taxes, other than state sales
  taxes, if company does not exercise option of including such taxes with the
  cost of goods and services purchased.

  	
   

  	
  No allocation - direct
  charge to company

  

 

43

 

APPENDIX TO EXHIBIT B

 

INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY

MATRIX

ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES

 

A.           Office 001, 191, 195,198, 200, 201, 203, 204, 205, 206, 207, 208, 209,
211, 212, and 304 factors to Allstate or Affiliate are based on this
Agreement.  Once expenses are charged to
Allstate or Affiliate, a second and third tier of allocation occurs, which
allocates expenses to Life Profit Centers.

 

B.             P&C Head Office (Office 032) allocations
to the Life Company and Affiliates are based on:

 

1.     Compensation

2.     Time and effort studies

3.     Statistical data

 

C.             Regional Office allocations to the Life
Company and Affiliates are based on:

 

1.     Compensation

2.     Time and effort/usage studies

3.     System capacity studies

4.     Statistical Data

 

D.            Life Parent Company allocations to Life
Affiliates are based on:

 

1.               Expenses are direct coded to the appropriate
company.

2.               Determination of how expense is to be
allocated to profit center is based on time studies, project activity, required
capital, invested assets and statistical data.

 

44

 

EXHIBIT C

 

EXPENSE PROCESS OVERVIEW

ALLSTATE INSURANCE GROUP

 

For purposes of operational analysis and
financial reporting, functional expense groups are made up of three primary
categories:  (1) Loss adjustment
expenses, (2) Other underwriting expenses; and (3) Investment expenses.  A more detailed description of expense items,
which comprise these categories, is provided in Exhibits A and B.  These exhibits are the framework for
reporting expenses required by the NAIC.   
The expense categories, in turn, flow into the financial records based
on the following cost allocation methods: a direct charge basis; an allocated
or shared basis; or in accordance with the terms of one or several reinsurance
agreements.  The combined expense process
ultimately provides for financial records that reflect the financial
performance of the business.

 

On a day-to-day basis, expenses are incurred
directly by companies within the Allstate Group.  The expenses are charted numerically by
account. Formalized procedures are used in order to ensure that the expenses
are accurately recorded and allocated to the appropriate office, company, cost
center and cost element.  Allocations are
also provided for various support costs, which include:  company, cost center and general ledger
account (cost element) level with the objective of providing for an accurate
means of tracking expenses.

 

A brief description of each of the three
expense categories follows:

 

•                    Loss adjustment expenses are various costs
associated with the claim handling process. 
These costs, which comprise all aspects of the claims handling function,
include: the adjustment, factual investigation, defense and record keeping
functions.  Salaries of claim personnel
and allocated executive salaries, as well as other basic costs associated with
the claim function (accounting, data processing, rent, utilities, etc.) are
grouped in this category.  Generally,
these expenses may be either direct charged, allocated, or flow to an entity by
means of a separate reinsurance agreement.

 

•                    Other underwriting expenses include
acquisition, general expenses, taxes, licenses and fees.  The larger piece, acquisition expenses, is
comprised of agent commissions, various expenses related to underwriting (motor
vehicle reports, home inspections, etc.), salaries, marketing and other
allocations of expenses which support the production of new and renewal
business.  General expenses are typically
administrative in nature and do not fit cleanly in any other expense grouping.  Taxes, licenses and fees pertain to:  taxes (income and franchise) and licenses
fees levied by state and local government; insurance department expenses; and
guaranty fund assessments.  These expense
categories are charged to an entity in any of the same three methods shown
above for Loss adjustment expenses.

 

45

 

•                    Investment expenses for research, purchase
and sale activities, safekeeping, accounting and data support are the bulk of
expenses in this bucket.  Generally,
these expenses will flow to an entity by direct charges to an entity or on an
allocated basis.

 

The mechanism for recording
expenses can occur by means of one of the following three methods:

 

•                    Direct Charges – This method is used where the expenses are
unique to the company incurring them. 
These types of expenses are not allocated to another Allstate Company
due to their unique relationship to the company incurring them.  Expense payments are classified to the
responsible company through an accounting coding expense system involving
charge company, cost center, and cost element (See Exhibits A and B for more
detail).  By way of example: agents’
commissions, taxes, licenses and fees, and bad debt expense are company
specific, and therefore, coded directly to the appropriate company.

 

•                    Allocations

 

The
expense allocation process can be divided into 3 subcategories:

 

1.               Office – The objective of this phase of the allocation process is to properly
transfer various support costs performed by one organization to another
organization that they directly relate to. 
The basic justification for this cost transfer is efficiency gain, which
is mutually beneficial to both parties. 
Certain processes are centrally performed on behalf of a number of
entities, then allocated to the office/company being supported.  Routine expenses of this nature often include
support activities from the following functional areas: Accounting; Systems;
Investments; Corporate Relations; Law and Regulation; and Human Resources.   These
costs cannot be directly expensed. It is necessary to provide for an
appropriate method of allocation.  An
example of this method of allocation would relate to the accounting treatment
of costs and expenses attributable to Allstate’s Internal Audit Department
(IAD).  As part of the Allstate Corporate
Home Office structure, IAD salaries and related expenses are allocated to other
Affiliates companies and/or offices (i.e. data and profit centers) based on
time and effort studies.   The terms for
this allocation are delineated in a separate agreement between the parties
which is referred to as a Shared Service Agreement (SSA).  The SSA is a vehicle which allows the parties
to agree in advance on certain essential terms and conditions which include: a
description of the services to be provided; the period covered; costs and
standards.  The SSA concept can be used
to transfer expenses between Brands (e.g., Allstate, Ivantage, Indemnity,
Life), between Shared Services (e.g., Finance, Investments, Human Resources,
Technical) or between a Brand and Shared Service.

 

The Accounting Department
database is programmed to perform the allocation process on a monthly
basis.  The process begins with the
extraction of direct costs for each office, company, cost center and general
ledger account.  Varying premium and
claim statistics (e.g., policies in force, claim counts) as well as other
common factors (e.g., number of employees, number of retirees) are then entered
into the program.

 

46

 

The resulting data
provides the bases, or allocation drivers, for transferring expenses from an
office/cost center /general ledger account level of detail to other charge
offices/cost centers /general ledger accounts. 
Detail records are generated in order to provide the source and
recipient of the allocated expenses.

 

A separate process has
been initiated in order to periodically review the accuracy of the factors or
drivers of the allocations.  The accuracy
of service provider time and effort studies may be taken into account (i.e.
projected v. actual).  Other factors that
may be considered include an inventory of activities and customers in order to
ensure that allocations are accurate.  
Intensive discussions and management agreement between the provider and
customer are also an integral part of the process.  Flexibility in the overall allocation process
must routinely occur to provide for changes in the business activities or
organizational structure.

 

2.               Company – This step in the expense allocation process is similar the office
expense allocation process described above in that allocations are charged to
other affiliates.  For instance, both
Allstate Insurance Company and Allstate Life Insurance Company incur expenses
on a direct basis for themselves and on behalf of their affiliates.  A portion of these expenses may be
transferred to the affiliated companies, as appropriate.  Fixed factors are normally based on internal
time and effort studies, agents’ compensation, or statistical criteria such as
gross policies issued or claim notice counts.

 

3.               Uniform Accounting Transfer (UAT) – The next step in the process is to
reclassify all of the general office expenses addressed in the direct charges
and expense allocation (office and company) sections above, having been
recorded on a management basis, to their required statutory expense
classifications.  The use of a consistent
basis for reporting expenses, as dictated by the NAIC, allows the Regulators to
better compare various insurance companies’ operations.  On the property/casualty side, broad expense
categories and detail breakouts are required for both the Expense Exhibit in
the annual Statutory Statement as well as the Supplemental Expense Filing,
which is contained in the Insurance Expense Exhibit.  For Life companies, the General Expense and
the Taxes, Licenses and Fees Exhibits from the annual Statutory Statement have
distinct expense categories.  A synopsis
of these required expense categories, along with a description of each expense
category and the basis of allocation presently used by Allstate is contained in
Exhibit A and appendix (Property & Casualty affiliates) and Exhibit B and
appendix (Life Company affiliates).

 

In
order to provide for accurate summarization and reporting, each general ledger
account (cost element) included in the Chart of Accounts is assigned a
statutory expense classification.  Loss
adjustment, other underwriting and investment expenses are the broad
classifications that UAT applies to.  By
way of example, a systems function, whether relating to claims, sales, or
investments, is initially classified as a general office expense on a
management basis.  Based on the UAT
process, these expenses are reclassified for statutory reporting purposes to
loss adjustment, other underwriting or investments.  Taxes, licenses and fees, although included
in the other underwriting expense category, are not used in the UAT calculation
process. These

 

47

 

expenses
are directly charged to the appropriate statutory classification within
company.

 

Reinsurance
Agreements – Separate arrangements exist between
the property/casualty parent, Allstate Insurance Company, and certain
affiliates, and the life parent, Allstate Life Insurance Company, and certain
affiliates that drive expenses.   Terms
and conditions relating to methods of expense classification are contained in
each of the individual reinsurance agreements. 
Typically, the reinsurer will be liable for a pre determined pro-rata
share of all underwriting related expenses to support the assumed
business.  However, the reinsurer is not
generally liable for the investment expenses.

 

48

 

EXHIBIT
D

 

DEFINITIONS

 

The
following terms shown by “process flow” and “general” categories are commonly
used in explanation of the Allstate Group’s overall expense process.  Presentation of the “process flow” section
follows the same hierarchical order of our current expense processing
methodology.

 

PROCESS FLOW

 

Company –
Identifies legal entity that expense is charged to and may be disbursed
from.  Each entity who is a party to this
agreement is assigned a separate three digit company code (e.g., Allstate
Insurance Company – 010, Allstate Life Insurance Company – 030).  A “charged company” is the Allstate entity
charged with the expense under review and whose Statement of Income would be
ultimately impacted.

 

Cost
Centers – Describe where specific costs were
incurred.  Cost Centers will be the most
common object used. Cost centers are areas of organizational responsibility in
which costs are incurred and planned. 
Identifies administrative grouping within an office and duties as well
as the manager responsible. Regional Office Departments include: Underwriting;
Sales; Human Resources; and Claims. Each Regional Office is assigned a distinct
four digit number.

 

Cost Elements – They describe what specific costs have
occurred.  They are used to plan and
incur direct expenses for cost objects representing a unique item or category
of expense to the company.

 

Internal
Orders – A short-term cost collector used to collect,
identify and allocate costs associated with a process, event or activity.

 

Office –Typically,
office codes identify high level responsibility for the expenses charged.  Office level configuration (by type or
geographical location) is a key building block in the accumulation of Allstate’s
expenses.  This data is used in preparing
the various expense analyses/reports prepared. 
A “charged office” is the office within an Allstate entity charged with
the expense under review.  The decision
regarding which office to charge with an expense is based on Statement of
Income impact analysis.    Offices may
include various high level types, such as Profit Centers (Midwest Regional
Office – 002),  Data Centers (Atlantic –
136), Shared Services (Human Resources – 204), and Home Offices (Corporate Home
Office – 001, PP&C Head Office – 032). 
Each Office is designated by a three-digit code.

 

Profit
Center – Aligns expense to a distribution channel,
geographic location and product grouping (i.e. Denver Region, Colorado,
Standard Auto). 

 

49

 

GENERAL

 

Assessments/Allocated
Expenses – which, are
incurred by one Allstate Company or office and charged, or allocated, to other
companies or offices on the basis of mutual benefit.  Examples of the types of allocated expenses
include: Loss Adjustment, Other Underwriting and Investment Expenses.   These expenses include allocations in Cost
Centers from Cost Elements to Secondary Cost Elements and are described in
Exhibit C.  Criteria for cost allocation “drivers”
are based on the implementation of management objectives.   The assessments can use all three methods of
allocations: Field Percentage; Fixed Amount; and Variable Portions, which
contain Statistical Key Figures. 
Additional information is included in the Exhibits and Appendixes
attached.  Allocation drivers agreed to
by Management are used to allocate expenses, and these are described in detail
in the various exhibits and appendixes.

 

Reinsurance Agreement – An
agreement between two parties where one insurer spreads its risk (premium, loss
and expense) of losses with other insurers.

 

50

 

EXHIBIT
E

 

TERMINATED AGREEMENTS

 

Addendum to Service and Expense
Agreement between Allstate Insurance Company and Allstate North American
Insurance Company effective August 27, 2001.

 

Administrative Service
Agreement between Lincoln Benefit Life Company and ALFS, Inc. (f/k/a Allstate
Life Financial Services, Inc.) effective December 1, 1998.

 

Administrative Services
Agreement between Allstate Insurance Company and Intramerica Life Insurance
Company effective July 1, 1999.

 

Administrative Services Agreement
between Allstate Life Insurance Company and AFD, Inc. effective January 1,
2000.

 

Administrative Services
Agreement between Allstate Life Insurance Company and ALFS, Inc. (f/k/a
Allstate Life Financial Services, Inc.) effective May 1, 1999.

 

Administrative Services
Agreement between Allstate Life Insurance Company and Lincoln Benefit Life
Company effective February 1, 1998.

 

Administrative Services
Agreement between Allstate Life Insurance Company and Allstate Distributors,
L.L.C. effective May 1, 1999.

 

Amended and Restated Service
and Expense Agreement between Allstate Insurance Company and certain of its
affiliated insurance companies effective April 29, 2003 to include
Encompass Insurance Company of New Jersey.

 

Business Operations and Service
Agreement between Allstate Life Insurance Company of New York and Allstate Life
Insurance Company effective October 1, 1997.

 

Cost Sharing Agreement between
American Heritage Life Insurance Company and Keystone State Life Insurance
Company effective October 1, 1998.

 

Expense Allocation Agreement
between Allstate Life Insurance Company of New York and Intramerica Life
Insurance Company effective July 1, 1999.

 

Service Agreement between Allstate Insurance
Company and Allstate Life Insurance Company of New York executed February 27,
1990 and effective July 1, 1989.

 

Service Agreement between Allstate Life
Insurance Company and Allstate Life Insurance Company of New York executed
February 27, 1990 and effective July 1, 1989.

 

Service Agreement between Allstate Life
Insurance Company and Surety Life Insurance Company effective January 1, 1995.

 

Service Agreement between Lincoln Benefit
Life Company and Allstate Life Insurance Company effective July 16, 1984.

 

Service and Expense
Agreement among Allstate Insurance Company and certain of its affiliated
insurance companies, effective January 1, 1999, except with respect to
Glenbrook Life and Annuity Company, Columbia Universal Life Insurance Company
and LSA Asset Management LLC.

 

Service and Expense Agreement
between Allstate Insurance Company and Certain of its Non-Insurance Company
Affiliates effective January 1, 2000.

 

Service and Expense
Agreement between Surety Life Insurance Company and Lincoln Benefit Life
Company effective August 10, 1994.

 

Administrative Services Agreement between
Allstate Life Insurance Company of New York and American Heritage Life
Insurance Company.

 

51

 

Administrative Services Agreement between
Allstate Life Insurance Company of New York and Allstate Distributors, L.L.C.

 

52Exhibit 10.1

 

EXACT SCIENCES CORPORATION

 

2000
EMPLOYEE STOCK PURCHASE PLAN

 

Article 1 - Purpose.

 

This 2000 Employee Stock
Purchase Plan (the “Plan”) is intended to encourage stock ownership by all
eligible employees of Exact Corporation (the “Company”),
a Delaware corporation, and its participating subsidiaries (as defined in Article 17)
so that they may share in the growth of the Company by acquiring or increasing
their proprietary interest in the Company. 
The Plan is designed to encourage eligible employees to remain in the
employ of the Company and its participating subsidiaries.  The Plan is intended to constitute an “employee
stock purchase plan” within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the “Code”).

 

Article 2 - Administration
of the Plan.

 

The Plan may be
administered by a committee appointed by the Board of Directors of the Company
(the “Committee”).  The Committee shall
consist of not less than two members of the Company’s Board of
Directors.  The Board of Directors may
from time to time remove members from, or add members to, the Committee.  Vacancies on the Committee, howsoever caused,
shall be filled by the Board of Directors. 
The Committee may select one of its members as Chairman, and shall hold
meetings at such times and places as it may determine.  Acts by a majority of the Committee, or acts
reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.

 

The interpretation and
construction by the Committee of any provisions of the Plan or of any option
granted under it shall be final, unless otherwise determined by the Board of
Directors.  The Committee may from time
to time adopt such rules and regulations for carrying out the Plan as it
may deem best, provided that any such rules and regulations shall be
applied on a uniform basis to all employees under the Plan.  No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.

 

In the event the Board of
Directors fails to appoint or refrains from appointing a Committee, the Board
of Directors shall have all power and authority to administer the Plan.  In such event, the word “Committee” wherever
used herein shall be deemed to mean the Board of Directors.

 

Article 3 - Eligible
Employees.

 

All employees of the
Company or any of its participating subsidiaries whose customary employment is
more than 20 hours per week and for more than five months in any calendar
year and who have completed three months of service shall be eligible
to receive options under

 

 

the Plan to purchase
common stock of the Company, and all eligible employees shall have the same
rights and privileges hereunder; provided, however, that with respect to the
First Payment Period (as defined below), all employees of the Company or any of
its participating subsidiaries employed on the first day of the First Payment
Period and whose customary employment is more than 20 hours per week and
for more than five months in any calendar year shall be eligible to
receive options under the Plan to purchase common stock of the Company.  Persons who are eligible employees on the first
business day of any Payment Period (as defined in Article 5) shall receive
their options as of such day.  Persons
who become eligible employees after any date on which options are granted under
the Plan shall be granted options on the first day of the next succeeding
Payment Period on which options are granted to eligible employees under the
Plan.  In no event, however, may an
employee be granted an option if such employee, immediately after the option
was granted, would be treated as owning stock possessing five percent or
more of the total combined voting power or value of all classes of stock of the
Company or of any parent corporation or subsidiary corporation, as the terms “parent
corporation” and “subsidiary corporation” are defined in Section 424(e) and
(f) of the Code.  For purposes of
determining stock ownership under this paragraph, the rules of Section 424(d) of
the Code shall apply, and stock which the employee may purchase under
outstanding options shall be treated as stock owned by the employee.

 

Article 4 - Stock Subject to
the Plan.

 

The stock subject to the
options under the Plan shall be shares of the Company’s authorized but unissued common stock, par value $.01 per share (the “Common
Stock”), or shares of Common Stock reacquired by the Company, including shares
purchased in the open market.  The
aggregate number of shares which may be issued pursuant to the Plan is 300,000,  subject to
adjustment as provided in Article 12. 
If any option granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to
be exercisable in whole or in part, the unpurchased shares subject thereto
shall again be available under the Plan.

 

Beginning February 1,
2002 and each February 1 thereafter (each, an “Adjustment Date”), the
number of shares which may be issued pursuant to the Plan shall automatically
increase by such number of shares as is equal to the greater of (i) 0.75%
of the number of shares of Common Stock outstanding on the immediately
preceding December 31, and (ii) the number of shares of Common Stock
that has been made subject to options under the Plan during the year
immediately preceding such Adjustment Date; provided, however, that the Board
may provide for a lesser number of shares on any Adjustment Date by designating
such lesser number by resolution adopted on or before such Adjustment Date; and
provided further, however that the cumulative number of additional shares that
may be issued pursuant to the Plan as a result of increases on all Adjustment
Dates taken together may not exceed 1,000,000 shares (such number to be subject
to adjustment in accordance with Article 12 below).

 

Article 5 - Payment Period
and Stock Options.

 

The first Payment Period
during which payroll deductions will be accumulated under the Plan shall commence
on the effective date of the registration statement on Form S-1
registering

 

2

 

the shares to be offered
in the initial public offering of the Common Stock (the “Offering”) and shall
end on July 31, 2001 (the “First Payment Period”).  For the remainder of the duration of the
Plan, Payment Periods shall consist of six-month periods commencing on February 1
and August 1 and ending on July 31 and January 31 of each
calendar year.

 

Twice each year, on the first business day of each
Payment Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option to purchase on the last day of such Payment
Period, at the Option Price hereinafter provided for, a maximum of 1,000 shares, on condition that such employee remains
eligible to participate in the Plan throughout the remainder of such Payment
Period.  The participant shall be
entitled to exercise the option so granted only to the extent of the
participant’s accumulated payroll deductions on the last day of such Payment
Period.  If the participant’s accumulated
payroll deductions on the last day of the Payment Period would enable the
participant to purchase more than the maximum number of shares provided herein
except for the share limitation set forth herein, the excess of the amount of
the accumulated payroll deductions over the aggregate purchase price of the
maximum number of shares which many be purchased in accordance with this Article 5
shall be promptly refunded to the participant by the Company, without
interest.  The Option Price per share for
each Payment Period shall be the lesser of (i) 85% of the average market
price of the Common Stock on the first business day of the Payment Period and (ii) 85%
of the average market price of the Common Stock on the last business day of the
Payment Period, in either event rounded up to the nearest cent.  Notwithstanding the foregoing, with respect
to the First Payment Period, the Option Price shall be calculated as the lesser
of (i) 85% of the price per share at which the Common Stock is sold to the
underwriters in the Offering, without regard to any applicable discounts or
commissions provided to such underwriters, and (ii) 85% of the average
market price of the Common Stock on the last business day of the First Payment
Period.  The foregoing limitation on the
number of shares subject to option and the Option Price shall be subject to
adjustment as provided in Article 12.

 

For purposes of the Plan, the term “average market price”
on any date means (i) the average (on that date) of the high and low
prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on
that date) of the Common Stock on the NASDAQ National Market, if the Common
Stock is not then traded on a national securities exchange; or (iii) the
average of the closing bid and asked prices last quoted (on that date) by an
established quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market; or (iv) if the Common
Stock is not publicly traded, the fair market value of the Common Stock as
determined by the Committee after taking into consideration all factors which
it deems appropriate, including, without limitation, recent sale and offer
prices of the Common Stock in private transactions negotiated at arm’s length.

 

For purposes of the Plan,
the term “business day” means a day on which there is trading on the NASDAQ
National Market or the aforementioned national securities exchange, whichever
is applicable pursuant to the preceding paragraph; and if neither is
applicable, a day that is not a Saturday, Sunday or legal holiday in State of
Massachusetts.

 

3

 

No employee shall be
granted an option which permits the employee’s right to purchase stock under
the Plan, and under all other Section 423(b) employee stock purchase
plans of the Company and any parent or subsidiary corporations, to accrue at a
rate which exceeds $25,000 of fair market value of such stock (determined on
the date or dates that options on such stock were granted) for each calendar
year in which such option is outstanding at any time.  The purpose of the limitation in the
preceding sentence is to comply with Section 423(b)(8) of the
Code.  If the participant’s accumulated
payroll deductions on the last day of the Payment Period would otherwise enable
the participant to purchase Common Stock in excess of the Section 423(b)(8) limitation
described in this paragraph, the excess of the amount of the accumulated
payroll deductions over the aggregate purchase price of the shares actually
purchased shall be promptly refunded to the participant by the Company, without
interest.

 

Article 6 - Exercise of
Option.

 

Each eligible employee
who continues to be a participant in the Plan on the last day of a Payment
Period shall be deemed to have exercised his or her option on such date and
shall be deemed to have purchased from the Company such number of full shares
of Common Stock reserved for the purpose of the Plan as the participant’s
accumulated payroll deductions on such date will pay for at the Option Price,
subject to the maximum share limit of
the option and the Section 423(b)(8) limitation described in Article 5.  If the individual is not a participant on the
last day of a Payment Period, the he or she shall not be entitled to exercise
his or her option.  Only full shares of
Common Stock may be purchased under the Plan. 
Unused payroll deductions remaining in a participant’s account at the
end of a Payment Period by reason of the inability to purchase a fractional
share shall be carried forward to the next Payment Period.

 

Article 7 - Authorization
for Entering the Plan.

 

An employee may elect to
enter the Plan by filling out, signing and delivering to the Company an
authorization:

 

A.            Stating the percentage to be deducted regularly from the
employee’s pay;

 

B.            Authorizing the purchase of stock for the employee in
each Payment Period in accordance with the terms of the Plan; and

 

C.            Specifying the exact name or names in which stock
purchased for the employee is to be issued as provided under Article 11
hereof.

 

Such authorization must
be received by the Company at least ten days before the first day of the next
succeeding Payment Period and shall take effect only if the employee is an
eligible employee on the first business day of such Payment Period; provided, however,
that with respect to the First Payment Period, an option shall be granted to
each eligible employee and such authorization to participate in the plan must
be received no more than three weeks following the first day of the First
Payment Period.

 

4

 

Unless a participant
files a new authorization or withdraws from the Plan, the deductions and
purchases under the authorization the participant has on file under the Plan
will continue from one Payment Period to succeeding Payment Periods as long as
the Plan remains in effect.

 

The Company will
accumulate and hold for each participant’s account the amounts deducted from
his or her pay.  No interest will be paid
on these amounts.

 

Article 8 - Maximum Amount
of Payroll Deductions.

 

An employee may authorize
payroll deductions in an amount (expressed as a whole percentage) not less than
one percent (1%) but not more than ten percent (10%) of the employee’s
total compensation, including base pay or salary and any overtime, bonuses or
commissions.

 

Article 9 - Change in
Payroll Deductions.

 

Deductions may not be
increased or decreased during a Payment Period. 
However, a participant may withdraw in full from the Plan.

 

Article 10 - Withdrawal from
the Plan.

 

A participant may
withdraw from the Plan (in whole but not in part) at any time prior to the last
day of a Payment Period by delivering a withdrawal notice to the Company.

 

To re-enter the Plan, an
employee who has previously withdrawn must file a new authorization at least
ten days before the first day of the next Payment Period in which he or she
wishes to participate.  The employee’s
re-entry into the Plan becomes effective at the beginning of such Payment
Period, provided that he or she is an eligible employee on the first business
day of the Payment Period.

 

Article 11 - Issuance of
Stock.

 

Certificates for stock
issued to participants shall be delivered as soon as practicable after each
Payment Period by the Company’s transfer agent.

 

Stock purchased under the
Plan shall be issued only in the name of the participant, or if the participant’s
authorization so specifies, in the name of the participant and another person
of legal age as joint tenants with rights of survivorship.

 

Article 12 - Adjustments.

 

Upon the happening of any
of the following described events, a participant’s rights under options granted
under the Plan shall be adjusted as hereinafter provided:

 

A.            In the event that the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if, upon a
reorganization, split-up,

 

5

 

liquidation,
recapitalization or the like of the Company, the shares of Common Stock shall
be exchanged for other securities of the Company, each participant shall be
entitled, subject to the conditions herein stated, to purchase such number of
shares of Common Stock or amount of other securities of the Company as were
exchangeable for the number of shares of Common Stock that such participant
would have been entitled to purchase except for such action, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or exchange; and

 

B.            In the event the Company shall issue any of its shares as
a stock dividend upon or with respect to the shares of stock of the class which
shall at the time be subject to option hereunder, each participant upon
exercising such an option shall be entitled to receive (for the purchase price
paid upon such exercise) the shares as to which the participant is exercising
his or her option and, in addition thereto (at no additional cost), such number
of shares of the class or classes in which such stock dividend or dividends
were declared or paid, and such amount of cash in lieu of fractional shares, as
is equal to the number of shares thereof and the amount of cash in lieu of
fractional shares, respectively, which the participant would have received if
the participant had been the holder of the shares as to which the participant
is exercising his or her option at all times between the date of the granting
of such option and the date of its exercise.

 

Upon the happening of any
of the foregoing events, the class and aggregate number of shares set forth in Article 4
hereof which are subject to options which have been or may be granted under the
Plan and the limitations set forth in the second paragraph of Article 5
shall also be appropriately adjusted to reflect the events specified in
paragraphs A and B above. 
Notwithstanding the foregoing, any adjustments made pursuant to
paragraphs A or B shall be made only after the Committee, based on advice
of counsel for the Company, determines whether such adjustments would
constitute a “modification” (as that term is defined in Section 424 of the
Code).  If the Committee determines that
such adjustments would constitute a modification, it may refrain from making
such adjustments.

 

If the Company is to be
consolidated with or acquired by another entity in a merger, a sale of all or
substantially all of the Company’s assets or otherwise (an “Acquisition”), the
Committee or the board of directors of any entity assuming the obligations of
the Company hereunder (the “Successor Board”) shall, with respect to options
then outstanding under the Plan, either (i) make appropriate provision for
the continuation of such options by arranging for the substitution on an
equitable basis for the shares then subject to such options either (a) the
consideration payable with respect to the outstanding shares of the Common
Stock in connection with the Acquisition, (b) shares of stock of the
successor corporation, or a parent or subsidiary of such corporation, or (c) such
other securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair market value of the shares
of Common Stock subject to such options immediately preceding the Acquisition;
or (ii) terminate each participant’s options in exchange for a cash
payment equal to the excess of (a) the fair market value on the date of
the Acquisition, of the number of shares of Common Stock that the participant’s
accumulated payroll deductions as of the date of the Acquisition could
purchase, at an option price determined with reference only to the first business
day of the applicable Payment Period and subject to the maximum share
limitation set forth in Article 5 hereof, Code

 

6

 

Section 423(b)(8) and
fractional-share limitations on the amount of stock a participant would be
entitled to purchase, over (b) the result of multiplying such number of
shares by such option price.

 

The Committee or
Successor Board shall determine the adjustments to be made under this Article 12,
and its determination shall be conclusive.

 

Article 13 - No Transfer or
Assignment of Employee’s Rights.

 

An option granted under
the Plan may not be transferred or assigned, except by will or the laws of
descent and distribution, and shall be exercised, during the participant’s
lifetime, only by the participant.

 

Article 14 - Termination of
Employee’s Rights.

 

Whenever a participant
ceases to be an eligible employee because of retirement, voluntary or
involuntary termination, resignation, layoff, discharge, death or for any other
reason, his or her rights under the Plan shall immediately terminate, and the
Company shall promptly refund, without interest, the entire balance of his or
her payroll deduction account under the Plan. 
Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or for so long as the
participant’s right to re-employment is guaranteed either by statute or by
contract, if longer than 90 days.

 

Article 15 - Termination and
Amendments to Plan.

 

Unless terminated sooner
as provided below, the Plan shall terminate on January 31, 2011.  The Plan may be terminated at any time by the
Company’s Board of Directors but such termination shall not affect options then
outstanding under the Plan.  It will
terminate in any case when all or substantially all of the unissued shares of
stock reserved for the purposes of the Plan have been purchased.  If at any time shares of stock reserved for
the purpose of the Plan remain available for purchase but not in sufficient
number to satisfy all then unfilled purchase requirements, the available shares
shall be apportioned among participants in proportion to the amount of payroll
deductions accumulated on behalf of each participant that would otherwise be
used to purchase stock, and the Plan shall terminate.  Upon such termination or any other
termination of the Plan, all payroll deductions not used to purchase stock will
be refunded, without interest.

 

The Committee or the
Board of Directors may from time to time adopt amendments to the Plan provided
that, without the approval of the stockholders of the Company, no amendment may
(i) increase the number of shares that may be issued under the Plan; (ii) change
the class of employees eligible to receive options under the Plan, if such
action would be treated as the adoption of a new plan for purposes of Section 423(b) of
the Code; or (iii) cause Rule 16b-3 under the Securities Exchange Act
of 1934 to become inapplicable to the Plan.

 

7

 

Article 16 - Limits on Sale
of Stock Purchased under the Plan.

 

The Plan is intended to
provide shares of Common Stock for investment and not for resale.  The Company does not, however, intend to
restrict or influence any employee in the conduct of his or her own
affairs.  An employee may, therefore,
sell stock purchased under the Plan at any time the employee chooses, subject
to compliance with any applicable federal or state securities laws and subject
to any restrictions imposed under Article 21 to ensure that tax
withholding obligations are satisfied.  THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE
OF THE STOCK.

 

Article 17 - Participating
Subsidiaries.

 

The term “participating
subsidiary” shall mean any present or future subsidiary of the Company, as that
term is defined in Section 424(f) of the Code, which is designated
from time to time by the Board of Directors to participate in the Plan.  The Board of Directors shall have the power
to make such designation before or after the Plan is approved by the
stockholders.

 

Article 18 - Optionees Not
Stockholders.

 

Neither the granting of
an option to an employee nor the deductions from his or her pay shall
constitute such employee a stockholder of the shares covered by an option until
such shares have been actually purchased by the employee.

 

Article 19 - Application of
Funds.

 

The proceeds received by
the Company from the sale of Common Stock pursuant to options granted under the
Plan will be used for general corporate purposes.

 

Article 20 - Notice to
Company of Disqualifying Disposition.

 

By electing to
participate in the Plan, each participant agrees to notify the Company in
writing immediately after the participant transfers Common Stock acquired under
the Plan, if such transfer occurs within two years after the first
business day of the Payment Period in which such Common Stock was
acquired.  Each participant further
agrees to provide any information about such a transfer as may be requested by
the Company or any subsidiary corporation in order to assist it in complying
with the tax laws.  Such dispositions
generally are treated as “disqualifying dispositions” under Sections 421 and
424 of the Code, which have certain tax consequences to participants and to the
Company and its participating subsidiaries.

 

Article 21 - Withholding of
Additional Income Taxes.

 

By electing to
participate in the Plan, each participant acknowledges that the Company and its
participating subsidiaries are required to withhold taxes with respect to the
amounts deducted from the participant’s compensation and accumulated for the
benefit of the participant under the Plan, and each participant agrees that the
Company and its participating subsidiaries may deduct additional amounts from
the participant’s compensation, when amounts are added to

 

8

 

the participant’s
account, used to purchase Common Stock or refunded, in order to satisfy such
withholding obligations.  Each
participant further acknowledges that when Common Stock is purchased under the
Plan the Company and its participating subsidiaries may be required to withhold
taxes with respect to all or a portion of the difference between the fair market
value of the Common Stock purchased and its purchase price, and each
participant agrees that such taxes may be withheld from compensation otherwise
payable to such participant.  It is
intended that tax withholding will be accomplished in such a manner that the
full amount of payroll deductions elected by the participant under Article 7
will be used to purchase Common Stock. 
However, if amounts sufficient to satisfy applicable tax withholding
obligations have not been withheld from compensation otherwise payable to any
participant, then, notwithstanding any other provision of the Plan, the Company
may withhold such taxes from the participant’s accumulated payroll deductions
and apply the net amount to the purchase of Common Stock, unless the
participant pays to the Company, prior to the exercise date, an amount
sufficient to satisfy such withholding obligations.  Each participant further acknowledges that
the Company and its participating subsidiaries may be required to withhold
taxes in connection with the disposition of stock acquired under the Plan and
agrees that the Company or any participating subsidiary may take whatever
action it considers appropriate to satisfy such withholding requirements,
including deducting from compensation otherwise payable to such participant an
amount sufficient to satisfy such withholding requirements or conditioning any
disposition of Common Stock by the participant upon the payment to the Company
or such subsidiary of an amount sufficient to satisfy such withholding requirements.

 

Article 22 - Governmental
Regulations.

 

The Company’s obligation
to sell and deliver shares of Common Stock under the Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such shares.

 

Government regulations may
impose reporting or other obligations on the Company with respect to the
Plan.  For example, the Company may be
required to identify shares of Common Stock issued under the Plan on its stock
ownership records and send tax information statements to employees and former
employees who transfer title to such shares.

 

Article 23 - Governing Law.

 

The validity and
construction of the Plan shall be governed by the laws of Delaware, without
giving effect to the principles of conflicts of law thereof.

 

Article 24 - Approval of
Board of Directors and Stockholders of the Company.

 

The Plan was adopted by the Board of Directors on October 17,
2000 and was approved by the stockholders of the Company on October 17,
2000. The Plan was subsequently amended by the Board of Directors, without the
need for stockholder approval, on July 22, 2003.

 

9

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