SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 12 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report June 1, 1998
Regan Holding Corp.
(Exact name of registrant as specified in its charter)
California 0-4366 68-0211359
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1179 N. McDowell Blvd., Petaluma, California 94954
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (707) 778-8638
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On May 29, 1998, Regan Holding Corp., through its wholly-owned subsidiary
Legacy Marketing Group ("LMG"), entered into an Administrative Services
Agreement and on June 1, 1998, entered into a Marketing Agreement (collectively,
the "Agreements") both with Transamerica Life Insurance and Annuity Company
("Transamerica"). Pursuant to the Agreements, LMG will develop, market and
administer annuity products underwritten by Transamerica. For these services,
LMG will receive marketing allowance and commission income based on the volume
of policies sold and administrative fee income on a per transaction basis.
Item 7. Financial Statements, Pro-forma Financial Information
and Exhibits
(c) Exhibits
99.1 Marketing Agreement between LMG and Transamerica, dated June 1,
1998*
99.2 Administrative Services Agreement between LMG and Transamerica,
dated May 29, 1998, as amended*
* Certain confidential commercial and financial information has been
omitted from the indicated exhibits, but filed under separate cover with
the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REGAN HOLDING CORP.
Date June 11, 1998 By: s/David A. Skup
David A. Skup,
Chief Financial Officer
MARKETING AGREEMENT
This Marketing Agreement is made and entered into and effective as of May 29,
1998, by and between Transamerica Life Insurance and Annuity Company
("Transamerica"), a North Carolina corporation, and Legacy Marketing Group
("LMG"), a California corporation, based on the following facts:
A. Concurrently herewith, LMG and Transamerica are entering into a certain
Administrative Services Agreement pursuant to which certain insurance
business is to be administered by LMG.
B. The objective of this Agreement is to provide an arrangement to sell
certain policies ("Policies") of Transamerica as specified in APPENDIX A.
C. Transamerica desires to appoint LMG to recruit, train, and appoint
Wholesalers and Producers in the sale of certain Policies issued by
Transamerica as specified in APPENDIX A. Wholesalers and Producers are
those licensed insurance agents contracted with LMG to sell Transamerica
products.
Based on the foregoing facts, LMG and Transamerica agree as follows:
1. APPOINTMENT OF LMG AND SCOPE OF AUTHORITY
1.1 Transamerica hereby appoints LMG to recruit, train, and appoint
Wholesalers and Producers in the solicitation of the Policies in the
geographic territory specified in APPENDIX A (the "Territory").
1.2 LMG is appointed by Transamerica for the purpose of soliciting
applications for and servicing the Policies referenced in APPENDIX A
and otherwise transacting the business of this Agreement. LMG accepts
such appointment and agrees to comply with all applicable laws and
regulations, and to diligently devote itself to the business of this
appointment in order to sell the Policies referenced in APPENDIX A as
well as prevent the termination of such Policies through conservation
procedures mutually agreed upon by Transamerica and LMG.
1.3 LMG shall cause each new Wholesaler and Producer to enter into
Wholesaler and Producer Agreements in the form shown in APPENDIX C.
Transamerica will not be a party to the Wholesaler and Producer
agreements and shall have no obligation or liability thereunder. If
such a Wholesaler or Producer Agreement is modified by LMG, LMG will
provide Transamerica with copies, within ten (10) business days of
such modifications. LMG shall file appointments of Wholesalers and
Producers in the appropriate states' insurance departments and other
jurisdictions. LMG will report weekly to Transamerica a list of
current appointments, adding new appointments and terminations from
the list each week. Consideration for such appointments and
terminations is provided for in the Administrative Services Agreement,
executed concurrently herewith this Marketing Agreement.
1.4 It is understood and agreed that LMG is an independent contractor and
nothing herein shall be construed to create the relationship of
employer or employee between Transamerica and LMG or between
Transamerica and any officer, employee, Wholesaler, Producer or other
associated person of LMG. Neither LMG nor any Wholesaler or Producer
has authority to incur any liability on behalf of or to bind
Transamerica in any way or change its rights, duties, or obligations,
except as may be set forth in that Administrative Services Agreement
between Transamerica and LMG, executed concurrently herewith.
1.5 All Wholesalers and Producers who have been recruited and are
appointed to sell the Policies referenced in APPENDIX A by LMG shall
be identified by Transamerica as Wholesalers and Producers of LMG as
to such Policies. Any and all contracts entered into by and between
such Wholesalers or Producers with respect to such Policies shall be
coded through LMG and deemed Wholesalers and Producers of LMG.
Transamerica may terminate Transamerica's appointment of any
Wholesaler and Producer at its reasonable discretion, with prior
written agreement of LMG, such agreement shall not be unreasonably
withheld. Transamerica may not otherwise terminate, recode, or
otherwise disturb the relationship between LMG and its Wholesalers and
Producers with respect the Polices without the prior written consent
of LMG.
2. RIGHTS AND OBLIGATIONS OF TRANSAMERICA
2.1 It is acknowledged by both Transamerica and LMG that certain
obligations of Transamerica hereunder are to be performed by LMG as a
servicing organization, pursuant to the Administrative Services
Agreement between Transamerica and LMG. This does not relieve
Transamerica of any of its duties and obligations unless the specific
service is provided for in the Administrative Services Agreement,
executed concurrently herewith, whereby LMG has explicitly
acknowledged the responsibility of the service.
2.2 APPENDIX B will provide for the compensation payable to LMG from
Transamerica. APPENDIX B will be amended to conform with each new
product specification as it is developed and finalized.
APPENDIX B will be amended as new products are finalized. Such
amendment will be drafted by LMG, subject to Transamerica's written
approval, fifteen (15) days prior to the date on which Wholesalers and
Producers begin solicitation of the new product.
The marketing allowance of commissions may vary with the development
of each new product. Such marketing allowance will be specifically
provided for in APPENDIX B, or any subsequent amendments pertaining to
the new product.
2.3 The commissions specified in APPENDIX B shall be modified whenever
necessary to conform to the legal requirements of any state.
Furthermore, Transamerica reserves the right to withdraw its Policies
from any state or other jurisdiction, with 180 days written notice to
LMG, unless mandated by any law, regulation, regulatory agency or
court of law to do so immediately.
2.4 Transamerica shall have sole responsibility for filing advertising
materials, pertaining to the business underwritten by Transamerica, in
those states that so require prior to approving their use by LMG. All
costs associated with such filings will be the responsibility of
Transamerica.
2.5 LMG shall have no authority, nor shall it represent itself as having
such authority, other than as specifically set forth in this
Agreement. Without limiting the generality of the foregoing sentence,
LMG specifically agrees that it will not do any of the following
without the prior written consent of Transamerica:
(i) Litigation: Institute or prosecute any legal proceedings in
connection with any matter pertaining to the offering and/or sale
of the Policies identified in APPENDIX A or Transamerica's
business or accept service of process on behalf of Transamerica.
(ii) Alterations: Waive, amend, modify, alter, terminate or change any
term, provision or condition stated in any Policy Form or
discharge any contract in the name of Transamerica.
(iii)Advice to Policyholders/Prospective Policyholders: Offer tax,
legal, or investment advice to any policyholder or prospective
policyholder of Transamerica under any circumstances, with
respect to a Policy.
2.6 Agent Initial Appointment Fees--Transamerica shall be responsible for
payment of LMG's Wholesaler and Producer resident initial appointment
fees for such Wholesalers and Producers who have satisfied LMG's and
Transamerica's agreed upon selection and compliance criteria. In
addition, LMG will provide for Transamerica an annual projected number
of anticipated new initial Wholesaler and Producer appointments and
must receive Transamerica's approval of this number in order to
receive such initial resident fee payments. LMG's Wholesalers and
Producers will be responsible for any non-resident initial appointment
fees. Such non-resident appointment requirements will comply with
Transamerica's policies and procedures in effect as of the execution
of this Agreement. If Transamerica changes such policies and
procedures, the responsibility for payment of such non-resident
initial appointment fees will be mutually agreed by both LMG and
Transamerica.
Agent Renewal Appointment Fees--Transamerica will be responsible for
payment of LMG's Wholesaler and Producer resident renewal appointment
fees for contracted Wholesalers and Producers provided such
individuals have produced new first year commission business during
the prior twelve (12) months preceding the renewal date. The
Wholesalers and Producers will be responsible for any non-resident
renewal appointment fees. Such non-resident appointment requirements
will comply with Transamerica's policies and procedures in effect as
of the execution of this Agreement. If Transamerica changes such
policies and procedures, the responsibility for payment of such
non-resident renewal appointment fees will be mutually agreed by both
LMG and Transamerica.
Agent Termination Fees--Transamerica will be responsible for LMG's
Wholesaler and Producer Appointment termination fees in the states
which mandate such fees.
3. MODIFICATION AND TERMINATION OF AGREEMENT
3.1 This Agreement may be modified or amended at any time by mutual
agreement of the parties, provided the modification or amendment is in
writing, signed by authorized personnel, as provided in APPENDIX D of
this Agreement.
3.2 The termination of this Agreement is governed by the following
provisions:
(a) LMG or Transamerica may terminate this Agreement with or without
cause by twelve (12) months written notice to the other, sent by
mail. This Agreement may be terminated by mutual agreement of the
parties in writing at any time. LMG and Transamerica shall
provide fifteen (15) days' written notice of termination or
cancellation of this Agreement to the appropriate Departments of
Insurance. LMG and Transamerica shall fulfill any lawful
obligations with respect to such policies affected by this
Agreement, regardless of any dispute between LMG and
Transamerica.
(b) In the event that any state insurance department withdraws or
cancels LMG's license (or the license of the individual who is
acting on behalf of LMG in such states that do not permit the
licensing of corporations), or right to sell or conduct its
business, LMG will stop its marketing activity under this
Agreement in that state and notify Transamerica. Transamerica may
terminate the authority of LMG with regard to such affected
Policies which termination of authority shall be effective
immediately.
(c) LMG shall provide Transamerica ninety (90) days prior written
request if LMG desires to increase its fees or charges to
Transamerica or to change the manner of payment or to change any
of the other terms of this Agreement. Transamerica must respond
in writing to such request within sixty (60) days of receipt.
Transamerica reserves the right to re-price any products or
mandate the sale of affected products be ceased if LMG's proposed
changes affects Transamerica's profitability of its products.
(d) If either of the parties hereto shall materially breach this
Agreement or be materially in default in the performance of any
of its duties and obligations hereunder (the defaulting party),
the other party hereto may give written notice thereof to the
defaulting party and if such default or breach shall not have
been remedied within forty-five (45) days after such written
notice is given, then the party giving such written notice may
terminate this Agreement by giving thirty (30) days written
notice of such termination to the defaulting party.
(e) Notwithstanding anything herein to the contrary, Transamerica or
LMG may immediately terminate this Agreement with cause, upon
written notice to the other. Cause is generally defined as
fraudulent, criminal, unethical activity or blatant disregard for
the terms and conditions of this Agreement, however this list is
not exhaustive.
(f) Termination of this Agreement by default or breach by
Transamerica shall not constitute a waiver of any rights of LMG
in reference to services performed prior to such termination;
termination of this Agreement by default or breach by LMG shall
not constitute a waiver by Transamerica of any other rights it
might have under this Agreement.
(g) Termination of this Agreement does not affect in any way the
Administrative Services Agreement executed concurrently herewith.
4. RIGHTS AND OBLIGATIONS OF LMG
4.1 At all times during the term of this Agreement, LMG (or the licensed
individual who is acting on behalf of LMG in such states that do not
permit the licensing of corporations) and all Wholesalers and
Producers shall be properly licensed with each state or other
jurisdiction and properly appointed with Transamerica in each state or
other jurisdiction within the Territory before engaging in any
activity which under the laws of such state or other jurisdiction
makes such licensing and appointment necessary. Without limiting the
generality of the foregoing, all such Wholesalers and Producers shall
at all times bear the cost of maintaining all licenses required by any
such state.
4.2 LMG will itself and will communicate to and cause each Wholesalers and
Producer to use only forms, applications, advertising (as such term is
generally defined by the regulation of the state or other jurisdiction
in which Policies, referenced in APPENDIX A, are solicited), office
procedures, guides and rules furnished, authorized or promulgated by
Transamerica and agreed to by both parties and in each state or other
jurisdiction where any Wholesalers or Producer solicits Policies,
referenced in APPENDIX A,. No written advertising or sales materials
of any kind, including sales illustrations, or recruiting material
referencing the Policies, referenced in APPENDIX A, of Transamerica
shall be authorized by LMG until after it has been approved in writing
by Transamerica. LMG will provide such materials with sufficient
lead-time to allow appropriate review by Transamerica. Transamerica
will then use its best efforts to provide a timely response within
five (5) business days. No oral presentation of any kind shall be
authorized by LMG which does not conform to applicable statutes and
regulations or which does not accurately reflect the terms and
conditions of the Policies, referenced in APPENDIX A, being sold. All
recruiting practices of LMG shall comply with all applicable laws,
ordinances, and regulations of the appropriate authorities.
Transamerica shall be responsible for the maintenance of the
advertising files and logs, as mandated by applicable laws and
regulations.
4.3 LMG agrees to provide insurance coverages as appropriate and agreed to
by Transamerica.
(a) LMG will possess an adequate fidelity bond for any losses caused
by the dishonesty of LMG's employees or agents (not Wholesalers
or Producers) with limits of at least $3 million. LMG will also
maintain a surety bond(s) as so required in the states which it
is compelled to do so. LMG will file such bond, if so required,
with the appropriate agency. The bond shall be executed by a
corporate insurer authorized to transact business in the states
which mandate the maintenance of such bond.
(b) LMG will possess and maintain at all times errors and omissions
coverage with a limit of not less than $2 million written by an
insurer authorized to transact business in the states which
mandate the maintenance of such insurance. Such coverage will
comply with the requirements of the states in which such
insurance coverage is required.
(c) LMG will possess and maintain commercial, general and liability
insurance with limits of not less than $1 million per occurrence
combined single limit. Transamerica shall be named as an
additional insured and such coverage shall be primary with
respect to any other insurance maintained by Transamerica.
(d) LMG will make available and encourage the purchase of a group
Errors and Omissions plan with a limit of at least $1 million per
Wholesaler and Producer.
(e) The above insurance coverages shall be provided by insurance
companies with a minimum Best's rating A- or otherwise acceptable
to Transamerica. Any deductible or self insured retention must be
declared to and accepted by Transamerica in its reasonable
discretion. Each insurance policy required by this contract shall
be endorsed to state that coverage can not be materially changed
except after thirty (30) days prior notice by mail (10 days in
the event of non-payment of premium) has been given to
Transamerica. LMG shall provide Transamerica with certificates of
insurance and/or endorsements evidencing the above coverage
within fifteen (15) days of each insurance policy renewal and
within sixty (60) days of execution of this Agreement.
4.4 Each party shall be excused from performance for any period and to the
extent that the party is prevented from performing any services, in
whole or in part as a result of delays caused by an act of God, war,
civil disturbance, court order, labor dispute, or other cause beyond
that parties reasonable control, including failures or fluctuations in
electrical power, heat, light, air conditioning, or telecommunications
equipment and such non-performance shall not be a default or a ground
for termination. Notwithstanding the above, LMG agrees that it will
establish and maintain reasonable recovery steps, including technical
disaster recovery facilities, uninterruptable power supplies for
computer equipment and communications and that as a result thereof LMG
will use its best efforts to ensure that the Computer System shall be
operational within 48 hours of a performance failure. Within ninety
(90) days of the execution of this Agreement, LMG will establish a
general business recovery plan. Such plan will include, at a minimum,
procedures for answering calls; processing premium and on-line
operation of LMG's administrative systems. A comprehensive business
recovery plan will be implemented prior to December 31, 1998. LMG will
forward copies of both plans to Transamerica for their records. LMG
will provide for the off-premises site for storage of backup software
for the operating systems and data files.
4.5 LMG may rely on instructions of any person indicated on Transamerica's
"Schedule of Authorized Personnel," attached hereto as APPENDIX D.
Each of such persons is authorized to give instructions under this
section with respect to any matter arising in connection with this
Agreement. LMG shall not be liable for, and shall be indemnified by
Transamerica against, any loss arising from any action taken or
omitted by LMG in good faith in reliance upon such instructions.
4.6 Transamerica shall immediately, within five (5) business days, provide
LMG with written notice of any change of authority of persons
authorized and enumerated in APPENDIX D to provide LMG with
instructions or directions relating to services to be performed by LMG
under this Agreement.
4.7 In the event malfunction of the LMG systems, used in the offering
and/or sale of Polices specified in APPENDIX A, causes an error or
mistake in any record, report, data, information or output under the
terms of this Agreement, LMG shall at its expense correct and
reprocess such records. LMG will reimburse Transamerica for any costs
and/or expenses associated with such error or mistake. In the event
Transamerica discovers any such errors or mistake it shall, within
three (3) business days after discovery, notify LMG in writing of such
error or mistake in any record, report, data, information or output
received by Transamerica.
4.8 LMG is responsible for the payment to Transamerica of all monies which
LMG collects on behalf of Transamerica. However, until Transamerica
receives all monies due, the same shall be a debt payable by the
debtor upon demand for which Transamerica may at its option offset
with commissions otherwise due until such liability is satisfied. Any
indebtedness to Transamerica or its affiliates or subsidiaries shall
be a first lien against monies otherwise due under this Agreement. LMG
shall be responsible for all commission debit balances with the
exception of:
(i) Transamerica will consider sharing of these expenses on a case by
case basis, and such sharing of the expense will be mutually
agreed upon by both parties. Transamerica will only consider such
a request after reasonable collection efforts by LMG.
(ii) Commission debit balances resulting from any actions of law or
regulation, regulatory agency or court of law. Transamerica shall
be responsible for these debit balances once they are deemed to
be uncollectable after reasonable collection efforts by LMG.
4.9 LMG, in performance of its marketing obligations and duties, will not
itself and will use its best efforts to prevent Wholesalers or
Producers appointed hereunder, in the performance of their obligations
and duties hereunder, from any of the following:
(a) Enter into any agreement or incur any obligation on behalf of
Transamerica, except with its written permission, or commit
Transamerica to:
(i) pay any money to any such Wholesalers, Producer or employee,
or
(ii) a date that a payment will be made.
(b) Assign this Agreement or any compensation, other than commissions
payable to Wholesalers and Producers, payable under it without
the prior written consent of Transamerica.
(c) Solicit applications for Transamerica in any manner prohibited by
or inconsistent with the provisions of this Agreement or the
rules and regulations mutually agreed by both parties, now or
hereafter in force.
(d) With respect to any Policy,
(i) make any alterations, modifications or endorsements or
otherwise alter Transamerica 's obligations as stated in the
Policy, as referenced in APPENDIX A;
(ii) collect or receive any premiums after the initial premium,
except as may be required in the Administrative Services
Agreement executed concurrently herewith, between
Transamerica and LMG;
(iii)adjust or settle any claim; except as provided for in the
Administrative Services Agreement, executed concurrently
herewith.
(e) Initiate any civil or criminal action or proceeding, whether or
not brought in the name of Transamerica, which may in any way
involve or affect Transamerica, its affiliates, their business,
operations, or any Policy, as referenced in APPENDIX A, issued by
Transamerica.
(f) Use or authorize the use of any written, oral or visual
communication, circular, advertisement or other publication:
LMG agrees that it will not place into use, or distribute to any
person, any advertising, sales material or other document
(including, without limitation, illustrations, telephone scripts
and training materials) referring directly or indirectly to
Transamerica or its Policies, or cause, authorize or permit any
person to do so, without Transamerica's prior written consent.
LMG agrees that it will not use the name of Transamerica on any
business card, letterhead or marquee or in any directory listing,
or in any other manner, or cause, authorize or permit any
producer or other person to do so, without our prior written
consent. LMG agrees that it will not, nor will LMG knowingly
permit its Wholesalers and/or Producers to misrepresent
Transamerica or its Policies, as referenced in APPENDIX A, and
will make no oral or written representation which is inconsistent
with the terms of such policies or sales literature or is
misleading in any way, or refer to any insurance company tending
to bring it into disrepute.
(g) Knowingly or willfully violate the insurance laws or the
regulations of the Insurance Department of any State or any other
jurisdiction in which LMG represents Transamerica.
(h) Knowingly or willfully misapply or embezzle funds of Transamerica
or any other person or entity.
(i) Knowingly or willfully perpetrate any fraud against Transamerica
or any other person or entity.
4.10 LMG agrees that the compensation payable pursuant to Section 2.2 shall
be accepted by it as full compensation from Transamerica for its
marketing services hereunder, except as otherwise agreed by mutual
consent of LMG and Transamerica.
4.11 LMG will be solely responsible for any commissions to be paid to its
Wholesalers or Producers, which are earned as a result the selling of
Transamerica products through LMG.
5. HOLD HARMLESS AND INDEMNIFICATION
5.1 Transamerica shall not be responsible for and LMG shall indemnify and
hold Transamerica harmless from and against, any and all costs,
expenses, losses, damages, charges, counsel fees, payments, and
liability which may be asserted against Transamerica or for which it
may be held liable, caused by:
(a) LMG's refusal or material failure to comply with the terms of
this Agreement;
(b) LMG's gross negligence or gross misconduct, or material breach of
any representation or warranty of LMG hereunder.
(c) LMG's failure to comply with federal, state or local laws or
regulations, in the performance of its obligations hereunder
(except for any such failure which results from LMG's following
directions or instructions from Transamerica).
(d) Liability which arises primarily out of instructions which
Transamerica receives from LMG with respect to the subject matter
of this Agreement (to the extent that LMG is required to instruct
and/or direct Transamerica in the performance of Transamerica's
duties under this Agreement, and Transamerica reasonably relies
on such instructions).
5.2 LMG shall not be responsible for and Transamerica shall indemnify and
hold LMG harmless from and against, any and all costs, expenses,
losses, damages, charges, counsel fees, payments, and liability which
may be asserted against LMG or for which it may be held liable, caused
by:
(a) Transamerica's refusal or material failure to comply with the
terms of this Agreement;
(b) Transamerica's gross negligence or gross misconduct, or material
breach of any representation or warranty of Transamerica
hereunder;
(c) Transamerica's failure to comply with federal, state or local
laws or regulations in the performance of its obligations
hereunder;
(d) Any aspect of LMG's method of processing, servicing, and
marketing the policies referenced in APPENDIX A if Transamerica
has given LMG specific, written approval of such aspect of such
method of processing, servicing and marketing such policies. For
purposes of the foregoing, the description of any aspect of the
method of processing, servicing, and marketing such policies set
forth in APPENDIX C of the Administrative Services Agreement
shall be considered to be written approval by Transamerica of
such aspect. Additionally, LMG may, from time to time, request
Transamerica's written approval of some aspect of LMG's method of
processing, servicing, and marketing the policies. In such event,
Transamerica shall respond to such request with Transamerica's
written approval or disapproval within 14 business days or, if
applicable, such shorter period as LMG shall notify Transamerica
as necessary to enable compliance with any law or regulation or
any provision of this Agreement or the Administrative Services
Agreement. Any such request for approval from LMG to Transamerica
under this Section 5.2(d) shall (a) include notice to
Transamerica of the time in which Transamerica is required to
respond, (b) include a statement that Transamerica's approval is
requested pursuant to this Section 5.2(d) of this Agreement and
(c) shall be directed to one of the authorized personnel listed
in APPENDIX D of this Agreement.
(e) Transamerica's errors and/or mistakes in its use of LMG computer
software or computer hardware or its use of the control
procedures pertaining to such computer software or computer
hardware;
(f) Liability which arises primarily out of instructions which LMG
receives from Transamerica with respect to the subject matter of
this Agreement (to the extent that Transamerica instructs and/or
directs LMG in the performance of LMG's duties under this
Agreement and LMG reasonably relies on such instructions;
(g) Any failure of the policy features, policy forms, advertising
materials, or any governmental filings made by Transamerica, to
comply with applicable law, including but not limited to any
state or federal insurance or securities laws.
5.3 If any claim is made by a party which would give rise to a right or
indemnification under Sections 5.1 and 5.2, the party entitled to
indemnification (the "Indemnified Party") promptly will give notice of
the claim to the party required to provide indemnification (the
"Indemnifying Party"). The Indemnifying Party shall have the right, at
its option and its own expense and by its own counsel, to participate
in the defense of any such indemnified claim for which indemnification
is provided by this Agreement. Notwithstanding the foregoing, the
Indemnifying Party shall not have the right to control or represent
the Indemnified Party in the defense of any claim.
5.4 The provisions of this Agreement shall not be construed to require any
party to be indemnified or held harmless for such party's own
negligence.
5.5 The indemnification provision of Sections 5.1 and 5.2 of this
Agreement shall not be construed to restrict or limit any
indemnification provision which may be set forth in any other section
of this Agreement.
6. RIGHTS AND OBLIGATIONS OF BOTH PARTIES
6.1 Each party agrees that it will not, knowingly or willingly, directly
or indirectly, at any time during the term of this Agreement or within
five (5) years thereafter, induce or attempt to induce any
policyholder or contract holder of the other party to terminate,
reduce coverage, or replace any Policy, as referenced in APPENDIX A,
or otherwise disturb the relationship between the other party and any
of its policyholders or contract holders.
6.2 During the term of this Agreement, Transamerica agrees not to develop
any proprietary products with any current or former (within two (2)
years of termination) LMG Wholesaler or Producer without the express
written approval of LMG. Transamerica is not restricted from
developing proprietary products with any agent licensed with
Transamerica and not licensed with LMG.
6.3 Any LMG Wholesaler or Producer who desires to sell Transamerica
products not jointly developed by LMG may do so and will need to
contract directly with Transamerica. LMG will not be entitled to any
compensation on this business.
6.4 Any Agent for Transamerica who desires to sell the Transamerica--LMG
proprietary products will need to contract with LMG to sell such
product.
6.5 Transamerica and LMG agree to provide the other with ninety (90) days
written notice of any intent to make significant changes or
modifications to any contract or Policy form for products co-developed
by Transamerica and LMG. Both parties will make best efforts to
achieve a satisfactory resolution to the cause of the proposed changes
and may also agree to extend the timeframe to implement such change if
such change is pursued; unless mutually agreed upon in writing by LMG
and Transamerica.
7. PROPRIETARY AND CONFIDENTIAL INFORMATION
7.1 LMG acknowledges that certain information received from Transamerica
may be proprietary and/or confidential in nature. All such information
shall be used by the recipient solely for purposes of soliciting
Policies pursuant to this Agreement. LMG agrees to indemnify and hold
Transamerica harmless from any and all loss and expenses sustained by
Transamerica as a result of the unauthorized use of proprietary and/or
confidential information by LMG, or its Wholesalers or Producers.
7.2 Transamerica acknowledges that certain information received from LMG
may be proprietary and/or confidential in nature. All such information
shall be used by the recipient solely for purposes of soliciting
Policies pursuant to this Agreement. Transamerica agrees to indemnify
and hold LMG harmless from any and all loss and expenses sustained by
LMG as a result of the unauthorized use of proprietary and/or
confidential information by Transamerica.
8. VESTING OF RENEWAL COMMISSIONS
8.1 LMG, its successors, executors, assigns, or administrators is vested
as to commissions provided in APPENDIX B, and shall continue to
receive commissions on premiums on Policies received by Transamerica
for as long as the Policy remains in force.
9. NON-COMPETE PROVISION*
*CONFIDENTIAL TERMS HAVE BEEN REDACTED
10. GENERAL PROVISIONS
10.1 The parties agree this Agreement is an honorable undertaking, and
agree to cooperate each with the other in carrying out its provisions.
10.2 Each party will cause its employees and Wholesalers and Producers to,
upon receipt of any summons or other notice of suit or regulatory
authority inquiry wherein the other party is named in any manner,
forward any and all such documents within five (5) business days to
the attention of the other party by telefax, express or overnight
mail, or courier.
10.3 The waiver of any breach of any term, covenant or condition of this
Agreement shall not be deemed a waiver of any subsequent breach of the
same or any other term, covenant, or condition. No term, covenant, or
condition of this Agreement shall be deemed to have been waived unless
such waiver is in writing signed by the party charged therewith.
10.4 For any notice under this Agreement, notice shall be sufficient and
effective five (5) business days after deposit in the U.S. Mail,
postage prepaid, return receipt requested, or upon receipt if
delivered personally or by fax or facsimile or by a delivery service.
Such notice shall be directed as follows:
<PAGE>
To LMG:
Legacy Marketing Group
Attn: R. Preston Pitts, President
1179 North McDowell Blvd.
Petaluma, CA 94954
To Transamerica:
Transamerica Life Insurance and Annuity Company
Attn: Ron Wagley, Senior Vice President and
Chief Agency Officer
1150 South Olive
Los Angeles, CA 90015-2211
With a copy to:
Transamerica Life Insurance and Annuity Company
Attention: General Counsel
1150 South Olive
Los Angeles, CA 90015-2211
10.5 To the extent that the Rules and Regulations do not conflict with the
terms of this Agreement, LMG and Transamerica will conform to the
rules and regulations as mutually agreed upon by LMG and Transamerica.
This provision shall not be construed to alter the relationship of the
parties as provided above.
10.6 Each party expressly represents and warrants that it has the authority
to enter into this Agreement and that it is not or will not be, by
virtue of entering into this Agreement or otherwise, in breach of any
other agreement with any other insurance company, association, firm,
person or corporation. Each party warrants that the other party will
be free from interference or disturbance in its use of all products,
advertising, marketing techniques and all information provided by the
originating party.
10.7 This Agreement shall be binding upon the successor and assignees of
Transamerica as well as upon LMG's successor and permissive assignees.
10.8 This Agreement is transferable by assignment or otherwise by either
party only with written consent of the other party.
10.9 The persons signing this Agreement on behalf of Transamerica and LMG
warrant, covenant and represent that they are authorized to execute
this document on behalf of such corporations pursuant to their bylaws
or a resolution of their board of directors.
10.10In the event of a dispute between LMG and Transamerica, Transamerica
agrees to continue to pay any commissions due to any Wholesaler or
Producer.
10.11This Agreement, including APPENDICES A, B, C and D attached and the
provisions thereof, constitute the entire agreement between the
parties. This Agreement shall be governed and construed in accordance
with the laws of the State of California. Any similar agreement signed
prior to the execution dates below is null and void and abrogated
hereby. No change, waiver, or discharge shall be valid unless in
writing and signed by an authorized representative of the party
against whom such change, waiver, or discharge is sought to be
enforced. No delay or omission by either party to exercise any right
or power shall impair such right or power or be construed as a waiver.
A waiver by either of the parties of any of the covenants to be
performed by the other or any breach shall not be construed to be a
waiver of any succeeding breach or of any other covenant.
10.12LMG shall provide reasonable access during normal business hours to
any location from which LMG conducts its business and provides
services to Transamerica pursuant to this Agreement to auditors
designated in writing by Transamerica for the purpose of performing
audits for Transamerica. Transamerica shall give reasonable advance
written notice of an audit and include in that notice the matters
which it will audit. LMG shall provide the auditors any assistance
they may reasonably require. Such auditors shall have the right during
normal business hours to audit any business record, activity,
procedure, or operation of LMG that is reasonably related to the
business marketed under this Agreement, including the right to
interview any LMG personnel involved in providing or supporting such
responsibilities.
LMG will comply with all the relevant provisions contained in
applicable state codes or statutes. If any provision of this Agreement
is in conflict with the laws of the State which governs this
Agreement, such provision will be deemed to be amended to conform with
such laws. Further, if the laws of the State which governs this
Agreement require the inclusion of certain provisions of relevant
statutes, this contract shall be deemed to be amended to conform with
such laws.
10.13LMG and Transamerica agree to inform the other of any changes its
legal structure, and of any changes in its officers or partners. LMG
and Transamerica also agree to inform the other of any transfer of its
stock or partnership interests.
10.14LMG will not use Transamerica's name, trademarks, logo, or the name
of any affiliate of Transamerica in any way or manner not specifically
authorized in writing by Transamerica.
Transamerica will not use LMG's name, trademarks, logo or the name of
any affiliate of LMG in any way or manner not specifically authorized
in writing by LMG.
Transamerica will provide to LMG electronic formats and camera ready
art of its trademark, pyramid logo, digitized officers' signatures for
use on Policy Forms and signature stamps of authorized personnel to be
used exclusively for agent appointment forms filed with regulatory or
governmental agencies. Those properties combined with the Transamerica
marks listed below:
Transamerica
TALIAC
Transamerica Life Insurance and Annuity Company
Transamerica Life and Annuity
Transamerica Life
The Pyramid Logo
make up the Transamerica marks and names ("Marks and Names") licensed
herein. Any marketing name or service mark adopted by the parties to
identify the Policy, as referenced in APPENDIX A, contemplated in this
Agreement shall be owned by Transamerica and considered one of the
Marks and Names.
As Transamerica is an owner-authorized user of those Marks and Names,
Transamerica desires to exercise control over the use of said Marks
and Names. Transamerica desires to license the Marks and Names for use
by LMG in the claims servicing, policy servicing and administrative
services outlined in this Agreement.
Accordingly the parties agree as follows:
(a) License of Marks and Names: Transamerica hereby grants a
non-exclusive license unto LMG at no cost to use the Marks and
Names solely in connection with the Services provided under this
Agreement.
(b) Manner of Use: LMG shall not use the Marks and Names in any
manner or format which differs from the electronic versions
provided by Transamerica to LMG. If LMG deems a change in format
for its limited use is necessary, a request for such change must
be submitted in writing to Transamerica for its approval. Said
request must include the version as originally supplied and the
requested change, as well as the reason such a change is
requested. Transamerica's approval of a request change shall not
be unreasonably withheld.
(c) Quality Control: LMG's usage of the Marks and Names shall be
under the quality control of Transamerica as provided herein and
shall comply with Transamerica's standards. As provided in
Section 10.12, Transamerica may conduct reasonable audits of
LMG's usage of the Marks and Names in relation to the services
provided under this Agreement to ensure compliance with the terms
set forth in this section.
(d) Indemnification: Transamerica shall protect, indemnify, defend
and hold harmless LMG from any and all liability, damages, costs
or expenses, including reasonable attorneys' fees incurred in
connection with any claim or action arising from LMG's use of the
Marks and Names, limited to causes of action sounding in state or
federal trademark infringement and/or state or federal trademark
dilution. This indemnification shall survive termination of this
Agreement.
(e) Termination: The license to use the Marks and Names shall
terminate in accordance with the provisions of Section 3. Any use
of the Marks and Names that does not comply with the terms as set
forth in this Section will be considered a default in the
performance of LMG's material duties and or obligations. Upon
termination under Section 3, LMG shall cease and desist in the
use of the Marks and Names, except for limited use in
administering and servicing Policies issued prior to the date of
termination.
10.15In no event and under no circumstances, however, shall either party
under this Agreement be liable to the other party under any provision
of this Agreement for lost profits or for exemplary, speculative,
special, punitive or consequential damages.
10.16Survival: Sections 4.4, 4.7, 5, 6.1, 8, 10.12, and 10.14 shall
survive the termination of this Agreement.
<PAGE>
In witness whereof, the parties here to have executed this Agreement to take
effect on the effective date specified.
LEGACY MARKETING GROUP
By /s/ R. Preston Pitts
__________________________________________________________
Title President
__________________________________________________________
Date 5/29/98
__________________________________________________________
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By /s/ William N. Scott
____________________________________________________________
Title Vice President
_________________________________________________________
Date 6/1/98
__________________________________________________________
<PAGE>
APPENDIX A
CONFIDENTIAL TERMS HAVE BEEN REDACTED
<PAGE>
APPENDIX B
COMMISSION AND MARKETING ALLOWANCE FEES
*CONFIDENTAL TERMS HAVE BEEN REDACTED
COMMISSION
Multi Year Guarantee Product: 5 Year Surrender Charge Schedule
Transamerica will pay LMG on the last business day of the week *% of all
premiums received by LMG during that week.
Multi Year Guarantee Product: 10 Year Surrender Charge Schedule
Transamerica will pay LMG on the last business day of the week *% of all
premiums received by LMG during that week.
The above referenced commission percentages include *% which is paid back to
the carrier at the end of each fiscal year (fiscal year begins with the first
month that any premium for the Policies referenced in APPENDIX A is received by
LMG) for the first $100 million of premium paid, net of free looks. LMG will
retain the *% on all premiums received in excess of $100 million in each
fiscal year. Such year ends the last day of the calendar month immediately
preceding the month the first premium paid is received.
If the issue age is 84 as defined in the Death Benefit Proceeds provision of the
Policies referenced in APPENDIX A, initial commissions are reduced by *%. A
monthly trail commission of *% multiplied by original commission percentage
divided by 12 of the Annuity Cash Value is paid, beginning in policy year 2.
Additional premiums will be subject to the same commission percentages as the
initial premium.
Such commission will be part of the weekly commission process and will be paid
by Transamerica to LMG by authorizing LMG to write a check to itself against the
Transamerica Disbursement account for the total weekly commission amount.
MARKETING ALLOWANCE
Transamerica will pay LMG a Marketing Allowance equal to *% of all premium
paid, net of free looks. Transamerica will pay LMG such Marketing Allowance by
wire transfer within five (5) business days of receipt of such documentation.
LMG TRAIL COMMISSION
Transamerica will pay LMG an annual rate, paid monthly, of *% of the total
Annuity Cash Value of the policies sold under this Agreement. For the purpose of
the foregoing, Annuity Cash Value is the contract's Cash Value which reflects
any applicable reductions, loans, and withdrawals. The commission is based on
the total month end Annuity Cash Value and will be paid within six (6) business
days of month end by Transamerica via wire transfer to a LMG bank account.
<PAGE>
APPENDIX C
WHOLESALER AND PRODUCER AGREEMENTS AND/OR APPROPRIATE AMENDMENTS
<PAGE>
APPENDIX D
SCHEDULE OF AUTHORIZED PERSONNEL
Representing Transamerica
Ron Wagley, Senior Vice President and Chief Agency Officer
Paul Norris, Vice President
Representing Legacy Marketing Group
Lynda Regan, Chief Executive Officer
R. Preston Pitts, President
Greg C. Egger, Chief Marketing Officer
David Skup, Chief Financial Officer
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement") is entered into and
effective as of May 29, 1998, between Transamerica Life Insurance and Annuity
Company ("Transamerica"), a North Carolina corporation, and Legacy Marketing
Group ("LMG"), a California corporation, with reference to the following facts:
A. Concurrently herewith Transamerica and LMG are entering into a certain
Marketing Agreement pursuant to which certain insurance business is to be
marketed by LMG.
B. That Transamerica desires to have LMG provide services to Transamerica with
respect to this business and LMG is willing to provide such services,
subject to the terms and conditions of this Agreement.
Based on the foregoing facts, LMG and Transamerica agree as follows:
1. SERVICES
1.1 From and after the date of this Agreement, LMG agrees to perform
certain Transamerica accounting and service functions. Such accounting
and service functions shall consist of the activities described in
APPENDIX C, but only for the Policies recited in APPENDIX A.
Consideration for such accounting and service functions is set forth
in APPENDIX B.
2. QUALITY AND LIMITATION OF SERVICES
2.1 All services to be provided by LMG under this Agreement shall be
performed in accordance with the policies and procedures mutually
agreed by both parties, industry standards and in accordance with all
applicable laws and regulations. Transamerica and LMG will use their
best efforts to agree to and document within 60 days of execution of
this Agreement the policies and procedures for all such services to be
provided by LMG on behalf of Transamerica.
3. HOLD HARMLESS AND INDEMNIFICATION
3.1 Transamerica shall not be responsible for and LMG shall indemnify and
hold Transamerica harmless from and against, any and all costs,
expenses, losses, damages, charges, counsel fees, payments, and
liability which may be asserted against Transamerica or for which it
may be held liable, caused by:
(a) LMG's refusal or material failure to comply with the terms of
this Agreement;
(b) LMG's gross negligence or gross misconduct, or material breach of
any representation or warranty of LMG hereunder.
(c) LMG's failure to comply with federal, state or local laws or
regulations, in the performance of its obligations hereunder
(except for any such failure which results from LMG's following
directions or instructions from Transamerica).
(d) LMG's errors and/or mistakes in the use of Transamerica's FIN
system and software used to calculate estimated settlement option
payments.
(e) Liability which arises primarily out of instructions which
Transamerica receives from LMG with respect to the subject matter
of this Agreement (to the extent that LMG is required to instruct
and/or direct Transamerica in the performance of Transamerica's
duties under this Agreement, and Transamerica reasonably relies
on such instructions).
3.2 LMG shall not be responsible for and Transamerica shall indemnify and
hold LMG harmless from and against, any and all costs, expenses,
losses, damages, charges, counsel fees, payments, and liability which
may be asserted against LMG or for which it may be held liable, caused
by:
(a) Transamerica's refusal or material failure to comply with the
terms of this Agreement;
(b) Transamerica's gross negligence or gross misconduct, or material
breach of any representation or warranty of Transamerica
hereunder;
(c) Transamerica's failure to comply with federal, state or local
laws or regulations in the performance of its obligations
hereunder;
(d) Any aspect of LMG's method of processing, servicing, and
marketing the Policies referenced in APPENDIX A if Transamerica
has given LMG specific, written approval of such aspect of such
method of processing, servicing and marketing such Policies. For
purposes of the foregoing, the description of any aspect of the
method of processing, servicing, and marketing the policies set
forth in APPENDIX C of the Administrative Services Agreement
shall be considered to be written approval by Transamerica of
such aspect. Additionally, LMG may, from time to time, request
Transamerica's written approval of some aspect of LMG's method of
processing, servicing, and marketing the Policies. In such event,
Transamerica shall respond to such request with Transamerica's
written approval or disapproval within 14 business days or, if
applicable, such shorter period as LMG shall notify Transamerica
as necessary to enable compliance with any law or regulation or
any provision of this Agreement or the Marketing Services
Agreement. Any such request for approval from LMG to Transamerica
under this Section 3.2(d) shall (a) include notice to
Transamerica of the time in which Transamerica is required to
respond, (b) include a statement that Transamerica's approval is
requested pursuant to this Section 3.2(d) of this Agreement and
(c) shall be directed to one of the authorized personnel listed
in APPENDIX D of this Agreement.
(e) Transamerica's errors and/or mistakes in its use of LMG computer
software or computer hardware or its use of the control
procedures pertaining to such computer software or computer
hardware;
(f) Liability which arises primarily out of instructions which LMG
receives from Transamerica with respect to the subject matter of
this Agreement (to the extent that Transamerica instructs and/or
directs LMG in the performance of LMG's duties under this
Agreement and LMG reasonably relies on such instructions;
(g) Any failure of the policy features, policy forms, advertising
materials, or any governmental filings made by Transamerica, to
comply with applicable law, including but not limited to any
state or federal insurance or securities laws.
3.3 If any claim is made by a party which would give rise to a right or
indemnification under paragraphs 3.1 and 3.2, the party entitled to
indemnification (the "Indemnified Party") promptly will give notice of
the claim to the party required to provide indemnification (the
"Indemnifying Party"). The Indemnifying Party shall have the right, at
its option and its own expense and by its own counsel, to participate
in the defense of any such indemnified claim for which indemnification
is provided by this Agreement. Notwithstanding the foregoing, the
Indemnifying Party shall not have the right to control or represent
the Indemnified Party in the defense of any claim.
3.4 The provisions of this Agreement shall not be construed to require any
party to be indemnified or held harmless for such party's own
negligence.
3.5 The indemnification provision of sections 3.1 and 3.2 of this
Agreement shall not be construed to restrict or limit any
indemnification provision which may be set forth in any other Section
of this Agreement.
4. ASSIGNMENT, MODIFICATION AND TERMINATION OF AGREEMENT
4.1 Neither party may assign or delegate all or any part of its rights
and/or duties under this Agreement without the written consent, as
signed by one or more of the personnel shown on APPENDIX D, of the
granting party.
4.2 This Agreement may be modified or amended at anytime by mutual
agreement of the parties, provided the modification or amendment is in
writing, by one or more of the personnel shown on APPENDIX D or by any
other authorized officer of such party. APPENDIX D may be modified by
a party by notice to the other party, signed by an authorized officer
of such party.
4.3 The termination of this Agreement is governed by the following
provisions:
(a) LMG or Transamerica may terminate this Agreement with or without
cause by twelve (12) months written notice to the other. This
Agreement may be terminated by mutual agreement of the parties in
writing at any time. LMG and Transamerica shall provide fifteen
days' written notice of termination or cancellation of the
Agreement to the appropriate Departments of Insurance.
Transamerica shall fulfill any lawful obligations with respect to
the Policies referenced by APPENDIX A of this Agreement,
regardless of any dispute between LMG and Transamerica.
(b) LMG shall provide Transamerica ninety (90) days written notice if
LMG desires to increase its fees or charges to Transamerica or to
change the manner of payment or to change any of the other terms
and conditions of this Agreement. Transamerica must respond to
such request within sixty (60) days of receipt. Processing fees,
systems time and material rates may be increased annually. Such
increase shall not exceed the current inflation factor, as
determined by the applicable San Francisco-Oakland-San Jose
Consumer Price Index-All Urban. If the inflation factor remains
constant, the processing fees, systems time and material rates
may be reviewed and mutually agreed by both parties to determine
whether an increase is appropriate. Any such increase will be
required to be mutually agreed upon by both parties prior to
being implemented. Transamerica reserves the right to re-price
any products or mandate the sale of affected products be ceased
if LMG's proposed changes affects Transamerica's profitability of
its products.
(c) If either of the parties hereto shall materially breach this
Agreement or be materially in default in the performance of any
of its duties and obligations hereunder (the defaulting party),
the other party hereto may give written notice thereof to the
defaulting party and if such default or breach shall not have
been remedied within forty-five (45) days after such written
notice is given, then the party giving such written notice may
terminate this Agreement by giving ninety (90) days written
notice of such termination to the defaulting party.
(d) Notwithstanding anything herein to the contrary, Transamerica or
LMG may immediately terminate this Agreement with cause, upon
written notice to the other. Cause is generally defined as
fraudulent, criminal, unethical activity or blatant disregard for
the terms and conditions of this Agreement, however this list is
not exhaustive.
(e) Termination of this Agreement by default or breach by
Transamerica shall not constitute a waiver of any rights of LMG
in reference to services performed prior to such termination;
termination of this Agreement by default or breach by LMG shall
not constitute a waiver by Transamerica of any other rights it
might have under this Agreement.
(f) In the event that this Agreement is terminated, LMG agrees that,
in order to assist in providing uninterrupted service to
Transamerica, LMG shall offer reasonable analysis and programming
assistance to Transamerica in converting the records of
Transamerica from the LMG system to whatever service or system is
selected by Transamerica, subject to reimbursement to LMG for
such assistance at its standard rates as illustrated in APPENDIX
B.
(g) In the event that this Agreement terminates for any reason other
than by mutual written agreement, as provided for above in
Section 4.3(a), LMG and Transamerica agree that LMG, at
Transamerica's option, will continue to provide the
administrative services on behalf of Transamerica, as set forth
in this Agreement, for up to one year from the date of such
termination.
(h) In the event either party becomes or is declared insolvent or
bankrupt, is the subject of any proceedings relating to its
liquidation, insolvency or for the appointment of a receiver or
similar officer for it, makes an assignment for the benefit of
all or substantially all of its creditors, or enters into an
agreement for the continuation, extension, or readjustment of all
or substantially all of its obligations, other than those
agreements entered into as part of LMG's normal course of
business, the other party may immediately terminate this
Agreement for cause.
(i) Termination of this Agreement does not affect in any way the
Marketing Agreement, executed concurrently herewith.
5. RECORDS MAINTENANCE
5.1 This Agreement shall be retained as a part of the official record of
both LMG and Transamerica for the duration of this Agreement and for
seven years after the termination of this Agreement.
5.2 LMG will maintain complete books and records of all transactions
between LMG, Transamerica and its policyholders. LMG will preserve
detailed and adequate books and records of all administered
transactions, among LMG, Transamerica and its policyholders,
sufficient to permit the insurer to fulfill all of its contractual
obligations to insured persons. These books and records shall be
maintained in accordance with prudent standards generally accepted in
business record keeping. LMG will maintain Transamerica's records
intact and separate and apart from the records of any other carrier.
The documentation will contain all pertinent documents in sufficient
detail to identify the relevant dates, events, and persons
participating in those insurance events. LMG will maintain complete
records of all transactions taken pursuant to its Third Party
Administrator license. The books and records shall be maintained
throughout this Agreement and for ten years after the transaction to
which they respectively relate.
5.3 Transamerica shall own the records generated by LMG pertaining to
Transamerica; however, LMG shall retain the right to continuing access
to records to permit LMG to fulfill all of its contractual
obligations. Transamerica and LMG shall have continuing right to
access and copy all accounts and records maintained by LMG related to
Transamerica's business. Any appropriately authorized governmental
agency shall have access to all books, bank accounts and records of
LMG and Transamerica for the purpose of examination, inspection and
audit. All information contained in the aforementioned books and
records, including the identity and addresses of policyholders shall
be kept confidential, except that such information may be used in
proceedings instituted against LMG or Transamerica.
5.4 Transamerica shall be given on-line access during LMG's normal
business hours to the Transamerica policy information maintained on
LMG's policy administration system beginning on a date within thirty
(30) days of such request and continuing until LMG ceases to provide
services under this Agreement. Beginning on a mutually agreeable date
after the volume of business reaches a level determined by
Transamerica, LMG will allow on-line access to its accounting system
during LMG's normal business hours. LMG will provide policyholder
information on request by Transamerica within a time period mutually
agreeable and appropriate with the request. Such access will continue
until LMG ceases to provide services under this Agreement.
5.5 In the event that LMG and Transamerica cancel this Agreement, LMG may,
by written agreement with Transamerica, transfer all records to
Transamerica or the successor administrator rather than retain them
for the period referenced in Section 5.2. If LMG transfers the records
to a successor administrator or to Transamerica, LMG is no longer
responsible for retaining such records. The successor third party
administrator shall acknowledge in writing in its agreement with
Transamerica, or Transamerica itself shall acknowledge in writing,
that it is responsible for retaining the records for which LMG had
previously been responsible.
5.6 LMG will be given on-line access during Transamerica's normal business
hours to Transamerica's producer/agent database for the purpose of
inquiring on such system prior to LMG processing agent appointments.
Such access will continue until such time as LMG ceases to process
agent appointments for Transamerica.
6. TERM
6.1 This Agreement shall remain in force and effect until such agreement
terminates as provided for in Section 4.3 of this Agreement.
7. GENERAL PROVISIONS
7.1 LMG and Transamerica agree this Agreement is an honorable undertaking,
and each agree to cooperate with the other in carrying out its
provisions.
7.2 If any clause, paragraph, term or provision of this Agreement shall be
found to be void or unenforceable by any court of competent
jurisdiction, such finding shall have no effect upon any other clause,
paragraph, term or provision of this Agreement, and same shall be in
full force and effect.
7.3 For any notice under this Agreement, notice shall be sufficient and
effective five (5) business days after deposit in the U.S. Mail,
postage prepaid, return receipt requested, or upon receipt if
delivered personally or by fax or facsimile or by a delivery service.
Such notice shall be directed as follows:
To LMG:
Legacy Marketing Group
Attn: R. Preston Pitts, President
1179 North McDowell Blvd.
Petaluma, CA 94954
To Transamerica:
Transamerica Life Insurance and Annuity Company
Attn: William Scott, Senior Vice President
1100 Walnut Street, Suite 2400
Kansas City, MO 64106-2152
With a copy to:
Transamerica Life Insurance and Annuity Company
Attention: General Counsel
1150 South Olive
Los Angeles, CA 90015
7.4 Each party expressly represents and warrants that it has the authority
to enter into this Agreement and that it is not or will not be, by
virtue of entering into this Agreement or otherwise, in breach of any
other agreement with any other insurance company, association, firm,
person, or corporation.
7.5 The persons signing this Agreement on behalf of Transamerica and LMG
warrant, covenant and represent that they are authorized to execute
this document on behalf of such corporations pursuant to their bylaws
or a resolution of their boards of directors.
7.6 LMG shall, in all cases and at all times, observe and obey the rules,
regulations, instructions and directives of Transamerica which are
equitable and consistent with the terms of this Agreement.
Transamerica may, from time to time and at any time, promulgate such
rules, regulations, instructions and directions for its operations,
and such shall not bind Transamerica in contravention thereof.
7.7 LMG is an independent contractor. Nothing contained in this Agreement
shall be construed to create the relationship of employer and employee
between Transamerica and LMG, nor shall LMG's employees, Wholesalers
or Producers be considered employees of Transamerica for any purpose.
7.8 This Agreement is the result of mutual negotiations between the
parties and shall not be deemed to have been prepared by either party,
but by both equally. The headings of the several paragraphs contained
herein are for convenience only and do not define, limit, or construe
the contents of such paragraph.
7.9 This Agreement, including APPENDICES A, B, C and D attached and the
provisions thereof, constitute the entire agreement between the
parties. This Agreement shall be governed and construed in accordance
with the laws of the State of California. Any similar agreement signed
prior to the execution dates below is null and void and abrogated
hereby. No change, waiver, or discharge shall be valid unless in
writing and signed by an authorized representative of the party
against whom such change, waiver, or discharge is sought to be
enforced. No delay or omission by either party to exercise any right
or power shall impair such right or power or be construed as a waiver.
A waiver by either of the parties of any of the covenants to be
performed by the other or any breach shall not be construed to be a
waiver of any succeeding breach or of any other covenant.
7.10 When a policy is issued to a trustee or trustees, a copy of the trust
agreement and any amendment thereto, shall be furnished to
Transamerica by LMG and shall be retained as part of the official
records of both LMG and Transamerica for the duration of the policy
and for six years thereafter.
7.11 Any policies, certificates, booklets, termination notices or other
written communication delivered by Transamerica to LMG for delivery to
insured parties or covered individuals shall be delivered by LMG
within ten (10) business days after receipt of instructions from
Transamerica to deliver them.
7.12 Payment to LMG of any premiums or charges for insurance by or on
behalf of the insured party shall be deemed to have been received by
Transamerica, and the payment of return premiums or claim payments
forwarded by Transamerica to LMG shall not be deemed to have been paid
to the insured party or claimant until such payments are received by
the insured party or claimant.
7.13 During the term of this Agreement and for one (1) year thereafter,
Transamerica and LMG and any of their affiliates shall not, directly
or indirectly, solicit for employment any person employed or working
on the services provided hereunder within the preceding 12 months by
the other party or any affiliate of the other party without the prior
written consent of the other party, which shall not be unreasonably
withheld; provided however; that (i) in the event either party uses
the services of a professional recruiter and provides such recruiter
solely with generic job duties and job descriptions (without making
any reference to the other party or the party's affiliates) and such
recruiter contacts a qualified candidate who happens to be an employee
of the other party and that candidate initiates contact through a
recruiter with that party, then that party may employ that employee,
or (ii) in the event an employee of the other party responds to a
general advertisement placed by a party, then that party may employ
that employee.
7.14 LMG shall provide reasonable access during normal business hours to
any location from which LMG conducts its business and provides
services to Transamerica pursuant to this Agreement to auditors
designated in writing by Transamerica for the purpose of performing
audits for Transamerica. Transamerica shall give reasonable advance
written notice of an audit and include in that notice the matters
which it will audit. LMG shall provide the auditors any assistance
they may reasonably require. Such auditors shall have the right during
normal business hours to audit any business record, activity,
procedure, or operation of LMG that is reasonably related to LMG's
responsibilities identified in this Agreement, including the right to
interview any LMG personnel involved in providing or supporting such
responsibilities.
7.15 Each party shall be excused from performance for any period and to the
extent that the party is prevented from performing any services, in
whole or in part as a result of delays caused by an act of God, war,
civil disturbance, court order, labor dispute, or other cause beyond
that parties reasonable control, including failures or fluctuations in
electrical power, heat, light, air conditioning, or telecommunications
equipment and such non-performance shall not be a default or a ground
for termination. Notwithstanding the above, LMG agrees that it will
establish and maintain reasonable recovery steps, including technical
disaster recovery facilities, uninterruptable power supplies for
computer equipment and communications and that as a result thereof LMG
will use its best efforts to ensure that the Computer System shall be
operational within 48 hours of a performance failure. Within ninety
(90) days of the execution of this Agreement, LMG will establish a
general business recovery plan. Such plan will include, at a minimum,
procedures for answering calls; processing premium and on-line
operation of LMG's administrative systems. A comprehensive business
recovery plan will be implemented prior to December 31, 1998. LMG will
forward copies of both plans to Transamerica for their records. LMG
will provide for the off-premises site for storage of backup software
for the operating systems and data files.
7.16 In no event and under no circumstances, however, shall either party
under this Agreement be liable to the other party under any provision
of this Agreement for lost profits or for exemplary, speculative,
special, punitive or consequential damages.
7.17 Survival: Sections 3, 4.3(f) and (g), Sections 5, 7.13, 7.14, 7.15,
9.2, 9.3 and 9.9 shall survive the termination of this Agreement.
8. RESPONSIBILITIES OF TRANSAMERICA
8.1 Transamerica will be responsible for the following:
(a) It is the sole responsibility of Transamerica to provide for
competent administration of the policies administered by LMG.
(b) Transamerica shall be responsible for researching, obtaining and
the registration of any trademarks issued by the Patent and
Trademark office for the products jointly developed by LMG and
Transamerica and any costs associated therewith.
(c) With respect to claims that LMG is authorized to pay on behalf of
Transamerica, Transamerica shall be responsible for any and all
costs of litigation associated with the payment of such claims.
These expenses shall include, but are not limited to, counsel
fees and court fees.
(d) Transamerica shall have sole responsibility for filing
advertising materials in those states that so require prior to
approving their use by LMG. All costs associated with such
filings will be the responsibility of Transamerica.
(e) Transamerica shall be responsible for the establishment and
maintenance of any group trusts associated with such product
filings and any costs associated therewith.
(f) Transamerica shall be responsible for the processing of payments
under the election of a settlement option by the beneficiary or
owner. LMG's responsibilities as they relate to this function are
detailed in APPENDIX C, Policyholder Services, Section 2.
Transamerica will supply LMG with software to calculate estimated
settlement option payments.
(g) Transamerica shall be responsible for determining the benefits
and claims payment procedures applicable to such coverage, if
any.
(h) Transamerica shall, at least semiannually, conduct a review of
operations of LMG. At least one such review will be an on-site
audit of the operations of LMG.
(i) Currently, LMG does not perform medical underwriting for
Transamerica, however, if granted such authority, LMG will comply
with all underwriting standards established by Transamerica and
adhere to all pertinent provisions contained in applicable Third
Party Administrator statutes. Transamerica shall be responsible
for the underwriting or other standards pertaining to the
business underwritten by Transamerica.
(j) Transamerica will provide certification for year 2000 compliance
of all systems which have an impact on LMG no later than the
second quarter of 1999.
(k) LMG shall have no authority, nor shall it represent itself as
having such authority, other than as specifically set forth in
this Agreement. Without limiting the generality of the foregoing
sentence, LMG specifically agrees that it will not do any of the
following without the prior written consent of Transamerica:
(i) Litigation: Institute or prosecute any legal proceedings in
connection with any matter pertaining to the Services
provided pursuant to this Agreement or Transamerica's
business or accept service of process on behalf of
Transamerica.
(ii) Alterations: Waive, amend, modify, alter, terminate or
change any term, provision or condition stated in any Policy
Form or discharge any contract in the name of Transamerica,
except as otherwise specifically provided in this Agreement,
such policy forms or as a result of a complaint resolution.
(iii)Advice to Policyholders/Prospective Policyholders: Offer
tax, legal, or investment advice to any Policyholder or
prospective Policyholder of Transamerica under any
circumstances, with respect to a Policy or the Services
provided pursuant to this Agreement.
8.2 Transamerica shall immediately, within five (5) business days, provide
LMG with written notice of any change of authority of persons
authorized and enumerated in APPENDIX D to provide LMG with
instructions or directions relating to services to be performed by LMG
under this Agreement.
9. RESPONSIBILITIES OF LMG
9.1 LMG agrees to provide insurance coverages as appropriate and agreed to
by Transamerica.
(a) LMG will possess an adequate fidelity bond for any losses caused
by the dishonesty of LMG's employees or agents (not Wholesalers
or Producers) with limits of at least $3 million. LMG will also
maintain adequate surety bond(s) as so required in the states
which it is compelled to do so. LMG will file such bond, if so
required, with the appropriate agency. The bond shall be executed
by a corporate insurer authorized to transact business in the
states which mandate the maintenance of such bond.
(b) LMG will possess and maintain at all times errors and omissions
coverage with a limit of not less than $2 million written by an
insurer authorized to transact business in the states which
mandate the maintenance of such insurance. Such coverage will
comply with the requirements of the states in which such
insurance coverage is required.
(c) LMG will possess and maintain commercial, general and liability
insurance with limits of not less than $1 million per occurrence
combined single limit. Transamerica shall be named as an
additional insured and such coverage shall be primary with
respect to any other insurance maintained by Transamerica.
(d) LMG will make available and encourage the purchase of a group
Errors and Omissions plan with a limit of at least $1 million to
its Wholesalers and Producers.
(e) The above insurance coverages shall be provided by insurance
companies with a minimum Best's rating A- or otherwise acceptable
to Transamerica. Any deductible or self insured retention must be
declared to and accepted by Transamerica in its reasonable
discretion. Each insurance policy required by this contract shall
be endorsed to state that such coverage can not be materially
changed except after thirty (30) days prior notice (10 days in
the event of non-payment of premium), has been given to
Transamerica. LMG shall provide Transamerica with certificates of
insurance and/or endorsements evidencing the above coverage
within fifteen (15) days of each insurance policy renewal and
within sixty (60) days of the execution of this Agreement.
9.2 In the event malfunction of the LMG systems causes an error or mistake
in any record, report, data, information or output under the terms of
this Agreement, LMG shall at its expense correct and reprocess such
records. LMG will reimburse Transamerica for any costs and/or expenses
associated with such error or mistake. In the event Transamerica
discovers any such errors or mistake it shall, within three (3)
business days after discovery, notify LMG in writing of such error or
mistake in any record, report, data, information or output received by
Transamerica.
9.3 LMG shall respond to all correspondence of a routine nature and other
general functions necessary for satisfactory administration of the
Policies referenced in APPENDIX A. LMG shall maintain complaint files
and complaint logs to comply with applicable laws and regulations.
If LMG receives:
(a) notice of the commencement of any legal proceeding involving any
of Transamerica's customers; or
(b) a communication from any insurance department, other
administrative agency or any other person identifying a complaint
by any Transamerica customer or calling a hearing involving any
Transamerica practice; or
(c) written complaints regarding Transamerica Policies referenced in
APPENDIX A from customers of Transamerica (oral complaints are
directed to make such complaint in writing and therefore will be
handled in accordance with such written complaint handling
procedures); or
(d) a demand or request by any court, government agency or regulatory
body to examine any of the books and records of Transamerica
relating to Policies or services.
LMG will notify Transamerica within two (2) business days. LMG will
send copies of any necessary documentation to Transamerica within
three (3) business days.
LMG and Transamerica will jointly develop a complaint handling
process.
LMG will maintain a file containing any correspondence relating to
complaints received from Transamerica customers and/or government
agency or regulatory body for a period of seven (7) years from receipt
of the complaint letter.
Transamerica will respond to summons and complaints commencing legal
actions on its own behalf. Transamerica will also be responsible for
the costs associated with responding to such summons and complaints
commencing legal action on its own behalf.
9.4 LMG will provide a written notice, approved in writing by
Transamerica, to policyholders advising them of the identity of
Transamerica and LMG, and the relationship between LMG, the
policyholder and Transamerica.
9.5 LMG will only use advertising pertaining to the business underwritten
by Transamerica that Transamerica has approved in writing in advance
of its use. If so required, Transamerica shall obtain the prior
approval of the appropriate Department of Insurance before approving
advertising for use by LMG. Transamerica will also be responsible for
all costs associated with obtaining such approval.
9.6 LMG is responsible for system modification costs for initial new
product development. LMG is not responsible for the costs associated
for other modifications that are not necessary to the normal course of
business. "New product development" will be defined and agreed on
prior to development. Transamerica will reimburse LMG for any system
modification costs requested that are beyond those necessary to the
normal course of business at its standard rates illustrated in
APPENDIX B.
9.7 LMG warrants that the software will continue to function in accordance
with its specifications in the processing of dates and date dependent
data (including but not limited to calculating, comparing and
sequencing dates starting with the year 1900) from the date of this
Agreement through the year 2100, including leap year calculations.
This warranty is independent of any other warranty provided in this
Agreement and shall survive the expiration or termination of any other
warranty provided. LMG will also provide certification for year 2000
compliance on Administrative and Accounting Systems prior to the end
of the second quarter of 1999.
9.8 LMG will comply with all of the relevant provisions contained in
applicable Third Party Administrator statutes. If any provision of
this Agreement is in conflict with the laws of the State which governs
this agreement, such provision will be deemed to be amended to conform
with such laws. Further, if the laws of the State which governs this
Agreement require the inclusion of certain provisions of relevant
statutes, this Agreement shall be deemed to be amended to conform with
such laws.
9.9 LMG will not use Transamerica's name, trademarks, logo, or the name of
any affiliate of Transamerica in any way or manner not specifically
authorized in writing by Transamerica.
Transamerica will not use LMG's name, trademarks, logo or the name of
any affiliate of LMG in any way or manner not specifically authorized
in writing by LMG.
Transamerica will provide to LMG electronic formats and camera ready
art of its trademark, pyramid logo, digitized officers' signatures for
use on Policy Forms and signature stamps of authorized personnel to be
used exclusively for agent appointment forms filed with regulatory or
government agencies. Those properties combined with the Transamerica
marks listed below:
Transamerica
Transamerica Life Insurance and Annuity Company
TALIAC
Transamerica Life and Annuity
Transamerica Life
The Pyramid Logo
make up the Transamerica marks and names ("Marks and Names") licensed
herein. Any marketing name or service mark adopted by the parties to
identify the Policies contemplated in this Agreement shall be owned by
Transamerica and considered one of the Marks and Names.
As Transamerica is an owner-authorized user of those Marks and Names,
Transamerica desires to exercise control over the use of said Marks
and Names. Transamerica desires to license the Marks and Names for use
by LMG in the claims servicing, Policy servicing and administrative
services outlined in this Agreement.
Accordingly the parties agree as follows:
(a) License of Marks and Names: Transamerica hereby grants a
non-exclusive license unto LMG at no cost to use the Marks and
Names solely in connection with the Services provided under this
Agreement.
(b) Manner of Use: LMG shall not use the Marks and Names in any
manner or format which differs from the versions provided by
Transamerica to LMG. If LMG deems a change in format for its
limited use is necessary, a request for such change must be
submitted in writing to Transamerica for its approval. Said
request must include the version as originally supplied and the
requested change, as well as the reason such a change is
requested. Transamerica's approval of a request change shall not
be unreasonably withheld.
(c) Quality Control: LMG's usage of the Marks and Names shall be
under the quality control of Transamerica as provided herein and
shall comply with Transamerica's standards. As provided in
Section 7.14, Transamerica may conduct reasonable audits of LMG's
usage of the Marks and Names in relation to the services provided
under this Agreement to ensure compliance with the terms set
forth in this Section.
(d) Indemnification: Transamerica shall protect, indemnify, defend
and hold harmless LMG from any and all liability, damages, costs
or expenses, including reasonable attorneys' fees incurred in
connection with any claim or action arising from LMG's use of the
Marks and Names, limited to causes of action sounding in state or
federal trademark infringement and/or state or federal trademark
dilution. This indemnification shall survive termination of this
Agreement.
(e) Termination: The license to use the Marks and Names shall
terminate in accordance with the provisions of Section 6 of this
Agreement. Any use of the Marks and Names that does not comply
with the terms as set forth in this Section will be considered a
default in the performance of LMG's material duties and or
obligations. Upon termination under Section 6 of this Agreement,
LMG shall cease and desist in the use of the Marks and Names,
except for limited use in administering and servicing Policies
issued prior to the date of termination.
10. COMPUTER SYSTEM AND PROPRIETARY RIGHTS
10.1 Definitions: As used in this Agreement, the following terms shall have
such meanings:
(a) "Administrative Computer System" or "Computer System" shall refer
to all computer systems and related materials used by LMG to
administer the Policies, including LMG proprietary software and
third party licensed software comprised of computer programs and
supporting documentation, including, but not limited to, source
code, object code input and output formats, program listings,
narrative descriptions and operating instructions and shall
include the tangible media upon which the computer programs and
supporting documentation are recorded as well as the deliverable
forms and documents.
LMG's proprietary software and third party licensed software are
used to administer the Policies listed in APPENDIX A.
(b) "Property" shall mean all property of either party including, but
not limited to, data records, materials, supplies, computer
software, customer records, premium information, underwriting
files, customer lists, sales data, policyholder data, data on
Wholesalers and Producers and any other distribution systems.
10.2 Computer System. The Computer System will be and remain the property
of LMG and Transamerica shall have no rights or interest in the
Computer System except as provided in this Agreement. Modifications to
the Computer System developed for Transamerica that are mutually
agreed to be proprietary to Transamerica shall not be sold, licensed,
transferred, assigned or otherwise distributed without the express
written consent of Transamerica.
(a) The Computer System currently uses the Leverage ALS/LCS/LPS
System, licensed to LMG. Transamerica understands and agrees
that, at LMG's option, the Licensed Software or any replacement
software may be replaced at any time and from time to time, at
LMG's expense, with other suitable software of LMG's choice.
In the event that LMG decides to replace such licensed software,
LMG agrees to test the replacement software prior to its
installation to be certain that it will properly perform the
services contemplated by this Agreement. LMG will provide
Transamerica with reasonable notice prior to any such
replacements.
(b) LMG agrees to use its best efforts to convince Leverage to enter
into an agreement with Transamerica. Such agreement shall
provide, in substance, that should this Agreement terminate for
any reason, then Leverage shall, at Transamerica's option, issue
to Transamerica, or to a Transamerica affiliate specified by
Transamerica, a license agreement to use the version of Leverage
Computer System and modifications and enhancements done by LMG
then currently used to service Transamerica's business. Any such
agreement shall provide that the fee for any such license shall
not exceed the current market price for the product.
Notwithstanding the above, Transamerica understands and agrees
that in no event shall LMG provide to Transamerica during the
term of this Agreement or any extension thereto, access to
Leverage proprietary software source codes, technical design
documentation, detailed business or technical practices or
techniques, confidential correspondence or documentation.
LMG warrants that the Computer System is the property of LMG and
utilizes software developed by or licensed to LMG. LMG further
warrants that the use of the Computer System to provide the
Services contemplated by this Agreement will not infringe upon or
violate any patent, copyright, trade secret or other proprietary
right of any third party. These warranties shall survive
termination of this Agreement.
In witness whereof, the parties here to have executed this Agreement to take
effect on the effective date specified.
LEGACY MARKETING GROUP
By /s/ R. Preston Pitts
____________________________________________________________
Title President
_________________________________________________________
Date 5/29/98
__________________________________________________________
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By /s/ William N. Scott
____________________________________________________________
Title Vice President
_________________________________________________________
Date 6/1/98
__________________________________________________________
<PAGE>
APPENDIX A
GEOGRAPHIC TERRITORY:
*CONFIDENTIAL TERMS HAVE BEEN REDACTED
The District of Columbia and all states except New York and currently
Alabama
POLICY FORMS
LMG/Transamerica:
Multi Year Guarantee Product
Flexible Premium Deferred Annuity
Group Master Policy # ___________________*
Policy #: ___________________*
State required variations of the above referenced forms may be required.
<PAGE>
APPENDIX B
*CONFIDENTIAL TERMS HAVE BEEN REDACTED
PROCESSING FEES
1. Multi Year Guarantee Products
a. Acquisition Fees: One time fee of $* per application received.
b. Maintenance: $* per inforce Policy per year to be paid
weekly pro rata.
c. Terminations: One time fee of $* to be paid at time of
surrender, maturity, election of a settlement
option or death claim of each Policy.
d. Payment of Claims: $* per death claim paid by LMG in addition
to the $* termination fee, as provided above
in ss.c.
2. Agent Appointment and Termination: $* per agent appointment per state;
$* per agent termination per state.
3. Out-Of-Pocket Expenses
a. In addition to the fees set forth above, LMG will forward to
Transamerica on a monthly basis a bill for the out of pocket expenses
listed below. Such invoice will include adjustments for any fees due
to Transamerica from LMG as a result of Agent initial and renewal
appointment fees which are due or have been collected from such
Wholesalers and Producers. Transamerica will reimburse LMG with
fifteen (15) days of receipt of such bill. If LMG does not receive
reimbursement within fifteen (15) days, Transamerica will allow LMG to
draw the following out of pocket expenses from the disbursement
account. Out-of-pocket expenses are expenditures for the items such as
those listed below and any other items agreed to in writing by the
parties:*
b. Transamerica will be responsible for cash management of this
disbursement account and LMG agrees to provide Transamerica records
and information to properly perform this function.
4. Systems Time and Materials Rates
Under certain conditions as set forth in this Agreement, Transamerica will
reimburse LMG for the costs of systems modifications or systems support at
the following rates:
Chief Information Officer $* per hour
Director--Technical Support $* per hour
Senior Programmer Analyst $* per hour
Programmer Analyst $* per hour
Senior Business Analyst $* per hour
Project Manager $* per hour
Business Analyst $* per hour
Tester $* per hour
5. Payment of Processing Fees.
Transamerica will pay LMG the processing fees from 1 and 2 weekly. Fees
from 1 and 2 will be paid by wire transfer within 5 days of receipt of such
documentation.
6. Compensation Not To Be Contingent
This Agreement shall not provide for compensation, commissions, fees or
charges which are contingent upon savings effected in the adjustment,
settlement and payment of losses (the loss ratio) covered by Transamerica's
obligations. In the event that LMG adjusts or settles claims on behalf of
Transamerica, such compensation shall in no way be contingent on claims
experience.
This provision does not prevent the compensation of LMG from being based on
premiums or charges collected or the number of claims paid or processed or
performance-based compensation for providing auditing services. LMG will
not receive any administrative compensation except as expressly set forth
in this Agreement between LMG and Transamerica.
<PAGE>
APPENDIX C
SERVICES TO BE PROVIDED
These services, which do not represent a complete list of services to be
provided by LMG, are to be performed by LMG in accordance with the policies and
procedures mutually agreed to by both parties, applicable laws and regulations
and reasonable industry standards. LMG will consult with and obtain
Transamerica's approval prior to performing processing of items that are not
covered in the policies and procedures documented in this Agreement or otherwise
agreed upon by both parties.
1. Services:
Clerical Processing of Agent Appointment and Termination with States
Appointment
1. Review signed Producer Agreement for completeness and accuracy, input
agent information into LCS system (LMG agent database).
2. Conduct Background Investigation on Producer, including credit report,
NAIC RIRS inquiry, Vector Check, state licensing check (in all States
in which Producer requests appointment), criminal check, and past
employment check.
3. If Producer meets LMG/Transamerica hiring criteria, complete and mail
all state required appointment forms or electronic transmission of
appointment data to state.
4. Depending on state criteria, once appointment is effective, input
appointment information into LCS system for renewal tracking, new
business processing and weekly transmission to carrier.
Termination
1. Complete and mail state required forms or electronic transmission to
terminate agent's appointment in state(s).
2. Update LCS with appropriate appointment termination into LCS system to
prohibit new business processing. Weekly transmission of agent
termination information to carrier.
Appointment Renewal Processing
1. LMG will forward to Transamerica within three (3) business days of a
written request by Transamerica any Producer address that is required
to be provided to a regulatory agency.
Clerical Processing of Transfers (1035x, CD Money Market, Mutual Fund
Qualified Transfers)
1. Review all transfer documentation for completeness and accuracy,
including receipt of all state specific forms (replacements).
2. Contact transfer institution for verification of account information.
3. Mail required documentation including state specific forms to transfer
institution.
4. Mail initial letter to applicant confirming receipt of application.
5. Contact transfer institution on a regular basis until receipt of such
funds.
6. Once all funds are received complete Contract Issue.
Contract Issue
1. Review all annuity applications for completeness and accuracy,
including state product availability and agent licensing.
2. Input application into ALS administrative system.
3. Process any transfers, as previously defined.
4. Generate state specific policy forms.
5. Mail policy to Producer for delivery.
6. Follow-up on any outstanding delivery requirements and delivery
receipt.
7. Once all outstanding requirements are received, apply the premium to
policy, place the policy inforce and generate a commission payment to
agent.
Policyholder Service
Includes all maintenance on all certificates/policies after issue
(inforce). Responsibilities include, but are not limited to, the following:
1. Responding to all written or verbal consumer or agent inquiries
regarding an inforce policy.
2. Clerical processing of the following financial transactions:
Withdrawals (including systematic withdrawal income and Minimum
Required Distributions).
Partial surrenders.
Full surrenders, including 1035X.
Strategy transfers.
Election of a settlement option by owner or beneficiary (however LMG
will not process the actual payments under a settlement option). LMG
will provide Transamerica with the all required documentation to
process the payments under such election within ten (10) business days
of receipt of completed forms.
Free Look or Not Taken processing
Additional Deposit(s)
Claims processing, as defined in this Agreement
3. Clerical processing of the following non-financial transactions.
Address changes.
Beneficiary changes.
Ownership changes.
Mailing of quarterly statements.
Collateral Assignment.
Review of legal documents (not limited to POA, Guardianship).
4. Maintain a toll-free telephone line for policyholders.
Clerical processing is defined as reviewing requests to determine all state
and carrier mandated forms have been completed, data entry into ALS
(administrative system) to record such transaction and providing written
confirmation to policyholder of such clerical processing.
Maintenance of Policyholder Records
LMG will be responsible for the maintenance of policyholder records.
Specifically, LMG will maintain accurate and complete policyholder records
according to the provisions of this Agreement. Paper records will be
maintained in an offsite storage facility approved by Transamerica. Copies
of all paper records will be permanently scanned with LMG's imaging system.
Records of all transactions will also be maintained in LMG's administrative
system.
Data Processing Services - All data files provided to Transamerica will be
in formats that are mutually agreed to by both parties. Month end cutoff
for all accounting files will be the 21st of each month or the prior
business day unless otherwise agreed upon by both parties.
1. Maintenance of the general ledger for all premium and disbursement
cash accounting as well as all policy related financial transactions.
2. Within ten (10) days of month end LMG will transmit of the general
ledger interface to Transamerica for financial statement preparation.
3. Maintain policy transaction data files.
4. Transmission of policy transaction data files to Transamerica for the
preparation of reserve calculations.
5. Provide computer-accessible valuation data: account balance
information, policyholder activity, and policy provision data (such as
changing schedules of interest) at a sufficient level of detail to
make Statutory Valuation and GAAP accounting possible without
resorting to estimates. Create and transmit the data files with a
sufficiently early effective date that they may be used by
Transamerica before the calendar month end.
6. Provide ledger input data whose end-of-month close date coincides with
the effective date for the valuation data.
7. Provide Transamerica with a complete file extract of all policyholder
data from the administration system a minimum of once per month in a
mutually agreed upon format. Such policyholder data is confidential
and shall only be used by Transamerica for the purpose of performing
demographic and marketing research. Any other use of such data
requires prior written consent by LMG. More frequent updates or
incremental updates will be provided at a mutually agreed upon date.
Agent Compensation
LMG is responsible for weekly processing and payment via check or ACH of
first year and trailing commissions to its Wholesalers and Producers.
Commission payments result from premium being applied to appropriate
Transamerica policies. LMG is responsible for generating the weekly
commission statements, maintenance of year to date commission information,
and processing of the actual commission payment. Agent compensation amounts
are determined by the Producer's LMG contract level, product type, age of
annuitant and owner, and premium amount.
Premium Accounting
LMG is responsible for receiving premium checks and depositing into
Transamerica depository bank account. The receipt of premium is recorded in
the administrative system and a general ledger entry is created to record
the deposit. However, LMG is not responsible for investing and managing
these assets.
Tax Reporting to Agents
LMG will be responsible for the reporting on a yearly basis to its agents
information on all commissions earned, as well as other compensation from
incentive trips, etc. Such reporting to Wholesalers and Producers will
consist of generating and mailing of 1099 forms. LMG will also be
responsible for the transmission of such records to the applicable federal
and state taxing authorities. LMG policies and procedures comply with all
state and federal regulations.
Tax Reporting to Policyholders
LMG is responsible for the reporting on a yearly basis to policyholders
information regarding certain financial transactions on such Transamerica
policies. Reporting to policyholders consists of generating and mailing of
1099 forms, Year End Account Balances and 5498 forms. LMG will also be
responsible for the transmission of such records to the applicable federal
and state taxing authorities. LMG policies and procedures comply with all
state and federal taxing authority regulations.
Tax Reporting to Vendors
LMG will be responsible for the reporting on a yearly basis to its vendors
information on all compensation paid. Such reporting to vendors will
consist of generating and mailing of 1099 forms. LMG will also be
responsible for the transmission of such records to the applicable federal
and state taxing authorities. LMG's policies and procedures comply with all
state and federal regulations.
Tax Reporting to Beneficiary(ies)
LMG is responsible for the reporting to beneficiary(ies) on a yearly basis
information regarding receipt of lump sum claim payments. Reporting to
beneficiary(ies) consist of generating and mailing of 1099 forms. LMG will
also be responsible for the transmission of such records to the applicable
federal and state taxing authorities. LMG policies and procedures comply
with all state and federal taxing authority regulations.
2. Other Services:
a. Accounting Services
(1) Maintenance of general ledger system
(2) Reconciliation of all cash and suspense accounts monthly
(3) Furnishing to Transamerica of all applicable data necessary for
preparation of Transamerica NAIC Convention Blank
(4) Furnishing to Transamerica of all applicable data necessary for
preparation of the Transamerica corporate tax return
(5) Furnishing to Transamerica of all applicable data necessary for
preparation of the Transamerica GAAP financial statements
(6) Furnishing to Transamerica of all applicable data necessary for
the preparation of the Transamerica unclaimed property reports
(7) Furnishing to Transamerica of monthly data sets of all applicable
data necessary for the preparation of the Transamerica premium
tax returns and payments
b. Actuarial Services
(1) LMG will assist and provide actuarial support to Transamerica.
LMG's responsibilities will vary by each product jointly
developed and may include:
Provide initial product specification
Provide competitive analysis for the product
Define pricing assumptions
Provide any necessary support for pricing assumptions
Share deterministic pricing results
Perform sensitivity analysis
Provide final product specifications
Define actuarial memorandum Provide
Actuarial field support
Monitor actuarial assumptions
Assist in ongoing profit/pricing management of the
business
(2) LMG will draft initial policy forms and applications to be used
for each product jointly developed. LMG will assist Transamerica
in the completion and preparation of filing such forms. LMG's
responsibilities will vary with each product jointly developed.
c. Advertising Material Development
LMG will be responsible for the creation, printing and distribution of
all advertising material used by LMG for such products jointly
developed. However, LMG will obtain the necessary approval from
Transamerica prior to use of such advertising material.
It is LMG's intention to provide all administrative services, with the
exception of the following:
a. Administration after the election of a settlement option by Owner, and
any subsequent payments after such election.
b. Administration after the election of a settlement option resulting
from a death, and any subsequent payments after such election.
3. Collection and Disposition of Funds:
All insurance premiums collected by LMG on behalf of Transamerica, and
return premiums received from Transamerica, shall be held by LMG in a
fiduciary capacity and will not be used as general operating funds of LMG.
Such funds shall be immediately, within two (2) business days be remitted
to the person or persons entitled to them or shall be deposited promptly,
within two (2) business days, in a Premium Fiduciary Account. Such Premium
Fiduciary Account will be held in the name of Transamerica. However, it
will be established and maintained by LMG in a federally or state insured
financial institution, separate and apart from any funds belonging to LMG
or third parties.
This Premium Fiduciary Account will at all times have a balance equal to
contributions plus any interest earned less, authorized disbursements by
Transamerica. If LMG is authorized to draw checks on the Premium Fiduciary
Account, this will be clearly indicated on their face.
LMG may not pay any claim by withdrawals from the aforementioned Premium
Fiduciary Account. Withdrawals from the Premium Fiduciary Account shall be
made as provided in this Agreement between LMG and Transamerica for any of
the following:
a. Remittance to Transamerica, if so entitled to such remittance;
b. Deposit in an account maintained in the name of Transamerica;
c. Transfer to and deposit in a claims-paying account, with claims to be
paid as provided by Transamerica.
LMG will maintain in a fiduciary capacity, Disbursement Accounts where
Transamerica will fund the balance and LMG is authorized to make the
following disbursements:
a. Payment to LMG of its out of pocket expenses, as defined in Appendix
B, Section 3a, and weekly commissions.
b. Remittance of return premium to the person or persons entitled
thereto.
c. Any policy/certificate holder disbursements, including payment of
claims.
LMG will pay claims from funds collected on behalf of Transamerica and
shall be paid only on drafts of, and as authorized by Transamerica. In the
event that LMG receives monies to pay claims on behalf of Transamerica,
such funds will be held in a fiduciary capacity. No deposits will be made
into or disbursements made from this fiduciary account except for claims
and claim adjustment expenses. This fiduciary account will at all times
have a balance equal to the amount deposited less claims and claims
adjustment expenses paid.
4. Settlements/Reports:
a. As agreed upon but no later than twenty (20) calendar days of the end
of each month, the prior month's balance sheet activity shall be
reconciled by LMG.
b. As agreed upon, LMG shall provide service reports to Transamerica,
including but not limited to the following items:
(1) General ledger report
(2) Premium and commission reports
(3) Claim reports
(4) Statutory reserve policy information
(5) FAS 97 detail policy information
c. Daily, LMG shall provide to Transamerica, including but not limited to
the following items:
(1) Cash control reports, beginning the first day of business
d. Weekly (Monday, for the previous week's business activity), LMG shall
provide to Transamerica, including but not limited to the following
items:
(1) Copies of check registers
(2) Bi-weekly--Transmission of general ledger data (including state
code detail), beginning on a mutually agreeable date after the
volume of business reaches a level determined by Transamerica to
warrant daily updates
e. As agreed upon but no later than twenty (20) calendar days of the end
of each month, LMG shall provide to Transamerica, including but not
limited to the following items:
(1) Copies of all bank reconciliations
(2) All supplemental financial reporting information as requested by
Transamerica
(3) Copies of tax reporting to policyholders and vendors
f. Miscellaneous ad hoc sales reporting.
5. Claims Payment:
All Policy claims services, with the exception of the adjudication of death
claims not paid out as a lump sum, shall be performed by LMG on behalf of
Transamerica. All Policy claims shall be investigated, processed and paid
in accordance with the policies and procedures mutually agreed to by both
parties. Transamerica's claim personnel who are specified in LMG's claims
manual, (approved by Transamerica), shall be made available at
Transamerica's expense to answer any questions that might arise from LMG's
claims personnel relating to claims investigation, processing and payment
of Policy claims.
In addition to the foregoing, in the case of a decision by LMG that a
Policy claim should be denied, LMG shall communicate its proposed action to
appropriate Transamerica personnel who must agree and approve the proposed
claim denial before the claims decision is finalized. LMG will communicate
appropriate details of any proposed claim denial in accordance with
notification procedures to be jointly developed by the parties. If no
response is received within five (5) business days of transmission, LMG
shall have the right to proceed on the basis that Transamerica is in
agreement with the decision to deny the claim. All claims paid by LMG from
funds collected on behalf of or for Transamerica shall be paid on only
drafts or checks of and as authorized by Transamerica. All monies received
by LMG to pay claims on behalf of Transamerica shall be held in an
administrative capacity. No deposits will be made into, nor disbursements
made from this fiduciary account, with the exception of claims and claims
adjustment expenses. This fiduciary account will at all times have a
balance equal to the amount deposited less claims and claims adjustment
expenses paid. LMG is responsible for all correspondence with the claimant
and preparation of the claim checks.
For those claims referred to Transamerica by LMG, LMG will provide
Transamerica with copies of the following:
1) Policy records ( including but not limited to: all correspondence
relating to the policy)
2) All correspondence with the claimant.
3) Diary screens.
4) Claim proofs.
6. Service Standards
Process Standard
New Business
Policy Issue Policy will be issued within 2 days of receipt
Reissue Policy will be reissued within 5 days of
receipt of request
New Business Transfers New business transfers will be mailed within 2
days of receipt
Transfer Follow-up Transfers will be follow-up on every 10
business days
Agent Contracting All new agent contracts will be reviewed and
all necessary background investigation reports
ordered within 5 days of receipt
Appointment Processing Agent appointment(s) will be completed within
5 days of receipt
Commission Processing Process and mail checks on Friday of each week
for all complete new business applications
received by Thursday of that week
Commission Inquiries Process and confirm within 2 business days
Premium Deposit Premium will be deposited the day it is
received
Policyholder Services
Claims Processing Process and approve within 6 business days of
receipt
Financial Transactions Process and confirm within 10 business days of
receipt
Non-Financial Transactions Process and confirm within 10 business days of
receipt
Customer Service Call Center
Answer Rate 80%
Abandon Rate 5%
Average Hold Time 1 minute
Turnaround times are from the date of receipt of complete
policyholder/beneficiary/Producer documentation or approval from
Transamerica when applicable.
LMG has communicated the above referenced service standards to our
Wholesalers and Producers. To ensure continued Policyholder, Producer and
Wholesaler satisfaction, LMG is committed to performing at these standard
levels. LMG will provide Transamerica with reports showing their
performance in the standards listed above. These reports will be provided
on a monthly basis, unless otherwise agreed to by both parties. A timeframe
will be determined and agreed to by both parties within thirty (30) days
from the execution of this Agreement for items which are not currently
being tracked by LMG.
<PAGE>
APPENDIX D
SCHEDULE OF AUTHORIZED PERSONNEL
Representing Transamerica
Authorized to modify this Agreement
T. Desmond Sugrue, Executive Vice President
William Scott, Senior Vice President
Authorized to provide day to day direction of LMG employees for items not
covered in this Agreement
William Scott, Senior Vice President
Brian Hoyt, 2nd Vice President
Nancy DeWitt
Representing Legacy Marketing Group
Lynda Regan, Chief Executive Officer
R. Preston Pitts, President
David Skup, Chief Financial Officer
<PAGE>
AMENDMENT TO
ADMINISTRATIVE SERVICES AGREEMENT
The Administrative Services Agreement ("Agreement") as entered into on May 29,
1998 between Transamerica Life Insurance and Annuity Company, ("Transamerica"),
a North Carolina corporation, and Legacy Marketing Group, ("LMG"), a California
corporation, is hereby amended, effective May 29, 1998, as follows:
Add to 3. HOLD HARMLESS AND INDEMNIFICATION:
3.1
(f) In addition to the foregoing, LMG shall indemnify and hold
harmless Transamerica from and against any tax, interest or
penalties imposed by the IRS or any state or local taxing
authority on Transamerica, as well as any liability
Transamerica may incur to Policyholders caused by or
relating to LMG's failure to properly apply the rules under
IRC Section 72, or its failure to (i) deposit the correct
amount of income tax withholding on time; (ii) issue timely
information returns; (iii) correctly process tax related
transactions related to non-resident aliens; and (iv)
correctly process tax related transactions related to death
claims.
Add to 7. GENERAL PROVISIONS:
7.1 Section 9.2 shall also be deemed to survive the termination
of this Agreement.
The parties agree as above
LEGACY MARKETING GROUP
By /s/ R. Preston Pitts
____________________________
Title President
_________________________
Date June 9, 1998
__________________________
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By /s/ William N. Scott
____________________________
Title Vice President
_________________________
Date June 3, 1998
__________________________
