TRANSITION SERVICES AGREEMENT

Exhibit 2.2

 

CONFIDENTIAL

 

TRANSITION SERVICES AGREEMENT

 

BETWEEN

 

RBC LIFE INSURANCE COMPANY

 

AND

 

PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY

 

AND

 

UNUMPROVIDENT CORPORATION

 

MADE AS OF

NOVEMBER 18, 2003

 

McCarthy Tétrault LLP

Toronto, Ontario

 

Table of Contents

 

 

 

TRANSITION SERVICES AGREEMENT

 

THIS AGREEMENT is made as of November 18, 2003, between Provident Life and Accident Insurance Company (the “Seller”), RBC Life Insurance Company (the “Purchaser”) and UnumProvident Corporation (“UPC”).

 

WHEREAS, the Seller and the Purchaser have entered into an Asset Purchase Agreement dated as of the date hereof (the “Purchase Agreement”) pursuant to which the Seller will sell and the Purchaser will purchase the Purchased Business;

 

AND WHEREAS, the Seller is a subsidiary of UPC being directly and indirectly wholly-owned by UPC;

 

AND WHEREAS, the Seller has heretofore contracted with UPC pursuant to the General Services Agreement (as defined herein) to provide and make available to the Branch certain services in connection with the operation of the Branch;

 

AND WHEREAS, UPC has outsourced on behalf of the Seller, the provision of certain of the services to International Business Machines Corporation (“IBM”) pursuant to the DPSSC Agreement (as defined herein);

 

AND WHEREAS, in order to provide for the orderly transfer of the Purchased Business from the Seller to the Purchaser, the parties desire that UPC and/or the Seller provide or cause IBM to provide the Services to the Purchaser and to enter into such other arrangements and transactions as are described herein.

 

NOW THEREFORE, in consideration of the premises, terms and conditions contained herein, the parties agree as follows:

 

ARTICLE 1 - GENERAL INTENT OF THE PARTIES

 

1.1

General

 

In order to provide for the orderly transfer of the Purchased Business from the Seller to the Purchaser, UPC and the Seller agree to provide to the Purchaser and its Affiliates, the Services in accordance with the requirements set forth in this Agreement. Subject to the specific provisions of this Agreement, it is the intent and understanding of the parties that such Services will be provided in the same manner and at the same level of service as heretofore provided and made available so that the Purchaser may continue the business operations of the Purchased Business, as currently conducted from and after the date hereof. The parties agree to cooperate in good faith and to make all reasonable accommodations to each other in order to accomplish this intention.

 

1.2	Dealings with IBM

 

(a) The Purchaser acknowledges and agrees that IBM shall have no liability of any kind whatsoever to the Purchaser in respect of the provision of Services under this Agreement, regardless of the claim, source of claim or any acts or omissions of IBM and regardless of the

 

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form of action, whether in contract, tort or otherwise. Furthermore, the Purchaser agrees that it as not a third party beneficiary of any contract or contracts between UPC and IBM as they now exist or as they may be entered into or amended from time to time. For greater certainty, the Purchaser shall make any Claims under this Agreement solely against UPC and/or the Seller, as the case may be.

 

(b) The Purchaser agrees that it shall direct any and all communications concerning Services to UPC and/or the Seller and that it shall not communicate or otherwise contact IBM directly with respect to any matters covered under this Agreement. UPC and/or the Seller shall promptly forward to IBM any such communications relating to problems with, or delivery of, the Services, in accordance with the procedures set forth in the DPSSC Agreement.

 

ARTICLE 2 - DEFINITIONS

 

2.1	Definitions

 

In this Agreement:

 

“Additional Services” means those Services as described in Section 3.9.

 

“Agreement” means the body of this agreement, its recitals and its Schedules, as amended from time to time.

 

“Ancillary Services” means those of the Services listed in Section 7 of Schedule A.

 

“APA Upset Limit” means the $4,000,000 identified in Section 6.02(1)(b) of the Purchase Agreement.

 

“Business Records” means all non-electronically generated or stored records and information of any description or type and related data, however recorded, created or used in the ordinary course of business and includes all print-outs of Electronic Business Records.

 

“Claims” means all losses, damages, costs, expenses, liabilities, claims and demands of whatever nature or kind.

 

“Confidential Information” has the meaning set out in Section 6.1.

 

“Damage Cap” means the amount calculated by reference to Section 6.02(1)(c) of the Purchase Agreement.

 

“Disclosing Party” has the meaning set out in Section 6.1

 

“DPSSC Agreement” means the Data Processing and Services Strategic Consulting Agreement between IBM and UPC dated August 14, 2000.

 

“Electronic Business Records” means all electronically generated or stored records and information of any description or type and related data however electronically recorded,

 

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created or used in the ordinary course of business (including, without limitation, word processor e-mail and other electronic office systems).

 

“General Services Agreement” or “GSA” means the services agreement entered into between UPC and the Seller effective April 11, 1998.

 

“GST” means the goods and services tax and harmonized sales tax imposed under the GST Act.

 

“GST Act” means Part IX of the Excise Tax Act (Canada).

 

“Indirect Damages” has the meaning set out in Section 9.2(1)(d).

 

“ITC” means the IT Committee described in Schedule C.

 

“Knowledge of UPC and the Seller” means the actual knowledge of UPC and/or the Seller of matters after UPC and/or the Seller have made reasonably diligent enquiries concerning the relevant subject matter and such other enquiries as UPC and/or the Seller, in their sole discretion, consider appropriate, provided however that neither UPC nor the Seller shall be required to make enquiries of any third parties contracting with the Purchased Business.

 

“Off-Shore Exemption” means the consent of OSFI to the provision of the Services from outside of Canada.

 

“OSFI” means the Office of the Superintendent of Financial Institutions.

 

“Oversight Committee” has the meaning set out in Section 8.1

 

“Party” means the Purchaser on the one hand and the Seller and UPC on the other hand.

 

“Purchased Business Records” means the Business Records and Electronic Business Records relating to the Purchased Business which exist as of the Closing Date and which are generated during the term of this Agreement.

 

“QST” means the Québec Sales Tax imposed under the QST Act.

 

“QST Act” means Title I of An Act respecting the Québec sales tax (Québec).

 

“Receiving Party” has the meaning set out in Section 6.1.

 

“Schedules” means all schedules attached hereto and all Attachments and Exhibits attached thereto.

 

“Service Component” means a component of the Services identified as a separate service in the applicable Schedules.

 

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“Services” means the services, facilities and support to be provided by UPC and/or the Seller pursuant to this Agreement all as described in Schedule A together with the Additional Services requested in accordance with the provisions of Section 3.9.

 

“Service Facilities” means the data processing facilities of UPC located at Chattanooga, Tennessee, Portland, Maine and Columbia, South Carolina, including the facilities in Columbia, South Carolina which house the IBM owned and operated equipment together with all associated services, telecommunications facilities, support and operations activities necessary to ensure the effective use of the Service Facilities made available to UPC pursuant to the DPSSC Agreement.

 

“Third Party Software” has the meaning set out in Section 3.3.

 

“TSA Upset Limit” means the $500,000 identified in Section 9.2(1)(b) of this Agreement.

 

2.2	The Purchase Agreement

 

Capitalized terms used in this Agreement that are defined in the Purchase Agreement and not otherwise defined herein will have the same meaning herein as in the Purchase Agreement.

 

2.3

Schedules

 

The following are the Schedules to this Agreement:

 

Schedule A – Description of Services

Schedule B – Performance Standards

Schedule C – Governance

Schedule D – Fees and Expenses

Schedule E – Disaster Recovery Services Schedule

 

2.4

Currency

 

All amounts referred to in this Agreement are in Canadian dollars unless otherwise specified.

 

ARTICLE 3 - SERVICES

 

3.1

Services

 

Subject to the terms of this Agreement, UPC and/or the Seller will provide or cause _BM to provide the Services to the Purchaser during the periods specified in the applicable Schedules, or as otherwise agreed to in writing by the parties in order to assist the Purchaser in maintaining ongoing, effective record-keeping, management, operation and control of the Purchased Business.

 

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3.2	Level of Service

 

UPC and the Seller are responsible for ensuring that the Services will be provided in the same manner and at the same levels of service, as regards priority, frequency, workload and volumes, as were applicable on the date hereof and immediately prior to the Closing Date, and subject to any specifically agreed-upon service levels in Schedule B, using a degree of care and skill at least as high as those then in effect. If the Seller and/or UPC fail to meet certain service levels, the Purchaser shall, in addition to any and all rights and remedies available to the Purchaser under this Agreement, or otherwise at law or in equity, be entitled to those service credits set forth in the Schedules in respect of such failures, which amounts shall be liquidated damages and not penalties. The Seller will credit the service credits to the Purchaser at the Purchaser’s option either against the next monthly invoice or against other amounts due to the Seller. If UPC and/or the Seller fail to meet a service level, UPC and/or the Seller will, in accordance with the procedures, limitations and timings set out in the Schedules, (i) promptly investigate the root cause or causes, as the case may be, of the failure, (ii) deliver to the Purchaser a written report identifying such root cause or causes, (iii) use all commercially reasonable efforts to correct its failure to meet such service level and to begin meeting such service level as soon as practicable, and (iv) advise the Purchaser of the status of such corrective efforts.

 

3.3	Third Party Consents

 

With respect to those items of software listed in Exhibit B.1 to Schedule B which are licensed from third parties and which are employed in providing the Services (the “ Third Party Software ”), UPC and/or the Seller agree to obtain at their own expense such consents of such third parties as are necessary for the use by the Purchaser of the Third Party Software pursuant to the provisions of this Agreement during the periods specified in the applicable Schedules, or as otherwise agreed to in writing by the parties. The Purchaser agrees that it will utilize the Third Party Software in accordance with the terms of the licenses thereto.

 

3.4	Use of Communication Lines

 

Subject to the provisions of Section l(k) of Schedule A:

 

•

Frame Relay will be used to connect Burlington to UPC data facility in Columbia.

 

•

The Inter Exchange Carrier will be MCI or Qwest and decided upon after signing.

 

•

There will be no connectivity between UPC and other Canadian branch locations.

 

•

The Purchaser will be responsible for connectivity between branches and Burlington.

 

•

The Seller will provide a firewall at the Seller’s facility to secure access to the Seller’s network.

 

•

The Purchaser will provide its own internet access and not rely on the Seller for internet connectivity.

 

•

Internet VPN tunnelling will be used to provide backup connectivity between Burlington and Columbia.

 

•

Network speeds and configurations will be as currently provided to the Seller.

 

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3.5	Representations, Warranties and Covenants of UPC and the Seller

 

UPC and the Seller represent, warrant and covenant to the Purchaser that:

 

(a)

all Services will be performed in a good and workmanlike manner, promptly, diligently and competently, using adequate numbers of individuals with suitable training, experience and skill as necessary to enable the Services to be performed to the standards set forth in this Agreement;

 

(b)

the Services will meet the service levels set out in the applicable Schedules

 

(c)

the Services will be provided in the same manner and at the same levels of service as regards priority, frequency, workload and volumes, as were applicable on the date hereof and immediately prior to the Closing Date subject to any specifically agreed-upon service levels in Schedule B;

 

(d)

they have the right to enter into and perform their obligations under this Agreement;

 

(e)

the provision of the Services will not constitute any material breach of contract;

 

(f)

the provision of the Services will not constitute an infringement or misappropriation of any patent, trade secret, copyright or trade-mark of any third party such that the Purchaser will incur any related liability;

 

(g)

all Services will comply in all material respects with applicable laws, rules and regulations;

 

(h)

to the Knowledge of UPC and the Seller, there are no outstanding investigations before any Governmental Authority existing or pending which would have a material adverse effect on the ability of UPC or the Seller to perform the Services;

 

(i)

there are no outstanding actions, suits, audits or proceedings at law or equity which would have a material adverse effect on the ability of UPC or the Seller to perform the Services; and

 

(j)

the Services (excluding any Additional Services) are sufficient to operate the Purchased Business as of the date hereof.

 

3.6	Warranty Disclaimer

 

THIS IS A SERVICE AGREEMENT. THE PRECEDING WARRANTIES ARE THE SELLER’S AND UPC’S ONLY WARRANTIES CONCERNING THE SERVICES. EXCEPT FOR THESE EXPRESS WARRANTIES, THERE ARE NO WARRANTIES, REPRESENTATIONS OR CONDITIONS, EXPRESS OR IMPLIED BY THE SELLER OR UPC, IN FACT OR IN LAW, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABLE QUALITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

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3.7	Project Co-ordinators

 

UPC and the Purchaser will forthwith designate a responsible individual with adequate authority to act as project co-ordinator and liaison whose responsibility will be to serve as project co-ordinator and interface with the other party hereto in connection with the performance and receipt of all such Services including the oversight of the business aspects of the whole transition project covered by this Agreement and all aspects of the Ancillary Services. UPC’s co-ordinator shall also have authority described above to bind the Seller.

 

3.8

Reporting

 

The project co-ordinators of the parties shall as soon as practicable after the date hereof develop and agree upon an appropriate set of periodic reports in respect of the Ancillary Services to be issued to the Purchaser by UPC and the Seller which reports shall be submitted on at least a monthly basis. The project co-ordinators shall also work with the IT Committee to define reports that relate to the project as a whole. The process for establishing the obligations of the parties with respect to reports and reporting procedures are set out in Schedule C.

 

3.9	Additional Services

 

If the Purchaser requires any services in addition to those Services set out in Schedule A (the “ Additional Services ”), the requirement for any Additional Services will be dealt with in accordance with the Change Request Process set out in Section 8 of Schedule A.

 

3.10	Assignment

 

(c) Subject to Sections 3.10(b), neither this Agreement nor any rights granted hereby may be assigned by any party voluntarily or by operation of law without the other parties’ prior written consent which consent may not be unreasonably withheld or delayed. Any such attempted assignment shall be null and void. Assignment shall be deemed to include the transfer of substantially all of the assets of, or a majority interest in the voting shares of, the party, or the merger or amalgamation of the party with one or more entities. This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

 

(d) Any party may, without the prior approval of the other parties, assign its rights and obligations under this Agreement to an Affiliate of the assignor, provided that in no event shall such assignment relieve the assignor of its obligations under this Agreement.

 

3.11	Subcontracting

 

(a) Neither the Seller nor UPC may subcontract any of its obligations under this Agreement unless the subcontractor agrees to substantially equivalent obligations as are set out herein in connection with confidentiality, pricing, Business Records and access to the subcontractor’s premises by the Purchaser and OSFI.

 

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(b) Notwithstanding any use of subcontractors by UPC or the Seller, UPC or the Seller, as the case may be, shall remain responsible for all of its obligations under this Agreement and for all acts or omissions of any such subcontractors.

 

3.12	Purchased Records

 

The Seller and UPC agree to provide the Purchaser with the necessary assistance in providing copies of the Purchased Business Records to be kept in Canada in order to meet the requirements of the Act.

 

ARTICLE 4 - FEES AND EXPENSES

 

4.1	Fees and Expenses

 

The fees and expenses for the Services (other than Additional Services) are set out in Schedule D. Fees for Additional Services will be determined in accordance with the Change Request Process set out in Section 8 of Schedule A.

 

4.2

Payment

 

To the extent that fees and expenses are payable for any given month, the Seller will invoice the Purchaser for Services on a monthly basis in arrears. Invoices will be paid in full within 30 days of receipt of same, without any set off except for any amounts that are the subject of a bona fide dispute. Interest on overdue amounts will be payable at the rate of nine (9) percent per annum calculated from the date the amount should have been paid to the date that payment is received by the Seller.

 

4.3

Taxes

 

There will be added to each invoice any applicable sales, use and value-added taxes (which excludes any taxes based upon the net income of the Seller), which the Seller is required by tax legislation to charge, collect and remit to a taxing authority. If any withholding tax or other amount is required by law to be withheld in respect of amounts invoiced, the Purchaser will withhold and remit the applicable amount to the relevant taxing authorities and will furnish to the Seller particulars of such withholding and remittance in sufficient detail to enable the Seller to substantiate a claim for a refund from the applicable taxing authority or a foreign tax credit in respect thereof. The Seller shall, at all relevant times, when providing the Services and bi