EXECUTION VERSION
ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
HARTFORD LIFE INSURANCE COMPANY
AND
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
DATED JANUARY 2, 2013
TABLE OF CONTENTS
PAGE
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Article I DEFINITIONS 1
Section 1.01 Definitions 1
Article II APPOINTMENT; NOTIFICATION OF INTERETED PARTIES 8
Section 2.01 Appointment 8
Section 2.02 Provision of Services Subject to the Transition Services 9
Agreement
Section 2.03 HLIC Services 9
Section 2.04 Power of Attorney 9
Section 2.05 Notification of Interested Parties 10
Section 2.06 Ongoing Communications 10
Section 2.07 Coordinators 10
Article III NEW INSURANCE POLICIES 11
Section 3.01 New Insurance Policies 11
Section 3.02 Guidelines 12
Section 3.03 Termination of Authority 12
Section 3.04 HLIC Licenses; Certain Actions 12
Marketing Activities 13
Article IV SERVICES PROVIDED BY ADMINISTRATOR 13
Section 4.01 Services 13
Section 4.02 Standards and Licenses 13
Section 4.03 Subcontracting 14
Section 4.04 Recommendations 14
Section 4.05 Decision Authority 14
Section 4.06 Non-Guaranteed Elements 15
Section 4.07 Additional Covenants of HLIC 15
Section 4.08 Certain Actions with Respect to Recoverables 16
Section 4.09 Product Filings 16
[REDACTED]
Section 4.11 Investment Guideline Compliance 17
Section 4.12 Compensation Upon Termination of the Investment 18
Management Agreement
Article V FEES FOR SERVICES 19
Section 5.01 Fees for Services 19
Article VI CERTAIN REPORTS; BOOKS AND RECORDS; 19
BANK ACCOUNTS AND REMITTANCES 19
Section 6.01 Reports 19
Section 6.02 Books and Records and Access to Books and Records 20
Section 6.03 Disbursing Accounts 21
Section 6.04 Remittances 22
Section 6.05 Audit Rights 22
Section 6.06 Internal Controls Over Financial Reporting 22
Article VII INABILITY TO PERFORM SERVICES; ERRORS 23
Section 7.01 Inability to Perform Services 23
Section 7.02 Errors 24
Article VIII REGULATORY COMPLAINTS AND LEGAL ACTIONS 24
Section 8.01 Routine Complaints 24
Section 8.02 Regulatory Actions 24
Section 8.03 Legal Actions 25
Section 8.04 Cooperation 26
Section 8.05 Reporting 27
Section 8.06 Relationship with Other Agreements 27
Section 8.07 Taxes 27
Article IX DURATION; TERMINATION 27
Section 9.01 Duration 27
Section 9.02 Termination 27
Section 9.03 Survival 28
Article X CUSTOMER INFORMATION 28
Section 10.01 Customer Information 28
Article XI DISASTER RECOVERY 29
Section 11.01 Disaster Recovery 29
Article XII INDEMNIFICATION 29
Section 12.01 Indemnification by HLIC 29
Section 12.02 Indemnification by the Administrator 29
Section 12.03 Notice of Claim; Defense 30
Section 12.04 No Duplication; Exclusive Remedy 31
Section 12.05 Limitation on Set-off 32
Section 12.06 Mitigation 32
Section 12.07 Recovery by Indemnified Party 32
Section 12.08 Relationship with Reinsurance Agreement 32
Article XIII COOPERATION 33
Section 13.01 Cooperation 33
Article XIV TRADEMARK LICENSE 33
Section 14.01 Trademark License 33
Article XV FIDELITY BOND 33
Section 15.01 Fidelity Bond 33
Article XVI TAX MATTERS 33
Section 16.01 Premium Taxes 33
Section 16.02 Tax Information Reporting, Withholding, and Depositing 36
Section 16.03 Sales Taxes 36
Section 16.04 Reinsurer Product Tax Liabilities 36
Section 16.05 Conflicts 37
Article XVII MISCELLANEOUS 37
Section 17.01 Notices 37
Section 17.02 Entire Agreement 38
Section 17.03 Dispute Escalation; Governing Law and Jurisdiction 38
Section 17.04 No Third Party Beneficiaries 39
Section 17.05 Expenses 40
Section 17.06 Counterparts 40
Section 17.07 Severability 40
Section 17.08 Waiver of Jury Trial; Multiplied and Punitive Damages 40
Section 17.09 Treatment of Confidential Information 40
Section 17.10 Assignment 41
Section 17.11 Waivers 41
Section 17.12 Relationship 41
Section 17.13 Interpretation 42
Section 17.14 Conflict 42
Section 17.15 Force Majeure 42
SCHEDULES AND EXHIBITS
Schedule I Scheduled Reports
Schedule II Services
Schedule III Information Security Requirements
Schedule IV Investment Accounting
Exhibit A Form of Trademark License Agreement
This
ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and entered
into on January 2, 2013 by and between HARTFORD LIFE INSURANCE COMPANY, a
Connecticut-domiciled life insurance company ("HLIC"), and THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey-domiciled life insurance company (the
"Administrator").
RECITALS
WHEREAS, pursuant to that certain Purchase and Sale Agreement, dated September
27, 2012 (the "Purchase Agreement"), by and among Hartford Life, Inc., a
Delaware corporation (the "Seller"), and Prudential Financial, Inc., a New
Jersey corporation (the "Buyer"), and for purposes of Sections 8.4, 8.5 and
14.16 of the Purchase Agreement, The Hartford Financial Services Group, Inc., a
Delaware corporation, Seller and Buyer are required to cause the execution and
delivery of this Agreement in connection with the closing of the transactions
contemplated thereunder;
WHEREAS, pursuant to that certain Reinsurance Agreement, dated the date hereof
(the "Reinsurance Agreement"), between HLIC and the Administrator, HLIC has
agreed to cede to the Administrator and the Administrator has agreed to assume
from HLIC, on a one-hundred percent (100%) indemnity reinsurance basis, on the
terms and conditions set forth in the Reinsurance Agreement, certain liabilities
arising in respect of the Covered Insurance Policies (as hereinafter defined);
WHEREAS, pursuant to the Reinsurance Agreement, the Administrator has purchased
from HLIC, and HLIC has sold and assigned to the Administrator, all Recoverables
(as hereinafter defined); and
WHEREAS, HLIC wishes to appoint the Administrator to provide administrative and
other services as specified in this Agreement with respect to the Administered
Business (as hereinafter defined), and the Administrator desires to provide such
administrative and other services in consideration for HLIC entering into the
Reinsurance Agreement.
NOW, THEREFORE, in consideration of the mutual and several promises and
undertakings herein contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Capitalized terms not defined herein and which are
defined in the Purchase Agreement or Reinsurance Agreement, as applicable, shall
have the meanings ascribed to them in the Purchase Agreement or Reinsurance
Agreement, as applicable. As used herein, the following terms have the
respective meanings set forth in this Section 1.01:
"Accounting Firm" has the meaning set forth in Schedule IV.
"Accounting Period" has the meaning set forth in the Reinsurance Agreement.
"Action" has the meaning set forth in the Purchase Agreement.
"Administered Business" means the Business of HLIC with respect to the Covered
Insurance Policies, the Separate Accounts, the Existing Reinsurance Agreements
and any Reinsured Liabilities. For the avoidance of doubt, the Administered
Business does not include any Discovered Policies unless otherwise agreed to by
the parties.
"Administrator" has the meaning set forth in the preamble.
"Administrator Disbursing Accounts" has the meaning set forth in Section
6.03(a).
"Administrator Indemnified Parties" has the meaning set forth in Section 12.01.
"Affiliate" has the meaning set forth in the Purchase Agreement.
"Agreement" has the meaning set forth in the preamble.
"Ancillary Agreement Covered Contracts" has the meaning set forth in the
Purchase Agreement.
"Ancillary Agreements" has the meaning set forth in the Purchase Agreement.
"Applicable Law" has the meaning set forth in the Purchase Agreement.
"Applicable Privacy Laws" means Applicable Laws relating to privacy, data
protection and the collection and use of an individual's personal information
and user information gathered, accessed, collected or used by HLIC or any of its
Affiliates in the course of the operations of the Business, including any
applicable provisions of state insurance privacy laws and state privacy
regulations.
"Authorized Persons" has the meaning set forth in Schedule III.
"Broker Price" has the meaning set forth in Schedule IV.
"Business" has the meaning set forth in the Purchase Agreement.
"Business Day" has the meaning set forth in the Purchase Agreement.
"Buyer" has the meaning set forth in the recitals.
"Claim Notice" has the meaning set forth in Section 12.03(a).
"Closing" has the meaning set forth in the Purchase Agreement.
"Compliance Program" has the meaning set forth in Schedule II.
"Confidential Information" has the meaning set forth in the Reinsurance
Agreement.
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"Contract" has the meaning set forth in the Purchase Agreement.
"Coordinators" means the two (2) individuals, one designated by HLIC and the
other designated by the Administrator, who are primarily responsible for
managing performance with respect to this Agreement as described in Section
2.07.
"Covered Insurance Policies" has the meaning set forth in the Reinsurance
Agreement.
"Court Order" has the meaning set forth in the Purchase Agreement.
"Custodial Account" has the meaning set forth in the Reinsurance Agreement.
"Custodial Funds" has the meaning set forth in the Reinsurance Agreement.
"Customer Information" means any financial or personal information about a
policyholder, insured or beneficiary under any Covered Insurance Policy,
including, but not limited to, such policyholder's, insured's or beneficiary's
name, street or mailing address, electronic mail address, telephone or other
contact information, employer, social security or tax identification number,
date of birth, driver's license number, state identification card number,
financial account, credit or debit card number, health and medical information
or photograph or documentation of identity or residency (whether independently
disclosed or contained in any disclosed document) and any other information of
such policyholder, insured or beneficiary deemed "nonpublic" and protected by
any Applicable Privacy Law.
"Data" has the meaning set forth in Schedule III.
"Data Provider" has the meaning set forth in Schedule III.
"Data Recipient" has the meaning set forth in Schedule III.
"Disbursing Accounts" has the meaning set forth in Section 6.03(a).
"Discovered Policies" has the meaning set forth in the Purchase Agreement.
"Distribution Intermediaries" has the meaning set forth in the Wholesaling
Agreement.
"Distributor" has the meaning set forth in the Purchase Agreement.
"DRP" has the meaning set forth in Section 11.01.
"Effective Time" means the effective time of the Closing under the Purchase
Agreement.
"Eligible Assets" has the meaning set forth in the Reinsurance Agreement.
[REDACTED]
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[REDACTED]
"Existing Reinsurance Agreements" has the meaning set forth in the Reinsurance
Agreement.
"Filings" means all documents (including electronic media) required to be filed
with the SEC relating to any Separate Account, including, but not limited to,
registration statements, policyholder proxy materials and filings on Form ▇-▇,
▇▇▇▇ ▇▇▇▇ and Form 24 F-2 or any successor forms.
"GAAP" has the meaning set forth in the Purchase Agreement.
"General Account Liabilities" has the meaning set forth in the Reinsurance
Agreement.
"General Account Reserves" has the meaning set forth in the Reinsurance
Agreement.
"Governmental Body" has the meaning set forth in the Purchase Agreement.
"HESCO" has the meaning set forth in the Purchase Agreement.
"HFIC" means Hartford Fire Insurance Company.
"HLIC" has the meaning set forth in the preamble.
"HLIC Indemnified Parties" has the meaning set forth in Section 12.02.
"HLIC NAV Reports" has the meaning set forth in Schedule IV.
"HLIC Services" has the meaning set forth in Section 2.03.
"IMA Date" has the meaning set forth in Section 4.10(a).
"Indemnified Party" has the meaning set forth in Section 12.03(a).
"Indemnifying Party" has the meaning set forth in Section 12.03(a).
"Information Security Requirements" has the meaning set forth in Schedule III.
"Information Security Safeguards" has the meaning set forth in Schedule III.
"Investment Company Act" means the Investment Company Act of 1940, as amended.
"Investment Guidelines" means the investment guidelines attached as Exhibit L,
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Part B to the Purchase Agreement Amendment.
[REDACTED]
"Legal Action" has the meaning set forth in Section 8.03(a).
"Losses" has the meaning set forth in the Purchase Agreement.
"Material Breach" has the meaning set forth in Section 7.01(b).
"Material Threshold Variance" has the meaning set forth in Schedule IV.
[REDACTED]
"New Business Period" has the meaning set forth in Section 3.01(a).
"New Insurance Policies" means any and all binders, endorsements, riders,
policies, certificates and contracts of individual life insurance, and
supplementary contracts of individual life insurance (including retained asset
accounts and all other settlement options) issued, renewed, reinsured or assumed
by HLIC following the Closing Date in accordance with Article III of this
Agreement.
[REDACTED]
"Non-Guaranteed Elements" has the meaning set forth in the Reinsurance
Agreement.
"Non-Guaranteed Elements Policy" means the policy of the Administrator (in its
capacity as the "Reinsurer" under the Reinsurance Agreement) as in effect from
time to time with respect to the Non-Guaranteed Elements relating to the Covered
Insurance Policies.
"Party" means each of HLIC and the Administrator.
"Person" has the meaning set forth in the Purchase Agreement.
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"Premium Taxes" shall mean any Taxes that constitute General Account Liabilities
as provided for in the Reinsurance Agreement.
"Premiums" has the meaning set forth in the Reinsurance Agreement.
"Product Tax IT" has the meaning set forth in the Purchase Agreement.
"Private Securities Material Threshold Variance" has the meaning set forth in
Schedule IV.
"Public Securities Material Threshold Variance" has the meaning set forth in
Schedule IV.
"Purchase Agreement" has the meaning set forth in the recitals.
"Purchase Agreement Amendment" means that certain Amendment to the Purchase
Agreement by and among Buyer, Seller and The Hartford Financial Services Group,
Inc. dated as of the date hereof.
"Recapture Triggering Event" has the meaning set forth in the Reinsurance
Agreement.
"Recoverables" has the meaning set forth in the Reinsurance Agreement.
"Regulatory Action" has the meaning set forth in Section 8.02.
"Reinsurance Agreement" has the meaning set forth in the recitals.
"Reinsured Liabilities" has the meaning set forth in the Reinsurance Agreement.
"Reinsurance Recoverables" has the meaning set forth in the Reinsurance
Agreement.
"Reinsurer Existing Reinsurance Agreements" has the meaning set forth in the
Reinsurance Agreement.
"Reinsurer Extra-Contractual Obligations" has the meaning set forth in the
Reinsurance Agreement.
"Reinsurer Product Tax Liabilities" has the meaning set forth in Section 16.04.
"Representative" has the meaning set forth in the Purchase Agreement.
"Required Balance" has the meaning set forth in the Reinsurance Agreement.
"Routine Complaints" has the meaning set forth in Section 8.01.
"SAP" has the meaning set forth in the Reinsurance Agreement.
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"Schedule T" shall mean Schedule T, Premiums and Other Considerations, of the
NAIC Annual Statement or any successor schedule.
"SEC" means the United States Securities and Exchange Commission.
"Security Incident" has the meaning set forth in Schedule III.
"Seller" has the meaning set forth in the recitals.
"Specified Action" has the meaning set forth in the Purchase Agreement.
"Separate Accounts" has the meaning set forth in the Reinsurance Agreement.
"Separate Account Reserves" has the meaning set forth in the Reinsurance
Agreement.
"Services" has the meaning set forth in Section 2.01.
"Settlement Statement" has the meaning set forth in the Reinsurance Agreement.
"Statutory Book Value" has the meaning set forth in the Reinsurance Agreement.
"Subcontractor" has the meaning set forth in Section 4.03.
"Taxes" has the meaning set forth in the Purchase Agreement.
"Tax Returns" has the meaning set forth in the Purchase Agreement.
"Terminal Settlement Statement" has the meaning set forth in the Reinsurance
Agreement.
"Third-Party Claim" has the meaning set forth in Section 12.03(a).
"Trademark License Agreement" has the meaning set forth in Section 14.01.
"Transaction Agreements" means the Purchase Agreement and each of the Ancillary
Agreements other than this Agreement.
"Transferred Contract" has the meaning set forth in the Purchase Agreement.
"Transferred Disbursing Accounts" has the meaning set forth in Section 6.03(a).
"Transition Services Agreement" has the meaning set forth in the Purchase
Agreement.
"Treasury Regulations" has the meaning set forth in the Reinsurance Agreement.
"Triggering Event" has the meaning set forth in the Reinsurance Agreement.
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"Underlying Companies" means the insurance companies that have ceded any
liabilities or obligations under Covered Insurance Policies to HLIC pursuant to
any Underlying Reinsurance Agreement.
"Underlying Reinsurance Agreements" has the meaning set forth in the Reinsurance
Agreement.
"Virus" means any computer code (a) designed to disrupt, disable, harm, or
otherwise impede in any manner, including aesthetical disruptions or
distortions, the operation thereof, of any other associated software, firmware,
hardware, computer system or network (sometimes referred to as "viruses" or
"worms"), (b) that would disable or impair in any way the operation thereof
based on the elapsing of a period of time, the exceeding of an authorized number
of users or copies, or the advancement to a particular date or other numeral
(sometimes referred to as "time bombs", "time locks", or "drop dead" devices),
or (c) that would permit access by the Administrator or any third party to cause
such disablement or impairment (sometimes referred to as "traps", "access codes"
or "trap door" devices), or any other similar harmful, malicious or hidden
procedures, routines or mechanisms that would cause the Services, systems or
software to malfunction or to damage or corrupt data, storage media, programs,
equipment or communications, or otherwise interfere with operations.
"Wholesaling Agreement" means that certain Wholesaling Agreement dated as of the
date hereof by and among HESCO, Hartford Securities Distribution Company, Inc.,
HLIC, Hartford Life and Annuity Insurance Company, Hartford Life and Accident
Insurance Company, Pruco Securities, LLC and Prudential Insurance Agency, LLC.
ARTICLE II
APPOINTMENT; NOTIFICATION OF INTERESTED PARTIES
Section 2.01 Appointment. On the terms and subject to the limitations and
conditions set forth herein, HLIC hereby appoints the Administrator as of the
Effective Time as its agent to provide, as an independent contractor of HLIC,
all required, necessary and appropriate administrative and other services,
including the services set forth in Section 4.01 and Schedule II, with respect
to the Administered Business (other than those services to be provided by HFIC
and its Affiliates pursuant to the terms of the Transition Services Agreement
for so long as such services are required to be provided by HFIC and its
Affiliates under the Transition Services Agreement and the HLIC Services)
(collectively, the "Services"), and the Administrator hereby accepts such
appointment and shall perform such Services at and following the Effective Time
on behalf of and in the name of HLIC. At all times during the term of this
Agreement, the Administrator shall hold and maintain any and all licenses,
permits and authorizations required in any state in the United States and in
Guam and Puerto Rico to perform its duties and obligations under this Agreement
on behalf of HLIC. For purposes of this Agreement, the intention of the Parties
is that the Administrator shall perform all Services in such a manner as to
minimize the involvement of HLIC and its Affiliates, subject to (a) Section 2.02
below and (b) Section 2.03 below. Except for the HLIC Services, as between HLIC
and the Administrator, neither HLIC nor any of its Affiliates shall be obligated
to provide any services under this Agreement relating to the Administered
Business.
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Section 2.02 Provision of Services Subject to the Transition Services
Agreement. The Parties hereby agree that to the extent any Service is provided
by HLIC or its Affiliate pursuant to the Transition Services Agreement, the
Administrator shall have no obligation to provide such Service pursuant hereto
until HLIC's or its Affiliate's obligation to provide such Service pursuant to
the Transition Services Agreement has terminated in accordance with the terms of
such agreement. If Administrator relies on a service that is provided by HLIC or
its Affiliate pursuant to the Transition Services Agreement to provide a Service
hereunder, Administrator shall have no obligation to provide such Service, or
have any liability in connection with the provision of that Service, to the
extent HLIC or its Affiliate has failed to provide a required service under the
Transition Services Agreement.
Section 2.03 HLIC Services. The Parties hereby agree that, notwithstanding
anything herein to the contrary, HLIC shall, for the term of this Agreement,
continue to take those actions (i) that HLIC is required by Applicable Law to
take without the Administrator or any other third party acting on its behalf, if
any, but only to the extent such actions are to be taken from and after the
Effective Time and are necessary or appropriate with respect to the Administered
Business and (ii) that do not exclusively relate to the Administered Business
and are performed on the entity level, including with respect to accounting
reports, tax returns, guaranty fund reports, actuarial reports and other reports
and certifications, in each instance, if and to the extent relevant, based on
information and statements provided by the Administrator as contemplated therein
(collectively with the actions that are identified to be taken by HLIC set forth
in Section 4.10(a) through (c), the "HLIC Services"), in each case, in
accordance with Applicable Law, and that the Administrator shall have no
obligation to provide such services; provided, that the Administrator shall be
obligated to provide Services to HLIC that the Administrator is permitted to
take under Applicable Law to allow HLIC to perform the HLIC Services; provided,
further; that all reasonable and necessary out-of-pocket costs and expenses
incurred by HLIC in connection with any HLIC Services that exclusively relate to
the Administered Business shall be paid or reimbursed by the Administrator. To
the extent either Party becomes aware of any HLIC Services, such Party shall
give the other Party notice of such HLIC Services, and the Parties shall
reasonably cooperate in performing such HLIC Services.
Section 2.04 Power of Attorney. Subject to the terms and conditions herein and
in Section 12.2(c) of the Purchase Agreement, HLIC hereby appoints and names the
Administrator, acting through its authorized officers and employees, as HLIC's
lawful attorney-in-fact, from and after the Effective Time for so long as the
Administrator is authorized to perform the Services and solely to the extent
necessary to provide the Services (all on terms and subject to the limitations
set forth herein), (a) to do any and all lawful acts that HLIC might have done
with respect to the Administered Business, and (b) to proceed by all lawful
means (i) to perform any and all of HLIC's obligations with respect to the
Administered Business, (ii) to enforce any right and defend (in the name of
HLIC, when necessary) against any liability arising with respect to the
Administered Business, (iii) to ▇▇▇ or defend (in the name of HLIC, when
necessary) any Action arising from or relating to the Administered Business,
(iv) to sign (in HLIC's name, when necessary) vouchers, receipts, releases and
other papers in connection with any of the foregoing matters, (v) to take
actions necessary, as may be reasonably determined, to maintain the Administered
Business in compliance with Applicable Law, (vi) to sign any and all documents
necessary to carry out its obligations under this Agreement in accordance with
the terms and conditions of this Agreement, including without limitation,
Section 4.07(a), and
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(vii) to do everything lawful in connection with the satisfaction of the
Administrator's obligations and the exercise of its rights under this Agreement.
HLIC shall execute such powers of attorney and other documents as may be
required or are reasonably necessary or appropriate in furtherance of the
foregoing. For the avoidance of doubt, the powers of attorney set forth in this
Section 2.04 shall not apply to any Intellectual Property Rights held by HLIC or
its Affiliates, except as expressly set forth in the Ancillary Agreements
(excluding this Agreement).
Section 2.05 Notification of Interested Parties. The Administrator shall send
to (a) the policyholders of the Covered Insurance Policies and (b) any
applicable service providers, reinsurers, Underlying Companies, custodians,
Distributors, mutual fund organizations or other counterparties, in each case of
(a) and (b), to the extent required by Applicable Law or any Transferred
Contract or Ancillary Agreement Covered Contract, a written notice prepared by
the Administrator and reasonably acceptable to HLIC, advising that the
Administrator has been appointed by HLIC to provide the Services. Such notices
shall be sent to such Persons' last known address of record as furnished by HLIC
to the Administrator. HLIC shall cooperate in the preparation and mailing of any
such required notices, including by providing the names and addresses of the
relevant Persons to whom such notices are to be sent in an agreed upon
electronic format. The Administrator may include such notice in a regularly
scheduled mailing to such Persons in lieu of a separate mailing.
Section 2.06 Ongoing Communications.
The Administrator shall comply with the terms of the Trademark License Agreement
and all Applicable Laws with respect to the use of HLIC's name in communications
with policyholders, insureds and beneficiaries of the Covered Insurance
Policies. HLIC shall cooperate with the Administrator in connection therewith,
including by providing sample forms (both hard copies and electronic copies) of
the HLIC stationary used in communications with policyholders, insureds and
beneficiaries of the Covered Insurance Policies and the Administrator's use of
trademarks on the stationary will be governed by the terms of the Trademark
License Agreement.
Section 2.07 Coordinators. HLIC and the Administrator shall each appoint a
Coordinator, each of whom will serve as the primary contact point for their
respective Party with respect to issues that may arise out of the performance of
this Agreement. HLIC and the Administrator may replace their respective
Coordinator by giving notice pursuant to Section 17.01 to the other Party
stating the name, title and contact information for the new Coordinator. The
Parties shall cause the Coordinators to meet, either in person or
telephonically, at least once quarterly, or more frequently if mutually agreed
upon, to discuss the status of the Services, and to manage open issues related
to this Agreement and performance hereunder. In addition, either Coordinator may
call a meeting with the other Coordinator upon five (5) Business Days' prior
written notice to address any time critical (in the reasonable judgment of the
requesting Coordinator) issues related to the Services.
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ARTICLE III
NEW INSURANCE POLICIES
Section 3.01 New Insurance Policies.
(a) Subject to Section 3.02 and 3.03, HLIC hereby authorizes and grants the
Administrator the authority, [REDACTED] with respect to (x) new insurance
policies to be issued or reinsured pursuant to contractual commitments or
exchanges under certain insurance contracts of HLIC, such as term conversions,
additional coverage options, and other conversion rights written by HLIC or its
Affiliates with respect to the Business or (y) as required to replace or
remediate Covered Insurance Policies in order to comply with Applicable Law or
to terms of such policies or as required to resolve or remediate a complaint,
lawsuit or regulatory matter involving a Covered Insurance Policy (such period,
the "New Business Period"), to quote, market, sell, underwrite, issue, renew,
reinsure or assume in the name of HLIC, binders, endorsements, riders, policies,
certificates and contracts of individual life insurance, and supplementary
contracts of individual life insurance (including retained asset accounts and
all other settlement options). The portion of the New Business Period referred
to in clause (i) above may be renewed upon no later than sixty (60) calendar
days notice prior to the eighteen (18) month anniversary of the date hereof for
an additional six (6) month period if reasonably required for the Administrator
to complete the transition of the marketing, sales, underwriting and issuance of
such New Insurance Policies to the Administrator or one of its Affiliates. In no
event shall the authority granted hereunder be deemed to authorize the
Administrator to quote, market, sell, underwrite, issue, renew, reinsure or
assume any insurance policies in jurisdictions where HLIC does not hold the
required licenses therefore.
(b) Subject to Sections 3.01(a)(ii) and 3.01(a)(iii), the Administrator shall
have the sole and exclusive right to make decisions with respect to the
issuance, renewal, non-renewal, reinsurance, cancellation or termination of the
Covered Insurance Policies, subject to compliance with Applicable Law and the
terms and conditions set forth in the applicable Covered Insurance Policies, the
Reinsurance Agreement and this Agreement. [REDACTED]
(c) Subject to the Reinsurance Agreement and in accordance with the terms
thereof, all New Insurance Policies shall be automatically ceded (effective
immediately upon issuance thereof) by HLIC to the Administrator (in its capacity
as "Reinsurer" under the Reinsurance Agreement), and reinsured by the
Administrator (in its capacity as "Reinsurer" under the Reinsurance Agreement)
from HLIC, on a one hundred percent (100%) indemnity reinsurance basis in
accordance with the terms of the Reinsurance Agreement.
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(d) All costs and expenses associated with the quotation, marketing, sale,
underwriting, issuance, renewal and reinsurance of New Insurance Policies,
including surcharges and assessments imposed on the basis of Premiums or
otherwise with respect to the New Insurance Policies, shall be borne by the
Administrator.
Section 3.02 Guidelines. Any and all New Insurance Policies shall be (a)
quoted, marketed, sold, underwritten, issued, renewed and reinsured in
accordance with standards, guidelines, procedures and practices consistent with
those utilized by the Administrator in its business and in accordance with (i)
the Existing Reinsurance Agreements, (ii) Applicable Law and (iii) in the case
of conversions, the Contract and related practices giving rise to the conversion
right and (b) written on policy forms and using the rating plans in effect for
HLIC for such type of business at the Effective Time, except for, in the case of
both (a) and (b), changes required by Applicable Law or changes that have been
approved in advance and in writing by HLIC, such approval not to be unreasonably
withheld, delayed or conditioned.
Section 3.03 Termination of Authority. The authority granted to the
Administrator under Sections 3.01(a) and (b) may be terminated by HLIC upon
written notice to the Administrator: (i) in the event that the Administrator
assigns or delegates its underwriting authority with respect to such New
Insurance Policies to be issued pursuant to sub-clause (i) of Section 3.01 to
any Person without the prior written consent of HLIC (which consent may be
withheld in HLIC's sole discretion), (ii) upon termination of the Reinsurance
Agreement or the inability of the Administrator under the Reinsurance Agreement,
to reinsure New Insurance Policies under the Reinsurance Agreement, (iii) in the
event that the Administrator becomes insolvent or is placed into liquidation,
rehabilitation, conservation, supervision, receivership or similar proceedings
(whether voluntary or involuntary), or there is instituted against the
Administrator proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator or trustee in bankruptcy, or other agent known by
whatever name, to take possession of its assets or assume control of its
operations, or (iv) if a Recapture Triggering Event has occurred under the
Reinsurance Agreement and the business reinsured thereunder is recaptured by
HLIC under the Reinsurance Agreement pursuant to its terms.
Section 3.04 HLIC Licenses; Certain Actions. HLIC shall, until and including
the last calendar day of the New Business Period:
(a) hold and maintain all material licenses, permits and authorizations
required under Applicable Law to issue New Insurance Policies during the New
Business Period in accordance with Section 3.01; provided, that notwithstanding
the foregoing, in no event shall HLIC be required to maintain any given license,
permit or authorization to the extent that there is a change in Applicable Law
or issuance of a binding order from a Governmental Body that prohibits HLIC from
maintaining such license, permit or authorization; and
(b) take no action within HLIC's actual control and without the Administrator's
consent (which consent shall not be unreasonably withheld, delayed or
conditioned) that would adversely affect in any material respect the ability of
the Administrator to quote, market, sell, issue, renew or reinsure New Insurance
Policies during the New Business Period in accordance with the terms and
conditions of Section 3.01; provided, that this
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Section 3.04(b) shall in no event be construed to require HLIC to maintain any
insurance financial strength or similar rating.
Section 3.05 Marketing Activities.
(a) Subject to the terms and conditions set forth in the Trademark License
Agreement and the Wholesaling Agreement, the Administrator may develop and use
new marketing and sales materials for the New Insurance Policies in accordance
with Applicable Law. To the extent not otherwise provided to HLIC pursuant to
the Trademark License Agreement or the Wholesaling Agreement, the Administrator
shall provide HLIC with copies of all such materials prior to use for HLIC's
prompt review. Administrator shall not use such new marketing and sales material
until HLIC provides Administrator written approval (such approval not to be
unreasonably withheld or delayed).
(b) The Administrator shall have responsibility for, and shall bear all costs,
expenses and liabilities associated with, all activities relating to the
marketing and sale of the New Insurance Policies by the Administrator, in the
name of HLIC, including, without limitation, developing, printing and
distributing marketing materials, and training agents and other Distributors.
ARTICLE IV
SERVICES PROVIDED BY ADMINISTRATOR
Section 4.01 Services. During the term of this Agreement and except as
otherwise provided in the Transition Services Agreement or in Sections 2.02 and
2.03, the Services to be provided by the Administrator hereunder shall include
all services that are required, necessary or appropriate for the administration,
handling and performance of the Administered Business and any other
administrative services (including reporting services) that are reasonably
required, necessary or appropriate under Applicable Law, the terms of the
Covered Insurance Policies, the Separate Accounts or the Existing Reinsurance
Agreements or otherwise in connection with, or incidental to, the administration
of the Administered Business. Without limiting the generality of the foregoing,
the Services to be provided by the Administrator hereunder shall include the
Services set forth on Schedule II hereto.
Section 4.02 Standards and Licenses.
(a) The Administrator acknowledges that the performance of the Services in an
accurate and timely manner is of paramount importance to HLIC. Administrator
shall provide each of the Services: (i) with the same priority it accords its
own operations, (ii) in substantially the same manner and using at least the
same standard of care and degree of efficiency and quality that Seller, its
Affiliates and their subcontractors used during the twelve (12)-month period
immediately prior to the Effective Time in performing such Services or similar
services (to the extent such Services were provided by Seller prior to the
Effective Time) for the Business and (iii) in compliance with (A) Applicable Law
and (B) the Covered Insurance Policies. HLIC understands and agrees that
Administrator is not in the business of providing
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Services to third parties, and under no circumstances shall Administrator be
held accountable to a higher standard of care than that set forth herein.
(b) For the duration of this Agreement, the Administrator hereby covenants that
it shall, at its sole cost and expense, as an independent contractor:
(i) subject to the Administrator's right to delegate or subcontract its
responsibility to perform any portion of the Services, in accordance
with and subject to the terms hereof, employ and retain staff with
the requisite experience, skill and expertise to perform the
Services it is obligated to perform hereunder, in a manner
consistent with the standards set forth in Section 4.02(a) and using
the Administrator's facilities, systems and equipment; and
(ii) own, hold, possess and maintain all licenses, franchises, permits,
privileges, immunities, approvals and other authorizations from any
Governmental Body in any state in the United States and in Puerto
Rico and Guam that are necessary for the provision by the
Administrator of the Services.
(c) The Administrator shall not be liable to HLIC for any acts, errors or
omissions in performing the Services to the extent such acts, errors or
omissions were directed by HLIC in writing or caused by any act or omission of
HLIC or any of its Affiliates or resulted from a breach of any of the
Transaction Agreements by HLIC or any of its Affiliates.
Section 4.03 Subcontracting. The Administrator may delegate or subcontract the
performance of any Service (or any portion thereof) to another Person (the
"Subcontractor"); provided, that the Administrator shall provide HLIC with
reasonable advance written notice of its intention to delegate or subcontract to
an unaffiliated third party any Service or portion thereof; provided, further,
that no such subcontracting or delegation shall relieve the Administrator from
any of its obligations or liabilities hereunder, and the Administrator shall
remain responsible for all obligations or liabilities of such Subcontractor with
respect to the provision of such Service or Services as if provided by the
Administrator. HLIC shall cooperate in good faith with the Administrator's
efforts to, and take all actions reasonably requested by the Administrator to,
delegate or subcontract the performance of any Service or portion thereof to any
Subcontractor. The Administrator shall reimburse HLIC for any reasonable and
necessary out-of-pocket costs associated with such cooperation.
Section 4.04 Recommendations. The Administrator may recommend to HLIC
amendments to the products, benefits, forms, rating plans and prospectuses in
use for the Covered Insurance Policies, including the New Insurance Policies.
With HLIC's prior consent, which may not be unreasonably withheld, the
Administrator may make such amendments on behalf of HLIC.
Section 4.05 Decision Authority.
(a) Notwithstanding any other provision of this Agreement to the contrary, HLIC
shall have the right to direct the Administrator to perform any action necessary
with respect to the Administered Business or the administration thereof to
comply with Applicable Law, or to cease performing any action that constitutes a
violation of Applicable Law
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to the extent such action, inaction or administration is within the control of
the Administrator, in each case, taking into account the recommendations of the
Administrator provided to HLIC hereunder, which HLIC shall only reject in good
faith and in light of the intent of the parties to, and the stated purposes of,
the Purchase Agreement, the Ancillary Agreements and this Agreement. The
Administrator shall have the right to request HLIC to perform any action
necessary for the Covered Insurance Policies, the Separate Accounts, and
Existing Reinsurance Agreements or the administration thereof to comply with
Applicable Law, or to cease performing any action that constitutes a violation
of Applicable Law and HLIC shall use commercially reasonable efforts to comply
with such request.
(b) In the event of any dispute as to whether or not an action is required or
should be suspended in order to comply with Applicable Law, such dispute shall
be referred to the Coordinators, pursuant to Section 17.03.
Section 4.06 Non-Guaranteed Elements. HLIC shall set all Non-Guaranteed
Elements under the Covered Insurance Policies from and after the Effective Time,
taking into account the recommendations of the Administrator, which HLIC shall
only reject in good faith and on a reasonable basis that such recommendations
fail to comport with Applicable Law, applicable Actuarial Standards of Practice
or the terms of any Covered Insurance Policy. HLIC shall convey to the
Underlying Companies under the Underlying Reinsurance Agreements the
recommendations of the Administrator with respect to Non-Guaranteed Elements as
if such recommendations were the HLIC's own. In connection with any
recommendation by the Administrator with respect to any Non-Guaranteed Elements
under this Section, the Administrator shall provide HLIC a copy of its
Non-Guaranteed Elements Policy in effect as of the Closing Date and from time to
time thereafter upon a change or amendment to the Non-Guaranteed Elements
Policy.
Section 4.07 Additional Covenants of HLIC.
(a) HLIC shall (i) use commercially reasonable efforts to continue in-force the
Existing Reinsurance Agreements, Underlying Reinsurance Agreements, Mutual Fund
Agreements and Distribution Contracts to which it or any of its Affiliates is a
party to the extent relating to the Covered Insurance Policies, (ii) not agree
to amend, modify or terminate, expand or otherwise alter any Existing
Reinsurance Agreement, Underlying Reinsurance Agreements, Mutual Fund Agreement
or Distribution Contract (including with respect to any fund option) to the
extent related to the Covered Insurance Policies in any manner without the
Administrator's prior written consent, (iii) cooperate in good faith with the
Administrator's efforts to, and take all actions reasonably requested by the
Administrator to, amend, modify, expand or otherwise alter the Existing
Reinsurance Agreements, Underlying Reinsurance Agreements, Mutual Fund
Agreements or Distribution Contracts to the extent related to the Covered
Insurance Policies in the manner reasonably requested by the Administrator and
in accordance with any applicable terms and conditions of the Reinsurance
Agreement, and (iv) use commercially reasonable efforts to facilitate the
enforcement by the Administrator of all of HLIC's rights and the timely
performance by the Administrator of all HLIC's obligations under such agreements
to the extent related to the Covered Insurance Policies. HLIC shall provide the
Administrator with prompt notice after HLIC becomes aware of any proposal by any
counterparty to any Existing Reinsurance Agreement, Underlying Reinsurance
Agreement, Mutual Fund Agreement or
15
Distribution Contract to terminate any such Existing Reinsurance Agreement,
Underlying Reinsurance Agreement, Mutual Fund Agreement or Distribution Contract
or to amend or reduce or increase any amounts payable under any such Existing
Reinsurance Agreement, Underlying Reinsurance Agreement, Mutual Fund Agreement
or Distribution Contract with respect to the Covered Insurance Policies.
(b) The Administrator may make recommendations to HLIC as to fund options for
the Separate Accounts and HLIC shall not unreasonably reject or delay such
recommendations. If the Administrator makes a change in the Covered Insurance
Policies or the Separate Accounts in connection with the change of a fund option
as permitted above, the Administrator shall, at its own expense, prepare for
signature by HLIC and transmit on behalf of HLIC to the appropriate Governmental
Body any SEC exemptive application, no-action letter or other regulatory filing
necessary to reflect or implement such change.
(c) HLIC shall take all actions necessary to execute amendments to the
Ancillary Agreement Covered Contracts, prepared from time to time by the
Administrator to conform such Ancillary Agreement Covered Contracts to the
extent required by any changes in Applicable Law.
(d) HLIC shall take all actions necessary to execute agreements to facilitate
trading via National Securities Clearing Corporation (NSCC) with respect to the
Administered Business.
Section 4.08 Certain Actions with Respect to Recoverables. The Administrator
shall (i) deposit in the applicable Separate Account any Recoverables
attributable to such Separate Account to the extent required to be deposited
therein by such Covered Insurance Policy and (ii) on behalf of HLIC, pay out of
the applicable Separate Account any amounts to be paid out of such Separate
Account in accordance with the terms of the applicable Covered Insurance Policy.
If any Recoverables attributable to a Separate Account are received by HLIC,
such amounts shall be paid to the Administrator for deposit into such Separate
Account.
Section 4.09 Product Filings. The Administrator shall have the exclusive
authority to make filings with respect to the Covered Insurance Policies with
applicable Governmental Bodies, in the name of and on behalf of HLIC, to apply
for amendments to any policy form or any other document related to the Covered
Insurance Policies, including, without limitation, any application, sales
illustration related to new business, marketing material, endorsement or rider;
provided that the Administrator shall deliver to HLIC copies of any filings it
makes with Governmental Bodies relating to the Covered Insurance Policies prior
to or contemporaneously with making such filings. HLIC shall use commercially
reasonable efforts to assist the Administrator in seeking approval of any filing
made pursuant to this Section 4.09. The Administrator shall reimburse HLIC for
any reasonable and necessary out-of-pocket costs associated with such
assistance.
[REDACTED]
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17
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ARTICLE V
FEES FOR SERVICES
Section 5.01 Fees for Services. Except as otherwise provided for in this
Agreement, the Administrator shall provide Services with respect to the
Administered Business pursuant to this Agreement at its sole cost and expense
(including payment of all necessary fees to any third parties) in consideration
for the promises made by HLIC and its Affiliates under this Agreement and the
Transaction Agreements, and shall not receive any separate fee from HLIC for the
provision of the Services.
ARTICLE VI
CERTAIN REPORTS; BOOKS AND RECORDS;
BANK ACCOUNTS AND REMITTANCES
Section 6.01 Reports.
(a) As of and following the Effective Time, the Administrator shall prepare any
reports reasonably requested by HLIC in connection with the Administered
Business to enable HLIC to comply with any and all Applicable Laws, including
all statutory insurance reporting, tax reporting and SAP, GAAP and SEC financial
reporting requirements and any current or future informational reporting, prior
approval or other requirements imposed by any Governmental Body; provided, that
HLIC shall reimburse the Administrator for reasonable costs and expenses
incurred by the Administrator in the preparation of reports that are not
substantially similar to reports the Administrator or its Affiliates prepare in
connection with the administration of its own life insurance business. Any such
reports required to be prepared by the Administrator shall, to the extent
practicable, be prepared and delivered on a timely basis based on reasonable
notice provided by HLIC in order for HLIC to comply with any filing deadlines
required by Applicable Law, by Contract or by HLIC's reasonable internal
procedures and policies, to the extent such procedures and policies have been
previously provided to the Administrator with sufficient advance notice thereof.
All such reports shall include such information as may reasonably be requested
by HLIC.
(b) As of and following the Effective Time, the Administrator shall prepare and
furnish the reports identified in Schedule I (the "Scheduled Reports") on the
dates set forth on Schedule I (or such later dates as mutually agreed upon by
the parties).
(c) To the extent additional reports are requested by HLIC under this
Agreement, the Administrator shall provide such reports in a form and manner as
is reasonably requested by HLIC; provided, that HLIC shall reimburse the
Administrator for the reasonable costs and expenses incurred by the
Administrator in the preparation of such reports.
(d) The Parties acknowledge and agree that changes in Applicable Law may make
delivery of Scheduled Reports and other reports on the timeframes contemplated
herein and in the Schedules hereto impracticable. In such case, the Parties
shall cooperate in good faith to revise such deadlines.
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Section 6.02 Books and Records and Access to Books and Records.
(a) As of and following the Effective Time, to the extent not otherwise
maintained by the Administrator under the Reinsurance Agreement and except as
provided under the Transition Services Agreement, the Administrator shall assume
responsibility for maintaining accurate and complete books and records of all
transactions pertaining to the Administered Business and all data used by the
Administrator in the performance of Services required under this Agreement,
including claims filed in respect of the Covered Insurance Policies and any
documents relating thereto, any communications with any Governmental Body,
complaint logs, billing and collection files, files containing actuarial data
and all other data used by the Administrator in performance of the Services. All
such books and records shall be maintained by the Administrator (i) in
accordance with any and all Applicable Laws, (ii) in accordance with the
Administrator's record retention procedures and policies and (iii) in a format
accessible by HLIC and its Representatives.
(b) During the term of this Agreement, upon any reasonable request from HLIC or
its Representatives, the Administrator shall (i) provide to HLIC and its
Representatives reasonable access during normal business hours to the books and
records (including any such materials developed after the Effective Time by a
Party hereto or its Affiliates) under the control of the Administrator
pertaining to the Administered Business and the Services to be provided under
this Agreement and the reinsurance to be provided under the Reinsurance
Agreement; provided that such access shall not unreasonably interfere with the
conduct of the business of the Administrator, and (ii) permit HLIC and its
Representatives to make copies of such records, in each case, at no cost to HLIC
(other than for reasonable out-of-pocket expenses). Nothing herein shall require
the Administrator to disclose any information to HLIC or its Representatives if
such disclosure would jeopardize any attorney-client privilege, the work product
immunity or any other legal privilege or similar doctrine or contravene any
Applicable Law or any Contract (including any confidentiality agreement to which
the Administrator or any of its Affiliates is a party) (it being understood that
the Administrator shall use commercially reasonable efforts to obtain waivers or
make other arrangements (including redacting information or entering into joint
defense agreements) that would enable otherwise required disclosure to HLIC or
its Representatives to occur without so jeopardizing privilege or contravening
such Applicable Law, Court Order or Contract, or require the Administrator to
disclose its tax records or tax returns of the Administrator or any of its
Affiliates or any personnel or related records.
(c) During the term of this Agreement, upon any reasonable request from the
Administrator or its Representatives, HLIC shall (i) provide to the
Administrator and its Representatives reasonable access during normal business
hours to the books and records (including any such materials developed after the
Effective Time by a Party hereto or its Affiliates) under the control of HLIC or
any of its Affiliates pertaining to the Administered Business and the Services
to be provided under this Agreement and the reinsurance to be provided under the
Reinsurance Agreement (including the books and records of HESCO); provided that
such access shall not unreasonably interfere with the conduct of the business of
HLIC, and (ii) permit the Administrator and its Representatives to make copies
of such records, in each case, at no cost to the Administrator (other than for
reasonable out-of-pocket expenses). Nothing herein shall require HLIC to
disclose any information to the Administrator or its
20
Representatives if such disclosure would jeopardize any attorney-client
privilege, the work product immunity or any other legal privilege or similar
doctrine or contravene any Applicable Law or any Contract (including any
confidentiality agreement to which HLIC or any of its Affiliates is a party) (it
being understood that HLIC shall use commercially reasonable efforts to obtain
waivers or make other arrangements (including redacting information or entering
into joint defense or common interest agreements) that would enable otherwise
required disclosure to the Administrator or its Representatives to occur without
so jeopardizing privilege or contravening such Applicable Law, Court Order or
Contract) or require HLIC to disclose its tax records (except as otherwise
provided under the Purchase Agreement or Article XVI of this Agreement) or any
personnel or related records.
(d) The Parties shall maintain facilities and procedures that are in accordance
with Applicable Law and commercially reasonable standards of insurance
recordkeeping for safekeeping the books and records maintained by the applicable
Party or its Affiliates that pertain to the Administered Business.
(e) The Administrator shall cooperate with any Governmental Body having
jurisdiction over HLIC in providing access to the books and records referenced
in this Section 6.02.
Section 6.03 Disbursing Accounts.
(a) During the term of this Agreement, the Administrator shall maintain one or
more accounts (which may be zero balance accounts) in the name of the
Administrator with banking institutions as necessary to allow the Administrator
to make or direct all payments required to be made or directed by the
Administrator on behalf of HLIC with respect to the Administered Business (the
"Administrator Disbursing Accounts"); provided, that the Parties acknowledge and
agree that disbursement accounts maintained by HLIC may be used on a
transitional basis until relevant functions are migrated to the Administrator
Disbursing Accounts. If requested by the Administrator, HLIC, in its sole
discretion, shall assign and transfer to the Administrator, and the
Administrator shall accept and acquire, one or more additional accounts held in
the name of HLIC with banking institutions and related to the Administered
Business (the "Transferred Disbursing Accounts" and, collectively with the
Administrator Disbursing Accounts, the "Disbursing Accounts"). The Disbursing
Accounts shall be used for all disbursements provided for in connection with the
Services, including but not limited to benefit payments, insurance contract
surrenders, annuity payments and other benefits under Covered Insurance
Policies. Until the occurrence of a Triggering Event or Recapture Triggering
Event, the Administrator shall, as needed, deposit in the Disbursing Accounts
funds sufficient to cover checks drawn on the Disbursing Accounts by the
Administrator with respect to the Administered Business from time to time. The
Administrator shall be solely responsible for all fees, costs and expenses of
the Disbursing Accounts, and in no event shall HLIC have any obligation to
provide funding for the Disbursing Accounts with respect to the Administered
Business or be responsible for any fees, costs or expenses associated therewith.
Checks drawn on the Disbursing Accounts in connection with the Services shall
show the Administrator, acting on behalf of HLIC.
(b) Unless prohibited by Applicable Law and excluding any payments
21
in progress to policyholders or beneficiaries, upon the occurrence of, and
during the continuance of, a Triggering Event or a Recapture Triggering Event,
the Administrator, immediately upon becoming aware of such Triggering Event or
Recapture Triggering Event, shall, in accordance with the terms of the
Reinsurance Agreement, (i) transfer all Custodial Funds previously deposited or
held in the Disbursing Accounts from the Disbursing Accounts into the Custodial
Account, (ii) deposit all Custodial Funds directly into the Custodial Account as
set forth in Section 4.9(b) of the Reinsurance Agreement and (iii) to the extent
permitted pursuant to the Reinsurance Agreement, apply such Custodial Funds as
set forth in Section 4.9(c) of the Reinsurance Agreement.
(c) HLIC shall cooperate with the establishment and maintenance of the
Disbursing Accounts (including the assignment and transfer of the Transferred
Disbursing Accounts).
Section 6.04 Remittances. If HLIC or the Administrator or any of their
respective Affiliates receives any remittance or other payment that it is not
entitled to under the terms of this Agreement, the Reinsurance Agreement or any
other Transaction Agreement, HLIC, the Administrator or such Affiliate shall
hold such remittance or other payment in trust for the benefit of HLIC, the
Administrator or the applicable Separate Account, as the case may be. Upon
becoming aware that another Party is entitled to such remittance or other
payment, HLIC or the Administrator shall endorse any such remittance to the
order of HLIC, the Administrator or the applicable Separate Account, as the case
may be, and promptly transfer such remittance or other payment to HLIC, the
Administrator or to the applicable Separate Account, as the case may be.
Section 6.05 Audit Rights.
(a) During the term of this Agreement and continuing for one (1) year after the
termination of this Agreement, the Administrator shall permit HLIC to review the
Administrator's compliance with its obligations under this Agreement, not more
than once annually and on no less than thirty (30) calendar days' notice (except
as set forth below) during normal business hours. Such audits shall be conducted
by personnel of HLIC or its Affiliates or by an independent auditor selected by
HLIC. The Administrator shall accommodate such audits and shall provide each
auditor access to pertinent books and records during normal business hours upon
reasonable advance notice. HLIC shall bear the expenses of any such audits.
(b) Upon the written request of HLIC and if specifically available solely
related to the Services, the Administrator shall provide to HLIC a copy of its
SSAE 16 Type II report (or any successor or other substantially similar report).
Section 6.06 Internal Controls Over Financial Reporting. Each Party shall
provide the other with reasonable access to its personnel, books and records,
and such other certifications and information as the other Party may reasonably
deem necessary to enable its designated officers to evaluate the effectiveness
of the disclosing party's internal control over financial reporting, as defined
in Exchange Act Rules 13a-15(f) and 15(d)-15(f) and Subsection I
22
of Section 3 of the NAIC Annual Financial Reporting Model Regulation ("Internal
Control Over Financial Reporting") with respect to the Administered Business
(including with respect to any financial information provided by the disclosing
Party to the other Party under this Agreement or any other Ancillary Agreement).
ARTICLE VII
INABILITY TO PERFORM SERVICES; ERRORS
Section 7.01 Inability to Perform Services.
(a) In the event that the Administrator is unable to perform all or a portion
of the Services for any reason for a period that could reasonably be expected to
exceed twenty (20) Business Days, the Administrator shall promptly provide
notice to HLIC of its inability to perform the applicable Services and shall
cooperate with HLIC in obtaining an alternative means of providing such
Services. The Administrator shall be responsible for all fees, costs and
expenses incurred in order to obtain such alternative means of providing the
applicable Services and in order to restore such Services.
(b) In the event that the Administrator commits three (3) independent Material
Breaches (as such term is defined below) during any rolling twelve (12) month
period, HLIC will, at its option, initiate the dispute resolution process set
forth in Section 17.03(a). If, after Level Three Negotiations, HLIC is not
reasonably satisfied with the results thereof, the CEO or CFO of HLIC's ultimate
parent will provide written notice to the CEO or CFO of the Administrator's
ultimate parent and the Administrator shall use commercially reasonable efforts
to obtain an alternative means of providing the impacted Services pursuant to
the service standards set forth in Section 4.02(a). In such event, the
Administrator shall be responsible for the incremental costs incurred in
providing such alternative services. The term "Material Breach" shall mean a
material breach of a material obligation under this Agreement by the
Administrator, the occurrence of which is not subject to a good faith dispute
between the Parties, that remains in existence ninety (90) calendar days after
receipt by the Administrator of HLIC's written notice of such breach (which
notice shall specify HLIC's view that such breach is a material breach of a
material obligation hereunder), which breach shall not have been cured within
such ninety (90) calendar day period; provided, however, that if the
Administrator can demonstrate that, despite having used its commercially
reasonable efforts to cure such failure within the ninety (90) calendar day
period, it has not been able to effect such a cure, HLIC may, at its sole
discretion, grant the Administrator additional time in which to effect such a
cure. The remedy set forth herein and HLIC's indemnification rights pursuant to
Section 12.02 shall be HLIC's sole and exclusive remedy with respect to any
Material Breach that is not cured within the foregoing cure period.
(c) For the avoidance of doubt, if the Administrator fails to perform any
obligation hereunder and such failure is attributable to (i) an act, error or
omission of HLIC, including any failure by HLIC or HLIC's Representatives to
perform any obligation of HLIC hereunder or under any of the Ancillary
Agreements (excluding this Agreement), (ii) revocation by HLIC of any or all
authority of the Administrator under Section 6.03(c) or (iii) the termination
upon the occurrence of a Recapture Triggering Event of Administrator's right to
23
direct disbursements from the Custodial Account, then in each such case, such
failure to perform such obligation by the Administrator shall not be a breach of
this Agreement and the Administrator shall have no liability under this
Agreement with respect to such obligation.
(d) In the event that a third party administrator is engaged in accordance with
Section 7.01(b) and the Administrator subsequently determines that such third
party administrator is incapable of performing the Services subcontracted to
such third party administrator, the Parties agree that the Administrator shall,
at its option, replace the third party administrator with another third party
administrator or resume its performance of such Services pursuant to this
Agreement.
Section 7.02 Errors. The Administrator shall, at its own expense, correct any
errors in the Services caused by it as promptly as practicable following notice
thereof from HLIC or any other Person or upon discovery thereof by the
Administrator. HLIC shall, at its own expense, cooperate with and assist
Administrator to correct any errors resulting from any act or omission by HLIC
as promptly as practicable following notice thereof from Administrator or any
other Person or upon discovery thereof by HLIC. HLIC shall reimburse the
Administrator for the reasonable costs and expenses incurred by the
Administrator in making any such corrections.
ARTICLE VIII
REGULATORY COMPLAINTS AND LEGAL ACTIONS
Section 8.01 Routine Complaints. The Administrator shall supervise and control
the investigation, contest, defense and/or settlement of any policyholder,
insured or beneficiary complaints (including any such complaints asserted
through any Governmental Body) that in the Administrator's reasonable judgment
would reasonably be expected to result solely in monetary Losses [REDACTED]
relating to the Administered Business (the "Routine Complaints") at its own cost
and expense, and in the name of HLIC when necessary. Notwithstanding anything in
this Agreement to the contrary, the Administrator shall not be required to
provide notice to HLIC with respect to any Routine Complaints; provided, that at
HLIC's request, the Administrator shall, no more frequently than monthly,
provide HLIC with a report summarizing the nature and status of any pending or
resolved Routine Complaints, the alleged actions or omissions giving rise to
such Routine Complaints, and the status of any such Routine Complaints.
Section 8.02 Regulatory Actions.
(a) If HLIC or the Administrator receives notice of, or otherwise becomes aware
of, any Regulatory Action (as defined below), HLIC or the Administrator, as
applicable, shall promptly notify the other Party thereof. The term "Regulatory
Action" means any Action initiated by or involving the participation of a
Governmental Body related to the Administered Business other than Routine
Complaints. HLIC, upon twenty (20) calendar days written notice to the
Administrator, shall have the right at any time to assume sole and exclusive
control over the response, defense, settlement or other resolution of any
Regulatory Action; provided that HLIC shall be solely responsible for all costs
and expenses related thereto (including any Losses, fines, penalties or other
amounts imposed on or suffered by the
24
Administrator and its Affiliates, and the cost of any remediation efforts by the
Administrator) and any increased liability of the Administrator, in its capacity
as the Reinsurer, under the Reinsurance Agreement or this Agreement resulting
from HLIC's control thereof. The Administrator shall have the right at its sole
expense to engage its own separate legal representation and to participate fully
in, but not control, any such defense, settlement, or compromise assumed by
HLIC. Notwithstanding the foregoing, HLIC shall not settle or compromise any
such Regulatory Action without the Administrator's prior written consent (such
consent not to be unreasonably withheld, conditioned or delayed) unless (i)
there is no finding or admission of any violation of Applicable Law or any
violation of the rights of any Person by the Administrator or any of its
Affiliates, (ii) HLIC pays all settlement amounts with respect thereto, (iii)
HLIC obtains a complete release for the Administrator and its Affiliates who are
parties to the proceedings with respect to such Regulatory Action, and (iv) the
terms of the proposed settlement or compromise of the Regulatory Action do not
impose injunctive, equitable relief or remediation or result in any non-monetary
restriction or condition or material burden on the Business or operations of the
Administrator and its Affiliates.
(b) In the event that HLIC does not timely assert its right to control the
handling of Regulatory Actions pursuant to SECTION 8.02(B), the Administrator
shall assume sole and exclusive control over the response, defense, settlement
or other resolution of any Regulatory Action. HLIC shall have the right at its
sole expense to engage its own separate legal representation and to participate
fully in, but not control, any such defense, settlement, or compromise assumed
by the Administrator. Notwithstanding the foregoing, the Administrator shall not
settle or compromise any such Regulatory Action without HLIC's prior written
consent (such consent not to be unreasonably withheld, conditioned or delayed)
unless (i) there is no finding or admission of any violation of Applicable Law
or any violation of the rights of any Person by HLIC or any of its Affiliates,
(ii) the Administrator pays all settlement amounts with respect thereto, (iii)
the Administrator obtains a complete release for HLIC and its Affiliates who are
parties to the proceeding with respect to such Regulatory Action, and (iv) the
terms of the proposed settlement of the Regulatory Action do not impose
injunctive, equitable relief or remediation or result in any non-monetary
restriction or condition on HLIC or its Affiliates.
(c) Upon the other Party's request, the controlling Party shall provide such
other Party with a report of any pending Regulatory Actions controlled by the
controlling Party that are covered under this SECTION 8.02, summarizing the
nature of any such pending Regulatory Actions, the alleged actions or omissions,
if any, giving rise to such Regulatory Actions and copies of any files or other
documents that the controlling Party may reasonably request in connection with
its review of such matters.
Section 8.03 LEGAL ACTIONS.
(a) The Administrator shall promptly notify HLIC of any Action other than a
Regulatory Action or a Routine Complaint that has been instituted or threatened
in writing with respect to the Administered Business or any Covered Insurance
Policy (each, a "LEGAL ACTION"), and in no event more than five (5) Business
Days after receipt or notice thereof.
(b) HLIC shall promptly notify the Administrator of any Legal Action to the
extent known to it and not made against or served on the Administrator as
administrator
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hereunder, and in no event more than five (5) Business Days after receipt or
notice thereof, and shall promptly furnish to the Administrator copies of all
pleadings in connection therewith.
(c) The Administrator shall supervise and shall exclusively control the
investigation, contest, defense and/or settlement of all Legal Actions, at its
own cost and expense and in the name of HLIC when necessary.
(d) Notwithstanding anything in this Agreement to the contrary, HLIC shall have
the right to engage its own separate legal representation, at its own expense,
and to participate fully in, but not control, the defense of any Legal Action
with respect to which HLIC is a named party to the extent that such Legal
Action, if successful, could (in HLIC's reasonable opinion) materially interfere
with the business, assets, liabilities, obligations, financial condition,
results of operations or reputation of HLIC or any of its Affiliates other than
the Administered Business, without waiving any right to indemnification or
payment that it may have under the terms of the Purchase Agreement, the
Reinsurance Agreement or this Agreement. The Administrator and HLIC shall use
commercially reasonable efforts to cooperate with each other with respect to the
administration of any such Legal Action. The Administrator shall not settle or
compromise any Legal Action without HLIC's prior written consent (such consent
not to be unreasonably withheld, conditioned or delayed) unless (i) there is no
finding or admission of any violation of Applicable Law or any violation of the
rights of any Person by HLIC or any of its Affiliates, (ii) the Administrator
pays all settlement amounts with respect thereto, (iii) the Administrator
obtains a complete release for HLIC and its Affiliates who are parties to the
proceeding with respect to such Legal Action, and (iv) the terms of the proposed
settlement do not impose injunctive, equitable relief or remediation or result
in any non-monetary restriction or condition on HLIC or its Affiliates.
(e) The Administrator shall keep HLIC informed of the progress of all pending
Legal Actions and, at HLIC's request (which requests shall be reasonable in
their frequency and nature as reasonably determined by the Administrator),
provide to HLIC a report summarizing the nature of any pending Legal Action, the
alleged actions or omissions giving rise to such Legal Action and copies of any
files or other documents that HLIC may reasonably request in connection with its
review of such matters, in each case other than such files, documents and other
information as would, in the judgment of counsel to the Administrator, lead to
the loss or waiver of legal privilege. Except to the extent that the
Administrator prepares such reports in the ordinary course of business, HLIC
shall reimburse the Administrator for the reasonable out-of-pocket costs
incurred by it in preparing the reports and copies described in this Section
8.03(e).
Section 8.04 Cooperation. Each Party shall use commercially reasonable efforts
to cooperate with and assist the controlling Party in responding to, defending,
prosecuting and Routine Complaint, Regulatory Action or Legal Action pursuant to
Article VIII, provided, that neither Party shall be required to waive any
applicable attorney-client, attorney work product or other evidentiary
privileges; provided, further, that, except as set forth in this Article VIII,
the Administrator shall reimburse HLIC for any reasonable out-of-pocket costs
and expenses incurred by HLIC in connection with such efforts. Neither HLIC nor
the Administrator shall have the authority to institute, prosecute or maintain
any legal or regulatory proceeding on behalf
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of the other Party without the prior written consent of such other Party, except
as expressly contemplated in this Agreement.
Section 8.05 Reporting. On a quarterly basis, (a) HLIC shall prepare and
provide to the Administrator a report containing a summary of any Regulatory
Actions with respect to which HLIC has exercised its right to supervise and
control the defense thereof in accordance with Section 8.02(b), and (b) the
Administrator shall prepare and provide to HLIC a report containing a summary of
any Legal Actions and Regulatory Actions controlled by the Administrator in a
form reasonably acceptable to HLIC.
Section 8.06 Relationship with Other Agreements. Notwithstanding anything to
the contrary contained herein, the provisions of this Article VIII (including
any obligation of the Administrator to bear any costs associated with any
Regulatory Action or Legal Action) shall be subject to and shall not impair or
reduce the indemnity obligations and rights of the Parties and their Affiliates
and other provisions related to indemnification under the Purchase Agreement and
the Reinsurance Agreement. The Parties acknowledge and agree that this Article
VIII shall not apply to the Specified Action, with respect to which the
provisions of Section 8.20 of the Business Disclosure Schedule to the Purchase
Agreement shall govern.
Section 8.07 Taxes. This Article VIII shall not apply to matters relating to
Taxes.
ARTICLE IX
DURATION; TERMINATION
Section 9.01 Duration. This Agreement shall become effective as of the
Effective Time and shall continue until the earlier of (a) the date on which the
Reinsurance Agreement is terminated in accordance with the terms thereof (b) the
date on which this Agreement is terminated in accordance with the provisions of
Section 9.02, or (c) the date of a recapture under the Reinsurance Agreement.
Section 9.02 Termination.
(a) This Agreement may be terminated at any time upon the mutual written
consent of the Parties hereto, which written consent shall state the effective
date and relevant terms of termination.
(b) This Agreement is subject to immediate termination at the option of HLIC,
upon written notice to the Administrator, in the event that the Administrator
becomes insolvent or is placed into liquidation, rehabilitation, conservation,
supervision, receivership or similar proceedings (whether voluntary or
involuntary), or there is instituted against it proceedings for the appointment
of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy,
or other agent known by whatever name, to take possession of its assets or
assume control of its operations.
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(c) This Agreement is subject to immediate termination in its entirety upon
written notice to the Administrator, if the business reinsured under the
Reinsurance Agreement is recaptured pursuant to its terms or the Reinsurance
Agreement is terminated.
(d) Upon termination of this Agreement (other than a termination resulting from
the termination of all liabilities of HLIC under all Covered Insurance Policies
in accordance with their respective terms), the Administrator shall reasonably
cooperate in the transfer of the applicable Services and any books and records
and other materials maintained by the Administrator related to such Services as
promptly as practicable (or, where required by Applicable Law, copies thereof)
to HLIC or HLIC's designee, such that HLIC or its designee shall be able to
perform the applicable Services without interruption following termination of
this Agreement.
Section 9.03 Survival. Notwithstanding the other provisions of this Article IX,
Articles I, XII and XIII and Sections 17.01, 17.03, 17.05, 17.08 and 17.09 shall
remain in full force and effect after the termination of this Agreement.
ARTICLE X
CUSTOMER INFORMATION
Section 10.01 Customer Information.
(a) The Administrator shall, and shall cause its Affiliates and its and their
respective Representatives to, comply with Applicable Privacy Laws and the
Information Security Requirements set forth in Schedule III attached hereto.
(b) HLIC agrees that the Administrator may use and disclose Customer
Information for any and all purposes described in: (i) Sections 16 and 17 of the
NAIC Model Privacy of Consumer Financial and Health Information Regulation and
(ii) Section 13 of the NAIC Insurance Information and Privacy Protection Model
Act, except where disclosure is prohibited by Applicable Law.
(c) HLIC agrees that the Administrator may use Customer Information for the
Administrator's own purposes relating to its insurance products and services,
including but not limited to: servicing, administering, and maintaining its
insurance products and services; administering and servicing benefits or claims;
underwriting, risk management and control; and the detection and prevention of
fraud, criminal activity, misrepresentations, or unauthorized transactions.
(d) HLIC hereby enters into a joint marketing agreement with the Administrator
as described in Section 15 of the NAIC Model Privacy of Consumer Financial and
Health Information Regulation such that Nonpublic Personal Financial
Information, as defined in the NAIC Model Privacy of Consumer Financial and
Health Information Regulation, relating to the Covered Insurance Policies may be
disclosed to the Administrator and used by the Administrator to market insurance
products and services to insureds or policyholders under the Covered Insurance
Policies. Specifically, HLIC agrees that it will send or cause the Administrator
to send, on HLIC letterhead, at Administrator's sole cost and expense, marketing
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material regarding the products and services of the Administrator and its
affiliates and subsidiaries to insureds or policyholders under the Covered
Insurance Policies. The content of such marketing material is subject to
approval by HLIC, the approval of which shall not be unreasonably withheld by
HLIC. Notwithstanding the foregoing, Administrator shall not solicit individuals
that are included in HLIC's Do Not Contact Database (which database shall be
made available to the Administrator by HLIC upon Administrator's reasonable
request).
DISASTER RECOVERY
Section 11.01 Disaster Recovery. The Administrator represents that it has
developed and shall maintain, for as long as Services are provided hereunder, a
disaster recovery plan ("DRP") related to the Services that is consistent with
commercially reasonable business practices. For as long as Services are provided
hereunder, the Administrator will: (a) periodically, but no less than one time
per calendar year, update and test the operability of the DRP; (b) certify to
HLIC at least once during every calendar year that the DRP is fully operational;
(c) in consultation with HLIC, implement the DRP upon the declaration of a
disaster under such DRP; and (d) reinstate the Services upon the declaration of
such a disaster within the applicable timeframes specified in the DRP. HLIC
shall have the right to review the DRP periodically, but no more than one time
per calendar year at the Administrator's location.
ARTICLE XII
INDEMNIFICATION
Section 12.01 Indemnification by HLIC. HLIC shall indemnify, defend and hold
harmless the Administrator and its Affiliates and their respective
Representatives, successors and assigns (collectively, the "Administrator
Indemnified Parties") from and against and pay and reimburse all Losses imposed
on, sustained, incurred or suffered by the Administrator Indemnified Parties
resulting from, arising out of or relating to (whether or not arising from a
Third-Party Claim) (a) any breach by HLIC of the covenants and agreements of
HLIC contained in this Agreement, (b) any breach by HLIC (or by any applicable
Affiliate of HLIC) of the covenants and agreements of HLIC contained in the
Investment Management Agreement or, if prior to the IMA Date, the investment
guidelines set forth in Exhibit L Part A of the Purchase Agreement Amendment, to
the extent such breach does not result from any acts, errors or omissions taken
pursuant to instructions from, or any reports or other information received
from, the Administrator or the Investment Manager and (c) any successful
enforcement of this indemnity.
Section 12.02 Indemnification by the Administrator. Except as otherwise
provided in Section 4.02(c), the Administrator shall indemnify, defend and hold
harmless HLIC and its Affiliates and their respective Representatives,
successors and assigns (collectively, the "HLIC Indemnified Parties") from and
against and pay and reimburse all Losses imposed on, sustained, incurred or
suffered by the HLIC Indemnified Parties resulting from, arising out of or
relating to (whether or not arising from a Third-Party Claim) (a) any breach by
the Administrator of the covenants and agreements of the Administrator contained
in this Agreement, or if prior to the IMA Date, in the investment guidelines set
forth in Exhibit L, Part A of the Amendment to the Purchase Agreement, (b) any
breach by the Investment Manger of the covenants and
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agreements of the Investment Manager contained in the Investment Management
Agreement, to the extent such breach does not result from any acts, errors or
omissions taken pursuant to instructions from, or any reports or other
information received from, HLIC and (c) any successful enforcement of this
indemnity.
Section 12.03 Notice of Claim; Defense.
(a) If (i) any non-affiliated third party or Governmental Body institutes
asserts any Action that may give rise to Losses for which a Party (an
"Indemnifying Party") may be liable for indemnification under this Article XII
(a "Third-Party Claim") or (ii) any Person that may be entitled to
indemnification under this Agreement (an "Indemnified Party") desires to make a
claim not involving a Third-Party Claim to be indemnified by an Indemnifying
Party, then the Indemnified Party shall promptly send to the Indemnifying Party
a written notice specifying the nature of such claim and a good faith estimate
of the amount of all related Losses to the extent they are ascertainable (a
"Claim Notice"). The Indemnifying Party shall not be relieved from any of its
indemnification obligations under this Article XII as a result of a failure of
the Indemnified Parties to provide a Claim Notice except to the extent that it
is prejudiced by such failure.
(b) The Indemnifying Party may, by notice delivered within twenty (20) Business
Days of the receipt of a Claim Notice with respect to a Third-Party Claim,
assume the defense and control of such Third-Party Claim (at the expense of such
Indemnifying Party). The Indemnified Party may take any actions reasonably
necessary to defend any Third-Party Claim prior to the time that it receives
notice from the Indemnifying Party as contemplated by the preceding sentence.
The Indemnifying Party shall not be entitled to assume or maintain control of
the defense of any Third-Party Claim and shall pay the reasonable fees and
expenses of counsel retained by the Indemnified Party if (i) the Third-Party
Claim relates to or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation against the Indemnified Party or (ii)
the Third-Party Claim would reasonably be expected to result in an injunction or
equitable relief against the Indemnified Party that would, in each case, have a
material effect on the operation of the business of such Indemnified Party or
any of its Affiliates.
(c) Subject to Section 12.03(b), in the event of a Third-Party Claim, if the
Indemnifying Party assumes the defense of a Third-Party Claim, the Indemnifying
Party may elect to retain counsel reasonably acceptable to the Indemnified
Parties to represent such Indemnified Parties in connection with such Action and
shall pay the fees, charges and disbursements of such counsel. Subject to
Section 12.03(b), if the Indemnifying Party so elects, the Indemnified Parties
may participate, at their own expense and through legal counsel of their choice,
in any such Action; provided that (i) the Indemnifying Party shall control the
defense of the Indemnified Parties in connection with such Action and (ii) the
Indemnified Parties and their counsel shall reasonably cooperate with the
Indemnifying Party and its counsel in connection with such Action. To the extent
such action can be taken in a way that does not unreasonably jeopardize the
attorney-client privilege: (i) the Indemnified Party's right to participate in
the defense of any Action shall include the right to attend all significant
internal meetings, all meetings with representatives of plaintiffs, hearings and
the like; and (ii) counsel for a Indemnified Party also shall be given a
reasonable opportunity to comment upon all memoranda of law, pleadings and
briefs and other documents relating to the Third-Party Claim, and the
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Indemnifying Party and its counsel shall give reasonable consideration to the
comments of counsel for the Indemnified Party. The Indemnifying Party shall not
settle any such Action without the relevant Indemnified Parties' prior written
consent, unless the terms of such settlement (A) provide for no relief other
than the payment of monetary damages, (B) involve no finding or admission of any
breach or violation by any Indemnified Party and (C) include an express
unconditional release of each Indemnified Party from all liability arising from
such Action. Notwithstanding the foregoing, if the Indemnifying Party does not
promptly retain counsel and assume control of such defense, then the Indemnified
Parties may retain counsel reasonably acceptable to the Indemnifying Party in
connection with such Action and assume control of the defense in connection with
such Action. Under no circumstances will the Indemnifying Party have any
liability in connection with any settlement of any Action that is entered into
without its prior written consent (such consent not to be unreasonably withheld,
delayed or conditioned).
(d) From and after the delivery of a Claim Notice involving a Third-Party
Claim, at the reasonable request of the Indemnifying Party, each Indemnified
Party shall grant the Indemnifying Party and its counsel, experts and
Representatives full access, during normal business hours, to the books,
records, personnel and properties of the Indemnified Party to the extent
reasonably related to such Claim Notice at no cost to the Indemnifying Party
(other than for reasonable out-of-pocket expenses of the Indemnified Parties).
(e) In the event any Indemnifying Party receives a Claim Notice from an
Indemnified Party that does not involve a Third-Party Claim, the Indemnifying
Party shall notify the Indemnified Party within twenty (20) Business Days
following its receipt of such notice whether the Indemnifying Party disputes its
liability to the Indemnified Party under this Article XII.
Section 12.04 No Duplication; Exclusive Remedy.
(a) To the extent that an Administrator Indemnified Party or an HLIC
Indemnified Party has received payment in respect of a Loss pursuant to the
provisions of any other Ancillary Agreement, such Administrator Indemnified
Party or HLIC Indemnified Party shall not be entitled to indemnification for
such Loss under this Agreement to the extent of such payment.
(b) Except with respect to claims alleging fraud and as otherwise provided
under this Agreement or the provisions of any other Ancillary Agreement, from
and after the Closing, the exclusive remedy of the Administrator, the
Administrator Indemnified Parties, HLIC and the HLIC Indemnified Parties in
connection with this Agreement (and any certificate or instrument delivered
hereunder) and the transactions contemplated hereby (whether under this
Agreement or arising under Applicable Law) shall be as provided in this Article
XII. In furtherance of the foregoing, each of Administrator, on behalf of itself
and each other Administrator Indemnified Party, and HLIC, on behalf of itself
and each other HLIC Indemnified Party, hereby waives, from and after the
Closing, to the fullest extent permitted under Applicable Law, any and all
rights, claims and causes of action (other than claims of, or causes of action
arising from, fraud) it may have against HLIC or any of its Affiliates or
Representatives and the Administrator or any of its Affiliates or
Representatives, as the case may
31
be, arising under or based upon this Agreement or any certificate or instrument
delivered in connection herewith, except (x) pursuant to the indemnification
provisions set forth in this Article XII or (y) as otherwise provided under this
Agreement or the provisions of any other Ancillary Agreement.
Section 12.05 Limitation on Set-off. Neither HLIC nor the Administrator shall
have any right to set off any unresolved indemnification claim pursuant to this
Article XII against any payment due pursuant to any Transaction Agreement.
Section 12.06 Mitigation. The Administrator and HLIC shall cooperate with each
other with respect to resolving any claim or liability with respect to which one
Party is obligated to indemnify the other Party under this Article XII,
including by making commercially reasonable efforts to mitigate such claim or
liability, to the extent required by Applicable Law.
Section 12.07 Recovery by Indemnified Party.
(a) In any case where an Indemnified Party recovers from a third party not
affiliated with such Indemnified Party any amount in respect of any Loss for
which an Indemnifying Party has actually reimbursed it pursuant to this Article
XII, such Indemnified Party shall promptly pay over to the Indemnifying Party
the amount so recovered (net of any out-of-pocket expenses incurred by such
Indemnified Party in collecting such amount), but not in excess of the sum of
(i) any amount previously paid by the Indemnifying Party to or on behalf of the
Indemnified Party in respect of such claim and (ii) any amount expended by the
Indemnifying Party in pursuing or defending any claim arising out of such
matter.
(b) If any portion of Losses to be reimbursed by the Indemnifying Party
pursuant to this Article XII could be recovered from a third party not
affiliated with the relevant Indemnified Party (including under any applicable
third-party insurance coverage) based on the underlying claim or demand asserted
against such Indemnifying Party, then the Indemnified Party shall promptly give
notice thereof to the Indemnifying Party and, upon the request of the
Indemnifying Party, shall use commercially reasonable efforts to collect the
maximum amount recoverable from such third party, in which event the
Indemnifying Party shall reimburse the Indemnified Party for all reasonable
costs incurred in connection with such collection. If any portion of Losses
actually paid by the Indemnifying Party pursuant to this Article XII could have
been recovered from a third party not affiliated with the relevant Indemnified
Party (including under any applicable third-party insurance coverage) based on
the underlying claim or demand asserted against such Indemnifying Party, then
the Indemnified Party shall transfer, to the extent transferable, such of its
rights to proceed against such third party as are necessary to permit the
Indemnifying Party to recover from such third party any amount actually paid by
the Indemnifying Party pursuant to this Article XII.
Section 12.08 Relationship with Reinsurance Agreement. Nothing contained in
this Article XII is intended to amend or supersede any provision of the
Reinsurance Agreement.
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ARTICLE XIII
COOPERATION
Section 13.01 Cooperation. The Parties hereto shall use commercially reasonable
efforts to reasonably cooperate in order that the duties assumed by the
Administrator hereunder will be effectively, efficiently and promptly
discharged, and will not take any actions that would frustrate the intent of the
transactions contemplated by this Agreement or any Transaction Agreement. In
accordance with the foregoing and at the Administrator's sole cost and expense,
each Party shall, at all reasonable times under the circumstances, make
available to the other Party properly authorized personnel for the purpose of
consultation and decision.
ARTICLE XIV
TRADEMARK LICENSE
Section 14.01 Trademark License. On the date hereof, HFIC and the Administrator
shall enter into the Trademark License Agreement, a form of which is attached
hereto as Exhibit A (the "Trademark License Agreement"), pursuant to which HFIC
will grant the Administrator a license to the trade names and marks described
therein, subject to the terms and conditions set forth therein.
ARTICLE XV
FIDELITY BOND
Section 15.01 Fidelity Bond. The Administrator shall, at its sole cost and
expense, obtain from an insurance company or companies and maintain in-force at
all times during the performance of the Services a fidelity bond or employee
dishonesty insurance policy in an amount [REDACTED], subject to a deductible
which is subject to the Administrator's self-insurance. The insurance companies
providing insurance under this Article XV shall have a Best's Financial
Performance Rating of A- or higher and a Financial Size Category of VIII or
higher, unless otherwise approved in writing by HLIC.
ARTICLE XVI
TAX MATTERS
Section 16.01 Premium Taxes.
(a) Quarterly Premium Tax Report. Within 20 calendar days of the end of each
calendar quarter, the Administrator (i) will provide a report (a "Quarterly
Premium Tax Report") to HLIC and (ii) will forward to HLIC, in the
Administrator's capacity as the Reinsurer, any reimbursement for Premium Taxes
and assessments due and payable by the Reinsurer in respect of the Covered
Insurance Policies under the terms of the Reinsurance Agreement (a "Quarterly
Premium Tax Payment"). Each Quarterly Premium Tax Report shall provide Premium
and Premium Tax rate information by state, which information shall include,
without limitation, the applicable rate for Premium Taxes for each state in the
report. The
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Quarterly Premium Tax Payment accompanying a Quarterly Premium Tax Report shall
be calculated using the statutory rate for Premium Taxes in each of the states
listed in the report.
(b) Retaliatory Premium Taxes. For purposes of preparing each Quarterly Premium
Tax Report, HLIC shall provide to the Administrator, in accordance with Section
16.01(c), such additional information as is necessary and appropriate for
purposes of facilitating the Administrator's calculation of retaliatory Premium
Taxes for such preceding calendar quarter. Unless HLIC (i) provides the
Administrator with such additional information in accordance with Section
16.01(c) and (ii) certifies to the Administrator that the information so
provided is the same as the information that will be reported on, or taken into
account in preparing, HLIC's Premium Tax Returns for the taxable period to which
the Quarterly Premium Tax Report relates, the Administrator shall calculate
retaliatory Premium Taxes for the relevant Quarterly Premium Tax Report (x)
based upon the difference between HLIC's state of domicile rate for Premium
Taxes and the statutory rates for Premium Taxes of other applicable
jurisdictions and (y) only when the rate for Premium Taxes of another
jurisdiction is lower than the rate for Premium Taxes of HLIC's state of
domicile.
(c) Requested Information. HLIC shall provide to the Administrator on a timely
basis any information within HLIC's possession or control that is reasonably
requested by the Administrator in connection with the Administrator's
obligations under this Article XVI. The Quarterly Premium Tax Report shall be
based on Premiums collected by the Administrator with respect to the Covered
Insurance Policies pursuant to this Agreement and the information in its
possession. HLIC and the Administrator shall cooperate in the accurate
preparation and timely filing of all Tax Returns that must be filed in
connection with Premium Taxes. Each Party shall furnish to the other Party all
information and records reasonably requested by the other Party for use in the
preparation, review or verification of all Tax Returns that must be filed in
connection with Premium Taxes. HLIC will provide to Administrator copies of any
communications received from a Taxing Authority relating to Premium Taxes or to
any related credits, deductions or offsets.
(d) Credits, Deductions, Offsets. The Quarterly Premium Tax Report will
indicate any credits, deductions, or offsets that reduce the Reinsurer's
obligation to reimburse HLIC for Premium Taxes under the terms of the
Reinsurance Agreement. If (i) a credit, deduction, or offset against Premium
Taxes was reflected as an asset on the Closing Date Transfer Balance Sheet or
(ii) the Reinsurer shall have reimbursed HLIC under the Reinsurance Agreement
for an assessment by any guaranty fund, insolvency fund, plan, pool,
association, or any similar assessment that has given rise to a credit,
deduction, or offset against Premium Taxes, and such credit, deduction or offset
cannot be fully used by HLIC to offset a liability for Premium Taxes for which
the Reinsurer otherwise would be required to reimburse HLIC, and the remainder
of the credit, deduction or offset is applied against other Taxes payable by
HLIC, then such credit, deduction or offset shall be applied to reduce the
Reinsurer's obligation to reimburse HLIC as reflected on the Quarterly Premium
Tax Report for the next succeeding calendar quarter (or the first calendar
quarter thereafter for which the Reinsurer would otherwise be required to
reimburse HLIC with respect to Premium Taxes under the terms of the Reinsurance
Agreement). To the extent that HLIC receives any refunds of amounts previously
paid to a guarantee fund, plan, pool, or association or of any similar
assessment, HLIC shall reimburse the Administrator (in the Administrator's
capacity as the Reinsurer) to the extent such amount was reflected as an
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asset on the Closing Date Transfer Balance Sheet or the Reinsurer shall have
reimbursed HLIC under the Reinsurance Agreement for the amount refunded.
(e) Pro Forma Schedule T. Within twenty (20) calendar days of the end of each
calendar year, the Administrator shall prepare and provide HLIC with a pro forma
Schedule T with respect to the Administered Business for the preceding calendar
year. The pro forma Schedule T will be prepared on the basis of the Quarterly
Premium Tax Reports for the calendar year to which the pro forma Schedule T
relates. HLIC will file its Schedule T in a manner consistent with the pro forma
Schedule T provided to it by the Administrator and will provide a copy of its
filed Schedule T to the Administrator. Should the Administrator come into
possession of any additional information that it would have used to prepare the
pro forma Schedule T after it has provided the pro forma Schedule T to HLIC in
accordance with this Section 16.01(e), the Administrator shall promptly provide
such additional information to HLIC in writing, along with a reasonably detailed
written explanation of what changes should be made to the pro forma Schedule T
to reflect such additional information.
(f) Annual Premium Tax Report. The Administrator will provide HLIC with a final
annual report of Premiums and Premium Taxes for each calendar year of this
Agreement (the "Annual Premium Tax Report") on or before March 31st of the
following calendar year. Each Annual Premium Tax Report (i) shall provide
Premium and Premium Tax rate information by state, which information shall
include, without limitation, the applicable rate for Premium Taxes for each
state in the report and (ii) shall be prepared by the Administrator in a manner
consistent with the pro forma Schedule T provided by the Administrator to HLIC
with respect to such calendar year pursuant to Section 16.01(e) (taking into
account any additional information provided by the Administrator to HLIC in
accordance with the last sentence of Section 16.01(e)), as adjusted to reflect
any additional information in the Administrator's possession at the time the
Annual Premium Tax Report is prepared and to take into account the definition of
General Account Liabilities in the Reinsurance Agreement and Section 16.01(d).
The Annual Premium Tax Report will reflect (x) any overpayment or underpayment
of reimbursements by the Reinsurer for Premium Taxes due in respect of Premiums
reported and paid to HLIC with the Quarterly Premium Tax Reports for the
calendar year to which the Annual Premium Tax Report relates and (y) any other
relevant adjustments to Premium Taxes, which adjustments shall be described in
reasonable detail in a schedule to the Annual Premium Tax Report. Such
overpayment or underpayment will be reconciled in conjunction with the next
Quarterly Premium Tax Payment following HLIC's receipt of the Annual Premium Tax
Report.
(g) Notice. Each of HLIC and the Administrator shall promptly notify the other
in writing upon receipt by it or any of its Affiliates of notice of any pending
or threatened Action related to any Premium Taxes or any Tax Returns filed in
connection with such Taxes.
(h) Actions. HLIC shall have the sole right to control the conduct of any
Action related to any Premium Taxes or any Tax Returns filed in connection with
such Premium Taxes, and to employ counsel of HLIC's choice at HLIC's expense;
provided, that the Administrator shall be permitted, at the Administrator's
expense, to be present at, and to participate in, any such Action.
Notwithstanding such control, HLIC shall not settle, either administratively or
after the commencement of litigation, any claim for Premium Taxes without
35
the consent of the Administrator, which consent shall not be unreasonably
withheld or delayed. HLIC and the Administrator shall furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the preparation for any Tax audit or
other Action related to Taxes, and the prosecution or defense of any Action
related to any Premium Taxes or any Tax Returns filed in connection with such
Premium Taxes. HLIC and the Administrator shall reasonably cooperate with each
other in the conduct of any Action related to any Premium Taxes. For the
avoidance of doubt, nothing in this Agreement shall require HLIC to provide the
Administrator access to any federal, state, or local consolidated income Tax
Return that includes HLIC or its Affiliates. Any information obtained under this
Section 16.01(h) shall be kept confidential, except as otherwise reasonably may
be required in connection with the filing of Tax Returns or claims for Tax
refunds or in conducting any Action related to Taxes.
Section 16.02 Tax Information Reporting, Withholding, and Depositing.
(a) The Administrator shall be responsible for all Tax information reporting,
withholding, and depositing required under Applicable Law with respect to the
Administered Business. All Tax Returns required to be filed with respect to such
Tax information reporting, withholding, and depositing shall be accurate and
complete in all material respects, and filed by the Administrator on a timely
basis and, where required by Applicable Law, shall be accompanied by the correct
amount of required payments or deposits of Taxes.
(b) Upon HLIC's reasonable request, the Administrator shall (i) provide HLIC
reasonable access during normal business hours to (A) review, audit, or copy any
Tax Returns for which the Administrator is responsible under Article XVI (either
prior to or following the filing of such Tax Returns) and (B) review the
Administrator's processes and operations with respect to its obligations under
Article XVI, provided that such access shall not unreasonably interfere with the
conduct of the business of the Administrator; (ii) provide information to HLIC
demonstrating the Administrator's compliance with Article XVI; and (iii)
cooperate with HLIC in connection with any Action related to any Tax Return for
which the Administrator is responsible under Article XVI (provided that such
cooperation shall not unreasonably interfere with the business or operations of
the Administrator).
Section 16.03 Sales Taxes. HLIC shall reimburse the Administrator for all
sales, value-added, goods and services, or similar Taxes (including any such
Taxes that are collected through withholding, but excluding any Taxes based
upon, or calculated by reference to, the income, receipts, or capital of the
Administrator, which Taxes shall be solely the liability of the Administrator)
imposed on or paid by the Administrator with respect to its receipt of payments
from HLIC under this Agreement; provided that the Administrator shall provide
HLIC with written notice that, and information reasonably sufficient to verify
that, such Taxes have been paid or are payable by the Administrator. In any case
where the Administrator has not previously paid such Taxes, the Administrator
shall promptly make payment of such Taxes to the appropriate Governmental Body
upon receipt of the reimbursement from HLIC.
Section 16.04 Reinsurer Product Tax Liabilities. To the extent that the
Reinsurer is liable under the Reinsurance Agreement for any Reinsurer
Extra-Contractual Obligations that relate to the Tax treatment or the Tax status
of one or more Covered Insurance Policies
36
("Reinsurer Product Tax Liabilities"), including, without limitation, any Losses
described in clauses (i) and (ii) of Section 12.6(a) of the Purchase Agreement,
HLIC and the Administrator shall cooperate in the defense and resolution of any
Action related to such Reinsurer Product Tax Liabilities, provided that such
cooperation shall not unreasonably interfere with the business or operations of
either Party.
Section 16.05 Conflicts. Notwithstanding any other provision in this Agreement,
with respect to the matters specifically set forth in this Article XVI, the
provisions of this Article XVI shall control. To the extent not provided for in
this Article XVI or any other provisions of this Agreement, including the
schedules to the same, matters related to Taxes shall be governed by the
Purchase Agreement, the Reinsurance Agreement, the Transition Services
Agreement, the Trust Agreement, or another Ancillary Agreement, as applicable
and as appropriate.
ARTICLE XVII
MISCELLANEOUS
Section 17.01 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the Party to whom
notice is to be given, (b) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, or (c) on the
Business Day after delivery to an overnight courier (such as Federal Express) or
an overnight mail service (such as the Express Mail service) maintained by the
United States Postal Service, to the Party as follows:
To HLIC or HFIC:
Hartford Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
With concurrent copies (which will not constitute notice) to:
The Hartford
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Ceded Reinsurance & General Counsel
[REDACTED]
37
To the Administrator:
The Prudential Insurance Company of America
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Legal Officer, Individual Life Insurance
With concurrent copies (which will not constitute notice) to:
Prudential Financial, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
[REDACTED]
or to such other address as such Party may indicate by a notice delivered to the
other Party hereto. Notwithstanding the foregoing, pursuant to Section 17.01
notice shall also be given by e-mail to the respective party's Coordinator.
Section 17.02 Entire Agreement. This Agreement, together with the Schedules and
Exhibits referred to herein, the Purchase Agreement, the Reinsurance Agreement,
the Transition Services Agreement, the Trust Agreement and the other documents
delivered pursuant hereto and thereto, contain the entire understanding of the
Parties hereto with regard to the subject matter contained herein or therein,
and supersede all other prior representations, warranties, agreements,
understandings or letters of intent between or among any of the Parties hereto
which representations, warranties, agreements, understandings or letters of
intent shall be of no force or effect for any purpose. This Agreement shall not
be amended, modified or supplemented except by a written instrument signed by an
authorized Representative of each of the Parties hereto or their respective
successors in interest.
Section 17.03 Dispute Escalation; Governing Law and Jurisdiction.
(a) In the event a dispute arises between the Parties under this Agreement,
face-to-face negotiations shall be conducted between the Parties' respective
Coordinators within five (5) calendar days following a written request from any
Party ("Level One Negotiations"). The Parties shall ensure that their respective
Coordinators shall use reasonable efforts and work together in good faith to
resolve any disagreements or disputes between the Parties as expeditiously as
possible. If such Project Managers are unable to resolve the dispute within five
(5) calendar days after the Parties have commenced Level One Negotiations, then
either Party may request that face to face or telephonic negotiations be
conducted within five (5) calendar days of such request by the Parties'
respective internal subject matter experts ("Level Two Negotiations"). If such
individuals are unable to resolve the dispute within five (5) calendar days
after the Parties have commenced Level Two Negotiations, any
38
Party may request that face to face or telephonic negotiations shall be
conducted within five (5) calendar days of such request between a senior
executive of HLIC and a senior executive of the Administrator ("Level Three
Negotiations"). Except for Material Breaches under Section 7.01, if such
executives are unable to resolve the dispute within ten (10) calendar days after
the Parties have commenced Level Three Negotiations, any unresolved dispute
arising out of the interpretation, performance, or breach of this Agreement,
including the formation or validity thereof, shall be resolved pursuant to
Section 17.03(b).
(b) This Agreement shall be governed by and construed in accordance with the
internal laws (as opposed to the conflicts of law provisions) of the State of
New York (other than Sections 5-1401 and 5-1402 of the General Obligations Law,
which shall apply). Each of the Parties hereto irrevocably agrees that any and
all Actions arising out of, relating to or in connection with this Agreement or
its subject matter and the rights and obligations arising hereunder, or for
recognition and enforcement of any settlement or judgment in respect of this
Agreement and the rights and obligations arising hereunder brought by any other
Party hereto or its successors or assigns, shall be brought and determined
exclusively in the courts of the State of New York located in the Borough of
Manhattan, The City of New York or in the courts of the United States of America
for the Southern District of New York. Each of the Parties agrees that mailing
of process or other papers in connection with any such Action in the manner
provided in Section 18.01 or in such other manner as may be permitted by
Applicable Laws, will be valid and sufficient service thereof. Each of the
Parties hereto hereby irrevocably submits with regard to any such Action for
itself and in respect of its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it will not bring
any Action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court or tribunal other than the aforesaid courts. Each of
the Parties hereto hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any Action with respect
to this Agreement and the rights and obligations arising hereunder, or for
recognition and enforcement of any judgment in respect of this Agreement and the
rights and obligations arising hereunder (a) any claim that it is not personally
subject to the jurisdiction of the above named courts for any reason other than
the failure to serve process in accordance with this Agreement, (b) any claim
that it or its property is exempt or immune from jurisdiction of any such court
or from any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise) and (c) to the fullest extent
permitted by Applicable Law, any claim that (i) the Action in such court is
brought in an inconvenient forum, (ii) the venue of such Action is improper or
(iii) this Agreement, or the subject matter hereof, may not be enforced in or by
such courts. In order to facilitate the comprehensive resolution of related
disputes, and upon request of any Party to any Action, the court may consolidate
the Action with any other Action relating to this Agreement or to any Ancillary
Agreement and the Parties hereby agree not to oppose any request by the other
Party to consolidate any such Action with another Action relating to this
Agreement or to any Ancillary Agreement.
Section 17.04 No Third Party Beneficiaries. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to confer upon any
Person other than the Parties and permitted successors and assigns and the
Administrator Indemnified Persons and the HLIC Indemnified Persons any right,
remedy or claim under or by reason of this Agreement.
39
Section 17.05 Expenses. Except as otherwise expressly set forth in this
Agreement, each Party hereto will pay all costs and expenses incident to its
negotiation and preparation of this Agreement and to its performance and
compliance with all agreements and conditions contained herein or therein on its
part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and independent public accountants.
Section 17.06 Counterparts. This Agreement may be executed in one or more
counterparts, including by facsimile or by electronic delivery in .pdf format,
each of which shall be considered an original instrument, but all of which shall
be considered one and the same agreement, and shall become binding when one or
more counterparts have been signed by each of the Parties hereto.
Section 17.07 Severability. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under Applicable Law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
Section 17.08 Waiver of Jury Trial; Multiplied and Punitive Damages. EACH PARTY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND WHETHER MADE BY CLAIM, COUNTERCLAIM, THIRD-PERSON CLAIM OR
OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS IN THIS SECTION. EACH PARTY ALSO IRREVOCABLY WAIVES ANY RIGHT TO
PUNITIVE, INCIDENTAL, CONSEQUENTIAL OR MULTIPLIED DAMAGES, EITHER PURSUANT TO
COMMON LAW OR STATUTE, IN EACH CASE IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (BUT NOT AS TO
ANY ACTION BY ONE PARTY AGAINST THE OTHER SEEKING INDEMNIFICATION FOR A THIRD
PARTY CLAIM AGAINST THE PARTY INITIATING THE ACTION, TO THE EXTENT THAT SUCH
DAMAGES MAY BE RECOVERABLE AS PART OF THE INDEMNIFICATION BY THE INDEMNIFIED
PARTY).
Section 17.09 Treatment of Confidential Information.
(a) The Parties agree that, other than as contemplated by this Agreement or any
Transaction Agreement and to the extent permitted or required to implement the
transactions contemplated by this Agreement and the other Transaction
Agreements, the Parties will keep confidential and will not use or disclose the
other Party's Confidential Information and the terms and conditions of this
Agreement, including the exhibits and schedules hereto, except (x) as otherwise
required by Applicable Law or any order or ruling of any state insurance
regulatory authority or any other Governmental Body, (y) as may be required to
be disclosed in the financial statements of such Party or any of its Affiliates
or (z) such disclosure as
40
may be required in connection with any dispute resolution proceeding between the
Parties in respect hereof.
(b) The confidentiality obligations contained in this Agreement shall not apply
to the federal tax structure or federal tax treatment of this Agreement and each
Party hereto may disclose to any and all persons, without limitation of any
kind, the federal tax structure and federal tax treatment of this Agreement;
provided, that such disclosure may not be made until the earliest of (x) the
date of the public announcement of discussions relating to this Agreement, (y)
the date of the public announcement of this Agreement, or (z) the date of the
execution of this Agreement. The preceding sentence is intended to cause this
Agreement to be treated as not having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision) of the Treasury Regulations promulgated under Section 6011 of the
Code, and shall be construed in a manner consistent with such purpose. Subject
to the provision with respect to disclosure in the first sentence of this
subsection (b), each Party hereto acknowledges that it has no proprietary or
exclusive rights to the federal tax structure of this Agreement or any federal
tax matter or federal tax idea related to this Agreement.
Section 17.10 Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and permitted
assigns. Except as provided below in this Section 17.10, the rights and
obligations of either Party under this Agreement shall not be assignable or
delegable by such Party hereto without the written consent of the other Party;
provided, that the Administrator may (i) assign this Agreement or any rights,
duties or obligations hereunder to any Affiliate of the Administrator and (ii)
subcontract the performance of any Service (or any portion thereof) under this
Agreement to another Person in accordance with Section 4.03; provided further,
that no such assignment or delegation (including with respect to permitted
Subcontractors) shall relieve the Administrator from any of its obligations or
liabilities hereunder, and the Administrator shall remain responsible for all
obligations or liabilities of any such assignee with respect to the provision on
any Services as if provided by the Administrator.
Section 17.11 Waivers. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, in writing at any time by the
Party or Parties entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this Agreement if, as to
any Party, it is authorized in writing by an authorized Representative of such
Party. The failure of any Party hereto to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part hereof or the right
of any Party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be held to constitute a waiver of any
preceding or subsequent breach.
Section 17.12 Relationship. HLIC and the Administrator are and shall remain
independent contractors and not employees or agents of the other Party. Except
as expressly granted in this Agreement or otherwise by the other Party in
writing or as may be required by Applicable Law or as necessary to perform the
services to be provided hereunder or to obtain the benefits hereof, no Party
shall have any authority, express or implied, to act as an agent of the other
Party or its subsidiaries or Affiliates under this Agreement. Except as
otherwise provided
41
by this Agreement or by any other agreement between the Parties, each Party
shall be responsible for the payment of all employment, income and social
security Taxes arising in connection with the compensation payable to its
personnel involved in the provision of the Services hereunder.
Section 17.13 Interpretation. The table of contents, articles, titles and
headings to sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement. The Schedules and Exhibits referred to herein shall be construed
with and as an integral part of this Agreement to the same extent as if they
were set forth verbatim herein. All references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". Unless the context otherwise
requires, the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine
genders of such term. Any agreement or instrument defined or referred to herein
or any agreement or instrument that is referred to herein means such agreement
or instrument as from time to time amended, modified or supplemented, including
by waiver or consent, and references to all attachments thereto and instruments
incorporated therein. Any statute or regulation referred to herein means such
statute or regulation as amended, modified, supplemented or replaced from time
to time (and, in the case of any statute, includes any rules and regulations
promulgated under such statute), and references to any section of any statute or
regulation include any successor to such section. Any agreement referred to
herein shall include reference to all Exhibits, Schedules and other documents or
agreements attached thereto.
Section 17.14 Conflict. In the event of any conflict between the terms of this
Agreement and the Reinsurance Agreement, the terms of the Reinsurance Agreement
shall control.
Section 17.15 Force Majeure. No Party shall be liable for any expense, loss or
damage whatsoever arising out of any interruption of Service or delay or failure
to perform under this Agreement caused by Force Majeure (except to the extent
that the Service being provided was a disaster recovery service). For purposes
of this Agreement, "Force Majeure" means any circumstance or event beyond the
reasonable control of any Party relying upon such event or circumstance,
including: acts of God, acts of a public enemy, acts of terrorism, acts of a
nation or any state, territory, province or other political division thereof,
changes in Applicable Law, fires, floods, epidemics, riots, quarantine
restrictions, freight embargoes or other similar causes. In any such event,
HLIC's and the Administrator's obligations hereunder shall be postponed for such
time as its or their performance is suspended or delayed on account thereof. If
any Party is so affected, such Party will notify the other Parties in writing
upon learning of the occurrence of such event of Force Majeure. Upon the
cessation of the Force Majeure event, such Party will use commercially
reasonable efforts to resume, or to cause the relevant Subcontractor, to resume,
its performance with the least practicable delay.
42
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
43
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the
date first written above by their respective duly authorized officers.
HARTFORD LIFE INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
-----------------------------------------
Name: ▇▇▇▇ M [ILLEGIBLE]
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Second Vice President
[SIGNATURE PAGE TO HLIC
ADMINISTRATIVE SERVICES AGREEMENT]
SCHEDULE I
SCHEDULED REPORTS
(i) The Administrator shall promptly prepare and furnish to HLIC or, at HLIC's
reasonable request or as otherwise provided herein, the applicable Governmental
Body, all filings, submissions, reports, annual statement exhibits and schedules
and related summaries (including statistical summaries), certifications and
other information required or requested by any Governmental Body with respect to
the Administered Business (other than any filings, submission reports and
related summaries and other information that are the subject of any HLIC
Service).
(ii) Within twenty (20) Business Days after the end of each Accounting Period,
the Administrator shall prepare and provide to HLIC a Settlement Statement (and,
upon the request of HLIC, detailed supporting records therefor) in accordance
with Section 3.4 of the Reinsurance Agreement.
(iii) Within fifteen (15) Business Days after the end of each calendar quarter
that this Agreement is in effect, the Administrator shall provide to HLIC
reports (including quarterly statement exhibits and schedules) including all
such items related to the General Account Reserves (including average liability
credit rate), General Account Liabilities, Separate Account Reserves, Separate
Account Liabilities, and all other General Account and Separate Account general
ledger data required to be reported on HLIC's financial statements, footnotes,
tax returns, and other SAP and GAAP financial reports required by HLIC's
auditors or any Governmental Body related to the Covered Insurance Policies;
provided, however, that quarterly AG 36 certifications shall be provided within
twenty (20) Business Days after the end of each calendar quarter that this
Agreement is in effect. Notwithstanding the foregoing, for tax reserves, such
quarterly reports shall contain estimates of the General Account Reserves and
the Separate Account Reserves. The Administrator shall provide such reports in
such form and manner as may reasonably be requested by HLIC prior to the end of
each calendar quarter.
(iv) Within forty-five (45) Business Days after the end of each calendar year,
the Administrator shall provide to HLIC a report setting forth projections of
General Account Reserves, GUL Net Reserves and the Required Balance, on an
annual basis going forward each year until the expiry of the liabilities ceded
under the Reinsurance Agreement.
(v) Within twenty (20) Business Days after the end of each calendar year that
this Agreement is in effect, the Administrator shall provide to HLIC reports,
including (i) relevant information regarding the Covered Insurance Policies
(including any New Insurance Policies), the face amount thereof and the
reinsurance coverage provided for such policies in order for HLIC to reasonably
verify the calculations described in Section 8.4(d) of the Reinsurance
Agreement; and (ii) all such items related to the General Account Reserves
(including average liability credit rate), General Account Liabilities, Separate
Account Reserves, Separate Account Liabilities, and all other General Account
and Separate Account general ledger data required to be reported on HLIC's
financial statements, unaudited footnotes, tax returns, and other SAP and GAAP
financial reports required by HLIC's auditors or any Governmental Body related
to the Covered Insurance Policies. Notwithstanding the foregoing, for tax
reserves, the
reports with respect to General Account Reserves and Separate Account Reserves
shall be provided as soon as possible, but in any event by May 1st of the
following year. In addition, the Administrator shall provide to HLIC as soon as
possible, but in no event later than the dates sets forth below: (1) final,
clean copies of all required actuarial opinions of the Administrator and
supporting actuarial memoranda prepared by the Administrator's actuaries,
independent or otherwise, in each case, pertaining to the Covered Insurance
Policies in a form to be mutually agreed by the Parties (which may include
redactions of confidential information not related to the Covered Insurance
Policies) by a date mutually agreed by the Parties each year, provided such date
shall in any event be reasonably sufficient to allow HLIC to comply with any
regulatory filing requirements or deadlines (and provided that HLIC shall have
given Administrator sufficient advance detailed notice of the need thereof); (2)
annual certifications, in a form to be mutually agreed by the Parties, by an
actuary employed by the Administrator (who meets the requirements of the
American Academy of Actuaries for providing actuarial opinions) that the General
Account Reserves and the Separate Account Reserves reported by the Administrator
with respect to the Covered Insurance Policies are consistent with the
requirements for such calculation by no later than February 15th of each year to
the extent required to allow HLIC to comply with applicable regulatory filing
requirements; (3) all actuarial exhibits and schedules as available starting
with Exhibit 5 and Schedule S with a target of February 7th of each year but no
later than February 15th of each year; (4) final, clean copies of all other
reports such as analysis of increase in reserves, exhibit of life insurance, and
state business pages required to be included in HLIC's annual statement and to
complete HLIC's New York Annual Statement Supplement filing by no later than
February 15th of each year and other state specific information with sufficient
time to allow HLIC to meet any other regulatory filing requirements (and in any
event at least ten (10) calendar days prior to the date such filings are due);
and (5) final, clean copies of all non-actuarial annual statement exhibits and
schedules by no later than January 31st of each year; provided, however, that in
the case of items (1) through (4) above, the Administrator may provide its
reasonable best estimate with respect to AAT reserves as are available by
February 15th;
(vi) The Administrator shall timely provide written notice to HLIC of any
material changes in the reserve basis or reserve methodology used in calculating
the General Account Reserves and the Separate Account Reserves in each case in
accordance with Applicable Law.
[REDACTED]
2
(viii) During the term of this Agreement, the Administrator shall furnish to
HLIC the reports and certifications specified by the Trust Account Investment
Guidelines.
(ix) Within thirty (30) Business Days after the end of each calendar quarter
that this Agreement is in effect, other than the calendar quarters ending on
December 31, the Administrator shall provide to HLIC information required to
file reports BE-45 and BE-140 required by the U.S. Department of Commerce. Such
information to include premiums earned and losses incurred on reinsurance
assumed from insurance companies resident abroad and premiums incurred and
losses recovered on reinsurance ceded to insurance companies resident abroad.
The Administrator shall provide such reports in such form and manner as may
reasonably be requested by HLIC prior to the end of each calendar quarter.
(x) Within forty-five (45) Business Days after the end of each calendar year
that this Agreement is in effect, the Administrator shall provide to HLIC
information required to file reports BE-45 and BE-140 required by the U.S.
Department of Commerce. Such information to include premiums earned and losses
incurred on reinsurance assumed from insurance companies resident abroad;
premiums incurred and losses recovered on reinsurance ceded to insurance
companies resident abroad and premiums earned and losses incurred on primary
insurance sold to foreign persons. The Administrator shall provide such reports
in such form and manner as may reasonably be requested by HLIC prior to the end
of each calendar year.
(xi) The Administrator shall provide its Asset Impairment (OTTI) Policy (i) at
or before the Effective Time, as such policy is in effect as of the Effective
Time and (b) after the Effective Time, promptly upon any changes to such policy.
(xii) With respect to any commercial mortgage loans held in any trust account
established pursuant to the Reinsurance Agreement, the Administrator shall
provide (or shall cause the servicer of such loans to provide) to HLIC the
following standard reports, which shall be substantially in the forms set forth
in Exhibit A to this Schedule I within fifteen (15) Business Days after the end
of each calendar month: (a) monthly remittance reports detailing loan number,
loan name, investor trial balance, UPB, collections of principal, interest,
prepayment premium/yield maintenance, and any other amounts paid by the borrower
under such loan and (b) a month end loan listing report which reflects loan
number, loan name, end of month UPB, book value, market value and maturity date.
3
EXHIBIT A TO SCHEDULE 1
SCHEDULE II
SERVICES
The Services shall include, but are not limited to, the following:
(a) Upon the reasonable request by HLIC, the Administrator shall provide
"ledger information" feeds with respect to the General Account and the Separate
Account concerning the Administered Business as soon as practicable thereafter.
Parties will make commercially reasonable efforts to migrate the use of "ledger
information" feeds to provide the Services in Schedule II and the reports in
Schedule I as are reasonably practicable.
(b) Preparing and/or mailing all necessary, required or appropriate statements,
notices, reports, confirmation statements, policy statements (quarterly and
annual), contract prospectuses, and communications to Underlying Companies,
policyholders of the Covered Insurance Policies, and to individual insurance
producers, including notices of premiums and notices of any grace and lapse in
coverage, as required by Applicable Law and performing services necessary to
meet SEC requirements with respect to any Covered Insurance Policy, In addition,
the Administrator, shall distribute at its expense to policy owners all required
contract and fund prospectuses, post effective amendments or supplements to the
registration statements of the Separate Accounts or of any underlying funds as
well as annual and semi-annual reports;
(c) billing, collecting (for the account of the Administrator) and processing
Recoverables and other amounts due under the Covered Insurance Policies and
Existing Reinsurance Agreements and processing and paying any return
Recoverables and other amounts due under the Covered Insurance Policies,
Existing Reinsurance Agreements, any other Ancillary Agreement Covered
Contracts, this Agreement and the Reinsurance Agreement;
(d) providing usual and customary services for the Underlying Companies and
policyholders of the Covered Insurance Policies, including processing
reinstatements, cancellations, policy lapses, expiries, non-forfeiture options,
policyholder and beneficiary changes, policy loans, surrenders, policyholder
sub-account transfer requests, and systematic payouts or other changes provided
for under the Covered Insurance Policies and calculations relating thereto, and
processing any policy changes requested by policyholders of the Covered
Insurance Policies, including name changes, address changes, loss payee changes
and increases and decreases in coverage amounts;
(e) as provided in Article XVI, calculating all premium taxes and assessments
due in respect of the Administered Business and notifying HLIC of the full
amount of said premium taxes and assessments for HLIC to make payment to the
appropriate Governmental Body or guaranty association and furnishing HLIC with
all information necessary for HLIC to make such payments and comply with all
related filing and reporting requirements under the terms of this Agreement;
(f) preparing and delivering to HLIC or an HLIC Affiliate all accounting,
financial, regulatory and actuarial information and reports related to the
Administered Business that is necessary to meet any regulatory, statutory, tax
or GAAP accounting requirements;
(g) monitoring the Required Balance of the Trust Account and the assets held
therein for purposes of delivering the reports required under Schedule I(vii);
(h) subject to Article VIII, handling all Governmental Body compliance matters
in connection with the Administered Business and the Services;
(i) receiving, administering, processing, investigating and evaluating claims
and disbursement requests filed by or on behalf of policyholders or Underlying
Companies of the Covered Insurance Policies and either (i) paying, within the
time periods and in the manner prescribed by Applicable Law, on behalf of HLIC,
such claims and disbursement requests in accordance with the terms and
conditions of the Covered Insurance Policies and Applicable Law (it being
understood that this obligation is merely in furtherance of the provision of
Services and is not intended to expand the Administrator's liability with
respect to the Covered Insurance Policies, which liability shall be solely
governed by the Reinsurance Agreement) or (ii) proposing to deny or denying, or
compromising in accordance with the terms and conditions of the Covered
Insurance Policies, Applicable Law and customary practices, such claims and
disbursements in whole or in part and communicating the reason for denial to the
claimant. In the event of non-payment of claims on account of incomplete or
insufficient data, the Administrator shall acknowledge such fact to the claimant
by the number of days provided by Applicable Law. The Administrator shall also
communicate with reinsurers with respect to submission approval and payment,
compromise or denial of claims made under the Covered Insurance Policies;
maintain such files and records as are necessary to enable HLIC, at any time, to
determine the true and accurate claim experience of the Covered Insurance
Policies; and perform such other claim services as may be reasonably required in
connection with the support and administration of the Covered Insurance
Policies;
(j) The Administrator shall provide HLIC, on a monthly basis a list of all
reported and discovered deaths of insureds under Covered Insurance Policies so
that HLIC can comply with state death claim sharing requirements.
(k) The Administrator shall search public records to identify insured deaths.
Such searches shall be done in accordance with Applicable Law, any applicable
regulatory settlement or agreement in a process as reasonably agreed by the
Parties. The Administrator may utilize the services of third party vendors to
identify and locate insureds as long as the vendors are obligated to safeguard
and keep confidential Customer Information relating to the Covered Insurance
Policies to the same extent as the Administrator.
(l) Preparing all required escheat filings with respect to the Administered
Business and timely providing information to HLIC upon request in order to allow
HLIC to timely file such escheat filings;
(m) transferring assets or funds (i) between one or more Separate Accounts and
HLIC's general account, (ii) between one or more sub-accounts of any such
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Separate Accounts, or (iii) between HLIC and the Reinsurer in support of the
Reinsurance Agreement;
(n) providing the following services related to the Separate Accounts on behalf
HLIC and any additional Services reasonably requested by HLIC with respect to
the Separate Accounts:
(i) maintaining copies of each Separate Account's governing documents;
provided that HLIC shall provide to the Administrator all current copies of
such documents;
(ii) preparing and filing with state insurance departments, necessary
filings for the Separate Accounts, and preparing and maintaining required
licenses and permits and complying with all related regulatory
requirements; provided that the Administrator shall not be required to take
any action pursuant to this paragraph (n)(ii) with respect to the modified
guaranteed life insurance business;
(iii) (1) preparing all Filings with the SEC in an accurate and complete
manner and consistent with all applicable requirements for such Filings,
except as provided below for Form N-6 filings;
(2) with respect to Covered Insurance Policies required to be filed
on Form N-6, the Administrator shall coordinate the preparation and
filing with the SEC of registration statements and any amendments
thereto. The Administrator shall prepare the prospectus, statement of
additional information, Part C and any exhibits and letters required
to be filed in or with the registration statement. The Administrator
shall also prepare and file the financial statements of the Registrant
(the separate account as defined in Section 2(a)(37) of the Investment
Company Act of 1940 and as required by Form N-6 (SA Financials)) and
coordinate the review of the SA Financials and the registration
statement with the appointed independent auditing firms, HLIC will
provide the Administrator with the financial statements of the
Depositor as required by Form N-6 as soon as reasonably practicable
for the Administrator to edgarize and include in the registration
statement filings with the SEC. The Administrator shall obtain the
necessary consents and exhibits for the registration statements. The
Administrator shall provide HLIC with each registration statement
prior to filing so that HLIC can review the filing and sign the Legal
Opinion Letter provided in Item 26(k) of Form N-6. HLIC agrees to
cooperate with the Administrator and provide the Administrator
information and assistance reasonably necessary in order for the
Administrator to timely file the registration statements,
(iv) upon reasonable prior notice, the Administrator may cease updating
prospectuses relating to the Covered Insurance Policies in accordance with
the SEC no-action letter dated October 23, 1990 issued to Great-West Life &
Annuity Insurance Company and any subsequent related no-action letters, or
may begin to update prospectuses that HLIC has previously stopped updating.
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(v) administering Contracts on behalf of HLIC with, among others, mutual
fund organizations that make their mutual funds available as investment
options within the Separate Accounts;
(vi) performing all accounting services with respect to the Separate
Accounts as may be reasonably requested by HLIC from time to time or as
required by Applicable Law, including that (1) within fifteen (15) days
after the end of each calendar month, the Administrator shall provide
"ledger information" in a mutually agreeable format with respect to the
Separate Account so that HLIC can prepare the statutory annual statements,
and (2) Administrator shall perform daily net asset/unit valuations; and
(vii) performing, in the name and on behalf of HLIC or on behalf of an
Affiliate of HLIC, all of HLIC's or an Affiliate's obligations under, and
shall comply with the terms of, (i) any Mutual Fund Agreements, (ii) the
underwriting agreements between HLIC and the principal underwriters for the
policies, and (iii) any Distribution Agreements or other agreements related
to the distribution of the policies, in each case to the extent that HLIC
has provided complete copies of such agreements (including any amendments
thereto) to the Administrator, in each case, to the extent consistent with
Applicable Law,
(o) performing monthly reconciliations of suspense and withholding accounts
and, upon HLIC's request, providing documentation of these reconciliations to
HLIC;
(p) receiving, logging and responding to complaints in respect of the Covered
Insurance Policies in accordance with Article VIII;
(q) providing any standard supplies needed for the administration of the
Administered Business, which materials shall strictly be used in accordance with
this Agreement;
(r) making recommendations to HLIC with respect to: (i) Non-Guaranteed Elements
in accordance with Section 4.06, (ii) reserving methodologies related to the
Covered Insurance Policies, (iii) dividends with respect to any par policies and
(iv) changes to fund options in accordance with Section 4.07;
(s) managing any communications with Distributors or Distribution
Intermediaries regarding the Covered Insurance Policies;
(t) Rule 38a-l Compliance Program. For as long as any Covered Insurance Policy
that is registered as a security with the SEC remains in force and the
Administrator continues to act as an "administrator" (as defined in the
Investment Company Act of 1940, as amended), the Administrator shall implement
and, throughout the term of this Agreement, maintain in effect, policies and
procedures reasonably designed to prevent, detect, and correct violations of
"federal securities laws" (as defined in Rule 38a-1), insofar as applicable to
the Services the Administrator is providing hereunder, by the Administrator and
its respective employees, officers, agents and Affiliates. The Administrator
will promptly notify HLIC in the event that it becomes aware of any "material
compliance matter" (as defined in Rule
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38a-1) arising with respect to the Services provided hereunder. The
Administrator shall promptly provide true and complete copies of such policies
and procedures (or summaries thereof) and related information required by
Applicable Law upon reasonable request including but not limited to, control
reports, incident reports, exception reports, compliance check-lists and
internal audit reports. The Administrator shall cooperate with periodic reviews
by HLIC's personnel of such policies and procedures, their operation and
implementation, including visual inspection of the Administrator's facilities
and processes, and provide such additional information, reports, and
certifications to HLIC in respect of such policies and procedures, compliance
with federal securities laws and related compliance matters as HLIC may
reasonably request. The Administrator shall appoint a Chief Compliance Officer
whose responsibilities include preparation of reports on the operation and
effectiveness of the Separate Account's Rule 38a-l compliance program
("Compliance Program"), and providing information with respect to the Compliance
Program to HLIC so that the HLIC 38a-l CCO can prepare the annual and periodic
reports as required.
(u) The Administrator shall provide HLIC or an Affiliate of HLIC as required by
Applicable Law, with the following non-exclusive list of periodic reports,
certifications, and additional information, the frequency of which may be
changed from time to time at the discretion of HLIC:
(i) The Administrator's Compliance Program shall include an annual review
by the Administrator's Chief Compliance Officer of the adequacy and
effectiveness of the policies and procedures of the Administrator's
Compliance Program and the effectiveness of its implementation and the
submission of a signed annual report by the Administrator's Chief
Compliance Officer by no later than May 1 of every calendar year containing
all customary and reasonable detail and elements of a report necessary for
the HLIC 38a-l CCO to prepare the reports as provided in Rule 38a-l;
(ii) The Administrator shall promptly notify HLIC in the event that it
becomes aware of any compliance matter arising with respect to the Services
provided hereunder within 24 hours of discovery, if possible, but in no
instance later than three (3) Business Days after discovery thereof, and
shall provide HLIC with copies of all pertinent files and information
relating thereto and the HLIC 38a-l CCO shall have the opportunity to
discuss the Administrator's remediation plans, prior to implementation if
practicable, regarding any such compliance matter and to make reasonable
recommendations to the Administrator regarding such remediation plan;
(iii) In the event the Administrator contemplates making any material
changes to the existing compliance policies and procedures under its
Compliance Program, the Administrator shall timely notify and provide HLIC
with copies of the proposed amendments for review, comment, and final
approval by HLIC of such documents;
(iv) Provide HLIC with reports upon request, regarding the compliance
personnel employed and retained by the Administrator to provide
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services to the Covered Insurance Policies, or on behalf of an Affiliate of
HLIC, and describing the experience, skill, expertise, licenses and
accreditation of said compliance staff; and
(v) Create and maintain all internal reports, control reports, exception
reports, and certifications necessary to administer the business, and make
such reports and certifications available to HLIC as needed for internal
and external purposes.
(v) Perform services to administer and manage the Existing Reinsurance
Agreements, including:
(i) Provide reports and data to reinsurers as required under the Existing
Reinsurance Agreements;
(ii) Calculate amounts required, pay amounts due and collect amounts owing
as required under the Existing Reinsurance Agreements;
(iii) Consult with reinsurers as required under the terms of the Existing
Reinsurance Agreements (such consultation may include notification of
changes in rates or terms of Covered Insurance Policies, changes in
policies, manuals or processes related to the Covered Insurance Policies or
review of claims made under the Covered Insurance Policies );
(iv) Respond to reinsurer requests for information and facilitate audits
as permissible under the Existing Reinsurance Agreements;
(v) Initiate and facilitate amendments to Existing Reinsurance Agreements,
as requested by HLIC or the reinsurers;
(vi) Facilitate, in accordance with the Existing Reinsurance Agreements,
the timely update of any collateral supporting HLIC's reserve credit under
such Existing Reinsurance Agreements in its Statutory Financial Statements;
(vii) Provide HLIC with updated collateral documentation within fifteen
(15) Business Days of" receipt by the Administrator and an annual
verification of collateral amounts no later than fifteen (15) Business Days
after every calendar year; and
(viii) Provide HLIC with information related to the Existing Reinsurance
Agreements to complete internal and external reporting related to
reinsurance. Such reporting includes, but is not limited to quarterly and
annual statutory and GAAP reporting, rating agency surveys, and regulatory
reports, requests and inquiries.
(w) The Administrator shall investigate and prepare responses to all customer
complaints and regulatory inquiries or complaints. Subject to the foregoing, all
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customer complaints shall be handled in accordance with Applicable Law
(including without limitation any response time requirements applicable
thereto). A record of all customer complaints shall be maintained in a log
showing the date received, the nature of the complaint, the action taken (if
any) and the date of the response. As used herein, a "customer complaint" shall
be deemed to include any written communication primarily expressing a grievance
against HLIC, an Affiliate of HLIC, or the Administrator;
(x) Print and mail privacy notices to policy owners as required by Applicable
Law;
(y) Provide regulatory supervision and compliance, to the extent the
Administrator is permitted under Applicable Law, as to all Services contemplated
by this Agreement;
(z) Monitor statutes and regulations of the insurance departments in the
various states in which the policyowners or Covered Insurance Policies are
located to ensure compliance therewith and to provide reasonable assurance that
any actions or communications required by such regulations or statutes are
properly made;
(aa) Monitor the federal securities statutes and the rules, regulations, orders
and interpretations thereunder and the securities statutes and rules,
regulations, orders and interpretations thereunder of the various states in
which the policy owners or Covered Insurance Policies are located to provide
reasonable assurance of compliance therewith and to ensure that any actions or
communications required thereby are properly made;
(bb) Monitor the federal Tax and the rules, regulations, orders, and
interpretations thereunder and the tax statutes and rules, regulations, orders
and interpretations thereunder of the various states in which the policy owners
or Covered Insurance Policies are located to provide reasonable assurance of
compliance therewith and to ensure that any actions or communications required
thereby are properly made; and
(cc) Provide such services as HLIC or an Affiliate of HLIC may require in
connection with responding to inquiries from the SEC, FINRA, NAIC or the
insurance or securities departments in accordance with Article VIII.
(dd) Provide the Commission Payment Services, as such term is defined in and,
in accordance with, the Letter Agreement dated January 2, 2013 by and among the
Administrator, HESCO, Hartford Securities Distribution Company, Inc., HLIC,
Hartford Life and Accident Insurance Company and Hartford Life and Annuity
Insurance Company as long as it remains in effect, including:
(i) Providing ministerial services involving the calculation and provision
of commission disbursement payment instructions to a financial institution
selected by HLIC for the payment of commissions to Distribution
Intermediaries distributing products covered by this Agreement, including
variable life insurance policies underwritten by HLIC's affiliated
broker-dealers;
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(ii) Providing HLIC and any affiliated broker-dealer information
reasonably necessary for HLIC and any such affiliated broker-dealer to
monitor the Administrator's performance with respect to the functions
described in paragraph (i) above;
(iii) Providing HLIC and any affiliated broker-dealer with information
necessary for such affiliated broker-dealer to properly reflect the
commission payments described in (i) above on any affiliated
broker-dealer's books and records in accordance with FINRA rules and
regulations;
(iv) Creating and maintaining books and records reflecting the commission
payment instructions with respect to insurance policies covered by this
Agreement in accordance with Applicable Law (as defined in the Purchase
Agreement), retaining such books and records for time periods required by
Applicable Law, and providing access to the books and records to HLIC and
any affiliated broker-dealer upon their reasonable written request.
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SCHEDULE III
INFORMATION SECURITY REQUIREMENTS
1. Purpose. This Schedule III sets forth the minimum information security
program and infrastructure policies (the "Information Security Requirements")
that each Party (the "Data Recipient") must meet and maintain in order to
protect Confidential Information and Personal Information (collectively, the
"Data") of the other Party (the "Data Provider") from unauthorized use, access,
disclosure, theft, manipulation, reproduction and/or possible security breach
during the term of the Agreement and for any period of time thereafter during
which the Data Recipient has possession of or access to the Data.
2. Information Security Safeguards. The Data Recipient and all of its
Affiliates and Representatives have implemented, currently maintain, and will
maintain throughout the term of this Agreement an information security program
designed to protect Data, which program includes administrative, technical and
physical safeguards (i) to ensure the security and confidentiality of Data; (ii)
to protect against any anticipated threats or hazards to the security or
integrity of such Data; and (iii) to protect against unauthorized access to or
use of Data which could result in harm or inconvenience to the Data Provider or
its customers ("Information Security Safeguards").
2.1 Standards & Practices. The Data Recipient's Information Security Safeguards
shall incorporate commercially reasonable methods and safeguards to ensure the
security, confidentiality, integrity, availability and privacy of the Data.
2.2 Information Security Policies. The Data Recipient must have in place and
adhere to internal information security and privacy policies that address the
roles and responsibilities of the Data Recipient's personnel, including both
technical and non-technical personnel, who have direct or indirect access to the
Data. These internal security and privacy policies must, at a minimum, include:
security policy; organization of information security; asset management; human
resources security; physical and environment security; communications and
operations management; access control; information systems procurement,
development and maintenance; information security incident management; business
continuity management; and compliance.
2.3 Workspace Security. The Data Recipient's Information Security Safeguards
must include reasonable workspace controls designed to protect Customer
Information.
2.4 Appropriate Safeguards. The Data Recipient's Information Security
Safeguards shall include (i) safeguards against the unauthorized destruction,
loss, or alteration of the Data; (ii) safeguards against unauthorized access to
such data; and (iii) network and internet security procedures, protocols,
security gateways and firewalls with respect to such data in accordance with
best commercial practices.
2.5 Physical Security Safeguards. The Data Recipient's Information Security
Safeguards shall include physical safety and security safeguards at any
facilities
where any Services are performed or received that meet or exceed reasonable best
commercial practices.
3. Vulnerability Assessments. Without limiting the Data Recipient's obligations
set forth in this Agreement, the Data Recipient will maintain, at its own
expense, a vulnerability assessment program that is consistent with the Data
Recipient's standard process and procedures, or at least annually, on all
information applications and/or systems associated with accessing, processing,
storage, communication and/or transmission of the Data including the Data
Recipient's systems and networks. The assessment program must include a
methodology for identifying, quantifying, ranking and mitigating weaknesses in
the Data Recipient's systems.
4. Third Party Security Assessment. No more than one time per year, the
Administrator shall complete HLIC's Third-Party Security Assessment
Questionnaire and forward a completed copy to HLIC's information protection
department. No more than one time per year, HLIC shall complete Administrator's
Third-Party Security Assessment Questionnaire and forward a completed copy to
Administrator's information protection department.
5. Information Security Infrastructure.
5.1 Access Controls. The Data Recipient will ensure appropriate access controls
are in place to protect the Data. The Data Recipient must also ensure that
segregation of duties principles are employed in the assignment of all critical
job functions. The Data Provider will be solely responsible for implementing and
maintaining access controls on its own systems to which the Data Recipient may
be granted access.
5.2 Authorized Persons. The Data Recipient shall limit access to the Data to
those of its Representatives who have a need to access such data in connection
to the uses permitted by this Agreement ("Authorized Persons"). The Data
Recipient shall ensure that each Authorized Person is trained and shall comply
with the requirements of the Data Recipient's Information Security Safeguards.
The Data Recipient shall re-evaluate its list of Authorized Persons at least
annually.
5.3 Password Administration. The Data Recipient's passwords that are associated
with access to Data must comply with PCI password requirements.
5.4 Encryption. The Data Recipient must encrypt all off-site tapes, removable
media devices, laptops, e-mail between the Parties, network file transfers, and
web transactions. Encryption is provided through commercial grade,
industry-standard strong cryptographic algorithms, protocols, and commercially
reasonable key strengths.
5.5 Network and Host Security. The Data Recipient must have commercially
reasonable and efficient network intrusion detection, firewalls and anti-virus
protection in place and functioning properly. The Data Recipient shall use
commercially reasonable efforts to ensure that operating systems and
applications
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that are associated with the Data must be patched within a commercially
reasonable time period after Data Recipient has actual or constructive knowledge
of any security vulnerabilities. The Data Recipient will exercise generally
accepted industry standards to protect against malware and Viruses.
6. Audit and Reporting. Each Data Recipient must conduct annual self-audits to
ensure compliance with these Information Security Requirements and its internal
information security and privacy policies and, upon request, shall provide a
copy of the latest report for such audits to the Data Provider.
7. Customer Information.
7.1 The Data Recipient shall notify the Data Provider, promptly and without
unreasonable delay, but in no event more than two (2) Business Days after
learning that unauthorized access to, disclosure of, or breach in the security
(in each case as defined by Applicable Law) of Customer Information disclosed or
provided by the Data Recipient has occurred (a "Security Incident"). Thereafter,
the Data Recipient shall, at its own cost and expense:
(a) promptly furnish to the Data Provider full details of the Security
Incident;
(b) assist and cooperate fully with the Data Provider in the Data
Provider's investigation of the Data Recipient and employees or third
parties related to the Security Incident (subject to the Data Recipient
being present at any discussions with such employees or third parties),
including providing the Data Provider with reasonable and necessary
physical access to the facilities and operations affected, facilitating
interviews with employees and others involved in the matter (subject to the
Data Recipient being present at any interviews with such employees or
others), and making available all relevant requested records, logs, files,
and data;
(c) cooperate with the Data Provider in any litigation or other action
against third parties deemed necessary by Data Provider to protect its
rights; and\
(d) promptly use its commercially reasonable efforts to prevent a
recurrence of any such Security Incident.
7.2 In addition to the foregoing, the Data Recipient agrees that in the event of
a Security Incident, the Data Provider shall have the sole right to determine
(i) whether notice is to be provided to any individuals, regulators, law
enforcement agencies, consumer reporting agencies, or others as required by law
or regulation; (ii) the contents of such notice; and (iii) whether any type of
remediation may be offered to affected persons (provided that such remediation
shall be limited to two (2) years of credit monitoring at a level at least equal
to that offered by Equifax ID Patrol). Any such notice or remediation shall be
at the Data Recipient's sole cost and expense.
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7.3 The Data Recipient agrees that its treatment of Customer Information is in
compliance with Applicable Laws and/or regulations with respect to privacy and
data security and that it has implemented and currently maintains an effective
information security program that includes administrative, technical, and
physical safeguards to (i) ensure the security and confidentiality of such
Customer Information; (ii) protect against any anticipated threats or hazards to
the security or integrity of such Customer Information; and (iii) protect
against unauthorized access to, destruction, modification, disclosure or use of
such Customer Information which could result in substantial harm or
inconvenience to the Data Provider, or to any person who may be identified by
such Customer Information. The Data Recipient shall immediately notify the Data
Provider if the Data Recipient is in material breach of this Schedule III. The
Data Recipient shall allow the Data Provider to perform an audit, the scope of
which is mutually agreed upon, of the Data Recipient's facilities and records to
ensure compliance with the privacy and security provisions of this Agreement.
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SCHEDULE IV
INVESTMENT ACCOUNTING
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EXHIBIT A
FORM OF TRADEMARK LICENSE AGREEMENT
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