EXECUTION VERSION
ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
HARTFORD LIFE AND ANNUITY 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 INTERESTED PARTIES 9
Section 2.01 Appointment 9
Section 2.02 Provision of Services Subject to the Transition Services 10
Agreement
Section 2.03 XXX Services 10
Section 2.04 Power of Attorney 10
Section 2.05 Notification of Interested Parties 11
Section 2.06 Ongoing Communications 11
Section 2.07 Coordinators 11
Article III NEW INSURANCE POLICIES 12
Section 3.01 New Insurance Policies 12
Section 3.02 Guidelines 13
Section 3.03 Termination of Authority 13
Section 3.04 XXX Licenses; Certain Actions 13
Section 3.05 Marketing Activities 13
Article IV SERVICES PROVIDED BY ADMINISTRATOR 14
Section 4.01 Services 14
Section 4.02 Standards and Licenses 14
Section 4.03 Subcontracting 15
Section 4.04 Recommendations 15
Section 4.05 Decision Authority 15
Section 4.06 Non-Guaranteed Elements 16
Section 4.07 Additional Covenants of XXX 16
Section 4.08 Certain Actions with Respect to Recoverables 17
Section 4.09 Product Filings 17
[REDACTED]
[REDACTED]
Article V FEES FOR SERVICES 20
Section 5.01 Fees for Services 20
Article VI CERTAIN REPORTS; BOOKS AND RECORDS; 20
BANK ACCOUNTS AND REMITTANCES 20
Section 6.01 Reports 20
Section 6.02 Books and Records and Access to Books and Records 21
Section 6.03 Disbursing Accounts 22
Section 6.04 Remittances 23
Section 6.05 Audit Rights 23
Section 6.06 Internal Controls Over Financial Reporting 24
Article VII INABILITY TO PERFORM SERVICES; ERRORS 24
Section 7.01 Inability to Perform Services 24
Section 7.02 Errors 25
Article VIII REGULATORY COMPLAINTS AND LEGAL ACTIONS 25
Section 8.01 Routine Complaints 25
Section 8.02 Regulatory Actions 25
Section 8.03 Legal Actions 26
Section 8.04 Cooperation 27
Section 8.05 Reporting 28
Section 8.06 Relationship with Other Agreements 28
Section 8.07 Taxes 28
[REDACTED]
Article X DURATION; TERMINATION 30
Section 10.01 Duration 30
Section 10.02 Termination 30
Section 10.03 Survival 31
Article XI CUSTOMER INFORMATION 31
Section 11.01 Customer Information 31
Article XII DISASTER RECOVERY 32
Section 12.01 Disaster Recovery 32
Article XIII INDEMNIFICATION 32
Section 13.01 Indemnification by XXX 32
Section 13.02 Indemnification by the Administrator 32
Section 13.03 Notice of Claim; Defense 33
Section 13.04 No Duplication; Exclusive Remedy 35
Section 13.05 Limitation on Set-off 36
Section 13.06 Mitigation 36
Section 13.07 Recovery by Indemnified Party 36
Section 13.08 Relationship with Reinsurance Agreement 36
Article XIV COOPERATION 37
Section 14.01 Cooperation 37
Article XV TRADEMARK LICENSE 37
Section 15.01 Trademark License 37
Article XVI FIDELITY BOND 37
Section 16.01 Fidelity Bond 37
Article XVII TAX MATTERS 37
Section 17.01 Premium Taxes 37
Section 17.02 Tax Information Reporting, Withholding, and Depositing 40
Section 17.03 Sales Taxes 40
Section 17.04 Reinsurer Product Tax Liabilities 40
Section 17.05 Conflicts 41
Article XVIII MISCELLANEOUS 41
Section 18.01 Notices 41
Section 18.02 Entire Agreement 42
Section 18.03 Dispute Escalation; Governing Law and Jurisdiction 42
Section 18.04 No Third Party Beneficiaries 43
Section 18.05 Expenses 43
Section 18.06 Counterparts 44
Section 18.07 Severability 44
Section 18.08 Waiver of Jury Trial; Multiplied and Punitive Damages 44
Section 18.09 Treatment of Confidential Information 44
Section 18.10 Assignment 45
Section 18.11 Waivers 45
Section 18.12 Relationship 45
Section 18.13 Interpretation 46
Section 18.14 Conflict 46
Section 18.15 Force Majeure 46
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 AND ANNUITY INSURANCE
COMPANY, a Connecticut-domiciled life insurance company ("XXX"), 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 XXX and the Administrator, XXX has agreed
to cede to the Administrator and the Administrator has agreed to assume from
XXX, 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 XXX, and XXX has sold and assigned to the Administrator, all Recoverables
(as hereinafter defined); and
[REDACTED]
WHEREAS, XXX 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 XXX 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.
"Additional Restrictions" has the meaning set forth in the Investment
Guidelines.
"Administered Business" means the Business of XXX 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 13.01.
"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 XXX 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.
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"Buyer" has the meaning set forth in the recitals.
"Claim Notice" has the meaning set forth in Section 13.03(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.
"Contract" has the meaning set forth in the Purchase Agreement.
"Coordinators" means the two (2) individuals, one designated by XXX 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.
"Distributor" has the meaning set forth in the Purchase Agreement.
"Distribution Intermediaries" has the meaning set forth in the Wholesaling
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Agreement.
"DRP" has the meaning set forth in Section 12.01.
"Effective Time" means the effective time of the Closing under the Purchase
Agreement.
"Eligible Assets" has the meaning set forth in the Reinsurance Agreement.
"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 X-0,
Xxxx XXXX and Form 24 F-2 or any successor forms.
[REDACTED]
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[REDACTED]
"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.
"XXX" has the meaning set forth in the preamble.
"XXX Indemnified Parties" has the meaning set forth in Section 13.02.
"XXX NAV Reports" has the meaning set forth in Schedule IV.
"XXX Services" has the meaning set forth in Section 2.03.
"Indemnified Party" has the meaning set forth in Section 13.03(a).
"Indemnifying Party" has the meaning set forth in Section 13.03(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" has the meaning set forth in the Investment Management
Agreement.
"Investment Management Agreement" means that certain Investment Management
Agreement dated as of the date hereof by and between XXX and Prudential
Investment Management, Inc. (the "Investment Manager"), [REDACTED]
"Investment Manager" has the meaning set forth in the definition of Investment
Management Agreement.
[REDACTED]
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[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.
"Modco Assets" has the meaning set forth in Section 4.11(a).
"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 XXX following the Closing Date in accordance with Article III of this
Agreement.
"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 XXX and the Administrator.
"Person" has the meaning set forth in the Purchase Agreement.
"Portfolio" has the meaning set forth in the Investment Management Agreement.
"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.
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"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.
"Reinsured Portfolio" has the meaning set forth in Section 4.10(a).
"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 17.04.
"Representative" has the meaning set forth in the Purchase Agreement.
"Required Balance" has the meaning set forth in the Reinsurance Agreement.
"Retained Portfolio" has the meaning set forth Section 4.10(b).
"Routine Complaints" has the meaning set forth in Section 8.01.
"SAP" has the meaning set forth in the Reinsurance Agreement.
"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.
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"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 13.03(a).
[REDACTED]
"Trademark License Agreement" has the meaning set forth in Section 15.01.
"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.
"Underlying Companies" means the insurance companies that have ceded any
liabilities or obligations under Covered Insurance Policies to XXX pursuant to
any Underlying Reinsurance Agreement.
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"Underlying Reinsurance Agreements" has the meaning set forth in the Reinsurance
Agreement.
[REDACTED]
"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, XXX, 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, XXX hereby appoints the Administrator as of the
Effective Time as its agent to provide, as an independent contractor of XXX, 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 XXX 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 XXX. 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
XXX. 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 XXX and its Affiliates, subject to (a) Section 2.02 below and (b)
Section 2.03 below. Except for the XXX Services, as between XXX and the
Administrator, neither XXX 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 XXX or its Affiliate pursuant to the Transition Services Agreement, the
Administrator shall have no obligation to provide such Service pursuant hereto
until ILA'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 XXX 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 XXX or its Affiliate has failed to provide a required service under the
Transition Services Agreement.
Section 2.03 XXX Services. The Parties hereby agree that, notwithstanding
anything herein to the contrary, XXX shall, for the term of this Agreement,
continue to take those actions (i) that XXX 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 XXX set forth
in Section 4.11(a) through (f), the "XXX 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 XXX that the Administrator is permitted to take under
Applicable Law to allow XXX to perform the XXX Services; provided, further; that
all reasonable and necessary out-of-pocket costs and expenses incurred by XXX in
connection with any XXX 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 XXX Services, such Party shall give the other Party
notice of such XXX Services, and the Parties shall reasonably cooperate in
performing such XXX Services.
Section 2.04 Power of Attorney. Subject to the terms and conditions herein and
in Section 12.2(c) of the Purchase Agreement, XXX hereby appoints and names the
Administrator, acting through its authorized officers and employees, as ILA'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 XXX might have done
with respect to the Administered Business, and (b) to proceed by all lawful
means (i) to perform any and all of ILA's obligations with respect to the
Administered Business, (ii) to enforce any right and defend (in the name of XXX,
when necessary) against any liability arising with respect to the Administered
Business, (iii) to xxx or defend (in the name of XXX, when necessary) any Action
arising from or relating to the Administered Business, (iv) to sign (in ILA'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
(vii) to do
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everything lawful in connection with the satisfaction of the Administrator's
obligations and the exercise of its rights under this Agreement. XXX 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 XXX 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 XXX, advising that the
Administrator has been appointed by XXX to provide the Services. Such notices
shall be sent to such Persons' last known address of record as furnished by XXX
to the Administrator. XXX 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 ILA's name in communications
with policyholders, insureds and beneficiaries of the Covered Insurance
Policies. XXX shall cooperate with the Administrator in connection therewith,
including by providing sample forms (both hard copies and electronic copies) of
the XXX 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. XXX 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. XXX and the Administrator may replace their respective
Coordinator by giving notice pursuant to Section 18.01 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, XXX hereby authorizes and grants the
Administrator the authority, [REDACTED] to (x) new insurance policies to be
issued or reinsured pursuant to contractual commitments or exchanges under
certain insurance contracts of XXX, such as term conversions, additional
coverage options, and other conversion rights written by XXX 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 XXX, 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). [REDACTED] 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 XXX 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 XXX 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 XXX, on a one hundred percent (100%) indemnity reinsurance basis in
accordance with the terms of the Reinsurance Agreement.
(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.
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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
XXX 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 XXX, 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 XXX 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 XXX (which consent may be
withheld in ILA'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 XXX
under the Reinsurance Agreement pursuant to its terms.
Section 3.04 XXX Licenses; Certain Actions. XXX 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 XXX 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 XXX from
maintaining such license, permit or authorization; and
(b) take no action within ILA'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 Section 3.04(b) shall in no
event be construed to require XXX 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
13
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 XXX
pursuant to the Trademark License Agreement or the Wholesaling Agreement, the
Administrator shall provide XXX with copies of all such materials prior to use
for ILA's prompt review. Administrator shall not use such new marketing and
sales material until XXX 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 XXX, 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, the Existing Reinsurance
Agreements [REDACTED] 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 XXX. 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, (B) the Covered Insurance Policies [REDACTED] XXX understands and agrees
that Administrator is not in the business of providing Services to third
parties, and under no circumstances shall Administrator be held accountable to a
higher standard of care than that set forth herein.
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(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 XXX for any acts, errors or
omissions in performing the Services to the extent such acts, errors or
omissions were directed by XXX in writing or caused by any act or omission of
XXX or any of its Affiliates or resulted from a breach of any of the Transaction
Agreements by XXX 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 XXX 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. XXX 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 XXX for any reasonable and
necessary out-of-pocket costs associated with such cooperation.
Section 4.04 Recommendations. The Administrator may recommend to XXX amendments
to the products, benefits, forms, rating plans and prospectuses in use for the
Covered Insurance Policies, including the New Insurance Policies. With ILA's
prior consent, which may not be unreasonably withheld, the Administrator may
make such amendments on behalf of XXX.
Section 4.05 Decision Authority.
(a) Notwithstanding any other provision of this Agreement to the contrary, XXX
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 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 XXX
15
hereunder, which XXX 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 XXX 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 XXX 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 18.03.
Section 4.06 Non-Guaranteed Elements. XXX 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 XXX 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. XXX 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 ILA's own. In connection with any recommendation by the Administrator
with respect to any Non-Guaranteed Elements under this Section, the
Administrator shall provide XXX 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 XXX.
[REDACTED]
16
[REDACTED]
(b) The Administrator may make recommendations to XXX as to fund options for
the Separate Accounts and XXX 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 XXX and transmit on behalf of XXX to the appropriate Governmental
Body any SEC exemptive application, no-action letter or other regulatory filing
necessary to reflect or implement such change.
(c) XXX 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) XXX shall take all actions necessary to execute agreements to facilitate
trading via National Securities Clearing Corporation (NSCC) with respect to the
Administered Business.
[REDACTED]
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 XXX, 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 XXX, 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 XXX, 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 XXX copies of any filings it
makes with Governmental Bodies relating to the Covered Insurance Policies prior
to or contemporaneously with making such filings. XXX shall use commercially
reasonable efforts to assist the Administrator in seeking approval of any filing
made pursuant to this Section 4.09.
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The Administrator shall reimburse XXX for any reasonable and necessary
out-of-pocket costs associated with such assistance.
[REDACTED]
18
[REDACTED]
19
[REDACTED]
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 XXX and its Affiliates under this Agreement and the
Transaction Agreements, and shall not receive any separate fee from XXX for the
provision of the Services.
ARTICLE VI
CERTAIN REPORTS; BOOKS AND RECORDS;
BANK ACCOUNTS AND REMITTANCES
Section 6.01 Reports.
[REDACTED]
(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).
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(c) To the extent additional reports are requested by XXX under this Agreement,
the Administrator shall provide such reports in a form and manner as is
reasonably requested by XXX; provided, that XXX 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.
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 XXX and its Representatives.
(b) During the term of this Agreement, upon any reasonable request from XXX or
its Representatives, the Administrator shall (i) provide to XXX 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 XXX and its
Representatives to make copies of such records, in each case, at no cost to XXX
(other than for reasonable out-of-pocket expenses). Nothing herein shall require
the Administrator to disclose any information to XXX 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 XXX 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
21
from the Administrator or its Representatives, XXX 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 XXX 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
XXX, 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 XXX to disclose
any information to the Administrator 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 XXX or any of its
Affiliates is a party) (it being understood that XXX 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 XXX to
disclose its tax records (except as otherwise provided under the Purchase
Agreement or Article XVII 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 XXX 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 XXX with respect to the Administered Business (the
"Administrator Disbursing Accounts"); provided, that the Parties acknowledge and
agree that disbursement accounts maintained by XXX may be used on a transitional
basis until relevant functions are migrated to the Administrator Disbursing
Accounts. If requested by the Administrator, XXX, 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 XXX 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,
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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 XXX 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 XXX.
(b) Unless prohibited by Applicable Law and excluding any payments 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) XXX 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 XXX 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, XXX, the Administrator or such Affiliate shall hold
such remittance or other payment in trust for the benefit of XXX, 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, XXX or the Administrator shall endorse any such remittance to the order
of XXX, the Administrator or the applicable Separate Account, as the case may
be, and promptly transfer such remittance or other payment to XXX, 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 XXX 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 XXX or its Affiliates or by an independent auditor selected by
XXX. 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. XXX shall bear the expenses of any such audits.
(b) Upon the written request of XXX and if specifically available solely
related to the Services, the Administrator shall provide to XXX a copy of its
SSAE 16 Type II report (or any successor or other substantially similar report).
23
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 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 XXX of its inability to perform the applicable Services and shall
cooperate with XXX 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, XXX will, at its option, initiate the dispute resolution process set
forth in Section 18.03(a). If, after Level Three Negotiations, XXX is not
reasonably satisfied with the results thereof, the CEO or CFO of ILA'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 ILA's written notice of such breach (which
notice shall specify ILA'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, XXX may, at its sole
discretion, grant the Administrator additional time in which to effect such a
cure. The remedy set forth herein and ILA's indemnification rights pursuant to
Section 13.02 shall be ILA'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
24
any obligation hereunder and such failure is attributable to (i) an act, error
or omission of XXX, including any failure by XXX or ILA's Representatives to
perform any obligation of XXX hereunder or under any of the Ancillary Agreements
(excluding this Agreement), (ii) revocation by XXX 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 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 XXX or any other Person or upon discovery thereof by the
Administrator. XXX shall, at its own expense, cooperate with and assist
Administrator to correct any errors resulting from any act or omission by XXX as
promptly as practicable following notice thereof from Administrator or any other
Person or upon discovery thereof by XXX. XXX 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 XXX when necessary. Notwithstanding anything in
this Agreement to the contrary, the Administrator shall not be required to
provide notice to XXX with respect to any Routine Complaints; provided, that at
ILA's request, the Administrator shall, no more frequently than monthly, provide
XXX 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 XXX or the Administrator receives notice of, or otherwise becomes aware
of, any Regulatory Action (as defined below), XXX 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
25
Administered Business other than Routine Complaints. XXX, 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 XXX 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 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 ILA'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 XXX.
Notwithstanding the foregoing, XXX 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) XXX pays all settlement amounts with respect thereto, (iii) XXX
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 XXX 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. XXX 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 ILA'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 XXX or any of its Affiliates,
(ii) the Administrator pays all settlement amounts with respect thereto, (iii)
the Administrator obtains a complete release for XXX 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 XXX 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 XXX of any Action other than a
Regulatory Action or a Routine Complaint that has been instituted or threatened
in writing
26
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) XXX 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 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 XXX when necessary.
(d) Notwithstanding anything in this Agreement to the contrary, XXX 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 XXX is a named party to the extent that such Legal Action,
if successful, could (in ILA's reasonable opinion) materially interfere with the
business, assets, liabilities, obligations, financial condition, results of
operations or reputation of XXX 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 XXX 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 ILA'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 XXX or any of its Affiliates, (ii) the Administrator
pays all settlement amounts with respect thereto, (iii) the Administrator
obtains a complete release for XXX 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 XXX or its Affiliates.
(e) The Administrator shall keep XXX informed of the progress of all pending
Legal Actions and, at ILA's request (which requests shall be reasonable in their
frequency and nature as reasonably determined by the Administrator), provide to
XXX 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 XXX 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, XXX
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
27
Administrator shall reimburse XXX for any reasonable out-of-pocket costs and
expenses incurred by XXX in connection with such efforts. Neither XXX nor the
Administrator shall have the authority to institute, prosecute or maintain any
legal or regulatory proceeding on behalf 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) XXX shall prepare and provide
to the Administrator a report containing a summary of any Regulatory Actions
with respect to which XXX 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 XXX a report containing a summary of any Legal
Actions and Regulatory Actions controlled by the Administrator in a form
reasonably acceptable to XXX.
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
[REDACTED]
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[REDACTED]
ARTICLE X
DURATION; TERMINATION
Section 10.01 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 10.02, or (c) the date of a recapture under the Reinsurance Agreement.
Section 10.02 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 XXX,
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.
(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 XXX 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 XXX or ILA's designee, such that XXX or its designee shall be able to perform
the applicable Services without interruption following termination of this
30
Agreement.
Section 10.03 Survival. Notwithstanding the other provisions of this Article X,
Articles I, XIII and XIV and Sections 18.01, 18.03, 18.05, 18.08 and 18.09 shall
remain in full force and effect after the termination of this Agreement.
ARTICLE XI
CUSTOMER INFORMATION
Section 11.01 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) XXX 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) XXX 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) XXX 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, XXX agrees that it will send or cause the Administrator
to send, on XXX letterhead, at Administrator's sole cost and expense, marketing
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 XXX, the approval of which shall not be unreasonably withheld by
XXX. Notwithstanding the foregoing, Administrator shall not solicit individuals
that are included in ILA's Do Not Contact Database (which database shall be made
available to the Administrator by XXX upon Administrator's reasonable request).
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ARTICLE XII
DISASTER RECOVERY
Section 12.01 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
XXX at least once during every calendar year that the DRP is fully operational;
(c) in consultation with XXX, 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. XXX shall
have the right to review the DRP periodically, but no more than one time per
calendar year at the Administrator's location.
ARTICLE XIII
INDEMNIFICATION
Section 13.01 Indemnification by XXX. XXX shall indemnify, defend and hold
harmless Administrator and its Affiliates, including the Investment Manager, 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 XXX of the covenants and agreements of XXX contained in this
Agreement;
[REDACTED]
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(d) any fraud, theft or embezzlement by officers, employees or agents of XXX
with respect to the Reinsured Portfolios during the term of this Agreement and
the Investment Management Agreement;
(e) the failure of XXX to comply with any Applicable Law; and
(f) any successful enforcement of this indemnity.
Notwithstanding anything in this Agreement to the contrary, the indemnification
claims set forth in subsections (b) and (c) of this Section 13.01 shall not
constitute "Legal Actions" as defined in Section 8.03(a), and any
indemnification thereunder shall be governed by this Article XIII.
Nothing contained in this Section 13.01 is intended to amend or supersede any
provision of the Investment Management Agreement.
Section 13.02 Indemnification by the Administrator. Except as otherwise
provided in Section 4.02(c), Administrator shall indemnify, defend and hold
harmless XXX and its Affiliates and their respective Representatives, successors
and assigns (collectively, the "XXX Indemnified Parties") from and against and
pay and reimburse all Losses imposed on, sustained, incurred or suffered by the
XXX 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;
[REDACTED]
(c) any fraud, theft or embezzlement by officers, employees or agents of the
Investment Manager during the term of this Agreement or the Investment
Management Agreement;
(d) the failure of Administrator, the Investment Manager or any sub-manager
retained by the Investment Manager in accordance with Section 3 of the
Investment Management Agreement to comply with any Applicable Law; and
(f) any successful enforcement of this indemnity.
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Notwithstanding anything in this Agreement to the contrary, the indemnification
claims set forth in subsection (b) of this Section 13.02 shall not constitute
"Legal Actions" as defined in Section 8.03(a), and any indemnification
thereunder shall be governed by this Article XIII.
Nothing contained in this Section 13.02 is intended to amend or supersede any
provision of the Investment Management Agreement.
Section 13.03 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 XIII
(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 XIII 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 13.03(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 13.03(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 meetingswith representatives of plaintiffs, hearings and
the like; and (ii) counsel for a
34
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 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 XIII.
Section 13.04 No Duplication; Exclusive Remedy.
(a) To the extent that an Administrator Indemnified Party or an XXX Indemnified
Party has received payment in respect of a Loss pursuant to the provisions of
any other Ancillary Agreement, such Administrator Indemnified Party or XXX
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, XXX and the XXX 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
XIII. In furtherance of the foregoing, each of Administrator, on behalf of
itself and each other Administrator Indemnified Party, and XXX, on behalf of
itself and each other XXX 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
35
arising from, fraud) it may have against XXX or any of its Affiliates or
Representatives and the Administrator or any of its Affiliates or
Representatives, as the case may 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 XIII or (y)
as otherwise provided under this Agreement or the provisions of any other
Ancillary Agreement.
Section 13.05 Limitation on Set-off. Neither XXX nor the Administrator shall
have any right to set off any unresolved indemnification claim pursuant to this
Article XIII against any payment due pursuant to any Transaction Agreement.
Section 13.06 Mitigation. The Administrator and XXX 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 XIII,
including by making commercially reasonable efforts to mitigate such claim or
liability, to the extent required by Applicable Law.
Section 13.07 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
XIII, 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 XIII 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 XIII 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 XIII.
Section 13.08 Relationship with Reinsurance Agreement. Nothing contained in this
Article XIII is intended to amend or supersede any provision of the Reinsurance
Agreement.
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ARTICLE XIV
COOPERATION
Section 14.01 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 XV
TRADEMARK LICENSE
Section 15.01 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 XVI
FIDELITY BOND
Section 16.01 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 [REDACTED], subject to a deductible which is subject
to the Administrator's self-insurance. The insurance companies providing
insurance under this Article XVI 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 XXX.
ARTICLE XVII
TAX MATTERS
Section 17.01 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 XXX and (ii) will forward to XXX, 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 Quarterly Premium Tax Payment accompanying a Quarterly Premium Tax Report
shall be
37
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, XXX shall provide to the Administrator, in accordance with Section
17.01(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 XXX (i) provides the
Administrator with such additional information in accordance with Section
17.01(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, ILA'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 ILA'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 ILA's state of domicile.
(c) Requested Information. XXX shall provide to the Administrator on a timely
basis any information within ILA's possession or control that is reasonably
requested by the Administrator in connection with the Administrator's
obligations under this Article XVII. 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. XXX 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. XXX 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 XXX 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 XXX 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 XXX to offset a liability for Premium Taxes for which the Reinsurer otherwise
would be required to reimburse XXX, and the remainder of the credit, deduction
or offset is applied against other Taxes payable by XXX, then such credit,
deduction or offset shall be applied to reduce the Reinsurer's obligation to
reimburse XXX 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 XXX with respect to
Premium Taxes under the terms of the Reinsurance Agreement). To the extent that
XXX receives any refunds of amounts previously paid to a guarantee fund, plan,
pool, or association or of any similar assessment, XXX shall reimburse the
Administrator (in the Administrator's capacity as the Reinsurer) to the extent
such amount was reflected as an asset on the Closing Date Transfer Balance Sheet
or the Reinsurer shall have reimbursed XXX under the
38
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 XXX 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. XXX 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 XXX in
accordance with this Section 17.01(e), the Administrator shall promptly provide
such additional information to XXX 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 XXX 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 XXX
with respect to such calendar year pursuant to Section 17.01(e) (taking into
account any additional information provided by the Administrator to XXX in
accordance with the last sentence of Section 17.01(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 17.01(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 XXX 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 ILA's receipt of the Annual Premium Tax Report.
(g) Notice. Each of XXX 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. XXX 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 ILA's choice at ILA'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, XXX shall not settle, either administratively or after the commencement
of litigation, any claim for Premium Taxes without the consent of the
Administrator, which consent shall not be unreasonably withheld or delayed.
39
XXX 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. XXX 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 XXX to provide the Administrator access to any federal,
state, or local consolidated income Tax Return that includes XXX or its
Affiliates. Any information obtained under this Section 17.01(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 17.02 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 ILA's reasonable request, the Administrator shall (i) provide XXX
reasonable access during normal business hours to (A) review, audit, or copy any
Tax Returns for which the Administrator is responsible under Article XVII
(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 XVII, provided that such access shall not unreasonably interfere with
the conduct of the business of the Administrator; (ii) provide information to
XXX demonstrating the Administrator's compliance with Article XVII; and (iii)
cooperate with XXX in connection with any Action related to any Tax Return for
which the Administrator is responsible under Article XVII (provided that such
cooperation shall not unreasonably interfere with the business or operations of
the Administrator).
Section 17.03 Sales Taxes. XXX 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 XXX under this Agreement; provided that the Administrator shall provide XXX
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 XXX.
Section 17.04 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 ("Reinsurer Product Tax Liabilities"),
including, without limitation, any Losses described in clauses (i) and (ii) of
Section 12.6(a) of the Purchase Agreement, XXX and the Administrator
40
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 17.05. Conflicts. Notwithstanding any other provision in this
Agreement, with respect to the matters specifically set forth in this Article
XVII, the provisions of this Article XVII shall control. To the extent not
provided for in this Article XVII 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 XVIII
MISCELLANEOUS
Section 18.01 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 XXX or HFIC: Hartford Life and Annuity Insurance
Company
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: President
With concurrent
copies (which will not
constitute notice) to: The Hartford
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Ceded Reinsurance &
General Counsel
[REDACTED]
41
To the Administrator: The Prudential Insurance Company of
America
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Legal Officer,
Individual Life Insurance
With concurrent
copies (which will not
constitute notice) to: Prudential Financial, Inc.
000 Xxxxx Xx., 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
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 18.01
notice shall also be given by e-mail to the respective party's Coordinator.
Section 18.02 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 18.03 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 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 XXX and a senior
executive of the
42
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 18.03(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 18.04 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 XXX Indemnified Persons any right,
remedy or claim under or by reason of this Agreement.
Section 18.05 Expenses. Except as otherwise expressly set forth in this
Agreement, each Party hereto will pay all costs and expenses incident to its
negotiation and
43
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 18.06 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 18.07 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 18.08 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 18.09 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 may be required in connection with any dispute
resolution proceeding between the Parties in respect hereof.
44
(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 18.10 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 18.10, 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 18.11 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 18.12 Relationship. XXX 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 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.
45
Section 18.13 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 18.14 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 18.15 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,
ILA'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.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
46
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 AND ANNUITY INSURANCE
COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx Xxxxxx
Title: Second Vice President
[SIGNATURE PAGE TO XXX ADMINISTRATIVE SERVICES AGREEMENT]
SCHEDULE I
SCHEDULED REPORTS
[REDACTED]
(ii) Within twenty (20) Business Days after the end of each Accounting Period,
the Administrator shall prepare and provide to XXX a Settlement Statement (and,
upon the request of XXX, 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 XXX 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 ILA's financial statements, footnotes, tax
returns, and other SAP and GAAP financial reports required by ILA'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 XXX 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 XXX 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 XXX 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 XXX 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 ILA's
financial statements, unaudited footnotes, tax returns, and other SAP and GAAP
financial reports required by ILA'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 XXX 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 XXX to comply with any
regulatory filing requirements or deadlines (and provided that XXX 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 XXX 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 ILA's annual statement and to
complete ILA'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 XXX 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 XXX 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
XXX 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 XXX 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 XXX 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 XXX
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 XXX 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 XXX 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 I
SCHEDULE II
SERVICES
The Services shall include, but are not limited to, the following:
(a) Upon the reasonable request by XXX, 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 XXX of the full amount
of said premium taxes and assessments for XXX to make payment to the appropriate
Governmental Body or guaranty association and furnishing XXX with all
information necessary for XXX to make such payments and comply with all related
filing and reporting requirements under the terms of this Agreement;
(f) preparing and delivering to XXX or an XXX 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 XXX,
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 XXX, 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 XXX, on a monthly basis a list of all
reported and discovered deaths of insureds under Covered Insurance Policies so
that XXX 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 XXX upon request in order to allow
XXX to timely file such escheat filings;
(m) transferring assets or funds (i) between one or more Separate Accounts and
ILA's general account, (ii) between one or more sub-accounts of any such
Separate Accounts, or (iii) between XXX and the Reinsurer in support of the
Reinsurance Agreement;
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(n) providing the following services related to the Separate Accounts on behalf
XXX and any additional Services reasonably requested by XXX with respect to the
Separate Accounts:
(i) maintaining copies of each Separate Account's governing documents;
provided that XXX 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, XXX 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 XXX with each registration statement prior to
filing so that XXX can review the filing and sign the Legal Opinion Letter
provided in Item 26(k) of Form N-6. XXX 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 XXX has previously stopped updating.
(v) administering Contracts on behalf of XXX with, among others, mutual
fund organizations that make their mutual funds available as investment
options within the Separate Accounts;
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(vi) performing all accounting services with respect to the Separate
Accounts as may be reasonably requested by XXX 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 XXX 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 XXX or on behalf of an
Affiliate of XXX, all of ILA's or an Affiliate's obligations under, and
shall comply with the terms of, (i) any Mutual Fund Agreements, (ii) the
underwriting agreements between XXX 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 XXX
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 ILA's request, providing documentation of these reconciliations to
XXX;
(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 XXX 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 XXX in the event that it becomes aware of any "material
compliance matter" (as defined in Rule 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
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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 ILA'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 XXX in respect of such policies and
procedures, compliance with federal securities laws and related compliance
matters as XXX 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 XXX so that the XXX 38a-l CCO can prepare the annual and
periodic reports as required.
(u) The Administrator shall provide XXX or an Affiliate of XXX 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 XXX:
(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 XXX 38a-l CCO to prepare the reports as provided in Rule 38a-l;
(ii) The Administrator shall promptly notify XXX 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 XXX with copies of all pertinent files and information
relating thereto and the XXX 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 XXX
with copies of the proposed amendments for review, comment, and final
approval by XXX of such documents;
(iv) Provide XXX with reports upon request, regarding the compliance
personnel employed and retained by the Administrator to provide services to
the Covered Insurance Policies, or on behalf of an Affiliate of XXX, and
describing the experience, skill, expertise, licenses and accreditation of
said compliance staff; and
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(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 XXX 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 XXX or the reinsurers;
(vi) Facilitate, in accordance with the Existing Reinsurance Agreements,
the timely update of any collateral supporting ILA's reserve credit under
such Existing Reinsurance Agreements in its Statutory Financial Statements;
(vii) Provide XXX 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 XXX 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
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"
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shall be deemed to include any written communication primarily expressing a
grievance against XXX, an Affiliate of XXX, 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 XXX or an Affiliate of XXX 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
Administrator, HESCO, Hartford Securities Distribution Company, Inc., Hartford
Life Insurance Company, 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 XXX for the payment of commissions to Distribution
Intermediaries distributing products covered by this Agreement, including
variable life insurance policies underwritten by ILA's affiliated
broker-dealers;
(ii) Providing XXX and any affiliated broker-dealer information reasonably
necessary for XXX and any such affiliated broker-dealer to monitor the
Administrator's performance with respect to the functions described in
paragraph (i) above;
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(iii) Providing XXX 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 XXX 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 ILA's Third-Party Security Assessment Questionnaire
and forward a completed copy to ILA's information protection department. No more
than one time per year, XXX 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 that are associated with the Data must be patched within a
commercially
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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.
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
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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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EXHIBIT A
FORM OF TRADEMARK LICENSE AGREEMENT
[REDACTED]
