EXECUTION COPY
REINSURANCE AGREEMENT
THIS REINSURANCE AGREEMENT (this "AGREEMENT"), dated as of April 1, 2001, is
entered into by and between FIRST FORTIS LIFE INSURANCE COMPANY, a New York
stock life insurance company (the "COMPANY"), and HARTFORD LIFE INSURANCE
COMPANY, a Connecticut stock life insurance company ("REINSURER").
WHEREAS, the Company is engaged in the sale, marketing, underwriting,
issuance and administration of certain life insurance policies and annuity
contracts (the "BUSINESS"); and
WHEREAS, the Company and Reinsurer are parties to that certain Asset
Purchase Agreement dated January 25, 2001 (the "PURCHASE AGREEMENT"), by and
among Fortis, Inc., Fortis Benefits Insurance Company, Fortis Insurance Company,
First Fortis Life Insurance Company, Houston National Life Insurance Company,
Xxxx Xxxxx Life Insurance Company (collectively, the "SELLER PARTIES"), Hartford
Life, Inc., Hartford Life and Annuity Insurance Company, and Hartford Life
Insurance Company, pursuant to which, among other things, the Seller Parties
have agreed to sell and transfer to Reinsurer, and Reinsurer has agreed to
purchase and assume, certain assets and liabilities used in or related to the
operations of the Business subject to the terms, conditions and limitations
contained therein; and
WHEREAS, in connection with such sale and transfer of assets and
liabilities, the parties desire that the Company cede 100% of the Reinsured
Liabilities (as defined below) under the Reinsured Contracts (as defined below)
to Reinsurer, and Reinsurer desires to reinsure the Reinsured Liabilities, on
the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
As used herein and in the Schedules hereto, each of the following terms has
the meaning set forth below (such meaning to be equally applicable to both the
singular and plural forms of the term defined).
"ADJUSTED STATUTORY LIABILITIES" has the meaning set forth in the Purchase
Agreement.
"ADMINISTRATIVE SERVICES" has the meaning set forth in the Administrative
Services Agreement.
"AFFILIATE" means, with respect to any Person, at any relevant time, any
other Person controlling, controlled by or under common control with such
Person.
"ADMINISTRATIVE SERVICES AGREEMENT" means that certain Administrative
Services Agreement, dated as of the date hereof, by and between the Company and
Reinsurer, providing for the servicing and support of the Reinsured Contracts.
"AGENTS DEBIT BALANCES" means, with respect to the Company, the aggregate of
all agents balances and advanced Commissions owed to the Company with respect to
the Reinsured Contracts, determined in accordance with Applicable SAP and
appropriately includable on lines 2.1 and 0501 of Exhibit 13 of the NAIC Annual
Statement Blank or in comparable line items in successor NAIC annual statement
blanks.
"AGREEMENT" means this Reinsurance Agreement and all Schedules hereto, as
the same may be supplemented, modified or amended from time to time.
"APPLICABLE SAP" means the statutory accounting principles, consistently
applied, as prescribed or permitted by the insurance regulatory authorities in
the state of the Company's state of domicile.
"ASSERTED LIABILITY" has the meaning set forth in Section 5.3.
"BUSINESS DAY" means any day other than a Saturday, Sunday, a day on which
banking institutions in the States of New York and Connecticut are permitted or
obligated by Law to be closed, or a day on which the New York Stock Exchange is
closed for trading.
"CLAIMS NOTICE" has the meaning set forth in Section 5.3.
"COMMISSIONS" mean all commissions, expense allowances, benefit credits and
other fees and compensation payable to producers, agents, brokers or other such
sales representatives.
"COMPANY INDEMNITEES" has the meaning set forth in Section 5.1.
"COMPANY RETAINED LIABILITIES" means all liabilities or obligations of any
character or nature (whether known or unknown, absolute or contingent, disclosed
or undisclosed) that are not Reinsured Liabilities or otherwise required to be
paid by Reinsurer to the Company pursuant to the express terms and conditions of
this Agreement
2
or the Administrative Services Agreement. By way of illustration but without
limitation to or exclusion of any category of Company Retained Liability not
specifically enumerated herein, the Company Retained Liabilities shall include
any liability or obligation arising from any of the following: (a) Premium taxes
due in respect of Premiums paid prior to the date hereof or on account of the
Premiums Receivable; (b) the Excluded Assets or Excluded Contracts (each of
which is defined in the Purchase Agreement); (c) Litigation against the Company
with respect to the Business that is pending on the date hereof or that arises
with respect to events occurring prior to the date hereof; (d) any Seller Extra
Contractual Obligations; and (d) any income Taxes of the Company resulting from
the transfer or assignment to Reinsurer of the Transferred Investment Assets,
Net Transfer Amount or Purchased Assets (each of which are defined in the
Purchase Agreement).
"CONTRACT" means any written or oral agreement, arrangement, commitment,
contract, indenture, lease, obligation, plan, understanding or undertaking of
any kind or character to which a party hereto is a party or that is binding on
any such party or its assets or business.
"CONTRACT STATES" means those jurisdictions listed on SCHEDULE 1.1 hereto.
"CONTRACTHOLDER" means the owner of a Reinsured Contract.
"DAC TAX REIMBURSEMENT" has the meaning set forth in Section 3.10(b).
"EFFECTIVE DATE" means, (i) with respect to each Existing Reinsured
Contract, 12:01 a.m. on the date of this Agreement, and (ii) with respect to
each New Reinsured Contract, the date and time after 12:01 a.m. on the date of
this Agreement upon which the Company's obligations under such New Reinsured
Contract begin.
"EXISTING REINSURED CONTRACTS" means only those contracts of insurance and
annuities described on SCHEDULE 1.2 that have been issued or reinsured by the
Company in connection with the Business and are in force on the date hereof, or
have been applied for prior to the date hereof, or are subject to being renewed
or reinstated in accordance with their terms on the date hereof, together with
all related binders, slips and certificates (including applications therefor and
all supplements, endorsements, riders and agreements in connection therewith).
SCHEDULE 1.3 lists the individual policy number for each such insurance or
annuity contract that was an Existing Reinsured Contract as of the close of
business on the third Business Day immediately preceding the date of this
Agreement.
"EXTRA CONTRACTUAL OBLIGATIONS" means all claims, actions, suits,
liabilities, obligations or losses, other than Reinsured Liabilities, arising
under the Reinsured Contracts including, without limitation, obligations or
losses in excess of the contractual policy benefits of the applicable Reinsured
Contract, any liability for fines, fees, penalties, punitive, special, exemplary
or other form of extra-contractual damages, which
3
claims, actions, suits, liabilities, obligations or losses arise from any act,
error or omission, whether or not intentional, negligent, in bad faith or
otherwise relating to: (i) the design, marketing, sale, underwriting, rating of
or rates chargeable under, issuance, cancellation or administration of the
Reinsured Contracts; (ii) the investigation, defense, trial, settlement or
handling of claims, benefits, dividends or payments under the Reinsured
Contracts; or (iii) the failure to pay, the delay in payment, or errors in
calculating or administering the payment of benefits, claims, dividends or any
other amounts due or alleged to be due under the Reinsured Contracts.
"GENERAL ACCOUNT RESERVES" means, with respect to the Company, the amount of
the reserves (other than any amount of reserves for Litigation or other Company
Retained Liabilities) of the Business determined in accordance with Applicable
SAP and appropriately includable in line items 1, 2, 3, 4.1, 4.2, 5, 10.1, 10.2
and 10.3 of the Liabilities, Surplus and Other Funds page of the NAIC Annual
Statement Blank or in comparable line items in successor NAIC annual statement
blanks.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local, foreign or
other governmental or public agency, instrumentality, commission, authority,
self-regulatory organization, board or body, including, without limitation, the
SEC, NASD and any state insurance regulatory authority.
"INDEMNIFIED PARTY" has the meaning set forth in Section 5.3.
"INDEMNIFYING PARTY" has the meaning set forth in Section 5.3.
"LAW" means any federal, state, local or foreign code, law, statute,
ordinance, regulation, rule, reporting or licensing requirement, policy,
guideline, administrative interpretation or other requirement of a Governmental
Authority (including those of the SEC, NASD, NAIC, any self-regulatory
organization or any state insurance department) applicable to the parties
hereto, or any of their respective Affiliates, properties, assets, officers,
directors, employees or agents, as the case may be.
"LITIGATION" means any action, cause of action (whether at law or in
equity), arbitration, claim or complaint by any Person alleging potential
liability, wrongdoing or misdeed of another Person (other than claims for policy
benefits in the ordinary course of business), or any administrative or other
similar proceeding, criminal prosecution or investigation by any Governmental
Authority alleging potential liability, wrongdoing or misdeed of another Person.
"LOSS" means any action, claim, loss, liability, damage, deficiency, cost,
expense (including reasonable fees and expenses of attorneys, actuaries,
accountants and other consultants), interest or penalty.
4
"MARKETING AGREEMENT" means that certain Agreement, dated as of the date
hereof, by and between the Company and Reinsurer, providing for, among other
things, the Company to provide certain marketing services on behalf of
Reinsurer.
"NAIC ANNUAL STATEMENT BLANK" means the form of annual statement for life
and accident and health insurance companies--association edition, as prescribed
by the NAIC, that was in effect for year-end 1999 filings.
"NEW REINSURED CONTRACTS" means all of those fixed and variable annuity
contracts described on SCHEDULE 1.2 that are issued by the Company after the
date hereof pursuant to the Marketing Agreement, together with all fixed and
variable annuities contracts issued by the Company after the date hereof
pursuant to Section 2.9 hereof.
"NON-GUARANTEED ELEMENTS" mean loads and expense charges, credited interest
rates, mortality and expense charges, and administrative expense risk charges,
as applicable, under the Reinsured Contracts.
"PERSON" means any individual, corporation, partnership, firm, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, governmental, judicial or regulatory body,
division, business unit or other entity.
"POLICY LOAN RECEIVABLES" means, with respect to the Company, the aggregate
principal and accrued interest thereon of all policy loans with respect to the
Reinsured Contracts, determined in accordance with Applicable SAP and
appropriately includable on lines 5 and 17 of the Assets page of the NAIC Annual
Statement Blank or in comparable line items in successor NAIC annual statement
blanks.
"PREMIUMS" mean premiums, considerations, deposits and similar receipts with
respect to the Reinsured Contracts.
"PREMIUMS RECEIVABLE" means, with respect to the Company, the aggregate of
all Premiums receivable (including any due and deferred premiums) with respect
to the Reinsured Contracts, determined in accordance with Applicable SAP and
appropriately includable on lines 15 and 16 of the Assets page of the NAIC
Annual Statement Blank or in comparable line items in successor NAIC annual
statement blanks.
"REINSURED CONTRACTS" means collectively the Existing Reinsured Contracts
and the New Reinsured Contracts.
"REINSURED LIABILITIES" means all (i) liabilities of the types for which
amounts are included in the Adjusted Statutory Liabilities arising under or with
respect to the Reinsured Contracts, regardless of whether such liabilities arise
before, on or after the Effective Date, and (ii) all Extra Contractual
Obligations that arise out of acts or omissions by Reinsurer or any of their
respective directors, officers, employees,
5
Affiliates, agents or representatives which acts or omissions occur (or, in the
case of omissions, fail to occur) at any time on or after the date hereof.
"REINSURER INDEMNITEES" has the meaning set forth in Section 5.2.
"SELLER EXTRA CONTRACTUAL OBLIGATIONS" means all Extra Contractual
Obligations that arise out of acts or omissions occurring (or in the case of
omissions, failing to occur) at any time prior to the date hereof by the Company
or its directors, officers, employees, Affiliates, agents or representatives.
"SEPARATE ACCOUNT" means the FFLIC Separate Account A, which is a unit
investment trust and is registered as an investment company under the 1940 Act
and was established by the Company pursuant to applicable state insurance and
federal securities Laws, with respect to the Reinsured Contracts that are
variable life insurance policies or variable annuity contracts.
"SEPARATE ACCOUNT RECEIVABLES" means the aggregate amount owed by the
Separate Account to the Company determined in accordance with Applicable SAP and
appropriately includable on line 13A of the Liabilities, Surplus and Other Funds
page of the NAIC Annual Statement Blank or in comparable lines in successor NAIC
annual statement blanks.
"SEPARATE ACCOUNT REVENUES" means, for all Reinsured Contracts that are
variable annuity contracts, the net cash flows (including any change in the
Separate Account Receivables) associated with the Separate Account.
"TAX" means any federal, state, local, foreign or other income, premium,
payroll, withholding, excise, sales, use, gains, transfer, real and personal
property, use and occupation, capital stock, franchise or other tax, assessment
or governmental charge in the nature of a tax, including interest and penalties
thereon.
"THIRD PARTY CLAIM" has the meaning set forth in Section 5.4(a).
"THIRD PARTY CLAIMANT" has the meaning set forth in Section 5.4(a).
ARTICLE 2
COINSURANCE
2.1 COINSURANCE.
(a) As of the Effective Date, the Company hereby cedes to Reinsurer and
Reinsurer hereby accepts reinsurance on a coinsurance basis of one hundred
percent (100%) of the Reinsured Liabilities under the Reinsured Contracts. The
liability of Reinsurer under this Agreement with respect to any Reinsured
Contract will begin
6
simultaneously with that of the Company, but not prior to the Effective Date. It
is understood and agreed by the parties that in no event shall Reinsurer assume,
or have any responsibility or obligation for, any Company Retained Liabilities.
Subject to any termination that might occur pursuant to Section 6.2 hereof,
Reinsurer's liability with respect to any Reinsured Contract will terminate on
the date the Company's liability on such Reinsured Contract is terminated in
accordance with its terms. Termination of Reinsurer's liability herein is
subject to the Company's actual receipt of payments which discharge such
liability in full in accordance with the provisions of this Agreement. In no
event shall the interpretation of this Section 2.1 imply a unilateral right of
Reinsurer to terminate this Agreement.
(b) In no event shall such coinsurance be in force and binding unless
the underlying Reinsured Contract as issued by the Company is in force and
binding as of the Effective Date, or has lapsed but would be entitled to
reinstatement by its terms, as of the Effective Date, and is reinstated
thereafter in accordance with its terms.
(c) With respect to each of the Reinsured Contracts, the amount of
coinsurance hereunder shall be maintained in force without reduction so long as
the Reinsured Contract remains in force without reduction. If there is a
reduction with respect to a Reinsured Contract, Reinsurer's liability with
respect thereto shall be equally reduced. If the Company collects Premiums in
arrears in connection with a reinstated Reinsured Contract, the Company shall
pay such Premiums to the Reinsurer.
(d) On and after the Effective Date, as between the parties, Reinsurer
shall have the responsibility of all payments for Reinsured Liabilities.
(e) The Company shall use all commercially reasonable efforts to comply
with directions from Reinsurer with respect to all matters affecting Reinsurer's
reinsurance obligations hereunder, so long as such directions comply with all
applicable Laws and are not inconsistent with the provisions of this Agreement
or the Administrative Services Agreement; provided that the Company will have
ultimate decision making authority with respect to such matters.
2.2 PARTIES TO COINSURANCE. This Article 2 provides for indemnity
reinsurance solely between the Company and Reinsurer. The reinsurance under this
Agreement shall not create any right or legal relation between Reinsurer and the
Contractholder or insured under a Reinsured Contract.
2.3 SERVICING OF REINSURED CONTRACTS. The parties hereby agree that the
Reinsured Contracts shall be administered by Reinsurer or an Affiliate of
Reinsurer in accordance with the terms and conditions of the Administrative
Services Agreement.
2.4 MAINTENANCE OF RESERVES. Reinsurer shall maintain General Account
Reserves with respect to the Reinsured Contracts determined in accordance with
generally accepted actuarial standards and all applicable Laws, rules and
requirements for
7
the filing of the Company's statutory financial reports in the Company's state
of domicile. All such General Account Reserves will be accounted for by the
Company as ceded reinsurance and by Reinsurer as coinsured reinsurance.
2.5 CREDIT FOR CEDED REINSURANCE. Reinsurer shall maintain all licenses or
otherwise take any and all action under its control for the Company to qualify
for statutory reinsurance credit for the Reinsured Liabilities in all Contract
States in which Reinsured Contracts are outstanding at any time.
2.6 SEPARATE ACCOUNT. The parties acknowledge and agree that certain of the
Reinsured Contracts are variable annuity contracts for which the Company has
established the Separate Account pursuant to applicable state insurance and
federal securities Laws. The parties acknowledge and agree that the Separate
Account liabilities are being reinsured hereunder by Reinsurer on a 100%
modified coinsurance basis, and as a result the Company shall maintain the
Separate Account reserves. The parties also acknowledge and agree that it is the
intent of the parties that (i) the funds required to be maintained in such
Separate Account shall continue to be so maintained in such Separate Account of
the Company, (ii) the General Account Reserves shall be transferred to Reinsurer
as described in Section 3.1(a) hereof and in the Purchase Agreement, and (iii)
pursuant to the Administrative Services Agreement, Reinsurer shall perform all
administrative services required with respect to the Reinsured Contracts,
including, without limitation, administrative services with respect to such
Separate Account and the transfer of funds to and from the Separate Account.
2.7 CERTAIN POLICY ELEMENTS. From and after the Effective Date, Reinsurer
may make recommendations to the Company with respect to the Non-Guaranteed
Elements of the Reinsured Contracts. Subject to applicable Laws and the
Company's then existing procedures, the Company shall establish all
Non-Guaranteed Elements of the Reinsured Contracts taking into account the
recommendations of Reinsurer with respect thereto.
2.8 POLICY CHANGES. The Company agrees that after the Effective Date it
shall not make (a) any changes to the terms and conditions of a Reinsured
Contract, or (b) withdraw or terminate any form of Reinsured Contract on file
with any Governmental Authority, except in the case of either clause (a) or (b),
with the Reinsurer's prior written consent; PROVIDED, HOWEVER, that the Company
shall be entitled to make changes to a Reinsured Contract or withdraw or
terminate the form of a Reinsured Contract to the extent such action is required
by applicable Law or pursuant to the terms of the Reinsured Contract, and the
Company shall have given written notice thereof to the Reinsurer in advance of
taking such action.
2.9 CONVERSIONS. In addition to any New Reinsured Contracts that the Company
issues pursuant to the terms and conditions of the Marketing Agreement, the
Company shall issue individual life insurance coverage following the exercise of
conversion rights or similar coverage options by Contractholders in accordance
with the
8
terms and conditions of the Reinsured Contracts giving rise to such rights. Any
coverage issued by the Company pursuant to such conversion rights or coverage
options shall be deemed a New Reinsured Contract for purposes of this Agreement
and the Administrative Services Agreement.
ARTICLE 3
PAYMENTS AND REPORTS
3.1 REINSURANCE PREMIUMS.
(a) As initial consideration for Reinsurer's reinsurance of the Existing
Reinsured Contracts, the Company is paying to Reinsurer on the date hereof a
reinsurance premium equal to $4,210,000, subject to adjustment in accordance
with the Purchase Agreement.
(b) Notwithstanding anything in the Purchase Agreement to the contrary,
as additional consideration for Reinsurer's reinsurance of the Reinsured
Liabilities under the Reinsured Contracts, the Company hereby agrees that the
Reinsurer is entitled to receive, from and after the Effective Date, free and
clear of all claims, liens, interests and encumbrances, all amounts received by
or on behalf of the Company for any of the following after the Effective Date
with respect to the Reinsured Contracts:
(i) Premiums Receivable;
(ii) Policy Loan Receivables;
(iii) Agents Debit Balances;
(iv) Separate Account Revenues; and
(v) all other fees, charges and amounts, including, without limitation,
Premiums and payments of policy loan principal and interest.
(c) Reinsurer hereby is authorized by the Company to endorse for payment
all checks, drafts and money orders payable to the Company as payment of
Premiums, loan repayments and other amounts with respect to the Reinsured
Contracts. The Company hereby authorizes the Reinsurer, in the name of the
Company or otherwise, to ask, demand, collect, receive and furnish receipts for
Premiums, loan repayments and other amounts with respect to the Reinsured
Contracts. The Company hereby grants to Reinsurer, in accordance with the terms
and conditions of the Administrative Services Agreement, the access of the
Company to draft or debit the accounts of any Contractholders for Premiums and
other amounts earned under the Reinsured Contracts on or after the Effective
Date, including existing pre-authorized bank draft or electronic fund transfer
arrangements between the Company and such Contractholders. The
9
Company will promptly endorse and remit to Reinsurer any Premiums, loan
repayments and other amounts under the Reinsured Contracts received by the
Company on or after the Effective Date.
(d) On and after the Effective Date, the Company shall pay or cause to
be paid in accordance with the terms outlined in the Administrative Services
Agreement to the Reinsurer an amount equal to 100% of the items set forth in
subsection (b) above.
3.2 CEDING COMMISSION. In consideration of the Company's transfer of the
Existing Reinsured Contracts to Reinsurer as provided herein, Reinsurer is
paying to the Company on this date a ceding commission in the amount of Fifteen
Million Dollars ($15,000,000).
3.3 BENEFITS AND ASSUMED PAYMENTS. Reinsurer shall reimburse the Company for
all Reinsured Liabilities that are paid by the Company on and after the
Effective Date, provided that any such payments by the Company shall be in
accordance with the terms and conditions of the Reinsured Contracts or other
applicable Contract within the Reinsured Liabilities.
3.4 PREMIUM TAXES. Reinsurer shall reimburse the Company for Premium taxes
(including retaliatory taxes) paid by the Company on account of Premiums and
other amounts received on the Reinsured Contracts on and after the Effective
Date, on the basis specified herein. For each calendar year, Reinsurer shall
reimburse such Premium tax payments, with respect to each state and
municipality, on an annual basis, within thirty calendar days after receipt of a
billing for Reinsurer's share of such Premium taxes paid. Reinsurer's share
shall be determined on the basis of each such state's actual tax rate for
Reinsured Contract Premiums multiplied by the Premiums received in such state
during the annual period. Such Premium taxes shall be reduced to the extent of
any credit that the Company is entitled to take in any such year on its Premium
tax returns for any amounts paid by Reinsurer pursuant to Section 3.5 below.
Notwithstanding the foregoing, because the Company is required by Law to pay
estimated Premium taxes on a quarterly basis throughout each calendar year,
Reinsurer will pay the Company such Premium tax reimbursements on a quarterly
basis within fifteen calendar days after receipt of a written estimate prepared
by the Company, and the parties will make any necessary adjustment at the end of
the calendar year so that Reinsurer only reimburses the Company for the actual
Premium taxes on the basis specified above.
3.5 GUARANTY FUND ASSESSMENTS. The Company shall retain the obligation to
pay, without any right to reimbursement from Reinsurer, all amounts arising from
participation in any guaranty fund, insolvency fund, plan, pool, association or
similar organization that are assessed with respect to the Existing Reinsured
Contracts as a result of Premiums paid to the Company prior to the date hereof
or on account of the Premiums Receivable. Reinsurer shall reimburse the Company
for any and all such assessments with respect to the Reinsured Contracts as a
result of Premiums paid on or after the date hereof, except to the extent
included in the Premiums Receivable.
10
3.6 QUARTERLY REPORTS. For so long as this Agreement is in effect, Reinsurer
shall provide the Company with a quarterly report relating to the Reinsured
Contracts no later than twenty Business days after the end of each calendar
quarter, in accordance with the terms of the Administrative Services Agreement.
3.7 PAYMENTS.
(a) All amounts due to be paid to either the Company or Reinsurer shall
be determined on a net basis as of the last day of the calendar quarter to which
such payment is attributable. All such amounts will be due and accrued as of
such date. Payment shall be based upon the report delivered by Reinsurer
pursuant to Section 3.6. If, based upon such report, it is determined that
Reinsurer owes a payment to the Company, such payment shall be made within five
calendar days after delivery of such report. If, based upon such report, it is
determined that the Company owes a payment to Reinsurer, such payment shall be
made within fifteen calendar days after delivery of such report. All such
payments shall be made in cash.
(b) If there is a delayed settlement of any payment due hereunder,
interest will accrue on such payment at the three month London Interbank
Offering Rate ("LIBOR") as published in THE WALL STREET JOURNAL, Eastern
Edition, in effect on the day such payment is due. For purposes of this Section
3.7, a payment will be considered overdue, and such interest will begin to
accrue, on the date which is five Business Days after the date such payment is
due.
(c) Any debts or credits between the Company and Reinsurer under this
Agreement are deemed mutual debts and credits, as the case may be, and the
Company and Reinsurer shall have, and may exercise at any time and from time to
time, the right to net or offset any such debts or credits under this Agreement
and only the balance shall be allowed or paid hereunder. This right of netting
and offset shall not be affected or diminished because of insolvency of either
party to this Agreement. Without limiting the generality of the foregoing, in
the event of insolvency of either party, the items described in Section 3.1(b)
of this Agreement may be netted or offset against payments of Reinsured
Liabilities described in Section 2.1(d).
3.8 ANNUAL REPORTS. Each party shall provide to the other on a timely basis
after the end of each calendar year such information as may be reasonably
requested in order for the requesting party to prepare statutory filings, tax
returns and other similar filings and reports.
3.9 WIRE TRANSFERS. Any payment of cash required under this Agreement shall
be paid to the recipient in immediately available funds, United States Dollars,
by means of a wire transfer, if the recipient provides to the payer appropriate
wire transfer instructions at least two Business Days prior to the required date
of payment, and otherwise by means of a certified check.
11
3.10 DAC TAX MATTERS.
(a) To the extent that Section 848 of the Internal Revenue Code of 1986
(the "CODE"), and corresponding Regulations 1.848-1 and 1.848-2 are applicable
to the Reinsured Contracts, the Company and Reinsurer agree as follows:
(i) Pursuant to the joint election set forth in Section 1.848-2(g)(8) of
the Regulations corresponding to the Code, the party with the net positive
consideration for this Agreement for each taxable year will capitalize
specified policy acquisition expenses with respect to this Agreement without
regard to the general deductions limitation of Code Section 848(c)(1). The
first taxable year for which the joint election will be effective is the tax
year ending December 31, 2001. Both parties shall attach a joint schedule to
their 2001 federal income tax returns that identifies this Agreement as an
agreement for which the joint election has been made.
(ii) Both parties shall exchange information pertaining to the amount of
net consideration under this Agreement each year to ensure consistency or as
otherwise required by the Internal Revenue Service.
(iii) Reinsurer will submit a schedule to the Company by April 1 of each
year providing Reinsurer's calculation of the net consideration for the
preceding calendar year. This schedule will be accompanied by a statement
signed by an officer of Reinsurer stating that Reinsurer will report such
net consideration in its tax return for the preceding calendar year.
(iv) The Company may contest such calculation by providing an
alternative calculation to Reinsurer in writing within thirty calendar days
of the Company's receipt of Reinsurer's calculation. If the Company does not
so notify Reinsurer, the Company will report the net consideration as
determined by Reinsurer in the Company's tax return for the previous
calendar year. If the Company contests Reinsurer's calculation of the net
consideration, the parties will act in good faith to reach an agreement as
to the correct amount within thirty calendar days of the date the Company
submits its alternative calculation.
(b) (i) Other than with regard to the initial reinsurance premium as set
forth in Section 3.1(a), it is intended that the Company should not bear an
economic cost, or reap any economic benefit, relating to the federal income tax
treatment of the net consideration determined as described in Section 3.10(a).
To approximate this result, an annual reimbursement (the "DAC TAX
REIMBURSEMENT") as determined under Section 3.10(b)(ii) will be paid for each
taxable year for which this Agreement is in effect.
(ii) The DAC Tax Reimbursement for each taxable year will be determined
as follows:
12
[((.95a-SUMb)x.35)/.65]
where:
"a" is the capitalized deferred acquisition cost ("DAC") and is equal to
the Net Positive Consideration times the Applicable Percentage, where:
"NET POSITIVE CONSIDERATION" is determined in accordance with Section
3.10(a), but without regard to the initial reinsurance premium as set
forth in Section 3.1(a); and
"APPLICABLE PERCENTAGE" is the appropriate rate set forth in Section
848(c) of the Code.
"(SUM)" is a summation for n = 1 through 10, where "n" is equal to the
number of calendar years subsequent to the taxable year for which the
DAC Tax Reimbursement is being determined.
"b" is the amortized DAC and is equal to the PV Factor times the
Amortization Amount, where:
n
"PV FACTOR" is equal to (1/(1+i) ), where "i" is equal to the ten-year
U.S. Treasury Note rate on December 31 of the taxable year for which the
DAC Tax Reimbursement is being determined; and
"AMORTIZATION AMOUNT" is equal to:
10% times a for n = 1 through 9, and
5% times a for n = 10.
".35" is the highest corporate tax rate set forth in Section 11(b) of
the Code.
".65" is 1 minus the highest corporate tax rate set forth in Section
11(b) of the Code.
(iii) In the event of a change in the highest corporate federal income
tax rate specified in Section 11(b) of the Code, or the applicable
percentages specified in Section 848(c) of the Code, the DAC Tax
Reimbursement formula set forth in Section 3.10(b)(ii) will be modified
accordingly.
13
(iv) The DAC Tax Reimbursement will be paid to the party with Net
Positive Consideration as defined in Section 3.10(b)(ii).
(v) The DAC Tax Reimbursement will be paid at the time of the first
settlement pursuant to Section 3.7 of this Agreement following the time at
which the Company and Reinsurer agree as to the amount of net consideration
pursuant to Section 3.10(a).
(vi) The DAC Tax Reimbursement will be taken into account in determining
net consideration for this Agreement for the taxable year in which the DAC
Tax Reimbursement is paid.
3.11 FINANCING STATEMENTS. The Company shall take all action reasonably
requested by the Reinsurer to assist the Reinsurer to record and perfect its
right, title and interest in and to the items transferred to the Reinsurer
pursuant to this Article 3. Such action shall include without limitation the
Company's execution and delivery of any financing statements reasonably
requested by the Reinsurer to the extent that it may appear appropriate to the
Reinsurer to file such financing statements under Article 9 of the Uniform
Commercial Code.
ARTICLE 4
INSOLVENCY
4.1 PAYMENTS BY REINSURER. Reinsurer hereby agrees that all Reinsured
Liabilities shall be payable by Reinsurer on the basis of the liability of the
Company under the Reinsured Contracts, without diminution because of the
insolvency, liquidation or rehabilitation of the Company or the appointment of a
conservator, receiver, liquidator or statutory successor of the Company,
directly to the Company or to its conservator, receiver, liquidator or other
statutory successor.
4.2 CLAIMS. It is agreed that any conservator, receiver, liquidator or
statutory successor of the Company shall give prompt written notice to Reinsurer
of the pendency or submission of a claim under any such Reinsured Contract.
During the pendency of such claim, Reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense available to the Company or its conservator, receiver,
liquidator or statutory successor. The expense thus incurred by Reinsurer is
chargeable against the Company as a part of the expense of insolvency,
liquidation or rehabilitation to the extent of a proportionate share of the
benefit which accrues to the Company solely as a result of the defense
undertaken by Reinsurer.
ARTICLE 5
INDEMNIFICATION
14
5.1 REINSURER INDEMNIFICATION. From and after the date of this Agreement,
Reinsurer shall indemnify, defend and hold harmless the Company and the Separate
Account (and their respective directors, officers, employees, successors and
permitted assigns) (the "COMPANY INDEMNITEES") from and against all Losses
asserted against, imposed upon or incurred by such Company Indemnitees resulting
from, arising out of, based upon or otherwise in respect of any of the
following: (a) any breach of any covenant or agreement made or to be performed
by Reinsurer pursuant to this Agreement, (b) any directions of Reinsurer given
pursuant to Section 2.1(e) or 2.7 hereof and followed by the Company in a timely
manner, (c) the payment of or failure to pay any Reinsured Liabilities, (d) any
fraud, theft or embezzlement by officers, employees or agents of Reinsurer
during the term of this Agreement, (e) the failure of Reinsurer to comply with
any applicable Law during the term of this Agreement, and (f) the reasonable
costs to the Company Indemnitees of enforcing this indemnity against Reinsurer.
5.2 COMPANY INDEMNIFICATION. From and after the date of this Agreement, the
Company shall indemnify, defend and hold harmless Reinsurer (and its respective
directors, officers, employees, successors and permitted assigns) (the
"REINSURER INDEMNITEES") from and against all Losses asserted against, imposed
upon or incurred by such Reinsurer Indemnitees resulting from, arising out of,
based upon or otherwise in respect of any of the following: (a) any breach of
any covenant or agreement made or to be performed by the Company pursuant to
this Agreement, (b) any Company Retained Liabilities, (c) any fraud, theft or
embezzlement by officers, employees or agents of the Company or the Separate
Account during the term of this Agreement, (d) the failure of the Company to
comply with any applicable Law during the term of this Agreement, (e) the
failure of the Separate Accounts to comply with any applicable Law during the
term of this Agreement, unless such failure is caused by Reinsurer's actions or
omissions under the Administrative Services Agreement, and (f) the reasonable
costs to Reinsurer Indemnitees of enforcing this indemnity against the Company.
The parties agree that, for purposes of the Company's indemnification
obligations hereunder, the Company shall not be liable for the acts of any of
its agents or other producers who are appointed by the Company pursuant to
Section 2.2 of the Marketing Agreement to the extent such agents or other
producers are engaged in the sales or marketing of New Reinsured Contracts.
5.3 NOTICE OF LOSS, ASSERTED LIABILITY. As promptly as practicable after (a)
becoming aware of circumstances that have resulted in a Loss for which a party
entitled to indemnification pursuant to Section 5.1 or Section 5.2 intends to
seek indemnification under such Section (the "INDEMNIFIED PARTY") or (b) receipt
by the Indemnified Party of written notice of any demand, claim or circumstances
which, with the lapse of time, the giving of notice or both, would give rise to
a claim or the commencement of any Litigation that may result in a Loss (an
"ASSERTED LIABILITY"), the Indemnified Party shall give notice thereof (the
"CLAIMS NOTICE") to any other party obligated to provide indemnification
pursuant to Section 5.1 or Section 5.2 (the "INDEMNIFYING PARTY"). The Claims
Notice shall describe the Loss or the Asserted Liability in reasonable detail
and shall indicate the amount (estimated, if necessary) of the Loss or Asserted
Liability that
15
has been or may be suffered by the Indemnified Party. If a Claims Notice is not
provided within the time required by the first sentence of this Section 5.3, the
Indemnified Party nonetheless shall be entitled to indemnification by the
Indemnifying Party except to the extent that the Indemnifying Party is actually
prejudiced by such late receipt of the Claims Notice.
5.4 OPPORTUNITY TO CONTEST.
(a) If an Indemnified Party asserts, or may in the future seek to
assert, a claim for indemnification hereunder because of a claim or demand made,
or an action, proceeding or investigation instituted, by any Person not a party
to this Agreement (a "THIRD PARTY CLAIMANT") that may result in a Loss with
respect to which the Indemnified Party would be entitled to indemnification
pursuant to this Article 5 (a "THIRD PARTY CLAIM"), the Indemnified Party shall
deliver to the Indemnifying Party a Claims Notice with respect thereto, which
Claims Notice shall, in accordance with the provisions of Section 5.3, be
delivered as promptly as practicable after such Third Party Claim is actually
known to the Indemnified Party. Failure to deliver a Claims Notice with respect
to a claim in a timely manner as specified in the preceding sentence shall not
be deemed a waiver of the Indemnified Party's right to indemnification hereunder
for Losses in connection with such claim, but the amount of reimbursement to
which the Indemnified Party is entitled shall be reduced by the amount, if any,
by which the Indemnified Party's Losses would have been less had such Claims
Notice been timely delivered.
(b) The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party, to investigate, contest, defend or settle any Third Party
Claim that may result in a Loss with respect to which the Indemnified Party is
entitled to indemnification pursuant to this Article 5; PROVIDED, that the
Indemnified Party may, at its option and at its own expense, participate in the
investigation, contesting, defense or settlement of any such Third Party Claim
through representatives and counsel of its own choosing; and, PROVIDED FURTHER,
that the Indemnifying Party shall not settle any Third Party Claim unless (i)
such settlement is on exclusively monetary terms and provides a complete release
of, or dismissal with prejudice of, all claims against any Indemnified Party
potentially affected by such Third Party Claim for all matters that were or
could have been asserted in connection with such claim, or (ii) the Indemnified
Party shall have consented to the terms of such settlement, which consent shall
not unreasonably be withheld, conditioned or delayed. If requested by the
Indemnifying Party, the Indemnified Party will, at the expense of the
Indemnifying Party, cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim against the Third Party
Claimant, or any cross-complaint against any Person (other than the Indemnified
Party or its Affiliates). Unless and until the Indemnifying Party elects to
defend the Third Party Claim, the Indemnified Party shall have the right, at its
option and at the Indemnifying Party's expense, to do so in such manner as it
deems appropriate; PROVIDED, HOWEVER, that the Indemnified Party shall not
settle or compromise any Third Party Claim for which it seeks indemnification
hereunder without the prior written
16
consent of the Indemnifying Party (which shall not be unreasonably withheld,
conditioned or delayed).
(c) The Indemnifying Party shall be entitled to participate in (but not
to control) the defense of any Third Party Claim that it has elected not to
defend with its own counsel and at its own expense.
(d) Except as provided in the first sentence of Section 5.4(b), the
Indemnifying Party shall bear all costs of defending any Third Party Claim and
shall indemnify the Indemnified Party for all costs, fees and expenses incurred
in connection with defending such Third Party Claim.
(e) The parties shall make available to each other all relevant
information in their possession relating to any Third Party Claim (except to the
extent that such action would result in a loss of attorney-client privilege) and
shall cooperate with each other in the defense thereof.
(f) No party otherwise entitled to indemnification under this Agreement
shall be indemnified pursuant to this Agreement to the extent that such party's
Losses are increased or extended by the willful misconduct, violation of
applicable Law or bad faith of such party.
5.5 CERTAIN REDUCTIONS; SUBROGATION RIGHTS. All indemnification payments
payable hereunder shall be reduced by the amount of insurance proceeds received
by, or any Tax benefits inuring to the benefit of, the Indemnified Party as a
result of the Loss for which the Indemnified Party is seeking indemnification.
In the event that the Indemnifying Party shall be obligated to indemnify the
Indemnified Party pursuant to this Article 5, the Indemnifying Party shall, upon
payment of such indemnity in full, be subrogated to all rights of the
Indemnified Party with respect to the Loss to which such indemnification
relates; PROVIDED, HOWEVER, that the Indemnifying Party shall only be subrogated
to the extent of any amount paid by it pursuant to this Article 5 in connection
with such Loss.
ARTICLE 6
TERM AND TERMINATION
6.1 DURATION. This Agreement shall continue in force until such time that
Reinsurer's liability with respect to all Reinsured Contracts reinsured
hereunder is terminated pursuant to Section 6.2.
6.2 TERMINATION. This Agreement (i) may be terminated at any time upon the
mutual written consent of the parties hereto, which writing shall state the
effective date of termination, and (ii) shall terminate automatically at such
time as none of the Reinsured Contracts remains in force.
17
6.3 SURVIVAL OF CERTAIN ARTICLES AND SECTIONS. Notwithstanding the other
provisions of this Article 6, the rights and obligations of the parties pursuant
to Sections 3.4, 3.5, 3.7 and 3.10, and Articles 1, 5, 7 and 8 shall survive the
termination of this Agreement for a two year- period following such termination
with respect to matters or events occurring during the term of this Agreement.
ARTICLE 7
DISPUTE RESOLUTION
7.1 DISPUTE RESOLUTION. The parties acknowledge and agree that either party
may pursue judicial remedies at Law or equity in the event of a dispute with
respect to the interpretation, construction or enforcement of this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 COOPERATION. Each party hereto shall cooperate with the other party and,
individually or collectively, shall promptly take such further action and
promptly execute such further documents, certificates, instruments, statements,
filings, conveyances, and agreements as may be reasonably necessary to
effectuate the purposes of this Agreement.
8.2 OVERSIGHTS AND ERRORS. It is agreed that in the event that any
unintentional or accidental failure to comply with the terms of this Agreement
can be shown to be the result of a misunderstanding, oversight or clerical
error, both parties shall be restored to the position they would have occupied
had the misunderstanding, oversight or error not occurred.
8.3 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. Except as otherwise
expressly provided herein, this Agreement (including the Schedules hereto)
constitutes the entire agreement between the parties with respect to the
transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement,
expressed or implied, is intended to confer upon any Person, other than the
parties or their respective successors and permitted assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
8.4 AMENDMENTS. Any change or modification to this Agreement shall be null
and void unless made by amendment to this Agreement and signed by both parties.
8.5 WAIVERS. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more
18
instances shall be deemed to be or construed as a further or continuing waiver
of such condition or breach or a waiver of any other condition or of the breach
of any other term of this Agreement.
8.6 BINDING EFFECT; ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other party, except that, without
having to obtain such consent, either party may assign this Agreement to a
Person who acquires all or substantially all of the equity or assets of such
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns. Reinsurer or the Company, as the case may be, shall
promptly notify each other following any "change of control" filing with respect
to such party made with an insurance regulatory authority, the approval of any
plan to liquidate, merge or dissolve Reinsurer or the Company, as applicable, or
of any proceeding or lawsuit that materially affects Reinsurer's or the
Company's ability to perform this Agreement, including, but not limited to,
insolvency or rehabilitation proceedings.
8.7 NOTICES. All notices or other communications that are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by certified mail postage pre-paid, or by courier or
overnight carrier, to the Persons at the addresses set forth below (or at such
other address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
The Company: First Fortis Life Insurance Company
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
and
Fortis, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
With copy to counsel Xxxxxx & Bird LLP
(which shall not 0000 Xxxx Xxxxxxxxx Xxxxxx
19
constitute notice): Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
Reinsurer: Hartford Life Insurance Company
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
Fax: 000-000-0000
Phone: 000-000-0000
With copy to counsel Lord, Bissell & Brook
(which shall not 000 X. XxXxxxx Xxxxxx
constitute notice): Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Fax: 000-000-0000
Phone: 000-000-0000
8.8 GOVERNING LAW. Notwithstanding the place where this Agreement may be
executed by any of the parties, the parties expressly agree that this Agreement
shall in all respects be governed by, and construed in accordance with, the Laws
of the State in which the Company is domiciled, without regard for any conflicts
of laws principles.
8.9 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement. All references herein to
Articles, Sections and Schedules shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require.
8.10 INTERPRETATION.
(a) For purposes of this Agreement, the words "hereof," "herein,"
"hereby" and other words of similar import refer to this Agreement as a whole
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Whenever the singular is used herein, the same
shall include the plural, and whenever the plural is used herein, the same shall
include the singular, where appropriate. All dollar references in this Agreement
are to the currency of the United States.
(b) No uncertainty or ambiguity herein shall be construed or resolved
against any party, whether under any rule of construction or otherwise. No party
to this Agreement shall be considered the draftsman. The parties acknowledge and
agree that this Agreement has been reviewed, negotiated and accepted by all
parties and their attorneys and shall be construed and interpreted according to
the ordinary meaning of the words used so as to fairly accomplish the purposes
and intentions of all parties hereto.
20
8.11 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES BEGIN ON NEXT PAGE]
21
IN WITNESS WHEREOF, the parties have executed this Reinsurance Agreement as
of the date first above written.
FIRST FORTIS LIFE INSURANCE
COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
HARTFORD LIFE INSURANCE
COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
22
SCHEDULE 1.1
CONTRACT STATES
New York
SCHEDULE 1.2
REINSURED CONTRACTS
See attached.
SCHEDULE 1.3
EXISTING REINSURED CONTRACTS
Please see CD-ROM provided to Reinsurer by the Seller Parties for the Business
and generated as of March 30, 2001.
EXECUTION COPY
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (this "AGREEMENT"), dated as of
April 1, 2001, is entered into by and between FIRST FORTIS LIFE INSURANCE
COMPANY, a New York stock life insurance company (the "COMPANY"), on behalf of
itself and its Separate Account A (the "SEPARATE ACCOUNT"), and HARTFORD LIFE
INSURANCE COMPANY, a Connecticut stock life insurance company ("REINSURER").
WHEREAS, Reinsurer and the Company have entered into that certain
Reinsurance Agreement, dated of even date herewith (the "REINSURANCE
AGREEMENT"), pursuant to which Reinsurer will reinsure the Reinsured Contracts
(as defined in the Reinsurance Agreement) on the terms and conditions set forth
therein; and
WHEREAS, the parties desire that Reinsurer will provide all
administrative services with respect to the Reinsured Contracts, except as
specifically set forth herein; and
WHEREAS, the parties desire to set forth in this Agreement the terms
and conditions upon which such administrative services will be performed;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
As used herein and in the Schedules hereto, each of the following terms
has the meaning set forth below (such meaning to be equally applicable to both
the singular and plural forms of the term defined). Any capitalized term used
but not defined herein shall have the meaning set forth in the Reinsurance
Agreement.
"ADMINISTRATIVE SERVICES" has the meaning set forth in Section 2.1.
"AFFILIATE" has the meaning set forth in the Reinsurance Agreement.
"ASSERTED LIABILITY" has the meaning set forth in Section 6.3.
"BANK ACCOUNTS" has the meaning set forth in Section 3.14.
"BUSINESS DAY" has the meaning set forth in the Reinsurance Agreement.
"CLAIMS NOTICE" has the meaning set forth in Section 6.3.
"COMMISSIONS" mean all commissions, expense allowances, benefit credits
and other fees and compensation payable to producers, agents, brokers or other
such sales representatives.
"COMPANY INDEMNITEES" has the meaning set forth in Section 6.1.
"COMPANY RETAINED LIABILITIES" has the meaning set forth in the
Reinsurance Agreement.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 4.4.
"CONTRACTHOLDER" means the owner of a Reinsured Contract.
"FILINGS" means all documents required to be filed with the SEC
relating to the Separate Account, including, but not limited to, Registration
Statements, Annual and Semi-Annual Reports to Contractholders, Contractholder
proxy materials, and filings on Form N-3, Form NSAR and Form 24 F-2.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local,
foreign or other governmental or public agency, instrumentality, commission,
authority, self-regulatory organization, board or body, including, without
limitation, the SEC, NASD and any state insurance regulatory authority.
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.3.
"INDEMNIFYING PARTY" has the meaning set forth in Section 6.3.
"INTERMEDIARY" means an individual or entity designated by a
Contractholder as its broker of record or as the individual or entity that will
act on such Contractholder's behalf, in some or all respects, in connection with
such Contractholder's Reinsured Contract.
"LAW" means any federal, state, local or foreign code, law, statute,
ordinance, regulation, rule, reporting or licensing requirement, policy,
guideline, administrative interpretation or other requirement of a Governmental
Authority (including those of the SEC, NASD, NAIC, any self-regulatory
organization or any state insurance department) applicable to the parties
hereto, or any of their respective Affiliates, properties, assets, officers,
directors, employees or agents, as the case may be.
2
"LITIGATION" means any action, cause of action (whether at law or in
equity), arbitration, claim or complaint by any Person alleging potential
liability, wrongdoing or misdeed of another Person (other than claims for policy
benefits in the ordinary course of business), or any administrative or other
similar proceeding, criminal prosecution or investigation by any Governmental
Authority alleging potential liability, wrongdoing or misdeed of another Person.
"LOSS" means any action, claim, loss, liability, damage, deficiency,
cost, expense (including reasonable fees and expenses of attorneys, actuaries,
accountants and other consultants), interest or penalty.
"MARKETING AGREEMENT" means that certain Marketing Agreement, dated as
of the date hereof, by and between the Company and Reinsurer, providing, among
other things, for the Company to provide certain marketing services on behalf of
Reinsurer.
"MATERIAL REGULATORY PROCEEDING" has the meaning set forth in
Section 3.4.
"PENDING LITIGATION" means any Litigation relating to the Reinsured
Contracts that (a) is pending against or otherwise involving the Company on the
date hereof, or (b) arises after the date hereof and is a Company Retained
Liability.
"PERSON" means any individual, corporation, partnership, firm, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, governmental, judicial or regulatory body,
division, business unit or other entity.
"PREMIUMS" mean premiums, considerations, deposits and similar receipts
with respect to the Reinsured Contracts.
"PURCHASE AGREEMENT" means that certain Asset Purchase Agreement, dated
January 25, 2001, by and among Fortis, Inc., Fortis Benefits Insurance Company,
First Fortis Life Insurance Company, Houston National Life Insurance Company,
Xxxx Xxxxx Life Insurance Company, Hartford Life Insurance Company, Hartford
Life and Annuity Insurance Company and Hartford Life, Inc.
"REINSURER INDEMNITEES" has the meaning set forth in Section 6.2.
"REINSURED LIABILITIES" has the meaning set forth in the Reinsurance
Agreement.
"RULES AND REGULATIONS OF THE SEPARATE ACCOUNT" means the Separate
Account's governing Rules and Regulations, as amended, from time to time.
"SEC" means the United States Securities and Exchange Commission.
3
"SERVICE EFFECTIVE DATE" means, (i) with respect to each Existing
Reinsured Contract, 12:01 a.m. on the date of this Agreement, and (ii) with
respect to each New Reinsured Contract, the date and time upon which the
Reinsurer's obligations with respect to such Reinsured Contract begin under the
terms and conditions of the Reinsurance Agreement, PROVIDED that, in each
instance, the Company shall provide such services as may be required of the
Company under the Transition Services Agreement in accordance with the terms and
conditions thereof.
"SERVICE PROVIDER" means an individual or entity, other than an
Intermediary, that provides services to holders of Reinsured Contracts.
"TAX" has the meaning set forth in the Reinsurance Agreement.
"THIRD PARTY CLAIM" has the meaning set forth in Section 6.4.
"THIRD PARTY CLAIMANT" has the meaning set forth in Section 6.4.
"THIRD PARTY REINSURANCE AGREEMENTS" means all agreements pursuant to
which the Company cedes or retrocedes risks assumed under the Reinsured
Contracts.
"TRANSITION SERVICES AGREEMENT" means that certain Transition Services
Agreement, dated of each date herewith, by and between, among others, the
Company and the Reinsurer, providing for the servicing and support of the
Reinsured Contracts and the Separate Account by the Company during a transition
period specified therein.
ARTICLE 2
APPOINTMENT; STANDARDS; NOTIFICATION OF CONTRACTHOLDERS
2.1 APPOINTMENT AND ACCEPTANCE OF APPOINTMENT. Except as expressly
provided herein, or unless specifically required by applicable Law, the Company
hereby appoints Reinsurer, on an exclusive basis for the period specified in
accordance with Section 7.1 hereof, to provide with respect to the Reinsured
Contracts and the Separate Account the administrative services set forth in
Section 3.2 hereof (collectively, the "ADMINISTRATIVE SERVICES") (other than
those services to be provided by the Company pursuant to the Transition Services
Agreement for so long as such services are required of Company under the
Transition Services Agreement), and Reinsurer hereby accepts such appointment
and agrees to perform such Administrative Services on behalf of and in the name
of the Company or the Separate Account, as appropriate. The Reinsurer's
obligations to provide the Administrative Services shall be subject to the
Transition Services Agreement as provided above.
2.2 STANDARDS. Reinsurer acknowledges that the performance of the
Administrative Services in an accurate and timely manner is of paramount
importance to the Company and the Separate Account. Reinsurer agrees to perform
the Administrative
4
Services with the skill, diligence and expertise commonly expected from
experienced and qualified personnel performing such duties and in conformance
with industry standards, the terms and conditions of the Reinsured Contracts,
applicable Law and the standards established by the Company or as may be
mutually agreed to by the Company and Reinsurer from time to time. When
performing Administrative Services for the Separate Account, Reinsurer will
comply with the provisions of the Rules and Regulations of the Separate Account
provided to Reinsurer by the Company and comply with the written policies of the
Separate Account; PROVIDED THAT such policies are not in conflict with this
Agreement, the Separate Account's governing documents, or any applicable Laws;
and PROVIDED, FURTHER, that Reinsurer shall have no responsibility for
compliance with any such Rules and Regulations or policies until it shall have
received written copies thereof; AND PROVIDED FURTHER, that, unless required by
Law, the Company shall not amend such Rules and Regulations or policies without
the prior written consent of the Reinsurer, which consent shall not be
unreasonably withheld, conditioned or delayed.
2.3 NOTIFICATION OF CONTRACTHOLDERS. Reinsurer agrees to send to
(i) holders of the Reinsured Contracts, (ii) the Intermediaries reasonably
identified by Reinsurer after the date hereof, (iii) the Service Providers
reasonably identified by Reinsurer after the date hereof, and (iv) such
Intermediaries, Service Providers and other appropriate persons as required by
applicable Law or the applicable Reinsured Contract, a written notice prepared
by Reinsurer and reasonably acceptable to the Company, to the effect that
Reinsurer has been appointed by the Company to provide the Administrative
Services. Reinsurer shall send such notice for each Reinsured Contract, by first
class U.S. mail, at its own expense, as soon as practicable but no later than
thirty calendar days after the Service Effective Date for such Reinsured
Contract. The parties shall cooperate with each other to make certain that such
notice shall include a statement that the Company remains the issuing company
under the applicable Reinsured Contract and that Reinsurer is administering such
Reinsured Contract on the Company's behalf.
ARTICLE 3
ADMINISTRATIVE SERVICES
3.1 ADMINISTRATIVE SERVICES GENERALLY.
(a) Except as otherwise provided in the Transition Services
Agreement, Reinsurer agrees to perform all Administrative Services during the
period specified in Section 7.1 hereof, and is authorized to do so in the name
or on behalf of the Company or the Separate Account where appropriate. The
Company shall cooperate with the Reinsurer in connection with the provision of
the Administrative Services as reasonably requested by the Reinsurer from time
to time and Reinsurer shall pay the Company therefor in accordance with Section
3.5. The Company shall use all commercially reasonable efforts to comply with
directions from Reinsurer with respect to all matters affecting Reinsurer's
obligation to perform the Administrative Services, so long as such directions
comply with all applicable Law and are not inconsistent with the provisions of
this Agreement or the Reinsurance Agreement; PROVIDED FURTHER THAT
5
nothing in this Agreement shall be construed to conflict with the Company's
ultimate authority and obligation to make decisions with respect to the
administration of the Reinsured Contracts.
(b) The intention of the parties is that Reinsurer will
perform all such Administrative Services in such a way as to minimize the
involvement of the Company and the Separate Accounts therein, subject to (i) the
Transition Services Agreement and (ii) any requirements of applicable Law that
specific actions be taken by the Company or the Separate Account without the
Reinsurer acting on its or their behalf. Reinsurer will give the Company timely
notice of any actions that are legally required to be taken by the Company or
the Separate Account with respect to the Reinsured Contracts and, to the extent
reasonably practicable, prepare in a timely manner the forms of any
documentation required for the Company and the Separate Account to comply
therewith.
(c) Notwithstanding anything in this Agreement to the
contrary, the Company shall prepare and deliver, at the Reinsurer's expense, any
notices with respect to the Reinsured Contracts required by Title V of the
Xxxxx-Xxxxx-Xxxxxx Act or any state statute or regulation requiring the delivery
of similar notices, including New York Regulation 169, which notices shall not
be mailed, unless required by Law, until they have been approved in writing by
the Reinsurer, which approval shall not be unreasonably withheld, conditioned or
delayed.
3.2 ADMINISTRATIVE SERVICES SPECIFICALLY. The Administrative
Services shall consist of the following:
(a) Billing, collection and processing of Premiums, deposits
and other remittances from Contractholders (including payments of principal or
interest on contract loans) and from any collection facility, including
Intermediaries and other Persons that receive remittances with respect to the
Reinsured Contracts and Separate Account.
(b) Subject to the provisions of Section 3.12 of this
Agreement regarding the handling of Pending Litigation and of Section 3.13 of
this Agreement regarding the handling of claims involving Company Retained
Liabilities, the administration and processing of claims and disbursements under
the Reinsured Contracts, including, but not limited to, the payment of death
benefits, annuity benefits, withdrawals, surrenders, transfers, contract loans
and returns of deposits. As part of such administration and processing,
Reinsurer shall, without limitation,
(1) Receive and process all requests for claims and
disbursements.
(2) Evaluate and pay promptly and accurately all
allowable claims arising under the terms of the Reinsured Contracts
after receipt of the completed claim form and all other required
documents, within the number of days provided by applicable Law.
6
(3) In the event of non-payment of a claim on account of
incomplete or insufficient data, receipt of the claim shall be
confirmed with, and the reason for nonpayment shall be communicated to,
the claimant promptly after receipt of the claim form, within that time
frame provided by applicable Law. Claims decisions and payments will be
made by Reinsurer in compliance with all applicable Laws.
(4) If Reinsurer determines that a claim under a
Reinsured Contract requires investigation or is to be denied, the
Company shall be promptly notified.
(5) Process policy lapses, expiries and/or non-forfeiture
options with respect to the Reinsured Contracts.
(6) Prepare and deliver to the Company initial monthly
claims reports substantially in the form of SCHEDULE 3.2 hereto, as
such form may reasonably be changed by the Company from time to time.
(7) Perform such other claim services necessary in
connection with the maintenance of the Reinsured Contracts.
(c) Delivery to the Company of such information (if any)
in addition to the monthly and quarterly reports, as applicable, required by
Subsection 3.2(b)(6) and Section 4.3 hereof as may reasonably be required by the
Company to calculate and pay Premium taxes due in respect of the Reinsured
Contracts and to determine if the Reinsurer's calculation of the amount of the
General Account Reserves for the Reinsured Contracts are consistent with the
applicable provisions of the Reinsurance Agreement.
(d) Maintenance of necessary computer and other records,
including without limitation, records with respect to applications,
Contractholders and Premium payments to the extent and for such duration as
required by applicable Law, so as to enable the Company to determine by
inspection of such records, at any time during normal business hours upon
reasonable notice to Reinsurer, the true and accurate status of the insurance in
force under the Reinsured Contracts.
(e) The making available of all records relating to the
Reinsured Contracts and Separate Account for examination by the Company, and of
all reasonably relevant personnel of Reinsurer for interviews and discussions
with the Company, for any reasonable business purpose in accordance with the
terms and conditions of Section 4.2 hereof. Such records shall include, but not
be limited to, Contractholder records, in-force listings, Premium records, claim
forms, itemized xxxxxxxx, General Account Reserves calculations and eligibility
documentation.
(f) The giving of required notices to Contractholders of
any lapse in coverage as required by applicable Law.
7
(g) The giving of prompt notice to the Company of any
consumer complaint that threatens legal action against the Company and the
forwarding to the Company of all written consumer complaints within seventy-two
hours, if reasonably practicable, but in no instance longer than ten Business
Days after receipt thereof, as well as copies of all pertinent files and
correspondence relating thereto.
(h) The provision of those standard supplies needed for
the administration of the Reinsured Contracts and Separate Account in the
Company's name; PROVIDED, HOWEVER, that the Company will supply, at Reinsurer's
expense, such Company forms, letterhead, stationery and other similar materials
as are reasonably necessary for Reinsurer's administration and support of the
Reinsured Contracts and Separate Account and such materials shall be used in
strict accordance with the Company's instructions.
(i) Processing of requests for termination of coverage
in accordance with the terms and conditions of the Reinsured Contracts.
(j) Processing of policy changes requested by
Contractholders including, but not limited to, name changes, address changes,
loss payee changes, increases and decreases in coverage amounts, reinstatements
and the like.
(k) Providing the Company with reports of transactions
under the Reinsured Contracts in accordance with the terms and conditions of
Subsection 3.2(b)(6) and Section 4.3 hereof.
(l) Calculation of General Account Reserves on the
Reinsured Contracts and other items used in computing the General Account
Reserves and providing the Company with the results of such calculations on the
reports required by Section 4.3 hereof, including sufficient information so that
the Company may comply with its financial reporting requirements and
obligations.
(m) Reporting of such information with respect to the
Reinsured Contracts as the Company may reasonably require from time to time for
statutory filing and reporting purposes.
(n) Without limiting the generality of any of the
foregoing, specifically with respect to the Separate Account:
(1) maintain copies of the Separate Account's governing
documents, including the Rules and Regulations of the Separate Account,
provided that the Company shall provide Reinsurer all current copies of
such documents;
(2) prepare and file with state insurance departments,
necessary filings for the Separate Account, and prepare and maintain
required licenses and permits and comply with all related regulatory
requirements;
8
(3) prepare all Filings with the SEC that are accurate,
complete and consistent with the requirements for such filings, so that
the Company may timely file the Filings with the SEC;
(4) administer contracts on behalf of the Separate
Account with, among others, the Separate Account's custodian and
transfer agent;
(5) perform all accounting services for the Separate
Account as may be reasonably requested by the Company from time to time
consistent with its past practice or as required by applicable Law,
including, without limitation, providing a quarterly trial balance to
the Company, performing net asset valuations, and providing schedules
to the Company for preparation of the Company's statutory annual
statements;
(6) calculate performance data of the Separate Account in
accordance with industry practice for dissemination to information
services covering the investment company industry;
(7) at least annually provide to Contractholders on
the appropriate forms the amount and federal and state income Tax
character of any distributions;
(8) examine and review the operations of the Separate
Account's custodian, transfer agent and investment adviser to promote
compliance with applicable federal and state Laws;
(9) handle the preparation, printing and distribution
of publicly disseminated prospectuses and reports, as required by
applicable Law or contract;
(10) prepare and disseminate confirmations pursuant to
Rule 10b-10 of the Securities Exchange Act of 1934, as amended;
(11) respond to Contractholder inquiries;
(12) perform internal audit examinations in accordance
with procedures adopted by Reinsurer and the Separate Account
consistent with past practice and applicable Law;
(13) assist with the operation of the Separate Account as
may be reasonably requested by the Company;
(14) monitor the Separate Account's compliance with
Section 817 and Sections 851 through 855 of the Code, so as to enable
the Separate Account to comply with the diversification requirements
applicable to investments of variable contracts and to maintain its
status as a "regulated investment company;" and
9
(15) advise the Separate Account on matters concerning the
Separate Account and their affairs.
(o) Such other administrative services as may be
reasonably required from time to time in connection with the maintenance,
support and administration of the Reinsured Contracts and Separate Account.
3.3 POWER OF ATTORNEY. Subject to the provisions of Section 3.12
of this Agreement regarding the handling of Pending Litigation and of Section
3.13 of this Agreement regarding the handling of claims involving Company
Retained Liabilities, the Company does hereby appoint and name the Reinsurer,
acting through its authorized officers and employees, as the Company's lawful
attorney in fact with respect to the rights, duties, privileges and obligations
of the Company and the Separate Account, respectively, relating to the Reinsured
Contracts, (i) to do any and all lawful acts that the Company and the Separate
Account might have done with respect to the Reinsured Contracts, and (ii) to
proceed by all lawful means (A) to perform any and all of the Company's
obligations under the Reinsured Contracts, (B) to enforce any right and defend
against any liability arising under the Reinsured Contracts, (C) to xxx or
defend (in the name of the Company, when necessary) any action arising under the
Reinsured Contracts, (D) to collect any and all sums due or payable to the
Company under the Reinsured Contracts and to quit and release for same, (E) to
collect any and all Premiums due or payable under the Reinsured Contracts
through any automatic charge authorizations or otherwise of persons who own or
hold Reinsured Contracts, (F) to sign (in the Company's name, when necessary)
vouchers, receipts, releases and other papers in connection with any of the
foregoing matters, (G) to take actions necessary, as may be reasonably
determined, to maintain the Reinsured Contracts in compliance with applicable
Laws, (H) to perform Reinsurer's duties and responsibilities under the Marketing
Agreement, including, without limitation, designing and filing marketing and
advertising materials in accordance with the terms and conditions of the
Marketing Agreement, (I) to request rate changes for the Reinsured Contracts
pursuant to Section 3.6 hereof and subject to Section 3.1(a), (J) to undertake
the necessary duties in connection with payment of Commissions in connection
with the Reinsured Contracts, and (K) to do everything lawful in connection with
the satisfaction of the Reinsurer's obligations and the exercise of its rights
under this Agreement.
3.4 CERTAIN NOTICES.
(a) The Company shall promptly remit and shall refer to
Reinsurer all inquiries involving the Reinsured Contracts, including without
limitation, inquiries regarding additional Premiums, claims payments of policy
provisions, limitations or exclusions. Claims relating to the Reinsured
Contracts erroneously submitted to the Company will be forwarded promptly to the
Reinsurer.
(b) Each party agrees to notify in writing the other
party, and provide to the other party copies of all relevant documents, within
five Business Days upon
10
receipt of: (i) any written or oral communication from any Governmental
Authority of such Governmental Authority's intention to commence any market
conduct or other examination or review or to proceed with any administrative
action, such as a hearing, fine, penalty, license suspension or revocation or
similar action, against the Company or Reinsurer, which examination, review or
administrative action relates in any way to any of the Reinsured Contracts or
Separate Account; (ii) any inquiry or other communication from any Governmental
Authority regarding Contractholder and/or consumer concerns; and (iii) notice of
any litigation that is instituted, or of any complaint that any Person files
with any state insurance department or other Governmental Authority, or
otherwise arising out of or in connection with any activity or omission with
respect to the Reinsured Contracts or the Separate Account. The Reinsurer shall
have the authority to respond to and resolve all regulatory matters, consumer
complaints and regulatory investigations and proceedings relating to the
Reinsured Contracts or the Separate Account; PROVIDED, HOWEVER, that the Company
may participate in any and all such regulatory matters at the Company's expense,
and, PROVIDED FURTHER, the Reinsurer shall not have the authority to consent to
any resolution that would restrict the Company's ability to conduct business, or
require it to take or refrain from taking any action, other than with respect to
the Reinsured Contracts or the Separate Account, or involve any admission of
wrongdoing or violation of Law by the Company (a "MATERIAL REGULATORY
PROCEEDING"). The Reinsurer agrees to promptly respond on behalf of the Company
to inquiries received from Governmental Authorities regarding consumer inquiries
and complaints relating to the Reinsured Contracts or Separate Account, and the
Reinsurer shall keep the Company fully informed of the proceedings relative to
all such matters. The Reinsurer shall conduct whatever investigation is
reasonable under the circumstances in order to respond to such inquiries and to
the extent so requested by the Company shall share with Company the information
developed in such investigation. The Reinsurer shall promptly notify the Company
of any such inquiry to which the Reinsurer determines that it will not provide a
response and Company shall be entitled to handle any such matter at Reinsurer's
cost and expense. Notwithstanding anything contained herein to the contrary, the
parties shall mutually agree to an appropriate response, including which party
should respond, to any regulatory investigation or proceeding relating to the
Reinsured Contracts or the Separate Account which could reasonably be expected
to be a Material Regulatory Proceeding, and the parties hereby agree to
cooperate and coordinate in resolving any and all Material Regulatory
Proceedings. Subject to Section 3.1(a), the parties acknowledge that the Company
shall have ultimate responsibility for resolution of these matters.
(c) Without limiting the generality of the foregoing, in
the event that a claim or liability constituting a Company Retained Liability
becomes known to Reinsurer, Reinsurer shall promptly notify the Company, shall
provide the Company with copies of all supporting documentation and records
pertaining to the claim or liability.
3.5 COMPENSATION. In consideration of the Company having entered
into the Purchase Agreement and the Reinsurance Agreement, Reinsurer agrees to
perform the Administrative Services with respect to the Reinsured Contracts and
the Separate Account at its own expense (except as provided otherwise in this
Agreement or in the
11
Reinsurance Agreement) and without any rights of reimbursement from the Company
or the Separate Account. Reinsurer will reimburse the Company and the Separate
Account for the following costs, associated with any and all actions taken by
the Company and the Separate Account as contemplated by Section 3.1(a) or
3.1(b)(ii) or otherwise at Reinsurer's request as contemplated by this
Agreement, , excluding normal accounting, actuarial, legal and regulatory
activities normally associated with consolidating the book of business into the
Company's and the Separate Account's regulatory statements and Tax filings: (i)
all reasonable out-of-pocket expenses incurred by the Company or the Separate
Account in providing such services, (ii) a proportionate and reasonable share of
the Company's or the Separate Account's corporate overhead allocable to
providing such services computed, as of any date, in accordance with the
Company's or the Separate Account's current charge-back methodologies used
generally by the Company or the Separate Account for its own internal allocation
purposes, (iii) all employment related costs reasonably incurred by the Company
or the Separate Account in providing such service (to the extent not included in
item (ii) above, computed, as of any date, in accordance with the Company's or
the Separate Account's current charge-back methodologies used generally by the
Company or the Separate Account for its own internal allocation purposes, and
(iv) any sales or use Taxes charged, assessed or incurred by the Company or the
Separate Account directly in connection with providing such services. Such
reimbursement shall be made quarterly in connection with the quarterly reports
and payments described in Section 4.3, and the Company and the Separate Account
shall provide to Reinsurer copies of related third-party invoices and other
reasonable supporting documentation as Reinsurer may request. In the event that
the total expenses of the Separate Account in any fiscal year exceed expense
limitations imposed by applicable Laws, the Separate Account's investment
adviser shall reimburse the Separate Account by the amount of such excess.
3.6 SUBSEQUENT RATE FILINGS. Subject to Section 3.1(a), Reinsurer
shall have the authority to make filings with insurance regulatory authorities
where applicable, in the name of and on behalf of the Company, to (i) apply for
increases in the premium rates that may be charged for the Reinsured Contracts
from time to time and make related amendments to the applicable policy forms
including, without limitation, applications, endorsements and riders; PROVIDED
THAT a copy of the generic rate increase and related generic policy form filing
shall be delivered to the Company at least ten Business Days in advance of the
date that Reinsurer begins making state specific filings; PROVIDED, FURTHER,
that Reinsurer shall deliver copies of rate increase and related policy form
filings it made with state regulatory authorities promptly upon the request of
the Company; and (ii) apply for other amendments to the applicable policy forms
including, without limitation, applications, endorsements and riders, PROVIDED
THAT Reinsurer shall deliver copies of policy form filings it made with state
regulatory authorities promptly upon the request of the Company. Subject to
Section 3.1(a), the Company shall cooperate with the Reinsurer in seeking
approval of any reasonable filing made pursuant to this Section 3.6.
3.7 COMPLIANCE OF THE REINSURED CONTRACTS. The Company and
Reinsurer agree to cooperate fully with each other and the relevant Governmental
Authorities in
12
maintaining the Reinsured Contracts in compliance in all material respects with
existing and future applicable Law. If Reinsurer determines that any of the
Reinsured Contracts are not in compliance with applicable Law, Reinsurer shall
so notify the Company, and the parties shall cooperate to take whatever action
is reasonably necessary to bring such Reinsured Contracts into compliance with
such applicable Law (including, without limitation, amending the forms of such
Reinsured Contracts). Reinsurer shall prepare any necessary filings for the
purpose of obtaining Governmental Authority approval for such amendment.
3.8 LICENSING. Reinsurer represents and warrants to the Company
that, in all material respects, Reinsurer is and will be at all times during the
term of this Agreement duly licensed or authorized to perform the Administrative
Services.
3.9 THIRD PARTY REINSURANCE AGREEMENTS. The parties acknowledge
and agree that there are no Third Party Reinsurance Agreements with respect to
the Reinsured Contracts.
3.10 ABANDONED PROPERTY, ETC. The Company shall promptly reimburse
Reinsurer for any and all amounts paid to Contractholders by Reinsurer as a
result of the non-negotiability of checks and other drafts issued by the Company
prior to the date hereof for amounts owed under Reinsured Contracts. Reinsurer
shall reimburse the Company for all amounts under Reinsured Contracts paid by
the Company to the applicable state that escheat to such state as abandoned
property because checks and other drafts issued by Reinsurer on or after the
date hereof with respect to Reinsured Liabilities under the Reinsurance
Agreement were not timely cashed by the applicable payee. The Company shall
promptly seek reimbursement from the applicable state for any amounts paid by
Reinsurer to Contractholders under the Reinsured Contracts after corresponding
amounts have been paid to the Company and escheated to the applicable state
pursuant to the immediately preceding sentence, and the Company shall promptly
reimburse Reinsurer after it has received such amounts from the applicable
state. Reinsurer shall provide to the Company information concerning the
Reinsured Contracts reasonably necessary for the preparation of any report,
notice or filing concerning abandoned property required to be made by the
Company by the applicable state.
3.11 RESTRICTIVE LICENSE REGARDING USE OF NAMES. The Company hereby
grants a restrictive, non-exclusive license, during the term of this Agreement,
with no right to sublicense or assign without the Company's express written
consent, for Reinsurer and its Affiliates to display and refer to the Company's
name as may be necessary or appropriate for Reinsurer to perform its obligations
or exercise its rights hereunder or under the Reinsurance Agreement, PROVIDED
THAT Reinsurer's use of the Company name shall be in accordance with the
Company's written trademark usage guidelines as provided to the Reinsurer from
time to time. Reinsurer shall not take any action that might have an adverse
effect on the validity of the Company's proprietary materials, trademark or
copyright markings or ownership by the Company thereof, and shall cease to use
the markings, or any similar markings, in any manner immediately
13
upon the expiration of this Agreement. Reinsurer shall not acquire any other
rights of any kind in the Company's trade names, trademarks, product name or
marks by the use authorized in this Section. Reinsurer may also use its own
marks in connection therewith.
3.12 PENDING LITIGATION. On and after the date hereof, Reinsurer
shall cause its in-house legal staff assigned to the Business to manage the
Pending Litigation for and on behalf of the Company according to the following:
(a) Reinsurer shall notify the Company promptly of any
material action or development in a Pending Litigation matter, provide to the
Company copies of all written correspondence, communications, briefs, orders and
the like with respect to such matter, and otherwise keep the Company informed
about the progress and status of the Pending Litigation matter. Without limiting
the generality of the foregoing, Reinsurer shall provide to the Company such
information about the Pending Litigation as the Company may reasonably request
from time to time.
(b) Reinsurer shall not engage any outside legal counsel,
incur any third-party expense (such as the costs of an expert witness) in excess
of $5,000, or settle or compromise any Pending Litigation matter, without the
prior written consent of the Company, which consent shall not be unreasonably
withheld, conditioned or delayed.
(c) Reinsurer shall supervise and manage such outside
counsel's efforts, and take all other actions in connection with such litigation
management, in good faith in the best interests of the Company according to the
same standards as if the Pending Litigation matter were a legal liability of
Reinsurer. For the avoidance of doubt, the parties acknowledge and agree that
all Losses associated with the Pending Litigation are the legal liability of the
Company.
(d) The Company shall cooperate fully with Reinsurer to
provide such assistance as Reinsurer shall reasonably request in connection with
such management of the Pending Litigation.
(e) The Company may at any time direct Reinsurer to
transfer management of a Pending Litigation matter to other counsel designated
by the Company, whether outside counsel or in-house counsel for the Company. In
such event, Reinsurer shall take commercially reasonable actions on a timely
basis to transfer all files and information about the matter to such designated
counsel, following which time Reinsurer shall have no further responsibility for
managing such matter, other than to continue to provide information to the
Company about past actions on the matter as may be reasonably requested by the
Company from time to time.
(f) The Company shall reimburse Reinsurer for the
following costs, if applicable, associated with management of the Pending
Litigation and transferring management responsibilities to other counsel as
contemplated by subsection (e) above: (i)
14
all reasonable out-of-pocket expenses incurred by Reinsurer in providing such
services, (ii) a proportionate and reasonable share of Reinsurer's corporate
overhead allocable to providing such services computed, as of any date, in
accordance with Reinsurer's current charge-back methodologies used generally by
Reinsurer for its own internal allocation purposes, (iii) all employment related
costs reasonably incurred by Reinsurer in providing such service (to the extent
not included in item (ii) above, computed, as of any date, in accordance with
Reinsurer's current charge-back methodologies used generally by Reinsurer for
its own internal allocation purposes, and (iv) any sales or use Taxes charged,
assessed or incurred by Reinsurer directly in connection with providing such
services. Such reimbursement shall be made quarterly in connection with the
quarterly reports and payments described in Section 4.3, and Reinsurer shall
provide to the Company copies of related third-party invoices and other
reasonable supporting documentation as the Company may request.
3.13 CLAIMS INVOLVING COMPANY RETAINED LIABILITIES. Reinsurer shall
notify the Company promptly of claims made under the Reinsured Contracts that
involve Company Retained Liabilities. The parties shall mutually agree on an
appropriate response to any claims under the Reinsured Contracts that involve
both Company Retained Liabilities and Reinsured Liabilities under the
Reinsurance Agreement and hereby agree to cooperate and coordinate in resolving
any and all such claims. In lieu of participating with the Company in the
defense of any claim involving both Company Retained Liabilities and Reinsured
Liabilities under the Reinsurance Agreement, the Reinsurer may elect to pay to
the Company the portion of such claim which is reinsured under the Reinsurance
Agreement, following which the Company shall be solely responsible for resolving
the remainder of such claim at its own expense. Notwithstanding anything in this
Agreement to the contrary, without the Company's prior written consent, the
Reinsurer shall not pay any portion of or settle any claim involving Company
Retained Liabilities or admit liability on the part of the Company with respect
to such claim.
3.14 BANK ACCOUNTS. During the term of this Agreement, the
Reinsurer shall establish and maintain accounts with banking institutions to
provide the Administrative Services for the Reinsured Contracts (the "BANK
ACCOUNTS"). The Reinsurer shall have the exclusive authority over the Bank
Accounts including, without limitation, the exclusive authority, including the
related obligation, to (i) open the Bank Accounts in the name of the Company,
(ii) designate the authorized signatories on the Bank Accounts, (iii) issue
drafts on and make deposits in the Bank Accounts in the name of the Company, and
(iv) make withdrawals from the Bank Accounts, in every instance solely to
provide the Administrative Services. The Company shall do all things necessary
to enable the Reinsurer to open and maintain the Bank Accounts including,
without limitation, executing and delivering such depository resolutions and
other documents as may be requested form time to time by the banking
institutions. The Company agrees that without the Reinsurer's prior written
consent it shall not make any changes to the authorized signatories on the Bank
Accounts nor attempt to withdraw any funds therefrom.
15
3.15 NON-GUARANTEED ELEMENTS. The parties' agreements with respect
to the administration of the Non-Guaranteed Elements (as defined in the
Reinsurance Agreement) are set forth in the Reinsurance Agreement.
ARTICLE 4
BOOKS AND RECORDS; REPORTS
4.1 MAINTENANCE OF BOOKS AND RECORDS.
(a) For the duration of this Agreement, Reinsurer shall
maintain, at a location to be agreed upon by Reinsurer and the Company, true and
accurate books and records of all transactions pertaining to the Reinsured
Contracts and Separate Account, including any disbursement requests submitted in
respect of the Reinsured Contracts and Separate Account and any documents
relating thereto, any communications with Governmental Authorities, complaint
logs, spreadsheets used to calculate Reinsured Contract values, all files
containing actuarial data, and all other data used by Reinsurer in the
performance of the Administrative Services. These books and records shall be
maintained (i) in a format no less accessible than the format in which such
books and records are maintained on the date hereof, (ii) in accordance with any
and all applicable Laws, including, without limitation, New York Regulation 152,
and (iii) for a minimum of seven years following the creation thereof. All such
books and records pertaining to the Reinsured Contracts and the Separate Account
shall be made available to the Company, its auditors or other representatives,
and Governmental Authorities, during normal business hours and at any other time
on reasonable notice, for review, inspection, examination and (at the Company's
cost) reproduction, including, without limitation, in compliance with Rule 31a-3
under the Investment Company Act of 1940, as amended. Access to such books and
records shall be exercised by the Company and its authorized representatives in
a manner that shall not interfere unreasonably with the normal operations of the
Reinsurer. Except as otherwise provided in Section 7.2 hereof, upon termination
of this Agreement, all books and records pertaining to Reinsured Contracts and
the Administrative Services shall be delivered promptly to the Company or such
other Person as the Company shall designate in writing. Notwithstanding anything
in this Article 4, the parties agree and acknowledge that the books and records
pertaining to the Reinsured Contracts shall remain the property of the Company.
(b) Reinsurer shall back up all of its computer files
used in the performance of services under this Agreement on a regular basis and
shall maintain back-up files in an off-site location.
(c) Reinsurer shall maintain facilities and procedures
reasonably acceptable to the Company for safekeeping all records used in the
performance of the Administrative Services.
16
4.2 REVIEW OF BOOKS AND RECORDS. Upon reasonable written notice to
the other party, each party shall have the right at its sole expense, to review,
inspect, examine and reproduce the other party's records relating to the
Reinsured Contracts and Separate Account at the place such records are located,
and to discuss such matters with the employees of the other party that are
knowledgeable about such records, during regular business hours and without
undue disruption of the normal operations of the party whose records are being
reviewed. The party reviewing the records shall reimburse the party whose
records are being reviewed for any extraordinary costs that the latter party
incurs in providing assistance in connection with such review.
4.3 QUARTERLY TRANSACTION REPORTS. Within twenty Business Days
after the end of each calendar quarter during the term of this Agreement,
Reinsurer shall provide the Company with a summary report and accounting of all
transactions, including receipts, payments, disbursements, policy loans,
surrenders and other matters, that occurred during the quarter just ended, which
report shall currently be substantially in the form of SCHEDULE 4.3 hereto, as
such form may reasonably be changed and agreed to by Company and Reinsurer, as
applicable, from time to time. Such report shall set forth the amount of any
reimbursements and payments due between the parties pursuant to this Agreement
and the Reinsurance Agreement, the amount of the General Account Reserves for
the Reinsured Contracts as of the end of such quarter, and any other matters as
may be reasonably requested by the Company. Reinsurer shall provide to the
Company such documentation supporting such quarterly reports as may be
reasonably requested by the Company.
4.4 CONFIDENTIAL INFORMATION. Reinsurer and the Company
acknowledge that during the performance of services pursuant to this Agreement,
each of them will be exposed to the confidential and proprietary information of
the other party and the other party's Affiliates, including, but not limited to,
information containing the names and addresses of Contractholders and all other
non-public personal information related to the Reinsured Contracts or the
Contractholders (the "CONFIDENTIAL INFORMATION"). Each party agrees to take all
commercially reasonable measures to prevent the Confidential Information from
being acquired by unauthorized Persons to the same extent it protects its own
confidential and proprietary information, and will not disclose the Confidential
Information to third parties without the prior written consent of the other
party, except as required by Law. Neither the Company nor any of its Affiliates
may use the Confidential Information for any purpose other than the performance
of its obligations pursuant to this Agreement, the Reinsurance Agreement or the
Marketing Agreement, or as required by applicable Law. This Section 4.4 shall
survive the termination of this Agreement.
ARTICLE 5
INABILITY TO PERFORM SERVICES; ERRORS
5.1 INABILITY TO PERFORM SERVICES. In the event that Reinsurer
shall be unable to perform services as required by this Agreement for any reason
for a period that can
17
reasonably be expected to exceed twenty Business Days, Reinsurer shall cooperate
with the Company in obtaining an alternative means of providing such services;
PROVIDED, HOWEVER, that if the Reinsurer is unable to provide the data necessary
for any report or accounting required hereunder, the Reinsurer shall use its
best efforts to provide estimates of such data. Reinsurer will be responsible
for all costs incurred in either restoring services or obtaining an alternative
source of services.
5.2 ERRORS. Reinsurer shall, at its own expense, correct any
errors in Administrative Services caused by it within a reasonable time after
receiving notice thereof from the Company or otherwise.
ARTICLE 6
INDEMNIFICATION
6.1 REINSURER INDEMNIFICATION. From and after the date of this
Agreement, Reinsurer shall indemnify, defend and hold harmless the Company and
the Separate Account (and their respective directors, officers, employees,
successors and permitted assigns) ("COMPANY INDEMNITEES") from and against all
Losses asserted against, imposed upon or incurred by such Company Indemnitees
resulting from, arising out of, based upon or otherwise in respect of any of the
following: (a) any breach of any covenant or agreement made or to be performed
by Reinsurer pursuant to this Agreement, (b) any breach of or inaccuracy in the
representation and warranty of Reinsurer contained in Section 3.8 hereof, (c)
any directions of Reinsurer given pursuant to this Agreement and followed by the
Company in a timely manner, (d) the failure of any subcontractor retained by
Reinsurer in accordance with Section 10.5 to provide the services that Reinsurer
is obligated to provide hereunder, (e) the payment of or failure to pay any
Reinsured Liabilities, (f) any fraud, theft or embezzlement by officers,
employees or agents of Reinsurer during the term of this Agreement, (g) the
failure of Reinsurer to comply with any applicable Law during the term of this
Agreement [unless such failure is caused by Company's actions or on issues under
this Agreement], and (h) the reasonable costs to the Company Indemnitees of
enforcing this indemnity against Reinsurer.
6.2 COMPANY INDEMNIFICATION. From and after the date of this
Agreement, the Company shall indemnify, defend and hold harmless Reinsurer (and
its respective directors, officers, employees, successors and permitted assigns)
("REINSURER INDEMNITEES") from and against all Losses asserted against, imposed
upon or incurred by such Reinsurer Indemnitees resulting from, arising out of,
based upon or otherwise in respect of any of the following: (a) any breach of
any covenant or agreement made or to be performed by the Company pursuant to
this Agreement, (b) any Company Retained Liabilities, (c) any fraud, theft or
embezzlement by officers, employees or agents of the Company or the Separate
Account during the term of this Agreement, (d) the failure of the Company or the
Separate Accounts to comply with any applicable Law during the term of this
Agreement, unless such failure is caused by Reinsurer's actions or omissions
18
under this Agreement, and (e) the reasonable costs to Reinsurer Indemnitees of
enforcing this indemnity against the Company. The parties agree that, for
purposes of the Company's indemnification obligations hereunder, the Company
shall not be liable for the acts of any of its agents or other producers who are
appointed by the Company pursuant to Section 2.2 of the Marketing Agreement to
the extent such agents or other producers are engaged in the sales or marketing
of New Reinsured Contracts.
6.3 NOTICE OF LOSS, ASSERTED LIABILITY. As promptly as practicable
after (a) becoming aware of circumstances that have resulted in a Loss for which
a party entitled to indemnification pursuant to Section 6.1 or Section 6.2
intends to seek indemnification under such Section (the "INDEMNIFIED PARTY") or
(b) receipt by the Indemnified Party of written notice of any demand, claim or
circumstances which, with the lapse of time, the giving of notice or both, would
give rise to a claim or the commencement of any litigation that may result in a
Loss (an "ASSERTED LIABILITY"), the Indemnified Party shall give notice thereof
(the "CLAIMS NOTICE") to any other party obligated to provide indemnification
pursuant to Section 6.1 or Section 6.2 (the "INDEMNIFYING PARTY"). The Claims
Notice shall describe the Loss or the Asserted Liability in reasonable detail
and shall indicate the amount (estimated, if necessary) of the Loss or Asserted
Liability that has been or may be suffered by the Indemnified Party. If a Claims
Notice is not provided within the time required by the first sentence of this
Section 6.3, the Indemnified Party nonetheless shall be entitled to
indemnification by the Indemnifying Party except to the extent that the
Indemnifying Party is actually prejudiced by such late receipt of the Claims
Notice.
6.4 OPPORTUNITY TO CONTEST.
(a) If an Indemnified Party asserts, or may in the future
seek to assert, a claim for indemnification hereunder because of a claim or
demand made, or an action, proceeding or investigation instituted, by any Person
not a party to this Agreement (a "THIRD PARTY CLAIMANT") that may result in a
Loss with respect to which the Indemnified Party would be entitled to
indemnification pursuant to this Article 6 (a "THIRD PARTY CLAIM"), the
Indemnified Party shall deliver to the Indemnifying Party a Claims Notice with
respect thereto, which Claims Notice shall, in accordance with the provisions of
Section 6.3, be delivered as promptly as practicable after such Third Party
Claim is actually known to the Indemnified Party. Failure to deliver a Claims
Notice with respect to a claim in a timely manner as specified in the preceding
sentence shall not be deemed a waiver of the Indemnified Party's right to
indemnification hereunder for Losses in connection with such claim, but the
amount of reimbursement to which the Indemnified Party is entitled shall be
reduced by the amount, if any, by which the Indemnified Party's Losses would
have been less had such Claims Notice been timely delivered.
(b) The Indemnifying Party shall have the right, upon
written notice to the Indemnified Party, to investigate, contest, defend or
settle any Third Party Claim that may result in a Loss with respect to which the
Indemnified Party is entitled to indemnification pursuant to this Article 6;
PROVIDED, that the Indemnified Party may, at its
19
option and at its own expense, participate in the investigation, contesting,
defense or settlement of any such Third Party Claim through representatives and
counsel of its own choosing; and, PROVIDED FURTHER, that the Indemnifying Party
shall not settle any Third Party Claim unless (i) such settlement is on
exclusively monetary terms and provides a complete release of, or dismissal with
prejudice of, all claims against any Indemnified Party potentially affected by
such Third Party Claim for all matters that were or could have been asserted in
connection with such claim, or (ii) the Indemnified Party shall have consented
to the terms of such settlement, which consent shall not unreasonably be
withheld, conditioned or delayed. If requested by the Indemnifying Party, the
Indemnified Party will, at the expense of the Indemnifying Party, cooperate with
the Indemnifying Party and its counsel in contesting any Third Party Claim or,
if appropriate and related to the Third Party Claim in question, in making any
counterclaim against the Third Party Claimant, or any cross-complaint against
any Person (other than the Indemnified Party or its Affiliates). Unless and
until the Indemnifying Party elects to defend the Third Party Claim, the
Indemnified Party shall have the right, at its option and at the Indemnifying
Party's expense to do so in such manner as it deems appropriate; PROVIDED,
HOWEVER, that the Indemnified Party shall not settle or compromise any Third
Party Claim for which it seeks indemnification hereunder without the prior
written consent of the Indemnifying Party (which shall not be unreasonably
withheld, conditioned or delayed).
(c) The Indemnifying Party shall be entitled to
participate in (but not to control) the defense of any Third Party Claim that it
has elected not to defend, with its own counsel and at its own expense.
(d) Except as provided in the first sentence of Section
6.4(b), the Indemnifying Party shall bear all costs of defending any Third Party
Claim and shall indemnify the Indemnified Party for all costs, fees and expenses
incurred in connection with defending such Third Party Claim.
(e) The parties shall make available to each other all
relevant information in their possession relating to any Third Party Claim
(except to the extent that such action would result in a loss of attorney-client
privilege) and shall cooperate with each other in the defense thereof.
(f) No party otherwise entitled to indemnification under
this Agreement shall be indemnified pursuant to this Agreement to the extent
that such party's Losses are increased or extended by the willful misconduct,
violation of applicable Law or bad faith of such party.
6.5 CERTAIN REDUCTIONS; SUBROGATION RIGHTS. All indemnification
payments payable hereunder shall be reduced by the amount of insurance proceeds
received by, or any Tax benefits inuring to the benefit of, the Indemnified
Party as a result of the Loss for which the Indemnified Party is seeking
indemnification. In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this
20
Article 6, the Indemnifying Party shall, upon the Indemnified Party's recovery
of full payment for its Loss, be subrogated to all rights of the Indemnified
Party with respect to the Loss to which such indemnification relates; PROVIDED,
HOWEVER, that the Indemnifying Party shall only be subrogated to the extent of
any amount paid by it pursuant to this Article 6 in connection with such Loss.
ARTICLE 7
DURATION; TERMINATION
7.1 DURATION. This Agreement shall commence on the earliest
Service Effective Date with respect to any Reinsured Contract and continue until
it is terminated under Section 7.2.
7.2 TERMINATION.
(a) This Agreement may be terminated (i) at any time upon
the mutual written consent of the parties hereto, which writing shall state the
effective date of termination and shall set forth in reasonable detail the
procedures for transferring the Administrative Services to the Company or the
Company's designee, (ii) automatically at such time as none of the Reinsured
Polices remains in force and no further Administrative Services in respect of
any Reinsured Contracts are required, or (iii) at the option of the Company upon
written notice to Reinsurer for one of the following reasons:
(1) the filing by Reinsurer of a proceeding in
bankruptcy, receivership, rehabilitation or reorganization, or for
composition, liquidation or dissolution or for similar relief, or the
filing against Reinsurer of any such proceeding which is not dismissed
within sixty days after the filing thereof;
(2) Reinsurer materially breaches any of the terms and
conditions of this Agreement and (i) if curable within thirty days,
such breach shall not have been cured within thirty days after written
notice by the Company of such breach, or (ii) if not curable within
thirty days, such breach shall not have been addressed within such
thirty days after written notice by the Company of such breach by
Reinsurer through a good faith plan to cure such breach; or
(3) the Reinsurance Agreement is terminated for any
reason whatsoever.
(b) Following any termination of this Agreement other
than under Section 7.2(a)(ii), Reinsurer shall cooperate fully with the Company
in effecting the prompt transfer of the Administrative Services and all books
and records maintained by Reinsurer relating to the Reinsured Contracts and the
Separate Account to the Company or the Company's designee, so that the Company
or its designee will be able to perform the services required under this
Agreement without interruption following any such termination.
21
(c) If this Agreement is terminated pursuant to Section
7.2(a)(ii) hereof, all books and records maintained by the Reinsurer relating to
the Reinsured Contracts and the Separate Account shall remain in the possession
of the Reinsurer and will be maintained pursuant to Section 4.1.
7.3 SURVIVAL. The provisions of Sections 4.4 and 7.2(b)-(c) and
Articles 1, 6, 8 and 10 shall survive the termination of this Agreement.
ARTICLE 8
DISPUTE RESOLUTION
8.1 DISPUTE RESOLUTION. The parties acknowledge and agree that
either party may pursue judicial remedies at Law or equity in the event of a
dispute with respect to the interpretation, construction or enforcement of this
Agreement.
ARTICLE 9
INSURANCE
9.1 ERRORS AND OMISSIONS INSURANCE. Reinsurer shall maintain
errors and omissions liability coverage in commercially prudent amounts as
reasonably determined by Reinsurer to cover any loss arising as a result of any
real or alleged negligence, errors or omissions on the part of Reinsurer's
officers, agents, subcontractors or employees in any aspect of the performance
of its obligations under this Agreement.
9.2 FIDELITY BOND. Reinsurer shall maintain fidelity bond coverage
in commercially prudent amounts as reasonably determined by Reinsurer protecting
the Company against any acts of theft or dishonesty on the part of Reinsurer's
officers, agents, subcontractors or employees.
ARTICLE 10
MISCELLANEOUS
10.1 COOPERATION. Each party hereto shall cooperate with the other
party and, individually or collectively, shall promptly take such further action
and promptly execute such further documents, certificates, instruments,
statements, filings, conveyances and agreements as may be reasonably necessary
to effectuate the purposes of this Agreement.
10.2 OVERSIGHTS AND ERRORS. It is agreed that in the event that any
unintentional or accidental failure to comply with the terms of this Agreement
can be shown to be the result of a misunderstanding, oversight or clerical
error, both parties shall
22
be restored to the position they would have occupied had the misunderstanding,
oversight or error not occurred.
10.3 PRIVACY RIGHTS. The parties recognize that, in the performance
of their respective obligations under this Agreement, they each may obtain from
the other personal or privileged information about individuals collected or
received in connection with insurance transactions under the Reinsured
Contracts. Pursuant to the provisions of the Insurance Information and Privacy
Protection Act, and/or similar applicable Laws as enacted in various states, of
the parties agrees to maintain the confidentiality of such information in
accordance with all such applicable Laws, and not to disclose such information
to third parties without the individual's written authorization unless such
disclosure is otherwise permitted by applicable Law. Each party shall be
responsible for its own compliance with all such applicable privacy Laws, except
to the extent provided otherwise in this Agreement.
10.4 LIMITED AUTHORITY. The Company and Reinsurer are not partners
or joint venturers, and no employee or agent of either party shall be considered
an employee or agent of the other. Reinsurer's authority shall be limited to
that which is stated in this Agreement. The performance of services by Reinsurer
for the Company pursuant to this Agreement shall in no way impair the absolute
control of the business and operations of the Company or Reinsurer by their
respective Boards of Directors.
10.5 SUBCONTRACTING. Reinsurer may not subcontract for the
performance of any services that Reinsurer is to provide hereunder, except as
permitted in writing by the Company, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing sentence, Reinsurer shall be permitted
to subcontract for the performance of any of such services with (i) any Person
that is performing such services as a subcontractor for the Company as of the
date hereof, without obtaining the consent of the Company so long as Reinsurer
notifies the Company of such subcontract on or prior to the effective date
thereof, (ii) any Person that is performing such services as a subcontractor for
Reinsurer with respect to all or substantially all of Reinsurer's insurance
business that is similar to the insurance business to be administered hereunder,
or (iii) an Affiliate of Reinsurer, PROVIDED THAT Reinsurer shall remain liable
for such Affiliate's performance under this Agreement. The provisions of this
Section 10.5 are not intended to and do not prohibit the employment by Reinsurer
of temporary personnel from time to time, in the ordinary course of business.
10.6 COORDINATORS. Each of the Company and Reinsurer shall appoint
one individual who shall serve as a contact person for purposes of communicating
with the other party and carrying out this Agreement, and who shall be
authorized to act on behalf of his or her respective party as to matters
pertaining to this Agreement. Effective upon execution of this Agreement, such
coordinators shall be as set forth in SCHEDULE 10.6 hereto. Each party shall
notify the other in writing as to the name, address and telephone number of any
replacement for such designated coordinator.
23
10.7 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. Except as
otherwise expressly provided herein, this Agreement (including the Schedules
hereto) constitutes the entire agreement between the parties with respect to the
transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement,
expressed or implied, is intended to confer upon any Person, other than the
parties or their respective successors and permitted assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
10.8 AMENDMENTS. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by all parties.
10.9 WAIVERS. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.1 BINDING EFFECT; ASSIGNMENT. Except as expressly contemplated
hereby, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that,
without having to obtain such consent, either party may assign this Agreement to
a Person who acquires all or substantially all of the equity or assets of such
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns. Each party shall notify the other promptly of any
"change of control" filing with respect to such party made with an insurance
regulatory authority, the approval of any plan to liquidate, merge or dissolve
such party, or of any proceeding or lawsuit that materially affects such party's
ability to perform this Agreement, including, but not limited to, insolvency or
rehabilitation proceedings.
10.11 NOTICES. All notices or other communications that are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by certified mail postage pre-paid, or by courier or
overnight carrier, to the Persons at the addresses set forth below (or at such
other address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
24
the Company: First Fortis Life Insurance Company
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
and
Fortis, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
With copy to counsel Xxxxxx & Bird LLP
(which shall not 0000 Xxxx Xxxxxxxxx Xxxxxx
constitute notice): Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
Reinsurer: Hartford Life Insurance Company
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
Fax: 000-000-0000
Phone: 000-000-0000
With copy to counsel Lord, Bissell & Brook
(which shall not 000 X. XxXxxxx Xxxxxx
constitute notice): Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Fax: 000-000-0000
Phone: 000-000-0000
10.12 GOVERNING LAW. Notwithstanding the place where this Agreement
may be executed by any of the parties, the parties expressly agree that this
Agreement shall in all respects be governed by, and construed in accordance
with, the Laws of the State in which the Company is domiciled, without regard
for any conflicts of laws principles.
10.13 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement. All references
herein to Articles, Sections and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
25
10.14 INTERPRETATION.
(a) For purposes of this Agreement, the words "hereof,"
"herein," "hereby" and other words of similar import refer to this Agreement as
a whole unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Whenever the singular is used herein, the same
shall include the plural, and whenever the plural is used herein, the same shall
include the singular, where appropriate. All dollar references in this Agreement
are to the currency of the United States.
(b) No uncertainty or ambiguity herein shall be construed
or resolved against any party, whether under any rule of construction or
otherwise. No party to this Agreement shall be considered the draftsman. The
parties acknowledge and agree that this Agreement has been reviewed, negotiated
and accepted by all parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
10.15 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.16 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES BEGIN ON NEXT PAGE]
26
IN WITNESS WHEREOF, the parties have executed this Administrative
Services Agreement as of the date first above written.
FIRST FORTIS LIFE INSURANCE
COMPANY
By: ______________________________
Name: ______________________________
Title: ______________________________
HARTFORD LIFE INSURANCE
COMPANY
By: ______________________________
Name: ______________________________
Title: ______________________________
27
SCHEDULE 2.3.1
INTERMEDIARIES
Please see CD-ROM provided to Reinsurer by the Seller Parties on April 1, 2001.
SCHEDULE 2.3.2
SERVICE PROVIDERS
None.
SCHEDULE 3.2
FORM OF MONTHLY CLAIM REPORT
TO BE DETERMINED IN GOOD FAITH BY MUTUAL
AGREEMENT OF THE PARTIES AS SOON AS PRACTICABLE
AFTER THE EFFECTIVE DATE.
SCHEDULE 4.3
FORM OF QUARTERLY TRANSACTION REPORT
TO BE DETERMINED IN GOOD FAITH BY MUTUAL
AGREEMENT OF THE PARTIES AS SOON AS PRACTICABLE
AFTER THE EFFECTIVE DATE.
SCHEDULE 10.6
INITIAL COORDINATORS
On behalf of the Company:
Fortis, Inc.
One Chase Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax: 000-000-0000
Phone: 000-000-0000
On behalf of Reinsurer:
Hartford Life Insurance Company
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Fax: 000-000-0000
Phone: 000-000-0000
